Criminal prosecutions, specifically paper intensive fraud, corruption and revenue laundering circumstances are costly. The common of proof is higher, the outcome is tricky to predict and the technique is not mainly intended to forfeit the proceeds of criminality in favour of the State.
Some could assume that this explains the introduction of totally free-standing forfeiture proceedings and the current conferment of the energy to bring them on the prosecuting authorities.
These sort of powers are not fully new. For instance, HM Customs have lengthy had powers to forfeit goods. But basic civil recovery powers have been introduced by Component five of the Proceeds of Crime Act 2002.
The proceedings are commenced in the Higher Court and are governed by the CPR. Initially, only the Director of the Assets Recovery Agency could bring them. The ARA was abolished and its powers transferred to the Really serious Organised Crime Agency in 2007. At the similar time the Crown Prosecution Service, Income and Customs Prosecutions Workplace and Really serious Fraud Workplace have been offered the proper to bring such civil proceedings.
The structure of the civil recovery provisions is that if house is identified by the Court to have been obtained by or by way of crime or is traceable to crime then the Court should forfeit it to the State. There are some exceptions, notably exactly where the owner of the house is a very good faith purchaser to worth without the need of notice of its criminal origin. There are interim powers offered to preserve house, principally the energy for the Court to make a house freezing order, related to a Component 25 freezing injunction.
The use of these powers raises exciting queries. How should really the choice be taken by a prosecutor to conduct a civil case rather than a criminal 1? Will civil proceedings be applied to side-step the safeguards in the criminal approach? Is it proper that significant criminality is not marked by prosecution and a conviction of the guilty? What are the consequences to civil recovery proceedings if criminal proceedings have been brought?
Prosecuting authorities’ choice to conduct civil recovery proceedings
The opening section in Component five of the Proceeds of Crime Act is s.240. This delivers:
“Basic objective of this Component
240.-(1) This Component has impact for the purposes of
(a) enabling the enforcement authority to recover, in civil proceedings ahead of the Higher Court or Court of Session, house which is, or represents, house obtained by way of unlawful conduct.
(b) [similar in respect of cash forfeiture]
two) The powers conferred by this Component are exercisable in relation to any house (such as money) whether or not or not any proceedings have been brought for an offence in connection with the house.”
Section 2A of POCA (initially s.two and reworked when the ARA was abolished) sheds some light on the hierarchy in between criminal and civil proceedings. By this section the powers in POCA conferred on SOCA and the prosecuting authorities should be exercised to decrease crime. The House Secretary should problem guidance to SOCA and the Lawyer Basic should problem guidance to the prosecuting authorities. That guidance should say that the reduction in crime is very best accomplished by criminal prosecution, rather than civil recovery proceedings.
As a result, by statute it is clear that civil recovery proceedings are secondary to criminal proceedings. Usually, criminal proceedings should really be brought if they can. If they can’t be brought or have been brought and fail, civil recovery proceedings can adequately be regarded as. So Collins J. in Director of the ARA v He and Chen  EWHC 3021 (Admin) (a case prior to the abolition of the ARA) mentioned:
“As a result, the strategy of the Director should be to let criminal proceedings take precedence, as it have been, and only act if such proceedings are either not becoming taken, or for any explanation may possibly have failed if, notwithstanding their failure or the inability for what ever explanation to take them, she requires the view that she can establish inside the specifications of the Act that the house in query was unlawfully obtained….”
It is vital that the scheme is understood, and that it is apparent that the powers offered to the Director are wide-ranging and the objective behind this aspect of the Act is, as I have indicated, to allow house which has been obtained by suggests of criminal conduct to be recovered from the individual or persons who have been involved in that criminal conduct, whether or not or not a prosecution has ensued or been productive.”
Comparable comments can be identified in (1) Satnam Singh v Director of the ARA  1 WLR 3747 exactly where Latham L.J. mentioned that “Usually speaking the civil approach is intended to be subsidiary to the criminal approach” and (two) SOCA v Olden  EWCA Civ 143 exactly where Sir Scott Baker, getting regarded as the adjustments brought about the Really serious Crime Act 2007, mentioned “The philosophy of the legislation remains that the public interest is very best served by providing priority to criminal proceedings exactly where they can be brought and it is in the public interest to bring them.”
Joint guidance was offered by the House Secretary and the Lawyer Basic to SOCA and the prosecuting authorities on the 5th November 2009 and can be identified on the Lawyer General’s internet-web page. In summary, it says that:-
(1) Criminal prosecution should be regarded as initially.
(two) If the case does not meet the criteria for prosecution (evidential sufficiency + public interest), then civil recovery can be regarded as.
(three) In deciding whether or not the public interest criteria is met for prosecution, SOCA/the prosecuting authorities are entitled to take the view that the public interest is greater served by civil recovery proceedings.
(four) A criminal investigation does not require to be completed ahead of civil recovery can be regarded as.
(five) A criminal investigation / prosecution can continue in tandem with a civil recovery investigation, but criminal and civil proceedings can’t be carried on at the similar time in relation to the similar criminality.
