Developments in the Law: 2013
(Serious Crime)

 

Useful Cases and Materials

NOTE: KHAT: For a copy of the House of Commons Home Affairs Committee Eleventh Report (of Session 2013-14) on KHAT, see the following link: [link]. For more information regarding this and other drug substances, see the Misuse of Drugs pages on this website.

NOTE: The Law Commission has published an important Discussion Paper ‘Criminal Liability: Insanity and Automatism’ (23 July 2013) which examines the rules governing the defences of insanity and automatism and sets out the Law Commission’s provisional proposals for reform on the law concerning a defendant’s unfitness to plead. It seems that the Law Commission is not holding a consultation on these proposals at this stage. [link].

NOTE: The Misuse of Drugs Act 1971 (Temporary Class Drug) Order 2013 came into force on 10th June 2013: [link]. The Explanatory Note states that “The substances specified in paragraph 1 of the Schedule include the material commonly known as 25I-NBOMe and other related substances, and those specified in paragraph 2 include the materials commonly known as 5- and 6-APB and other related substances including 5- and 6-IT. Paragraphs 3 to 5 of the Schedule specify derivatives of the substances specified in paragraphs 1 and 2.”

NOTE: A copy of the Justice and Security Act 2013 is available here [link].

NOTE: A copy of the Crime and Courts Act 2013 is available here [link].
See also
“The Crime and Courts Act 2013 (Commencement No. 1 and Transitional and Saving Provision) Order 2013” [SI 2013 No.1042] [link].

“The Crime and Courts Act 2013 (Commencement No. 2 and Saving Provision) Order 2013” [2013 No. 1682] [link]

“The Crime and Courts Act 2013 (Commencement No. 3) Order 2013” [2013 No. 1725] [link]

NOTE: A copy of the “All-Party Parliamentary Group for Drug Policy Reform Report of an Inquiry into new psychoactive substances” (January 2013), is available from the following link: “Towards a Safer Drug Policy: Challenges and Opportunities arising from ‘legal highs’” [link].

O-desmethyltramadol as an ingredient in “Krypton”, and other substances
NOTE: The Misuse of Drugs (Designation) (Amendment) (England, Wales and Scotland) Order 2013 came into force on the 26th February 2013: [link]. The Explanatory Notes state that the Order “….amends the Misuse of Drugs (Designation) Order 2001 by inserting into Part 1 of the Schedule to that Order 2-((dimethylamino)methyl)-1-(3-hydroxyphenyl)cyclohexanol, commonly known as O-desmethyltramadol; new categories of synthetic cannabinoids; and 2-(ethylamino)-2-(3-methoxyphenyl)cyclohexanone, commonly known as methoxetamine, and other compounds related to ketamine and phencyclidine. Article 7 substitutes a new paragraph 3 to the effect that an ester or ether of O-desmethyltramadol is not designated as a drug to which section 7(4) of the Misuse of Drugs Act 1971 applies.”

NOTE: The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2013 came into force on the 26th February 2013: [link]. The Explanatory Notes state that the Order adds in Reg.2, “3, 2-((dimethylamino)methyl)-1-(3-hydroxyphenyl)cyclohexanol, commonly known as O-desmethyltramadol, to paragraph 1(a) of Schedule 1 to the Misuse of Drugs Regulations 2001. Regulations 4 and 5 add new categories of synthetic cannabinoids in substituted sub-paragraphs (h), (i), (j) and (k), and new sub-paragraphs (la), (lb) and (lc), of paragraph 1 respectively. Regulation 6 adds 2-(ethylamino)-2-(3-methoxyphenyl)cyclohexanone, commonly known as methoxetamine, and other compounds related to ketamine and phencyclidine, in new paragraph 1(p). Regulation 7 substitutes a new paragraph 3 with the effect that an ester or ether of O-desmethyltramadol is not specified in Schedule 1 to the Misuse of Drugs Regulations 2001.”

NOTE: The Misuse of Drugs Act 1971 (Amendment) Order 2013 came into force on the 26th February 2013: [link].

O-desmethyltramadol has appeared as an ingredient in a product known as “Krypton”: see the Misuse of Drugs Law page on this website for further details.

