Source: http://www.accountingevidence.com/blog/tag/residential-property/
Timestamp: 2019-04-26 02:40:37+00:00

Document:
The Serious Crime Act 2015 has introduced a new power enabling a Crown Court judge when making a confiscation order to make a “determination” of the extent of the defendant’s interest in any property which is likely to be used to satisfy the order.
In other words, where more than one person has an interest in the property the judge may ‘determine’ what proportion of the property belongs to the defendant at the time the confiscation order is made.
That determination will then, subject to limited exceptions, be conclusive in further proceedings taken with a view to satisfying the order.
The objective of such a “determination” under the new s10A Proceeds of Crime Act 2002 appears to be to facilitate the enforcement of confiscation orders by a conclusive ruling at the time the confiscation order is made on competing interests in assets which might need to be realised to satisfy the order. Previously such matters would not be resolved until a later stage – when enforcement proceedings against the defendant’s assets were underway.
But it remains open to the judge to make a confiscation order without making any “determination” – in other words to do precisely what he would have done before s10A was introduced. It is envisaged that in many cases that is exactly what will happen.
The new law, which came into effect on 1 June 2015, is to be found in sections 1 – 4 Serious Crime Act 2015.
Section 1 is the key provision, inserting a new s10A into PoCA 2002 setting into law the power to make a “determination” and the requirement that, before doing so, the court must give any “interested person” (meaning any third party whom the court thinks has, or may have, an interest in the property) a reasonable opportunity to make representations to it.
So where a judge is considering making a “determination” an “interested person” can be represented at the confiscation hearing, which is a new development in confiscation law.
As always in confiscation law, “property” means an asset of any description – not just land & buildings.
Section 2 deals with the provision of information to the court by the defendant (amending s18 PoCA 2002), the prosecutor (amending s16) and the interested person (inserting a new s18A).
Sections 3 & 4 deal with appeals & reconsideration. I deal with those aspects in ‘S10A PoCA 2002 determinations – appeals & reconsideration‘.
The idea is that when a convicted defendant is first required by a s18 order to provide information to the court for the purposes of confiscation proceedings he may also be required to provide information which would be relevant to a potential s10A determination. In other words he may be required to set out his assertions concerning the extent to which he is interested in assets in which he has a less than 100% interest. Presumably the court would wish at that stage also to be provided with the identities of any “interested persons”.
The court may at any stage require an “interested person” to provide information to it. New s18A enables the court to place upon an “interested person” similar obligations to those placed on a defendant under s18 – and with the same danger that where an “interested person” fails to comply with the court order the court may draw appropriate inferences.
The prosecutor is required to include in his s16 statement any information known to him which he believes is relevant to a possible s10A determination. This appears to be a mandatory requirement applying to all s16 statements issued after 1 June 2015.
Although there are no changes to s17, a defendant would be unwise not to respond to any relevant assertions in the prosecutor’s s16 statement with which he did not agree because his silence may be taken for agreement.
At the conclusion of the confiscation hearing the court could make not only a confiscation order but also a s10A determination of the defendant’s interests in specified assets (i.e. the proportion of each asset which belonged to the defendant).
If the confiscation order was not satisfied & matters proceeded to enforcement then, subject to the provisions relating to appeals and reconsideration already mentioned, enforcement could then proceed on the basis of the defendant’s interests in those assets as had been determined.
To better understand the issues let us consider a fictional case study.
Norman & Monica have been married for ten years & have two school age children. They jointly own their matrimonial home (as joint tenants) subject to a building society mortgage (also in joint names). They purchased their current home, Rose Cottage, 3 years ago.
Norman also owns a ‘buy to let’ property, Rainbow’s End, which is occupied by students at the local university. Norman bought the property 5 years ago in his sole name with the help of a secured bank loan (also in his sole name). Norman declares all the rents received from Rainbow’s End on his personal income tax returns.
Norman was recently convicted in connection with a drug trafficking conspiracy & is now subject to confiscation on the basis of a ‘criminal lifestyle’. The figure of his ‘benefit’ is undoubtedly going to be very large so the confiscation order will be limited by his ‘available amount’.
Norman’s ‘available amount’ will include his interests in Rose Cottage & Rainbow’s End. In relation to any s10A determination which the judge may be considering making in regard to those properties the “interested persons” appear to be Monica, the building society & the bank.
If the court is considering making a s10A determination it may issue s18A orders requiring Monica, the building society & the bank to supply information & must give each of them an opportunity to make representations to it.
In practice the interests of the commercial lenders are likely to be uncontroversial & it is unlikely that they will wish to be represented at the confiscation hearing. However there is a danger that the interests of the lenders in the properties may change between the date the confiscation order is made & the date the order is enforced. The new legislation does not appear to be designed to accommodate that possibility, particularly as the legislation refers to the defendant’s interest as a proportion of the value of the property itself, s10A(5).
An alternative approach might be for the court to define the ‘property’ to be dealt with by the determination as ‘Norman & Monica’s interests in Rose Cottage & Rainbow’s End’. That may enable some potential complications to be side-stepped but arguably would run counter to the natural meaning of the wording of s10A. Another option may be for the court to give a rather wide meaning to the word “proportion” in this context.
For the purposes of a s10A determination the court would then need to reach a conclusion as to whether Monica had any interest in the ‘buy to let’ property Rainbow’s End. That might depend upon whether Rainbow’s End was regarded as ‘matrimonial property’ in the sense that term is understood in the Family Court.
As a quite separate matter the Crown Court would have to consider, in the context of deciding Norman’s ‘available amount’, whether Norman had made any ‘tainted gifts’. It is possible that any interest Monica had in Rose Cottage and / or Rainbow’s End might be considered to have arisen by ‘tainted gift’ from Norman (which would mean that his ‘available amount’ would need to include the current value of the interest gifted by him & still held by Monica).
Suppose the Crown Court made a s10A determination that Norman had a 100% interest in Rainbow’s End, subject only to the interest of the bank as secured lender. If Monica & Norman were later to divorce would the Family Court be able to take account of the value of Rainbow’s End in the divorce settlement? Could it do so on the basis that, contrary to to the s10A determination in the Crown Court, Monica did have an interest in the property – whilst at the same time recognising Norman’s obligations under his confiscation order?
In such a case the Crown Court judge might consider the better course would be to decline to make any “determination” under s10A, leaving matters to be resolved if necessary in enforcement proceedings. Indeed even when legislating the government envisaged that the Crown Court would only make s10A determinations in relatively straightforward cases.
There appear to be no relevant express transitional provisions in the Serious Crime Act 2015 or the commencement order. However the practicalities are that a s10A determination cannot be made unless the “interested persons” have been identified & notified of the intention to make a “determination”.
For that reason, although the law came into effect on 1 June 2015, courts are unlikely to be making any s10A determinations just yet.
However I would suggest that all prosecutor’s s16 statements should now contain the information required by new subsection 16(6A) inserted by s2 Serious Crime Act 2015.
As yet I have detected no enthusiasm on the part of prosecutors for inviting the Crown Courts to make s10A determinations. This may be because of the extra complexity that this would bring to the proceedings involved in obtaining a confiscation order.
It remains to be seen whether, in the event, this new power is employed often in practice or left to gather dust in the statute book.
In one of its last acts the Office of Fair Trading has penalised three firms of estate agents for failures to comply with the Money Laundering Regulations 2007.
Estate agents based in the UK dealing with the sale or purchase of land or property fall within the ‘regulated sector’ for the purposes of MLR 2007 and, in the course of that work, are obliged to comply with MLR requirements.
The OFT penalised Hastings International UK Ltd (an estate agent in south London) £47,966; Jackson Grundy Ltd (Northampton) £169,652; and Jeffrey Ross Ltd (Cardiff) £29,000.
Train relevant employees in how to recognise and deal with transactions and other activities which may be related to money laundering and terrorist financing.
The MLR 2007 provide civil penalties for such failures.
These penalties will provide a wake up call to any other estate agents who are not properly implementing the anti-money laundering requirements. These penalties may be subject to appeal.
From 1 April 2014 the Office of Fair Trading has ceased to exist. Its responsibilities in relation to monitoring estate agents’ compliance with MLR 2007 have been passed to HM Revenue & Customs. HMRC already monitor the MLR compliance of certain other types of business including ‘money service businesses’, ‘high value dealers’ and those accountants who are not members of another supervisory body.
