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CONFISCATION ORDERS and the PROCEEDS OF CRIME ACT 2002

CONFISCATION ORDERS and the PROCEEDS OF CRIME ACT 2002

Introduction This paper deals principally with Part 2 of the Proceeds of Crime Act 2002, that is to say, the scheme applicable within the jurisdiction of England and Wales, for making value confiscation orders in the Crown Court, following the conviction of the defendant in that jurisdiction, of any offence. Although the 2002 Act uses the expression `confiscation order' [s.6]1, in reality such an order does not empower the court to forfeit, or to confiscate, any item of property, but it does impose on the defendant an obligation to pay a sum of money [the `recoverable amount'2] equal to the value3 of the `benefit'4 from his `criminal conduct'5, or (if less) the `available amount', 6 or (as a last resort) a `nominal amount', if the available amount is nil.7 In a case where the court believes that a victim of criminal conduct has started, or intends to start, civil proceedings against the defendant, and the defendant has insufficient wealth to pay the full value of his benefit under a confiscation order, as well as an amount in damages, the court is given a discretion under section 6(6) to make a confiscation order, and to do so for an amount "as the court believes is just" [s.7(3)]. Note also s.13(5) and (6) in respect of the making of a confiscation order, and a compensation order,8 in circumstances where the court believes the defendant will have insufficient means to pay both orders. Relationship between confiscation under the PCA and Sentence There is little doubt that a confiscation order is penal in nature notwithstanding that the court applies the civil standard of proof to determine any question as to (i) whether a person has benefited from an offence or (ii) the amount to be recovered in his case, [s.6(7) PCA]. That a confiscation order is a penalty was conceded in Benjafield (21st December 2000; [2002] 2 WLR 253 HL). A confiscation order is not to be regarded as part of the sentence imposed in respect of the underlying offence [see s.13(4)], BUT: i) a confiscation order is a "sentence" for the purposes of the Criminal Appeal Act 19689; and see A-G Reference Numbers 114-116 of 2002 and Numbers 144-5 of 2002 (also known as Regina v. Glenn Michael Flowers and others) [2003] EWCA Crim 3374;

1 2 3 4 5 6 7 8 9

And see s.86(6)(a) of the Act. See section 7. see section 79, and especially section 80. section 76(4). Section 76. Section 7. Section 7. That is to say, under s.130, Powers of the Criminal Courts (Sentencing) Act 2000. See the amendment to section 50 of the 1968 Act made by s.456 of the Proceeds of Crime Act 2002, schedule 11, para.4(3) "In section 50(1) (meaning of sentence) after paragraph (c) insert ­ `(ca) a confiscation order under Part 2 of the Proceeds of Crime Act 2002; (cb) an order which varies a confiscation order made under Part 2 of the Proceeds of Crime Act 2002 if the varying order is made under section 21, 22, or 29 of that Act (but not otherwise);"

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ii) The court seems to be entitled to have regard to the `totality principle' when considering the term of imprisonment to be imposed in default of payment: Cukovic (1996) 1 CAR(S) 131, and see Walpole (19th June 1997). In Walpole, a default term was quite exceptionally reduced below the normal band, that is to say the term was reduced from 8 years' imprisonment to four years imprisonment: and see Atlan (February 20, 1997); Middlekoop (October 25, 1996). iii) Information gleaned during confiscation proceedings might be taken into account by the sentencer but not in a manner that contravened the fundamental principle that the offender is only to be sentenced for the offences in respect of which he had been convicted. Material coming to light in confiscation proceedings could be used to inform the court of the seriousness of the offence: Thompson and Smith [1997] 1 Cr. App. R.(S) 289; Harper (1989) 11 Cr. App. R.(S) 240; and see Andrews [1997] 1 Cr. App. R.(S) 279; but see Rogers [2001] EWCA 1168

Transitional Arrangements Part 2 of the Act applies in respect of any offence committed on or after the 24th March 2003: SI 2003 No.333, article 3(1).10 However, the article has to be applied so that, after the word `offence', there appears the words, "in respect of which a confiscation order is or could be sought" (see Simpson [2003] EWCA Crim 149911), and see Aslam [2004] EWCA Crim 2801, which went one step further and said that it interpreted the phrase "in respect of which a confiscation order is sought" as referring to a case "where the prosecution maintain their reliance on the count in question at the substantive hearing of the application for a confiscation order." See also, Stapleton [2008, 23rd May]. The old law applies in respect of offences committed before the 24th March 2003: see article 10, SI 2003 No.333. Transitional arrangements are the subject of two Statutory Instruments. The first is SI 2003/333. The second, SI 2003/531, amends the former by substituting a modified version of article 7 in order to remedy a defect in the original wording of that article.12

10 11 12

Presumably having regard to the decision of the E.Crt.H.R. in Welch v the United Kingdom (1995) 20 EHRR 247. Simpson was a five judge court. 7. - (1) This article applies where the court is determining under section 6(4)(a) of the Act whether the defendant has a criminal lifestyle. (2) Conduct shall not form part of a course of criminal activity under section 75(3)(a) of the Act where any of the three or more offences mentioned in section 75(3)(a) was committed before 24th March 2003. (3) Where the court is applying the rule in section 75(5) of the Act on the calculation of relevant benefit for the purposes of determining whether or not the test in section 75(2)(b) of the Act is satisfied by virtue of conduct forming part of a course of criminal activity under section 75(3)(a) of the Act, the court must not take into account benefit from conduct constituting an offence mentioned in section 75(5)(c) of the Act which was committed before 24th March 2003. (4) Conduct shall form part of a course of criminal activity under section 75(3)(b) of the Act, notwithstanding that any of the offences of which the defendant was convicted on at least two separate occasions in the period mentioned in section 75(3)(b) were committed before 24th March 2003. (5) Where the court is applying the rule in section 75(5) of the Act on the calculation of relevant benefit for the purposes of determining whether or not the test in section 75(2)(b) of the Act is satisfied by virtue of conduct

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The transitional provisions must be kept well in mind on each occasion that: (i) (ii) (iii) the court considers making a confiscation order under section 6 of the 2002 Act; the court is required to consider the `criminal lifestyle' provisions of section 75; [note article 7 of SI 2003/333 as substituted by SI 2003/531]; the defendant absconds: see s.27 and s.28; and see articles 3(2) and 3(3), SI 2003/333.

Of the various amendments to Part VI of the 1988 Act, the most important were introduced by the CJA 1993 and by the Proceeds of Crime Act 1995. The three main time-bands are as follows: (i) If the offence was committed on or after the 3/4/1989, and proceedings were instituted before the 3/2/95, Part VI of the CJA 1908 applies as originally drafted. This situation will rarely be encountered now. (ii) If proceedings were instituted after 3/2/95 [SI 1995/43] the relevant provisions are Part VI of the CJA 1988 as amended by the CJA 1993. The principal changes are (a) that the standard of proof throughout is the civil standard [s.71(7A)], and (b) determinations may be postponed [s.72A, inserted by s.28 CJA 1993]. (iii) If the offence was committed on or after 1/11/95 [SI 1995/2650] Part VI of the 1988 Act is applied as amended by the CJA 1993, and by the PCA 1995. The latter made significant changes, namely (a) placing a duty on the court to embark on confiscation proceedings in every case in which written notice was given by the prosecutor; (b) giving a power to the court to initiate confiscation proceedings (c) abolishing the minimum requirement in the sum of £10,000 (d) removing the discretion to make a confiscation order in an amount as the court considered fit. Note also the judgments of the Court of Appeal in R v Ajay Kumar Sharma [2006] EWCA 16 Crim, and Glatt [2006] EWCA Crim 605 [paras.84 and 85] regarding the effect of amending provisions to pre-existing enactments and the impact of the ECHR (if any).

The Proceeds of Crime Act as a confiscation code for the United Kingdom Part 2 applies only to England and Wales. Similar confiscation schemes apply in Scotland [Part 3] and Northern Ireland [Part 4], but differences exist ­ particularly in respect of Part 3 (Scotland). Thus, in Scotland, the court does not have power to initiate confiscation proceedings: the discretion is that of the prosecutor alone [see s.92(3)].13 The reasoning is that the prosecutor is usually in the best position to decide whether it is in the public

forming part of a course of criminal activity under section 75(3)(b) of the Act, the court may take into account benefit from conduct constituting an offence committed before 24th March 2003. (6) Where the court is applying the rule in section 75(6) of the Act on the calculation of relevant benefit for the purposes of determining whether or not the test in section 75(2)(c) of the Act is satisfied, the court must not take into account benefit from conduct constituting an offence mentioned in section 75(6)(b) of the Act which was committed before 24th March 2003.". [SI 2003/531 amending SI 2003/333]

13

Contrast with s.6(3)(b); and see Report on Confiscation and Forfeiture, SLC Report No.147.

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interest to hold confiscation proceedings. For example, proceedings may not be costeffective, or they may not be in the interests of law-enforcement. Unlike Part 2, a court in Scotland must, before making a confiscation order, take into account any representations made to it by any person whom the court thinks is likely to be affected by the order: section 92(8): see HM Advocate v McSalley 2000 SLT 1235. In England, some judges have permitted third parties to be legally represented, and to make representations, in confiscation proceedings. The legal basis for this is unclear (perhaps the Human Rights Act 1998), or the right of a court to determine its own rules of practice and procedure. Section 98 gives statutory effect to recommendations of the Scottish Law Commission that when a confiscation order has been made by a court, the prosecutor may not dispose of any right or interest held by the `relevant person' in the `family home' without the consent of the family, or without the consent of the court. The protection is subject to the court not being satisfied that the `relevant person' acquired the interest as a benefit from his criminal conduct. There is no equivalent statutory protection in Part 2 of the 2002 Act. Approach Despite the fact that a number of provisions in Part 2 resemble provisions in earlier enactments, the Proceeds of Crime Act should be viewed as a creating its own confiscation scheme, and not as a measure that merely consolidates or harmonises the Drug Trafficking Act 1994 and Part VI of the 1988 Act. To take the latter approach is likely to lead the court into serious error. The 2002 Act includes the following features: · Creating the Assets Recovery Agency [section 1]. The agency was abolished by the Serious Crime Act 2007. The functions of ARA have been transferred to other agencies ­ notably the Serious Organised Crime Agency (SOCA). · Rules relating to confiscation set out mainly as one code. · Confiscation for drug trafficking and other crimes put on a SIMILAR footing. · A confiscation order may be made to recover benefits derived from the commission of the offence(s) of which the defendant falls to be sentenced. A confiscation order may go beyond the offences before the court if the defendant has a "criminal lifestyle": section 6(4)(a). · "Criminal lifestyle" has statutory meaning: section 75. · There is one test for benefit for all offences, namely, "if he obtains property as a result of or in connection with...conduct": section 76(4) to section 76(7); and see section 80 (value of benefit). A person who obtains a pecuniary advantage is to be taken to obtain a sum of money equal to the value of the pecuniary advantage: s.76(5). Cases regarding "payments received" (in Drug Trafficking Act cases) are of some but limited assistance. Assumptions are mandatory whether offence relates to drug trafficking or not: s.10. · Determining the "amount that might be realised" (if lower than the benefit figure) is restyled "the available amount": section 7(2), section 9.

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·

· · · ·

· · · · · · · · ·

· · · ·

An amount is `available' if it is "free": section 9 and section 82 Property is "free" if it is not subject to a forfeiture order or confiscation order: section 82. A court has no discretion under POCA to leave gifts out of account (formerly this discretion existed under the Criminal Justice Act 1988 only). Time to pay is immediate, unless court gives time to pay ­ then only for up to 6 months unless extended (maximum is 1 year): section 11. Rules relating to postponement radically different from former legislation: up to 2 years ­ unless that period is extended section 14. Power for prosecutors to ask the Crown Court to revise its calculation of the `available amount' held by the defendant to satisfy a confiscation order: section 22. A right of appeal by the prosecution, to the Court of Appeal, against judge's ruling in connection with the making of a confiscation order: section 31. A right of appeal by the prosecution, to the Court of Appeal, if judge declines to make a confiscation order: section 31(2) Power of the Court of Appeal to make determinations under section 6: section 32 Power for prosecution/defence to appeal to the House of Lords at various stages: section 33 (confiscation order); s.44 (restraint orders); s.66 (receivers). House of Lords may review a decision of the Court of Appeal, and the House of Lords may make determinations under section 6 to correct errors. Power to order banks and building societies to pay money in an account, to the enforcement authority, to satisfy a confiscation order: section 67(5) Limited third party rights (not at confiscation stage it seems): contrast the position in Scotland (see section 98 re disposal of the family home [Scotland]). Immunity for Insolvency Practitioners, who unwittingly (but not negligently) interfere with restrained property: section 432(2). Money laundering offences widened: section 327 to 340 (Part 7 of the Act) but note the amendments made to some of these sections by SOCPA 2005 in connection with overseas conduct. Mens rea requirements modified for money laundering offences as to: see sections 327 to 334 noting the amendments made by SOCPA 2005. Creation of a civil recovery scheme to recover, without conviction, the proceeds of crime [Part 5 of the Act]. New rules relating to taxation (Part 6 of the Act). Legislates for improved co-operation between agencies.

