Inadequate arguments – the circumstances in which confiscation orders can be revised

Fatima Jama examines the judgment in Pigott vs Crown Prosecution Service [2024] EWHC 2177 (Admin) involving an application for a certificate of inadequacy under section 83 of the Criminal Justice Act 1988, following a confiscation order.

Introduction

The case of Pigott vs Crown Prosecution Service [2024] EWHC 2177 (Admin) involved a second application for certificate of inadequacy. The High Court rejected the application to reduce the £1.4 million confiscation order, clarifying the existing legal framework.

Background

On the 03 May 2005 at the Canterbury Crown Court the applicant in this matter, Stephen Pigott, pleaded guilty to offences of cheating the revenue and money laundering. The fraud (of the type often referred to as a “carousel fraud”) involved a loss to the Revenue estimated to be in excess of £40 million. Carousel fraud involves a chain of cross-border transactions where goods are rapidly traded between companies, with one company collecting VAT but disappearing without remitting it to the government, while another claims a VAT refund. This circular trading pattern, which gives the fraud its name, exploits the zero-rating of exports and VAT reclaim on imports, resulting in significant tax revenue losses for governments. On 09 September 2005 he was sentenced to a total of eight years’ imprisonment.

On 30 November 2007, a confiscation order was made in the sum of £1,535,595.19, being the realisable amount, comprised of identifiable assets – such as houses, watches and cars – and hidden assets of £1 million.

The Crown Court imposed a default term of ten years’ imprisonment, subsequently reduced on appeal, in November 2009, to eight years. The Court of Appeal upheld the remainder of the confiscation order in the amount certified by the Crown Court.

Mr Pigott absconded soon after, and he was recalled on licence. A warrant was issued for his arrest. Mr Pigott lived abroad between 2009 and 2019.

Mr Pigott had made payments of £9,500.  The receiver’s efforts to realise the tangible assets identified in the confiscation order produced a total of £88,040, a value of £498,887.60 having been placed upon those items in the confiscation proceedings.  The total sum recovered towards satisfying the order was £97,540. The balance of £1,401,347.60 remained outstanding, steadily accruing interest.

The Application

By an application notice dated 18 December 2023, Mr Pigott sought a certificate of inadequacy (“CoI”) under section 83 of the Criminal Justice Act 1988 on the basis that his available and realisable assets were insufficient to satisfy the outstanding sums. Although the confiscation provisions of the Act were repealed and replaced by the Proceeds of Crime Act 2002, they continue to apply to offences committed before the 24 March 2003.

This was the second application made by Mr Pigott for a CoI, the first application having been heard in front of Swift J. on 26 October 2021 and dismissed as being totally without merit.

The Crown’s response

The Crown Prosecution Service contested the application, citing abuse of process and lack of credible evidence. They pointed out discrepancies in Mr Pigott’s statements and his history of deception.

18. The Respondent submitted that it was not open to Mr Pigott to make a further application. The principle of finality is a cornerstone of the legal system, and it is equally applicable, albeit under a different nomenclature, to criminal proceedings such as confiscation order applications. While the technical doctrine of res judicata is a creature of civil law, the overarching concept of preventing parties from re-litigating matters that have already been determined is fundamental to the efficient and just administration of justice. In the criminal context this is encapsulated in the concept of abuse of process.

19. The court’s power to prevent such abuse is broad and discretionary. In determining whether to apply the principle of finality or issue estoppel in a particular case, the court will adopt a merits-based approach, considering a range of factors. These include the public interest in finality, fairness to the parties and the specific circumstances of the case; none of which assisted the applicant.

20. The cornerstone of the original confiscation order was the finding of hidden assets valued at £1 million. The allegation that a substantial portion of this sum was diverted to a third party should have been raised during the initial confiscation proceedings, or was necessarily determined in those proceedings and could not be introduced at this stage by an application for CoI.

21. … the applicant’s credibility was seriously undermined by his history of dishonesty, including the use of false identities. This continuing pattern of behaviour cast doubt on the veracity of his current claims and the sufficiency of the supporting evidence provided. It was still essentially a matter of assertion on his part. There remained a dearth of corroborative material, particularly in relation to the applicant’s financial circumstances during the period when he absconded.

