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.

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