HER MAJESTY'S ADVOCATE AGAINST JASON MCALLISTER
| HIGH COURT OF JUSTICIARY |
| IND/2012/18 | [2014] HCJ 112 OPINION OF LORDBOYD OF DUNCANSBY in causa HER MAJESTY’S ADVOCATE against JASON MCALLISTER ________________ |
Crown: Barry Divers, Advocate Depute ; Crown Agent
Accused: J Crowe; Michael S Allan, Solicitors
16 June 2014
[1] Jason McAllister was convicted on 9 January 2012 at an accelerated diet under section 76 of the Criminal Procedure (Scotland) Act 1995 of being concerned in the supply of cocaine for a period during September and October 2011 contrary to section 4(3)(b) of the Misuse of Drugs Act 1971. He was on licence at the time having been convicted of an analogous offence in 2003 for which he received a sentence of 10 years imprisonment. He was released from that sentence on 28 March 2008. On 16 May 2012 the court sentenced him to a cumulo sentence of four years and one month imprisonment and 12 months in respect of an order under section 16 of the Prisoners and Criminal Proceedings (Scotland) Act 1993. The prosecutor served a statement of information (SOI) under section 101 of the Proceeds of Crime Act 2002 (“the Act”) seeking an order under section 92 of the Act. Answers were lodged under section 102 of the Act. I heard a proof over three days commencing on 11 March 2014. I heard evidence on his behalf from Jason McAllister himself, his sister Zena McAllister and David Bell a forensic accountant. Parties agreed that a statement taken by DC Forbes from Thomas McAllister on 29 November 2013 should be read into the evidence. Thomas McAllister was the father of Jason and Zena McAllister and is now deceased. The Crown led a forensic accountant, Ann Condick.
Assessing the Witnesses
Jason McAllister: General
[2] Jason McAllister has twice been convicted of offences against the Misuse of Drugs Act. On both occasions the offences attracted High Court sentences. On the first occasion proceedings under the Act resulted in an agreed benefit of £400,000 and realisable assets of £85,000. In his evidence Mr McAllister insisted that he had stayed out of trouble since his release from prison. He had resolved to change and not to become involved in offending again. He had tried to do so. That was his only involvement in criminality. He said that on his release the police had been watching him so he could not have got away with selling drugs for three and a half years. With a minor exception I did not accept his evidence as reliable and credible. Apart from his two convictions I found that he had been involved in two mortgage frauds. If he had legitimate income he had not declared it and thus avoided any tax liability. He maintained that he had not been involved in any drug activity. I accept that there is no evidence that he had been involved beyond the scope of the libel. He was however asked about trips to England. He said that these had been visits to his then wife’s parents who lived in England. Yet his bank account showed acquisitions made at a number of filling stations in England. I was not satisfied with his answer that they all related to trips he made with his wife.
[3] In short I found his answers evasive and opaque on detail. Crucially much of his evidence was unsupported by any documents or even other witnesses who might have afforded a degree of independent support. He was untruthful in many of his answers.
Jason McAllister: Mortgage frauds
[4] In October 2008 Jason McAllister made an application to the Abbey Building Society (now Santander) to fund the build of 1 Acquithie Road. The application purported to show that Mr McAllister was employed as a bricklayer with Banckhory (sic) Contractors Ltd. He had been employed in that capacity since 1 January 2008 and earned £38,755 per annum. A later email from Kim Harrison of Aberdeen Mortgage Management to the Society dated 16 October 2008 purports to correct the sum earned; it is stated as £32,000. A later form shows a start date with his employer of 6 January 2007. The application is signed by Mr McAllister. In fact the application was fraudulent. Mr McAllister was never, as he admitted, employed by Banchory Contractors. Mr McAllister was in prison on both 6 January 2007 and 1 January 2008 when his employment was said to have commenced.
[5] In March 2009 another application was submitted by Jason McAllister, this time to the Skipton Building Society, for a mortgage to build a house at Quarrybrae Croft, Clinterty, Aberdeen. The application purported to show that Mr McAllister was employed by Banchory Contractors, otherwise known as Bancon. The application showed his occupation to be skilled manual. His salary was said to be £38,755 per annum with a guaranteed bonus of £6,000. It was said that he had been employed by them for one year three months. A P60 for the tax year 2007 – 2008 from Banchory Contractors accompanied the application showing earnings for that tax year of £10,922.49. The application was signed by Mr McAllister. It too was fraudulent. It follows that the P60 was fake and part of the fraud committed on the Building Society.
[6] The applications were submitted through a company known as Aberdeen Mortgage Management (not to be confused with another well known company with a similar name). The broker for the first application was said to be Kirk Harrison, a friend of Jason McAllister. In the second application the broker is said to be Alastair Hay.
[7] Mr McAllister claimed not to have seen these applications and not know how it was said that he was employed by Bancon or Banchory Contractors. Mr McAllister blamed Kirk Harrison.
[8] I did not believe Jason McAllister when he claimed not to know of the fraudulent applications or be aware of the details. While he may well not have been the only person involved in the fraud I am satisfied that he was lying when he told the court that he was unaware of the representations being made in the application that he was employed by Bancon or Banchory Contractors and had been since a date when he was still in prison.
