England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT

		Royal Courts of Justice Strand London WC2
		7th December 2004

1. MR JUSTICE COLLINS: The Proceeds of Crime Act 2002 established the Assets Recovery Agency. It is concerned with depriving persons of property obtained as a result of criminal activities. Parts 2 to 4 of the Act deal with confiscation in England and Wales, Scotland and Northern Ireland respectively, following conviction of criminal offences. Part 5, with which this case is concerned, is headed, "Civil Recovery of the Proceeds etc of Unlawful Conduct." Section 240, which introduces part five, reads under the heading, "General purpose of this part":

"(1) This Part has effect for the purposes of --

"(a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct,

"(b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates' court or (in Scotland) the sheriff.

"(2) The powers conferred by this Part are exercisable in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property."

2. One of the weapons in the Director's armoury is an interim receiving order. Such an order appoints a receiver who may be authorised to take a number of steps for the purposes of identifying relevant property and ensuring that it is preserved. Section 247 sets out the functions of an interim receiver, and provides as follows:

"(1) An interim receiving order may authorise or require the interim receiver --

"(a) to exercise any of the powers mentioned in Schedule 6.

"(b) to take any other steps the court thinks appropriate,

"for the purpose of securing the detention, custody or preservation of the property to which the order applies or of taking any steps under subsection (2).

"(2) An interim receiving order must require the interim receiver to take any steps which the court thinks necessary to establish --

"(a) whether or not the property to which the order applies is recoverable property or associated property.

"(b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if it is, who holds it.

"(3) If --

"(a) the interim receiver deals with any property which is not property to which the order applies, and

"(b) at the time he deals with the property he believes on reasonable grounds that he is entitled to do so in pursuance of the order

"the interim receiver is not liable to any person in respect of any loss or damage resulting from his dealing with the property except so far as the loss or damage is caused by his negligence."

3. Broadly speaking, recoverable property is property which has been obtained through unlawful conduct, and associated property is property which is mixed in with recoverable property. For example, if a person has an interest in the property and that interest was obtained by virtue of criminal conduct, associated property covers the interest of perhaps an innocent party who was not concerned in the criminal conduct and thus is regarded, or may be regarded, as associated property.
4. Schedule 6 to the Act contains very wide powers indeed. Broadly, the powers include seizure, the requirement of information, search of properties to discover whether there is other property there, or to obtain documentary information, and management of the property in question.
5. The application for an interim receiving order is subject to a number of conditions precedent. By section 246(1), if the enforcement authority (that is the Assets Recovery Agency, which I will refer to as the "the Director") may take proceedings for a recovery order in the High Court, she may apply to the court for an interim receiving order, whether before or after starting those proceedings. It may be made without notice to the person or persons affected by it, if such notice would prejudice any right of the Director to obtain a recovery order in respect of any property. The conditions precedent are set out in subsections (5) and, where applicable, (6). Subsection (5) of 246 reads:

"(5) The first condition is that there is a good arguable case --

"(a) that the property to which the application for the order relates is or includes recoverable property, and

"(b) that, if any of it is not recoverable property, it is associated property."

6. Subsection 6:

"(6) The second condition is that, if --

"(a) the property to which the application for the order relates includes property alleged to be associated property, and

"(b) the enforcement authority has not established the identity of the person who holds it

"the authority has taken all reasonable steps to do so."

7. In order to see whether there is sufficient evidence to establish a good arguable case for making an interim receiving order, the Director will normally make use of her powers to obtain information from third parties. The most usual of those powers is a Production Order, which is dealt with by section 345 of the Act. That provides, so far as material:

"(1) A judge may, on an application made to him by an appropriate officer, make a production order if he is satisfied that each of the requirements for the making of the order is fulfilled.

"(2) The application for a production order must state that --

(a) ...

"(b) property specified in the application is subject to a civil recovery investigation.

"(3) The application must also state that --

"(a) the order is sought for the purposes of the investigation;

"(b) the order is sought in relation to material, or material of a description, specified in the application;

"(c) a person specified in the application appears to be in possession or control of the material.

"(4) A production order is an order either --

"(a) requiring the person the application for the order specifies as appearing to be in possession or control of material to produce it to an appropriate officer for him to take away, or

"(b) requiring that person to give an appropriate officer access to the material

"within the period stated in the order."

8. The period is normally seven days. Production Orders are usually made against financial institutions such as banks or building societies, or sometimes against solicitors who have dealt with property transactions of one sort or another, and is an obviously important and useful means of obtaining information for the Director to see whether there is a good arguable case which would justify, if that is thought necessary, the request for an interim receiver.
9. In this case, an interim receiving order was granted by Keith J on 21st July 2004 against the respondents. The application before me is stated to be for a variation of that order, but it is clear that the respondents are submitting that the order should be discharged. Mr De Mello has submitted that proceedings under Part 5 of the 2002 Act should be construed in such a way that they are regarded as criminal, or, if not, that the criminal standard of proof should apply. He submits, too, that Article 6, in relation to criminal proceedings, and Article 7 of the European Convention on Human Rights apply, and further that the application for and the granting of the interim receiving order is contrary to, and incompatible with, the Convention, in particular, in relation to Article 1 of the First Protocol.
10. He further submitted that in this case it amounted to an abuse of the process and that, on the facts, no unlawful conduct had been established. There is thus a wide general attack on Part 5 of the Act and a need to consider how its provisions should be construed. In addition, there is an assertion that the interim receiving order cannot be justified on the facts of this case.
11. That introduction leads me to set out further relevant statutory provisions. One starts with the introduction to the Act itself, in section 2. This deals with the Director's functions and subsection (5) of section 2 provides that:

"(5) In considering under subsection (1) the way which is best calculated to contribute to the reduction of crime the Director must have regard to any guidance given to him by the Secretary of State."

12. Subsection (6) provides:

"(6) The guidance must indicate that the reduction of crime is in general best secured by means of criminal investigations and criminal proceedings."

13. Thus, the approach of the Director must be to let criminal proceedings take precedence, as it were, and only act if such proceedings are either not being taken, or for any reason may have failed, if, notwithstanding their failure or the inability for whatever reason to take them, she takes the view that she can establish within the requirements of the Act that the property in question was unlawfully obtained.
14. I have already referred to section 240 of the Act, which is the introduction to Part 5 and which, by subsection (2), makes clear that the powers conferred by Part 5 are exercisable whether or not any proceedings have been brought for an offence. Section 241 defines unlawful conduct as meaning conduct which is unlawful under the criminal law of any part of the United Kingdom where that conduct occurred or, if it occurred outside the United Kingdom, is unlawful under the criminal law of that country and, if it had occurred in the United Kingdom, would have been unlawful within the United Kingdom as well.
15. Subsection (3) of section 241 is of vital importance in this case. It reads:

"(3) The court or sheriff must decide on a balance of probabilities whether it is proved --

"(a) that any matters alleged to constitute unlawful conduct have occurred, or

"(b) that any person intended to use any cash in unlawful conduct."

16. Section 242 defines what is meant by property obtained through unlawful conduct, and subsection (1) provides:

"(1) A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct."

17. There is a refinement of that in subsection (2) but I do not need to burden this judgment with that.
18. Section 245 defines associated property as meaning:

"... property of any of the following descriptions (including property held by the respondent) which is not itself the recoverable property --

"(a) any interest in the recoverable property,

"(b) any other interest in the property in which the recoverable property subsists,

"(c) if the recoverable property is a tenancy in common, the tenancy of the other tenant,

"(d) ...

