It is no secret that the Proceeds of Crime Act 2002 (“POCA”) is a significant and draconian piece of legislation. Not only does it place extensive onus on a defendant, but it is fundamentally complex.
Forfeiture and confiscation regimes have existed in England and Wales since feudal Europe and slowly culminated into the enactment of POCA which was given royal assent on 24 July 2002. It was enacted following the Cabinet Office’s Performance Innovation Unit’s report on recovering the proceedings of crime. The report considered that most crime is motivated by profit. What followed was the POC Bill 2001 and the POCA we have today which has sought to deprive criminals of the benefit of their crimes. POCA sets out the legislative scheme for the recovery of criminal assets including through confiscation orders.
Confiscation orders are, as is well known, orders against convicted defendants to confiscate the lower of two values between (1) the defendant’s benefit obtained from criminal conduct and (2) the amount available to the defendant to pay a confiscation order. The orders are ‘in personam’ (against the person) and not ‘in rem’ (against property). Thus, in effect, a defendant may have obtained assets through perfectly legitimate means but the assets can still be made subject to a confiscation order, in that they are available to satisfy it, if the defendant has benefitted from criminal conduct.
On 8 November 2022, the Law Commission published its report on the confiscation of proceeds of crime after conviction. The 2022 Law Commission Report aims to “simplify, clarify and modernise the law on confiscation by considering amendments to the current legislative regime and recommendations for the creation of a new confiscation regime through legislation”. One such aspect of the report is the calculation of benefit. A draft bill based on the report is due to be published this year.
Benefit under the existing POCA
Benefit, one might think, is simply an advantage or profit gained (as is defined in the dictionary). However, in the context of POCA, it is not quite so simple. Section 76 of POCA sets out what benefit is:
“(4) For the purposes of this Part of this Act 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.
(5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.”
Section 84 sets out the rules pertaining to property, including, section 84(2)(h) which states that references to “an interest” includes any right in property, including a right to possession. Currently, benefit has been interpreted by caselaw to be the gross amount passing through a defendant’s hands and is not reduced by any incurred expenses (May [2008] 1 AC 1028). The Supreme Court, applying civil property law principles, has read “obtains” broadly as ‘obtaining control’ (as opposed to owning): Ahmad [2015] AC 299.
The value of benefit is determined with reference to market value. The value of property at the time of the confiscation hearing is the greater of:
- its value at the time the defendant obtained it (adjusted for inflation); or
- the value at the time of the confiscation hearing of either the property obtained or, if the defendant exchanged it, the value of the property the defendant exchanged it for.
The Law Commission’s recommendations
Chapter 8 of the 2022 Law Commission Report considers the calculation of benefit under a chapter entitled “defining and apportioning benefit”. It recommends replacing the current method of calculating particular benefit with one which asks “whether the defendant has “gained” property as a result of the conduct.”
Recommendation 29 says:
“We recommend that the defendant’s benefit should be calculated according to the following rules:
(1) a defendant’s total benefit is equivalent to what the defendant “gained” as a result of or in connection with the criminal conduct for which they were convicted; unless
(2) the defendant proves or the court is otherwise satisfied that it would be unjust to make an order that the defendant’s benefit is equivalent to the gain, because the defendant has intended to have only a limited power to dispose of or to control the gain, the court may reduce the total benefit figure to an amount which reflects the limited power to dispose of or to control the gain.”
This, the report says, “would allow the court to temper a rigid calculation of the defendant’s gain which might lead to unjust outcomes”.
The Law Commission recommends (recommendation 30) that the definition of “gain” should include: (1) keeping what one has; (2) getting what one does not have; and (3) gains that are temporary or permanent.
So how does this improve POCA as it currently is in relation to benefit?
Well, the Law Commission say that the current law as to benefit is not satisfactory because it has created an uncertainty in the law, conflating whether benefit has been obtained with the value of the benefit and has given inconsistent outcomes. The example provided is that of drug couriers, who, obtain a possessory right over the drugs they are temporarily entrusted to carry. Under a strict interpretation of POCA, they benefit to the value of the drugs they temporarily carry. The courts, they say, have simply recognised the impact of the law being wholly unfair on the drug courier and have instead ignored POCA and asked whether the defendant has a power of control or disposition over the property (which drug couriers do not have). This application, the Law Commission says, is disingenuous. They say the test is not apt to cover:
- Property held on trust for another.
- Instances where the defendant has solely a reversionary interest in property (not too dissimilar to holding property on trust. The Law Commission gives the example of a bailment).
- Instances where the defendant has “tenuous control”. The example given here is the outcome in Mooney v HM Advocate – where the payment of rebates fraudulently obtained were paid by HMRC to customers and the defendant received a commission. The court considered that the defendant did not benefit only to the extent of the commission but “controlled the amount of her profit from crime by maximising the repayments to be made by HMRC… by her actions she was in control of the total sum disbursed by HMRC”.
Gain is a term already defined by the Fraud Act 2006 (section 5(3)) and the Theft Act 1968 (section 34(2)(2)(i)) as including “a gain by keeping what one has, as well as a gain by getting what one does not have.” The Law Commission also recommends that a gain, for the purposes of calculating benefit, can be temporary and permanent.
The addition of judicial discretion
The Law Commission has recommended a further aspect to calculating benefit which in effect permits a degree of judicial discretion. They say the court should make the order that the defendant’s benefit is equivalent to what the defendant has gained as a result of or in connection with the criminal conduct “unless the defendant proves or the court is otherwise satisfied that it would be unjust to do so because the defendant intended to have only a limited power to dispose of or to control the gain.”
They consider the onus ought to be on the defendant to satisfy the court that the benefit figure ought to be reduced. They also suggest that the court may even be satisfied of this from the evidence before it at trial and without more.
Perhaps this may remedy the impact of the calculation of benefit on the drug courier, for example.
Conclusion
So, in effect, the recommendations by the Law Commission do not merely improve fairness to the defendant. Rather, their recommended definition of benefit is also an attempt to simplify the legislation and provide clarity in law. The Law Commission says: “the court should ask, what did the defendant get from committing their offence that they did not have before?” Thus, the aim is to bring the existing case law in line with legislation rather than continue with a regime where the case law almost exists independently from the strict wording of POCA. The proposed means of achieving the outcome is perhaps clearer than before but it remains to be seen whether it will result in substantive differences in the calculation of benefit.
By Mai Holdom
