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[COURT OF APPEAL]

REGINA v. GARNER

REGINA v. BULLEN

REGINA v. HOWARD

1985 May 14, 22; July 31

O'Connor L.J., Mars-Jones and Hodgson JJ.

Crime - Sentence - Fine - Imposition of maximum term of imprisonment with fine and criminal bankruptcy order - Whether appropriate for serious tax frauds - Principles on which imprisonment and fine to be imposed

Crime - Criminal bankruptcy order - Whether appropriate - Serious VAT fraud - Custodial sentence, fine and criminal bankruptcy order - Effect of criminal bankruptcy order

The appellant G., operating through a company J. Ltd., was aided by the appellant B. to defraud the Customs and Excise of £1939923.00 value added tax. He also for a shorter period with the aid of the appellant H. operated through L. Ltd. a similar value added tax fraud amounting to £127000 but that sum was subsequently repaid by, inter alia, G. and H. Convictions were recorded against G. and B. in respect of J. Ltd. on a count charging them with conspiring to contravene section 38(1) of the Finance Act 1972 by the fraudulent evasion of value added tax. On a second count G. and H. had convictions recorded against them for a similar offence but in respect of L. Ltd. The appellants G. and B. were sentenced to the maximum two year term of imprisonment on the first count, G. was fined £100000 and B. £25000 and criminal bankruptcy orders were made against them in the sum of £1939923.00. On the second count G. was sentenced to two years' imprisonment consecutive with the sentence imposed on the first count and fined £50000. H. was sentenced to 15 months' imprisonment and fined £20000, which he subsequently paid. The Customs and Excise Commissioners decided to take advantage of the criminal bankruptcy orders and petitioned for receiving orders to be made against G. and B.

On appeals against sentence by the three appellants: -

Held, allowing the appeals, (1) that the maximum term of imprisonment had been rightly imposed on G. and B. for their operation through J. Ltd. of a serious fraud on the Customs and Excise; but that a distinction should have been drawn between that fraud and the lesser fraud operated through L. Ltd. where the sums defrauded had been repaid; that, therefore, G.'s sentence on the second count would be reduced to one year's imprisonment and H., having served nearly six months' imprisonment, would be immediately released from prison (post, p. 79A-E).

(2) That provided the amount of a fine did not exceed a sum that a defendant was capable of paying it could be imposed as a punishment or as an indirect means of coercing a defendant to hand over the profits of his crime; that, since the appellants had profited from their fraud, there was nothing wrong in principle in imposing both the maximum prison sentence and a fine (post, p. 85D-E, F-G); but that, since the Customs and Excise Commissioners had applied for receiving orders, the appellants G. and B. were no longer in the position of being able lawfully

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to pay the fines and, therefore, the court would quash those fines and leave it to the commissioners to use the insolvency legislation to obtain from the two appellants the profits of their criminal acts which they had managed to transfer abroad (post, pp. 77C-D, 87D-F).

Per curiam. A criminal bankruptcy order, of itself, has no practical effect. All it does is provide conclusive proof of an act of bankruptcy upon which the official petitioner can petition for a receiving order (post, pp. 77H-78A). It will only be in very rare cases that a fine should be imposed as well as the making of a criminal bankruptcy order. In cases when the Crown is not the creditor, the effect of a fine, if it is paid before a petition is presented will be to reduce the funds available to compensate the victims named as creditors in the order. Where the Crown is the creditor, it will almost always be better to omit making a criminal bankruptcy order if a fine is imposed, leaving it to the commissioners to petition in bankruptcy for the tax avoided if they wish to do so (post, p. 87A-B, C).

The following cases are referred to in the judgment:

Reg. v. Ayres [1984] A.C. 447; [1984] 2 W.L.R. 257; [1984] 1 All E.R. 619, H.L.(E.)

Reg. v. Benmore (1983) 5 Cr.App.R.(S.) 468, C.A.

Reg. v. Chatt (1984) 6 Cr.App.R.(S.) 75, C.A.

Reg. v. Cuthbertson [1981] A.C. 470; [1980] 3 W.L.R. 89, [1980] 2 All E.R. 401, H.L.(E.)

Reg. v. Forsythe (1980) 2 Cr.App.R.(S.) 15, C.A.

Reg. v. Green and Green (1984) 6 Cr.App.R.(S.) 329, C.A.

Reg. v. Harding (unreported), 26 February 1974, C.A.

Reg. v. Hill (1982) 4 Cr.App.R.(S.) 319, C.A.

Reg. v. Lewis [1965] Crim.L.R. 121, C.A.

Reg. v. Lott-Carter (1978) 67 Cr.App.R. 404, C.A.

Reg. v. Mahoney (unreported), 13 May 1985, C.A.

Reg. v. Maund (1980) 2 Cr.App.R.(S.) 289, C.A.

Reg. v. Michel (1984) 6 Cr.App.R.(S.) 379, C.A.

Reg. v. Millington (unreported), 3 July 1975, CA; but see Thomas, Current Sentencing Practice, J1.3(b)

Reg. v. Nagle and Dereham (unreported), 8 April 1975, CA; but see Thomas, Current Sentencing Practice, J1.2(c)

Reg. v. Po (unreported), 11 June 1974, CA; but see Thomas, Current Sentencing Practice, J1.3(d)

Reg. v. Savundranayagan [1968] 1 W.L.R. 1761; [1968] 3 All E.R. 439; 52 Cr.App.R. 637, C.A.

