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(ii) Founding a Claim on the Crime Itself

(1) Objections to Restitutionary Claims Founded on the Commission of Crimes Where the victim of the crime is unable to sue the criminal for the commission of a tort or breach of fiduciary duty is it possible to found a restitutionary claim on the crime itself? In principle the answer should be ‘yes’, because the commission of a crime may often be an even more heinous form of wrongdoing. There are no cases, however, where a claimant has brought a restitutionary claim founded on the commission of a crime. The main reason for this is that the crime will typically also constitute a tort so that the victim of the crime will have a claim for compensation from the defendant. Where the victim’s loss is equivalent to the defendant’s gain and it is clear that the victim can recover compensation for loss suffered as a result of the crime, whether at common law or by virtue of particular statutory provisions,[1] there is no need to bring a somewhat speculative claim for restitution.

Sometimes, however, the victim may not have suffered any loss or the defendant’s gain might exceed the victim’s loss and so a restitutionary claim would be attractive.[2] That such a restitutionary claim might be brought was, however, doubted by Glidewell LJ in Halifax Building Society v Thomas:[3] ‘The proposition that a wrongdoer should not be allowed to profit from his wrongs has an obvious attraction. The further proposition, that the victim or intended victim of the wrongdoing, who has in the event suffered no loss, is entitled to retain or recover the amount of the profit is less obviously persuasive.’ Two reasons can be suggested for this reluctance to allow the victim to recover the proceeds of the crime.

First, the award of gain-based remedies is easier to justify where the defendant has committed a tort or broken a fiduciary duty than where a crime has been committed. This is because in those cases where the defendant committed a tort or broke a fiduciary duty it will be clear that the defendant has breached a duty which was owed to the victim. Where, however, the defendant has committed a crime the law treats this as involving the breach of a duty which is owed to the State, hence the power of the State to punish the criminal. But, despite this, in those cases where the victim has been harmed by the commission of a crime it is appropriate to conclude that this involves a breach of duty which was owed to the victim. The fact that the defendant has harmed the victim, either physically or by interfering with his or her property, and has obtained a benefit as a result, should be sufficient to enable the victim to claim the defendant’s benefit. Although, in fact, in many cases where the criminal’s profit derives from interference with the victim’s property, the victim will have a tortious claim for conversion for which a gain-based remedy will be available.[4] But this will not always be the case, such as where the defendant has stolen choses in action which are capable of being property for the purposes of theft[5] but not for the tort of conversion,[6] because such rights cannot be possessed.

Another reason for the judicial reluctance to recognize that the victim of a crime can recover the profits from the criminal is that the policy of preventing the criminal from profiting from the crime is a matter for Parliament, using the statutory mechanism of confiscation. It is often asserted that it is not for the courts to interfere with this policy by extending the law to deprive the criminal of the proceeds of the crime. This was recognized by Peter Gibson LJ in Halifax Building Society v Thomas:[7]

In considering whether to extend the law of constructive trusts in order to prevent a fraudster benefiting from his wrong, it is also appropriate to bear in mind that Parliament has acted in recent years... on the footing that without statutory intervention the criminal might keep the benefit of his crime. Moreover, Parliament has given the courts the power in specific circumstances to confiscate the benefit rather than reward the person against whom the crime has been committed.[8]

But, whilst it is clear that the State has the prime interest in ensuring that criminals do not profit from their crimes, it does not follow that the judges lack a subsidiary power to deprive criminals of the proceeds of their crimes for the benefit of the victim where the statutory powers are inadequate to deprive the criminal of all the proceeds. The inadequacy of the statutory powers is exemplified by the fact that the statutory powers of confiscation are limited to where the crime committed by the defendant was sufficiently serious and cannot be invoked unless the defendant has been convicted of a crime.[9] Further, where the victim has instituted civil proceedings or might do in respect of loss, injury or damage arising from criminal conduct, the court has a power rather than a duty to make a confiscation order.[10] [11]

There is surely a role for the law of restitution as developed by the judiciary to serve an interstitial function to ensure that the criminal does not retain the proceeds of crime.2

(2) The Case for Recognizing Restitutionary Claims Founded on Crimes There is consequently no obvious objection to the law of restitution recognizing that the victim of a crime should have a right to obtain the proceeds of the crime from the criminal, although this right should be subsidiary to the power of the State to obtain such proceeds. This restitutionary right of the victim is justified for two main reasons.

