England and Wales High Court (Administrative Court) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Assets Recovery Agency v Kean [2007] EWHC 112 (Admin) (31 January 2007)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2007/112.html
Cite as: [2007] EWHC 112 (Admin)

[New search] [Help]

		Neutral Citation Number: [2007] EWHC 112 (Admin)
		Case No: CO/6481/2006

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

Royal Courts of Justice
Strand, London, WC2A 2LL

31/01/2007

B e f o r e :

MR JUSTICE STANLEY BURNTON
____________________

Between:

	THE DIRECTOR OF THE ASSETS RECOVERY AGENCY	Claimant
	- and -
	ROBERT ALAN KEAN	Defendant

____________________

Mark Cunningham QC (instructed by Hatch Brenner) for the Defendant
Jonathan Brettler (instructed by the Assets Recovery Agency) for the Claimant
Hearing dates: 9 November 2006, 13 December 2006
____________________

HTML VERSION OF JUDGMENT
____________________

Stanley Burnton J :

Introduction

This is an application by Robert Kean, the Defendant in these proceedings, to set aside the property freezing order dated 11 August 2006 made by Langstaff J on the Claimant's application without notice. The order, made on the evidence contained in the witness statement of Amy Nixon dated 17 July 2006, restrains dealings with the property known as 1b Charnleys Lane, Southport PR9 8HH, to which I shall refer as "the Property".

The application was heard by me on 9 November 2006. As mentioned below, the Claimant, the Assets Recovery Agency ("ARA") sought to rely on Mr Kean's application for a mortgage loan secured on the property, which it alleged was fraudulent. Since he had not had an opportunity to respond to that allegation, I gave leave for him to serve evidence and written submissions in relation to it. He did so. However, while my judgment was reserved, the ARA served voluminous additional evidence. This led to an application by Mr Kean for an order precluding the admission of that evidence. On its part, the Agency applied for permission to rely on that evidence in support of the continuation of the property freezing order. I heard these cross-applications on 13 December 2006 on strict time constraints, owing to my commitments elsewhere. I commend Counsel for having completed their submissions in these applications in the relatively short time available.

In this judgment I shall address first the issues addressed and the evidence before me on 9 November 2006 together with the evidence arising from the allegation that Mr Kean obtained his mortgage loan by fraud. I shall then consider the consequences of the ARA's new evidence.

The grounds of the application to set aside the property freezing order: the evidence relied

The grounds of Mr Kean's application are threefold: that the ARA has no good arguable claim to the Property; that the order was obtained by the Claimant in breach of her duty to make full and frank disclosure to the Judge; and that the proceedings are an abuse of process as constituting an attempt to relitigate an issue that has already been decided by a Court of competent jurisdiction.

The unlawful conduct alleged by the ARA was and is drug trafficking and money laundering the proceeds of drug trafficking. However, in a witness statement made on 8 November 2006, i.e., the day before the hearing before me, Amy Nixon, the financial investigator of the ARA who has made the witness statements on which it relies, alleged that the proceeds of the mortgage loan to which I refer below had been procured by Mr Kean's fraud, in that he had falsely represented to the lender that he was a partner in a partnership called Gary Richman Business Consultancy, with a 75 per cent interest, and had an annual income from that source of £74,500. It is common ground that Mr Kean has no interest in that business. The ARA relied on that alleged fraud as independently justifying the retention of the property freezing order in relation to the mortgage loan moneys obtained by it.

That allegation of fraud was made unavoidably late, since Miss Nixon had only received a copy of Mr Kean's mortgage application on the same day. Mr Kean had had no opportunity to address it. I therefore gave directions for him to serve and to file such evidence and submissions as he thought fit, and for the ARA to respond. I address the issues arising from the allegation of fraud separately below.

The statutory provisions

Civil recovery of the proceeds of crime is the subject of Part 5 of the Proceeds of Crime Act 2002, as amended by the Serious Organised Crime and Police Act 2005. For present purposes, the most relevant provisions are sections 241 to 243, 245A, 245B, 266, 304 and 305. Section 243 confers power on the ARA to bring civil proceedings for a recovery order, which, as provided in section 266, is an order vesting recoverable property in a trustee for civil recovery. Recoverable property is property obtained through unlawful conduct or property into which such unlawful property or its proceeds may be followed (or traced) (sections 304 and 305). Unlawful conduct is conduct which is criminal: section 241. Section 241(3) is as follows:

"(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."

