R v Waya

A confiscation order under Proceeds of Crime Act 2002 must be read and applied compatibly with article 1 of the First Protocol. The Crown Court must refuse an order, or limit it, where it would be disproportionate to the statutory purpose of removing the proceeds of crime.

This safeguard does not restore a general discretion. Orders may properly exceed a defendant’s net gain in recognised circumstances, but an order requiring a defendant to pay again property or money wholly restored to the loser is ordinarily disproportionate. In a mortgage fraud, the property obtained and its representing property must be identified and valued under the statutory scheme. Legitimate concurrent interests, including a mortgagee’s interest, must be recognised.

The appellant obtained a £465,000 mortgage advance by making false statements about his employment and earnings. He used it, together with £310,000 of untainted funds, to buy a flat. The original mortgage was redeemed on a later remortgage, and the flat had substantially increased in value by the confiscation day.

He was convicted at Southwark Crown Court of obtaining a money transfer by deception contrary to section 15A of the Theft Act 1968. The Crown Court made a confiscation order of £1.54 million. The Court of Appeal reduced it to £1.11 million in [2010] EWCA Crim 412.

The Supreme Court considered whether he had obtained property or a pecuniary advantage within Part 2 of the Proceeds of Crime Act 2002, how any benefit should be valued, and when a confiscation order would breach article 1 of the First Protocol.

1. The appeal was allowed unanimously. By a seven-to-two majority on the appropriate order, the court substituted a confiscation order of £392,400. Lord Phillips and Lord Reed would have quashed the order altogether.

2. The leading judgment, delivered by Lord Walker and Sir Anthony Hughes, held that section 6(5) of the Proceeds of Crime Act 2002 must be read under section 3(1) of the Human Rights Act 1998 as subject to proportionality under article 1 of the First Protocol. The sentencing judge must refuse, or reduce, an order which would be disproportionate. This is not a reintroduction of the former general discretion, and does not depend on abuse of process or prosecutorial discretion.

3. The statutory purpose is to remove the proceeds of crime, not to impose an additional financial penalty. An order may properly require payment of jointly obtained or successively received proceeds, and may ignore criminal expenses. However, where a defendant has wholly restored the relevant proceeds to the loser, an order requiring payment of the same sum again will ordinarily be disproportionate. The court explained and qualified earlier authority, including R v Rose [2008] EWCA Crim 239.

4. On the majority’s analysis of the mortgage transaction, the appellant did not obtain the £465,000 advance. He obtained a chose in action: the right to have the advance applied towards the purchase, subject from completion to the lender’s security. It had no immediate market value. It was represented by the proportion of the equity attributable to the fraudulently obtained mortgage, with the lender’s legitimate mortgage interest fully recognised.

5. Section 80(3) provides an alternative, not cumulative, valuation of property representing criminal property. The remortgage proceeds could be included only if still held, directly or indirectly, at confiscation day. Applying the statutory valuation and making a small adjustment for capital repaid from untainted funds, the recoverable amount was £392,400.

6. Lord Phillips and Lord Reed agreed with the proportionality analysis in paragraphs 1 to 34. They dissented from the majority’s mortgage analysis. In their view, the flat subject to the mortgage was the property initially obtained under POCA, but A1P1 required the order to be limited to the modest benefit of obtaining finance on potentially better terms.

• United Kingdom Supreme Court: Appeal allowed. The court substituted a confiscation order of £392,400: [2012] UKSC 51 .
• Court of Appeal (Criminal Division): Reduced the Crown Court order from £1.54 million to £1.11 million: [2010] EWCA Crim 412 .
• Crown Court: Following conviction, made a confiscation order of £1.54 million. A reported citation is not stated in the judgment.