R (on the application of Gibson) v Secretary of State for Justice [2018] UKSC 2

Mr Gibson, convicted of drug trafficking, faced a £5.4m confiscation order with a six-year default prison term. The Supreme Court held that credit for part payments should be calculated against the original sum, not the sum plus accrued interest, entitling him to 11 extra days' reduction.

Facts

Mr Gibson was convicted of drug trafficking offences on 21 May 1999 and sentenced to 25 years’ imprisonment. On 29 March 2000, a confiscation order was made requiring him to pay just over £5.4m, with a default term of six years’ imprisonment fixed by the Crown Court under the Drug Trafficking Act 1994. He was given 12 months to pay, after which interest began to accrue.

He made no payment until 4 May 2007, when £12,500 was paid via a receiver. By that time, accrued interest had raised the net outstanding sum to approximately £8.1m. The magistrates, on issuing a warrant of commitment, deducted seven days from the default term to reflect this part payment. Further payments of £12,500 and £65,370 were made in 2007 and 2011. The prison authorities calculated reductions to the default term using the £8.1m figure (outstanding at the date of committal, including interest), producing a total reduction of 24 days. Had the calculation been made against the original £5.4m principal, approximately 11 additional days of reduction would have resulted.

Issues

The central issue was whether, under section 79(2) of the Magistrates’ Courts Act 1980 (as applied via section 9 of the Drug Trafficking Act 1994 and sections 139-140 of the Powers of Criminal Courts (Sentencing) Act 2000), the proportionate credit for part payment of a confiscation order should be calculated by reference to:

• the original principal sum specified in the confiscation order; or
• the original sum plus accrued interest at the time of the magistrates’ commitment proceedings.

A subsidiary question, resolved by agreement before the Supreme Court, was when a period of imprisonment is “imposed” for the purposes of section 79(2) in a Crown Court confiscation case.

Arguments

The Secretary of State

Mr Perry QC argued that the starting point for the calculation must be the original sum plus interest. He submitted that section 10(1) of the Drug Trafficking Act 1994 expressly treats accrued interest “for the purposes of enforcement” as part of the amount to be recovered under the confiscation order. By necessary statutory fiction, references in section 79(2) to “any sum adjudged to be paid” should accordingly include interest. He relied by analogy on the express treatment of costs and charges of distress in section 79(2), drew attention to the legislative intention that interest be paid, and noted that a confiscation order presupposes ability to pay so that default is a matter of election by the defendant.

The Appellant

Mr Weatherby QC contended that the natural language of section 79(2) tied the calculation to the sum due “at the time the period of detention was imposed” – which, in the case of a Crown Court confiscation order, was the date the Crown Court fixed the default term, when no interest had yet accrued.

Judgment

The Supreme Court (Lord Reed and Lord Hughes giving the leading judgment, with whom Lord Mance, Lord Carnwath and Lady Black agreed) allowed the appeal.

When is the default term “imposed”?

The Court held that, in a Crown Court confiscation case, the period of imprisonment in default is “imposed” for the purposes of section 79 when the Crown Court discharges its duty under section 139(2) of the 2000 Sentencing Act to fix the anticipatory default term. This conclusion was supported by the definition of “impose imprisonment” in section 150 of the Magistrates’ Courts Act 1980, by section 140(3)(b) of the 2000 Sentencing Act (which contemplates prior reduction under section 79(2) before committal), and by rule 55 of the Magistrates’ Courts Rules 1981, which assumes part payments can be made before a warrant of commitment issues. The Court of Appeal’s approach of reading additional words (“before or after”) into section 79(2) was therefore unnecessary.

Starting point for calculating part payment reduction

The Court rejected the Secretary of State’s construction. The operative words of section 79(2) require the proportion to be calculated against “so much of the said sum … as was due at the time the period of detention was imposed”. At the time the Crown Court imposed the default term, no interest had yet accrued. To read in interest would do considerable violence to the statutory wording.

The Court emphasised the principle of strict construction of penal legislation, particularly where liberty is at stake. The statutory scheme for enforcement of confiscation orders operates by successive referrals to provisions drafted for different purposes (magistrates’ fines), which had not been adapted to achieve the outcome the Secretary of State sought. The reference to costs and charges of distress in section 79(2) did not assist, because that was expressly provided for; no equivalent express provision existed for interest.

The Court also observed that the Secretary of State’s construction would cause practical difficulty, as interest accrues daily, and would progressively reduce the incentive to make part payment as interest rose, while providing no consequence at all for a defendant who made no payment whatsoever.

Implications

The decision clarifies, for confiscation orders made under the Drug Trafficking Act 1994 and, by extension, orders made under the Proceeds of Crime Act 2002 (where the drafting is not identical but the issue arises in much the same way), that proportionate credit for part payment under section 79(2) of the Magistrates’ Courts Act 1980 is calculated against the principal sum outstanding at the time the Crown Court fixed the default term, not against the principal plus accrued interest.

The judgment reinforces the principle that penal statutes, particularly those affecting liberty, must be strictly construed and that purposive arguments cannot overcome clear statutory language to the detriment of the defendant. The Court expressly acknowledged that a scheme basing the calculation on the total outstanding including interest “may or may not” have been what Parliament intended, but held that express legislation would be required to achieve such a result.

The decision is of practical significance for a substantial number of prisoners subject to confiscation orders and for prison governors determining release dates. It also highlights the drafting difficulties caused by enforcing confiscation orders through statutory machinery designed for magistrates’ fines, and signals that legislative reform would be required if interest is to be factored into the part-payment calculation.

Verdict: Appeal allowed. The reduction in the default term of imprisonment for part payment of a confiscation order is to be calculated by reference to the principal sum outstanding when the Crown Court imposed the default term, excluding subsequently accrued interest.

Source: R (on the application of Gibson) v Secretary of State for Justice [2018] UKSC 2