Section 242, so far as is material, is as follows:

"242 "Property obtained through unlawful conduct"

(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.

(2)         In deciding whether any property was obtained through unlawful conduct—

(a)     it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct,

(b)     it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct."

Section 245A confers power on the ARA to apply to the Court for a property freezing order:

"(1)     Where the enforcement authority may take proceedings for a recovery order in the High Court, the authority may apply to the court for a property freezing order (whether before or after starting the proceedings).

(2)     A property freezing order is an order that—

(a)     specifies or describes the property to which it applies, and

(b)     subject to any exclusions (see section 245C(1)(b) and (2)), prohibits any person to whose property the order applies from in any way dealing with the property.

(3)     An application for a property freezing order may be made without notice if the circumstances are such that notice of the application would prejudice any right of the enforcement authority to obtain a recovery order in respect of any property.

(4)     The court may make a property freezing order on an application if it is satisfied that the condition in subsection (5) is met and, where applicable, that the condition in subsection (6) is met.

(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)     (Not applicable)."

Variation and setting aside of property freezing orders are the subject of section 245B:

"(1)        The court may at any time vary or set aside a property freezing order.

(2)     …

(3)     …

(4)         If the court decides that any property to which a property freezing order applies is neither recoverable property nor associated property, it must vary the order so as to exclude the property.

(5)         Before exercising power under this Chapter to vary or set aside a property freezing order, the court must (as well as giving the parties to the proceedings an opportunity to be heard) give such an opportunity to any person who may be affected by its decision.

(6)     …"

Mr Kean's acquisition of the Property

Mr Kean's account of his acquisition of beneficial title to the Property is set out in his Amended Particulars of Claim in the proceedings in the Chancery Division to which I shall have to refer below. According to that pleading, the site of the Property had been purchased by a William McDonald. In 1990, Mr McDonald applied for planning permission for a 4-bedroomed detached house on the site. The planning permission was granted in September 1990. At some date thereafter, Mr McDonald began building what is now the house on the property. As a result of problems with its construction, Mr McDonald and Mr Kean discussed the building project together and "orally agreed that they would build the house together on the basis that (Mr Kean) would pay the remainder of the building costs". They agreed that the Property would be sold and the net proceeds of sale divided equally, after deducting their costs of the acquisition of the site and the construction work. Thereafter, Mr Kean provided cash to Mr McDonald of "approximately £40,000 to pay the building contractors" and "£30,000 for other expenses to be incurred by" Mr McDonald. Mr Kean was remanded in custody between November 1994 and February 1997, when he was acquitted of the charges brought against him. On his release, he found that Mr McDonald had been drinking and gambling heavily, had misapplied the cash sent to him and that the Property had still not been completed. In early 1997, following his release from custody, Mr Kean reached:

"an agreement, arrangement or understanding" with Mr McDonald whereby, in consideration of (Mr Kean) agreeing:

(i) to pay (Mr McDonald) £10,000;

(ii) not to pursue (Mr McDonald) for recovery of the sums paid to, but misapplied by him…; and

(iii) to finish the building work at the Property;

(Mr McDonald) agreed that (Mr Kean) should be, and treat himself as, the owner of the Property, and that, as evidence thereof, he would transfer to (Mr Kean) or his nominee or agent the Land Certificate and Title Deeds for the Property."

Mr Kean alleged that pursuant to that agreement, arrangement or understanding, he had arranged for a Mr Gary Richman to pay £10,000 in cash to Mr McDonald and to collect the Land Certificate, Title Deeds and other documents relating to the property. Mr Kean did not pursue Mr McDonald for a recovery of the monies he had paid; he finished the building work at the Property; and he took possession of the Land Certificate, Title Deeds, plans and papers relating to the property. Mr Kean pleaded that as a result of the foregoing matters, he became the sole beneficial owner of the Property. The Land Certificate, Title Deeds and other documents relating to the Property were delivered to a Mr Ashley Sansom, a business associate of Mr Kean operating a financial services company or business known as "AJS Financial" for safe-keeping on Mr. Kean's behalf. In about November 1997, Mr Sansom acquired a company called Stableclock Ltd. In January 1998, Mr Sansom forged a transfer of the Property purporting to transfer title to it from himself to Stableclock Ltd. He then arranged for Stableclock Ltd to be registered at the Land Registry as the registered proprietor of the Property, without Mr Kean's knowledge or agreement. In January 2001, Stableclock Ltd was dissolved. As a result the Property vested in the Crown as bona vacantia.