Reg. v. Stevens (unreported), 5 April 1976, CA; but see Thomas, Current Sentencing Practice, J1.2(c)

Reg. v. Waterfield (unreported), 17 February 1975, CA; but see Thomas, Current Sentencing Practice, J1.3(a)

Savundra, In re (Note) [1973] 1 W.L.R. 1147; [1973] 3 All E.R. 406; 58 Cr.App.R. 54, D.C.

The following additional case was cited in argument:

Reg. v. Jacobs [1980] CrimL.R. 800, C.A.

APPEALS against sentence.

On 15 October 1984 in the Central Criminal Court (Judge Lowry) the appellants, David Frederick Bullen and Kenneth Charles Howard, pleaded guilty to one offence each of conspiring to contravene section 38(1) of the Finance Act 1972 (counts 3 and 4). On 22 November 1984

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the appellant, Roy William Garner, was convicted of two offences of conspiring to contravene section 38(1) of the Act of 1972 (counts 3 and 4). On 26 November they were sentenced.

Garner was sentenced to two years' imprisonment and a fine of £100000 (12 months' imprisonment, consecutive, in default) on count 3; two years' imprisonment, consecutive, and a fine of £50000 (12 months' imprisonment, consecutive, in default) on count 4; in addition a criminal bankruptcy order was made in respect of £1939923.00; he was also ordered to pay a contribution not exceeding £90000 towards the prosecution costs.

Bullen was sentenced on count 3 to two years' imprisonment and a fine of £25000 (12 months' imprisonment, consecutive, in default); in addition a criminal bankruptcy order was made in the sum of £1939923.00 and he was ordered to pay a contribution not exceeding £7500 towards the prosecution costs.

Howard was sentenced on count 4 to 15 months' imprisonment and a fine of £20000 (12 months' imprisonment, consecutive, in default); he was also ordered to pay a contribution not exceeding £7500 towards the prosecution costs.

They applied for leave to appeal against sentence, inter alia, on the ground (in respect of Garner and Bullen) that it was wrong to impose fines and an order for costs where an order of criminal bankruptcy had first been made; that also it was wrong to impose consecutive sentences in default of payment of the fines as the effect of the criminal bankruptcy order was to ensure that the appellants would be unable to pay the fines, which effectively resulted in sentences above the permitted maximum. Howard's application was made on the ground that, in the circumstances of his case, the sentence of imprisonment together with the fine was excessive.

On 22 May 1985 the Court of Appeal granted the applications, allowed the appeals in part (for reasons to be delivered later), quashed the fines imposed on Garner and Bullen, reduced the term of imprisonment imposed on Garner in respect of count 4 from two years to 12 months, and reduced the term of imprisonment imposed on Howard in respect of count 4 from 15 months to such term as would permit his immediate release.

The facts are stated in the judgment.

Michael Corkery QC and James Tabor for the appellants.

R. Alun Jones as amicus curiae.

Cur. adv. vult.

31 July. HODGSON J. read the following judgment of the court. The appeals of Garner, Bullen and Howard came before the court on 14 May. They were all appeals against sentences passed upon the appellants at the Central Criminal Court on 26 November 1984. Because the appeals raised difficult issues, we sought the assistance of an amicus curiae and the hearing of the appeals was continued on 22 May. We are greatly indebted to Mr. Jones for the assistance he has given the court.

On 26 November 1984, Garner was sentenced to two years' imprisonment on each of two counts charging him with conspiracy to contravene section 38(1) of the Finance Act 1972. He was also fined £100000 on the first and £50000 on the second count with 12 months'

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imprisonment on each count to run consecutively in default of payment. In addition, a criminal bankruptcy order in the sum of £1939923.00 was made. The creditor was named as the Customs and Excise Commissioners. He was also ordered to pay a contribution not exceeding £90000 towards the costs of the prosecution. He was given until 26 February 1985 to pay the two fines.

On one count, Bullen was sentenced to two years' imprisonment, fined £25000 to be paid by the same date as Garner with 12 months' imprisonment in default consecutive to the two years' imprisonment. A criminal bankruptcy order was made in the same sum with the same creditor and he was ordered to pay costs of £7500.

On one count, Howard was sentenced to 15 months' imprisonment, fined £20000 to be paid by the same date with 12 months' imprisonment in default and ordered to pay costs of £7500.

On 22 May, we quashed the fines imposed upon Garner and Bullen, reduced the sentence of imprisonment passed on Garner in respect of the second count to one of one year making three years in all and in the case of Howard reduced the sentence of imprisonment to allow for his immediate release.

On 15 October 1984 at the Central Criminal Court, the three appellants, together with three others, faced charges of conspiring to contravene section 38(1) of the Finance Act 1972 by the fraudulent evasion of value added tax. Originally, counts of conspiracy to defraud were charged, but these counts were, on the application of the prosecution, quashed. This decision no doubt followed the judgment of the House of Lords in Reg. v. Ayres [1984] A.C. 447. It is not clear to us why it was necessary to charge conspiracy rather than the substantive offence of "being concerned" in the fraudulent evasion and it may be that an even more appropriate offence to have charged would have been cheating the revenue, a common law offence with no limit upon penalty which was specifically retained by section 32 of the Theft Act 1968.