"(e) if the recoverable property is part of a larger property, but not a separate part, the remainder of that property."

19. Section 246 I have already referred to. It deals with the application for the interim receiving order and section 247, the functions. Again, I have already referred to that.
20. Section 251 provides, under the heading "Supervision of interim receiver and variation of order":

"(1) The interim receiver, any party to the proceedings and any person affected by the action taken by the interim receiver, or who may be affected by any action proposed to be taken by him, may at any time apply to the court for directions as to the exercise of the interim receiver's functions."

21. Then subsection (2) requires the court to hear anyone who would be affected and subsection (3) provides:

"The court may at any time vary or set aside an interim receiving order."

22. Again, subsection (4) provides that anyone who may be affected, and the receiver, must be given the opportunity of being heard.
23. There is a further section which deals with variation, or discharge, and that is section 254, because that requires, by subsection (1), a court to vary the order so as to exclude property which is not recoverable or associated property. It reads:

"(1) If the court decides that any property to which an interim receiving order applies is neither recoverable property nor associated property, it must vary the order so as to exclude it.

"(2) The court may vary an interim receiving order so as to exclude from the property to which the order applies any property which is alleged to be associated property if the court thinks that the satisfaction of any right of the enforcement authority to recover the property obtained through unlawful conduct will not be prejudiced.

"(3) The court may exclude any property within subsection (2) on any terms or conditions, applying while the interim receiving order has effect, which the court thinks necessary or expedient."

24. Thus, for example, property in which others than a respondent have an interest could be disposed of and only the value of a respondent's interest retained under that provision, which is clearly there to protect the interests of third parties in property in which a respondent has an interest.
25. Section 255 requires that there be included in an interim receiving order an obligation upon the interim receiver to inform the enforcement authority, the Director that is, and the court as soon as reasonably practicable if he thinks that any property to which the order applies by virtue of a claim that it is recoverable property is not recoverable property, and (b) makes the same obligation in relation to associated property and (c) the same in relation to property which has been discovered in accordance with section 247(2) of which the Director was unaware at the time that the interim receiving order was made, and so on. Equally, the obligation to inform extends to a situation where the interim receiver thinks that there has been some other material change of circumstances.
26. Subsection (2) of 255 requires that the interim receiver must report his findings to the court and serve copies on the enforcement authority and on any person who holds any property to which the order applies, or who may otherwise be affected by the report.
27. Section 266 deals with recovery orders and provides that if the court is satisfied that any property is recoverable, proceedings for a recovery order having been taken, the court must make a recovery order and that order will vest the recoverable property in the trustee for civil recovery. There are provisos which protect third parties who have obtained property in good faith and so on, but I do not need to go into the details of those.
28. Section 283 provides for the possibility of compensation subject to conditions if property to which an interim receiving order has at any time applied is not in the end decided to be recoverable property or associated property. Again, I do not need to go into the details of them.
29. Section 287 provides that there is a financial threshold for the recovery of property under Part 5. That threshold is £10,000. That is not in the Act, but that is the current threshold. Section 288 deals with limitation. The effect of it is that a claim for recovery under Part 5 can relate to property which was acquired up to 12 years before either a claim form is issued seeking recovery, or an application is made for an interim receiving order, whichever be the earlier.
30. Section 304(1) provides that:

"(1) Property obtained through unlawful conduct is recoverable property."

31. Subsection (2) provides:

"(2) But if property obtained through unlawful conduct has been disposed of (since it was so obtained), it is recoverable property only if it is held by a person into whose hands it may be followed.

32. Subsection (3) provides:

"(3) Recoverable property obtained through unlawful conduct may be followed into the hands of a person obtaining it on a disposal by --

"(a) the person who through the conduct obtained the property, or

"(b) a person into whose hands it may (by virtue of this subsection) be followed."

33. There are various other exceptions and exemptions, which again it is not necessary for me to go into, and I do not think that I need to read any more provisions of Act. I have read quite enough as it is. But it is important that the scheme is understood, and that it is apparent that the powers given to the Director are wide-ranging and the purpose behind this part of the Act is, as I have indicated, to enable property which has been obtained by means of criminal conduct to be recovered from the person, or persons, who were involved in that criminal conduct, whether or not a prosecution has ensued or been successful.
34. Mr He, the first respondent, is a British citizen, having been in this country for over 17 years and having married a United Kingdom citizen. That marriage subsisted for a substantial time, but sadly ended in divorce, and the second respondent is Mr He's present wife. In January 2000, Mr He was investigated by NCS, having been suspected of involvement in human trafficking and laundering the proceeds. He was arrested in March 2001 but no charges were brought and the investigation concluded in July 2001. Subsequently, a further investigation was carried out by the Metropolitan Police in relation to similar suspicions, but again no charges were brought. However, the police informed the Director of their investigations and referred the fruits of them to her. These gave her reasonable grounds to suspect that Mr He and his wife were holding recoverable property and so a number of Production Orders were obtained during the first half of 2004 to obtain documents from banks, mortgagors and other financial institutions. Following that, an interim receiving order was applied for on the basis that there was a good arguable case that the property covered by it derived from crime.
35. The skeleton argument provided on behalf of the Director for the purpose of obtaining the interim receiving order summarised the evidence as follows:

"38. The witness statements set out evidence concerning the Defendants [that is Mr He and his wife] -- at its most basic level the evidence shows:

"Assets well beyond the apparent legitimate means of the parties.

"Throughput well beyond the declared legitimate income of the Defendants.

"The use of companies to hold assets.

"Links between [Mr] HE and human trafficking, including a foreign (Greek) conviction.

"The involvement of [his wife] as a director of companies.

"A turnover on a large scale both historically and continuing to date.

"That turnover commences as cash made in numerous deposits in different places on a daily basis.

"A mixing and consolidating of that cash in various accounts, ultimately leading to transfer abroad."

36. The respondents are directors of a number of companies. Most important for the purposes of this case is a company called Futsing Finance Limited. The allegation is set out in paragraph 5.7 of the witness statement of Mr Cooper, who was the member of the Assets Recovery Agency who had charge of this case. For the purpose of obtaining the interim receiving order, he states as follows:

"5.7 The police alleged that [Mr] HE, through Futsing Finance Limited, operated a series of money collectors nationwide to gather money from illegal Chinese immigrants in their locality. These funds are believed to be for the repayment of the facilitation of their human trafficking into the United Kingdom.

"5.8 I understand that the cost for a Chinese person to be smuggled into the United Kingdom is several thousand pounds. The system in place is that part of this fee is paid in China by friends and family, the balance is paid in the United Kingdom to be returned to China. The Chinese immigrants are found employment in various Chinese businesses around the UK, mainly in the catering trade. Their wages fund the repayment.

"5.9 The network of collectors pay cash deposits into the bank accounts controlled by [Mr] HE or of Futsing Finance Limited at various banks around the United Kingdom. Several deposits are made daily. The funds are consolidated on a daily basis and payments are made to overseas accounts."