On 18 October 2004, Mr Kean commenced proceedings against Mr McDonald, Mr Sansom, a Robert Wilson and a Robert Gerrard, claiming a declaration that he was the beneficial owner of the Property and consequential orders for the transfer to him of title. The CPS and H.M. Attorney General to the Duchy of Lancaster were joined as defendants. The amended defence of the CPS did no more than to put Mr Kean to proof of his claim.

The claim was tried by Mr Michael Crystal QC, sitting as the Deputy Judge of the Chancery Division, on 21 and 22 February 2006. Mr Cunningham QC represented Mr Kean. The CPS was represented by Mr Michael Parroy QC and junior counsel. None of the individual defendants was represented, although Mr McDonald gave evidence. During the course of Mr Kean's cross-examination, Mr Parroy raised for the first time an issue as to illegality. He cross-examined Mr Kean with a view to establishing that, if Mr Kean's case was otherwise well-founded, he had acquired the beneficial interest in the Property wholly or partly with the proceeds of crime, and he submitted that it would be contrary to public policy for the Court to grant him any relief. Mr Crystal QC found that Mr Kean's case was indeed well-founded. Mr Crystal QC referred to the alleged payment of £10,000 in paragraphs 9 and 10 of his sparsely-worded judgment:

"9. I now turn to the alleged payment of £10,000 to Mr McDonald. The oral evidence of those involved (Mr Kean, Mr Richman and Mr McDonald himself) was that it was paid and the (sic) Mr McDonald handed over the documentation relating to the Property. The CPS relies upon the absence of any reliable contemporaneous documentation and invites me to reject the oral evidence which I heard on this point. This I am not prepared to do. Nor am I prepared to find that the source of the funds used to re-imburse Mr Richman was not legitimate.

10. I am satisfied that £10,000 was paid to Mr McDonald in cash on behalf of Mr Kean as a result of the arrangement. Accordingly, Mr Kean has established detrimental reliance by him on the arrangement."

Accordingly, Mr Crystal QC made the orders sought by Mr Kean, and he was duly registered at H.M Land Registry as the proprietor of the Property.

The application for the property freezing order

In her first witness statement, Miss Nixon stated that she made it from information that had been supplied to her by Merseyside police, who have referred the case to the ARA. She stated that she was "aware of my obligation to notify the Court of all material facts of which it should be aware, and in particular any facts which would undermine my beliefs or weaken this application". She stated her belief that the Property directly or indirectly represented the proceeds of unlawful conduct, or had been purchased with the proceeds of unlawful conduct over a period when Mr Kean's lawful income was insufficient to fund its purchase. By a way of background, she stated that on 17 December 1998, one Stephen Gerrard (who was one of the defendants in the Chancery proceedings) was charged by Merseyside Constabulary with offences under the Drugs Trafficking Act 1994 in relation to his involvement in the importation of 400 kg of cocaine into the United Kingdom from the Netherlands. A restraint order was obtained by Merseyside Constabulary over all of Mr Gerrard's assets, including the Property. The Property was then registered in the name of Stableclock Ltd, of which Mr Sansom was the sole director. Mr Gerrard absconded while on bail and was and is still at large. Following his absconcion, Mr Kean claimed to be the beneficial owner of the Property. Merseyside Constabulary rejected his claim, as a result of which Mr Kean brought the proceedings in the Chancery Division of the High Court referred to above. In her statement, Miss Nixon stated that the High Court had "agreed with Kean" that the Property was his and had made the order which resulted in its transfer into his name. She set out the facts alleged by Mr Kean, summarised above, which had been found by Mr Crystal QC. In support of her belief that the Property had been obtained through unlawful conduct, Miss Nixon referred to his declared income and his criminality. She said:

"Kean has a long list of convictions dating from 27/04/64 – 07/06/02 for a number of offences including the acquisitive crimes of obtaining goods by forged instrument, false accounting, theft and receiving stolen goods. In addition he has convictions of the kidnap of Ashley Sansom, common assault and possession of a firearm. He is also believed to be involved [in] drug trafficking. He has also been convicted for an offence of kidnapping Ashley Sansom. Ashley Sansom for his part has pleaded guilty to an offence of laundering Kean's proceeds of drug trafficking.

