Tag Archives: restraint

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.)

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.)

Serious Crime Act 2015 amendments to confiscation law

ER 1 sigThe Serious Crime Act 2015 has received the Royal Assent.  The new Act amends the Proceeds of Crime Act 2002 in relation to confiscation (and makes numerous other amendments to criminal law).

The changes referred to in this article came into force on 1 June 2015 (see reg 3 Serious Crime Act 2015 (Commencement No. 1) Regulations 2015) except where otherwise noted.

 

Proportionality

One relatively late amendment to the Act was to introduce into statute law, by an addition to s6(5) PoCA 2002, the proportionality requirement identified by the Supreme Court in R v Waya [2012] UKSC 51.  The words “Paragraph (b) applies only if, or to the extent that, it would not be disproportionate to require the defendant to pay the recoverable amount” have been added to that subsection.

However there is no amendment to reflect the more recent Supreme Court decision in R v Ahmad [2014] UKSC 36 concerning double recovery of jointly obtained benefit.

 

Major reforms

The major reforms fall into six areas: – restraint orders; money belonging to a person subject to a confiscation order; determination of third party interests in assets; time to pay; default sentence for non-payment and other powers to ensure compliance; and powers of investigation.

This article deals with the reforms to confiscation law applicable in England & Wales.  The Act also introduces amendments to the confiscation law operating in Scotland and Northern Ireland.

 

Restraint orders

As noted in my article “Restraint orders under PoCA 2002“, under the old law the applicant for the restraint order had to show that he had reasonable cause to believe that a benefit had been obtained from criminal conduct, s40(2).  Now s11 of the new Act amends s40(2) so that an applicant is only be required to show that there are reasonable grounds to suspect that a benefit has been obtained from criminal conduct.  That obviously is a lesser hurdle for the applicant.

But interestingly the Act does not amend s69(2) which forms the basis of the view that ordinarily a restraint order should be made only if there is genuinely a risk that assets will be dissipated.  That approach has itself militated against the early obtaining of a restraint order in some cases.

Additional changes to sections 40 to 42 of the 2002 Act in relation to restraint orders have been made in regard to: (a) the prosecution making reports to the court on the progress of a criminal investigation where a restraint order has been made on that basis; (b) the continuation of a restraint order where a conviction is quashed and a re-trial is ordered; and (c) restrictions on foreign travel by a person subject to a restraint order.  Further changes (which were included in the Policing and Crime Act 2009) relating to: (i) outstanding legal aid contributions due from the subject of a restraint order; and (ii) the retention of seized property (inserting a new section 41A), have also been brought into effect on 1 June 2015.

 

Money belonging to a person subject to a confiscation order

Amendments to s67 & s67A make it easier for a court to order that money held in a bank account (or similar account) should be paid into court where the money belongs to a person subject to a confiscation order, s14.  That applies when the account is in the name of the defendant or where the money has previously been seized by the authorities.

Previously this power could only be exercised where the money was subject to a restraint order and where the period allowed for payment under the confiscation order had elapsed.  These two conditions are omitted under the amendments.

 

Determination of third party interests in assets

Prior to the coming into effect of the new Act a person other than the defendant who claims an interest in property in which the defendant also has an interest, played no part in the confiscation proceedings until the enforcement stage (that is, after the confiscation order had been made).  However the extent of the defendant’s interest in the property (and hence also the extent of the third party’s interest in it) may have had a bearing on the defendant’s benefit (particularly where the ‘criminal lifestyle‘ assumptions have been triggered) and on his available amount.

In consequence at the enforcement stage third party claims on assets might need to be considered by the courts for the first time.  That could have the effect of delaying and, in some cases, frustrating enforcement of the confiscation order.

Under the new Act at the stage of making the confiscation order the Crown Court may make a ruling determining the defendant’s interest in property (in which a third party has, or may have, an interest) and such a determination would be conclusive in most circumstances, s10A PoCA 2002 inserted by s1 of the new Act.  Determinations would be subject to appeal to the Court of Appeal, s3.

In order to allow third party claims to be properly considered, the prosecutor must include in his s16 statement any relevant information known to him & the Crown Court, before making such a determination, would allow third parties to make representations to the court regarding their interests in the property in question.  Amendments are made to sections 16 & 18 PoCA 2002 and a new s18A is introduced by s2 of the new Act.

In the author’s view this change risks creating as many problems as it solves.  It will in many cases increase the complexity of confiscation proceedings.  It carries the risk of Crown Court judges making rulings in matters relating to issues of property law and family law in which they may have little experience.  Confiscation orders may be unjust where third parties realise too late that they ought to have been represented in confiscation proceedings in order to protect their own interests.

