Trinity Term [2014] UKSC 36 On appeal from: [2012] EWCA Crim 391; [2013] EWCA Crim 2042

JUDGMENT
R (Appellant) v Ahmad and another (Respondents)
R (Respondent) v Fields and others (Appellants)
before
Lord Neuberger, President
Lord Sumption
Lord Reed
Lord Hughes
Lord Toulson
JUDGMENT GIVEN ON
18 June 2014
Heard on 10 and 11 February 2014
Appellant Respondents (Ahmad)
Simon Farrell QC Andrew Mitchell QC
William Hays Kennedy Talbot
(Instructed by CPS
Appeals Unit
)
(Instructed by Bivonas
LLP
)
Appellants (Fields) Respondent
Tim Owen QC Simon Farrell QC
Andrew Bodnar William Hays
(Instructed by Morgan
Rose
)
(Instructed by CPS
Appeals Unit
)
Intervener (Secretary of
State for the Home
Department)
James Eadie QC
Mathew Gullick
(Instructed by the
Treasury Solicitor
)
LORD NEUBERGER, LORD HUGHES AND LORD TOULSON (with whom
Lord Sumption and Lord Reed agree)
Introductory
1. Since 1986, there has been legislation in this country to meet the perceived
need for an effective confiscation process to deter criminal activity, especially large
scale fraud and drugs-related activities, which are often of a cross-border nature.
This concern has, unsurprisingly, not been limited to this country, as is evidenced
by Conventions such as the United Nations Convention Against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances 1988, and the Council of Europe
Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from
Crime 1990.
2. The aim of such legislation is to introduce a robust process of “asset
recovery” into the legal system of the United Kingdom. The first statute in England
and Wales with this aim was the Drug Trafficking Offences Act 1986 (which was
replaced by the Drug Trafficking Act 1994), which was shortly followed by the more
broadly targeted Part VI of the Criminal Justice Act 1988, which in turn was
amended by the Proceeds of Crime Act 1995. The provisions of Part VI of the 1988
Act (as amended by the 1995 Act) and the 1994 Act were repealed and replaced by
the fuller provisions of the Proceeds of Crime Act 2002, although the 1988 Act (like
the 1994 Act) still applies to crimes committed before the 2002 Act came into force.
These appeals are concerned only with post-conviction confiscation orders.
Different provisions apply to civil recovery independent of any criminal
prosecution.
3. The two instant appeals concern the proper approach for the court to adopt,
and the proper orders for the court to make, in confiscation proceedings where a
number of criminals (some of whom may not be before the court) have between
them acquired property or money as a result of committing an offence for which all
or only some of them have been convicted in the trial which led to the proceedings.
An outline of the post-conviction confiscation legislation
4. The statutory exercise of asset recovery often starts before a defendant is
convicted, through the medium of an order freezing all or some of his assets, but it
is only after conviction that the extent of a defendant’s liability is finally assessed
by the court. The role of the court at that point is to determine the “recoverable
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amount” from a convicted defendant and to make an order requiring him to pay it.
The extent of a defendant’s liability for this sum is based on the value of the property
which he obtained “as a result of or in connection with” the conduct which gave rise
to the offence or offences of which he was convicted – section 71(4) of the 1988 Act
and section 76(4) and (7) of the 2002 Act.
5. The 2002 Act has widened the potential liability of a defendant who has a
“criminal lifestyle”. Such a defendant can be made liable for a recoverable amount
which is based on the proceeds not merely of the criminal activity of which he has
been convicted, but on the proceeds of his “general criminal conduct” – see section
6(4) of the 2002 Act. A defendant has a “criminal lifestyle” if he falls within section
75 and Schedule 2. The conditions there set out include conviction of certain
specified offences, such as money laundering and drugs or arms trafficking,
conviction of a minimum number of other offences, and conviction of one or more
offences committed over a specified period. In a case where a defendant has a
“criminal lifestyle”, certain rebuttable assumptions are specifically required to be
made against the defendant (eg as to the source of his wealth) by section 10 of the
2002 Act when assessing the recoverable amount. Seven years before the passing of
the 2002 Act, a new provision, section 72AA, was added to the 1988 Act which had
a rather similar purpose albeit a narrower scope.
6. In order to determine the recoverable amount, the judge first has to assess the
“value of the property obtained” by the defendant through the criminal activity in
question. That figure is the greater of (a) the value of that property when it was
obtained, adjusted for subsequent inflation, and (b) the current value of that property
or of any property which has been substituted for it – see sections 71(4) and 74(5)
of the 1988 Act and sections 76(2) and 80(2) of the 2002 Act. Having arrived at that
figure, the judge must assess the recoverable amount at that figure, save that sections
7(1), (2) and 9(1) of the 2002 Act provide that, if the defendant can show that it is
more than the total value of his assets, the judge should assess the recoverable
amount as that total value. The 1988 Act had similar provisions in sections 71(6)
and 74(1)-(3).
7. Confiscation hearings can take a long time. In one of the two cases before us,
the confiscation hearing lasted over four weeks. Article 6.1 of the European
Convention on Human Rights (“the Convention”) applies to all aspects of such a
hearing. However, article 6.2 of the Convention does not, as the hearing is treated
as part of the sentencing process rather than part of the criminal trial – see Phillips
v United Kingdom [2001] Crim LR 817, (2001) 11 BHRC 280, paras 34-36. In that
case, the Strasbourg court rejected the contention that a mandatory statutory
assumption that payments received by a convicted drug dealer were derived from
drug trafficking infringed the Convention, and referred to confiscation as “a weapon
in the fight against the scourge of drug trafficking” – para 52. In the subsequent
case of Grayson v United Kingdom [2009] Crim LR 200, (2008) 48 EHRR 722, the
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Strasbourg court held that imposing a reverse burden of proof on a convicted
defendant in relation to certain issues at the confiscation hearing also did not infringe
the Convention – see especially para 49.
8. In R v Silcock and Levin [2004] EWCA Crim 408; [2004] 2 Cr App R (S) 61,
para 60 and R v Clipston [2011] EWCA Crim 446; [2011] 2 Cr App R (S) 101, paras
57-60, the Court of Appeal, Criminal Division explained that the character of a
confiscation hearing was more civil than criminal. Thus, the judge can decide issues
on the balance of probabilities, compel the defendant to disclose documents, draw
adverse inferences from the absence of evidence, and rely on hearsay evidence. In
our view, this is plainly right, both as a matter of principle and in the light of section
71(7A) of the 1988 Act and section 6(7) of the 2002 Act.
