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Cite as: [2001] EWHC Admin 606

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In the matter of G (restraint order) v. In the matter of the Criminal Justice Act 1988 [2001] EWHC Admin 606 (30th July, 2001)

Case No: CJA/110/01
Neutral Citation Number: [2001] EWHC Admin 606
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Monday 30th July 2001

B e f o r e :
THE HONOURABLE MR JUSTICE STANLEY BURNTON
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	In the matter of G (restraint order)
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	In the matter of the Criminal Justice Act 1988

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
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Barry Gregory (instructed by the Solicitor for HM Customs and Excise) for the Applicant
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Judgment
As Approved by the Court
Crown Copyright ©
MR JUSTICE STANLEY BURNTON:
Introduction
1. On 23 July 2001, on the application of the Customs and Excise, I made a restraint order against the defendant, his wife and a company of which he is the sole director. The application was as is normal made without notice to the defendant or to the other persons affected by the order. The application was accompanied by a draft order containing provisions that, I was informed, had been used in other cases. I considered certain of these provisions to be inappropriate; in addition, the draft omitted other provisions that I considered necessary. I decided that, notwithstanding that this application was not the subject of a hearing at which the defendant and other parties affected by the order were represented (and restraint orders rarely are), I should give a written judgment setting out the reasons for my rejection of the restraint order as drafted and the inclusion in the order of certain provisions that had been lacking. I hope that this judgment will be helpful on future applications for such orders.
The facts
2. The defendant is a businessman. He has been charged with a number of offences relating to the fraudulent evasion of payment of duty and VAT on hydrocarbon oil. The amount involved is alleged to be some £3 million. A company of which he is the sole director, which for the purposes of this judgment I shall refer to as G Ltd, is alleged to have been involved in the commission of these offences. In addition the defendant trades under the name of G Fuels. The defendant's home is owned by the defendant and his wife, to whom I shall refer as Mrs G, jointly. There are a number of joint bank accounts in their names.
3. The original draft order submitted by the Customs and Excise:
(a) was addressed to the defendant alone;
(b) contained an order that "The corporate veil be lifted in relation to the companies G Ltd and G Fuels."
(c) restrained Mrs G from dealing with any of the assets specified in paragraph 1 of the order, including all of the joint bank accounts;
(d) contained no provision for payment by Mrs G of any living expenses or the cost of any legal advice or representation she might require;
(e) contained no provision for G Ltd to pay for any legal advice or representation;
(f) contained an undertaking on the part of the Customs and Excise to serve the order or the witness statement relied upon on the application for the order on the defendant, but not on either Mrs G or G Ltd.
I considered that the draft order was deficient in the above respects.
The wife of the defendant
4. Section 77 of the 1988 Act empowers the High Court to make a restraint order prohibiting any person from dealing with any realisable property. Such a person may be someone other than the defendant, provided he or she holds realisable property. Realisable property is defined by section 74(1) as:

"(a) any property held by the defendant; and
(b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act."

Subsection (10) provides that a gift is caught by that Part of the Act if-

"(a) it was made by the defendant at any time after the commission of the offence or, if more than one, the earliest of the offences to which the proceedings for the time being relate; and
(b) the court considers it appropriate in all the circumstances to take the gift into account."

5. "Property" is widely defined by section 102(1), and includes money and things in action. Section 102(7) is as follows:

"Property is held by any person if he holds an interest in it."