Whilst the government apparently anticipates that Crown Courts will exercise this power of determination only in straightforward cases, the author’s view is that an apparently straightforward case may prove to be more complex when further matters come to light after a determination has been made.

This may prove to be the most controversial of the reforms.

[UPDATE:  A more extensive article on s10A determinations may be found HERE.]

 

Time to pay

The new Act has halved the maximum time allowed for payment of a confiscation order and made explicit provision for parts of the total sum ordered to be paid to fall due earlier than other parts, s5.

Prior to 1 June 2015 a Crown Court could initially allow a defendant up to six months to pay.  A further six months, making a maximum of 12 months in all, could be allowed on a further application, s11 (as originally enacted)The new law has reduced the initial period to three months maximum, with a further three months available on application, making a maximum of six months in total.

Courts are also able to provide for earlier payment dates for part of the total sum – for example where the available amount comprises money in a bank account and an interest in a residential property the confiscation order could require payments from the bank account within, say, 14 days of the confiscation order with the balance due three months from the date of the order.

The practical effect of this proposal is to further limit the discretion of Crown Court judges to allow a defendant time to pay the confiscation order, with the result that interest and enforcement action will be triggered more quickly.

The Act substitutes a new s11 in PoCA 2002.

 

Default sentence for non-payment

The provisions applicable prior to 1 June 2015 are dealt with in my article “Confiscation – default sentence“.   The new Act amends s35 PoCA 2002, by s10 of the new Act, so the maximum default sentences will read as follows:

An amount not exceeding £10,000 6 months
An amount exceeding £10,000 but not exceeding £500,000 5 years
An amount exceeding £500,000 but not exceeding £1,000,000 7 years
An amount exceeding £1 million 14 years

Furthermore, where the confiscation order is made for an amount in excess of £10 million the usual provision allowing release at the half-way stage of a sentence will be disapplied.  This means that a person who is the subject of a confiscation order in excess of £10 million may be required to remain in prison for the full 14 years of a default sentence.  (This disapplication of early release applies where the default occurs on or after 1 June 2015 and so may apply to confiscation orders made before the new Act received the Royal Assent, s86(2).)

A fuller article considering the changes to default sentences can be found HERE.

A new power is provided for the Crown Court to make a ‘compliance order’ under s13A PoCA 2002 (subject to appeal under s13B).  These sections are inserted by s7 of the new Act.  A ‘compliance order’ is such order as the court “believes is appropriate for the purpose of ensuring that the confiscation order is effective”.

A compliance order might, for example, restrict a defendant’s ability to travel outside the UK.

 

Powers of investigation

Under previous legislation the investigation powers under Part 8, PoCA 2002 ceased to be available as soon as a confiscation order was made.   The new Act provides that these powers shall remain available in effect until the confiscation order is satisfied, s341 PoCA 2002 is amended by s38 of the new Act.  (Note – this provision came into force in England and Wales on 1 March 2016.)

 

Other changes on 1 June 2015

In addition to the changes being made to confiscation law under Part 2, Proceeds of Crime Act 2002 by the Serious Crime Act 2015, other amendments – made by the Policing & Crime Act 2009 and the Crime & Courts Act 2013 – have been brought into effect on 1 June 2015.  Further details of those changes can be found in a Home Office Circular issued on 22 May 2015.  These changes principally concern the search, seizure & forfeiture of property (including cash), applications to the Crown Court (rather than the High Court) for certain orders in relation to proceeds of crime, and payment of legal aid contributions from restrained funds.  New Codes of Practice were issued in March 2016.

 

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.)

Reform of confiscation law

Police lamp copyright David Winch 2014The government has announced proposed reforms of confiscation law which are expected to come into effect in 2015.  This article considers the most significant of those proposals which are set out in the Serious Crime Bill 2014 introduced into Parliament on 6 June 2014.

The major reforms fall into six areas: – restraint orders; money belonging to a person subject to a confiscation order; determination of third party interests in assets; time to pay; default sentence for non-payment; and powers of investigation.

This article deals with the reforms to confiscation law applicable in England & Wales.  The Bill also proposes to amend the confiscation law operating in Scotland and Northern Ireland.

 

Restraint orders

As noted in my article “Restraint orders under PoCA 2002“, under existing law the applicant for the restraint order must show that he has reasonable cause to believe that a benefit has been obtained from criminal conduct, s40(2).  Under the proposals an applicant for a restraint order would only be required to show that there were reasonable grounds to suspect that a benefit had been obtained from criminal conduct, clause 11.  That obviously is a lesser hurdle for the applicant.

But interestingly the Bill does not include any proposed amendment to s69(2) which forms the basis of the view that ordinarily a restraint order should be made only if there is genuinely a risk that assets will be dissipated.  That approach has itself militated against the early obtaining of a restraint order in some cases.

