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Clause 49 - Powers

Proceeds of Crime Bill – in a Public Bill Committee at 9:45 am on 29th November 2001.

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Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office) 9:45 am, 29th November 2001

I beg to move amendment No. 39, in page 30, line 36, leave out from `property' to end of line 37.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

With this it will be convenient to take Government amendments Nos. 40 to 44, 46 and 47.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

This is a group of eight minor amendments concerning management receivers, directors' receivers and enforcement receivers. Amendment Nos. 39, 43 and 46 delete the power of the court to impose conditions or exceptions when it confers the power to take possession of property upon the receiver. However, amendments Nos. 42, 44 and 47 give the court the wider discretion to impose conditions or exceptions when it confers any power on the receiver under clauses 49, 51 and 53.

Amendment Nos. 40 and 41 relate to the ability of a management receiver to pay his or her remuneration and expenses out of the managed property. Amendment No. 40 is purely technical. The receiver is to be permitted to meet his expenses out of the property that he is managing. However, the power to sell assets might be too narrow if, for example, the receiver wished to take money from a bank account. I am sure the Committee—particularly the hon. Member for Beaconsfield—will understand that the word ``realised'' has a broader meaning than the word ``sell'' and will give the receiver more latitude.

Amendment 41 is substantive. It makes clear that before a receiver is allowed to draw down any of the managed assets for his or her remuneration and expenses, third parties must be given the right to be heard. In practice, a management receiver is never allowed to draw down assets that may be subject to a third party claim. The amendment gives explicit statutory recognition to the principle.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I listened carefully to what the Minister had to say. I had hoped that he would explain in more detail the reasoning behind the amendments, rather than simply explaining the bare bones of what they would achieve. If I understood the hon. Gentleman correctly, the amendment is designed, in the case of a management receiver who is dealing with property under a restraint order, to give him the power to be remunerated from the assets that are under restraint and widen those powers to enable him to draw down certain assets more easily. I have a worry about that. The assets are under restraint. They are not assets that have been confiscated, nor is the confiscation process taking place. It must therefore be possible that, at a later stage, those assets—if the confiscation procedure does not work—might have to be returned to the defendant.

That brings us to an issue that we should look at later. Indeed, last night I was drafting an amendment about the potential knock-on effects on an individual of the way in which his assets are handled during the restraint procedure. Let us suppose that a person has a pool of money and the receiver draws down on that money while the assets are under restraint. If at a subsequent point—I ask the Minister to reassure me on this—no confiscation order is made, the pool of money will have to be replaced before it is given back to the defendant. That will compensate him, and the cost of the receivership will be borne by the taxpayer and by the state.

If, during the course of the receivership under the restraint order, there is a complete muddling of the defendant's existing financial arrangements, he may have a legitimate grievance. The immediate monetary loss that he has suffered will not in fact be his true loss. The true loss is much more complex, and is incalculable, because his business and everything associated with it may have been destroyed. The Committee ought to bear that possibility seriously in mind, because we are using the restraint procedure widely for a variety of individuals, with the intention that we will confiscate. Of course if we confiscate, there is no problem. However, if we end up not confiscating for any reason, it is incumbent on us to ensure that a regime is in place that minimises and removes any suggestion that the person has been subject to a financial disadvantage. That may be impossible to achieve in 100 per cent. of cases, but it means that careful thought must be given to issues such as who pays the receiver. While the assets are under restraint, there is a strong argument that the receiver should be paid by the state. If, after the completion of the process, a confiscation order is made, that is the time for the receiver to draw down his money from the confiscated assets.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster 10:00 am, 29th November 2001

I shall speak simply to say that I agree with my hon. Friend. I appreciate what the Government are trying to achieve. The restraint period will be long drawn out, and significant expenses will be incurred. If large amounts of assets are under restraint, those assets should be available for the remuneration of a receiver. It should be remembered, however, that in any insolvency situation professional advisers have a prior claim. That is analogous, if not directly comparable. None the less, it would be inconvenient, apart from anything else, if assets were sold at what would inevitably be a knock-down sale price, and the restraint order and confiscation order then moved in the opposite direction. It would cause great embarrassment to the authorities if it was discovered that hundreds of thousands of pounds of undervalued assets had been sold off to pay fees, and the end result was the reimbursement of a defendant. It seems common sense that in the first instance, the state, rather than the assets of the defendant, should pay the fees over what should normally be a short period.

