Background
Mr Ashford owned plumbing, maintenance and car sales businesses. The local authority received complaints about the plumbing business in relation to overcharging, taking credit card payments without authorisation and telling customers that their properties need work which was not needed. This case is reported at [2014] EWCA Crim 1244.
A restraint order was made without notice and the defendant was arrested on the 1st October 2013; when the inter parties hearing came before the Crown Court on the 28th February 2014 the investigation was two years old and no charges had yet been brought.
At the ex parte hearing in September 2013 the Judge accepted that there were deficiencies in the witness statements and draft orders, and he accepted at the inter parties hearing that with hindsight there may not have been sufficient evidence to make orders against two of the companies. However, by the main hearing he ruled that there was sufficient evidence to make restraint orders against all.
Restraint orders can be made prior to the institution of criminal proceedings. In that event, section 40(2) of the Proceeds of Crime Act 2002 requires that:
“(a) a criminal investigation has been started in England and Wales with regard to an offence, and
(b) there is reasonable cause to believe that the alleged offender has benefitted from his criminal conduct.”
In relation to two of the companies, the crucial question was whether there was “reasonable cause” to believe that the alleged offender had benefited from his criminal conduct.
It was also argued that there was no risk of dissipation of assets. The Proceeds of Crime Act 2002 does not make reference to the risk of dissipation in terms; instead the “legislative steer” is provided by section 69(2)(a) which says that the powers “must be exercised with a view to the value for the time being of realisable property being made available (by the property’s realisation) for satisfying any confiscation order that has been or may be made against the defendant.” In other words, the power to restrain should be used to make sure that if an order is made there are assets to satisfy it.
The Judgment
1. Reasonable Cause
The Court referred to R v Windsor and others [2011] 1 W.L.R. 1519, [2011] EWCA Crim 143, in which Hooper LJ recognised that certainty was not required at the preliminary stage of an investigation but that “uncertainly is not in itself a reason for making a restraint order” (at para 53). He also made it clear (at para 87) that:
“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 material on which he can reach the conclusion himself 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”.
Thus in the present case the Court of Appeal took the view that the Judge was being asked to accept that the investigators had concluded that there was reasonable cause, rather than being presented with evidence sufficient to reach his own conclusion to that effect. The two company orders in question were quashed.
2. Dissipation
In relation to dissipation, the Court reminded itself that where the alleged offences involve dishonesty, the risk of dissipation will generally speak for itself: see Jennings v CPS [2005] 4 All ER 391 at para 61. The risk was even more obvious given that money was being moved around corporate vehicles without apparent explanation.
3. Homework
The Court concluded by describing the case as another example of the failure of investigating authorities and of the court to make sure that sufficient time is given to consider such applications properly. It was necessary to repeat the observations of Lord Toulson SCJ in Barnes v The Eastenders Group and another [2014] UKSC 26 under the heading ‘Lessons for the future’. For completeness, they are set out here:
118 In the judgment of the Court of Appeal referred to at para 24 above, Hooper LJ deplored the fact that the original application was made at short notice to a judge who was in the middle of conducting a heavy trial and with only a limited time available for considering it. It should be axiomatic that, as he said, an application of this complexity should be listed before a judge with sufficient time to read and absorb the papers and with sufficient time to conduct a proper hearing. The problem was compounded in this case by the lack of proper opportunity which the judge had to consider the evidence lodged by the companies before he made the critical decision to implement the receiver's powers.
119 When the CPS is proposing to seek a restraint order, and particularly a restraint order coupled with a receivership order, it should give as much advance notice to the listing office as it reasonably can, together with a properly considered estimate of the time likely to be required for pre-reading and for the hearing of the application. If other trials are not to be interrupted, the listing office will need proper time to make the necessary arrangements under the supervision of the resident judge, who may well need to consult the presiding judge and should certainly do so in complex cases, which may merit being heard by a High Court judge.
