Confiscation - Joint Proceeds of Crime
THE PRINCIPLES TO BE APPLIED WHERE A CONFISCATION ORDER IS SOUGHT AGAINST CO-PRINCIPAL CONSPIRATORS WHO HAVE JOINTLY OBTAINED THE PROCEEDS OF CRIME.
Written January 2014 by:
Peter Doyle QC - 25 Bedford Row - Called 1975 - Silk 2002
A Criminal defence practitioner highly proficient in defending Serious Crime, Complex Fraud & Confiscation proceedings. Peter Doyle QC has a phenomenal eye for detail and is unrivalled in his thorough preparation of cases. He is recommended as a leading Silk in Fraud in the Legal 500 2013 and Chambers & Partners 2014.
- Where defendants have been convicted as co-principal conspirators and have jointly obtained the benefit of the proceeds of the conspiracy, is the benefit obtained by each (a) the full amount of such proceeds or (b) is the value of the benefit to be attributed to them in rateable shares?
- If the answer to the above question is (a) and assuming that each has realisable assets matching or exceeding the benefit, is the amount of the confiscation order to be apportioned rateably between the defendants in order to avoid a disproportionate outcome?
- These issues fell to be considered by the Court of Appeal (Criminal Division) in R v Fields, Sanghani, Sagoo and Rajput (judgment delivered 14 November 2013), it being argued on behalf of the appellants that in the light of the recent decision of the Supreme Court in Waya (2013) 1 AC 294 the answer to the first question was (b). Alternatively it was argued that if the answer was (a) then it was disproportionate to order each defendant to pay the full benefit figure as it would amount to multiple recovery operating by way of a fine.
- It is to be noted that the case was concerned with the joint obtaining of property. The court was not concerned with a case where a pecuniary advantage had been obtained. (See paragraph 20 below).
- The court expressed the view that if the arguments advanced on behalf of the appellants were correct, then it would effect a profound change in the hitherto general understanding of the operation of the Proceeds of Crime Act 2002.
- The conspiracy in question involved the fraudulent use of a company in a “long firm fraud”. The total benefit arising from the conspiracy in the form of goods and services supplied was £1,410,762.
- The first three appellants were sentenced and confiscation orders made against each on the basis that the benefit had been jointly obtained by each pursuant to a joint operation between them. Applying the principle established on the authorities (See R v Sivaraman (2009) 1 Cr.App. R(S) 80 at 449) that where two or more defendants obtain property jointly each was to be regarded as obtaining the whole of it, the trial judge ruled that each had benefited in the sum of £1,410,762 as adjusted by the increase in the value of monies at the time of the orders.
- This article assumes familiarity with the statutory procedure required to be followed pursuant to Sects. 6,7,8,9,76,79,80 and 83 of the 2002 Act as explained by the House of Lords in May (2008) 1 AC 1028.
- In short there are three fundamental questions (1) has the defendant benefited from the relevant criminal conduct, (2) if “yes” what is the value of the benefit the defendant has obtained and (3) what sum is recoverable from him. Each question is distinct and the answer to one does not determine the answer to be given to another.
- The appellants submitted that the court had to identify each appellant’s “beneficial interest” in the total benefit figure and on the facts of the case each had an equal one- third share and therefore pursuant to s.79(3) of the 2002 Act the true benefit in the case of each appellant was the extent of that “beneficial interest”.
- The Court took exception to this submission on two grounds. First on public policy grounds. It rejected the notion of a court being obliged to construct let alone recognise the existence of a trust in such criminal circumstances. To expect such an approach would, it said, run entirely counter to the statutory aim.
- The appellants submitted that although the illegality attending the obtaining by each of their relevant benefit, might mean that a court would not enforce the trust on equitable grounds, that did not displace the existence of the right itself. Support for this proposition was said to derive from the judgment of Lord Bingham in May (paragraph 45 of the opinion) who observed that the exercise of the confiscation jurisdiction should involve no departure from familiar rules governing entitlement and ownership.
- The court observed that Lord Bingham had said in that regard that it was necessary to apply “ordinary common law principles” and that the submission was artificial given that section 79(3) of the 2002 Act was to be taken as extending to make allowance for lawfully subsisting prior interests of other persons and not to the asserted “beneficial interests” of co-conspirators whose very criminality had caused the relevant property to be obtained jointly in the first place.
- The court in reviewing the relevant authorities emphasised that although Keen LJ in May had, in the Court of Appeal, indicated the possible availability, on proportionality grounds, of an apportionment approach to liability that lent no support to the suggested apportionment of benefit. This was made clear by Lord Bingham when May reached the House of Lords.
- Only where it was established on the evidence that ordering the full amount against each defendant might be disproportionate and contrary to article 1 of the First Protocol might apportionment as between defendants be justified.
