Six Draconian features of confiscation

The confiscation legislation in the Proceeds of Crime Act 2002 and its predecessors has often been described as “Draconian”.  But what features of the regime cause it to be so described?

I suggest these half a dozen key features combine to make the confiscation regime unduly severe.

The intention of confiscation is to part the convicted criminal from the proceeds of his crime.  But the proceeds are not to be ascertained by an accountant’s detailed examination of the “business” in which the criminal was engaged.  Indeed the Court of Appeal over 20 years ago in R v Ian Smith [1989] 1 WLR 765 said:

“It seems to us that the section is deliberately worded so as to avoid the necessity, which the appellant’s construction of the section would involve, of having to carry out an accountancy exercise, which would be quite impossible in the circumstances of this case.”

That view was quoted with approval by the House of Lords ten years ago at paragraph [24] of R v Smith [2001] UKHL 68 and is entirely consistent with the comment at paragraph [48.1] of the House of Lords decision in R v May [2008] UKHL 28 that:

“The benefit gained is the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses”.

equating the ‘benefit’ to be confiscated with the gross amounts received

With that in mind the legislation has always been interpreted (in England and Wales at least) as equating the ‘benefit’ to be confiscated with the gross amounts received by the convicted defendant in connection with his criminal conduct.  This figure may be far in excess of the criminal’s profit from the enterprise.

A second Draconian feature derives from the long-standing legal doctrine that where monies or other assets are received jointly by two or more persons then each of them receives the whole amount.  English courts have held that this means that, in confiscation, each of them obtains as ‘benefit’ the value of the whole of the amount received jointly by them.  This inherently leads to double counting (and more than double counting in those cases where more than two people jointly receive monies or assets).

Where a defendant does not have adequate records over the previous 6 years or more he may find himself unable to produce the “clear and cogent evidence” which the courts require

In cases where the convicted defendant is held to have a ‘criminal lifestyle’ (which include cases in which the defendant has been convicted of a single offence) the statutory assumptions (now found in s10 Proceeds of Crime Act 2002) apply.  These are a third Draconian feature of the legislation.  The effect of the statutory assumptions is that all receipts and expenditures since the ‘relevant day’ (normally 6 years prior to the day on which the defendant was charged with the offence(s) of which he is subsequently convicted) are deemed to represent benefit of unspecified criminal conduct, and all assets held by the defendant after the date of his conviction are deemed to represent further benefit.  These assumptions may be rebutted but the burden of proof, on the balance of probabilities, falls upon the defendant rather than the prosecution.  Where a defendant does not have adequate records over the previous 6 years or more he may find himself unable to produce the “clear and cogent evidence” which the courts require in order for the assumptions to be rebutted.

A fourth Draconian feature concerns the ‘available amount‘ of the defendant.  A confiscation order is normally made for whichever is the lesser of (i) the defendant’s ‘benefit’ and (ii) his ‘available amount’.  But his ‘available amount’ is not the amount which he has available.  Rather it is his gross assets, less liabilities secured on those assets, plus the value of any ‘tainted gifts’.  Further, the burden is placed upon the defendant to prove to the court, on the balance of probabilities, that his ‘available amount’ is less than the figure of ‘benefit’.  This leads to difficulties where the prosecution allege that there may exist ‘hidden assets’.

it is open to the prosecutor to recommence proceedings against the defendant in later life

In the event that a confiscation order is made based on the defendant’s ‘available amount’ being less than his ‘benefit’ then it is open to the prosecutor under s22 to recommence proceedings against the defendant, in later life, to collect from him the balance of the ‘benefit’ which he was not ordered to pay first time around.  A fifth Draconian feature.

The final, sixth Draconian feature, is the default prison sentence which attaches to an unpaid confiscation order.  When making the confiscation order initially the court may order the amount to be paid immediately or allow the defendant up to 6 months to pay.  On further application the defendant may be allowed a further 6 months (making 12 months in all) but PoCA 2002 lays down that no extension beyond that 12 months is permissible.

[UPDATE: With effect from 1 June 2015 these periods have been halved to 3 months & 6 months.]

