The Proceeds of Crime Act legislation is the most commonly used confiscation law. It is often described as draconian. Interestingly, the legislative background demonstrates that it was deliberately drafted to clamp down hard on the what was then seen as a loophole in the law.
This client guide has been prepared in response to numerous queries from our criminal defence clients who have approached us having been dissatisfied with the advice that they have received from other sources when they have been prosecuted for cannabis cultivation offences.
Unlike many other lawyers practising in this area, we always instruct forensic experts to comment on the conclusions relied on by the Prosecution when presenting their case to the court.
Anecdotal evidence suggests that there has been an significant increase recently in the number of applications recently made under Section 22 of POCA 2002.
This provision allows the Crown to apply to the court for a reconsideration of a defendant’s available amount after the confiscation order has been made.
Many recent clients have fallen foul of these provisions. In one case, Client A, a defendant who had served his default sentence having been made subject to a confiscation order in excess of £1 million had recently found himself subject to a potential Section 22 Application.
Based on testimony from lawyers of other defendants, and drawing on the frequently-cited Human Rights Watch report of August this year, Sahota expressed concern that the trial of Morsi, as well as others, did not meet international standards for fairness.
According to Sahota, the delegation met with a variety of persons, including detainees' relatives, the families of the deceased, students, lawyers, trade unionists, politicians, and also some government officials.
"We heard disturbing accounts of indiscriminate arrests, torture in detention, the targeting of student and political activists – evidence of a deliberate strategy to deny political detainees the basic rudiments of due process."
Roger Sahota was invited to attend a Human Rights Mission to Egypt from the 11-15 October 2014. The delegation was organised by the International Coalition for Freedom and Rights (ICFR). Roger wrote about the trip for the Society of Asian Lawyers Blog. The trip attracted a great deal of media attention in Cairo and took place with the knowledge and permission of the Egyptian Ministry of Interior's Human Rights Department. For the SAL blog Roger wrote;
"As part of a 11 strong delegation I was invited to attend a human rights monitoring mission in Egypt between the 11th to 15th October 2014. The 11 strong delegation of independent lawyers, journalists and human rights activists was organised by the International Coalition for Freedom and Rights (“ICFR”). Our purpose was to observe the trial of Dr. Morsi and to investigate allegations of recent human rights violations.
The delegation heard evidence from lawyers, journalists, politicians, doctors, trade unionists, adult and child detainees and the families and friends of people killed or detained by the authorities following the election of a military dominated government in 2013. We also met representatives of the new military dominated government in Egypt since what has been described as a “military coup” took place on the 30 June 2013.
A common thread that emerged from the witnesses we spoke to is of the targeting of political opponents of the current regime. Those arrested who were identified as political detainees were not subject to the normal provisions of the Egyptian criminal code.
We heard many accounts of political detainees were often kept in custody for months without being produced before a court and denied access to lawyers or sight of the case against them.
Defence lawyers who also specialised in representing student protestors or anti-Government figures complained that they were often arrested and imprisoned for simply trying to perform their professional duties.
Unfortunately we were denied access to any Egyptian courts or prisons so were unable to verify these allegations. We did meet with the Egyptian Minister of Prisons who denied that any detainees were tortured or mistreated in their custody.
Based on the evidence we did hear, corroborated by the findings of a recent Human Rights Watch Egypt Country Report, it has been suggested that the delegation call on the Law Society and other national Bar Associations to consider making representations to the relevant Egyptian authorities concerning reports of the harassment, arbitrary arrest and detention of lawyers and human rights defenders for simply carrying out their professional duties and/or because of their political beliefs and religious affiliations."
Further details on the delegations work can be obtained from the ICFR website.
Global Investigations Review is a magazine which focuses on white-collar crime. A feature in their October edition concerned the the SFO reportedly serving Section 2 notices under the Criminal Justice Act 1987 on several former Barclays directors. Roger Sahota in London said the SFO uses section 2 to over-ride professional confidentiality obligations.
“They’re routinely used in serious fraud investigations, largely when financial services or other professionals have a duty of confidence. It forces [them] the targets to disclose evidence, which they couldn’t otherwise do without client permission. Section 2 acts as the legal trigger which lets them release information.”
