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The Proceeds of Crime Act 2002 in Financial Remedy Proceedings Part 1.

In the first of a two part Article, Christian Jowett, Barrister, Temple Chambers, Cardiff and Newport. and Rhys Taylor, barrister, Thirty Park Place Chambers, Cardiff, offer insights for the family lawyer into the law and practice of confiscation proceedings and their impact on financial remedy proceedings.



















Christian Jowett
, Barrister, Temple Chambers, Cardiff and Newport, and Rhys Taylor, barrister, Thirty Park Place Chambers, Cardiff.

Confiscation proceedings are uncharted waters for many family practitioners but a working knowledge of the relevant legal and procedural framework is essential.  Applications for a financial  remedy may be made in circumstances where one of the parties is, or may become, subject to a confiscation order. The competing claims for matrimonial property between a confiscation order and a financial remedy application, can appear confusing. In this article, we will try to dispel at least some of the mystery.

Part One of the article sets out the key concepts and procedural aspects of confiscation. Part Two, which will be published in Family Law Week next week, explains the approach where confiscation orders and financial remedy proceedings compete for the same matrimonial property.

What is a Confiscation Order?
A confiscation order requires a defendant to pay a sum fixed by the Crown Court. It is a personal order. It confers no proprietary interest upon the state in any of the defendant's assets.

'Although "confiscation" is the name ordinarily given to this process, it is not confiscation in the sense in which schoolchildren and others understand it. A criminal caught in possession of criminally-acquired assets will, it is true, suffer their seizure by the state. Where, however, a criminal has benefited financially from crime but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value, if he has them. The object is to deprive him, directly or indirectly, of what he has gained. "Confiscation" is, as Lord Hobhouse of Woodborough observed in In re Norris [2001] UKHL 34, [2001] 1 WLR 1388, para 12, a misnomer.': R v May [2008] UKHL 28, [9].

The Applicable Legislation
The confiscation regime is set out in Part 2 of the Proceeds of Crime Act 2002 ('PoCA'). This came into force on 24th March 2003. Prior to PoCA, confiscation was provided for by the Drug Trafficking Offences Act 1986 ('DTOA') and the Criminal Justice Act 1988 ('CJA'). The old legislation will continue to apply where the offence, or any of the offences, was committed before 24th March 2003: Proceeds of Crime Act (Commencement No. 5, Transitional Provisions, Savings and Amendment) Order 2003 (SI 2003/333). This article focuses on PoCA. Further, some cases, decided under corresponding provisions of the old legislation, are of great assistance in interpreting PoCA.

Key Concepts
Confiscation contains numerous concepts which will not necessarily be familiar to the family law practitioner. The following concepts are key to understanding confiscation proceedings and will be explained in context below:-

• property
• the distinction between benefit and recoverable amount
• the distinction between recoverable amount, available amount and realisable property
• criminal lifestyle
• the distinction between general criminal conduct and particular criminal conduct
• the statutory assumptions
• the relevant day
• tainted gifts

The definition of 'property' applies throughout. Property is all property and includes money, all forms of real or personal property, things in action and other intangible or incorporeal property: s.84(1) PoCA. Property is:

• held by a person if he holds an interest in it: s.84(2)(a) PoCA
• obtained by a person if he obtains an interest in it: s.84(2)(b) PoCA
• transferred by one person to another if the first one transfers or grants an interest in it to the second: s.84(2)(c) PoCA.

Property is 'free property' unless specifically excluded: s.82 PoCA. Realisable property is any free property held by the defendant, or by the recipient of a tainted gift: s.83 PoCA.

Making a Confiscation Order
S.6 PoCA sets out how a confiscation order is made. The parties to the proceedings are the prosecutor and the defendant. Third parties have no right to be heard (although they may be called to give evidence).

Two conditions must be satisfied.

• The first condition (s.6(2) PoCA) is that a defendant is either (a) convicted of an offence or offences in proceedings before the Crown Court, or (b) committed to the Crown Court for sentence in respect of an offence or offences, or (c) committed to the Crown Court in respect of an offence or offences under s.70 PoCA with a view to a confiscation order being considered.

• The second condition (s.6(3) PoCA) is that the prosecutor asks the Crown Court to proceed under s.6 PoCA, or the court believes that it is appropriate for it to do so.

If these two conditions are satisfied, then by s.6(1), the Crown Court must proceed under s.6 PoCA to make a confiscation order; it has no discretion to refuse to do so, unless the victim has taken, or intends to take, civil action against the defendant, in which case there is a power, but not a duty, to make a confiscation order: s.6(6) PoCA.1

In R v May (above), the House of Lords set out the approach which the courts should take. Making a confiscation order under s.6 PoCA involves the Crown Court making three distinct assessments. These are (s.6(4) and (5) PoCA):

• whether the defendant has benefited from his criminal conduct;
• if so, what is the value of the benefit he has obtained; and
• the recoverable amount.

