The Serious Crime Act 2015 has introduced a new power enabling a Crown Court judge when making a confiscation order to make a “determination” of the extent of the defendant’s interest in any property which is likely to be used to satisfy the order.
In other words, where more than one person has an interest in the property the judge may ‘determine’ what proportion of the property belongs to the defendant at the time the confiscation order is made.
That determination will then, subject to limited exceptions, be conclusive in further proceedings taken with a view to satisfying the order.
The objective of such a “determination” under the new s10A Proceeds of Crime Act 2002 appears to be to facilitate the enforcement of confiscation orders by a conclusive ruling at the time the confiscation order is made on competing interests in assets which might need to be realised to satisfy the order. Previously such matters would not be resolved until a later stage – when enforcement proceedings against the defendant’s assets were underway.
But it remains open to the judge to make a confiscation order without making any “determination” – in other words to do precisely what he would have done before s10A was introduced. It is envisaged that in many cases that is exactly what will happen.
The new law
The new law, which came into effect on 1 June 2015, is to be found in sections 1 – 4 Serious Crime Act 2015.
Section 1 is the key provision, inserting a new s10A into PoCA 2002 setting into law the power to make a “determination” and the requirement that, before doing so, the court must give any “interested person” (meaning any third party whom the court thinks has, or may have, an interest in the property) a reasonable opportunity to make representations to it.
So where a judge is considering making a “determination” an “interested person” can be represented at the confiscation hearing, which is a new development in confiscation law.
As always in confiscation law, “property” means an asset of any description – not just land & buildings.
Section 2 deals with the provision of information to the court by the defendant (amending s18 PoCA 2002), the prosecutor (amending s16) and the interested person (inserting a new s18A).
How is it supposed to work?
The idea is that when a convicted defendant is first required by a s18 order to provide information to the court for the purposes of confiscation proceedings he may also be required to provide information which would be relevant to a potential s10A determination. In other words he may be required to set out his assertions concerning the extent to which he is interested in assets in which he has a less than 100% interest. Presumably the court would wish at that stage also to be provided with the identities of any “interested persons”.
The court may at any stage require an “interested person” to provide information to it. New s18A enables the court to place upon an “interested person” similar obligations to those placed on a defendant under s18 – and with the same danger that where an “interested person” fails to comply with the court order the court may draw appropriate inferences.
The prosecutor is required to include in his s16 statement any information known to him which he believes is relevant to a possible s10A determination. This appears to be a mandatory requirement applying to all s16 statements issued after 1 June 2015.
Although there are no changes to s17, a defendant would be unwise not to respond to any relevant assertions in the prosecutor’s s16 statement with which he did not agree because his silence may be taken for agreement.
Prior to the confiscation hearing if the court was contemplating making a s10A determination any “interested persons” would need to be notified of the hearing to enable them to be represented at it. (However it is far from clear whether any legal aid funding would be available to an “interested person” who wished to obtain legal advice or instruct a legal representative to appear at the hearing.)
At the conclusion of the confiscation hearing the court could make not only a confiscation order but also a s10A determination of the defendant’s interests in specified assets (i.e. the proportion of each asset which belonged to the defendant).
If the confiscation order was not satisfied & matters proceeded to enforcement then, subject to the provisions relating to appeals and reconsideration already mentioned, enforcement could then proceed on the basis of the defendant’s interests in those assets as had been determined.
A fictional case study
To better understand the issues let us consider a fictional case study.
Norman & Monica have been married for ten years & have two school age children. They jointly own their matrimonial home (as joint tenants) subject to a building society mortgage (also in joint names). They purchased their current home, Rose Cottage, 3 years ago.
Norman also owns a ‘buy to let’ property, Rainbow’s End, which is occupied by students at the local university. Norman bought the property 5 years ago in his sole name with the help of a secured bank loan (also in his sole name). Norman declares all the rents received from Rainbow’s End on his personal income tax returns.
Norman was recently convicted in connection with a drug trafficking conspiracy & is now subject to confiscation on the basis of a ‘criminal lifestyle’. The figure of his ‘benefit’ is undoubtedly going to be very large so the confiscation order will be limited by his ‘available amount’.
Norman’s ‘available amount’ will include his interests in Rose Cottage & Rainbow’s End. In relation to any s10A determination which the judge may be considering making in regard to those properties the “interested persons” appear to be Monica, the building society & the bank.
If the court is considering making a s10A determination it may issue s18A orders requiring Monica, the building society & the bank to supply information & must give each of them an opportunity to make representations to it.
In practice the interests of the commercial lenders are likely to be uncontroversial & it is unlikely that they will wish to be represented at the confiscation hearing. However there is a danger that the interests of the lenders in the properties may change between the date the confiscation order is made & the date the order is enforced. The new legislation does not appear to be designed to accommodate that possibility, particularly as the legislation refers to the defendant’s interest as a proportion of the value of the property itself, s10A(5).
An alternative approach might be for the court to define the ‘property’ to be dealt with by the determination as ‘Norman & Monica’s interests in Rose Cottage & Rainbow’s End’. That may enable some potential complications to be side-stepped but arguably would run counter to the natural meaning of the wording of s10A. Another option may be for the court to give a rather wide meaning to the word “proportion” in this context.
For the purposes of a s10A determination the court would then need to reach a conclusion as to whether Monica had any interest in the ‘buy to let’ property Rainbow’s End. That might depend upon whether Rainbow’s End was regarded as ‘matrimonial property’ in the sense that term is understood in the Family Court.
As a quite separate matter the Crown Court would have to consider, in the context of deciding Norman’s ‘available amount’, whether Norman had made any ‘tainted gifts’. It is possible that any interest Monica had in Rose Cottage and / or Rainbow’s End might be considered to have arisen by ‘tainted gift’ from Norman (which would mean that his ‘available amount’ would need to include the current value of the interest gifted by him & still held by Monica).
Suppose the Crown Court made a s10A determination that Norman had a 100% interest in Rainbow’s End, subject only to the interest of the bank as secured lender. If Monica & Norman were later to divorce would the Family Court be able to take account of the value of Rainbow’s End in the divorce settlement? Could it do so on the basis that, contrary to to the s10A determination in the Crown Court, Monica did have an interest in the property – whilst at the same time recognising Norman’s obligations under his confiscation order?
In such a case the Crown Court judge might consider the better course would be to decline to make any “determination” under s10A, leaving matters to be resolved if necessary in enforcement proceedings. Indeed even when legislating the government envisaged that the Crown Court would only make s10A determinations in relatively straightforward cases.
There appear to be no relevant express transitional provisions in the Serious Crime Act 2015 or the commencement order. However the practicalities are that a s10A determination cannot be made unless the “interested persons” have been identified & notified of the intention to make a “determination”.
For that reason, although the law came into effect on 1 June 2015, courts are unlikely to be making any s10A determinations just yet.
However I would suggest that all prosecutor’s s16 statements should now contain the information required by new subsection 16(6A) inserted by s2 Serious Crime Act 2015.
What will actually happen?
As yet I have detected no enthusiasm on the part of prosecutors for inviting the Crown Courts to make s10A determinations. This may be because of the extra complexity that this would bring to the proceedings involved in obtaining a confiscation order.
It remains to be seen whether, in the event, this new power is employed often in practice or left to gather dust in the statute book.
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(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)