Category Archives: Confiscation

Confiscation

Seeing the crescent – or the whole moon?

Crescent moonHow should a forensic accountant approach a confiscation case? Should he (or she) focus on the benefit and available amount asserted in the prosecutor’s s16 PoCA 2002 statement – or consider the wider aspects of the proceedings? Should he study the bright crescent, or the whole of the moon?

The prosecutor’s s16 statement

The s16 statement may have been written by a financial investigator who has been involved in the case before and during the trial and who will bring to his s16 statement his knowledge of the circumstances of the case, the indictment and the judge’s sentencing remarks.  That can mean that the benefit in the s16 statement fairly and properly reflects the situation of the convicted defendant.

However, in my experience this is often not the case, particularly where there has been more than one defendant convicted at trial.  Sometimes the author of the s16 statement adopts a one-size-fits-all approach to the confiscation – going overboard with ‘cut and paste’ to speed up the production of multiple s16 statements.

But confiscation is very much focused on each single defendant.

The forensic accountant

The forensic accountant who is provided only with the s16 statement and its appendices, may be (at that stage) unaware of important features of the specific charges of which this defendant was convicted and relevant details of his unique role in the offending.

Obtaining copies of the indictment and perhaps the judge’s sentencing remarks, or the prosecution opening, may provide information of key relevance to benefit which is not to be found in the s16 statement.

So a little digging by the forensic accountant may bear fruit.

Conspiracy

This is particularly so in conspiracy cases where the s16 statement may blithely treat all convicted defendants as having jointly obtained the full benefit derived from the conspiracy.  But did the evidence at trial support that view?  The judge’s sentencing remarks may throw some light on this, perhaps indicating a more limited role for a particular defendant involving a more restricted benefit for him.

Tax evasion

Another fertile area of challenge surrounds convictions for offences such as “being knowingly concerned in the fraudulent evasion of tax”.  This is an example of an area in which there may be a disconnect between the criminal conduct and the benefit derived from it.

Consider the case of a company director who deliberately submits false VAT returns for his company to enable it to retain or obtain the funds it needs to continue a legitimate trade.  The director may be quite properly convicted of the offence.  In these circumstances the s16 statement is likely to assert that he has benefited to the extent of the tax evaded.  But has he?  Undoubtedly the initial beneficiary will have been the company rather than the director.

The disconnect between offending and benefit

As long ago as 2008, in the case of CPS v Jennings [2008] UKHL 29 the court authoritatively stated,  “A person’s acts may contribute significantly to property … being obtained without his obtaining it. But … a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained, which must be read as meaning ‘obtained by him’.”

That is as true today as it was then.

Whether, and to what extent, the director has himself obtained a benefit demands careful investigation, it is by no means a foregone conclusion.

There are many more examples in which establishing the benefit obtained by a particular defendant demands a wider consideration of the circumstances of the case and the essential principles of confiscation law and practice.

Ideally these issues will have been identified and addressed by the defendant’s legal team and set out in detailed instructions to the forensic accountant.

But in practice this is often not the case for one reason or another.

Criminal lifestyle

Importantly the issue of whether a defendant has a ‘criminal lifestyle’ – triggering the draconian statutory assumptions – may depend upon whether he has obtained from his offending a total benefit of at least £5,000 (in England and Wales).

So not only may the benefit derived from the defendant’s ‘particular criminal conduct’ be important in itself, it may be the key to establishing – or not – a much larger benefit figure.

The danger of focusing only on the s16 statement is that the forensic accountant may fail to appreciate the importance of relevant matters which are not referred to within that statement.

Contacting us

Our contact details are here.

David

(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.)

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.

Contacting us

Our contact details are here.

David

(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.)

Tainted gifts – valuation and consequences

Tainted giftAllegations of tainted gifts can cause serious problems for a defendant in confiscation proceedings. But what are those problems and how is a ‘tainted gift’ valued? In this second article on tainted gifts I explore these issues.

I have considered what is meant by a tainted gift in an earlier blog post.

The value of a tainted gift

Valuing a tainted gift is not entirely straightforward.  The starting point is that value means ‘market value’, s79 PoCA 2002. It is reasonable to suggest that ‘market value’ means the open market value as between a willing buyer and a willing seller, each of whom is fully informed about the asset.

But the statute goes on to deal specifically with the value of tainted gifts, s81. This says that the value of the tainted gift at the “material time” is the GREATER of (i) the value at the time of the gift (adjusted to take account of later changes in the value of money), or (ii) the value at the “material time”.

The expression “material time” is not defined in s81, but is used in s80 to mean the time when the court makes its decision (in other words the time at which the confiscation order is made or varied). The only sensible interpretation is that “material time” has the same meaning in s81.

So let’s consider a couple of examples.  Suppose a defendant has made a tainted gift of a new car to his wife, some years ago. At the time he purchased the car for £25,000. That is the market value of the car when the gift was made. Today the car, which the wife still has, is worth £15,000.  Then the value of the tainted gift is £25,000 (uplifted for inflation) because that is the greater of the two values.

Take another example, some years ago a defendant bought a house for £300,000 and gave it to his son. That is the market value of the house when the gift was made. Today the house, which the son still has, is worth £400,000. Then the value of the tainted gift is £400,000 because that is the greater of the two values (assuming that when the £300,000 is uplifted for inflation it does not exceed £400,000).

What about assets which go up and down in value, like shares in a listed company? Only two values matter for this purpose – the value at the time the gift is made and the value at the ‘material time’. The court should ignore the value at other times.

What if the gift has now become worthless? Case law tells us that even where the asset gifted no longer has any value the tainted gift will have value if the asset gifted had a value when the gift was made, see R v Johnson [2016] EWCA Crim 10. This again is because the greater value is the one to be adopted by the court.

But what if the recipient of the gift no longer has it, or has only part of it? In this case s81 provides that the court should value any asset which the recipient has which directly or indirectly represents the asset gifted to him.  If he has part of the asset, then what the court will value will be the part which he has plus any other asset which he has which directly or indirectly represents the other part.

Suppose a defendant has a valuable collection of rare postage stamps, which he gives to his daughter.  She keeps some of the stamps, sells some for £10,000 and swaps some of the stamps for some from another collector.  The court will need to know (i) the value of the collection at the time of the gift (uplifted for inflation since the date of the gift), and (ii) the current value of the stamps from the original collection which the daughter still has, plus £10,000 (uplifted for inflation since the date of the sale) for the stamps she sold, plus the current value of the stamps she received from the swaps. The value of the tainted gift will be the greater of (i) or (ii).

Finally let us consider the situation in which the defendant has gifted an asset to someone but there is simply no information before the court as to what has become of that asset since the gift.  In this case the court cannot say whether the recipient still has the asset, or any part of it, or any other asset which represents it. In such a case it appears that the court should simply value the gift at the time it was made (and uplift that for inflation), see R v Box [2018] EWCA Crim 542 at paragraph [7].

 

The effect of a tainted gift on available amount

It is beyond doubt that the value of a tainted gift must be added into the defendant’s ‘available amount’, s9. So the tainted gift increases the defendant’s ‘available amount’ and this may have the effect of increasing the amount the defendant is ordered to pay under the confiscation order.

This will be the case whether or not the defendant is in a position to recover the value of the gift from the recipient, as is underlined in the case of Johnson – to which reference has already been made.

In relation to the court’s power to appoint a receiver, s83 provides that property held by the recipient of a tainted gift is ‘realisable property’ which means that the court can appoint a receiver under s50 with the powers over the recipient’s property set out in s51. These may include power to sell assets belonging to the recipient in order to recover for the court the value of the tainted gift, to assist in satisfying the confiscation order.

Whether the making of a confiscation order with such drastic consequences would be ‘disproportionate’ in the sense referred to in s6(5) will depend upon the facts of the individual case. However such an order would not typically be regarded as disproportionate (even where it would cause hardship) because the main purpose of the legislation is to recover the value of the benefit of the convicted defendant’s criminal conduct and the order would be directed toward that aim.

In these circumstances it would not be necessary for a receiver to identify particular assets of the recipient which were, or represented, the assets gifted by the defendant as all the recipient’s assets are ‘realisable property’.

Where a court was satisfied that the ‘available amount’, including the tainted gift, was truly irrecoverable it may be appropriate for the court to set a lower default sentence, see Johnson at paragraph 31(iii).

 

The effect of a tainted gift on benefit

The effect of a tainted gift on benefit is less clear cut.

Where the defendant has purchased an asset, such as an item of jewellery, and made a gift of that asset then the purchase cost will be ‘expenditure incurred by the defendant’ which may be caught by the expenditure assumption of s10(4). Where the defendant has a ‘criminal lifestyle’ that will lead to an increase in benefit unless the assumption can be rebutted by evidence or the court considers that there would be a serious risk of injustice if the assumption were made. But that is a consequence of purchasing the asset – not a consequence of gifting it.

What about the situation in which a gift is made but no expenditure is incurred by the defendant? This was the situation in the Johnson case referred to above. In that case the defendant had gifted a house which was subject to a mortgage. The defendant considered the house to be worth £140,000 but transferred it to her daughter for only £120,000. She therefore had made a gift of £20,000. The defendant had a ‘criminal lifestyle’ and the gift was made after the ‘relevant day’.

The gift was therefore a tainted gift. But the property had originally been purchased many years earlier for £69,000. The tainted gift comprised part of the appreciation in value of the house. There was no expenditure incurred by the defendant in connection with making this gift.

However it appears that the Crown Court considered that this gift had the effect of increasing both the defendant’s ‘available amount’ and her benefit. The defendant appealed in connection with the increase in her ‘available amount’. The appeal was dismissed.

In the course of the judgment the Court of Appeal said this:

“However, it [the asset] was not alleged to be the proceeds of crime. The asset (equity in the house) had been acquired by the appellant because she held the property while it appreciated in value. There was no evidence that she had bought the house with the proceeds of crime. It was brought into account for the purposes of confiscation because of the criminal lifestyle and tainted gift provisions. The combined effect of these is to treat an asset as proceeds of crime even though it was not. The justification for this is described above. The appellant would not have been able to make a gift of £20,000 if she had not been benefiting from a criminal lifestyle and therefore the Act treats it as if it were the proceeds of crime.”

This suggests that where the prosecution can show that the defendant would not have been able to make the tainted gift if he had not been benefiting from a ‘criminal lifestyle’ the value of the tainted gift may become an element in benefit.

I have to say that I have been unable to find any basis for that in the wording of the legislation. It might also be suggested that, as the Johnson appeal concerned ‘available amount’ rather than benefit, this comment was obiter dictum.

I have not been able to find any other case law, or any statute law, directly on this point. This may be a matter that the courts will revisit at some point in the future.

In other circumstances it would appear that the making of a tainted gift does not, of itself, generate any benefit for the purposes of confiscation. There is no direct reference to a ‘tainted gift’ in the ‘criminal lifestyle’ assumptions of s10 or any other section dealing with the quantification of the benefit obtained by a defendant.

Contacting us

Our contact details are here.

David

(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.)

Confiscation – what is a tainted gift?

Allegations of tainted gifts can cause serious problems for a defendant in confiscation proceedings. But what exactly is a ‘tainted gift’?

 

What is a gift?

In confiscation proceedings the word gift has a wider meaning than in everyday life.  A defendant is treated as making a gift if he transfers an asset to another person and receives either nothing for it or receives in return something whose value is significantly less than the value of that asset, s78 PoCA 2002.

So, for example, if I transfer £100 to you and receive nothing in return, I have made a gift to you.  But I can also make a gift to you if I transfer to you a car worth £20,000 and you pay me only £10,000 for it.

The statute does not contain a complete definition of a “gift”, it only indicates that, for example, a “gift” includes a transfer of an asset at a significant undervalue.

However case law suggests that for there to be a gift there must be (i) transfer of legal and beneficial ownership in an asset, (ii) acceptance of the gift by the donee, (iii)  no intention on the part of the donor that the asset should be returned to him, and (iv) that the transfer be either without consideration or at a significant undervalue, see Re Somaia [2017] EWHC 2554 (QB) at para [76].

So, for example, if a defendant owns a car and changes the registered owner to someone else (such as his wife or a friend) but continues to use the car as his own, then it could be argued that there has been no gift as the defendant is still in reality the owner of the car.  To put this in more formal words, there may have been a transfer of legal ownership but no transfer of beneficial ownership.

Similarly with a property, the legal title shown at the Land Registry does not necessarily indicate the beneficial ownership of the property.

If the defendant retains beneficial ownership of an asset then there has been no gift of that asset by him.  The same will be true if the defendant transfers an asset to someone to simply look after it for a while and return it to him later, or where the defendant transfers the asset to someone to hold it on trust for him.  In these cases the defendant is to be regarded as still owning the asset in question.

 

What is a tainted gift?

First of all, a tainted gift must be a gift by the defendant.  Once that is established, whether the gift is a tainted gift will in most cases depend solely on the date on which the gift was made.  The nature and provenance of the asset which is gifted is irrelevant in most cases.

The rules are slightly different depending upon whether the defendant has a criminal lifestyle or not.

If the defendant does not have a criminal lifestyle, then a gift by him will be a tainted gift if, and only if, it is a gift made by him on or after the date on which the offence was committed.  If the offence was committed on more than one day, or there is more than one offence, then the earliest day is used, see s77(4) to (7).

(Reference to the offence means the offence for which he is being sentenced in the proceedings which trigger the confiscation, see s6(2) and (9).)

So, for example, consider the case of Peter being sentenced for thefts from his employer which occurred from 5 October 2016 to 9 January 2017.  Peter does not have a criminal lifestyle.  The earliest day is 5 October 2016 and any gift by Peter on or after that day will be a tainted gift.  But any gift made by him before 5 October 2016 is not a tainted gift.

If the defendant does have a criminal lifestyle, then a gift by him will be a tainted gift in one of two circumstances.

Firstly, a gift will be a tainted gift if it was made on or after the ‘relevant day’.  Here the ‘relevant day’ is the first day of the period of six years which ends on the day on which the proceedings were commenced against the defendant which have resulted in conviction for an offence which has triggered the confiscation, see s77(2) and (9).  If there are two or more days, then the earliest one is the ‘relevant day’.

So, for example, consider the case of Jane being sentenced for concealing or converting criminal property which she did on 15 November 2016.  She has no previous convictions.  Jane does have a criminal lifestyle (because her offence is a Schedule 2 offence).  She was charged with the offence on 8 September 2017, which is the day the proceedings against her commenced.  So the ‘relevant day’ in her case is 9 September 2011.  Any gift by Jane on or after 9 September 2011 is a tainted gift.  Any gift made by her before 9 September 2011 is not a tainted gift.

But where a defendant has a criminal lifestyle there is an additional rule.  A gift is also tainted if it was made by the defendant at any time and was of property (a) which was obtained by the defendant as a result of or in connection with his general criminal conduct, or (b) which (in whole or part and whether directly or indirectly) represented in the defendant’s hands property obtained by him as a result of or in connection with his general criminal conduct, see s77(3).

This will rarely be applicable.  It can occur however if a long time elapses between the commission of an offence and the defendant being charged or where a defendant has previous convictions in previous proceedings (because these convictions will form part of his general criminal conduct, see s76(2)).

So, for example, consider the case of Trevor being sentenced for tax evasion from 6 April 2008 to 5 April 2015 from which he has obtained a benefit of £23,500.  Trevor does have a criminal lifestyle (because his offence was committed over a period of at least six months and he has obtained a benefit of at least £5,000).  He was charged with the offence on 27 June 2017, which is the day the proceedings against him commenced.  So the ‘relevant day’ in his case is 28 June 2011.  Any gift by Trevor on or after 28 June 2011 is a tainted gift.  But in addition any earlier gift of an asset which is, or is derived from, benefit of his offending (which as we know commenced prior to 28 June 2011) will also be a tainted gift.

This situation, where the defendant has a criminal lifestyle and his offence, or an earlier offence, occurred or commenced before the ‘relevant day’, is the only circumstance in which the nature and provenance of the asset which is gifted may be relevant to whether there has been a tainted gift.

 

What about spouses?

It is clear that one spouse may make a gift to the other and, in appropriate circumstances, a gift to a spouse is a tainted gift.  But does that mean that day to day sharing of money between spouses can be treated as the making of tainted gifts?

In practice it does not appear that, for example, a husband is regarded as making a gift when his salary is paid into a joint bank account with his wife.

It might be argued that legally there is no gift as, in this example, the husband is free to withdraw all the money in the account himself and so there is an expectation of a return of any ‘gift’.

A more likely explanation may be that prosecutors typically regard this as simply a feature of day to day domestic financial realities for many couples, rather than as examples of gifts being made from one spouse to another.

