Many readers of this article will know all too well about the provisions of the Proceeds of Crime Act 2002 (POCA) - facing uphill struggles in confiscation proceedings. However, what many may not realise is there is an even more draconian tool available to prosecutor's within POCA.
POCA created an agency called the Assets Recovery Agency (ARA), its main role was to issue proceedings in the High Court in civil proceedings seeking 'recovery' of property which was said to be or 'represent' the proceeds of crime - or as the Act puts it property obtained through unlawful conduct (s304). The ARA's function was to take the profitability out of crime. The defendants in such civil actions would not of course go to jail, but they stood to lose everything they had.
However, the ARA was not a success and it was abolished in 2008 and its functions taken over by the Serious and Organised Crime Agency (SOCA). Now, all the main prosecuting agencies have the ability to issue civil recovery proceedings, e.g. the Serious Fraud Office, Customs, CPS, etc. For the purposes of this article we will refer to SOCA, but what is said here applies equally to the other agencies.
Issue of Proceedings
Part 5 of POCA enables SOCA 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. For SOCA the advantage of going to the High Court is that it provides a civil procedure. SOCA need not bother with the cumbersome task of obtaining a criminal conviction from a jury who are convinced beyond reasonable doubt that the suspect is indeed guilty. In fact there is no need at all for there to be any criminal proceedings, and there is nothing preventing SOCA from seeking a civil order even if a defendant has been acquitted in the criminal courts! The civil standard of proof applies even though what is being alleged is straight criminal offending.
The authors are presently involved in an appeal case where we challenged the universal application of the civil standard of proof (balance of probabilities) in civil recovery proceedings and especially the pursuit of defendants who had already been acquitted - in our case in criminal proceedings overseas. Judgment from the Court of Appeal in this case of SOCA v Gale and Others is imminent. In Gale we have been defending the two main defendants who were acquitted of offences of drug dealing and money laundering in criminal trials in Portugal years ago, only to be pursued in the English High Court by SOCA in a case relying on the very same allegations that were considered by the Portuguese. The challenge is based on the human rights law following helpful recent developments here and in Strasbourg on Article 6 of the European Convention - the right to be presumed innocent which, in this context, suggests that the criminal standard of proof should apply and not the civil standard. There is also a technical but important challenge to the approach of the authorities/Courts to time-limits and when the limitation clock starts to run - many of these cases are bordering on the historic and the case will hopefully establish how precisely the issue of limitation is to be approached.
When Can the Proceedings be Started?
In many cases SOCA will first of all apply for an Interim Receiving Order under s246 or, more likely now, a Property Freezing Order under s245A. The effect is the same - SOCA has been to Court without the Defendant's and obtained an Order which preventing him or her with, potentially, any of their assets.
We have already touched on time-limits above, until the Court of Appeal rule in the case of Gale it must be said that how the time limits are applied is far from clear. Originally POCA provided for a 12 year limitation period. In other words SOCA could seek Recovery Orders for property which was obtained as long as 12 years before the proceedings were issued (s27A of the Limitation Act 1980). If however the Court finds that the there has been deliberate 'concealment' of facts relevant to the issue of proceedings then it may extend the 12 year period (s32 of the Limitation Act 1980).
However, not content with 12 years SOCA now, from January of this year, have a 20 year limitation period. It can be seen that we expect that there will be more and more civil recovery proceedings cases given the extended ambit of the jurisdiction.
Further, the alleged criminality is not limited to offences committed here in the UK. They can have been committed overseas as long as the offences would have been offences here too (s241).
What Property can be 'Recovered'?
Anything. SOCA 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. This will include money in bank accounts, cars, houses, anything. It is also not limited to property in the defendant's possession. In many cases 3rd parties, especially family members are roped into the litigation as the money is traced through to properties that have passed to others. In such cases there is a defence of innocent possession (s308) but it can be seen that the legislation is punitive and is aimed at the property rather than the person.
