New Clause
10
Proceeds
of crime (criminal
lifestyle)
‘(1) Section 75 of
the Proceeds of Crime Act 2002 (c. 29) (criminal lifestyle) is amended
as follows.
(2) In subsection
(2)(c), for “six months” substitute “three
years”.
(3) In
subsection (3)(a)—
(a)
for “in the proceedings” substitute “prior to the
proceedings”, and
(b)
after “benefited”, insert “, and each of those
offences was committed after 24th March
2003”.
(4) In subsection
(3)(b)—
(a) for
“two separate occasions” substitute “three
separate occasions”, and
(b) after “benefited”, insert
“, and at least one of those offences was committed after 24th
March 2003 and before the date of any of the offences under section
6(2) of this Act”.
(5)
In subsection (4) for “£5,000” substitute
“£20,000”.—[Mr.
Hogg.]
Brought
up, and read the First
time.
Mr.
Hogg:
I beg to move, That the clause be read a Second
time.
The
Chairman:
With this, it will be convenient to discuss
amendment No. 169, in title, line 9, after
‘warrants’,
insert—
‘and in
relation to criminal
lifestyle’.
Mr.
Hogg:
This is the last occasion that I rise to my feet in
this debate. Therefore, may I begin by thanking you, Mr.
Benton, for the way that you have chaired this Committee, and may I,
through you, thank Mr. Bercow, who has also been a very good
Chairman of this Committee? I also thank the Public Bill Office for the
assistance that I have received. As you will have seen, Mr.
Benton, I have drafted a huge number of amendments. The fact that they
were in order and comprehensible owes a great deal to the Public Bill
Office, to which I am very grateful.
I thank the two Ministers
present—and the former Minister with responsibility for such
matters, the hon. Member for Bradford, South (Mr.
Sutcliffe)—for the courteous way in which they have responded.
They know that there is a lot of this Bill that I do not agree with, in
particular part 1. I shall be voting against it on Third Reading for
that reason, whatever my right hon. and hon. Friends do. May I also
thank my hon. Friends? It is always a pleasure to work with colleagues.
We do not always agree, but I always enjoy working with my hon.
Friends.
Having said
all that, I shall come to new clause 10. I am bound to say that I am
about to make the most boring speech that you have probably heard in
this Committee, Mr. Benton. The only thing that I would say
in its defence is that it will be brief, but dull it is—dull and
technical.
I would
like to make some preliminary points as I approach the task of
addressing new clause 10. First, I do not expect the Minister to accept
what I have drafted, nor indeed do I intend to put the new clause or
the amendment to the vote. My purpose is simply to point out that we
have put into legislation measures capable of causing injustice, and to
point out that the fact that the injustice is being done to those who
are proven criminals in no sense prevents it from being an injustice.
One can do injustice to criminals, and we need to keep that well in
mind. The problem, of course, is that one often closes one’s
mind to that injustice, because the people involved are proven
criminals.
My purpose
in moving the new clause is to interest the Home Office—or is it
now the Ministry of Justice?—in what I believe to be an
injustice, and also perhaps to get the Law Commission, in time, to
examine this matter. My interest in this issue was stimulated by a
professional case that I was involved with just a few weeks ago. I do
not expect members of this Committee to be familiar with the relevant
legislation. I make no complaint about that—nor was I, until I
became involved in that case. I will briefly tell the
Committee the facts of the case, which are necessary for the
understanding of the new clause. I was involved in the case on behalf
of a police officer who, rather surprisingly, was allowed to work
part-time as an estate agent. I am bound to say that I find that quite
remarkable. He did so with the authority of the Metropolitan police
commission. He was working two days a week as a detective and the rest
of the time he was an estate agent—very rum indeed. He was an
estate agent who owned a lot of property, in respect of which he
received a great deal of rent, most of it in cash. So this was a very
surprising situation indeed.