When the law changes can an appeal be made to the Court of Appeal outside the normal time limits?
Normally an appeal against a decision of the Crown Court in England and Wales has to be submitted within 28 days of the decision. But the Court of Appeal can give leave for an appeal to be heard where the deadline has been missed – and has done so in some cases where the deadline has been missed by months or even years.
Where a defendant has suffered a decision which, though it appeared to be well founded at the time it was made, now appears to be incorrect in the light of subsequent case law, what is the position regarding the submission of an appeal out of time?
This is an issue which arises from time to time – and may be particularly topical following the decision of the UK Supreme Court in the case of R v Waya  UKSC 51.
The general rule is that the Court of Appeal will not allow an appeal to be made out of time if the only reason for the appeal is that subsequent cases have shown the previous perception of the legal position was mistaken.
This was set out many years ago in the case of R v Mitchell  65 CAR 185 when it was said that, “It should be clearly understood, and this court wants to make it even more abundantly clear, that the fact there has been an apparent change in the law or, to put it more precisely, the previous misconceptions about the meaning of a statute have been put right, does not afford a proper ground for allowing an extension of time in which to appeal against conviction”.
That rule has been reiterated many times since. See, for example, the comment, “alarming consequences would flow from permitting the general re-opening of old cases on the ground that a decision of a court of authority had removed a widely held misconception as to the prior state of the law” from the case of Ramsden  Crim LR 547 and repeated, with approval, in the case of R v Ramzan & Others  EWCA Crim 197 at paragraph .
In the case of R v Cottrell  EWCA Crim 2016 it was said, at paragraph , “there is a continuing public imperative that so far as possible there should be finality and certainty in the administration of criminal justice. In reality, society can only operate on the basis that the courts administering the criminal justice system apply the law as it is. The law as it may later be declared or perceived to be is irrelevant”.
But there have been exceptions made to the general rule.
It does appear to be the case that where the Court of Appeal can be satisfied that a defendant has suffered a substantial injustice then it can be persuaded to hear an appeal out of time. In the case of Hawkins  1 Cr.App.R 234 the Court of Appeal commented that “the practice of the Court has in the past, in this and comparable situations, been to eschew undue technicality and ask whether any substantial injustice has been done”.
So, for example, where a defendant has been convicted of an offence of which, under a new understanding of the law, he could not now be found guilty – but the evidence shows that he must have been guilty of another similar offence (of which he had not been charged), then the Court of Appeal will generally not allow an appeal to be heard out of time. This was the position of a Mr Malik who had been convicted of conspiracy to launder money prior to the ruling in R v Saik  UKHL 18 (which changed the law regarding the conspiracy offence where there was merely a suspicion that monies were proceeds of crime). The Court of Appeal considered that there was ample evidence of the substantive offence of money laundering in Mr Malik’s case and refused him leave to appeal his conviction out of time.
In R v Charles  EWCA Crim 1755 the Court of Appeal said, at paragraph , “In practice judges and courts are probably not as reluctant to grant extensions of time as the authorities may suggest. It has been the experience of the members of this Court that consideration will usually be given to the merits before declining to grant an extension of time. Both in Jones (No. 2) and Asraf, the merits were considered notwithstanding the absence of any proper explanation for the delay. There are some cases, such as those where the applicant wishes to rely on fresh evidence unavailable at trial, where the extension of time will be readily granted. There are cases such as those envisaged in Hawkins where it will not be”.
Perhaps slightly different are cases where, because the law was not properly understood at the time, a key issue in the proceedings was not recognised and addressed in the Crown Court. This is illustrated by the case of Bell & Others v R  EWCA Crim 6.
Mr Bell was subject to a confiscation order made in 2007 after he had been convicted of being knowingly concerned in the fraudulent evasion of the duty chargeable on cigarettes contrary to section 170(2)(a) Customs and Excise Management Act 1979. The confiscation order was based on the amount of duty evaded when the cigarettes in question had been smuggled into the UK. But in fact it does not follow that a person committing this offence is himself liable for the duty and thus has ‘obtained’ a pecuniary advantage which would form the basis for a confiscation order. That had not been appreciated by the Crown Court at the time the confiscation order was made. In consequence the Crown Court had not addressed the question of whether Mr Bell was himself liable for the evaded duty and evidence relevant to that issue had not been obtained.
