In a 640-page final report on the topic in November 2022, the Law Commission has made 119 recommendations to reform the process and substance of the regime related to confiscation orders in England and Wales; a draft bill to implement those recommendations is reportedly imminent. BCL partner, John Binns analyses the report’s background, its recommendations and the possible implications for criminal investigations in the future.
“Broadly speaking, its suggestions are practical and sensible in connection with the broader procedural aspects of the regime, but less so in connection with the substance of how the values of such orders are calculated.”
‘Tough on crime’
In policy terms, one of the main aims of the New Labour government that enacted the Proceeds of Crime Act 2002 (POCA) was to be (and to be seen as) ‘tough on crime’, including by ensuring that ‘crime should not pay’. The confiscation regime in Part 2 is rightly recognised as deliberately draconian in its pursuit of that aim, and this is reflected both in its legislative provisions and in how it has been interpreted and enforced. Among the considerations that took a distant second place were clarity, fairness (including to defendants’ families), and practicality.
The provisions of the regime reflect judges’ reluctance at that time to use their existing powers against convicted defendants, especially if they were sending them to prison. In reaction to that, POCA requires judges at the Crown Court to make orders that require such defendants to pay either the ‘benefit’ they have obtained from criminal conduct, or their ‘available amount’ (if they can show that this is smaller). The judge imposes a prison sentence (on a sliding scale, relating to the amount) in default, which can be activated by magistrates’ courts in enforcement proceedings.
The process for making confiscation orders can be fiendishly complicated, involving orders that require the defendant (and sometimes third parties) to provide information. On top of that, both the ‘benefit’ and the ‘available amount’ can be recalculated in further ‘redetermination’ proceedings. To prevent the dissipation of assets that may be used to satisfy an order, a ‘restraint order’ can be imposed from the outset of an investigation, assets may be seized, and/or receivers appointed.
A question of values
Unhelpfully, both POCA and the case law interpreting it go on to define both ‘benefit’ and ‘available amount’ in ways that lead to absurd results. ‘Benefit’ here means any ‘property obtained’, which for instance includes the full value of property that was obtained jointly or for someone else, as well as property that since has been seized or otherwise lost. In many cases it is also assumed (under the heading of ‘criminal lifestyle’) to include the value of anything the defendant has owned, received or spent since six years before proceedings started (the ‘relevant day’), unless they can show this is untrue or unfair.
‘Available amount’ also includes ‘tainted gifts’, which means any assets transferred at an undervalue to anyone since the day of the offence (or, in ‘lifestyle’ cases, since that same ‘relevant day’). The extent to which the the defendant fails to show that their ‘available amount’ is lower than their ‘benefit’ is often called a ‘hidden assets’ finding, although it is a ‘finding’ driven by the legislative provisions, not necessarily on the facts.
The net effect of all this (together with, as the report recognises, a ‘targets culture’ in the early days of the regime’s operation, and a hitherto unrealistic 8% rate of interest) has been a proliferation of increasingly high-value orders that have not been (in all likelihood, because they never realistically could be) enforced, exacerbating the strong impression that the regime is ineffective. Previous reforms have focused on increasing default sentences and making restraint orders easier to obtain. These recommendations aim more broadly to make the regime more efficient, fair and flexible, as well as to simplify it, and to improve its enforcement.
The first recommendation is to insert into a POCA a clear statement of the regime’s aim, namely ‘to deprive a [convicted] defendant of their benefit from criminal conduct, within the limits of their means’. This seems reasonable at first glance, but of course begs the question of how best to ensure the regime itself fulfils that aim.
Preparing for the hearing
The next few recommendations are also uncontroversial, and include:
(a) clearer sequencing and timetabling, including provision for fines etc to be imposed before the confiscation hearing;
(b) amending the Criminal Procedure Rules (Crim PR) to improve information exchanges, and to identify complex cases;
(c) establishing a non-mandatory system for Early Resolution of Confiscation (EROC), including meetings and hearings aimed at agreeing orders if possible; and
(d) allocating, pre-trial, cases where confiscation is likely to be complex to judges who have had appropriate expertise or additional training.
