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Getting out of jail interest-free

When a person convicted in the Crown Court has an additional prison term enforced by the Magistrates for having only part paid off a confiscation order, he is entitled to a reduction in that term proportionate to the money that has been paid. R (Gibson) v Secretary of State for Justice [2018] UKSC 2; [2018] 1 WLR 629 confirmed that the starting point for calculating this reduction is the original sum ordered by the Crown Court, and not the larger sum including interest that had accrued by the date of the Magistrates’ enforcement.

In 1999, Mr Gibson was convicted of drug trafficking offences and sentenced to twenty-five years’ imprisonment. In March 2000, he was made subject to a confiscation order of a little over £5.4 million. This sum was payable within twelve months, with a six-year prison term in default.

Perhaps unsurprisingly, Mr Gibson failed to pay the £5.4m on time. From March 2001, interest began to accrue on the outstanding amount at a rate of 8% per annum. By the time the Magistrates’ Court committed Mr.Gibson to prison under the default sentence, he had only paid £90,370 in total. Meanwhile, interest had been adding up on the original £5.4m and the total sum outstanding had grown to £8.1m.

It was uncontroversial that Mr Gibson was entitled to some reduction in his sentence on account of having paid the £90,370. The issue was how the reduction should be calculated: whether by reference to the total amount outstanding, including interest, at £8.1m or by reference the principal sum that was payable under the confiscation order, at £5.4m.

Originally, the calculation had been based on the £8.1 million. That meant Mr. Gibson’s term was reduced by twenty-four days. But Mr Gibson wanted the calculation to be based on the original £5.4 million, which would have meant a further reduction of eleven days.

His case fell to be decided upon legislation that is now repealed but the issue raised by the appeal remains live under the current legislation, the Proceeds of Crime Act 2002.

Lord Reed and Lord Hughes, in a joint judgment with which the other members agreed, helpfully outlined the tangled statutory regime for the enforcement of confiscation orders:

1. Section 9 of the Drug Trafficking Act 1994 made the confiscation order enforceable as if it were a fine imposed by the Crown Court.

2. That led to the Powers of Criminal Courts (Sentencing) Act 2000, which provided that a fine imposed by the Crown Court was treated, for enforcement purposes, as if it had been imposed by the Magistrates.

3. Unfortunately, the Magistrates’ powers in relation to their own fines were not in the 2000 Act. They were to be found in the Magistrates’ Courts Act 1980.

4. Section 76 of the Magistrates’ Courts Act 1980 gave Magistrates a power to commit a person to prison if they failed to pay a fine. Section 79(2) dealt with part-payment. It required that the term set in default of payment of “any sum adjudged to be paid” had to be reduced in “the same proportion as the amount so paid bears to so much of the said sum… as was due at the time the period of detention was imposed”.

The courts below had held that the reference to a period of imprisonment’s having been “imposed” in default of payment was a reference to the Magistrates issuing the warrant of commitment. But in the case of a Crown Court confiscation order, the period of imprisonment in default was “imposed” when the Crown Court fixed the (anticipatory) term in default.

In Gibson, the Secretary of State argued that the reference in section 79(2) to “any sum adjudged to be paid” had, by a necessary statutory fiction, to be references to the sum fixed by the original order plus interest. This strained reading, the Supreme Court held, did more than a “little violence” to the language of section 79(2); at the time that the Crown Court imposed the default term, no interest had accrued at all. Ultimately, this statutory fiction could not be justified where it would increase the amount of time someone would have to spend in prison. Penal legislation had to be construed strictly and particularly where the penalty involved deprivation of liberty. Accordingly, the court decided in Mr Gibson’s favour.

There are two immediate, practical consequences of this decision, Mr Gibson’s eleven days out of prison aside. First, there will be slightly more generous reductions in default sentences where there has been part payment. Second, it appears that a default sentence can no longer be activated where the due remaining balance is less than the total interest that has accrued. The second point is likely to cause some concern, so be on the lookout for the government introducing new legislation in this area.