Ernest, R v

Where the criminal-lifestyle assumptions under Proceeds of Crime Act 2002 apply, transfers to a defendant are treated as benefits of general criminal conduct unless the defendant shows that the assumption is incorrect or would create a serious risk of injustice. Unsupported assertions of legitimate trading do not rebut the assumption, particularly where the activities formed part of a fraudulent enterprise.

The prosecution must nevertheless prove that expenditure was incurred before the expenditure assumption can operate. A general living-cost index cannot establish additional expenditure where bank evidence already shows that some living costs were paid from sums included in the benefit figure. The defendant bears the burden of showing that the available amount is lower than the benefit.

Following his conviction for 17 fraud offences and an identity-document offence, Sam Ernest was made subject to a confiscation order in the Crown Court at Kingston-upon-Thames under Proceeds of Crime Act 2002. The Crown Court found that he had a criminal lifestyle and assessed benefit and available amount at £308,380.29.

Ernest challenged the inclusion of money paid into bank accounts under his control, the addition of £98,400 for living expenditure calculated from a minimum-income index, and the finding that his available amount equalled his benefit. The appeal concerned the proper use of the criminal-lifestyle assumptions and the evidential burdens governing benefit, expenditure and available amount.

1. The appeal was allowed in part. The Crown Court was entitled to include the sums transferred into bank accounts controlled by Ernest as benefit obtained from his general criminal conduct.

2. Under Proceeds of Crime Act 2002, section 10(2), the court was required to make that assumption unless it was shown to be incorrect or to create a serious risk of injustice. Ernest supplied no business, tax or accounting records capable of identifying legitimate transactions. The evidence also supported the finding that his ticket-related activities were a continuing fraudulent enterprise, not a legitimate business with occasional defaults.

3. The benefit was not reduced by expenditure incurred in operating the criminal venture. That conclusion accorded with R v May [2008] 1 A.C. 1028 and R v Ahmad, R v Fields [2014] 3 W.L.R. 23.

4. The Crown Court erred by adding £98,400 as assumed living expenditure. The prosecution had to establish that expenditure had been incurred before the assumption in section 10(3) could be made. The bank records showed that at least some living expenses had already been paid from money included in the benefit calculation. It was therefore impermissible to infer further expenditure merely by applying a general minimum-living-cost index. The court left open whether such an index could assist in a different case.

5. Ernest had not shown under section 7(2) that his available amount was lower than his benefit. The judge was entitled to reject his dishonest evidence and to conclude, from the case as a whole, that he had not discharged that burden.

6. The confiscation order was varied. The substituted benefit, available amount and recoverable amount were £209,280.29. The default term was reduced from three years to two years and six months.

• Court of Appeal (Criminal Division)—allowed the appeal to the limited extent of removing the additional £98,400 expenditure figure and varied the confiscation order: [2014] EWCA Crim 1312.
• Crown Court at Kingston-upon-Thames—made a confiscation order following Ernest’s convictions, assessing benefit and available amount at £308,380.29.