The charges arose out of a classic value added tax fraud of huge proportions. Put briefly, the scheme was to import massive quantities of krugerrands, sell them, usually at a loss and, taking advantage of the postponed accounting system applicable to imports not exceeding £50000, make off eventually with the output tax. Two companies were involved; Jencorose Ltd. which "traded" in this way from 17 August 1982 to 9 March 1983 with a two month gap, and Laughtree Ltd., which "traded" only from 8 September 1982 to 15 October 1982, and at a substantially lower level. When the Customs and Excise struck in March 1983, the value added tax liability of Jencorose was £1939925.00. Laughtree's liability was £127000.

The man behind the frauds was the appellant, Garner. In respect of Jencorose, his lieutenant was Bullen, in respect of Laughtree, Howard. Also involved with Jencorose was Garner's 21 year old son, Mark. With Laughtree were involved Doris and Paul Fenton.

All the defendants except Garner senior pleaded guilty. Bullen gave evidence for the defence at the trial of Garner. On 22 November Garner was convicted on both counts.

From 18 October 1982 the appellants, Garner and Bullen, began to withdraw money from the Jencorose account. By 8 December some £700000 had been withdrawn. In evidence, Bullen said that he had taken £1000000 in cash out of the business. He said that this was in a secret place which he was not prepared to reveal. On 10 December 1984

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Bullen and Mark Garner went, purportedly on holiday, to the United States of America. In January, they were joined by Garner senior.

On their return, they began "trading" once again through Jencorose. They were all arrested in March Following the arrests, the commissioners obtained an injunction freezing £185000 in the Jencorose account. They were also able to lay their hands on £50000 owing to Jencorose. Both Bullen and Mark Garner were in possession of krugerrands when arrested. In total, the Customs and Excise appear to hold the equivalent of some £650000.

Laughtree had been purchased "off the shelf" by the Fentons. It "traded" for only a month or so. In October 1982 two sums of £66300 and £89000 were withdrawn. The value added tax liability of Laughtree has been met: as to £52000 by Garner and as to £52000 by Howard. Howard has also paid the fine imposed upon him.

None of the value added tax liability of Jencorose has been met. Pending the hearing of the appeals, Garner and Bullen were advised by leading counsel not to pay the fines imposed upon them. On 22 February 1985 the commissioners petitioned that receiving orders might be made in respect of the estates of Garner and Bullen. An order was made in respect of Garner's estate on 23 April 1985. In respect of Bullen's estate, an order was made on 3 April 1985. The effect of those orders was to vest in the official receiver all the defendants' assets both in England and abroad: section 167 of the Bankruptcy Act 1914.

The trial judge was faced with a very difficult sentencing problem. He naturally wanted to recover as much of the defendants' ill-gotten gains as possible as well as to mete out punishment for these very serious offences. However, the maximum term of imprisonment for an offence under section 38(1) and therefore also for the statutory conspiracy charged is one of two years. As the judge pointed out, that maximum penalty was plainly meant to meet the case of the genuine trading concern fraudulently evading the value added tax due on that legitimate trading. It was not intended for this sort of case where there was no legitimate trading involved and the provisions of the value added tax legislation were themselves being used for a vast fraud.

After the conviction of Garner senior, the proceedings preparatory to sentence began on Friday, 23 November and continued on Monday, 26 November. There was much debate between the judge and counsel as to what the effect of a criminal bankruptcy order would be. It was not at times conspicuously accurate.

Under section 39 of the Powers of Criminal Courts Act 1973, the court may make a criminal bankruptcy order where it appears to the court that, as a result of offences of which a person has been convicted or has had taken into consideration, loss or damage exceeding in the aggregate £15000 has been suffered by one or more persons known to the court. The order can only be made if it specifies the amount of loss resulting from the offence, names the persons appearing to have suffered that loss, and states the amount of that loss which it appears to the court that each of the persons has suffered. The order must also specify the "relevant date," which is the date on which the earliest offence was committed. If not made in excess of Jurisdiction, there is no appeal against the making of an order.

The first thing to notice about a criminal bankruptcy order is that, of itself, it has no practical effect at all. All it does is provide conclusive proof of an act of bankruptcy upon which the official petitioner, who is

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the Director of Public Prosecutions or one of the creditors named in the order, can petition for a receiving order. The director has a complete discretion as to whether he will petition or not. In making his decision, the director applies two criteria, first, whether the offender has sufficient assets to make proceedings worthwhile, second, whether it is in the public interest to take proceedings in respect of those assets. If he decides not to petition, he informs the named creditors of his decision, but we understand that, when this happens, the creditors, influenced no doubt by the decision, usually forgo further action.

It follows that when a judge makes a criminal bankruptcy order, he has no means of knowing whether it will be effective or, if a petition does follow, when a receiving order will be made. When it is made, if it is made at all, is entirely dependent upon when a petition is presented. It could be presented on the day the order is made. In these cases, some three months elapsed before the commissioners petitioned. They petitioned four days before the time limited for the payment of the fines.