It follows that a joint bank account of a defendant and another person, in which they both have an interest, is property held by the defendant, and is therefore disposable property for the purposes of the Act. The other person, who also holds that property, may therefore be prohibited from dealing with that bank account under section 77.
6. There are therefore two possible bases under the 1988 Act for making a restraint order prohibiting the wife of a defendant from dealing with a bank account in their joint names:
(a) that the credit balance in the bank account constitutes realisable property; and
(b) that the wife's interest in the joint bank account may be the result of a gift or gifts caught by Part VI of the 1988 Act.
On the same bases, real property in joint names may also be made the subject of a restraint order prohibiting both husband and wife from dealing with the property. Of course, in many cases basis (b) will be inapplicable, either because no gift has been made (as where the wife's interest results from her own earnings) or because of the requirement of section 74(10) that the gift must have been made after the earliest of the offences in question. In addition, if a joint bank account is used for domestic expenses and has a modest credit balance, it is debatable whether the payments into the account made by the defendant are a "gift" for the purposes of Part VI of the Act, or whether the court would consider it appropriate to take it into account (see section 74(9)(b)).
7. If, as in the present case, a wife is to be prohibited from dealing with any property, the order should make clear on its face that she is the subject of the order. In the case of civil proceedings, this may be done by making her a respondent to the application, and a defendant in the proceedings. RSC Order 115 rule 2A would seem to prevent making the wife, against whom no criminal proceedings have been instituted and, as far as I am aware, is not to be charged, a defendant to proceedings such as the present. However, the "Notice to the Defendant" at the beginning of the restraint order should be supplemented so as to become "Notice to the Defendant and to [the wife]", giving the full names of the wife. It is not sufficient for the application of the order to the wife to be found only in the operative paragraphs of the order.
8. In addition, unless there is evidence that the wife has adequate separate means, it is essential that the order permit her to spend an adequate weekly sum on ordinary living expenses and to pay for her separate legal advice and representation. It is not appropriate to rely on her right to apply to vary the order for this purpose.
9. Lastly, the order should include an undertaking by the prosecutor to serve the order and the affidavit or witness statement in support on the wife as soon as practicable. Such service would be necessary apart from the specific provisions of the rules, but RSC Order 15 rule 4(3) makes such service mandatory. It provides:

"Where a restraint order is made the prosecutor shall serve copies of the order and of the witness statement or affidavit in support on the defendant and on all other named persons restrained by the order and shall notify all other persons or bodies affected by the order of its terms."

10. The above considerations are equally applicable to anyone who is a cohabitee of the defendant.
G Ltd
11. Leaving gifts aside, there are two bases on which a prosecutor may apply for a restraint order prohibiting dealings in the assets of a company controlled by a defendant but against which no criminal charge is to be made.
(a) That the company holds realisable property within the meaning of Part VI; and
(b) That the company has no genuine separate existence from the defendant, and is used by him as a device for fraud.
12. In the case of (b), the court treats the assets of the company as if they were in the name of the defendant. The court is said to "lift the corporate veil", but, while this phrase may be a helpful shorthand, it has no place in an injunction, the object of which is to set out clear and specific prohibitions affecting the defendant and the other persons affected by the order, and to impose equally clear obligations on the applicant. If the evidence before the court raises a prima facie case justifying the lifting of the corporate veil, and to treat the property of the company as property of the defendant, the order should prohibit the company, in addition to the defendant, from dealing with its property. The principles relating to the lifting of the corporate veil in this context are no different from those applicable in other areas of the law: see Re H (restraint order: realisable property) [1996] 2 All ER 391 and, recently, Trustor AB v Smallbone [2001] 1 WLR 1177, especially at paragraph 23. In many cases, it will be appropriate to appoint a receiver, under the power conferred by section 77(8) of the 1988 Act, to take possession of the property of the company and to manage it, as was done in Re H.
13. At the stage of the application without notice, the court has no more than a prima facie case before it. The company may subsequently be able to establish that it has a legitimate existence as a legal person carrying on a lawful business. The order should therefore be addressed to the company and it and the applicant's witness statement served on it, as required by RSC Order 115 rule 4(3). The order should provide that the company should be entitled to spend up to a maximum sum (which is liable to be increased) on its separate legal advice and representation.
14. Particular caution is required if it appears that, in addition to engaging in fraudulent transactions, the company is carrying on a legitimate business that may be closed down by the order. It may not be appropriate to treat the assets of the company as those of the defendant in such circumstances. Freezing injunctions in civil proceedings normally contain an exception to the prohibition against dealing with property to enable the person restrained to deal with his assets in the ordinary course of business. A restraint order may be made subject to such a specified exception where appropriate, under the general wording of section 77(1) of the 1988 Act.
G Fuels
15. The evidence before me showed that G Fuels is a trading name of Mr G. That evidence shows that it is not a registered company and is not a separate legal entity. It is therefore incorrect and unnecessary for it to be separately restrained. The order I have made prohibits Mr G from dealing with the assets of G Fuels. This may serve to make clear to Mr G that he is prohibited from dealing with the assets he holds in connection with the business carried on under the name of G Fuels, but is strictly unnecessary, being covered by the prohibition on his dealing with his assets.