(six) A prosecution which fails can then outcome in civil recovery.
(7) Civil settlements may possibly be entered into to compromise civil recovery proceedings, but a possible defendant can’t acquire his way out of prosecution by producing a civil payment if the case justifies a prosecution, criminal proceedings should really be brought.
With the doable exception of the absolute prohibition on criminal and civil proceedings co-current, the guidance appears sensible and in accordance with the statutory regime and the authorities decided below it.
It is not clear what is meant in the guidance by criminal and civil proceedings can’t be “carried on” “in relation to the similar criminality” at the similar time. If all that is meant is that if there are criminal proceedings, then civil recovery proceedings should really not be actively pressed by litigation, then it is unobjectionable. Even so, it is doable to envisage circumstances exactly where it is sensible to have at least a civil recovery house freezing order in force at the similar time as criminal proceedings. For instance exactly where house derived from crime carried out by X is held by Y X is prosecuted and Y (for what ever explanation) is not.
In R v Innospec Limited  EW Misc 7 EWCC (Southwark Crown Court), Lord Justice Thomas sat in the Crown Court to sentence Innospec a organization which had pleaded guilty to corruption. The Crown and Innospec had agreed, topic to approval by the Crown Court, the quantity of a criminal confiscation order: $six.7m. It was also agreed in between the parties, and would in due course have to be authorized by the Higher Court, that Innospec would submit to a civil recovery order for a additional $6m.
Thomas LJ explained that a prosecutor could not agree a certain penalty in this way and should really never ever enter into an agreement of this kind once again. The Consolidated Criminal Practice Path only permitted ranges of sentence, in accordance with authority, to be identified. The UK’s international obligations below the OECD Convention on Combatting Bribery of Foreign Public Officials 1997 call for the UK to implement criminal sanctions which are “efficient, proportionate and dissuasive.”
Thomas LJ emphasised that providers guilty of corruption should really be treated like any other criminal defendant. It was “hardly ever proper” for criminal conduct by a organization to be dealt with by a civil recovery order. This was specifically so in the case of corruption, guilt of which should really be produced patent by a criminal sanction. There may possibly be space for civil recovery in addition to a fine and the Lord Chief Justice should really contemplate directions that would let the similar judge to contemplate each at the similar time.
Thomas LJ’s comments should be observed in context. The context was a organization against whom there was a realistic prospect of conviction certainly it had pleaded guilty. Thomas LJ can’t have meant that wherever there is any proof of corruption (or for that matter any significant acquisitive crime) then there should really be a prosecution and it would hardly ever be proper to bring civil proceedings otherwise Thomas LJ would be encouraging prosecutorial choice producing contrary to the Code for Crown Prosecutors. What Thomas LJ should imply is that exactly where the test for prosecution in the Code is happy a prosecution should really ordinarily comply with.
Construed in this way, Innospec is constant with the Code for Crown Prosecutors and the Joint Guidance. If criminal proceedings can be brought and it is in the public interest to bring them, they should really be brought, rather than civil proceedings. The Joint Guidance permits the prosecuting authorities to take account of the availability of civil recovery when deciding whether or not it is in the public interest to prosecute. But as mentioned in paragraph four of the Joint Guidance:-
“care should be taken not to let an person or physique corporate to keep away from a criminal investigation and prosecution by consenting to the producing of a civil recovery order, in situations exactly where a criminal disposal would be justified below the overriding principle that the reduction of crime is commonly very best served by that route, and in accordance with the public interest aspects in the relevant prosecutors’ Code.”
The prospect of dealing with a corruption or other significant proceeds of crime inquiry by civil proceedings for that reason remains open. The SFO, in specific, is probably to see this as very good news as it is advertising a policy on corruption which encourages self-reporting with the prospect of the case becoming dealt with by a civil recovery order rather than prosecution.
Bringing civil recovery proceedings exactly where criminal proceedings have failed
It is totally understandable that defendants triumphant in criminal proceedings are dismayed to be served with a claim kind for civil recovery alleging the similar criminality.
Even so this is expressly supplied for by s.240(two) set out above and, for what it is worth, supported by the Joint Guidance.
Additional, in a series of unbroken circumstances, so far at least, the Courts have regularly held that such a course is inside the statute.
In Director of ARA v Green and Other people  EWHC 3340 (Admin) the submission that exactly where criminal proceedings had been stayed as an abuse of approach, it would be incorrect for the ARA Director to bring civil recovery proceedings was rejected by Collins J. POCA particularly permits recovery proceedings to be brought what ever fate had befallen earlier criminal proceedings. The ARA Director was a separate entity from any prior prosecuting authority. The truth that criminal proceedings had been stayed as an abuse of approach did not in itself make it an abuse to pursue recovery proceedings in the Higher Court.
Comparable comments can be identified in Director of the ARA v He and Chen  EWHC 3021 (Admin).