Roger Sahota's guide for solicitors who are made subject to a police raid features in the Law Society Gazette's "Practice Points" section. The article follows Roger's recent instruction in a highprofile judicial review of a search warrant before the QBD.
Roger Sahota and his co-aurthor Rupert Bowers of Doughty Street acted in the case of F; and Rupert Bowers in S and in AB. Read the article here or below.
As law enforcement agencies appear to be increasingly willing to conduct searches of solicitor offices where legal professional privilege (LPP) material may be present, every practitioner should understand their basic rights and the safeguards that apply.
Lawyers will face a dilemma when confronted with a police officer bearing a search warrant to enter offices where confidential material is present. Rule 4 of the SRA Code of Conduct requires practitioners to keep all information concerning the affairs of clients and former clients confidential ‘except where disclosure is required or permitted by law’, or the client or former client consents.
However, deciding when ‘disclosure is required by law’ is not straightforward. Although solicitors have no choice but to co-operate with the authorities at the point the warrant is executed, as rule 5 mandates compliance with a court order, subsequently a judicial review challenge may be justified.
In our experience, warrants for the search and seizure of LPP material are frequently vulnerable to legal challenge. In a number of recent decisions of the Divisional Court, search warrants have been quashed because on their face they reach to LPP material or other material that may not be seized. Many other cases have settled before any substantive hearing.
Below are practical steps solicitors should consider in the event of a police raid, and the procedures that should be contemplated when drafting a practice crisis management plan.
SRA Guidance and PACE 1984
Rule 4 sets out the duties of a solicitor when handling confidential client material. Not all client communications will meet the definition of LPP. Rule 4 stipulates that LPP material can only be disclosed in certain circumstances. No search warrant may authorise the seizure of material subject to LPP, but documents created in furtherance of crime will be covered by the crime exemption to privilege and may be seized (see section 10 of the Police and Criminal Evidence Act 1984 (PACE)). There is often dispute over what material is covered by privilege.
Excluded material as defined in section 11 of PACE (for example, medical reports often found in litigation files) also cannot be seized. ‘Special procedure material’ as defined in section 14(2) of PACE (broadly, anything held in confidence in the course of a trade or profession that is not LPP or excluded material) may be taken only if the warrant has been obtained from a Crown court judge under section 9 and schedule 1 of PACE, rather than the more common section 8 process before the magistrates’ court.
Execution of the search
The officer conducting the search is obliged to identify themselves and provide a copy of the warrant to the occupier. Law Society guidance recommends that practitioners carefully scrutinise the terms and scope of the warrant to ascertain the statutory power to which it relates, the date of issue, the location specified, who may enter the premises, what material is covered and if LPP material is sought. Any concerns as to the validity of the warrant should be recorded and brought to the officers attention.
Practitioners may wish to ask the police to wait while they instruct external lawyers, though they have no right to delay a search.
Where the search of a solicitor’s premises (or any premises where LPP or excluded material may be present) is envisaged, the investigators should be accompanied by independent counsel, normally a barrister in private practice unconnected to the investigation. Counsel’s remit is limited (see the guidance issued by the Bar Council). Counsel cannot advise on any wider issues such as the scope of the warrant, its lawfulness or whether any given item comes within it. Interestingly, the guidance from the Bar Council only relates to LPP material and so there is no guidance as to whether independent counsel can sift out excluded material or, if the warrant was obtained under section 8 of PACE, special procedure material.
Procedures should be adopted to minimise the risk that privileged material is seen or seized by an investigator or lawyer associated with the authorities. The methodology chosen should ensure that when the officers locate a file or group of documents that may fall within the terms of the warrant, it should be inspected by counsel for a decision as to whether any of the documents attract LPP. Counsel can only provide his opinion as to whether an item should or should not be inspected on grounds it is privileged; the final decision lies with the investigating agency. If there is doubt, the material may be seized, and bagged and sealed, for later consideration if privilege is asserted.
