Posted: 16 / 04 / 2020
These are very difficult times. What can be done where a confiscation order cannot be paid in full or on time – perhaps as a result of difficulties in selling a property or a fall in value of investments?
The normal situation
Under normal circumstances the Crown Court dealing with a confiscation will rule on the defendant’s ‘benefit’ and his ‘available amount’. Very often the ‘available amount’ will be less than the ‘benefit’ (perhaps very much less) and the defendant will be ordered to pay a sum, referred to as ‘the amount required to be paid’, which is equal to his ‘available amount’.
The court may order this amount to be paid immediately, or at a future date (often 3 months after the date of the confiscation order), or in stages over a period of up to 3 months.
On application by the defendant the time to pay may be extended, so that it expires no later than 6 months after the date of the confiscation order, but an extension beyond 6 months is not permitted, see s11 Proceeds of Crime Act 2002.
Where the amount required is not paid on time and in full, interest is added to the sum outstanding, s12. The interest is currently charged at 8% per annum – meaning that if, for example, the sum unpaid is £10,000 then interest of £800 per year (approximately £2.19 every day) will be added to the sum due.
A reduction in the ‘available amount’
Particularly where the defendant’s ‘available amount’ includes a value placed on an asset, such as a property, a car, an investment, or a business, which has to be sold, it may turn out that the asset is sold for less than the value which had been placed upon it at the time the confiscation order was made.
In consequence the defendant will be unable to pay in full the amount required under the confiscation order.
The defendant (or his legal representatives), or the prosecutor or a receiver acting under the order, may then apply to the Crown Court to have the confiscation order varied so that the amount required to be paid is reduced, s23.
The effect of a s23 application
An application under s23 requires the court to make a new calculation of the defendant’s ‘available amount’ on the day it decides the application, taking into account any new information on the valuation of the defendant’s assets and liabilities secured on them, s23(2).
If the court finds that the available amount (as so calculated) is inadequate for the payment of any amount remaining to be paid under the confiscation order it may vary the order by substituting for the amount required to be paid such smaller amount as the court believes is just, s23(3).
An example may make this clearer.
An example – Benedick’s s23 application
Benedick was made subject to a confiscation order on 8 January 2020. The order showed his benefit to be £500,000 and his available amount to be £100,000. A schedule attached to the order showed that Benedick’s available amount was based on a bank balance of £20,000 in an account in Benedick’s sole name, and 100% of the equity in 25 Acacia Avenue. The property was valued at £300,000 but there was an outstanding mortgage of £220,000, so there was £80,000 equity in the property. The Land Registry title showed Benedick to be the sole owner having absolute freehold title, subject to the mortgage.
At the confiscation hearing Benedick and his domestic partner Beatrice had argued that she was entitled to 50% of the equity in the property. The judge rejected that argument and ruled that Benedick was himself entitled to 100% of the equity.
Benedick had no other assets or secured liabilities, and had made no tainted gifts. His ‘available amount’ therefore was £100,000 (which is £20,000 plus £80,000).
The confiscation order made on 8 January 2020 showed the amount required to be paid by Benedick to be £100,000, of which £20,000 was due on 5 February 2020 (28 days after the date of the order) and the remainder was due on 8 April 2020 (3 months after the date of the order). A default term of 2 years was specified in the confiscation order, to apply if the order was not paid.
On 5 February 2020 Benedick paid the £20,000 which was due on that day.
However Benedick had difficulty selling the house and applied to the court for an extension of time to pay. The court fixed a new due date of 8 July 2020 for the remaining £80,000 (which was six months after the date of the confiscation order).
Benedick was unable to sell the house in time and failed to pay the £80,000 by 8 July 2020. From that date interest at the rate of 8% per annum was added to the £80,000 outstanding (amounting to approximately £17.53 every day).
In August 2020 Benedick agreed the sale of the house for £255,000. In September 2020 Benedick received the net sales proceeds. After paying off the mortgage and estate agent’s and solicitor’s fees, Benedick received just £30,000 from the sale of the property.
Obviously Benedick was then unable to pay the £80,000 plus interest which was outstanding under the confiscation order made on 8 January.
Benedick made an application to the court under s23.
The court heard the application on 27 October 2020. The court accepted that Benedick’s available amount on 27 October was only the £30,000 he had received from the sale of the property. (Of course he no longer had the £20,000 which he had paid over on 5 February.)
The court accepted that Benedick’s available amount of £30,000 was inadequate for the payment of the amount remaining to be paid under the confiscation order (which was £80,000 plus interest).
The court on 27 October 2020 varied the confiscation order by amending the amount required to be paid under the order, which originally had been £100,000, to £50,000 (of which £20,000 had already been paid).
At the same time the court varied the default sentence to 18 months under s39.
The effect is that if Benedick promptly pays the £30,000, no further sum will be outstanding under the confiscation order made on 8 January. (However this would not prevent the court from varying the order again at a later date, for example under s22).
Note that it would not be appropriate when making his application under s23 for Benedick to raise again the argument about whether any of the equity in the property belonged to Beatrice. If he, or Beatrice, wished to continue to argue that point they would need to do that via a different route (such as appealing to the Court of Appeal against the confiscation order made on 8 January). When a court is hearing a s23 application it is not re-hearing the confiscation case.
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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. There are a number of additional issues which could be relevant to a defendant’s confiscation proceedings in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)