37. Police enquiries showed sums totalling £70 million had been passed through Mr He's associated bank accounts in the course of the year 2002 to 2003. There were multiple deposits of cash into various personal accounts and some five properties had been purchased during 2002, one in 1994 and one in 2003. The purchase price of those properties came to approximately £1.5 million. In addition, there are sums totalling £700,000 which have been frozen and were discovered in a large number of bank accounts. The present value of Mr He's and his wife's interest in the seven properties is approximately £500,000.
38. Mr Cooper summarises the matter in his first statement in paragraph 7.38 in these words:

"I believe that the above identified assets are recoverable property for the following reasons:

"i. The underlying alleged offences are acquisitive crime and as such the Respondents could be expected to receive personal gain from being involved in these offences;

"ii. The activities of Futsing Finance Limited give me cause to believe that it is being used for transmitting or laundering the proceeds of crime. High volumes of cash are received on a daily basis with the ultimate destination of these funds being, in the main, China.

"iii. The evidence currently available to me suggests that the funds consist, or largely consist of payments made by illegal immigrants back to organisers in China.

"iv. On any view it seems highly improbable that these funds represent legitimate taxed earnings.

"v. The business of Futura Management Limited [that is another company effectively run by Mr He and his wife] is not making the appropriate returns to the Inland Revenue, although PAYE does appear to be being paid. That said their declarations to the HM Customs and Excise are up to date but in this instance the company is receiving repayments of VAT. As described above it appears this company is in receipt of funds beyond that which they are declaring certainly to HM Customs and Excise. Some of these funds follow the same route to China as those funds that go via Futsing Finance Limited.

"vi. It is undoubtedly the case that Futura Management Limited carries on an otherwise legitimate meat supply business, however it also appears to have a function for transmitting or laundering receipts into its bank accounts."

39. One matter relied upon against Mr He is a conviction in Greece in 1999. This was, it is said, in connection with involvement in people trafficking. Mr He denies this. In a statement made on 26th July 2004, he said that he was questioned in detention for a day about his travel arrangements, but was unaware of any proceedings, and if he was convicted of anything he was unaware of it. Documentation has now been obtained from Greece. The court record shows that Mr He was in court, together with two other Chinese defendants, charged with fraud and that he gave evidence. The evidence against him was that he had given boarding passes to enable one of the other Chinese charged with him to get to Canada and another to London, he, Mr He, having brought a number of air tickets. He was convicted of attempted fraud and sentenced to 8 months' imprisonment, that sentence being commuted to a fine of 1500 drachmae per day. On the face of it, there is a strong implication that he was involved in people trafficking and the information from Greece is, it would appear, inconsistent with his original statement about it.
40. His case is that he provides a service to Chinese to enable them to transfer money to relatives or whomsoever they wish in China. He is not concerned with whether his customers have the right to work here; he cannot be expected to check that. He used personal accounts to transfer the monies in order to avoid bank charges. Documents accompanying the deposits showed on some occasions that the customer was not permitted to work, but those documents were obtained for identification purposes only and the representatives whom he used as collectors were unaware of the significance of those documents in respect of whether there was permission to work. He has refuted the allegations made against him and has given detailed explanations of his business practices.
41. In particular, in a statement of 8th November 2004, he says this, at paragraph 35:

"35. The Applicant and the Receiver have had more than three months to investigate into my affairs under the Proceeds of Crime Act 2002. Any prolonging of what has been proven as a fruitless investigation would cause irreparable damage to Futsing Finance and all my other legitimate businesses. I have had to borrow heavily at high interest rates and costs to help continue my businesses since my assets have been placed under Receivership. My wife, children and staff who rely on me for their livelihood and welfare have also suffered immense distress which can only get worse the longer this investigation continues due to the uncertainties and disproportionate interference it has brought about for my family and businesses. In about August 2004, my family and I had been denied access to our family home ... for about six weeks as the Receiver was investigating into this property. We had to seek alternative makeshift accommodation with friends/families or at our office premises. This has caused immense hardship for my children who have had to endure overcrowded accommodation during some of the hottest weather spells.

"36. The National Crime Squad (NCS) have previously investigated the same matters that the Applicant and the Receiver are now investigating. After a thorough investigation lasting about half a year, NCS have cleared me of any involvement in criminal conducts under the MLR and money laundering legislations. All monies that had been seized in this investigation had been returned with interest by NCS and on 23rd July 2001, NCS wrote to my solicitor acknowledging a 'pleasant and professional' approach from my part in dealing with their investigation.

"37. No adverse comments had been made by the NCS about my businesses during or following the conclusion of their enquiries in 2001. This led me to believe that I could continue with my businesses unchanged and I did so believing my businesses were proper, up to date and lawful. At the conclusion of the NCS investigation, I was approached by the UK government/police to assist with their investigations into crimes concerning Chinese people in the UK."

42. In relation to that last sentence, I have seen a statement from Mr He which gives further details of the assistance that he has given in certain important respects to authorities in this country.
43. The receiver has produced an interim report. That is dated 8th September 2004. I shall refer now to its key findings. The interim receiver sets out in it an analysis of responses from identifiable clients, who had provided the money which made up the £700,000 which has been frozen. In paragraph 5.4.1 of her report, she records as follows:

"Approximately 47.33% of sampled clients were successfully contacted, of whom 28.57% provided partial explanations, 2.26% were able to offer satisfactory explanations or offered to provide further details on request and 69.17% either declined to comment further or were not able to offer satisfactory explanations as to the source or destination of the funds. Of the 92 classified as providing an unsatisfactory explanation, 38 either refused to disclose any details or denied ever having used Futsing. 83 of those who responded confirmed they were asylum seekers.

"5.4.2 In the absence of evidence to the contrary, I must therefore conclude that a large proportion of the funds currently frozen may represent recoverable property on the basis that few of the individuals involved are willing to come forward and provide confirmation as to the legitimacy of the funds.

"5.4.3 I should clarify that my methodology in formulating the above table has been to contact individuals from each of the money collectors' remittance sheets randomly and to ask a series of questions designed to obtain sufficient information to satisfy me as to the legitimacy of the funds."

44. She submits a copy questionnaire and continues:

"In calculating the percentages outlined in the table, I have firstly indicated the number of individuals who responded as a percentage of the total number who I attempted to contact. Further, satisfactory responses indicated instances where the individuals were able to confirm the amount, the source and the destination of funds, unsatisfactory responses refer to instances where individuals either declined to assist in my enquiries or were not able to provide confirmation as to either the source or the destination of the funds. Partial satisfaction results were recorded in instances where individuals were able to provide some information in relation to the transaction but not sufficient to allow me to conclude that the transaction is entirely legitimate.

"5.4.4 I am, of course, mindful of the fact that the individuals concerned were under no compulsion to assist in my enquiries and that there may be a number of reasons why certain individuals felt unable to assist in this regard. Nevertheless, I am extremely concerned that of those who did respond to my enquiries, a high proportion were unable to confirm details of either the source or the destination of the funds. Given that these are, according to the First Respondent, individuals remitting considerable sums gained from employment in the UK for the benefit of their families in China, I am concerned that so few individuals were able to recall these details. Furthermore, 17.29% of those questioned denied ever having used or heard of Futsing. In such cases it would appear that either the individuals concerned are seeking to distance themselves from Futsing or their names and numbers are being used to disguise the introduction of funds from unknown sources.

"5.4.5 It will also be noted that a large proportion (62.41%) of those who responded to the enquiries indicated that they were asylum seekers working casually rather than with fixed employers. I am mindful of the fact that in certain circumstances asylum seekers in the UK are not permitted to obtain employment (whether paid or unpaid) and that in such cases any funds earned would be unlawful. Given the high proportion of asylum seekers who appear to have remitted funds through Futsing, I am obviously concerned that a significant proportion of these funds may represent the untaxed earnings of persons working in the United Kingdom without the requisite authority from the Immigration Service. I am, of course, mindful that such funds may constitute recoverable property under the terms of the Proceeds of Crime Act 2002 on the basis that the evasion of income tax constitutes unlawful activity.

