Communicated on 29 January 2015
FOURTH SECTION
Application no. 23178/13
Vjacheslav DOSTENKO
against the United Kingdom
lodged on 26 March 2013
STATEMENT OF FACTS
The applicant, Mr Vjacheslav Dostenko, is a British national who was born in 1967 and who is currently detained in Her Majesty’s Prison Highpoint, Newmarket.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
1. The background facts
The applicant and another defendant (“K”) ran a business together which the Crown alleged was a vehicle for cheating the public revenue through fraudulent tax repayment claims.
On 9 December 2009 the applicant and K were convicted of one count of cheating the public revenue. The applicant was also convicted of a second count of cheating the public revenue, which related to the continued operation of the fraudulent activity while K was in prison.
On the same day K was sentenced to eight years’ imprisonment. For procedural reasons the applicant was not sentenced until 15 October 2010, when he received concurrent sentences of seven years and three years on the first and second counts respectively. Both the applicant and K were sentenced on the basis that the fraud had deprived the revenue of GBP 1,665,567.29.
On 26 March 2012 confiscation orders were made against the applicant and K. The prosecution had contended that the applicant’s benefit amounted to GBP 1,665,567.29 and K’s to GBP 1,584,733.20, the difference reflecting the applicant’s additional offending. The applicant did not dispute the benefit figure. K did, arguing, inter alia, that because half of the amount paid out had been in untraceable payable orders, it could not be proven that the defendants in fact received that half of the proceeds. However, the judge rejected that argument and found as a fact that the prosecution’s assessment of the benefit figure was correct.
The judge also considered the question of apportionment. After considering the evidence regarding the level of each defendant’s involvement in the fraud, he rejected their contention that the sum should be apportioned:
“these men were both involved at a very high level indeed in the [...] fraud. They both worked jointly, they both jointly benefited and they are each jointly liable for the full sum of benefit.”
The judge finally considered the question of the available amount. He noted that in respect of each defendant only GBP 28,806.12 in assets had been discovered. However, as there was no cogent evidence as to what had happened to the remaining money, he could not find that it was unavailable to the defendants. He therefore held that in respect of each defendant the available amount was the benefit figure.
Consequently, confiscation orders were made in the amounts of GBP 1,665,567.29 for the applicant and GBP 1,584,733.20 for K, with sentences in default of six years.
2. Appeal to the Court of Appeal
On 20 February 2012 the applicant had applied for leave to appeal against conviction. He had also applied for an adjournment of the confiscation proceedings pending the outcome of the appeal proceedings but this application was refused.
On 25 June 2012 the applicant applied for leave to appeal against sentence on the ground that the sentence was unfair because it was based on an incorrect benefit figure.
On the same day the applicant also applied for leave to appeal against the confiscation order. He argued only two points: first, that the recoverable amount should have been apportioned between the defendants because they had acted as equal partners, failing which the order amounted to “double recovery” and was therefore disproportionate; and secondly, that the judge had failed properly to consider whether the applicant’s realisable assets were less than the recoverable amount.
Although the applicant was represented by counsel, he included some forty pages of his own grounds. Insofar as they related to the confiscation order and raised distinct points to those of counsel, they argued that there was abuse and bias in the judge’s calculation of the benefit figure and in his decision not to adjourn the confiscation proceedings pending a decision on the application for permission to appeal against conviction.
3. The single judge’s rulings
On 3 October 2012 each of these applications was refused by a single judge.
With regard to the appeals against conviction and sentence, permission was refused because the applications had been made out of time and the judge refused to extend time as no sufficient explanation had been given for the long delay. In any case, he noted that there was no proper basis for allowing an appeal.
In relation to confiscation order, although the application for permission to appeal had been lodged marginally out of time the judge refused permission to appeal because he did not consider that there were any grounds for challenging the order. In particular, he found that the judge had been right not to apportion the sum, having found that the applicant and K were jointly responsible for the fraud.
4. The full Court of Appeal’s ruling
The applicant renewed his application at an oral hearing. However, on 20 December 2012 the full Court of Appeal refused his application for permission to appeal. In relation to the appeals against conviction and sentence, the court agreed that there was no good reason to grant an extension of time for the appeal and it could therefore be dismissed on that ground only. However, it noted that the single judge had carefully considered in meticulous detail all the applicant’s many grounds of appeal and it agreed entirely with his conclusion that there was no properly arguable ground of appeal against conviction or sentence and that those applications were wholly without merit.
In respect of the appeal against the confiscation order, the court noted that the application was marginally out of time, but indicated that it would primarily rule on the merits.
It found first, that it was clearly established by authority that a confiscation order might properly require a defendant to pay the whole of the sum which he has obtained jointly with one or more others (see, for example, R v. May [2008] UKHL 28 and R v. Waya [2012] UKSC 51). It further found that the defendant had not discharged the burden of proof necessary to demonstrate that the available amount was less than the benefit figure.
The applicant’s separate grounds were dismissed as they were not properly arguable and disclosed no proper basis for an appeal.
