Were the Court of Appeal right? A s22 POCA variation case

Scales of justiceA recent Court of Appeal decision on a s22 PoCA 2002 variation gives some food for thought.
The nub of the case presented to the Court concerned the Crown Court judge’s interventions in the cross-examination of a defence witness.  On appeal it was suggested that the judge had gone too far and had effectively become a second prosecution counsel.

But for me the more interesting issues lay elsewhere.

The defendant’s history

The defendant’s history was not in dispute. He had twice been the subject of a confiscation order under PoCA 2002.

On 24 August 2007 Carl O’Flaherty and another person were in a vehicle stopped by police.  The vehicle was searched and 20 small bags and one large bag of cannabis were found.  Mr O’Flaherty’s home was searched and cash contaminated with cannabis was found there.  The defendant pleaded guilty to possession of the cannabis in the vehicle with intent to supply.

On 1 November 2010 a confiscation order was made.  The benefit figure was £30,350.20 and the defendant’s available amount at that time was found to be £5,135.00.  He was ordered to pay £5,135.00.  This was paid in full.

Subsequently in February 2011 it was discovered that Mr O’Flaherty and others had loaded cash onto a Thomas Cook Cash Passport Account throughout 2010 and 2011 in order to launder money.  On 18 January 2013 he was convicted of conspiracy to convert, transfer and remove from England and Wales criminal property.

On 20 December 2013 Mr O’Flaherty was made the subject of a confiscation order comprising benefit of £27,556.06 and available amount of £871.51. This led to a confiscation order for £871.51.  This was paid in part.  At the time of the s22 hearing £120.00 remained outstanding.

In 2016 the Crown identified a residential property held in Mr O’Flaherty’s name.  A restraint order was obtained and an application was made for variation under s22 PoCA 2002.

The s22 hearing

At a hearing on 5 December 2016 the Crown argued that Mr O’Flaherty held a 100% equitable interest in the residential property, which had an agreed value of £65,000, and sought variation of both confiscation orders to require payment of additional amounts and provide new default sentences.

Mr O’Flaherty’s case was that he owed money to his employer, Mr Usta, which should be deducted from the equity in the property in arriving at his available amount.  Mr O’Flaherty had intended to purchase the property for £43,000 with a mortgage from Santander, but Santander pulled out after their surveyor had inspected the property.

Mr O’Flaherty then approached his employer who lent him £30,000 on the understanding that he would be repaid £40,000 after six months (when Mr O’Flaherty expected to have sold the property for £65,000).  There was no written loan agreement or legal charge document.

In the event the property sale did not go through as planned after the restraint order had been obtained.

Mr Usta and Mr O’Flaherty both provided written witness statements and gave oral evidence at the s22 hearing.

It appears that no documentary evidence was put before the Crown Court to confirm the original involvement of Santander, the payment of £30,000 from Mr Usta to the defendant, or the defendant’s employment with Mr Usta (of which apparently HMRC had no record).  Nothing had been filed at the Land Registry concerning Mr Usta’s interest in the property.

The Crown Court judge accepted the prosecution’s submissions, rejected the evidence of the defendant and Mr Usta, and varied both confiscation orders as requested by the Crown.

Mr O’Flaherty appealed, R v O’Flaherty [2018] EWCA Crim 2828.

The issue raised in the appeal

The issue raised at the appeal concerned the judge’s treatment of Mr Usta at the hearing.

When examined in chief Mr Usta had simply confirmed his written statement, setting out that he had lent the defendant £30,000 and expected £40,000 in return, to be true.

The Crown indicated it had no questions for Mr Usta in cross-examination.

Unusually, the judge then asked Mr Usta a series of questions.  The judge was polite, but sceptical.  He asked for clarification of the terms of the loan, why there had been no agreement in writing and no involvement of a solicitor.  The judge also enquired about the lack of evidence of the defendant being employed by Mr Usta and the extent to which Mr Usta was aware of the defendant’s criminal record.

On appeal it was submitted that the judge had acted improperly in challenging the witness on issues which could have been raised by the Crown in cross examination but had not.

The decision on the appeal

The Court of Appeal dismissed Mr O’Flaherty’s appeal (except to the extent that the s22 order was amended to correct a figure which both sides agreed to have been incorrect in the original order).

The Crown Court judge was entitled to efficiently and courteously seek clarification of the defendant’s case and to raise matters with Mr Usta which cried out for challenge.

The Court of Appeal found that the Crown Court judge had exercised considerable self-restraint and simply obtained from Mr Usta confirmation as to what his case was.

The judge’s questions related to matters referred to by Mr Usta in his witness statement.  Had Mr Usta been properly questioned by the prosecution no intervention would have been needed from the judge.  At the end of the judge’s questions he asked counsel for the defendant whether he had questions by way of re-examination and counsel did so.  There was therefore no apparent or real unfairness or bias in the proceedings.

A couple of obvious points

Let’s deal with a couple of obvious points first.

The defence case rested upon the assertion of certain facts, the most fundamental of which was that Mr Usta had lent £30,000 to the defendant – but not even the most basic documentary evidence (the bank statements of the defendant and Mr Usta showing the loan being made) were produced to the court.