CASES

• R v Waya [2012] UKSC 51. Given the importance of this Supreme Court decision, and notwithstanding that the case was decided in 2012, a summary and commentary appears at the foot of this page . 
• R v Fields and oths [2013] EWCA Crim 2042. This is a case of considerable importance. The Court of Appeal reviewed a large number of decisions including Porter [1990] 1WLR 1260, May [2008] 1 AC 1028, Lambert [2012] 2 Cr App R (S) 90, and Waya [2013] 1 AC 294 (but not Rooney [2010] EWCA Crim 2). In relation to the determination of the “recoverable amount”, the Court rejected the argument that it would be disproportionate to order each defendant to pay the total amount of the benefit (on the footing that each had failed to disprove that he had available assets sufficient to discharge payment in that amount): see judgment, paras. 72-90. Less clear (it is submitted) is what the court’s approach should be when determining a defendant’s “available amount” (s 9, POCA) in circumstances where the extent of the defendant’s wealth is ostensibly no more than the value of his or her share of the proceeds of the criminal conduct in question. In Fields, the Court said that to embrace concepts of apportionment “at any stage” would “potentially involve impracticable inquiries into financial dealings between criminals and could lead to evasion, manoeuvring and chicanery on the part of defendants” (per Davis LJ, para. 82(iv)). COMMENT: It has often been said by this commentator that practitioners should avoid speaking in terms of “apportionment”. What will often matter are those facts that can be inferred. Suppose D3 has modest means (ostensibly) and the court is looking to assess the value of property that must have passed through D3’s hands as a result of his or her criminal conduct. If the joint benefit is say £300,000, then might it not be open to a court to ‘infer’ (subject to the facts of a given case) that D1-3 shared equally [consider Rooney, above, para.36] and that D3’s wealth (even if ‘hidden’) is no less than £100,000?
• R v Morgan [2013] EWCA Crim 1307. [transcript]. M conceded a ‘criminal lifestyle’ for the purposes of POCA 2002, in connection with “disposal” of “inert” waste, in which no waste management licence had been obtained and no landfill tax paid. The experts agreed that the relevant range of sums which M thereby saved was between £156,500 and £207,000. The judge took the lowest figure as constituting M’s ‘benefit’ from his ‘criminal conduct’ and made a confiscation order in that sum. The Court held (among other things) that the concept of ‘abuse of process’ was not appropriate to the argument M advanced, namely, that the judge’s finding of the benefit obtained by M resulted in a confiscation order that was contended to be “oppressive”. Rather, the key question is whether the confiscation order made was “disproportionate” so as to amount to a breach of M’s rights under A1P1. On the assumption that the judge was correct to conclude that M had engaged in a “disposal” operation, he was also correct to conclude that M had, by engaging in unlawful unlicensed activity, thereby obtained a pecuniary advantage in the sum of £156,500. Given the definition of “property” in s.84(1)(a) of POCA and the application of the assumption in s.10(3), this pecuniary advantage constituted “property” obtained by M as a result of his general criminal conduct, and thus the “benefit” obtained from such conduct for the purposes of s.6(4). There was no basis on which it could be alleged that the use of the assumption in s.10(3) was incorrect. Given the experts’ agreement of the sums saved by M as a result of carrying on an unlawful “disposal” exercise, it could not be argued that the use of the presumption in s.10(3) would produce a serious risk of injustice within s.10(6)(b). Accordingly, there were no “very unusual circumstances” in M’s case “to court the danger” of the confiscation order being disproportionate: see Waya [2013] 1 AC 294, para.25. Furthermore, as this was a ‘criminal lifestyle’ case, the court had to decide whether M “has benefitted” from his general criminal conduct: s.6(4)(b), POCA. The question of whether there has been a ‘benefit’ “cannot depend on what the defendant intended would be the outcome of his criminal conduct. It must depend on what, in fact, actually happened. Thus when s. 76(4) of POCA states that a person “benefits from conduct if he obtains property as a result of or in connection with the conduct” it is concerned with actual, not intended, conduct” (per Lord Justice Aikens, para.54). The Court added that “the connection between the conduct and whether a person ‘benefits’ from it is put in broad terms….[By] s.76(4) if a person obtains ‘property’…‘as a result of or in connection with’ conduct, then that person obtains a benefit by conduct. The link between the conduct and obtaining the ‘property’ is a loose one” [para.55]. It was enough that M obtained property (i.e. the pecuniary advantage) “in connection with” the conduct of actually carrying out the “disposal” of waste.
• R v Bestel and oths [2013] EWCA Crim 1305. [transcript]. The common issue in this case concerned the identification of the principles upon which the CACD should act in considering whether to grant an extension of time within which to appeal the making and enforcement of a confiscation order when the effect would be to permit the applicant to take advantage of the change in the law. The Court, having reviewed a number of decisions (including Jawad [2013] EWCA Crim 644), held that the Court does not “apply the finality principle in isolation from the justice of the case….[T]he practice of this Court, almost without exception, has been to examine the underlying justice of a conviction for a criminal offence” [24]. However, this begs the question of what constitutes an underlying “injustice” for these purposes? On the one hand, the Court said that one has to recobnise ‘the principle of finality’: “At the time the orders were made in their cases, they were properly made under the law as then consistently applied to the level of the Court of Appeal.” [25]. But, on the other hand, the Court recognised that “when enforcement proceedings are taken in respect of breaches of obligations arising after a change in the law the enforcing authority may well need to judge the justice of the case against the changed circumstances and to ameliorate the penalty which would otherwise be imposed.”[26]
