Judgment
MRS JUSTICE NICOLA DAVIES : 1.By an application dated 30 May 2012 Terence George Adams applies for a Certificate of Inadequacy pursuant to Section 83 of the Criminal Justice Act 1998 (“CJA 1998”). On 6 February 2007 at the Central Crown Court the applicant pleaded guilty to one count of conspiracy to conceal, between August 1997 and May 2003, the proceeds of criminal conduct. On 9 March 2007 he was sentenced to 7 years imprisonment for the criminal offence. A Confiscation Order was made requiring him to pay £750,000 by 30 September 2007 with a default sentence of 4 years imprisonment. Pursuant to a written basis of plea, it was agreed between the prosecution and the defence that the value of the applicant’s realisable assets for the purpose of the Confiscation Order was £750,000. It was agreed that the amount of money laundered during the 5 ½ year period identified in the offence, did not exceed £1million. Absent from the papers in these proceedings is a Schedule of Assets as was required for the purpose of making a Confiscation Order. The applicant is also subject to a Financial Reporting Order (“FRO”) made on 21 May 2007 for a period of 10 years. The order requires the applicant to submit financial reports; when in custody every 6 months, upon release, every 4 months. The applicant was released from prison in June 2010. He was arrested and returned to prison in August 2011 for breaches of the FRO. He pleaded guilty to breaches of the FRO and was sentenced to 8 weeks imprisonment. He was released from prison on 25 July 2012. 2.It is the applicant’s case that the major part of the original realisable assets figure was the value of his interest in his matrimonial home at Fallowfield, London NW7. In addition items of jewellery, antiques, art, vehicles, cash seized by the police at the applicant’s home amounting to £58,900, accounted for the remainder together with credit balances at banks. Fallowfield was not sold until 2009 and then at a reduced price. After relevant deductions, the applicant’s share of the net proceeds of sale was £234,166.21. In October 2009 the CPS applied for the appointment of a Receiver in relation to the remainder of the applicant’s assets. On 31 August 2010 the Receiver published his final account. He had disposed of all the assets of the applicant which had been referred to in his letter of appointment and had realised the net sum of £130,323.39 which was paid in part satisfaction of the Confiscation Order. In his letter the Receiver stated that both the applicant and his wife had co-operated with the process. The total sum realised from the disposal of the applicant’s assets and paid in part satisfaction of the Confiscation Order was £364,489.60. As at the date of the hearing the amount outstanding on the Confiscation Order was £651,611.00. Interest is accruing at the rate of £83 per day.The Background to the Criminal Proceedings. 3.The background to the criminal proceedings is set out in the judgment of the Court of Appeal R v. Adams [2009] 1 WLR 301 by Latham LJ as follows:“4. The background facts are as follows. The defendant was for a significant period of time a highly successful career criminal and was well known as such. By his basis of plea it is plain that he was asserting and it was accepted by the prosecution, the criminality in question had ceased in or about 1993. The basis of plea was: “(a) I will plead guilty to count 10 only excluding drugs on the basis of a full fact opening. (b) The prosecution will not undermine any suggestion that the criminality which created the funds was five to six years before 1998 (consequently the defendant will mitigate on the basis that although money from crime was laundered in accordance with the time frame in Count 10, no other crime has been committed since five to six years before 1998). (c) The prosecution are content for the defence to mitigate on the basis that the total value of the criminal activity at the time of offences was £1m. (d) Confiscation – figure for realizable assets is £750,000. (e)Prosecution cost £50,000.5. The defendant had clearly amassed a considerable fortune by the time of the end of his criminal activity and it was expended on a lavish lifestyle which involved, according to the prosecution, significant numbers of first class flights to different destinations around the world, expensive jewellery, private education for his child and the acquisition of antiques, works of art and other property. When he was ultimately arrested on 30 April 2003 his home, Fallowfields was a large property in a desirable area of North London. The police found substantial quantities of valuable property and the clear indications were that the defendant had been able to maintain his lifestyle because of the criminal activities in question. 6. The defendant had paid no income tax for a significant period. There was an investigation into his position in 1995, and eventually in 1996 he agreed to pay £95,000 settlement, covering his tax liabilities. But that was on the basis of false information that he had provided. It then became apparent to him that he would have, in some way or another, to account in a way which would satisfy the authorities for the wealth that he had amassed. It was in those circumstances that he obtained the assistance of others in order to disguise the proceeds of crime. 