Criminal conduct is conduct which constitutes an offence in England and Wales, or would constitute such an offence if it occurred in England and Wales: s.76(1) PoCA.

Step 1: Benefit
A person benefits from conduct if he obtains property as a result of or in connection with the conduct: s.76(4) PoCA. We have already seen the wide definition of 'property'. Benefit can include, for example, a pecuniary advantage: s.76(5) PoCA. 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: s.76(6) PoCA.

In deciding whether the defendant has benefited from conduct, and deciding his benefit from conduct, the court must take account of conduct occurring up to the time it makes its decision, and take account of property obtained up to that time: s.8(1) and (2) PoCA.

Criminal Lifestyle
Before the court can assess the defendant's benefit from his criminal conduct, it must decide if he has a criminal lifestyle: s.6(4)(a) PoCA. This is very important, as it will bear directly on how that benefit is assessed.

One of three conditions must be satisfied before a criminal lifestyle will be found: s.75(1) PoCA.

(1) Criminal Lifestyle: Specified Offence
The first is straightforward. The defendant will have a criminal lifestyle if the offence (or any of the offences) is specified in Schedule 2 of PoCA: s.75(2) PoCA.

The remaining two conditions concern the circumstances of the offence itself. In both of these situations, the offence will not satisfy the criteria for a criminal lifestyle to be found unless the defendant obtains a 'relevant benefit' of not less than £5,000: s.75(4) PoCA.

(2) Criminal Lifestyle: Course of Criminal Conduct
The defendant will have a criminal lifestyle if the offence (or any of the offences) constitutes conduct forming part of a course of criminal activity.

• Conduct will form part of a course of criminal activity if the defendant has benefited from the conduct and, in the proceedings in which he was convicted, the defendant was convicted of three or more other offences, each of three or more of them constituting conduct from which he has benefited: s.75(3)(a) PoCA.

• Alternatively, conduct will form part of a course of criminal activity if the defendant has benefited from it and in the period of six years ending with the day when those proceedings were started (or, if there is more than one such day, the earliest day), he was convicted on at least two separate occasions of an offence constituting conduct from which he has benefited: s.75(3)(b) PoCA.

The relevant benefit for the purposes of a course of criminal activity is set out in s.75(5) PoCA. It is (a) benefit from conduct which constitutes the offence, (b) benefit from any other conduct which forms part of the course of criminal activity and which constitutes an offence of which the defendant has been convicted, and (c) benefit from conduct which constitutes an offence which has been or will be taken into consideration by the court in sentencing the defendant for an offence mentioned in (a) or (b).

(3) Criminal Lifestyle: Period of Six Months
The defendant will have a criminal lifestyle if the offence is committed over a period of at least six months, and the defendant has benefited from the conduct which constitutes the offence.

Here, relevant benefit is set out in s.75(6) PoCA. It is (a) benefit from the conduct which constitutes the offence, and (b) benefit from conduct which constitutes an offence which has been or will be taken into consideration by the court in sentencing the defendant for this offence.

Assessing the Benefit: Criminal Lifestyle
If the defendant has a criminal lifestyle, the court must decide whether he has benefited from his general criminal conduct: s.6(4)(b) PoCA.

General criminal conduct of the defendant is all his criminal conduct, and it is immaterial whether conduct occurred before or after the passing of PoCA, and whether property constituting a benefit from conduct was obtained before or after the passing of PoCA: s.76(2) PoCA.

Assessing the Benefit: Criminal Lifestyle: The Assumptions
If the court decides that the defendant has a criminal lifestyle, it must make the following four assumptions for the purposes of (a) deciding whether he has benefited from his general criminal conduct, and (b) deciding his benefit from the conduct:

• any property transferred to the defendant, at any time after the relevant day2, was obtained by him as a result of his general criminal conduct and at the earliest time he appears to have held it: s.10(2) PoCA;

• any property held by the defendant at any time after the date of conviction was obtained by him as a result of his general criminal conduct, and at the earliest time he appears to have held it: s.10(3) PoCA;

• 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: s.10(4) PoCA: and

• 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: s.10(5) PoCA.

However, the court must not make a required assumption in relation to particular property or expenditure if it is shown to be incorrect, or there would be a serious risk of injustice if the assumption were made: s.10(6) PoCA. If the assumption is not made, the court must state its reasons: s.10(7) PoCA.

