The recent case of Mills has highlighted an important gap in legislation concerning the ability to appeal Default Orders made by Crown Courts seeking to enforce Confiscation Orders under the Proceeds of Crime Act 2002 (POCA 2002).

Background

Graham Mills pleaded guilty to fraud and money laundering offences at Nottingham Crown Court in September 2013 and was sentenced to 7 years imprisonment. The charges related to Mills’ role in what the Court of Appeal described as a set of ‘sophisticated ‘boiler room’ frauds’ operated largely from Thailand.  Mills and his co-conspirators created a fake investment company and defrauded investors over a 6-year period (between November 2007 and September 2013).

Confiscation proceedings were initiated against Mills in May 2017, during which he was found to have a criminal lifestyle and a benefit under the legislation of £8,922,378. The recoverable amount was originally assessed at £657,197.33 including £500,000 of hidden assets. Mills was further made subject to a Default Order, whereby if he failed to satisfy the confiscation order he would serve a further 18 months imprisonment.

The recoverable amount was subsequently increased slightly to £661,027 at a second hearing, pursuant to s.155 Powers of Criminal Courts (Sentencing) Act 2000, after further assets were identified and brought to the attention of the court. The judge, however, declined to revisit the accompanying Default Order.

Argument in the Court of Appeal

The prosecution appealed against the Default Order on the grounds that it fell well below the term envisaged by the proper application of the leading authority (R v German Castillo [2012] 2 Cr App R (S) 36) and the statutory scheme at s.35(2A) POCA 2002.

The Court of Appeal agreed with both submissions.

In particular, the court referred to the learned judge’s sentencing remarks, where he made clear that his choice of sentence in default was influenced by the length of the original sentence that Mills received for the substantive charges. Specifically, the German Castillo guidance expressly states that the court ‘must not be influenced by the overall totality of the sentence passed for the crime plus the default term’. The judge had erred in this regard and wrongly taken into account the original sentence.

Further, in sentencing the judge had commented that the recoverable amount was ‘right at the bottom of the relevant scale’ while deciding the sentence in default. In fact, it fell comfortably within the £500,000-£1,000,000 bracket, which called for a sentence of between 5 and 7 years.

It was the Court of Appeal’s clearly stated view that the sentence pursuant to the Default Order was manifestly wrong in that the judge had taken account of impermissible factors and arrived at a figure that was well below the period provided for by the statutory scheme.

Against these significant grounds in favour of revising the Default Order, counsel for Mills argued that the Court of Appeal did not have jurisdiction to hear an appeal flowing from a Default Order. Counsel for Mills also suggested that the setting of the default term was an exercise of discretion which the Court of Appeal should not interfere with.

Specifically, the case of R v Gary Ellis [1992] 2 Cr App R (S) 403 was relied upon, in which the subject of a Confiscation Order had appealed against it on the basis that the sentencing judge had failed to make a Default Order, thus tainting the Confiscation Order. Ellis, supported by other authorities considered by the Court of Appeal, made clear that the Default Order is not subsumed within the Confiscation Order, but is a separate – albeit closely connected – distinct order.

In Mills, the Court of Appeal held that as POCA 2002 was drafted after the decision in Ellis, and only permitted a prosecutor to appeal a Confiscation Order, it followed that appeal against a Default Order had not been envisaged by Parliament.

The irresistible conclusion – which the court itself described as unsatisfactory – of the combination of authorities and legislative drafting is that a Default Order cannot be appealed.

As a result, the appeal was dismissed and the Default Order of 18 months was allowed to stand.

Conclusion

It is evident from this case that the current drafting of s.31 of POCA 2002 has left a legislative gap through which unsatisfactory Default Orders may slip. Indeed, as Mills is near the end of the 18-month Default Order sentence that he did receive, the consequences of this gap in the law are all the more poignant. Although such sentencing errors are rare, without the ability to review manifestly wrong Default Orders, Mills demonstrates a further problem with a confiscation scheme already fraught with enforcement difficulties.

Considering the attention drawn to this issue by the Court of Appeal judgment, the Government may seek to correct matters swiftly. In light of the body of case law establishing that Confiscation and Default Orders are related but distinct, this could perhaps best be achieved by a minor amendment to ss.31 and 32 of POCA 2002 to allow prosecutors to appeal and the Court of Appeal to quash or vary those Default Orders that are manifestly wrong.