As we have said, the effect of a receiving order is to vest in the official receiver all the assets of the offender. From then on, he has no power of disposal of them. By reason of paragraph 10 of Schedule 2 to the Powers of Criminal Courts Act 1973, the official receiver has wide powers to re-open transactions occurring after the date specified in the order, and his title will relate back to the date on which the order was made. These powers are wider than those provided in the Bankruptcy Act 1914.

By section 22(3) of the Act of 1914, the bankrupt is bound to "aid, to the utmost of his power, the realisation of his property." Section 154 of the Act of 1914 provides a whole battery of offences for which a bankrupt can be prosecuted and, if found guilty, sentenced to imprisonment for up to two years and, under the general powers contained in section 30 of the Powers of Criminal Courts Act 1973 and section 32(1) of the Criminal Law Act 1977, fined an unlimited amount. In addition, section 159 of the Act of 1914 makes it an offence to quit England or to make preparations to quit England and take property exceeding £250. In respect of the offences under section 154, the burden of proving there was no intention to defraud is placed upon the bankrupt.

It should also be noticed, in the context of this case, that claims for value added tax take priority over other debts (section 41(1)(a) of the Finance Act 1972 and section 33 of the Bankruptcy Act 1914) and that a fine is a debt of record due to the Crown and may be proved for in a bankruptcy by the Crown, but value added tax liability takes priority over it. Nor is there any liability on the Crown to prove and a bankrupt cannot rely on the Crown's failure to prove as a ground for disputing the lawfulness of his detention under a sentence of imprisonment imposed for non-payment of a fine: In re Savundra (Note)[1973] 1 W.L.R. 1147.

Faced with this difficult sentencing problem, the trial judge decided to combine sentences of imprisonment, fines and criminal bankruptcy orders. In the cases of Garner and Bullen, he further decided to pass the maximum sentence available to him together with substantial fines and to impose the maximum periods of imprisonment in default. These he made consecutive. Imprisonment in default of payment of a fine gives no entitlement to remission and no possibility of parole. One year's

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imprisonment in default of payment of a fine is therefore the equivalent of 18 months' imprisonment with good behaviour.

The first criticism levelled against the sentences imposed upon Garner is this. Whilst it is accepted that, in respect of the Jencorose offences, the maximum prison sentence was not only totally justified, but almost inevitable, it is submitted that it was wrong in principle to impose the same sentence for the Laughtree offences. We think that there is force in this submission. The Laughtree offences covered a far shorter period, and involved only between 6 per cent. and 7 per cent. of the tax evasion perpetrated by Jencorose. In addition, all the tax avoided in the Laughtree operation was repaid, as to £52000 by Garner, and as to £52000 by Howard. The balance of £22000 was paid by the Fentons. In respect of the two lieutenants, Bullen and Howard, the trial judge made this distinction, sentencing Bullen for the Jencorose operation to two years' imprisonment, but only sentencing Howard, for the Laughtree operation to 15 months. He did not, however, make the same differentiation in respect of the Jencorose and Laughtree counts in sentencing Garner. Whilst this is wholly understandable considering the size of the maximum sentence available, we have come to the conclusion that it was wrong not to distinguish between the two counts with which Garner was charged. We decided therefore to reduce his sentence to one year in respect of the second count.

This would have the effect of reducing Garner's sentence on the second count below that received by Howard, his lieutenant. In addition, unlike Garner and Bullen, Howard has paid the fine of £20000 imposed upon him. He therefore must, we think, however undeservedly, benefit from our partially allowing the appeal of Garner and, accordingly, we reduced his sentence to such a term as would permit his immediate release. He has served nearly six months in prison.

The second way in which the sentences passed upon Garner and Bullen are criticised is this. It is submitted that it is wrong in principle to pass the maximum sentence of imprisonment for an offence and then to add to it a fine. This criticism applies to the sentence passed on Bullen and the sentence passed in the Jencorose count on Garner. The fact that we have reduced Garner's prison sentence on the Laughtree count to one year robs it of force in respect of that sentence.

The principles which should guide a sentencer when he passes a sentence of imprisonment and imposes a fine for the same offence have been the subject of much litigation. This, in large measure, is due to the fact that English law provides no specific means of estimating the amount of gain a defendant has made from his wrong-doing and thereafter confiscating those gains. This lacuna in the armoury of the law was graphically illustrated by the decision of the House of Lords in Reg. v. Cuthbertson [1981] A.C. 470 (the "Operation Julie" drug case). In recent years, legislation has provided means by which criminal courts can compensate the victims of crime, but has not as yet provided any means of confiscation in cases where there is no or no identifiable victim. This has led to the fine being used not only as a punishment, but also as a (somewhat blunt) weapon of confiscation.

The power of the Crown Court to impose a fine is a general power "in lieu of or in addition to dealing with him in any other way": section 30 of the Powers of Criminal Courts Act 1973. There is no limit to the amount of the fine which a court can impose and even where the offence creating legislation purports to limit the amount of the fine, this

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limitation is overridden in the Crown Court: section 32(1) of the Criminal Law Act 1977.

In legislation, the words used to describe a monetary punishment is sometimes "fine," sometimes "penalty." The two words are interchangeable. Those instructing Mr. Jones have done an elaborate exercise to see if there is any discernible difference even of emphasis between the two words and have found none.

