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This article was first published on LexisPSL Crime on 24 April 2014. Click here for a free trial of LexisPSL.

Confiscation orders--issues of proportionality

24/04/2014 Crime analysis: When is a confiscation order 'disproportionate'? Discussing the judgment in R v King, David Winch, a forensic accountant specialising in crime and proceeds of crime, considers whether the courts continue to struggle with issues of proportionality in confiscation cases.

Original news
R v King [2014] EWCA Crim 621, [2014] All ER (D) 57 (Apr) The appellant sold vehicles as a private seller when they actually formed part of his business activity in order to avoid providing a warranty. He pleaded guilty to falsely claiming or creating the impression that he was not acting for purposes relating to his trade and was ordered to pay a confiscation order which represented the turnover of the sales of the vehicles. He appealed against that order. Dismissing his appeal, the Court of Appeal, Criminal Division decided that if a transaction was inherently unlawful because of the manner in which it was conducted, that finding would militate in favour of making an order that was directed at the gross takings of the business. In the instant case, the entire undertaking had been unlawful and making an order that had been directed at the gross takings of the business had not been a disproportionate result within the meaning of art 1 of protocol 1 to the European Convention on Human Rights (ECHR).

What is the background to this case?

No less than nine Supreme Court justices had in R v Waya [2012] UKSC 51, [2013] 1 All ER 889 unanimously concluded that Proceeds of Crime Act 2002, s 6(5)(b) should be read as if the words 'except in so far as such an order would be disproportionate and thus a breach of ECHR, art 1, protocol 1, were added after the words 'make an order (a confiscation order) requiring him to pay that amount'. The effect is that courts should not make confiscation orders in which the recoverable amount (the amount which the defendant is required to pay) is disproportionate. But when is the recoverable amount disproportionate? This, said the Supreme Court, 'requires examination of the relationship between the aim of the legislation and the means employed to achieve it'. The aim of the legislation was seen as 'to impose upon convicted defendants a severe regime for removing from them their proceeds of crime'. The Supreme Court judgment in Waya had limited the sweep of this by giving some examples of when orders may not be disproportionate, for example where they 'require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime'. In R v King, Mr King appealed against a confiscation order in the sum of 109,970 which represented the entirety of the sales proceeds of 58 motor vehicles which he had sold contrary to consumer protection legislation. The essence of his offence was that he purported to sell each vehicle as a private individual when in truth he was engaged in a trade.

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The sales of these vehicles were said to have generated a profit of only 11,140 for Mr King.

What issues did the case raise?

It was argued on behalf of Mr King that the confiscation order based on total sales proceeds was disproportionate. It was contended that Mr King had provided full value to the purchasers of the 58 motor vehicles and that the confiscation order should be limited to his profit. The appeal court was referred to the case of R v Sale [2013] EWCA Crim 1306, [2013] All ER (D) 367 (Jul) in which a confiscation order had been based on the profit generated from a contract obtained by bribery. The defence sought to distinguish Mr King's circumstances from those in R v Beazley [2013] EWCA Crim 567, [2013] All ER (D) 210 (Mar). In that case the offenders offered wheel trims for sale that were designed specifically for about a dozen different well-known makes of motor car and bore the logos of the car manufacturers. However, the relevant car manufacturers had not made any of the wheel trims, nor had they granted a licence to the offenders. The Court of Appeal in that case decided that a confiscation order based on the entirety of the proceeds of sale of the wheel trims would not be disproportionate.

To what extent is the judgment helpful in clarifying the law in this area?
In my view the courts continue to struggle with issues of proportionality in confiscation cases. New Court of Appeal decisions tend to add further complexities to the case law rather than providing definitive guidance on a consistent approach which could be of widespread application in the Crown Court. Perhaps the most illuminating paragraph in the Court of Appeal's decision in King highlights the lack of certainty in relation to cases of arguably disproportionate confiscation orders, where the court says (at para [32]):
'The authorities reveal there is a clear distinction to be drawn between cases in which the goods or services are provided by way of a lawful contract (or when payment is properly paid for legitimate services) but the transaction is tainted by associated illegality (eg the overcharging in Shabir or the bribery in Sale), and cases in which the entire undertaking is unlawful (eg a business which is conducted illegally, as in Beazley). When making a confiscation order, the court will need to consider, among other things, the difference between these two types of cases. It is to be stressed, however, that this divide is not necessarily determinative because cases differ to a great extent, but it is a relevant factor to be taken into account when deciding whether to make an order that reflects the gross takings of the business.'

In the event Mr King lost his appeal.

What are the challenges for lawyers acting in cases such as this?
The courts appear to be attempting to reconcile conflicting principles. On the face of it the statute law obliges courts sometimes to make very substantial confiscation orders following relatively minor offences (both Mr Waya and Mr King received a community sentence followed by a six-figure confiscation order). Nevertheless, the courts are seeking to avoid confiscation orders becoming fines or additional punishments (which could infringe human rights, particularly where the statutory 'criminal lifestyle' assumptions are triggered), while recognising that they should act as deterrent penalties. At the same time the Supreme Court appears to have been attempting to ameliorate the harshness of confiscation law while maintaining the validity of every dot and comma of earlier decisions, such as that in R v May [2008] UKHL 28, [2008] 4 All ER 97. Meeting all of these disparate aims is, in my view, a daunting task requiring judicial mental gymnastics of the highest order--and increasingly so with each new set of circumstances presented to the appellate courts. In the circumstances one can only sympathise with the lawyer who is tasked with explaining to the defendant what the courts mean by a disproportionate order and how this differs from the defendant's own interpretation, faced with what he might regard as an unfair outcome of his confiscation proceedings. Although a confiscation order self-evidently involves quantification of benefit in money terms, the criminal courts have had a long history of eschewing accountancy exercises in such matters, which can be traced as

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far back as R v Smith (Ian) [1989] 2 All ER 948, 89 Cr App Rep 235. This judicial steer has militated against limitation of confiscation orders based on the notion of 'profit' in criminal cases. Perhaps the figurework by the Supreme Court in its judgment in Waya will break the mould, encouraging judges to make use of their calculators. In the wake of Waya and subsequent decisions, a line of cases has started to develop in which there has been a focus on whether there has been 'full restoration' or something akin to 'full restoration', so that the apparent victim of the crime has, in reality, suffered no loss. In these circumstances limiting the confiscation order to the defendant's profit has been promoted as proportionate and an acceptable means of satisfying the court's conflicting aims. Hopefully lawyers in confiscation cases will continue to do what they have always done--argue their client's case making use of the most favourable case law available.

Do you have any predictions for future developments?

The position in relation to confiscation orders remains fluid. Neither Waya nor King were cases in which the defendant was deemed to have a 'criminal lifestyle', nor did either of these cases involve multiple defendants, although in Waya the Supreme Court did make some comments relevant to these situations. Further Supreme Court judgments in confiscation cases are expected later this year which hold the tantalising prospect of more fresh thinking and further upheaval. David Winch is a Director of Accounting Evidence Ltd. His particular strength is in criminal litigation, acting as the key expert, at different times, for both prosecution and defence teams in relation to criminal investigations. Interviewed by Kate Beaumont. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.