  At para.31, the Court said:
  “31. The principle of finality that decisions made under the law as it was then understood should not be disturbed unless substantial injustice would follow is well recognised and we must apply it. The relevant date is the date of the confiscation order and not of the enforcement proceedings. ….. On the other hand, within the criminal jurisdiction, the enforcement proceedings and their consequences are a relevant factor in a consideration whether a substantial injustice might follow should an extension of time be refused; so also, on the other, is the availability of an application to the Crown Court under section 23. In particular, where the “available amount” is represented by the value of the very property which the tainted loans enabled the applicant to acquire, it must follow….that when at the enforcement stage it is known that the property is subject to a charge in favour of the lender, that charge must be brought into account so as to reduce the available amount if it has not already been considered. Equally, if the market value of the property has decreased since the making of a confiscation order based on the market value of the property, section 23 would enable the Crown Court to reflect that fact. Where, however, as a result of an erroneous assessment of benefit, a defendant has been required to meet a confiscation order from assets which can be clearly demonstrated to be untainted, the availability of the section 23 application may not, in our view, act to ameliorate the stringency of the principle.”
  The decision also usefully illustrates instances where D is an “absconder” for the purposes of s.27, POCA 2002, and instances where he or she is not. [48]
• R v Harvey [2013] EWCA Crim 1104. [transcript]. In this decision, the CACD expressed the following conclusions as to the status of the pre-Waya cases as follows:
  i) Smith and May are still good law as the Supreme Court has expressly approved them.
  ii) Singh was correctly decided in the light of Waya paragraphs 25 and 26.
  iii) Morgan is still good law because the Supreme Court has approved it. The only reason why Morgan survives is that M had failed to make full restoration by the date of the hearing and had not indicated any willingness to make full restoration: see paragraph 39 of Hughes LJ’s judgment in Morgan. Even so we are bound to say that Morgan seems to be a decision which is close to the line, since M had restored to V 81% of the money which M had taken from her.
  iv) Xu and Xu is still good law as the reasoning of the Court of Appeal seems to be entirely consistent with Waya.
  v) Baden Lowe is probably no longer good law, as this was a case in which there was full restoration of the relevant property to V.
  vi) Del Basso is another case which is close to the line. This was a “criminal lifestyle” case where the statutory assumptions applied. The Court of Appeal proceeded on the basis that the expenses which Ds incurred in administering the car park and the football club should not be deducted. Thus paragraphs 25 and 26 of Waya would seem to suggest that Del Basso was correctly decided. On the other hand the final decision does seem excessively harsh and may arguably be characterised as disproportionate.
  vii) James and Blackburn must still stand as it is consistent with Waya.
  viii) Ahmad would also appear to be consistent with the decision in Waya.
• R v Taylor [2013] EWCA Crim 1151. [transcript]. The decision usefully illustrates principles to be applied in confiscation cases where the alleged benefit relates to the evasion of duty and/or tax. The Court rejected T’s submission that it would have been open to HMRC to have sought recovery of the duty and tax by issuing a tax assessment imposing a tax liability and seeking to recover the debt jointly and severally from the defendants, and that it is disproportionate for the Crown to bypass the normal procedures of seeking payment of taxation in such a way as to impose a separate liability in the full amount on four defendants.
  The appellants’ submission would, if sound, produce a fairly massive gloss on the confiscation regime. No confiscation order could be made if the Crown could seek to recover lost tax by civil proceedings. [paras. 46/47]
• R v William and oths [2013] EWCA Crim 1262. [transcript]. The CACD has held that with regards to the definition of “criminal property” (s.327, POCA) for the purposes of the money laundering provisions (Part 7 of the Act), the reference to ‘in whole or in part’ is important “because it shows that the whole property is treated as criminal property, even where only part of it represents benefit from criminal conduct.” [25]. Further, s.340(6) is also important in the context of this case because it means that someone who cheats the Revenue by failing to pay the tax he or she should pay, has obtained a pecuniary advantage and therefore is taken to have obtained a benefit within the meaning of sub-section (3) which is equal to the pecuniary advantage. The Court held that the value of that benefit is the amount of the tax unpaid. In cases where the turnover is falsely represented, the benefit is the tax due on the undeclared turnover. However, the “criminal property” (as defined by s. 340) is the entirety of the undeclared turnover and not merely the tax due because the benefit is represented in part by that sum. [27] The Court said that its analysis is, in its view, supported by the judgment of Dyson LJ as he was, in R v K(I) [2007] EWCA Crim 491; [2007] 2 Cr App R 10. COMMENT: time will tell if the first proposition (i.e. concerning the words ‘in whole or in part’) endures.
• R v Jawad [2013] EWCA Crim 644. [transcript]. This is an important decision that explains the relationship (post R v Waya SC) between compensation orders [s. 130, Powers of Criminal Courts (Sentencing) Act 2000] and confiscation orders made under POCA 2002. In giving the judgment of the Court, Hughes LJ observed that s.13 POCA does not necessarily means that the court must deal with a POCA confiscation order first and, in doing so, to ignore any compensation order which it is also being asked to make. The effect of s.13 is that the amount of a compensation order is not to be reduced by a POCA confiscation order. The method of calculation of a POCA confiscation order is tightly prescribed by the Act, but now that it is clear (following R v Waya SC) that disproportion must be avoided, “…it follows that the question of compensation might be relevant to that issue, if compensation means that money which is restored to the loser will be counted again in the POCA confiscation order. Therefore in principle it must be possible either to consider the two issues together or to have in mind, when considering the disproportion question, any compensation order which has been or is going to be made. Nevertheless….ordinarily the concern of the judge will be less with an order for compensation than with whether actual restoration to the loser is assured” (para.15).
