Hayes [2018] EWCA Crim 682
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In Hayes [2018] EWCA Crim 682 the Court of Appeal dismissed an appeal against a confiscation order, holding that the appellant had made a tainted gift when he purchased property in joint names with his wife notwithstanding her non-financial contributions as wife and mother.
Mr Hayes was convicted on three counts of conspiracy to defraud between 2006 and 2010 involving manipulation of the Yen LIBOR whilst working as a trader for UBS Japan and later Citigroup Japan. Following conviction, confiscation proceedings were commenced. Cooke J assessed the benefit at £852,560.94 and the available amount at £1,757,919.68, making a confiscation order in the sum of the benefit with a three year term in default. The available amount included the value of a property known as The Old Rectory, Woldingham.
The appellant met Sarah Tighe, a qualified solicitor, in Tokyo in 2007. They became engaged in December 2008 and married in September 2010. In December 2010 they purchased a property at 40 Sugar House for £995,000, paid entirely by the appellant from his own resources but placed in joint names. In December 2011, whilst Ms Tighe was pregnant and not working, they purchased The Old Rectory for £1,218,682. The appellant again provided the entire purchase price in cash without any mortgage. The property was transferred into joint names with a declaration of trust stating they held as beneficial joint tenants. Ms Tighe made no financial contribution. Between the marriage in September 2010 and May 2013, Ms Tighe earned no money. She was full time at home caring for their son Joshua, born in October 2011, managing the household and supporting the appellant, who paid all household expenses.
In May 2013 Ms Tighe returned to work. In July 2013 the appellant transferred his entire interest in The Old Rectory to her for £250,000, significantly below the property’s value of around £1.7 million. She took out a mortgage of £350,000, paying £250,000 to the appellant to assist with legal costs. The Old Rectory was eventually sold in October 2016 for £1,638,500.
Cooke J held that both transactions constituted tainted gifts under sections 77 and 78 of the Proceeds of Crime Act 2002. As regards the December 2011 purchase, the judge found that the appellant had made a gift of a half share to Ms Tighe because she made no financial contribution and was his dependant. The judge distinguished the statutory test from considerations that might arise in family proceedings, emphasising that Ms Tighe’s contributions to the marriage were irrelevant for the purposes of the confiscation legislation. As regards the July 2013 transfer, the judge found the appellant had sold his half share at an undervalue of approximately £600,000. Only the first finding was challenged on appeal.
The appellant advanced two grounds. First, he contended there could be no transfer of property because at the time of completion the appellant held no interest in The Old Rectory to transfer; both parties acquired their interests simultaneously. Second, he argued the judge erred in focusing solely on financial contributions. He submitted Ms Tighe’s contributions as wife and mother constituted valuable consideration which should be valued at one half of the property.
Lord Justice Davis, giving the judgment of the court, rejected both grounds. As to the first ground, the court held it was untenable and would undermine the statutory purpose of the tainted gifts regime. If correct, a criminal could avoid confiscation by applying criminal proceeds into property purchased in joint names or even in another’s name. The court held that when the appellant’s money was transferred to the solicitors acting in the purchase, it was held on behalf of both parties jointly. Ms Tighe thereby acquired an interest in those funds before title to The Old Rectory was transferred, constituting a transfer by the appellant of a half interest. The court endorsed the reasoning in Thompson [2015] EWCA Crim 1820, where a similar argument had been rejected. The court noted that the appellant ultimately abandoned this ground.
As to the second ground, the court examined sections 77 and 78 of the 2002 Act in detail. Section 78(1) provides that if a defendant transfers property for consideration whose value is significantly less than the value of the property at the time of transfer, he is treated as making a gift. The court emphasised that consideration must have value capable of assessment in money terms to enable application of the mathematical formula in section 78(2). The test is objective.
The court rejected the submission that Ms Tighe’s contributions as wife and mother could be valued at fifty per cent of the property. The court held there was no principled basis for such an assessment and it was simply an assertion. The court emphasised that the very fact of marriage could not itself constitute consideration of value matching half the property’s value, as this would undermine the statutory purpose. The court distinguished the statutory context from family proceedings, holding that considerations relevant in the Family Court concerning fair division of assets, contributions (financial and non-financial), respective means and needs of parties and children have no part to play in Crown Court confiscation proceedings under the 2002 Act. The underlying statutory purposes are wholly different.
The court distinguished Gibson v Revenue Customs and Prosecution Office [2008] EWCA Civ 645, which concerned subsequent mortgage repayments by the husband out of tainted money where the trial judge’s finding that the wife provided consideration by bringing up children and looking after the home had been conceded by the prosecution on appeal. That case involved a different statute, enforcement proceedings, a purchase prior to the relevant day, and joint mortgage liability. The court also distinguished Usoro [2015] EWCA Crim 1958, where regular payments to the mothers of the defendant’s children for maintenance discharged his legal obligations and were held to be for valuable consideration on the particular facts.
The court declined to rule that family services could never constitute valuable consideration for section 78(1) purposes, accepting that each case is fact sensitive. However, the court provided guidance for Crown Courts. The approach involves four steps: valuing the property transferred; assessing whether consideration was provided and its value; assessing whether that value is significantly less than the property’s value; and if so applying the calculation in section 78(2). Each step must be undertaken objectively and on an evidence based approach. Where asserted consideration is not a direct financial contribution, the evidence must be examined rigorously to see if it is capable of being assessed as consideration of value and to what extent. Any consideration must be attributable to the transfer in question and capable of being ascribed a monetary value.
Applying this approach, the court held that Ms Tighe made no financial contributions towards the purchase and the appellant paid the entire price. Their marriage of around one year and Joshua’s birth could not involve consideration of value within section 78(1), let alone the asserted fifty per cent. Everything Ms Tighe did as wife and mother was to be put in the context of the appellant paying all household expenses and outgoings, and could properly be attributed to and set against that. The court noted that the Crown had fairly never argued that payment of all household expenses constituted a tainted gift. The judge’s conclusion was wholly justified.
In short, the purchase of a matrimonial home in joint names where one spouse provides the entire purchase price without financial contribution from the other constitutes a tainted gift of a half share notwithstanding the non-contributing spouse’s role as wife and mother, as such contributions cannot be valued as consideration for the purposes of the Proceeds of Crime Act 2002.
Stack v Dowden [2007] UKHL 17, [2007] AC 432
Jones v Kernott [2011] UKSC 53
Gibson v Revenue and Customs Prosecution Office [2008] EWCA Civ 645
Serious Organised Crime Agency v Lundon [2010] EWHC 353 QB
Kim Smith [2013] EWCA Crim 502, [2013] 2 CAR (S) 77
Johnson (Beverley) [2016] EWCA Crim 10, [2016] 2 CAR (S) 403
Thompson [2015] EWCA Crim 1820
Buckman [1997] 1 CAR (S) 325
Richards [2008] EWCA Crim 1841
Usoro [2015] EWCA Crim 1958
Jones v Kernott [2012] 1 AC 776