During the search a senior member of the practice should be identified as the point of contact for staff and police. Staff or external advisers should shadow the investigators and keep a full note of their conduct and the items taken, and ensure they do not examine material or enter parts of the premises not mentioned in the warrant. Before leaving the premises a list of all items seized should be obtained. Be wary of videos or photographs taken of the search. Currently the law is uncertain as to whether this is permissible.
Powers exist under sections 50-51 of the Criminal Justice and Police Act 2001 for the police to remove from the premises potentially privileged material, or irrelevant material, which may not be separated from material that may be seized because of how it is stored or its volume (computers and hard drives are obvious receptacles of such ‘mixed’ material). A notice should be left with the occupier if either of these powers has been used, listing the items taken and their rights to challenge the seizure and attend an initial examination of the material taken.
Challenging the warrant
Immediate steps should be taken to contact a suitably qualified legal adviser. An application to the court may be necessary to stop the authorities from inspecting any of the items seized before the warrant can be reviewed. Appropriate steps to ensure any reputational damage is minimised should be considered. Advice on whether to file a suspicious activity report and how to manage your relationship with the client will be essential.
Deciding if a search warrant is lawful or has been properly executed in this technical area will require specialist advice. The decisions in recent cases – such as R (Rawlinson and Hunter) v CCC and SFO  1 WLR 1634; R (on the application of S) v Chief Constable of the British Transport Police  1 WLR 1647; R (on the application of AB) v Huddersfield Magistrates’ Court  EWHC 1089 (Admin); and most recently R (on the application of F) v Blackfriars Crown Court  EWHC 1541 (Admin) – illustrate the problems the authorities face when raiding lawyer premises. This is a complex and challenging area of law and the investigating agencies have frequently shown little understanding of the correct procedures to follow.
Lord Hoffman famously described LPP as ‘a fundamental human right long established in the common law. It is a necessary corollary of the right of any person to obtain skilled legal advice about the law.’ Solicitors would be well advised to be vigilant in upholding and protecting it.
Roger Sahota and Rupert Bowers QC of Doughty Street acted in the case of F; and Rupert Bowers in S and in AB
Roger Sahota attended the inaugural International Fraud and Asset Recovery Conference organised by Carmelite Chambers. The conference was addressed by a number of leading experts in the field of international economic crime and money laundering from across the world.
Roger Sahota was invited to speak at a conference of International Advocacy Trainers organised by the Nottingham Trent Law School. Roger joined a panel of international lawyers including David Josse QC and Dan Arshank to speak about his experience as an advocate practicising before the international tribunals and the core skills needed to succed in this forum.
The two day conference attracted a host of high profile lawyers and on Friday evening was addressed by legal columnist Joshua Rozenberg.
Roger Sahota has been instructed in a groundbreaking high profile historical domestic war crimes investigation conducted by S015. Further details to follow.
Roger Sahota is the only Solicitor Advocate to have conducted a war crimes trial in the Hague and has unparalled expertise as a Solicitor in the area.
Roger now specialises in fraud, financial crime and serious crime.
BSB Fraud Partner Roger Sahota has been instructed in one of the country's largest mortgage fraud investigations. The police claim more than 70 victims were defrauded by a rogue mortgage broker.
Roger Sahota has been appointed to the committee of the Society of Asian Lawyers.
The President of SAL, Jo Sidhu QC, said when welcoming the new committee members,
“The AGM elections demonstrated SAL’s renewed commitment to its role as the leading democratic organisation in the UK representing minority lawyers.
I am completely confident that my fellow elected committee members will each bring a unique contribution to SAL’s mission."
Roger Sahota was instructed as Solicitor and Junior Counsel in the latest of a string of cases where the Administrative Court has quashed warrants granted to the police to conduct searches of solicitors premises. In R. (on the application of F) v Blackfriars Crown Court, Divisional Court, 15 April 2014, the Admin Court upheld an application by the claimants to quash a warrant on the grounds it unlawfully authorised the seizure of LPP and excluded material stored on hard drives and digital media that may not have been of relevance or of substantial value to the police investigation.
The Court rejected arguments from the Metropolitan Police that the offending words on the warrant could be severed – the warrant was the invalidated by the defect.
Roger Sahota appeared as solicitor and junior counsel (a rare combination for the Admin Court) and was led by Rupert Bowers QC of Doughty Street Chambers.
