Case No: 9903071Z3
 
IN THE COURT OF APPEAL
(CRIMINAL  DIVISION)

Royal Courts of Justice
Strand, London, WC2A 2LL

Tuesday 15th February 2000

B e f o r e :

THE LORD CHIEF JUSTICE OF ENGLAND AND WALES
(LORD BINGHAM OF CORNHILL)
MR JUSTICE GARLAND
MR JUSTICE NELSON

	REGINA		
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	JUAN CARLOS MIRANDA		

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040,  Fax No:  0171 831 8838
Official Shorthand Writers to the Court)
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Nicholas Hamblin appeared on behalf of  the appellant.
Mark Bishop and Kennedy Talbot (instructed by  HM Customs and Excise) appeared on behalf of the Crown.
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Judgment
As Approved by the Court

Crown Copyright ©

 Mr Justice Nelson:
1. On the 6th July 1998 in the Crown Court at Croydon, the Appellant pleaded guilty to conspiracy to defraud (Count 1) and conduct which must have involved the commission of a VAT Act offence contrary to section 72(1) or (3) of the Value Added Tax Act 1994 contrary to section 72(8) of the same Act. (Count 2)

2. On the 1st April 1999 he was sentenced to 33 months imprisonment on each count concurrent.

3. On the same date a confiscation order was made under section 71 of the Criminal Justice Act 1988 in the sum of £436,340, payable within 24 months. In default of payment the Appellant was ordered to serve 15 months imprisonment, consecutive to the term imposed for the conspiracy to defraud and VAT offence.

4. A further count under section 72 of the VAT Act was ordered to lie on the file.

5. The Appellant’s co-accused, Roy Sam, was convicted after trial of the conspiracy to defraud (Count 1) and sentenced to 10 months imprisonment suspended for 18 months. He was acquitted on two other counts. Paul Cavadino and John Chisnell were acquitted on the conspiracy to defraud and a VAT Act offence. The Appellant appeals against his sentence of imprisonment, and the confiscation order, by leave of the Single Judge.

The Facts.
6. The Appellant traded as Antares Importacione y Distribucion (Antares) from premises in Seaford, East Sussex. He also traded in Tenerife in the Canaries, and had other business interests there. His wife was a partner in Antares. This business involved, amongst other things, the export of soft drinks from the United Kingdom to the Canary Islands.

7. the Appellant opened an account for Antares with Britvic International Limited from whom he purchased soft drinks for export. The soft drinks meant for export were priced at a cheaper rate that those for internal sale, and were not subject to VAT. The Appellant sold a substantial quantity of these export only soft drinks to UK customers at a higher price than he had paid for them, and charged and received VAT though he never paid that on to the Customs and Excise.

8. There were two elements to the fraudulent operation. Firstly, Britvic were prevented from making the additional profit on the drinks which they might have made if there had been an available market for selling those drinks at the higher internal UK market price. False bills of lading, purporting to confirm the shipping details of exported goods, were prepared to deceive Britvic into thinking that the goods were indeed going to be and had been exported. The Appellant enlisted help from his co-accused Sam, a director of the freight forwarders used by Antares, who arranged for the collection of containers from Britvic and their onward internal distribution. Secondly, VAT was charged on the subsequent sale of drinks to UK customers but not accounted for to Customs and Excise.

9.  The conspiracy commenced in August 1995. The first order to Britvic for export only soft drinks was placed on the 17th September 1995. Thereafter the Appellant continued to place such orders with Britvic and though some of these were genuinely for export and the goods duly exported, many were simply diverted into the UK market.

10. Britvic became suspicious after learning that a quantity of drink sold for export to Antares had turned up in a cash and carry in Wembley. They met the appellant on the 6th March 1996 in order to satisfy themselves that he was indeed exporting their goods as he said he was. The Appellant agreed to produce bills of lading in order to prove to Britvic that the goods had been exported.

11. Undeterred by Britvic’s suspicions, the Appellant continued with his fraudulent operation. On the 28th March 1996 a VAT officer visited the Appellant who told him that he had only a few UK sales. He did not tell the VAT officer that he was buying from Britvic for export and then selling in the UK and charging VAT on the sales. Although he says in his interview in September 1996 that he was about to declare all the VAT that he had collected on his UK sales and account for it to Customs and Excise just before his arrest, he had in fact completed and signed a VAT return for the period 1st May 1996 to 31st May 1996 claiming a repayment, and made no reference in that return to receipt of VAT on his UK sales.