"5.4.6 Finally, it is interesting to note that in one of the 3 cases where more detailed explanations were provided the individual concerned advised that the monies were being remitted to a friend who had helped him to come to the United Kingdom."

45. She concludes her report in paragraph 8 thus:

"8.1 I have been able through my investigations to confirm that the Futsing Finance business model and banking structure operate broadly in the manner described by Mr He. It is also the case that Mr He observes a number of practices in relation to the identification of Futsing Clients. Nevertheless, I remain deeply concerned that the funds frozen in the Futsing Accounts may represent the proceeds of unlawful conduct. There are a number of concerns in relation to the immigration status of some Futsing clients and their ability to work legally within the UK. Moreover, the inability of many Futsing clients to provide basic details in respect of their transactions such as employer details or national insurance numbers leads me to conclude that, absent any evidence to the contrary, the funds frozen in the accounts may constitute the proceeds of unlawful conduct.

"8.2 Given my concerns in relation to the funds following into Futsing Finance, I have further concerns in respect of assets purchased using Futsing's accounts as these funds are drawn from sources I believe to be tainted, I would conclude that properties acquired by Mr He and Dan Dan Chen may also constitute the proceeds of unlawful conduct.

"8.3 In order to complete a final recoverable property report in this matter it will be necessary to finalise my investigations into both the assets and lifestyle of Mr He and Dan Dan Chen."

46. That, submits Mr De Mello, is quite insufficient to justify any further investigation, let alone a claim to recover assets. There simply is not enough evidence to establish that any of the property is recoverable, whatever may be the standard of proof. Let me turn now to consider the nature of proceedings under Part 5.
47. There is no doubt that in domestic law they are classified as civil proceedings. That is made clear by the heading to Part 5, and section 240, which sets out the purpose of Part 5, namely to recover in civil proceedings property which is, or represents, property obtained through unlawful conduct, whether or not any proceedings have been brought for an offence in connection with the property.
48. That is but the starting point, when the jurisdiction of the European Court of Human Rights has to be considered. The leading case in this connection is Engel v The Netherlands (No.1) [1976] 1 EHRR 647. The tests set out in that case have been treated as giving authoritative guidance. Those tests are set out in paragraphs 80 to 82 of the report.
49. In summarising them, I gratefully borrow from the decision of Coghlin J in The Director of the Assets Recovery Agency v Walsh [2004] NIQB 21. At paragraph 13 of his judgment in that case he says this:

"The three principal criteria identified in Engel are:

"(i) The manner in which the domestic state classifies the proceedings. This normally carries comparatively little weight and is regarded as a starting point rather than determinative -- see Ozturk v Germany [1984] 6 EHRR 409 at 421 and 422.

"(ii) The nature of the conduct in question classified objectively bearing in mind the object and purpose of the Convention.

"(iii) The severity of any possible penalty -- severe penalties, including those with imprisonment in default and penalties intended to deter are pointers towards a criminal classification of proceedings -- see Schmautzer v Austria [1995] 21 EHRR 511.

"In Lauko v Slovakia [1998] ECHR 26138/95 the court observed that these criteria were alternatives and not cumulative although a cumulative approach might be adopted where a separate analysis of each criterion did not make it possible to reach a clear conclusion as to the existence of a 'criminal charge'."

50. The approach set out in Engel is one that should be applied domestically. That has been confirmed by the House of Lords in R v H [2003] 1 All ER 497.
51. A number of decisions in the High Court have established that condemnation forfeiture proceedings are to be regarded as civil proceedings: see Goldsmith v Customs and Excise Commissioners [2001] 1 WLR 1673 and R (Mudie and Anr) v Dover Magistrates' Court [2003] QB 1238. In Mudie reference was made to Butler v United Kingdom 41661/98, which concerned proceedings for the forfeiture of cash under the Drug Trafficking Act, now contained in Chapter 3 of Part 5 of the 2002 Act, and in which the European Court decided that such proceedings were civil, not criminal. No criminal charge was brought, nor did the liability for forfeiture depend upon a conviction of a criminal offence.
52. In Mudie, at page 1254, in the judgment of Laws LJ, who gave the only reasoned judgment, there is set out the citation from Butler which reads, so far as material, as follows:

"It is the applicant's contention that the forfeiture of his money in reality represented a severe criminal sanction, handed down in the absence of the procedural guarantees afforded to him under article 6 of the Convention, in particular his right to be presumed innocence [sic]. The court does not accept that view. In its opinion, the forfeiture order was a preventive measure and cannot be compared to a criminal sanction, since it was designed to take out of circulation money which was presumed to be bound up with the international trade in illicit drugs. It follows that proceedings which led to the making of the order did not involve 'the determination ... of a criminal charge (see Raimondo v Italy [1994] 18 EHRR 237, 264, at para 43; and more recently Arcuri v Italy (Application No 52024/99), inadmissibility decision of 5th July 2001..."

53. On page 1259, in paragraph 36 of his judgment in Mudie, Laws LJ concludes thus:

"I would just add these observations. Lord Steyn's remarks in R (McCann) v Crown Court at Manchester [2003] 1 AC 787, although made in the domestic context, show that some care needs to be taken in the application of the Engel test. It is certainly beyond contest that the concept of 'criminal charge' possesses an autonomous meaning in the European Court of Human Rights jurisprudence. It is also true that the first of the three criteria, that is the domestic classification of the proceedings, is treated as no more than a starting point. But that proposition should not distract the court from the question whether, given the three criteria, the proceedings in issue are in substance in the nature of a criminal charge. Are they an instance of the use of state power to condemn or punish individuals for wrongdoing? The European Court of Human Rights and our own courts have held that condemnation proceedings are not in any such category. The emphasis on the in rem nature of such proceedings in Air Canada v United Kingdom 20 EHRR 150, Lord Woolf CJ's judgment in Goldsmith v Customs and Excise Comrs [2001] 1 WLR 1673, Lord Steyn's observations in the McCann case [2003] 1 AC 787, and the European Court of Human Rights' own discussion in Butler v United Kingdom 27 June 2002, combine, in my judgment, to underline the force of that conclusion."

54. Arcuri v Italy is one of a number of cases which have gone to the European Court concerned with the Italian legislation which is designed to frustrate the Mafia in their obtaining and possession of unlawfully obtained property. The Italian provisions are more draconian than ours, inasmuch as they provide for a reverse burden of proof in certain circumstances. Nonetheless, those provisions have consistently been held by Strasbourg to be civil proceedings, not criminal, and, furthermore -- a point that will be material when I come to consider later submissions -- not to contravene the principle of proportionality in connection with Article 1 of the First Protocol, or, as far as it may be material, Article 8.
55. Forfeiture of property which has been obtained by unlawful conduct is not regarded as a penalty. It would be helpful, I think, to refer specifically to a commission decision, M v Italy Application Number 12386/86, a decision of 15th April 1991. The finding was that Articles 6 and 7 of the Convention are not applicable to confiscation of property belonging to a person suspected of being a member of a Mafia-type organisation, decided in the context of proceedings for the application of preventive measures under various Italian Acts, as the measure does not involve a finding of guilt subsequent to a criminal charge and does not constitute a penalty.
56. The report provided to me on that case is 17 DR 59. At page 98, the Commission, in deciding that the claim was not admissible, said this:

"The Commission considers that this legal background confirms the preventive character of confiscation and shows that it is designed to prevent the unlawful use of the property which is the subject of the order. It follows that the confiscation of the applicant's property does not imply a finding that he was guilty of a specific offence, any more than the compulsory residence order against him does.