5. The sentences in default
The applicant did not pay the sum due under the confiscation order and on 12 June 2012 the Magistrate’s Court activated his sentence in default of payment.
K, who was not a British national, was deported without paying the sum due under the confiscation order and without serving the sentence in default.
B. Relevant domestic law
1. The Proceeds of Crime Act 2002
Confiscation proceedings are governed by the Proceeds of Crime Act 2002 (“the 2002 Act”). Section 6(4) sets out the approach to be followed by the court:
“(a) it must decide whether the defendant has a criminal lifestyle;
(b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct;
(c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct.”
Under section 76(4), a person benefits from conduct if he obtains property as a result of or in connection with the conduct. Section 76(7) provides that if a person benefits from conduct, his benefit is the value of the property obtained.
Section 10 provides for the making of four assumptions for the purpose of deciding whether or not a defendant has benefited from his general criminal conduct and calculating his benefit from that conduct. Where relevant, it provides:
“(1) If the court decides under section 6 that the defendant has a criminal lifestyle it must make the following four assumptions for the purpose of —
(a) deciding whether he has benefited from his general criminal conduct, and
(b) deciding his benefit from the conduct.
(2) The first assumption is that any property transferred to the defendant at any time after the relevant day was obtained by him —
(a) as a result of his general criminal conduct, and
(b) at the earliest time he appears to have held it.
(3) The second assumption is that any property held by the defendant at any time after the date of conviction was obtained by him —
(a) as a result of his general criminal conduct, and
(b) at the earliest time he appears to have held it.
(4) The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct.
(5) The fourth assumption is that, for the purpose of valuing any property obtained (or assumed to have been obtained) by the defendant, he obtained it free of any other interests in it.
(6) But the court must not make a required assumption in relation to particular property or expenditure if —
(a) the assumption is shown to be incorrect, or
(b) there would be a serious risk of injustice if the assumption were made.”
The “relevant day” referred to in subsections (2) and (4) is normally the day six years before proceedings were started against the defendant (section 10(8)). Thus, any property transferred to the defendant at any time in the six years before his conviction will be assumed to have been obtained by him as a result of his general criminal conduct.
Pursuant to section 6(5), where the court decides that the defendant has benefited from the conduct referred to it must calculate the recoverable amount and make a confiscation order requiring him to pay that amount. Section 6(7) requires any question arising under subsections (4) or (5) to be decided on a balance of probabilities.
Section 7 provides guidance on fixing the recoverable amount:
“(1) The recoverable amount for the purposes of section 6 is an amount equal to the defendant’s benefit from the conduct concerned.
(2) But if the defendant shows that the available amount is less than that benefit the recoverable amount is–
(a) the available amount, or
(b) a nominal amount, if the available amount is nil.”
2. Case-law in respect of confiscation
In R. v. Wilkes [2003] EWCA Crim 848, the defendant appealed against a confiscation order made under the Criminal Justice Act 1988 (the provisions of which were similar to those contained in the 2002 Act). Together with a number of others, he had taken goods up to the value of GBP 7,000 from a shop when they were interrupted by police officers. All of the goods were recovered. Goods from a second linked offence also appear to have been recovered separately. He maintained that he had not benefited from the offences because the police had recovered the goods. Dismissing the appeal, the court observed that the question of whether the offences had resulted in a successful outcome for the defendant was irrelevant. When the appellant had completed the commission of the offences he had obtained property and the fact that he had been unable to realise that property because of the intervention of the police was immaterial.
In R v. Sharma [2006] EWCA Crim 16 the Court of Appeal for England and Wales (Criminal Division) found that the 1988 Act focused on the individual benefit obtained by each defendant, the total amount of which was not limited by the amount of the victim’s loss (paragraph 19 of its judgment). The court went on to observe (at paragraph 25):
“In our judgment, since the Act is concerned to force a defendant to surrender the benefit he has obtained from his criminal activity, so long as the benefit he obtained is correctly calculated, it cannot be disproportionate for him to be made accountable for what he obtained. The amount of the benefit he obtained is not affected by the amount which might also be obtained by others to whom he transfers any part of the benefit. The amount of money which might be recovered pursuant to a confiscation order is irrelevant. In every case, at the time a confiscation order is made, there can be no certainty that the amount to be paid will be paid and thus, where more than one confiscation order is made in respect of a victim’s loss, the question of double recovery may not arise.”
R v. May [2008] UKHL 28 concerned several defendants who had been jointly responsible for fraud. The trial judge had decided that the property obtained had been held jointly by them, that each had benefited in the amount jointly held, and that there was no requirement to apportion that amount between them. In confirming that approach, the House of Lords observed (at paragraph 45 of the Report from the Appellate Committee):
“There might be circumstances in which orders for the full amount against several defendants might be disproportionate and contrary to Article 1 of the First Protocol, and in such cases an apportionment approach might be adopted, but that was not the situation here and the total of the confiscation orders made by the judge fell well below the sum of which the Revenue had been cheated.”