These defendants were charged with statutory conspiracies to commit offences under section 38(1) of the Finance Act 1972. The power to impose a penalty under that section was in these terms:

"If any person is knowingly concerned in . . . the fraudulent evasion of tax . . . he shall be liable to a penalty of £1000 or three times the amount of the tax, whichever is the greater, or to imprisonment for a term not exceeding two years, or to both."

No doubt, in view of the provision of section 32(1) of the Criminal Law Act 1977, this section, when re-enacted in the Value Added Tax Act 1983, no longer contains any limit upon the amount of the penalty which is stated to be "of any amount." In the case of a statutory conspiracy, the length of imprisonment is limited to that which can be imposed for the substantive offence, but the general power to fine for conspiracy is specifically retained: section 3(1)(b) of the Criminal Law Act 1977.

When the Crown Court imposes a fine, it must fix a term of imprisonment in default of payment: section 31(2) of the Powers of Criminal Courts Act 1973. The maximum term (where the fine exceeds £10000) is one year's imprisonment: section 31(3A). There is neither remission nor any possibility of parole.

The courts have held that a sentencer imposing a fine must do his best to fix an amount that is within the capacity of the offender to pay: Reg. v. Stevens (unreported), 5 April 1976; Thomas, Current Sentencing Practice, J1.2(c), Reg. v. Nagle and Dereham (unreported), 8 April 1975, Thomas, Current Sentencing Practice, J1.2(c) and Reg. v. Lewis [1965] CrimL.R. 121.

The courts have frequently in recent years approved the use of a fine combined with a custodial sentence as a way of confiscating the profits of crime. Perhaps the most precise articulation of this principle is contained in the judgment of Lawton L.J. in Reg. v. Waterfield (unreported), 17 February 1975, Thomas, Current Sentencing Practice, J1.3(a):

"The first thing the law should do is to ensure that those who break it . . . should not make any money out of their wrong doing. It follows that the fines totalling £7000, in so far as they were a calculation by the judge of the profit this appellant had been making, cannot be criticised. This court is firmly of the opinion that if those who take part in this kind of trade know that on conviction they are likely to be stripped of every penny of profit they make and a good deal more then the desire to enter it will be diminished."

As a statement of principle, that dictum could not be criticised, but the difficulty is that English law provides no way of investigating the profit made nor, without the full co-operation of the defendant, deciding whether he has the means available to pay the fine. If, contrary to the belief of the judge, he cannot pay then the result will be that he will

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serve a substantially longer term of imprisonment than he would otherwise have done.

The problems raised by the combination of fine and imprisonment in a sentence first aRose in Reg. v. Savundranayagan [1968] 1 W.L.R. 1761. Savundra was convicted of the common law offence of conspiracy to cheat and defraud so that the penalties of fine and imprisonment were unlimited. He was sentenced to eight years' imprisonment in all and two fines (of £30000 and £20000) were imposed with sentences of one year's imprisonment consecutive in default of payment of either. There was an appeal against sentence. When it was heard, a receiving order had been made against the defendant and he deposed on oath to the fact that his assets were then only just over £100. The appellant could not therefore, because of the order, lawfully pay the fines at the time. The court was plainly sceptical about the appellant's assets, but justified the fines on the ground that a total sentence of ten years' imprisonment would not have been an excessive punishment for his offending. (The court did not seem to appreciate the fact that the default terms of imprisonment would not qualify for remission.) In giving the judgment of the court, Salmon L.J. said, at p. 1766:

". . . £50000 is a very small proportion of this man's plunder and this court can see nothing wrong with the decision of the judge that if the appellant does not or cannot produce the sum, his sentence should be one of 10 years, which this court certainly would not regard as being in any way excessive." (Emphasis added)

At the time that Savundra was sentenced, the courts had no general power to award compensation or make a criminal bankruptcy order and, in any event, even had there been such powers, it seems unlikely that it would have been possible to identify the victims of his defrauding.

In Reg. v. Harding (unreported), 26 February 1974, Thomas, Current Sentencing Practice, J1.3(d), the appellant had been sentenced to two years' imprisonment and fined £1000 with 12 months' imprisonment in default. He was an undischarged bankrupt and so had no means to pay the fine. The court justified the sentence on precisely the same ground as in Reg. v. Savundranayagan [1968] 1 W.L.R. 1761. In giving the judgment of the court, Roskill L.J. said:

"What the judge obviously intended was to pass a 'global' sentence, partly imprisonment and partly fine, with the clear intention that if the fine element was not paid, there would be an extra consecutive term of imprisonment for 12 months so that the maximum sentence to which this man would then become liable would be three years' imprisonment, not merely two. We have already indicated our view that even if one treats this as a sentence of three years' imprisonment in all, it was less than any member of this court would have imposed if he had been the trial judge. Be that as it may, when the sentence is regarded in that light, this court can see nothing wrong in principle . . ."

Those two decisions can only be distinguished from the cases where it has been held that a fine should not be imposed if the defendant has not the means to pay on the ground that that principle does not apply where there is a sentence of imprisonment imposed as well as a fine.

In Reg. v. Po (unreported), 11 June 1974; Thomas, Current Sentencing Practice, J1.3(d), the Court of Appeal refused to make this

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distinction. The sentence of the court had been six years' imprisonment and a fine of £5000 with one year in default. The appellant could not pay the fine and this the trial judge knew, but he specifically stated that the proper sentence was seven years and the fine, which he thought would or might be paid by the organisation to which the defendant (a drug "courier") belonged, was imposed in lieu of an extra year. Despite this explicit reasoning by the sentencing judge, the court quashed the fine because it offended "against the principle that a fine should not be imposed upon a prisoner when he has not got the funds to pay the fine."