7. It was principally done through sham companies that were set up, in particular Skye Consultancy Ltd., and Clouds Consultancy Ltd., which gave him effectively bogus employment and an income generated by the companies on the basis that he was some form of consultant. The precise details of the way in which those companies were operated is not of any materiality for the purposes of the sentencing exercise. Suffice it to say that means were found to enable an apparently honest source of income to be developed over a substantial period of time. Indeed, the prosecution case was in reality that the whole of the period from 1996 onwards was a period in which the defendant was seeking, by bogus means, to hide the way in which he had come by his money. 8. Although, at the end of the day, the prosecution were prepared to accept the basis of plea, it remains to some extent uncertain what the full extent of the financial situation was or indeed is. None the less the Judge was prepared to sentence the defendant on the basis of the matters which were accepted by the prosecution on that basis of plea. …”4.Evidence for the purpose of the criminal proceedings was obtained from covert surveillance using listening devices installed in the home of the applicant and his wife between June 1997 and February 1999. Ruth Adams, the applicant’s wife, was jointly charged with her husband and others with offences of fraudulent trading, furnishing false information and Count 10. The Particulars of Count 10 stated that Terence and Ruth Adams together with two others “ Between the 5th day of August 1997 and the 12th day of January 2003 conspired together with Saul Solomon Nahome and other persons to conceal or disguise property which in whole or in part directly or indirectly represented the proceeds of relevant criminal conduct and/or drug trafficking of the said Terence George Adams with the intention of avoiding prosecution for an offence to which Part vi of the Criminal Justice Act 1998 applies and/or a drug trafficking offence or for the purpose of avoiding the making or enforcement in his case of a Confiscation Order.” Prior to the hearing in 2007 Ruth Adams had been seriously ill. The prosecution did not pursue the charges against Ruth Adams following her husband’s plea of guilty to Count 10. Following their arrest in April 2003 a Restraint Order prohibiting the disposal of assets was made against Terence and Ruth Adams on 22 July 2003. 5.At trial it was the Crown’s case that the applicant had retired from crime between 1991 and 1993 which was described as the “clearest measure of his success as a criminal businessman.” It was said that prior to the mid nineties Terence Adams had been able to maintain his lifestyle without the need to demonstrate any visible means of support, he had achieved this by placing his funds in the hands of third parties and nominees, drawing on those funds as and when necessary. It was in early 1995 that the Special Compliance Office of the Inland Revenue began an investigation into Terence Adams’s finances as a result of which it became necessary for him to provide details of his source of income over a period of some six years. Until he was murdered in November 1998, Solly Nahome played a principal part in organising Terence Adams’s financial affairs. Following his death his role in relationship to Terence Adams’s finances was assumed by three others – Ruth Adams, Nahome’s widow Joanna Barnes and a friend, an accountant/bookkeeper. It was the Crown’s case that these three individuals continued to practise the deceits necessary to conceal the fact that Terence Adams derived his income from the proceeds of crime. Joanna Barnes was also charged with forging a loan agreement ostensibly between her husband and Terence Adams, an offence to which she pleaded guilty. The Current Proceedings.6.In summary the applicant contends that at the time the Confiscation Order was made the prosecution could agree with confidence that there were no hidden or unidentified assets. If the available amount for the purpose of the realisable assets included an element of hidden or unidentified assets or a tainted gift that should have been included in the Judge’s certification, there was no suggestion by the Crown that there was such a finding. The assets comprising the available amount at the time of the original Confiscation Order have now been sold. The applicant has now exhausted all his assets. He has received minimal remuneration for such work as he has been able to obtain since his release from prison and is financially dependent upon his wife. It is denied that Ruth Adams has any capital reserves but even if she did they would not be available to the applicant in order to pay the Confiscation Order. 