"The Commission further considers that the severity of the measure is not so great in this case as to warrant its classification as a criminal penalty for the purposes of the Convention. Confiscation is a measure not confined to the sphere of criminal law; it is encountered widely in the sphere of administrative law. Items liable to confiscation include illegally imported goods (see the issue examined by the Court and the Commission in the Agosi case, Eur. Court HR judgment of 24th October 1986, Series A no 108), the proceeds from unlawful activities not classified as criminal offences (such as buildings constructed without planning permission), certain items considered dangerous in themselves (such as weapons, explosives or infected cattle) and property connected, though only indirectly, with a criminal activity (cf the confiscation under Italian law of the funds of secret societies pursuant to Law No 17 of 15th January 1982).

"Thus it can be seen from the legislation of the Council of Europe member States that measures of great severity, but necessary and appropriate for protection of the public interest, are ordered even outside the criminal sphere.

"The Commission notes that the impugned confiscation measure concerns property considered to be of unlawful origin. Its aim is to strike a blow against mafia-type organisations and the very considerable resources they have at their disposal to finance unlawful activities. The Commission therefore takes the view that the measure in question can be likened to those mentioned above.

"That being the case, and in the light of the Court's case-law, the Commission concludes that the confiscation complained of does not involve a finding of guilt subsequent to a criminal charge, and does not constitute a penalty. Consequently, the complaints of a violation of Article 6 para 2 and Article 7 of the Convention are incompatible ratione materiae with those provisions and must be rejected pursuant to Article 27-para 2."

57. The Commission then went on to say that they were also proportionate and that there was no breach Of Article 1 of the First Protocol.
58. I have no doubt that Coghlin J was correct in deciding as he did that these were civil proceedings. I do not need, I think, to say more than that I entirely agree with the reasons that he gives to reach that conclusion. His conclusion is entirely consistent with, and supported by, both domestic and Strasbourg jurisprudence.
59. The standard of proof appropriate in deciding whether any matters alleged to constitute unlawful conduct have occurred is the balance of probabilities: see section 241(3) of the Act. Notwithstanding that, Mr De Mello submits that there is a scale of probabilities and that to establish what amounts to criminal conduct requires that the top end of the scale is appropriate, and that is equivalent to the criminal standard. He refers me to Gough v Chief Constable of Derbyshire Constabulary [2002] 2 All ER 985. That case concerned football banning orders. Those, the Court of Appeal decided, were civil proceedings, but that an exacting standard of proof should be applied which was hard to distinguish from the criminal standard. The relevant provision was section 14(b) of the Football Spectator's Act 1989. The relevant provisions are set out in paragraphs 89 and 90 on page 1011 of the All England report.
60. The statute in that case did not refer to the balance of probabilities. Mr De Mello seeks support for his submission from a line of cases, the most well known of which is Hornal v Neuberger Products Ltd [1957] 1 QB 247. The County Court Judge, HHJ Leon, had said that he had found fraud to be established on the balance of probabilities, but would not have done so if the standard had been beyond reasonable doubt. The Court of Appeal stated that that was a correct approach, because the appropriate standard was the balance of probabilities. But at page 258 of the report, Denning LJ said this:

"In setting himself this problem the judge showed an uncommon nicety of approach. I must say that, if I was sitting as a judge alone, and I was satisfied that the statement was made, that would be enough for me, whether the claim was put in warranty or on fraud. I think it would bring the law into contempt if a judge were to say that on the issue of warranty he finds the statement was made, and that on the issue of fraud he finds it was not made.

"Nevertheless, the judge having set the problem to himself, he answered it, I think, correctly. He reviewed all the cases and held rightly that the standard of proof depends on the nature of the issue. The more serious the allegation the higher the degree of probability that is required: but it need not, in a civil case, reach the very high standard required by the criminal law. Take this very case. If Mr Neuberger did represent that the machine was Soag reconditioned he did very wrong because he knew it was untrue. His moral guilt is just as great whatever the form of the action, no matter whether in warranty or in fraud. He should be judged by the same standard in either case."

61. At page 260 Hodson LJ said:

"The comparative dearth of express authority on this topic is not surprising. No responsible counsel undertakes to prove a serious accusation without admitting that cogent evidence is required, and judges approach serious accusations in the same way without necessarily considering in every case whether or not there is a criminal issue involved. For example, in the ordinary case arising from a collision between two motor-cars involving charges of negligence, I have never heard of a judge applying the criminal standard of proof, on the ground that his judgment might involve the finding of one of the parties guilty of a criminal offence."

62. Morris LJ, at page 266, said this:

"It is, I think, clear from the authorities that a difference of approach in civil cases has been recognised. Many judicial utterances show this. The phrase 'balance of probabilities' is often employed as a convenient phrase to express the basis upon which civil issues are decided. It may well be that no clear-cut logical reconciliation can be formulated in regard to the authorities on these topics. But perhaps they illustrate that 'the life of the law is not logic but experience.' In some criminal cases liberty may be involved; in some it may not. In some civil cases the issues may involve questions of reputation which can transcend in importance even questions of personal liberty. Good name in man or woman is 'the immediate jewel of their souls.'

"But in truth no real mischief results from an acceptance of the fact that there is some difference of approach in civil actions. Particularly is this so if the words which are used to define that approach are the servants but not the masters of meaning. Though no court and no jury would give less careful attention to issues lacking gravity than to those marked by it, the very elements of gravity become a part of the whole range of circumstances which have to be weighed in the scale when deciding as to the balance of probabilities. This view was denoted by Denning LJ when in his judgment in Bater v Bater [1955] 2 QB 600 he spoke of a 'degree of probability which is commensurate with the occasion' and of 'a degree of probability which is proportionate to the subject-matter.'"

63. In Re H (Minors) [1996] AC 563, the House of Lords was concerned with the standard of proof in sexual abuse allegations arising in care proceedings. The leading majority speech was given by Lord Nicholls. At page 586 he said this at letter D:

"The balance of probability standard means that a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence. Deliberate physical injury is usually less likely than accidental physical injury. A stepfather is usually less likely to have repeatedly raped and had non-consensual oral sex with his underage stepdaughter than on some occasion to have lost his temper and slapped her. Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.

"Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability its occurrence will be established. Ungoed-Thomas J expressed this neatly in In re Dellow's Will Trusts [1964] 1 WLR 451, 455: 'The more serious the allegation the more cogent is the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.'

"This substantially accords with the approach adopted in authorities such as the well known judgment of Morris LJ in Hornal v Neuberger Products Ltd. This approach also provides a means by which the balance of probability standard can accommodate one's instinctive feeling that even in civil proceedings a court should be more sure before finding serious allegations proved than when deciding less serious or trivial matters.