This is the fourth reported case Roger Sahota has featured in as Counsel since his return to domestic practice from the international Hague tribunals.
Under Regulation 73.1 of the Regulations of the International Criminal Court, the Registrar of the Court maintains a roster of Counsel included in the List of Counsel, who are available at any time to represent any person before the Court, or to represent the interests of the defence.
Suitable candidates must have requisite experience and expertise in international criminal law.
Roger Sahota was appointed to the list of Counsel authorised to practise before the ICC on the 25th March 2014.
On the 5th February 2014 I chaired an interesting discussion with Iain Morley QC on the Special Tribunal for the Lebanon. Iain was a former prosecutor at the STL responsible for drafting the Indictment in the prosecution of Ayaash and Others. Iain had some surprisingly critical and very controversial views on the decision to proceed with trials in absentia of a number of co-accused alleged to have been responsible for the murder of the Lebanese President Rafik Hariri in Lebanon in 2005.
A podcast of the event is available here.
Facing withering criticism from the Chair of the House of Commons Public Accounts Committee, a Senior Ministry of Justice official issued an ominous warning last week, writes Roger Sahota.
Mark Sedwill, answering questions from Chair Margaret Hodge MP, said that Government Ministers were considering changing the law to allow courts to impose even longer prison sentences in the face of criticism that the enforcement record of the authorities in recovering Confiscation Orders had been an abject failure.
Mr. Sedwill did not provide any further details of the Government’s proposals.
Mr. Sedwill’s also claimed that the yardstick of the success of the confiscation regime should not be the revenue raised – an estimated £133m in 2011-12 against a cost to the taxpayer of £100m – but in the effect it had in deterring criminals from further offending.
At present those that default on Confiscation Orders can face prison sentences of up to ten years in addition to any penalty for the offence they are convicted of. They are still liable to pay the sum owed once they serve the default sentence, with interest charged at 8% per annum.
As discussed elsewhere in this blog, there is little evidence that the threat of a lengthy prison sentence either acts as a deterrent or is effective in persuading offenders to cough up and pay the amounts they owe. In fact, only 2% of offenders paid in full once a default sentence was imposed according to the National Audit Office Report published on the 17th December 2013.
The original article can be found at www.confiscationorder.com
Roger Sahota writes for Progress Online on 27 June 2012 With the coalition facing growing criticism for it’s failure to get to grips with city crime, Labour’s policy review on Tackling Serious Fraud and White Collar Crime, announced last week, makes welcome reading.
In the past few years the United Kingdom has unfortunately cemented an international reputation as the weakest link in the global fight against corporate crime. This is partly due to the weakness of the Serious Fraud Office as a prosecutor and investigator of fraud but also to the government’s refusal to consider much needed changes to the law on fraud and sentencing policy.
The introduction of Deferred Prosecution Agreements (DPA’s) in April of this year has been the coalition’s main anti-fraud initiative. It is hoped that DPA’s will encourage companies to pre-empt a prosecution by self-reporting wrongdoing or bribery before settling a type of plea bargain on agreed terms. This would include signing a statement outlining their conduct, paying a substantial fine, making reparation to victims and implementing compliance procedures.
But many fraud lawyers believe that DPA’s are likely to be a damp squib if introduced in isolation without other reforms. Corporations have little reason to fear weak and poorly resourced prosecution and investigative agencies and so have no incentive to self-report.
Furthermore, the law as it stands makes it difficult to prosecute companies for the illegal acts of their directors, employees or agents. To secure a conviction it is necessary to show that the individuals responsible for commissioning an offence represent the “directing mind or will” of the firm. In a small company this may be easy to establish. Problems arise with large or medium sized ventures where the directors are some distance away from the day to day actions of their employees. Consequently, according to one eminent Law Professor, our current law on corporate liability “works best in cases where it is needed least (i.e. small companies) and works least where it is needed most”.
It is well known that US prosecutors have had far greater success in holding companies to account for fraudulent behaviour than their British counterparts. Experts have long argued that our criminal law on corporate liability, fraud sentencing policy and the culture of our prosecuting authorities all need a US style makeover. Labour’s policy review promises this in three key areas.