The provisions most likely to be encountered during confiscation proceedings are:section 6 sections 14 and 15 section 16 section 17 section 18 section 75 section 76 making a confiscation order; postponement provisions; Statement of Information (formerly `prosecutor's statement') defendant's Response to the Statement of Information; provision of information by the defendant; meaning of `criminal lifestyle'; definition of `criminal conduct';

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section 76(4)-(6) section 10 section 9 sections 79 and 80 section 83 section 82 sections 77, 78, 81 Section 11

definition of `benefit' [and note section 8] the four statutory assumptions, and the two exceptions; definition of `available amount'. valuation of property (and benefit obtained); definition of `realisable property' definition of `free property'; tainted gifts time for payment of a confiscation order.

THREE KEY CONCEPTS These are the concepts of: (i) `criminal conduct'; (ii) `criminal lifestyle', and (iii) the definition of `benefit'. I. "Criminal Conduct" An Overview The Drug Trafficking Act 1994 was confined to recovering the proceeds of drug trafficking. Part VI of the 1988 Act empowered the Crown Court to recover benefit obtained in respect of indictable offences other than drug trafficking and certain `terrorist offences'. A magistrates' court had limited powers under the 1988 Act to recover benefit derived from offences specified in schedule 4 to that Act. The 2002 Act has removed the power of magistrates to make confiscation orders, but section 97 of the Serious Organised Crime and Police Act 2005 (SOCPA), empowers the Secretary of State to make (by order) such provision "as he considers appropriate" for or in connection with enabling confiscation orders under Part 2 of POCA, or Part 4 (Northern Ireland), to be made by a Magistrates' Court. A Magistrates' Court will not be empowered to make a confiscation order for an amount exceeding £10,000. This section is now in force but, as of May 2008, no order has been made by the Secretary of State. It is not apparent what has prompted s.97 SOCPA to appear on the statute book [incidentally, s.97 seems to enable the Secretary of State to legislate by secondary legislation ­ a trend that ought to be reversed, because matters as this ought to receive the greatest possible scrutiny in Parliament]. It is not clear whether the ceiling of £10,000 relates to the "available amount" or to the "benefit figure". If the former, then conceivably a Magistrates' Court would be empowered to embark on confiscation proceedings even if the potential benefit figure in a given case might be colossal, but the "available amount" must not exceed £10,000. Such a power is illogical, and it would make more sense for confiscation proceedings in Magistrates' Courts to be confined to cases that are relatively straightforward, and where the determination of the defendant's benefit is limited to his "particular criminal conduct" only. Accordingly, the means now exist by which the prosecution may take confiscation proceedings in the Crown Court to recover benefit, which the defendant derived from any offence.

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"Criminal conduct", the structure and language of the Proceeds of Crime Act 2002 The Proceeds of Crime Act uses a bewildering array of conduct terms scattered across Part 2. What follows is an attempt to put those terms into context, and to try to give the relevant provisions some kind of structure. Section 7(1) is indicative of the court's objective, namely, to recover under a confiscation order, "an amount equal to the defendant's benefit from the conduct concerned". Note the words "conduct concerned" ­ not `offences concerned'. Section 88(1) states that a reference to "the offence (or offences) concerned must be construed in accordance with section 6(9)". Section 6(9) states that references in Part 2, to the "offence (or offences) concerned" are references to offences mentioned in section 6(2) ­ in effect, offence(s) in respect of which the defendant has been convicted. An issue is whether there might be circumstances in which it is necessary to distinguish between "the offence...concerned" and "the conduct concerned". Section 6(4)(b) and 6(4)(c) impose an obligation on the court to decide if the defendant has benefited from "general criminal conduct" (i.e. in cases where the court finds that the defendant has a `criminal lifestyle'), or from "particular criminal conduct" (if the defendant does not have a criminal lifestyle). It is important to note that subsections 76(2) and (3) separately define "general" and "particular" criminal conduct. It will be seen that "particular criminal conduct" is limited to conduct which constitutes "the offence or offences concerned" ­ i.e. offences falling within s.6(2).14 However, "general criminal conduct" expressly includes "all his criminal conduct" whether it occurred before or after the passing of the 2002 Act. There is nothing in section 76(2) (when read in conjunction with s.76(1)) that obliges the court to limit a determination of the benefit of "general criminal conduct" to offences in respect of which the defendant has actually been convicted. It will be seen that section 76(1) does not contain a dual-criminality requirement. The subsection appears to be broad enough to include conduct performed anywhere in the world, provided the conduct would constitute an offence if it occurred in England and Wales, and irrespective as to whether the defendant was convicted of an offence concerning that conduct. If that is the intended reach of section 76(2), then it follows that "general criminal conduct" need only be proved on a balance of probabilities: see section 6(7). It follows that if the defendant has a `criminal lifestyle', the reach of 2002 Act is considerably greater (in respect of non-drug trafficking cases) than under Part VI of the 1988 Act, as amended by the PCA 1995. Under that Part, benefit is recoverable in respect of `relevant criminal conduct', namely, offences on the indictment + offences to be taken into consideration + assumed benefit. The reach of s.2(3) of the Drug Trafficking Act 1994 is more draconian than under the CJA 1988, so that benefit is recoverable if the prosecution can prove on a balance of probabilities that the defendant "at any time (whether before or after the commencement of this Act)

Noting s.6(9) and s.88(1). The offences must be committed on or after 24 March 2003 SI 2003/333, article 9.

th

14

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received any payment or other reward in connection with drug trafficking carried on by him, or another person". The 2002 Act resembles the DTA to the extent that the court is given power to recover an offender's proceeds of crime ­ if he has a `criminal lifestyle' - no matter when the `criminal conduct' (that generated the proceeds) was performed.

II. "Criminal Lifestyle" Central to Part 2 is the concept of `criminal lifestyle'. If the court embarks on confiscation proceedings, its first task is to decide whether the defendant has such a lifestyle: s.6(4)(a). `Criminal lifestyle' triggers the statutory assumptions under section 10, and it broadens the definition of `tainted gifts' [see section 77]. The Definition of `Criminal Lifestyle': s.75 Broadly stated, a defendant has a `criminal lifestyle' in three situations: i) ii) iii) the defendant is convicted in current proceedings of an offence specified in schedule 2 [s.75(2)(a)]; the `offence concerned'15 is conduct that forms part of a "course of criminal activity" [s.75(2)(b)]. The `offence concerned' was committed over a period of at least 6 months AND the defendant has benefited from that conduct.

In each case, the offence concerned [see s.6(9)] must have been committed on or after the 24th March 2003.16 Article 7, as substituted by SI 2003/531, is relevant in respect of conduct forming part of a `course of criminal activity'. (i) Schedule 2 offences A conviction of one schedule 2 offence is sufficient to constitute a `criminal lifestyle'. It is not necessary to show that the defendant benefited from the offence. The conviction must relate to an offence charged as a count on the indictment, and not an offence to be taken into consideration.

(ii) Course of Criminal Activity This means EITHER: (a) the defendant has been convicted of an offence from which he has benefited AND he has benefited from THREE other offences in respect of which he was convicted in the same proceedings: s.75(2)(b), and s.75(3)(a). th Note that all offences must have been committed on or after the 24 March 2003: SI 2003/333 as amended by SI 2003/531.

15 16

See section 88(1) and note s.6(9). SI 2003/333, article 3(1), and note article 1(1).

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Note that the defendant must be convicted of at least FOUR offences. Note that the four offences must not include an offence to be taken into consideration. Note that each offence must result in benefit to the defendant ­ even if only in the sum of £1. Note that there must be `relevant benefit'17 of at least £5000 [s.75(4)]. Note that for the purposes of relevant benefit, the court can include offences to be taken into consideration ­ s.75(5). OR

(b)

The defendant has been convicted of an offence from which he has benefited AND he was convicted on at least TWO other occasions in the period of 6 years before he was charged with the current offence: s.75(3)(b). Note that the defendant must therefore benefit from at least THREE offences.

Note that the current conviction must be for an offence committed after the 24th March 2003, BUT the two earlier convictions can pre-date the 24th March 2003 [SI 2003/333, article 7 as substituted by SI 2003/531]. Note, there must be "relevant benefit" of at least £5000, and for this purpose, the court may include the value of benefit derived from offences taken into consideration: s.75(5).

(iii) Offences committed over six months

The offence must have been committed on or after the 24th March 2003 ­ note article 1(1), SI 2003/333; and consider the cases of Ahmed (Kurshid)18 (8.2.2000, CA), Martin (also known as `Brown') [2001] EWCA 2761, Palmer [2002] EWCA Crim 2202, Clayton [2003] EWCA Crim 1209, Simpson [2003] EWCA Crim 1499, and Foggon [2003] EWCA 270, in the context of conspiracy or substantive continuing offences ­ when is the offence committed? The offence must be one from which the defendant has benefited: s.75(2)(c) The court must find `relevant benefit' of at least £5000: s.75(4). "Relevant benefit" can include offences to be taken into consideration [s.75(6)] BUT the offences must not have been committed pre 24th March 2003: see article 7(6) SI 2003/333 as substituted by SI 2003/531.

17 18

See the definition of `relevant benefit' in s.75(5) and (6) of the 2002 Act. Not to be confused with Ahmed and Qureshi [2004] EWCA Crim 2599, which is cited in R v May [2008] UKHL 28.

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III. BENEFIT Statutory Definition of "Benefit"

Section 76(4) defines benefit as:19 "A person benefits from conduct if he obtains property as a result of or in connection with the conduct". In cases where the defendant obtains a pecuniary advantage as a result of or in connection with conduct20, section 76(5) provides: "....he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage". By section 76(6)21: "References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other".

Overview

Subsections 76(4) to (6) broadly reproduce the definition of benefit for the purposes of the Criminal Justice Act 1988, but whereas s.71(4) of the 1988 Act referred to "benefits from an offence", s.76(4) of the 2002 Act refers to "benefits from conduct". The conduct in question might be offences in respect of which the defendant has been convicted (e.g. determining benefit from `particular criminal conduct', s.76(3)), or it might be conduct amounting to `criminal conduct' [s.76(1)] in respect of which the defendant has benefited, notwithstanding that the defendant has not been convicted (but forms part of the calculation of benefit from the defendant's `general criminal conduct' [s.76(2)]) Unfortunately, the 2002 Act does not attempt to clarify the definition of `benefit' in the light of case law generated by the wording of subsections 71(4) and (5), and s.102(5) of the 1988 Act. When considering the meaning of "benefit", and when assessing the value of a defendant's benefit from conduct, it is necessary to have regard to the considered opinion of the Committee of the House of Lords in trilogy of appeals known as R v May [2008] UKHL 28, CPS v Jennings [2008] UKHL 29, and R v Green [2008] UKHL 30. The aforementioned trilogy of appeals attempts to rationalize numerous cases decided under POCA, Part VI of the CJA1988 (as amended), as well as the DTA1994 and its forerunner, the DTOA 1986. However, a number of loose-ends and difficulties remain (notably, but not exclusively, in connection with cases of money laundering, e.g. problems concerning whether and to what extent a courier of cash `benefits' from his/her criminal conduct). It is necessary to read the three cases together (particularly the cases of May and Jennings).

19 20 21

See section 71(4), Criminal Justice Act 1988, for comparative purposes. See section 71(5), Criminal Justice Act 1988, for comparative purposes. see section 102(5), Criminal Justice Act 1988, and section 63(2), Drug Trafficking Act 1994, for comparative purposes.

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In R v May, the House of Lords stated six conclusions of which the sixth is perhaps the most significant (para.48(1)-(6)) [please note that the footnotes, and emphasis in italics, have been added by the author of this paper]:

"(1) The legislation is intended to deprive defendants of the benefit they have gained from relevant criminal conduct, whether or not they have retained such benefit, within the limits of their available means. It does not provide for confiscation in the sense understood by schoolchildren22 and others, but nor does it operate by way of fine.23 The benefit gained is the total value of the property or advantage obtained, not the defendant's net profit after deduction of expenses or any amounts payable to co-conspirators. (2) The court should proceed by asking the three questions posed above: (i) Has the defendant (D) benefited from relevant criminal conduct? (ii) If so, what is the value of the benefit D has so obtained? (iii) What sum is recoverable from D? Where issues of criminal life style arise the questions must be modified. These are separate questions calling for separate answers, and the questions and answers must not be elided. (3) In addressing these questions the court must first establish the facts as best it can on the material available, relying as appropriate on the statutory assumptions. In very many cases the factual findings made will be decisive. (4) In addressing the questions the court should focus very closely on the language of the statutory provision in question in the context of the statute and in the light of any statutory definition. The language used is not arcane or obscure and any judicial gloss or exegesis should be viewed with caution. Guidance should ordinarily be sought in the statutory language rather than in the proliferating case law.24 (5) In determining, under the 2002 Act, whether D has obtained property or a pecuniary advantage and, if so, the value of any property or advantage so obtained, the court should (subject to any relevant statutory definition) apply ordinary common law principles to the facts as found. The exercise of this jurisdiction involves no departure from familiar rules governing entitlement and ownership. While the answering of the third question calls for inquiry into the financial resources of D at the date of the determination, the answering of the first two questions plainly calls for a historical inquiry into past transactions. (6) D ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment or conveyance of property to someone else. He ordinarily obtains a pecuniary advantage if (among other things) he evades a liability to which he is personally subject. Mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained that property. It may be otherwise with money launderers."