9. Once the recoverable amount is determined, the judge should make an order
requiring the defendant to pay it within a period which (under section 75(1) of the
1988 Act) would be the same as for a fine, or (under section 11 of the 2002 Act)
must be specified by the court but cannot exceed twelve months. If and to the extent
that the recoverable amount is not paid, the defendant must serve a term of
imprisonment in default, fixed by the judge by reference to section 139(4) of the
Powers of the Criminal Courts (Sentencing) Act 2000 – see section 75(2) of the 1988
Act and sections 35-39 of the 2002 Act. Serving that default term does not, however,
remove the liability to pay – see section 75(5A) of the 1988 Act and section 38(5)
of the 2002 Act.
10. Confiscation hearings may take place before sentencing, or can be – and often
are – postponed, but the postponement should not be for a period of more than six
months (under the 1988 Act) or two years (under the 2002 Act) from the date of the
conviction unless there are “exceptional circumstances” – see section 72A of the
1988 Act and section 14 of the 2002 Act.
The facts giving rise to these two appeals
11. In the first appeal, the appellants, Shakeel Ahmad and Syed Ahmed (“the
Ahmad defendants”) were convicted by a jury of fraud and sentenced by His Honour
Judge Alexander QC to seven years in prison. The fraud was a so-called carousel
fraud, which involves criminally misusing the collection system of Value Added
Tax (“VAT”) to extract money from the revenue authorities. The Ahmad defendants
had been the sole directors and shareholders of a company known as MST, which
dealt in computer central processing units (“CPUs”), which were zero rated for VAT
purposes on import to the United Kingdom. The fraud involved five companies in
Ireland, which, in a total of 32 transactions during April 2002, purported to export
large quantities of CPUs to five companies in the UK, each of whom was either a
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registered company which went “missing” or a genuine company the identity of
which was hijacked by the fraudsters. The missing trader then ostensibly sold the
goods to a company known as GW224, which then sold the goods on to MST.
12. GW224 was a company interposed to make it more difficult for the
authorities to identify the fraud. On paper, the missing trader sold the goods to
GW224 at a loss enabling everyone else in the supply chain ostensibly to sell on at
a profit. The missing trader issued a VAT invoice to GW224 enabling it to deduct
the amount shown as input tax from the amount due from GW224 to HM Revenue
and Customs (“HMRC”) in respect of output tax on the onwards sale to MST. MST
then sold the goods on to an exporting company, for an amount which included
VAT. The exporting company then exported the goods back to the company in
Ireland which had originally sold the goods. In many cases the whole chain of
transactions took place on the same day.
13. No VAT was payable on the export. The exporting company however then
reclaimed the VAT which it had paid to MST. The amount of the VAT which was
fraudulently reclaimed by the exporting company was about £12.6m, which
represented HMRC’s loss as a result of the fraud. If the transactions had been
genuine and there had been no missing trader then there would have been no loss to
HMRC.
14. After the Ahmad defendants had been convicted, there was a confiscation
hearing, pursuant to the 1988 Act, which lasted some thirty days before Flaux J. In
a full and careful judgment, he concluded that MST made
a. Payments directly to one of the Irish companies, including the first
payment made in order to “prime the pump” for the fraud;
b. Payments to GW224 to prime the pump; and
c. Payments to “cashing-up accounts”: entities which allowed their
(genuine) accounts to be used for converting the proceeds of the fraud
into cash or to buy gold bullion.
15. None of the cash or gold bullion could be traced. The judge found that the
vast majority of MST’s trading over the relevant period was fraudulent and that the
Ahmad defendants had used MST for the purpose of crime. He also held that they
controlled its property, and that as between themselves they held everything in its
name jointly and equally. There was no evidence as to the means by which the
Ahmad defendants had extracted their gains from the fraud, nor was there any
evidence as to the number of other participants in the fraud. The judge said that
nothing which either of the Ahmad defendants said could be relied upon to be
truthful. They had deliberately flouted the restraint order by disposing of frozen
assets. They had advanced repeated false allegations against their own lawyers,
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which the judge described as “outrageous”. They had abused the proceedings by
deliberate time wasting and irrelevance. Both Ahmad defendants, Flaux J said, were
“unscrupulous and deeply mendacious”.
16. The Ahmad defendants contended that they had obtained no benefit at all and
that MST had merely acted as an intermediary for others. The judge rejected that
evidence. He concluded that, for the purposes of the 1988 Act, the benefit obtained
by MST was the benefit obtained by the Ahmad defendants jointly. He assessed that
benefit at a very large figure for which the Crown no longer contends. The Court of
Appeal determined that benefit to be the loss suffered by HMRC, namely £12.6m,
which translated to £16.1m when adjusted for inflation. The judge rejected the
defendants’ evidence that the available amount was less, and that was the
recoverable amount specified payable by each of them in the confiscation orders
made by the Court of Appeal. As Hooper LJ put it, in reliance on what Lord Bingham
said in R v May [2008] UKHL 28; [2008] AC 1028, para 43, “where a benefit is
obtained jointly, each of the joint beneficiaries has obtained the whole of the benefit
and may properly be ordered to pay a sum equivalent to the whole of it”, unless the
circumstances were such that such a decision would infringe article 1 of the first
protocol to the Convention (“A1P1”) – see [2012] EWCA Crim 391, [2012] 1 WLR
2335, para 21. The default prison terms set by the judge were upheld at ten years in
each case.
17. In the second appeal, the three appellants, Michael Fields, Mitesh Sanghani
and Karamjit Sagoo (“the Fields defendants”), and a fourth man, Wasim Rajput,
were found guilty by a jury of conspiracy to defraud over a period between January
and June 2005. The Fields defendants were each sentenced to five years in prison,
and Mr Rajput was imprisoned for thirty months.
18. The fraud was said by the prosecution to involve two other men who were
acquitted, and one other man as to whose guilt the jury was unable to agree. The
Fields defendants were described by the trial judge, His Honour Judge Carr, as being
“at the heart of the fraud”, and that it was “a joint operation between them”, whereas
Mr Rajput’s position was accepted by the judge as being more peripheral.
