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Restraint and Freezing Orders Proceeds Of Crime Act 2002

If you are reading this page then it maybe that you, or someone close to you, has had their assets 'frozen' by a Restraint Order made under the POCA. We know that when clients are served with a Restraint Order it can feel incredibly frustrating and, of course, very frightening; especially for those that suddenly realise upon service of the Order that in fact a detailed investigation has been under way into their activities and affairs for some time.

The initial reaction

Often the initial reaction of clients is shock and then concern about how they are 'to play the game' when the odds seem so stacked in the opposition's favour. Later may come the resentment at mis-stated 'facts' or half-baked theories presented to the Judge who has frozen your assets. Clients can feel like they are one – nil down at the start of a game when they weren’t even there for kick-off! But many clients do not realise at first, that even though they feel like latecomers to the game, they have more potential than they realise. What they need is a good team behind them; something we at Rahman Ravelli have a proven track record in providing.

The fact is that the Restraint Order will have usually have been obtained ex parte; i.e. without the defence present, or even aware of the private application. But this is because of that initial dis-advantage that the Crown have to be seen to be bending over backwards not to mis-state their case or leave out pertinent facts.  The Court too has a heightened duty to the absent defendant. These advantages are all too often forgotten, or not used properly in the next stage – the inter partes stage when the defendant can apply to vary or discharge the Order.

What is the test for making a Restraint Order?

The test that needs to be satisfied at the application stage is just 'reasonable cause to believe that the alleged offender has benefitted from his criminal conduct'. (s40(2)). The Crown do not have to convince the Judge that any named property was purchased directly with ill-gotten gains. But, that is not then the end of it – the Court cannot just freeze money because there is that belief – there must also be a ‘risk of dissipation’. This is a further area where the Crown’s case can be attacked; see below.

Challenges

The Court

Challenges to orders can be made against the Court, the prosecution or both.  There is always the possibility of a High Court Judicial Review of the decision to grant the Order but more likely the first step will be an application to vary or discharge the Order. That will be a hearing where both sides are represented, usually before the Judge who granted the Order.

Windsor & Hare v CPS [2011] EWCA 143 is an important Court of Appeal case in this area. HMRC were investigating an alleged duty diversion fraud involving suspects linked to the Eastenders group of companies dealing in alcohol imports. The Court noted in that case that Crown Court Judges must focus fully on the statutory test, namely whether there is reasonable cause to believe etc. The key ground for the Court of Appeal was the insufficiency of the evidence before the Judge who granted the Order. The witness statements in support of the ex parte application were full of allusions to suspicion – 'it is suspectedthe goods may have been diverted' etc.  That is suspicion – not evidence , and the Court firmly found it is not good enough – that is perhaps why the test is reasonable cause to believe – and not just reasonable belief, and certainly not reasonable suspicion. Nor was the fact that persons involved in the case had previous convictions for precisely the same offence of assistance; the Court found that that was of little relevance to the test.  Hughes LJ said this at para 87:

We do not see how the judge can rely upon such a broad and unsupported statement to find 'reasonable cause'. Without being too prescriptive, it is vital that the judge is given the material on which he can reach the conclusion himself or herself that there is reasonable cause. He cannot find it just because he is told that an investigation has confirmed the suspicions of the Belgian authorities. Mr Stancombe seemed to be suggesting that these kinds of unsupported assertions are typical of statements of this kind. We hope not.

The Prosecution: Disclosure

The principal challenge to Restraint Orders is lack of full disclosure to the Judge that made the Order ex parte. That challenge will be made at the Crown Court in an application to vary or discharge the Order. In the Eastenders case the Appeal Court took advantage of the case to effectively teach HMRC a lesson – and a lesson to Judges that such orders should not be granted ex parte unless the prosecution can demonstrate that they have done their job properly.

But the lessons from the Eastenders case have still not been learned. There has been a series of recent cases concerning ex parte applications by prosecutors before Crown Court Judges. The ex parte procedure imposes a duty on the prosecution to make a balanced application and inform the Court of all material facts; Re Stanford [2010] 3 WLR 941. Any non-disclosure should be marked in costs against the prosecution – again a highly under-used defence tool. Non-disclosure which is 'appalling' is likely to disqualify the Crown from maintaining a Restraint Order: Jennings v CPS [2006] 1 WLR 182 at [64].