There are other aspects of the trilogy of appeals in May, Jennings and Green, that should be noted:

22

23

24

Leaving aside the reference to "schoolchildren and others", the shorter Oxford English Dictionary definition of "confiscate" includes "appropriated to the use of the state, adjudged forfeit", "to appropriate property to the public treasury by way of penalty"; and "confiscation" is defined as "the action of confiscating" and, even, "robbery under legal authority". A confiscation order is a money order which, in some respects, can be enforced in the same manner as a fine. However, a confiscation order certainly does not operate as a fine (albeit that such an order is a "sentence" for the purposes of the Criminal Appeal Act 1968 and constitutes a "penalty" in ECHR terms): see para.13 in CPS v Jennings (HL). That is not to say that existing case law is to be disregarded (it is impossible to see how it could be as many of the cases necessarily explain the operation of the relevant enactment).

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1. In CPS v Jennings, the House of Lords said that the committee regards the meaning of s.71(4) CJA1988 (see s.76(4) POCA) "as in substance the same as the equivalent provisions of the drug trafficking legislation": para.13. This is significant because both the DTOA1986 and the 1994 defined "benefit" in the context of a "payment or other reward" that had been "received" by the offender. This may explain para.16 in the opinion of the House of Lords in R v May, which states:

"In R v Gokal (unreported, 7 May 1997, Buxton J) the judge had to consider the meaning of section 71(4) of the unamended 1988 Act. He held that section 71(4) requires "what can fairly be described as an obtaining by the defendant himself" and that "the obtaining of property under section 71(4) must be by the defendant personally". These statements are not incorrect, but they should not, with respect, be understood as excluding joint receipts from the operation of the section, nor cases where payment is made to a third party at the behest of the defendant." 25

Note that Mr Justice Langley, in Martens, Tuegal and Saia (April 20th 1999)26 agreed with Mr Justice Buxton (Gokal) that in normal language, a person does not obtain property which he caused to be received by someone else, and that s.71(4) CJA1988 was looking to the extent of obtaining by the defendant personally. Thus, the House of Lords appears to be saying that a defendant `obtains' property if he received it by or in connection with his offending conduct (and that the property was "obtained by him" personally, i.e. whether alone or jointly: see para.14, CPS v Jennings (HL)). In CPS v Jennings, the House of Lords did not accept as "helpful or entirely accurate" the formulation of Laws LJ (in the Court of Appeal's decision in that case)27 that all that was required is that D's acts should have contributed, to non-trivial (not de minimis) extent. Their Lordships said that "A person's acts may contribute significantly to property (as defined in the Act) being obtained without his obtaining it" (para.14). It would therefore seem to be on this basis that the House of Lords was able to say in R v May (para.26), not merely that R v Walls [2002] was correctly decided, but also that the principle in Walls applies regardless of whether the operative legislation is POCA, the CJA1988 or the DTOA/DTA:

"In several cases the court has been called upon to evaluate the benefit accruing to a defendant who had obtained a mortgage loan by making a fraudulent misstatement. In Re K (unreported, 6 July 1990, McCullough J), in the context of an order applied for under the 1988 Act to restrain the defendant from disposing of his assets in anticipation of a confiscation order, the judge rejected the defendant's submission that the benefit he had obtained was the equity of

25

26 27

In Gokal (11.3.99, CA), the Court of Appeal declined to quash a confiscation order in the sum of approximately £2.9 million. G was convicted of two counts of conspiracy to defraud, and conspiracy to account falsely. The trial judge (Buxton J, as he then was) rejected the prosecution's argument that the defendant should be regarded as having obtained £548 million from BCCI for the Gulf Group (run by G and his family). He held that "the phrase `if he obtains' in s.71(4) of the 1988 Act requires what can fairly be described as an obtaining by the defendant himself". First instance; Bristol Crown Court. [2005] EWCA Civ 746, [2006] 1 WLR 182 (Civil Division)

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redemption in the house he had bought rather than the house itself. That decision was followed by the Court of Appeal in R v Layode (unreported, 12 March 1993, per Macpherson J), another decision under the unamended 1988 Act. It must, however, be appreciated that section 71(4) called for an essentially factual enquiry: what is the value of the property the defendant obtained? If (say) a defendant applies £10,000 of tainted money as a down-payment on a £250,000 house, legitimately borrowing the remainder, it cannot plausibly be said that he has obtained the house as a result of or in connection with the commission of his offence. This was the conclusion correctly reached by the Court of Appeal in R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731. That was a case under the 1994, not the 1988, Act, but in distinguishing the earlier decisions the court relied not on the differences between the two confiscation regimes (see para 27) but on the considered reasoning of Neill LJ in the earlier Court of Appeal decision in R v Johnson [1991] 2 QB 249, which had not been cited in the earlier cases."

The implication of the above passage is that the reasoning of the courts in Re K and Layode might have been different had the case of Johnson been cited to them. But an equally credible explanation is that Re K and Layode (CJA1988), and Walls and Johnson (drug confiscation legislation), were concerned with different statutory regimes. Whatever the actual explanation might be for the different conclusions in those two sets of cases, the fact remains that Walls represents the law. 2. There can be a joint `obtaining' of property by two or more defendants (see Porter [1990] 1 WLR 1260; para.27 in R v May (HL); see also Rees, Chrastny No.2; Simpson, Banks, Patel, below, and see Sharma [2006] EWCA Crim 16), and see Allpress [2006] EWCA Crim 687, Homer [2006] EWCA Crim 1559,. 3. There can be an obtaining in equal or unequal shares (depending on the facts of a given case): see Gibbons (equal division), and Houareau (H had a 1/3rd interest in the benefit): 28 see para.33, R v May (HL).

28

"18. It seems to us that, where someone has knowingly played his part in assisting in the importation, it is open to the judge to infer that that person had a beneficial interest in the goods in question, unless there is some evidence demonstrating the contrary. That was the position here. In our judgment the judge below was entitled to make that inference. If so, the appellant was an importer of the goods and was thus one of those liable to the Revenue for the unpaid duty. It then follows that, on the authority of Smith, he derived a 'pecuniary advantage' within the meaning of section 71(5) of the 1988 Act. 19. It seems to us that the way in which the Crown as an alternative seek to put the argument today is also a sound one. It is an alternative way of putting the same point that the pecuniary advantage is derived, once there is a finding that a defendant has an interest in goods which have been obtained at a value lower than they should have been if duty had properly been paid. That is, it seems to this court, simply another way in which pecuniary advantage is derived once that finding of fact has been arrived at. 20. We agree with what was said in Olubitan, that it is a question of fact whether a defendant has derived a pecuniary advantage. It may not be enough that a defendant has been knowingly concerned in the importation, though that is clearly relevant. But in determining that question of fact, a judge is entitled to make robust inferences when those are properly open to him. Otherwise defendants, by remaining silent about the financial arrangements made between them, could frustrate the intentions of Parliament as clearly embodied in the 1988 Act. 21. The instance suggested by Mr Pearce of a defendant who merely supplied a gallon of diesel does not, in our view, give rise to difficulties. If such a defendant gives evidence that he was to be paid, say, £300 as a specific reward for his involvement, and that evidence is accepted by the court, it would not normally be open to the court to infer that he had an interest in the goods: it would be a distinct transaction. But that is not this case. The appellant gave no evidence and the judge could properly make the inference which he did." [emphasis added]

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4. Where two or more defendants obtain control of property jointly, each of them has obtained the whole of it: see para.15, R v Green [2008] UKHL 30. 5. A court must not make a confiscation order that has the effect of being jointly and severally enforceable against two or more co-defendants: Porter [1990] 12 Cr. App. R. (S) 377, and see Chrastny No.2 (1991) 12 Cr.App.R.(S.) 715. 6. But, there is no statutory power to apportion liability in confiscation between parties jointly liable: see para.46, R v May (HL). Earlier cases need to be viewed with caution: consider Afsar [2004] EWCA Crim 3010, Ripley [2005] EWCA Crim 1453, Glatt [2006] EWCA Crim 605.29 7. However, "[t]here might be circumstances in which orders for the full amount against several defendants might be disproportionate and contrary to article 1 of the First Protocol, and in such cases an apportionment approach might be adopted": para.45, R v May (HL). 8. There will be cases when it is appropriate for the court to `pierce the corporate veil'. In CPS v Jennings, the House of Lords went so far as to talk about the veil of incorporation having been "rudely torn away": para.16. Once the veil is pierced, the property in question can be regarded as the joint property of those persons who controlled the company: see para.45, R v May (HL). 9. The question whether assets legitimately acquired by the defendant after the date of the confiscation order may be included within the recoverable amount, as held by the Court of Appeal in R v Tivnan [1999] 1 Cr App R (S) 92, was not one raised in any of the appeals before the House of Lords, and "should be considered in a case where the issue arises": para.41, R v May (HL).

There are at least four major difficulties associated with the statutory definition of `benefit', and these are set out below.

(1) Benefit defined as "he obtains property" and "pecuniary advantage"30 The 2002 Act applies to offences of all descriptions. Although one instinctively associates the phrases `obtains property' and `pecuniary advantage' with similar expressions that appear in the Theft Act 1968, it is submitted that each phrase should be given a construction that has regard to the purpose of the 2002 Act, but "there must...exist a reasonable relationship of proportionality between the means employed and the aim sought to be realised...": Phillips v United Kingdom [2001] Crim.LR 817, HUDOC 5th July 2001 (see para.51 of the judgment)

29 30

The House of Lords held that, in Porter, the confiscation order should have been for £9,600 against each severally and not, as the Court of Appeal ordered, in the sum of £4,800 each: R v May (para.27). Note the words "constitutes a person's benefit from criminal conduct", and the definition of benefit in s.340(5)(7), mirror the wording in s.76(4)-(6) POCA 2002.

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The E.Crt.H.R. added that "the making of a confiscation order operates in the way of a deterrent to those considering engaging in drug trafficking, and also to deprive a person of profits received from drug trafficking and to remove the value of the proceeds from possible future use in the drugs trade".31 The Court was careful not to say that deterrence was itself an object of the legislation: deterrence is a desirable effect of the making of a confiscation order. It is submitted that the meaning of `obtains property' and `pecuniary advantage' for the purpose of Part 2, is not to be found in the Theft Acts, and that the application of subsections 76(4)-(6) [`benefit'] might need to have regard to the elements of the underlying offence of which the defendant has been convicted. It is important to note that the House of Lords, in R v May said that the court should "focus very closely on the language of the statutory provision": see para.48(4) of the judgment (referred to above). Section 15(2) of the Theft Act 1968 provides that `obtain' includes `obtaining for another or enabling another to obtain or to retain": see Archbold 2006 21-172 (for s.15 TA 1968), and consider Rees (July 19, 1990); Gokal (11.3.99, CA); Saia and others (20th April 1999), Patel (3.11.99; CA), and Foggon [2003] EWCA Crim 270. Rees, Patel and Foggon are summarized below. In Rees (July 19, 1990, Auld J., Plymouth Crown Court), D pleaded guilty to three counts of obtaining property by deception. He had been charged jointly with two others. The value of the property obtained was £90,000. Auld J held that the non-receipt of monies by the defendant and the absence of loss by the mortgage lenders were not relevant to the calculation of the benefit which the defendant had received. In Patel (3.11.99; CA) the court noted that in Gokal, G was charged with conspiracy to defraud, and therefore s.15(2) TA 1968 cannot assist in the construction of the 1988 Act where the offender is not charged with obtaining property by deception under s.15 TA 1968, or a conspiracy to do so. P was charged with such a conspiracy, and received in his hands £51,920.89. In Foggon [2003] EWCA Crim 270, F pleaded guilty to cheating the public revenue by opening what purported to a company account, but used the monies largely for his private purposes. Held: the Crown was right to say that F `obtained property' [s.71(4) of the 1988 Act] and not that F obtained a `pecuniary advantage' [s.71(5)]. In A-G Ref No.25 v Moran [2001] EWCA Crim 1770, M pleaded guilty to charges of cheating the revenue. M was a market trader who traded in his own right. There was no company and no misappropriation of money. He understated his income. Held: the judge was right to make a confiscation order for £190,000 being the amount of the underpayment of tax, plus interest, and not the whole value of the under declared profits, namely, £386,584. "It is hard to see how the balance of the profits which are the product of lawful trading can be said to represent a pecuniary advantage which has resulted from or come about in connection with the commission of an offence". In Cadman Smith [2002] 1 WLR 54, the defendant obtained a pecuniary advantage, the value of which was held to be his `benefit' notwithstanding that nothing tangible existed

Para.52.

