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Lord Falconer of Thoroton moved Amendment No. 12:
- Page 5, line 3, at end insert—
The noble and learned Lord said: My Lords, in moving this Amendment perhaps I may speak at the same time to Amendments Nos. 13, 14, 16, 41, 42, 44, 70 to 72, and 74. These amendments to Clauses 8 and 10 and their equivalents in Parts 3 and 4 are technical changes relating to the calculation of benefit and the use of the assumptions. Unfortunately, the problem that these amendments are designed to deal with is very real and has come to light only recently.
We are concerned here with the narrow situation where a "general criminal conduct" confiscation order is being made against a defendant who has previously been the subject of a confiscation order. The problem does not affect defendants who are before the court for a confiscation order for the first time.
Provision is needed to deal with the narrow situation I have referred to because, as noble Lords will be aware, "general criminal conduct" means all of the defendant's criminal conduct at any time in the past. If the court were to make a "general criminal conduct" confiscation order now and a similar one was made against the same person five years ago, there would be a risk of double counting of all the benefit gained by the defendant more than five years ago, unless the Bill prevented it.
At present, Clause 8 prevents this double counting by providing that, if the court is making a general criminal conduct confiscation order, it must deduct any amount ordered to be paid under a previous confiscation order. So if the defendant's benefit from general criminal conduct is calculated now at £120,000 and a previous order was made for £60,000, the defendant can be ordered to pay only £60,000 this time. That is obviously correct.
Unfortunately, there is a technical problem connected with the operation of the assumptions, which means that the provision will not work as we would wish it in all cases. The problem is that Clause 8 as it stands requires the court to calculate the defendant's benefit from general criminal conduct afresh every time it makes a confiscation order. This means in practice in some cases where benefit has been exposed by the operation of the assumptions at the time of a previous confiscation order that the director and the prosecutor would have to prove that benefit to the court without the assistance of the assumptions. They might well find it impossible to do so.
If the authorities were unable to prove this earlier benefit, the clause as it stands would require the defendant to pay nothing. For example, if the operation of the assumptions exposed £60,000 worth of benefit in 1990 and the operation of the assumptions against different property today also exposes £60,000 worth of benefit, the clause would require the previous £60,000 to be deducted from the current £60,000, leaving the defendant to pay nothing. That is not the desired result. The mechanism should yield a total benefit of £120,000 this time round, from which the earlier £60,000 is deducted.
The amendments achieve this. They will require the court to accept the assessment of benefit made by the court that previously made a confiscation order against the defendant. This will relieve it of the unnecessary burden of revisiting the earlier benefit when it makes another confiscation order against the same person.
The amendment to Clause 10 and its equivalents deals with the fact that a previous confiscation order may have been made in the past six years. The amendments to Clause 8 require the present court to
Regrettably, these amendments are of more practical importance than may be immediately obvious. It is far from unknown for more than one confiscation order to be made against the same defendant. I beg to move.
On Question, amendment agreed to.
Lord Falconer of Thoroton moved Amendment No. 13:
On Question, amendment agreed to.
Lord Falconer of Thoroton moved Amendment No. 14:
On Question, amendment agreed to.
Lord Goodhart moved Amendment No. 15:
The noble Lord said: My Lords, this is the first of a number of groups of amendments which deal with what we see as a serious problem in this Bill, which is the total disregard by the Government of the adverse effect that it may have on bona fide creditors of persons against whom orders under the Bill are made and other innocent third parties.
In moving this amendment, I shall speak also to Amendments Nos. 24, 43, 54, 73, 79 and 136. This group of amendments aims to protect the position of creditors when a confiscation order, a restraint order or a civil recovery order has been made against their debtor. A defendant against whom the order under the Bill has been made may, for example, have commissioned building works from a local, small builder, thousands of pounds may be due under that
There are in fact two sub-groups of amendments in the group. Amendments Nos. 15, 43, 73 and 136 are new clauses which provide for compensation to be payable where a confiscation order or a civil recovery order has been made and where the circumstances specified in the clauses are satisfied. The noble Baroness, Lady Buscombe, and the noble Lord, Lord Kingsland, have put their names to all of those amendments. Amendments Nos. 24, 54 and 79 allow debts to a bona fide creditor to be paid out of the property which is subject to a restraint order. I accept that a confiscation order or a civil recovery order will not necessarily leave the defendant penniless, but in a number of cases they may very well do so.
