Posted: 17 / 07 / 2016
The revisiting of old confiscation orders by prosecutors under section 22 Proceeds of Crime Act 2002 is becoming more frequent.
This blog post considers the provisions of s22 and ways in which prosecution applications under s22 may be challenged by the defendant.
Section 22 is headed “Order made: reconsideration of available amount”.
WARNING – THIS IS A LENGTHY BLOG POST – APPROXIMATELY 3,000 WORDS
Reconsideration of available amount
Section 22 PoCA 2002 empowers the Crown Court to vary an existing confiscation order made under s6 of the Act. In effect it allows the prosecution to apply to the court for a further payment to be required from the defendant under an existing confiscation order where his available amount has increased since the original order was made.
This blog article does not consider variations to confiscation orders made under earlier legislation, such as the Criminal Justice Act 1988, Drug Trafficking Act 1994 or Drug Trafficking Offences Act 1986. Different rules apply under those Acts.
Nor are we considering the position of a person who has a new conviction and a new confiscation order is being made as a result of that.
We are considering the situation of a defendant who was made subject to a confiscation order, perhaps some years ago, at which time the court ruled that he had a figure of benefit which was higher than his available amount. At that time the court would not have ordered him to pay the full amount of his benefit. Instead the amount he was then ordered to pay would have been restricted to his available amount at that time. The figures of the defendant’s benefit, available amount and the amount he was ordered to pay should all be spelled out in the original confiscation order.
Under s22 the prosecutor asks the court to consider the available amount which the defendant has now and to order him to pay a further amount now towards his total benefit.
Let’s consider Jim’s case. Jim was subject to a confiscation order in September 2008. That order says that Jim’s benefit was £100,000 and his available amount was £500. Jim was ordered to pay £500 which he has paid. Today Jim owns a house with his wife. The house is worth £200,000 but there is a mortgage of £180,000. So Jim’s half share in the equity in the house is worth £10,000. Jim also has a car worth £6,000 but no other assets, so Jim’s total available amount today is £16,000.
The prosecution can ask the court under s22 to order Jim to pay a further £16,000 (or some other figure) by making a variation to the confiscation order made in September 2008, requiring a further payment now.
The legal ‘trigger’
The legal ‘trigger’ for a s22 variation is in subsection 22(4):-
“If the amount found under the new calculation exceeds the relevant amount the court may vary the order by substituting for the amount required to be paid such amount as –
(a) it believes is just, but
(b) does not exceed the amount found as the defendant’s benefit from the conduct concerned“.
The ‘trigger’ is in the first phrase – “If the amount found under the new calculation exceeds the relevant amount“. What that means is that a s22 variation can only be made where the defendant’s available amount now exceeds the available amount shown on the original confiscation order.
In Jim’s case it obviously does (£16,000 is more than £500) and so the court can consider making an order requiring a further payment from Jim now.
“Makes” v “varies”
Under s22 a court may “vary” an existing confiscation order – but it does not “make” a confiscation order. The legislation does not regard a variation to amount to the ‘making’ of an order. This can be seen most clearly in the differing provisions regarding default sentence when a court “makes” an order – see s35 – and when a court “varies” an order – see s39.
It follows that an order which has been varied under s22 is an order which was ‘made’ at the time of the original confiscation hearing, not at the time of the variation.
In these cases we can be looking back at figures determined by the court some years ago. Because of this s22 recognises the effect of inflation by subsection 22(7) which says:-
“In deciding under this section whether one amount exceeds another the court must take account of any change in the value of money.”
This is done by using the CPIH index published by the Office for National Statistics.
In Jim’s case the confiscation order was made in September 2008 when CPIH stood at 87.5. The latest figure (May 2016) is 100.8.
So uplifting Jim’s benefit of £100,000 it becomes equivalent to £115,200 and his original available amount of £500 becomes equivalent to £576 today.
So, strictly speaking, the trigger condition is whether £16,000 exceeds £576 – which of course it does.
The prosecutor will most likely ask the court to vary the original confiscation order so that Jim’s amount required to be paid is £16,500 – that is the £500 which he has already paid plus a further £16,000 payable now.
The prosecutor will point out that this amount (which when adjusted for changes in the value of money is equivalent to £16,576) is less than Jim’s total benefit (which when adjusted for changes in the value of money is £115,200).
Note that what the prosecutor should be asking the court to say is that Jim’s “available amount” is now £16,000 and that the confiscation order will be varied so that the “amount required to be paid” is £16,500, of which Jim has previously paid £500. In practice what prosecutors sometimes request is that the court says Jim’s “available amount” is £16,500 – but this would not be correct. It is important not to confuse the “amount required to be paid” with the “available amount” as this can lead to misunderstandings.