12. The potential loss of profit to Britvic on UK sales was £293,584. The VAT which he should have paid but did not pay was calculated at £63,467. There was no evidence before the Crown Court as to whether there was an available UK market which would have enabled Britvic to have made the whole of that potential profit.

13. The Appellant was arrested and his premises searched on the 20th June 1996. When he was interviewed on the 26th September 1996 he accepted that he had been diverting goods meant for export but claimed that he had meant to regularise the position with Customs and Excise just before he was arrested. He made a short statement in July 1998 implicating Roy Sam and offered to give evidence against him. Sam was duly tried and convicted on the conspiracy count but the Appellant was not called as a witness at that trial.

Antecedents.
14. The Appellant is 34 and married with two young children. He was of previous good character. He is described as a man of great ability in the character references provided for the Court, and this fact is borne out by the fact that people are still prepared to employ him in the full knowledge of his convictions. He suffers at present from reactive depression and his wife has suffered seriously from depression as a result of his conviction and imprisonment. Two letters sent to this Court by the Appellant and his wife of the 3rd December 1999 and the 10th December 1999 respectively indicate the extent to which the Appellant and his family have found his time in prison particularly hard to bear.

The Pre-Sentence Report.
15. The Appellant says in his statement that the idea of the fraudulent scheme was introduced to him by one of his customers. It is said in the pre-sentence report that it was “clever but not illegal”, but the Judge rightly found that the contemporaneous documentation shows that he was fully aware of the fact that his conduct was unlawful. In fact the Appellant admitted deceiving Britvic and said that he became greedy as the operation increased.

16. He was born in the Canary Isles and came to Britain when he was three. He had an established import export business in Spain and then moved back to England and continued trading with a partner in Tenerife. He said that the partner stole some £400,000 from the business however and left debts of half that amount. The Appellant had subsequently formed another business which he had built up into the sole source of family income. The Probation Officer considered that the risk of re-offending was low. The effect of a custodial sentence was that his business would collapse with the inevitable consequences for its creditors. It would have a considerable impact on his family and the possibility of a Community Sentence was mooted. He was said to be eligible for Community Service. 

17. The Appellant said that he has indeed been made bankrupt on the 4th June 1999.

18. The prison report indicates that the Appellant is a model prisoner fully aware of the gravity of his offence, and remorseful.

The Confiscation Order.
19. The following dates are relevant:-
6.7.98  The Plaintiff pleaded guilty. Sentence was adjourned until after the trial of the co-accused and the Prosecution served a statement under section 73(1)(a) of the Criminal Justice Act 1988. The court was informed that there was a dispute as to whether the Defendant had benefited from his offences and how much could be recovered. The Appellant was ordered to respond to the Prosecution statement by 7.9.98

8.7.98 -24.7.98 The co-accused were tried resulting in the conviction of Sam and the acquittal of the other co-accused. Sentencing of the Appellant and Sam fixed for 2.10.98.

7.9.98	 The Appellant failed to serve his response to the Prosecution statement.

1.10.98  The date for sentencing was vacated because the Judge was unavailable. 24.11.98  Fixed as the new date for sentencing.

24.11.98  Date for sentencing vacated on the written application of the Appellant on the grounds that his wife was unwell. Sentencing later fixed for 25.2.99.

25.2.99 Court unable to deal with sentence. Adjourned to 31.3.99

29.3.99 The Appellant put in his response to the Prosecution statement under section 73(1)(a).

30.3.99 - 1.4.99 The Appellant and Sam are sentenced and Confiscation Orders made.

In his response to the Prosecution statement under section 73(1)(a) the Appellant served a statement and in addition relied upon the affidavit which he had sworn on the 8th January 1998 for the purposes of the application for a restraint order made by the Customs and Excise.

