As the financial year draws to a close, it seems like as good a time as any to reflect on the past year in relation to assets recovery, proceeds of crime, restraint and confiscation.
2008 was a very important year as far as proceeds of crime is concerned with a number of high profile and important decisions being handed down by the House of Lords and Court of Appeal. I have picked out a few important decisions that have had an impact and are likely to continue to do so in the next year.
May, Jennings & Green and beyond
Perhaps the longest awaited decision was that handed down by the House of Lords in the cases of May, Jennings and Green. These appeals dealt with a number of important points in this area and considering a number of authorities.
The House issued guidance on the way courts should deal with confiscation proceedings in a helpful endnote, which although not setting out anything particularly new, certainly assists making the process a little easier to follow. Firstly, there was a reminder that confiscation is intended to deprive offenders of the benefit of their criminal activity whether or not they have retained, and as such benefit is not the profit after deduction of expenses or payments to others, but rather is the total value of the property or advantage gained. The House then reminded courts of the process to be taken and that three separate questions had to be considered, namely whether a defendant had benefited from relevant criminal conduct; if so, what was the value of that benefit; and then what sum was recoverable from the defendant (ie what does he have available to pay?). Courts should decide each question separately and arrive at findings of fact on each question. The House then confirmed that when addressing the questions courts should consider the language of the statutory provision concerned and should seek to apply any judicial gloss to it (this was a criticism particularly brought to light in Jennings). When considering whether the defendant has obtained property or a pecuniary advantage courts should consider ordinary concepts such as entitlement and ownership.
Finally, the House gave some general guidance on the definition of "obtaining". The House stated that a person ordinarily obtains property if in law he owns it, whether alone or jointly, which ordinarily connotes a power of disposition or control. Someone obtains a pecuniary advantage if for example he evades a liability to which he is personally subject. The House then went on to offer some more commonsense guidance - mere custodians and couriers or other minor contributors to an offence who are rewarded by payment of a specific fee and have no interest in the property or the proceeds of sale are unlikely to be held to have obtained the property. However, the House warned that the position may be different with money launderers.
The appeals of Jennings and Green dealt with at the same time offer similar guidance to that in May. What the decisions confirmed was that there was nothing wrong in principle with joint offenders each being held responsible for the entirety of the benefit obtained in a case, subject to the proviso regarding mere custodians and couriers and the like as set out above. Jennings offered some further hope for defence practitioners in the dicta that a person may contribute significantly to the commission of an offence and property being obtained, but may not actually obtain the property himself.
Since those decisions numerous appeals have been brought relying on the principles established. A couple of examples are Sivaraman and Grainger.
In Sivaraman the court succinctly summarised the effect of May, Jennings and Green and then considered and gave guidance on common misconceptions in confiscation proceedings, confirming that a conspiracy is not a legal entity but an agreement or arrangement which people may join or leave at different times. In confiscation proceedings the court is concerned not with the aggregate benefit obtained by all parties but with the benefit obtained, whether singly or jointly, by the particular defendant before the court. Further, it was not correct to suggest that anybody who has taken part in a conspiracy in more than a minor way is to be taken as having a joint share in all the benefits obtained. Although, the more heavily involved a defendant is in a conspiracy the more severe the penalty may be, but confiscation proceedings are concerned with an inquiry into the benefit gained by the relevant defendant. What a particular defendant has obtained is a matter of fact and therefore evidence. In the case in question, the defendant who accepted receiving £15,000 for his part in a diesel scam was found by the Court of appeal not to have benefited to the full value of the fraud, but rather his benefit should be restricted to the £15,000 he actually received.
In Grainger a confiscation order of a nominal sum of £1 was overturned as there was no basis on which it could be shown that monies received by a company as part of a large-scale fraud could be said to have been received by the defendant himself, despite his position as a company director.
Abuse of process
There have been a number of cases in the past year which have offered some hope to defence practitioners that there might at last be an element of commonsense being applied to confiscation cases in the form of applications to stay cases as an abuse of process of the court.
In Morgan & Bygrave the Court of Appeal stated that where a defendant's offending was limited to one or more identifiable losers, and his benefit is limited to that offending only, the losers have not brought or are contemplating civil proceedings, and the defendant has paid or is willing and able to pay the losers back, then it may amount to an abuse of process for the prosecution to embark on confiscation proceedings which would result in effect in double payment by the defendant.
In Shabir, a case this firm took to the Court of Appeal having taken matters on after the confiscation order had been made, it was successfully argued that where the value of fraudulent monies received by a defendant from his criminal activity was £464, it was oppressive and therefore an abuse of process for the prosecution to seek a confiscation order of in excess of £200,000 using the notion of monies received in connection with the proceeds of crime and applying criminal lifestyle assumptions which would not otherwise have come into consideration. The £212k confiscation order was quashed and replaced with a compensation order for £464.
It is often said that confiscation regime is draconian and deliberately so. However, it is clear from the recent authorities highlighted above that there may be softening of the approach, or rather the taking of a more commonsense approach, albeit in the right cases. This does not apply just to the legal principles involved, but also in respect of evidential matters.
In Stapleton, in restraint proceedings, the High Court stated that suspicion alone that the respondent was dishonest would not do and there must be some evidential foundation of dishonesty before the court would make such a finding to uphold a restraint order over a property in the respondent's name.
Similarly, in Winters, the Court of Appeal confirmed that prima facie evidence was not sufficient in order for the prosecution to allege that payments made by a third party in cash towards a mortgage on the defendant's property were a sham and in fact represented the proceeds of the defendant's criminal conduct, rather evidence to the civil standard of proof was required.
On a different note was the rather worrying case of Chambers in which Revenue & Customs accepted that they had mistakenly misled the court as to the correct regulations applying concerning cigarette importation, such that the confiscation order was quashed by the Court of Appeal. It is understood that a review is under way of other cases that might have been affected by similar mistakes.
A final development of note was the first use by the prosecuting authorities of a Civil Recovery Order under the Proceeds of Crime Act. Balfour Beatty agreed an order in the sum of £2.25m following a lengthy investigation by the SFO in relation to accounting irregularities concerning a construction contract in Egypt. This development shows the extent of the civil powers available under POCA and also that there are options for the prosecuting authorities and defendants which do not mean criminal proceedings.
Personal highlights and a look ahead
As for personal highlights from the last year, the successful appeal in Shabir has to be top of the list, but behind that were a number of large-scale reductions in confiscation applications, and a successful application by an Isle of Man based company to remove properties from a Crown Court restraint order resulting in a substantial costs order in the client's favour.
Looking forward, likely areas of development will include further appeals concerning the interpretation of benefit based on May et al, and further clarification in relation to money launderers. It is also highly likely that many will consider possible argument based on abuse of process and the principles flowing from Morgan & Bygrave and Shabir, however, it is likely that the court will be reluctant to open the floodgates and so caution should be exercised in bringing only appeals that are appropriate, so that court are not pressed to restrict further the limited circumstances in which such appeals can be successfully brought. Finally, there are likely to be a number of orders reconsidered following Chambers and the realisation that many orders were made in respect of cigarette importations which applied the wrong regulations. Anyone recently convicted in cigarette importation cases and made subject to a confiscation order should urgently seek advice as to the possibility of reviewing the order.
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