R v Waya - important new POCA case

10 DECEMBER 2012

R v Waya [2012] UKSC 51

On 14th November 2012 the United Kingdom Supreme Court consisting of no less than nine Supreme Court Justices provided judgement in this case on appeal from the decision of the Court of Appeal ([2010] EWCA Crim 412).

This follows the Supreme Court having reserved judgement following two sets of submissions: firstly, those argued in May 2011 as to the facts specific to the appellant’s case and during the course of such submissions having identified a specific human rights issue [see paragraph 10 of the judgement]; and subsequently in March 2012, further submissions as to whether or not the confiscation provisions of the Proceeds of Crime Act (POCA) could potentially give rise to a confiscation order which would breach article 1 of the First Protocol of the European Convention on Human Rights, which protects the right to peaceful enjoyment of an individual’s possessions (hereafter referred to as A1P1).

This has been a long-awaited judgement whose effects will be far-reaching in future post-conviction confiscation proceedings.  The Judgement considers two specific issues, firstly the benefit a defendant obtains as a result of a fraudulently obtained mortgage, and secondly, and more significantly, the Supreme Court has ruled that the Human Rights Act requires criminal courts to refuse to make disproportionate confiscation orders.

The facts of Waya involved a purchase of a flat for £775,000 in 2003 through a combination of £310,000 from the defendant’s own legitimate resources coupled with the balance of £465,000 from a mortgage obtained fraudulently on the basis of false representations. However, in April 2005 that fraudulent mortgage was redeemed following a remortgage to a different lender.

 In July 2007 Mr Waya was convicted of obtaining a money transfer by deception in relation to the original 2003 mortgage for £465,000. Somewhat incredulously, the Judge in 2008 made a confiscation order for £1.54 million which comprised the increased market value of the flat at the time, less the original £310,000 legitimate contribution towards the purchase price in 2003. In March 2010 the Court of Appeal reduced the order to £1.11m comprising 60% of the initial value of the property provided by the mortgage lender due to the false statements, the original purchase price being about 40 per cent legitimate (the £310,000) and 60 per cent fraudulent (the £465,000) and calculated the increase in value of these respective portions.

The Court of Appeal judgement is worth reading and illustrates just how confusing and theoretical the confiscation regime has become, with all parties to the appeal purporting to apply the provisions of POCA correctly yet all reaching different results.   As all practitioners will be aware the provisions of POCA have led to some far-reaching and prima facie unfair results which are often difficult to reconcile with common sense.

The Supreme Court quashed that confiscation order and substituted a confiscation order for £392,000, which represented the benefit of 60 per cent of the increase in the flat’s market value over its acquisition price [paragraph 70 of the judgement].  Even this revised sum was subject to dissent by Lord Phillips and Lord Reed who in their partially dissenting speeches considered that the confiscation order should be quashed entirely.

In effect the Supreme Court made it very clear that the benefit a defendant obtains does NOT arise from actually obtaining the mortgage itself, but that a benefit can arise when the property purchased with that mortgage increases in value.  In Waya the fraudulently obtained mortgage represented 60% of the purchase price and hence the benefit was 60% of the increase in the value of the purchase price.  However, it must be borne in mind that the defendant in Waya had used his own legitimate money, and only the mortgage funds were derived from crime.  A very different result would emerge if both sources were obtained wholly or partly illegally and on which Waya remains open to further interpretation.

However, the Supreme Court went further in their judgement than merely remedying what they considered to be an obvious injustice in the Appellant’s case and it is paragraphs 1 to 29 of the judgement that practitioners should familiarise themselves with when conducting POCA proceedings. We have all seen cases where the benefit figures are substantial and often exceed many times the available assets figures and are sought to be justified on the basis of applying the statutory assumptions and considering section 76 of POCA dealing with conduct and benefit, especially section 76(4): “a person benefits from conduct if he obtains property as a result of or in connection with the conduct”.

The judgement in Waya places a clear and unequivocal duty on all Crown Court judges not to make a confiscation order which involves a violation of A1P1 [paragraph 19], there being no need now to invoke the doctrine of abuse of process merely to consider whether the order sought is wholly disproportionate. However, this is not an invitation to reduce the draconian nature of POCA but merely to re-state the fundamental aim of POCA as stated in paragraph 4 of R v May [2008] 1 AC 1028, namely “The purpose of confiscation proceedings is to recover the financial benefit that the offender has obtained from his criminal conduct”. There is however an important distinction to be drawn in applying this principle to particular criminal conduct cases on the one hand and general criminal conduct cases on the other.  In relation to particular criminal conduct cases the dicta in Waya may well be of considerable use in seeking to ensure that the benefit figure matches precisely that gained from the specific offence rather than, as in Waya, going far beyond the original amount obtained from criminal offending.   Certainly this represents a drawing back from the ease with which the prosecution had applied the provisions of POCA hitherto.  However, in general criminal conduct cases it is difficult to see how the concept of proportionality can be used to rebut statutory assumptions as set out in section 10 of POCA, given that Parliament clearly intended those assumptions to be made subject to the serious injustice caveat.   However, I do expect that Waya will result in an increase in arguments reliant on section 10(6)(b) to submit that there would be a serious risk of injustice in general criminal conduct cases, particularly bearing in mind section 140 of the Coroners and Justice Act 2009, which permits the Court of Appeal to refer POCA cases back to the Crown Court for further factual issues to be determined.  No doubt over the next several years case law will develop as to the extent that A1P1 principles will encroach substantially on a criminal lifestyle confiscation. Certainly in Waya the Supreme Court was of the view that such circumstances would be very unusual indeed [paragraph 25 of the Judgement].

Practitioners conducting these hearings would be well advised to have this judgement at their disposal as well as the other leading case referred to of R v May and to critically examine the benefit calculations set out in section 16 statements.

Matthew Roberts