Proceeds of Crime Bill

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Mr. Wilshire: My understanding is that when bankruptcy proceedings are initiated, there is a pecking order that determines which creditors will get the money. It would be helpful to know where in the pecking order a particular creditor would come.

Mr. Ainsworth: Bankruptcy proceedings must be settled before any confiscation can take place. We are not changing the order of creditors within the bankruptcy proceedings.

Mr. Mark Field: I fully appreciate that, when bankruptcy proceedings have preceded a confiscation order, there should be preferred creditors—for example banks and mortgage companies—who would claim some of the assets. Is the Minister saying that non-secured creditors would hold themselves in a preferable position to the state in that regard?

5.15 pm

Mr. Ainsworth: The clause is not changing the bankruptcy proceedings. Those that have already commenced take precedence over confiscation proceedings. After the bankruptcy proceedings have been settled, the claim for compensation can be pursued. We are not proposing to unpick bankruptcy proceedings that have already commenced.

Mr. Field: My hon. Friend's concern is that there will be a significantly diminished pool if such a view is taken. If you have bankruptcy proceedings under way, unless it is preferred that creditors should have the first bite at the cherry, should there not be some variation? Surely, under confiscation proceedings, the state will face a significantly diminished pool or will the variation be on the whole sum? Will preferred creditors receive a share that will take account of the variation or will they receive their full amount in advance?

The Chairman: Order. I assure the hon. Gentleman that, although I took my wife Christmas shopping in New York at the weekend, I do not have bankruptcy proceedings under way.

Mr. Ainsworth: I am sorry, but I am not sure on what the hon. Gentleman is inviting me to agree with. If a defendant goes bankrupt before confiscation proceedings can be taken against him, the ability to confiscate any of the proceeds of crime will be reduced. That is self-evident. I do not know what more I can say.

Mr. Wilshire: I assure the Minister that I am not spinning out the matter. A real loophole is opening up, and I should be grateful if he would concentrate carefully on whether I might be right. He said that, in the event of bankruptcy proceedings being commenced before the order is made, they would flow and the order would come into effect on what is left thereafter. If that is so, and someone thinks that he will be charged or is part way through a court case and has a nasty feeling that he is about to lose, it would pay him to file for bankruptcy in attempt to get some of the money that could be confiscated shifted to a creditor where he might have an interest.

The Chairman: Order. I have been double-checking. We are dealing with variation orders. Bankruptcy is dealt with under part 9. If the hon. Gentleman wants to debate bankruptcy in detail, he should wait until we reach that part of the Bill. I understand the linkage difficulty, but that is in relation only to a variation of the order.

Mr. Wilshire: I am grateful for your advice, Mr. McWilliam. In the circumstances, I am sure that I have given the Minister due notice of such matters and by the time we discuss that clause, no doubt he will have an answer to my questions.

Mr. Ainsworth: The hon. Gentleman is surely right that, if someone is being pursued on a charge for which there may be substantial proceeds of crime, it may be in his interests to commence bankruptcy proceedings to frustrate the confiscation. There are other ways in which to dispose of the assets before the finalisation of the charges, but that is one of the reasons why we introduced the concept of restraint to the start of the proceedings. If restraint is applied before bankruptcy proceedings have commenced, that takes precedent. I do not know how, and in what circumstances, we could justly disregard bankruptcy proceedings that had already commenced ahead of any other proceedings that had even been started against the defendant. We have done what we can to close any possible loopholes, and we cannot go further than that.

Mr. Davidson: Notwithstanding the fact that the provision goes wider than bankruptcies, I should be grateful if the Minister could clarify the circumstances in which the court has reduced the amount to be paid by the guilty person. If it were found subsequently that a scam was being worked and that assets were being concealed, surely the court or prosecutor would still be able to return again to claw back money that had been evaded the first time by false declarations about bankruptcy or limited means.

Mr. Ainsworth: As we have exposed in previous confiscations, in theory the prosecutor can return within a six-year period if he thinks that the benefit was not calculated correctly and he can convince the court that there should be a revaluation of the benefit. That would also apply to the circumstances outlined by my hon. Friend the Member for Pollok.

Mr. Hawkins: I may have solved a potential problem for the Minister. He will note that, with one significant difference, the last two lines of subsection (3) are identical to those under clause 22(7), which my hon. Friends the Members for Spelthorne and for Beaconsfield and I were worried may be ambiguous. Subsection (3) states:

    ``it may vary the order by substituting for the amount required to be paid such smaller amount as the court believes is just.''