20. The amount of benefit which the Appellant had received from his offences was formally agreed at £436,340. The Court had therefore to determine the amount to be recovered against the Appellant under the Act. Mr Ian Beazley of the National Investigation Service of the Customs and Excise, who had prepared the Prosecution statement gave evidence, as did the Appellant. In accordance with R-v- Crutchley and Tonks (1994) 15 Cr App R (S) at 637 citing the case of Layode (unreported) the Judge found that it was for the Appellant, to satisfy the court to the civil standard of proof, that his realisable assets amounted to a figure less than the amount of benefit. The Judge found that the Appellant had failed to discharge this burden, a number of features of his evidence being unsatisfactory. The Appellant did not seem to be truthful and treated his partnership assets as though they were entirely separate from his own as a way of hiding his own assets. The Judge found that money came in freely and considerable sums were available to the Appellant to satisfy his requirements. He had produced nothing to substantiate what he said about the loss of his funds in Tenerife to his former business partner. In his affidavit in the restraint proceedings he had claimed that legal action was being taken to reclaim the embezzled money but was unable to produce any evidence. The Judge found that he was concealing assets and accordingly it was necessary to make an order against him the in the whole sum of the benefit of £436,340.

Sentencing Remarks.
21. When passing sentence the Judge said that the Appellant was a man of good character and successful in business. He had properly and fairly acknowledged that the fraudulent scheme was his idea. He was a man of excellent talent and brighter than average. He had however had a warning from Britvic that he should not go on with the fraud but had continued and drawn in Sam. Whilst the fraud was not very elaborate, arrangements for false bills of exchange and other arrangements had been made with an element of cunning to cover the fact that the goods for export were not being exported. The Judge said that it was of very great importance that the Appellant had pleaded guilty.

22. The Judge acknowledged that this was not the only business he ran, nor was it the only way he ran his business. He had quite a successful business and it was not necessary for him to have done what he knew was not only wrong but illegal. The submission that he thought it was clever but not illegal was not accepted. The Judge said that it may be that others had put him up to it but it was not accepted that there was any great pressure on him. He said he intended to pay the VAT, which was dubious. Only a custodial sentence could be passed. The plea, delay and assistance and information offered to the Customs and Excise would be taken into account.

23. In his sentencing remarks the Judge made, on the face of the transcript, two remarks which suggested that he was confused as to whether it was Sam or the Appellant who pleaded guilty. In fact Sam had been convicted by the jury and the Appellant had pleaded guilty. When the sentencing remarks are taken as a whole however it is quite plain that the Judge expressly acknowledged that the Appellant had pleaded guilty and expressly gave him credit for doing so. It may indeed be as Prosecution counsel suggested, that there may have been an error in the transcription of some of the remarks.

24. In his grounds of appeal and submissions before this Court it is said that whilst the sentence was correct in principle, its length was excessive given the plea, good character, the admissions in interview, the offer to give evidence for the Prosecution, the fact that the fraudulent operation only lasted some eight months, and the contents of the pre-sentence report.

25. Further, as no reference was made in the sentencing remarks to the medical report which concluded that the Appellant had reactive depression, it is submitted that either no or too little attention was paid to that report. The Appellant had a genuine offer of a job in London, had excellent personal references from his bank and accountant and others, his wife was not in good health either, suffering (on the basis of the medical evidence not available to the Judge but available to this Court) from clinical depression which was deteriorating. The effect of the sentence of imprisonment on the Appellant’s family was not sufficiently reflected in the sentence. The bankruptcy and good behaviour in prison were also further matters in mitigation which had arisen since sentence.

The Appeal against Sentence.
26. If the Judge had given a full discount for the plea of guilty it appeared that his starting point was 48 months which it was submitted was too high. The Court’s attention was drawn to the cases of R-v- Cleary (1991) 13 Cr App R (S) 237, R-v- Dayan (1993) 15 Cr App R (S) 223  and  R-v-Lai (1993) 15 Cr App R (S) 143. The range of sentences in these cases which are not dissimilar on their facts, was between 2 years and 2½ years. But the Appellant’s persistence in the fraud in this case after Britvic had voiced their suspicions of his activities to him, and the VAT officer had questioned him about his business, indicates a real determination to break the law and hence a high degree of criminality. We are satisfied on the material put before the Judge, and before this Court, that whilst the sentence was severe, it cannot properly be described as manifestly excessive. This part of the appeal is therefore dismissed.

