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Proceeds of Crime Bill

3.51 p.m.

The Minister of State, Home Office, (Lord Rooker): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Rooker.)

On Question, Motion agreed to.

House in Committee accordingly.

[THE CHAIRMAN OF COMMITTEES in the Chair.]

Clause 72 [Serious default]:

Lord Kingsland moved Amendment No. 76:


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The noble Lord said: Under Clause 72 of the Bill compensation is payable to the defendant who has suffered loss in consequence of a confiscation order, a restraint order, the appointment of a receiver or other orders under Part 2 of the Bill. However, before a defendant is entitled to compensation, he or she must show that proceedings were never brought, or he was not convicted of an offence, or his conviction was quashed, or that he was pardoned.

In all those circumstances any confiscation or other order made will be discharged. The defendant's loss may be modest or substantial. It could be that, as a result of the restraint order, he was unable to continue his lawful business; indeed, he may have lost that business as a result, and that loss could have been substantial.

It is right and proper, therefore, that any person suffering such loss, in such circumstances, should be entitled to compensation. However, before being entitled to compensation, that innocent defendant must prove that there has been a serious default by a member of the police force, the CPS, the Serious Fraud Office, a customs officer or an officer of the Commission of the Inland Revenue. A mere mistake is not sufficient. A careless mistake is not sufficient. Only a serious default gives rise to compensation, however disastrous the consequences for the innocent party.

That cannot be right. The powers given to the police force, the CPS, the Serious Fraud Office, a customs officer or an officer of the Commission of the Inland Revenue can ruin people. Those powers can be exercised even when no proceedings are ever brought. The courts are given little discretion in the matter and in some circumstances must make the order where the prosecutor requests.

We believe that, where there are such powers, there must also be accountability on behalf of the public authority; the two go hand in glove. If a member of the prosecution team makes a careless mistake, we do not believe that the innocent defendant should bear any loss as a consequence.

In short, it is important that those who have those powers exercise them as carefully as they can, and that those who supervise them ensure that they do so. If they fail then compensation should be payable. We suggest therefore that compensation should be payable in cases of negligent default and not just serious default. I beg to move.

Lord Goodhart: I speak to Clause 72 stand part, Amendment No. 77, Clause 142 stand part, Amendment No. 134, Clause 226 stand part and Amendment No. 193. Those are all in the same form respectively as regards England and Wales, Scotland and Northern Ireland.

We support Amendment No. 76, but we go somewhat further. We suggest that where property is subject to a restraint order then compensation should be paid, whether or not there is negligence, if the order is ultimately refused. The position in ordinary civil proceedings is that, where one party is entitled to or obtains an order from the court to freeze the property

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of another—normally known as a Mareva injunction—the making of the injunction is conditional upon the party who seeks the injunction giving a cross-undertaking in damages; that is, an undertaking to compensate any other party for any loss suffered as a result of the making of the order.

We believe that that is the right principle and that there is no justification for the Government observing a lower standard of compensation than would be the case in ordinary civil proceedings between private parties. We believe therefore that the appropriate course, where the restraint order is made but is discharged and not replaced by a confiscation order, is for compensation to be paid for the loss which is suffered.

The Government are exercising considerable powers. The power to freeze somebody's property, as the noble Lord, Lord Kingsland, said, is one that may cause serious loss. It should therefore be the automatic result that if the order is discharged, compensation is paid. I accept, as would be the case in civil proceedings, that compensation may not be ordered in the exceptional case where the party against whom the order is made has in some way acted so as to cause suspicion and in effect to bring the order on himself. Subject to that there should be an automatic right to compensation.

Lord Rooker: The two groups of amendments spoken to by the noble Lords, Lord Kingsland and Lord Goodhart, essentially deal with the same part of the Bill but would have a considerably different effect. That is probably recognised in the brief speeches that we have just heard.

The effect of the first group of amendments—Amendments Nos. 76, 132, 133, 191 and 192—would be to make compensation payable where there was negligent default on the part of the enforcement authorities in the investigation or prosecution of an offence, and a loss had been occasioned. The effect of the second group, spoken to by the noble Lord, Lord Goodhart, would be to make compensation whenever a restraint order is discharged without a confiscation order being made, no matter why the confiscation order was not subsequently made. It may be useful for the Committee to appreciate that the provisions were debated substantively in the other place, as recorded in Hansard of 29th November at columns 411 to 426.