  At para.21, the Court said “we do not agree that the mere fact that a compensation order is made for an outstanding sum due to the loser, and thus that that money may be restored, is enough to render disproportionate a POCA confiscation order which includes that sum. What will bring disproportion is the certainty of double payment. If it remains uncertain whether the loser will be repaid, a POCA confiscation order which includes the sum in question will not ordinarily be disproportionate.” Where there is timely restoration of property (or repayment) to the loser, credit will be given for it against a POCA confiscation order. [consider, para.23]
  COMMENT: There is a widespread practice among authors of Statements of Information (s.16, POCA) to particularise (in a criminal lifestyle case) D’s alleged benefit under two headings, namely, ‘particular crminal conduct’ and ‘general criminal conduct’. It is submitted that such an approach is unwarranted having regard to the language of POCA. Although this point was not directly addressed by the CACD in the instant case, it is submitted that support for it appears in paras.25 and 26 of the judgment of the Court [underlining has been added]: “25. We are also unable to accept Mr Krolick’s third submission, summarised at [7(ii)] above. He submitted that the £64000 represented the proceeds of the defendant’s particular criminal conduct, i.e. that charged in the count of which he had been convicted. In fact, this may not be true of the whole of that sum, since the only count to which the defendant pleaded guilty was the money-laundering count, and that related only to the cross-firing fraud and not to the credit card fraud, so that it looks as if not all of the £64,000 bank loss was attributable to it. We do agree, however, that clearly a part, and perhaps a substantial part, of the £64,000 represented the proceeds of particular criminal conduct. Since this was a lifestyle case, says Mr Krolick, the benefit is, by section 6(4)(b), not the proceeds of the defendant’s particular criminal conduct but the proceeds of his general criminal conduct. There we also agree. But what is plainly wrong is the last stage of the argument, which is that benefit from general and from particular criminal conduct are concepts which are mutually exclusive. In a lifestyle case, general criminal conduct plainly includes the particular conduct charged in the count of which the defendant has been convicted. There is nothing in section 6 to say otherwise and it would be nonsense if there were. Moreover, section 76(2) specifically provides that “general criminal conduct of the defendant is all his criminal conduct” (without further qualification), whilst particular criminal conduct is, by section 76(3), the restricted sub-category of conduct constituting offences resulting in conviction or which are taken into consideration.”
  “26. We do not think that the rules contained in section 10 about assumptions lead to any different conclusion. Mr Krolick submitted that in a case where the particular criminal conduct was more than six years old the assumptions would not apply to bring it within the umbrella of general criminal conduct. We agree, but the assumptions are only one route by which sums may be held to be the proceeds of general criminal conduct. In the case postulated by Mr Krolick, of a robbery committed seven years before the confiscation proceedings and never charged on indictment, its proceeds would be proved to be the product of general criminal conduct without recourse to the assumptions.” (per Hughes LJ)
  The Court is right in saying that there is no mandatory duty under the Act to take the POCA confiscation order into account when deciding whether to make a compensation order (noting s.13(3)(a), POCA) and, therefore, R v Jawad does not disturb those decisions in which it has been held that it is open to a court to make both a compensation order and a confiscation order in respect of the same offence. However, following R v Waya, there is now the important qualification that “What will bring disproportion is the certainty of double payment” (Jawad, para.21; underlining added). Accordingly, “What a court should not entertain, because there is no need to do so, are expressions of well-meaning intentions on behalf of a defendant which are not backed by assurance of repayment. Still less is a court likely to be receptive to pleas to adjourn the confiscation hearing for the defendant to seek ways of making repayment.” [23] See also R v Hursthouse [2013] EWCA Crim 517 [transcript].
  It is submitted that in ‘criminal lifestyle case’ a major loose-end, left by R v Waya (UKSC) and by Jawad, is the scope of the ‘serious risk of injustice’ exception to the making of statutory assumptions under POCA 2002.
• R v Mahmood [2013] EWCA Crim 325. [transcript]. In a case that usefully distills the principles to be applied when a court is determining the value of a conspirator’s benefit from criminal conduct, the Court said (paras.19 and 20), “In our view it is clear law that with a conspiracy each member can be regarded as jointly obtaining the whole benefit of the property the subject matter of the conspiracy. Thus each can be required to pay its full value: Waya, [26]. However, that does not follow automatically by any means. There is the oft cited passage in R v May [2008] UKHL 28; [2008] 1 AC 1028, where the House of Lords recognised that mere couriers or custodians, and other minor contributors to a conspiracy, rewarded by specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained the property: [48]. Indeed, the authorities establish that a person may play a more important role in a conspiracy than those identified in that passage in May without obtaining property for the purposes of the calculation of benefit: e. g., R v Sivaraman [2008] EWCA Crim 1736; [2009] 1 Cr App R(S) 80; R v Allpress [2009] EWCA; [2009] 2 Cr App R(S) 58, [31]; R v Clark and Severn [2011] EWCA Crim 15, [30]…..Conversely, a person does not have to be at the top of a conspiracy for the benefit figure to reflect the full value of the property the subject matter of the conspiracy. As the court held in Allpress, what matters is the capacity in which a member of a conspiracy receives the property, whether for his own personal benefit or on behalf of others, or jointly on behalf of himself and others: [30]-[31]. What is necessary is a careful examination of the evidence. The issue is not resolved by attaching a label to the person’s position in the conspiracy, although the role a person plays may assist in evaluating such evidence as is available.” (per Cranston J).