The Appeal against the Confiscation Order.
27. The relevant statutory framework is that set out in the Criminal Justice Act 1988 as amended by the Criminal Justice Act 1993. The Proceeds of Crime Act 1995 does not apply as the starting date of the conspiracy was in August 1995 and hence before the 1st November 1995, the relevant date under the 1995 Act.

28. The Appellant’s submissions are firstly, that the time limit for the determination of the confiscation proceedings expired on the 6th January 1999, six months after the date of the Appellant’s plea of guilty with the consequence that those proceedings, which were not heard until the 1st April 1999 should be quashed, and secondly that the Judge wrongly exercised his discretion on the evidence given and should have found that the recoverable assets were £46,000 and not £436,340. Grounds B(b) and B(c) in the original grounds, namely the submission that the Judge should not have taken into account the matrimonial home and that he should have exercised his discretion so as to make no confiscation order, were abandoned at the hearing of the appeal.

29. Section 71 of the Criminal Justice Act 1988 as amended by the Criminal Justice Act 1993 (the Act) gives the Crown Court the power to make a confiscation order against an offender where:-
"(a) he is found guilty of an offence to which this Part of this Act applies; and
 (b) it is satisfied -
	(i) that he has benefited from that offence.. and
       (ii) that his benefit is at least the minimum amount." Section 71(1) and  
            72(2)(a)(b)(i)(ii)

30. Section 72 of the Act provides that the Court cannot exercise the power to make a confiscation order unless the prosecutor has given written notice to the Court to the effect that “it appears to him, that were the Court to consider that it ought to make such an order, it would be able to make an order requiring the offender to pay at least the minimum amount” (72(1)).
72(2) provides:-
"if the Prosecutor gives the court such a notice, the court shall determine whether it ought to make a confiscation order."

31. Section 72(4) states:-
"if the court determines that it ought to make such an order, the court shall, before sentencing or otherwise dealing with the offender in respect of the offence or, as the case may be, any of the offences concerned, determine the amount to be recovered in his case by virtue of this section and make a confiscation order for that amount specifying the offence or offences."
     
Section 72(5) provides that where a confiscation order is made against a Defendant the court shall take account of that order before imposing any fine or making any other payment order against him.

32. Where, under section 73(1) of the Act the Prosecutor tenders to the Court a statement relevant:-
"(i)  to determining whether the Defendant has benefited from the offence.. or
 (ii)  to an assessment of the value of the Defendant’s benefit from the offence.."

and the Defendant accepts any of those allegations, the court may for the purpose of determining or making an assessment treat the acceptance as conclusive.

33. Where a Prosecutor’s statement has been served, the Court, under section 73(2), may require the Defendant to indicate to what extent he accepts the Prosecutions statement and if in any respect he doesn’t, to indicate the matters he proposes to rely on. The Defendant may be treated as accepting the allegations, with certain exceptions, if he fails to comply with this requirement (section 73(3)).

34. If the Defence statement is accepted in any part by the Prosecutor, that acceptance may be treated by the Court as conclusive. The Defendant may indicate a matter for the purposes of section 73(2) either orally before the Court or in writing. (Section 73(5)). 
Section 72A gives the Court power to postpone confiscation order determinations. The relevant part of the section states:-
"72A(1) where a court is acting under section 71 above but considers that it requires further information before -
   (a) determining whether the Defendant has benefited as mentioned in section    
        71(2)(b)(i) above;
   (b) determining whether his benefit is at least the minimum amount; or
   (c) determining the amount to be recovered in his case by virtue of section 72
        above
it may, for the purpose of enabling that information to be obtained, postpone making that determination for such period as it may specify.
(2) More than one  postponement may be made under subsection (1) above in relation to the same case.
(3) Unless it is satisfied that there are exceptional circumstances, the Court shall not specify a period under subsection (1) above which:-
	(a) by itself; or
	(b) where there have been one or more previous postponements under 
	      subsection (1) above or (4) below, when taken together with the earlier 
	      specified period or periods
exceeds 6 months beginning with the date of conviction."