In any event, he was convicted,
on his own plea, of mortgage frauds, in respect of which he had gained
some £70,000. The offences were committed over about 12 months,
there were six relevant counts, and the conviction was on a plea of
guilty. My client was sentenced to a term of imprisonment of about
three years. I emphasise that the term of imprisonment was the
punishment. It should be distinguished in kind from confiscation, which
is intended to be not punishment but the removal of ill-gotten gains.
It is important to keep it in mind that confiscation is not intended to
be an additional
penalty.
12.15
pm
I want to focus
on the confiscation proceedings, which are the subject of the new
clause. The net worth of the officer after conviction was about
£500,000, once account had been taken of his debts, particularly
mortgage debts; because of the Proceeds of Crime Act 2002, it
is very likely that although his benefit from the fraud was
£70,000, he will be ordered to forfeit all his net worth. In
other words, following a conviction for an offence in which he obtained
£70,000, the probability is that he will lose all his net worth
of £500,000. The confiscation proceedings have not yet been
dealt with, but that is the likely outcome. That is the result of the
legislation, which is very complex.
There are lots of ifs, buts and
provisos, but for simplicity and brevity I will touch on just a few
bits of the relevant legislation, the 2002 Act, which was modelled on
the preceding drug trafficking legislation. Incidentally, I think the
criteria used ought to be different but in many respects they are the
same.
A court must
make a confiscation order when a person is convicted of an offence and
the court is satisfied that the defendant has a criminal lifestyle.
That is the effect of section 6 of the 2002 Act. To start with, the
court has to determine the benefit that the defendant has gained from
his criminal lifestyle and a process is embarked upon. It means, in
effect, that the value of all the benefits that the defendant has
received over a period of six years is to be deemed as benefit except
to the extent that he can show that he has obtained them honestly. One
takes an overall figure of the total benefit that he has received
during the relevant six-year period, discounts those that he can show
he has come by honestly, and the benefit that is left is regarded as
the relevant amount. If the defendant has net assets that are the same
or less than the benefits, he will be deemed to forfeit the
lot.
There are two reasons to fear
the injustice. First, one asks rhetorically what is a criminal
lifestyle, a definition of which is to be found in section 75 of the
2002 Act. It is not the only criterion, but it includes the following:
if in one set of proceedings the defendant was convicted of three or
more offences from which he has benefited or, alternatively or
additionally, if over a relevant six years he has been convicted on at
least two separate occasions of an offence from which he has benefited.
If either of those two situations applies, he is deemed to have had a
criminal lifestyle and the confiscation procedure grinds into
operation.
The court
will then examine the defendant’s financial dealings over the
previous six years and he will be deemed to have benefited from all the
revenue and benefits that he has received over that period except those
that he can show he came by legitimately. If his net worth is the same
or less than the deemed benefit, the entire net worth will be
forfeited.
The injustice
arises in the following respects. First, the presumptions arise on a
very inadequate basis. In my client’s case, they arose from the
fact that on a plea of guilty he was convicted of more than three
offences committed over a l2-month period. That was sufficient to
establish a criminal lifestyle. His gain from those offences was valued
at about £70,000. However, because of the deeming provisions of
the 2002 Act, the value of the benefits, assessed over a six-year
period, was over £1 million, which he could not immediately
explain. Because the net worth of the benefits is some £500,000,
he is liable to lose the lot. It is not right that the presumption
should come into play on such a fragile basis. Three offences over a
12-month period should not give rise to a rebuttable presumption that
his income over six years was gained from illegal activity, nor, in
such circumstances, should the court be able to oblige him to forfeit a
sum that is substantially in excess of the proven gain from the
offences for which he was convicted. Also, as a matter of natural
justice, the process should not be triggered by a conviction for three
or more offences on one indictment, when the defendant in question has
no previous conviction that would have put him on notice as to the risk
of confiscation. My new clause takes express notice of
that.
Those of us who
are on pay-as-you-earn—all of us here are—or who are in
receipt of regular dividend income, or who have to account to the
Revenue for the value added tax on all fees received, as I do as a
part-time barrister, have no great difficulty in establishing the
sources of our income and we have relevant documents to prove it.
