§ 5.4 p.m.
§ Second Reading debate resumed.
§ Lord Lloyd of Berwick
My Lords, I suggest that it is safe to say that everyone supports the objectives of the Proceeds of Crime Bill. There is something very unattractive about criminals enjoying the proceeds of their crimes when they come out of prison, even if they have served a long sentence. Of course it is even less attractive when they have never been convicted and thus never punished. We all agree about the end to be achieved, but I have to say that I have serious doubts about the means which have been proposed.
My first doubt concerns whether in reality the elaborate procedure now being proposed by the creation of a new agency will he any more effective in recovering the proceeds of crime than are the existing procedures. Will this new body, which it must be remembered will cost some £40 million over the next two years, be truly cost-effective? That question requires the answer to a preliminary question: why is the existing legislation thought to be working less well than had been hoped? Surely we should be given a satisfactory answer to that question before we throw yet more legislation and yet more new agencies at the problem.
My second doubt is more than a doubt. It arises in connection with Part 5 of the Bill. Is it acceptable for a civil court to have the power to impose what will be in effect a criminal sanction—I have no doubt whatever 45 about that—on a mere balance of probabilities? I suspect that Part 5 forms the centrepiece of the new legislation, but I must say with regret that, as it stands, in my view—with the exception of Chapter 3—Part 5 is simply unacceptable. In due course I shall come back to my reasons for taking that view.
I shall first make three or four short preliminary points. In so far as the Bill consolidates existing law contained in the Criminal Justice Act 1988, as amended on numerous occasions, and the Drug Trafficking Act 1994, it can do nothing but good. At the least the Government should get a pat on the back for that. Perhaps I may add here that I am glad to see that Ministers have not made any attempt to consolidate with the two Acts that I have mentioned the forfeiture provisions contained in the Terrorism Act 2000. As I tried to point out in my report on the question of legislation against terrorism, forfeiture under terrorism legislation serves a quite different purpose. I do not think it can be said that terrorists benefit from their horrific crimes in any ordinary sense of the word and it is that benefit which we are trying to get at with this Bill. I am glad, therefore, that terrorism has not been included in the consolidation.
Some of the provisions in Part 2, covering the consolidation of the two existing Acts, go further than I would like. The noble Baroness, Lady Buscombe, mentioned some of them in her excellent and very comprehensive speech. I agree also with what was said by the noble Lord, Lord Goodhart, in relation to the reverse burden of proof. Surely it should be made clear that this ought to be what we lawyers call an evidential burden and not a persuasive burden, although I doubt any layman will understand. These are largely matters which should be dealt with at a later stage of these proceedings, not today. I do not propose to say anything more about them.
My second preliminary point is that when we are considering a Bill such as this—which is in part pure consolidation, in part consolidation with amendments and in part brand-new law—I, for one, would find it very convenient if there was a simple way in which one could distinguish what is old from what is new. Otherwise one can spend many hours, as I have spent, ferreting around and, if one can find it at all—it is not always easy—comparing one piece of legislation with other pieces of legislation.
When I was chairman of the Joint Committee on Consolidation Bills—a post which I can confidently say is the dreariest job in the Palace of Westminster—it was made very easy for us; we could see what was old and what was new. Perhaps the same kind of thing could be done when we are considering the immensely long Bill that we have before us today. Perhaps it could be included in the Explanatory Notes, which would enable us to take a more intelligent interest in the provisions of the Bill and save a lot of time.
My third preliminary point concerns the structure of the Bill. I entirely agree with what the noble Lord, Goodhart, said about that. If it is any comfort to him, I was just as much confused as he was in trying to find my way around until I suddenly came to a definition many, many clauses later.
46 Turning to the language in which the Bill is couched, there was a time, not so long ago, when clauses in a Bill consisted of one or more sentences—sometimes quite long sentences, but sentences which one could understand as one went along. Indeed, there was a time, even longer ago, when whole statutes consisted of a single sentence without any punctuation. I do not suggest that we should go back to those days, but have we not gone too far in the opposite direction? I find the staccato method of modern draftsmanship very trying. It reminds me of filling up those endless forms that we all have to fill up in which it states, "If the answer to question four is 'yes', go to question five; if the answer to question four is 'no', go straight to question six" and so on. It is almost as though we cannot be trusted to join up two sentences. Every sentence seems to be a separate clause or a separate paragraph throughout the Bill. Does the Minister know whether this is something that we have wished on parliamentary draftsman, or is it only the fashion of the moment?
My fourth preliminary point is of a different nature. When looking at the proceedings at the Committee stage in another place, it seemed to me that the Opposition Benches put up a splendid and well sustained fight, even if it was not wholly successful. However, I noticed that when they were hard pressed they would say, almost as an argument of last resort, "Well, you wait until this Bill gets to the House of Lords and see what the Law Lords have to say". I seem to be the only Law Lord here today and I feel that I should call up reinforcements. Certainly I feel as though the members of the Standing Committee in the other place are breathing down my neck. I hope that I come up to their expectations, but I doubt somehow that I shall.
Turning to the Bill, Part 1 creates yet another agency—and one almost groans as one says so—which will cost, as I have said, £40 million over the next two years. Will it be cost effective? The main function of the new agency, as I understand it, is to act as the enforcement authority under Part. I shall come back to that. But the director also has what I call a kind of walk-on part in relation to Part 2. He can ask the court to proceed under Clause 6—in which case he must provide statements of information under Clause 17—and will then act as the enforcement authority under Clause 35.
However, I cannot understand why these tasks cannot be equally well performed by the Crown Prosecution Service. Why do we need two separate agencies doing exactly the same thing in relation to Part 2 of the Bill and performing precisely the same functions? How will they divide the work between them? Will they take it in turns? Will they say, "It's your turn now to deal with this and it's my turn to deal with the next one"? It seems to me that this is not only, at best, quite unnecessary duplication of effort but, at worst, a recipe for confusion or, even worse, for disaster.