31

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in his hands that represented that advantage; see also Bakewell [2006] EWCA Crim 2, and Rowbotham [2006] EWCA Crim 747. In Ellingham [2004] EWCA Crim 3446, E was not the organiser of the importation of the cigarettes, nor was he financier nor the end user, but he assisted others in organising freight forward into the United Kingdom and organising the freight for their original storage. E was promised £10,000 for his assistance but he only received £5,000. On the confiscation hearing E conceded a pecuniary advantage in the sum of £1,120,850 and realisable assets in the sum of £129,756, the sum in which the order was made. The Court held, following R v Smith [2002] 1 WLR 54, that the `property' in question is a sum of money equal to the value of the pecuniary advantage. Under section 74(5) CJA 1988, for the purposes of making a confiscation order, the value of the property is its value to the offender when he obtained it. E derived a pecuniary advantage by evading the duty at the moment when he imported the cigarettes. See Bakewell [2006] EWCA Crim 2, which was decided mindful of Ellingham. In Rigby [2006] EWCA Crim 1653, the Court of Appeal held that the temporary increase in the value of D's shares, did not result in D deriving a pecuniary advantage from the commission of the offence of which he was convicted. It is doubtful whether "benefit" can always be assessed merely by answering the question `whether, but for the criminal conduct, the defendant would not acquired the property in question': consider ARA v Jones [2007] EWHC 360 (QB), and see ARA v Olupitan [2008] EWCA Civ 104. However, care must be taken when considering cases decided under Part 5 POCA (civil recovery) with reference to Part 2, because Part 5 of the Act is concerned with "unlawful conduct" within the meaning of s.241 POCA (rather than "criminal conduct") and, the concept of `benefit' for the purposes of Part 5 differs32 from that which appears in Part 2. It is now clear that the expression "he obtains property" does not mean that the property must pass through the defendant's hands, but it is not always sufficient to show merely that the defendant's acts contributed to a non-trivial extent to the getting of the property": see CPS v Jennings (HL), and consider R v Newman [2008] EWCA Crim 816, Byatt [2006] EWCA Crim 904, [2006] 2 Cr App R (S) 116 (where B withdrew from the conspiracy before the robbery took place and therefore did not obtain a `benefit')33, and see Stanley [2007] EWCA Crim 2857. See also ARA v Olupitan [2008] EWCA Civ 104 and Nadarajah [2007] EWCA Crim 2688. Stolen property, that has been recovered by the police, constitutes a `benefit' in the hands of a person who unlawfully handles stolen goods, and it is immaterial that the

32

33

"A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct": s.242 POCA2002. The words "by or in return" do not feature in s.76(4)(6) POCA2002. "The prosecution did not require the issue of the time of the appellant's withdrawal from the conspiracy to be tried. That was the basis of plea that was accepted by the learned judge. When he (the appellant) withdrew, no robbery had taken place. The appellant and Young had gone at the time of the robbery; and he cannot be said to have been instrumental in obtaining the cash in any realistic way. In those circumstances, as we conclude that there was no benefit, it is unnecessary to deal with the other points raised. We therefore quash the confiscation order." [Her Honour Judge Goddard QC]

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offender "had no real benefit from his crime as the [property] was in his possession for only a few weeks": see Charlton [2006] EWCA Crim 2304. In R v Wilkes [2003] EWCA Crim 848. the Court of Appeal held, applying Cadman Smith, that the value of property obtained in a burglary or received as stolen goods constituted a benefit within section 71(4), even though the offender was arrested by the police and the property all recovered. It is clearly established that the court looks to proceeds, and not to `profit': see e.g. Neuberg [2007] EWCA Crim 1994, and see Currey (1995) Cr App R(S) 421, and Priestley [2004] EWCA Crime 2237, but see the obiter of the CA in Nwangoro [2006] EWCA Crim 3061 (para.76 re the costs of servicing a mortgage): and see the House of Lords decisions in May, Jennings, and Green. In Morphy and Morphy [2006] EWCA Crim 2698, the Court of Appeal said that one must not confuse `control' and `benefit', so that in the case (for example) of a brother keeper, it "may be a proper inference that where there is a sufficient degree of control the brothel keeper obtains the whole fee and simply pays a proportion of it to the prostitute, but it is not a necessary inference". Note that the fact that D initially obtained criminal property which he then divided up between others, does not prevent D being assessed as having obtained the whole amount: see Patel (above) and see R v Carter and others [2006] EWCA Crim. 416; and see Glatt [2006] EWCA Crim 605 [para.82]; and see Gibbons [2002] EWCA Crim 3161, [2003] Cr.App.R.(S.)34. In Causey (18.10.99, CA) the court held, in relation to money laundering offences under the 1988 Act, that "it was still fundamental to prove that there was either an economic advantage, as defined in Article 6 of the Strasbourg Convention: Laundering Offences, or `proceeds of criminal conduct', as appears from section 93(1)(c), accruing from the crime itself - in this case monetary advantage". In R v Alagobola [2004] EWCA Crim 89, [2004] 2 Cr App R (S) 48, A was convicted of money laundering under s.93A(1)(a) of the 1988 Act. £121,570 was paid into A's bank account by T. A's suspicion about the money, and therefore his criminality, did not arise until some time after the deposit of the money into his account. The judge found that the benefit to be £62,238.61 and limited the confiscation order to that sum: the bank had recovered the balance. In Scragg [2006] EWCA Crim 2916, the Court of Appeal held that where S obtained a vehicle worth £10,000 and sold it for £8,000 the benefit would be £10,000. The benefit would not be £10,000 + £8,000 = £18,000. On the other hand if the vehicle were sold not for £8,000 but for £12,000 then the benefit would be £12,000. It is respectfully submitted that the approach of the Court of Appeal is plainly correct: see also Nadarajah [2007] EWCA Crim 2688. Great care must be taken before proceeding on the basis that the benefit `obtained' by the defendant is the controlled drugs that he is proved to have dealt in. Controlled drugs obtained illicitly usually have no legitimate `market value' for the purpose of the legislation (see Hussain [2006] EWCA Crim 621, following Dore [1997] 2 Cr App R(S) 152

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and R v Ajibade [2006] EWCA Crim 368). It is inappropriate to take the street value of drugs that have been seized: see Dowell [2003] EWCA Crim 2248. It may be possible to infer that the defendant has expended money on purchasing the drug in question. If there has been such expenditure within the relevant statutory period, then this may trigger the statutory `expenditure' assumption under the DTA or POCA: see Butler (1993) 14 Cr App R (S) 537, J [2001] 1 Cr App R (S) 273; Johannes [2002] Crim LR 14), Dellaway [2001] 1 Cr.App.R.(S.) 265, and note Barnham [2005] EWCA Crim 1049. (2) Is there a `pecuniary advantage' if the offender remains liable to pay a debt? When a debt is evaded or deferred, the value of the advantage is obtained notwithstanding that the offender remains liable for the debt (e.g. to the Inland Revenue). In Dimsey and Allen [2000] 1 Cr.App.R(S)497, tax was evaded over a period of years but the appellant was able to exploit the monies not paid to the Inland Revenue. In that sense he had "benefited" from the economic advantage he had obtained. Law LJ said: "Evasion does not necessarily mean permanent escape. If the bookmaker evaded his pursuers on Monday, the fact that he is caught and made to pay up on Tuesday does not alter the fact that he evaded his obligations on Monday." In Cadman Smith [2001] 1 WLR 54; UKHL 68, CS imported cigarettes using a boat that CS purchased. He evaded duty on the cigarettes, which were forfeited. The CA held that the unpaid duty could not be said "in relation to the moneys that the appellant retained, to have been the proceeds of the offence". The HL allowed the Crown's appeal. The reasoning of the CA involves a consideration of the fate of the cigarettes, whereas it makes no difference if the property is destroyed or damaged in a fire, or is seized by customs officers. The relevant value is still the value of the property to the offender when he obtained it: see also Rowbotham [2006] EWCA Crim 747

R v Davy [2003] EWCA Crim 781: Conspiracy to obtain property by deception ­ MDMA ­ tablets seized not controlled at all. "...it is clear that the present appellant, Mr Davy, never personally came into possession of, indeed never even saw the 13,000 tablets which were seized by the police in transit and yet from which he was held to have benefited....Despite the fact that the appellant had made arrangements for the purchase and onward distribution of these tablets by others, we do not see how he can be said, in these circumstances, either to have obtained property or to have derived a pecuniary advantage within the meaning of the Act as a result of or in connection with the offence of conspiracy to obtain property by deception."

(3) "Obtained both in that connection and some other" ­ s.76(6) The reach of s.76(6) is not clear. The provision would seem to be dealing with benefit derived from activities connected to the offence ­ e.g. cheque book journalism, or a book published by the offender describing his criminal exploits: see Randle and Pottle, The Independent, 26.3.91, [1991] COD 369; see also Moran [2001] EWCA 1770.

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It is unclear whether profits that are not derived from the commission of the offence, come within section 76(6): e.g. starting capital £10,000 dishonestly obtained, but business successfully generated assets of £1 million: see Moran, ante. In Cadman Smith [2001] 1 WLR 54; UKHL 68, CS bought a boat (with monies provided by an accomplice) for the purpose of smuggling cigarettes into England. In the House of Lords, the Crown argued that CS had obtained the boat in connection with the commission of the offence. The House did not decide the point. However, see Osei (1988) 10 Cr.App.R(S) 289. See also Pattison [2007] EWCA Crim 1536 (where property received by a defendant through his criminal activity generates rental income).

(4) What is the position if the fraud taints part of the property obtained by the defendant? Suppose a company, controlled by the defendant, received a substantial capital injection derived from frauds perpetrated by him. As a result, the company was rescued from financial ruin and continued to trade, successfully and honestly. On one analysis it may be said that the company's success was built on fraud and thus the value of that success represents the benefit he obtained "in connection" with the offences he committed. However, would such a determination be consistent with the purpose of the legislation? There will often be more than one way to calculate the value of the defendant's benefit: see Danison, unreported, 11.12.97. 34 Example D bought properties worth £3 million (true value) and then pretended to sell them, at an inflated price, to fictitious individuals for £6 million (those transactions being financed by mortgages in the inflated sum). Is D's benefit £6 million, or £3 million (on the basis of the properties being repossessed)? After allowing for expenditure incurred in pursing the criminal venture, D's net profit amounted to £2½ million. Is the benefit obtained therefore only £2½ million? The decision as to where the line should be drawn (to mark the limit of the defendant's benefit) is one that must be left to the good sense of the court on the facts of each case. It is submitted that it is unlikely that a court would be criticised if, in the majority of cases, it treated the gross value of the property obtained as the benefit figure. However, in order to achieve a just and fair result, the Courts tend to look at the true benefit received by the defendant from his offending. This might be no more than the value of the tax and duty evaded,35 see Martin and White (1998) 2 Cr. App. R. 385, but the benefit figure should not be assessed on the basis of net profit: see Banks [1997] 2 Cr. App. R.(S) 110; Smith 11 Cr.App.R(S) 55, and consider Neuberg [2007] EWCA Crim 1994.

34 35

On the facts of that case, the judge made an order only for the value of the defendant's realisable assets. For a contrary view, see Mitchell, Taylor and Talbot, Confiscation and the Proceeds of Crime.

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Benefit and section 8 POCA 2002 The court must have regard to s.76(4) ­ (7), AND to section 8. The latter provision is not straightforward. It is submitted that the following propositions represent the law: (i) section 8(1) and (2), are to be applied in every confiscation inquiry under Part 2. Section 8 must not be confused with the making of statutory assumptions. (ii) Section 8(2) does little more that to state the obvious, namely, that the court should have regard to all relevant facts and matters when deciding whether the defendant has benefited from conduct and/or the value of his benefit.

(iii) Section 8(1) and (2) require the court to have regard to the defendant's financial history, and career, up to the moment the court makes determinations under Part 2 of POCA 2002; (iv) Subsections 8(3) to (8) apply only where the court has found that the defendant has a `criminal lifestyle' and a confiscation order has been made against the defendant on an earlier occasion. However, the confiscation order must have been made under a statutory scheme that empowered, or required, the court to make statutory assumptions [s.8(8)]. In such a case, the court treats the value of the benefit (determined on the previous occasion) as representing the value of the defendant's "general criminal conduct" from his criminal lifestyle at that point in his life. Accordingly, there is no need for the court to look any further back in time. (v) The benefit figure determined in respect of the earlier confiscation order is added to the value of the defendant's benefit from his `general criminal conduct' calculated from the moment the earlier order was made, LESS the amount `ordered to be paid' under the earlier order: section 8(5).36

(vi) Thus, in summary, if the defendant ("D") has a `criminal lifestyle', the steps to be followed in section 8 are: Does D have a `criminal lifestyle'? IF YES:- Determine D's benefit from his `general criminal conduct' Look at all of D's conduct and property: s.8(2). Has a Confiscation Order OF A TYPE mentioned in s.8(5) previously been made against D? - i.e. under the PCA 2002 [s.8(5)(a)] or under the old legislation [s.8(5)(b) + s.8(7)] If YES -- Was D's benefit assessed as if it was "general criminal conduct" [see s.76(2) + s.8(8)]? If YES -- Section 8(4) applies ­ Therefore, ADD benefits together, DEDUCT amount ordered to be paid under previous orders.

36

Presumably, the words "ordered to be paid" mean that it is immaterial that the amount imposed under a confiscation order remains unpaid. What is deducted is the amount ordered to be paid.

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Example D convicted in 1990. Benefit invoking the statutory assumptions = £100,000. Amount that might be realised = £10,000. Therefore confiscation order = £10,000. D convicted in 2004, and he has a `criminal lifestyle'. Benefit since 1990 = £50,000. Therefore applying section 8, benefit in 2004 = £50,000 + £100,000 - £10,000 = £140,000.