35. The Court may also postpone making its determination where the Defendant appeals against his conviction, but such postponement shall not exceed three months after the date on which the appeal is determined or otherwise disposed of unless the court is satisfied there are exceptional circumstances. Section 72A(4) and (6)

36. Section 72A(5) and (7) provide that:-
 "a postponement or extension under subsection (1) or (4) above may be made -
	(a) on application by the Defendant or the Prosecutor or
	(b) by the Court of its own motion
(7) where the Court exercises its power under subsection (1) or (4) above, it may nevertheless proceed to sentence, or otherwise deal with, the Defendant in respect of the offence or any of the offences concerned."

37. Section 73A was inserted by the Proceeds of Crime Act 1995 and hence not in force at the material time in this case. It should be noted however that the section enables the Court to order the Defendant to give information to assist it in carrying out its functions under the Act. This reinforces the view that ‘information’ under section 72A has a wide meaning and includes information from any other source such as the Prosecution, or a third party. There is no reason why ‘information’ should exclude information included in any section 73 statement or response. 

38. The Appellant submits that the confiscation order proceedings were embarked upon on the 6th July 1998 when he pleaded guilty and the Prosecution served the Prosecutor’s statement under section 73(1)(a) having then or shortly before served written notice under section 72(1). The Court was informed orally on that day that there would be a dispute as to the amount of the benefit and how much could be recovered from the Defendant. In those circumstances the Court ordered the Defendant to make his response to the Prosecutor’s statement under section 73(2). no determination was made that day but, it is submitted, the confiscation order proceedings clearly had commenced.

39. The six months time limit under section 72A starts to run on the date on which the offender is either found or pleaded guilty. (R-v- Shergill and others (1999) Crim LR 591.) The Court of Appeal there treated the six months period as a general limitation period and held that in the absence of exceptional circumstances the Court had no power to specify a period of postponement which exceeded six months beginning with the date of the verdict or the plea of guilty to the offences in question. As no step in the confiscation order proceedings had been taken within six months on the facts of that case it was too late for the Prosecution to make their application for confiscation orders when they gave their written notice under section 71(1)(a). This case was decided after the Proceeds of Crime Act 1995 was in force and was, the Crown submit therefore dealing with a different statutory framework. It is conceded that it does however determine that the six month period starts to run from the date of conviction or plea of guilty rather than from some later date such as date of sentence.

40. The Appellant submits that by ordering him to give his response under section 73(2) the Court was seeking to secure further information under section 72A and was acting under section 71 in so doing. The six month time limit therefore came into play and, as it was conceded by the Crown that no application had been made under section 72A for an extension or postponement of time, and because no period of postponement specified and no exceptional circumstances found, the Prosecution was out of time after the 6th January 1999 when the six months period expired. The confiscation order should therefore be quashed.

41. The Prosecution submit that before the Crime Proceeds Act 1995 came into force the Court had a discretion as to whether to make a confiscation order or not (section 72(2) and (4)), whereas under the 1995 Act, once benefit to the offender is established the Court has to make a confiscation order under section 71(1A) and (1B).

42. Under section 72(2) the Court had to determine whether it ought to make a confiscation order, described by the Crown as making a “primary determination”. Such a determination it is submitted, has now been abolished by the 1995 Act. As the Judge in this case had not made his primary determination until his ruling on the 1st April 1999, he was not until then acting under section 71. The order made under section 73(2) requiring the Defendant to serve his response to the Prosecutor’s statement could be made before any primary determination had been made by the Court. Thus, the Crown submit, the Judge was at no time acting under section 72A to postpone the determinations as he had not got that far. This argument is reinforced, it is said, by the ruling made by the Judge when he acknowledged that his first task was to determine whether to make a confiscation order. The six months time limit on the Crown’s case never started to run.

43. The distinction must be drawn, the Crown submit, between a postponement of determination under section 72A because of a need for more information, and a simple adjournment of sentencing, which of necessity involves the adjournment of the determination of the confiscation order. In such circumstances the general provisions of section 72 apply simply requiring the sentence to follow the confiscation order as it did in this case.