  The Court added that “joint liability of members of a conspiracy does not assist in identifying which member of it may have incurred expenditure in the course of its operation. Nor does the statutory assumption in section 10(4) help. It is an assumption about the source of expenditure, once it has been established that a defendant incurred it. What is required is evidence about the identity of the particular member of the conspiracy who actually incurred the expenditure.” (para.26).
  As to s.10(4) [expenditure assumption], the Court is plainly right (it is submitted): and see Whittington [2009] EWCA Crim 1641, para.18, which is to the same effect. It should be noted that the ‘expenditure assumption’ is that expenditure was “met from property obtained by him as a result of his general criminal conduct”. Thus, the fact of expenditure assumes an earlier ‘obtaining’ of property, and it is with respect to that property that s.10(4) creates a further assumption that it had been derived from criminal conduct. It is submitted that care needs to be taken to avoid double counting where criminal proceeds are used to fund a series of criminal transactions (e.g., drug importations). As to the issue of the ‘joint obtaining’ of property, the decision of Rooney [2010] EWCA Crim 2, may be of assistance.
• R v Asmelash [2013] EWCA Crim 157. [transcript]. The question on appeal was whether the voluntary consumption of alcohol falls within the ambit of s.54(1)(c), as amplified by s.54(3) of the Coroners and Justice Act 2009, when consideration is being given to the question whether a person of the defendant’s sex and age “with a normal degree of tolerance and self-restraint and in all of D’s circumstances other than those whose only relevance to D’s conduct is that they bear on D’s general capacity for tolerance or self-restraint might have reacted in the same or a similar way to D”? The Court of Appeal (Criminal Division) held that it could find nothing in the “loss of control” defence to suggest that Parliament intended that the normal rules, which apply to voluntary intoxication, should not apply [24].
• R v Shillam [2013] EWCA Crim 160. [transcript] The decision usefully discusses the principles relating to the law of conspiracy but it is submitted that the conclusions are more fact-specific than might appear to be the case at first sight.
• R v Kenny [2013] EWCA Crim 1. [transcript]. The question on appeal was whether a breach of a restraint order made under the Proceeds of Crime Act 2002 is capable, without more (i.e. involving no illegality beyond the breach of the order itself), of constituting the offence of perverting the course of justice? The Court of Appeal (Criminal Division) answered the question in the affirmative (Gross LJ). However, the Court added that “In cases of breach of restraint orders, nothing we have said should encourage prosecutors to charge perverting the course of justice where it is unnecessary to do so; ordinarily the sanction of contempt of court will suffice. We would respectfully echo the observations in Archbold, at 28-2, themselves founded on R v Sookoo [2002] EWCA Crim 800, that in such cases the offence of perverting the course of justice should only be charged where there are serious aggravating features” (per Gross LJ, para.36).
• R v Axworthy [2012] EWCA Crim 2889. [The judgment is available on CaseTrack].
  The Supreme Court decision of R v Waya [2012] UKSC 51, was applied, resulting in a confiscation order being quashed (the Crown conceding the matter on appeal), together with the default term attached to it. In Axworthy a stolen car was recovered. This was not a criminal lifestyle case. By s 6(4) and s 76, A’s benefit was the vehicle he acquired. By ss 79 and 80, the value of that benefit was £22,010. By s 9, A’s free property exceeded that figure and thus, by s 7, the recoverable amount was £22,010. “At that stage of the process, and applying the principles explained in Waya, the issue that next arose was whether, in accordance with section 6(5), the making of a confiscation order in the sum of £22,010 would be disproportionate and be in breach of Article 1 Protocol 1 in circumstances where the [vehicle had been recovered]” [per Globe J., para.11]: the answer was in the affirmative.
• Petrodel Resources Limited (and Oths) v Prest (and oths) [2012] EWCA Civ 1395. [transcript]. This is a civil case, but it has much to say about piercing the corporate veil. Consequently, criminal law practitioners ought to be aware of its existence (it is submitted). See, now, the Supreme Court decision: [transcript] 
• R v Waya [2012] UKSC 51. [transcript].
  The facts
  In late 2003, W contracted to buy a flat for £775,000. £310,000 came from his own resources. The balance of £465,000 was provided by way of a mortgage, which W obtained having made false statements about his employment and earnings. In April 2005, the mortgage was redeemed by way of a second loan (honestly obtained) in the sum of £838,943. By the date of confiscation proceedings, the open market value of the property was £1,850,000.
  The trial judge assessed the benefit in the sum of £1,540,000 (£1.85M – £310K).
  The CACD determined W’s benefit in the sum of £1.11M (£1.85M x 60% (i.e. (£465K/£775K) x 100 = 60%).
  The majority of the UKSC held that the correct determination was £392,400 (see para.80). The minority held that the “real benefit” was no more that the money value of obtaining financing on better terms than might otherwise have been available (para.124).