Given that the order may well require the convicted defendant to dispose of all his assets it may be something of a tall order to satisfy the confiscation order on time.  In the event that payment is not made on time interest commences to run at 8% per annum on the unpaid balance.  More seriously the defendant may be committed to prison for (or have his sentence extended by) a ‘default sentence’.  The length of the maximum default sentence is fixed by law on a scale relating to the amount of the confiscation order.  Where the order is for £1 million or more the maximum sentence in default is 10 years.  This is not a sentence to be served instead of paying the confiscation order, it is in addition to the order (since the amount due under the order remains payable in full).

In my view the confiscation regime richly deserves its Draconian epithet.

David

24 thoughts on “Six Draconian features of confiscation”

    1. The MAXIMUM default sentence in respect of a confiscation order in the sum of £55,000 would be two years imprisonment. The LIKELY default sentence would be between 18 months and 2 years – normally near the bottom of that range.

      There is a table of MAXIMUM default sentences in s139 Powers of Criminal Courts (Sentencing) Act 2000:

      An amount not exceeding £200 – 7 days
      An amount exceeding £200 but not exceeding £500 – 14 days
      An amount exceeding £500 but not exceeding £1,000 – 28 days
      An amount exceeding £1,000 but not exceeding £2,500 – 45 days
      An amount exceeding £2,500 but not exceeding £5,000 – 3 months
      An amount exceeding £5,000 but not exceeding £10,000 – 6 months
      An amount exceeding £10,000 but not exceeding £20,000 – 12 months
      An amount exceeding £20,000 but not exceeding £50,000 – 18 months
      An amount exceeding £50,000 but not exceeding £100,000 – 2 years
      An amount exceeding £100,000 but not exceeding £250,000 – 3 years
      An amount exceeding £250,000 but not exceeding £1 million – 5 years
      An amount exceeding £1 million – 10 years

      David

  1. In relation to the reconsideration of a defendant’s ‘available amount’ in later life (the fifth Draconian feature referred to in the article) the UK Supreme Court has confirmed in Re Peacock [2012] UKSC 5 that in relation to confiscation orders made under Drug Trafficking Act 1994 provisions, as well as those made under Proceeds of Crime Act 2002, the courts may take into account the value of assets legitimately acquired by the defendant after the confiscation order was made.

    This means that a confiscation order can act as a ‘life sentence’ on a defendant until he has paid in full the amount of his ‘benefit’ (which under PoCA 2002 will be adjusted to reflect inflation).

    (There are no corresponding provisions in relation to confiscation orders made under the Criminal Justice Act 1988.)

    David

  2. Dear David,

    I am currently in the process of replying to the prosecution’s POCA “Statement of Information” and trying my best to displace as many of the 50 or so deposits into my bank account over the past 6 years which the prosecution claims to have come from a general criminal lifestyle (“Assumed Benefit”). Do I have to account for and evidence each and every deposit/transfer, or is displacing the vast majority of deposits sufficient to assert that, in accordance with Section 10 of the Act, the Court should not assume that any of the deposits or transfers into my accounts were obtained as a result of general criminal conduct and ask the Court instead to make a Confiscation Order in the amount of the Direct Benefit only?

    1. Chris

      Strictly speaking you are required to deal with each of the deposits, on an item by item basis. Looking at s10(6) it says, “the court must not make a required assumption in relation to particular property or expenditure if . . .”.

      However (almost) everything in confiscation is decided on ‘the balance of probabilities’. So if your evidence regarding just some of the deposits is sufficient to satisfy the court, on the balance of probabilities, that the other deposits are also likely to be legitimate then you will have achieved the result you desire.

      Do remember that there is often a certain amount of ‘horse trading’ and negotiating done shortly before a confiscation case gets into court. You may find the prosecution are willing to reach an agreement with you rather than going through a contested hearing in front of the judge.

      David

  3. Dear David,

    I’ve already served my default sentence for none payment of my confiscation order (hidden assets finding) but am still being chased to pay it,if i’m unable/refuse to pay the interest can i be imprisoned again and does that wipe clean the interest? Or does it start again once released?

    1. Andrew

      You should consult a solicitor for legal advice on this (I am not a solicitor).

      However, for what it is worth, my understanding is that you can be committed to prison (again) in relation to the unpaid interest and that serving the further prison term will not wipe out the liability to pay the interest.