44. The interpretation of these amended provisions is not without difficulty. We have resolved any ambiguity in what is in essence a limitation period imposed by section 72A in the Appellant’s favour. There is no reference in the Act to a “primary determination”, no doubt for the good reason that in practice the court, as happened here, decided whether it ought to make a determination at the same hearing as deciding what the recovery ought to be in such a case. The Prosecutor’s statement was likely, as occurred here, to deal with both whether the Defendant had benefited and the extent to which he had benefited. Any defence response under section 73(2) is likely to, as here, deal with the Defendant’s case as to whether there has been any benefit, the value of that benefit, and the amount that might be realised under section 71(6), and the Court is therefore likely to look at all the evidence in the round before deciding whether a confiscation order ought to be made, and if so, in what amount. The concept of a “primary determination” is an artificial and unnecessary concept as far  as the construction of the Act is concerned and in so far as its application in practice is concerned.

45. The time limit under section 72A is applicable where the following conditions are satisfied:-
(1) the court is acting under section 71
(2) the court requires further information before determining whether the Defendant has benefited, or whether his benefit is at least the minimum amount, or determining the amount to be recovered in his case
(3) the court postpones the determinations for the purpose of enabling that information to be obtained.

 (1) Was the court acting under section 71. 
46. As soon as the court embarks upon the process of deciding whether to exercise the power under section 71 it can be said that it is acting under that section. Where, as here, the written notice from the Prosecutor under section 72(1) has been served and where, as here, the Prosecutor’s statement under section 73(1)(a) has also been served on the court and on the Defendant, the process of acting under section 71 has been commenced. This was demonstrated on the facts of this case by the Defendant indicating orally that the Prosecutor’s statement was not accepted as to benefit or its value, and by the court ordering under section 73(2), that the Defendant respond to the Prosecutor’s statement.

47. We are satisfied that on the facts of this case the court was acting under section 71 as from the 6th July 1998 when the plea of guilty was entered, the Prosecutor’s statement served, the defence indication given that the Prosecutor’s statement was disputed, and the order made that the Defendant should respond to that statement.

(2) Further Information.
48. As the Prosecutor’s statement was disputed, the court was not in a position to be able to make the determinations set out in 72A(a)(b)(c) without further information. That information had to come in part from the Defendant, and was to be provided by the response he was ordered to make under section 73(2) even if the Court had decided to seek yet further information (which it did not) from the prosecution or a third party such as the Spanish police. By making his response the Defendant was providing the court with further information as to whether he had benefited, the value of any such benefit and the amount to be realised. The information given in the Prosecutor’s statement and the defence response under section 73 of the C J A would, together with any evidence given in the trial and any evidence given in the confiscation hearing itself, enable the court to make its determination. (R-v-Dickens (1990) 2 QB 102 (A Drug Trafficking Offence Act case but relevant to confiscation orders under the CJA.))

49. We are satisfied therefore that the court in acting as it did on the 6th July 1998 must have considered that it required further information before it could make its determinations.

(3). Postponement made to obtain the information.
50. The adjournment was ordered, on the face of it for two purposes; firstly to adjourn the appellant’s sentence until after such time as his co-accused had been tried and secondly to postpone the determination of the confiscation order proceedings until such time as the court had the necessary further information to make those determinations.

51. It cannot properly be said in the view of this Court that when the matter was adjourned on the 6th July 1998 the adjournment was solely for the purpose of adjourning sentence and merely had the co-incidental effect of also adjourning the confiscation proceedings. The confiscation proceedings themselves plainly had to be postponed until such time as the court was provided with the necessary information in order to make its determination.

52. We are therefore satisfied that a postponement under section 72A was made here even though neither the court nor the parties may have focused on that section when dealing with the matter on the 6th July 1998.

53. In such circumstances the six month period applies unless there were exceptional circumstances for it to be extended. No application was made for any extension beyond the six month period on the grounds of exceptional circumstances, and it is not submitted that there were any exceptional circumstances which could have satisfied the court that it was appropriate to specify a period longer than six months. The court did not consider “exceptional circumstances” under section 72A(3) and cannot, and on the facts could not, have been satisfied that they existed so as to justify specifying a period exceeding six months.

54. We therefore conclude that the court had no jurisdiction to make a confiscation order after the expiry of six months from the date of the plea of guilty in this case. The order that the appellant pay £436,340 and serve 15 months imprisonment in default of payment, is quashed. The appeal against the confiscation order is therefore allowed.