In Reg. v. Millington (unreported), 3 July 1975; Thomas, Current Sentencing Practice, J1.3(b), the court followed Reg. v. Po(unreported) and quashed a fine of £1000 (with one year's imprisonment in default) imposed in addition to a sentence of four years' imprisonment. In that case, the court did say, however, that the sentence of four years was quite enough already. In that case, the appellant was bankrupt.

In Reg. v. Lott-Carter (1978) 67 Cr.App.R. 404, where the appellant had been sentenced to one year's imprisonment and fined £2000 with one year's imprisonment in default, the court, considering Reg. v. Savundranayagan [1968] 1 W.L.R. 1761, refused to quash the fine on the ground that the "global" award of two years was not excessive.

In two cases in 1980, Reg. v. Forsythe (1980) 2 Cr.App.R.(S.) 15 and Reg. v. Maund (1980) 2 Cr.App.R.(S.) 289, fines imposed in addition to sentences of imprisonment were quashed on the ground that the appellants had not profited by their criminality. These decisions therefore explicitly recognised the role of the fine as a means of confiscation.

In Reg. v. Benmore (1983) 5 Cr.App.R. (S.) 468, the court followed Reg. v. Savundranayagan [1968] 1 W.L.R. 1761 and refused to quash fines imposed in addition to sentences of imprisonment. In that case, however, there were good grounds for believing that the fines could be paid out of the appellants' ill-gotten gains.

In Reg. v. Chatt (1984) 6 Cr.App.R.(S.) 75, a fine of £3000 with 12 months' imprisonment in default had been imposed in addition to a sentence of 12 months' imprisonment. In dismissing the appeal, the court distinguished Reg. v. Savundranayagan, Reg. v. Harding and Reg. v. Lott-Carter from Reg. v. Lewis and Reg. v. Po on the ground that in the first three cases, the court had in mind that very probably there was a substantial amount of property which had not been recovered, which would be available for the use of the appellant when he or she had finished serving his or her sentence of imprisonment. The court laid down, at p. 80:

"the so-called 'global sentence' should be imposed only in circumstances where the court has reason to believe that a substantial amount of stolen property still remains outstanding and may be available for the use of the offender when he has completed his sentence of imprisonment."

With respect, this way of distinguishing the cases does not seem to be valid because in both Reg. v. Savundranayagan and Reg. v. Harding, the appellants were bankrupt and subject to receiving orders so that the only way in which the fines or part of them could be recovered was by the Crown proving in the bankruptcy, a step which, as we have seen, the Crown refused to take in Reg. v. Savundranayagan.

In October 1984, Reg. v. Green and Green (1984) 6 Cr.App.R.(S.) 329 came before the court. In that case, fines had been imposed in

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addition to lengthy terms of imprisonment for offences involving the importation of cannabis on a massive scale. There seems to have been neither doubt that large profits had been made nor that the appellants in all probability had assets sufficient to pay the fines if they wished to do so. Nevertheless, some fines were quashed on the ground that the "global" sentence which would result from the combination of imprisonment imposed with imprisonment in default would exceed the proper "tariff" sentence for the offences. In giving the judgment of the court, Griffiths L.J., after considering a large number of authorities, laid down the following principle, at p. 332:

"We have been assisted by Mr. Corkery taking us through a fairly elaborate citation of authority. I do not propose to refer to all those authorities, but I summarise their effect as follows. If it cannot be shown that an offender has made a profit out of a transaction and has no means to pay a fine, it is not right to impose a fine in addition to a prison sentence (see Reg. v. Maund(1980) 2 Cr.App.R.(S.) 289). If it is apparent to the court that, as the result of a crime, the accused has received a large financial benefit and if there is reason to suppose that some of that financial benefit is still available to him, it is perfectly proper to impose a fine in addition to a term of immediate imprisonment. But, nevertheless, when imposing the fine and fixing the alternative penalty to be served in default of payment of the fine, the court should have regard to the overall term of imprisonment that will be served in such circumstances. The court should ensure that the overall term of imprisonment to be served in such a contingency will not be disproportionate to the offence itself: Reg. v. Savundranayagan [1968] 1 W.L.R. 1761; Reg. v. Lott-Carter (1978) 67 Cr.App.R. 404; and Reg. v. Benmore (1983) 5 Cr.App.R.(S.) 468.

"In the present case, there was ample evidence which justified the judge in imposing a fine of £75000. On the appellant's own calculations, put forward through his counsel, he had made a profit of £60000. Bearing in mind that he was one of the principals engaged in this operation and that the street value was £1 million, this was likely to be a very conservative estimate indeed. There was also evidence of high living when the fraud was flourishing. In all the circumstances, therefore, it was perfectly reasonable for the judge to assume that this man had made substantial profits out of this operation and that a part of it might well still be available to pay a fine.