That brings me back to the question of what the Bill is trying to achieve. What exactly are the shortcomings or defects which Ministers see in the present legislation? How exactly will the new legislation cure 47 those defects? If the Minister was to say—I do not think he has said this yet—that the judges are somehow reluctant to make confiscation orders, or are not to be trusted to make them when they are appropriate, he would be wrong.
Only last month, there was the reported decision of the House, to which the Minister referred, in the case of Benjafield. In that case, the defendant was charged with 14 offences of theft. He pleaded guilty to two of those charges, involving about £5,000, and might have expected a fairly modest penalty. Quite unexpectedly, one imagines, the other 12 charges were simply dropped; the Crown Prosecution Service did not proceed with them. What was the reason? It was perfectly straightforward—the defendant found himself the subject of a confiscation order, based on the two charges, in the sum of £214,000. It would have been £500,000 if that sum had been available, which it was not.
So the existing legislation is working. Judges are not reluctant to make confiscation orders if they are asked to do so. Quite the contrary, they make them whenever they are asked and their decisions are, as we have seen, upheld on appeal.
If the Minister was to say that judges are not asked to make confiscation orders as often as they should be because the Crown Prosecution Service is too busy to do the necessary legwork, then surely the answer is simple—the Crown Prosecution Service should employ more staff specifically dedicated to that task. Why duplicate the task by setting up a new agency?
When the Minister was giving what he said were the defects of the existing legislation, he referred to its complexity. When replying, he may have some difficulty in persuading the House that the proposed legislation is any less complex. Indeed, it seems to be much more complex than the existing legislation.
The true reason why larger sums—more in total— are not recovered is quite different. It is perfectly simple. The sophisticated criminals who operate today are just too clever to be caught with recoverable assets in their hands. If that is the true reason, how will the creation of a new agency make any difference? Is the idea that the Crown Prosecution Service is a tired, old-fashioned organisation and that we need a new agency to inject new life into the idea—new men, new ideas? If that is the idea, I hope that the Minister will say so.
I turn in conclusion to Part 5 of the Bill, which has been described as the centrepiece of the new legislation. Despite the fact that one suspects that Ministers are quite proud of their new Part 5, I noted a rather significant health warning in a Cabinet Office report dated June 2000. It stated that Part 5 might be viewed as contentious by some. That seems to me to be the under-statement of the decade.
The basic objection is simply as follows—and one would have thought that it was shared by everyone. Let us suppose that a person is charged with the theft of a car or a sum of money. He is acquitted by the jury on the grounds that there is insufficient evidence to convince the jury beyond reasonable doubt. Along 48 comes the director. He cannot, of course, overturn the verdict of the jury, but all the same he thinks that the car was stolen and he is prepared to prove it, if he can, by calling the same evidence and using the same arguments on a lesser burden of proof—on a mere balance of probabilities. If he succeeds, the car or its value is transferred to another newcomer, called the trustee for civil recovery, who then sells the car and transfers the proceeds back to the director, who hands them over to the state just as if it had been a fine. That is mere facade. What is in fact happening is that the state is enforcing a criminal penalty without bringing criminal proceedings or, worse still, when the defendant has actually been acquitted.
A Home Office Memorandum, dated 7th January 2002, advances a number of arguments in support of Part 5. It says that the critics of Part 5 have got hold of the wrong end of the stick and that the civil recovery proceedings are reparative in nature. It states that society as a whole, not merely the previous owner of the car, has been damaged by the theft of the car and society as a whole is, therefore, entitled to be compensated.
That is simple nonsense. It is the kind of argument which, as Lord Atkin once said in a famous case, might have found favour with the Court of King's Bench in the time of Charles I, but surely should not find favour today. One might as well say that a prisoner's sentence is reparative in nature because in some way he is paying a debt to society.
I do not know whether the noble and learned Lord the Attorney-General will seek to support the view expressed in the Home Office Memorandum. It was utterly demolished by the Joint Committee on Human Rights in its further report on the Bill. Its view is that Part 5 may well fall foul of the European convention. One sometimes forgets that the convention is intended as a minimum, not a maximum, of what is required for the protection of what I still like to call the liberty of the subject. I do not care whether or not Part 5 will fall foul of the European convention. It is sufficient for me that it falls foul of what I regard as acceptable in English law.
Therefore, if any Member on the Liberal Democrat Benches or on the Conservative Benches, or indeed any distinguished lawyer on the Government Back Benches feels bold enough to oppose the Question that Clause 5 shall stand part of the Bill, I will give such amendment my fullest possible support—except for Chapter 3, which seems to me to serve a useful, or at any rate a legitimate, purpose.
I shall say nothing more about the other provisions of the Bill. I found 190 pages out of 304 pages all that I could manage.
§ 5.26 p.m.
§ The Earl of Mar and Kellie
My Lords, my noble friend Lord Goodhart complained about the length—or, it might be said, the weight—of the Bill. History records that in 1716 the Act of Attainder passed on my noble kinsman, the 6th Earl of Mar, the confiscation of his estate and the estate's transfer to the 49 commissioners of the forfeit estates. All that took less than one page. So, clearly, confiscation is a matter that we are revisiting. Parliament is familiar with the idea from earlier times.
The Bill sets out to improve the legal system's ability to collect in the ill-gotten gains of criminal activity, and so to take more effective measures to disrupt organised crime and, it is to he hoped, make it less worthwhile. That is clearly necessary, as it would seem that drug trafficking in Scotland may well he worth £800 million per annum—which I understand to be 1 per cent of Scottish GDP.
Of course, my remark about "the legal system's ability" is all wrong—for the Bill deals with all three legal systems within the United Kingdom, and does so openly and constructively. My interest is, inevitably, in the Scottish clauses. However, I fully appreciate that the aim of the Bill is to create as uniform an approach to the proceeds of crime as the three distinct legal systems will allow.
The Scottish clauses exist in the Bill because of the passage of a Sewel Motion in the Scottish Parliament in October last year. Indeed, some aspects of the Scottish legislation have yet to be brought before the Scottish Parliament. The Bill is a good use of the Sewel Motion procedure. However, we must always be on the look-out for significant amendment to the Scottish clauses, because significant amendment would raise the question of what exactly the Scottish Parliament agreed to last October.