- The overriding principle was that where defendants jointly obtain the benefit then each obtains the full value of it. Thus, by way of example, in Gibbons (2002) EWCA Crim 1621 the court apportioned the value of the benefit obtained equally between the four conspirators because there was insufficient evidence upon which the trial judge could find that the benefit had been jointly obtained.
- The second ground for rejecting the submissions was that there had been no challenge to the trial judge’s finding that this was a case of joint benefit obtained as co-principals and that the submissions being advanced were in truth seeking to go behind that finding. The facts of the present case were removed from those of Gibbons and it could not now be converted into a Gibbons type of case.
- To emphasise why apportionment of benefit was entirely inapposite in a joint benefit case the court gave an example; If three defendants had jointly obtained the benefit but at the time of the confiscation proceedings two had no assets at all and one had sufficient assets to meet the confiscation order, it would be entirely arbitrary and contrary to the object of the 2002 Act that the one who could meet the order should avoid doing so by arguing that his interest was only one third. Were that so, then despite the value of the benefit jointly obtained and the ability of one defendant to pay it, the recovery would be limited to only one-third of the value of that joint benefit.
- What if in the same example two of the defendants fled the jurisdiction before trial but were later extradited and convicted of the same crime? If the appellants’ submissions were correct it would mean that no order for confiscation could be made against the two defendants if an order for the full amount of the benefit had already been made against the defendant who had not fled the jurisdiction but had faced his trial.
- The court rejected the submission that the decision in Waya now required apportionment between these appellants. That case was not concerned with property jointly obtained. In Waya the appellant had acquired property with the partial assistance of a loan secured by a charge obtained by fraudulent representation. That necessitated careful consideration of the interest actually acquired. Waya has no bearing on the question of attribution or apportionment of benefit and does not depart, in a joint benefit case, from the principles established in May and subsequent reported cases with regard to the valuation of benefit.
- The only relevance that apportionment might have on proportionality grounds may arise when determining the recoverable amount in which the confiscation order is to be made in each case; this being the final stage in the process. To that extent and to that extent alone Waya has potential relevance.
- It was argued on behalf of the appellants that to order each to pay the full amount of the benefit would be disproportionate as it would amount to treble recovery and operate by way of an unjustified “fine”.
- Although this submission ran counter to the decision in Lambert and Walding where the court had said that the statutory provisions had to be read “shorn of judicial glosses and paraphrases”, Waya had made it clear that in order to achieve compliance with Article 1 of the First Protocol (“A1P1”) s.6(5) of the 2002 Act is to be “read down” or qualified so as to include the words “except and in so far as such an order would be disproportionate and thus a breach of A1P1.”
- The court acknowledged that given the opinion in May circumstances “might” arise in the case of several defendants where it would be disproportionate and an apportionment approach would be appropriate. However, it went on to recognise that in that and subsequent cases it remains the law, in a case of joint benefit , that each defendant obtains the benefit as a whole and by making a confiscation order against each in that amount is to deprive the defendant of what he has gained and not to deprive him of something he has not gained. That being so the order does not operate by way of a fine.
- Thus, no objection on proportionality grounds can be made in a case where a confiscation order is made depriving a defendant of a benefit which he has in fact and in law obtained and which order is within the limits of the recoverable amount against him.
- For a case of proportionality in action one need only look at the case of Morgan and Bygrave. In that case the defendant had restored to his victim all the proceeds of the crime which he had gained. It was held that to make a confiscation order in the same amount against him would not achieve the statutory objective of depriving a defendant of the proceeds of his crime but would simply operate as an additional financial penalty.
- It is to be remembered that pursuant to s6(6) of the 2002 Act the duty to make a confiscation order becomes a discretion whether to do so or not wherever the loser,whose property represents the defendant’s proceeds of crime, either has brought or proposes to bring civil proceedings to recover his loss.
- It would, said the court, be capricious and thus disproportionate to distinguish between a defendant whose victim was about to sue him and a defendant who had avoided being sued by making full reparation to the victim. If anything it is more disproportionate in the latter case because that defendant has not forced his victim to litigate.
- Thus, if a prospective order for confiscation is to be adjudged disproportionate (having regard to Waya) it is to be (1) because it is disproportionate with regard to that defendant who is to be made prospectively subject to that order and (2) because it is disproportionate having regard to the scheme and objective of the 2002 Act.
- Lack of proportionality is not to focus simply be reference to other orders made against other defendants or payments made by them. Nor is it to focus on the potential “profit” accruing to the Crown (on the appellants’ arguments) by reason of prospective multiple recovery. At all times the focus is to be on depriving each defendant of the proceeds of his crime.
- In February 2014 the case of Ahmad (2012) EWCA Crim 391 will be considered by the Supreme Court. That appeal is likely to cover at least the question of apportionment of the recoverable amount. The parties in the present appeal were sufficiently concerned with the delay in their own case as to oppose adjourning it to the outcome of the appeal in Ahmad.
- Watch this space.
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This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of its content.