But what about more substantial and non-recurring gifts?

The case of R v Hayes [2018] EWCA Crim 682 concerned a married couple and the home in which they lived.  They married in September 2010.  Prior to their marriage both had had successful careers and well paid employments in Japan.  The husband’s employment came to an end just prior to their wedding.  The couple returned to the UK and the wife became pregnant, giving birth in October 2011.  It appears that neither of them were earning on their return to the UK.

In September 2011 they purchased a property.  The husband funded the entire purchase cost of £1.2m from his own resources, there was no mortgage.  But ownership of the property was placed in their joint names.

The husband and wife lived in the property.  The wife was a full time housewife and mother until returning to work in May 2013.  Until that time the husband paid all the household expenses and regular outgoings.

In July 2013 the husband transferred his half share in the matrimonial home to the wife for £250,000.  He was by that time incurring significant legal fees dealing with a criminal investigation into his conduct between 2006 and 2010.  He had been formally charged in June 2013.

His wife took out a mortgage to enable her to pay him the £250,000.

In October 2016 the property was sold for £1.6m.

The husband was ultimately convicted and was subject to confiscation on the basis that he had a criminal lifestyle.  The relevant day was in June 2007.

The issue arose as to whether he had made tainted gifts to his wife (a) on the purchase of the property in September 2011, and (b) on the sale of his half-share to her for £250,000 in July 2013.

Undoubtedly these events occurred after the ‘relevant day’ – the issue was whether these events were ‘gifts’.

The prosecution did not suggest that any additional gift arose from the husband paying all the household expenses and regular outgoings.

The husband pointed out that his wife had provided unpaid services as a wife and mother and argued that these should be valued and taken into account in determining whether he had made any gifts to her in relation to the ownership of the matrimonial home.

The court held that the husband had made tainted gifts to his wife on both occasions and that, for the purposes of confiscation, no monetary value could be placed on her services as a wife and mother in this case.

The court emphasised that each case is different and that the court needs to undertake an objective and evidence based approach to assertions concerning contributions.  Where the consideration which is asserted to have been provided by the recipient of the property is not in the form of a direct financial contribution, then it is necessary to examine the evidence rigorously and closely to see if the asserted consideration is capable of being assessed as consideration of value and (if it is) to what extent.  Any consideration which is asserted to have been provided must be capable of being ascribed a value in monetary terms and must be attributable to the transaction in question.

 

What are the consequences of a tainted gift?

The valuation of a tainted gift (both when the gift is made and subsequently) and the consequences of a tainted gift in confiscation proceedings are considered in a further blog article Tainted gifts – valuation and consequences.

 

Contacting us

Our contact details are here.

David

(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.)

Confiscation and Trading Standards offences

Cumbria Trading Standards officerTrading standards officers these days deal with a wide range of offences.  Years ago trading standards work centred on checking that retailers were using correct weights and measures.  That is still an element of the work, but trading standards officers today also deal with scams, frauds, dishonest overcharging, trade mark and intellectual property offences and transgressions of the Consumer Protection from Unfair Trading Regulations 2008 and other legislation.

Consumer protection

The essence of trading standards work is the protection of consumers.  So it is not surprising that in criminal prosecutions trading standards departments will focus on the loss to the consumer.  That includes losses which the offender intended but failed, for one reason or another, to bring about.

For sentencing purposes it is unquestionably correct for the court to have regard to both the actual and the intended losses to consumers.

But a different approach is required in confiscation.

Confiscation

It should not be overlooked that the principal objective of confiscation is to deprive a wrongdoer of the financial benefit obtained by him from his criminal conduct.  Self-evidently benefit which the convicted defendant had intended to obtain but did not, cannot be the subject of a confiscation order.

But equally importantly, the focus of a confiscation order is on the benefit obtained by the convicted defendant – not on the loss suffered by the consumer.  As it was put succinctly in the case of R v Reynolds & Others [2017] EWCA Crim 1455 at para [58(vi)] “the amount lost by the loser is generally irrelevant”.

But how is the benefit to be established for the purposes of the confiscation provisions of the Proceeds of Crime Act 2002?

Benefit

The first step has to be the correct identification of the convicted defendant.  This is particularly important where there is more than one defendant (where it is necessary to determine if each element of benefit was obtained singly by one defendant or jointly by more than one) and where a limited company is involved (where it may be necessary to consider whether the corporate veil should be pierced or to differentiate between benefit obtained by the company and benefit obtained by a director or employee).

This may involve careful consideration of matters of fact and issues of law.

Of course when there is more than one convicted defendant quite separate s16 statements are required for each defendant.

The next step is careful consideration of the precise offence(s) of which the defendant has been convicted and – if possible ‘criminal lifestyle’ is in issue – the period of time over which each offence occurred, and the number of offences of which this defendant has been convicted.

It is sometimes the case that a defendant will be prosecuted for a number of individual offences but the trading standards officers regard these specific charges as merely representative of a more widely operated illegal method of business.

In assessing the benefit of ‘particular criminal conduct’ the court will have regard only to matters which have been the subject of a charge which has resulted in conviction (and other offences taken into consideration in sentencing).

Where the offences do not appear in Schedule 2 PoCA 2002 and the aggregate benefit obtained by a convicted defendant is less than £5,000 (in England and Wales) then that defendant will not be deemed to have a ‘criminal lifestyle’ and the statutory assumptions of s10 cannot be employed.

When quantifying the benefit obtained by a convicted defendant it may, depending upon the circumstances, be appropriate to use the amount of the his profits (i.e. net proceeds), permitting him to deduct the expenses incurred in supplying the goods or services in question.

It may also be necessary to reduce the amount of benefit in respect of VAT charged to the consumers and any amounts refunded to them.

For all these reasons the benefit obtained by the convicted defendant may be very much less than the losses suffered by consumers as a result of the criminal conduct in which he engaged, or even the amount referred to by the judge when sentencing him.

So what are the key points to remember?

Key points

For the prosecution, great care needs to be taken at the charging stage regarding who to charge (and, for example, whether to charge a limited company as well as charging a director), what offence(s) to charge, and how many charges to bring.

For the defence, it is important to challenge the s16 statement appropriately having regard to applicable statute and case law and the relevant facts.

In many trading standards cases it will be useful for the defence to instruct a forensic accountant to critically review the prosecution s16 statement.

Contacting us

Our contact details are here.

David

(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.)

UK Supreme Court split on confiscation

Supreme Court logoIt is perhaps surprising and a little troubling to find in 2018 the UK Supreme Court split 3 – 2 on the application of confiscation legislation which is 15 years old.

The issue was a simple one – but its resolution involved consideration of some fundamental principles of statutory interpretation.

The issue & the relevant legislation

There were two defendants, who were husband and wife, R v McCool (Northern Ireland) [2018] UKSC 23.  Each of them had pleaded guilty to four offences in connection with false applications made for state benefits.  In each case one offence occurred prior to 24 March 2003, and the other three after that date.

When it came to confiscation the prosecution wished to proceed under Proceeds of Crime Act 2002 rather than Criminal Justice Act 1988 confiscation provisions – but should they be permitted to do so?

That was the issue the Supreme Court was tasked to determine.

The Proceeds of Crime Act 2002 confiscation provisions apply to offences committed after 23 March 2003, by virtue of the Proceeds of Crime Act 2002 (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2003.

The prosecution had sought to disregard for each defendant the offence committed before 24 March 2003, relying in each case on the benefit from only the three later offences.

The prosecution did not seek to invoke the ‘criminal lifestyle’ assumptions against the defendants.

One might ask why the prosecution did not wish to proceed under Criminal Justice Act 1988 provisions, which could have allowed the s72AA statutory assumptions to be invoked.  The answer is not spelled out in the judgment but it is clear that, in any event, each defendant’s ‘available amount’ was less than his or her ‘benefit’.  So the statutory assumptions under CJA 1988 would not have produced any useful result in practice.

On the other hand, the CJA 1988 legislation has no provision similar to s22 PoCA 2002, which provides for the upward variation of a confiscation order in later years when a defendant has an increased ‘available amount’.

It may have been the potential for a future s22 application which attracted the prosecution to the PoCA 2002 confiscation provisions (even though this involved a reduction in ‘benefit’ because in each case any ‘benefit’ arising under the earliest offence could not be recognised at all under PoCA 2002).

Although this was a Northern Ireland case very similar legislation applies in England and Wales, so the decision of the Supreme Court is equally relevant in that jurisdiction.