 

Money belonging to a person subject to a confiscation order

A proposed amendment to s67 will make it easier for a court to order that money held in a bank account (or similar account) should be paid into court where the money belongs to a person subject to a confiscation order, clause 14.  That will apply when the account is in the name of the defendant or where the money has previously been seized by the authorities.

Under existing law this power can only be exercised where the money is subject to a restraint order and where the period allowed for payment under the confiscation order has elapsed.  These two conditions are omitted under the proposed amendment.

 

Determination of third party interests in assets

Under existing legislation a person other than the defendant who claims an interest in property in which the defendant also has an interest, plays no part in the confiscation proceedings until the enforcement stage (that is, after the confiscation order has been made).  However the extent of the defendant’s interest in the property (and hence also the extent of the third party’s interest in it) may have a bearing on the defendant’s benefit (particularly where the ‘criminal lifestyle‘ assumptions have been triggered) and on his available amount.

In consequence at the enforcement stage third party claims on assets may need to be considered by the courts for the first time.  That can have the effect of delaying and, in some cases, frustrating enforcement of the confiscation order.

The proposal is that at the stage of making the confiscation order the Crown Court may make a ruling determining the defendant’s interest in property (in which a third party has, or may have, an interest) and that such a determination would be conclusive in most circumstances, clause 1.  Such a determination would therefore, for example, defeat any greater claim made subsequently in the family courts by a domestic partner.

In order to allow third party claims to be properly considered, under this proposal the Crown Court, before making such a determination, would allow third parties to make representations to the court regarding their interests in the property in question.

In the author’s view this proposal risks creating as many problems as it solves.  It will in many cases increase the complexity of confiscation proceedings.  It carries the risk of Crown Court judges making rulings in matters relating to issues of property law and family law in which they may have little experience.  Confiscation orders may be unjust where third parties realise too late that they ought to have been represented in confiscation proceedings in order to protect their own interests.

Whilst the government apparently anticipates that Crown Courts will exercise this power of determination only in straightforward cases, the author’s view is that an apparently straightforward case may prove to be more complex when further matters come to light after a determination has been made.

This may prove to be the most controversial of the proposed reforms.

 

Time to pay

The proposal is to halve the maximum time allowed for payment of a confiscation order and to make explicit provision for parts of the total sum ordered to be paid to fall due earlier than other parts, clause 5.

At present a Crown Court may initially allow a defendant up to six months to pay.  A further six months, making a maximum of 12 months in all, may be allowed on a further application, s11The proposal is to reduce the initial period to three months maximum, with a further three months available on application, making a maximum of six months in total.

Courts would also be able to provide for earlier payment dates for part of the total sum – for example where the available amount comprises money in a bank account and an interest in a residential property the confiscation order could require payments from the bank account within, say, 14 days of the confiscation order with the balance due three months from the date of the order.

The practical effect of this proposal is to further limit the current discretion of Crown Court judges to allow a defendant time to pay the confiscation order, with the result that interest and enforcement action will be triggered more quickly.

 

Default sentence for non-payment

The existing provisions are dealt with in my article “Confiscation – default sentence“.   The proposal, clause 10, is to amend the maximum default sentences to read as follows:

An amount not exceeding £10,000 6 months
An amount exceeding £10,000 but not exceeding £500,000 5 years
An amount exceeding £500,000 but not exceeding £1,000,000 7 years
An amount exceeding £1 million 14 years

Furthermore, it is proposed that where the confiscation order is made for an amount in excess of £10 million the usual provision allowing release at the half-way stage of a sentence will be disapplied.  This means that a person who is the subject of a confiscation order in excess of £10 million may be required to remain in prison for the full 14 years of a default sentence.  (This disapplication of early release is proposed to apply where the default occurs on or after clause 10(3) has come into force and so may apply to confiscation orders made before the Bill receives the Royal Assent, clause 68(2).)

 

Powers of investigation

At present the investigation powers under Part 8, PoCA 2002 cease to be available as soon as a confiscation order is made.  It is proposed that these powers should remain available in effect until the confiscation order is satisfied, amending s341 by clause 34 of the Bill.

 

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 – challenging the prosecutor’s s16 statement

Legal wig copyright David Winch 2014How should the defence challenge the prosecutor’s assertions concerning the defendant’s benefit and available amount?

The prosecutor’s s16 Proceeds of Crime Act 2002 statement is a key document in confiscation proceedings.  In preparing the s16 statement the prosecution will have considered the offence(s) of which the defendant has been convicted; the evidence at trial (or readied for trial where there has been a guilty plea) and other information collected during investigation of the offence; information provided by the defendant in any statement under s18 or in response to any requirement in a restraint order under s41(7); information obtained from banks and others (perhaps by way of a production order under s345); and the results of the prosecution’s own investigations – probably undertaken by an accredited financial investigator.