Value of property that constitute benefits · · · · Under the 2002 Act, the rules relating to the valuation of benefit differs from rules found in the DTA 1994 and Part VI of the CJA 1988. Sections 79 and 80 provide rules for the valuation of property. Section 80 specifically relates to the value of benefits obtained by the defendant ­ ie. as a result of his/her criminal conduct. The leading case is Nottinghamshire CPS v Rose [2008] EWCA Crim 239, which examined the relationship between ss.79 and 80 POCA:37 (a) The Court concluded that POCA brought together two separate confiscation regimes (drug trafficking and other criminal conduct) but which differed to some extent, in their provisions. (b) Section 79 takes effect subject to s.80. Although the linkage between ss.79 and 80 represents "a difference from the earlier provisions" the difference does not "evidence a legislative choice to follow the approach of one of the earlier regimes in preference to the other" [para.81]. (c) The reference to s.79, in s.80, takes one to the `market value' provisions of s.79(2). (d) In the ordinary way, the "market value" of property obtained by a thief or a handler, "is the amount it would have cost the defendant to obtain the property legitimately, or the economic value to the loser, rather than what the defendant could get for that property if he sold it (or, therefore, what he could get for his interest in the property if he sold that interest)" [see para.87]. (e) The focus is on "the incoming value" of the property ­ not the value of the property in his hands [para.87; and see Ascroft [2003] EWCA Crim 2365, [2004] 1 Cr App R (S) 56]. (f) The fact that stolen property has been returned to the owner is irrelevant. On that basis, there is no need to consider, (i) the nature of the defendant's interest in the property obtained, or (ii) the market value of that interest.

37

And see Confiscation Proceedings: Adieu Layode and R v K?, R. Fortson, Archbold News, Issue 8, 11th September 2007.

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(g) The court appears to say that in a case in which the statutory assumptions are relevant (`criminal lifestyle' cases) then s.79(3) POCA may have a role to play in the calculation of benefit under that Act. Section 79(3) states that if, at the time `X' holds property, "...another person holds an interest in the property its value, in relation to [`X'], is the market value of his interest at that time, ignoring any charging order under a provision listed in subsection (4)". Accordingly, if D displaces a statutory assumption in respect of property held by him by showing that the purchase price of the property came from `clean' third party sources, then the court may be required to apply the assumption only to the value of the defendant's interest in the property ­ e.g. the equity of redemption [see R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731, and R v Johnson [1991] 2 Q.B.249, and see Nottinghamshire CPS v Rose (para.90)]: and see the House of Lords decision in R v May [2008] UKHL 28, para.26. · The court aims to find the greatest value: and note Scragg [2006] EWCA Crim 2916 (above), and Nadarajah [2007] EWCA Crim 2688, which provide useful simple examples of the principles to be applied: see also Olupitan v ARA [2008] EWCA Civ 104, in the context of Part 5, POCA 2002 As stated above, the usual rule is that the court looks to the market value of property held by the person in question. However, at the time of making a confiscation order the court may:· Look to the market value of property at the time it was obtained by D adjusted to reflect the increase in the value of money (i.e. the inflationary/deflationary value of currency): section 80(2)(a). Under this provision, the court is not concerned with changes in the market value of that property. The court may look to the market value of property held by D. This seems to be the value of D's interest in the property [see s.84(2), and s.80(3)(a)], and therefore this may be the equitable value of redemption in cases where property has been purchased with the assistance of a mortgage advance: see s.79(3): consider Walls [2002] EWCA Crim 2456; Stewart [2003] EWCA Crim 265, Shah [2003] EWCA Crim 3763, Compton [2006] EWCA Crim 1075; and note Mouldon [2004] EWCA Crim 2715. See also : MacFarlane [2007] EWCA Crim 2293, and Nottinghamshire CPS v Rose [2008] EWCA Crim 239, Nadarajah [2007] EWCA Crim 2688. The court may look to the market value of property held by D that represents (directly or indirectly) the value of the property originally obtained by D ­ e.g. cash in the bank that represents the proceeds of sale of stolen property: s.80(3)(b).

·

·

·

·

Where D, for example, sells part of the stolen property, but retains the other part, the court may look to the market value of property retained by D, and the market value of property that represents the property he sold: s.80(3)(c). Note that the market value of controlled drugs unlawfully handled would (for the purposes of POCA and earlier legislation) normally be nil: see Hussain [2006] EWCA Crim 621, following Dore [1997] 2 Cr App R(S) 152 and R v Ajbade [2006] EWCA Crim 368.

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OTHER ISSUES CONCERNING CONFISCATION PROCEEDINGS I. Ordering the Defendant to Provide Information Note the terms of s.18 of POCA 2002. No reason in principle why an order cannot be made under s.18 before the prosecutor has served a Statement of Information. Note s.18(9) which provides "(9) No information given under this section which amounts to an admission by the defendant that he has benefited from criminal conduct is admissible in evidence in proceedings for an offence". The precise level of protection afforded to defendants by reason of s.18(9) has not yet been determined by an appellate court. With regards to pre-existing legislation (DTA1994/CJA1988) difficult questions might arise in respect of defence submissions that (a) disclosure of the information sought would offend the privilege against self-incrimination; (b) the defendant is entitled to immunity from prosecution. Consider In Re O [1991] 2 QB 550 Glidewell LJ at page 531 said:

"However, the purpose for which information so disclosed can properly be used must be limited to the purpose for which the power to make a restraint order is granted, namely, to ensure that the defendant's property is preserved so as to be available to satisfy any confiscation order which may be made if the defendant is convicted of the offence or offences charged. Any attempt by the prosecution to seek to use information disclosed under the compulsion of a disclosure order as evidence in the prosecution of the offences charged would, in my view, normally be an attempt to use the information for a purpose outside those for which the order was made."

However, the case of Kearns [2002] EWCA Crim 748 is also instructive:38

Following the bankruptcy adjudication the Official Receiver was appointed to administer the bankruptcy. The Official Receiver demanded to see the appellant's accounting records. Some were produced but the Official Receiver was not satisfied that he had the full picture. The allegations made against Mr Kearns were that: (i) the official receiver had required Mr Kearns to account for the loss of the sum of £22,400 from the account in the National Westminster Account that was in Mr Kearns' name; (ii) Mr Kearns had failed to do so, and had no reasonable excuse for this failure; and so (iii) he was guilty of an offence under section 354(3)(a) of the 1986 Act. The court referred to Attorney-General's Reference (No 7 of 2000) [2001] EWCA Crim 888; [2001] 2 Cr App R 286.....and noted that the Court came to the conclusion that the Saunders case (at paragraphs 68 and 69) recognised a distinction between a statement of a defendant that had been made under compulsion and the production of pre-existing documents or other evidence under compulsory powers....The Court concluded (in paragraph 59) that this distinction was valid; jurisprudentially sound and should be followed. In the Court's view legitimate objection might be made to evidence that a defendant had been forced to create by the use of compulsory powers. However if the evidence was already in existence and the only effect of the use of the compulsory powers was to bring such evidence to the attention of the court, then its production could not be so objectionable. That is because the existence and quality of such evidence are independent of any order to produce it that is

38

Kearns was considered in Brady [2004] EWCA Crim 1763 [cheating the Inland Revenue].

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made against the will of the accused person. Therefore the production of such pre-existing and "independent" evidence could not render a trial unfair and so breach Article 6 .

In Kearns, the Court said [para.53]:

(1) Article 6 is concerned with the fairness of a judicial trial where there is an "adjudication". It is not concerned with extra-judicial enquiries as such. (2) the rights to silence and not to incriminate oneself are implicit in Article 6. The rationale for the implication of those rights in criminal cases is that (a) an accused should be protected against improper compulsion by the authorities, which would militate against a fair procedure; and (b) the prosecution should prove their case against the accused without using evidence obtained through methods of coercion or oppression in defiance of the will of the accused. Otherwise the principle of the presumption of innocence (Article 6(2)) is impugned. (3) The rights to silence and not to incriminate oneself are not absolute, but can be qualified and restricted. A law which qualifies or restricts those rights is compatible with Article 6 if there is an identifiable social or economic problem that the law is intended to deal with and the qualification or restriction on the rights is proportionate to the problem under consideration. (4) There is a distinction between the compulsory production of documents or other material which had an existence independent of the will of the suspect or accused person and statements that he has had to make under compulsion. In the former case there was no infringement of the right to silence and the right not to incriminate oneself. In the latter case there could be, depending on the circumstances. (5) A law will not be likely to infringe the right to silence or not to incriminate oneself if it demands the production of information for an administrative purpose or in the course of an extra-judicial enquiry. However if the information so produced is or could be used in subsequent judicial proceedings, whether criminal or civil, then the use of the information in such proceedings could breach those rights and so make that trial unfair. (6) Whether that is the case will depend on all the circumstances of the case, but in particular (a) whether the information demanded is factual or an admission of guilt, and (b) whether the demand for the information and its subsequent use in proceedings is proportionate to the particular social or economic problem that the relevant law is intended to address.

Consider also the case of C Plc [2007] EWCA Civ 493. Information provided by a defendant pursuant to a disclosure order made in connection with restraint proceedings (pre-trial) might be admissible in confiscation proceedings: the privilege against self-incrimination is not necessarily engaged once the defendant has been convicted of the offence charged: HMCE v El Heri [2001] EWCA Civ 1782

II. Evidence In Silcock and Levin [2004] EWCA Crim 408, the Court of Appeal held that the sentencing judge was

"...right to rule that the ordinary rules of criminal evidence did not apply and that the confiscation hearing was an extension of the sentencing hearing, and was more in the nature of civil proceedings, though we prefer a description that the confiscation hearing is an extension of the sentencing hearing, and therefore criminal in nature, but that by virtue of the 1993 [Criminal Justice Act] the civil procedure is correctly adopted and applied".

In fact, "civil procedure" is hardly mirrored in confiscation proceedings. The Court did not say, for example, that the provisions of the Civil Evidence Act 1995 apply in relation to hearsay evidence.

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The Court of Appeal, in Silcock and Levin, explained the reason for its decision as follows:

"....that since the coming into force, in February 1995, of the 1993 amendments to the 1988 Act, there has been a sea change in the conduct of confiscation proceedings, which are now to be viewed, as Parliament intended through the prism of those amendments...First, the burden of proof is now the civil burden. Second, the court may make far-reaching assumptions. Third, the court may require the defendant to provide information and may draw inferences from his failure to do so. Fourth, the court may rely both on evidence at trial and on any relevant information, properly obtained both before trial and thereafter, in order to determine a defendant's benefit and the amount to be recovered. These are, and are intended to be far-reaching provisions, with the aim of separating criminals from the proceeds of their crimes. The determining judge must, of course, examine both the evidence and the information obtained judicially and with great care as to its weight. But we are in no doubt that the sentencing judge here was proceeding well within the letter and the spirit of these provisions in proceeding as he did. He was fully entitled to consider all of the material provided to him, drawing from it such inferences and making such assumptions as were proper. Moreover, it was for him thereafter to attach such weight to the material as seemed proper."

It might be said that Silcock and Levin has been overtaken by the provisions of chapter 2 to Part 11 of the CJA 2003. This is doubtful. The hearsay provisions apply to "criminal proceedings". Section 134(1) defines that phrase as "criminal proceedings in relation to which the strict rules of evidence apply". However, Silcock and Levin decides that the strict rules do not apply in connection with confiscation proceedings. In Silcock and Levin, the court imposed no limit on the "information" that might be received by a court. The weight to be attached to information is a matter for the court. But that decision of the Court of Appeal is as much a case for the defence, as it is for the prosecution. The case has attracted surprisingly little academic comment but and it has not been held to be wrongly decided by a later decision of the Court of Appeal: see Tahir [2006] EWCA Crim 792.

III. Postponements The 2002 Act provides a period of two years in which to hold confiscation proceedings [section 14]. Note that section 14 speaks of the `proceedings' being postponed, and not `determinations' (as was formerly the case under the earlier legislation). This avoids arguments that determinations must be finalised within the statutory period, or that the court is required to specify an actual date upon which the determination must take place: see Newlove [2003] EWCA Crim 819.39 To postpone confiscation proceedings for a substantially longer period might attract arguments that such delay renders the process unfair and contrary to convention rights. The opinions of the House of Lords in R v Soneji and Bullen [2005] UKHL 49, and in R v Knights [2005] UKHL 50, hopefully provide the last word on when and in what circumstances a procedural irregularity renders the making of a confiscation order invalid on the basis that it was made without jurisdiction.

The latter argument was misconceived in respect of the earlier legislation.

39

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Note that the decision in Soneji departs from Sekhon [2002] EWCA Crim 2954 on two key points: (i) Soneji decides that the consequences of a failure to comply with a statutory requirement, which is expressed in imperative form, is to be analysed by posing the question whether Parliament intended the outcome to be total invalidity, rather than deciding whether the requirement is mandatory or directory requirement [per Lord Steyn, para.15]; and (ii) that a failure to comply with a procedural requirement may represent a dissolution of a duty rather than depriving the court of jurisdiction, but which will not necessarily invalidate an order that has been made[see Lord Cullen, para. 57].