The legislation

The transitional provisions provide that “Section 6 of the Act (making of confiscation order) shall not have effect where the offence, or any of the offences, mentioned in section 6(2) was committed before 24th March 2003″ (but with the substitution of s156, the equivalent section, in Northern Ireland).

Subsection (2) (in England and Wales) provides:-

“The first condition is that a defendant falls within any of the following paragraphs —

    (a) he is convicted of an offence or offences in proceedings before the Crown Court;
    (b) he is committed to the Crown Court for sentence in respect of an offence or offences under section 3, 3A, 3B, 3C, 4, 4A or 6 of the Sentencing Act;
    (c) he is committed to the Crown Court in respect of an offence or offences under section 70 below (committal with a view to a confiscation order being considered)”.

The Northern Ireland legislation is similar, but with (b) omitted.

Here the two defendants had been committed to Crown Court with a view to a confiscation order being considered.

Lord Kerr’s view

Lord Kerr’s view was that it would be “a wholly anomalous result” if this legislation were interpreted to mean that where a defendant had been convicted, in the same proceedings, of offences committed both before and after 24 March 2003 all of those offences had to be dealt with under the earlier confiscation statutes.

In Lord Kerr’s opinion, it was Parliament’s intention that all offences committed after 23 March 2003 which could generate confiscation orders under the Act should be dealt with under PoCA 2002.

“It cannot have been intended that a swathe of post-2003 offences should be removed from the Act’s purview simply because the defendant was convicted of an associated offence before the relevant date”, he said.

Since the courts will generally seek to find an interpretation of legislation which does not produce an anomalous or absurd result, and which gives effect to Parliament’s intention, subsection (2) must be interpreted as referring to the “offence or offences” to which PoCA 2002 applied.  That is the “offence or offences” committed after 23 March 2003.

It follows that the “offence or offences mentioned” in subsection (2) were all committed after 23 March 2003.

On that basis the defendants’ offences committed before 24 March 2003 could be ignored and confiscation could proceed under PoCA 2002 as sought by the prosecution – relying only upon those offences committed after 23 March 2003.

The views of Lord Hughes and Lady Black

Lord Hughes and Lady Black arrived at the same conclusion as Lord Kerr.

“If the appellants’ contention were correct, and the earlier confiscation regime has to be applied wherever there is a single pre-commencement offence on the indictment (or before the magistrates) even if it is not relied on for confiscation, it would follow that that rule would have to apply even if the pre-commencement offence could never, even arguably, have generated a benefit, and thus could never, even arguably, have had the slightest relevance to the issue of confiscation,” said Lord Hughes.

Because this outcome “might well be termed absurd” this could not be the appropriate interpretation of the legislation.

Since three of the five judges had reached this conclusion the prosecution’s approach had prevailed.

The dissenting minority

The dissenting minority, Lord Reed and Lord Mance, disagreed with the majority about the intention of Parliament and did not agree that it would be “absurd” for the earlier confiscation legislation to have been required to apply where one or more offences dealt with in the same proceedings had been committed before 24 March 2003.

They considered that the words in the legislation should be given their natural meaning and that the interpretation placed on the words by the majority was “strained beyond breaking point”.

“It seems to me to be much more likely that the drafter of the transitional provisions intended to bring all the offences in any set of proceedings into one statutory confiscation scheme or the other. Then, at least, no offences would fall outside all confiscation regimes”, said Lord Reed.

Conclusions

The prosecution won the day and it is now undeniable that the prosecution may opt, in confiscation proceedings, to entirely disregard offences committed before 24 March 2003 in order to proceed under PoCA 2002.

It is also true that none of the Supreme Court justices considered it appropriate in this case to “read into” the legislation additional words in order to give a clear and unambiguous meaning to that legislation.

However the sharp differences in opinion in these judgments underline the dangers of seeking to divine the intentions of Parliament – and the complexities of the law around confiscation.

Contacting us

Our contact details are here.

David

(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.)

The Court’s discretion under s22 PoCA 2002

Crown Court judgeThe revisiting of old confiscation orders by prosecutors under section 22 Proceeds of Crime Act 2002 is becoming more frequent but as yet few variations made under s22 have been appealed.

In stark contrast to the position when a confiscation order is first made, on a s22 revision the court – in other words the judge – has discretion concerning what variation to make to the original confiscation order and even whether to refuse to make any variation at all.

[NOTE: A longer article on s22 is HERE.]

Section 22 is headed “Order made: reconsideration of available amount”.

 

Reconsideration of available amount

Section 22 PoCA 2002 empowers the Crown Court to vary an existing confiscation order made under s6 of the Act. In effect it allows the prosecution to apply to the court for a further payment to be required from the defendant under an existing confiscation order where his available amount has increased since the original order was made.

We are considering the position of a defendant who was made subject to a confiscation order, perhaps some years ago, and the court ruled then that he had a figure of benefit which was higher than his available amount. At that time the court would not have ordered him to pay the full amount of his benefit. Instead the amount he was then ordered to pay would have been restricted to his available amount at that time. The figures of the defendant’s benefit, available amount and the amount he was ordered to pay should all be spelled out in the original confiscation order.

Under s22 the prosecutor returns to court and asks it to consider the available amount which the defendant has now and to order him to pay a further amount now towards his total benefit.

But the court is required under s22(4) to do what “it believes is just”.  In the case of Padda v R [2013] EWCA 2330 the Court of Appeal noted, at para [45] that it is entirely appropriate on a s22 application for the court to bear in mind any “consideration which might properly be thought to affect the justice of the case”.

At the same time the court must have regard to the underlying policy behind confiscation – that offenders should be stripped of the benefit of their offending.

So could there ever be a case where the court would simply refuse the prosecution’s application to order the defendant to pay a further amount?

 

Mr Mundy’s case

Ian Mundy had been convicted in Cardiff Crown Court in 2008 of drugs offences (involving cocaine and cannabis) and money laundering.  He had been subject to confiscation with a benefit of £172,365 and an available amount of £9,275.  He was ordered to pay £9,275 and did so by 19 March 2009.

There was therefore an excess benefit of £163,090 which Mr Mundy had never been ordered to pay.

In 2016 or 2017 it came to the attention of prosecutors that the property owned by Mr Mundy (which had a negative equity in 2008) now had a positive value.  In addition Mr Mundy now had a car, a van and two motorcycles and had over £8,000 in bank accounts.  He seemed an ideal candidate for a s22 application.

A restraint order was obtained on 21 February 2017 and a s22 application was lodged on 26 May 2017.  The Crown sought a further payment of £29,791.  Mr Mundy disputed the Crown’s valuation of his assets and, following exchanges of documents, the Crown reduced its figure to £22,061.  Mr Mundy put the figure at only £2,561 arguing, amongst other things, that the monies in the bank accounts were to pay for various items and to support his family. He said the motorcycles had little value and were his hobby; the van was used for work; the car was jointly owned with a third party and the value placed on the property was excessive.

The application was heard on 13 September 2017.  The Crown Court judge refused to order that Mr Mundy pay any further amount.  The judge said, “I have read the application and the information in support of the application to make the order. I have also read the detailed response to the section 22 application in which the explanation is provided on behalf of the defendant, firstly, to the circumstances in which he acquired the various vehicles and also the circumstances and the use to which the savings which were gathered were to be put. I have absolutely no doubt that it would not be just in these circumstances to make the order under section 22 and I decline to do so.”

The Crown appealed.

 

The appeal

The Court of Appeal heard the case in January 2018, R v Mundy [2018] EWCA Crim 105.

On appeal the court noted that what was “just” required a consideration of what was “just” for the prosecution as well as for the defendant.  The court noted that the judge in the Crown Court had expressly referred to the public interest in confiscating the proceeds of crime.

The court considered that the judge’s reasoning had been rather too “abbreviated”.  At para [33] it remarked “If the judge had gone through the list and given brief reasons for rejecting each element in it, and if he had added that there must be an element of proportionality in the disposition of court resources, then we doubt there could have been any proper basis for challenging the order.  Judges are entitled summarily to dismiss applications that they regard as being substantially without merit, but the Crown had spent considerable time and effort preparing for the application and both it and the public were entitled to know why the judge rejected the application.”

But the Court of Appeal went on to conclude that the Crown Court judge had a discretion to refuse to vary the order and that on the facts it was properly open to him to do so in Mr Mundy’s case.  The court dismissed the prosecution’s appeal.

