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Confiscation and local authorities: resolving a tension

Money iStock 000008683901XSmall 146x219Following a recent decision in Norwich Crown Court, Andrew Campbell-Tiech QC and Richard Heller consider the problems faced by local authorities in recovering costs in significant confiscation cases.

As the budgets of state prosecuting authorities become increasingly stretched, the burden of prosecuting serious regulatory crime is falling upon the hard-pressed local authority.

Once seen as a minor adjunct of the criminal justice process, local authorities are all too often the only barrier between a certain type of fraudster and his public. Fraudsters in all but name target vulnerable groups, particularly the elderly, who are offered goods and services at vastly inflated cost, buttressed by worthless and misleading guarantees.

These cases can be complex. Mis-selling is big business, and conducts itself accordingly. The controlling minds may disguise their interest through nominee directors within a corporate structure that is designed to discourage investigation.

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Complex cases are notoriously time-consuming and difficult to prosecute. They are also expensive.

Local authorities traditionally offset the cost of such prosecutions through the recovery of costs from the defendant. In appropriate cases, the authority will apply for compensation for victims. And the authority will rightly embark upon removing the proceeds of crime by instituting confiscation proceedings, which often prove to be the most effective punishment and deterrent.

But there is a problem.

By S.13(2) and (3) of the Proceeds of Crime Act 2002, the court ‘must take account of the confiscation order before it makes an order ...involving payment by the defendant other than... compensation’.

Costs are such an order. Therefore, the court may not make a costs order against the defendant before it makes a confiscation order.

Why does this matter?

It is a commonplace of confiscation practice that the assessment of benefit in any serious case involving two or more defendants is likely to be in a sum that exceeds the defendant’s available amount. This is the counter-intuitive consequence of the decision of the House of Lords in May [2009] 1 Cr.App.R (S) 31, where the court held that each principal to an offence benefits by the sum obtained by all.

By S.7(2)(a), the defendant will be ordered to pay a sum equal to his benefit unless he can show that the available amount is less. The available amount is the entirety of his assets.

The court has no discretion to order a lesser sum.

Therefore, successful large-scale confiscation proceedings will often preclude any order of costs made against the defendant, for the obvious reason that the defendant has no means left by which to pay them.

But Parliament went one stage further. By S.17 and S.18 of the Prosecution of Offences Act 1985 no public authority may recover its costs from central funds.

And of course, a local authority is a public authority.

Contrast the position of the private prosecutor, whose right to conduct confiscation proceedings has been upheld by the Court of Appeal in Zinga [2014] EWCA Crim 52. Since he is not a public authority, he may recover both the costs of trial and of confiscation from the taxpayer.

So the local authority, by seeking confiscation, may find that it cannot recover any of its costs. This constitutes a serious disincentive, and is clearly not in the public interest.

What about the Asset Recovery Incentive Scheme (ARIS) whereby up to 37% of the confiscated sum will be paid to the prosecuting authority?

The Home Office, in introducing this scheme in 2004, never intended it to be the sole means by which local authorities attempted to cover its costs. Nor is there any guarantee that it would. The difference between what a defendant is ordered to pay by way of a confiscation order and such lesser sum as is eventually recovered can, and often is, substantial. This too is a commonplace of confiscation practice.

What to do?

In a recent case involving three defendants convicted of substantial and chronic mis-selling after a 10-week trial, Judge Holt sitting at Norwich Crown Court acceded to a prosecution application to limit the assessment of benefit so as to permit an order for costs to be made against the defendants. Judge Holt expressly commended this course of action as reflecting the wider public interest, for he acknowledged that local authorities might be unable to pursue such complex cases in the absence of any mechanism for the recovery of costs.

He also observed that the defendants were fortunate, for had the legislation been applied to its full extent, the benefit flowing from their offending would have led to significantly higher assessments. But there would have been no assets left from which costs might be ordered.

Herein lies a tension.

The confiscation scheme sets out to remove all illicit gain and prevent any repetition of similar illegal conduct.

ARIS encourages local authorities to prosecute.

Yet if the authority does so to the extent contemplated, indeed demanded, by the Proceeds of Crime Act it may quickly find itself financially disabled from prosecuting other cases in the future.

How might this tension be reduced? There are two obvious routes. The first is to increase the local authority’s share of the ARIS pot. This would require no primary or secondary legislation, as ARIS is not a creature of statute. However, since the increase must inevitably lead to a decrease in the monies available to other stakeholders, it is likely to meet sustained resistance.

The second is to amend S.13 POCA so as to permit the payment of a prosecutor’s costs out of the confiscation order. This ‘tweak’ could have far-reaching and beneficial consequences for public authorities that have long been encouraged by the Home Office to deploy confiscation, yet have hesitated because of the real and continuing risk in costs.

Pending a change in the law, Judge Holt’s endorsement of the reasons for seeking a lesser order provides some comfort for those who take the decision to prosecute. They can do so knowing that thereby the wider public interest is best served.

Andrew Campbell-Tiech QC and Richard Heller are barristers at Dyers Chambers. They were instructed by Maxine Robins on behalf of the London Borough of Hillingdon in the Norwich case.

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