 

Variety

Prosecution s16 statements are prepared in a wide variety of circumstances.  No two s16 statements will be the same – though they all have some similarities.  In any event the s16 statement will need careful study.  Typically the body of the s16 statement will run to between 10 and 30 pages with supporting appendices which could run to several hundred pages, and may include spreadsheets.

The s16 statement is likely to include some background narrative which sets the confiscation proceedings into context, including a description of the court proceedings resulting in the conviction and any restraint order which has been obtained.   There may also be information about the defendant (date of birth, previous convictions, etc) and information about his known legitimate income.

The defence legal team will wish to challenge any incorrect factual assertions in that narrative – but this narrative background is not at the heart of the s16 statement.

 

Financial investigations and ‘benefit’

The s16 statement will then move on, probably providing some details about the financial investigations undertaken by the prosecution and their findings about the defendant’s financial affairs.  That leads to the prosecution assertions about the defendant’s ‘benefit’ for confiscation purposes.

In this context ‘benefit’ has a special meaning based on the statutory provisions – it does not refer to what might be the defendant’s benefit in the everyday sense of the word.

 

‘Benefit’ of the offences

The first element of the defendant’s ‘benefit’ which the s16 statement will deal with is the ‘benefit’ of the offences of which the defendant has been convicted, sometimes referred to as the ‘direct benefit’ or the ‘benefit of particular criminal conduct’.  Here the prosecution are considering what the defendant ‘obtained’ as a result of the offences of which he has been convicted in the proceedings which triggered the confiscation.

This may be very easy to establish.  If the defendant has been convicted of, say, stealing a cheque for £10,000 payable to someone else and paying it into his own bank account then the ‘benefit’ of that offence is £10,000 (possibly uplifted for changes in the Retail Prices Index since the date of the theft).

But in many cases the ‘benefit’ of the offence will be less clear cut.  For example there may be theft of cash where there are inadequate records to quantity the amount of cash stolen, or supply of controlled drugs where there are no records of the monies received for the drugs, or the defendant may have been a member of a conspiracy (meaning it will be necessary to ascertain the amount ‘obtained’ by this particular defendant in his role in that conspiracy).

In rare cases the ‘benefit’ may be based on the profit deriving from fundamentally legitimate business operations which have been tainted by criminality, as in the case of R v Sale.

The ‘benefit’ asserted by the prosecution may also include assets which need to be valued, such as controlled drugs seized at the time of the defendant’s arrest.

In other cases the ‘benefit’ may be based on a ‘pecuniary advantage’ arising from the evasion of a liability – for example evasion of income tax, VAT or duties on goods.

In a minority of cases the prosecution may not be asserting that the defendant has obtained any benefit at all from the offences of which he has been convicted.

 

Assumed ‘benefit’

If the prosecution assert that the defendant has a ‘criminal lifestyle’ then the s16 statement will also deal with additional assumed ‘benefit’ which arises under the statutory assumptions of s10 PoCA 2002.  The statutory assumptions apply to the defendant’s receipts and expenditures since the ‘relevant day’ (which is usually 6 years prior to the date on which the defendant was charged with the offences of which he has been convicted) and to any assets held by the defendant since the date of his conviction.

Typically the prosecution will have obtained bank and credit card statements for all known bank and credit card accounts held by the defendant and will have reviewed all deposits to those accounts since the ‘relevant day’.  They may also have information about the defendant’s expenditures since the ‘relevant day’ – for example as a result of examining documents seized from searches of the defendant’s premises or considering information provided by the defendant in recorded interviews or in his s18 statement.  In addition the prosecution may have obtained Land Registry records or solicitors’ conveyancing files regarding property purchases, and mortgage account statements.

These same sources of information may be the basis for assertions of assumed ‘benefit’ in respect of any assets held by the defendant after the date of his conviction.

 

‘Available amount’

Finally the prosecutor’s s16 statement will deal with the defendant’s ‘available amount’.  Again this is a term defined by statute which does not mean simply the amount which the defendant has available to meet the confiscation order.  It refers to the current market value of the defendant’s assets, less any mortgage or other liability which is secured on those assets, plus the current value of any ‘tainted gift’ which the defendant has made.

However many of the defendant’s liabilities, such as unsecured borrowings and unpaid bills, will be ignored when computing the defendant’s ‘available amount’.

 

Default sentence

The s16 statement may conclude with an indication of the range of default sentences applicable where a confiscation order remains unpaid.

 

Challenging the s16 statement

The defence will wish to scrutinise in detail the prosecution assertions in relation to both the defendant’s ‘benefit’ and his ‘available amount’.  The focus of the defence challenge to the prosecutor’s figures will depend very much on the details within the s16 statement.

