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Lord Goodhart: My Lords, would the noble and learned Lord agree that it would be perfectly possible for someone who was claiming that winnings were the result of gambling to provide a genuine paper trail which would show that he had won a substantial bet, but would fail to show that he had simultaneously made a large number of losing bets? Is not the right way to deal with that problem to make it clear that
winnings from gambling should not be regarded as providing an excuse for treating those assets as having been acquired by legitimate means?
Lord Goldsmith: My Lords, I am grateful for the spirit which moved that observation. But the ultimate proposition that the Government should say that proceedings of gaming are illegal and can be recouped by the state may surprise some people. The noble Lord's point tends to support rather than undermine my point; that is, if one simply allows a defendant to raise the possibility to discharge the evidential burden by saying, "I got it from gaming", for example, and then places on the prosecutor the obligation to demonstrate where it came from, it would defeat a lot of the object of the Bill.
The question was raised as to whether or not such a burden is compatible with the ECHR. There is no rule of the ECHR that reverse burdens are not legitimate; indeed, the cases to which my noble friend Lord Rooker referred in his opening address are exactly such cases. The cases of McIntosh and Benjafield to which the noble Lord, Lord Thomas, referred, are cases in which there is an actual reverse burden and they have been accepted by the highest courts, as has Phillips in the European Court of Human Rights itself.
The question of the family home was raised by the noble Baroness, Lady Buscombe, and the noble Lords, Lord Goodhart and Lord Kingsland. As was explained in another place, the difference in treatment between Scotland and England and Wales reflects existing differences in the law of those countries. The provision in Scotland replicates earlier Scottish confiscation legislation in the Proceeds of Crime (Scotland) Act 1995, which itself developed an earlier provision along the same lines in the Criminal Justice (Scotland) Act 1987. That in turn reflects the fact that under a 1981 Act—we are going back a long way—Scottish law provided a right to occupy the matrimonial home to spouses who were not owners or tenants and provided for the protection of occupancy rights in a way that is different from English law.
The difference in treatment reflects the difference in protection of spouses' rights in Scotland. Both propositions in a sense have an argument of principle in their favour. On the one hand, if these are proceeds of crime, why should they be capable of retention under any circumstances? On the other hand, it may be argued that family circumstances may justify the retention even of unlawfully obtained proceeds of crime. Both arguments, in principle, are justifiable positions to take. It does not seem to the Government that there is a way of immediately producing a common approach between them. However, we shall continue to reflect on the matter and to monitor the operation of all three parts closely in any event when the Bill is in force.
I turn now to the question of creditors. I can deal with this quite quickly in view of the hour. It was raised by the noble Baroness, Lady Buscombe. I draw a distinction between the position of secured creditors and that of unsecured creditors. Secured creditors—those who have an interest in the property—will, as the
Bill shows, be able to have their interest recognised and generally protected. But if all debts were given priority over confiscation what would be the consequence? Let me suggest at least two. First, spurious creditors would emerge claiming that they have a prior debt outstanding against the defendant. In reality they could be criminal associates of the defendant. That would be difficult to prevent and would greatly weaken the compensation system. Or defendants could acquire services on credit to defeat the confiscation process.An unsecured lender exposes himself to all sorts of risk. I accept that that would be one more risk, but not one of a different order. However, it may turn out that the person to whom he lent the money is unable to pay it back on this occasion because it turns out that his assets are the proceeds of crime.
The noble Baroness, Lady Buscombe, raised the question of potential double recovery. Under Clause 14 the court has discretion to take forfeiture orders into account, so that is a matter for the court. In cases where there is no forfeiture order, it does not seem right to take into account the purchase price of drugs. In any event, the limit on what the court can do relates to the amount of available assets—the money that the defendant actually has. That is an important observation.
The noble Lord, Lord Goodhart, asked why legal fees could not come from the restrained assets. As the House knows, the line taken by the Government is that legal aid will be available when it is not possible for legal expenses to be met. Legal fees should come out of assets that are not the contested proceeds of crime.
The noble Lord, Lord Thomas of Gresford, painted a dramatic picture of penalty being imposed on penalty, but under Clause 8 the court cannot make an order for confiscation that is greater than the available assets of the defendant. Therefore, the example that he gives is of someone against whom an order of the court has been made but who refuses to comply with it. That is the case in relation to other orders, fines and so forth.