Unlike criminal proceedings, civil recovery litigation concentrates on specific property -.i.e. the house, car boat, bank account etc and the Court asks the question - is this 'recoverable property'? If so then the Court makes the Order affecting those items of property; the ownership is passed by the Order from the defendant to the State.
When civil recovery where first instituted many cases simply did not get off the ground as the Legal Services Commission either refused to grant legal aid or made it impossibly difficult to secure proper funding. Therefore, Parliament acted to change the POCA provisions so as to allow any monies restrained under the proceedings to be released in order to pay for both reasonable living expenses and reasonable legal expenses - see s245C(5)(b). This creates a tension between the parties as the more money the defence lawyers charge the less money will be left for SOCA if they are successful after trial - and thus the more pressure there is on them to settle. Of course if the defendants win they can expect to get their costs back. However, SOCA have reacted to this 'problem' by seeking Orders for a losing defendant to pay the costs of any Interim Receiver - i.e. over and above the impact of any actual Recovery Order made. Again, the Gale case will decide the law on this - SOCA are appealing against a refusal by the High Court to make such an Order and judgment is expected very shortly.
In essence once you have been served with an Order (Freezing or Interim Receivership) then the often lengthy litigation process begins. First, though you have a right to apply to discharge or vary the Order that has been made - i.e. a challenge to the case right at the outset, or at least a challenge to part of it or the level of allowed living expenses. An Order can be challenged for instance where there has been material non-disclosure to the Court granting the Order - remembering of course that the defendant will not be present, there is therefore an enhanced duty on the applicant to ensure he pleads the case fully and fairly; see e.g. Re: Stanford International Bank (In Receivership)  EWCA Civ 137 where a restraint order was set aside for misrepresentation and material non-disclosure - though the Court re-imposed the Order after hearing full argument.
The arguments for the actual trial may simply be factual and rely on inferences about alleged criminal conduct and any lack of obvious legitimate income or tax returns which could support the purchase of the two houses and so on. However, the case of R (ARA & Ors) v Green & Ors, TLR, Feb 27th 2006 should be bourne in mind. In that case Sullivan J. said that though there is no requirement 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. But remember, everything is 'in' - from hearsay to raw intelligence, there is little in the way of evidence that will not be permitted by the High Court because there is no jury. However, in a case called SOCA v Pelekanos  EWHC 2307 (QB) SOCA attempted to rely on 'intelligence' - i.e. un-sourced hearsay. Mr. Justice Hamblen said that the evidence amounted to un-attributable multiple hearsay accounts which could not be investigated and was effectively un-challengeable. The Court found it could attach "no real weight" to the evidence.
The fact that all the major prosecuting agencies now have the power to take civil recovery proceedings means we are likely to see more and more use of civil recovery as the various agencies get used to the idea of using the High Court rather than the Crown Court. A powerful example is the Serious Fraud Office who after only 6 months of having the power to instigate civil recovery proceedings obtained, by consent, an order from the High Court for the payment of £2.25 million plus costs against the firm Balfour Beatty following an investigation into corruption allegations.
Civil recovery proceedings are often complex and involve difficult preliminary skirmishes over funding - it is an altogether different experience from criminal litigation. Just as in confiscation proceedings the key is to set out your case as exhaustively as possible but first and foremost to get immediate guidance on dealing with any freezing orders put in place by the Courts.
Jonathan Lennon is a Barrister specialising in serious and complex criminal defence case at 23 Essex Street Chambers in London. He is a contributing author to Covert Human Intelligence Sources, (2008 Waterside Press) and has extensive experience in all aspects of the Proceeds of Crime Act 2002.
Aziz Rahman is a Solicitor - Advocate and Partner at the leading Criminal Defence firm Rahman Ravelli Solicitors, specialising in Human Rights, Financial Crime and Large Scale Conspiracies/Serious crime. Rahman Ravelli are members of the Specialist Fraud Panel.
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