In relation to the ‘benefit’ of the offences of which the defendant has been convicted the defence will wish to consider the existence of the asserted ‘benefit’; whether it has been ‘obtained’ by the defendant himself, solely or jointly; and whether it is correctly valued.

Regarding the assumed ‘benefit’ the defence will wish to consider whether the criteria for a ‘criminal lifestyle’ have been met; whether the ‘relevant day’ has been correctly identified; the existence of the asserted receipts, expenditures and assets of the defendant himself (which may involve careful consideration of bank accounts and assets held in joint names and consideration of ‘lifting the corporate veil’); any evidence of the legitimate nature of those receipts and legitimate funds used to finance those expenditures and the purchase of those assets; any overlap or double counting between the various heads of asserted ‘benefit’ including, for example, where monies have been withdrawn from one of the defendant’s bank accounts and paid in to another; and the valuation of the various items reflected in the assumed ‘benefit’.

In relation to the asserted ‘available amount’ the defence will again consider the existence of those assets; the ownership of them by the defendant himself so as to exclude any interest of third parties; the current market value of those assets; and the amount of any liabilities secured on those assets.

Particular difficulties may arise where the ‘available amount’ is said to include any ‘tainted gifts’ or ‘hidden assets’.

Ultimately the defence will also wish to consider whether the use of the statutory assumptions involves a ‘serious risk of injustice’ or the confiscation order sought by the prosecution would be disproportionate and so infringe the defendant’s human rights.

All of these matters will feed in to the drafting of a s17 statement to be signed by the defendant and filed in response to the prosecution’s s16 statement, and the defence preparation for the confiscation hearing in the Crown Court.

 

Use of a forensic accountant

A forensic accountant may be able to assist the defence in challenging a number of aspects of the s16 statement.  This is likely to be particularly important in cases involving ‘assumed benefit’ under the ‘criminal lifestyle’ assumptions.  A forensic accountant may be better placed than the solicitor to undertake detailed examination of the figures and financial documents underlying the prosecution’s s16 assertions.

The cost of a forensic accountant’s report will normally be met by criminal legal aid under prior authority arrangements.

As a first step it is advisable to ask the forensic accountant to provide a fee quotation (to be forwarded to the Legal Aid Agency with an application for prior authority).  In order to prepare his quotation the forensic accountant should ideally be provided with a copy of the body of the prosecutor’s s16 statement, an approximate page count of the appendices to that statement, a copy of the defendant’s s18 statement, any advice which may have been obtained from counsel in relation to the s16 statement, and a note of the court timetable for the submission of the defendant’s response in the form of a s17 statement.

Where the appendices to the s16 statement include spreadsheets it is usual to ask the prosecution to supply electronic copies of the Excel spreadsheets (not the PDFs) either on disc or as email attachments.

Once the prior authority has been obtained the forensic accountant’s work can get underway!

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 orders – Public Accounts Committee report

The influential House of Commons Public Accounts Committee published its report on Confiscation Orders on 21 March 2014.  The report is highly critical of the performance of the various government agencies involved in obtaining and enforcing confiscation orders and made a number of recommendations.

 

The facts

The annual cost of the confiscation regime is approximately £100m and in 2012-13 approximately £130m was recovered through confiscation orders.  In 2012-13 673,000 offenders in England & Wales were convicted of a crime but there were only 6,392 confiscation orders made.  In the same period only 1,368 restraint orders were made.  The number of restraint orders made appears to be falling.

The success rate in collecting monies from low value confiscation orders, those under £1,000, is high.  But success rates in relation to high value confiscation orders, those over £1m, is very much lower.  There is, on paper, around £1,500m of confiscation order debt which remains uncollected.  A relatively small number of confiscation orders account for the majority of that figure.  Examination of confiscation orders made since 1987 indicates that roughly 6% of the orders made accounted for nearly 60% of the value of all confiscation orders.  The authorities have identified 183 high priority confiscation cases to be actively pursued.

 

Legislative changes under consideration

The report identified a number of legislative changes which are under consideration.  These changes could:

  • ease the evidential burden on applicants for restraint orders, particularly in relation to the need to satisfy the court that there is a real risk of dissipation of assets in the absence of a restraint order;
  • oblige convicted defendants to attend confiscation hearings and permit bail provisions to apply until the confiscation hearing in relation to a convicted defendant who is not held in custody;
  • permit the authorities readily to formally appropriate, towards the satisfaction of a confiscation order, assets which they hold but which belong to the defendant;
  • increase the maximum default sentences which the court can attach to unsatisfied confiscation orders.

 

Recommendations

The Public Accounts Committee report considered an earlier report by the National Audit Office in December 2013.  The findings of these two reports understandably overlap.  The committee made a number of recommendations.

The committee concluded that not enough confiscation orders are imposed and recommended that law enforcement and prosecution agencies agree and apply a common set of criteria to ensure that they consider consistently and properly all crimes with financial gain for confiscation orders.

In relation to enforcement the committee recommended that financial investigators are brought in early in high value cases and better use is made of restraint orders.  It also recommended that action be taken by government to strengthen the sanctions regime for non-payment (in terms of default sentences and interest).

The committee also concluded that the current incentive scheme for bodies involved in confiscation needs to be revised.

 

My own view

Inevitably the confiscation proceedings involving any significant sum involve a long haul process – from the initial suspicion and investigation; through to charge, prosecution and conviction; then collection and presentation of evidence for confiscation purposes; then a further court hearing; then enforcement of the confiscation order.  It may be the case that at one or more stages during that long process there is a lack of effort & resource from the Crown which results in the overall process not being as effective as it could be.

I believe it is also the case that many of the very large confiscation orders are simply unrealistic as a consequence of the draconian nature of the legislation.  It has been suggested that of the £1,500m uncollected debt on paper only about £200m is realistically collectable. That may be so.

Nevertheless a coherent, consistent and sensible policy from the Crown on the appropriate use of restraint and confiscation in criminal cases would be a welcome innovation.

David

Restraint orders under PoCA 2002

Restraint orders can be obtained by the authorities acting under the Proceeds of Crime Act 2002 – but in what circumstances and what are the effects?  This blog article attempts to answer some of the most common questions about restraint orders.

 

What is a restraint order?

Essentially a restraint order under the Proceeds of Crime Act 2002 is an order made by a Crown Court judge, normally at the request of the police or other investigating or prosecuting authority, which effectively ‘freezes’ the assets (including bank accounts) of an individual or a company.  A single restraint order may apply to several connected individuals and / or companies.  A restraint order is typically designed to ‘freeze’ all the assets of the individual(s) and company(ies) to whom it is directed, including assets legitimately acquired and even including assets outside the UK.

The key legislation in relation to England & Wales is sections 40 – 47 PoCA 2002.

 

When can a restraint order be made?

A restraint order can be made at any time after a criminal investigation has commenced into suspected criminal conduct from which an individual or company is suspected to have benefited.  It is not necessary for the investigation to have progressed as far as the arrest of anybody, nor is it necessary that anybody has been charged with an offence.

But the applicant for the restraint order must show that he has reasonable grounds to suspect that a benefit has been obtained from criminal conduct, s40.  Ordinarily a restraint order should be made only if there is genuinely a risk that assets will be dissipated (for example being spent, hidden, given away or removed from the country) in the absence of such an order, see s69 and R v B [2008] EWCA Crim 1374.

 

How is a restraint order made?

A restraint order is normally made by a Crown Court judge on an application by the police / Crown Prosecution Office or other authority.  Before making the restraint order the judge will be provided with a witness statement (often supported by other documentary evidence) from the applicant for the order.  However the subject(s) of the order will NOT have an opportunity to challenge the making of the order at this stage and will NOT be informed of the application until after the restraint order has been made.

As a result the subject(s) of the restraint order will normally be unaware of the application until he / she / they are served with a copy of the restraint order – by which time it will already be in force.

 

Who can be the subject of a restraint order?

An individual or company may be the subject of a restraint order if he / she / it is an alleged offender who is suspected to have benefited from an offence or is a person who (though not an alleged offender) has received assets from an alleged offender (by way of what is known as a ‘tainted gift’).

It follows that a restraint order may be drawn up to name as its subjects not only the alleged offender but also, for example, his spouse.

 

What is the effect of the restraint order?

The restraint order will prevent the assets of the subject(s) being dissipated by preventing the sale or transfer of those assets and by ‘freezing’ the subject’s bank accounts.  Technically the restraint order prohibits each subject from “dealing with” his assets. The restraint order will typically list known bank accounts and assets of the subject and will contain clauses designed to ensure that the order relates to those assets and accounts and to any other assets and accounts which are not shown on the list.

There is normally a provision in the restraint order allowing the subject to draw and spend a sum of money, typically £250 per week, to meet day to day living expenses.

The applicant who obtained the restraint order will normally serve copies of it on the subject(s) of the order and send copies of it to banks, etc at which the subject(s) are believed to have accounts and to, for example, the Land Registry in relation to land and buildings owned by the subject(s).

 

Can a restraint order be challenged?

Yes.  The subject of a restraint order can apply to have the order discharged (cancelled) or amended.  The application will be heard by a Crown Court judge who will hear submissions both from the applicant for the original order and the subject(s) of that order.

Typically a subject of a restraint order will apply to have the terms of the order relaxed, for example to allow a higher level of living expenses or to allow monies to be used to pay specific expenses (such as mortgage payments) or to remove one or more of the subjects from the scope of the order.

