Back to basics on confiscation

The House of Lords has recently pronounced on three important confiscation cases suggesting a 'back to basics' approach: establish the facts then apply the words of the statutes and the long established principles of English law to those facts. But there is a considerable amount of useful detail in these judgments too.

R v May

In the first case, R v May [2008] UKHL 28, the Lords had to consider the confiscation order to be made following a conviction for VAT 'carousel' fraud. This particular fraudulent conspiracy involved four phases of activity in which different individual members of the conspiracy played different roles.

Mr May only took part in the third and fourth phases, but was found to be a driving force in those phases. The 'benefit' found by the Crown Court judge to have been obtained via bogus companies in relation to those two phases was £3,264,277. Mr May's 'available amount' was found to be £3.8m and so a confiscation order was made against Mr May for the 'benefit' figure of £3,264,277.

However Mr May was by no means the only person involved in these phases of the conspiracy. In total 16 individuals had been charged.

Mr May argued that the benefit should have been apportioned between the conspirators.

The House of Lords held that as various conspirators had obtained joint control of the benefit of the conspiracy via their joint control of the bogus companies, each of those conspirators was jointly liable for the whole of that benefit.

Any attempt by the courts to apportion the liability between the parties jointly liable would be 'contrary to principle and unauthorised by statute'.

The case confirms the principle that when defendants obtain joint control of property they each, in law, obtain the whole of the amount jointly obtained. Each person's 'benefit' for confiscation purposes is therefore the whole of the amount jointly obtained.

Crown Prosecution Service v Jennings

The second case, CPS v Jennings [2008] UKHL 29, concerned exactly what is involved in 'obtaining'.

Mr Jennings had been an employee of a company which had engaged in an 'advance fee fraud'. Another defendant was the sole director and controlling shareholder of the company.

The prosecution considered Mr Jennings to be a prime mover in the fraud along with the director of the company. Mr Jennings received a salary from the company but held no shares in it.

The Crown contended that Mr Jennings had 'obtained' the whole of the amount generated by the fraud, amounting to £584,637. Mr Jennings argued that he had obtained only his salary and certain other payments amounting to no more than £50,000.

The Court of Appeal had said that in order to 'obtain' an asset, 'All that is required is that the defendant's acts should have contributed, to a non-trivial (that is, not de minimis) extent, to the getting of the property'.

In his role as an employee Mr Jennings had therefore 'obtained' the entire benefit of the fraud.

The House of Lords did not endorse the approach of the Court of Appeal on this point, finding it 'not. . . to be helpful or entirely accurate'.

Rather the House of Lords found, 'A person's acts may contribute significantly to property (as defined in the Act) being obtained without his obtaining it.

But under s 71(4) [Criminal Justice Act 1988] a person benefits from an offence if he obtains property as a result of or in connection with its commission, and his benefit is the value of the property so obtained, which must be read as meaning 'obtained by him'.'

This is, in my view at least, a significant shift in the legal position in relation to the meaning of 'obtain' in confiscation cases.

R v Green

The third case was R v Green [2008] UKHL 30. This concerned a drug trafficking conspiracy and, again, centred on the amount properly to be regarded as having been 'obtained' by the defendant.

It was contended on behalf of Mr Green that the appropriate measure of benefit is the total value of the property actually received by the particular defendant the court is considering. In particular, sums retained by Mr Green's co-defendants ought, it was argued, to be deducted from the 'benefit' attributable to Mr Green.

The prosecution argued, on the other hand, that Mr Green had 'obtained' the whole amount obtained from the conspiracy.

The House of Lords noted the decision of the judge in the Crown Court on the relevant facts, and that: 'Whether the proceeds of sale received by [the appellant's associates] in the present case were initially received on their own personal behalf or on behalf of the conspirators as a whole was a matter for the judge to decide on the evidence before him. In fact, there was evidence on which he could find that the appellant was the ringleader and controller of the conspiracy and in those circumstances he was entitled to infer that the others were acting in accordance with his instructions, receiving proceeds of sale on behalf of the conspirators as a whole before retaining for themselves such amounts as had been agreed with the appellant.'

Since the sums received by the other conspirators were received on behalf of the conspirators as a whole they did form part of the benefit obtained by Mr Green. The findings of fact were decisive.

The endnote

In the May case the Lords added to their judgment an endnote summarising the key principles to be applied in confiscation cases. This will repay careful consideration and bears reproduction in full: 'The committee would conclude by drawing attention to the current importance of the power to make confiscation orders. In the period April 2007 '“ February 2008 the courts in England and Wales made 4,504 such orders in sums totalling £225.87m.

'In recent years the number of orders and the sums confiscated have steadily risen. Recognition of the importance and difficulty of this jurisdiction prompts the committee to emphasise the broad principles to be followed by those called upon to exercise it:

n 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.

n 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.

n 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.

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.

n In determining, under the 2002 Act, 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.

n 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.'

Questioning precedents

Three points stand out in relation to earlier cases on similar issues.

The Lords considered that the earlier decision in, 'R v Porter [1990] 1 WLR 1260 is not authority that the court has power to apportion liability between parties jointly liable'. This case is often referred to by prosecutors in their statements of alleged benefit (under s 73 CJA 1988 or s 11 DTA 1994 or s 16 PoCA 2002). The Lords implicitly confirmed that: 'There might be circumstances in which orders for the full amount against several defendants might be disproportionate and contrary to article 1 of the First Protocol [to the European Convention on Human Rights]'.

The Lords made no criticism of the approach in the Court of Appeal in the case of Green that: 'The first step, therefore, is to identify what sums or other rewards the defendant has received. In this context it should be noted that, although s 4(3)(b) [Drug Trafficking Act 1994] requires the court to assume that money used to finance expenditure was derived from drug trafficking, it does not require the court to assume that such money was derived from sources other than those to which the evidence naturally points.'

In that case the Court of Appeal referred to the statutory assumptions as merely providing 'a tool that can be used' for the purpose of identifying payments and rewards received by the defendant in connection with drug trafficking.

Prosecutors often appear to place too much emphasis on the statutory assumptions and have too little regard for the factual evidence. The House of Lords decisions redirect our attention to the factual evidence, possibly announcing a fresh emphasis on the role of forensic science in assisting with the establishment of the relevant facts in each case.