A Crown Court deals every day with criminals who tell lies when it suits them.  So supporting evidence is vital.  All the more so when what is being asserted appears unusual.  Whatever relevant documents which could be found should have been produced to the court (in advance of the hearing).

Secondly, to be effective the defendant had to show that he had less than a 100% interest in the property because Mr Usta also had an interest in it.  But it seems that all that was being asserted was that the defendant owed a significant sum of money to Mr Usta.  That, on its own, would not have reduced the defendant’s ‘available amount’ for confiscation purposes (but the agreement of a loan secured on the property would have done).

The standard and burden of proof

It is settled law that at a confiscation hearing the burden is on the defendant to satisfy the court, on the balance of probabilities, that his available amount is less than his benefit.

But what is the position on an application for a variation under s22?

The Court of Appeal held that “The burden of proof was the balance of probabilities and lay with [Mr O’Flaherty]”.

But what does this mean?  I would suggest that what the Court of Appeal meant here was that the Crown had produced evidence sufficient to satisfy the court that the defendant now appeared to have an ‘available amount’ which exceeded the ‘relevant amount’ referred to in s22(8) – which in this case was the ‘available amount’ shown in the original confiscation order.  In that way the Crown had appeared to satisfy the ‘trigger condition’ of s22(4).

That having already been done, the burden of proof was then on the defendant to rebut that or to satisfy the court concerning the amount which it would be ‘just’ to order him to pay (which would normally be based on his current ‘available amount’) to enable the court to vary (or to decline to vary) the confiscation order.

The more interesting issue

The more interesting issue, to me at least, concerns the lack of attention to s8 PoCA 2002 by both the Crown Court (on more than one occasion) and the Court of Appeal.

Looking back at Mr O’Flaherty’s history we can see that the offences of which he was convicted in 2010 (possession of a controlled drug with intent to supply) and 2013 (conspiracy to convert, etc criminal property) were both Schedule 2 ‘criminal lifestyle’ offences.

Section 8 spells out how the court should deal with a defendant who is, for a second time, subject to ‘criminal lifestyle’ confiscation.

In effect the benefit found in the later confiscation order must include the benefit found in the earlier confiscation order, with a deduction for the amount which the defendant has previously been ordered to pay under that first confiscation order (to avoid double counting).

When making the new confiscation order the court also must not recognise any other alleged benefit obtained by the defendant prior to the date of the earlier confiscation order, see R v Chahal & Chahal [2014] EWCA Crim 101.

So in 2013 when making the new confiscation order the Crown Court should have proceeded in the following way.  Firstly, it should have identified all the benefit obtained by the defendant after 1 November 2010 (the date of the first confiscation order).

That would include both the benefit of his particular criminal conduct obtained after that day and the assumed benefit in relation to, for example, property transferred to the defendant after 1 November 2010.  In effect the ‘relevant day’ for the purposes of the s10 PoCA 2002 assumptions would be 1 November 2010, see s10(9).

In respect of benefit obtained by the defendant on or before 1 November 2010 the Crown Court would be obliged, when making the new order, to accept the benefit figure of £30,350.20 in the earlier order as being a correct statement of ALL the benefit obtained by this defendant from his criminal conduct up to that date.

This £30,350.20 should have been included as benefit within the second confiscation order, but subject to a deduction of £5,135.00 (which is the amount which the defendant had been ordered to pay under the original order).

So there would be £25,215.20 to include in Mr O’Flaherty’s benefit as his total benefit obtained up to 1 November 2010, and this should have been included in the benefit figure in the 2013 confiscation order.

The original order would then in effect cease to operate (except in respect of any action to enforce collection of the £5,135.00 previously ordered to be paid).

If subsequently the Crown wished to proceed under s22 it would do so only under the second confiscation order (as the unpaid benefit under the first order would be included within the benefit figure in the second order).

It seems clear that the Crown Court when making the second order in 2013 failed to do this.

When in 2016 the Crown Court considered the s22 application it could, in my view at least, have been argued that in consequence of s8 the 2013 order must be viewed as including ALL the benefit obtained by Mr O’Flaherty up to 20 December 2013.  On that basis it would not be open to the Crown Court to entertain any application under s22 in respect of the first confiscation order.

However there is nothing to suggest that this argument was put at that time or that the Crown Court’s attention was drawn to s8 on this occasion either.

Again when the s22 variation was appealed s8 could have been discussed.  But there is nothing in the Court of Appeal judgment to suggest that s8 was referred to in legal submissions or oral argument before the Court.

Perhaps if it had been the outcome would have been different.

As things have turned out it is difficult to conclude that Mr O’Flaherty has suffered any major injustice.  It might be more accurate to suggest that he has failed to gain the advantage of a peculiarity in confiscation law.

As an aside, it would have been open to the prosecution in 2013, before the second confiscation order was made, to have made an application to the Crown Court under s21 PoCA 2002 to have the benefit figure in the 1 November 2010 confiscation order increased to reflect new information (concerning the money laundering offending which apparently occurred throughout 2010) which had come to light.

Had that been done then the benefit to be included within the second order would have been able to fully reflect Mr O’Flaherty’s benefit obtained up to 1 November 2010.

In my view that would have been the proper way to deal with Mr O’Flaherty’s case.

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(Note: This article applies to confiscation proceedings 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 proceedings 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.)

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