[9] I discuss below evidence relating to the application made by Zena McAllister for a mortgage to enable her to purchase 1 Acquithie Road. Mr Crowe submitted that evidence of these frauds were irrelevant or a “red herring” as he put it. He pointed out that Mr McAllister had not been charged let alone prosecuted or convicted of mortgage fraud. I disagree. While it is true that he has not been convicted of any fraud evidence of these transactions is part of the background to this case. Both properties feature in the SOI although in the end no separate issue for my determination arises in respect of Quarrybrae Croft. However much of the proof was concerned with 1 Acquithie Road and the fact that both the building of the property by Jason McAllister and the purchase of the property by Zena McAllister were financed by fraudulently obtained loans is highly relevant. At the very least they cast doubt on the credibility of both Jason and Zena McAllister.
Zena McAllister
[10] Zena McAllister is Jason McAllister’s sister and gave evidence on behalf of her brother. She is employed in the social work department of Aberdeen City Council. She is now the proprietor of 1 Acquithie Road, Kemnay. She acquired title to it from her brother, Jason. Documents exist which show that she purchased the property from him for a consideration of £250,000 of which £12,500 was a gift from her brother. The Crown however alleged that the transfer of ownership was a tainted gift. In those circumstances it was perhaps surprising that she was not separately represented. Whether it would have made any difference to the outcome only she can tell. However, as will be discussed below one of the problems in assessing her evidence is the absence of supporting documentation although during the hearing she claimed that the necessary documentation existed; she had not appreciated that she would need to produce them.
[11] I will come to discuss her evidence in some detail. However it was to the effect that over the years she had loaned her brother just over £50,000. She had bought 1 Acquithie Road from him for £250,000 having borrowed £210,000 for that purpose with the balance being made up from her own savings and from money from her father.
[12] In some ways it was difficult to know what to make of her evidence. She gave her evidence in a straightforward manner. It was clear and concise and she made appropriate concessions. She holds a responsible job. There are however three difficulties in accepting her evidence without qualification. The first is the very large sum of money that she said that she loaned to her brother. As I discuss below this amounts to over £50,000 over a period of four or five years. This represented a very considerable portion of her income over that period. While I can well accept that a sister may well help out her brother in financial difficulties I found it difficult to accept that she would support him to such an extent. My difficulty in accepting this evidence is compounded by the complete lack of any independent evidence to support it. There are no documents of security, receipts, IOU’s or any bank accounts showing relevant transfers.
[13] Secondly it is undoubtedly the case that the mortgage which was used by her to assist the purchase of the property was, obtained by fraud. She used the same brokers as her brother and like the applications made by her brother it was accompanied by fictitious documentation. The application correctly listed the source of income but the payslips were false. They showed income in excess of her true earnings. While on balance I came to the conclusion that she had not been directly involved in the fraud, to the extent of the falsification of her payslips, I was not convinced that she was wholly unaware of the financial machinations behind the transfer.
[14] Thirdly there were occasions when her evidence was less credible, in particular when she was asked whether it was intended that her brother Jason would rent the property from her after the transfer of ownership. Her answer to that question lacked candour.
[15] One final matter is relevant to her evidence. In the joint minute that had been entered into between the Crown and Jason McAllister when the previous confiscation proceedings had been settled, he had accepted that he had an interest in a building society account in the name of his sister. In evidence Jason McAllister said that he had only agreed to this provision because the bank account had been frozen and it was necessary to agree to this in the settlement so that it, and other accounts, could be unfrozen. I did not believe Mr McAllister. On the other hand Zena McAllister professed to be genuinely unaware that this had been agreed. She herself had not been a party to the previous proceedings. She denied that her brother ever had any interest in her account. In the end I was unable to make any finding as to the truth of this. At best perhaps it shows a casualness to money and property within the McAllister family.
Legal background
[16] Section 92, subsections (1), (2) and (3) sets out the three conditions that apply for the court to make an order. There is no dispute that these conditions apply. Nor is there any dispute that the accused has a criminal lifestyle; section 92(5)(a), schedule 4, paragraph 2(1)(a). The task for the court when these conditions are met is to establish whether the accused has benefitted from his general criminal conduct, if so what is the value of the benefit and what sum is recoverable; see R v May [2008] 1 AC 1028, per Lord Bingham at paragraphs 8 and 48.
[17] Although these questions appear as separate and distinct no issue was raised in the course of the proof as to value of the property and expenditure detailed in either the SOI or for that matter in Mr Bell’s reports. The issues raised were whether the assumptions in section 96 could be made. Accordingly I shall deal with the first two questions together.