However, we will see that another potential cause of injustice arises
if we put ourselves in the position of someone in the cash economy. The
cash economy can involve income either on a large or a small scale;
that person could be a plumber—that might be on a large scale
these days, but historically speaking it has been fairly
modest—or it could be someone like my client, who was receiving
enormous sums of money in rent from tenants. Within the cash economy,
it is quite difficult to prove sources of income comprehensively and
satisfactorily to the court, with the burden of proof resting on the
defendant. Therefore, while I suspect that my client’s sources
of income were in many respects lawful, he will be hard pushed to show
that they are so. As a result, he
will find that the court confiscates much more than it should, as a
consequence of the legislation that we have put in
place. I acknowledge
that my client is a proven criminal; I do not doubt that for a moment.
He pleaded guilty and there may be other crimes to his name, for all I
know. I also accept that he was not prepared to pay tax that he ought
to have paid, and that is another factor that no doubt comes into play.
However, I have the strong impression that, because of the way we have
framed the legislation, and in particular because we have used the
model of the Drug Trafficking Act 1994 to catch many other offences,
including mortgage fraud, we will require people to pay much more by
way of confiscation than is proper, and certainly much more than the
benefit that they have received from their unlawful
activity.
I return to
my original point, that confiscation is not intended to be an
additional penalty; it is intended only to remove ill-gotten gains.
That is in part to protect the public, and also because it offends the
public that criminals should retain their ill-gotten gains. We are at
risk of doing much more than removing those gains, however. The purpose
of the new clause and the amendment is to highlight that point, and to
try to get some sensible argument and discussion of whether we have
gone too far. In other words, it is to stimulate debate. I would be
quite content if it has that effect. I am not seeking actually to
change the law on this occasion and I shall not, for these purposes, be
pressing the new
clause.
James
Brokenshire:
I rise briefly to thank and to pay tribute to
the work of my right hon. and learned Friend the Member for Sleaford
and North Hykeham, in relation not only to the new clause, but to the
other amendments that he has brought forward during the Committee
debates, and to his contributions in support of the arguments that we
have advanced. He has made an interesting, well-considered point that
was well argued and well explained, as one would have expected based on
his contributions throughout. He raises an interesting point, designed,
as he says, to provoke debate. He has certainly done that today in
highlighting this issue and moving this new clause. We shall see how
the matter progresses, and I shall note with interest the
Minister’s response to his detailed legal arguments and the way
in which he set them out.
Mr.
Coaker:
I start by thanking the right hon. and learned
Member for Sleaford and North Hykeham for the measured way in which he
put forward his new clause, and for the important issues that he
raised.
The point
about trying to stimulate debate on some of the issues is important.
From what I have seen, both in power and in opposition in various
guises on councils, one might stimulate debate and a year or two or
three later, lo and behold, somebody somewhere takes notice. Victory is
not immediate, but it does sometimes arrive.
In its four
years of operation, the Proceeds of Crime Act 2002 has resulted in the
recovery of a considerable amount of criminal wealth. A record
£125 million was recovered in the past financial year. That
represents a substantial year-on-year increase and a fivefold increase
over the previous five years. That is a significant success, but we do
not want to rest on our laurels. We want to double the annual recovery
to £250 million by 2010. Confiscation following criminal
conviction is a core part of our efforts to deprive criminals of their
ill-gotten gains. The new clause, as the right hon. and learned
Gentleman points out, seeks to dilute the provisions that provide
important tools to ensure that that occurs. Under the
2002 Act, a court assumes that a defendant who has a criminal lifestyle
funds his entire wealth by crime. Consequently, the value of the
defendant’s assets is available to be reckoned into a
confiscation order. The alternative is for only the direct gain from
the offence of which the defendant was convicted to be available for
confiscation. As the right hon. and learned Gentleman pointed out,
criminal lifestyle is defined in several different ways. Some
defendants are found guilty of specific offences, such as people
trafficking and money laundering. Other criteria, based on the number
and pattern of prosecutions, tend to show that a defendant is a career
criminal.
