In R v Johnson the Crown Court recently assessed the issue of 'tainted gifts' and their impact on confiscation orders made under the Proceeds of Crime Act when considering the defendant's available assets.(1)

The defendant, Ms Johnson, pleaded guilty to 16 counts of defrauding her employer, Leeds Credit Union. During confiscation proceedings, the judge determined that the benefit of Johnson's criminal conduct was £45,000, but accepted that Johnson had no assets with which to satisfy any confiscation order, apart from a gift of equity in a house she had sold to her daughter in July 2008.

At the time the gift was made, the equity in the property was valued at £20,000 and the house valued at £140,000. As part of the conveyance, Johnson gifted the £20,000 equity to her daughter. Following a slump in property prices, the value of the house decreased and was worth around £110,000 at the time the confiscation order was made; the daughter's gift of £20,000 had been lost as she could no longer realise it.

The Crown Court established that the gift made by Johnson to her daughter was a tainted gift for the purposes of the Proceeds of Crime Act. The Crown Court clarified that under the act, when considering assets available to fulfil a confiscation order, the value of a tainted gift should be determined on the date it is made rather than its value on the date of a confiscation order. The Court of Appeal upheld this as not being manifestly excessive or wrong in principle.

The judgment will be useful when interpreting tainted gifts under the Proceeds of Crime Act and makes clear that the aim of the act is to discourage those who commit fraudulent acts from gifting away their proceeds.

For further information on this topic please contact Kathleen Harris, Stuart Baker, Michael J Atkinson or James McSweeney at Arnold & Porter LLP by telephone (+44 20 7786 6100) or email (kathleen.harris@aporter.com, stuart.baker@aporter.com, michael.atkinson@aporter.com, or james.mcsweeney@aporter.com). The Arnold & Porter website can be accessed at www.arnoldporter.com.

Endnotes

(1) R v Johnson (2016) EWCA Crim 10.

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