In Whittington [2010] 1 Cr.App.R.(S.) 83, the Court of Appeal held [13-15] that it is for the prosecution to prove the underlying facts to which the assumption is to be applied. The prosecution must prove those facts on the balance of probabilities (s.6(7) PoCA), unless this requires proof of criminal offences, in which case, the standard of proof is the criminal standard: R v Briggs-Price [2009] 1 AC 1026, HL. So, for example, it would be necessary for the prosecution to prove that property was transferred to the defendant, and then, and only then, can it be assumed that this property was obtained by him as a result of his general criminal conduct.

Assessing the Benefit: No Criminal Lifestyle
If the defendant does not have a criminal lifestyle, it must decide if he has benefited from his particular criminal conduct: s.6(4)(c) PoCA.

Particular criminal conduct of the defendant is all his criminal conduct, which, by s.76(3) PoCA:

• constitutes the offence or offences concerned;
• constitutes offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned;
• constitutes offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned.

Step 2: The Value of the Benefit
If a person benefits from conduct, the value of the benefit is the value of the property obtained: s.76(7) PoCA. If a person obtains a pecuniary advantage as a result of or in connection with conduct, 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: s.76(5) PoCA.

PoCA contains detailed provision for deciding value at any time of property then held by a person. The basic rule is that the value of property held by a person is its market value at that time: s.79(2) PoCA. This is subject to s..79(3) to (5) PoCA. S.79 PoCA needs to be read in conjunction with the further definitions provided for the value of property obtained from conduct (s.80 PoCA) and the value of a tainted gift (s.81 PoCA).

Step 3: Recoverable Amount
If the court decides under s.6(4)(b) or (c) that the defendant has benefited from general or particular criminal conduct, it must (a) decide the recoverable amount, and (b) make an order (the confiscation order) requiring him to pay that amount: s.6(5) PoCA.

Recoverable Amount Equal to Benefit
The recoverable amount is an amount equal to the defendant's benefit from the conduct concerned: s.7(1) PoCA.

Available Amount and Recoverable Amount
However, if the defendant shows that the available amount is less than the benefit, the recoverable amount is either the available amount or, if the available amount is nil, a nominal amount: s.7(2) PoCA.

The available amount is the aggregate of the totals 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 the total of the values (at that time) of tainted gifts: s.9(1) PoCA. Note that the burden has now passed to the defendant.

If the court decides the available amount, it must include in the confiscation order a statement of its findings as to the matters relevant for deciding that amount: s.7(5) PoCA.

Tainted Gifts
A defendant is to be treated as making a gift if he 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: s.78(1) PoCA. The property given is to be treated as such share of the property as is represented by the following fraction (s.78(2) PoCA):

the difference between the two values set out in s.78(1) PoCA
the value of the property at the time of the transfer

The definition of 'tainted gifts' depends upon the court's decision as to criminal lifestyle.

If the court has decided that the defendant has a criminal lifestyle, or no decision has been made, then a gift will be tainted if it was made by the defendant at any time after the relevant day: s.77(1) and (2) PoCA. A gift will also be tainted if it was made by the defendant at any time and was of property which was obtained by the defendant as a result of or in connection with his general criminal conduct, or 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: s.77(3) PoCA.

If the court has decided that the defendant has no criminal lifestyle, a gift will be tainted if it was made by the defendant at any time after the date on which the offence concerned was committed, or, if his particular criminal conduct consists of two or more offences and they were committed on different dates, the date of the earliest: s.77(4) and (5) PoCA.

A gift may be a tainted gift whether it was made before or after the passing of PoCA: s.77(8).

The Court's Approach to Making a Confiscation Order
In May (above) at [48], the House of Lords set out a series of broad principles to be followed in making confiscation orders. This is fundamental, and worth repeating in full:

(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 schoolchildren and others, but nor does it operate by way of fine. 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.

(5) In determining, under [PoCA], 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.

Time for Payment and The 'Default Period'
The amount to be paid under the confiscation order must be paid upon the making of the order: s.11(1) PoCA. However, if the defendant can show that he needs time to pay the amount ordered to be paid, the court making the order may order payment within a specified period, not exceeding six months, starting on the day the order is made: s.11(2) and (3) PoCA. Within that period, the defendant may apply to the Crown Court for the period to be extended for a period not exceeding twelve months from the date on which the confiscation order is made; the court may grant the application if there are exceptional circumstances: s.11(4) and (5) PoCA.

At the time of making the confiscation order, the judge will fix a default period of imprisonment to be served if the order is not satisfied: s.35 PoCA and s.139 Powers of Criminal Courts (Sentencing) Act 2000 ('PCC(S)A'). However, the default periods set out in s.139 PCC(S)A are maximum terms, and the court retains a discretion as to the actual term fixed: R v Spencer [2010] EWCA Crim 2870.