[18] Section 96(1) of the Act provides that where the accused has a criminal lifestyle it must make four assumptions for the purpose of (a) deciding whether he has benefitted from his general criminal conduct and (b) deciding his benefit from the conduct. The four assumptions are set out in section 96(2), (3), (4) and (5) of the Act. In short the first assumption is that any property transferred to the accused after the relevant date was obtained by him as a result of his general criminal conduct; secondly that any property held by him after the date of conviction was obtained by him as a result of his general criminal conduct; thirdly that any expenditure incurred by the accused after the relevant date was met from property obtained by him as a result of his general criminal conduct; and fourthly that for the purpose of valuing any property obtained by the accused, he obtained it free of any interests in it. However the court must not make any of those assumptions in relation to particular property or expenditure if (a) the assumption is shown to be incorrect, or (b) there would be a serious risk of injustice if the assumption were made; section 96(6). If the court does not make one or more of the assumptions it must state its reasons.
[19] The relevant date is six years before the commencement of proceedings; section 96(8). In this case Mr McAllister was in prison during part of this time and although the SOI has columns going back to 2006 the first entries appear in 2008.
Scope of general conduct
[20] Mr Crowe submitted that I should not make any of the assumptions in section 96 as there would be a serious risk of injustice were I to do so. In his submission I should restrict the period of any general conduct to the period of the libel; a period of three weeks in September and October 2011.
[21] Mr McAllister gave evidence about his previous conviction, his release on licence and that, other than a minor road traffic conviction in 2008, he had stayed out of trouble until his arrest on this matter. When he was arrested he had been interviewed by police officers. He had told them the truth. In particular he told them that he was selling cocaine to pay off a debt. A guy had given him four and a half ounces of cocaine and told him to bulk it up to a kilo with Benzocaine and give him £20,000. That was his only involvement in drugs offences. Mr McAllister gave evidence to the effect that he had found prison to be a life changing event.
[22] Mr Crowe’s position was quite straight forward; the court should not make any assumptions under section 96 and should accept that the period of general criminal conduct should be restricted to the period of the libel to which he pled guilty. No authority was cited as a precedent for such an approach.
[23] I reject the submission. In the first place it would drive a coach and horses through the assumptions which Parliament requires the court to make where the accused is deemed to have a general criminal lifestyle. Secondly as I read section 96 the assumptions must be made in relation to any particular property or expenditure unless either of the conditions in section 96(6) are met. These are either that (a) the assumption is shown to be either incorrect or (b) there was a serious risk of injustice if the assumption is made. The use of the phrase “particular property or expenditure” is important as it indicates that the court must first look at the particular item of property or expenditure and then make the assumption unless one of the conditions is met. There is no room in my opinion for the court to interpret section 96(6) as allowing it to take a blanket approach and restrict the scope of the general criminal conduct.
Benefit
[24] The statement of information set out the Crown’s position that the benefit amounted to £301,179.09. By the time that Ms Condick, the Crown accountant gave evidence, that sum had been reduced to £140,000. It is not necessary for me to go through the adjustments that produced that figure. Helpfully the disagreements between the Crown figures and those of Mr Bell are set out in the appendices to Mr Bell’s reports, defence productions 15 and 16. Defence production 15 still records the Crown figure as above but it is helpful to substitute the revised figure of £140,000 and to record the areas which are still in dispute.
1 Acquithie Road, Kemnay
[25] Prior to coming out of prison Mr McAllister had resolved to build a house on land owned by him at what is now 1 Acquithie Road, Kemnay. Through his sister he had engaged an architect and subsequently had obtained and accepted a quotation for the construction of the house of £170,000.
[26] On schedule 2 of the SOI the Crown have included as an asset the property at 1 Acquithie Road. The value placed on it is £220,327.50. That is comprised of £15,000 as the cost of land, £205,000 as the build cost and the balance in legal expenses. Ms Condick explained that she reached the estimate of £205,000 by making a calculation on the mortgage that was borrowed on the security of the property. In her experience a building society will usually lend money up to a maximum of 70 to 80% of the value of the property. A mortgage of £170,000 represented 70% of a valuation of £240,000 and 80% of a valuation of £212,000. Taking a mid-figure of £220,000 and deducting £15,000 gave £205,000. The Crown did not lead any other evidence to suggest that this figure might be correct. However Ms Condick noted that the house had originally been on the market at offers over £295,000. The building society surveyor had estimated the rebuild cost to be £280,000.
[27] Schedule 2.1 of the SOI shows the construction being financed by £112,500 being from Mr McAllister’s account. The Crown accepts that this figure should read £114,768.03 based on a thorough analysis of that account. The Crown contends that the balance was financed from an unknown source. Accordingly the court must make the assumption in section 96(4) of the Act that it was financed from general criminal conduct.
[28] Mr McAllister’s position was that the cost to him of building the property was £170,000. That was based on the builder’s quotation which he had accepted. He accepted that not all the payments had gone through his bank account. He also explained that he had made payments in cash for labour and materials some of which he outlined in evidence. For example he gave evidence that he had got marble tops from a place in Fife.
[29] Mr Bell disputed the cost of building the house on the basis that there was no evidence to support it. He also contended that the court should accept that some payments were made in cash. He originally proposed an adjustment from the Crown’s benefit figure of £107,500. In his subsequent report he recorded that the Crown had informed him of a payment to Tayside Plumbing on 13 March 2009 of £6001 of which £23 was a bank charge. The figure of £107,500 accordingly required to be reduced by £5978 giving an adjusted figure of £101,522.00.
