Walker, R v

A beneficiary’s vested life interest in possession in an identified share of a trust fund is free property for confiscation purposes under the Proceeds of Crime Act 2002. This remains so where the trustees have a discretionary power to appoint capital, since the beneficiary’s hope of capital is distinct from the present right to receive income as it arises. A wide administrative investment power, including a power to hold non-income-producing assets, does not negate that right. It differs from a dispositive power to accumulate income. Classification of an interest as free property is separate from its market valuation. Where there is no evidence of value, the appellate court may confirm the existing confiscation order despite the prosecutor succeeding on the legal issue, if further valuation proceedings would be disproportionate and contrary to the public interest.

The respondent pleaded guilty to drug, criminal-property and assault offences. It was agreed that he had a criminal lifestyle and had benefited from criminal conduct by £25,854.

At confiscation proceedings in the Wood Green Crown Court, the parties agreed that his other assets totalled £9,422.42. The dispute was whether his interest in a children’s trust established by his grandfather formed part of his available amount under the Proceeds of Crime Act 2002. The judge held that it did not, and made a confiscation order for £9,422.42.

The Crown appealed. The central issue was whether the respondent’s beneficial interest, comprising a vested life interest in one third of the trust fund and a discretionary prospect of capital, was free property for confiscation purposes.

1. The confiscation order was confirmed. The Crown succeeded on the legal issue, but the court declined to vary the order because there was no valuation evidence and further proceedings would be disproportionate.
2. On attaining 18, the respondent acquired a vested life interest in possession in one third of the trust fund. He had a present right to the income from that share for life as and when income arose. That right was intangible property and therefore free property under sections 82 and 84 of the Proceeds of Crime Act 2002. By contrast, his hope that the trustees might appoint capital to him was not free property.
3. The trustees’ wide investment power did not prevent the life interest from being an interest in possession. It was an administrative power and could not displace the respondent’s immediate entitlement to any income produced. This differed from the dispositive power to accumulate income considered in Pearson v IRC [1981] AC 753, which could prevent a beneficiary from having any present entitlement to income.
4. The court distinguished the existence of free property from its market value for the available-amount calculation. An assignable life interest will ordinarily have a value. Although the trust fund was apparently invested in a non-income-producing bond, a purchaser could seek to enforce the trustees’ fiduciary duty to consider fairly the interests of income and capital beneficiaries, as recognised in Nestle v National Westminster Bank plc [1993] 1 WLR 1260.
5. There was, however, no expert or other evidence of the market value of the respondent’s interest. Under section 32(1), the court could confirm, quash or vary the order. Given the modest fund, valuation uncertainties and disproportionate public cost of an adjournment and further hearing, it confirmed the order for £9,422.42.

• Court of Appeal (Criminal Division). The Crown appealed the treatment of the respondent’s trust interest. The court held that his vested life interest was free property, but confirmed the confiscation order: [2011] EWCA Crim 103.
• Wood Green Crown Court. On 10 July 2009, HH Judge Pawlak held that the trust interest was not free property and made a confiscation order for £9,422.42.