Modjiri, R. v

For confiscation under the Proceeds of Crime Act 2002, a defendant’s beneficial share in land is valued by reference to that share of the market value of the land as a whole. The valuation does not assume that the beneficial interest must be sold separately.

Practical difficulty in selling or borrowing against a fractional interest does not make its value nil or justify an illiquidity discount. The court should proceed on the basis that the land can be sold, where necessary through an order for sale, and value the defendant’s proportion of the expected sale price less sale costs. A different result may follow where realisation is proved impossible.

The respondent had been convicted of possessing cocaine with intent to supply. In confiscation proceedings, the Crown Court found that his benefit was £83,958.46.

He held a 25 per cent beneficial interest in a flat with his siblings. A declaration of trust prevented a sale, mortgage or lease without all registered proprietors’ consent. The Crown Court treated that interest as valueless because it could not practically be sold separately, and made a confiscation order by reference only to the respondent’s equity in another property.

The prosecution appealed. The central issue was whether the respondent’s beneficial share should be included in the available amount at 25 per cent of the flat’s market value.

1. Appeal allowed. The Crown Court had misconstrued section 79(3) of the Proceeds of Crime Act 2002. The confiscation order was set aside.

2. Under sections 9, 79 and 84, the respondent’s beneficial interest was free property and was to be valued for the available amount. Section 79(3) concerns valuation, not the separate realisation of a fractional beneficial interest. The court should therefore value the respondent’s 25 per cent share by reference to 25 per cent of the price obtainable on a sale of the flat as a whole, less sale costs.

3. The court must proceed on the basis that the respondent could seek an order under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 for sale of the whole property. The unanimity clause in the declaration of trust was relevant to such an application but did not prevent an order for sale. Personal difficulty in marketing the interest, or a lack of a market for a stand-alone share, did not reduce its statutory market value to nil and did not warrant an illiquidity discount.

4. This construction accorded with the earlier confiscation legislation and avoided an irrational disparity with enforcement. If a confiscation order were unsatisfied, an enforcement receiver could realise the property or seek a payment from the other interest holders under sections 50 and 51 of the 2002 Act.

5. A genuinely impossible realisation may prevent an asserted value from being included and may support variation of an order. That exception did not apply here. The court further considered that, if the respondent had no other means of payment, an order for sale would be likely despite the trust restriction, having regard to confiscation policy and the available enforcement powers.

6. The value of the flat had not been determined below. The parties were invited to agree it; otherwise, a short further hearing would determine the valuation process.

• Court of Appeal (Criminal Division): Allowed the prosecution’s appeal and set aside the confiscation order.
• Crown Court at Blackfriars: On 1 May 2009, His Honour Judge Hillen held that the respondent’s 25 per cent beneficial interest in the flat had no value and assessed the available amount at £6,128.14.