New tools to defend against oppressive confiscations

The Supreme Court's ruling in Waya has radically changed the confiscation landscape. Not only is it a complete U-turn in the way we approach confiscation in cases of mortgage fraud, such as the one in question, it has far reaching implications for all confiscations.

The judgment, handed down on 12 November 2012, has fully introduced the Human Rights Act 1998 (HRA) into Proceeds of Crime Act 1995 (POCA). Interestingly, the HRA was not an issue raised when the case was before the Court of Appeal. Indeed it seemed to be an afterthought in the Supreme Court and is hardly mentioned during earlier deliberations. However, the court eventually seized an opportunity to introduce fairness and proportionality into POCA, which should now be read through HRA glasses.

By a 7-2 majority the Supreme Court held in R v Waya [2012] UKSC 51 that a confiscation order of 1.54m against Nigerian businessman Terry Waya should be reduced to 392,400. His London property worth over 1.5m, which has already been forfeited by the prosecution authorities, was returned to him with immediate effect (see box).

Human rights compatibility

The outcome of Waya is that section 6 POCA should be read to comply with section 3 HRA and article 1 of protocol 1 ECHR.

Section 6(5) POCA sets out the final stage of the process of assessment of a confiscation order and it exemplifies the inflexible and draconian tone of the legislation. It reads:

"If the court decides under subsection 4(b) or (c) that the defendant has benefited from the conduct referred to, it must:

(a) decide the "recoverable" benefit amount, and

(b) make an order (a confiscation order) requiring him to pay that amount".

The Supreme Court in Waya has now qualified section 6 by requiring that it should be read as though it included the words: "save insofar as such an order would be disproportionate".

When assessing cases under section 6, the Supreme Court went on, judges should now refuse to make confiscation orders that are disproportionate and should substitute orders they regard as proportionate.

It would be rare to invoke the concept of abuse of process or judicial review in POCA proceedings now. The application would ordinarily be an application to the judge on the grounds that the order would be wholly disproportionate and in breach of protocol 1.

The ruling should also affect the way prosecutions are undertaken. Section 6 HRA imposes on prosecutors the duty not to act in a manner incompatible with the convention right. So the prosecution will now have an important preliminary function in ensuring that a disproportionate order is not sought. Time will tell whether this results in more realistic confiscations being sought.

Previous confiscation orders, particularly those arising out of mortgage fraud cases, will have to be reviewed and appealed.

However, introducing wide concepts such as 'proportionality' will encourage more argument and more contested hearings.

Where all the benefit obtained by a defendant has been restored to the loser a confiscation order will be disproportionate. In truth, any confiscation here would be a fine. Take the earlier case of R v Wilkes [2003] 2 Cr App R (S) 105 for instance, which concerned a burglar defendant where the assumptions were applied but all items stolen were recovered and returned undamaged.

Or consider evasion of duty cases. In my experience, HMRC does not as a matter of practice seek double recovery by way of both the payment of the unpaid duty and a confiscation order in the same sum. To do so would be arguably disproportionate.

According to the Supreme Court, situations analogous to the case of the benefit being fully restored to the loser "will have to be resolved on a case-by-case basis". Someone may induce someone else to trade with him in a manner otherwise lawful, and who gives full value for goods and services obtained. It would not be proportionate to proceed to confiscation in such cases arguably.

The more serious cases in which confiscation orders are appropriate are criminal lifestyle cases. The "lifestyle assumptions" in POCA were viewed by the Supreme Court as proportionate because they are applied only if doing so does not create a risk of serious injustice (section 10(6)(b) POCA). Those defending may be expected to pay a lot more attention as to whether the circumstances of their case might create a serious risk of injustice were these assumptions to be applied.

The rule established in R v May, preventing defendants setting off expenses incurred in obtaining their benefit from crime, is proportionate according to the Supreme Court, as is the rule allowing "double-recovery" in certain circumstances.

However, in mortgage fraud cases a proportionate confiscation order is "the benefit that the defendant has derived from his use of the loan, namely the increase in the value of the property attributable to the loan".

Consistent line

The Court of Appeal in recent years has repeatedly attempted to restrict and narrow benefit, an approach now approved in Waya.

The case of R v Shabir [2008] EWCA Crim. 1809 concerned a prosecution attempting to ignore the basis on which the defendant had been sentenced and inflate the benefit figure. Lord Justice Hughes viewed this as oppressive, disproportionate and reference was made to the HRA.

In R v Silvermann [2008] EWCA Crim 1736 Toulson LJ took the view that a defendant employee may contribute "significantly" to obtaining the benefit without obtaining it himself. In other words "an employee does not benefit".

Similarly, in R v Grainger [2008] EWCA Crim 2506 Toulson LJ confirmed "the moral is that in such cases it is essential to look to see what the real benefit the offender has obtained and to examine the evidence relating to it in order to arrive at a fair valuation".

A year later, the benefit approach was endorsed in R v Allpress [2009] EWCA Crim 8, where cash couriers were found to have no "right to possession". Toulson LJ confirmed "the focus of the inquiry is on the benefit gained by the relevant defendant, with the court relying on evidence and by drawing common sense inferences."

Finally, R v M [2009] EWCA Crim 214 concerned a defendant who had travelled abroad and loaded illegally imported tobacco onto a lorry to bring back to the UK. The prosecution suggested he should be subject to a confiscation order in respect of the evaded excise duty. Toulson LJ believed this appellant was "doing the donkey work". The confiscation order imposed was 100 (the money he was paid).

The Waya case concerned mortgage fraud but it has wider implications. Human rights are now centre stage. Wide concepts such as proportionality are live issues. Prosecutors will be expected to bring proportionate confiscations. The test now is: what is a fair or "proportionate" order? Two very different pieces of legislation, POCA and HRA, have been amalgamated. Lawyers now have the tools to defend oppressive confiscations and mould the confiscation order to meet the justice of the case.