On the 18th June 2014 the Supreme Court gave judgment (link here) in the combined appeals from Ahmad [2014] 2 WLR 2335 and Fields [2014] 2 WLR 233. Both were carousel frauds where the Court of Appeal had dealt with the proper approach for the court to adopt, and the proper orders for the court to make, in confiscation proceedings where a number of criminals, some of whom may not be before the court, have together acquired property or money in a joint enterprise or conspiratorial criminal venture.
In essence, the Court decided that where a finding of joint obtaining is made, whether against a single defendant or more than one, the confiscation order should be made for the whole value of the benefit thus obtained, but should provide that it is not to be enforced to the extent that a sum has been recovered by way of satisfaction of another confiscation order made in relation to the same joint benefit.
To understand the effect of this important case, it is important for a moment to consider the judgments from the Court of Appeal.
Ahmad and Ahmed
The defendants were directors and shareholders of a company which was registered for VAT. The company was involved in 32 circular transactions by which goods were purportedly sold by, and later bought back by, companies in Ireland in circumstances which involved VAT in the sum of £12,662,822 being fraudulently reclaimed from the revenue by the Irish companies. The defendants were convicted of conspiracy to defraud the public revenue and proceedings for confiscation orders followed. Flaux J held that the benefit to each of the defendants was not to be restricted to the £12,662,822 paid out by the revenue but comprised the total amount of money which had passed through the bank accounts of the company in furtherance of the frauds, on the footing that those sums were property which had been obtained “in connection with [the] commission” of the offence within the meaning of section 71(4) of the Criminal Justice Act 1988. He found that each defendant had benefited in the sum of some £72m, uplifted for changes in the value of money due to inflation to £92,333,667, being the sum which had passed through bank accounts under their control in furtherance of a massive carousel fraud, and made confiscation orders in the uplifted sum against each of the defendants, finding that they had failed to prove that they had less than those amounts. The defendants appealed against, inter alia, the confiscation orders on the ground that expenditure on committing the fraud should not have been included in the calculation of benefit.
The Court of Appeal allowed the appeals, since the object of the legislation was to deprive defendants of the product of their crimes and not to operate by way of fines. Sums banked as the result of the sale or purported sale of goods by a buffer company in the course of a carousel fraud generating false claims for the repayment of VAT were not property obtained “in connection with [the] commission” of the offence within section 71(4) of the Criminal Justice Act 1988 . The judge had therefore been wrong to set the benefit for each defendant in the sum of £92,333,667 and was reduced in each case to £12,662,822, to which was uplifted to £16.1m by inflation.
So the Court of Appeal declined to rule that the money that had been used to “prime the pump”, i.e. used to pay for the goods, should represent benefit. The Court also considered the possibility that the “same money” was passing through the accounts each time (in other words double counting) but did not need to reach a conclusion on that issue.
Fields and Others
Three defendants were convicted of conspiracy to defraud involving the use of a company. The total benefit in the form of goods and services supplied arising from the conspiracy was calculated at £1,410,762 (uplifted to £1.6m by inflation). At the first defendant's confiscation proceedings pursuant to the Proceeds of Crime Act 2002 1 the judge determined that the total benefit of his particular criminal conduct was the same as the total benefit arising from the conspiracy and made a confiscation order against him in that amount, adjusted to allow for changes in the value of money, plus a further amount for the benefit of his general criminal conduct on the basis of the defendant's concession that his was a criminal lifestyle within the meaning of section 75(2)(c) of the 2002 Act, with a default period of 7½ years' imprisonment. At the second and third defendants' confiscation proceedings, the judge decided that the criminal lifestyle provisions did not apply to them and assessed the benefit for each of them as also being the total benefit of the conspiracy, adjusted for changes in the value of money, and made confiscation orders in that amount. The judge found that each of the defendants had been a principal conspirator in a joint operation and applied the principle that where two or more defendants obtained property jointly, each was to be regarded as obtaining the whole of it, and he refused to apportion the confiscation amount. The three defendants appealed against their confiscation orders on the grounds, inter alia, that the benefit attributable in each case should have been one third of the benefit jointly obtained and, further, that it was disproportionate to order each defendant to pay an amount equal to the value of the benefit jointly obtained.
