R v Waya – the UK Supreme Court judgment

The UK Supreme Court judgment in the confiscation case of R v Waya [2012] UKSC 51 has added another layer of complexity to confiscation cases in England & Wales.

The judgment addressed two issues: (i) Where a mortgage is fraudulently obtained how is the benefit of that fraud to be calculated for confiscation purposes? (ii) Is the confiscation scheme under Part 2 of the Proceeds of Crime Act 2002 in England and Wales compliant with Article 1 of the First Protocol to the European Convention on Human Rights (referred to as ‘A1P1’)?

 

Mortgage fraud

The Supreme Court’s answer to the mortgage fraud question is rather different from that previously adopted in the Crown Court and Court of Appeal.

It boils down to this.  No benefit arises from the actual obtaining of the mortgage itself, but a benefit can arise when the property purchased with that mortgage increases in value.

An example illustrates how this is to be worked out.  Suppose a defendant, call him Mark, buys a property for £775,000.  He puts up a 40% deposit from his own (legitimate) money, that’s £310,000.  The remaining 60%, or £465,000, he obtains fraudulently by giving false details of his income to the lender.  Mark is convicted of mortgage fraud and is then subject to confiscation proceedings.  At the time of the confiscation hearing the property has increased in value to £1,200,000 and there is still the original £465,000 outstanding on the mortgage.

The increase in the value of the property has been £425,000 (the difference between £775,000 and £1,200,000) and the fraudulently obtained mortgage was 60% of the purchase price.  So the benefit is 60% of the increase in value – which works out to be £255,000.

That is not the way that benefit in mortgage fraud cases was calculated before this judgment was published on 14 November 2012, but from now on this is the way that the calculation should be done.

But note that Waya was a case in which the defendant’s own money was legitimate and only the mortgage money was derived from crime.  A different approach is needed in cases where the defendant’s own money is derived from (other) crime and the mortgage advance is legitimately obtained.  A different approach would also have been needed if the property being purchased had been fraudulently over-valued in connection with the obtaining of the mortgage resulting in the mortgage advance being greater than the true market value of the property being purchased.

The calculations get more complicated where some of the original mortgage advance has been repaid before the date of the confiscation, or where the property has been subject to a re-mortgage and further borrowing.  It is not possible to deal with those complexities in a short article such as this.

 

Human Rights

The Supreme Court also addressed the issue of compliance with A1P1, Article 1 of the First Protocol to the European Convention on Human Rights.

Essentially the Supreme Court recognised that there are cases in which simply calculating the ‘recoverable amount’ (the amount that the defendant is ordered to pay by the confiscation order) by strictly following the wording of Part 2 PoCA 2002 produces a result which is disproportionate and would therefore infringe the defendant’s human rights.  That cannot be permitted.

The judgment makes it clear that in order to prevent that happening Crown Court judges must reduce the amount of a disproportionate confiscation order below the figure calculated in accordance with PoCA 2002.

However the Supreme Court said that a confiscation order should not be regarded as disproportionate simply because it would “involve the possibility of removing from the defendant by way of confiscation order a sum larger than may in fact represent his net proceeds of crime”.

In particular the Supreme Court said that it would not be disproportionate to:

  1. require the defendant to pay the whole of a sum which he has obtained jointly with others;
  2. require several defendants each to pay a sum which has been obtained, successively, by each of them; or
  3. require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.

In relation to ‘criminal lifestyle’ cases the Supreme Court drew particular attention to s10(6)(b) PoCA 2002 which requires that “the court must not make a required assumption in relation to particular property or expenditure if . . . there would be a serious risk of injustice if the assumption were made”.  As a result of applying s10(6)(b) the Supreme Court suggested that the courts ought not normally to be at risk of making disproportionate confiscation orders in ‘criminal lifestyle’ cases.  I have previously considered the operation of s10(6)(b) in ‘criminal lifestyle’ confiscation cases in my blog article Confiscation: a serious risk of injustice.

The new approach does not amount to the re-creation of a general discretion for judges in confiscation cases, nor does it introduce a new regime in which the confiscation order must be governed by the “real benefit” obtained by the defendant.