Subsequently the Court of Appeal had decided the case of White & Others v The Crown  EWCA Crim 978 which highlighted this issue. Mr Bell then lodged an appeal against the confiscation order made against him three years earlier.
Before the Court of Appeal it was accepted that, in fact, Mr Bell had not been personally liable for the evaded duty. The Court of Appeal granted leave to appeal the confiscation order out of time because “it would be a grave injustice not to grant leave”.
In place of a benefit of £157,775 based on the evaded duty, Mr Bell was made subject to a confiscation order of just £950 based on the payment he had received for his role in the smuggling offence.
We have yet to see whether the Court of Appeal will grant leave to appeal confiscation orders out of time following the decision of the UK Supreme Court in the case of R v Waya  UKSC 51.
The Waya case decided two points of principle: (1) confiscation orders should not be ‘disproportionate’ because that would infringe Article 1 of the First Protocol to the European Convention on Human Rights and (2) a mortgage applicant does not ‘obtain’ a mortgage advance (for confiscation purposes) if that advance is simply paid to a solicitor, acting on behalf of both the applicant and the lender, and then remitted to the vendor of the property being purchased (or his solicitor) – because the mortgage applicant does not at any stage gain ‘control’ of the monies advanced.
It may be that defendants who have been subject to a confiscation order which they consider is more severe than the Crown Court would have made had the decision in Waya been available at the time will now seek to appeal their orders. It will be very interesting to see how such appeals are dealt with by the Court of Appeal.
EDIT: A further article on the subject updates the position: Appealing a confiscation order out of time.
This article considers what is meant by a defendant’s ‘available amount’ and explains some of the rules the court must follow in determining the ‘available amount’.
In confiscation proceedings against a convicted defendant the Crown Court will ordinarily have to separately determine two figures – the ‘benefit’ obtained by the defendant and his ‘available amount’. The court will then order the defendant to pay an amount equal to the lower of these two figures (see s7).
This article is based on the confiscation provisions of Part 2 of the Proceeds of Crime Act 2002, PoCA 2002, which apply in England & Wales. Slightly different rules apply in Scotland and Northern Ireland. In earlier confiscation legislation the ‘available amount’ was referred to as the ‘amount that might be realised’.
Like a lot of expressions used in confiscation, ‘available amount’ is defined by PoCA 2002 and has a specific meaning which is not the same as the meaning of the expression in everyday English usage. A defendant’s ‘available amount’ is not simply the amount he has available to pay a confiscation order. Section 9 of PoCA 2002 defines ‘available amount’ as the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and the total of the values (at that time) of all tainted gifts.
Typically a defendant’s ‘available amount’ is the total of all his assets less any liabilities secured on those assets, plus the value of any tainted gifts. Take a simple example: John and his wife jointly own their home which is currently valued at £300,000, there is an outstanding mortgage currently of £260,000 on it, John has £1,000 in a bank account in his own name, he owns shares quoted on the London Stock Exchange which have a current value of £12,000, he owes £15,000 on credit cards, and he has £80,000 in a pension scheme (which he cannot currently access as he is aged only 45), five years ago he gave £10,000 to his son Jake. Let’s assume that for confiscation purposes John has a ‘criminal lifestyle‘. What is John’s ‘available amount’?
John’s ‘available amount’ is £43,000. This is made up of £20,000 as his half-share of the equity in his home, the £1,000 in the bank account, the shares worth £12,000 and the £10,000 gift to Jake. The mortgage is taken into account because it is secured on the property and so reduces the value of John’s interest in the house, see s79(3). The credit card debts are not secured on any asset and so are ignored. The pension scheme has a realisable value of nil because John cannot access it at present (see R v Chen  EWCA Crim 2669). The value of the gift to Jake is added in because it is a ‘tainted gift’ (see s77).
Let’s assume that the court has determined John’s ‘benefit’ to be £100,000. The court will order John to pay £43,000 (because this is his ‘available amount’ which is lower than his ‘benefit’) and can initially allow him up to three* months to pay (see s11). In default John may have to serve an additional term of imprisonment of up to 5 years*, because the amount does not exceed £500,000* (see s35(2A) PoCA 2002).
