Prosecution Applications to reconsider the available amount, pursuant to s22 POCA 2002
January 29, 2021
Alex Menary considers the impact of the leading authority of R v Cole  EWCA Crim 888 to s22 Applications
Although Cole was now decided some time ago, it remains an important decision as the Court of Appeal set out the correct approach to s22 applications in mortgage-fraud cases where the original order was made prior to the decision in Waya.
S22 applications are back in vogue post-pandemic as the housing market is experiencing something of a boom and driving up house prices. Assets that in 2008 or 2009 may have had little or no equity, or been in negative equity, are now of significant interest to the POCA units due to the passage of time and inflation: increasingly s22 applications are being drafted on little more than an internet house price search to demonstrate a broad increase in value, and the ease of drafting such applications means that they can be churned out at quite a rate.
Issue is sometimes taken at an early stage with the evidential value of such internet searches (including a case recently where the defence required the algorithm coder of Mouseprice to be called to be cross-examined on his incorrect statistical approach!): Importantly the 2002 Act refers to “Statements of Information” throughout for the purposes of s16-18, rather than “evidence”, and insofar as the rules of hearsay evidence apply, then they go more to the issue of weight rather than admissibility (R v Clipston  EWCA Crim 446).
Inevitably the situation in such applications is complicated, as the defendant’s original representatives may no longer be in practice, and the court may also have destroyed the paperwork that it did hold in line with data protection regulations, as necessarily any order made pre-Waya will now be over 8 years old.
Section 22 applications may be triggered where there has either been further offending on behalf of the defendant, or alternatively, and more frequently, the assets which were the subject of the original order were houses or other property, and were either in negative equity due to the financial crisis of 2008, or the defendant settled their order by alternative sources of funding to reflect their equitable interest in a shared property (such as the martial home, business premises etc).
If a defendant has dealt with the order in that way, it will be important to check that they did then go on to formally relinquish any equitable interest in the property in writing: it is not uncommon to find that once the order was paid the defendant then did nothing further, leading to a situation where, 10 years down the line, they still appear to retain an interest in a property that may now be worth significantly more than it was at the time of the original order.
Turning to the live issue in Cole, it concerned a confiscation order made prior to the decision in Waya, which as the Court noted at paragraph 18 materially transformed the law so as to change the court’s approach to confiscation (and specifically benefit figures) in cases of mortgage fraud: in short, prior to Waya then defendants were often fixed with the benefit of the entire mortgage advance, whereas after it the court was more concerned with what the defendant had actually gained.
Under s22(3), the court must proceed to make the new calculation where invited to do so, and so the issue was whether and how Waya should apply to the new calculation figures: from the example of mortgage advances above, then the benefit figure under the original order would most likely far exceed the “new” benefit figure calculated in line with Waya.
The Court set out that the appropriate course was a three-stage test to be followed pursuant to s22(4) at paragraph 32:
- Whether the new calculation of the available amount exceeded the previous calculation of available amount;
- If so, what amount the Court believed was just to be paid, subject to the limit of the benefit figure, and;
- Whether the court should in the exercise of the discretion (implicit in the use of the word, ‘may’) vary the order?
It went on to approve an approach of re-calculating the benefit figure in line with Waya, to provide a so-called “Waya-compliant” benefit figure as the starting point for the new calculation at stage 2 above: in effect this simply means that the Financial Investigator will have to set out the original benefit figure and then subtract any mortgage advances, leading in most cases to a significant reduction in the new benefit figure.
Whilst the court did not concern itself specifically with the proper interpretation of the new available amount calculation under s22, it is implicit in the reasoning and logic set out above that it is sufficient that the defendant now has something, or anything, more in the way of assets than he did before: A small but profitable industry of “experts” has sprung up as regards this issue and seek to argue that the new figure must exceed the previous figure, i.e. if the previous figure was £100,000, then unless the defendant has amassed more than £100,000 again, no order can be made.
Unsurprisingly this was given short shrift: otherwise the effect would be that so long as a defendant never gained more than £99,999 in the example above the order could never be revisited, which on a common sense view would be contrary to the intention of a piece of legislation aimed at recovering criminal property from convicted defendants.