Clause 69 - Powers of court and receiver

Proceeds of Crime Bill – in a Public Bill Committee am 2:30 pm ar 29 Tachwedd 2001.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 2:30, 29 Tachwedd 2001

I beg to move amendment No. 136, in page 43, line 39, at end insert—

`(bb) must be exercised, in a case where a confiscation order has not been made, with a view to minimising so far as is reasonable and subject to the provisions of paragraph (b) any impact on the existing financial arrangements of the defendant.'.

We touched on this question before lunch, but we now have the opportunity to have a fuller debate on the point, which causes me considerable concern. The Under-Secretary now has the opportunity to set out how he thinks the regime will operate in practice. He might consider citing examples, if he can, of how he expects receivership to work. The issue is difficult, but the Committee must grapple with it.

In subsection (2) the receiver's powers are defined, and I do not take exception to the way in which those powers are set out. He must exercise his powers

``with a view to the value for the time being of realisable property being made available . . . for satisfying any confiscation order that has been or may be made against the defendant'' and,

``in a case where a confiscation order has not been made, with a view to securing that there is no diminution in the value of realisable property''.

That makes perfect sense. The powers must also

``be exercised without taking account of any obligation of the defendant or a recipient of a tainted gift if the obligation conflicts with the object of satisfying any confiscation order that has been or may be made against the defendant''.

That is, perhaps, slightly more problematical. Finally, the powers

``may be exercised in respect of a debt owed by the Crown.''

I have tabled an amendment that states that the powers

``must be exercised, in a case where a confiscation order has not been made, with a view to minimising so far is reasonable and subject to the provisions of paragraph (b) any impact on the existing financial arrangements of the defendant.''

I am making an important point. The period of receivership before confiscation takes place may last for a considerable time. It is difficult to make an estimate, but if we consider the time that it sometimes takes for a major case to come to trial, there could be nine to 12 months between the date on which original restraint order was made and the date on which a trial takes place. Depending on the nature of the case and the complexity of the trial, that could be extended to 18 months or two years. Despite the fact that courts try to bring cases to trial as quickly as possible, I know from experience that there may be occasions when the defence asks legitimately for several adjournments, and finding a trial date for a matter that may last several months—in the case of drug trafficking proceedings or a conspiracy, for example—can take a considerable time.

During that time, the receiver has the task of looking after complex property issues with a view to securing that there is no diminution in the value of the realisable property. However, nothing is said about what the receiver should be doing in terms of managing the property so that it can be returned, if necessary, in a state at least partially recognisable as what it was previously to the defendant, if he is acquitted and no confiscation order is secured. I shall cite some obvious examples. As the rules stand, if a house were the subject of a restraint order it could be sold and the proceeds put into a bank account. It is all very well saying that the money could ultimately be paid back to the person concerned if he were acquitted, but the money and the house are not the same.

The house might be a property to which the person was particularly attached, because it had been in his family for generations, yet he might not necessarily recover it even if he were acquitted. Moreover, he will not have any formal means of redress or complaint about such action, save under the serious default provisions, which we shall examine later. The items may be chattels, although the receiver would have little reason to sell them unless he felt that their property value was declining rapidly and he had to secure it.

The property may be a business, and the question of whether it could be managed over the period is difficult. I am anxious about the rules because they do not even attempt to recognise the catastrophic consequences for an individual of being put through such a process. His assets are placed under restraint, but even on being exonerated he will recover only a pale shadow of what they were when they were seized—not necessarily in value, but practically, and in terms of how they were to sustain him and his family for the future. My amendment does not contain the best wording, but it concentrates on something that the Government should consider carefully.

We are dealing not with a bankrupt, but with an individual against whom nothing has been proved. He may be wealthy—although the amount of wealth is perhaps irrelevant. Arguably, a person with huge wealth might be less affected, because at least the huge wealth would be given back to him and he could start again. However, a person with moderate wealth, perhaps with a small business, may be completely ruined by the consequences of a restraint order.

As I said to the Minister, this is linked to compensation. If within the Bill there were a formula for compensation that included taking account of, for instance, economic loss—I put that at its absolute highest—I would not worry about the existing provisions under clause 69. On the face of it, that would be of little consequence. Understandably, however, there will not be provision for a compensation formula that covers every aspect of a person's loss if a restraint order is made and he subsequently receives back much less than the package that he put in. We ought to spell out what the receiver should be doing.