In practice John will have difficulty paying the £43,000 because the only money he has readily available is the £1,000 in the bank account and the £12,000 he can raise from selling the shares. He may need to sell the house in order to pay off the confiscation order in full. He should talk to his solicitor about seeking further time to pay and about requesting reconsideration of the ‘available amount’ if the house and the shares cannot be sold for the full amount of their valuation.
In law the burden is upon the defendant to satisfy the court that his ‘available amount’ is less than his ‘benefit’ (see s7 which says “if the defendant shows that the available amount is less than that benefit . . .”).
In practice the prosecutor will normally supply information about the defendant’s ‘available amount’ in his s16 statement. The defendant may feel that the information supplied by the prosecutor is incorrect or incomplete, but it is up to the defendant to supply the correct information.
If the defendant fails to supply information about his ‘available amount’ to the court, or the court is not satisfied that the information supplied by him is correct and complete, then the court might simply make an order that the defendant should pay the whole amount of his ‘benefit’. Indeed in the case of R v Barwick  EWCA Crim 3551 the Court of Appeal went so far as to say “once the benefit has been proved, it is permissible and ought normally to be the approach of the court, to conclude that the benefit remains available until the defendant proves otherwise”.
That was exactly what the English courts did in the case of Mr Barnham, R v Barnham  EWCA Crim 1049. Mr Barnham ultimately appealed to the European Court of Human Rights contending that the burden placed upon him to satisfy the court of his ‘available amount’ involved a breach of his human rights, but the European Court found against him.
However it does not follow that in every case in which the court is not satisfied that the defendant has made a complete and accurate disclosure of his ‘available amount’ the court will make a confiscation order in the full amount of the benefit.
It appears therefore that a Crown Court judge has some scope to weigh the evidence as a whole in coming to his own determination of a defendant’s ‘available amount’ where there is uncertainty about the true position.
Where, after the confiscation order has been made, it transpires that the defendant’s assets are less valuable than previously thought or, on realisation, they fail to produce the expected value, then the defendant may request the court to adjust his available amount. That will involve the court reconsidering the entirety of the defendant’s available amount – so that the values all the defendant’s assets taken into account in the confiscation order are reconsidered by the court.
It is possible for an appeal to be made against a confiscation order on the basis that the Crown Court judge has made an error in his determination of the defendant’s ‘available amount’.
There is a recorded case, R v Lemmon  EWCA Crim 1, in which a confiscation order was quashed on appeal when a professional residential property valuation obtained after the date of the confiscation hearing showed that the defendant’s ‘available amount’ had been overstated. However that decision may be specific to its facts. In particular it appears that in that case “the figures put as the value of his realisable assets were unknown to the appellant until the day of the hearing”. Ordinarily a defendant will be made aware of the prosecution’s assertions regarding his ‘available amount’ in advance of the Crown Court hearing, as they will be set out in the prosecutor’s s16 statement.
In the case of R v Davies  EWCA Crim 3380 a prosecution valuation of property (which proved to be an over-valuation) was not challenged at the confiscation hearing. Subsequently a professional valuation was obtained in a substantially lower figure and an appeal was lodged against the order. In the Court of Appeal defence counsel indicated that the valuation had not been challenged due to an oversight on his part. The Court of Appeal considered, at paragraphs  to , that the Crown Court judge had been misled as to the value of the property and it amended the defendant’s ‘available amount’ and hence the amount of the confiscation order.
As a result of amendments made to the Criminal Appeal Act 1968 by s140 Coroners and Justice Act 2009 it is now open to the Court of Appeal to remit confiscation cases to the Crown Court for re-hearing. However it would be unwise, I suggest, to assume that a failure by the defence to carefully consider the defendant’s ‘available amount’ at the time of the Crown Court hearing could always be remedied on appeal.
Mortgage fraud – but by whom?
Ted Kelly was no stranger to the inside of a police station or the Crown Court dock. He had had many brushes with the law, but being charged with financial crime was a new experience.
Ted’s home had been searched by the police more than once in the course of an investigation into serious crimes and the police had found documents concerning a buy-to-let property in Liverpool which Ted owned. A search at the English Land Registry turned up a mortgage from Borset Building Society and enquiries there revealed the mortgage application had been submitted online by a mortgage broker, Adrian Broke.