[30] The advocate depute informed me that the Crown accepted Mr Bell’s figure of £114,768.03 as identifiable expenditure from Mr McAllister’s account detailed in appendix 1 to defence production 16. However that does not appear to include the figure of £5978. It was not clear to me how this should be treated. If it is accepted as identifiable expenditure then it appears to me that the sum of £112,500 that appears in schedule 2.1 should now read £120,746.03 being the sum of £114,768.03 and £5978.
[31] Before accepting that figure I will invite representations from the parties as to whether my understanding of the position with regard to the sum of £5978 is correct.
[32] Section 96(4) of the Act provides that any expenditure incurred by the accused at any time after the relevant day was met from property obtained by him as a result of general criminal conduct. However for the court to make that assumption it has to be satisfied that there has been expenditure which can be linked to the accused.
[33] In schedule 2.1 the Crown have shown 1 Acquithie Road as an asset at a value of £220,327.50. However that is based on assumed expenditure, in particular an estimate of build cost of £205,000. The Crown have not sought to justify that figure by leading evidence of actual build cost. Nor did they lead an expert such as a builder to give an estimation of cost. It is based purely on Ms Condick‘s approach that the mortgage is likely to be 70% to 80% of the value of the property. However valuation and build cost are not necessarily the same. And while I accept that Ms Condick may have some experience of building society practice I did not consider that I could accept her as an expert in this area.
[34] Since the onus is on the Crown to demonstrate that the accused has incurred expenditure I do not consider that I can hold on the balance of probabilities that the build cost was £205,000. However the house has been built and clearly there was expenditure on it. The best evidence of cost comes in this instance from Mr McAllister and the quotation given by the builder of £170,000. I add to that figure the sum of £15,000 as the cost of land and the legal fees of £327.50. The total cost is therefore £185,327.50. That is the expenditure which should be shown as new build cost in schedule 2.1.
The transfer of 1 Acquithie Road to Zena McAllister
[35] On 22 July 2010 a firm of solicitors known as Solicitors Direct in Aberdeen, acting on behalf of Zena McAllister made an offer to themselves, acting on behalf of Jason McAllister, to purchase the property at 1 Acquithie Road, Kemnay at a price of £250,000 on the terms and conditions that one would expect to see in an arm’s length transaction. On 26 July Solicitors Direct replied to themselves accepting the offer subject to certain qualifications. On 27 July Solicitors Direct accepted these qualifications holding the bargain as concluded. Subsequently Jason McAllister signed a disposition in favour of Zena McAllister of the property at 1 Acquithie Road, Kemnay for a consideration of £237,500. The disposition is dated 27 August 2010.
[36] On 26 August 2010 Solicitors Direct, on this occasion purporting to act for Zena McAllister, wrote to the Abbey (now Santander), from whom Ms McAllister was obtaining a mortgage, enclosing a Certificate of Title and requesting loan funds for 27 August. They took the opportunity of informing them that the purchase price was £250,000 of which their client was receiving a mortgage from the Abbey of £200,000 and was putting down a deposit of £37,500. The remaining £12,500
“is a gifted deposit from the seller who is our client’s brother. We believe the broker has already informed you of this at application stage.”
The broker was Aberdeen Mortgage Management. Santander’s application file shows Ms McAllister to be a Care Manager at Aberdeen City Council. That is true. It says that she commenced employment with them on 1 June 2005. Ms McAllister said it was in 2007. The file shows her salary before tax as £41,000. That is not true; it is £33,000. It also shows other earnings of £7,800. That is true.
[37] On the file there is a hand written undated letter which purports to come from Jason McAllister addressed to Santander. The letter confirms that he was gifting £12,500 to his sister Zena McAllister for the purchase of his property. Mr McAllister was not asked about this letter and I would have difficulty, given the apparent difference in handwriting style between the signature on the disposition and the signature on the letter, from holding that he had in fact written the letter.
[38] On 3 August 2010 Mr Andrew Hay of Aberdeen Mortgage Management sent a fax to Abbey in which he said that the agreed sale price was £250,000. The applicant was providing £37,500 as a deposit and the balance was being gifted. The fact that the intention was that the property would be let to a family member. Ms McAllister was asked who she was going to rent it to. Her answer was vague. She at first said that she was not sure – she was keeping her options open. She was then asked if that was a reference to her brother Jason McAllister. She said it could have been. She was asked if he had rented it and she said yes. She was asked if there was a lease and she said there was but that she did not have a copy of it.
[39] Later she explained that she had been house sitting for her brother when he went away (for a long weekend to Appleby). It was then that the house had been set on fire. She was too frightened to stay there. In June 2011 her brother and his girlfriend moved into the house. There was a lease with the girl friend and she had paid £650 per month. Unfortunately there was no documentation of this.
[40] The mortgage application purported to vouch Ms McAllister’s income from Aberdeen City Council with payslips for May and June 2010. They purport to show a monthly income of £3541.67. Grossed up, that exceeds £42,000 per annum. While they have the appearance of genuine payslips they are not in the format used by Aberdeen City Council.