      If you do face proceedings aimed at committing you to prison again your solicitor in those proceedings may want to suggest to the court that you should not be committed to prison again if you are not in any position to pay the interest. The fact that you have already served the original default term may be regarded as an indication that you are simply unable to pay the debt.

      Interest continues to run on the original debt (unless it is paid or the amount due is varied by order of the Crown Court).

      But it would seem a pretty pointless exercise for the prosecution to keep asking the court to send you back to prison repeatedly in respect of unpaid interest as it mounts up.

      Your solicitor may suggest to the court that in these circumstances you should not be returned to prison.

      David

  4. my boyfriend is currently serving an 18month sentence for non payment of a confiscation order,he already served 3 years for the origional crime.when he is released,is there a chance he will be sent back to prison as he doesnt have the money to pay what the court says he must pay,he never has had,and interest has gone on top so the amount is even more now than it was.its like this is a never ending nightmare.

    1. Diane

      See my reply to Andrew (above).

      A person can only serve a default sentence once for the original amount owing (and that amount remains owing even after the default sentence has been served). But the law does permit a person to be sent to prison for a further period in respect of the unpaid interest on the original sum.

      However, as I said in response to Andrew’s post, that does seem to be a pretty pointless exercise.

      You (or your boyfriend) need to talk to a solicitor about this.

      David

  5. Thank you David for your reply.

    At the moment i’m due to start paying £5pw out of my benefits, so i guess as i long as i’m trying to pay it off, even though realistically it never will, they shouldn’t put me back in prison for the interest.?

    Thanks again for replying.

    1. Yes, there have been cases taken to the European Court of Human Rights on various aspects of confiscation under English law.

      There are similar laws in some other European countries and they too have resulted in cases going to the European Court.

      Generally speaking the Court has upheld the confiscation orders (i.e. it has concluded that they do not involve any infringement of the European Convention on Human Rights). However the European Court did hold that a case from the Netherlands involved a breach of human rights where the convicted defendant had been subject to confiscation in relation to the alleged benefit of additional offences of which he had actually been acquitted in court.

      Also the UK Supreme Court has recognised that confiscation orders should not be made which would be “disproportionate”. But what a judge regards as disproportionate may be rather different from what the defendant considers to be disproportionate. See my article “R v Waya – the UK Supreme Court judgment“.

      David

  6. My husband has served 7 years in default of a confiscation order and is now facing a possible sentence for 500,00 interest on the original sum. What can he expect his further sentence to be..can any one help.

    1. Julie

      Your husband needs to discuss all the relevant aspects of his situation with his lawyers.

      I am not a lawyer and cannot provide you with legal advice.

      David

    2. I hope you don’t mind me replying to your question to this forum. I wondered the outcome of your husbands situation in court. Did he get a further sentence for the interest? I ask because I’m in the same situation myself, facing court soon with a £1.4m interest accrument. My lawyer told me that they can’t sentence me twice for the same thing as I’ve no assets at all. I hope it worked out for you okay.

    3. Hi Julie. I think I’ve added my question to you in the wrong place originally. I’ve replied to David Winch not you. As you can see I was just asking of your outcom as I’m in the same situation. Hope All is well.

  7. A confiscation hearing is to take place against Mr B later this year. The questions I want to ask are:

    1) Mr B only has one property (still paying mortgage) which is a family home to 2 adults and 3 children. Can Mr B argue the fact that this is a family home based on Human rights, this property should not be taken into account by the prosecution as ‘available amount’. Can this be an arguable point?

    2) The property is in Mr B’s name but Mr B’s father had paid around £50,000 to him, now Mr B’s father is asking for the money back. If Mr B’s father takes this case to civil court and gets a court order, will the prosecution accept that the equity in the property should minus Mr B’s father’s £50,000?

    3) If a confiscation order is made and Mr B can not pay back to the prosecution on time, can the prosecution take the house and force sell the house?

    4) Can Mr B take the case to European court of human rights based on family life that the family needs a house to stay to get the confiscation order’s available be reduced? (minus the property equity)

    5) Is it better idea to negotiate with the prosecution but not to offer the full equity of the property but a fixed sum. Do you think the prosecution will accept that and stick to the agreement? Can the prosecution change their mind and ask for more later on?