It follows that – at least for now – Mr Mundy is not required to pay anything further under the confiscation order.

 

Contacting us

Our contact details are here.

David

(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.)

Default sentence reduction for part payment

Supreme Court logoOn 24 January 2018 the UK Supreme Court handed down its judgment in R (Gibson) v Secretary of State for Justice [2018] UKSC 2. As a result of this judgment there will be slightly more generous reductions in default sentences to be served where part of the amount due under a confiscation order has been paid. It may be that in its determination of what the statute law actually says the Supreme Court has found that the law in this area is more generous to convicted defendants than parliament had intended it to be.

 

Mr Gibson’s case

Mr Gibson had been made subject to a confiscation order of over £5.4m in March 2000.  He was ordered to pay this within 12 months, with a six year prison term in default.  Perhaps not surprisingly Mr Gibson did not pay the amount in full on time and from March 2001 interest started to be added, at the rate of 8% per annum, on the amount outstanding.

In fact only relatively small amounts were paid under the confiscation order.  By the time the Magistrates’ Court committed Mr Gibson to prison under the default sentence only £90,370 in total had been paid – but the interest added to the amount originally ordered to be paid had resulted in the total amount outstanding rising to over £8.1m.

The original default term had been six years, or 2,190 days.  There was no doubt that Mr Gibson was due some reduction in this because he had paid £90,370 off the order.  But should the reduction be calculated as a proportion of the original amount ordered of £5.4m or as a proportion of the amount now outstanding of £8.1m?

Originally the calculation was made based on the £8.1m.  That resulted in a reduction of 24 days in the default term.  But Mr Gibson wanted the calculation to be based only on the original £5.4m – which instead would result in a reduction of 35 days.  Mr Gibson commenced legal proceedings to get the extra reduction in his default sentence.

The law on the point is not particularly clear.  Mr Gibson originally lost the argument in the Administrative Court.  He appealed to the Court of Appeal – and lost again.  But in January 2018 the Supreme Court decided in Mr Gibson’s favour.  As a result he is entitled to the extra 11 days reduction in his default sentence.

 

The effect of the Supreme Court decision

This decision applies in every case (in England and Wales) in which a default sentence has been activated by the Magistrates’ Court, interest has been added to the amount outstanding, and there needs to be some reduction in the default sentence as a result of part of the confiscation order having been paid.

The effect of the decision is that the reduction for the part payment is to be calculated based on the original amount ordered to be paid when the confiscation order was made – not on the amount (including interest) which is outstanding when the Magistrates’ Court activates the default sentence.

Let’s take a simpler example. John is subject to a confiscation order in the sum of £150,000 with a default sentence of 30 months. He has paid £15,000 under the order, but interest of £5,000 has been added. When John is being committed to prison under the default sentence the balance outstanding is £140,000 (including the interest).

John’s default term will be reduced by 3 months (which is 10% of the original default term) because he has paid £15,000 (which is 10% of the original confiscation order amount of £150,000).  So he will be committed to prison for 27 months (3 months less than the original default term of 30 months).  In practice the default sentence would be calculated in days rather than months.

When calculating the reduction in the default sentence the interest is ignored.

 

Is this what parliament intended?

It seems doubtful that this is what parliament intended.  One effect of this decision appears to be that a default sentence cannot be activated where the remaining balance outstanding is less than the total interest which has been added.

Consider the example of Peter who was originally the subject of a confiscation order for £60,000 with a default sentence of 18 months.  Peter does not pay on time and interest of £5,000 has been added.  The amount outstanding is now £65,000 – but if Peter pays just the original £60,000 off then he cannot be committed to prison under the default sentence, even though the £5,000 interest is still outstanding.  This is because there is a 100% reduction in the default sentence because he has paid 100% of the original amount of the confiscation order.

Of course parliament can change the law by passing new legislation if it wishes.

 

Contacting us

Our contact details are here.

David

(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.)

Criminal Finances Act 2017

Big Ben imageThe new Criminal Finances Bill was published on 13 October 2016. Consideration of the detailed provisions of the Bill by MPs and Lords has now been completed and limited amendments have been made to the original Bill.  When this blog post was last updated (16 April 2018) the final version of the Bill had received Royal Assent and had become the Criminal Finances Act 2017.  However most of the operative sections of the Act are being brought into force by regulations which are being made in stages (updates to the text below indicate provisions which are in force).

The new Act strengthens civil recovery of the proceeds of crime; creates ‘unexplained wealth orders’; creates new offences of failing to prevent the facilitation of tax evasion; and extends existing investigation powers in relation to money laundering and terrorist finances.

It appears that the provisions in the Bill were largely based on suggestions from investigators and prosecutors.  Insofar as the Bill was criticised in parliament those criticisms were to the effect that the Bill’s provisions did not go far enough.

WARNING – THIS IS A LENGTHY BLOG POST – OVER 2,000 WORDS

 

  1. Strengthening civil recovery powers
  2. Unexplained wealth orders
  3. Failing to prevent the facilitation of tax offences
  4. Suspicious Activity Reports and the moratorium period
  5. Tidying up investigation powers
  6. Conclusion
  7. Contacting us

 

Strengthening civil recovery powers

Originally Part 5 of the Proceeds of Crime Act 2002, which deals with civil recovery, contained 87 sections (numbered 240 to 326).  Previous amendments have deleted two of those sections but added 31 new ones.  The new Act adds a further 45 new sections to Part 5 in two entirely new chapters, chapter 3A ‘Recovery of listed assets in summary proceedings’ and chapter 3B ‘Forfeiture of money held in bank and building society accounts’.

The existing chapter 3 of PoCA 2002 (which continues in force) makes provision for officers to search for cash, for the detention of cash where (on ‘reasonable grounds’) that cash is suspected to be ‘recoverable property’ (which broadly means proceeds of crime) or is suspected to be intended for use in crime, and is more than the ‘minimum amount’ (which is £1,000), and for the forfeiture of seized cash where the court is satisfied (on a balance of probabilities) that the cash is ‘recoverable property’ or is intended for use in crime (or where no objection has been raised to forfeiture).

In essence the new chapter 3B, inserted by s16, extends similar provisions (except the search provisions) to monies in bank or building society accounts.  That will involve a bank or building society account initially being ‘frozen’ for a period of up to 2 years by an ‘account freezing order’ made in the Magistrates’ Court (which, like a Crown Court restraint order, may initially be made on an ex parte basis).  Application could then be made, by way of an ‘account forfeiture notice’, for monies in the ‘frozen’ account to be forfeit to the Crown without the necessity of a further appearance in the Magistrates’ Court.  Alternatively, or if an objection were made (in writing and normally within 30 days) to the ‘account forfeiture notice’ (for example by the account holder or another interested party), a hearing in the Magistrates’ Court would be required before the monies could be forfeit.

There is provision for the account holder to be informed of the making of an ‘account freezing order’ and the issue of an ‘account forfeiture notice’ and for allowances to be made for monies to be drawn from a ‘frozen’ account – for example to meet living expenses or to allow the running of a business, as well as to meet appropriate legal costs.  There are also provisions to cater for setting aside or variation of an ‘account freezing order’ and for late objections and appeals.

The new chapter 3A, inserted by s15, extends similar provisions (including search provisions) to ‘listed assets’ which  include precious metals, precious stones, watches, artistic works, face-value vouchers and postage stamps.  The chapter 3A provisions also cater for associated property and joint property (where only part of an asset is subject to forfeiture).  Again a ‘minimum value’ of £1,000 applies.

The Act also provides, s14, for the definition of “cash” in s289 PoCA 2002 to be extended.  The definition already included cheques (including travellers’ cheques), bankers’ drafts, postal orders, bearer bonds and bearer shares.  It will now include gaming vouchers, fixed-value casino tokens and betting receipts.  The idea is to cover what might be described as ‘cash substitutes’ which could be used by criminals as an alternative means of transferring value.  A similar amendment is made to the Anti-Terrorism, Crime and Security Act 2001 in respect of “terrorist cash”.

The scope of ‘unlawful conduct’ which may be the basis of civil recovery action under Part 5, PoCA 2002 is extended by s13 to include ‘gross human rights abuse or violation’ which is defined by a new section 241A PoCA 2002.

[UPDATE: The provisions of s16, inserting a new chapter 3B into PoCA 2002, came into force on 31 January 2018.  The provisions of s15, inserting a new chapter 3A into PoCA 2002, and s14, extending the definition of cash, came into force on 16 April 2018.]