19. The fraudulent conspiracy involved the use of a company called Mercury
Distributions Ltd (“MDL”), whose published accounts for the years 2002/3 and
2003/4 falsely recorded that it had over £1m in fixed assets. It was appreciated that
potential customers of MDL would be likely to check the accounts before
committing themselves to doing business with it and granting credit. Premises were
obtained by Mr Sagoo in February 2005, with the assistance of false trade references.
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20. From then on, MDL engaged in fraudulent trading, applying to buy goods or
obtain services on credit, which resulted in credit checks which indicated that it was
financially healthy. As a result, credit agreements were approved, and goods and
services were supplied by around 35 businesses, but no payments were ever made
and, at least for the most part, the goods disappeared. The Fields defendants were
each instrumental in this fraudulent activity. Mr Rajput was much less closely
involved.
21. In the subsequent confiscation proceedings, which were described by Davis
LJ as “protracted”, it appears that the evidence on behalf of the Fields defendants
was attenuated and misleading. The judge found that the total benefit, in the form of
goods and services supplied, arising from the conspiracy was about £1.4m, which
had been acquired jointly by the Fields defendants. Having adjusted that figure
upwards to about £1.6m to allow for inflation, the judge rejected the contention that
this was more than “the available amount”, and decided (subject to an irrelevant
point) that confiscation orders under the 2002 Act should be made against each of
the Fields defendants for the whole of this amount (with a default period of
imprisonment of seven years). As to Mr Rajput, he was found to have received
£12,000 for his involvement, but only a nominal order was made against him
because he established that he had no assets.
22. The Court of Appeal upheld the confiscation orders made against the Fields
defendants. In his judgment, Davis LJ rejected the contention that the defendants
had “beneficial interests” limited to one third each of the £1.6m and held that it was
right that each should be individually liable for the whole of that sum. He did so in
the light of (i) authority, in particular the decision of the House of Lords in May, and
(ii) on the grounds of “strong policy objections” to the court recognising beneficial
interests inter se amongst those who had jointly obtained the whole of the relevant
property. The court held that “[s]ection 79(3) of the 2002 Act is to be taken as,
generally speaking, extending to making allowance for lawfully subsisting prior
interests of other persons: not to the asserted ‘beneficial interests’ of co-conspirators
whose very criminality has caused the relevant property to be obtained jointly in the
first place.” – see [2013] EWCA Crim 2042, [2014] 2 WLR 233, paras 36-46.
The issues in these appeals
23. In neither appeal do the appellant defendants challenge the quantification of
the aggregate recoverable amount, (£16.1m in the case of the Ahmad defendants and
£1.6m in the case of the Fields defendants) or the finding that they obtained that
amount jointly. What they do challenge is the decision of the Court of Appeal that
each of the appellants should be separately liable for the whole of that amount. They
contend that such an outcome is arbitrary and oppressive. However, the preferred
approach of the two groups of appellants was different.
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24. For the Ahmad defendants, Mr Mitchell QC accepted that it was appropriate
for each of the two appellants to be liable for £16.1m, but contended that their
liability should be treated as joint and several in accordance with normal common
law principles, so that they should be required to pay that sum between them. In
other words, if, for instance, Mr Ahmad paid £12.6m, then both he and Mr Ahmed
would then continue to be liable, but only for £3.5m, and if one or both (between
them) then paid the £3.5m, there would be no further liability on either of them.
25. Mr Owen QC, for the Fields defendants, raised a more fundamental challenge
to the approach adopted by the Court of Appeal, and said that it was wrong for each
of the Fields defendants to be liable for £1.6m. He argued that the courts below
ought to have apportioned the benefit between the three Fields defendants, and
therefore assessed their individual liability accordingly. Thus, subject to any
liability being attributed to other persons, and subject to any reason to think that they
should not be equally liable, the Fields defendants should each be liable for
£533,333.
26. The issue raised by these appeals can be encapsulated in the question: when
a number of people (all or only some of whom are before the court) have been
involved in the commission of a crime which resulted in property being acquired by
them together, what is the proper approach for the court to adopt, and the proper
orders for the court to make, in confiscation hearings?
27. The resolution of the issue must depend on the interpretation of the relevant
legislation, taking into account (i) previous case law (including a number of
decisions, more than one at the highest level, which support the approach adopted
by the Court of Appeal in the instant two cases), and (ii) the practical difficulties
faced by any judge carrying out a confiscation hearing.
The centrally relevant statutory provisions
28. Although the language of the 1988 and 2002 Acts is not identical, there is no
material difference between them for present purposes and it is convenient to
consider that issue in the context of the 2002 Act, which now applies to the great
majority of cases which come before the courts. The central provisions are sections
6 (making an order), 7 (recoverable amount), 9 (available amount), 76 (conduct and
benefit), 79 and 80 (value) and 84 (property).
29. Section 6(5) of the 2002 Act requires the court to decide on the recoverable
amount, and to make a confiscation order in that sum. Section 7(1) provides that the
recoverable amount is “the defendant’s benefit from the conduct concerned”.
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Section 7(2) states if the defendant shows that that benefit is more than the available
amount, then the recoverable amount is the available amount. Section 9(1) explains
that the available amount is the aggregate of all the free property available to the
defendant at the time of the confiscation order, subject to any obligations which have
priority (and property is “free” if it is not subject to certain forfeiture or deprivation
orders – sections 82-83).
30. Section 76(4) of the 2002 Act provides that “[a] person benefits from conduct
if he obtains property as a result of or in connection with the conduct”, and section
76(7) states that in such a case the person’s “benefit is the value of the property
obtained”. Section 79(1) provides that the value of any property “held by a person”
at any time is to be determined in accordance with section 79(2), which states that
that value is to be “the market value at that time”. Section 79(3) provides that “if at
that time another person holds an interest in the property its value, in relation to the
person mentioned in subsection (1), is the market value of his interest at that time”.
31. Section 80(1) of the 2002 Act provides that the value of property obtained
for the purpose of a confiscation order is its value at the time the court makes its
decision, and section 80(2) provides that that value is to be the greater of (a) “the
value of the property (at the time the person obtained it)”, adjusted for inflation, and
(b) the current value of the property. Section 80(4) states that the references to “the
value” in section 80(2) “are to the value found in accordance with section 79”.