The burden of proof
An application under s22 is made by the prosecutor (or an enforcement receiver appointed under s50). It would appear that the burden of proof is on the applicant to provide information enabling the court to make a “new calculation” of the defendant’s available amount.
This contrasts with the position when the confiscation order was originally made (at which time the burden was on the defendant to show that his available amount was less than his benefit, by virtue of s7).
What is ‘just’?
Under s22(4) the court is to vary the amount to be paid to an amount which the court “believes is just.” What does that mean?
What is ‘just’ does not only mean what is ‘just’ for the defendant. The concept has regard to the legitimate interests of both sides.
I suggest that part of the process of deciding what is ‘just’ involves looking back at the figure of benefit previously decided by the court and considering whether that figure, in the light of subsequent legal developments, is either faulty because it was based on a misunderstanding of the law (as may have arisen, for example, in a case of mortgage fraud), or is an amount which it would now be considered disproportionate to order the defendant to pay in full (as may be the case, for example, where stolen property has been returned to its owner).
That will involve some detailed reconsideration of the basis on which the original confiscation order was made, which may involve re-examination of the basis of prosecution’s assertions regarding benefit which were set out in the original s16 statement insofar as the court accepted those assertions when making the confiscation order.
Where, in the light of the relevant law as it is understood today, the defendant would not now be ordered to pay an amount based on the whole of the benefit shown in the original confiscation order then, I suggest, it would not be ‘just’ to order a defendant to pay that amount now under s22.
So it is necessary, in my view, to consider the impact of case law such as R v Waya  UKSC 51 (proportionality and confiscation, mortgage fraud), R v Ahmad  UKSC 36 (recovery from co-defendants), R v Harvey  UKSC 73 (VAT and confiscation) and Boyle Transport (Northern Ireland) Ltd v R  EWCA Crim 19 (piercing the corporate veil) on the understanding of confiscation law, when considering an application under s22.
This does not mean that the defendant is appealing against the benefit figure in the original confiscation order. He is asking the court to consider what it would be ‘just’ for him to be ordered to pay now under s22.
[UPDATE: The case of R v Cole  EWCA Crim 888 (24 April 2018) in the Court of Appeal concerned a s22 application in a mortgage fraud case. The original confiscation order had been made before the Supreme Court decision in Waya and the benefit included the amount of the mortgage advance. The Court of Appeal restricted the further amount ordered to be paid under s22 in line with what the original benefit figure would have been had a ‘Waya-compliant’ approach been followed when the confiscation order was first made. In other words the Court of Appeal did take into account the decision in Waya when making the s22 variation.]
More broadly the court appears to have a discretion under s22 to consider what amount, in all the circumstances, it believes it would be ‘just’ for the defendant to be ordered to pay.
The Court of Appeal has held in the case of Padda v R  EWCA Crim 2330, “In that context, it is entirely appropriate for a court to consider such matters as the amount outstanding, the additional amount which might now be available for a further payment, the length of time since the original confiscation order was made, the impact on the Defendant of any further payment contemplated and indeed any other consideration which might properly be thought to affect the justice of the case.”
When the court is considering a variation to a confiscation order under s22 then – once the trigger condition has been satisfied – the court may order the defendant to pay a further amount of any size, large or small, so long as the total which the defendant is required to pay under the confiscation order (adjusted for changes in the value of money) does not exceed the total of his benefit (adjusted for changes in the value of money).
Strictly speaking, the only relevance of the defendant’s current available amount is in relation to determining whether the trigger condition is satisfied. In practice however the prosecutor is likely to suggest that it would be just for the defendant to be ordered to pay an additional amount which is the lesser of (a) his current available amount, and (b) the maximum which the defendant could be ordered to pay in relation to his total benefit.
The prosecutor’s s22 application and witness statement
Section 22 does not make express provision for a prosecutor’s statement in support of an application for a variation of a confiscation order. There are no express provisions akin to those found in s16.
Nevertheless the prosecutor (or enforcement receiver) will need to make a written application to the court and the likelihood is that he will append to that a witness statement which will be in some respects similar to a s16 statement. Rule 33.16 Criminal Procedure Rules 2015 applies to the service of the application and any supporting witness statement. It is likely that the defendant will want to respond to the application by way of a statement of his own before the court hearing.
Restraint orders and investigation powers
The prosecutor is entitled to apply for a restraint order, under s40(6), when a s22 application is to be made or has been made.
Where the court makes a restraint order it may also require the subject of the restraint order to supply information under s41(7) for the purpose of ensuring that the restraint order is effective.
However it appears that the investigation powers under Part 8 of PoCA 2002 are not available to a prosecutor applying for a s22 variation, because a s22 application does not appear to involve a ‘confiscation investigation’ as defined by s341(1).
