James Fletcher discusses O’Connor v Crown Prosecution Service [2021] EWHC 2900 (Admin) for Lexis Nexis PSL. 

Gary Pons appeared for the Respondent (The CPS) in the High Court.

The defendant, who had been convicted of fraud and against whom a confiscation order had been made against him in the sum of £4,257,008 in September 2007 failed in his application to the High Court for a Certificate of Inadequacy. This case demonstrates that a defendant cannot simply state that they no longer have ‘hidden’ assets, but rather must explain what happened to them. 

What are the practical implications of this case?

The case provides a useful summary and reminder of the legal principles involved in applications to vary confiscation orders on behalf of defendants. In particular, the case demonstrates the significant difficulty faced by defendants whose confiscation orders include an element of ‘hidden assets’. The defendant cannot simply state that he no longer has such assets, but has to explain what happened to them. A defendant who does not provide an explanation is unlikely to be able to obtain a certificate, even if their other known assets have been realised.

What was the background?

In 2005 the court granted a restraint order over the defendant’s assets which included balances of bank accounts, shares, motor vehicles, the family home in Surrey and property in Ireland. In 2006, the defendant was convicted of Cheating the Revenue. Before sentence he absconded to Ireland and was sentenced in absence to four years and six months. In 2007, a confiscation order was made against him. The benefit was £4,257,008. The court was not satisfied that the amount to be realised was less than the benefit figure, so the confiscation order was made in the sum of the benefit, payable immediately with five years imprisonment in default. This is sometimes known as a ‘hidden assets’ finding. The defendant made an application for a Certificate of Inadequacy in 2020.

On an application for a Certificate of Inadequacy pursuant to section 83 of the Criminal Justice Act 1988 (CJA 1988), if the High Court is satisfied on the balance of probabilities that the defendant’s realisable property (ie property in which he has any interest) is inadequate for the payment of any sum remaining to be recovered under a confiscation order, then it must issue a certificate to that effect. Once a certificate has been obtained the defendant may then make a separate application to the Crown Court; and the Crown Court must reduce the amount to be recovered under the order as appears just in all the circumstances, substituting a shorter term of imprisonment in default. Due to the dates of the underlying offences, this application was made pursuant to the CJA 1988, but for offences committed from 24 March 2003, section 23 of the Proceeds of Crime Act 2002 provides for a ‘one stop’ application in the Crown Court using the same principles.

Certificate of Inadequacy applications recognise post confiscation events which have altered the value of a defendant’s realisable property. A defendant can seek a certificate that shows they do not have enough assets to pay their outstanding order and they can then go to the Crown Court for the order to be varied, protecting them from having to serve the default term of imprisonment that had been calculated on the value of their property when the confiscation order was originally made. The burden to establish inadequacy is on the applicant.

In this case, by the time the court heard the application, approximately £76,000 had been paid towards the order, but due to interest being added to the outstanding sum, the total amount payable by the applicant was £8.8m.

The defendant stated his known assets had been realised and that he had no other property. He submitted that if there were hidden assets in 2007, they would have been discovered by the Prosecution. The Prosecution resisted the application.

What did the court decide?

The court conducted an accounting exercise to assess the value of the defendant’s realisable property at the time of the application. The court found that most of the known assets had been realised or their value dissipated. However, in relation to properties in Ireland the court found that the defendant had gifted those assets to third parties. Accordingly, the value of the gifts was part of the defendant’s realisable property. The court therefore found the defendant still had realisable property.

The court found that the defendant had done all he could to evade the Restraint Order, by gifting assets, selling his assets without keeping records and dissipating the assets in general expenditure.

The court held that it could not go behind the hidden assets finding of the Crown Court and the defendant’s evidence provided no explanation as to what had happened to the hidden assets.

Accordingly, the court considered that the defendant had failed to prove that his assets were inadequate and his application failed.

This analysis was first published on Lexis®PSL on 19/11/2021.

Case details

  • Court: England and Wales (Administrative Court)
  • Judge: Mr Justice Lang
  • Date of judgment: 2 November 2021
James Fletcher practises in both civil and criminal law. He is a specialist in Asset Recovery and Proceeds of Crime work. He has significant expertise in dealing with Account Freezing and Forfeiture applications. He is instructed on behalf of businesses, by individual members of the public and by Government departments. This year he has acted for both the HMRC and the NCA in their first contested applications for Account Forfeiture Orders, assisted a client to obtain the return of sums frozen pursuant to an Account Freezing Order and provided advice to a foreign national on Unexplained Wealth Orders.
He has been featured in Chambers and Partners in the field of Proceeds of Crime and Asset Forfeiture work (all circuits) since 2014 and has been “Top Ranked” since 2016. He is also ranked as a Tier 1 leading individual in The Legal 500 for POCA and Asset Forfeiture (London Bar).