7.Further, as a matter of law, the Crown are not entitled now to make assertions that at the time of the original hearing the applicant had hidden any unidentified assets or had made tainted gifts to a third person in addition to the assets comprised in the agreed £750,000. The Crown are precluded, by the decision of the Trial Judge and their own agreement as to the basis of plea, from asserting that at the time of the Confiscation Order the applicant’s assets exceeded those comprised in the agreed realisable sum. Any assertion by the respondent that the applicant has a substantial capital reserve must be limited to the value of any assets which were comprised in the realizable assets held by the applicant on 9 March 2007 but which have not been realised since that date or realizable assets which have been obtained by the applicant from whatever source since March 2007. There are no further assets. It is accepted that the burden lies on the applicant to provide a full account of what has happened to the original realisable assets and also his assets as at the date of this hearing. 8.It is the respondent’s case that Terence Adams has failed to prove on a balance of probability that his current assets are worth less than the outstanding balance on the Confiscation Order. The evidence in the case is inconsistent with this proposition of fact in that money provided to Terence or Ruth Adams is in all likelihood his money but has been dressed up as loans or investments. Money paid to Terence and Ruth Adams ostensibly for services/employment is more likely to be a device to channel Terence Adams’s assets to him. Terence and Ruth Adams utilise cash (bank notes) in a manner which suggests a source of funds and a desire to conceal the extent of their spending. Their spending is inconsistent with their case that they have no capital or income of any substance and have accrued debts in the order of £160,000. 9.It is for Terence Adams to prove the facts necessary to obtain a Certificate of Inadequacy, there is no duty on the respondent to prove anything. It is not for the respondent to satisfy the court as to the source of any capital reserves which are funding the lifestyle of the applicant. The financial affairs of Terence and Ruth Adams are intertwined, they comprise matters which are known peculiarly to themselves. It is incumbent on Terence Adams to set out all these matters in a transparent, full and honest manner. The legal submission made on behalf of the applicant flies in the face of the wording of section 83 CJA 1988 and its purpose. Parliament cannot have intended that the Court upon such an application is required to ignore the existence of assets which are successfully concealed by a defendant when a Confiscation Order is made against him but which are now available to pay it.10.Witness statements on behalf of the applicant and the respondent were filed. Pursuant to an order of Nicol J the makers of some witness statements were required to attend court for the purpose of cross-examination. Terence and Ruth Adams gave evidence together with other witnesses identified below. On behalf of the Crown, witnesses were tendered for cross-examination, none of whom had been involved in the original confiscation proceedings. The Law11.Criminal Justice Act 1988“83. – (1) If, on an application by the defendant in respect of a confiscation order, the High Court is satisfied that the realisable property is inadequate for the payment of any amount remaining to be recovered under the order the Court shall issue a certificate to that effect, giving the court’s reasons……(3) where a certificate has been issued under subsection (1) above, the defendant may apply –(a) Where the confiscation order was made by the Crown Court, to that court;….(4) The Crown Court shall, on an application under subsection (3) above –(a) substitute for the amount to be recovered under the order such lesser amount as the court thinks just in all the circumstances of the case; and(b) substitute for the term of imprisonment or of detention fixed under subsection (2) of section 31 of the 1973 c. 62. Powers of Criminal Courts Act 1973 in respect of the amount to be recovered under the order a shorter term determined in accordance with that section in respect of the lesser amount.”12.In Glaves v. Crown Prosecution Service [2011] EWCA Civ 69 the Court of Appeal considered the circumstances in which a Certificate of Inadequacy could properly be granted to a defendant who claimed that he was unable to fully comply with a Confiscation Order made against him following his conviction. In these proceedings the report of the case at [2011] 4 Costs LR 556 was used as it provides a report of the full judgment which the neutral citation report does not. Toulson LJ (as he then was) gave the judgment with which his fellow judges concurred. At [13] he stated:“In Summers [2008] EWCA Crim 872… Penry-Davey J said at para 11:It is clearly established by authority and was accepted in this case that the burden of establishing that the realisable amount was less than the benefit so as to justify a lower figure for the confiscation order was on the appellant to the civil standard on the balance of probabilities and it is equally clear that if he sought to establish that that he had to do so by clear and cogent evidence; Wallbrook v. Glasgow… followed in Anderson [2005] EWCA Crim 384. Following from that, it is also clear that there