Success in the Supreme Court for Martin Evans QC
On the appeal of the CPS, the Supreme Court has reversed the decision of the Court of Appeal in Andrewes and restored the confiscation order made in the Crown Court.
The facts
The case was an example of ‘CV fraud’. A obtained remunerative employment and two NHS appointments as a result of dishonest statements made about his academic qualifications and employment experience in the respective job applications. He would not have been offered the positions had the truth been known because he did not possess the required qualifications or experience. His employment/positions would have been terminated at once had the truth been discovered; in the event, he resigned before he could be sacked.
The false representations continued throughout his employment/terms of office and were not limited to the date on which the dishonest job applications were submitted. When sentencing, the judge remarked that for a period of over 10 years A’s outwardly prestigious life “had been based on a lie - more accurately, a series of staggering lies”.
In the Crown Court, benefit was calculated by reference to his total net salary and remuneration (£643,602.91). However, as the available amount, and hence the recoverable amount, was agreed to be £96,737.24, the confiscation order was made in that sum.
The decision of the Court of Appeal
In the Court of Appeal [CoA] it was argued for A that (i) his remuneration was causally too removed from the criminal conduct to constitute benefit therefrom (the causation issue); and (ii) the confiscation order was disproportionate because it in substance required him to make payment back of his remuneration in circumstances where he had already given full value (the proportionality issue).
The CoA rejected A’s contentions on the first ground but decided that the order was disproportionate because by performing the services, he had given full value for the remuneration he had received [§91]. However, the court distinguished those cases where the false representation concerns a legal requirement for the post (e.g. holding an HGV licence or being entitled to work in the UK); in such a case, the applicant has no lawful right to work, and cannot lawfully give value [§94]. As there was no legal bar to A’s being employed or appointed, he was to be taken as having given full value for his remuneration. The situation was therefore analogous to restoring the benefit received. A confiscation order would accordingly be disproportionate to the aim of the 2002 Act: it would involve a double penalty [§98].
The CoA certified this point of law for the Supreme Court to answer:
“Where a defendant obtains remuneration as a result of or in connection with an offence of fraud based upon the obtaining of employment by false representations or non-disclosure, in what circumstances (if any) will a confiscation order based on the wages earned be disproportionate within the terms of section 6(5) of the Proceeds of Crime Act 2002, or contrary to Article 1, Protocol 1 of the European Convention on Human Rights?”
The decision of the Supreme Court
For the Crown, it was argued that a confiscation order reflecting A’s total net salary over the 10 years of his employment was not disproportionate. Performing work obtained by fraud was equivalent to the costs of the criminal enterprise and therefore not ‘analogous to restoration’ (Waya at §34). The effect of the CoA’s decision was that A was able to retain the property he obtained “as a result of or in connection with” his offending – an outcome wholly at odds with the legislative aim of ensuring that criminals do not profit from their crimes (Waya at §2).
A adopted the approach of the CoA – any confiscation order would be disproportionate where, as here, work was carried out to the satisfaction of the employer.
The Supreme Court [SC] rejected both the ‘take all’ [CPS] and the ‘take nothing’ [A] approaches. Applying the ‘disproportionality proviso in s.6(5) of PoCA, the question for the judge is whether the confiscation of the sum in question (the recoverable amount) is a proportionate means of achieving the legitimate aim – namely, stripping the criminal of the fruits of crime [38].
As to the ‘take all’ approach, although the performance of the services was not restoration as such (services cannot be restored in the same way as money or goods), a confiscation order which did not reflect a deduction for the value of the services rendered, while requiring the defendant to repay the net earnings, would constitute “double disgorgement”. Double disgorgement goes beyond disgorgement of benefits and constitutes a penalty – which would be disproportionate [41].