    6) Mr B has no hidden assets, his only assets is the property he is currently living in. Is it worth going to the hearing and argue the facts or will the court be on the prosecution’s side?

    Hope to hear from you!

    1. Sisi

      You need to get legal advice on these points from a lawyer. I am not a lawyer, I am an accountant.

      Of course Mr B can make any argument he wishes to make in the confiscation hearing.

      In my experience (in Crown Courts in England and Wales) the defendant’s interest in the equity of a residential property is normally taken into account in calculating his ‘available amount’ – even if the property is his family home.

      I am not aware of any appeal previously having been made to the European Court of Human Rights on this point.

      A confiscation order is an order which requires the convicted defendant to pay a sum of money to the authorities. It is not in itself an order requiring that any specified assets of the defendant have to be sold.

      But further legal action can be taken by the authorities which could result in specified assets of the defendant’s (such as a house) being sold to pay the debt. At that stage anyone else with an interest in that property (such as a wife) can object to that further action. The success or failure of that objection will depend upon the individual facts of the case.

      In Scotland there is an additional safeguard of the family home under s98 PoCA 2002, but that does not operate in England & Wales.

      Ordinarily in calculating the defendant’s ‘available amount’ debts of his WHICH ARE SECURED ON HIS ASSETS are deducted from the value of the assets. So if his father has secured the debt by a legal charge or mortgage on the property then that debt will normally be recognised as a deduction from his ‘available amount’. (The position may be different if the court made a ‘restraint order’ prior to the debt being secured.)

      In my view it is always better to obtain legal advice prior to a hearing. Ordinarily I would expect the legal adviser to recommend that the defendant’s arguments should be fully prepared ready to put before the court at the hearing.

      In practice very often matters are settled by negotiation with the prosecution rather than by a full hearing and argument before the judge.

      Where a convicted defendant has a confiscation order made against him which shows his ‘available amount’ to be less than his ‘benefit’ then it is open to the Crown to seek a further court order at a later date when the defendant has an additional amount ‘available’. The court can make such an order, under s22 PoCA 2002, where the court believes it is just to do so.

      David

  8. Update to Mr B’s case. Now he has a confiscation order of the amount which is the equity of his house. His house has been under restraint order for three years. How does he get start to sell the property?
    Can he ask the prosecution to vary the restraint order in order to sell the property? Will the prosecution add condition in the varied order?( such as appointed receiver or ask the money from sales to be deposited into certain bank account etc ) Can Mr B sell the property freely to anyone? You are an expert in this matter, hope you can help. Thank you in advance.

    1. Sisi

      Again Mr B should ask his lawyers about this.

      Normally if the house is being sold for a fair price the prosecution will consent to the sale with the conveyancing solicitor using the sale proceeds to pay off the estate agent’s and solicitor’s fees, then the mortgage outstanding, then the confiscation order.

      Assuming nobody other than Mr B had any interest in the house (e.g. he didn’t own it jointly with someone else) then Mr B himself will not receive anything from the sale.

      If the sale proceeds are not sufficient to pay the confiscation off fully (and Mr B has nothing else to pay it with) then Mr B will have to go back to court after the sale to get the confiscation order reduced (under s23) so that it is treated as paid off.

      David

  9. Dear David
    Thanks a lot for your reply. It is very helpful!
    Mr B has been given a certain amount of confiscation order which is less than the benefit figure. If after he sales the house ,paid all fees, mortgage and satisfy the confiscation order, he still have some money left from the sales, will he get to keep the left over money? Or will the prosecution apply to the court to confiscate the rest of the money up to the amount of the benefit figure?

    kind regards

    sisi

  10. I wonder if anyone can help with this issue.

    A defendant is ordered to pay £100,000.00 or serve a default sentence of 2 years.

    The defendant fails to realize the assets and serves the default term in full (12 months imprisonment).

    Obviously serving the default term does not expunge the debt, and upon release a calculation is performed stating that the sum owing is now £100,000.00 plus accrued interest of, say, £25,000.

    Can the defendant be sentenced to a new default term in respect of the accrued interest?

    I have been looking for case law on this point but haven’t found a definitive precedent.

    Any assistance would be gratefully received.

    Ian Anderson
    Solicitor – Opus Law

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