120 The fact that such applications are made ex parte, and the potential seriousness of the consequences for defendants (at this stage presumed to be innocent) and for potential third parties, mean that there is a special burden both on the prosecution and on the court. Hughes LJ spelt this out plainly and emphatically in In re Stanford International Bank Ltd [2011] Ch 33, para 191, in a passage (cited in An Informer v A Chief Constable [2013] QB 579, para 71) which I would again repeat and endorse:
“it is essential that the duty of candour laid on any applicant for an order without notice is fully understood and complied with. It is not limited to an obligation not to misrepresent. It consists in a duty to consider what any other interested party would, if present, wish to adduce by way of fact, or to say in answer to the application, and to place that material before the judge. That duty applies to an applicant for a restraint order under POCA in exactly the same way as to any other applicant for an order without notice. Even in relatively small value cases, the potential of a restraint order to disrupt other commercial or personal dealings is considerable. The prosecutor may believe that the defendant is a criminal, and he may turn out to be right, but that has yet to be proved. An application for a restraint order is emphatically not a routine matter of form, with the expectation that it will routinely be granted. The fact that the initial application is likely to be forced into a busy list, with very limited time for the judge to deal with it, is a yet further reason for the obligation of disclosure to be taken very seriously. In effect the prosecutor seeking an ex parte order must put on his defence hat and ask himself what, if he were representing the defendant or a third party with a relevant interest, he would be saying to the judge, and, having answered that question, that is what he must tell the judge.”
I would qualify that only by saying that it is not acceptable that such an application should be forced into a busy list, with very limited time for the judge to deal with it, except in the comparatively rare case of a true emergency application where there is literally no opportunity for the prosecution to give the court sufficient notice for any other arrangement to be made. In that case, the judge will need to consider what is the minimum required in order to preserve the situation until such time as the court has had an adequate opportunity to consider the evidence.
121 A material failure to observe the duty of candour as explained above may well be regarded as serious misconduct within the meaning of section 72 of the Act because of its potential to cause serious harm.
122 Before making an application order for a restraint order, with or without a receivership order, the prosecutor must consider carefully the statutory conditions for making such order. There must be reasonable cause to believe that the prospective defendant has benefited from criminal conduct (section 40(2)(b)) and there must be a good arguable case that the assets which it is sought to restrain must be realisable property held by him. Both conditions require careful thought about who is alleged to have been party to the criminal conduct under investigation. Careful thought must also be given to the potential adverse effect on others who are not alleged to be party to the criminal conduct and possible means of avoiding or limiting it.
123 A judge to whom such an application is made must look at it carefully and with a critical eye. The power to impose restraint and receivership orders is an important weapon in the battle against crime but if used when the evidence on objective analysis is tenuous or speculative, it is capable of causing harm rather than preventing it. Where third parties are likely to be affected, even if the statutory conditions for making the order are satisfied, the court must still consider carefully the potential adverse consequences to them before deciding whether on balance the order should be made and, if so, on what conditions. A judge who is in doubt may always ask for further information and require it to be properly vouched.
124 It is important to remember that under section 49(9) a receivership order may be made subject to such conditions and exceptions as the court specifies. The conditions attached to receivership orders appear to have become largely standard, but the making of a receivership order should never be a rubber stamping exercise. The court has a responsibility to consider what conditions it should contain. In In re Pigott [2010] STC 1190, para 54, Rix LJ referred to a suggestion made by Wilson LJ in the course of argument that in an appropriate case a management receivership order might be made subject to a special term that, if it should be shown in due course that the property subject to the order was not “realisable property” of the defendant but wholly in the legal and beneficial ownership of a third party, then the costs of the management receivership should be borne, not by the property, but, in the absence of any other source, by the prosecutor. I attach as an appendix to this judgment a possible form of “Pigott condition”, for which I am grateful to Lord Wilson JSC. In my view there may indeed be cases in which such a condition would be appropriate, particularly cases in which the court can see the possibility that payment of the receiver's expenses and remuneration out of the relevant assets might infringe a person's A1P1 rights.