"Nevertheless, the imposition of another three years if he failed to pay the fine would mean that he was being sentenced effectively to 13 years' imprisonment for this offence. We accede to Mr. Corkery's submission that that would be excessive for this offence and more in line with a sentence that could be expected in the case of a hard drug such as heroin. Accordingly, what we propose to do is to interfere with this sentence to the extent of ordering that in default of payment of the fine the sentence of 12 months' imprisonment should not run consecutive[ly] but concurrently, but consecutive to the nine year term. The result, in plain language, is that if he does not pay the £75000, he will have to serve another 12 months' imprisonment. That will bring the total sentence up to 10 years, which we think is not excessive for this offence."

[1986]		84
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In two very recent cases, Reg. v. Michel (1984) 6 Cr.App.R.(S.) 379 and Reg. v. Mahoney (unreported), 13 May 1985, there have been appeals against the imposition of fines in addition to sentences of the maximum term of imprisonment for value added tax offences. We have been provided with transcripts of these two decisions and we shall have to refer to them in more detail when we come to consider the criminal bankruptcy orders. The argument advanced in both those cases, as it is before us, is that if You apply the "global" award principle to a case where the maximum sentence of imprisonment has been imposed, You cannot logically impose a fine in addition. The maximum sentence must, by definition, be the top of the "tariff" and any fine imposed in addition must make the total punishment too high. In Reg. v. Michel that argument succeeded; in Reg. v. Mahoney it did not.

In giving the judgment of the court in Reg. v. Mahoney, Lawton L.J. said:

"The next problem is that having regard to the fact that Parliament has decided that the maximum sentence should be two years' imprisonment, was it right, in all the circumstances that the judge should give a 50 per cent. increase on the maximum sentence in default of the payment of a very substantial fine? The court has on two previous occasions had to consider this problem. The first was in Reg. v. Savundranayagan [1968] 1 W.L.R. 1761, to which I have already referred. The basis of that decision was that when the court is deciding what sentence should be passed in default of payment of a fine it must look at the sentence of imprisonment which was passed and at the sentence which is going to be imposed in default of payment of the fine, consider them both together as one period of imprisonment and ask itself whether in all the circumstances the combined sentence, if there is default, would be excessive. The problem in this case is that as Parliament has decided that the maximum sentence should be two years for the worst kind of offence which can reasonably be foreseen as likely to happen, to add 50 per cent. on to it for non-payment of the fine might be considered excessive. In Reg. v. Benmore (1983) 5 Cr.App.R.(S.) 468, the court considered this problem and followed what had been decided in Reg. v. Savundranayagan. The facts of that case were very different from this, but the court applied the principle of Savundra. It seems to us that it is our duty also to apply that principle. We bear in mind that in Reg. v. Benmore the maximum sentences were not imposed for the offence. That, in our judgment, does make a difference. Mr. Trollope pointed out very tellingly that the effect of the sentence of 12 months' imprisonment for default is to add 50 per cent. to the sentence which Parliament considered to be the appropriate maximum sentence. In all the circumstances of this case, we have come to the conclusion that the sentence in default should be reduced from 12 months to nine months. To that extent only, the appeal will be allowed."

The result of that decision was therefore that the global penalty imposed upon the appellant was one of two years plus nine months (the equivalent of 13 months taking into account the non-entitlement to remission whereas the maximum prison sentence available was only two years).

[1986]		85
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It is, we think, difficult if not impossible to reconcile all these decisions. This is, we believe, due to a failure to distinguish between the imposition of a fine as a punishment and the use of the fine as a rough and ready method of confiscating the profit of crime. Neither, of course, is this distinction made in the general or particular legislation which empowers the courts to fine offenders. We hope that legislation will, in the not too distant future, make more sophisticated provision for the confiscation of the profits of crime alongside the already available means of compensating the victims of crime. Until that happens the only weapon of confiscation in the case of "non-victim" crime available to the courts is the fine.

It is, in our judgment, wrong to impose a fine either as punishment or confiscation if a defendant is unable to pay it. That principle is amply supported by authority. Where a sentencer is imposing a term of imprisonment which he considers is itself adequate punishment for the offence, he will not add to the imprisonment a punitive fine. In most cases, if the sentence of imprisonment is the maximum permitted, that will be thought adequate in itself, but there may be exceptional cases where even the maximum permitted sentence of imprisonment is considered to be inadequate; in such rare cases a punitive fine could properly be added to the term of imprisonment. Such a possibility is, we think, specifically contemplated by section 38(1) of the Finance Act 1972. On the other hand, we see nothing wrong in adding a fine to any sentence of imprisonment if the sentencer is satisfied that the defendant has made profit from his wrongdoing, and believes on reasonable grounds that he has the means to pay back that or some of that profit. In such circumstances it is wrong to look at the imprisonment to be served in default of payment of the fine as additional punishment. It is not being used as a punishment, but as a means of coercing the offender into surrendering the profit of his wrongdoing. The offender can choose whether to pay up or spend further time in prison. One of the weaknesses of the fine as a method of confiscation lies in the limit of one year which, where the retained profits of wrongdoing have been enormous, may prove a totally inadequate coercion. This will be particularly the case where the offender faces a lengthy prison sentence anyway. Where confiscation is the object and the court is satisfied that profit has been made, and assets are available, we see or maximum available sentence of imprisonment.

We do not, therefore, accede to Mr. Corkery's argument on this point and would not, on the "global" penalty principle, interfere with the fines imposed in this case.