I turn to the first set of amendments. The Bill as drafted provides that compensation is payable where there is a serious default. The provision is settled and the Bill reflects existing legislation in that respect. There is nothing new about it. The word "negligent" is broader than the word "serious". The amendments would extend the conditions in which compensation was payable from those where one of the enforcement authorities committed a serious default to those in which the authorities committed any negligent act. Clause 72 uses the word "serious" rather than the word "negligent" because the enforcement authorities must not feel unnecessarily inhibited in the exercise of their duties.

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As the Explanatory Notes point out, the restriction to serious default cases is based on the principle that the restraint and realisation of the property is ancillary to a criminal trial—in the same way as is the detention of a person pending trial. In neither case is compensation paid on acquittal as a matter of course. Many years ago, I remember raising the case of one of my constituents who served his term of imprisonment and had been released before he got his conviction and sentence quashed. He was a former police officer, so it was a highly contentious case, but he could not get a penny from the Home Office. I fear that that is the way of the world.

It is reasonable to make statutory provision for compensation where there is a serious matter, such as the fabrication of evidence, but it would be wrong to hang a compensation scheme around the necks of enforcement authorities for genuine mistakes made in the exercise of their duties. Where the investigating and prosecuting authorities have made mistakes leading to the making of a restraint order, it will be open to those affected to sue them for negligence in the civil courts. In deciding whether or not those authorities owe a duty of care, the courts will take into account the relevant public interest in ensuring that crime is investigated and prosecuted. That is our starting point.

The amendments would discourage the investigation and prosecution of crime and ultimately ensure that more criminals were left to hold onto their assets. We therefore find their wording unsatisfactory and I hope that Members of the Committee will not press them.

As I explained, the second set of amendments would give the courts power to award compensation in any circumstances where property is restrained but no confiscation order subsequently made. They would not provide the courts with any criteria as to how they should apply their power to award compensation. That would be completely unacceptable. I remind the Committee that the serious default test recognises the fact that the restraint is an aspect of criminal proceedings where a similar test applies in general before ex gratia payments are made.

The practical effects of the amendments could be enormous. For example, every defendant acquitted on a technicality could lodge a claim for compensation in respect of alleged loss while his property was under restraint. As I explained in relation to the first set of amendments, enforcement authorities must not be inhibited from performing their duties. The amendments would have precisely that effect. Indeed, they would make the whole Bill unworkable.

Obviously, these matters have been considered since they were debated in the other place, but we are less persuaded of the merits of the second set of amendments than we are of the first, because they would make the Bill entirely unworkable.

We do not think that the comparison with the Mareva injunction made by the noble Lord, Lord Goodhart, applies. We are talking about the possibility of criminal proceedings against a

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defendant. Restraint will be applied only where there is reasonable cause to believe that a defendant has benefited from criminal conduct. Let me make it abundantly clear that we are not discussing fishing expeditions. We do not have criminal prosecution on the basis of fishing expeditions in this country—and quite right too. The same test for compensation applies as under current legislation. There is nothing new about the principle of the Bill's provisions; it has already stood the test of time in existing procedure.

I hope that, having aired this important issue, Members of the Committee will not press their amendments.

4 p.m.

Lord Kingsland: I thank the Minister for his response. There is a curious inequality of approach by the Government between what the Minister said about this part of the Bill and what the Government provide in Part 7. Under Part 7, covering money laundering, which the Committee has yet to discuss, an individual who negligently fails to report a particular transaction will be subject to criminal proceedings. Yet in this part of the Bill, a member of the executive arm in one form or another will not be liable, even in negligence, for failing to observe a duty of care in relation to the particular defendant to which his or her attention is directed.

I submit that that is unacceptable. It is wholly appropriate for public officials exercising their powers under this part of the Bill to be subject to the law of negligence. Clearly, a duty of care must be owed, but once it is established that that duty of care is owed, an appropriate standard of conduct should apply.

I appreciate the careful attention that the Minister paid to the amendment. I shall not press it now, but I shall almost certainly return to it on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 agreed to.

Clause 73 [Order varied or discharged]:

[Amendment No. 77 not moved.]

Clause 73 agreed to.

Clause 74 agreed to.

Clause 75 [Criminal lifestyle]:

[Amendments Nos. 78 to 80 not moved.]


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