32. Section 84(1) of the 2002 Act defines “property” in very wide terms, and it
includes “real or personal property”, money, and “intangible or incorporeal
property”. Section 84(2) contains some “rules”, which include in para (a) that,
“property is held by a person if he holds an interest in it”, and in para (b) that
“property is obtained by a person if he obtains an interest in it”.
33. The only arguably relevant difference between the 1988 and 2002 Acts
relates to the treatment of the definition of property. Whereas section 80(4) of the
2002 Act specifically applies to property when obtained as well as to property when
held, section 74(4) of the 1988 Act only applies to property when held. However,
particularly as property is “held” the moment it is “obtained”, it seems clear that, at
least in relation to the issues raised on these appeals, the outcome is the same
whichever statute applies. Accordingly, it is sensible simply to concentrate on the
2002 Act when discussing these appeals, but the observations which follow apply
equally to the 1988 Act.
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Preliminary observations
34. As Lord Bingham pointed out in May, para 8, a court considering an
application for a confiscation order must address and answer three questions. The
first question is whether a defendant has benefited from the relevant criminal
conduct; the second question concerns the value, or quantification, of that benefit;
and the third question is what sum is recoverable from the defendant. These are
separate questions, and, although a degree of consistency of approach is required to
all three questions and the answer to an earlier question will affect the answer to a
subsequent question, the questions themselves should not be elided. When
answering each question, the court must, of course, be guided by the 2002 Act.
35. The 2002 Act has often been described as having been poorly drafted. That
is a fair criticism, as can be illustrated by the problems which have had to be faced
by the courts in a number of cases, some of which are referred to below. However,
it is only fair to the drafters of the statute to record that the problems are partly
explained by the difficulties inherent in the process of recovering the proceeds of
crime from those convicted of offences. Those difficulties are at least threefold and
are particularly acute when it comes to sophisticated crimes, such as large-scale
financial frauds, substantial illegal drug importing operations, and people
trafficking, which involve many people, often in different countries.
36. First, there are the practical impediments in the way of identifying, locating
and recovering assets actually obtained through crime and then held by the
criminals. The defendants will often, indeed normally, be as misleading and
uninformative as they can, and the sophistications and occasional corruptions in the
international financial community are such as to render the task of locating the
proceeds of crime very hard, often impossible. Secondly, again owing to the
reticence and dishonesty of the defendants, there will often be considerable, or even
complete, uncertainty as to (i) the number, identity and role of the conspirators
involved in the crime, and (ii) the quantum of the total proceeds of the crime, or
how, when, and pursuant to what understanding or arrangement, the proceeds were,
or were to be, distributed between the various conspirators. Thirdly, there will be
obvious difficulties in applying established legal principles to the allocation of
liability under the 2002 Act, as the rules relating to matters such as acquisition, joint
and several ownership, and valuation of property and interests in property, and the
rights and liabilities of owners, both as against the world and inter se, have been
developed by the courts over centuries by reference to assets which were lawfully
acquired and owned.
37. The present appeals provide good examples of these problems. That is
particularly true of the first appeal which, not least thanks to the full judgment of
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Flaux J, graphically illustrates all three difficulties, as may be appreciated from the
summary in paras 11-17 above.
38. When faced with an issue of interpretation of the 2002 Act, the court must,
of course, arrive at a conclusion based both on the words of the statute and on legal
principles, but it is also very important to bear in mind the overall aim of the statute,
the need for practicality, and Convention rights. The overall aim of the statute is to
recover assets acquired through criminal activity, both because it is wrong for
criminals to retain the proceeds of crime and in order to show that crime does not
pay. Practicality involves ensuring that, so far as is consistent with the wording of
the statute and other legal principles, the recovery process, both in terms of any
hearing and in terms of physically locating and confiscating the assets in question,
is as simple, as predictable, and as effective, as possible. Defendants are entitled to
their Convention rights, in particular to a fair trial under article 6 and are only to be
deprived of assets in accordance with A1P1.
39. It is also important to bear in mind that the issues raised on these appeals have
been considered by the House of Lords, the Supreme Court, and the Court of Appeal
on a number of occasions. In a trio of decisions, Lord Bingham, with whom the other
Law Lords agreed, gave general guidance as to the application of the 1988 Act and
confiscation provisions of the Drug Trafficking Act 1994 – see May, Jennings v
Crown Prosecution Service [2008] UKHL 29; [2008] AC 1046 and R v Green
[2008] UKHL 30; [2008] AC 1053. Also, in R v Waya [2012] UKHL 51; [2013] 1
AC 294, Lord Walker and Hughes LJ, speaking for the majority of the Supreme
Court, considered aspects of the 2002 Act in some detail, and approved some
decisions of the Court of Appeal concerned with valuation of obtained property, in
particular R v Rose [2008] 1 WLR 2113; [2008] EWCA Crim 239; and R v Ascroft
[2003] EWCA Crim 2365; [2004] 1 Cr App R (S) 326. R v Mackle [2014] UKSC 5;
[2014] 2 WLR 267 was another decision of this Court concerned with the 2002 Act,
and in the course of his judgment, Lord Kerr, with whom the other Justices agreed,
approved the approach adopted by the Court of Appeal in cases which had provided
further guidance to judges hearing confiscation claims, including R v Sivaraman
[2008] EWCA Crim 1736; [2009] 1 Cr App R (S) 464 and R v Allpress [2009]
EWCA Crim 8; [2009] 2 Cr App R (S) 399.
40. It would be wrong to depart from the guidance given in these cases unless it
was shown that they were plainly wrong or unless it was established that they had
led to problems for courts making confiscation orders. Adherence to previous
guidance from this court is mandated by the need to ensure that the law is clear and
predictable as well as by the doctrine of precedent. These factors are particularly
appropriate in the present circumstances, because, as mentioned, the 2002 Act and
its statutory predecessors have given rise to considerable difficulties in terms of both
hearings and subsequent enforcement. It has not been suggested that those
difficulties have been caused or aggravated by the guidance given in the cases
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referred to in the preceding paragraph, and there is therefore a real risk that any
departure from that guidance would serve to confuse an already inherently difficult
procedure.