The mortgage application indicated that Ted was a self-employed joiner, trading as Kelly’s Joinery Services. Attached to the application were two years accounts for the business, prepared by Peter Addit & Co – members of a leading professional body of accountants, and signed both by Mr Addit and by Ted.
Ted’s self-employment came as a surprise to the police (who understood him to make his living from less legitimate activities) and, sure enough, a check with HM Revenue & Customs revealed that they had no knowledge of Ted’s self employment either.
“Gotcha!” said DC Lund to himself. To assemble his case DC Lund interviewed Adrian Broke and Peter Addit concerning their dealings with Ted. They confirmed that Ted had approached Mr Addit in June 2008 to have accounts prepared – just a simple Profit & Loss Account. Mr Addit had not been instructed to do any tax work for Ted. He assumed Ted wanted the accounts for his bank or was dealing with his tax himself. Ted produced his passport and driving licence (which Mr Addit photocopied) and had handed Mr Addit a list of work done and expenses from which Mr Addit had prepared the P & L account. The fee was less than £200.
The following year Ted had returned with a similar schedule and Mr Addit had produced the 2009 accounts for him then and there, for a similar fee. The net profit each year shown on the accounts was in the region of £40,000. At the June 2009 meeting there had been some discussion of a property purchase and Mr Addit had recommended the services of Mr Broke the mortgage broker (who was also a client of his).
Mr Broke confirmed that in July 2009 Ted had contacted him about obtaining a mortgage to buy a home for himself. He had produced his passport and driving licence (which Mr Broke photocopied) and two years accounts prepared by Mr Addit. Mr Broke had carried out a fact find and then recommended a mortgage from Borset Building Society and some life and critical illness policies as well as property and contents insurance. Ted had accepted these recommendations and Mr Broke had completed the mortgage application online based on the information and accounts Ted had provided.
Armed with these facts DC Lund arrested Ted, interviewed him, and then charged him with fraud by false representation in that he had dishonestly made a false representation to Adrian Broke that the accounts were true, with the intention of obtaining the mortgage advance, contrary to s2 Fraud Act 2006.
But Ted’s version of events was very different. He said he had never met Mr Addit, had never instructed him to prepare any accounts, and had never been self employed as a joiner. He had been wanting to buy a property in Liverpool to let out and his cousin had recommended the mortgage broker Mr Broke. Ted went to see Mr Broke. Although Ted had no regular employment Mr Broke had assured him this would be no problem. All that would be needed would be his passport and driving licence. Ted took these to a second meeting with Mr Broke who asked him to sign numerous documents – all of which he signed, without reading, where Mr Broke pointed. Mr Broke also took photocopies of his passport and driving licence.
Shortly afterwards the mortgage came through and Ted was able to purchase the property and let it out to tenants. The rental income more than covered the mortgage payments (which he always paid on time). Ted also found he was paying for some insurances by direct debit, and he cancelled those.
When the matter came to court DC Lund, Mr Broke and Mr Addit were called by the prosecution and gave evidence.
Under cross-examination Mr Broke confirmed that Mr Addit was his accountant, that he and Mr Addit referred clients to each other from time to time (but without any referral fee) and that he knew Ted’s cousin. He also confirmed that as a result of Ted’s property purchase he would receive payments from Borset Building Society, from the conveyancing solicitor whom he had recommended to Ted, and from the insurance companies. Had the mortgage not gone ahead he would have received none of these payments, which he estimated at less than £2,000 in total. But he confirmed the statement he had given to DC Lund.
Mr Addit also confirmed the evidence in the statement he had given DC Lund. But under cross-examination he accepted that he had at first given the police a statement saying Ted had approached him initially for two years accounts to be prepared. That had been based on a mistaken recollection which he had corrected in his second statement. Mr Addit had not asked for, nor seen, any bills or receipts in relation to Ted’s self employment. He had relied on the schedule presented to him by Ted. He had returned the schedule to Ted and not kept a copy. Mr Addit had believed the accounts to be true based on the information supplied to him by Ted.