I accept the possibility of returning to the court for guidelines or directions, but the receiver's discretion is particularly wide. The clause is worrying. In the past—as I think the Minister will agree—similar powers have existed in respect of confiscation orders and the surrounding restraint orders. The hon. Gentleman may tell me that I am wrong about that, but I expect them to be similar. They were, however, being targeted at a much smaller area. We are now extending those powers widely. Far more people will, we hope, be caught in the net. Equally, the risk of not proving the criminal lifestyle and the other things that would lead to confiscation may be greater. I am eager to hear what the Minister has to say, but this is a serious issue and I am worried about how the restraint provisions will work in practice.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Before I propose the amendment formally, I must tell hon. Members that there is a possibility of a Division. If that happens, I will suspend the sitting for 15 minutes. If we continue until the end of business in the House, there is a possibility of two Divisions, and in that case I shall suspend the sitting for half an hour.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I support the amendment so eloquently moved by my hon. Friend the Member for Beaconsfield (Mr. Grieve). It is incumbent upon the Government at this juncture either to draw up some detailed guidelines, or at least provide some guidance from the Minister as to an effective compensation programme for those who would otherwise lose out as a result of the provisions and extensive powers of the court and the receiver. In particular, there needs to be some consideration about effective—as opposed to simply the legal minimum—compensation for those who are found innocent in the longer term.

As my hon. Friend rightly pointed out, such new and extensive powers could affect the innocent, not just the guilty. As has rightly been said, they go considerably beyond any other similar set-up, although, as I said earlier, there is at least some analogy with insolvency provisions. Clearly, however, we are not talking about an insolvency case, but about someone who may be innocent.

I have two worries. The first is in relation to the general rule that economic loss is not usually considered. A possible scenario is that over a period of two or three years—following the restraint order coming into place and while the investigation carries on, leading finally to acquittal—an individual's business may be entirely ruined. The goodwill is lost, and the person is in no fit state, mentally or physically, to carry on the business. As such, he finds himself at a massive loss. Indeed, assets that are restrained and subsequently sold off may be somewhat undervalued. I appreciate that it is extremely difficult to quantify the exact value. However, surely it is incumbent on any governing body or authority to give us guidelines to ensure that there is effective and correct compensation.

A second aspect worries me deeply, because I have never supported this country's signing up to the European convention on human rights. However, our nation could encounter great problems as a result of a claim under that convention by an individual who felt that his rights were being infringed, not least by a long-standing case that had resulted in neither conviction nor acquittal—or, indeed, by a fully-fledged acquittal.

This is in part a probing amendment, and I would be interested to know about the thought mechanism behind it. The procedure is new, so we need the Minister to say more than, ``Well, there are legal guidelines in place for existing procedures,'' because this procedure goes more than a few steps further forward. It would be difficult to draw up subsections on the hoof, but I would like to know what the Government are thinking both specifically about clause 69, and about such cases in general, because I suspect that such a procedure will appear in many future Acts dealing with the proceeds of crime or other criminality.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department 2:45, 29 Tachwedd 2001

I recognise the worries of the hon. Members for Beaconsfield and for Cities of London and Westminster (Mr. Field), which are wrapped up with concerns about compensation. Both hon. Gentlemen are right to say that some of the provisions are new, although some are based on existing legislation. The hon. Member for Beaconsfield said that the provisions were wider. That point has been made in other contexts, and I understand why he made it. The provisions in subsections (2)(b), (3)(c) and (4) are not in existing legislation.

I will address the amendment, although I know that some of the concerns of the hon. Member for Beaconsfield arise in connection with compensation. The amendment would spell out explicitly that a person exercising pre-emptive restraint and management receivership powers must exercise them so as to interfere as little as possible with the existing financial arrangements of the defendant. The amendment would state explicitly how we would expect the powers to be exercised, and, indeed, how they have been exercised in practice for many years.

The amendment is unnecessary. It also creates a problem because the legislative steer in clause 69 applies both to realisable property held by the defendant and to realisable property held by the recipient of a tainted gift. The hon. Member for Beaconsfield would not necessarily want the defendant's interests to be paramount in the same way as those of the holder of a tainted gift whose property has been seized.

The exercise of the restraint and receivership powers is discretionary. The Bill enables any person who believes that the powers of restraint or receivership are exercised inappropriately to apply for a variation of the relevant order, and there is an appeal to the Court of Appeal against refusal to vary that request.

I must point out the consequences of some additions to the legislation. Subsection (3)(c) and subsection (4) enable the defendant or the recipient of a tainted gift to challenge the management receiver's decision to dispose of a particular asset on the grounds that it is irreplaceable. The provisions have regard to the fact that the defendant has not been convicted at that stage, so he should not be obliged to lose irreplaceable assets.

The management receiver will be obliged to manage the business under his control in the best interests of the financial well-being of that business. However, there may be parts of, or assets in, that business that are of special interest to the owner, which, if a hard-headed business look were taken at the matter, should be disposed of. If we had seized the assets of the hon. Member for Henley (Mr. Johnson), the management receiver might decide that it would be better to sell The Spectator.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Despite the fact that that may be the financially sensible thing to do, the hon. Gentleman might be utterly opposed to such a move, and he should be allowed to go to court to ensure that it did not happen.

Photo of Boris Johnson Boris Johnson Ceidwadwyr, Henley

I must, of course, set the Committee's mind to rest. If, in the unhappy event of my being convicted of a crime, the director were to seize The Spectator, that would to some extent prove the point that Opposition Members have been making. Although The Spectator may be connected with me and my conduct, it is in no sense my property. It is the property of Conrad Black, so selling it would be a grievous injustice. Were the director to place a restraint order on the conduct of The Spectator, that would prove even more of the eloquent criticisms that have been made. I hope that the Minister will take that as an example of exactly the way in which the Bill could go wrong.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

I sort of knew that the hon. Gentleman did not own The Spectator, but I thought that he should be drawn into our conversation and involved a little more in our proceedings.