‘Benefit’ and ‘available amount’
The report is less clear-eyed in connection with quantifying ‘benefit’ and ‘available amount’. It recommends that:
(a) the court should first look at property ‘gained’ rather than ‘obtained’, and be able to disregard property it finds the defendant had ‘limited power to dispose of or control’;
(b) in cases of joint benefit, where the defendants’ respective shares are unclear, it should order each to pay an equal share (unless it would be in the interests of justice to order, as is now the default, each to pay the whole amount);
(c) various tweaks should be made to the rules on lifestyle assumptions, including to make clear that prosecutors have a discretion not to rely on them, and to broaden the scope of scenarios where the courts may find them to be untrue or unfair;
(d) various principles developed in case law should be codified, either into the Crim PR or POCA itself;
(e) the value of seized assets should be deducted from the ‘benefit’, to arrive at a figure for ‘outstanding benefit’;
(f) it should be made clear to defendants when orders are made that if their ‘available amount’ is lower than the ‘outstanding benefit’, the prosecutor may seek a redetermination in future, to claw back the remainder; and
(g) provisions in POCA itself should assist the courts to find whether there are ‘hidden assets’.
Discretion and judgement
Regrettably, the report does not propose a broader return of judicial discretion (or judgement) in this issue, to cater for scenarios where property was neither retained by the defendant nor used for their (direct or indirect) benefit – in other words, to put an end to the excessively technical approach to defining ‘benefit’ that has caused so many of the regime’s problems. This should also help in scenarios of joint benefit, for which an ‘equal shares’ assumption surely invites unjust results.
With respect to the ‘available amount’, the report’s discussion of ‘hidden assets’ does not appear to appreciate how that POCA requires such findings as a default. To make this a genuine judicial exercise, the court would have to find for itself what assets were either visibly available or ‘hidden’, albeit with some expectation that a defendant would bear some burden of disclosure or explanation.
Similarly, though the report recommends only a minor tweak to the ‘tainted gifts’ provisions, these too often cause injustice thanks to POCA setting its face against judges exercising judgement (and, some would say, common sense).
With respect to enforcement, the report’s recommendations include:
(a) a discretion for the Crown Court judge to make immediate or contingent enforcement orders, the latter if the defendant seems unlikely to pay, or where third party interests are involved;
(b) where there are related family law proceedings, an option to allocate confiscation proceedings to the High Court;
(c) new powers for the Crown Court or magistrates’ courts to make ‘confiscation assistance orders’, appointing a ‘suitably qualified person’ to assist defendants in satisfying their confiscation order; and
(d) a new bespoke power to direct a defendant to provide information and documents on their financial circumstances.
Of these, perhaps the most intriguing idea is that what confiscation defendants need is assistance from a ‘suitably qualified person’ (the nature of whose qualifications is unclear, but who would presumably be employed by the state) to help them pay off or pay down their order, rather than (for instance) access to a lawyer and adequate resources (including in prison) to do so in their own interests.
With respect to proceedings to recalculate the ‘benefit’ or the ‘available amount’, the report recommends that:
(a) the ‘available amount’ may only be increased if the defendant has assets that were not identified at the time of the order, or whose sale has realised more than expected (not, for example, from subsequent legitimate earnings or windfall);
(b) the power to apply to decrease the available amount be extended to designated officers of the magistrates’ courts;
(c) where the available amount is decreased, the benefit figure can be reduced as well; and
(d) confiscation orders can be ‘provisionally discharged’, where there seems no real prospect of recovery, or the only outstanding sum is interest.
Notably, (b) to (d) would enable the misleading statistics based on historic (outstanding and unrealistic) orders to be corrected.
With respect to restraint orders, the report recommends amending POCA:
(a) to add the requirement from case law that restraint orders should only be made where assets are at risk of dissipation;
(b) to add detail as to when a restraint order can be varied to allow payment of reasonable living expenses; and
(c) to remove the ban on variations to allow payment of legal expenses for defence of the case.
The last of these is of obvious interest to defence lawyers, but would also have far broader benefits, raising the efficiency, quality and safety of criminal and confiscation proceedings, while also lessening the pressure on the legal aid budget.
…And the rest
The report’s remaining recommendations include:
(a) enabling the Crown Court to appoint a receiver over detained (not necessarily restrained) assets;
(b) establishing a new Criminal Asset Recovery Board (CARB) to develop a strategy for these issues;
(c) where defendants have more than one confiscation order, enabling the court should be able to consolidate them; and
(d) amending POCA to make clearer the various routes of appeal.
A lot of the report’s recommendations do not need amendments to POCA. Many of the amendments suggested are to clarify or codify, rather than to make substantive changes, and many of the substantive changes are in the nature of uncontroversial ‘tidying up’. After a process that has already taken years, it is to be hoped that the daunting size of the project will not prevent those reforms being made without further delay.
Unfortunately, the changes that would be most likely to make a real difference are also the ones most likely to attract controversy. In a political climate where (even more than usual) criminal defendants and defence lawyers vie for unpopularity, reforming restraint orders to enable the former to pay money to the latter is frankly a tough sell.