[UPDATE: The Criminal Finances Act 2017 includes – at section 33 – an amendment to s341(1)(c) intended to make the investigation powers of Part 8 available to a prosecutor applying for a s22 variation. This came into force on 31 January 2018.]
There is no statutory time limit. This means that a s22 application may be made many years after the original confiscation order was made.
The correct process for the prosecutor
The correct process for the prosecutor is for him to closely follow the detailed requirements of s22.
The first step is to prepare the new calculation required by s22(3). This is like calculating the defendant’s available amount as if a new confiscation order were being made today. So that will be based on the defendant’s assets which he has today, less any liabilities he has today which are secured on those assets, plus any tainted gifts which he has made up to today.
This calculation does not include any assets which were included in his available amount at the time the confiscation order was made, but which he no longer has (for example because they were realised and used to pay a previous amount due under the confiscation order).
In Jim’s case (referred to above) that s22(3) calculation produces a figure of £16,000.
Then the prosecutor should ascertain the ‘relevant amount’ referred to in s22(8). In Jim’s case that is his available amount when the confiscation order was made, which is £500.
The prosecutor then needs to ascertain whether the s22(3) figure exceeds the s22(8) figure. In doing this he needs to have regard to the provisions of s22(7) regarding changes in the value of money. As we have already noted this means the figure of £500 is replaced by a figure of £576 for the purposes of this comparison.
Having ascertained that the s22(3) figure exceeds the s22(8) uplifted under s22(7) – that is that £16,000 exceeds £576 in Jim’s case – the prosecutor has satisfied himself that the trigger condition of s22(4) is satisfied. It is then appropriate for the prosecutor to request the court to require a further payment under the confiscation order.
The court will also need to know the figure of the maximum which the defendant can be required to pay under the order for the purposes of s22(4)(b). This is the original benefit, adjusted for changes in the value of money since the order was made. In Jim’s case the original benefit figure was £100,000 and after adjustment this is uplifted to £115,200.
As Jim has already paid £500 (which is uplifted to £576) the court should not require him now to pay an additional amount greater than £114,624.
In Jim’s case the prosecutor is likely to request that the amount required to be paid under the order be varied to £16,500 (of which Jim has previously paid £500) and that Jim’s available amount now be recorded as £16,000.
It is not unusual as a result of a s22 application for the order to be varied so that the amount required to be paid exceeds the available amount – that is perfectly proper. In Jim’s case, for example, the amount required to be paid is £16,500 and his available amount is £16,000.
In my experience prosecutors typically do not approach the preparation of their application under s22 following the steps I have outlined here, which are based on the wording of s22 itself. In practice the prosecutor will often fail to undertake the calculation required by s22(3), fail to take account of changes in the value of money as required by s22(7), and fail to consider whether the figure from the s22(3) computation exceeds the relevant amount from s22(8). In consequence the prosecutor may fail to take the court through the detailed requirements of s22 before inviting the court to vary the confiscation order.
A s22 application may be subject to a variety of challenges by the defendant.
The defendant may assert that the trigger condition has not been satisfied. Take the example of Bert who was subject to a confiscation order made in February 2012. In that order his benefit was held to be £90,000 and his available amount was £40,000. Bert was ordered to pay £40,000 which he has paid. The prosecutor now finds that Bert has £25,000 in a bank account in his sole name. Bert has no other assets, so his available amount now is £25,000.
The CPIH in February 2012 was 95.2. The latest figure (May 2016) is 100.8.
So uplifting Bert’s benefit of £90,000 it becomes equivalent to £95,294 and his original available amount of £40,000 becomes equivalent to £42,352 today.
So, strictly speaking the trigger condition is whether £25,000 exceeds £42,352 – which of course it does not.
It follows that the trigger condition is not satisfied and the court should not order Bert to pay a further amount now under s22.
A second area of challenge concerns the defendant’s available amount. Consider Charles who, according to Land Registry records, is the sole legal owner of Rose Cottage. The prosecutor values Rose Cottage at £250,000. There is an outstanding mortgage of £150,000. The prosecutor therefore asserts that Charles has an available amount of £100,000.
Charles may challenge this on the basis that he is not the sole beneficial owner of Rose Cottage and that the current value of Rose Cottage is less than £250,000. That challenge may have a bearing on whether the trigger condition is satisfied and on the value of Charles’ current available amount – with implications for any further amount which Charles may be ordered to pay now as a result of the s22 application.
A third area of challenge concerns what might loosely be described as ‘change of law’. In 2005 Peter was convicted of mortgage fraud in that he had purchased a house with a mortgage of £100,000 which he had obtained by giving false information on his mortgage application. Peter was subject to confiscation with a benefit of £100,000 (the amount of the mortgage advance) and an available amount of £20,000. He was ordered to pay £20,000 which he has paid. Peter now has £50,000 in a bank account in his sole name but no other assets, having sold the house some years ago (so his available amount is £50,000). He is subject to a s22 application.