Also, in our experience, there is often little reference, by either prosecution or defence, to the detailed procedural rules under the Criminal Procedure Rules and the Attorney General's Code of Practice issued under s377 of the Act. It is this attention to detail that can add weight to any challenge, and it is clear from recent case law that the higher Courts are prepared to quash Restraint Orders, and other Orders granted ex parte at an early stage of an investigation.

The Prosecution: Risk of Dissipation

One principal, area of attack at discharge hearings is the lack of a risk of dissipation.  In fact, though there is no reference in the Act to risk of dissipation, the case law is quite clear – see e.g. Re AJ and DJ (unrep) , Dec 1992 - this concerned an earlier Act but the principle is the same, the Court of Appeal considered that applications "should only be made if there is a reasonable apprehension that, without it, realisable property may be dissipated … if there is no such risk or the risk is merely fanciful, the order ought not to be made since, ex hypothesi, it would not be necessary for the achievement of its only proper purpose."  Also, in R v B [2009] 1 Cr App R 14 Moses LJ said at [9]:

"There can be no justification for such a restraint unless the prosecution establish that there is a real risk that assets will be dissipated which might otherwise meet a confiscation order should there be a conviction."

So, if you have been under investigation for a long time and during that time there was no evidence of, e.g. bank balances being transferred to overseas accounts then that is positive evidence against the making of the Order.

Other

We can never hope to cover every possible challenge to Restraint Orders here.  We do though set out below two areas which are not often covered but, which in our experience, arise often and cause real concern to those on the wrong end of a Restraint Order.

Property Held Jointly

Third parties holding an interest in property can be affected by a Restraint Order. This is often an area of real concern as Restraint Orders will often restrain the spouse's interests as well. The case of Gibson v RCPO [2008] Times Law Reports, 14/7/08 is instructive in this scenario.  In that case a Confiscation Order was made against a convicted drug trafficker.  The assets identified had been the 50% equity in the matrimonial home and joint bank account, held by the offender's wife – the home had been purchased in joint names. The Crown Court took the view that the wife must have realised that the mortgage was being paid by the husband's ill-gotten gains and was thus an asset which could be sold to satisfy the Confiscation Order. The Court of Appeal took a different view, it found that there was no legal principle under which a spouse could be deprived of the benefit of illegally obtained property on the grounds of public policy. The wife kept her half of the house and bank account. Applying that principle to start of proceedings, i.e. the Restraint Order stage, there is solid argument for limiting the scope of any such Order where there are assets which are held in joint names with a spouse – again there may well be scope for argument if the prosecution have failed to bring this to the attention to the Judge at the ex parte stage.

Living & Legal Expenses

This is another area which often wrankles with those on the wrong end of a Restraint Order – the amount allowed by the Order for ordinary living expenses.  Variation applications made after the initial ex parte Order will often challenge the amount allowed. What is required is a careful analysis of expenses together with as much proof as possible – these steps need to be considered at the very earliest opportunity.

An exception cannot be made for legal expenses in relation to the actual offence in respect of which the Restraint Order is made (s41(4)(a)).  The State therefore must pay for the defence through Legal Aid. However, bearing in mind that Restraint Orders are only designed to protect assets that might be confiscated there are solid arguments to be had where the defendant's entire assets are restrained in a case where the value of any Confiscation Order could not reasonably, on the facts, exceed a given amount. It is certainly possible to argue for the release of property from an Order which, even in the worst case scenario cannot be part of any confiscation Order.

Finally

Some cases will of course be stronger than others. At Rahman Ravelli however we believe in pro-active defending and the early implementation of effective strategies. In Restraint Order cases this will often include a challenge of some sort to the Order. The benefits that emerge from such an approach lie not just in dealing with the Restraint Order itself; that may be just a warm-up match. The benefit also lies in the main match ahead – the criminal proceedings.  The Crown can be forced to nail their colours to the mast about documents, transactions and the like long before they want or are even ready to – in life, as in football, the warm up match can expose the weaknesses and strengths of the other side – this advance practice can be invaluable in the practice for the final.

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Also in Confiscation and Restraint

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