By way of example, the Supreme Court indicated that in, say, a theft case in which goods had been stolen but recovered intact and returned to their owners it might be disproportionate for a confiscation order to be made based on the value of those stolen goods, although a strict reading of PoCA 2002 would require that.

 

The practical effects

There is, in my view at least, a very real danger that this judgment will create more complexities and difficulties for the Crown Courts and Court of Appeal whilst doing very little to introduce more justice and common sense into the confiscation regime.

The judgment may breathe new life into s10(6)(b) in ‘criminal lifestyle’ cases and we may see judges adopting more frequently a broad brush reduction in the defendant’s benefit figure as exemplified by the case of R v Deprince [2004] EWCA Crim 524 (a case not referred to in the Supreme Court judgment).

I would suggest that if the confiscation case of Del Basso & Goodwin v R [2010] EWCA Crim 1119 were to be heard today the confiscation order against Mr Del Basso might be scaled back to a level related to the profit of the business (which was essentially legitimate) rather than its turnover, in the light of the comments at paragraph [34] of the judgment in Waya.

Of course the Court of Appeal now has power to send a confiscation case back to the Crown Court for rehearing under s140 Coroners and Justice Act 2009, particularly where it is appropriate to make further findings of fact.

In new cases the judgment may provide encouragement for defendants, and their legal representatives, to routinely argue in the Crown Court that a proposed confiscation order would be disproportionate and infringe the defendant’s A1P1 rights.  There would appear to be nothing to be lost by making that submission even where it may have little prospect of success.

On the other hand the judgment seems to offer nothing to encourage prosecutors – their lives are undoubtedly going to be made harder by it.

David

(Note: This article applies to confiscation orders under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation order in particular cases which it is not possible to deal with in a relatively short article such as this.  Appropriate professional advice should be sought in each individual case.)

23 thoughts on “R v Waya – the UK Supreme Court judgment”

  1. As the Supreme Court has found that Mr Waya did not “obtain” the £465,000, what effect does that finding have on Mr Waya’s conviction for “obtaining” a money transfer by deception contrary to S15A Theft Act 1968? Is it possible that Mr Waya obtained the money transfer but not the money?

    1. Yes, Mr Waya obtained the money transfer “for himself or another” but the money was not “obtained by him” as he never owned it nor had control of it, see paras [48] to [53].

      Note that s15A Theft Act 1968 was introduced because such an action could not amount to theft or the obtaining of ‘property’ (which includes money) belonging to another by deception, see R v Preddy [1996] UKHL 13. Counsel in the case of Preddy was Ivan Krolick – who was also counsel in the case of Waya.

      The conviction under s15A does not depend upon Mr Waya having obtained the money and so there is no contradiction in law between Mr Waya’s conviction and the outcome of his confiscation case.

      David

  2. Hello Mike, as David says the conviction is unaffected because as a shorthand we refer to the offence Waya was convicted of as “obtaining by deception”, in actual fact the full offence is “obtaining a money transfer by deception for yourself or another” – and in Mr Waya’s case the prosecution’s case was almost certainly put on the basis that Mr Waya obtained the money transfer by deception for the vendors of the flat.

    Thanks for the article David – I agree with you that there is not going to be much in it that brings a smile to prosecutors’ faces, although perhaps the explicit comments by the Supreme Court that it will not be disproportionate to make a confiscation order that does not take account of the expenses a defendant has incurred with cheer them up a bit.

    1. David

      Thanks for your comment. Do you feel, as I do, that where there is a largely legitimate business, similar to the cases of Del Basso and Xu & Xu, we might in future see confiscation orders based on profit rather than turnover?

      Do you think, as I do, that rough & ready scaling back of benefit, such as was done in the case of Deprince some years ago, might become more commonplace in ‘criminal lifestyle’ cases?

      David

  3. Thank you for the replys.

    Quote taken from the post of David Allan above.

    “in Mr Waya’s case the prosecution’s case was almost certainly put on the basis that Mr Waya obtained the money transfer by deception for the vendors of the flat”

    Would it be different if Mr Waya had been charged with obtaining a money transfer for himself – omitting the another?

    1. I don’t think it would make a difference – I still think it would be perfectly proper for Mr Waya to have been convicted of dishonesty in relation to the mortgage application & advance (either under the old s15A Theft Act 1968 or under the Fraud Act 2006) and to be held not to have obtained anything of (immediate) value for confiscation purposes.

