European Court Forces POCA Legislation to Think Again

How a bite from the European Court forced POCA legislation to think again?

Stephen PortraitMy first real taste of successfully challenging a piece of legislation was in the 2006 case of R-v- Mtude (False instruments; Immigration offences; obtaining pecuniary advantage by deception) before the Court of Appeal. Little did I know some 5 years later that I would have the privilege of being involved in a ground breaking case challenging arguably the most draconian piece of modern legislation?

After numerous appearances in the Crown Court arguing over the unfairness of crippling and disproportionate confiscation orders, I surrendered with the words ringing in my ears… Give unto Caesar what is due to Caesar! Well the phrase is perhaps not synonymous with a piece of, until recently, draconian and disproportionately punitive piece of legislation. The question asked by many was one the Supreme Court was now ready to tackle; does all of it really belong to Caesar?

Judgement in the recent case of R-v- Waya before the Supreme Court has had significant implications for cases triggering the confiscations proceedings under the Proceeds of Crime Act 2002 (hereinafter referred to as “POCA”) and the courts approach to such hearings. My involvement in this groundbreaking case, as one of two junior counsel to the extremely knowledgeable, Ivan Krolick, has been the highlight of my legal career thus far.

It has taken a myriad of cases; years of troubled legislation vast numbers of frustrated circuit judges, defence lawyers and brow beaten clients to reach this point. The significance of this decision cannot and should not be underestimated.

As a British Born lawyer of Nigerian decent practicing in the criminal courts and my involvement in the cases of a prominent Nigerian Government official charged with fraud and money laundering offences, the case of Waya was particularly interesting to me as these types of offence inevitably result in the assets of those foreign nationals being confiscated.

The origins of the current legislation were founded on principles of confiscation under the Drug Trafficking Act 1986. Even back then the mindset of the drafters was clear from the legislation when one considers the case of R-v- Osei , a case in which it was not necessary to establish ownership of a quantity of cash, possession of it was sufficient. Lord Lane recognised that the legislation was draconian in its drafting and in the results it bore . This perhaps was the catalyst for a balancing of the scales of proportionate punishment for forfeiture/confiscation. The Hodgson committees report in 1984 “Profits of their crime and their recovery” hinted at what should have been the true spirit and intention of the legislation namely, to restore the status quo before the offence. Thus confiscation of only the net profits from offending.

With the emphasis on drug trafficking offences it was why by the time 1986 came Parliament introduced confiscation into the drug trafficking legislation. The intention of that Act was abundantly clear when Douglas Hurd, the then Home Secretary of State, now referred to as the Secretary of State for the Home Department, rose to his feet to introduce the bill in the House of Commons . This was rapidly and predictably followed by the confiscation concept to non-drug criminal conduct in order to remove from offenders the profits of their offending. Yet again the Home Secretary found himself addressing the house on the proposed Criminal Justice Bill . The Criminal Justice Act 1988 enjoyed a significant period in force with courts declining or refusing to consider or the difference between the two definitions of benefit as advocated earlier by the Hodgson Committee. The unfairness of the confiscation process morphed effortlessly into the “POCA” 2002 as amended by the act of the same name in 1995, notwithstanding the important fact that the statutory provisions were different, and so were the intentions of Parliament.

Caesar is of course entitled to that which is his after all fair and proportionate taxes and indeed punishment for wrongdoing could not be challenged on any moral ground. The existing principles based on a flawed premise were however entrenched in a plethora of decisions of the Court of Appeal, too many to cite here. Yet despite the crafted submissions by many an advocate, including Ivan, on behalf of their frustrated and perplexed appellants, the Court of Appeal was unable to depart from their earlier decisions, that is until the case of Waya.

The issues in the case were understandably complex. At the conclusion of the Court of Appeal ruling, it certified a point of law of general importance in the following terms “where a person obtains a money transfer by deception contrary to section 15A Theft Act 1968 as amended, and thereby causes a lending institution to transfer funds to the persons solicitor for the purpose of purchase of a mortgage advance to enable purchase by that person of a residential property, does:-

i. that person obtains a benefit from his conduct in the form of property within the meaning of Part 2 of the Proceeds of Crime 2002?

ii. if so is the property so obtained the value of the loan advanced to purchase the property or his interest in the property or some other property?

iii. if not does the person obtain a pecuniary advantage within the meaning of Part 2 of the Proceeds of Crime Act 2002?”