22. … the applicant’s application was without merit and should be dismissed. It represented an attempt to reopen a matter that has already been subject to judicial determination whilst the lack of credible supporting evidence meant that it was fundamentally flawed.

The Legal Framework

Under the provisions of section 83 of the Criminal Justice Act 1988, it is for the applicant to satisfy the court to the civil standard of proof that his realisable property is inadequate for the payment of any amount remaining to recovered under the confiscation order. If so satisfied the court must issue a certificate to that effect giving its reasons for doing so.

The process is in two stages since once a certificate has been granted the applicant must then apply to the Crown Court which made the confiscation order to seek a variation. It is then for the Crown Court to determine whether the order should be varied and if so by how much.

The principles underpinning certificates of inadequacy are to be found in the judgment of the Court of Appeal case of Adams v Crown Prosecution Service (CPS) [2017] EWCA Civ 185 quoting from its earlier decision in Glaves v Crown Prosecution Service [2011] EWCA Civ 69 in which the court approved a summary of the law by, the then, Mr David Holgate QC, sitting as a deputy judge of the High Court, in In re B [2008] EWHC 3217 at [74]:

(1) The burden lies on the applicant to prove, on the balance of probabilities, that his realisable property is inadequate for the payment of the confiscation order (see O’Donoghue, Re [2004] EWCA Civ 1800 (04 November 2004).

(2) The reference to realisable property must be to “whatever are his realisable assets as a whole at the time he applies for the certificate of inadequacy. If they include assets which he did not have when the confiscation order was made, that is by no means a reason for leaving such fresh assets out of consideration” (ibid and see also Re Philips [2006] EWHC 623 (Admin).

(3) A s.83 application cannot be used to go behind a finding made at the confiscation hearing or embodied in the confiscation order as to the amount of the defendant’s realisable assets. Such a finding can only be challenged by way of an appeal against the confiscation order (see Gokal v Serious Fraud Office [2001] EWCA Civ 368 (16 March 2001) (bailii.org), per Keene LJ at para 17 and 24).

(4) It is insufficient for a defendant to say under section 83 “that his assets are inadequate to meet the confiscation order, unless at the same time he condescends to demonstrate what has happened since the making of the order to realisable property found by the judge to have existed when the order was made” (see Gokal para 24 and Re O’Donohue at para 3).

(5) The confiscation hearing provided an opportunity for the defendant to show that his realisable property was worth less than the prosecution alleged. It also enabled the defendant to identify any specific assets which he contended should be treated as the only realisable property. The section 83 procedure, however is intended to be used only where there has been a genuine change in the defendant’s financial circumstances. It is a safety net intended to provide for post confiscation order events (see McKinsley v Crown Prosecution Service [2006] EWCA Civ 1092 (25 July 2006) (bailii.org) per Scott-Baker LJ at paras 9, 21-24, 34 and 35).

(6) A section 83 application is not to be used as a “second bite of the cherry”. It is not an opportunity to adduce evidence or to present arguments which could have been put before the Crown Court Judge at the confiscation hearing (para 38 of Gokal and paras 23, 24 and 37 of McKinsley)”.

Accordingly a section 83 application cannot challenge findings made during the confiscation hearing, or embodied in the confiscation order, in relation to the defendant’s realisable assets. Such challenges can occur only through an appeal against the order. It is for the applicant to demonstrate what has happened to the realisable property which the court found to have existed when the order was made and to explain why what has taken place since constitutes a genuine change in his financial circumstances.

Conclusion

Concluding this case, the court did not find that Mr Pigott should be precluded from applying for a certificate on the basis that the application was an abuse of process. However, the court did find that Mr Pigott’s explanations for the asset shortfall was unsupported by reliable evidence. The court determined that the hidden assets remained unaccounted for, and that Mr Pigott failed to show a genuine change in his financial situation.

23. I do not conclude that Mr Pigott should be precluded from applying for a certificate on the basis that the application is an abuse of process. The circumstances in which his earlier application was dismissed did not involve any consideration by the court of all the material which is before me and it must be open to a party in his position to rely on new information and evidence in making such an application. Whilst the Respondent argued that all of the explanations now put forward could have been advanced in 2021 and so were not “new” in that sense, for these purposes I take at face value Mr Pigott’s evidence that in 2021 he was following advice, when he was represented. On any view the application made then was advanced on extremely thin grounds and the present application has at the very least been expanded with some supporting evidence (as the Respondent accepted).