I understand the anxieties of the hon. Member for Beaconsfield about compensation, and we shall discuss some of the issues involved later. Using restraint early will be absolutely necessary if we are to be effective, because of the possibility of dissipation. We run the risk of placing too many hurdles in the way of its use, and thus of ensuring that it is not used. That must be borne in mind, too.

The management receiver will have responsibility for taking care of the assets that have been transferred to him. Admittedly it is possible that he will not manage them as effectively as the original owner would have done, resulting in a loss. The original owner may subsequently be acquitted of the charges against him and feel that the loss is unjust. However, the managing receiver may manage affairs in a way that realises a lot more gain than the owner would ever have received. That gain would go to the owner on acquittal. We are discussing criminal proceedings. I understand the point that the hon. Member for Beaconsfield makes, but we must keep in mind the necessity for the measures in the Bill to be effective.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

Taking the Minister back to the point about the receiver—I do not say this with tongue in cheek—we know that the receiver will be entitled to draw down assets in order to pay himself. That raises the interesting question of what happens when the amount that the receiver claims out of the business is what tips the balance between whether the business should be liquidated or continued. Is that not one reason why the suggestion in my amendment might be beneficial?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The amendment would not make any difference to the current arrangements; it merely points out the manner in which the receiver must manage the assets.

There is a problem with the amendment, as I have pointed out to the hon. Gentleman: it refers to the defendant, but not to the recipient of the tainted gift. It does not do what he claims; it does not remove the receiver's management costs from the issue. We might have to discuss that matter when, in connection with the provisions for compensation, we debate whether the threshold is too high.

I understand that the hon. Gentleman is flagging up an issue that he has broader concerns about, but the amendment would not, of itself, make any difference to the treatment of the defendant's property.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I thank the Minister for alerting us to the purpose of subsection (4). His comments have provided some comfort. However, in practical terms, what is deemed to be impossible to replace might be a possession that has personal significance, such as a house that has been owned by the family for several generations, or works of art, or antiques. That is another reason why, in compensation for a receiver's fees, property that can be easily liquidated, such as moneys that are available within a business, or small bits of a business that can be readily sold off, will be targeted first. That calls to mind a point that my hon. Friend the Member for Beaconsfield made a few moments ago—

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. This is a lengthy intervention, and it is not relevant to the amendment.

Photo of Mark Field Mark Field Ceidwadwyr, Cities of London and Westminster

I was responding not only to the amendment but to the Minister's comments, Mr. McWilliam.

Photo of Mr John McWilliam Mr John McWilliam Llafur, Blaydon

Order. We are dealing with the amendment.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The hon. Gentleman overlooks subsection (3)(c), which says:

``in a case where a confiscation order has not been made against the defendant, property must not be sold if the court so orders under subsection (4).''

If a house has been owned by the family for generations—or the item might perhaps be a work of art, a racehorse or whatever—the defendant will tell the court that he does not want the receiver to be allowed to dispose of that property. He will make his case, the court will instruct the receivers not to dispose of that property, and they will not be allowed to do so. Subsequently, when a confiscation order is made, the property will cease to belong to the defendant; it will become the property of the state, and the receiver will dispose of it as he deems fit, on behalf of the citizen.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I take on board the Minister's point about subsection (4), and I was aware of its existence when I drafted the amendment. However, it seemed to me that the question of what is irreplaceable raises some interesting issues. I appreciate that the Mona Lisa might be irreplaceable, but I do not think that a house or a business is irreplaceable, which is why I tabled the amendment. If the Minister's advice suggests that I am wrong about that, I would be grateful to hear his explanation, as that would helpful to the Committee.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Let me try to help the hon. Gentleman. As I interpret the Bill, we are not talking about Mona Lisas, or anything else that someone else believes is irreplaceable; we are talking about something that the defendant believes is irreplaceable, because it has sentimental value or whatever. If that interpretation is wrong, I will inform the hon. Gentleman, because I do not believe that, prior to conviction, that sort of action should be allowed.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The end of this discussion has been particularly helpful, and I am grateful to the Minister for those last comments. We have reached the point where at least counsel acting for a defendant in such circumstances might be well advised, if there is a subsequent problem, to refer to the Hansard record of the Committee, to which reference can now be made during the course of court proceedings—that has been the case for some time—and read what the Minister has said. As I said to him, this goes beyond the Mona Lisa, castles and antique chattels that are not readily replaceable with equivalents.

There is also the question of the maintenance of a defendant's basic financial structure under a restraint order. I am reassured by the Minister's comments, although with subsection (2), one could spell out the principles. As the Minister has helpfully spelled out principles that are in accordance with the amendment that I drafted, and as those principles could now be referred to, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 69 ordered to stand part of the Bill.