is no burden on the prosecution to show a prima facie case of hidden assets, but for the appellant to provide evidence demonstrating the extent of his realisable assets: Barwick [2001] 1 Cr App R [S] 129 (p.445) and Barnham [2006]1 Cr App R (S) 16 (p83).”14 The expression “hidden assets”, used in Summers and other cases is not an expression found in the legislation and it is capable of misleading. There may be cases in which a court makes a positive finding that a defendant has hidden away all or part of the proceeds of his crime, but it is not incumbent on the prosecution to establish that fact. In Barnham Gage LJ giving the judgment of the court, said at para 41:“To hold that the prosecution must, in some way, show a prima facie case that the defendant has hidden assets in our judgment would defeat the object of the legislation. It is designed to enable the court to confiscate a criminal’s ill-gotten gains. The expression “hidden assets” is indicative of the fact the prosecution can have no means of knowing how and where a defendant may have dealt with or disposed of the proceeds of his criminal activities.”At [18] the principles applicable to an application pursuant to section 83CJA 1988 were identified as follows: “… The general principles were succinctly summarised by Mr David Holgate QC sitting as a deputy High Court Judge, in B [2008] EWHC 3217 at para 74:(1) The burden lies on the applicant to prove, on the balance of probabilities that his realisable property is inadequate for the payment of the confiscation order (see Re O’Donoghue [2004] EWCA Civ 1800, per Laws LJ at para 3). (2) The reference to realisable property must be to “whatever are his realisable assets as a whole at the time he applies for the certificate of inadequacy. If they include assets he did not have when the confiscation order was made, it is by no means a reason for leaving such fresh assets out of consideration”(IBID and see also Re Phillips [2006] EWHC 623 (Admin).)(3) A s 83 application cannot be used to go behind a finding made at the confiscation hearing or embodied in the confiscation order as to the amount of the defendant’s realisable assets. Such a finding can only be challenged by way of an appeal against the confiscation order. (see Gokal v. Serious Fraud Office [2001] EWCA Civ 368, per Keene LJ at para 17 and 24.)(4) It is insufficient for a defendant to say under s 83 “that his assets are inadequate to meet the confiscation order, unless at the time he condescends to demonstrate what has happened since the making of the order to realise the property found by the judge to have existed when the order was made”. (see Gokal para 24 and Re O’Donohue at para 3).(5) The confiscation hearing provided an opportunity for the defendant to show that his realisable property was worth less than the prosecution alleged. It also enabled the defendant to identify any specific assets which he contended should be treated as the only realisable property. The s 83 procedure, however, is intended only to be used where there has been a genuine change in the defendant’s financial circumstances. It is a safety net intended to provide for post-confiscation order events. (see McKinsley v. Crown Prosecution Service [2006] EWCA Civ 1092 per Scott-Baker LJ at paras 9,21- 24, 34 and 35.)(6) A Section 83 application is not to be used as a “second bite at the cherry”. It is not an opportunity to adduce evidence or to present arguments which could have been put before the Crown Court judge at the confiscation hearing (para 38 of Gokal at paras 23,24 and 37 of McKinsley).”At [44] the concurring judgment of Pill LJ in O’Donohue [18] was quoted with approval:“The judge has a fact finding exercise to conduct under s83 (1) of the Criminal Justice Act 1988. He has to assess the current value of realisable assets as a whole. All I would add, whilst expressing full agreement with what My Lord has said, is that the judge needs to keep a sense of proportion in conducting that exercise, however dishonest or uncooperative a defendant may have been with respect to what has been found to be one or more of his realisable assets. There could be cases where, on an overall view it would be open to the judge to hold that the value was on balance of probability inadequate within the section, even if the defendant has declined to condescend to give an explanation with respect to every single asset.”At [46] Toulson LJ citing passages from the judgment of Moses LJ in Telli v. Revenue and Customs Prosecution Office [2008] 2 Crim App R (s48) stated:“…. absent identification of all the realisable property held by him, the defendant will normally be unable to satisfy the court that the amount that might be realised at the time of the confiscation order is less than the amount to be professed to be the proceeds of his trafficking.” Toulson LJ identified the starting point for considering any application for a Certificate of Inadequacy as the Confiscation Order itself [52]. In assessing the evidence of a defendant Toulson LJ noted [53] that “… there is a balance of judgment to be struck. The courts are right to treat with some scepticism generalised assertions by someone whose