24. Plainly an attempt to simply reargue an application where there had been no significant change in the nature of the argument or the underlying material on which it is based as between an earlier hearing and an extant application would be an abuse of process, but that is not this case. That means that the application should be entertained by the court (notwithstanding the hearing before Swift J.) but it does not mean that the issues raised were not, on analysis, necessarily considered at the confiscation hearing or relate to matters which could have been raised earlier. That goes to the question of whether this application is essentially an impermissible attack on the confiscation proceedings as well as to Mr Pigott’s credibility.

25. The fact that the tangible assets did not realise the value attributed to them is not in itself a reason for granting a certificate. As Swift J. observed:

“… The fact that the receiver has realised only a proportion of the amount anticipated in respect of the known assets is only one part of the evidential picture. “

26. Mr Pigott’s account, in this application, of his income, assets and location after he left the United Kingdom is not consistent with the very different account he gave to the Probation service in 2021.

“Mr Pigott tells me that following his departure from the UK, initially he headed to Spain due to one of his daughters ‘going missing’, he reports staying there for around ten days and once he located her, she returned to the UK and he travelled to Berlin. He subsequently had spells in the Middle East/Hong Kong and Sydney…

Mr Pigott resides with his long term partner, whom he plans to re-marry in the near future. He also referred to having a house in London, although he tells me this property is owned by his partner. Employment, training and education Mr Pigott tells me he is a Co-Manager of a Web Design company with four offices in different locations; Sydney, Hong Kong, Singapore and Bangkok. He described how he is responsible for managing the Hong Kong office which he now manages from the UK. Due to Covid, the Hong Kong office has been reduced from eight employees to four. In addition to the above, Mr Pigott has previously worked in the music industry as a Writer /Arranger and Producer for which he continues to receive loyalties.

According to Mr Pigott, he, and his business partners have not drawn a salary since early 2020 at the start of the Covid pandemic. Prior to Covid, Mr Pigott states he would typically draw a salary of around £3000 each month. In addition to the above, Mr Pigott also receives between approximately £12,000 – £15,000 annually in loyalties and income from several private pensions. He reports no out-goings with his home being owned outright so he ‘manages to keep afloat’. Mr Pigott states he has ‘a few more’ pensions due in the next few years.”

27. The Prosecution case in relation to hidden assets was advanced on the basis of copious evidence as to the flow of monies to Mr Pigott in Dubai, his residence there, his part in setting up shell companies to channel money, his use of serial false identities, large receipts to his own accounts and a web of concealment and dishonesty. He was aware in 2003, on his own evidence, of the alleged loan arrangement and diversion of monies in repayment. The confiscation proceedings took place in 2007. Either the explanation he now gives was considered by the court or the failure to advance it then is a powerful indication that it is not truthful. In the circumstances there is no obligation on the court to simply accept what Mr Pigott now asserts unless it is substantiated by reliable evidence. What exactly became of the large sums which undoubtedly came his way as a result of the fraud remains opaque. I conclude that the hidden assets remain hidden; Mr Pigott has not established that they are dissipated or unavailable to him. His case at times appeared to take issue with the Crown Court’s finding that they were ever his assets, a submission that is not available to him.

As a result, the High Court rejected Mr Pigott’s application for a CoI, concluding that he did not meet the necessary burden of proof. Having examined the legal requirements under section 83 of the Criminal Justice Act 1988. The court emphasised that the applicant bore the responsibility of proving the inadequacy of their assets in fulfilling their confiscation order.

Importantly, the court’s judgment serves to clarify and reinforce the existing legal framework surrounding certificates of inadequacy and confiscation orders. This ruling provides guidance on the circumstances under which a CoI may be granted; the evidential burden on applicants seeking such certificates; the court’s approach to assessing an applicant’s true financial position and; the permissibility and potential success of multiple applications for CoI. This judgment underscores the courts’ commitment to ensuring that criminals do not benefit from their illegal activities, while also providing clarity on the legal recourse available to those subject to such orders.