      What he obtained was the benefit of the loan which, at the time of the loan being advanced, has a value of nil.

      David

  4. What happens to pre R v Waya confiscation orders where the Supreme Court ruling suggests the orders were incorrect. e.g. mortgage fraud where confiscation orders were made for the amount of the property obtained and not any increase in property price?

    1. I am not a lawyer. If you are subject to a confiscation order which you feel is wrong you should get legal advice from a lawyer based on your individual circumstances.

      However I believe that the general rule is that if a case has been decided by the courts in accordance with the law as it was understood at the time, and the normal time limit for lodging an appeal (which is fairly short) has expired then that decision will stand (even if it now appears to have been misguided). But if there is an appeal already in the system, or if an appeal can be brought (out of time) on some other ground, then when the appeal is heard it will be decided on the basis of the up to date understanding of the law.

      That may seem unfair – but the alternative would be that an awful lot of cases would be revived in the appeal courts after decisions on other cases made the original judgments questionable (not just in confiscation cases but in all sorts of other criminal and civil cases too). The law is always developing and changing but there has to be finality in respect of decisions in individual cases.

      David

      1. David you are wrong old cases are aloud for rehearing under s140 coroners and justice act 2009 that is written by Supreme Court above all these cases have been unfair and have destroyed people’s lives over a mistake of inflation of income on for example self certified mortgage applications. Pocca 2002 should be shredded in courts and pay compensation to those who have lost their houses and business so please Mr WInch don’t make opinions look like the truth.

        1. Mike

          Section 140 Coroners and Justice Act 2009 made a modification to allow the Court of Appeal more flexibility in dealing with an appeal which they are considering in a confiscation case.

          The Court of Appeal do not normally hear evidence from witnesses – they normally only hear legal arguments from counsel. That creates a problem if the Court of Appeal decides that a factual issue has relevance but the Crown Court did not think (because of a misunderstanding or misapplication of the law) that that factual issue was relevant – and so did not hear evidence on that issue of fact.

          Under the 2009 amendment in those circumstances the Court of Appeal can now send the matter back into the Crown Court for the Crown Court to hear relevant witness evidence about the factual issue, and make a revised confiscation order.

          But the 2009 amendment does not open the door for the Court of Appeal or the Crown Court to hear appeals which are out of time, simply because more recent legal decisions have produced a new interpretation of the law. The law on re-opening old cases was not changed by the 2009 amendment.

          It was said in an appeal case in 1977 that, “It should be clearly understood, and this court wants to make it even more abundantly clear, that the fact there has been an apparent change in the law or, to put it more precisely, the previous misconceptions about the meaning of a statute have been put right, does not afford a proper ground for allowing an extension of time in which to appeal”.

          In general the courts are continuing to follow that policy. So where previously the Court of Appeal would not hear an appeal out of time, they will still not hear that appeal. Nevertheless the Court of Appeal does have a discretion to extend the time limit (and had that discretion before 2009) and will do so in appropriate cases. It cannot be said that the Court of Appeal would never allow an appeal resulting from a change in the understanding of the law to be heard out of time – but it would be unusual for them to do so.

          An appeal was heard although it was 5 months out of time in the confiscation case of Rezvi in 2000. An appeal was also heard out of time in the case of Varma in 2010. Both these appeals went on to the House of Lords / Supreme Court because they involved new points of law.

          More recently appeals were heard, although they were very considerably out of time, in the case of Bell and Others in 2011. In that case the Court of Appeal were persuaded to hear late appeals because there would be a “substantial injustice” if leave to appeal out of time were not granted. It may be that the Court of Appeal may be persuaded to hear appeals out of time in cases involving confiscation orders following mortgage fraud on the grounds of “substantial injustice”.

          But as I said in my earlier comment, “the general rule” is that appeals based on a subsequent change in the understanding of the law will not be heard out of time.

          If you wish to make an appeal in your own case you should seek advice from a solicitor.

          The ordinary time limit for initiating an appeal is 28 days from the date of the judgment being appealed.

