Author: Nicola Sharp
7 December 2012
5 min read
POCA created an agency called the Assets Recovery Agency (ARA), whose main role was to issue in the High Court civil proceedings seeking 'recovery' of property which was said to be or 'represent' the proceeds of crime. The ARA was set up to take the profitability out of crime: defendants in such civil actions would not go to jail but they stood to lose everything they had.
But the ARA was not a success and was abolished in 2008; its functions taken over by the Serious and Organised Crime Agency (SOCA). In fact, all the main prosecuting agencies have the ability to issue civil recovery proceedings, e.g. the Serious Fraud Office (SFO), Customs, Crown Prosecution Service. In reality, it is SOCA that is responsible for most civil recovery applications.
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. As it is a civil case, SOCA need not obtain a criminal conviction from a jury who are convinced beyond reasonable doubt that the suspect is indeed guilty. There is no jury. There does not have to be 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.
At Rahman Ravelli, we have lodged an appeal with the European Court of Human Rights (ECHR) to challenge the universal application of the civil standard of proof (balance of probabilities) in civil recovery proceedings and the pursuit of defendants who had already been acquitted. In our case, SOCA v Gale, we have been defending the two main defendants. They 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. Our 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. It is a high-profile case that has been through the UK courts – and was the first civil recovery case to reach the UK’s highest Court. We hope that an appeal to the ECHR will redress the balance for a procedure that is so stacked against the individual.
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. For them, it is a simpler way to penalise those they believe to be guilty – even though they have not proved their guilt to a criminal standard. This was shown clearly by the SFO who - after only 6 months of having the power to instigate civil recovery proceedings - obtained 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. The key is to set out your case as exhaustively as possible and seek immediate legal guidance on dealing with any freezing orders put in place by the Courts. Such a situation is stressful to an individual. They face the prospect of losing all they have and an immediate future of uncertainty and fear.
In many cases, SOCA will initially apply for an Interim Receiving Order under s246 or, more likely now, a Property Freezing Order under s245A. The effect is the same: SOCA goes to court without the defendant and obtains an Order for any 'recoverable property': that means any property obtained through unlawful conduct or anything 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, third parties such as 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 the legislation is punitive and is aimed at the property rather than the person. If the court finds that the house, car, boat or money is 'recoverable property' then it makes the Order affecting those items and ownership passes from the defendant to the State.
Under POCA, any monies restrained under the proceedings can be released in order to pay for a defendant’s reasonable living expenses and legal expenses. This creates a tension, as the more money the defence lawyers charge then the less money will be left for SOCA if they are successful. SOCA has reacted to this by seeking Orders for a losing defendant to pay the costs of any Interim Receiver – on top of what is taken under the initial Recovery Order.
Once you have been served with an Order you have a right to apply to discharge or vary it. At this point, the services of an expert solicitor, familiar with the way SOCA and the civil recovery process work, are vital for a defendant. Only that way can a person mount an effective challenge to the Order or some of its terms. For example, an Order can be challenged where there has been material non-disclosure to the Court granting the Order: if the defendant is not present when SOCA applies to the court for the Order, there is an enhanced duty on SOCA (or any applicant) to ensure they plead the case fully and fairly. The applicant’s argument may simply be based on inferences about alleged criminal conduct and any lack of obvious legitimate income or tax returns.
In the case R (ARA & Ors) v Green & Ors, TLR, Feb 27th 2006 the judge ruled that although 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 it has to be remembered that there is little in the way of evidence that will not be permitted by the High Court because there is no jury; hearsay will usually be admissible although the Court may not attach much weight to it. In SOCA v Pelekanos , SOCA attempted to rely on 'intelligence' that was unsourced hearsay. Mr. Justice Hamblen said that the evidence amounted to un-attributable multiple hearsay accounts that could not be investigated and was effectively unchallengeable, so the court found it could attach "no real weight" to the evidence.
Preparation for a civil recovery case is not like preparation for a criminal trial. In addition to the full factual picture, the defence really have to consider any possible legal challenge to limit the case against the client. After all, the price of defeat in civil recovery may be different from that in criminal prosecution but it is still huge.
FOR MORE ON CIVIL RECOVERY, PLEASE SEE THE ARTICLE ON THE FRONT OF OUR AUGUST 2012 NEWSLETTER CONCERNING THE CASE OF PERRY AND OTHERS V SOCA
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.