The Minister has explained the Bill to the House, and it passes the test of expediency. By that, I mean that it contains several measures which are necessary to improve performance in the recovery of the proceeds of crime. During the passage of the Bill through this House, I hope that the House will be persuaded that the measures are more than expedient, and that they are just.
There has to be some concern about the conditions required to satisfy the court in Clause 94, on making confiscation orders in Scotland. I am encouraged by the Law Society of Scotland to suggest that there ought to be a fourth condition at this early stage requiring a statement of information from the prosecutor. That would be similar to the requirements in Clause 104. I accept that the statement would be somewhat limited because the investigation would be only in its earliest stages, but I believe that it should be there.
Similarly, in the case of restraint orders—in Clauses 122 and 123—the Bill is rather forward in freezing property in all cases at the earliest stage of investigation. I am being encouraged to believe that restraint orders at the earliest stage should be made only if it is arguably necessary, with a real risk of dispersal, rather than on a blanket basis.
In the measures for civil recovery, I hope that there is sufficient imperative to start at the top of the hierarchy, with criminal proceedings, not just an easy option of going straight to civil recovery, or even taxation.
50 Finally, I must mention the Scottish matrimonial home provisions in Clause 101. It is right to observe the practice of the Scottish courts towards matrimonial homes in existing confiscation legislation. This is not a problem of devolution; it is evidence of an acceptable lack of symmetry between the legal systems, which are rightly pre-Union institutions of considerable antiquity.
I wish the Bill well in its passage through the House. Its heart is in the right place at least. It has been surprisingly well scrutinised in the other place, with more than 115 hours of debate. I welcome that. Ministers will be pleased to hear that I believe that the Bill is not too far from being ready for the road.
§ 5.32 p.m.
§ Lord Carlisle of Bucklow
My Lords, as one of only three Members of your Lordships' House taking part in the debate who are not Front-Benchers, I already find myself in agreement with much that has been said. I hope that it will not be felt that my remarks are merely repetitive.
For example, one could not fail to agree with the Minister, the noble Lord, Lord Rooker, when he described this as a substantial Bill. Given the number of pages and clauses, to which the noble Lord, Lord Goodhart, referred, it would be fair to say that it is rather larger than the average novel. One could not possibly suggest that it was not a highly complex Bill. I have tried to read the whole Second Reading debate in the House of Commons, but I have not succeeded in reading anywhere near the whole of the Bill. I was much attracted to the proposal of the noble and learned Lord, Lord Lloyd of Berwick, that it should be colour coded so that we know which parts we need to read. If I have misunderstood the intentions behind the Bill or the way in which they are carried out. I hope that it will be put down to the complexity of the Bill. I apologise in advance if I am mistaken in some of the assumptions that I have drawn.
Of course, as everyone has said, the Bill is desirable and welcome. Everyone in the country would agree that any measure that improves the power of the courts, particularly the Crown Courts, to prevent the criminal benefiting from the proceeds of his crime is welcome. Like others in this House, I have spent much of my professional career prosecuting or defending in the criminal courts or sitting as a recorder trying cases at that level. I am, therefore, aware that greed is a major motive of crime and concerned about the enormous profits involved in major crime. That covers the proceeds not only of drug trafficking, but also of major customs fraud, or any other kind of fraud, including long firm fraud, as well as major armed robberies.
I accept that the proceeds of crime have a corrosive effect on society and provide the money to breed further criminal activity. The drug dealer—whether he is dealing in cannabis, cocaine, ecstasy or heroin—is making, or setting out to make, large sums of money at the cost of creating human misery for many other people. Equally, and perhaps in some ways more 51 disturbingly, it was clear when I sat as a recorder that the vast majority of petty crime—one might call it "acquisitive crime"—is a means of obtaining the funds to feed that individual's drug addiction.
Much has recently been said about decriminalising or legitimising the use of cannabis. I have one remark to make about that. No one can decriminalise or legalise the use of cannabis without realising that, in doing so, he will be bound to decriminalise or legalise the supply of cannabis. We cannot make it an offence to supply a person with goods that he is free to use. Unless we sort out the supply before we consider how to deal with decriminalisation, my worry is that we will simply spread the drug dealer's power and influence to start young people on cannabis and then work them through to ecstasy, heroin and the other much more dangerous and addictive drugs.
I have no doubt about the importance of the overall aim of the Bill. However, as the noble and learned Lord, Lord Lloyd, and my noble friend Lady Buscombe said so effectively, it is equally important to remember that the responsibility of Parliament and of this House is to scrutinise legislation to ensure that, while achieving laudable and desirable aims, we do not go beyond what is necessary or practical and do not set aside or undermine principles that have been accepted as the foundation of our legal system and our liberty for many years. I refer to three principles: the presumption of innocence, the burden of proof in criminal cases, and the rights of innocent third parties. The Bill has to be tested in detail on how it meets those issues, as well as achieving its main objective. Those principles should be set aside only if it is considered necessary to do so after proper scrutiny of their need.
That leads me to have cause for concern on three areas of the Bill. The first is the whole concept of a criminal lifestyle: on what it is based, how it is proved, and how wide it goes. The second is the right in all cases to seize and recover goods through civil proceedings without recourse to the criminal courts. The third is adequate protection of the innocent third party. In the Bill's laundering provisions, we may be in danger of making the test of negligence rather than the test of knowledge the basis of a serious offence. I shall very briefly deal with those three matters.
If I have understood the position on criminal lifestyle aright, if someone is convicted of any offence in a criminal court and the court is asked to do so by the prosecution, the court must proceed with the process of making a confiscation order. The court has no discretion. When proceeding to make that confiscation order, the court is required, first, to decide whether that person has what is described as a "criminal lifestyle". It must then go on to decide whether he has benefited from his general criminal behaviour. But what is the test of that "criminal lifestyle"? If I have understood the Bill correctly, if the man or woman has been convicted of a drug trafficking offence, that in itself would establish that he or she has a criminal lifestyle. The same would apply if it was a money laundering offence or an offence specified in regulations made by the Secretary 52 of State. The crime could also be said to constitute conduct forming part of a criminal lifestyle. I was therefore glad to hear the Minister say that he has placed in the Library of the House a list of the likely offences. I was also glad to hear of the Government's intention to amend the Bill as the Minister described.