First, by advocating a change in the law to introduce a far lower threshold for determining corporate criminal liability. In the US corporations are liable for the actions of their agents that are within the scope of their duties and benefit the company.
Second, by calling for much stiffer financial penalties, based on a percentage of turnover, for firms that engage in fraudulent behaviour and longer prison sentences for fraudsters. The fines imposed by the FSA or FCA and the courts in England are weak by international standards. For example, the Department of Justice extracted a £230m fine from Barclays for it’s role in the LIBOR scandal in comparison to £60m obtained by the FSA. The highest fine imposed in a SFO case is £2.2m compared with a $3 billion fine imposed in the US against GSK.
Third, the review suggests that the SFO would benefit from recruiting more talented young lawyers from private practice to work on specific cases. Young American lawyers fight to join prosecution teams to gain valuable trial experience on flagship cases before embarking on lucrative careers in top law firms.
These changes are urgently needed, as is clear from the reaction to news that the SFO, not the US Department of Justice, will prosecute the first LIBOR case concerning allegations that the interbank lending rate was manipulated. The SFO’s decision is seen by some as good news for the first accused Tom Hayes, a former UBS trader, because he has avoided a prolonged extradition battle to the USA where conviction rates and sentences are much higher. Convictions in the LIBOR case may help repair the SFO and UK’s tattered reputation for fighting fraud to some extent, but the case for serious reform remains compelling.
Roger Sahota writes for the Law Society Gazette Opinion Column Reports that 16 of Britain’s most high-profile offenders still owe £126m in unpaid confiscation orders will not surprise anyone with an interest in financial crime. But tabloid calls for new measures to “beef up the authorities’ powers to seize ill-gotten gains” are only part of the solution. The Proceeds of Crime Act isn’t working and the time is ripe for reform. Earlier this year, the MOJ admitted that £780 million in confiscation orders made against convicted criminals remains unpaid and may never be recovered. That figure represents 60% of the global sum (£1.3 billion) that was outstanding in mid 2011-2012.
For the government to effectively concede that it has no strategy in place to recover this money is understandably cause for public outrage. Millions may have to be written off the MOJ’s balance sheet (as the sum owed is accounted for as an asset) at a time that its budget has already been slashed.
Better enforcement to tackle non-payment and prevent criminals from hiding or dissipating their assets is one answer that everyone can agree on. However, this should go hand in hand with a review of the law governing the confiscation of the proceeds of crime from convicted offenders.
One of the principal reasons why this problem arises is because the courts regularly make confiscation orders that will never be realised due to the way in which the POCA legislation must be applied.
POCA became law in 2002. It’s objective was to deprive offenders of the benefit (defined as turnover, not profit) from their criminal conduct. Parliament laid down a mandatory regime which Judges regularly describe as “draconian” in application. They have little or no discretion in applying the rules. Difficulties arise because POCA requires the courts to make far-reaching assumptions about the extent of an offender’s benefit from criminal conduct, to order the confiscation of legitimately acquired assets, as well as tainted property, and to send defaulters to prison.
Invoking the law of unintended consequences, the strict application of these provisions means that our courts regularly end up making unrealistic confiscation orders for sums far in excess of what a defendant can pay.
The knock-on effect includes the cost to the Exchequer of POCA enforcement proceedings, as well as that of keeping defaulters in prison, serving sentences of up to 10 years. Exaggerated confiscation orders far in excess of an offender’s likely assets may also act, in the opinion of the Court of Appeal, “as a disincentive to co-operate.”
The POCA methodology has also been criticised for producing results that are manifestly unjust. An offender’s real benefit may bear little relation to the confiscation order that the court must pass. In the recent landmark case of Waya (2012 UKSC 51), the Supreme Court recognised that the Act can generate confiscation orders that are disproportionate or unfair. It highlighted the case of a pharmacist who had overcharged the NHS by £464 from a total batch of claims in excess of £200,000 but was liable to pay a confiscation order in the total sum. The Supreme Court hinted that a change in the law might be desirable;
“The Crown Court has encountered many difficulties in applying POCA 's strict regime. Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts.”
