Sentence - Realisable property - Criminal Justice Act 1988
R v Gangar and another: Court of Appeal, Criminal Division (Lord Justice Hughes, Mr Justice Burnett and Mr Justice Nicol): 21 June 2012
The defendants were convicted of a Ponzi-type investment fraud (the fraud). Subscriptions were invited from high-worth individuals on the faith of promises that investments would be made which guaranteed abnormally high returns. None of the money subscribed was either invested or kept separate. Instead, parts of it were used to make payments to earlier investors which purported to be gains and the rest was used by the defendants and a number of associates to sustain their own lifestyles. The fraud involved sustained and complex untruthfulness on the part of both defendants, together with an enormous web of financial transactions, offshore accounts, nominee assets-holders and rapid movement of assets, all designed to hide where the money had gone, whilst putting it out of reach of authority and leaving it available to the defendants.
The fraud was ended by searches of the defendants' houses and their subsequent arrests in October 2002. It was carried out at a time when their assets were frozen under a court order of November 1998 made in connection with a different investigation and after the first defendant had pleaded guilty to charges brought by the Financial Services Authority of failing to provide information without reasonable excuse. After their arrests in October 2002, the defendants continued their financial activities, inviting investments in a number of ventures. At their trial for fraud and bribery, they denied the offences, but were convicted by the jury. Confiscation proceedings followed.
The defendants' benefit was agreed, in each case, to be the sum of £60,750,000. By the time of the confiscation hearings, there were remarkably few assets which could be identified with a view to seizure. However, there were extensive records of transactions which suggested that the defendants either had, or had had, substantial assets, but no sign of where the money was then. The judge concluded that each defendant had available to him solely substantial assets. The first defendant had available over £1.7m. The second defendant had available rather more than £185,000. Furthermore, he found assets which he held to be available to them jointly and concluded that those assets should be treated as available to each of them.
That meant that the available assets of each defendant were lifted by the whole value of the jointly held items, which amounted to something over £971,000. That brought the total for the first defendant to about £2,750,000 and for the second defendant to £1.2m. Default terms of six years', and five years', imprisonment were imposed in relation to the first and second defendants respectively. The defendants appealed.
The issue that fell to be determined was whether, if two defendants were the co-owners of an available asset, the full value of that asset constituted part of the assets available for realisation in relation to a confiscation order in both their cases. The prosecution submitted, inter alia, that the judge had been correct to include the full value of any jointly held assets in the available assets of both defendants. The effect of treating the joint assets as those of both defendants would not be to risk penalising one defendant for failing to pay what he could not pay because the other had used up the joint assets to meet his own confiscation order. That was because if D1 were to pay the money, D2 could apply to the court under section 83 of the Criminal Justice Act 1988 (the 1988 act) for a certificate of inadequacy on the basis that the assets in question was no longer available to him (the prosecution argument).
The defendants contended, inter alia, that the £971,000 held to be available jointly was held by them in equal beneficial shares so that what ought to have been added to their individual assets was, in each case, half of it. Consideration was given, inter alia, to the Proceeds of Crime Act 2002, the Drug Trafficking Act 1994 and to R v May  4 All ER 97 (May). The appeal would be allowed in part.
Any one defendant could only be called upon to realise what was his to realise. That was limited to his beneficial interest. The remaining question was one of evidence. It was established law that the starting point in a case of co-ownership was that equality was prima facie equity. The beneficial interests were, prima facie, equal. It was further settled law that the essential feature of confiscation was that no one was to be penalised for not paying what he had not got. It could not possibly be the law that a judge was required to make two confiscation orders on the basis that if one was satisfied, the other, which became impossible of obedience, would then require an application for a certificate of inadequacy or for a variation in order to cure a defect which was always patent.
Even if such applications were to be required in every case, they would not, in many instances, have cured the defect, because it could not have been predicated that they would succeed. Treating jointly held assets as 100% available to both defendants had not been required by May, nor did it accord with the scheme of the 1988 act or with principle (see -,  of the judgment).
On the facts of the instant case, the confiscation orders made against the defendants were wrong insofar as they had been based upon treating the jointly held assets as 100% available to both of them. If the prosecution argument had been correct, then the result would have been orders which, by definition, required one or other defendant to pay what he could not have had. That was because the orders as made required, as to the joint assets, the payment in total of 200% of the value found to exist. The appeals had to be allowed to the limited extent of repairing the error. Absent the element of double counting, the order against the first defendant ought to have been in the sum of £2,289,074.03 and that against the second defendant ought to have been in the sum of £686,996.81. There would be a consequential effect on the sentence in default in the case of the second defendant (see ,  of the judgment).
The confiscation orders would be quashed and confiscation orders in the sums of £2,289,074.03 and £686,996.81 would be substituted in respect of the first and second defendants respectively. In the case of the second defendant, the default term of five years' imprisonment would be quashed and a default term of three-and-a-half years' imprisonment would be substituted (see  of the judgment). R v May  4 All ER 97 applied; R v Chrastny (No 2)  1 All ER 193 criticised; R v Buckman  1 Cr App Rep (S) 325 considered; R v Simpson  2 Cr App Rep (S) 111 considered; S (application under section 41 of the Proceeds of Crime Act 2002), Re  All ER (D) 180 (Nov) considered.
Geoffrey Cox QC and Nathaniel Rudolf (instructed by Messrs Janes) for the first defendant; Rex Tedd QC and Martin Liddiard (instructed by Frisby & Co) for the second defendant; James Curtis QC and Martin Pinfold (instructed by the Crown Prosecution Service) for the Crown.