Making the Confiscation Order: Procedure
If the prosecutor asks the court to proceed under s.6 PoCA, or the court considers that it is appropriate to proceed under that section, the court may at any time order the defendant to give it information specified in an order, for the purpose of obtaining information to help it carry out its functions: s.18 PoCA. If a defendant fails to comply, the court may draw such inference as it believes appropriate: s.18(4) PoCA.

The prosecution must give the court a statement of information within a period ordered by the court: s.16(1) and (2) PoCA. This statement will set out whether the prosecutor believes that the defendant has a criminal lifestyle, whether he has benefited from his general or particular criminal conduct and, if so, what that benefit is: s.16(3) and (5) PoCA. In a criminal lifestyle case, the prosecutor must include information relevant to the making of an assumption under s.10 PoCA, and for the purposes of enabling the court to decide whether it must not make such an assumption: s.16(4) PoCA.

If the prosecutor gives the court a statement of information and a copy is served on the defendant, the court may order the defendant to indicate, within the period it orders, the extent to which he accepts each allegation in the statement, and so far as he does not accept such an allegation, to give particulars of any matters he proposes to rely on: s.17(1) PoCA. If the defendant accepts to any extent an allegation in the statement of information the court may treat such acceptance as conclusive of the matters to which it relates for the purpose of deciding the issues under s.16(3) or (5) PoCA: s.17(2) PoCA. If the defendant fails in any respect to comply with any order under s.17(1) PoCA, he may be treated under s.17(2) PoCA as accepting every allegation in the statement of information apart from any allegation in respect of which he has complied with the requirement, and any allegation that he has benefited from his general or particular criminal conduct: s.17(3) PoCA.

No acceptance given in a statement under s.17 PoCA that the defendant has benefited from conduct, or in response to an order under s.18 PoCA which amounts to an admission that he has benefited from criminal conduct is admissible in evidence for proceedings for an offence: s.17(6) and s.18(9) PoCA.

Restraint
The Crown Court may make an order (a restraint order) prohibiting any specified person from dealing with any realisable property held by him: s.41 PoCA.

A restraint order may apply to all realisable property held by a person, whether or not it is described in the order, and to realisable property transferred to the specified person after the order is made: s.41(2) PoCA. The restraint order may also be subject to exceptions, for example, for living expenses: s.41(3) PoCA.

However, the court may only make a restraint order if one of the conditions set out in s.40 PoCA is satisfied: s.41(1) PoCA.

The restraint provisions (ss.41 to 47 PoCA) must, however, be read in full.

Reconsideration, Variation and Discharge of Confiscation Orders
PoCA includes various provisions in which confiscation orders may be reconsidered, varied or discharged. These include:

• reconsideration where no order was made: s.19 PoCA
• reconsideration of benefit where no order was made: s.20 PoCA
• reconsideration of benefit where an order was made: s.21 PoCA
• reconsideration of the available amount where an order was made: s.22 PoCA
• variation of the order where the available amount is inadequate: s.23 PoCA
• discharge of the order where the available amount is inadequate: s.24 PoCA
• discharge of the order where a small amount is outstanding: s.25 PoCA

Magistrates' Court Enforcement
The Magistrates' Court enforces the payment of confiscation orders, as if the amount ordered to be paid under the order were a fine imposed upon the defendant: s.35(1) and (2) PoCA. This reinforces the position that the confiscation order does not confer upon the state any proprietary interest in the available assets. However, certain of the magistrates' powers with respect to enforcing fines do not apply. They cannot dispense with immediate payment, remit fines, and are not required to inquire into means: s.35(3) PoCA. Nonetheless, there are several methods of enforcement, culminating in committing the defendant to prison. The confiscation order continues to have effect so far as any other method of enforcement is concerned, even after a term of imprisonment has been served: s.38(5) PoCA.

Part Two of this article will deal with the interface between confiscation orders and third parties in the matrimonial context.


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[1] Cases in support of the mandatory nature of proceeding under s.6 PoCA are R v Farquhar [2008] 2 Cr.App.R.(S.) 104, CA and R v Morgan; R v Bygrave [2009] 1 Cr.App.R.(S.) 60, CA. There remains a limited jurisdiction to stay such proceedings as an abuse of process:  R v Paulet [2010] 1 Cr.App.R.(S.) 82, CA.

[2] The "relevant day" is the first day of the period of six years ending with the day when proceedings for the offence concerned were started against the defendant, or if there are two or more offences and proceedings for them were started on different days, the earliest of those days.