  General principles
  In a nine-judge decision of the Supreme Court, the Justices were unanimous in respect of the following propositions (lead judgment, Lord Walker and Sir Anthony Hughes):

  1. “Although the statute has often been described as “draconian” that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness. But subject to this and to HRA, the task of the Crown Court judge is to give effect to Parliament’s intention as expressed in the language of the statute.” [8]
  2. Article 1 of the First Protocol to the ECHR (“A1P1”) “imports, via the rule of fair balance, the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia¸ the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation.” [12, citing Jahn v Germany (2006) 42 EHRR 1084, para.93]
  3. Any violation of A1P1 can be avoided by applying to POCA, and in particular to section 6, the rule of construction required by section 3 of HRA. [14]
  4. It is possible to read s.6(5)(b) of POCA (“…make an order (a confiscation order) requiring him to pay that amount…”) as subject to the qualification “except insofar as such an order would be disproportionate and thus a breach of Article 1, Protocol 1” and, it is necessary to do so in order to ensure that POCA remains Convention compliant. [16]
  5. Confiscation orders of the kind considered in cases such as Morgan and Bygrave [2008] EWCA Crim 1323, and Shabir [2008] EWCA Crim 1809, “ought to be refused by the judge on the grounds that they would be wholly disproportionate and a breach of A1P1. There is no need to invoke the concept of abuse of process”. [18]
  6. The “safeguard of the defendant’s Convention right under A1P1 not to be the object of a disproportionate order does not, and must not, depend on prosecutorial discretion, nor on the very limited jurisdiction of the High Court to review the exercise of such discretion by way of judicial review” [19]
  7.However, “the judge’s responsibility to refuse to make a confiscation order which, because disproportionate, would result in an infringement of the Convention right under A1P1 is not the same as the re-creation by another route of the general discretion once available to judges but deliberately removed”. [24]
  8. The severity of the regime “will have a deterrent effect on at least some would-be criminals. It does not, however, follow that its deterrent qualities represent the essence (or the “grain”) of the legislation. They are, no doubt, an incident of it, but they are not its essence. Its essence, and its frequently declared purpose, is to remove from criminals the pecuniary proceeds of their crime”. [21]
  9. In “lifestyle cases” (see s.75, read with Schd.2, of POCA), although the starting point is that the assumptions “must” be made (section 10(1)), “this duty is subject to two qualifications contained in section 10(6). The assumptions should not be made if they are shown to be incorrect: section 10(6)(a). Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b).” [25]
  10. To make a confiscation order where D “has restored to the loser any proceeds of crime which he had ever had, is disproportionate. It would not achieve the statutory objective of removing his proceeds of crime but would simply be an additional financial penalty.” [28]
  11. To the extent that Rose [2008] 1 WLR 2113 held (at para 88) that the recovery and restoration intact of the stolen property was always irrelevant to the making of a confiscation order, “that part of the decision should not be followed”. [30].
  12. In R v Smith (David) [2001] UKHL 68, [2002] 1 WLR 54, the House “was not…considering the case in which the criminal property obtained has been restored to its owner undamaged.” [33]
  13. A legitimate, and proportionate, confiscation order may have one or more of three effects [26]:
  (a) It may require the defendant to pay the whole of a sum which he has obtained jointly with others;
  (b) Similarly, it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property;
  (c) It may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.

