R v Waya

The Supreme Court considered the meaning and operation of Part 2 of the Proceeds of Crime Act 2002 (POCA), focussing on identification and valuation of the benefit obtained from criminal conduct (sections 76, 79, 80 and 84) and the impact of the Human Rights Act 1998 (in particular Article 1 of Protocol 1 of the European Convention on Human Rights). The Court held that a confiscation order must be derived by a three-stage statutory process (identification of benefit, valuation at the relevant time, and valuation of available realisable assets) and that, if strict application of POCA would produce an order disproportionate under A1P1, the sentencing judge must refuse to make an order to that extent and substitute a proportionate order under the duty imposed by section 3 of the HRA.

Applying those principles, the majority identified the appellant’s initial property obtained as a chose in action which was immediately represented on completion by a 60% share of the leasehold equity in the flat less the whole mortgage liability; the appropriate basis of confiscation in the appellant’s case was 60% of the capital appreciation of the equity attributable to the mortgage advance (subject to a small adjustment for a later untainted repayment). The Court allowed the appeal and substituted a confiscation order of £392,400.

Background and nature of proceedings

• This was an appeal to the Supreme Court from the Court of Appeal (Criminal Division) ([2010] EWCA Crim 412) concerning a confiscation order under Part 2 of POCA made against Mr Waya after his conviction for obtaining a money transfer by deception contrary to section 15A of the Theft Act 1968.
• The Crown Court (Judge Rivlin QC) had ordered £1.54m; the Court of Appeal reduced that to £1,110,000 and certified questions of general public importance. The Supreme Court reheard the appeal (nine Justices) addressing both statutory construction and Convention issues.

Facts

• In 2003 the appellant purchased a flat for £775,000, contributing £310,000 from his own resources and obtaining a mortgage advance of £465,000 induced by false statements about his employment and earnings. A later remortgage realised further funds and some repayment of principal from untainted funds occurred before the confiscation day.
• The Crown sought a confiscation order derived from the value of the flat; defence contested the identification and valuation of the benefit and argued for proportionality under A1P1.

Issues framed

• What property or pecuniary advantage did the appellant obtain "as a result of or in connection with" his criminal conduct (section 76)?
• How is that property to be valued under sections 79 and 80, and what is the application of section 80(3) (tracing/representation)?
• Does strict application of POCA in this context risk a disproportionate interference with A1P1 and, if so, what is the appropriate remedy?

Reasoning and conclusions

The Court emphasised the three-stage statutory approach (identify benefit, value it, value available assets) and that the statutory language must be given a fair and purposive construction subject to the HRA duty in section 3. The Court accepted that POCA may, in some circumstances, operate disproportionately, engaging A1P1; where that occurs the Crown Court judge must not make an order which would be disproportionate and must instead make a proportionate order.

On the facts the majority concluded the initial thing obtained was a chose in action which, on completion, was represented by a 60% share of the equity in the flat but subject to the whole mortgage liability, so that the defendant’s benefit was properly measured as 60% of the capital appreciation of the net equity attributable to the mortgage advance. The remortgage proceeds that had been dissipated could not be caught by s.80(3) where they were not shown to remain represented in identifiable assets on the confiscation day. A small deduction was made for an untainted repayment.

The majority allowed the appeal and substituted a confiscation order of £392,400 as proportionate and consistent with POCA read compatibly with A1P1. The dissenting judgment agreed the A1P1 remedy but took a different approach to valuation and would have quashed the order without remitting for further quantification.

Appeal allowed. The majority held that the statutory three-stage approach under POCA must be followed (identification of benefit under s 76, valuation under ss 79 and 80, and valuation of available assets). Where strict application of POCA would produce a confiscation order disproportionate under Article 1 Protocol 1, the Crown Court judge must, applying the HRA duty in section 3, refuse to make a disproportionate order and substitute a proportionate one. On the facts the appellant’s benefit was 60% of the capital appreciation attributable to the mortgage advance (with a small adjustment for an untainted repayment) and the appropriate confiscation order substituted was £392,400.

Conviction and confiscation at Southwark Crown Court (Judge Rivlin QC): confiscation order £1.54m. Court of Appeal (Criminal Division) reduced order to £1,110,000 and certified points of law ([2010] EWCA Crim 412). Appeal to the Supreme Court ([2012] UKSC 51), reheard before nine Justices, which allowed the appeal and substituted an order for £392,400.