If the crime meets any of those tests, the court would have to proceed to assume effectively that any property given to that person in the past six years, any expenditure he has made on property in those years, and any property in his possession are the result of his general criminal conduct. If the defendant wished to challenge that, the burden of making that challenge would rest on him. It seems to me that those are fairly draconian powers.
The noble Lord, Lord Goodhart, used an example that I was going to use. Should such powers be used against a possibly rather pathetic defendant with three separate shoplifting convictions in the previous six years? Should they be used against someone who has committed one offence of possessing drugs for the purpose of supply, however small that amount of drugs may be? Or should we include in the Bill a de minimis clause, as the Minister says he plans to do in Part 5? Perhaps better, should we not adopt the proposal by my noble friend Lady Buscombe to give the courts the discretion to decide the type of case in which these powers should be used? If we do not choose one of the latter options, there is a danger that much of the agency's time will be taken up unnecessarily in pursuing minor cases, rather than concentrating on the major cases as it should.
As for the power to recover through the civil courts, I fully understand the argument advanced in the paper from the Home Office that it is still necessary to recover money obtained from crime when the person has died or gone overseas. However, should not the power to use such a provision at least be limited to cases in which there is an apparent reason why criminal proceedings could not be brought and a conviction obtained? I am concerned that, as the noble and learned Lord, Lord Lloyd of Berwick, said, the Bill's drafting is such that the civil burden of proof could be used to recover goods even in cases where there has been an acquittal, or where a conviction is doubtful, because of the criminal burden of proof.
So I believe that there are issues—the burdens of proof, the presumption of innocence, the risk of not providing sufficient protection for the rights of the innocent—that will have to be examined in Committee. I apologise that part of my speech has been repetitive and somewhat rambling. However, I believe in and support the Bill's principles. I also support what the Government wish to do. Nevertheless, like others who have spoken, I hope that the Government achieve that goal by means that are compatible with and do not endanger some of the major principles of our legal liberty.
§ 5.46 p.m.
§ Lord Thomas of Gresford
My Lords, I feel that I should first declare an interest as a practising criminal 53 lawyer who has had some practical experience of the existing confiscation legislation. As the particular case that I have in mind is still undecided, I say no more about that. However, it does help to have had some practical experience of how these provisions are currently working. Your Lordships will recall that the noble and learned Lord, Lord Lloyd of Berwick, asked why the current legislation is not adequate.
The Bill's complexity conceals its draconian effect. These confiscation orders are no small beer: they involve the possibility of long sentences of imprisonment in default. In Section 139 of the Powers of Criminal Courts (Sentencing) Act 2000, certain maximum periods are set out for the non-payment of orders. Accordingly, a confiscation order that exceeds £1 million can attract a further 10-year sentence if the compensation payable is not paid, and default on a £250,000 order can attract a five-year sentence. As the Bill's provisions, particularly Clause 14, provide that the confiscation order is to be left out entirely—not taken into account at all—in considering the sentence that should be passed on an offender, the offender could receive, for example, 25 years for a drug offence, but then be subject to an order in excess of £1 million with the possibility of another 10 years should he default. That is how the Bill can operate.
Currently, the prosecution presents its case at trial and may maintain that the defendant is not a major player in events. Nevertheless, if the unit concerned with recovery—not the Crown Prosecution Service, but the police or Customs and Excise—decides that assets have passed through his hands, he would be responsible for those assets regardless of the fact that the prosecution maintains that he has never touched them. He may be an accomplice; he may play a small part in the particular offence of which he is convicted. If he is convicted the assumptions operate, and it is for him to prove what has happened to the assets.
Very often that is a completely impossible burden because the money may have passed to confederates abroad. There is no way in which he will be believed when he gives evidence, nor will he be able to call his confederates to say what they have done with the money that they may have received from, for example, the sale of contraband, or to prove what has been paid to suppliers. Consequently, he will be pursued not for any money that is necessarily in his hands, but for the whole of the money that may simply have passed through a bank account in his name. That is tough. It may be that that is the kind of draconian instrument that we require. I am seeking to establish before your Lordships that the existing legislation is already tough.
I admit to a certain frisson of excitement when I saw an attractive picture of the noble Baroness, Lady Buscombe, in one of today's daily papers next to a picture of me, with the headline "Shame on you". That is nothing to the frisson of excitement that will have passed through the relatives of my wife in Scotland, which is where they are at the moment. It is simply daft to suggest that the Opposition Benches in this House are in any way weak on crime and are anxious to support drug dealers or those who have made large fortunes out of criminal activities. That is not the case.
54 But there is no point in passing legislation through this House that is inconsistent with an Act of Parliament that this Government have already introduced, namely, the Act that placed the European Convention on Human Rights upon our statute book. Therefore, it is necessary to consider to what degree these provisions comply with the provisions of that European convention.
The previous legislation required that the target was a proven offender. In my view, the civil recovery provisions in Part 5 of the Bill have been rightly attacked by the noble and learned Lord, Lord Lloyd of Berwick, who speaks with great authority, as a facade. An entirely new concept is being introduced. The burden of proof circumvents the safeguards that exist for those effectively charged with a criminal offence. That is one of the aspects that, in previous decisions, have caused the judges in this country to say that the current legislation is proportional, but will future legislation be proportional?