  Property obtained and its value

  By a majority (lead judgment, Lord Walker and Sir Anthony Hughes, with whom Lady Hale, Lord Judge, Lord Kerr, Lord Clarke and Lord Wilson agreed [Lord Phillips and Lord Reed dissenting]):

  1. In the case of an ordinary loan induced by fraud, “there is no doubt that the defendant does obtain the loan sum advanced.” [48]
  2. If a borrower repays a fraudulently induced loan, secured or unsecured, “…a confiscation order which requires him to pay the same sum again is (lifestyle considerations apart) likely to be disproportionate and wrong. But that, likewise, does not mean that he did not obtain the loan sum advanced in the first place.” [48]
  3. In the case of a mortgage advance of the kind relevant in Waya, W never acquired anything but the equity of redemption [53]…“what Mr Waya obtained was the right to have the mortgage advance applied in the acquisition of his flat, subject from the moment of completion to the mortgage lender’s security, which ensured the repayment of the advance. This thing in action had no market value at or immediately after completion, as the equity of redemption (or in everyday speech, the equity) represented Mr Waya’s down-payment.” [53, emphasis added]
  4. “If the defendant and another person both hold interests in the same property, then it is the value of the defendant’s limited interest which is to be taken for the purposes of calculating his benefit.” [65; noting ss.84(2)(b) and 79(3), POCA]
  5. Rose and, Ascroft [2004] 1 Cr App R (S) 326, are correct in holding that the measure of the value of the interest in property stolen to the thief, for the purposes of confiscation, is what it would cost him to acquire it in the open market. [68]
  6.In economic terms, W’s benefit was so much of any appreciation in value as was attributable to the mortgage obtained by his dishonesty, which on the facts of his case, was 60 per cent (i.e. £465K (dishonestly obtained), over £775K (cost of acquisition) = 60%) of the appreciation in the net value of the flat, subject to the mortgage. [78; and see paras.71 and 80]

  COMMENT:
  Of the judges who considered the law pertaining to this case, all of them would doubtless say that they reached a determination of the value of W’s “benefit” in a manner that was faithful to the language of POCA 2002 and yet, each tier (HHJ, CACD, and SC), assessed that value in a significantly different amount. Indeed, the two dissenting Supreme Court Justices held that “The real benefit was no more than the money value of obtaining his financing on better terms than might otherwise have been available. To base the confiscation order on the increase in value of the flat would be disproportionate. For this reason we consider that the judge should have applied A1P1 and reduced the confiscation order to reflect the modest benefit that Mr Waya may have enjoyed of obtaining the mortgage on better terms.” [124].

