Confiscation Proceedings | Tainted Gifts and Third Parties


Dean Phillips of Kangs Solicitors discusses the current confiscation regime that was set up to deprive those convicted of criminal offences of the benefits of their crime, especially those defendants who under provisions of the Proceeds of Crime Act (POCA) 2002 are deemed to have led a “criminal lifestyle”.

The Confiscation Law | Confiscation Solicitors

Under the Proceeds of Crime Act 2002 a defendant who is assessed to have benefited from criminal conduct must repay this amount unless they can show that they do not have sufficient realisable assets with which to do so.

This typically means that most people subject to a confiscation order are (at least in theory) able to sell their assets and pay the amount ordered within the allotted time given by the court.

A strong incentive to pay the Order is the imposition of a potentially lengthy “default prison sentence” for those who fail to do so.

What about ‘Gifts’ | POCA Solicitors

A significant problem exists however for those defendants who are shown to have either “gifted” criminal property to other people or, in cases where criminal lifestyle is presumed, have made gifts to others 6 years prior to their arrest

The problem is that, pursuant to s.6 of the Proceeds of Crime Act 2002, these amounts are deemed to be part of their “realisable property” even though they have no direct control over these amounts or even if such “tainted gifts” are capable of being recovered.

In such cases, defendants might find themselves facing significant lengths of additional time in jail despite all efforts to repay their confiscation orders.

The Tainted Gift | POCA and Confiscation Solicitors

The “Tainted Gift” provisions within the Proceeds of Crime Act 2002 are detailed at s.77 and s.78.

These provisions were introduced to prevent defendants avoiding confiscation orders by transfering ill-gotten gains to others who may well have had no knowledge of the criminal origins of the money or believed, (wrongly) that the transfer was for full value.

Problems therefore occur where a defendant, faced with a lengthy default sentence, is unable to persuade the recipient of a tainted gift to voluntarily hand back the monetary value of the gift (or repay by other means).

This may involve scenarios where:

  • The recipient refuses to hand back the gift or believes that they are rightly entitled to it.
  • The recipient is unable to hand back the “gift” as it was spent and no monies remain to repay it.

Refusal to Repay | Appointment of Enforcement Receiver | POCA 2002

Where a third party refuses to repay the “tainted gift” an application needs to be made to the Crown Court to appoint an Enforcement Receiver under s.51 of Proceeds of Crime Act 2002.

Sections 51 and 69 of the Proceeds of Crime Act 2002 set out the wide range of powers available to an Enforcement Receiver to realise “realisable property”.

As “realisable property”, as defined in s.83(b) of the Act, includes “any free property held by the recipient of a tainted gift”, the Enforcement Receiver is able, in certain circumstances, to exercise these powers over third parties.

This potential encroachment upon the rights of third parties is subject to s.51(8) of the Act which prohibits the Court from conferring these powers to the Enforcement Receiver unless those holding an interest in the property are given the opportunity to make reasonable representations.

This clause is important as confiscation proceedings are generally decided against a person and not property.

As a result, as decided in the case of R v Norris, third parties do not have any right to make representations during the confiscation proceedings themselves.

How we can help protect and represent Third Parties in POCA cases

While the Serious Crime Act 2015 attempted to give third parties via a s.10A application the right to make such representations, the Central Criminal Court (R v Hayes) in March 2016 ruled that this right only extends where

  • both the third party and the defendant held an interest in the asset at the date of the making of the Confiscation Order

thereby continuing to exclude the recipients of supposedly “tainted gifts” from making representations during confiscation proceedings.

It is important, should you receive notice of any such application under s.51 Proceeds of Crime Act 2002, that you seek legal advice as a matter of priority.

Kangs Solicitors have extensive experience in such matters and can help protect your interest in such property.

A recent example of our work in this area can be seen by following the below link:

 Inability to Repay | Enforcement Receiver | POCA Solicitors

In some cases it may be that the defendant is very unlikely, even with the potential support of an Enforcement Receiver, to be able to recover the “tainted gift”.

The mere fact that such a gift cannot be recovered, as found in the case of R v Kim Smith (2013), does not preclude the “tainted gift” from being included within the defendant’s Confiscation Order in the “Realisable Amount” figure.

A Recent Case | Kangs Solicitors | Confiscation Lawyers

This situation was considered recently by the Court of Appeal in the case of R v Beverley Jones (2016.

In this case it was recognised that a transfer of a house at an undervalue of £20,000 by the defendant to her daughter was rightly included within the defendant’s realisable assets.

This was despite the fact that the house was being repossessed at a significantly lesser value, resulting in the value of any gift being completely wiped out at the time of the confiscation hearing.

The reasoning for this is that the court is bound to accept the greater of either the value at the time of transfer or the date of the making of the Confiscation Order.

The Court of Appeal, noting the case of R v Waya that imposed a duty to act proportionally under Article 1 Protocol 1, held that the result was, nonetheless, fair and proportionate as the defendant had not taken any steps herself to extinguish or mitigate the loss.

In recognising the conflict between including the “tainted gift” into the realisable assets that would form the Confiscation Order and the imposition of the confiscation regime as a method of depriving assets and not as a further punishment, The Court of Appeal stated:

                “Although there is an obligation to impose a term of imprisonment in default when making a confiscation order (Powers of Criminal Courts (Sentencing) Act 2000, section 139(2)), the court is required to consider all of the circumstances of the case when doing so in accordance with R v. Castillo  [2011] EWCA Crim 3173.

There is no minimum term which must be imposed. The purpose of the term is enforcement not further punishment, and where the court is affirmatively satisfied that enforcement is impossible that may be a reason to make a substantial reduction in the term imposed in default.”

Early Advice in Confiscation Proceedings | POCA Solicitors

Neither the Magistrates Court nor the Crown Court has any power to alter the position after a Confiscation Order has been made.

(The only exception to this rule is an application under s.23 POCA 2002 to reflect reductions in the value of assets sold in satisfaction of a Confiscation Order).

Therefore, it is of the utmost importance that any such issues are dealt with during the confiscation proceedings themselves, as a failure to do so could result in a defendant spending additional time in prison with little to no ability to avoid doing so.

Kangs Solicitors are specialists in:

Contact Us | Specialist Confiscation & POCA Solicitors

Should you need to speak to someone regarding any of the issues above or any other such related matters please feel free to contact Dean Phillips or John Veale at Kangs Solicitors.

Arrangements can be made to meet at any of our 3 offices – Birmingham, London or Manchester.

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