Supreme Court revises confiscation order via A1P1

_41773060_mtic_carousel416x302R v Ahmad and others [2014] UKSC 36, 18 June 2014 – read judgment

A bit of a familiar refrain in which A1P1, the right to property, comes in and stops an order being made which would otherwise be lawful under statute: see my recent post here on the Eastenders case.

The case concerns confiscation proceedings following the conviction of two sets of defendants for carousel fraud.  A carousel fraud involves setting up a whole series of paper transactions to generate an apparent entitlement to reclaim VAT from the tax man: see the pic for an example. The VAT is repaid, at which point the money, and the fraudsters, disappear into the dust. But in these cases, they were found, prosecuted and confiscation orders made against the individuals to try and get the money back.

In the first case, the Ahmad defendants ran a company MST, and took £12.6m (£16.1m uprated for inflation) off the taxman. In the second, the Fields defendants got £1.6m (including inflation) via their company, MDL.

In each case, the order was made in those sums against each individual defendant. So each Ahmad defendant was ordered to pay £16.1m, even if some of that £16.1m was thereafter repaid by another defendant. It was this element of the order which the Supreme Court revised.

Under statute (the Criminal Justice Act 1988 applicable to these events or indeed the Proceeds of Crime Act 2002 which replaced it), a court has to answer three questions before making a confiscation order.

The first question is whether a defendant has benefited from the relevant criminal conduct.

The second question concerns the value, or quantification of the benefit.

The third question is what sum is recoverable from the defendant.

1. Benefit

The Court had no difficulty in concluding that the defendants had benefited from criminal conduct. The test under Section 76(4) of the 2002 Act is whether a defendant benefits from conduct because “ he obtains property as a result or in connection with the conduct.” “Obtains” in this context should be given a broad, normal meaning connoting a power of disposition or control rather than ownership – a thief does not “own” stolen property.

Where property is obtained as a result of a joint criminal exercise, it will often be appropriate for a court to hold that each of the conspirators “obtained” the whole of that property. However, where the evidence discloses separate obtainings, the judge should make that finding.

2. The value of the benefit

The second question: what is the value of the benefit? The Court said that even though a thief does not get ownership of property, the benefit should be valued at the market value of the property obtained, not because this represents the value of the thief’s legal interest in the goods, but because that is the value of what the thief has misappropriated.

3. What is the sum payable?

It was under question 3 that the A1PI point arose. The Supreme Court did not set out the A1P1 principles, outlined in Waya (see my post here) and in Eastenders (my post here). But it crisply concluded at [72] that

To take the same proceeds twice over from two defendants would not serve the legitimate aim of the 2002 Act and, even if that were not so, it would be disproportionate. The enforcement of an order for the confiscation of proceeds of crime that have already been paid to the state would violate A1P1. Article 1 of the First Protocol the European Convention on Human Rights, which protects the right to property.

This violation would occur at the time when the state sought to enforce an order for the confiscation of proceeds of crime which have already been paid to the state. The appropriate way of avoiding such a violation would be for the confiscation order made against each defendant to be subject to a condition which would prevent double recovery by the state.

As the Court noted, this approach may appear to risk producing inequity between criminal conspirators, on the basis that some may obtain a “windfall” because the amount of the confiscation order will be paid by others. But that is what happens if you are guilty of joint criminality. If the victim of a fraud were to sue the conspirators and to obtain judgments against them, he would be entitled to enforce against whichever defendant he most easily could. The losses must lie where they fall, and there is nothing surprising, let alone wrong, in the criminal courts adopting that approach.

Hence, in a case of joint obtaining the confiscation order should be made for the whole value of the benefit thus obtained,

but should provide that it is not to be enforced to the extent that a sum has been recovered by way of satisfaction of another confiscation order made in relation to the same joint benefit.

In theory a criminal court might therefore need to consider whether to stay the enforcement of a confiscation order made against one or more defendants to await the outcome of a later criminal trial against other defendants in respect of the same criminal conspiracy. However, except perhaps when a second trial is imminent this would not normally be appropriate.

Conclusion

A straightforward use of A1P1 to avoid an unjust result otherwise required by the statute.

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