Taking the profit out of crime, or just taking the Mickey? Pro-active defending in confiscation proceedings.
It’s impossible to do justice to the topic of confiscation in a short article such as this. We’re not going to even attempt to explain the law on, for example, tainted gifts, criminal lifestyle, hidden assets and so on. Instead we’re going to try to rise above the black letter of the law, so far as is possible, and look at strategy, tactics and the real mechanics of confiscation litigation in practice.
Why the Unfairness?
All criminal defence practitioners will tell you that the confiscation process is capable of producing unfair and sometimes absurd results. After many years dealing with asset forfeiture and Proceeds of Crime Act 2002 (POCA) issues we are convinced that the unfairness in the system is not just down to the Act being s deliberately ‘Draconian’, as it has been described. There is also an inbuilt unfairness on the battleground itself. Prosecution applications for confiscation are generally not in the hands of the prosecution Barrister, or even the CPS lawyer, but the police/ HMRC Financial Investigator (“FI”). Straight away you have lost the impartiality, or at least the appearance of impartiality, that should be present in any sentencing exercise.
The FI is the person that will normally produce the s16 ‘prosecution statement’ – the document that sets out the prosecution’s case on benefit and available amount. A good FI is needed in almost every confiscation case. Some FI’s are meticulously fair but it has to be said that many are less so. It is an oft cited compliant of the defence that the estimates of benefit and the available amount are unfair exaggerations and bear little resemblance to the reality. So why do some FI’s behave this way? Well for a start they are not meant to be impartial. Of course they have a duty to the Court to be accurate and to be fair but many defence lawyers will tell you that the incentivisation scheme is where the risk of injustice starts.
Since 2006 the Home Office has run the Assets Recovery Incentivisation Scheme (ARIS), which apportions all asset recovery monies. Of money recovered in confiscation the Home Office keeps 50%. The rest is split 3 ways; between the, the investigators (usually police or HMRC), the prosecution agency and the Court Service. In these cash-strapped times one can see the benefit of maximising confiscation claims. Conversely however, the defence will often be funded by legal aid but the Legal Aid Agency, which is strapped for cash like all public bodies, sees none of the revenue generated from confiscation despite having to pay for its process just as the Courts, CPS and investigators do. Also, confiscation proceedings are notoriously badly paid in legal aid cases. This is so even though the work can often at times be much more time-consuming and complex than the main criminal litigation. The authors of this article are experienced practitioners recognised in, for example, the legal guide ‘Chambers & Partners’ section on ‘POCA and Asset Recovery’ which only ranks a handful of Solicitors and Counsel.. We do not say that to grandstand but to highlight the fact that this area often demands a commitment and an expertise not always matched by the limits of legal aid.
These background factors can serve to create a toxic mix for the un-witting defendant. But knowing the ingredients of the mix can at least give some hope of fighting back. For example, the prosecution might make those bold assertions in their prosecution statement because they see no down side – but what if there was a down-side?
In 2013 the authors were involved in a case where we successfully reduced the size of one confiscation claim before it came to Court by reminding the prosecution about the very little used provisions on costs. Section 19 of the Prosecution of Offences Act 1985 provides for awards of costs between litigation parties, in respect of unnecessary or improper acts and omissions; see also Costs in Criminal Cases (General) Regulations 1986/135. This is not the high test of ‘wasted costs’ that suggests negligence that professional lawyers fear,but a lower test of just effectively wasting time and money by not doing the job right. This is rarely utilised for some reason yet this is how civil cases are fought all the time; i.e. the tactic of using costs as a weapon that turns the litigation into a real gamble. In that case the target was specifically the prosecution who relied on the FI’s s16 Statement whose original claims were spectacularly unreasonable. So it can be seen that, with careful tactics it is possible that the defence can make the prosecution review their “nothing to lose” attitude.
The same is true in the case of third parties; i.e. those non-defendants affected by a potential Confiscation Order. Typically this might be a wife in a family house that the Crown have placed a value on. It maybe that the prosecution apply the standard 50%; i.e. they will only suggest that 50% of the value of the house is available to go towards the Confiscation Order as the wife has a 50% interest. Of course that still means the house has to be sold and the wife may be in real difficulties at that point. What if the truth is more complicated – what if the defendant husband’s real interest in the house is in truth much less that 50%?
The standard mantra is that third parties have no right to be heard during the actual confiscation proceedings; they can only asset their right at the enforcement stage. This makes confiscation cases much more difficult to settle and greatly increases costs – just to avoid the Court hearing from third parties; see e.g. R v Ahmed & Qureshi  1 WLR 122.