First, it is a fundamental policy of English law that no defendant should profit from his or her crime. Where the State has not deprived the criminal of these profits it is entirely appropriate that the victim should be allowed to instigate such an action as ‘the instrument of a social purpose’.25

The second justification is just as important. In some cases where the claimant is the victim of a crime he or she will have suffered harm for which compensation is not available in the normal way. Enabling the claimant to obtain the proceeds of the crime will therefore act as some sort of recompense for the harm which has been suffered. So, for example, if a third party paid the defendant ?1,000 to assault the claimant, it is surely entirely appropriate that the claimant recovers ?1,000 from the defendant, both because the defendant should not be allowed to profit from the crime and because this operates as some form of recompense for the injury and trauma suffered by the victim. As Birks said, in such circumstances the recovery of the proceeds of crime which exceeds the claimant’s loss ‘is not an undeserved windfall but... a remedy for an individual wrong’.26

(3) The Nature of the Gain-Based Relief

If the defendant is held liable to make restitution to the victim as a result of the commission of a crime the remedy which should be awarded will typically be an account of the profits obtained as a result of the crime. It is, however, possible that the court will conclude that the defendant holds the proceeds of crime on constructive trust for the victim, so it follows that the victim could bring a proprietary restitutionary claim to recover the property which is held on trust. The potential importance of the constructive trust in the context of restitutionary claims founded on the commission of a crime arises from the judgment of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington LBC.27 The judge recognized that ‘when property is obtained by fraud equity imposes a constructive trust on the fraudulent recipient: the property is recoverable and traceable in equity’.28 It follows that the constructive trust will be particularly important where the defendant has committed any crime which can be considered to involve fraudulent conduct29 on the part of the defendant, because such conduct is unconscionable. Indeed, Lord Browne-Wilkinson specifically recognized that a thief who stole a bag of coins would hold those coins on constructive trust for the victim.30

  • [1] Such as the power of a criminal court to order the offender to pay compensation to the victim in respectof personal injury, loss or damage resulting from the offence: Powers of Criminal Courts (Sentencing) Act2000, s 130.
  • [2] A criminal court has the power to make a restitution order on conviction: Powers of Criminal Courts(Sentencing) Act 2000, s 148. See R v Ferguson [1970] 1 WLR 1246; R v Church (1970) 55 Cr App R 65; R vParker [1970] 2 All ER 458. Magistrates’ courts may also make orders for the delivery of property in thepossession of the police to the person who appears to be the owner: Police (Property) Act 1897. See M Dysonand S Greene, ‘The Properties of the Law: Restoring Personal Property Through Crime and Tort’ in M Dyson(ed), Unravelling Tort and Crime (Cambridge: Cambridge University Press, 2014), ch 14.
  • [3] [1996] Ch 217, 229.
  • [4] See p 459, above. 18 Theft Act 1968, s 4(1).
  • [5] 19 OBG v Allan [2007] UKHL 21, [2008] 1 AC 1, [102]-[106] (Lord Hoffmann); Armstrong GmbH v
  • [6] Winnington Networks [2012] EWHC 10 (Ch) [2013] Ch 156, [45] (Stephen Morris QC).
  • [7] [1996] Ch 217, 229. See also Glidewell LJ, ibid, 230.
  • [8] See also Hoffmann J in Chief Constable of Leicestershire v M [1989] 1 WLR 20, 23.
  • [9] Although note the powers of civil recovery by state officials which do not depend on the defendant beingconvicted of a crime: Proceeds of Crime Act 2002, Part V. See p 542, below.
  • [10] Proceeds of Crime Act 2002, s 6(6).
  • [11] See Glidewell LJ in Halifax Building Society v Thomas [1996] Ch 217, 230: ‘The enactment of thislegislation does not, of course, lead inevitably to the conclusion that neither common law nor equity provides ameans by which [the criminal] could be prevented from enjoying the profit of the crime.’ Though he did addthat ‘the readiness of Parliament to address the problem by legislation weakens the case for providing asolution by judicial creativity’.
 
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