credibility may be deeply suspect by reason of the facts of the offence. Absence of independent credible evidence to corroborate a defendant’s account is not fatal as a proposition of law, but it may well be fatal as a matter of fact…. At the stage of an application for a certificate of inadequacy the burden of proof is again on the defendant. He is unlikely to succeed unless the court is satisfied that he is being candid, and an application for a certificate of inadequacy is not intended to be a means of the defendant having a second bite at the same cherry. “[54]”… It is for the court to consider the totality of the evidence before concluding whether it accepts that the defendant has suffered a change of fortune such that he is probably not able to pay the balance of the outstanding monies “[55]”… It has been said many times that the statutory scheme for confiscating the proceeds of crime is intended to be draconian. So it is, but in administering the scheme it is right that the court should give a sense of justice and proportion, bearing in mind the essential purpose of the scheme, which is not to punish a defendant a second time for conduct for which he will have been sentenced but will have deprived him of the benefit of his criminal conduct.”[56].13.The applicant relies upon the authority of In re McKinsley [2006] 1 WLR 3420 which considered the application by a defendant who had been convicted of a drug trafficking offence pursuant to Section 17 Drug Trafficking Act 1994 to the effect that his realisable property was inadequate for the payment of any amount remaining to be recovered under the Confiscation Order made against him. The Drug Trafficking Act 1994 provides a parallel jurisdiction to that of the CJA 1988. The court upheld the ruling of Toulson J (as he then was) who held that it was not open to the defendant to seek to challenge the Crown Court judge’s findings as to his realisable assets on a subsequent application for a Certificate of Inadequacy on the ground that he did not have, and had not had when the Confiscation Order was made, the hidden assets identified by the Crown Court judge. Section 17 of the 1994 Act mirrors the provisions of Section 83 of the 1988 Act. The issue on the appeal was in what circumstances, if any, it is possible for an applicant in Certificate of Inadequacy proceedings to challenge the findings originally made by the Crown Court as to the amount which might be realised. It was the Crown’s case that the Certificate of Inadequacy procedure pursuant to Section 17 is intended to be used only where there has been a genuine change in the defendant’s financial circumstances since the Confiscation Order was made e.g. an asset has dropped in value. The defendant had a right of appeal against a Confiscation Order and that is the route to be followed on any challenge to the original Confiscation Order. It was the defendant’s case that the wording of Section 17 is not so restricted. It made sense for the Administrative Court to look at the whole picture and, if there had been any manifest error on the part of the court making the original order, then to correct it. It was submitted that a defendant is entitled to a Certificate of Inadequacy whenever he can satisfy the Administrative Court that his assets are inadequate to pay the amount of the Confiscation Order. The court is concerned solely with the current worth of the defendant’s assets. 14.The thrust of the arguments before the Court centred upon a construction of Section 17. This was in the context of an application by the defendant to go behind the original Confiscation Order by a means other than the appeals process provided by Section 9 Criminal Appeal Act 1968. It is in that context that the Court at [44] found that the Administrative Court does not have jurisdiction in Certificate of Inadequacy proceedings to go behind the basis of the Confiscation Order made by the Crown Court. An attempt to do so would be an abuse of process of the Court. The Court cited with approval the observations of Lord Lane CJ in R v. Dickens [1990] 2 (QB) 102, 105E namely that the object of the drug trafficking legislation is to ensure that the convicted drug trafficker has to part with the proceeds of his trafficking and that the extent of his realisable assets at the time of his conviction is likely to be peculiarly within his own knowledge. It is hardly surprising therefore, that the evidential burdens are placed upon him and that rigorous penalties are imposed in the event of non compliance with Confiscation Orders. At [30-31] the Court stated: “In our judgment a close examination of section17 against the background of the 1994 Act as a whole points strongly to the construction that the Administrative Court is limited to consideration of post confiscation order events and is not entitled to go behind the confiscation order even if there has been a manifest error.31. It is our view therefore that the structure of the Act points strongly towards the construction that it is not open to an applicant on an application for a certificate of inadequacy to challenge the Crown Court judge’s findings as to the applicants realisable assets. …”