I accept that the Government have legitimate concerns about the creation of bogus debts by which funds can be extracted from the estate of the defendant subject to the order. Our amendments are designed to cover both those points because before any compensation can be paid by the director out of the funds of the agency three things will have to be established. First, it will have to be shown that as a result of the order the defendant is in fact unable to pay his debts. Clearly, if the defendant is able to do so, he should be the primary source from which payment should be sought. Secondly, the debt must be one that has been incurred for full consideration. Obviously, we do not wish to enable bogus debts and artificially created debts to be used, as I have said, to extract money. So the existence of full consideration provided by the creditor must be shown. Thirdly, the creditor must have no reason to believe that a confiscation order or a civil recovery order is likely to be made so that if the creditor is aware of the possibility of an order then he is on notice of the existence of the risk. We accept that in those circumstances it is proper that he should bear that risk.
When these amendments were discussed at Committee stage the Government strongly overstated their case against them. The noble Lord, Lord Rooker, said in the debate on 22nd April:
In addition to that, what I cannot understand is the Government's attitude that somehow they have a moral claim to the proceeds of a confiscation order or a civil recovery order, which has priority to the claims of creditors. That is not so. In most cases confiscated property never belonged to the Government. In those cases where it did, such as criminal tax evasion, they have perfectly effective existing rights to get that property back. The purpose of the confiscation order is not to compensate the Government for any loss, but to impose a punishment on the defendant and a deterrent against the defendant and other possible
As I said in Committee, if I were an innocent creditor and found that the debtor could not pay because the Government had seized assets under a confiscation order, I would believe that, frankly, the Government had stolen my money and I would be right to believe that. The fact that a confiscation order overrides unsecured debts, even if the creditor can prove to the hilt that the debt was incurred for full value and in good faith, is completely unacceptable. I beg to move.
Baroness Buscombe: My Lords, I, too, wish to speak to the amendments proposed by the noble Lords, Lord Goodhart and Lord Thomas of Gresford. My noble friend Lord Kingsland and I have added our names to Amendments Nos. 15, 43, 73 and 136.
As the noble Lord, Lord Goodhart, said, these amendments would allow an innocent creditor to make a claim for compensation if it is made within one year of the confiscation order. These are sensible and reasonable proposals. The creditor must be innocent of the activities of the defendant and the amendments assist only those creditors where the debt is for full value and cannot be paid in the normal way by the defendant because of the confiscation order. This right will occur only if the confiscation order has mopped up all of the assets. If there are any assets left, it is only right and proper that the debt should be paid in full.
I support the noble Lords, Lord Goodhart and Lord Thomas of Gresford, in Amendments Nos. 24, 54 and 79, which concern restraint orders. Surely there ought to be an exclusion for the purpose of meeting legitimate debts. Indeed, these amendments foreshadow amendments that we have proposed in relation to insolvency in Part 12 of the Bill. We question whether it is right that innocent creditors should lose out to the Consolidated Fund.
It is important that we briefly revisit, as the noble Lord, Lord Goodhart has done, the debate in Committee, where the noble Lord, Lord Rooker, stated that if similar amendments were accepted,
This goes to the heart of a weak argument. The courts are perfectly capable and perfectly astute in dealing with false claims. They are able to decide which
I agree with the noble Lord, Lord Goodhart, that such arguments strongly overstate the position and accentuate the weakness of the Government's case.
"(2A) Subsection (2B) applies if—
(a) the conduct concerned is general criminal conduct,
(b) a confiscation order mentioned in subsection (3) has at an earlier time been made against the defendant, and
(c) his benefit for the purposes of that order was benefit from his general criminal conduct.
(2B) His benefit found at the time the last confiscation order mentioned in subsection (2A)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time."
Page 5, line 10, at end insert—
"(3A) But subsection (3) does not apply to an amount which has been taken into account for the purposes of a deduction under that subsection on any earlier occasion."
Page 5, line 21, at end insert—
"(5) The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (4) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person's benefit from the conduct."
After Clause 9, insert the following new clause—
"COMPENSATION OF CREDITORS
(1) Any person who was a creditor of the defendant at the time when the confiscation order was made may, within one year of the date of the order, make an application to the court for compensation.
(2) The court may require the enforcement authority to pay compensation to the applicant if it is satisfied that—
(a) as a result of the making of the order the defendant is wholly or in part unable to repay the debt;
(b) the debt was incurred for full consideration; and
(c) at the time the debt was incurred the applicant had no reason to believe that a confiscation order could be made against the defendant."
"In practical terms their effect would be disastrous on the operation of the legislation".—[Official Report, 22/4/02; col. 62.]
That is an absurd overstatement. I can understand the Government's concerns. We have tried to meet them and I believe that our amendments succeed in doing so.
5 p.m.
"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".—[Official Report, 22/4/02; col. 63.]
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