In fact, with careful strategising third party scenarios can work well for the defence. Just because there is no ‘right’ for a third party to be heard at the confiscation stage does not mean he or she cannot be heard. This may be especially important where it is alleged that the third party is in receipt of a ‘tainted gift’ from the defendant. Given there is no legal aid for third parties at the pre-confiscation order stage it is often only those third parties with access to private funds that can put up a proper fight. For example, the Court could be asked to list the case for mention to argue for third party participation in the main hearing where the Judge will determine the ‘available amount’. The argument being that that confiscation raises issues of fact that need to be determined and, to make those findings, the fact finder needs to hear all the relevant facts. If a Judge chooses to shut out a deserving third party at that stage then there may be routes of redress following from that decision. Even if the application is refused at least that pro-active defending puts before the Court arguments and/or evidence that it might not otherwise have had until after an Order was made. It might also influence the prosecution as they will see that there will be troubles ahead after the Order is made, and perhaps it might be better to grasp the third party nettle earlier than they might otherwise have done.
Similarly Restraint Orders also present potential opportunities. There is an absolute right for a third party affected by a Restraint Order to be heard before the Confiscation Order is made as the Order starts ‘biting’ immediately. Arguments can then be put forward that, e.g. the 3rd party’s interest in the property can and should be severed from the Restraint Order. Depending on the facts this may be an early argument for, in effect, a reduction of the claimed final Order figure. Again, this process will have the effect of putting those issues in the mind of the Court at an early stage. This is so even if the Restraint Order is not in fact varied. The variation application also serves to flush out the Crown’s arguments very early on, well before the main battle.
The essential problem with the POCA regime is the apparent lack of judicial discretion it permits. In 2012 the Supreme Court ruled in an important case which addressed this apparent lack of judicial discretion; R v Waya  UKSC51.
The Supreme Court considered the effect of the Human Rights Act 1998, specifically Article 1 of the 1st Protocol to the European Convention on Human Rights; this is the right to peaceful enjoyment of property. The Court found that applying Convention principles a Confiscation Order had to be ‘proportionate’ and therefore the final Order had to “bear a proportionate relationship to 2002 Act’s purpose” - i.e. to strip criminals of their proceeds of crime.
The Court specifically noted that this proportionality argument was not applicable in ‘criminal lifestyle’ cases; see R v Morgan  1 WLR 3450. This is where, in certain circumstances, the Court will make assumptions under s10 of the Act; e.g. the assumption that the defendant’s past 6 years earnings have all come from criminal offending. These assumptions must apply unless proven to be factually incorrect or liable to produce a “serious risk of injustice” (see s10); this was always very difficult to establish. But, despite the Waya case being limited to non-lifestyle cases it has, we suggest, influenced criminal lifestyle cases too as proportionality arguments can be brought to bear in submissions that s10 ought not to apply as a disproportionate outcome would produce a ‘serious risk of injustice’.
R v Ahmad & Ahmed  2 WLR 2335
This case is the latest seminal case on confiscation from the Supreme Court, handed down last summer. The case related to how to deal with joint findings of benefit. The Courts in conspiracy and joint enterprise cases had been handing down Confiscation Orders where the full value of the offence, e.g. a fraud, would be regarded as the benefit amount for each individual defendant. This was clearly capable of producing real injustice but nevertheless remained good law for years. The solution, according to the judgment, is for each Order to contain a condition that it should not be enforced if the sum has already been recovered from another defendant .
Finally, the Court briefly considered the issue of inequality of outcome between defendants, for example if the full amount were to be recovered from one, and the others were therefore released from their obligation to pay. The Court held that this was an inherent feature of joint criminality, and that in such cases the ‘losses must lie where they fall’ - it seems the potential for injustice remains.
Jonathan Lennon is a Barrister specialising in serious and complex criminal defence cases. He is based at 33 Chancery Lane Chambers in London. He has extensive experience in all aspects of financial and serious crime and the Proceeds of Crime Act 2002. He is ranked by both Legal 500 Chambers & Ptnrs & is recognised in C&P’s specialist POCA and Financial Crime sections; ‘he is phenomenal and is work rate is astonishing’ (2015).
Aziz Rahman is a Solicitor- Advocate and Partner at the leading Criminal Defence firm Rahman Ravelli Solicitors, specialising in Human Rights, Financial Crime and Large Scale Conspiracies/Serious crime. Rahman Ravelli are members of the Specialist Fraud Panel and have been ranked by Legal 500 as an 'exceptional' firm with Aziz Rahman being described as 'top class’'. The firm is also ranked in Chambers & Partners. Rahman Ravelli are a Top Tier and Band 1 firm.