[41] The application for the mortgage was fraudulent as it proceeded on the basis of a deliberately overstated income. That was supported by convincing, but fake, documentation.
[42] Ms McAllister said that she was unaware that the purchase price had been reduced to £237,500. She claimed to have been unaware of the gift to her of £12,500 though she later said that she could not remember it. Her evidence was to the effect that she had loaned her brother a considerable sum of money. She said that she was not aware of how the application had been submitted with a false statement of income and false documentation. She had given Aberdeen Mortgage Management her payslips. They looked very different from the ones submitted on her behalf. There were deductions which appeared on the genuine payslips which did not appear on these ones. It was Andrew Hay who had applied for the mortgage; she had simply provided her details to him. She knew nothing about the false representations. She was asked if she thought she had been used to which she replied, “I am not sure.” If she was used she was not aware of it.
[43] Ms McAllister told the court that she had to give the solicitors money for the deposit. It amounted to either £42,000 or £43,000, including legal fees etc. When it was pointed out to her that this sum was less than the £50,000 that, on her evidence, would be required to make up the difference between the £200,000 she was borrowing and the £250,000 purchase price (not taking into account the gift of £12,500 of which she was unaware) she rather quickly said that she thought she was borrowing £210,000. She denied that she had said that because she had become aware of the discrepancy in the figures. However there is no dispute that the Abbey mortgage was for £200,000.
[44] The balance according to her was made up from her own savings and money from her father. They intended to put in £21,000 each. On her side some money was going to come from a building society and she intended to borrow some money on her credit card. On 6 May 2010 she opened a current account with the Bank of Scotland. Regular payments are credited to her account consistent with her salary. However there are other payments. On 25 June 2010 there are three payments of £400 cash, £9,000 by cheque and £8,000 bank transfer. The £8,000 was a bank transfer from another account and the £9,000 was a cheque from a building society account held by her. There was no vouching of these payments or any evidence that these accounts existed. She was not asked and did not volunteer the names of the financial institutions or the branches where the accounts were held, or the types of account. In short there was no specification of where these monies had come from. Ms McAllister denied that her brother was the source of funds.
[45] On 14 July £950 in cash was paid into Ms McAllister’s account. On 20 July there was a bank credit of £2,500. On 23 July there was a bank transfer of £21,100. There was no explanation for the first two payments. However the sum of £21,100 was transferred to Zena McAllister’s account from a bank account in the name of her father Thomas McAllister.
[46] An analysis of Thomas McAllister’s account shows that commencing on 9 June 2010 there were a series of cash payments into the account totalling £21,000. Three were for £2,000. Two were for £3,000 and there is one payment of £9,000. All of these are cash and there is no way of tracing where these funds originated.
[47] On 26 August, the day of the transfer the sum of £41,744.50 was transferred from Zena McAllister’s account to Solicitors Direct. On 9 September 2010 the sum of £46,000 was credited to Ms McAllister’s account. That was transferred from Jason McAllister’s account and represented part of the proceeds of sale to her. The following day Ms McAllister transferred the sum of £15,000 to her father’s account. On 14 September a sum of £13,000 left her bank account by cheque. She told the court that she paid it into her building society account.
[48] The explanation for these payments was that the house required a considerable amount of money spent on it to finish it. The arrangement with her brother was that he would pay money to her so that she could complete it. Ms McAllister denied the suggestion that this was all a scheme to release money for Jason McAllister. It did release some equity for him but it also allowed him to payback some of the money that he owed both her and her father.
[49] There was evidence from both Jason McAllister and Zena McAllister that the house required some work to be done on it before it could be occupied. According to Ms McAllister it was a year before the house was completed and fit for occupation. Ms McAllister produced a statement outlining these works and their cost, together with a number of invoices vouching these payments. The main problem related to the drainage. It cost nearly £13,000 and was not complete until April 2011. Other substantial payments were for oak flooring, fitting of doors, the fitting of CCTV and landscaping. The total in the schedule produced by Ms McAllister, including mortgage payments for that year of about £15,000, is £70,000. Without necessarily accepting every payment as relevant I accept that a considerable amount of work required to be done on the house. It was not clear to me where all the money for these works came from. Some of it no doubt came from the balance of the £46,000 from the free proceeds of sale. Although Zena McAllister made out that she had paid for the rectification of the drainage works, Thomas McAllister in his statement said that he paid Nicol of Skene in excess of £12,800 to deal with problems with the septic tank.
[50] Ms McAllister told the court that over a number of years from 2006 she had lent her brother in excess of £51,000. She had stopped giving him money in 2010. It had started when he had first conceived the idea of building a house at 1 Acquithie Road. He was in prison at the time and wanted to have the house completed while he was in prison. She said that she had written down the amounts and started to produce a notebook. The advocate depute objected and the matter was not pressed. She said that she remembered architects fees of £500 and £1350. Thereafter she had supported him financially because he did not have enough money to pay the mortgage. She had given him £7,200 for the mortgage for Merkland House, another of Mr McAllister’s properties. Otherwise she said she gave him money as and when he required it.