However, the ‘take nothing’ approach was also wrong. It was not disputed that A would not have been employed or appointed to the NHS offices if the truth had been known. He would be profiting from his crime if no confiscation order were made [44]. A proportionate order would require him to disgorge not the full net earnings but rather the difference between the higher earnings he obtained and the lower earnings that he would have obtained had he not used fraud and hence had not been offered the particular job. This is to take away the “profit” made by the fraud (analogously to the reasoning adopted in R v Sale). This approach provides a principled “middle way” (or “halfway house”) between the take all or take nothing approaches [45].[1]
Focusing on profit obtained by a defendant from the fraud does not involve plucking a figure out of the air or a ‘discretionary multi-factorial approach’ (as contended by A) but does require the Crown to provide some evidential basis for comparing earnings with and without the fraud. It will usually be appropriate, as a pragmatic approximation of the relevant profit, simply to take the difference between the fraudster’s initial salary in the job obtained by fraud and the salary in his or her prior job. A detailed or precise evidential or accounting exercise is not needed - that would be inappropriate for confiscation orders where clear rules and a broad-brush approach are necessary so as to avoid complicating the administration of justice in the Crown Court [48].
Since the proviso in s.6(5) of PoCA instructs the court to address the proportionality question in relation to the recoverable amount rather than the benefit obtained, this will sometimes operate to simplify the task of the Crown Court judge. There is no need for much time and effort to be expended in assessing, even in a broad-brush way, the difference between the earnings with and without the fraud if it is clear (as on the facts of this case) that, in any event, that difference will exceed the recoverable amount [50]. Here, before he was employed at the Hospice (the first offence) A had been earning £54,361 gross; the initial salary he obtained by reason of his fraud was £75,000 gross, an increase of 38%. On a broad-brush basis a proportionate confiscation order (assuming not exceeding the recoverable amount) would therefore be 38% of the total net salary (£643,602.91), namely £244,569. That figure was A’s profit from his fraud [51]. Since the recoverable amount was only £96,737.24, the confiscation order was proportionate.
The Court stressed that the ‘middle way’ it adopted has no application where the performance of the services is illegal (i.e. where a person is appointed to a job as a surgeon or airline pilot or HGV driver because he or she has lied in the job application about having the necessary qualifications or licence to be appointed to that job) [53]. Since the performance of the services by such a person would constitute a criminal offence, it would not be disproportionate to confiscate the full net earnings because the performance of those services has no value that the law should recognise as valid [42].
Comment
The decision has significance beyond cases of CV fraud for the following reasons:
First, although there was no direct authority on the point, the SC decided that, given the criminal context, it is for the prosecution to establish that it would not be disproportionate to require the defendant to pay the recoverable amount. This clarification is helpful but it remains the case that a confiscation order made in accordance with the statutory scheme will be presumptively proportionate because it is concerned only with benefit obtained by the defendant from relevant criminal conduct and cannot exceed the available amount. A disproportionate confiscation order will be the exception: see Waya at §21 and Box, §20. The court must decide any question arising under s.6(5) on a balance of probabilities: s.6(7).
Second, in applying the reasoning of the CoA in Sale [2013] EWCA Crim 1306, [2014] 1 WLR 663, the SC focussed on the fact that A had profited from his offending even though he had given value for the remuneration he received. Since the legislative aim of Part 2 of PoCA is to ensure that criminals do not profit from their crimes, a confiscation order that requires the defendant to disgorge that profit is not disproportionate. In Sale, Network Rail had received full value; although a confiscation order to the full value of the corruptly obtained contracts was disproportionate, it was proportionate to require the defendant to disgorge the profit made and to treat the full value given under the contract as analogous to full restoration to the loser.
Third, although a ‘profit-based’ confiscation order is likely to be appropriate where the provision of the service in question is otherwise lawful, in the case of a criminal enterprise (e.g arms dealing without a licence), no deduction is to be made on the ground of proportionality because the provision of illegal labour does not constitute restoration of value.
Fourth, in assessing proportionality, a detailed or precise evidential or accounting exercise is not needed - that would be inappropriate for confiscation orders where clear rules and a broad-brush approach are necessary will be appropriate so as not to ensnare the courts in complex assessments requiring detailed evidential enquiries. Moreover, there is no need for much time and effort to be expended in assessing profit, even in a broad-brush way, if it is clear that, in any event, that difference between the earnings with and without the fraud will exceed the recoverable amount.
The judgment can be found on the Supreme Court website here.
Westlaw’s commentary can be found here.
Martin Evans QC was instructed by the CPS alongside Cameron Brown QC
[1] At the conclusion of the hearing, the CPS was invited to make supplemental written submissions in relation to a possible middle way in the event the Court were to reject its primary submission favouring a “take all” approach – which it did: see §46 of the judgment.