2.19 Kean's declared income is as follows:

Financial Year Employment Income

060/04/1995 – 05/04/1996 No Records held 0

06/04/1996-05/04/1997 No Records held 0

06/04/1997-05/04/1998 AJS Financial 0

06/04/98-0504/99 AJS Financial £31,317.48

0604/99-05/04/00 Partner in the Partnership Eldridge & Kean a building form registered at Kean's address £8,297

06/04/00-05/04/01 Partner in the Partnership Eldridge & Kean £17,446

06/04/01-05/04/02 Partner in the Partnership Eldridge & Kean £10,321

06/04/02-05/04/03 Partner in the Partnership Eldridge & Kean £5,889

06/04/03-05/04/04 Partner in the Partnership Eldridge & Kean £6,878

06/04/04-05/04/05 Partner in the Partnership Eldridge & Kean £6,844"

Miss Nixon then gave details of the criminality of Mr Richman, Mr Sansom and his links with AJS Financial services, and Mr Gerrard. She said that Mr Richman has previous convictions for importing controlled drugs, obtaining property by deception, theft, making a false VAT return, deception, assisting an undischarged bankrupt involved in the management of a company and defrauding creditors. Mr Sansom has previous convictions for laundering the proceeds of drug trafficking (including laundering Mr Kean's proceeds of drug trafficking), drugs supply, theft, deception and forgery. She said that AJS Financial Services Ltd was a company of which Mr Sansom and Insway Ltd were the directors. Insway Ltd was a company set up by Mr Richman and of which he was director. AJS had never filed any accounts. Miss Nixon said that Mr Kean had stated in the High Court proceedings that he had invested £90,000 into AJS but she doubted that that was true, since the company appeared not to have traded. She said:

"In addition it raises the question as to where he was able to obtain £90,000, after already providing nearly £40,000 in the development of 1b Charnleys Lane."

So far as Mr Gerrard's criminality is concerned, Miss Nixon referred to his having been charged with the drug trafficking offence referred to above and to his having absconded. Under the heading "Conclusions" she said:

"2.31. In relation to the purchase and financing of 1B Charnleys Lane Kean appears to have associated with individuals who are heavily involved in criminality. Kean himself is someone who has a series of criminal convictions and who has been able to acquire a property for £10,000 in cash, a sum deposited on his behalf by another Richman, who himself has an extensive criminal record and with whom banks have declared a reluctance to do business. I would submit that it is highly unusual for anyone to purchase a property in cash that is transported by just one person(?)

2.32. It is also significant to note that no solicitor was involved nor was there a contract in place to evidence the agreement between Kean and Richman.

2.33. As soon as the property was transferred to Kean it was put on the market for sale and for offers of around £375,000 which I believe to be an undervalue. It is clear that Kean is seeking to make a quick sale and therefore there is a serious risk of dissipation unless a Property Freezing Order can be obtained to preserve the asset pending the outcome of further enquiries into the matter.

2.34. It is hard to see form the evidence available how Kean could have accumulated over £130,000 (£90K investment in AJS and £40,000 in regards to Charnleys Lane) in cash in one year when his declared earnings from 1998 – 2005, a period of seven years, total only £86,992.48.

2.35.…

2.36. The Director is considering taking proceedings for a Recovery Order in the High Court under section 245A of the Act. I believe, however, that there is a serious risk that without a Property Freezing Order the Respondent will dissipate or otherwise deal with the identifiable recoverable property and thereby the preservation of that property will not be maintained."

The application for a property freezing order was lodged with the court on 4 August 2006 and the order made on the papers by Langstaff J on 11 August.

Mr Kean's criminal record

Mr Kean is aged 59. He has convictions for 19 offences. He was first convicted in 1964, and last convicted in June 2002. With one exception, all of his convictions were between 1964 and 1986, when he was aged 38. In June 2002 he pleaded guilty to the false imprisonment of Ashley Sansom and conspiracy: his sentence was varied on appeal to one of imprisonment for 66 months. According to the ARA, the offence of false imprisonment (described as kidnapping by Miss Nixon) related to debts owed by Sansom to Mr Kean.

Mr Kean has no convictions for possession of controlled drugs with intent to supply or other drug trafficking offences. He was arrested and charged with a drug trafficking offence in 1994, and was remanded in custody until his acquittal in January 1997.