 

Unexplained wealth orders

The Act creates ‘unexplained wealth orders’ by s1.  An ‘unexplained wealth order’ requires an individual to set out the nature and extent of his interest in the property specified in the order, and to explain how he obtained that property in cases where that person’s known income does not explain ownership of that property.

It therefore allows an enforcement authority to require an individual to explain the origin of assets that appear to be disproportionate to his income.  It is important to recognise that ‘unexplained wealth orders’ form part of chapter 8 of PoCA 2002 which deals with powers of investigation (new sections applicable to England and Wales are inserted after s362 of PoCA 2002) – rather than part 5 which deals with civil recovery.

Applications for ‘unexplained wealth orders’ are to be made to the High Court, who would need to be satisfied either that there are reasonable grounds for suspecting that the respondent is, or has been, involved in serious crime (or a person connected with the respondent is, or has been, so involved) or that the respondent is an overseas ‘politically exposed person’ (meaning an individual who has been entrusted with prominent public functions by an international organisation or a State outside of the UK or the European Economic Area, or a close relative or associate of such a person).

Serious crime refers to an offence set out in Schedule 1 to the Serious Crime Act 2007 (including some drug trafficking, arms trafficking, people trafficking and modern slavery offences, organised crime, money laundering, firearms offences, prostitution offences, fraud, tax evasion, bribery, counterfeiting and trade mark offences, poaching and environmental offences).

In the case of an overseas ‘politically exposed person’ there would be no requirement for a suspicion of serious criminality.

In the original Bill, an application for an ‘unexplained wealth order’ could only be made in connection with property having a value greater than £100,000.  During the Bill’s passage through parliament this figure was reduced to £50,000.

Where a person provides information in response to an ‘unexplained wealth order’ the authority may use that information as a basis for civil recovery proceedings under Part 5 or in connection with any confiscation proceedings under Part 2 PoCA 2002.

Where a person fails to provide information in response to an ‘unexplained wealth order’ (without reasonable excuse) there will be a rebuttable presumption that the property in question is ‘recoverable property’ for the purposes of any civil recovery proceedings taken subsequently.

Alongside the proposed new ‘unexplained wealth orders’ will be new ‘interim freezing orders’, introduced by s2, to ‘freeze’ assets subject to ‘unexplained wealth orders’ to prevent their dissipation.

[UPDATE: The provisions relating to unexplained wealth orders came into force on 31 January 2018.]

 

Failing to prevent the facilitation of tax offences

The Act creates, at sections 44 to 52, a new offence of failing to prevent the facilitation of tax offences.  This new offence may be committed by an organisation such as a limited company or a partnership (but not by an individual).  The essence of the offence is that where an individual has committed an offence which has facilitated a tax offence by another, then the organisation with which he is connected (typically his employer) may be prosecuted for its failure to prevent the individual committing his offence.

For example if an employee of a bank or a firm of accountants facilitates a tax offence by a customer or client then not only will that employee be liable to prosecution (as he is now) for his criminal conduct in facilitating the tax offence but the organisation will be liable to prosecution for this new offence.  In this way the government intends to hold organisations to account for the criminal misconduct of their employees and other persons acting on their behalf.

Under existing law the organisation would only be liable to prosecution if the ‘directing minds’ of the organisation were engaged in criminal conduct.  Because employees who commit tax evasion facilitation offences are typically not at the most senior level of the organisation which employs them the organisation itself is not currently at risk of prosecution.  The Act changes that.

The new offence is modelled on the s7 Bribery Act 2010 offence of failing to prevent bribery.

As with the Bribery Act offence, guidance will be issued to assist organisations to set up appropriate procedures to prevent tax evasion facilitation offences by their employees and agents.  Key principles are likely to include risk assessment, prevention procedures, due diligence, staff training, and monitoring and review.

[UPDATE: These provisions came into force on 30 September 2017.]

 

Suspicious Activity Reports and the moratorium period

Provisions in the Act aim to make more effective the Suspicious Activity Reports regime.  There is a new power, introduced by s12, allowing the National Crime Agency to require any person within the ‘regulated sector’ (that is businesses subject to the Money Laundering Regulations and obliged to make a Suspicious Activity Report in appropriate circumstances) to provide relevant information to the NCA where the NCA has received a SAR (whether from that person or another) or a request by an overseas authority.  If necessary an order may be made in the Magistrates’ Court compelling disclosure of the required information (with a penalty of up to £5,000 for non-compliance).

Previously the SARs regime operated on a ‘shop and stop’ basis.  Where a reporting entity, such as a bank or firm of accountants or lawyers, made a report it was relieved of any obligation of client confidentiality with regard to the content of the SAR.  But the reporter was not in a position to provide follow up information or further details to the NCA where ordinary client confidentiality prevented that.  So once the report had been submitted the reporter was effectively stopped from providing further details.  The provisions in the Act remove any obstacle to the supply of further information (except in respect of information covered by legal privilege).

Another change, introduced by s11 of the Act, facilitates the exchange of information about suspicious activities between different businesses within the ‘regulated sector’ so that, where appropriate, they can co-ordinate their reports and actions in relation to those suspicions.

Customers of banks in particular may be concerned by further provisions, inserted by s10 of the Act, allowing the ‘moratorium period’ (during which, for example, a bank account may be frozen) to be extended by up to six months longer than was previously permitted.

Under previous legislation a bank could freeze a customer’s account pending consent from the NCA initially for a period of seven working days and then for an additional period of no longer than 31 calendar days.  This 31 day period is known as the ‘moratorium period’.  Under the new provisions the NCA (or other appropriate investigator such as the police or HMRC) can apply to the Crown Court for the moratorium period in respect of a particular SAR to be extended.  Initially the Crown Court could grant an extension of (up to) 31 days and the court would have power, upon further applications by the investigator, to grant further (up to) 31 day extensions – up to a maximum extension of 186 days from the end of the original moratorium period.  Extensions could be granted where the Court is satisfied that it is necessary and reasonable, and where an investigation is being conducted diligently and expeditiously.  The Court may exclude from any part of its hearings concerning extending the ‘moratorium period’ the ‘interested person’ (the holder of a frozen bank account for example) and his legal representatives.

It follows that a customer’s bank account could be frozen for more than seven months without the customer having an opportunity to hear the evidence upon which the suspicion of money laundering was based and to effectively challenge that evidence or provide appropriate explanations.  Such a long period of account freezing could have very serious implications for the customer.

These provisions of the Act add new sections to Part 7 PoCA 2002.

[UPDATE: These provisions came into force on 31 October 2017.]

 

Tidying up investigation powers

The Act also contains various provisions to tidy up the PoCA 2002 provisions relating to powers of investigation.

In particular amendments made by s7 allow ‘disclosure orders’ under s357 PoCA 2002 to be obtained in connection with money laundering investigations and, by s33, the investigation powers of Part 8 PoCA 2002 become available for revisits under s22 PoCA 2002 to a defendant’s available amount in relation to an existing confiscation order.

Section 32 of the Act ensures that confiscation orders which are discharged under s24 or s25 PoCA 2002 may still be subject to reconsideration under s21 or s22 PoCA 2002.

The Act also extends PoCA 2002 enforcement and investigation powers more coherently to HMRC, the Serious Fraud Office, the Financial Conduct Authority and immigration officers.

[UPDATE: Some of these provisions have now come into force.]

 

Conclusion

The Criminal Finances Act 2017 makes significant changes to a variety of PoCA 2002 provisions with corresponding amendments to the law relating to terrorist property.

 

Contacting us

Our contact details are here.

David

(Note: This article deals with the Criminal Finances Act 2017 so far as it applies in England and Wales.  At the time of writing not all of the operative provisions of the Act had been brought into force.   Appropriate professional advice should be sought in each individual case.)

Challenging a s22 PoCA 2002 confiscation reconsideration

Crown Court judgeThe revisiting of old confiscation orders by prosecutors under section 22 Proceeds of Crime Act 2002 is becoming more frequent.

This blog post considers the provisions of s22 and ways in which prosecution applications under s22 may be challenged by the defendant.

Section 22 is headed “Order made: reconsideration of available amount”.