"No doubt it is this feeling which prompts judicial comment from time to time that grave issues call for proof to a standard higher than the preponderance of probability. Similar suggestions have been made recently regarding proof of allegations of sexual abuse of children: see In re G (A Minor) (Child abuse: Standard of Proof) [1987] 1 WLR 1461, 1466 and In re W [1994] 1 FLR 419, 429. So I must pursue this a little further. The law looks for probability, not certainty. Certainty is seldom attainable. But probability is an unsatisfactorily vague criterion because there are degrees of probability. In establishing principles regarding the standard of proof, therefore, the law seeks to define the degree of probability appropriate for different types of proceedings. Proof beyond reasonable doubt, in whatever form of words expressed, is one standard. Proof on a preponderance of probability is another, lower standard having the in-built flexibility already mentioned. If the balance of probability standard were departed from, and a third standard were substituted in some civil cases, it would be necessary to identify what the standard is and when it applies. Herein lies a difficulty. If the standard were to be higher than the balance of probability but lower than the criminal standard of proof beyond reasonable doubt, what would it be? The only alternative which suggests itself is that the standard should be commensurate with the gravity of the allegation and the seriousness of the consequences. A formula to this effect has its attraction. But I doubt whether in practice it would add much to the present test in civil cases, and it would risk causing confusion and uncertainty. As at present advised I think it is better to stick to the existing, established law on this subject. I can see no compelling need for a change."

64. In The Secretary of State for the Home Department v Rehman [2003] 1 AC 153, at page 193, Lord Hoffmann adverted to this issue. Rehman was an appeal from the decision of the Special Immigration Appeals Commission, which was concerned with whether Rehman should be deported from the United Kingdom on the basis that he had links with a group involved in terrorism. Lord Hoffman said, at paragraph 55 under the heading, "The standard of proof":

"I turn next to the Commission's views on the standard of proof. By way of preliminary I feel bound to say that I think that a 'high civil balance of probabilities' is an unfortunate mixed metaphor. The civil standard of proof always means more likely than not. The only higher degree of probability required by the law is the criminal standard. But, as Lord Nicholls of Birkenhead explained in In Re H (Minors) (Sexual Abuse: Standard of Proof) [1996] AC 563, 586, some things are inherently more likely than others. It would need more cogent evidence to satisfy one that the creature seen walking in Regent's Park was more likely than not to have been a lioness than to be satisfied to the same standard of probability that it was an Alsatian. On this basis, cogent evidence is generally required to satisfy a civil tribunal that a person has been fraudulent or behaved in some other reprehensible manner. But the question is always whether the tribunal thinks it more probable than not."

65. Perhaps Lord Hoffmann might have chosen a park other than Regent's Park for his example, but the point is an obvious one. Finally, I should refer in this context to an unreported decision of the Divisional Court, Butt v HM Customs & Excise [2001] EWHC Admin 1066. That case concerned forfeiture of a substantial sum of money, which the appellant's nephew was seeking to take from London to Amsterdam, the sum in question being $695,000 in cash. The court, of course, decided that the proceedings were civil and Hallett J said this:

"29. In B v Chief Constable of Avon and Somerset Constabulary the court was plainly dealing with very different provisions from those under consideration here. Firstly, in the Crime and Disorder Act 1988 Parliament, whatever its intention, did not expressly enact that the civil standard of proof should apply to the making of restriction orders upon convicted sex offenders. In the Drug Trafficking Act 1994 it did. In B the making of the order in question would have had very severe consequences for the individual concerned. Before making a restriction order the court must first find that since conviction the offender has continued to behave in such a way as gives reasonable cause to believe he poses a risk of serious harm to the public. If such findings are made the court may then impose restrictions upon the offender's movements, the people he may contact and where he may live. Breach of the court order may lead to a fine or imprisonment. Proceedings under section 43, however, lead to the forfeiture of a sum of money and nothing more. The proceedings here did not render Mr Butt, or indeed anyone else, liable to imprisonment or a fine. No findings have been made against Mr Butt to his discredit. No restrictions have been placed upon his life.

"30. I reject Mr Owen's submission, therefore, that the court should have applied a standard of proof akin to the criminal standard. I am not persuaded that proceedings which relate solely to the forfeiture of even a sum of money as large as this require HM Customs & Excise to prove the drugs connection to the criminal standard or, as Mr Owen put it, something very close. Nor am I persuaded that forfeiture proceedings of this kind fall into the category of case envisaged by Lord Nicholls where the allegation made is so inherently improbable that more cogent evidence is required than may normally be the case. I am satisfied that the test properly applied to these proceedings was whether or not the court was satisfied that it was more probable than not that the money represented the direct or indirect proceeds of drugs trafficking or was intended for use in drugs trafficking.

"31. I am satisfied that the approach adopted by Judge Adele Williams in this case to the standard of proof was an eminently sensible and fair one. As she put it, the court would apply the civil standard but with great care. If any gloss was needed on the words of the statute -- and I, for my part, am not persuaded that on the facts of this case it was -- that gloss must have operated to the benefit of Mr Butt. The court was plainly conscious of the consequences of a forfeiture order when such a considerable sum of money was at stake."

66. I note Hallett J's view that the allegation, which was that the money in question had been involved, or had resulted from involvement in, or was intended for drug trafficking, was not an inherently improbable allegation. As a general rule, no doubt, criminal conduct may be regarded as less probable than non-criminal conduct. But where there is evidence from which a court can be satisfied that it is more probable than not that criminal conduct has been involved, it does not seem to me that that is something that is so improbable as to require a gloss on the standard of proof. However, I recognise, and it is no doubt right, that since it is necessary to establish that there has been criminal conduct in the obtaining of the property, the court should look for cogent evidence before deciding that the balance of probabilities has been met. But I have no doubt that Parliament deliberately referred to the balance of probabilities, and that the court should not place a gloss upon it, so as to require that the standard approaches that appropriate in a criminal case. Apart from anything else, if that were necessary, the effectiveness of, in particular, Part 5 of the Act would be to a considerable extent removed. Since it is clear that Parliament intended that it should be used, even if criminal proceedings could not be successfully instituted, it is plain that Parliament deliberately imposed a lower standard of proof as the standard appropriate for these proceedings.
67. Mr De Mello submitted, as I have said, that to take these proceedings was an abuse of the process. It is said that previous inquiries which had led to no charges had exonerated Mr He. But that is not the position. He has not been exonerated. The decision has been that criminal proceedings should not be instituted, no doubt because it was considered that they would not succeed. But the fact that the matter was referred to the Director shows that the police did not believe that Mr He was to be regarded as an entirely innocent man. In any event, as I have said, Parliament has quite clearly indicated that a claim may be brought under Part 5 whether or not a prosecution is brought; see 2(6).
68. Mr De Mello submits that this is retrospective, and he relies on Article 7, in particular, of the European Convention on Human Rights. As far as material, Article 7 provides:

"(1) No-one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed."