Substituting the word ``smaller'' with the word ``larger'' would solve the problem to which we referred when debating clause 22. Because the same words are used in the provisions, albeit with the addition of ``smaller'', there is no reason why we should not add the word ``larger'' under clause 22(7) and thus achieve the clarification that we wanted when the Minister kindly accepted that we were not trying to water down the Bill. I hope that my suggestion has been helpful to the Minister and his officials.

Question put and agreed to.

Clause 24 ordered to stand part of the Bill.

Clause 25

Inadequacy of available amount:

discharge of order

Mr. Grieve: I beg to move amendment No. 107, in page17, line 9, leave out paragraph (c).

The Chairman: With this it will be convenient to take the following amendments: No. 108, in page 17, line 24, leave out paragraph (b).

No. 109, in page 17, line 25, leave out subsection (5).

Mr. Grieve: Clause 25 concerns the circumstances when the court has made a confiscation order. If the order was calculated in respect of a currency other than sterling at the time when it was made, and the confiscation order was an attempt by the court to give a sterling valuation to the foreign currency concerned, what would happen if subsequently, due to fluctuations in the exchange rate, insufficient money was realised to reach the sterling equivalent?

In addition, clause 25 provides for

    ``any reason specified by the Secretary of State by order.''

I wish to flag up first with the Minister that it would be helpful for the purposes of our deliberations if he could say what contingency that provision is likely to cover. I am bound to say that, apart from the problem of the fluctuations in currency, I cannot immediately think of one. However, if stocks and shares are involved and it takes some time for them to be realised, a similar problem may arise.

It is noteworthy that the procedure is limited to in imbalance of less than £1,000, although it is also provided that the Secretary of State may, by order, vary that amount from time to time at his discretion. We may be creating an unnecessary bureaucratic problem for ourselves. Why do we need to limit the amount that remains to be paid to £1,000 in such a way? If the value of stocks and shares or the sterling value of a foreign currency is calculated, and it turns out that, after a time has elapsed, that value cannot be met, the court would have to be satisfied that the inadequacy in the amount was due to a ``specified reason'', and not to the defendant's procrastination.

If the court decides that the defendant has realised the assets with reasonable speed, why limit ourselves to £1,000? Why not delete all reference to £1,000, as my amendment suggests? That removes the need for the Secretary of State to vary the amount by order. We could then have a simpler procedure. Where is the potential injustice or disadvantage to the director in that?

The Minister may have many explanations, but in some circumstances, huge sums of money might have to be confiscated. Indeed, the Minister hopes that we will go after the Mr. Bigs. A fluctuation of £1,000 in currency values or the value of stocks and shares could easily occur, and if it did, what procedure would we adopt? Would we have to go back to court for a complete recalculation or would there be an appeal by one of the parties? That seems a ponderous process if the problem is entirely a question of currency exchange rates or share valuation. All that would be required would be for the court to be persuaded that currency and share issues were the trigger that had caused the inadequacy of the available amount.

Will the Minister justify subsection (1)(c) and consider whether the Bill would be improved by its deletion. The Minister nodded in response to my comments about subsection (4)(b), which mentions

    ``any reason specified by the Secretary of State by order.''

Amendment No. 108, which would delete subsection (4)(b), is in a different category from amendments Nos. 107 and 109. Provided that the Minister can reassure me that he is thinking of stock and share values, I shall be far less concerned about amendment No. 108 than the others. If subsection (4)(b) relates to the change in the value of stocks and shares, why not state that?

Mr. Hawkins: I want to add to the point made by my hon. Friend the Member for Beaconsfield, with which I agree. The Minister could talk a little about the link between the amount referred to in subsection (1)(c) and the amount about which the hon. Member for Orkney and Shetland will speak when we reach amendment No. 66 to clause 26. Liberal Democrat Members suggest that in clause 26(1)(c), the figure of £50 should be changed to £1,000. I do not wish to anticipate the hon. Member for Orkney and Shetland, but perhaps one reason why he chose £1,000 is because it is the amount that the Government have used in clause 25(1)(c). It would be silly if the Minister did not explain why that figure is used at that point.

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Prepared 27 November 2001