          David

          1. Thanks for reply if you read about wayas case he’s appeal was accepted 3 years later and it was a matter of injustice his benefit was calculated completely wrong as many confiscation orders on mortgage fraud are so it’s been a error on how to work the benefit out. So it’s an error accorded by the crown which has been judged completely wrongly.and now it’s for the crown to put it right. You sayy the general rule is that appeals based on a subsequent change in the understanding of the law will not be heard out of time. This is not a law change waya case has been accepted as the way the benefits have been calculated from a mortgage fraud. Keep you informed as we have a vey good barrister who also is a sitting judge and has adviced us to appeal .

          2. Mike

            The 28 day time limit runs from the date the Crown Court judge gives his decision on the amount of the confiscation order to the date on which the defendant submits his form stating that he wishes to appeal.

            The time between the defendant submitting the form and the Court of Appeal or Supreme Court deciding if his appeal is to be successful is not relevant (and can run into years).

            The Waya judgment in the Supreme Court changed the understanding of how the benefit for confiscation cases ought to be determined in cases of mortgage fraud. Previously it was accepted that the amount obtained from the lender was a benefit for confiscation purposes. Now it is not regarded as a benefit if the monies were paid to the borrower’s solicitor (or legal conveyancer) and by him to the vendor of the property (or his legal representative). The Supreme Court said in the Waya case that because the borrower does not at any stage have control of the money borrowed that money is not his benefit. That decision by the Supreme Court is a change in the understanding of confiscation law.

            Your own appeal is, I assume, based on that decision in the Waya case. Therefore YOUR appeal is a “change of law” case. In effect you are saying that what the Crown Court judge did in your case seemed to be legally correct at the time he did it but now (as a result of the decision in the Waya case) it looks legally wrong. Presumably your confiscation order was made more than 28 days ago and was not previously subject to appeal. So your appeal form is being submitted “out of time”.

            Your lawyers therefore need to ask the Court of Appeal to allow your appeal to be heard “out of time”. The Court of Appeal may agree to do so – as they did in the case of Bell – or they may refuse. Your lawyers will probably refer to the case of Bell, in which an appeal was heard due to the “substantial injustice” which would be done if it were not heard.

            Your lawyers will presumably say to the Court of Appeal that, just like Mr Bell, you will suffer a “substantial injustice” if your appeal is not heard and therefore they should hear it.

            If the Court of Appeal agree to allow your case to be heard it does not automatically follow that you will win. But if your case involves a confiscation order and a fraudulently obtained mortgage used to purchase a property you should have a very good chance of success. If the fraudulently obtained mortgage was a re-mortgage on a property you already owned then your case is more complicated and you may not succeed or you may succeed only in part. This is because you will actually have been paid the money borrowed (or part of it) – which Mr Waya was not.

            Good luck with your case.

            David

  5. Hi
    Does anyone have any latest news on appeals to the Supreme Court of the ruling on how the Supreme Court will decide on out of time appeals similar to the WAYA case?
    I mean same cases as Waya that have been convicted and imposed confiscation orders which have wrongly been calculated.

  6. The provision under under Part 5 is different from Part 2 of Proceed of Crime Act (POCA) regarding recovery orders, it seems. Under Part 5, Recovery Orders will not be made if the matters in s.266 (3) and (4) POCA are established. Under Part 2, what are the matters to be established to avoid recovery under Part 2?

    1. Laitan

      Confiscation orders (under Part 2 PoCA 2002) are rather different from recovery orders (under Part 5) in a number of respects.

      A recovery order relates to PROPERTY (that is, an asset of any description – including money) which has been obtained through criminal conduct (including property which has not itself been so obtained, but which ‘represents’ property obtained through criminal conduct).

      So for example a stolen painting would be ‘recoverable property’. If the thief has sold the painting then the money he receives from the sale is ‘recoverable property’.

      A recovery order is therefore directed toward an asset.

      A confiscation order, on the other hand, is an order requiring a PERSON to pay an amount of money over to the authorities.

      A confiscation order is therefore directed toward a person.

      Before a person is made subject to a confiscation order he must have been convicted of an offence from which he has obtained a benefit, see s6. Furthermore a confiscation order must not exceed whichever is the lower of the defendant’s benefit (as defined) and his available amount (as defined). Finally the order must not be in an amount which would be disproportionate and so infringe the defendant’s A1P1 rights.

      David

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