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Tainted gifts and third party implications22nd July 2019 Business Crime
A defendant who, following conviction, faces confiscation proceedings under the Proceeds of Crime Act 2002 (“POCA„) will be required to repay a sum determined by the court and set out in a final Confiscation Order. In order to then satisfy that order, a defendant or third party may then be required to sell certain assets (e.g. property, motor vehicle and jewellery etc.).
Under sections 77 and 78 of POCA, the Court is entitled to find that a gift made by the defendant to a third party was in fact “tainted„ and should be included as an asset still available to the defendant that they can use to repay their order. This will be the case where the defendant is found to have a ‘criminal lifestyle’ and the gift was made within 6 years from the relevant date. A gift will also be deemed tainted if it is made at any time and was property obtained as a result of, or in connection with general criminal conduct. In these circumstances, the asset gifted may be assessed as forming part of the defendant’s realisable or available property. In this situation what is the position for the third party who is in receipt of the gift? This article will explore the rights of the third party recipient and what the issues that they may encounter.
What problems may a third party face?
A third party who has been gifted an asset by a defendant who now faces confiscation proceedings, whether such a gift being a car, a lump sum of cash or a house, is likely to face a number of difficulties owing to the gifted item being deemed as an asset that in fact still belongs to the defendant. This will also be the case even if the third party paid for the item at an undervalue. In other words, if the third party paid significantly less than the market value, the asset will still be viewed as a gift.
The third party is likely to find that the asset was or has been restrained under a Restraint Order and this is normally done without any notice. Moreover, once the court decides a gift is tainted, then the value of the asset will be included in the ‘recoverable amount’ figure whether it is in the defendant’s name or a third party. Therefore, if the defendant fails to realise or pay the value of that asset towards his/her confiscation order, he/she may find that a default custodial sentence is activated for non-payment.
In addition, regardless of whether the default sentence against the defendant is activate, the prosecution may then apply to appoint an Enforcement Receiver. If granted by the Crown Court, the Enforcement Receiver may be granted the power to take control of the asset and sell it in order to pay the amount towards the defendant’s confiscation order. Therefore, an entirely innocent third party could therefore find themselves having the asset taken from them.
What rights do third parties have?
Throughout confiscation proceedings, third parties have a right to make representations during the Crown Court proceedings. In addition, and even if a Confiscation Order is made before the third party is made aware, should the prosecution then apply to appoint an Enforcement Receiver in accordance with section 51 of POCA (to recover the tainted gift which is deemed as the defendant’s ‘realisable property’), at that stage, further representations can be made by the third party.
The position of third parties who find themselves unwittingly caught up in confiscation proceedings is arguably extremely harsh and provides little scope for the court to exercise discretion. The draconian nature of the legislation was emphasised in the recent case of R v Morrison 2019 in which the court found that the requirement for proportionality “does not call for nor does it permit a general balancing exercise in which various interests are weighed on each side of a balance, including the potential hardship or injustice that may be caused to third parties by the making of an order that includes a tainted gift.„ The Court of Appeal concluded that a family home, which was gifted to the defendant’s partner could be included as a realisable asset even in circumstances where a family would be rendered homeless.
What should I do?
It is important, should a notice under section 10A or 51 of POCA be received, that you seek legal advice as a matter of priority. Confiscation proceedings are complex and as set out above, the implications for third party recipients who become embroiled are severe.
JMW Solicitor’s Business Crime and Regulatory Partners and Solicitors have extensive experience and knowledge in advising upon all aspects of confiscation proceedings. For further information about the comprehensive service our lawyers can offer, don't hesitate to contact us if you are concerned about potential or ongoing proceedings. We are able to take on cases from anywhere across the UK and abroad.