In some circumstances it may be appropriate for a subject to apply to the court to have the order limited so as to cover only specified assets.

The decision of the Crown Court judge can be the subject of an appeal to the Court of Appeal and beyond.

Where the restraint order impacts upon a legitimate business it may be necessary to make careful arrangements in the order to allow the business to continue in operation – to pay employees’ wages and business expenditures, for example.  One option in such a situation is for the court to appoint a management receiver (such as an independent accountant or insolvency practitioner) to operate the business whilst protecting the business assets from dissipation. However this may prove expensive and the management receiver’s fees are normally met out of the assets which he is managing, so in effect the subject pays his fees.

 

What is the purpose of a restraint order?

Ultimately the purpose of a restraint order is to preserve the assets of the subject(s) so that they remain available to meet any confiscation order which the Crown Court may make after the alleged offender has been charged, tried and convicted of an offence, s69.

 

 

What else might a restraint order require?

Commonly a restraint order includes clauses requiring the subject(s) of the order to disclose further information to the authorities concerning their assets, s41(7).  This information may then be used to assist in ensuring the effectiveness of the restraint in preventing the dissipation of assets and to assist the prosecution in confiscation proceedings following the conviction of the alleged offender(s).  However the information cannot be used by the prosecution in the course of the alleged offender’s criminal trial.

A restraint order may also contain a requirement to return to the UK assets held overseas (such as monies in an overseas bank account).

 

What about paying the alleged offender’s legal fees?

Restrained assets cannot be used to meet any legal fees of the alleged offender in connection with his defence against any criminal charges arising from the investigation which formed the basis of the application for the restraint order, see s41(4) PoCA 2002.  This means that the alleged offender will have to rely on legal aid (or gifts from friends) to meet his defence costs.

 

What about payments made to lawyers before the restraint order was made?

Where a solicitor holds funds in his client account which he has received from a person who has since become subject to a restraint order then the balance standing to the credit of the client is an asset of the subject which (like his other assets) is ‘frozen’ by the restraint order.

It is permissible for the solicitor to bill work done by him up to the date of the restraint order and pay himself for that work by transfer from the client account.  But similar transfers cannot be made in respect of any subsequent legal work, see Irwin Mitchell v RCPO & Allad [2008] EWCA Crim 1741 at paragraph [40].

 

What is the effect of breaching the restraint order?

A person who breaches a restraint order may be held to be in contempt of court (this is a ‘civil’ contempt, see R v O’Brien [2014] UKSC 23, which can nevertheless result in imprisonment) or may be subject to prosecution for attempting to pervert the course of justice, see Kenny v R [2013] EWCA Crim 1 at paragraph [41].

 

When does the restraint come to an end?

A restraint order will continue in force until it is lifted by the Crown Court.  This could be on an application by the subject of the order, or where proceedings are not brought within a reasonable time as a consequence of a criminal investigation which has not resulted in anyone being charged, or on the acquittal of the alleged offender, or on the satisfaction of any confiscation order made by the Crown Court following the alleged offender’s conviction.

Even after a confiscation order has been satisfied or discharged a restraint order may continue in force & restrained assets may then be used to satisfy any outstanding legal aid contribution related to the criminal proceedings.

 

Conclusion

Anyone finding himself subject to a restraint order under PoCA 2002 should seek appropriate legal advice without delay.

David

 

[This article has been updated to reflect legal changes made with effect from 1 June 2015.]

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

Can a bankrupt individual be subject to confiscation?

One question which arises from time to time concerns the interaction of insolvency and confiscation.  If a convicted defendant individual is bankrupt can he nevertheless be subject to confiscation under Part 2 Proceeds of Crime Act 2002?  (All references to a ‘defendant’ in this article are to a defendant who has been convicted of a criminal offence.)

Common sense suggests that if a person is bankrupt he has no assets and so confiscation proceedings would be pointless.  But law and common sense do not always go hand in hand!

the confiscation legislation neatly side-steps bankruptcy

In reality the confiscation legislation neatly side-steps bankruptcy by providing, in s84(2)(d) PoCA 2002 that “references to property held by a person include references to property vested in his trustee in bankruptcy”.  What this means is that any assets of a bankrupt will form part of his ‘available amount‘ for confiscation purposes and can be subject in a ‘criminal lifestyle‘ case to the statutory assumption of s10(3) regarding property held after the date of conviction.  So these assets can be taken into account in determining the amounts reflected in the confiscation order. (However on a reconsideration of ‘available amount’ under s23 the court must take into account amounts due to creditors in a bankruptcy or liquidation.)