WARNING – THIS IS A LENGTHY BLOG POST – APPROXIMATELY 3,000 WORDS

  1. Reconsideration of available amount
  2. The legal ‘trigger’
  3. “Makes” v “varies”
  4. Inflation
  5. The burden of proof
  6. What is ‘just’?
  7. The prosecutor’s s22 application and witness statement
  8. Restraint orders and investigation powers
  9. Time limit
  10. Challenges
  11. Default sentence
  12. Due date for payment & interest
  13. Second revisit
  14. Appeals
  15. Conclusion
  16. Contacting us

 

Reconsideration of available amount

Section 22 PoCA 2002 empowers the Crown Court to vary an existing confiscation order made under s6 of the Act.  In effect it allows the prosecution to apply to the court for a further payment to be required from the defendant under an existing confiscation order where his available amount has increased since the original order was made.

This blog article does not consider variations to confiscation orders made under earlier legislation, such as the Criminal Justice Act 1988, Drug Trafficking Act 1994 or Drug Trafficking Offences Act 1986.  Different rules apply under those Acts.

Nor are we considering the position of a person who has a new conviction and a new confiscation order is being made as a result of that.

We are considering the situation of a defendant who was made subject to a confiscation order, perhaps some years ago, at which time the court ruled that he had a figure of benefit which was higher than his available amount.  At that time the court would not have ordered him to pay the full amount of his benefit.  Instead the amount he was then ordered to pay would have been restricted to his available amount at that time.  The figures of the defendant’s benefit, available amount and the amount he was ordered to pay should all be spelled out in the original confiscation order.

Under s22 the prosecutor asks the court to consider the available amount which the defendant has now and to order him to pay a further amount now towards his total benefit.

Let’s consider Jim’s case.  Jim was subject to a confiscation order in September 2008.  That order says that Jim’s benefit was £100,000 and his available amount was £500.  Jim was ordered to pay £500 which he has paid.  Today Jim owns a house with his wife.  The house is worth £200,000 but there is a mortgage of £180,000.  So Jim’s half share is worth £10,000.  Jim also has a car worth £6,000 but no other assets, so Jim’s total available amount today is £16,000.

The prosecution can ask the court under s22 to order Jim to pay a further £16,000 (or some other figure) by making a variation to the confiscation order made in September 2008, requiring a further payment now.

 

The legal ‘trigger’

The legal ‘trigger’ for a s22 variation is in subsection 22(4):-

If the amount found under the new calculation exceeds the relevant amount the court may vary the order by substituting for the amount required to be paid such amount as –

(a) it believes is just, but

(b) does not exceed the amount found as the defendant’s benefit from the conduct concerned“.

The ‘trigger’ is in the first phrase – “If the amount found under the new calculation exceeds the relevant amount“.  What that means is that a s22 variation can only be made where the defendant’s available amount now exceeds the available amount shown on the original confiscation order.

In Jim’s case it obviously does (£16,000 is more than £500) and so the court can consider making an order requiring a further payment from Jim now.

 

“Makes” v “varies”

Under s22 a court may “vary” an existing confiscation order – but it does not “make” a confiscation order.  The legislation does not regard a variation to amount to the ‘making’ of an order.  This can be seen most clearly in the differing provisions regarding default sentence when a court “makes” an order – see s35 – and when a court “varies” an order – see s39.

It follows that an order which has been varied under s22 is an order which was ‘made’ at the time of the original confiscation hearing, not at the time of the variation.

 

Inflation

In these cases we can be looking back at figures determined by the court some years ago.  Because of this s22 recognises the effect of inflation by subsection 22(7) which says:-

In deciding under this section whether one amount exceeds another the court must take account of any change in the value of money.

This is done by using the RPIJ index published by the Office for National Statistics.  [UPDATE: Since the article was written courts have moved on to using CPIH rather than RPIJ for ‘inflation’ uplifts.]

In Jim’s case the confiscation order was made in September 2008 when RPIJ stood at 209.8.  The latest figure (May 2016) is 240.1.

So uplifting Jim’s benefit of £100,000 it becomes equivalent to £114,442 and his original available amount of £500 becomes equivalent to £572 today.

So, strictly speaking, the trigger condition is whether £16,000 exceeds £572 – which of course it does.

The prosecutor will most likely ask the court to vary the original confiscation order so that Jim’s amount to pay is £16,500 – that is the £500 which he has already paid plus a further £16,000 payable now.

The prosecutor will point out that this amount (which when adjusted for changes in the value of money is equivalent to £16,572) is less than Jim’s total benefit (which when adjusted for changes in the value of money is £114,442).

 

The burden of proof

An application under s22 is made by the prosecutor (or an enforcement receiver appointed under s50).  It would appear that the burden of proof is on the applicant to provide information enabling the court to make a “new calculation” of the defendant’s available amount.

This contrasts with the position when the confiscation order was originally made (at which time the burden was on the defendant to show that his available amount was less than his benefit, by virtue of s7).

 

What is ‘just’?

Under s22(4) the court is to vary the amount to be paid to an amount which the court “believes is just.”  What does that mean?

What is ‘just’ does not only mean what is ‘just’ for the defendant.  The concept has regard to the legitimate interests of both sides.

I suggest that part of the process of deciding what is ‘just’ involves looking back at the figure of benefit previously decided by the court and considering whether that figure, in the light of subsequent legal developments, is either faulty because it was based on a misunderstanding of the law (as may have arisen, for example, in a case of mortgage fraud), or is an amount which it would now be considered disproportionate to order the defendant to pay in full (as may be the case, for example, where stolen property has been returned to its owner).

That will involve some detailed reconsideration of the basis on which the original confiscation order was made, which may involve re-examination of the basis of prosecution’s assertions regarding benefit which were set out in the original s16 statement insofar as the court accepted those assertions when making the confiscation order.

Where, in the light of the relevant law as it is understood today, the defendant would not now be ordered to pay an amount based on the whole of the benefit shown in the original confiscation order then, I suggest, it would not be ‘just’ to order a defendant to pay that amount now under s22.

So it is necessary, in my view, to consider the impact of case law such as R v Waya [2012] UKSC 51 (proportionality and confiscation, mortgage fraud), R v Ahmad [2014] UKSC 36  (recovery from co-defendants), R v Harvey [2015] UKSC 73 (VAT and confiscation) and Boyle Transport (Northern Ireland) Ltd v R [2016] EWCA Crim 19 (piercing the corporate veil) on the understanding of confiscation law, when considering an application under s22.

This does not mean that the defendant is appealing against the benefit figure in the original confiscation order.  He is asking the court to consider what it would be ‘just’ for him to be ordered to pay now under s22.

[UPDATE: The case of R v Cole [2018] EWCA Crim 888 (24 April 2018) in the Court of Appeal concerned a s22 application in a mortgage fraud case. The original confiscation order had been made before the Supreme Court decision in Waya and the benefit included the amount of the mortgage advance.  The Court of Appeal restricted the further amount ordered to be paid under s22 in line with what the original benefit figure would have been had a ‘Waya-compliant’ approach been followed when the confiscation order was first made.  In other words the Court of Appeal did take into account the decision in Waya when making the s22 variation.]

More broadly the court appears to have a discretion under s22 to consider what amount, in all the circumstances, it believes it would be ‘just’ for the defendant to be ordered to pay.

The Court of Appeal has held in the case of Padda v R [2013] EWCA Crim 2330, “In that context, it is entirely appropriate for a court to consider such matters as the amount outstanding, the additional amount which might now be available for a further payment, the length of time since the original confiscation order was made, the impact on the Defendant of any further payment contemplated and indeed any other consideration which might properly be thought to affect the justice of the case.

When the court is considering a variation to a confiscation order under s22 then – once the trigger condition has been satisfied – the court may order the defendant to pay a further amount of any size, large or small, so long as the total which the defendant is required to pay under the confiscation order (adjusted for changes in the value of money) does not exceed the total of his benefit (adjusted for changes in the value of money).

Strictly speaking, the only relevance of the defendant’s current available amount is in relation to determining whether the trigger condition is satisfied.  In practice however the prosecutor is likely to suggest that it would be just for the defendant to be ordered to pay an additional amount which is the lesser of (a) his current available amount, and (b) the maximum which the defendant could be ordered to pay in relation to his total benefit.

 

The prosecutor’s s22 application and witness statement

Section 22 does not make express provision for a prosecutor’s statement in support of an application for a variation of a confiscation order.  There are no express provisions akin to those found in s16.

Equally there are no express provisions akin to sections 17, 18 and 18A requiring statements or information from the defendant or third parties.