It is plain that the Court of Appeal will not lightly quash confiscation orders on the grounds of procedural irregularities: see, for example, Tahir [2006] EWCA Crim 792, Hill and others [2005] EWCA Crim 3271, Ellis [2006] EWCA Crim 1844, Compton [2006] EWCA Crim 1075. Legall [2006] EWCA Crim 796. That is not to say that the court is free to act as it pleases when managing confiscation proceedings. The legislation (whether POCA, the DTA or the CJA 1988) still requires a court to make a confiscation order (if it can) before it proceeds to sentence the defendant for the underlying offence. If the court postpones confiscation proceedings, it should postpone for a specified period (and not generally). The decision to postpone remains a judicial one: it is not a decision that ought to be made by a listing officer acting without the approval of a judge. Decisions to extend the period for making determinations on the grounds of "exceptional circumstances" are to be made judicially. Before the decision in Sekhon [2002] EWCA Crim 2954, and before the House of Lords decision in Soneji, the cases gave conflicting answers to the questions when and in what circumstances are there permissible reasons for postponing proceedings, or the circumstances that fall within the expression `exceptional circumstances' justifying postponing the proceedings outwith the permitted period: consider Lingham [2001] 1 Cr.App.R.(S)46, Miranda [2000] 2 Cr.App.R.164, Ruddick [2002] EWCA Crim 1061. The postponement provisions are now to be applied consistently with the opinions of their Lordships in Soneji [2005] UKHL 49 and Knights [2005] UKHL 50. The phrase "exceptional circumstances" is not to be too strictly construed: see Norman [2006] EWCA Crim 1769. It is submitted that Soneji does not disavow the principle that there must be a manifest decision to postpone, but the current policy is that the making of a confiscation order is more important than the fact that the decision to postpone was not as clear as it might have been, or, that the judge did not direct his/her mind to the precise section conferring the power to postpone.

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A difficult question is whether a confiscation order is valid if (a) the prosecution initiated confiscation proceedings after the defendant was sentenced, or (b) confiscation proceedings had been initiated prior to sentence, but the defendant was sentenced before the court exercised its powers to postpone those proceedings [consider Haisman [2004] 1 Cr.App.R.(S) 63. o The two aforementioned situations are obviously different in that in (a) the court would not have applied its mind at all to the question of confiscation proceedings, whereas in (b) at least some thought had been given to them. A number of practitioners have expressed the view that Ross [2001] 2 Cr.App.R.(S)484 has survived both POCA and the House of Lords decision in Soneji, and in Knights, but is that view correct? In the absence of clear judicial opinion, it is respectfully submitted that one cannot be confident that Ross has survived POCA. In Ross, the prosecution opened the facts of a drug trafficking case with a view to the judge passing sentence. At the conclusion of counsel's opening, the prosecution informed the court that there would be no confiscation proceedings. Sentence was adjourned until the following day, but just as the judge was about to sentence, counsel for the Crown said that he would be asking for an inquiry under the DTA 1994. The defence complained that expectations had been raised that there would be no enquiry, but the judge, without ruling in the matter, said "It does not affect the sentences anyway...that I am about to pass". After sentencing the defendant, the judge said to prosecuting counsel "Either the prosecution can off their own bat decide to proceed, or I independently can direct the prosecution that they serve a statement." Confiscation orders were later made, but they were quashed on appeal, on the grounds that s.2 and s.3 of the DTA 1994 lay down a mandatory sequence to be followed, and that only if the court has exercised its power to postpone, may it proceed to sentence without making determinations under the 1994 Act. This is a question of fact. The prosecution had initiated proceedings (but only just), but the court did not formally exercise its power to postpone determinations under the Act, and to proceed to sentence the defendant. o Section 2(1) of the DTA clearly requires confiscation proceedings to take place before the defendant is sentenced, unless the proceedings are postponed under s.3. Note that s.2(1) says "where the defendant appears before the Crown Court to be sentenced"; and the first five words of s.2(2) are "The court shall first determine". Section 2(4) includes the words "the court shall, before sentencing...determine...the amount to be recovered". Again, s.71(1) of Part VI of the 1988 Act states that "it shall be the duty of the court...to act as follows before sentencing...". o However, Part 2, 3 and 4 of POCA are differently constructed. Section 6 (England and Wales) [s.92 (Scot); s.156 (N.I.)], gives the court jurisdiction to make a confiscation order where a defendant "is convicted" of an offence, or committed to the Crown Court. Section 6 does not expressly impose a duty on the court to make determinations prior to sentencing the defendant, and s.14 merely states that the court "may" proceed under s.6 before it sentences the defendant. However, should the court decide to postpone under s.6, and then proceed to sentence [see s.15], it "must not" impose any fine on the defendant, or to impose an order specified in s.15(2).

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o Section 14(11) POCA 2002 states that a confiscation order must not be quashed only on the ground that there was a procedural defect in applying for, or granting, a postponement, but this does not apply if the court imposed a fine (etc) before making a confiscation order [s.14(12)]. Section 14 (12) makes it plain that confiscation orders have primacy over other financial orders that could be made against a defendant. For this reason, confiscation proceedings should precede sentence. Section 14(12) appears to contemplate that there might be circumstances in which a confiscation order might be quashed because the sentencer did not give primacy to the confiscation scheme in Part 2 [or Parts 3 or 4, as the case may be]: and consider Tahir [2006] EWCA Crim 792. o Suppose, in an aberrant moment, the prosecution forgot to ask the court to proceed under s.6 of POCA until after the defendant had been sentenced. Would a confiscation order made in those circumstances be valid? It is submitted that in this extreme case, the answer might be in the negative. There would have been no compliance with POCA at all, in that proceedings had not been initiated at the proper time, and the court therefore could not exercise its powers under s.14 of POCA [or the equivalent sections in Parts 3 and 4 of POCA]. However, consider Tahir [2006] EWCA Crim 792. If the court passes sentence, and then postpones confiscation proceedings (or even if the court adjourns all or part of a sentence), it is essential for the judge to state fully his reasons for doing so, and to make it clear what sentence or sentences he will consider at the adjourned hearing: Timothy Jones [2003] EWCA Crim 1631.40

IV. Making Statutory Assumptions

The assumptions appear in section 10 of the Act. The assumptions are engaged only if the court finds that the defendant has a `criminal lifestyle' as defined by section 75 [and see the opening words of section 10(1)] Unlike section 72AA(3) and (4) of Part VI of the 1988 Act, the court must make the assumptions if section 10 is engaged. Note that the wording of section 10 of the Proceeds of Crime Act differs from that employed in section 72AA(4)(a)(i) to (4)(c). Thus, note the words "obtained by him" rather than "received by him"; and "as a result of his...conduct", rather than "in connection with the commission of offences..." In R v Lazarus [2004] EWCA Crim 2297, L pleaded guilty to supplying cocaine over a sixmonth period. He had entered a written basis of plea to that effect and the Crown had accepted it. In subsequent confiscation proceedings it was shown that over the six year period described by s.4(3)(a)(ii) DTA 1994, some £51,000 passed through the defendant's bank account, of which only some £ 11,591 related to the six month period covered by the charge and thus by the basis of plea. L argued that there would be a

The making of a compensation order will be unlawful if it amounts to a variation of the original sentence beyond 28 days (by virtue of s.155 PCC(S)A 2000), and see Menocal (1979) 69 Cr.App.R 148, 1980 AC 598; Dorrien [2001] Cr App R 477; and consider Tuegal (2000) 2 Cr App R 361.

40

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serious risk of injustice if the statutory assumption was made in respect of money deposited otherwise than in the six month period. Hughes J (as he then was) said:

"A confiscation order is not limited to the proceeds of the offence which is charged on the indictment. The effect of the Act is that any conviction for a relevant drug trafficking offence opens the confiscation inquiry into property which has passed through the defendants' hands, not simply during the period of offence but for six years prior to the commencement of proceedings. It is then for the defendant to show on the balance of probabilities that such property was not the proceeds of crime or drug trafficking as the case may be. It is also for the court to keep a careful eye on whether there is a serious risk of injustice if the statutory assumption is made. This obligation of the court is a critical part of the scheme of the Act and is essential if injustice is to be avoided: see R v Benjafield [2002] 2 Cr App R(S) 71 but what the scheme of the Drugs Trafficking Act makes clear is that such risk of injustice does not and cannot arise simply because the assets in question were unrelated to the charge on the indictment. The confiscation scheme is subject to rules quite different to those which govern the laying of charges upon an indictment."

The First Assumption: "10(2) The first assumption is that any property transferred to the defendant at any time after the relevant day41 was obtained by him(a) as a result of his general criminal conduct, and (b) at the earliest time he appears to have held it." This assumption embraces property that the defendant "held" in the relevant six-year period but which he no longer holds. Note that a defendant holds property if he has any interest in it [s.84(2)(b)].

The Second Assumption: "10(3) The second assumption is that any property held by the defendant at any time after the date of conviction was obtained by him(a) as a result of his general criminal conduct, and (b) at the earliest time he appears to have held it. The assumption is triggered solely by the fact that the defendant held the property at the relevant time ­ that is to say, he held "any" interest in the property [s.84(2)]. The value of his benefit is the value of his interest in it [s.80].

- The assumption is not limited to property obtained in the six period

relevant to the making of the first and third assumptions: see Brett, The Times, October 13, 1997,42 and see Bentham and Clark (1998) and Chrastny No.2 [1991] 1 WLR 1385, at p. 1392.

41 42

Usually the first day of the period of six years ending with the day when proceedings for the offence were started against the defendant [s.10(8) and (9)] th Judgment delivered in the Court of Appeal on the 20 June 1997.

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The Third Assumption: "10(4) The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct." The practical effect of the expenditure assumption is (in most cases) that all of the defendant's expenditure incurred by him after the "relevant day will be assumed to be "met from property obtained by him as a result of his general criminal conduct" [s.10(4)]. Note that the sum expended is treated as evidence of property that the defendant must have obtained at some earlier time, and which is assumed to have been obtained as a result of his general criminal conduct. Clearly, the parties to the proceedings must be careful to ensure that there is no double counting of receipts and expenditure.43

The Fourth Assumption: "10(5) The fourth assumption is that, for the purpose of valuing any property obtained (or assumed to have been obtained) by the defendant, he obtained it free of any other interests in it."

V. Rebutting the Assumptions

Section 10(6) re-enacts the statutory exceptions found in Part VI of the 1988 Act (and indeed in the Drug Trafficking Act 1994). "Shown to be Incorrect": there has been some debate as to whether the defendant shoulders the burden of displacing a statutory assumption. In Dickens [1990] 2 All ER 626, Lord Lane CJ said `if after the matter has been fully heard the defendant shows on the balance of probabilities that in respect of each item of property and expenditure the assumptions are in his case incorrect, they can no longer be relied on as evidence that that item of property...was part of the defendant's proceeds..." [p.629j]. Lord Sutherland in HM Advocate v McLean 1993 SCCR 917, gave judgment in similar terms in connection with the Scottish legislation as it then existed. However, this issue might need to be reconsidered because (i) the judgments were based on the making of assumptions at a time when the statute gave the court discretion as to whether an assumption should be made,44 and (ii) placing the burden on the defendant to displace

43

44

This paragraph was amended on the 29 January 2009 to read consistently with this author's earlier work: see th "Misuse of Drugs: Offences, Confiscation and Money Laundering" (5 ed, Sweet & Maxwell) para.13-108. In Donnelly v HM Advocate 1999 JC 276 (judgment of Lord Coulsfield), the following interesting passage appears: "One thing which can be said, however, is that it is clear that the discretion to make the assumptions is closely linked, in the statute, to the question whether the assumptions have been shown to be incorrect. That is a matter about which the court has to make a judgment, on the evidence before it, and the wording of the provision clearly shows that what is required is evidence that the assumptions should not be made rather than evidence that they should. The accused person is required to show that the money in question was not received as a result of drugs trafficking. There may be situations in which the accused can go some way towards proving that the money in question was received from legitimate sources but may be unable to prove the amounts legitimately received to the last penny. In that situation there will remain a certain sum to which the exception in section 3(2) does not apply and in respect of which the court could therefore make the statutory assumptions. Considering the position as a whole, the court might, in the exercise of its discretion, decide that it should not make the assumptions in respect of any of the money. That is one example, at least, of a situation in which

th

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the assumption (and on a balance of probabilities) is arguable unfair, and (iii) the language of section 10(6) is neutral as to where the burden lies. It is submitted that the burden need not be placed on shoulders of any party to the proceedings. The relevant fact is that the assumption is shown to be incorrect. Who revealed that fact is immaterial. A confiscation hearing is primarily a process of accountability, not of culpability: see also HM Advocate v McSalley 2000 SLT 1235. For an example of a case in which the CA heard evidence and made a finding that a statutory assumption had been displaced, see Hesketh [2006] EWCA Crim 2596. "Serious risk of injustice": In Delaney and Hanrahan (unreported, 14.5.99, CA), the Court remarked (obiter) that s.72AA(5)(c) of the Criminal Justice Act 1988 may have been enacted to protect a defendant from errors of double counting.45 Note also Danison v United Kingdom (E.Crt.H.R, 7th September 1999). For other cases under this heading see Thorley (28th July 2000), DePrince [2004] EWCA Crim 524, Wenn [2002] EWCA Crim 1467, and Adjebade [2006] EWCA Crim 368. The assumption does not exist to avoid personal or domestic hardship: see Jones and others [2006] EWCA Crim 2061 and Dore [1997] 2 Cr App R(S) 152 and Ahmed and Qureshi [2005] 1 WLR 122.