69. The authorities to which I have already referred make it plain that there is no question of any penalty involved in these proceedings. Furthermore, there has been no conviction of a criminal offence leading to a penalty. Of course, property cannot be recoverable unless, at the time it was acquired, it was obtained through unlawful conduct. That conduct must have been criminal at that time. To that extent, the prohibition against retrospectivity will apply, but only because the Act says that the property must be property which was obtained by criminal conduct. In those circumstances, it is quite clear that Article 7 has no application.
70. Reliance again is placed on Article 1 of the First Protocol. That is the Article which prohibits interference with property, but it is subject to the ability of the state to take measures which are in accordance with the law and which are regarded as necessary. Article 1 of the First Protocol reads:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

"These preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

71. I have already referred to M v Italy. Arcuri v Italy is another case to the same effect that this type of provision will not fall foul of Article 1 of the First Protocol provided that the measure in question is regarded as proportionate. In Arcuri v Italy, the circumstances were that the first applicant was suspected of being a member of a criminal organisation involving drug trafficking. Proceedings were instituted against him under the preventive measure, and by an order of 31st October 1995, the president of the division of the Turin District Court, who specialised in preventive measures, ordered the seizure of the assets in question, which included eight vehicles, several plots of land and flats, two private company shares and numerous documents. He noted that the inspections carried out by the national anti-Mafia brigade showed a discrepancy between the first applicant's financial means and his legal business activities and declared income. The test applicable was that it was reasonably probable that he was involved in a criminal association.
72. At page 3 of the report I have, the relevant domestic law is identified thus:

"... 'the District Court may issue a reasoned decision, even of its own motion, ordering the seizure of property at the direct or indirect disposal of the person against whom the proceedings have been instituted, when there is sufficient circumstantial evidence, such as a considerable discrepancy between his lifestyle and his apparent or declared income, to show that the property concerned forms the proceeds from unlawful activities or their reinvestment. Together with the implementation of the preventive measure the District Court shall order the confiscation of any of the goods seized in respect of which it has not been shown that they were lawfully acquired."

73. Hence my reference earlier to the reverse standard. It was decided, at page 5, as follows:

"In this connection the Court points out that the impugned measure forms part of a crime-prevention policy; it considers that in implementing such a policy the legislature must have a wide margin of appreciation both with regard to the existence of a problem affecting the public interest which requires measures of control and the appropriate way to apply such measures.

"The Court further observes that in Italy the problem of organised crime has reached a very disturbing level.

"The enormous profits made by these organisations from their unlawful activities give them a level of power which places in jeopardy the rule of law within the State. The means adopted to combat this economic power, particularly the confiscation measure complained of, may appear essential for the successful prosecution of the battle against the organisations in question ..."

"The Court cannot therefore underestimate the specific circumstances which prompted the action taken by the Italian legislature. However, it has a duty to satisfy itself that the rights guaranteed by the Convention are respected in every case.

"The Court notes that in this case section 2(3) of the 1965 Act establishes, where there is 'sufficient circumstantial evidence', a presumption that the property of a person suspected of belonging to a criminal organisation represents the proceeds from unlawful activities or has been acquired with those proceeds.

"Every legal system recognises presumptions of fact or of law. The Convention obviously does not prohibit such presumptions in principle. However, the applicants' right to peaceful enjoyment of their possessions implies the existence of an effective judicial guarantee. Consequently, the Court must consider whether, having regard to the severity of the applicable measure, the proceedings in the Italian courts afforded the applicants a reasonable opportunity of putting their case to the responsible authorities ..."