[51] None of these payments were vouched in any way and no attempt was made to detail when these payments were made, how much was given to Mr McAllister and the way in which the payments were made. The only exception was in re‑examination when Mr Crowe took Ms McAllister to the bank account and she identified a cash withdrawal on 28 October 2010 of £2,750 as being a loan to Mr McAllister.
[52] If these payments were made I find it astonishing that there are no records whatsoever or if there are that they were not produced. Parties were clear that the issue of loans to Mr McAllister from his sister and father were major points of contention between them.
[53] The other source of loans is said to be from Thomas McAllister, Jason McAllister’s father. In his statement Mr McAllister said that it was always revolving doors with Jason. He borrowed more than he paid back. He was always having to lend him money sometimes from personal cash and sometimes through bank loans. In short he estimated that over the years Jason owed him in the region of £40,000. Most of it was for the house at Quarry Croft, Clinterty and the rest for various loans.
[54] In the table of revised benefit in defence production 16 Mr Bell has maintained that the sum of £20,000 should be deducted from the benefit representing the loan or loans said to have come from Thomas McAllister. Mr Bell explained that this was the figure that he obtained from a precognition from Jason McAllister. It is perhaps significant that it differs from the evidence given by Mr McAllister in court and in Thomas McAllister’s statement. Mr Bell also proposes an adjustment in respect of the loan or loans of £50,000 from Zena McAllister. That was based on what he was told and not on having sight of any documents to show that these loans were made. He accepted that if they were not made then the adjustments could not be justified.
[55] As I have indicated there is no independent documentary evidence to support these loans. Accordingly I do not consider that Mr McAllister has shown that the assumption that this expenditure was funded from general criminal conduct to be incorrect. Accordingly I decline to make the proposed adjustments.
Income
[56] Mr McAllister gave evidence that he had earned income which had been paid cash‑in‑hand. His father worked in the scrap metal trade. While he was in open prison working towards his release he would work with his father when he was allowed home leave. He also worked with him when he was released on licence. His father let him stay rent free in one of his properties and paid him between £300 and £500 per week. It was not clear for how long this arrangement lasted but it appears to have been up until 2011. In his witness statement Thomas McAllister said that before he retired his son Jason used to help in the business. During these weeks he paid him about £200 per month. In 2008 he would work one week a month when he was in semi open prison and after his release he worked full time with him. Mr McAllister senior then goes on to say that the business was then sold to Panda Rosa. He does not say when that occurred. He said that his son was self‑employed but he could not remember what he did. He had to pay his own tax and national insurance.
[57] Jason McAllister also said that he had been working with a man called Ross Beattie of Deeside Tiling as a tiler. He had gone to Newcastle to get qualifications and certificates were produced dated June 2011. Mr McAllister said that he had been paid £300 to £500 per week and that he had worked there for about nine or 10 months. A letter was produced which purported to come from Ross Beattie. It was unsigned and undated and was not on headed notepaper. The letter said that Jason McAllister had been helping out on specifically large and sometimes smaller tiling jobs in and around the Aberdeenshire area for the last 18 months. Mr McAllister senior said in his statement that around 2008 – 2011 his son had been working with a tiling company “at the same time” (presumably as working with him) and being paid £250 per week.
[58] David Bell calculated a sum £25,600 as representing the earnings that Mr McAllister made from his father. That calculation was based on earnings of £200 per week. The starting point was 28 February 2009. That was calculated on the basis of a payslip which purported to come from Bancon showing that he was employed by them until that date. Mr Bell then assumed four weeks holiday per annum and calculated his earnings until Mr McAllister’s arrest in October 2011. That sum represented legal earnings that had not been taken into account by the Crown. It should be taken off the benefit figure. Originally Mr Bell had included a sum representing earnings from Bancon but had raised questions about this during preparation and had deleted it. He was unaware of the supposed earnings from Deeside Tiling and had made no calculation in respect of that supposed employment.
[59] In his submissions Mr Crowe asked me to accept that Mr McAllister had received income from both his father and from Deeside Tiling. As I understood it he stood by the calculation made by Mr Bell in respect of income from his father despite the fact that Mr McAllister himself thought that the sum of £200 per week was low. The starting date for Mr Bell’s calculations was undoubtedly wrong as it purported to start at the end of his employment with Bancon. As we now know that was fictitious. The end date for the calculation was also wrong. Mr Crowe offered no calculation in respect of Deeside Tiling.
[60] The advocate depute submitted that no allowance should be made for these earnings. The figures were not vouched in any way. No tax return had been made and no tax paid on any earnings from the father or Deeside Tiling. He submitted that those who deal in cash and do not keep any records must take the consequences; R v David Lee Jones [2006] EWCA Crim 933 per Davis J at paragraph 20.
[61] It may well be that Mr McAllister worked from time to time for his father and was given cash in hand in payment. How often this occurred and how much he received is impossible to say. There is a divergence between father and son as to how much he was paid. There is nothing to vouch these payments and no tax returns were made.