The new
clause would amend the qualifying criteria. It provides that an offence
needs to have occurred over three years rather than six months. It
would also alter the test for deciding whether a person has engaged in
conduct that forms part of a course of criminal activity defined in
section 75(3)(a) of the 2002 Act. First, the conviction of three or
more other offences would have to have occurred prior to the
proceedings on which a confiscation order was
considered.
Mr.
Hogg:
May I just explain the reason for that? If the
Minister looks at the mandatory penalties for burglars, he will find
that there has to be a prior conviction that puts the burglar on notice
before the mandatory offence comes into play. That is the sort of
thinking that has informed the amendment.
Mr.
Coaker:
I thank the right hon. and learned Gentleman for
his further helpful clarification of his point.
Secondly, at least one of the
offences would have to have been committed in the period between 24
March 2003 and the date on which the offence giving rise to the
confiscation order was committed. There is also an existing safeguard
in that the criminal lifestyle test is met only if, in addition to
meeting the tests that I have set out, the defendant has benefited to a
certain monetary value. The new clause seeks to raise the threshold
from £5,000 to £20,000.
Experience of the operation of
the 2002 Act is that although the criminal lifestyle provisions have
been in force for four years, there has been no opposition to their
operation. Similar provisions operated in previous confiscation
legislation. The operation of the provisions has not, to our knowledge,
been challenged in the
courts.
I am convinced
that the tests set out are already high enough, and that only a career
criminal could qualify as having a criminal lifestyle. It is also
significant that even if a defendant was deemed to have such a
lifestyle, he would have the opportunity to show the court evidence
that his assets and property were not the
proceeds of crime. They would then not be subject to confiscation.
Furthermore, the courts have discretion on whether to include the value
of assets if there is a serious risk of
injustice. 12.30
pm
I
draw the attention of the right hon. and learned Gentleman and the
Committee to section 10(6) of the 2002 Act, which specifically states
that the court can ignore the value of assets if it believes that not
doing so could result in a serious injustice. It is also significant
that the courts are bound by the Human Rights Act to dispose of their
duties in a way that complies with the defendant’s rights under
the European convention of human rights. Again, I am unaware of any
human rights challenges having been brought under that
provision.
The
benefit figure of £5,000 is significant enough to catch career
criminals. I am confident that the concept of the criminal lifestyle
and the operation of those provisions in court are not draconian.
However, I am grateful to the right hon. and learned Gentleman for the
new clause, as it causes us to think again and to justify the
legislation continually. He said that he would not press the new
clause, but I am grateful to him for giving me the opportunity to reply
to the debate.
Mr.
Hogg:
I am grateful to the Minister for his reply. I would
be grateful if it caused his officials to ponder—and perhaps to
take account of the views of the judges.
I shall make two points. First,
on career criminals, I do not think the Minister is right. In the end,
it comes down to definitions. In my client’s case, the offences
covered 12 months or thereabouts, and although there were a number of
counts there was only one indictment. I would be inclined not to regard
a person who committed offences over a 12-month period as a career
criminal. I would take a different view if we were dealing with a man
who had committed offences over two, three or four years. That would be
different, but my case dealt with a range of offences, quite narrow in
compass, within a certain time frame. One needs to consider whether the
provision catches people who are not career criminals. That is my
view.
Secondly—it
is a small point about section 10(6) of the 2002 Act—there is a
settled authority on the matter. The courts are not entitled to
disregard the process, or indeed the sums, simply on the basis that is
unfair. Once they have embarked upon the process, it has to grind
through. They cannot simply say that the overall effect is unfair and
not do anything.
I
hope that we will give further thought to the matter. I recognise that
people like my client are not the immediate source of compassion or
sympathy. We are dealing with proven criminals. However, injustice can
be done even to proven criminals and it is the business of this House
to try not to do so. I beg to ask leave to withdraw the
motion.
Motion and
clause, by leave, withdrawn.
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