Quick Summary:
In this month’s newsletter, Director Kate McMahon and Senior Associate, David Jugnarian, examine the Court of Appeal’s latest judgment on private prosecutions and confiscation. In essence, the judgment allows for private prosecutors to utilise the draconian Proceeds of Crime Act 2002 which was enacted to strip criminals of their ill-gotten gains and allows for powerful and effective financial punishment of offenders.
Case:
R (Virgin Media Ltd) v Zinga [2014] EWCA Crim 52, [2014] All ER (D) 211 (Jan)
Firm Highlights:
Edmonds Marshall McMahon is mentioned in this Court of Appeal judgment as a UK firm specialising in bringing private prosecutions, and the judgment quotes the Fraud Advisory Panel “Factsheet” written by Edmonds Marshall McMahon. Our website is also quoted throughout the judgment. As the UK’s only specialist private prosecutor, we welcome this acknowledgement as leaders in this fast developing field.
Facts:
Virgin Media Ltd commenced a private prosecution against the defendant who was illegally selling set top boxes which allowed for free viewing of premium channels which viewers typically had to pay to watch via a subscription. It was estimated that Virgin’s lost revenue as a result of this fraud was £380 million.
The appellant was convicted of conspiracy to defraud and sentenced to 8 years imprisonment. Virgin proceeded to attempt to confiscate assets from the appellant.
This case and the subsequent appeal are unusual for the following reasons:
- This was a private prosecution;
- The Metropolitan Police Authority (MET) assisted the private prosecutor and obtained search warrants;
- It was not declared to the Court upon application for the search warrant that the matter would be a private prosecution;
- The MET arrested defendants for the private prosecutor;
- Virgin entered into an agreement with the MET whereby it promised 25% of any sums recovered under a compensation order would be paid to the MET;
- Virgin later abandoned its claim for compensation and solely pursued proceedings for confiscation (initially they sought to have compensation paid out of confiscation monies); and
- The MET provided assistance to the private prosecutor by using their confiscation investigation powers as accredited financial investigators to look into the defendant’s finances and into the financial benefit obtained by the defendant.
- The principal issues raised in this appeal was whether a private prosecutor was entitled to bring confiscation proceedings under the Proceeds of Crime Act 2002, even if it had no financial or other personal interest in the outcome. In addition to the principal issue, a second issue was raised as to the propriety of the agreement between Virgin and the Metropolitan Police Service.These issues were determined to be of some importance, for three reasons:
- There had been an increase in private prosecutions at a time of “retrenchment of state activity” in circumstances where the state had previously provided the funds to enable such prosecutions to be pursued by state bodies;
- The propriety of the agreement between Virgin and the Metropolitan Police Authority had to be considered in the light of the considerable reduction in funding available to the police; and
- There was an obvious and serious conflict of interest in Virgin’s position as a private prosecutor and as a company seeking very substantial compensation for its lost revenue through confiscation proceedings.
The Court of Appeal, Criminal Division, dismissed the defendant’s appeal and upheld that decision of the Crown Court: It was clearly held that private prosecutors may commence confiscation proceedings.
However, we understand that an appeal to the Supreme Court is under consideration, so this may not be the final decision in this case.
Why and how are Private Prosecutions Brought?
Prosecutions are regularly brought by arms of the executive and private citizens or companies. The right to bring a private prosecution is long established: its history is summarised in the judgments of Lord Wilson and Lord Mance in R (on the application of Gujra) v Crown Prosecution Service[2012] UKSC 52, [2012] All ER (D) 163 (Nov). When the CPS was created, the historic right to bring a private prosecution was expressly preserved by the Prosecution of Offences Act 1985, s 6(1).
What view did the court take as to the role of the prosecutor in confiscation proceedings?
The prosecutor’s role, public or private, is set out by the statutory steps in the 2002 Act.
Under the Proceeds of Crime Act 2002, s 6, confiscation proceedings may be commenced by ‘the prosecutor’. ‘Prosecutor’ is defined in s 40(9)(b) as the person the court believes is to have conduct of any proceedings for the offence. That definition obviously includes a private prosecutor. Thomas LCJ held that the definition at s 40(9) was applicable to the whole Act.
The Court of Appeal held that merely because private prosecutors will not be, and cannot employ, an appropriate officer under s 378(1), that does not mean they cannot participate as a prosecutor in confiscation proceedings. Private prosecutors may seek assistance from an appropriate officer and the mere fact that they cannot conduct the investigation does not impair their ability to participate fully in confiscation proceedings.
In our opinion, the judgment appears not to prohibit private prosecutors from preparing an open-source prosecutor’s statement under s 16, notwithstanding that they do not have the powers of investigation available to an appropriate officer. We have, and continue to, recommend this option to our clients who have been defrauded.
How did the incentive scheme in this case operate?
The incentive scheme operates in the same way in all cases, with 50 per cent of the proceeds of a confiscation order going to the Home Office, 18.75 per cent each to the prosecuting and the investigating authorities and 12.5 per cent to the Courts and Tribunals Service. However, it is possible to vary it in order to ensure compensation is properly paid to the loser. Initially in this case, 25 per cent of the compensation recovered by Virgin was also agreed to be paid as a donation to the Metropolitan Police. In accordance with the court’s powers under s 13, the court would then be able to pay out a proportion of the confiscated funds to Virgin in compensation, although Virgin later abandoned its claim for compensation. We consider this may have been done prematurely.
It appears that it was thought that there was no impropriety in Virgin properly remunerating the police to cover the assistance of an appropriate officer in the confiscation process privately prosecuted, however, it was acknowledged that the agreement entered into by the Police and Virgin “did run some of the risks identified by Gage J in Houndsham.”
Any compensation, remuneration or reward has to comply with the principle expounded in R v Hounsham [2005] EWCA Crim 1366, [2005] All ER (D) 406 (May) that confidence in the police ought to be maintained by avoiding arrangements that give the impression of preference being afforded to a paying victim of crime.
Under what power was the offer of the donation accepted? What is the extent of this power to accept financial contributions?
The donation was to be accepted under the Police Act 1996, s 93 (1), which provides that a police authority can accept gifts of money or loans in connection with the discharge of its functions. The Hounsham principle governs the extent to which there may be proper acceptance of financial reward by the police.
This is an area that, in our opinion, shall be explored more and more as we see funding cuts continue in the UK. At times, we consider there is a great advantage in the private sector funding the public sector, although only where the public sector retains independence and agreements are transparent.
Why would a company opt for a private prosecution instead of seeking civil redress?
Private prosecution is a cost-effective way of seeking both financial recovery and doing justice. It is typically faster and cheaper than pursuing the civil route. Financial compensation is more obviously enforceable. The Lord Chief Justice also notes that the costs of a private prosecution are more recoverable, ‘save where there is good reason for not [making an order], for example, where proceedings have been instituted or continued without good cause’.
What should lawyers take from this judgment?
Lawyers should ensure that arrangements with police into which they enter on their clients’ behalf are open and compliant with the principles in Hounshamand the relevant ACPO guidance (soon to be issued).
The increased success of public/private partnerships at the City of London Police and the Met, such as the Dedicated Cheque and Plastic Crime Unit and the Insurance Fraud Department, which are privately funded and publicly run, are indications that the police themselves recognise the importance of private funding assistance in these straitened times.
