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Criminal proceedings in the civil courts
Proceeds of Crime Act 2002
In 2003, an agency called the Assets Recovery Agency was created under POCA. Its stated purpose was to strip the profit out of crime. If, for some reason, an individual could not be prosecuted then at least he or she could have the proceeds of his or her criminal offending removed by a High Court order called a Civil Recovery Order (‘’CRO’’). At least that was the plan. A CRO was to be obtained following an application by the ARA to the High Court and, thereafter, civil jurisdiction would commence. So, although allegations would be made of, for example, fraud, money laundering or drug smuggling, there would be no jury and the standard of proof would be the lower civil standard. Despite the Respondent (as opposed to the ‘Defendant’) facing the possibility of losing all his or her worldly goods, there was no chance of a prison sentence – the action was solely to ‘recover’ property.
However, the ARA was not a success. It spent more than it 'recovered'. The ARA was abolished and on 1st April 2008 its functions were taken over by the Serious and Organised Crime Agency (SOCA), then in 2013 SOCA was abolished and its functions taken over by the new National Crime Agency (NCA).
In fact all, all the main prosecuting agencies now have the ability to issue civil recovery proceedings, organisations such as the Serious Fraud Office (SFO), HM Revenue and Customs (HMRC) and the Crown Prosecution Service (CPS). But in reality the NCA is the lead agency and will take on cases referred to it by, for example, the CPS or HMRC, where they cannot mount a successful prosecution.
Issue of Proceedings
Part 5 of POCA enables the NCA 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 the NCA, the advantage of going to the High Court is, of course, that it negates the cumbersome task of obtaining a criminal conviction from a jury that is 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 the NCA from seeking a civil order even if a defendant has 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. We are presently involved in an appeal case where we challenge the universal application of the civil standard of proof (balance of probabilities) and the pursuit of defendants who have been acquitted in criminal trials. In that case 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 in a case relying on the very same allegations that were considered by the Portuguese. The challenge is partly based on the human rights of the defendants (Article 6 - right to be presumed innocent), and some recent helpful authority on confiscation cases.
SOCA v Gale & Ors  UKSC 49
This was the first civil recovery case to go to the Supreme Court. We represented the two appellants. In that case the principal appellant had been acquitted in Portugal of drug trafficking. The NCA’s forerunners took civil proceedings against him and family members, claiming certain items of property were purchased from the proceeds of drug trafficking and that, therefore, a CRO should be made against those items. The allegations were a little wider than just the original Portuguese proceedings but the defence case was that, in effect, the Portuguese case was being re-tried without the benefit of ready witness availability and in defiance of the verdict of the overseas court. Article 6 (right to a fair trial) was pleaded. The challenges were essentially that where there has been an acquittal in one court then other proceedings, by the State, making the same allegations should either be barred or subject to the criminal standard of proof applying under Article 6 of the Convention. The Supreme Court ruled in favour of SOCA, but the 9 Panel Court did struggle with certain Strasbourg case law which was plainly in the Gales’ favour - and said in terms that clear guidance was required from the Grand Chamber in Strasbourg. The case is now with the European Court of Human Rights and will be the first civil recovery case to be tested there.
When Can the Proceedings be Started?
In most cases, the NCA will first of all apply for a Property Freezing Order (PFO). That does precisely what it says – it will prevent the Respondent from disposing of, or in any way diminishing the value of, his named assets and will freeze his bank accounts. Following the Supreme Court case of Perry v SOCA  1 AC 182 the Act was amended so that PFO’s, and CRO’s can apply to all property; wherever it is in the world.
POCA provides a 20-year limitation period. In other words, the NCA can seek Recovery Orders for property which you obtained as long ago as 20 years before the proceedings were issued (s27A of the Limitation Act 1980). If, however, the court finds that there has been deliberate 'concealment' of facts relevant to the issue of proceedings then it may extend the 20 years period (s32 of the Limitation Act 1980).
The alleged criminality is not limited to offences committed here in the UK. They could have been committed overseas as long as the offences would have been offences here too (s241).
What Property can be Recovered?
Anything. The NCA 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 Respondent’s possession. In most 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.
When civil recovery was first instituted, many cases simply did not get off the ground as the Legal Aid Authority 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 the NCA if they are successful after trial - and thus the more pressure there is on them to settle. Of course if the Respondents win they can expect to get their costs back.
The Litigation and Preparation
In essence, once you have been served with a PFO the often lengthy litigation process begins. At first, 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 to the level of allowed living expenses. Assuming the Order is not discharged then the Court will make directions for service of evidence and other ancillary matters.
The arguments for 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, for example, the purchase of two houses. However, the case of R (ARA & Ors) v Green & Ors, The Times, Feb 27th 2006 should be born in mind. In that case, Sullivan J. said 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 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.
Early preparation will be vital in the more complex contested cases as judges will bear in mind any evidence of any lawful income in assessing the application.
It is possible to enter into a dialogue with the NCA. However it is advisable to exercise caution and let experts conduct any negotiations. The NCA will have their specific settlement policies to consider in relation to civil recovery. That said, however, the downside of a civil course rather than prosecution is the cost. The NCA will always be open to discussions on settlement as the cost of these High Court CRO proceedings can become a real hindrance to them. Just as in any civil commercial case, costs become a part of the battleground. The NCA routinely use their power of restrained assets to advance their case by handicapping the opponent. Though they play that game it is also a risk for the NCA to try to limit the amount the lawyers spend from restrained assets; as if the NCA misuse their position then applications can be made to the court to allow the Respondent’s team to get on with defending the case - and any such application is costly in itself. This is all part of the to-ing and fro-ing that accompanies each and every civil recovery case.
What happens when a CRO application is successfully defended? The scheme does not allow for any undertaking in damages – as when an ordinary Freezing Order is made - but there is the possibility of compensation if property to which a PFO 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.
For further advice:
If you are the subject of a Civil Recovery Order - Contact our Civil Recovery Team. We offer a nationwide service.