The first question: has the defendant benefited?
41. Section 76(4) of the 2002 Act provides that a person benefits from conduct
“if he obtains property as a result of or in connection with the conduct.” In Jennings,
para 12, Lord Bingham agreed with Laws LJ in the Court of Appeal that the essence
of benefit in that phrase is given by the word “obtains”. Thus, one is concerned with
what the particular defendant obtained, which is by no means necessarily the same
as the totality of what was obtained by the criminal enterprise of which he was a
party. Lord Bingham explained that “obtain” in this context must ordinarily mean
that a defendant “has obtained property so as to own it, whether alone or jointly,
which will ordinarily connote a power of disposition or control, as where a person
directs a payment or conveyance of property to someone else” – see Jennings, para
13 and May, para 48(6).
42. At least in a technical, legal, sense, there are two problems with this analysis.
The first involves a generally applicable point; the second applies in cases such as
the present ones, where the facts are complex and there are several conspirators
involved. Whilst a criminal may sometimes become the owner of property obtained
through crime, in many cases he does not do so. When a person “obtains” a chattel,
money, a credit balance or land through criminal dishonesty, he does not acquire
title to, or ownership of, the item in question, although he does acquire control over
it. As was pointed out by Lord Walker and Hughes LJ in Waya, para 68 a person
who dishonestly obtains property has “at most a possessory interest good against
third parties, and thus of no significant value”. When Lord Bingham spoke of
obtaining something “so as to own it” he was doing so in the context of contrasting
the position of someone who unlawfully assumes the rights of an owner (ie “a power
of disposition or control”) with the position of a mere courier or custodian of stolen
property – see May at para 48(6). In Allpress at para 64 the Court of Appeal
helpfully interpolated the words “assumes the rights of an owner” to make this clear.
43. Unless a joint obtaining is understood in this sense, then the concept of
“joint” ownership is difficult to marry up with the facts of most cases of financial
fraud or drug importation, involving many conspirators. Lawful joint owners enjoy
“unity of possession”, which means that each co-owner is entitled to possession of
the whole of the asset, “unity of interest”, which means that each co-owner is entitled
to an equal interest as against the other co-owners, and “unity of time”, which means
that each co-owner acquired his interest at the same time. Joint ownership is a legal
fiction. Bracton fo 430 (ed Woodbine, vol 4, 336) states that each joint owner totum
tenet et nihil tenet (holds everything and holds nothing). More recently, Lord
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Nicholls of Birkenhead referred to the notion of each joint owner owning the whole
asset as “an esoteric concept … remote from the realities of modern life” – Burton
v Camden London Borough Council [2000] 2 AC 399, 404. In addition to joint
ownership, the law also recognises ownership in common. Owners in common also
enjoy unity of possession, but do not need to have unity of interest or of time, so
they can have different interests, as between each other. Such considerations are
inapposite in relation to criminals with no rights of ownership in the property
obtained.
44. Insofar as technical English property law concepts are concerned, it may be
more accurate to refer to several conspirators acquiring possession in common of
any asset or money, rather than jointly owning the asset or money. However, rather
than invoking English property law concepts, it is more appropriate to treat such
conspirators as obtaining the asset or money together, which has the same meaning
as “jointly”, provided that the latter word is understood in its ordinary English, and
not its technical, legal sense. “Obtain” is the statutory word, and “joint” reflects the
criminal enterprise. While some aspects of English property law in connection with
ownership may be esoteric, there is nothing remote from daily life about two
burglars jointly (ie together) obtaining a television. The burglars do not become the
owners of the television, and the argument about them being “joint owners” or
“owners in common” proceeds on a wrong premise. Each burglar has usurped the
rights of the owner.
45. The basic point made by Lord Bingham, and discussed in paras 41-42 above,
therefore appears to us to be, to put it at its lowest, sustainable, given the statutory
language, which is not concerned with ownership but with obtaining. As just
demonstrated, it is perfectly acceptable, as a matter of ordinary language, to describe
the people involved in a criminal joint enterprise which results in the obtaining of a
chattel, cash, a credit balance or land, as having jointly obtained the item concerned,
in the sense of having obtained it between them. The fact that the item may have
been physically taken or acquired by, or held in the name of, one of them does not
undermine the conclusion that they jointly obtained it. The word “obtain” should be
given a broad, normal meaning, and the non-statutory word “joint”, referred to by
Lord Bingham in May, paras 17 and 27-34, should be understood in the same nontechnical way.
46. Accordingly, where property is obtained as a result of a joint criminal
enterprise, it will often be appropriate for a court to hold that each of the conspirators
“obtained” the whole of that property. That is the view expressed in May, para 48(6),
first sentence (although the word “owns” is probably inappropriate), in Green, para
15, and in Allpress, para 31 (as quoted and approved in Mackle, para 65). However,
that will by no means be the correct conclusion in every such case.
Page 13
47. As was said in Sivaraman, para 12 (6) and in Allpress, paras 30-31 (and
approved in Mackle, paras 64-65), when a defendant has been convicted of an
offence which involved several conspirators, and resulted in the obtaining of
property, the court has to decide on the basis of the evidence, often relying on
common sense inferences, whether the defendant in question obtained the property
in the sense of assuming the rights of an owner over it, either because he received it
or because he was to have some sort of share in it or its proceeds, and, in that
connection, “the role of a particular conspirator may be relevant as a matter of fact,
but that is a purely evidential matter”.
48. In some cases, one or more of the conspirators may be able to show that he
was only involved to a limited extent, so that he did not in any way obtain the
property which was obtained as a result of the crime. Examples include acting as a
paid hand in the enterprise – eg an intermediary, a courier or a drugs “mule” (as
considered in May, paras 15 and 17, and in Allpress, paras 80-82) or a latecomer to
a conspiracy in which nothing was obtained after his arrival (as discussed in May,
para 19).