Lord Thomas of Gresford: In my experience, if it is claimed that a person's recoverable assets are nowhere near the benefits that have passed through his hands, he is said to have hidden assets. That is the situation to which I was referring.
Lord Goldsmith: Those cases will be judged by the court, having regard to material that is put before it and subject to appeal. Therein lies the safeguard.
Generally speaking, civil recovery appeared to be supported by most noble Lords, save the noble and learned Lord, Lord Lloyd of Berwick. I start with the question of the classification of this part of the Bill. It is an important issue with important implications. Is it a criminal matter or a civil one? As a matter of domestic law, these will be civil proceedings. But that is not conclusive under the European convention. The Government's view, having regard to the factors that the European jurisprudence requires, is that on
balance this is civil and not criminal. The reasons are summarised in the memorandum from the Home Office which is printed in the Joint Committee's report.On the confiscation proceedings, the jurisprudence is crystal clear. Oddly—as some might think—but accurately they are civil, not criminal, in nature. That is the effect of the Benjafield case, the Phillips case and the McIntosh case; and that is why Article 6.2 provisions do not apply after there has been a conviction. The question is whether or not free-standing civil recovery is in a different position. The Government's view is that it is not. It is not a form of prosecution. The purpose is not to secure a finding of guilt, let alone a conviction or imprisonment. It focuses on property and how it was obtained. There is no necessary implication that the person holding it is guilty. Only property that has been unlawfully obtained, or funds obtained for it, can be recovered.
The elements of civil procedure apply in the process. That is why the Government take the view that it is civil in nature. There is much case law but now is not the time to debate it. The Joint Committee considered that the existing case law did not conclude the issue either way. However, the Government consider that the case law points much more strongly than was suggested by the Joint Committee, as does Irish case law. Similar legislation has been examined at the highest level in the Irish courts.
The second question is how civil recovery will operate. If the issue were criminal in nature there would be concerns about Article 7 of the Convention, but not if it is a civil issue. That is why the limited amount of retrospection that the Bill provides is justified in the Government's view.
Thirdly, I turn to the safeguards under this procedure and I invite noble Lords to consider them. The director has discretion as to whether to bring civil recovery proceedings. The burden of proof is on the director and civil recovery proceedings will be governed by the civil procedure rules. There will be protection for third parties who have an interest in the property, and those who have purchased for full value in good faith and without notice will not have to give it up. The court also has an important residual power not to include in a recovery order measures that are incompatible with rights under the ECHR. That is expressly set out.
As these are civil proceedings in the Government's view, the standard of proof is the civil standard of the balance of probabilities. All noble Lords who have experience in the courts will know that, in practice, the High Court requires more cogent evidence when a claim involves an allegation of criminal conduct than it would for that of negligence.
I emphasise the hierarchy. This is not being put forward as a soft option to prosecution. The Government have made it clear that the first priority will be a criminal prosecution and not civil recovery as an alternative to it.
The money-laundering provisions received some attention from your Lordships. These were debated in another place, and I look forward to the further discussions that we shall have in Committee. The noble Baroness, Lady Buscombe, referred to the training that all employers are required to provide under the Money Laundering Regulations 1993. The concern that the negligence offence is unfair overlooks the fact that the offence in Clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken.
In response to a question from the noble Lord, Lord Goodhart, the Government have undertaken to strengthen NCIS's capacity to handle more suspicious transaction reports and have invested in ensuring that the systems are efficient and effective. No doubt we can provide the noble Lord with further information.
In conclusion, noble Lords have identified areas of the Bill that they wish to scrutinise. As always we welcome such scrutiny. We note that the Bill has been subjected to considerable scrutiny already, but improvements have been made. Certain matters, although looked at in detail by the Government, were not accepted. Subject to the changes that were identified by my noble friend, the amendments meet the concerns that have been raised. We all agree that the Bill is important. It should be proportionate—or just, to use the word of the noble Earl, Lord Mar and Kellie. The Government believe that it is and we look forward to working with your Lordships to ensure that the important principles of the Bill are not undermined, thereby making it unworkable. I commend the Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
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