VI. Determining the "Available Amount" Subject to one exception [s.6(6)] the court is required to recover under a confiscation order the value of the benefit, or the "available amount", or a "nominal amount" if the available amount is nil ­ whichever is the less [s.7]. The effect of section 7 is that the court should determine the `available amount' in every case: and see Jones and others [2006] EWCA Crim 2061. The burden is on the defendant to prove that the "available amount" is less than the value of the benefit: see Barwick (13th October 2000; [2001] Crim LR 52; cf. Kataryna (17th July 2000)). There are instances where the court has concluded that the defendant has `hidden assets'. In some cases, this may mean no more than the defendant has failed to discharge the burden of proof on him to show that the `available amount' is less than the value of his benefit: see for example, Barnham [2005] EWCA Crim 1049. The Court of Appeal is likely to give judgment as to whether the principle in Barwick (burden on defendant) is HRA compliant. This is based (in part) on a passage in Phillips v United Kingdom (5th July 2001), in which the E.Crt.H.R. said:

"Whilst the Court considers that an issue relating to the fairness of the procedure might arise in circumstances where the amount of a confiscation order was based on the value of assumed hidden assets, this was far from being the case as regards the present applicant."

discretion can be exercised. discretion without content."

45

Accordingly, it cannot be said that the view which we have taken leaves the

It is respectfully submitted that this is view is too narrow. It is unlikely that the exemption applies to social injustice: see, however, the Performance and Innovation Unit Report "Recovering the Proceeds of Crime" (June 2000)

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The court is entitled to have regard to all the circumstances of the case ­ including the defendant's failure (or reluctance) to explain the whereabouts of his assets, or his failure to provide a satisfactory explanation for the `apparent' loss of his assets. It is important to ascertain the "available amount" for several reasons: i) Section 7 requires the court to recover from the defendant either the value of the benefit, or the value of the `available amount', or a `nominal amount' ­ whichever is the less; By virtue of s.7(3) and s.6(6) the court is given the power (but not the duty) to make a confiscation order in such amount "as the court believes is just", if a victim of the defendant's conduct has instituted, or intends to institute, civil proceedings against the defendant. The court can perform this task effectively if it calculates the amount capable of being recovered under a confiscation order, and the amount likely to be available to satisfy an order for the payment of damages in a civil action. The court must take account of the value of a confiscation order before imposing any fine on the offender, or making an order under s.143 PCC(S)A 2000 (or s.27 MDA 1971) [s.13, PCA]; The court is empowered by s.13 to make a confiscation order and a compensation order against the defendant and to direct that any shortfall in the payment of a compensation order be met out of the amount recovered under a confiscation order [s.13(5) and (6)].

ii)

iii)

iv)

Do not confuse "realisable property" [s.83] , "available amount" [s.9], and "free property [s.82]" "Realisable property" and "the available amount" are not the same (see Dickens (1990) 91 Cr. App. R. 164 ­ a case that illustrates the distinction between `realisable property' and what used to be called `the amount that might be realised' - see p.172). It cannot be over emphasised that it is important to adhere closely to the wording of the PCA (particularly judges, when giving reasons) in order to avoid confusion.46

(a) Meaning of "Realisable Property" [s.83] "Realisable property" is crucial to the satisfaction of a confiscation order at the enforcement stage, as well as being crucial to the making of restraint orders, and the appointment of management or enforcement receivers. The definition of "realisable property" is very broad. It means (a) "any free property held by the defendant" [s.83(a)] and (b) "any free property held by the recipient of a tainted gift." [s.83(b)]; and see Wallace Duncan Smith [1996] 2 Cr. App. R.1.

46

See Jeevan (unreported, 21.5.98) where it is submitted the court may have fallen into error for this reason.

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"Realisable property" represents a pool of assets some, or all, of which a receiver may sell to satisfy a confiscation order (and to recover the value of a tainted gift) but of course it does not follow that the third party loses the value of his or her interest in the property, and it does not mean that all of the property will necessarily be realised to satisfy a confiscation order. The defendant holds property if he holds any interest in it: s.84(2). However, property that is not assignable might not be "realisable property": see Adams v CPS [2004] EWHC 2739 (Admin); and see now Cornfield [2006] EWCA Crim 2909. Pension funds: In Cornfield [2006] EWCA Crim 2909, the case concerned the amount of the confiscation order deriving from a pension, namely, £30,476. The Court said:

"Pension funds are tightly controlled by legislation, no doubt both as a matter of social policy and because they attract favourable tax treatment. This pension is under a scheme that is approved by the Inland Revenue under Chapter IV Part XIV of the Income and Corporation Taxes Act 1988. It is therefore not capable of assignment or surrender (see section 634(6) of that Act) and does not vest in a trustee in bankruptcy (see section 11(1) of the Welfare Reform and Pensions Act 1999). There is guidance on the administration of these schemes in an advice document entitled `Personal Pension Schemes Guidance Notes' IR76 (2000). The right to an annuity cannot be surrendered or assigned, nor can the right to a lump sum. The scheme member has an unfettered right to choose whether to take a limited part of his benefit as a lump sum, but he may take it all as an annuity.".... ..."In our judgment, market value in section 74(4) of the 1988 Act has to be viewed in the context that it is seeking to define "realisable property"; and in the context of legislation, draconian certainly, but whose purpose is to confiscate that which a defendant is able to realise. It must be realisable in some real way. Although it could extend to a contingent beneficial interest under a will (see the decision of Walbrook v Glasgow [1994] 15 Cr App R (S) 873), it does not, in our judgment, extend to the putative possible future receipt of a lump sum pension payment which could not be used as security for a loan; which, if it were paid, would go to the trustee in bankruptcy; and when the real possibility of the appellant borrowing money with reference to it was zero. On that analysis, the pension payment, its value or any value with reference to the possibility of a lump sum payment, was not part of the amount that might be realised at the time the order was made against the appellant."

Controlled drugs will usually not be realisable property: see Hussain [2006] EWCA Crim 621, and Thacker (above). Whether property has been gifted and is realisable property may be a difficult question of fact: see CPS v Malik [2003] EWHC 660 (Admin); see also Saleem (HHJ Atherton, Manchester Crown Court). Money held in a joint account may be realisable: see In the Matter of G [2001] EWHC Admin 606.

"Tainted Gift" By section 77(2), if a defendant has a `criminal lifestyle' then a gift is tainted if:

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"...it was made by the defendant at any time after the relevant day";

and by s.77(3):

"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."

By section 77(5), if the defendant does NOT have a `criminal lifestyle', a gift is tainted:

"(5) A gift is tainted if it was made by the defendant at any time after(a) the date on which the offence concerned was committed, or (b) if his particular criminal conduct consists of two or more offences and they were committed on different dates, the date of the earliest."

Thus, (i) a voluntary payment by the defendant to another, or (ii) a payment by the defendant towards the purchase of property vested in the name of another alone, or in the joint names of the defendant and a third party, may involve a "tainted gift" [see s.77], or (iii) a contribution to the purchase price of property might create a resulting trust in favour of the defendant (in which case he has not made a gift, but the property forms part of his realisable property): see Westdeutsche Landesbank v Islington B.C. [1996] AC 669; and see Dyer v. Dyer (1788) 2 Cox Eq Cas 92. See also the case of Stannard [2005] EWCA Crim 217. A defendant can make a gift in a number of ways. Section 78(1) puts one situation beyond doubt: "if the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer, he is to be treated as making a gift". Note that as the law presently stands, the value of a tainted gift is part of the `available amount' even if the donee has disposed of the gift itself: see Dickens, and see Wallace Duncan Smith [1996] 2 Cr. App. R. 1. To demonstrate the breadth of the meaning of "realisable property", consider two examples: i) X has a 10% interest in a house owned in the names of X and Y. The entire house is potentially realisable ­ not just the 10% interest in the property. ii) A gifts a car to B. B then sells the car and spends the proceeds on a world cruise. However, B owns other property worth £200,000. All of that property is realisable property ­ not just the value of the gift. The value of the gift is relevant to the calculation of the "available amount".

The point to note is that realisable property is identified by the fact that the defendant has an interest in the property, or by the fact that he has made a relevant gift to a person who holds property. NOTE: that realisable property can include property that was lawfully acquired either by the defendant or by the recipient of a gift.

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In cases where the Customs and Excise have played a role in the investigation of the offence before the court, it is common for that agency to forfeit property seized from the defendant that represents the instrumentalities of crime (notwithstanding that the defendant had not then been convicted of an offence) [consider Cadman Smith]. Unfortunately, it sometimes happens, that during confiscation proceedings, the defendant is wholly unaware that the property has in fact been forfeited. Forfeited property should of course be excluded from the valuation of the defendant's "free property", "realisable property" and, consequently, the "available amount": see Blower (unreported, 19.6.97, CA). However, if D has other assets, D cannot seek to reduce the value of a confiscation order by offsetting the value of an instrumentality of crime forfeited under a different enactment.

(b) Meaning of "Free Property" This is defined by s.82:

"Property is free unless an order is in force in respect of it under any of these provisions(a) section 27 of the Misuse of Drugs Act 1971 (c. 38) (forfeiture orders); (b) Article 11 of the Criminal Justice (Northern Ireland) Order 1994 (S.I. 1994/2795 (N.I. 15)) (deprivation orders); (c) Part 2 of the Proceeds of Crime (Scotland) Act 1995 (c. 43) (forfeiture of property used in crime); (d) section 143 of the Sentencing Act (deprivation orders); (e) section 23 or 111 of the Terrorism Act 2000 (c. 11) (forfeiture orders); (f) section 246, 266, 295(2) or 298(2) of this Act."

(c) Meaning of the "available amount" [s.9] `Available amount' is defined as:

(1) For the purposes of deciding the recoverable amount, the available amount is the aggregate of(a) the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and (b) the total of the values (at that time) of all tainted gifts.

Note the definition of `property held': section 84(2). Note that a contingent interest under a will may be part of the defendant's `free' and `realisable' property: Walbrook and Glasgow 15 Cr.App.R(S) 783; but note Cornfield [2006] EWCA Crim 2909 above. For the definition of a `tainted gift' see (a) above. Whereas "realisable property" represents a pool of property that can be sold, e.g. by a receiver, the "available amount" is an assessment of the value of the defendant's wealth as the 2002 Act defines it [see s.9]. Note also the definition of `free property' [s.82] The calculation of the "available amount" is as follows: i) Look at the "free property held only by the defendant. Focus only on the defendant's property at this stage.

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ii)

Assess the value of the defendant's interest in property. If the defendant owns property, in which nobody else enjoys an interest, the value is the market value [s.79(2)]. If there are third party interests in the property, the court should assess the value of the defendant's beneficial interest [s.79(3)]. Courts will often make a deduction for costs likely to be incurred in selling the property.47 Unlike Part VI of the 1988 Act, the 2002 Act does not make express provision for the deduction of the value of any incumbrance in respect of the defendant's beneficial interest. Presumably, this is because making such a deduction is a necessary step when calculating the market value of the defendant's interest. Thus, deduct the value of any secure incumbrance on the defendant's beneficial interest in property. It is doubtful that an unsecured loan can be properly deducted.48 If the incumbrance is a sham (and the court is satisfied about that) then its apparent value will be left out of account. Similarly, if the incumbrance cannot, or will not, be enforced, the court is not obliged to consider it: Harvey (31.7.98, CA) ­ see below.

iii)

iv) v)

We now have the value of the "free property" held by the defendant. Deduct "obligations having priority" [s.9(1)]. These are few in number and the expression is defined in s.9(2). Debts that remain owing by the defendant as a result of holding property with a negative equity, do not have priority over the amount to be recovered under a confiscation order: see Ghadami [1998] 1 Cr. App. R.(S) 42; [1997] Crim. L.R. 606. A loan is not an `obligation having priority': see McQueen [2001] EWCA Crim 2460. Legal costs do not constitute an `obligation having priority': Martins and White (1988) 2 Cr.App.R(S)385.

vi)

Add the value of tainted gifts (note Dickens [1990] 2 QB 102; and see Wallace Duncan Smith [1996] 2 Cr. App. R. 1; and see Liverpool Magistrates Court, ex.p. Ansen [1998] 1 All E.R. 692, at p.701; and note Gokal [2001] EWCA Civ 368). The court no longer has discretion in relation to gifts as it did under s.74A(10) of the Criminal Justice Act 1988.

Further issues concerning the value of the `available amount' There will be cases when it is necessary to quantify, and to value, the extent of a defendant's beneficial interest in the property. Depending on the nature of the relationship between the parties (e.g. husband/wife; father/child; business partner, stranger) the issues involved may be complex: see Norris (June 28, 2001, HL); and see the leading case of Stack v Dowden [2007] UKHL 17. Where property is held in joint names, the court should start with the prima facie position as to where the beneficial interests lie and then to go on to find whether there are tainted gifts which ought then to increase the value of the `available amount': see

See Cramer 13 Cr.App.R(S) 390. It is difficult to see how an unsecured loan can affect the market value of the defendant's interest.