In most of these circumstances the Court was influenced by the separate part of ARA or SOCA as opposed to the function of a prosecutor. So in Olupitan and an additional v Director of the Assets Recovery Agency  EWCA Civ 104 the Court of Appeal authorized Langley J the trial judge when he mentioned:
“The Director is not to be equated with the Crown as prosecutor. The Director is independent with a distinctive part and powers. That part and these powers exist regardless of criminal proceedings section 240 (two) (the 2002 Act).”
And in Really serious Organised Crime Agency v Olden (above)the defendant had effectively appealed to the Court of Appeal against his conviction on the grounds that proof had been unlawfully obtained and should really not have been admitted. His conviction was quashed. Civil recovery proceedings have been brought. The Court of Appeal upheld the trial judge’s choice to admit the proof. Reference was produced to the cited passage from Langley J’s ruling in Olupitan. The Court of Appeal held that the choice to admit the proof was 1 for the trial judge who should really take it totally free from the choices taken by the criminal courts.
All these circumstances, save Olden were exactly where the only individual who could bring civil recovery proceedings was the Director of the ARA. The only case decided just after the adjustments brought about by the Really serious Crime Act 2007 is Olden. But in Olden the claimant was SOCA, not the former prosecuting authority, and the Court of Appeal seemed to location some emphasis on the truth that SOCA have been not a prosecuting authority.
Consequently, the conferment by Parliament of civil recovery functions on the prosecuting authorities demands reconsideration of whether or not civil recovery proceedings can be brought by the similar physique which failed in criminal proceedings.
It is believed that the answer can be identified in the statute. S.240(two) particularly permits civil proceedings exactly where criminal proceedings have failed. If house is identified by the Court to be the proceeds of crime, it should be produced topic to a recovery order (s.266). The common of proof is decrease – a balance of probabilities (s.241(three)). And the Joint Guidance, authorised by s.2A, particularly permits civil recovery exactly where criminal proceedings have failed. These functions by themselves are adequate for a civil recovery claimant to be the similar physique that previously unsuccessfully prosecuted the similar defendant.
Any relief for the defendant should be identified in the basic jurisdiction of the Higher Court, offered in all actions and identified in CPR Component three.four to strike out the claimant’s case as abuse of approach. As mentioned, it is not believed that the bringing of civil proceedings exactly where a prosecution has failed is, by itself, an abuse. But it is doable to envisage situations exactly where it could be. For instance, if the prosecuting authority and a defendant attain an agreement as to advantage from crime in the producing of a confiscation order, it could effectively be an abuse for the similar prosecuting authority to then commence civil recovery proceedings which, on the details, go behind that agreement (see by parity of reasoning Lunnon  1 Cr App (S) 24, exactly where an agreed basis of plea for sentence restricted the Crown’s assertions in confiscation proceedings thereafter).
Civil recovery proceedings exactly where there has been a confiscation order
POCA tends to make provision to protect against many recovery. Component two of POCA creates the energy of the Crown Court to make a confiscation order following conviction. It is an order to spend a sum of revenue. It is calculated by assessing the quantity of the convicted defendant’s “advantage” from crime. Advantage is the worth of the house obtained by the defendant (not retained). It can also be the worth of a economic benefit obtained (eg a tax or other liability evaded) and if so, the defendant is taken to have obtained a sum of revenue to that worth (s.76(five)). The advantage quantity then becomes payable as a confiscation order, unless the defendant shows he can’t spend it from his assets. Then the order is restricted to the worth of the defendant’s assets.
POCA tends to make a somewhat dismal try to protect against unfair civil recovery exactly where there has currently been a confiscation order.
Initially, s.308(9) delivers that house is not recoverable if it has been taken into account by the Crown Court when deciding a person’s advantage for the producing of a confiscation order. This is a dreadfully badly believed out statutory provision. Though possibly aimed at stopping double recovery, it can protect against any recovery at all.
For instance, if a defendant is convicted of stealing a painting worth 50,000 which he sells to a fence for 20,000, his advantage is 50,000, that becoming the worth of the painting at the time he acquired it (s.80). If he has dissipated the 20,000 and has no assets, no confiscation order can be produced (save for a nominal quantity) (s.7(two)). But the impact of s.308(9) is that the painting can’t be recoverable house. It for that reason can’t be the topic of civil recovery proceedings in the hands of the fence, nor any other individual who subsequently receives it. Additional, if the fence sells it on for 40,000, the 40,000 in the hands of the fence would not be recoverable house as the tracing guidelines in POCA call for the new house to have been exchanged for recoverable house, which in this instance the painting is not (s.305).
The similar dilemma arises exactly where there is a joint getting and only 1 defendant is convicted. A joint getting suggests every obtains the entire, what ever may possibly subsequently occur to the house (May possibly  1 AC 1028). So if A is convicted of fraudulently getting 1m and passes it to B, who for what ever explanation can’t be prosecuted, no civil recovery proceedings may possibly be brought against B or any other individual who subsequently bargains with the funds or house traceable to it. This is so, even if A has no assets and so no confiscation order was produced against him.