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Lord Rooker: I understand that the issues raised in these amendments revisit an issue raised in the other place but in a different form. However, I cannot accept the principle behind the new clauses or the amendments. In practical terms their effect would be disastrous on the operation of the legislation.
The Bill recognises the rights of secured creditors to recover their security. A typical example would be where a person has an outstanding mortgage. It would be open to the mortgage company to apply for a variation or discharge of a restraint order under Clause 43(3) in order to recover the debt. There is also provision for such interest to be taken into account if a receiver is appointed at the realisation stage of a confiscation order.
Secured creditors are also protected under the legislation by the legislative steer in Clause 69(3)(a), which states that,
- "the powers must be exercised with a view to allowing a person other than the defendant or a recipient of a tainted gift to retain or recover the value of any interest held by him".
The only issue before us therefore is whether unsecured creditors should take priority over the settlement of the confiscation order. We do not believe they should. The new clauses provide that they should take priority. It is true that the unsecured lender will be exposed to a wide range of risks; the fact that the borrower may be subject to a confiscation order is only one of them. We are not inventing the risk in that respect. The borrower or recipient of goods or services may turn out to be insolvent, may die without leaving adequate funds in the estate, or may simply default.
The new clauses also overlook the consequences for other obligations to the Crown. For example, are members of the public who owe debts to be absolved thereby from the obligation to pay their taxes? There is an extension for which people would push. Are the courts to be able to require the state to pay the debts of criminals against whom fines, compensation orders, costs and other disposals have been levied? It is preposterous.
The amendment also overlooks the fact that the making of a confiscation order does not absolve the defendant of the obligation to pay his debts. There is no wipe-out of the defendant's debts just because there is a confiscation order. The debts remain payable. Even if the confiscation order takes priority, the defendant has to pay the debts after the confiscation order has been satisfied. In any case, the confiscation order may not consume all the defendant's property. No one has implied during any of our discussions today that that would necessarily be the case.
Lord Goodhart: I entirely understand that. That is why one of the conditions on which our amendment proposes payment should be dependent is that the inability to pay by the defendant derives from the confiscation order having been made. So if the defendant has other assets out of which to pay this order, then no order is made for payment out of the confiscated money.
Lord Rooker: I accept that. But that does not hold up, simply because, taken as a package, the clauses and amendments would have an adverse practical effect on the operation of the effective confiscation system. In a way the noble Lord, Lord Goodhart, touched on one aspect of that in his opening speech.
We would be setting up a system that invites claims from bogus creditors who in reality were associates of the defendant. A whole new industry would start up. It would be difficult to prevent and would greatly weaken the confiscation system. What is worse, it would make the legislation inoperable from the enforcement authorities' point of view. The enforcement authorities would undoubtedly be discouraged from pursuing confiscations with the threat of claims from unsecured creditors hanging over them.
The end result of the amendments would be to encourage defendants to defeat the confiscation process by running up legitimate debts, safe in the knowledge that the authorities would be left out of pocket at the end of any confiscation.
Of course, other assets are not taken into account in the amendments. That factor must also be noted. The amendments to Clauses 42, 123 and 196 would have a similar effect even before a confiscation was made, for reasons similar to those I have given. A restraint order currently prevents the defendant from paying his debts. That is how it should remain. For those reasons I hope that the proposed amendments will not be pursued. They are wrong in principle and in practice for the reasons I set out.
Viscount Goschen: Before the noble Lord, Lord Goodhart, responds to the Minister, does the Minister agree that this amendment highlights a potential situation where, notwithstanding the points made by the Minister in terms of bogus creditors and so forth, which the noble Lord sought to address within his amendment, the action of the state, in imposing a confiscation order, could force companies into bankruptcy because the party with whom they contracted was the subject of a major confiscation order which substantially changed their financial circumstances? Does the Minister feel, therefore, that it would be a just situation if, as a result of a confiscation order, a company which had contracted with the guilty party in good faith was forced into bankruptcy?
Lord Rooker: I would not want anyone to be forced into bankruptcy. But it is the way of the world. People are dealing with companies day in and day out. The fact is that the underlying principle of this legislation is to reduce crime by depriving criminals of the proceeds of crime. If anyone is going to make the claim that the whole economy, even for the good guys, is running on the basis of the bad guys, I cannot accept that.
Lord Goodhart: I am deeply disappointed, and indeed astonished, by the extent to which I received a negative reply from the Minister. A real problem exists here. It may not affect a great many people, but it will certainly affect some.
The Minister said that, of course, a creditor runs many risks—bankruptcy of the debtor, and so on—and of course he does. But if, as a creditor, I had given entirely bona fide credit to someone and the reason that I did not have that debt paid was because a confiscation order had taken away all the debtor's money, I should regard the state as having stolen that money from me. The Government should think again about the matter. I disagree that it will sabotage the operation of the scheme. It seems perfectly possible for the court to deal with the problem without a great deal of effort. Some effort would be necessary and entirely appropriate.
While today I beg leave to withdraw the amendment, it is likely that I shall bring it back at a later stage.
Amendment, by leave, withdrawn.
6.30 p.m.
Clause 11 [Assumptions to be made in case of criminal lifestyle]:
Lord Kingsland moved Amendment No. 21:
- Page 6, line 13, leave out paragraph (a) and insert—
The noble Lord said: I shall speak briefly to the amendment because its substance will be familiar to the Minister. It reflects a view espoused among others by Justice.
As the Committee is aware, reverse onus of proof clauses do not necessarily breach paragraph 2 of Article 6 of the European Convention on Human Rights. However, our courts have held that the imposition of a persuasive burden of proof on the defendant in respect of the crucial elements of an offence breaches paragraph 2 of Article 6. For example, in R v Lambert the Judicial Committee of your Lordships' House held that, in accordance with the principle of proportionality reverse onuses of proof clauses in the Misuse of Drugs Act 1971 should impose only an evidential rather than a persuasive burden of proof in order to comply with paragraph 2 of Article 6.
Although it may be open to the courts to interpret Clause 11 so as to impose an evidential burden only in accordance with the Human Rights Act, in my submission it should be clarified on the face of the legislation that the burden to be imposed is evidential rather than persuasive. Indeed, reverse onus of proof clauses in recent legislation have been expressly drafted so as to impose an evidential burden only following human rights concerns expressed in your Lordships' House and another place—for example, in Section 118 of the Terrorism Act 2000 or Section 53(3) of the Regulation of Investigatory Powers Act 2000.
In short, a similar provision in Clause 11 would help to ensure that the reverse onus clauses in the Bill are applied in accordance with the principles of the convention. I beg to move.
Lord Thomas of Gresford: In supporting the amendment, I speak also to Amendments Nos. 24 and 25 and their concurrent amendments in relation to Scotland. We are concerned also with the substitution of the legal or persuasive burden of proof as currently drafted with an evidential burden.
The general and sensible principle of litigation, whether civil or criminal, is that he who asserts must prove. It is difficult to prove a negative. Negative evidence is always circumstantial or indirect where a respondent must prove the existence of a fact, or a series of facts, which is or are inconsistent with the fact which his opponent is asserting and he seeks to disprove.
We have here in straightforward language a reverse burden of proof which, as the noble Lord, Lord Kingsland, said, always attracts the interest of the
"(a) the defendant adduces sufficient evidence to raise an issue with respect to the matter"
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