Photo of Boris Johnson Boris Johnson Conservative, Henley

I just want to say how vehemently I agree with my hon. Friends, and to add a layman's point of view. During our discussion of the restraint orders, appeal process and so on, one question has formed in my mind, which I would be grateful if the Minister would answer. I can understand the logic of freezing the potential villain's assets, because although he has not been convicted of anything, we do not want him to scarper, disperse his assets and make them unavailable for confiscation. If the assets are frozen, the receiver can avail himself of them to remunerate himself. Before the individual has been convicted, his property is being taken away, and I can see that there may be arguments in favour of that—but how long will that situation go on?

Is there a time limit to the restraint order and the freezing process before the charges are brought and the potential villain is charged with an offence? There seems to be a long period during which assets can be frozen, and frittered away by the state, and then it may be discovered that the assets snaffled by the director and the receiver were not the proceeds of crime, so they may have to be returned to the individual concerned. How long will it all go on? Does the Bill contain a provision for minimising that period? I have not discovered such a provision yet.

Several hon. Members rose—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. The debate has ranged considerably more widely than the amendments. I am now taking a view on the clause stand part debate, so I suspect that if hon. Members wish to discuss clause stand part now, they should carry on as they are doing.

Photo of David Wilshire David Wilshire Conservative, Spelthorne

I am grateful for those remarks, Mr. McWilliam. I want to ask something specific about the matter that we are debating, but some of the points that I wish to make are not wholly relevant to whether we accept the amendment to change the word ``sell'' to the word ``realise''. I seek your guidance, Mr. McWilliam, because in a sense, my comments will be a stand part contribution. If I understand you correctly, it will be in order to raise other points that are wholly related to the stand part debate.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

It strikes me that hon. Members are already discussing clause stand part rather than the amendments. The hon. Gentleman should continue, and we will dispense with the clause stand part debate.

Photo of David Wilshire David Wilshire Conservative, Spelthorne

I am grateful for your guidance, Mr. McWilliam.

I am sorry if Government Members sometimes think that I do not raise matters that are relevant or important to the layman. However, the points that I raise are all genuine, and the following points are especially so.

I am greatly worried by the debate. We are currently dealing with a person who, in British law, is innocent and not yet proved guilty. If that person is found to be not guilty of any of the charges, there are serious risks. The Government should spell out their thinking. My hon. Friend the Member for Beaconsfield said—I am sure that he is right—that if a not guilty verdict is returned, all assets that may have been taken must be returned. That is simple common sense. However, it is not that simple, because many issues that may arise must be addressed. For example, if certain assets are disposed of and must be reacquired, they could have earned interest, so interest will have been lost while they were not owned. Will the returning of the assets include interest earned? Natural justice would suggest that it should.

There is a further factor, which is—I do not apologise for returning to my mother's situation—that certain assets that a person or estate holds have a meaning and value that cannot be put in monetary terms. We should address seriously the issue of compensation, not only that of returning assets. If an asset that is disposed of cannot be recovered in its entirety, the price that would be fetched at auction will be inadequate, because more harm has been done to an innocent person than simple deprivation of money. Does the Minister envisage an allowance for compensation over and above the pure monetary value of an asset that is disposed of and subsequently recovered?

Some assets realised could be shares in public companies. Would such shares be recovered at the price at which they were sold or the price at which they would be bought back to return to the owner? We may consider the allowance of shares of a particular sort—I was going to discuss Railtrack, but that matter has overtones that would obscure my point—such as shares in the aviation industry. If proceedings had started before 11 September, shares in parts of the aviation industry would have been worth a lot, but now they are not. The value placed on them could be the value on the date when they were sold, which could have been after 11 September. Assets could have been seized before 11 September, and sold afterwards.

Photo of David Tredinnick David Tredinnick Chair, Statutory Instruments (Joint Committee), Chair, Statutory Instruments (Select Committee)

I have been looking at the Minister, and I suspect that he is not going along with what my hon. Friend said. Given the current terrorist problems, there are likely to be wild gyrations in markets. This is not about whether there is a 5 or 10 per cent. difference in valuation, because differences could be more substantial. My hon. Friend's point is extremely valuable, and I hope that he will pursue the question of how we assess and achieve a correct valuation.

Photo of David Wilshire David Wilshire Conservative, Spelthorne

I am grateful to my hon. Friend for making such a serious point. The Government must deal with it. Let us suppose that my assets were seized some time last August when I was in the process of disposing of them. I would have disposed of them between in August or at the beginning of September at a particular price. However, if the receiver had seized those assets in August and proceeded to sell them in October or November, would the Government argue that the true value of the property disposed of in October was the value in October or the value in August, when I would have disposed of them? As my hon. Friend the Member for Bosworth (Mr. Tredinnick) said, that could make a huge difference in the money raised, which could mean that large sums were involved.