49. It is clear from May at paragraph 34 that the amount of the benefit which a
defendant obtains is not affected by the amount which might be obtained by others
to whom he transfers any part of it (any more than it can be affected by his payment
out of the expenses of his criminal venture). However, there could be other cases
where the court may be satisfied on the evidence that individual defendants obtained
(ie assumed the rights of an owner over) only a specific part or share of the property
which had been acquired as a result of the criminal activity. An example might be
several obtainings by different criminals using a common form of deception which
they have agreed to use, but several obtainings are not limited to such a case. Lord
Bingham recognised in May at para 32 that there could be such cases, albeit that R
v Gibbons [2002] EWCA Crim 3161; [2003] 2 Cr App R (S) 169 (there referred to)
was in fact a case in which the Court of Appeal did no more than uphold an order
for £18,000, much less than an equal share of the whole, on the basis that the
defendant could not have obtained less.
50. There has sometimes been a tendency to equiparate joint involvement in the
crime with joint ownership of the fruits of the crime. But the fact that the defendants
were jointly responsible for the crime in question does not automatically justify a
conclusion that they jointly obtained the resulting property, a point well made by the
Court of Appeal in Allpress, para 31.
51. The tendency to conclude that property is jointly obtained by criminals may
also be attributable to the fact that it is often difficult to determine how the asset(s)
obtained has, or have, been distributed between the defendants. Judges in
confiscation proceedings should be ready to investigate and make findings as to
Page 14
whether there were separate obtainings. Sometimes of course this is too difficult or
impossible. In many cases the court will not have before it all the conspirators for a
variety of reasons. The indictment may well name other conspirators (as well as
including the usual phrase “and other persons unknown”). A court should never
make a finding that there has been joint obtaining from convenience, or worse from
laziness. Where the evidence supports a finding that the asset acquired from a crime
was obtained effectively on a several basis, the judge should make it, but there are
cases in which a finding of joint obtaining is the proper, indeed the only available
finding, especially but not only where an inference or presumption that the
defendants before the court were the only joint obtainers would be contrary to the
probabilities.
52. In the two cases before the Court, all that is known with any degree of
confidence is that there was a fraud, the defendants played a major part in it, and the
fraud resulted in a sum of money being obtained. Certainly in the first appeal, there
were others closely involved in the crime, but it is not clear how many or who they
were. There is no reliable evidence as to whether any particular person involved in
the fraud received any particular portion of, or had any particular interest in or share
of, the money obtained by the fraud. In these circumstances, it was fully open to
Flaux J to decide that the proceeds of the criminal activity, the property, had been
obtained by the conspirators, or at least all the principal conspirators, who included
the defendants before him. Indeed, on the basis of the primary facts as we understand
them, in each case, it is hard to see how he could have come to any other conclusion.
53. Although the argument of Mr Owen QC does not overtly challenge the
finding that the Fields defendants jointly obtained property to the value of £1.4m, it
comes close to doing so and thus it applies to the first question, as well as to the
second question, which is the question to which it principally applies. The argument
is best examined by reference to the Ahmad defendants, in the light of the fact that
Flaux J gave a much fuller judgment in the confiscation proceedings involving the
Ahmad defendants than was given in the proceedings involving the Fields
defendants. The argument can be analysed as amounting to a contention that Flaux
J should have apportioned the £12.6m equally between the two Ahmad defendants,
to justify the conclusion that the property each of them obtained under the 2002 Act
was half the total sum acquired. The argument has its attractions. It can be said to
accord with the presumption that, where two people lawfully own property jointly
“the beneficial interest belongs to the[m] in equal shares” – per Lord Diplock in
Gissing v Gissing [1971] AC 886, 908. It also would avoid the risk of double
recovery or unfair recovery. However, we would reject the argument.
54. First, to accept that argument would involve a reversal of the law as laid down
by the House of Lords six years ago, and affirmed by this Court recently. In Green
the question certified by the Court of Appeal was:
Page 15
“Where any payment or other reward in connection with drug
trafficking is received jointly by two or more persons acting as
principals to a drug trafficking offence …does the value of each
person’s proceeds of drug trafficking…include the whole of the value
of such payment or reward ?”
The House of Lords held that the correct answer was ‘yes’. In his judgment Lord
Bingham expressly approved at para 15 a passage in the judgment of Court of
Appeal in which David Clarke J said:
“…we consider that where money or property is received by one
defendant on behalf of several defendants jointly, each defendant is to
be regarded as having received the whole of it for the purposes of
section 2(2) of the Act [Drug Trafficking Act 1994]. It does not matter
that proceeds of sale may have been received by one conspirator who
retains his share before passing on the remainder; what matters is the
capacity in which he received them.”
The provisions of the statute there in question were similar to section 79(2) and (3)
of the 2002 Act. Mr Owen’s argument in this case is essentially a re-run of his
argument in that case, which the House rejected.
55. Secondly, as we have sought to explain, cases under the 2002 Act involve
“obtaining” not “ownership”, and, even if they did, we are doubtful whether the
ownership would be technically joint. Thirdly, Mr Owen’s approach would render
the prospect of full recovery even more unlikely than it already is. That is because,
in many multi-party sophisticated crimes, it is unusual to have all the conspirators
before the court, the defendants who are before the court will say that the other
conspirators received all the property, and frequently many of those other
conspirators will never be apprehended. Fourthly, for similar reasons, it would
render the task of a judge at a confiscation hearing more difficult than it already is,
and would make it correspondingly easier for an unscrupulous defendant (and most
defendants in these cases appear, unsurprisingly, to be unscrupulous) to seek to
avoid, or at least to minimise, his liability.
56. In many cases it is often completely unclear how many people were involved
in the crime, what their roles were, and where the money went. As a result, if the
court could not proceed on the basis that the conspirators should be treated as having
acquired the proceeds of the crime together, so that each of them “obtained” the
“property”, it would often be impossible to decide what part of the proceeds had
been “obtained” by any or all of the defendants. There is obvious cause for concern
about having to inquire into the financial dealings between criminals who have
Page 16
together obtained property, especially given that the ringleaders are often not even
before the court. It is one thing for the court to have to decide whether a defendant
obtained any property, which the 2002 Act requires. It is another thing for the court
to have to adjudicate on the respective shares of benefit jointly obtained, which the
Act does not appear to require.