Paragraphs 90 to 92 of Mr Parroy's closing submissions on behalf of the CPS were as follows:

"90. The nature of the alleged dealings, the lack of corroborative evidence and the multitude of inconsistencies are incompatible with honest, above-board dealing. In the circumstances, the Court must consider whether the Claimant is attempting to use its process to facilitate and further criminal financial dealings

91. If the Court found that R paid M £10,000 in cash, and further found that that money was paid pursuant to an agreement for the sale of the Property by M to Mr Kean or R, on the evidence presented by R the Court could not be satisfied that that £10,000 was not the direct or indirect product of drug dealing. The evidence of R with regard to his finances after he came out of prison in November 1996 was utterly unsatisfactory and incapable of belief. If the Court is satisfied that that evidence represented by R is untruthful, as we submit it should be, then there can be no certainty as to the legitimate source of funds paid to M.

92. If the Court is satisfied on the balance of probabilities that the source of funds is not legitimate (whether considering the £10,000 from R, S or Mr Kean), which we submit is the most logical conclusion on the evidence, then it should not permit its processes to be abused in order to deliver the proceeds of crime."

Paragraphs 5.8 and 5.9 of the closing submissions of Mr Cunningham, on behalf of Mr Kean, were so far as relevant as follows:

"5.8 Before leaving Mr Kean's claim it is necessary to address two stray points that have emerged, for the first time, in the CPS's Closing Submissions…

5.9 The second stray point is made in paragraphs 88 to 94 of the CPS's Closing Submissions under the heading "illegality". All of the objections raised in the previous paragraph (as to impermissible lateness, the absence of notice, the absence of pleading, and the Claimant being denied an opportunity to deal with a new allegation) are made in respect of the new contention that the Property was purchased with Mr Richman's tainted money. In any event it appears that the new allegation, in so far as it is said to impact on Mr Kean (as opposed to Mr Richman), is misconceived. The contention that is apparently advanced in paragraph 93 of the CPS' Closing Submissions is that any property held by Mr Richman "from his drug trafficking activities" should be confiscated. The Property is not held by Mr Richman; no-one has ever suggested to the contrary. The notion that the Property should be informally confiscated from Mr Kean (by rejecting his otherwise sound claim) because the Court might be troubled by the legitimacy of Mr Richman's monies is self-evidently preposterous."

In a letter dated 24 August 2006, Hatch Brenner, Mr Kean's solicitors, challenged the basis on which the property freezing order had been obtained. They expressed surprise that the judgment of Mr Michael Crystal QC had not been put before Langstaff J. In addition, they said:

"2. Your Application was made on the footing that 1B Charnley's Lane is recoverable property for the purposes of POCA s.245A(5)(a). As you will know "recoverable property" is defined as "property obtained through unlawful conduct" (POCA s.301(1)) whilst "unlawful conduct" is unlawful "…if it is unlawful under the criminal law of [the UK]" (See POCA 241(1)). We have scrutinised the Nixon Statement in the expectation of finding specific allegation as to the particular act(s) of unlawful conduct by which it is contended that Mr Kean obtained the £10,000 provided by him for the purchase of 1B Charnleys Lane. We have found no such particularisation or specificity. Instead you have sought to rely on the "criminality" of Mr Kean and others. We contend that without the necessary specificity you did not, and do not, have a good arguable case that 1B Charnleys Lane is recoverable property. Your problems in this regard are, of course, further compounded by the fact that Mr Crystal QC (see paragraphs 9 of his judgement) specifically found that the £10,000 was not illegitimately sourced.

3. In paragraph 2.33 of the Nixon Statement it is said (no doubt so as to warrant the Application being made without notice) that Mr Kean has put the property on the market at £375,000 (which Miss Nixon, without any evidence at all, says she believes it to be an undervalue) and that Mr Kean is "seeking to make a quick sale". These are demonstrably unfounded pieces of testimony. Mr Kean was declared to be the owner of the property in March 2006. Thereafter he put it on the market for sale. Some 6 months later he is still seeking a purchaser. On 3 August 2006 he was advised by Ball and Percival, his estate agents, to reduce the asking price from £375,000 to £350,000 so as to interest potential purchasers. Had Mr Kean been looking for a quick sale he would have put this property in an auction a long time ago."