It is easy to say that I am raising minor points, but we must contemplate the implications for British justice of someone being acquitted of all charges, despite every endeavour being made to replace the money that was seized. If the money that goes back is less than the value of the money seized, a huge injustice will have been done. The Minister must consider such possibilities.

I shall take your guidance, Mr. McWilliam, and raise now the couple of points that I would have raised on stand part. Under subsection (3),

``The court may by order confer on the receiver power to enter any premises''.

If the entry results in damage to the property, after which the person is acquitted, I assume that the taxpayer will pay for that damage. I should be grateful to receive confirmation of that.

Under subsection (2), the court gives the

``power to manage or otherwise deal with the property''.

I assume that that includes selling the property. If the property disposed of is earning interest and that interest is being used by the person who owns the property to pay for his family, for example, who will get the interest on the property that is seized? Is it the state, or is the interest handed over to enable that person to continue living his normal lifestyle until he is convicted? I do not believe that it is just to take away a person's property and remove his income, as a result of which he will lose the means of sustaining himself while the whole process trundles along, only for there to be a not guilty verdict in the end. That person would have lost a huge amount of income for a long time. I should be grateful to receive the Minister's comments on that position.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

When my hon. Friend the Under-Secretary was replying to various points made by the hon. Member for Beaconsfield, I was thinking about how long I have been around. I remember, with great affection, the hon. Gentleman's father. He was a distinguished and delightful Member of Parliament, and I had great respect for him. I have tried to think of an adjective to describe the hon. Gentleman himself, and the words ``diligent'', ``courteous'' and ``learned'' came to mind. However, when he turned up yesterday at Westminster Hall to speak in a debate about rural Scotland, ``ubiquitous'' seemed to be the only adjective to describe him. He is diligent in pursuing certain points, and he has the courtesy and accuracy that is not always shared by Opposition Members.

Clause 49 sets out the powers that the court can confer on a management receiver to manage property. I say to the hon. Member for Spelthorne that that person is managing the property pending conviction and confiscation. The clause makes a change from the present legislation, which does not set out such powers in detail. That is because they are inherently available to the High Court. Given that the Bill now gives the Crown court, instead of the High Court, the power to appoint both management and enforcement receivers, it is prudent to set out in full the powers that it will need to ensure that the provisions work effectively.

Subsection (7) prevents the powers from being exercised in relation to property that was made subject to a charging order under earlier confiscation legislation in England and Wales or Northern Ireland. No provision was made for charging orders in the Scottish legislation.

Subsection (8) states that the courts may not confer on the receiver the power to manage, deal with or realise property, including interests in tainted property,

``unless it gives persons holding interests in the property a reasonable opportunity to make representations to it.''

That has the same effect as provisions in existing legislation. In addition, we have made some technical amendments to this and other clauses that will add to its effectiveness.

Let me deal with specific points made by hon. Members. I say to the hon. Member for Beaconsfield that if the management receiver were not paid by someone—and it seems appropriate to pay him out of the assets—we could not employ him. The hon. Gentleman will be reassured to hear that there are provisions for compensation in clause 72 that could be used if there were a serious fault.

I say to the hon. Member for Henley (Mr. Johnson) that the clause is cross-referenced with many other clauses that qualify and deal with the points that he raised. Clause 41(7) states that there should be no ``undue delay'' in proceedings. Under other clauses, the defendant may apply to the court to have the order varied or set aside, if he is concerned. The time limit on proceedings is a matter for the court, but normally the High Court specifies and reviews the period. We expect the Crown court to do the same.

I say to the hon. Member for Spelthorne that interest must be taken into account, because the assets under restraint are still owned by the defendant, and the receiver merely manages them on the defendant's behalf. The receiver must retain the value of the assets. I refer hon. Members to clause 69(2), which states that the powers must be exercised with a view to maximising their value. A defendant would have lost money as a result of 11 September regardless of whether the assets were managed by a receiver or by him.

I say to the hon. Member for Beaconsfield, and indeed to other Opposition Members who made similar points, that the clause deals with anticipated criminal proceedings. We must strike a balance. We must take account of the interests of the state, of the public and of victims. I hope that I have dealt with the matters raised.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 10:15 am, 29th November 2001

I appreciate the Minister's point that we are dealing with anticipated criminal proceedings. The purpose of bringing those proceedings is to convict the defendant and confiscate his assets. Dealing with crime is an important part of the Government's law enforcement armoury. My anxiety is not about that but about people who emerge from the process with no conviction and no confiscation order, or those who are convicted but do not receive a confiscation order. Such people have rights. I am concerned to ensure that, so far as is possible, the process minimises any adverse impact on such people's financial arrangements.

I have drafted an amendment to clause 69 intended—although perhaps it does not do it particularly well—to encapsulate what troubles me with regard to these clauses, which are linked in many ways.