The Court of Appeal held that, consistently with the language and scheme of the Proceeds of Crime Act 2002 , where there had been a finding of jointly obtained benefit, that benefit was to be valued in the whole amount of the property so obtained in respect of each defendant. There was no scope in a case of joint benefit for the ascription of beneficial shares to each of the defendants for the purpose of valuing their benefit, nor did any question of apportionment of benefit arise at the stage when the benefit was being assessed. The making a confiscation order against each defendant in the whole amount each was being deprived of what he had gained, not what he had never obtained, and so was not being subjected to an additional financial penalty or fine;, so the confiscation order was not to be regarded as disproportionate because it removed from a defendant more than might actually represent his net profits from crime if the amount matched the correctly assessed benefit. Apportionment of a confiscation order carried a real risk that it would not be satisfied in full and involved impracticable inquiries into financial dealings between criminals which could lead to evasion, manoeuvring and chicanery on the part of defendants;
The focus of attention should be on removing from each criminal the proceeds of his crimes and lack of proportionality for the purposes of section 6(5) of the 2002 Act was not to be assessed by focusing on confiscation orders also made against others, or on payments made by others, or by focusing on the potential profit accruing to the Crown by reason of multiple recovery. Thus the three defendants had been properly adjudged as each liable to a confiscation order in the full amount of the joint benefit, without any apportionment or deduction being allowed on grounds of proportionality.
The Supreme Court Judgment
No doubt hoping that arguments on apportionment could be “put to bed” once and for all, the Supreme Court reached a practical and pragmatic compromise. It had to deal with differences in approach by the different sets of appellants:
The Ahmad defendants accepted that each of them was liable for £16.1m, they contended that they should be treated as jointly and severally liable and so should only have to pay the £16.1m between them.
The Fields defendants argued that the benefit figure should apportioned and so liable for a third each of the total sum.
The Court, relying on a long line of authority, found little trouble in finding that each of the appellants had benefited in the full amount, saying at paragraph 46 that
“… where property is obtained as a result of a joint criminal enterprise, it will often be appropriate for a court to hold that each of the conspirators "obtained" the whole of that property. That is the view expressed in May, para 48(6), first sentence (although the word "owns" is probably inappropriate), in Green, para 15, and in Allpress, para 31 (as quoted and approved in Mackle, para 65). However, that will by no means be the correct conclusion in every such case.”
Tim Owen QC, representing the Fields defendants, also represented Mr Green in the House of Lords triumvirate of cases eight years ago (Green, Jennings and May). In rejecting his argument for the Fields defendants in the present case, and no doubt with a view to putting an end to matters, the Court observed that:
“Mr Owen's argument in this case is essentially a re-run of his argument in that case, which the House rejected.”
However, the Supreme Court was persuaded that the recovery of more money than was obtained by the joint enterprise would not be proportionate, saying at paragraph 72 that:
“To take the same proceeds twice over would not serve the legitimate aim of the legislation and, even if that were not so, it would be disproportionate. The violation of A1P1 would occur at the time when the state sought to enforce an order for the confiscation of proceeds of crime which have already been paid to the state. The appropriate way of avoiding such a violation would be, as Mr Mitchell has submitted, for the confiscation order made against each defendant to be subject to a condition which would prevent that occurrence.”
The orders in each case were therefore amended to prevent recovery of more than the same joint benefit.
Conclusion
Thus my paraphrased answers to the three questions that the Court posed itself, and a hopefully simple and useful guide to multiple defendant POCA cases is:
1. Has the defendant benefited?
Section 76(4) of the 2002 Act provides that a person benefits from conduct “if he obtains property as a result or in connection with the conduct.” The essence of benefit in that phrase is given by the word “obtains” which should be given a broad, normal meaning, connoting a power of disposition or control rather than ownership.
Where property is obtained as a result of a joint criminal exercise, it will often be appropriate for a court to hold that each of the conspirators “obtained” the whole of that property. However, where the evidence discloses separate obtainings, the judge should make that finding. The use of the phrase obtaining “so as to own it” is simply to make a contrast as between someone who “assumes the rights of an owner with an “mere courier or custodian”.
2. What is the value of the benefit ?
The value will generally be the market value, and in accordance with section 84(2)(b), each defendant obtains the whole property. Once a defendant obtains property, whether jointly or solely, the market value is that value of what he has obtained which is the value of the appropriated property. The interests of co-conspirators are not to be taken into account when carrying out the valuation. In other words, there is no place for apportionment in the assessment of the value of the benefit.
However, given the absence of criticism of the Court of Appeal’s approach to assessing benefit in Ahmad, money used to pay for goods (i.e. to prime the pump) do not form part of the benefit.
3. What is the sum payable ?
Where a joint finding of benefit is made, confiscation orders should provide for them not be enforced in a sum greater than the whole benefit figure. It might be appropriate, for example where a further trial is anticipated in relation to the same conspiracy, to stay enforcement until that later trial; but this would be unusual.
Orders in based on lifestyle assumptions would require special consideration on their own facts.