Another item on which the courts have relied has been that the prosecutor exercises a discretion to bring proceedings under these provisions. The court also has a discretion. Perhaps I can refer your Lordships to the judgment of the former Lord Chief Justice, the noble and learned Lord, Lord Bingham, in the recent case that came before the Privy Council from Scotland. He said:The confiscation order procedure can only he initiated if the accused is convicted of a drug trafficking offence. The court is therefore dealing with a proven drug trafficker. It is then incumbent on the prosecutor to prove, as best he can, the property held by the accused and his expenditure over the chosen period up to six years, including any implicative gifts relied on … It is only if a significant discrepancy is shown between the property and expenditure of the accused on the one hand and his known sources of income on the other that the court will think it right to make the section 3(2) assumptions, and unless the accounting details reveal such a discrepancy the prosecutor will not in practice apply for an order".I pause there. That decision was that the existing legislation is proportional and complies with the Act. It is for the court to "think it right", so the court has a discretion as to whether to apply the assumptions. The noble and learned Lord, Lord Bingham, continued:It would be an obviously futile exercise to seek an order where the assets and expenditure of the accused are fully explained by his known sources of legitimate income. If a significant discrepancy is shown, and in the first instance it is for the prosecutor to show it. I do not for my part think it unreasonable or oppressive to call on the accused to proffer an explanation"—not to prove where the assets came from, but "to proffer an explanation". That puts into simpler terms the concept of an evidential burden upon the accused rather than the persuasive burden to which my noble friend Lord Goodhart, and the noble and learned Lord, Lord Lloyd of Berwick, in particular, have referred. The noble and learned Lord, Lord Bingham, said:He must know the source of his assets and what he has been living on".It is proportional; therefore, if the court has a discretion to make the assumptions and if the prosecutor has the discretion to make the 55 assumptions, all that is required of the accused is that he offers an explanation and that he produces evidence in support of his possession of property.
The noble and learned Lord, Lord Woolf, said something similar in the case of Benjafield, in the Court of Appeal:It is very much a matter of personal judgment as to whether a proper balance has been struck between the conflicting interests. Into the balance there must be placed the interests of the defendant as against the interests of the public, that those who have offended should not profit from their offending and should not use their criminal conduct to fund further offending. However, in our judgment, if the discretions which are given to the prosecution and the court are properly exercised, the solution which Parliament has adopted is a reasonable and proportionate response to a substantial public interest, and therefore justifiable".Again, I draw attention to those words. The noble and learned Lord, Lord Woolf, the current Lord Chief Justice, emphasised the discretion in the hands of the court as to whether to proceed with those draconian provisions against an individual.
The noble and learned Lord, Lord Hope, made similar points in a Scottish case:The Act provides that [the assumptions] can only be made where the accused has been convicted of a drug trafficking offence … In order to embark on this process the crown must first prove that the accused is guilty of such an offence. That is the threshold that first must be crossed".So, as far as the noble and learned Lord, Lord Hope, is concerned, part of the proportionality was that a specific offence had been proved against an individual. Consequently, it is vital, as my noble friend Lord Goodhart has said, that we should know what those offences are on the face of the Bill and that they should not be brought in by a side wind through regulations. The noble and learned Lord, Lord Hope, continued:Then there is the nature of those offences … The essence of drug trafficking is dealing or trading in drugs. People engage in this activity to make money, and it is notorious that they hide what they are doing. Direct proof of the proceeds is often difficult, if not impossible. The nature of the activity and the harm it does to the community provide a sufficient basis for the making of these assumptions. They serve the legitimate aim in the public interest of combating that activity. They do so in a way that is proportionate. They relate to matters that ought to be within the accused's knowledge, and they are rebuttable by him at a hearing before a judge on the balance of probabilities".There the noble and learned Lord, Lord Hope, focuses upon specific allegations with which a person can deal and not upon a broad concept. The noble Lord, Lord Carlisle of Bucklow, referred to a broad concept of a criminal lifestyle that is almost impossible to define.
The Government cannot rely—as did the noble Lord, Lord Rooker—upon the decisions which have taken place under the existing legislation. They cannot rely on the fact that this legislation is proportionate when it invades the very matters which affected the judges who came to the conclusion that the existing legislation complies with the European convention. For that reason, we shall consider in detail in Committee the provisions of the Bill.
Having said that, we entirely support the concept that criminals should not enjoy the fruits of their crime. That is obvious. But we also support sensible, 56 fair and just legislation which will not be struck down at some future date. We also support the creation of a properly funded agency to take over from the hard-pressed units of the police and Customs and Excise. I have seen them in operation. Their morale appeared to me to be low. I may be wrong. With wholly inadequate resources, they sought to grapple with the very clever criminals whose means of concealing crime are multifarious.
There is much in the Bill to discuss in Committee. We shall do our best to improve it.
§ 6.2 p.m.
§ Lord Kingsland
My Lords, the quality and comprehensiveness of your Lordships' contributions to the debate today have made my task easy. The Opposition thoroughly support the objectives of the Bill.
As my noble friend Lord Carlisle of Bucklow said, the proceeds of crime have a corrosive effect on society and in themselves breed crime. But, at the same time, I am sure the noble and learned Lord the Attorney-General will agree with me that the Bill changes, in some respects dramatically, the balance of power between the state and the citizen. I hope that he will further agree that it is right that your Lordships' House should scrutinise the text extremely carefully.
My contribution will be in inverse proportion to the length of the Bill. I propose to refer only briefly to three parts. Part 2 was addressed by almost all noble Lords. The noble and learned Lord, Lord Lloyd of Berwick, and the noble Earl, Lord Mar and Kellie, congratulated the Opposition in another place and the Liberal Democrat Party for the excellent way in which the Bill was scrutinised in Committee. I believe that there were no less than 39 sittings.
At least two important concessions were made by the Government as a result of that process. The first was the undertaking to schedule a list of offences which were likely to give rise to the definition of criminal lifestyle and we welcome that. The second was the decision to apply the affirmative resolution procedure to any new offences which would fall within the definition of criminal lifestyle. We think that both initiatives are very constructive. We are much obliged for them.
I agree with the noble Lord, Lord Goodhart, that the most difficult paragraphs in Part 2 are connected with the definition of a course of criminal conduct. It could be satisfied either by offences which were very grave or which were rather trivial. In circumstances where the offences which gave rise to the mandatory assumption were, let us say, three shoplifting offences I share his view that the Bill's reaction is disproportionate. When the noble Lord tables an amendment to the provision, the Opposition Benches will support the solution he proposes: that there would be circumstances where a judge might take the view that it is wholly unreasonable to move from such a course of criminal conduct to the mandatory assumptions.
