Factual and Procedural Background
An appeal was brought by the Prosecutor against a confiscation order made by Mr Recorder Bromley-Davenport QC on 5 June 2018 under the Proceeds of Crime Act 2002 ("the 2002 Act"). The Respondent pleaded guilty on 13 September 2017 at the Crown Court at Manchester to five offences, four under the 2002 Act, and was sentenced on 2 October 2017 to concurrent suspended imprisonment terms. A confiscation order was made for the sum of £1,923.63, payable within three months, with a default sentence of three months' imprisonment.
The Respondent pleaded guilty to money laundering arising from undeclared income earned over ten years from cash-in-hand work and two businesses he controlled. The Respondent transferred £38,200 to his then partner, Ms Collinge, for her to purchase a council-owned property at a discount. This sum included £30,000 from proceeds of crime and a £9,000 loan from a cousin. The property was purchased mortgage-free by Ms Collinge, who was unaware that the funds were criminal proceeds and was not charged.
The confiscation proceedings agreed the benefit figure as £80,709.43 and accepted the monies given to Ms Collinge as a "tainted gift." The Recorder found that the Respondent had no legal or equitable interest in the property and that Ms Collinge would not realistically sell it due to financial and familial hardship. Consequently, the Recorder ruled that including the tainted gift in the confiscation order would be disproportionate and made an order only for the smaller sum of £1,923.63.
Legal Issues Presented
- Whether the Recorder erred in law by ruling that including the tainted gift in the confiscation order would be disproportionate under section 6(5)(b) of the 2002 Act.
- Whether the Recorder confused the question of whether property could be sold with whether it would be sold, affecting the proportionality analysis.
- Whether the possibility of appointing an enforcement receiver to recover the tainted gift was properly considered.
- Whether section 10A of the 2002 Act concerning third party interests impacts the making of a confiscation order including a tainted gift.
Arguments of the Parties
Prosecutor's Arguments
- The Recorder erred by equating the Respondent's inability to force recovery of the tainted gift with disproportionality.
- The Recorder wrongly treated the likelihood that Ms Collinge would not sell the property as certainty that the confiscation order would not be paid.
- The Recorder failed to consider that an enforcement receiver could be appointed to recover the tainted gift.
- The Recorder incorrectly inferred that the absence of means to pay meant the order would not be paid.
- The Recorder improperly considered the Respondent's obligation to repay the £9,000 loan.
- The Recorder lacked sufficient evidence to be affirmatively satisfied that the order would not be paid.
Respondent's Arguments
- The Respondent cannot legally or practically force recovery of the tainted gift.
- Ms Collinge would suffer homelessness and financial loss if forced to sell; it is unrealistic to expect her to do so, leaving no means to satisfy the order.
- The prosecution did not raise the appointment of a receiver before the Recorder; third party interests must be considered.
- The prosecution failed to identify any means by which the Respondent could discharge the order other than sale of the property.
- No evidence suggests the Recorder considered the Respondent's loan repayment obligation.
- The Recorder properly applied relevant authorities and section 10A of the 2002 Act, which requires third party rights to be considered at the confiscation order stage.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| R v Waya [2012] UKSC 51 |
Interpretation of section 6(5)(b) of the 2002 Act, requiring proportionality and reading the statute in compliance with Human Rights Act 1998. |
Established that confiscation orders must be proportionate to the statutory aim of removing criminal proceeds, not punitive fines. |
| R v Box [2018] EWCA Crim 542 |
Tainted gifts remain part of defendant's available property; no duty to avoid serious injustice when including tainted gifts. |
Distinguished on facts; absence of evidence in Box contrasted with live evidence in present case. |
| R v Johnson (Beverley) [2016] EWCA Crim 10 |
Clarified the tainted gifts regime purpose and the limited scope of proportionality exception; emphasized need for clear evidence to avoid statutory order. |
Supported the principle that tainted gifts must be included unless disproportionate based on clear, unassailable evidence. |
| R v Harvey (Jack) [2015] UKSC 73 |
Confirmed stripping out disproportionate elements (e.g., VAT) from confiscation orders to maintain proportionality. |
Supported the focus on proportionate recovery of criminal benefit. |
| R v Smith (Kim) [2013] EWCA Crim 502 |
Purpose of tainted gift regime to prevent dissipation of criminal assets by gifts that cannot be recovered. |
Emphasized that inability to recover gifts should not defeat confiscation orders. |
| R v Morgan [2008] 4 All ER 890 |
Disproportionality where defendant has repaid victim fully and has no criminal lifestyle. |
Illustrated cases where confiscation orders would be disproportionate. |
| R v Shabir [2009] 1 Cr App R (S) 84 |
Orders should be refused if wholly disproportionate and breach Article 1 Protocol 1 ECHR. |
Supported refusal of disproportionate confiscation orders. |
| R v Ahmed and Qureshi [2004] EWCA Crim 2599 |
Third party rights under Article 8 ECHR considered at enforcement stage, not at confiscation order stage. |
Confirmed that third party interests are primarily relevant during enforcement, not order making. |
| R v Jawad [2013] EWCA Crim 644 |
Referenced in context of proportionality but no specific principle summarized. |
Considered among authorities on proportionality without establishing new rule. |
Court's Reasoning and Analysis
The Court analysed the statutory framework of the 2002 Act, particularly section 6(5)(b) as amended by the Serious Crime Act 2015, which codifies the requirement that confiscation orders must not be disproportionate in relation to the statutory aim of removing proceeds of crime. The Court emphasized that the proportionality test is a narrow one, distinct from a general discretion or balancing exercise that might consider hardship or injustice to third parties.
The Recorder’s decision was found to have conflated the question of whether the property could be sold with whether it would be sold, improperly focusing on the likelihood of sale rather than the legal possibility. The Court rejected the Respondent’s argument that the property’s non-sale meant the confiscation order including the tainted gift was disproportionate.
The Court further held that section 10A of the 2002 Act, concerning third party interests, does not permit the Court to avoid making an order on grounds of hardship to third parties at the confiscation stage; such considerations arise at enforcement. The Court agreed with the Prosecutor that enforcement mechanisms, including appointment of an enforcement receiver with powers to manage and sell property, could be employed to satisfy the order.
It was an error of law for the Recorder to conclude disproportionality on the basis that the Respondent had no means to pay and that the property would not be sold. The Recorder’s reasoning was tainted by this error, leading to an incorrect refusal to include the tainted gift in the order.
Holding and Implications
The Court of Appeal ALLOWED the appeal by the Prosecutor.
The confiscation order was varied to include the tainted gift at the increased value of £41,409.56, payable within three months. The default sentence of three months' imprisonment in the event of non-payment was maintained. This decision clarifies that the proportionality exception under section 6(5)(b) must be narrowly construed, focusing on whether an order is a proportionate means to achieve the statutory aim, not on potential hardship or unwillingness of third parties to cooperate. The ruling affirms that enforcement mechanisms exist to address recovery issues and that the mere possibility that property may not be sold does not render a confiscation order disproportionate.
No new precedent beyond the direct effect on the parties was set by this decision.