Indeed since Ted was no longer a client his files had been destroyed. Mr Addit had not sent Ted an engagement letter. Mr Addit had recently moved to a new computerised system and had not retained his diaries for 2008 and 2009. He had not contacted HM Revenue & Customs in relation to Ted’s self employment as he was not instructed to deal with Ted’s tax affairs.
It transpired that Ted had not paid Mr Addit for the preparation of either the 2008 or the 2009 accounts. In fact Mr Addit had not invoiced Ted for these accounts as he expected Ted to pay without an invoice. The only documentary evidence which Mr Addit held in relation to his dealings with Ted was the photocopies he had of Ted’s passport and driving licence (the same documents which Mr Broke had copied in July 2009).
He accepted that the date on which the 2008 accounts were shown as having been signed in June 2008 was a Sunday. He said the actual date of signing would be within a day or two of that.
The accounts were not prepared for tax purposes. The word “Allowable” which appeared against certain expense headings was on his standard word processing template for such accounts.
He denied however that he had backdated the accounts, or that he had prepared them on the instructions of Mr Broke rather than Ted, or that Mr Broke had paid him anything in connection with Ted’s accounts.
Immediately after Mr Addit had completed his evidence DC Lund asked him if he would still have on his computer system the Microsoft Word files for the 2008 and 2009 accounts. Mr Addit thought he could have and that he would be able to access them there and then using a Wi-Fi link from the court building.
When he did so it was discovered that the Word files for both the 2008 and 2009 accounts showed a ‘creation date’ on the evening before the day on which Mr Broke had filed Ted’s online mortgage application in July 2009. The creation dates were approximately two minutes apart. These files also each had a later ‘modified date’. In one case the modified date was approximately two hours later the same evening.
DC Lund passed this information to prosecuting counsel, and then it was passed on to defence counsel and the judge.
Mr Addit was recalled to the witness box and questioned about this. He maintained that in fact the accounts had been prepared earlier and that perhaps what was now being seen were Word files for later copies of the accounts. He denied that the later ‘modified dates’ showed that these were in fact the original working copies of the accounts.
That brought the prosecution case to a close. Whilst the jury were excluded defence counsel asked the judge to dismiss the case on the basis that Ted had ‘no case to answer’.
The judge agreed that the trial should be halted and Ted should be acquitted. The case against him had become so weak and tenuous that the jury could not possibly find that Ted had dishonestly represented to Mr Broke that the accounts prepared by Mr Addit were true – which was the basis on which Ted had been charged. What’s more there was a danger that the jury might convict Ted because they did NOT believe the prosecution witnesses and that was a possibility the judge was unwilling to countenance.
So, as things turned out, it was not necessary to hear any evidence from the defence witnesses (including myself). In any event the matters and issues which I had drawn to the attention of the defence team – and which had been set out in an expert witness forensic accountant’s report filed at court in advance of the trial – had largely been aired before the court already by defence counsel in his cross-examination of Mr Addit.
N.B. Names and certain other details have been changed to protect client confidentiality.
Just how is PoCA confiscation supposed to work?
The UK Supreme Court recently heard 3 days of complex legal submissions about a straightforward confiscation case. Four eminent counsel suggested half a dozen wildly differing figures for the benefit arising from a single mortgage fraud. Obviously the operation of confiscation under Part 2, Proceeds of Crime Act 2002 is neither simple nor straightforward. There is a conspicuous lack of clarity and certainty in the confiscation regime.
The appellant, Mr Waya, contested the finding of the Court of Appeal that he pay £1.11 million – R v Waya  EWCA Crim 412. That was a reduction on the figure originally ordered in the Crown Court of £1.54 million. His counsel suggested the correct figure was nil – or on an alternative basis it might be £0.255 million. Counsel for the prosecution contended the Court of Appeal had the correct figure. But counsel for the Home Department proposed a figure of £0.6 million and counsel for the Attorney General put the figure at £1.0 million. Each of these figures was said to be based on applying the same statute law to the undisputed facts of the case.
Mr Waya dishonestly obtained a mortgage advance which he used to purchase a flat. The flat went up in value . . .