57 I hope that noble and learned Lord will reflect on that issue between now and Committee stage. Another place gave some consideration to the matter. I know that your Lordships' House will be thinking carefully about it again.
I make two further points, telegraphically, on Part 2. One is the obvious point about the difference in the treatment of the family home between Scotland and the other parts of the United Kingdom. In my submission, that is in principle discriminatory and could well fall foul of the provisions of the Human Rights Act. The other refers to a point made most eloquently by the noble Lord, Lord Goodhart, when he distinguished between the persuasive and evidentiary burden in circumstances where the burden of proof is reversed in criminal matters. Again, I share his views on that.
With regard to Part 5.1 need do little more than refer noble Lords to the remarkable speech by the noble and learned Lord, Lord Lloyd of Berwick. I entirely endorse his conclusion that it is highly likely that the courts would decide that the procedure laid down in Part 5 is of a criminal and not a civil nature. If that conclusion is correct, Article 7 of the European Convention on Human Rights applies and would condemn those parts of the Bill which gave force retrospectively to Part 5.
Moreover, a decision in favour of the agency under Part 5 could be reached by evidential rules which were much lighter than the rules which apply in a criminal case—with regard to the balance of probability and with hearsay evidence and compelled evidence also admissible. For such a grave outcome for the individual, those rules of evidence are not tight enough. They do not provide the individual with sufficient protection.
I refer again to a point made by the noble and learned Lord, Lord Lloyd of Berwick. Were the civil procedure to follow a failure to convict, much of the evidence that arose in the criminal trial could be re-run in the civil trial to favour the state. Equally, a decision to recover under Part 5 in the civil trial could be used in a subsequent criminal trial, perhaps calling into question a presumption of innocence. Therefore, although the Opposition entirely understand the point underlying Part 5, and would not go so far as to say that it should not be there, they believe that the procedures implied by the civil approach are not sufficiently tight to guarantee the protection we would expect for the citizen.
Finally, so far as concerns the procedures with respect to money laundering, we wonder whether a negligent act by a professional in a City firm should give rise to the penalty of imprisonment. I hope that the noble and learned Lord will think again about that issue too.
§ 6.9 p.m.
§ The Attorney-General (Lord Goldsmith)
My Lords, I am grateful to all noble Lords who have taken part in the debate. Subject to certain reservations, the overall effect of the speeches by noble Lords is support for the 58 legislation; and for that we are grateful. The importance of the legislation was explained by my noble friend Lord Rooker in opening the debate. I welcome the comments made by your Lordships in support of what he said. I welcome the observations of the noble Lord, Lord Carlisle of Bucklow, based on his experience as a criminal practitioner and judge, as to the corrosive effect—I use the language of he noble Lord, Lord Kingsland—of the proceeds of crime, if we cannot remove them from the system, if we cannot starve criminals of their working capital. Removing the working capital of crime—removing the role model to which peaceful enjoyment of the proceeds of crime gives rise—is an important objective. I am glad that it is shared generally in the House.
However, the present system does not produce the results. It is estimated that the value-added of drugs is 1 per cent of GDP—perhaps as much as £8.5 billion in the United Kingdom—but less than £20 million was recovered in 2000–2001 by the existing procedures. Therefore, a key issue is to have a workable Bill. I noted the promise made by the noble Baroness, Lady Buscombe. If I took down her words accurately, she said that it was the will and wish of the Opposition to assist the Government to achieve a workable piece of legislation. The Government will be happy to judge that promise by the results of what takes place in Committee In that connection, it will be important to discover whether the approval of the noble Lord, Lord Kingsland, of at least part of what the noble and learned Lord, Lord Lloyd of Berwick, said in relation to Part 5 actually amounts—I thought he was working towards it—to denaturing Part 5 to such an extent that it would not work. That would not provide a workable Bill, and I shall return to that point.
In a Bill of this size, it is inevitable that there will be divergent views on some issues. My fundamental point is that we very much hope we can work together in Committee to ensure that the Bill's central themes are not significantly weakened. Although a balance has to be struck about which there is no difference of view, the Government's overall approach is to ensure that the legislation is not applied unfair ly or disproportionately. We owe a duty to the public to ensure that the law is not reduced to such a level that it renders the legislation powerless to act against those who will take every opportunity to circumvent its effect.
I shall do my best to deal with the points that have been raised. It is helpful to know what issues will be raised in Committee. However, some points are perhaps more appropriate for Committee Stage than Second Reading, and I hope that I shall be forgiven if' I omit some of them. I do not intend, however, to tread the interesting paths started by the noble Lord, Lord Goodhart, and continued by the noble and learned Lord, Lord Lloyd of Berwick, about the quality of the draftsmanship, the absence or presence of punctuation, or whether it is right that Scotland should have its own provisions separately set out in a single, comprehensive part. No doubt parliamentary counsel will read their comments with interest. As my noble friend Lord Rooker said in opening the debate, 59 this is a complex and heavy Bill. We shall do what we can outside this Chamber to assist noble Lords who seek such assistance to understand how the Government believe the legislation will work. I make that offer to noble Lords.
I deal, first, with Part 1 of the Bill. My noble friend Lord Rooker said that this Bill is part of a wider programme, including the provision of funds for more financial investigators. The noble Baroness, Lady Buscombe, asked whether the establishment of the new agency would result in a loss of existing expertise in financial investigation. I can assure her that that certainly will not happen. There is a need to improve Financial investigation skills. The priority to be given to financial investigation was a key recommendation of the Performance and Innovation Unit's report, which preceded this Bill, in June 2000. The agency will not entirely take over confiscation investigations from existing law enforcement agencies. However, it will share the confiscation functions of the law enforcement and prosecution authorities.