57. The first appeal provides a good example of the problems which a court
would face if Mr Owen’s approach was adopted. It is possible that the whole profit
of £12.6m had passed through the hands of the two Ahmad defendants. That is
unlikely, for it was paid out by HMRC to the exporting company, which could be
expected to retain at least something. However, even if the whole of the £12.6m did
pass through the Ahmad defendants’ hands, it is much more likely than not that some
of it was distributed to the others who were involved, who may have been either few
or numerous. The assumption that the two Ahmad defendants retained the whole of
the gains between them is therefore rebutted on the balance of probabilities. But
there is no material on which to judge how much was either retained by others en
route to them, or distributed to others by them. Nor is there any material on which
to judge whether some or all of the others were “fee-paid” assistants (as in Allpress),
or full accomplices sharing in the profits, and if the latter, in what proportions. An
assumption that accomplices shared the profits equally is of no help if one cannot
know how many of them there were. Thus, unless the judge could treat each of the
Ahmad defendants as having obtained the whole of the £12.6m, he would either
have had to make findings which have no proper basis in evidence, or he would have
been unable to attribute the obtaining of any specific sum to either defendant.
58. Fifthly, as for the risk of double recovery, it can be avoided for the reasons
given in this judgment, when considering the third question. Sixthly, and more
specifically to the first appeal, it would be logically incoherent to hold the two
Ahmad defendants each liable for half of the “property” simply on the basis that it
would be oppressive for each to be liable for the whole. If an argument based on
oppression were right, then no order could be made unless the number of participants
and the role of every participant in the fraud could be ascertained.
59. Finally, it may be that, if the Ahmad defendants had been frank rather than
dishonest in their evidence, they could have shown that the facts justified a
conclusion that the property which MST obtained was limited to the share of the
£12.6m which it actually received, and/or that their individual liabilities should each
be held to be for a sum equal to half the property obtained by MST. (It is only right
to add that it may well be that, even if they had been honest with the court, the facts
would not have justified such a conclusion.) As it was, given the complete absence
of any assistance from the Ahmad defendants (indeed, what they said was positively
misleading), the judge had no alternative to falling back on the natural conclusion
that, through the vehicle of MST, they had been major participants in the carousel
Page 17
fraud, and had therefore obtained the whole £12.6m, albeit together with the other
participants (only some of whom could be identified).
The second question: what is the value of the benefit?
60. In a case such as the present ones, where the court has concluded that a
defendant has obtained property together with others, the question which arises is
how to value the property which he has obtained. It is clear from section 79(1) and
(2) that it has to be the market value. The argument for apportioned valuation is that,
although section 84(2)(b) contains an injunction to assume that each defendant has
obtained the whole property, section 79(3) requires the valuation of the property to
take into account the interests of accomplices. This is essentially the same argument,
which we have rejected above when addressing the question of what has been
obtained.
61. The argument misunderstands the purpose and effect of section 79(3). A
defendant who steals property or obtains it by deception does not, as explained
above, acquire ownership of that property. In answering the second question, in such
a case (ie putting a figure on the benefit which the thief has obtained) the court takes
the market value of the goods, but not because this represents the value of the thief’s
legal interest in the goods, which would be nil. As explained in Rose, approved in
Waya, the court takes the market value of the property because that is the value of
what the thief has misappropriated, viz what it would cost anyone to acquire it on
the open market. (If the 2002 Act required the court to value the thief’s “interest” in
the misappropriated property, section 79(3) would require it to take into account any
other person’s interest, which would include the owner, but that was precisely the
argument which the court rejected because it would make a nonsense of the statute.)
Likewise if two defendants jointly misappropriate property, neither of them obtains
a legal interest in it and neither has an “interest” for the purpose of section 79(3). In
relation to each of them, the value is the value of what they have taken, viz the
market value of the misappropriated property. Thus, once a defendant has obtained
the property, whether solely or jointly, that market value is the value of what he has
obtained.
62. The current effect of the authorities is that the interests of accomplices are
not to be taken into account for the purposes of section 79(3) – ie that they are not
to be treated as “interest[s]” for this purpose. That is clear from Lord Bingham’s
judgment in May, and in particular his critique of earlier cases in paras 27-29 and
31, his conclusion in para 46, and his concluding remark in para 48(6), as well as
from the actual decision in Green – especially paras 15 and 16. It is also part of the
reasoning of this Court in Waya, (unanimous on this point) where Lord Walker and
Hughes LJ, having discussed section 84(2)(b), went on to say, at para 68, that the
effect of section 79(3) is that “lawfully co-existing interests in property are to be
Page 18
valued individually”. In the light of that observation, it seems clear that the
“interests” of a defendant’s co-conspirators are not to be taken into account when
valuing the property for the purpose of assessing the value of the property which the
defendant “obtained”. Furthermore, as explained in paras 47-50 above, when one is
valuing the property which a conspirator, including a defendant, has “obtained”, one
is not normally valuing an “interest” at all.
63. Even more recently, the Supreme Court effectively confirmed the correctness
of this approach when, in Mackle, paras 64-65, Lord Kerr approved the Court of
Appeal’s decision in Allpress to follow its earlier decision in Sivaraman, where the
decision and reasoning of the House of Lords in Green had been correctly analysed
and applied.
64. This approach is soundly based in principle. At the first question stage (what
has been obtained) it may be necessary to examine the dealings of the criminals inter
se, to the extent of determining whether a particular defendant has obtained anything
at all (Allpress) or to decide whether any obtainings were joint or several. However,
once it has been determined that a particular defendant obtained property, whether
alone or jointly, the answer to the second question is that the value of that property
is its market value. The court should not be called upon to investigate unlawful
claims (which do not amount to “rights”) as between accomplices.
65. Accordingly, it seems to us that, at least on the basis of the approach adopted
by the House of Lords in May and Green and by this Court in Waya, there is force
in the view that “recognis[ing] a trust in these criminal circumstances … would tend
to run entirely counter to the statutory aim”, as Davis LJ put it in his judgment in the
Fields case – [2013] EWCA Crim 2042, [2014] 2 WLR 233, para 36, reflecting
comments from other judges in earlier cases. This point is reinforced by the view
expressed in Waya, para 21, where Lord Walker and Hughes LJ described the
confiscation system as “a severe regime” which was intended to “have a deterrent
effect on at least some would-be criminals”, although they added that the
legislation’s “deterrent qualities … are, no doubt, an incident of it, but they are not
its essence”.