The facts are these. Mr Waya dishonestly obtained a mortgage advance which he used to purchase a flat. The flat went up in value. He legitimately obtained a new and larger mortgage, repaying the first mortgage in full. The flat continued to increase in value. Mr Waya was convicted of mortgage fraud (in relation to the original mortgage), or more accurately he was convicted of obtaining a money transfer by deception contrary to s15A Theft Act 1968, and was then subject to confiscation under PoCA 2002. The sole question before the court was the amount of his benefit from the mortgage fraud (referred to as the benefit of his ‘particular criminal conduct’).
There were striking differences of principle in the approach of different counsel to the interpretation of PoCA 2002 as well as some different interpretations of the facts of the case.
Mr Waya’s counsel put forward four alternative arguments. Firstly he said that, on careful consideration of the facts, Mr Waya had not obtained anything when the mortgage was advanced since he had never been in control of the monies advanced. He was never in a position to use the monies for whatever he might have wanted (they could only be used towards the purchase cost of the flat).
Secondly, Mr Waya (if he did obtain something) had obtained something of no market value. He had not obtained a gift, he had obtained a loan. The obligation to repay was integral to the money transfer – and the market value of the combination of the monies advanced to him and the repayment obligation was nil. This result flowed from s79(3) PoCA 2002.
Thirdly the courts should not, Mr Waya’s counsel contended, take a ‘snapshot’ view (considering only what happened when the mortgage was advanced) but instead “the entirety of the transaction” had to be considered. The lender had been repaid in full and had lost nothing as a consequence of Mr Waya’s dishonesty. So, looking at the entirety of the transaction, there was no benefit for the purposes of confiscation.
Fourthly, as a final alternative, the courts should look to the ‘pecuniary advantage’ derived by Mr Waya in accordance with s76(5). He had been assisted in the purchase of the flat which had subsequently increased in value. His counsel had calculated the value of his ‘pecuniary advantage’ to be £255,000.
Mr Waya’s counsel conceded that his proposal that the court should look to “the entirety of the transaction” rested on his view that the House of Lords had taken something of a wrong turning many years ago in the confiscation case of R v Smith  UKHL 68 when it was said at para  that “subsequent events are to be ignored”. That may be correct where, in the drug trafficking legislation, the benefit for confiscation purposes was to be based on the ‘payment or reward received’ – but it was not the correct approach to confiscation under the Criminal Justice Act 1988 or PoCA 2002 provisions where benefit was based on what had been ‘obtained as a result of or in connection with the criminal conduct’.
In consequence, it was contended, very many confiscation cases had been wrongly decided by courts at every level in England & Wales since that time.
Counsel for the prosecution, on the other hand, contended that the Court of Appeal had come to the correct conclusion in respect of Mr Waya’s confiscation. Furthermore, with a very few exceptions, appeal courts had come to correct conclusions in confiscation cases over the years. It was right to ignore subsequent events. In particular the Court of Appeal had correctly decided in the case of CPS v Rose  EWCA Crim 239 that s79(3) should not have the effect of causing the victim’s interest in any property to reduce the defendant’s benefit in confiscation in connection with his criminal conduct – although there are no words to that effect in the statute.
Counsel for the Home Department and for the Attorney General suggested a slightly different principle to be drawn from the Rose case. This was that a defendant should not be entitled to rely on his own crime to limit the benefit of that crime for the purposes of confiscation. In consequence, it was contended a thief or handler of stolen goods was to be treated as if he had obtained the value of good title to the stolen goods and where, as a result of criminal conduct, property had been obtained jointly by offenders then each of them was to be treated as obtaining the value of the whole of the property jointly obtained. Again, of course, there are no words to that effect in the statute.
It will probably be 2 or 3 months before we will learn the Supreme Court’s decision in this case. [UPDATE – Judgment in the Waya case was handed down on 14 November 2012, see below.] But whatever that decision is I suggest that there will continue to be serious difficulties with the practical application of the confiscation regime – not least because this case did not touch at all on the consequences of the statutory ‘criminal lifestyle’ assumptions.
P.S. I have prepared a summary of the detailed legal submissions by counsel to the UK Supreme Court in R v Waya which is on Criminal Solicitor Dot Net HERE.
The Supreme Court has handed down its judgment in the case, which is discussed in a new blog post R v Waya – the UK Supreme Court judgment.

References: UKSC 
 EWCA 
 EWCA 
 UKHL 
 EWCA 
 EWCA 
 EWCA 
 UKSC 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 UKHL 
 EWCA