It went on to state at paragraph 46:
“The sum which the appellant, jointly with others, was found to have fraudulently obtained from HM Customs and Excise was, in law, as much his as if he had acted alone. That conclusion leads ineluctably to the further conclusions that he benefited from his offending, and benefited to an extent substantially greater than the confiscation order made against him ... The order made was less than his realisable assets. It is entirely consistent with the legitimate objects of the legislation, and it requires, that he be ordered to pay such sum, which involves no injustice or lack of proportionality. The legislation is, as Lord Steyn described it in R v. Rezvi [2003] 1 AC 1099, para 17, ‘a precise, fair and proportionate response to the important need to protect the public’.”
Finally, as part of the endnote to the Report, it was stated (at paragraph 48(1):
“The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means. It does not provide for confiscation in the sense understood by schoolchildren and others, but nor does it operate by way of fine. The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses or any amounts payable to co‑conspirators.”
In R. v. Green [2008] UKHL 30 (heard and delivered at the same time as May) the House of Lords reached the same conclusion in respect of equivalent confiscation provisions in the Drug Trafficking Act 1994. It added that it could not regard it as disproportionate to make an order depriving a defendant of a benefit which he had in fact and in law obtained, within the limits of his realisable assets. It noted that challenges to the proportionality of the confiscation regime (as in Phillips v. the United Kingdom, no. 41087/980 ECHR 2001-VII and in its own judgment in R v. Rezvi [2002] UKHL 1, [2003] 1 AC 1099) had not succeeded. Finally, counsel for Green had sought to argue that the possibility of “multiple recovery” of the same sum from different offenders was not sanctioned by the relevant international conventions on the matter (including the Council Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime) or by the confiscation regimes of Australia, Canada, New Zealand or the United States. The House of Lords rejected that submission, stating that, in construing a United Kingdom statute, the meaning of which it judged to be clear, it could not be influenced by the legislation of other countries, even if (as might be the case) those countries had chosen to give effect to common international obligations in a different way.
In R v. Waya [2012] UKSC 51 the Supreme Court analysed the compatibility of the 2002 Act with the Convention. They stated that:
“26. It is apparent from the decision in May that a legitimate, and proportionate, confiscation order may have one or more of three effects:
(a) it may require the defendant to pay the whole of a sum which he has obtained jointly with others;
(b) similarly it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property;
(c) it may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.
These propositions are not difficult to understand. To embark upon an accounting exercise in which the defendant is entitled to set off the cost of committing his crime would be to treat his criminal enterprise as if it were a legitimate business and confiscation a form of business taxation. To treat (for example) a bribe paid to an official to look the other way, whether at home or abroad, as reducing the proceeds of crime would be offensive, as well as frequently impossible of accurate determination. To attempt to enquire into the financial dealings of criminals as between themselves would usually be equally impracticable and would lay the process of confiscation wide open to simple avoidance. Although these propositions involve the possibility of removing from the defendant by way of confiscation order a sum larger than may in fact represent his net proceeds of crime, they are consistent with the statute’s objective and represent proportionate means of achieving it....”
Finally, in R v. Ahmad [2014] UKSC 36, the Supreme Court modified the operation of confiscation orders to render them compatible with Article 1 of Protocol No. 1. It found that:
“72. In our view Mr Mitchell’s argument is as compelling as it is simple. 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.
[...]
74. Accordingly, where a finding of joint obtaining is made, where 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 sum has been recovered by way of satisfaction of another confiscation order made in relation to the same joint benefit.
[...]
76. [This solution, unlike a solution whereby the recoverable amount was calculated in a different way,] does not involve calling into question any decision made or guidance given by the House of Lords or the Supreme Court. It simply involves qualifying the effect of the orders which would follow from those decisions in a way which, while not contemplated in any of the judgments, is not inconsistent with anything said in them, and on a basis which was not considered, let alone rejected, in them.”
COMPLAINTS
Complaints in relation to confiscation
The applicant complains that his rights under Article 6 and Article 1 of Protocol No. 1 have been violated because of the failure to apportion the benefit. He also complains under Article 6 about the fairness of the proceedings in general, with particular reference to alleged failures in prosecution disclosure, the calculation of the benefit figure, alleged bias on the part of the trial and appeal judges, and the failure to adjourn the proceedings in light of his appeal against conviction. With respect to his complaint under Article 1 of Protocol No. 1, he further complains that the judge ignored his evidence as to the benefit figure, that the confiscation order amounted to a second punishment for one offence, and that the prison sentence in default was activated despite his pending appeals.
The applicant also complains that the sentence in default violated his rights under Article 5 of the Convention; and, as the confiscation order amounted both to a second penalty for the same offence, and to a retrospective penalty, that it violated Article 7 of the Convention.
The applicant raises the above complaints alone and together with Article 14 of the Convention.
Finally, the applicant complains that there has been a violation of his rights under Article 17 of the Convention.
QUESTION TO THE PARTIES
Did the confiscation order made against the applicant violate either Article 6 or Article 1 of Protocol No. 1 to the Convention?
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