If we do not deal with the issue in the right way, I foresee that applications with regard to interference with property rights will be made under the Human Rights Act. The applicants will say, ``These assets were seized. They were managed in this fashion. The payment of the receiver cost thousands of pounds.'' Receivers do not come cheap; they make more money than almost anybody else. I cannot remember what the receivers of Railtrack are charging Ernst and Young for its services, but it is a fairly stupendous sum.

The applicants may go on to say, ``Receivers came in, and they had to draw down on my assets to meet their needs.'' As I have said, if those assets are merely a cash sum, that can easily be replenished. However, if a business has to be sold, that cannot be easily restored.

I am concerned about how the management of assets should take place in such circumstances—we will return to that matter when we debate clause 69. Historically, receivership has usually come about when someone is going bankrupt—or, at least, heading for insolvency. The justification for appointing a receiver to manage those assets is that the person who owns them is already unable to meet his financial obligations.

However, with regard to the matter under discussion, receivers might be introduced in cases involving people who are solvent. Indeed, those people might be exceedingly prosperous and successful, and they might play a major role in the economic life of their locality—and all that might be damaged, long before a decision on confiscation was made, if the receivers were introduced. That would not matter if confiscation were to take place. However, if situations arise in which there is no confiscation, I foresee that there will be serious problems.

As the Minister has rightly said, in the past the sort of regime that we are debating has been sparingly used, because there have not been many relevant cases. However, if he succeeds in the legislation, it is to be anticipated that there will be a large number of cases, and we would therefore have to accept—because of the laws of statistics and human nature, and the capacity of human beings to get things wrong—that the cases in which individuals are subjected to this process will increase, and that there will also be a rise in the number who are acquitted of any offence and have their assets, nominally, returned to them. The Committee would not be doing its job properly if it did not challenge proposals that might lead to individuals claiming that their livelihoods suffered a massive adverse impact that cannot be adequately compensated in monetary terms.

The matter is made even worse by the fact that—we will also consider this later—the term ``serious'' default is introduced in a subsequent clause. That suggests that compensation might only be made available not in cases where damage has been suffered, but in cases where one can show, by applying a difficult test, that the proceedings should never have been commenced or that certain actions should not have been taken during the proceedings. That troubles me greatly.

Although I do not know the best way to progress, I oppose the amendment because it widens the existing powers. I appreciate why they are being introduced, but, until I am satisfied that we have got the overall framework right, I do not want the existing powers to be widened. The receivers are being given more power than they have had hitherto in cases of this kind.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I understand the hon. Gentleman's concerns, and I accept that they are genuine, rather than artificial or manufactured. However, I am unsure whether they are best dealt with in our discussion on this clause. With regard to that, he has tabled amendment No. 136, which the Committee will discuss later.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister may well be right, which is why amendment No. 136 proposes changes to clause 69, rather than to this clause—although they are linked.

Photo of Mr George Foulkes Mr George Foulkes Minister of State, Scottish Office, Minister of State (Scotland Office)

I accept that they are linked. The powers should, initially, be defined as widely as possible. The purpose of the legislation is to deal with people who have been carrying out drug trafficking or money laundering—people who are serious criminals. The hon. Gentleman wants, in spite of some of the amendments he tabled earlier, to tackle those criminals. Therefore, the definition of the powers should be as wide as possible. When we consider the exercise of those powers, we can decide whether further inhibitions are needed to protect the genuine and legitimate rights of those on whom were are making restraining orders in respect of the property.

I am mindful of, and sympathetic with, the hon. Gentleman's point, but we need not discuss it in more detail now. I hope that, in retrospect, he will consider not opposing the Government amendments, and that he accepts the appropriateness of having as wide powers as possible. No doubt he can envisage situations when—because the powers are not wide enough—we allow criminals to get off the hook and not have restraining orders made against them. It is better to have such powers defined, and insert at a later stage any necessary safeguards.

Amendment agreed to.

Amendment proposed: No. 40, in page 31, line 1, leave out `sell' and insert `realise'.—[Mr. Foulkes.]

Question put, That the amendment be made:—

The Committee divided: Ayes 12, Noes 4.

Division number 9 Adults Abused in Childhood — Clause 49 - Powers

Aye: 12 MPs

No: 4 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly agreed to.

Amendments made: No. 41, in page 31, line 37, after `(2)(b)' insert `or (d)'.

No. 42, in page 31, line 42, at end insert—

`(8A) The court may order that a power conferred by an order under this section is subject to such conditions and exceptions as it specifies.'—[Mr. Foulkes.]

Clause 49, as amended, ordered to stand part of the Bill.

Clause 50 ordered to stand part of the Bill.