In addition to these issues we on behalf of Mr Waya asked the Supreme Court to consider the question of whether the application of the “POCA” when calculating the benefit would in some circumstances result in the contravention of those rights which arose under the European Convention on Human Rights. This was a novel point which troubled the Supreme Court who invited submissions on a number of detailed questions simplified and summarized as follows:-

i. whether POCA is capable of operating in a way that is oppressive and if so should the Court give guidance in relation to the circumstances in which confiscation proceedings will be an abuse of process?

ii. where the contract is lawful and the defendant provides full consideration for the property that he receives under the contract, is the property that he receives none the less obtained ‘as a result of or in connection with’ his criminal conduct, so as to be the basis of a confiscation order?

iii. what is the result if, before the contract is performed, the other party discovers the fraud and avoids the contract?

iv. what is the result if, before the contract is performed, the other party discovers the fraud but affirms the contract?

Such was the complexity and importance of the issues before the Supreme Court that when it first convened with 6 of their Lordships and Lady Hale on the 5th May 2011, they concluded that the appeal should be heard de novo.

The Supreme Court recognised what many had been complaining of since the days of enactment of the “POCA” 1995 namely, that the confiscation proceedings were often, draconian and oppressive in their approach and overwhelmingly disproportionate and all because of the absence of discretion available before 1995 left courts powerless to do anything but follow the legislation.

So what was Waya all about?

In 2003, Mr Waya bought a flat for £775,000 placing a deposit of £310,000 of legitimate funds. This represented 40% of the purchase price and the remainder was funded through a borrowed amount of £465,000.00 i.e the remaining 60%. It transpired that he obtained that amount unlawfully by overstating his income to obtain the mortgaged amount. His conviction was for an offence of obtaining a money transfer by deception. Following that conviction Caesar’s outstretched hand demanded the sum of £1.54 million pounds, the confiscation order.

The amount was calculated on the basis of the current market value at the time less the legitimate deposit. The Court of Appeal decided that the value of the property obtained by Mr Waya amounted to that percentage of the property value funded by the dishonestly obtained mortgage, being 60% of £1.85 million i.e £1.1 million.

Article 1 of the 1st protocol (A1P1) was perhaps considered to be another piece of insignificant toothless legislation from the European Court. The Supreme Court did not think so and wrestled with the issue amongst others between the 27th – 29th March 2012. The almost frightening intellect of the 9 ‘man’ court tried to reconcile the POCA legislation with A1P1 and concluded that confiscation under the existing legislation must be proportionate with the aims of the legislation and further compatible with ECHR.

After all Shylock’s pound of flesh should not extend to any form of additional punishment but rather remove from convicted criminals the proceeds of their crime.

The case of Waya determined that as a result of an individual’s criminal conduct, in the case of a mortgage, the defendant merely acquired a bundle of rights and liabilities of no market value and these could be in this case lawful co-existing interests in property which needed to be valued individually. The acceptance by the Supreme Court that Crown Courts ought to have discretion to refuse disproportionate and unfair confiscation orders may have come too late for those already serving long sentences (as much as 10 years) in default of satisfaction of the draconian and oppressive court order. Mr Waya was at risk of this very punishment if he has defaulted on the order to pay £1.54 million pounds. The implications on those closest to the defendants should not be overlooked either. Property, vehicles and items regarded as tainted gifts did not escape the grasp of Caesar’s hand.

Another issue for a further debate is the restoration of confiscated funds to overseas countries where the UK authorities have recovered assets considered to be the proceeds of crime from offences allegedly committed in a foreign jurisdiction.

So with the assistance of A1P1, POCA has finally had to take a fair and proportionate approach to the recovery of ill gotten gains. Mr Waya used £310,000 of his own assets to purchase the property; he was almost saddled with another £987,400.00 or at worst 10 years in one of Her Majesty’s finest.

My experience and involvement in this case with Ivan Krolick and Oliver Grimwood reaffirmed my belief that fairness must always be pursued and ultimately prevail and where there is disproportionate and oppressive legislation then it should be challenged. The decision in Waya established the significance of the relationship between A1P1 and the existing legislation so that arguments over proportionality can be robustly argued before any such order is made. Caesar gets only what he is rightly entitled to and no more!!




[1] R-v- Mtude 2006 2 Cr.App (S). 22

[2] R-v-Waya [2012] UKSC51 , November 14th 2012

[3] [1998] 10Cr.App.R(s) 289(CA)

[4] R-v-Smith (Ian) [1989] 1 WLR 765 (CA)

[5] Hansard 21st January 1986 cols 242 &243

[6] Hansard vol. 106 27th November 1986