Section 7 prescribes that the amount which the defendant is ordered to pay will be the lower of his ‘benefit’ and his ‘available amount’.  But what about ‘preferential debts’?  A ‘preferential debt’ is taken into account by way of a reduction in the defendant’s ‘available amount’ by virtue of s9(2)(b).  But there is a common misconception that an individual’s tax liabilities are ‘preferential debts’.  The law in this area was changed, by amendment to s386 and schedule 6 Insolvency Act 1986, in 2003 so that debts due to HM Revenue & Customs ceased to be ‘preferential debts’.  So ‘preferential debts’ now arise only in respect of unpaid remuneration of employees, contributions to occupational pension schemes, and unpaid levies on coal and steel production.

It still remains the case however that an individual’s secured liabilities, such as a mortgage on his home, take precedence over confiscation (because the secured charge gives the lender an ‘interest’ in the property which the court is required to take into account by s79(3)).

the court should direct that the compensation order should be satisfied in priority

Where a court makes both a confiscation order under PoCA 2002 (which is an order that the defendant make payment to the Crown) and a compensation order under s130 Powers of Criminal Courts (Sentencing) Act 2000 (which is an order that the defendant make payment to the victim of his crime) then s13(5) and (6) provide that the court should direct that the compensation order should be satisfied in priority to the confiscation order where there are insufficient funds to satisfy both.

It should also be borne in mind that where a defendant is subject to an actual or contemplated civil claim from a victim of his crime then the court’s “duty” to make a confiscation order becomes simply a “power” to do so as a result of s6(6).

if the restraint order pre-dates the bankruptcy then the property subject to the restraint order does not fall into the bankruptcy and can be realised to pay the confiscation order

But a problem may arise for the defendant in realising the sum which he is required to pay under the confiscation order if he is bankrupt.  What then?

Well it depends upon whether there has previously been a restraint order made under PoCA 2002, or following the making of a confiscation order an enforcement receiver has been appointed under s50.  If there is a restraint order over assets, or an enforcement receiver has been appointed, and this pre-dates the bankruptcy order, then s417 provides that the property subject to the restraint order or receivership does not fall into the bankruptcy (so it can be realised to pay the confiscation order rather than the other creditors of the bankrupt defendant).  A restraint order under s41 or receivership will normally have been drafted with the intention of covering all the defendant’s assets.

On the other hand, under s418, if the defendant’s bankruptcy order is made before any restraint order or management or enforcement receivership order is made then the trustee in bankruptcy can exercise his powers to realise the defendant’s assets under his control and pay creditors in the normal way.  The defendant should ask the Crown Court to adjust his ‘available amount’ under s23 to reflect the payments to his creditors made by the trustee in bankruptcy.

So the issue is resolved on a first-come, first-served basis.

a prosecutor can return to court at any time and seek a reconsideration of the defendant’s current ‘available amount’

A bankrupt individual is likely to be discharged from bankruptcy in due course.  What is his situation then in relation to the confiscation?  Just like other defendants who are subject to confiscation he will be at risk for the remainder of his life to action under s22.  Under this section a prosecutor can return to court at any time and seek a reconsideration of the defendant’s current ‘available amount’ to include assets acquired (whether legitimately or illegitimately) since the original confiscation order was made, if it is just to do so.  In effect a confiscation order can operate as a ‘life sentence’ requiring the payment to the Crown of any amount which the defendant has, up to the figure of ‘benefit’ shown in the original confiscation order.

In summary then, a bankrupt individual can indeed be subject to confiscation proceedings.

If a restraint order under PoCA 2002 is in force, or an enforcement receiver is appointed, before any bankruptcy order, the order of priority for payment will be, in effect:

  1. Secured liabilities
  2. Preferential debts (unpaid remuneration of employees, contributions to occupational pension schemes, and unpaid levies on coal and steel production)
  3. Sums due under a compensation order
  4. Sums due under the confiscation order
  5. Unsecured and non-preferential debts (including taxes and ordinary creditors).

the defendant may apply to the court to have his ‘available amount’ reconsidered to reflect those payments

But if a bankruptcy order is made before any restraint order or enforcement receivership order under PoCA 2002 then the trustee in bankruptcy will retain control of the defendant’s assets vested in him.  Once the trustee has ascertained the likely outcome of the bankruptcy in terms of payments to creditors, the defendant may apply to the court under s23 to have his ‘available amount’ reconsidered to reflect those payments (which will normally result in a reduction in the amount he is required to pay under the confiscation order).

An insolvency practitioner who is dealing with assets of a person who has been convicted, or is suspected, of an offence from which a benefit may have been obtained should consider carefully whether he may be handling ‘criminal property’ and if so he should obtain the necessary consent under Part 7 so as to avoid committing a money laundering offence himself.

(Note: This article refers to confiscation in England and Wales under the provisions of Part 2 of PoCA, the Proceeds of Crime Act 2002.)

David