[62] The same comments may be made in relation to the supposed earnings from Deeside Tiling. There was nothing to vouch any payments from them. The undated unsigned letter which purported to come from Ross Beattie was at variance with Mr McAllister’s own account as to how long he had been working there. Ross Beattie himself was not called to give evidence. Mr Bell made no allowance in respect of any earnings from Deeside Tiling.
[63] In R v David Lee Jones Davis J said
“if persons…choose to operate their business dealings in such a way as to deal only in cash and keep no records … they must take the consequences that may arise; not least for the potential application of the Proceeds of Crime Act 2002.”
That applies in this case. Mr McAllister has failed to discharge the onus of proof on him. Accordingly I cannot hold that the assumption required by section 96 is wrong to the extent of any earnings from either Thomas McAllister or Deeside Tiling. Accordingly I decline to make the deduction advanced by Mr Bell in respect of earnings.
BMW M3
[64] I heard quite a bit of evidence about the acquisition and ownership of a BMW M3 coupe although in the end of the day it is not a realisable asset as it has been repossessed by the finance company. It is however shown in schedules 2, 2.5 and 4 as expenditure of £21,850.
[65] Mr McAllister identified an entry in his bank account of a credit on 5 August 2009 as coming from the sale by him of a Range Rover. According to him he had sold this car in order to help facilitate the purchase of a BMW M3 at a cost of £26,000. According to Mr McAllister he had bought it from a particular woman. However he had later sold it to his brother Derek McAllister. When Jason McAllister had purchased it he thought that there was no outstanding finance on the car. However it was subsequently discovered that there was outstanding finance and his brother had transferred the car back to him for him to sell it and deal with the outstanding finance.
[66] An examination of the DVLA records of the registered keeper of the vehicle paints a slightly different and more complicated story. Jason McAllister said that he bought the car from a named woman. However the DVLA documents show a transfer from this individual to Derek McAllister, not Jason. Moreover the date of the transfer is said to be 10 April 2010, eight months after the supposed sale of the Range Rover to help pay for it. There was no explanation for the apparent time gap between sale and purchase. Mr McAllister said that it was registered in his brother’s name as he did not intend to keep it.
[67] The next day, 11 April 2010, the car was transferred to Derek McAllister’s daughter, Stephanie McAllister. Mr McAllister had no explanation for this. On 21 June 2010 it was transferred back to Derek. On 4 April 2011 it went back to Stephanie. On 8 August 2011 it went back to Derek. Again there was no explanation for these transfers.
[68] On 21 September and 3 October 2011 Jason McAllister was observed driving the car while under police surveillance In his interview Mr McAllister said the car was his. He went on to say that he had bought the car three years before for £26,000. He then said that his brother had had it for two years and that he had sold it to him. He said that there was about £15,000 of finance on it so Derek McAllister gave it back to him to sort out.
[69] Jason McAllister transferred the car back to Derek McAllister on 20 August 2012 while he was in prison.
[70] By the time he came to give evidence Mr Bell had removed it as a proposed adjustment. His position was that although it was no longer an available asset Mr McAllister would need to show evidence that he had sold the car to his brother Derek McAllister. I am satisfied on the evidence that at the relevant date the car belonged to Jason McAllister. He bought the car even although it was registered in his brother’s name. The car was registered in the names of Derek McAllister, Stephanie McAllister and Jason McAllister during this period. At the time of the offence Jason McAllister was the registered keeper. He was seen driving the car when under police surveillance. There is no record of any sale to Derek McAllister and no evidence from him that he bought it.
[71] It is not clear to me what effect if any this has on the benefit figure. There is also a discrepancy between the value in the SOI and the evidence of the purchase price. Accordingly I will invite further submissions on this issue.
Employment Income of Mr McAllister’s partner
[72] In his original report Mr Bell had identified the sum of £14,435 as expenditure coming from Maija Dolman‑Shelcott, Mr McAllister’s partner as an adjustment to the benefit figure. In his supplementary report, defence production 16 he dropped that adjustment as the Crown had pointed out that it had not formed part of the SOI and it would have to be shown that she gave her income to Mr McAllister.
[73] I accept that it would it has not been shown that any adjustment should be made in respect of any income from Mr McAllister’s partner.
Value of Drugs
[74] Schedule 2 shows the wholesale value of the drugs recovered to be £10,000. Mr McAllister did not give direct evidence on this matter but he was referred to his police interview and he confirmed that he had told them the truth. In particular he told them that he was selling cocaine to pay off a debt. A guy had given him four and a half ounces of cocaine and told him to bulk it up to a kilo with Benzocaine and give him £20,000.
[75] Mr Crowe submitted that it should not form part of the benefit figure. The advocate depute did not press the matter too strongly. It is important to recall that the significance of this issue is whether Jason McAllister spent money on the purchase of the drugs. If he did then the assumption that he paid for it out of his general criminal conduct must apply. I am not satisfied, having regard to the police interview and the agreed narrative that the Crown has established that Mr McAllister did pay for the drugs himself. Accordingly I am satisfied that this should not form part of the benefit figure.