47 48

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Buckman [1997] 1 Cr. App.R.(S) 325; see Robson (1991) 92 Cr.App.R.2 (a DTOA decision but a useful illustration of the approach to be taken under the PCA 2002), and see Stack v Dowden [2007] UKHL 17. It is important to pay careful attention of the decision of the House of Lords in Stack v Dowden [2007] UKHL 17 in which a considerable number of cases including Midland Bank v. Cooke [1995] 4 All E.R.562, Pettitt v. Pettitt [1970] AC 777, Gissing v. Gissing [1971] AC 886, were reviewed. The case gives invaluable guidance on how, and in what circumstances, beneficial interests are to established and quantified. Thus, Lord Walker said: "[33] In the ordinary domestic case where there are joint legal owners there will be a heavy burden in establishing to the court's satisfaction that an intention to keep a sort of balance-sheet of contributions actually existed, or should be inferred, or imputed to the parties. The presumption will be that equity follows the law. In such cases the court should not readily embark on the sort of detailed examination of the parties' relationship and finances that was attempted (with limited success) in this case." Per Baroness Hale: "[56] Just as the starting point where there is sole legal ownership is sole beneficial ownership, the starting point where there is joint legal ownership is joint beneficial ownership. The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership. So in sole ownership cases it is upon the non-owner to show that he has any interest at all. In joint ownership cases, it is upon the joint owner who claims to have other than a joint beneficial interest." "[58]...at least in the domestic consumer context, a conveyance into joint names indicates both legal and beneficial joint tenancy, unless and until the contrary is proved." "[68] The burden will therefore be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way." "[69] In law, `context is everything' and the domestic context is very different from the commercial world. Each case will turn on its own facts. Many more factors than financial contributions may be relevant to divining the parties' true intentions. These include: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in their joint names; the reasons why (if it be the case) the survivor was authorised to give a receipt for the capital moneys; the purpose for which the home was acquired; the nature of the parties' relationship; whether they had children for whom they both had responsibility to provide a home; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses......cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual."

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See also the important contribution made by Lord Neuberger in his opinion in Stack v Dowden. It may be necessary to distinguish between a resulting and a constructive trust: see Robson (1991) 92 Cr. App. R. 1 (Eves v. Eves [1975] 1 WLR 1338, considered) A decision of importance is Gibson v HMRC [2008] EWCA Civ 645 (Court of Appeal (Civil Division)). Proceedings were taken in the High Court to enforce a confiscation order that had been made against Mr G. Mrs G (the appellant), was joined to enable her to contend, as she did, that she was the beneficial owner of 50% of the equity in the matrimonial home. Mr G, from at least 1993, had proceeds of crime on a huge scale. The home appears to have been purchased before the period 1993 and 1998, during which period, large cash sums were paid into accounts from which mortgage payments and payments under the endowment policies were made. The Deputy High Court Judge (after referring to Stack v Dowden [2007] UKHL 17) ruled that Mrs G was the beneficial owner of 50% of the equity in the property. The prosecution did not challenge that finding on the appeal. The key question was whether public policy or the Drug Trafficking Act 1994 (under which the confiscation order was made) made any difference and, if so, what difference? The judge found that Mrs G knew that money used to pay the mortgage was not legitimately earned. The difficulty that the prosecution faced was that Mrs G's 50% interest was established and it was hers without any court order in her favour. The prosecution had to establish a public policy jurisdiction entitling the court to confiscate her assets, when she was not convicted; when no confiscation order has been made against her under the 1994 Act or otherwise; and when there is no statutory confiscatory provision in the 1994 Act or otherwise on which the prosecution can rely. The prosecution needed to persuade the court that there is some free standing public policy jurisdiction to support their case and in this regard, the court held that the prosecution had failed to establish that jurisdiction. Lord Justice May said: "There is thus, in my judgment, no identifiable power in the court, supported by a public policy which in general I acknowledge, to supplement presently existing statutory provisions to achieve what the prosecution want to achieve in violation of Mrs Gibson's rights under Article 1 of Protocol 1 of the European Convention on Human Rights. Although, in the language in that Article, the result contended for might be in the public interest, it would not be subject to conditions provided for by the law. I decline to invent such conditions judicially." It remains to be seen whether this case is taken on appeal to the House of Lords. It is tentatively submitted that an important fact in this case might be that the property was purchased before Mr G was shown to have received the proceeds of crime. Stack v Dowden did not consider issues relating to legal and beneficial interests in the context of confiscation proceedings, or the use of the proceeds of crime to service a mortgage.

Deducting the value of any incumbrance on the defendant's interest in property This is part of the valuation of `free' and `realisable' property: s.79. Example 1 D is convicted of a conspiracy to defraud. The value of D's benefit is £600,000. He owns a house worth £500,000 in his sole name but he claims that the house is

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subject to a "loan" of £400,000 secured by a charge on the house. The evidence establishes, on a balance of probabilities, that the so-called `loan' is a sham and a device (a) to conceal the fact that the purchase money came from the proceeds of his crime and (b) to retain the benefit by misleading the court into believing that the incumbrance was genuine. No deduction need be made to the value of the defendant's `free property'. Example 2- (taken from the facts in Harvey (1999) 1 Cr. App. R(S) 354). The judge assesses D's benefit to the value of £600,000. His realisable property is a house valued at £432,500 (allowing for the costs of sale). D claims that the house is subject to a legal charge in respect of a so-called `mortgage loan' for £395,000 towards the purchase price of the house. The judge concludes that there was no real intention to enforce the loan and therefore the money advanced to D was a gift. The Court of Appeal held that the judge was correct in her determinations and that she was not bound to make a deduction in respect of the loan for the reasons she gave. If the asserted "incumbrance" is a sham, the lender does not intend to enforce a loan, or the agreement cannot be enforced, the court is not obliged to make any deduction in respect of that item. Note possible application of the "presumption of exoneration": Posener (16th January, 2001). Where the market value is lower than the amount owing on a mortgage (negative equity), the difference cannot be deducted from the value of the "available amount": Ghadami [1998] 1 Cr. App. R.(S) 42; [1997] Crim. L.R. 606.

Position where a victim intends to bring civil proceedings Where there is an identifiable victim who has, or who intends, to initiate civil proceedings against the defendant in respect of loss, injury, or damage, the court is not obliged to make a confiscation order but it is empowered to do so in such amount as the court believes is just: s.7(3). Of course, a victim may decide to initiate civil proceedings long after the date a confiscation order was made against the defendant. It seems that in such a case, it is open to the defendant to apply for leave to appeal to the Court of Appeal (Criminal Division) - albeit out of time - against the making of the confiscation order and that Court may quash or vary a confiscation order to take account of the value of the civil judgement: Sorelli (25.5.99, C.A.).

Ordering Compensation to a victim and Making a Confiscation Order Even if the court determines that the defendant has not benefited from relevant criminal conduct, it may go on to make a compensation order to a named victim under s.130 of the Powers of Criminal Courts (Sentencing) Act 2000.

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The court may make a compensation order and a confiscation order if the defendant has sufficient assets to pay both orders: see s.13(5) and (6). Bear in mind that section 71(1) of the 1988 Act, before it was amended by the Proceeds of Crime Act 1995, gave the court discretion as to the amount to be recovered under a confiscation order.49 See the cases of Brazil (12.1.1995); Williams [2001] 1 Cr.App.R(S) 500, Mitchell [2001] 2 Cr.App.R.(S) 141; Jannaway [2003] EWCA 459. See also Bartaby [2007] EWCA Crim 2350, and Nield [2007] EWCA Crim 993. In Jannaway, the court thought that the judge may, after taking account of the interests of victims, also have regard to the effect of the order on the defendant (even under the amended 1988 Act).50 Mitchell [2001] 2 CAR (S) 141 was a case under the 1988 Act as amended in 1995. The appellants, husband and wife, had defrauded the wife's employers, who were caterers at Lords Cricket Ground, and the husband had thereafter set fire to the caterers' premises at Lords to try to conceal the fraud. The joint benefits received totalled £67,439,60, and the damage by arson exceeded £60,000. The husband's assets totalled £60,874.76 (including £50,000 for his half share in the matrimonial home), while his wife's were simply her £50,000 half share in the home. Although the judge was informed that the caterers intended to pursue a civil claim, counsel at trial positively invited the judge to make confiscation orders in sums of £33,719 each, which the judge did. The Court reiterated, citing Brazil, that there is "no objection" to making both a confiscation and a compensation order when there are assets sufficient to cover both (p.145). However, it should not do so, if the result would be to prejudice a victim's claim to recover in full for loss suffered. The Court considered making orders under s.72(7) with a view to aiding the caterers to recover their loss, but the caterers had already obtained charging orders and did not seek this. In these circumstances, the confiscation orders were set aside in their entirety and the Court substituted compensation orders in the sums of £33,719 each. Williams [2001] 1 CAR (S) 500. The appellant had by fraud obtained payments for works which were either never carried out or grossly overvalued. The question argued on appeal was whether the judge ought to have made confiscation and compensation orders in identical sums when both represent the same loss. Brazil was cited, but not (so it would appear) Layode or Rees. Turner J giving the judgment in Williams, rejected the argument that to make both orders was analogous to imposing a fine. It was, he said at p.504, clear from the provisions of s.72 that the court should consider the question of confiscation before it proceeded to compensation, so as to ensure that the offender did not profit. There was "nothing within the Act itself to indicate that the expropriatory provisions of section 72 should be diminished in any way by the independent civil rights of the losers concerned". Where the defendant has insufficient means to pay both the amount that could be recovered under a confiscation order and a compensation order, the court may direct

See s.16(5) Proceeds of Crime Act 1995. With respect, it is doubtful that this observation is correct given that Part VI of the 1988 as amended gives no discretion as to the amount recoverable under a confiscation order, except in relation to gifts and victims who have initiated legal proceedings (or are likely to do so). Discretion under the 2002 Act has been reduced further ­ i.e. in relation to gifts.

49 50

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that any shortfall in the amount needed to satisfy a compensation order may be met out of the amount recoverable under the confiscation order: see s.13(6). Example: D's benefit from fraud is £½ million. The amount that might be realised is assessed at £200,000 and a confiscation order is made in that sum. A compensation order is made in the sum of £60,000. The court directs under s.13(6) that so much of the compensation as will not be recoverable because of the insufficiency of the defendant's means, shall be paid out of any sums recovered under the confiscation order. For problems associated with the making of a compensation order and a confiscation order where the effect of the orders would be the enforced sale of the matrimonial home, see below.

Is it open to the court NOT to make a confiscation order if the only realisable asset is the defendant's matrimonial home? There is only one situation that gives the court a power (rather than a duty) to recover benefits under a confiscation order, and that concerns the position of a victim who has commenced civil proceedings against the defendant (or intends to do so): s.71(1C). Accordingly, it is difficult to see how the court can (as a matter of discretion) leave the matrimonial home out of account. See: Judge and Woodridge (1992) 13 Cr. App. R.(S) 685 Crutchley and Tonks (1994) 15 Cr. App. R.(S) 637 Lee (1996) 1 Cr. App. R.(S) 135; [1995] Crim. L.R. 960 Gregory The Times, 31.10.95 (judgment, October 19, 1995) Preston [1990] Crim. L.R. 528 ­ the same case is reported (1990) 12 Cr. App. R.(S) 93 in the name "Keston". R v Taigel [1998] 1 Cr App R(S) 328 Farrell [2003] EWCA Crim 3889 Ahmed and Qureshi [2004] EWCA Crim 2599 Goodenough [2004] EWCA Crim 2260 Greet [2005] EWCA Crim 205 Suppose D has made a gift of his interest in the matrimonial home to his spouse. The court no longer retains discretion to leave out of account gifts caught by the Act.51 A difficult sentencing problem arises if the effect of making a compensation order and a confiscation order would be to enforce the sale of the matrimonial home. It is well established that the courts are discouraged from making compensation orders if the defendant will be forced to sell the matrimonial home ­ especially if the consequence is that the defendant's family will be made homeless: see Hackett 10 Cr. App. R.(S) 388; Holah 11 Cr. App. R. (S) 282.

51

[See Bartlett, (unreported, 4.7.97) where a point was taken as to whether the sentencer exercised his discretion correctly in relation to a gift; and see Lee (1996) 1 Cr. App. R(S) 135; [1995] Crim. L.R.960]

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It is open to the court under the PCA to make a compensation order and a confiscation order, but there is authority for the proposition that the court is not bound to include the value of the defendant's interest in the matrimonial home if his means are insufficient to satisfy both orders: Taigel [1998] 1 Cr. App. R (S) 328.

Impose the term of imprisonment in default of payment The date of commencement of the defendant's default sentence for non payment of a confiscation order is the day on which he is released from custody: R. v. City of London Justices, ex.p. Chapman, (1998) 162 J.P. 359; The Times, March 17, 1998. Stipulate time to pay etc. ­ s.11 It is desirable that the court should specify a date for the payment of a confiscation order: see R. v. City of London Justices, ex.p. Chapman, The Times, March 17, 1998. Note that section 11 of the 2002 Act gives the court limited power to allow the defendant time to pay a confiscation order. The maximum period is 6 months. The defendant can apply within that period for further time to pay, but he must show exceptional circumstances, and the extended period must be no more than 12 months from the date the confiscation order was made. Note that there is no provision in the Act for the payment of a confiscation order by instalments, and serving a term of imprisonment in default of payment will not extinguish the debt. Note that there is early release available in connection with terms of imprisonment imposed in default of payment of a confiscation order: see s.258 CJA 2003.

Rudi Fortson 25 Bedford Row London. WC1R 4HD Visiting Professor of Law, Queen Mary, University of London. [email protected]

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