Under the old law (pre-1995 and pre-POCA), a Judge could make a confiscation order to “pay such sums as the court thinks fit” in certain situations. POCA took that power away. A simple amendment to the Act, as advocated by some commentators, could restore it. Allowing the Judiciary to tailor confiscation orders to suit the facts of a case, taking into account what is actually realisable, would remedy many of the practical problems arising from the way POCA currently operates. More importantly, it would also help restore public confidence in our confiscation system.
The Supreme Court’s (SC) judgment in Waya ( 1 A.C. 294) has been rightly lauded as a landmark decision in the field of post-conviction confiscation. It concerned a mortgage fraud which is dealt with below. However, the most important part of the ruling was the SC’s application of the principle of proportionality in confiscation proceedings (paragraphs 1-34) and the implications of the stance taken by a minority of the SC justices.
Confiscation Orders Must be Proportionate i.e. Fair
In short, the SC said that a sentencing judge was entitled to refuse to make a confiscation order if it was “disproportionate” because it breached Article 1 of the First Protocol the ECHR (referred to as “A1P1”). A1P1 guarantees the right to “peaceful enjoyment” of one’s possessions which can only be interfered with in limited circumstances in the public interest.
In itself this declaration adds nothing new to the law. Our courts are required to take account of the provisions of the ECHR as it was incorporated into English law with the passing of the Human Rights Act. What has changed as a consequence of the SC’s ruling is the requirement for a proportionality test to be applied to every confiscation order.
The SC was divided on what that test should be. The prevailing majority view has it’s limitations but still merits claims of a significant shift in the judiciary’s approach to confiscation orders.
Lord Philips described the identification of A1P1 as “novel and imaginative.” It is worth noting nonetheless that the SC’s decision echoes the submissions made in R v May by the Defence (Andrew Campbell Tiech QC). May was the leading House of Lords confiscation authority before Waya. Interestingly, Lord Philips and Baroness Hale presided over both appeals;
The submissions attractively advanced by Mr Campbell-Tiech QC for the appellant were in essence simple. Parliament intended to establish a confiscation regime which was effective but fair. It intended to strip wrongdoers of their ill-gotten gains but not to deprive them of that which they had never had, to permit recovery of the same sum against different defendants or to permit recovery of a sum exceeding what the victim had lost. Such results were oppressive and disproportionate, inconsistent with article 1 of the First Protocol to the European Convention on Human Rights
The Limits of Proportionality
No Return to Judicial Discretion
Many practitioners have expressed frustration at the “draconian” confiscation orders that often result from the operation of the mandatory provisions of POCA. To their dismay, the SC was careful to emphasise that it’s decision did not (and could not) confer Judges with any discretion as to the making or quantum of a confiscation order. Under the old law, s.71 of the Criminal Justice Act of 1988 allowed a Judge to make a confiscation order to “pay such sum as the court thinks fit” in certain circumstances. The SC hinted that it considered such a measure to be desirable however;
“The Crown Court has encountered many difficulties in applying POCA ‘s strict regime. Many of the complexities and difficulties of confiscation cases, arising from the extremely involved statutory language, would undoubtedly be avoided if a measure of discretion were restored, but whether to restore it, and if so in which form, is a matter for Parliament and not for the courts.”
Two further important qualifications applied to the Courts decision. First, the SC made it clear that A1P1 will have limited application to S.75 “lifestyle” cases where the assumptions are triggered. Second, the SC also upheld the House of Lords observations in May concerning an offenders benefit.
Proportionality in Lifestyle Cases
In certain cases POCA allows the court to assume that any property transferred to or held by an offender in a six year period prior to the commencement of the proceedings represents the proceeds of criminal conduct. The burden is on the offender to displace the assumption.
S10(6)(a) and (b) of POCA allows the court to disapply the assumptions if they can be shown to be incorrect or if making them would give rise to a serious risk of injustice.
In the SC’s opinion the operation of these “safety valve” provisions made it very unlikely that any order would “court the danger of being disproportionate because the assumptions will only by applied if they can be made without risk of serious injustice.”