Recoverable amount
[76] Schedule 7 sets out the available amount. The main amount is the equity in 1 Acquithie House. Whether it is available depends on whether it is a tainted gift.
Tainted gift
[77] The advocate depute submitted that there were a number of reasons why the transfer of the property at 1 Acquithie Road should be regarded as a tainted gift and therefore part of the available amount. First he submitted that the sale price was below value. When the house was put on the market it was at offers over £295,000. Aberdeen Mortgage Management told the building society that they thought it was undervalued. On the face of the missives the purchase price was £250,000 yet it was reduced by the “gift” by Mr McAllister to his sister giving an actual price of £237,500. He referred me to the definition of “tainted gift” in section 144(9) of the Act.
[78] Secondly the cash going into Ms McAllister’s account prior to the transaction was not vouched. Certainly £21,100 could be seen going in from her father’s account but it was made up of cash payments going into the account shortly before the transfer to Ms McAllister. However none of these were vouched in any way and there was no indication as to the source of these funds.
[79] Thirdly there was Ms McAllister’s potential involvement in a mortgage fraud. He accepted that she had no convictions and was in a responsible job. However her income was inflated in order to obtain the mortgage. On her evidence she appeared not to know the details of the application. She did not know that the price of the house had been reduced to £237,500 or that she had received a gift of £12,500 from her brother. The application itself had been accompanied by fraudulently prepared payslips. She said that she had submitted payslips to the mortgage broker. Her position was that she had given them the correct payslips but there was no evidence of what had been submitted other than the payslips that accompanied the application. It was clear that there was a deliberate attempt to fraudulently inflate her income in order to obtain a mortgage. If she was indeed in ignorance of what had happened in her name she was, the advocate depute submitted, guilty of wilful ignorance.
[80] Then there was the odd set of circumstances after the transfer was complete where the sum of £46,000 was paid back into her account by Jason McAllister. It was significant that this sum was broadly equivalent to what she had had to put down as a deposit.
[81] The advocate depute pointed to the joint minute that had been entered into between the Crown and Jason McAllister when the previous confiscation proceedings had been settled. He had accepted that he had an interest in a building society account in the name of his sister.
[82] Jason McAllister had lived in the property after the purchase at least for some of the time. There was nothing to vouch the claim that rent had been paid on it.
[83] Section 144(3) of the Act provides that a gift is tainted if it is made by the accused at any time after the relevant date. Clearly the transfer of the property was made after the relevant date. The issue is whether or not it was a gift. On the face of it Ms McAllister paid £237,500 for the property. She obtained a mortgage to assist her in purchasing the house. The fact that it was obtained fraudulently does not directly impact on the issue of whether the transfer of the property was a gift.
[84] Section 144(9) provides that if an accused transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer, he is to be treated as making a gift. The first question is what is the value of the property? When it was first put on the market it was priced at offers over £295,000. The building society valued the house at £260,000. It is accepted that there was still work to be done on the house when the transfer took place and that would require the expenditure of money by the purchaser. Against that background it is difficult to say that the ostensible price of £250,000 did not represent the market value at the time.
[85] The actual sum paid by Ms McAllister was only £237,500 with a gift to her of £12,500. The advocate depute’s position is that this sum is significantly less than the value. It represents 5% of the value. The advocate depute did not submit, as he might have done, that I should consider the issue of the gift of £12,500 on its own unconnected with the transfer of the property. There were no submissions from Mr Crowe as to whether or not the transfer was significantly less than the value of the property.
[86] The sum of £12,500 is not a negligible sum of money. The question is whether or not it is significantly less than the value. On its own I think it may be marginal. However, the transfer of the property to Ms McAllister from Jason McAllister was followed shortly thereafter by the repayment to Ms McAllister of the sum of £46,000. It was said that it was to enable her to complete the property. However the incomplete nature of the property was reflected in the price that she paid for it. As the advocate depute pointed out the repayment more than matches the deposit that she had to pay for the property. If one deducts £46,000 and the £12,500 “gift” from the original purchase price of £250,000 then the cost to Ms McAllister was only £191,500. This is less than the sum she borrowed.
[87] Taking all these matters into account I would hold that the transfer was for a consideration significantly less than the value of the property. Accordingly I hold that it was a tainted gift.
[88] The agreed equity in the property at 1 Acquithie Road was £95,000 representing the value of the property as £290,000 less the amount of mortgage outstanding of £195,000.
Cash
[89] The sum of £7,265 in cash was seized from Mr McAllister on his arrest. It is agreed that this forms part of the available amount.
[90] The recoverable amount comprises the equity in the property together with cash seized on arrest of £7,265.
Conclusion
[91] A number of points arise on which I have invited further submissions. I would also wish to be addressed on the consequences of my findings for the total benefit figure and the recoverable amount as well as the form of the order that I should make.
[92] This opinion was issued in draft to the parties. At a continued determination hearing I was informed by both the advocate depute and Mr Crowe that the accountants had agreed that the benefit figure is £48,600. They invited me to make an order for payment in that amount with six months for payment at Dundee Sheriff Court.