  Beyond para.34 of the judgment of the Supreme Court, the two dissenting Justices fundamentally disagreed with the reasoning and approach of the majority.
  The true explanation (it is submitted) for the different determinations lies not only in the “complexities and difficulties of confiscation cases, arising from the extremely involved statutory language” (Waya, SC, para.4) but also in the markedly different reactions and views of the judiciary concerning the severity of outcomes and, policy considerations, of confiscation regimes (following conviction) such as POCA 2002 and earlier confiscation regimes that became largely stripped of judicial discretion to make determinations in a “just” amount. To the extent that, in recent years, the Courts have taken steps to make determinations of an offender’s benefit under statutory confiscation regimes more proportionate than hitherto (and which more closely reflects that offender’s actual benefit), the decision is to be welcomed (and see R. Fortson, “Modern Notion of Benefit”, Proceeds of Crime Review, 2011, Issue 5, pp.4-9 (Wildy’s, London). See also R v Seager [2009] EWCA Crim 1303, and R v Worrell [2012] EWCA Crim 1150, in which it was held that the turnover of a business does not always equate to the value of a defendant’s “benefit”.

  Lord Phillips and Lord Reed described the “identification of A1P1” as “novel and imaginative” (para.83), but A1P1 has often been cited in appellate decisions concerning confiscation following conviction. What is novel is the unanimous decision of the Supreme Court to use A1P1 as the means by which the reach of confiscation regimes can be kept within the limits of what is “proportionate” to the “legitimate aim which is sought to be realised by the deprivation [of property]”. [12]

  However, the decision of the SC in Waya is bound to result in arguments being advanced in confiscation proceedings that had previously been thought to be unarguable. The SC has made it clear that A1P1 does not vest the sentencer with a general discretion (see para.24). But, one practical effect of the decision of the UKSC is that even if D has “obtained property” as a benefit from “criminal conduct”, there may be circumstances in which it would be disproportionate (A1P1) to make a confiscation order in a sum that would otherwise be recoverable (s.6(5), POCA, and see judgment paras.15 and 16). The Supreme Court gave a few examples of the circumstances in which A1P1 would be engaged, but it did not (and could not) provide a closed list of such circumstances.

  Although the majority rejected the notion that A1P1 amounts to “creating a new governing concept of ‘real benefit’” (para.26), the majority appear to have regarded as a relevant factor, when determining the value of a defendant’s benefit, the level of his or her culpability. Thus, the Court noted that W had been sentenced to “80 hours’ community service” and that, “[d]epriving him of that prospective capital gain, or a proportionate part of it, would therefore be the appropriate way of making the confiscation order fit the crime” [42; italics added] This approach may say something about the nature of a confiscation order as a ‘penalty’, but it also begs the question, “what are the true objects of confiscation regimes following conviction?”

  In ‘criminal lifestyle’ cases, the Supreme Court (in Waya) alluded to the two exceptions to the making of statutory assumptions under s.10 POCA. Interestingly, the majority said “The assumptions should not be made if they are shown to be incorrect: section 10(6)(a). Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b). The combination of these provisions, and especially the latter, ought to mean that to the extent that a confiscation order in a lifestyle case is based on assumptions it ought not, except in very unusual circumstances, to court the danger of being disproportionate because those assumptions will only be applied if they can be made without risk of serious injustice.” [25] Given what the Court has stated in relation to A1P1, it is arguable that the “serious risk of injustice” exception will have a wider application than seemed to have been permitted under pre-existing case law: consider Delaney and Hanrahan (May 14, 1999), Mouldon [2004] EWCA Crim 2715 (cited in Panesar [2008] EWCA Crim 1526), Ul-Haq [2004] EWCA Crim 14, Rowsell [2011] EWCA Crim 1894, Deprince [2004] EWCA Crim 524, Elton v United Kingdom (ECHR), 11 September, 1997: and see R. Fortson ‘Misuse of Drugs and Drug Trafficking Offences’ (Sweet and Maxwell Ltd, 6th ed. 2012), chp.13-131. Would it now be “disproportionate” and a “serious risk of injustice” (in a criminal lifestyle case) to make a confiscation order where the only asset (albeit a ‘benefit’) is a modest ‘family home’ occupied by the defendant and his family?

  Perhaps the time has come for the appellate courts to consider whether the principle in R v Barwick [2001] 1 Cr App R (S) 129 is too strict (notwithstanding Grayson and Barnham v UK
  [2008] ECHR 871; (2009) 48EHRR 30; and see Dostenko [2012] EWCA Crim 3059) given the powers now available to the courts to reconsider determinations under POCA (notably, ss.19-23) and the power to make a Financial Reporting Order, or a Serious Crime Prevention Order, against the defendant in appropriate cases (noting Wright [2008] EWCA Crim 3207, Mullen [2012] EWCA Crim 606, and Hancox and Duffy [2010] 2 Cr App R(S) 74).