74. The court went on to decide that it did and that the measure was proportionate. Whilst the situation in this country is not, I hope, as dire as that represented by the activities of the Mafia in Italy, nonetheless Parliament has quite clearly decided that these measures are necessary in order to fight crime, and in particular to ensure, as far as possible, that those involved in crime should be unable to enjoy the fruits of their criminal activities. The measure is not as severe as the Italian measure, in particular it raises no presumptions and there is no question of any reverse burden of proof. Nonetheless, it seems to me that it would be quite wrong for me to strike these provisions down, in effect, when I know that Parliament has decided that they are indeed necessary. In my judgment, therefore, the provisions in question are indeed proportionate.
75. Mr De Mello also raised Article 8, the right to a family and personal life, but it seems to me that, even assuming it applies, it adds nothing, and the question of proportionality applies equally to it as it does to Article 1.
76. The unlawful conduct relied upon now is the alleged laundering of money suspected to have resulted from breaches of the Immigration Act, in that asylum seekers or other Chinese entrants are working when forbidden to do so, or evading tax. In addition, there is some evidence that Mr and Mrs He's lifestyle is such as is incompatible with the declared income upon which he has paid tax. The evidence that Mr He himself is now involved in people trafficking is not strong. However, there is the Greek conviction to which I have already referred. But any change of emphasis in the identification of criminal conduct does not mean that there was not, when the interim receiving order was obtained, a good arguable case that the property was recoverable property.
77. Mr De Mello submits that, on an application to discharge or vary under section 251(3), or the exercise of the court of its obligations under section 254(1), a good arguable case is no longer the correct test; the Director must establish that the property is indeed, on the balance of probabilities, recoverable. The Act sets out the steps which could be taken to obtain recoverable property. The first steps are investigatory. First, there are production orders, in order to get documents and information. Then, if necessary, there may be an interim receivership order. Following that, at the end of what can be regarded as the investigatory stage, comes an application for a recovery order.
78. The obtaining of an interim receivership order is based upon a good arguable case. If a respondent wishes the court to discharge such an order, he must establish that the property is not recoverable, or if the court is to act of its own motion under section 254, or perhaps following an application, the court must be persuaded that the property is not recoverable.
79. The court should not, in my judgment, at that stage, consider in advance the issues which it will have to consider if a decision is made to make a recovery application. Nor is it appropriate to pre-judge the receiver's report. But, even if I am wrong about that and that puts the case too high against a respondent who applies to discharge or vary, I have no doubt that the good arguable test must continue to apply. There is nothing in the Act that suggests to the contrary, and it seems to me that, until the receiver's report comes through, then, unless property is regarded as not recoverable -- and no doubt the receiver may well get information at an early stage or during her investigations which establishes that property is not recoverable -- the receivership order can continue in relation to property in respect of which there is a good arguable case that it is indeed recoverable.
80. As I have said, Mr He has put forward a number of detailed statements in which he challenges the allegations made against him. I have already referred to the interim report of the receiver and her conclusions. Mr De Mello emphasises her use of the word "may" and that does not, he submits, measure up to the required test. But, as it seems to me, it is plain from her report that there are and remain real and well-founded concerns that Mr He has indeed been involved in money laundering and that the cash and the properties which have been obtained are, or may well be, recoverable property. In my judgment, it is plain that a good arguable case still exists.
81. However, it is plain that there is a need for expedition. The receiver has an obligation to report as soon as practicable and there is a serious interference with Mr He's property and his ability to carry on business if the reality is that he is not in any way involved in criminal conduct and this is not to be regarded as recoverable property. The matters which the receiver has to investigate are of some complexity, and it is not surprising that she is taking some time to resolve them. But the time is nigh when enquiries must be brought to a conclusion. It seems to me that in the very early part of next year those conclusions must be reached. I am prepared, therefore, to indicate that, in my judgment, there should be no variation or discharge of the interim receivership order at present. But if there has been no report by a particular time in the early part of next year, then it will be open to Mr He to make a further application to the court and the court will be highly sympathetic, unless there is a very good reason given for failure to conclude the enquiries. Subject to that, this application must be dismissed.
82. Mr Bird, we did, I think -- I cannot remember the details -- raise this in the course of argument and I think I omitted to make a note of time, because you did accept as I recall that it was reasonable to expect --
83. MR BIRD: Yes. I accepted the principle, and the information that we had from one of the receiver's employees, who was at court on the last occasion, was that it was hoped that by the end of the year or the earlier part of January, the report would be completed. If your Lordship were minded to say something like 15th or 21st January, one of those two dates, I suspect that sounds about right. 15th January?
84. MR JUSTICE COLLINS: Mr De Mello, do you have any observations on that?
85. MR DE MELLO: Yes, I would, of course, invite you to consider less time.
86. MR JUSTICE COLLINS: Of course, but I have to recognise that Christmas is nearly upon us.
87. MR DE MELLO: Yes. Christmas works in both ways, because, as you appreciate, the respondent in this case has a livelihood. I note that you have considered that in your judgment, and what I would respectfully submit is no longer than four weeks as from today, if you consider that to be appropriate.
88. MR JUSTICE COLLINS: Well, in fact, when you have regard to the fact that one has to take out the time over Christmas, when no work can reasonably be expected to take place, 15th January is not much longer than that. So I am prepared to say 15th January.
89. MR DE MELLO: Whilst I am on my feet, of course, as a matter of formalities, I ask for permission to appeal, but that may not turn out given that the 15th January may well come before.
90. MR JUSTICE COLLINS: I appreciate that this is -- I have dealt with quite a lot of points on this legislation, and as far as I am aware this is the first case which has dealt with it in this jurisdiction.
91. MR DE MELLO: Yes, the Northern Ireland cases have dealt with it, but it is the first case in this jurisdiction.
92. MR JUSTICE COLLINS: What do you say about it, Mr Bird?
93. MR BIRD: My Lord, we would say that this is a matter where, if there is to be permission to appeal, it should come from the Court of Appeal rather than your Lordship. Your Lordship has given a, if I may say so, extensive judgment dealing with all of the points on a broad ranging attack on the legislation. In my submission, your Lordship should be confident in your judgment and leave it to stand and leave my learned friend to ask the Court of Appeal to deal with it later on.
94. MR JUSTICE COLLINS: Yes. I am concerned about the practicalities more than anything, Mr De Mello. I mean I appreciate that this is the first time, but on the other hand I am persuaded that the conclusions that I have reached really are quite unlikely to be successfully appealed. That sounds a bit arrogant, but one has to form a judgment. No, I think that, in the circumstances, you must persuade the Court of Appeal.
95. MR DE MELLO: As I understand from the last part of your Lordship's judgment, the receiver will be given until the 15th January.
96. MR JUSTICE COLLINS: The effect of it is, as you rightly say, that if no report is forthcoming by then, because you have to be shown the report under the terms of the Act, then you have the right to come here -- and you will have a very sympathetic ear -- to discharge the order unless there is a very good reason given for any further delay.
97. MR DE MELLO: Thank you very much.
98. MR BIRD: My Lord, there is an application for costs. I hope my Lord has a schedule, which has been submitted to the court?
99. MR JUSTICE COLLINS: Was it produced earlier?
100. MR BIRD: It was sent to the court since the last hearing, I think.
101. MR JUSTICE COLLINS: In that case it has not been passed to me.
102. MR DE MELLO: I have not seen a copy. It has been served on my solicitors, but I do not know if my learned friend has a spare copy. (Handed).
103. MR JUSTICE COLLINS: First of all, costs in principle.
104. MR DE MELLO: My Lord, in principle, my observations are as follows. Effectively the respondent in this case applies for a variation of an order made. Secondly, the receiver has chosen not to attend the hearing. The third thing is that --
105. MR JUSTICE COLLINS: Well, that I do not think is material.
106. MR DE MELLO: But the important thing is that he has applied for an order to discharge the receivership order which was imposed upon his own property, and it would be wrong we say, in principle, unless there are exceptional circumstances otherwise to justify the making of an order for costs in circumstances where he has been unsuccessful. We also ask you to consider that he has to fund this himself without drawing any --
107. MR JUSTICE COLLINS: Well, this is what is slightly perturbing. I have not rechecked the order, but is this one that extends to all property, or is it merely the property which is in the freezing order?
108. MR BIRD: It is only in relation to specific property scheduled to the freezing order, there is not an all property provision.
109. MR DE MELLO: But everything that actively comes in terms of funding comes from the Futsing property, and he has no other sources other than.
110. MR JUSTICE COLLINS: I understand. His source of income is very, very substantially decreased because of his inability to run the company at all for the moment.
111. MR DE MELLO: Exactly. It is tied with the business, the Futsing business -- that is where his income is from, and that is what the receiver also agrees, that his lifestyle is closely linked to that business.
112. MR JUSTICE COLLINS: Mr De Mello, I think in principle it is difficult to resist an order for costs. What I would propose to do, subject to Mr Bird, is to make an order that it be not enforced until further order, having regard to the constraints upon your client's use of property for the moment.
113. MR DE MELLO: Yes, and it may be well be that on 15th January, if the receiver does not provide --
114. MR JUSTICE COLLINS: If there are no proceedings, then, of course, you may have the right to apply for compensation under section 283. Of course, if you win in due course, Mr He again may have the right to compensation. But these costs would normally be "in any event" costs, because you have failed to succeed in obtaining the variation or discharge.
115. MR DE MELLO: Another way you may look at it, my Lord, is to see whether it is best that the question of costs should be deferred until after 15th January.
116. MR JUSTICE COLLINS: I see the point, but, no, I think, as I say, this would normally be "in any event". I think the fairest way of dealing with it, and the one which I hope will protect your client's interests, is if in due course the matter does not go ahead, or if he succeeds, as I say, to make an order but to say that it should not be enforced without leave of the court.
117. MR DE MELLO: Thank you.
118. MR JUSTICE COLLINS: Now, as far as quantum is concerned, Mr De Mello, have your solicitors had chance to consider that? (Pause). I do not want to bounce you into anything. Obviously you must have the opportunity of considering it.
119. MR BIRD: My Lord, if it assists, we have received a schedule from my learned friend's side in the normal way and his costs are significantly higher than ours.
120. MR JUSTICE COLLINS: I am bound to say that, on the face of it, they do not look at all unreasonable.
121. MR BIRD: They are for two hearings, of course. In the hearing before McCombe J, costs were reserved. Our total costs are £37,812. My learned friend's are £49,609. So on that basis --
122. MR JUSTICE COLLINS: On the other hand, of course, you are entitled, if you so wish, to a detailed assessment.
123. MR DE MELLO: Yes.
124. MR JUSTICE COLLINS: I tend to be fairly reluctant to go into summary where there are real disputes about the amount of time and so on, because, frankly, one needs usually rather more information for those sorts of disputes. Shall I leave it like this: you have an opportunity to consider, if you agree a sum, then of course I will make an order in that sum. If, between you, you take the view that you want me to make a summary assessment -- and, as I have indicated, I am not sure I really have the sufficient information -- then come back this afternoon. If you cannot agree, and if you accept that summary is perhaps not possible, then it will be a detailed assessment.
125. MR DE MELLO: As far as coming back this afternoon, I am likely to be in some difficulty, my Lord.
126. MR JUSTICE COLLINS: Then do it in writing, if the need arises.
127. MR BIRD: My Lord, can I then suggest that in fact the order that my Lord makes is the Director's costs to be the subject of a detailed assessment if not agreed?
128. MR JUSTICE COLLINS: Yes.
129. MR BIRD: Not to be enforced without further order of the court?
130. MR JUSTICE COLLINS: I think that is probably the sensible order. If you want me to change that, you can come back, or if you reach an agreement it does not need a further order. I think that is probably the most sensible thing to say at the moment, do you not, Mr De Mello?
131. MR DE MELLO: Yes.
132. MR JUSTICE COLLINS: In which case that is what I will order. I am sorry it has taken rather a long time to read that out, but it did cover quite a lot of ground. Thank you.