The noble and learned Lord, Lord Lloyd, asked whether it was necessary to have a new agency. The Government's view is that it most certainly is necessary. If I may draw on my own experience, I have seen the operation of a similar agency established in Dublin, and I have been much impressed by the joined-up way in which it is working with tax, Customs and police authorities, and financial investigators. I am quite satisfied that the PIU's recommendation that there should be a separate agency is a good one.
We need the legislation because of the defects in the current scheme. Those defects are referred to in the PIU's report, and many of the concepts contained in the Bill derive from the recommendations of that report. It emphasised that the present confiscation law has been developed in a piecemeal fashion, which has contributed to its under use. The fact is that confiscation orders are currently made in only 10 per cent of drug trafficking cases, and overall in only 0.3 per cent of criminal cases.
The problems of the present scheme were identified in summary by my noble friend Lord Rooker in opening. For example, the separate treatment of drug-trafficking and other criminal activity renders the legislation ineffective against sophisticated criminals, because it is often impossible to distinguish between the proceeds of drug trafficking and the proceeds of other crime. Modern technology allows funds to be transferred with sophistication and speed, which means that it is necessary to have new investigative powers in order to be able to trace them.
I turn to the parts of the Bill dealing with criminal confiscation, Parts 2 to 4. I did not detect any disagreement from the noble Lords who spoke as to the principles that lie behind those parts of the Bill. Let me therefore address some of the specific points that were made, if only to give an idea of what we would say in Committee if probed on them.
First, I turn to the discretion to make a confiscation order. Under existing legislation, the position in England, Wales and Northern Ireland in relation to 60 drugs is to make such an assumption—I hope your Lordships will forgive me for switching slightly between assumptions and the making of an order—following conviction for a single drug-trafficking offence. If one reverts to the question of the order itself, it is very important to consider what safeguards are in place. First, there is a discretion vested in the prosecutor. Will the prosecutor apply for the order at all? Secondly, there is an ability to rebut the assumptions that exist. Thirdly, the court must not make an assumption if to do so would result in a serious risk of injustice. That is an important matter and one to which I shall return, because it relates to a number of points made by noble Lords.
I turn to the issue of criminal lifestyle. Again, the fact that assumptions must be made by the court is already the position in relation to a single drugs-trafficking offence under existing legislation. The question with which we are concerned therefore is the definition of "criminal lifestyle" and how it will operate. I am grateful that the Government's intentions, as indicated by my noble friend Lord Rooker in opening—to produce a schedule of the lifestyle offences and to accept the recommendation of the committee in that respect—were welcomed.
In that context, I return to the issue of serious risk of injustice. Some examples raised by noble Lords were precisely the circumstances in which one would anticipate the court saying, "There is a serious risk of injustice in making the assumption in this case, having regard to what we know about this offender and having regard to the specific circumstances of the offence". That is an important safeguard to be borne in mind.
Two issues were raised in relation to the burden of proof. One was the persuasive and evidential burden and the other the standard of proof. It was suggested, as it was suggested in another place, that an evidential rather than a persuasive burden should be placed on the defendant. The Government's view has been that a persuasive burden is necessary. Why is that the case and what is the difference?
I take the example of an allegation in the course of proceedings that there is an unexplained transaction of £10,000. If all that the offender is required to do to discharge the evidential burden is simply to say, "I am a gambler", it will place on the prosecutor a difficult if not impossible obligation to prove where that £10,000 came from. It is in the nature of the sorts of transaction with which we are concerned that there are no paper trails which can be followed for the proceeds of drug trafficking, trafficking in humans, or whatever the behaviour may be.
§ Lord Goodhart
My Lords, would the noble and learned Lord agree that it would be perfectly possible for someone who was claiming that winnings were the result of gambling to provide a genuine paper trail which would show that he had won a substantial bet, but would fail to show that he had simultaneously made a large number of losing bets? Is not the right way to deal with that problem to make it clear that 61 winnings from gambling should not be regarded as providing an excuse for treating those assets as having been acquired by legitimate means?
My Lords, I am grateful for the spirit which moved that observation. But the ultimate proposition that the Government should say that proceedings of gaming are illegal and can be recouped by the state may surprise some people. The noble Lord's point tends to support rather than undermine my point; that is, if one simply allows a defendant to raise the possibility to discharge the evidential burden by saying, "I got it from gaming", for example, and then places on the prosecutor the obligation to demonstrate where it came from, it would defeat a lot of the object of the Bill.
The question was raised as to whether or not such a burden is compatible with the ECHR. There is no rule of the ECH R that reverse burdens are not legitimate; indeed, the cases to which my noble friend Lord Rooker referred in his opening address are exactly such cases. The cases of McIntosh and Benjafield. to which the noble Lord, Lord Thomas, referred, are cases in which there is an actual reverse burden and they have been accepted by the highest courts, as has Phillips in the European Court of Human Rights itself.
The question of the family home was raised by the noble Baroness, Lady Buscombe, and the noble Lords, Lord Goodhart and Lord Kingsland. As was explained in another place, the difference in treatment between Scotland and England and Wales reflects existing differences in the law of those countries. The provision in Scotland replicates earlier Scottish confiscation legislation in the Proceeds of Crime (Scotland) Act 1995, which itself developed an earlier provision along the same lines in the Criminal Justice (Scotland) Act 1987. That in turn reflects the fact that under a 1981 Act—we are going back a long way—Scottish law provided a right to occupy the matrimonial home to spouses who were not owners or tenants and provided for the protection of occupancy rights in a way that is different from English law.
The difference in treatment reflects the difference in protection of spouses' rights in Scotland. Both propositions in a sense have an argument of principle in their favour. On the one hand, if these are proceeds of crime, why should they be capable of retention under any circumstances? On the other hand, it may be argued that family circumstances may justify the retention even of unlawfully obtained proceeds of crime. Both arguments, in principle, are justifiable positions to take. It does not seem to the Government that there is a way of immediately producing a common approach between them. However, we shall continue to reflect on the matter and to monitor the operation of all three parts closely in any event when the Bill is in force.
