Andrew Mitchell QC, Kennedy Talbot, Critical PoCA Success - the End of Multiple Recovery? (Ahmad and Ahmed)

Andrew Mitchell QC and Kennedy Talbot's arguments on joint and several liability for the payment of confiscation orders were accepted by the Supreme Court in what could mark the end of 'multiple recovery'. 

Andrew Mitchell QC

Andrew Mitchell QC

Kennedy Talbot

Kennedy Talbot

In a unanimous decision, their Lordships ruled:

"The confiscation orders made in respect of each defendant should be amended to provide that they can be enforced only to the extent that the same sum has not been recovered through another confiscation order made in relation to the same joint benefit. However, the orders should not be amended to apportion the benefit between the respective defendants." 

The appellant's contentions was:

"For the Ahmad defendants... it was accepted that it was appropriate for each of the two appellants to be liable for £16.1m, but contended that their liability should be treated as joint and several in accordance with normal common law principles, so that they should be required to pay that sum between them. In other words, if, for instance, Mr Ahmad paid £12.6m, then both he and Mr Ahmed would then continue to be liable, but only for £3.5m, and if one or both (between them) then paid the £3.5m, there would be no further liability on either of them." 

The Court opined:

"In our view Mr Mitchell’s argument is as compelling as it is simple.." 


Summary


JUSTICES: Lord Neuberger (President), Lord Sumption, Lord Reed, Lord Hughes, Lord Toulson

BACKGROUND TO THE APPEALS

These appeals concern the proper approach for the court to adopt, and the proper orders for the court to make, in confiscation proceedings where a number of criminals, some of whom may not be before the court, have between them acquired property or money as a result of committing an offence for which all or some of them have been convicted in the trial which led to the proceedings.

In the first appeal, the appellants, Shakeel Ahmad and Syed Ahmed (“the Ahmad defendants”) were convicted of a carousel fraud (which involves criminally misusing the collection system of VAT to extract money from the revenue authorities) and sentenced to seven years in prison. The Ahmad defendants had been the sole directors and shareholders of a company, MST, which was registered for VAT. MST participated in 32 circular transactions by which goods were purportedly sold, and later bought back by, companies in Ireland in circumstances which resulted in £12.6 million being fraudulently reclaimed from HMRC. After a confiscation hearing, Flaux J concluded that, for the purposes of the Criminal Justice Act 1988 (“the 1988 Act”), the benefit obtained by MST was the benefit obtained by the Ahmad defendants jointly. (While the 1988 Act has been repealed and replaced by the Proceeds of Crime Act 2002 (“the 2002 Act”), the 1988 Act still applies to crimes committed before the 2002 Act came into force). The Court of Appeal determined that the benefit jointly obtained by the Ahmad defendants was the loss suffered by HMRC, uplifted to £16.1m to adjust for inflation, and that each of the Ahmad defendants was liable for the whole of this amount.

JUDGMENT

The Supreme Court unanimously allows the appeal in part. Lord Neuberger, Lord Hughes and Lord Toulson, with whom Lord Sumption and Lord Reed agree, give the judgment. The confiscation orders made in respect of each defendant should be amended to provide that they can be enforced only to the extent that the same sum has not been recovered through another confiscation order made in relation to the same joint benefit. However, the orders should not be amended to apportion the benefit between the respective defendants.

REASONS FOR THE JUDGMENT

Although the language of the 1988 and 2002 Acts is not identical, there is no material difference between them for present purposes [28]. A court considering an application for a confiscation order must address and answer three questions. The first question is whether a defendant has benefited from the relevant criminal conduct; the second question concerns the value, or quantification of the benefit; and the third question is what sum is recoverable from the defendant [34].

The first question: has the defendant benefited?

Section 76(4) of the 2002 Act provides that a person benefits from conduct “if he obtains property as a result or in connection with the conduct.” As Lord Bingham held in Jennings v Crown Prosecution Service [2008] AC 1046 and R v May [2008] AC 1028, the essence of benefit in that phrase is given by the word “obtains”, which in this context should be given a broad, normal meaning connoting a power of disposition or control rather than ownership [41-45].

In many cases it is unclear how many people were involved in the crime, what their roles were, and where the money went. As a result, if the court could not proceed on the basis that the conspirators should be treated as having acquired the proceeds of the crime together, so that each of them “obtained” the “property”, it would often be impossible to decide what part of the proceeds had been “obtained” by any or all of the defendants. It is one thing for the court to have to decide whether a defendant obtained any property, which is required by the 2002 Act. It is another for the court to have to adjudicate on the respective shares of benefit jointly obtained, which is not required [56].

Where property is obtained as a result of a joint criminal exercise, it will often be appropriate for a court to hold that each of the conspirators “obtained” the whole of that property. However, where the evidence discloses separate obtainings, the judge should make that finding [46-51].

The second question: what is the value of the benefit?

A defendant who steals property or obtains it by deception does not acquire ownership of that property. When valuing the benefit the court takes the market value of the property obtained, not because this represents the value of the thief’s legal interest in the goods, but because that is the value of what the thief has misappropriated [61].

The third question: what is the sum payable?

To take the same proceeds twice over would not serve the legitimate aim of the 2002 Act and, even if that were not so, it would be disproportionate. The enforcement of an order for the confiscation of proceeds of crime that have already been paid to the state would violate Article 1 of the First Protocol the European Convention on Human Rights, which protects the right to property [71].

References in square brackets are to paragraphs in the judgment which can be found here: