The
ARA was set up by POCA. It is not a prosecuting authority
– the idea is that the body will attempt to take the
profitability out of crime. It will confiscate or ‘recover’
the ‘proceeds of crime’.
Part
5 of POCA enables the Director of the ARA to issue proceedings
in the High Court against any person who it ‘thinks’
holds property which is, or represents, property obtained
through unlawful conduct, see ss242, 243 – this is ‘recoverable
property’. For the ARA the advantage of going to the
High Court is that it provides a civil procedure. The
ARA need not bother with the cumbersome task of obtaining
a criminal conviction from a jury who need to be convinced
beyond reasonable doubt of guilt. Infact there is no need
at all for there to be any criminal proceedings and there
is nothing in the legislation preventing the ARA from seeking
a civil order even if you have been acquitted in the criminal
courts. It is important to understand the concept
that Civil Recovery is all about the property, not the guilt
of the person holding it. The Courts have already decided
that Asset Recovery is not ‘criminal’ in nature
and therefore the full force of Article 6 of the European
Convention on Human Rights does not apply; Walsh
v ARA [2004] NIQB, and ARA
v S. Singh [2004] EWHC 2335 (Admin).
What
Property can be ‘Recovered’?
Anything
!
The
Director of the ARA is enabled to seek a Recovery Order for
any ‘recoverable property’ – that is any
property obtained through unlawful conduct or property which
represents property so obtained. Property obtained through
unlawful conduct is ‘original property’. But that
property may be sold – the effect is that that original
property continues to be ‘recoverable’ and any
goods/cash obtained by the sale of the original property also
becomes recoverable. This property is said to ‘represent’
the original property; s305. The ARA is not permitted to recover
all of this property but is permitted to recover either the
original property, if it still exists, or so much of the representative
property as equates to the value of the original property;
s278(4).
When
Can the Proceedings be Started?
Interim
Receiving Orders (IRO) and Limitation Periods
In many cases the ARA will first of all apply for an interim
receiving order (IRO) under s246, or possibly a Freezing Injunction
under Pt 25 of the Civil Procedure Rules. The ARA has been
to Court, without your knowledge or participation, and obtained
an Order which prevents you from dealing with, potentially,
any of your assets up to a certain value. The Act provides
a 12 year limitation period, i.e. the ARA may not bring proceedings
after the expiration of 12 years from the date from which
the cause of action accrues; (s27A of the Limitation Act 1980).
When does the cause of action accrue? The ARA’s cause
of action accrues at the time the property was obtained through
unlawful conduct (s27A). Where the proceedings are in respect
of property which represents the property originally obtained
through unlawful conduct, as opposed to the original property
itself, the cause of action also accrues at the time the original
property was obtained through criminal conduct. There is no
limitation on when the criminal conduct is said to have occurred.
This
12 year period is unusual in civil case - the usual limitation
period is 6 years. However, in cases that this firm is involved
in (not reached final hearing at time of going to press) arguments
are being put forwarded about the prejudice to a fair trial
where the lapse of time is so great – even if within
the 12 year period – that no trial of issue should be
permitted bearing in mind the right to a fair trial under
Art 6 of the European Convention on Human Rights – this
includes the right to a fair ‘civil’ trial.
Funding
- Legal Aid v Private Funding from Assets
The original
POCA regime envisaged that everyone who faced a Civil Recovery
Order would be entitled to defend the proceedings with the
assistance of funding from the Legal Services Commission.
However, since 1st January 2006 the situation has changed.
Obtaining LSC funding for these cases was proving very difficult
and time consuming. Section 98(1) of the Serious Organised
Crime and Police Act 2005 amended POCA. The amendment allows
the Court, when making a Freezing Order, to allow an exclusion
for legal expenses – s245C(5)(b). However this firm
is involved in one of the first cases where such exceptions
are allowed and the reality is that the funding has to be
negotiated with the ARA.
There
is an in-built tension as the ARA does not want funds, which
it claims to be recoverable property, being defrayed on legal
costs. It is vital therefore to ensure that solicitors representing
those facing a Civil Recovery application consider the funding
issue and the likely extent of any works needed in the initial
stages. This is especially so where the Court has
not made any initial variation (which is likely) and then
the onus will be on the solicitors to make any necessary applications
for funding expeditiously so that consideration can be given
to the formal defence as well as to any application to discharge
or vary the Freezing Order or Interim Receiving Order. Contact
us to discuss your funding options.
The
Litigation
Civil Recovery
Orders are not like Confiscation Orders made in the Crown
Court. With the latter the Court determines the Defendant’s
(as opposed to the ‘Respondent’s’) benefit
and then decides the recoverable or ‘available amount’
– i.e. how much the State can in reality get from you;
a pounds and pence figure. With Civil Recovery Orders
it is the actual property which is the subject of the order
– whether it be cash or an oil painting. It will all
be listed in the application. If that property was obtained
through unlawful conduct, or it represents property obtained
through unlawful conduct, then it will be in the ARA’s
sights.
Preparation
and Expert Evidence
The burden of proving that property was obtained by criminal
conduct lies with the ARA but the standard is the civil standard
– the balance of probabilities, and the rules of evidence
allow for hearsay. In essence once you have been served with
a Freezing or IRO you may seek to vary or discharge it. In
the likely event that the Order is not discharged then you,
the Respondent, will have to defend the application in the
High Court. What that involves depends entirely on the case
– you may need to instruct forensic accountants or track
down witnesses who can testify that your sports car came from
winnings at the bookies. The arguments may simply rely on
inferences about your criminal conduct and any lack of obvious
legitimate income or tax returns which could support the purchase
of your two houses and fleet of jet-skis; NB, bear in mind
the case of R (ARA & Ors) v Green & Ors, The Times,
Feb 27th 2006 where the Court found that though there is no
requirement on the ARA to allege any specific criminal offence,
a claim for civil recovery cannot be sustained purely on the
basis of there being no identifiable lawful income. Even so
early preparation will be vital in the more complex contested
cases as Judges will bear in mind the fact of any evidence
of any lawful income in assessing the application.
It
is possible that the ARA will dispute the necessity of an
independent expert – especially an Accountant; this
firm is involved in a case where such a dispute is likely.
It is our view that Court appointed Receivers may not always
be trusted by Respondents and certainly, in some cases, appear
to have displayed a less than balanced approach. How
far the Courts will allow Respondents to instruct their own
experts remains to be seen – for our part we consider
that in many cases a Forensic Accountant instructed by the
Respondent will be a vital part in ensuring fairness in the
trial process.
Tax
Cases
Tax Investigation, Assessment and HMRC
The ARA has power to carry out tax investigations and can
raise assessments, penalties and enforce tax debts. Part 6
of POCA allows the ARA to levy tax on property which the Director
has reasonable grounds to suspect is the proceeds of crime.
The property has to have been aquired as a result of ‘Criminal
Conduct’ or is ‘Criminal Property’ (ss 317
(1), s321(1), s322 (1). The ‘Criminal Conduct’
can be that of another. The ARA carries out Revenue functions.
Similar principles as those mentioned above apply and the
need for expert assistance becomes more crucial. (see Negotiations
below).
Negotiations
It is possible to enter into a dialogue with the ARA, however
it is advisable to exercise caution and let experts conduct
any negotiations. The ARA have a specific settlement policy
in relation to Civil Recovery and Tax cases. There are various
non exhaustive considerations.
The
Future
The ARA has so far survived the few legal challenges that
have arisen in respect of the Civil Recovery Order regime.
No doubt they will be emboldened by this and there will be
more and more people who find themselves fighting, not for
their liberty before a jury, but for their possessions in
front of a High Court judge. This firm is involved in a challenge
involving the use of CROs when a Confiscation Order has already
been quashed by the Appeal Court years before and the CRO
is being used as a substitute. The issue is likely to involve
the civil aspect of the Art 6(1) requirement that civil proceedings
should be bought within a ‘reasonable time’.
Also
we are yet to hear of what can be done when a CRO application
is successfully defended. The scheme does not allow for any
undertaking in damages when a Freezing Order is made but there
is the possibility of compensation if property to which an
IRO has applied is not in the end decided to be recoverable
property – i.e. where the Court makes that decision
or there is a discontinuance (not by consent). We look forward
to representing clients seeking compensation after a successful
defence – as well as defending in substantive actions.
If
you are the subject of an ARA application – contact
our Assets
Recovery Department.
We offer a nationwide service.
Related
Subjects