R v May Still Rings True
The SC was also at pains to state that the operation of A1P1 would not result in a new definition of an offender’s real benefit. Nor would it allow criminals to set off the expense of committing their crimes as if they were legitimate business costs against the sum they were required to pay to the court. The findings of the House of Lords in May still rang true and a “legitimate, and proportionate, confiscation order may have one or more of three effects:
(a) it may require the defendant to pay the whole of a sum which he has obtained jointly with
(b) similarly it may require several defendants each to pay a sum which has been obtained,
successively, by each of them, as where one defendant pays another for criminal property;
(c) it may require a defendant to pay the whole of a sum which he has obtained by crime
without enabling him to set off expenses of the crime.”
When is an Order Disproportionate?
Unfortunately the SC gave scant guidance as to when it would be unfair to make a confiscation order. References were made to two past cases that the Court felt that should have been decided differently as examples of where in future a confiscation order “ought to be refused” by the Judge as a disproportionate measure.
Confiscation in Excess of the Victims Loss or Offenders Reward
Citing R v Shabir (a pharmacist overcharged the NHS by £464 but the Crown applied for a confiscation order in excess of £400,000) confiscation orders where the victim’s loss or offenders reward is disproportionate to the quantum of the order may be disproportionate.
An order where the offender had repaid the sole victim the extent of his loss in full may also be disproportionate as in R v May.
While these examples give some clues as to the approach endorsed by the SC, the category of cases amenable to challenge must remain open and is likely to provide fertile ground for argument in the future. According to the editors of the CLR there are many decisions where confiscation orders have been upheld that may now be in question. They provide some pointers to the avenues that could be explored;
Where the Defendant repays an amount equivalent to the sum he receives from the fraud – query if the order should not be based on the sum obtained but the profit made from it – R v Farquhar
VAT evasion cases – where the goods liable to duty are seized and so any pecuniary advantage to the offender is purely notional
Money Laundering – should a launderer receiving a specific fee for allowing monies to wash through his account be liable for the entire sum passing through his hands (Allpress)
R v Neuberg – a business providing value to customers but operating under a name closely associated to another venture now in liquidation, should the order take into account it’s entire turnover
Mortgage Frauds – the Majority View
The SC’s decision on the facts of the case concerned a mortgage fraud and may be confined to similar factual circumstances. Here, the offender purchased an apartment having obtained a mortgage by lying about his income before it was subsequently re-mortgaged. In a rising market the value of the property appreciated considerably, so much so that the original mortgage advance could be repaid from the proceeds of sale. In this type of situation, where the deposit was untainted and the mortgage had been or could be repaid, the SC majority held that the benefit obtained by the offender was limited to the fraction of the appreciation attributable to the original mortgage.
The SC thus rejected the Crowns argument that the value of the benefit obtained should reflect the mortgage advance. It was held that the mortgage advance did not form part of the offender’s benefit as it never came into his control and possession following the dicta in May. Instead the defendant obtained a thing in action (in this case an equity in redemption) with no market value that could only be realised when the flat was sold.
The SC also emphasised that there will be other mortgage frauds with the thing in action may have a value (para.53). In these cases the Crown may be entitled to claim that the offender has benefitted to the value of the mortgage advance obtained. It therefore remains unclear if the formula adopted by the SC in calculating benefit can be applied by analogy in other mortgage frauds.
The Minority View – A True Revolution Averted
Lord Philips and Lord Reed dissented from the Majority view and suggested a completely different approach. When deciding the extent to which the offfender benfitted from his criminal conduct the Court should first ask what the POCA benefit is, then ask what the “real benefit” is (in the ordinary sense) and then decide if the POCA benefit was a proportionate one.
Applying this formula in Waya they believed the offenders benefit should be limited to “the money value of obtaining his financing on better terms than might otherwise have been available” when he obtained his original mortgage rather than any part of the increase in value of the flat.
The minority approach, with it’s emphasis on “real benefit” (a concept that is irrelevant to POCA) should be welcomed. It would give the courts far greater flexibility in determining an offenders benefit, thereby allowing some discretion to mitigate the main criticism levelled against the legislation which is that it often produces excessively harsh outcomes.
Waya has been heralded as the dawn of a new era in confiscation law. This description would have been all the more apposite had the minority, not the majority view prevailed.