That leaves the third argument against the imposition of the fines on Garner and Bullen that, in the circumstances of this case, it was wrong to combine imprisonment, fine and criminal bankruptcy order.

English law has been slow to utilise the criminal courts for the compensation of the victims of crime. There was no general unlimited power to make a compensation order until the Criminal Justice Act was passed in 1972. The power is now codified in sections 35 to 38 in the Powers of Criminal Courts Act 1973. In 1982, the power to make compensation orders was widened by removing the restriction hitherto in force that it could only be made in addition to some other penalty and by section 67(b) of the Criminal Justice Act 1982 (adding section 35(4A) to the Act of 1973) compensation orders are not given priority over

[1986]		86
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fines. The power to make a criminal bankruptcy order was introduced into English law in 1972 also: section 1 of the Criminal Justice Act 1972, now section 39 et seq. of the Powers of Criminal Courts Act 1973.

In Reg. v. Hill (1982) 4 Cr.App.R.(S.) 319, this court held that there was nothing wrong in principle in the imposition of a fine in addition to the making of a criminal bankruptcy order, but it seems at least doubtful whether the court was fully informed as to the effect of a receiving order. In Reg. v. Michel, 6 Cr.App.R.(S.) 379, this court was again faced with the problems which arise when an order is made as well as a fine. That case too concerned a value added tax fraud. In giving the judgment of the court, Purchas L.J. said, at p. 388:

"We, of course, accept the principle established by Hill (1982) 4 Cr.App.R.(S.) 319 that there is in principle nothing wrong in making a criminal bankruptcy order at the same time as fining an accused, although cases in which it will be appropriate to do so are likely to be infrequent. We say this bearing in mind the manner in which a criminal bankruptcy order operates."

He then went on to consider, as we have done earlier in this judgment, the effect of a criminal bankruptcy order and subsequent receiving order. He concluded, at pp. 388-389:

"The making of an order thus gives to inJured parties a comprehensive and far-reaching means of obtaining satisfaction. The defendant can not only be stripped of his ill-gotten gains, but obliged to make recompense for all loss which the inJured party has suffered to the limit of his means. He can be compelled on pain of imprisonment to repatriate his foreign assets. Such being the potential remedy open to the victim of a fraud where such an order is made, there should be relatively few cases in which it will be right to impose fines also. It may even be, if the adjudication follows quickly after the order, that a defendant will be unable to pay a fine because title to any funds in his hands has been vested in the official receiver. In this case, and apart from all other considerations, we conclude that it was inappropriate to impose these fines alongside a criminal bankruptcy order for over £14 million specifying H.M. Customs and Excise as the inJured party."

It does not appear from the transcript in that case whether receiving orders had been made at the time of the appeal.

Reg. v. Mahoney (unreported), 13 May 1985, which came before another division of this court the day before we began the hearing of this appeal was also concerned with value added tax fraud. Mars-Jones J. was a member of that court. In that case, to which we have already referred in relation to the coupling of fine and imprisonment, a criminal bankruptcy order had also been made, the commissioners being named as creditors. However, when the appeal was heard, neither the commissioners nor the official petitioner had petitioned for a receiving order. The court refused to interfere with the fines.

The facts of Reg. v. Mahoney differed from the facts of this case in that no receiving order had been made so that there was no impediment to the payment of the fine if the appellant wanted and was able to pay it. In this case, Garner and Bullen are unable to pay the fines. Their assets have already vested in the official receiver (although those suspected of being abroad are not in his hands). It seems also that the

[1986]		87
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court in Reg. v. Mahoney was misinformed as to the powers available to the official receiver. The only power brought to the attention of the court was an entirely irrelevant power to commit for contempt under section 14 of the Bankruptcy Act 1914 which refers to a person untruthfully stating himself to be a creditor.

In our judgment, it will only be in very rare cases that a fine should be imposed as well as the making of a criminal bankruptcy order. In cases when the Crown is not the creditor, the effect of a fine, if it is paid before a petition is presented will be to reduce the funds available to compensate the victims named as creditors in the order. A fine should never be imposed in such circumstances unless it is completely clear that even after the fine has been paid there will be ample funds to satisfy the creditor. To do otherwise would be to give priority to the fine over compensation.

Where, as here, the Crown is the creditor, we think that it will almost always be better to omit making a criminal bankruptcy order if a fine is imposed, leaving it to the commissioners to petition in bankruptcy for the tax avoided if they wish to do so.

A further difficulty could at least theoretically arise out of the making of an order and the imposition of a fine. If the court gave the defendant, say six months to pay the fine and the creditor were to petition at once and obtain a receiving order, the defendant might be placed in the position of being unable to pay the fine although, were he free to manage his own affairs, there would be funds available for him to do so.

In this case, Garner and Bullen are now in a position where they cannot lawfully pay the fines imposed upon them. In those circumstances, we have decided that the fines ought to be quashed. In so deciding, we express the hope that the full armoury contained in the insolvency legislation will be deployed rigorously against these defendants with as much expedition as possible to effect if possible the repatriation and payment to the commissioners of the gains which they have clearly salted away abroad.

Appeals allowed.

Sentences varied.

Solicitors: Pellys, Bishop's Stortford; Director of Public Prosecutions.

[Reported by EIRA CARYL-THOMAS, Barrister-at-Law]