Nevertheless the prosecutor (or enforcement receiver) will need to make a written application to the court and the likelihood is that he will append to that a witness statement which will be in some respects similar to a s16 statement.  Rule 33.16 Criminal Procedure Rules 2015 applies to the service of the application and any supporting witness statement.  It is likely that the defendant will want to respond to the application by way of a statement of his own before the court hearing.

 

Restraint orders and investigation powers

The prosecutor is entitled to apply for a restraint order, under s40(6), when a s22 application is to be made or has been made.

Where the court makes a restraint order it may also require the subject of the restraint order to supply information under s41(7) for the purpose of ensuring that the restraint order is effective.

However it appears that the investigation powers under Part 8 of PoCA 2002 are not available to a prosecutor applying for a s22 variation, because a s22 application does not appear to involve a ‘confiscation investigation’ as defined by s341(1).

There could be some debate as to whether a s22 investigation is an investigation into “the extent or whereabouts of realisable property available for satisfying a confiscation order made” in respect of the defendant, referred to in s341(1)(c).  My own view is that “satisfying a confiscation order made” refers to full payment of the amount ordered to be paid under the original confiscation order which has been made, rather than referring to satisfying a variation of that confiscation order which is (perhaps) to be made.  If that is the case, and if the original confiscation order has been paid in full, then the s22 investigation would, in my view at least, not fall within s341(1) with the result that the Part 8 investigation powers would not be available to a financial investigator acting for the prosecutor.

[UPDATE: The Criminal Finances Act 2017 includes – at section 33 – an amendment to s341(1)(c) intended to make the investigation powers of Part 8 available to a prosecutor applying for a s22 variation.  This came into force on 31 January 2018.]

 

Time limit

There is no statutory time limit.  This means that a s22 application may be made many years after the original confiscation order was made.

 

Challenges

A s22 application may be subject to a variety of challenges by the defendant.

The defendant may assert that the trigger condition has not been satisfied.  Take the example of Bert who was subject to a confiscation order made in February 2012.  In that order his benefit was held to be £90,000 and his available amount was £40,000.  Bert was ordered to pay £40,000 which he has paid.  The prosecutor now finds that Bert has £25,000 in a bank account in his sole name.  Bert has no other assets, so his available amount now is £25,000.

The RPIJ in February 2012 was 225.8.  The latest figure (May 2016) is 240.1.

So uplifting Bert’s benefit of £90,000 it becomes equivalent to £95,699 and his original available amount of £40,000 becomes equivalent to £42,533 today.

So, strictly speaking the trigger condition is whether £25,000 exceeds £42,533 – which of course it does not.

It follows that the trigger condition is not satisfied and the court should not order Bert to pay a further amount now under s22.

A second area of challenge concerns the defendant’s available amount.  Consider Charles who, according to Land Registry records, is the sole legal owner of Rose Cottage.  The prosecutor values Rose Cottage at £250,000.  There is an outstanding mortgage of £150,000.  The prosecutor therefore asserts that Charles has an available amount of £100,000.

Charles may challenge this on the basis that he is not the sole beneficial owner of Rose Cottage and that the current value of Rose Cottage is less than £250,000.  That challenge may have a bearing on whether the trigger condition is satisfied and on the value of Charles’ current available amount – with obvious implications for any amount which Charles may be ordered to pay now as a result of the s22 application.

A third area of challenge concerns what might loosely be described as ‘change of law’.  In 2005 Peter was convicted of mortgage fraud in that he had purchased a house with a mortgage of £100,000 which he had obtained by giving false information on his mortgage application.  Peter was subject to confiscation with a benefit of £100,000 (the amount of the mortgage advance) and an available amount of £20,000.  He was ordered to pay £20,000 which he has paid.  Peter now has £50,000 in a bank account in his sole name but no other assets (so his available amount is £50,000).  He is subject to a s22 application.

Peter may challenge the application on the basis that it would not be ‘just’ to order him to pay £50,000 under s22 as, on a proper and just interpretation of the legal position, he did not ‘obtain’ the mortgage advance and, in any event, the mortgage advance has since been fully repaid to the lender.

The court would then have to consider what further sum, if any, it would be ‘just’ to order Peter to pay under the confiscation order.  That may involve consideration of the price for which Peter ultimately sold the mortgaged property.

A fourth possible area of challenge concerns prosecution delay and Article 6(1) of the European Convention on Human Rights.  Consider the case of Derek who was subject to a confiscation order in 2006.  The court then found he had a benefit of £175,000 and an available amount of £25,000.  He was ordered to pay £25,000 which he has paid.  In 2011 the prosecution discovered that Derek was the sole owner of a property worth £200,000 which he had inherited from his father who died in 2009.  No action was taken by the prosecution at the time.  The file was reviewed in 2016 and an application was then made under s22.

Derek may challenge the application on the basis that it infringes his Article 6(1) rights in that the prosecutor has not brought the s22 application to court “within a reasonable time”.

Fifthly, a s22 application may be challenged on the basis that, taking everything into consideration, it would be simply unjust to order the defendant to make any further payment now – or that it would be unjust to require him to pay the full amount requested by the prosecution.  It might be argued, for example, that it would be just for the defendant to be ordered an amount based on his bank balance but not any part of the value of the equity in his home or the value of assets he uses in his legitimate business.  However such an argument would have to overcome the clear legislative policy in favour of maximising the recovery of the proceeds of crime, even from legitimately acquired assets.

There may be other bases on which a s22 application may be challenged.

 

Default sentence

The provisions of s22 permit the court to vary the amount to be paid under the confiscation order, but do not expressly authorise the court to vary the original default sentence (which will have been based on the original amount payable).

Section 35 authorises the court to set a default sentence when it “makes a confiscation order”, not when it varies one.  However s39 authorises the court to vary the default sentences in the circumstances detailed in that section.

One of the trigger conditions in s39 is that a confiscation order has been varied under s22 and the effect of the variation is to vary the maximum period of a default sentence applicable in relation to the order under s139(4) Powers of Criminal Courts (Sentencing) Act 2000.

Unfortunately when s35 was amended by s10 Serious Crime Act 2015 corresponding amendments to s39 were not made.  The effect appears to be that the court can vary the default term in accordance with the table of default terms in certain circumstances, but only in accordance with the default terms set out in s139(4) Powers of Criminal Courts (Sentencing) Act 2000.  These are the default terms which applied to confiscation orders made before 1 June 2015.

In other words, when considering a default term in the context of a s22 variation it is as if the changes to default sentences made by the Serious Crime Act 2015 had never happened.

 

Due date for payment & interest

Strictly speaking, s22 does not authorise the court to vary the due date for payment.  Under s11 this is closely tied to the date on which the confiscation order is “made” (not the date on which it is varied under s22).  Under s12 the defendant must pay interest on any amount which is not paid when it is required to be paid.

However it would appear to be a nonsense to charge interest, backdated to the date on which the confiscation order was originally made, on an additional amount.  Such an interest charge might be considered to infringe the defendant’s rights under Article 1 of the First Protocol of the European Convention on Human Rights.

 

Second revisit

After a confiscation order has been varied under s22 is it possible to revisit it again at a later date?  The short answer is ‘Yes’.

However on a subsequent revisit the ‘trigger’ condition will be interpreted as comparing the defendant’s current available amount with his available amount as determined on the most recent occasion on which an application was made under s22.

 

Appeals

It seems clear that a defendant can appeal against a s22 variation where he considers the variation to have been wrong in principle or manifestly excessive (see Padda referred to above).

On the other hand, it does not appear that a prosecutor is able to appeal against the amount by which the court decides to vary a confiscation order on a s22 application, or a decision not to make any variation – but he is able to make a fresh application under s22 at a later date.

[UPDATE: In the case of R v Mundy [2018] EWCA Crim 105 the Court of Appeal did grant the prosecution leave to appeal a Crown Court decision not to vary a confiscation order under s22.  The basis for that leave to appeal appears to have been s31(1) PoCA 2002 which refers to an appeal where the Crown Court “makes” a confiscation order.  Since the s22 application was a request to “vary” rather than to “make” a confiscation order, it is open to debate whether the prosecution’s appeal was validly made.  In any event the Court of Appeal dismissed the prosecution’s appeal.]

 

Conclusion

There are a number of matters which will need to be carefully considered by prosecution and defence in connection with a prosecutor’s application under s22 for reconsideration of a defendant’s available amount.

 

Contacting us

Our contact details are here.

David

(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales.  Appropriate professional advice should be sought in each individual case.)