Peter may challenge the application on the basis that it would not be ‘just’ to order him to pay £50,000 under s22 as, on a proper and just interpretation of the legal position, he did not ‘obtain’ the mortgage advance and, in any event, the mortgage advance has since been fully repaid to the lender.
The court would then have to consider what further sum, if any, it would be ‘just’ to order Peter to pay under the confiscation order. That may involve consideration of the price for which Peter ultimately sold the mortgaged property.
A fourth possible area of challenge concerns prosecution delay and Article 6(1) of the European Convention on Human Rights. Consider the case of Derek who was subject to a confiscation order in 2006. The court then found he had a benefit of £175,000 and an available amount of £25,000. He was ordered to pay £25,000 which he has paid. In 2011 the prosecution discovered that Derek was the sole owner of a property worth £200,000 which he had inherited from his father who died in 2009. No action was taken by the prosecution at the time. The file was reviewed in 2016 and an application was then made under s22.
Derek may challenge the application on the basis that it infringes his Article 6(1) rights in that the prosecutor has not brought the s22 application to court “within a reasonable time”.
Fifthly, a s22 application may be challenged on the basis that, taking everything into consideration, it would be simply unjust to order the defendant to make any further payment now – or that it would be unjust to require him to pay the full amount requested by the prosecution. It might be argued, for example, that it would be just for the defendant to be ordered an amount based on his bank balance but not any part of the value of the equity in his home or the value of assets he uses in his legitimate business. However such an argument would have to overcome the clear legislative policy in favour of maximising the recovery of the proceeds of crime, even from legitimately acquired assets. [UPDATE: For an example of this see R v Mundy  EWCA Crim 105.]
There may be other bases on which a s22 application may be challenged.
The provisions of s22 permit the court to vary the amount to be paid under the confiscation order, but do not expressly authorise the court to vary the original default sentence (which will have been based on the original amount payable).
Section 35 authorises the court to set a default sentence when it “makes a confiscation order”, not when it varies one. However s39 authorises the court to vary the default sentences in the circumstances detailed in that section.
One of the trigger conditions in s39 is that a confiscation order has been varied under s22 and the effect of the variation is to vary the maximum period of a default sentence applicable in relation to the order under s139(4) Powers of Criminal Courts (Sentencing) Act 2000.
Unfortunately when s35 was amended by s10 Serious Crime Act 2015 corresponding amendments to s39 were not made. The effect appears to be that the court can vary the default term in accordance with the table of default terms in certain circumstances, but only in accordance with the default terms set out in s139(4) Powers of Criminal Courts (Sentencing) Act 2000. These are the default terms which applied to confiscation orders made before 1 June 2015.
In other words, when considering a default term in the context of a s22 variation it is as if the changes to default sentences made by the Serious Crime Act 2015 had never happened.
Due date for payment & interest
Strictly speaking, s22 does not authorise the court to vary the due date for payment. Under s11 this is closely tied to the date on which the confiscation order is “made” (not the date on which it is varied under s22). Under s12 the defendant must pay interest on any amount which is not paid when it is required to be paid.
However it would appear to be a nonsense to charge interest, backdated to the date on which the confiscation order was originally made, on an additional amount. Such an interest charge might be considered to infringe the defendant’s rights under Article 1 of the First Protocol of the European Convention on Human Rights.
After a confiscation order has been varied under s22 is it possible to revisit it again at a later date? The short answer is ‘Yes’.
However on a subsequent revisit the ‘trigger’ condition will be interpreted as comparing the defendant’s current available amount with his available amount as determined on the most recent occasion on which an application was made under s22.
It seems clear that a defendant can appeal against a s22 variation where he considers the variation to have been wrong in principle or manifestly excessive (see Padda referred to above).
On the other hand, it does not appear that a prosecutor is able to appeal against the amount by which the court decides to vary a confiscation order on a s22 application, or a decision not to make any variation – but he is able to make a fresh application under s22 at a later date.
[UPDATE: In the case of R v Mundy  EWCA Crim 105 the Court of Appeal did grant the prosecution leave to appeal a Crown Court decision not to vary a confiscation order under s22. The basis for that leave to appeal appears to have been s31(1) PoCA 2002 which refers to an appeal where the Crown Court “makes” a confiscation order. Since the s22 application was a request to “vary” rather than to “make” a confiscation order, it is open to debate whether the prosecution’s appeal was validly made. In any event the Court of Appeal dismissed the prosecution’s appeal.]
There are a number of matters which will need to be carefully considered by prosecution and defence in connection with a prosecutor’s application under s22 for reconsideration of a defendant’s available amount.
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(Note: This article applies to confiscation proceedings under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. Appropriate professional advice should be sought in each individual case.)