66. Although, in paras 53-59 above, we have considered Mr Owen’s argument in
relation to the first question, it truly belongs in the second question. Having
determined that each of the Ahmad defendants obtained the whole of the £12.6m,
the argument is that the valuation exercise requires each of the appellants to be
treated as having acquired an interest equal in value to half the £12.6m. As in relation
to the first question, that argument has the attraction of being consistent with the
ordinary cases of beneficial joint ownership, but it would have to be very persuasive
before we were justified in departing from this clear and consistent approach in
relation to the second question.
Page 19
67. Essentially for the reasons given above, we would reject Mr Owen’s
argument in relation to the second question. The inappropriateness of adopting an
approach which a court would consider appropriate for the rights and obligations of
joint creditors and debtors is reinforced when one considers the so-called
Highwayman’s Case of 1725, Everet v Williams, noted at (1893) 9 LQR 106. That
case shows that the court’s powers cannot be invoked in connection with a criminal
exercise – in that case to accord discovery, an account and other relief in connection
with a partnership between two highwaymen. The position of joint obtainers under
the 2002 Act inter se is very different from that of two lawful joint owners or joint
debtors, and it is unsurprising if their rights and obligations under the 2002 Act do
not follow those of such owners and debtors.
68. Mr Owen pointed out that the valuation provisions of the 2002 Act apply both
to the assessment of the value of the benefit obtained (the second question) and the
assessment of the available amount (the third question), and suggested that it could
not be right that the same sum in respect of the same property should be included in
the amount assessed as available to each of two (or more) defendants because the
same amount could not be realised from each of them. Accordingly, he said, the
same sum could not be attributed to the value of benefit obtained by two defendants
in relation the second question. We do not accept that the same amount may not be
available to each of them at the time when the court is deciding the third question.
If money is held in a joint bank account on which each defendant has a mandate to
draw, it is at that stage available to each of them. A new situation will arise if and
when one of them draws the money to meet the confiscation order, but that raises a
different point.
69. For those reasons, on the second question, we would reject the argument of
Mr Owen and would adhere to the principles established in May, Green, Waya and
Mackle, and the decisions of the Court of Appeal which they approved.
70. In the first appeal, it therefore follows that the Court of Appeal was right to
conclude that each of the Ahmad defendants “obtained” £16.1m (after adjusting for
inflation) as “property”, and that that was the value of their benefit. In the second
appeal, as Davis LJ noted, there was no appeal against the judge’s finding that the
Fields defendants jointly obtained a benefit worth £1.6m (after adjusting for
inflation), and in those circumstances, it follows from the above discussion, that he
was right to hold that the benefit to be valued in respect of each defendant was the
whole amount of the property obtained. Reflecting what is said in paras 50-51
above, it may be that this was a case where the court concluded too readily that there
has been a joint obtaining where the better view may have been that the defendants
have obtained different property. However, that question does not arise on these
appeals.
Page 20
The third question: what is the sum payable?
71. Mr Mitchell, on behalf of the Ahmad defendants, did not challenge the
propriety of the finding that they had each benefited in the amount of the property
jointly obtained by them, but he submitted, in reliance on A1P1, that any payment
of an amount under the confiscation order by one of them should reduce or
extinguish the amount payable by the other, and that the order should contain a
proviso to that effect. The argument in support of his submission is simple. It is
true, as has been said many times, that the legislation is directed towards the
proceeds and not the profits of crime, but it would not serve the legitimate aim of
the legislation and would be disproportionate for the state to take the same proceeds
twice over.
72. This Court has considered the provisions of A1P1 in the context of the 2002
Act in two recent cases: Waya and in Barnes v Eastenders Cash & Carry plc [2014]
UKSC 26, [2014] 2 WLR 1269. In Waya, paras 11-13, Lord Walker and Hughes LJ
summarised the requirements of A1P1 and section 3 of the Human Rights Act 1998.
In Barnes, paras 53ff, Lord Toulson reviewed the Strasbourg jurisprudence. It is
unnecessary to repeat the summary or the analysis in this case; the general principles
are well understood. 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.
73. This approach may appear to risk producing inequity between criminal
conspirators, on the basis that some of them may well obtain a “windfall” because
the amount of the confiscation order will be paid by another. However, that is an
inherent feature of joint criminality. If the victim of a fraud were to sue the
conspirators and to obtain judgments against them, he would be entitled to enforce
against whichever defendant he most easily could. The losses must lie where they
fall, and there is nothing surprising, let alone wrong, in the criminal courts adopting
that approach.
74. Accordingly, where a finding of joint obtaining is made, whether 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 a sum has been recovered by way of satisfaction of
another confiscation order made in relation to the same joint benefit. A subsequent
confiscation order made against a later-tried defendant in relation to the same benefit
Page 21
may well be such an order. In theory a court might therefore need to consider
whether to stay the enforcement of a confiscation order made against one or more
defendants to await the outcome of a later criminal trial against other defendants in
respect of the same criminal conspiracy. However, except perhaps when a second
trial is imminent this would not normally be appropriate bearing in mind the purpose
of the 2002 Act and the statutory stipulation for a speedy hearing (see para 10
above). Orders made on the basis of lifestyle assumptions will require special
consideration on their facts.
75. This conclusion is in line with the outcome in the case of R v Gangar [2012]
EWCA Crim 1378; [2013] 1 WLR 147, although it is based on slightly different
reasoning. In that case, the Court of Appeal held that, when assessing the “available
amount” the court must recognise that the same asset cannot be sold and converted
to cash twice. Once the solution now propounded is adopted, the confiscation order
will be for the full amount obtained by the conspirators against each defendant, but
its enforcement more than once will be prevented.
76. Unlike the arguments raised by Mr Owen on behalf of the Fields defendants,
this argument raised by Mr Mitchell on behalf of the Ahmad defendants 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.
77. We should mention that, before this judgment was handed down, our
attention was drawn to the recent judgment of the Strasbourg court in Paulet v
United Kingdom (Application No 6219/08) (unreported) 13 May 2014, where a
violation of A1P1 was found in relation to a confiscation order. Nothing in that
judgment causes us to reconsider our conclusion in these cases.
Conclusion
78. In these circumstances, we would allow the appeals by both the Ahmad
defendants and by the Fields defendants, but only to the extent of directing that the
confiscation order in respect of each defendant be amended along the lines indicated
in the first sentence of para 74 above.
Page 22