I turn now to the question of creditors. I can deal with this quite quickly in view of the hour. It was raised by the noble Baroness, Lady Buscombe. I draw a distinction between the position of secured creditors and that of unsecured creditors. Secured creditors—those who have an interest in the property—will, as the 62 Bill shows, be able to have their interest recognised and generally protected. But if all debts were given priority over confiscation what would be the consequence? Let me suggest at least two. First, spurious creditors would emerge claiming that they have a prior debt outstanding against the defendant. In reality they could be criminal associates of the defendant. That would be difficult to prevent and would greatly weaken the compensation system. Or defendants could acquire services on credit to defeat the confiscation process.
An unsecured lender exposes himself to all sorts of risk. I accept that that would be one more risk, but nut one of a different order. However, it may turn out that the person to whom he lent the money is unable to pay it back on this occasion because it turns out that his assets are the proceeds of crime.
The noble Baroness, Lady Buscombe, raised the question of potential double recovery. Under Clause 14 the court has discretion to take forfeiture orders into account, so that is a matter for the court. In cases where there is no forfeiture order, it does not seem right to take into account the purchase price of drugs. In any event, the limit on what the court can do relates to the amount of available assets—the money that the defendant actually has. That is an important observation.
The noble Lord, Lord Goodhart, asked why legal fees could not come from the restrained assets. As the House knows, the line taken by the Government is that legal aid will be available when it is not possible for legal expenses to be met. Legal fees should come out of assets that are not the contested proceeds of crime.
The noble Lord, Lord Thomas of Gresford, painted a dramatic picture of penalty being imposed on penalty, but under Clause 8 the court cannot make an order for confiscation that is greater than the available assets of the defendant. Therefore, the example that he gives is of someone against whom an order of the court has been made but who refuses to comply with it. That is the case in relation to other orders, fines and so forth.
§ Lord Thomas of Gresford
In my experience, if it is claimed that a person's recoverable assets are nowhere near the benefits that have passed through his hands, he is said to have hidden assets. That is the situation to which I was referring.
§ Lord Goldsmith
Those cases will be judged by the court, having regard to material that is put before it and subject to appeal. Therein lies the safeguard.
Generally speaking, civil recovery appeared to be supported by most noble Lords, save the noble and learned Lord, Lord Lloyd of Berwick. I start with the question of the classification of this part of the Bill. It is an important issue with important implications. Is it a criminal matter or a civil one? As a matter of domestic law, these will be civil proceedings. But that is not conclusive under the European convention. The Government's view, having regard to the factors that the European jurisprudence requires, is that on 63 balance this is civil and not criminal. The reasons are summarised in the memorandum from the Home Office which is printed in the Joint Committee's report.
On the confiscation proceedings, the jurisprudence is crystal clear. Oddly—as some might think—but accurately they are civil, not criminal, in nature. That is the effect of the Benjafield case, the Phillips case and the McIntosh case; and that is why Article 6.2 provisions do not apply after there has been a conviction. The question is whether or not freestanding civil recovery is in a different position. The Government's view is that it is not. It is not a form of prosecution. The purpose is not to secure a finding of guilt, let alone a conviction or imprisonment. It focuses on property and how it was obtained. There is no necessary implication that the person holding it is guilty. Only property that has been unlawfully obtained, or funds obtained for it, can be recovered.
The elements of civil procedure apply in the process. That is why the Government take the view that it is civil in nature. There is much case law but now is not the time to debate it. The Joint Committee considered that the existing case law did not conclude the issue either way. However, the Government consider that the case law points much more strongly than was suggested by the Joint Committee, as does Irish case law. Similar legislation has been examined at the highest level in the Irish courts.
The second question is how civil recovery will operate. If the issue were criminal in nature there would be concerns about Article 7 of the Convention, but not if it is a civil issue. That is why the limited amount of retrospection that the Bill provides is justified in the Government's view.
Thirdly, I turn to the safeguards under this procedure and I invite noble Lords to consider them. The director has discretion as to whether to bring civil recovery proceedings. The burden of proof is on the director and civil recovery proceedings will be governed by the civil procedure rules. There will be protection for third parties who have an interest in the property, and those who have purchased for full value in good faith and without notice will not have to give it up. The court also has an important residual power not to include in a recovery order measures that are incompatible with rights under the ECHR. That is expressly set out.
As these are civil proceedings in the Government's view, the standard of proof is the civil standard of the balance of probabilities. All noble Lords who have experience in the courts will know that, in practice, the High Court requires more cogent evidence when a claim involves an allegation of criminal conduct than it would for that of negligence.
I emphasise the hierarchy. This is not being put forward as a soft option to prosecution. The Government have made it clear that the first priority will be a criminal prosecution and not civil recovery as an alternative to it.
64 The money-laundering provisions received some attention from your Lordships. These were debated in another place, and I look forward to the further discussions that we shall have in Committee. The noble Baroness, Lady Buscombe, referred to the training that all employers are required to provide under the Money Laundering Regulations 1993. The concern that the negligence offence is unfair overlooks the fact that the offence in Clause 330 of failing to report to the authorities is permitted only if the prosecution proves that money laundering was planned or undertaken.
In response to a question from the noble Lord, Lord Goodhart, the Government have undertaken to strengthen NCIS's capacity to handle more suspicious transaction reports and have invested in ensuring that the systems are efficient and effective. No doubt we can provide the noble Lord with further information.
In conclusion, noble Lords have identified areas of the Bill that they wish to scrutinise. As always we welcome such scrutiny. We note that the Bill has been subjected to considerable scrutiny already, but improvements have been made. Certain matters, although looked at in detail by the Government, were not accepted. Subject to the changes that were identified by my noble friend, the amendments meet the concerns that have been raised. We all agree that the Bill is important. It should be proportionate—or just, to use the word of the noble Earl, Lord Mar and Kellie. The Government believe that it is and we look forward to working with your Lordships to ensure that the important principles of the Bill are not undermined, thereby making it unworkable. I commend the Bill.
On Question, Bill read a second time, and committed to a Committee of the Whole House.