The ARA replied on 30 August 2006. They pointed out that Langstaff J had been informed of the result of the Chancery Division proceedings, and contended that the judgment added nothing. In relation to the other points made on behalf of Mr Kean, they said:

"With regard to the second matter raised in your letter, it is also clear from Miss Nixon's witness statement that the unlawful conduct which your client is alleged to have been involved in relates to drug trafficking and money laundering. 1b Charnleys Lane is considered to be recoverable property because of the £30,000 which your client had paid over to Mr McDonald prior to the agreement in relation to the payment of the additional £10,000. It will be the Directors case that these sums were acquired through unlawful conduct, which has to be viewed in conjunction with your client's declared income and his alleged involvement in unlawful activity.

With regard to the sale of the property, I note what you say on you client's behalf regarding the length of time it had been on the market and the reason for the reduction of the original sale price. However the Agency in my view was vindicated in making the application when it did because it has subsequently transpired that your client re-mortgaged the property for some £200,000 of which £194,708 was received by him and paid into an Abbey bank account."

On 31 October 2006 the ARA filed its application for a civil recovery order. Both Mr Kean and his wife are respondents to that application. It was supported by what was described as the third witness statement of Miss Nixon, of the same date. She stated that the Director of the ARA believed that Mr Kean and his wife held assets acquired from the proceeds of drug trafficking and money laundering. She referred to Mr Kean's allegations in the proceedings in the Chancery Division and said:

"1.9 It is the Agency's case that the £70,000 provided to Mr McDonald by Mr Kean and the £10,000 he provided to Mr Richman, comes from the proceeds of his Drug Trafficking and Money Laundering. 1B Charnleys Lane therefore, and any mortgage monies obtained from it, represent the proceeds of this conduct and therefore is recoverable property."

She added that Mr Kean had mortgaged the property to Platform Funding Ltd as security for a loan of the sum of £200,000, which had been transferred into an account in the joint names of Mr Kean and his wife. The account has been frozen by the property freezing order. Miss Nixon alleged that that sum was derived from the Property and therefore itself the proceeds of crime, and on that basis Mrs Kean was joined as second respondent to the proceedings. Miss Nixon stated that in June 2002 Mr Kean had pleaded guilty to the false imprisonment (which she described as kidnapping) of Mr Sansom; and that the offence was connected to moneys owed by Sansom to Mr Kean. Sansom had pleaded guilty to an offence committed between January 1997 and March 2000 of laundering £106,000 for Mr Kean, knowing or suspecting that that money was the proceeds of drug trafficking. Richman has convictions for importing controlled drugs, obtaining property by deception and other offences. She summarised the financial evidence as showing that between 1994 and 1997 Mr Kean had provided £70,000 to McDonald, when he had no declared income; during the same period he had purchased 3 properties and invested over £80,000 in AJS, the company or business run by Sansom who was later convicted of money laundering.

Mr Kean denies that he acquired the Property with the proceeds of crime. He has not made a witness statement himself. In a witness statement dated 6 November 2006 made by his solicitor, Mark Fitch, on his behalf, issue was taken with Miss Nixon's contention that he had had no declared income between 1990 and 1998. In relation to 1997/98, he exhibited evidence that Mr Kean had been paid £25,211 by AJS in respect of his employment.

Did the original evidence show a good arguable case?

Mr Cunningham submitted that the evidence fell short of a good arguable case that the Property was the proceeds of drug trafficking. The case of the ARA is vague; no specific offence is identified; in so far as the ARA relies on Mr Sansom's plea of guilty to laundering Mr Kean's proceeds of drug trafficking is concerned, it is significant that Mr Kean was not questioned by the Police in relation to that and knew nothing about Sansom's conviction at the time: the Police would have at least interviewed Mr Kean if the allegation was serious. That weakens or nullifies any inference that might otherwise be drawn from the plea. While accepting that the standard of proof is the balance of probabilities, he submitted that cogent evidence is required to prove criminal conduct of the kind alleged against Mr Kean.

Mr Brettler submitted that Mr Sansom's plea of guilty, which was hearsay evidence that Mr Kean had been involved in drug trafficking, together with the undisputed evidence of his relationships with those who had been convicted of drug trafficking offences, and the fact that his acquisition of the Property was entirely funded by cash rather than transfers from a bank account or by cheque, against the background of his criminal record, created a good arguable case. He reminded me, somewhat repetitively, that Mr Kean's application is interlocutory; the ARA and the Court have not had the benefit of disclosure of documents or oral evidence, which may strengthen the ARA's case. He submitted that by virtue of section 245B(4), in order to succeed under this ground it was necessary for Mr Kean to establish that the Property is neither recoverable property nor associated property (defined in section 245); and relied on the judgment of Collins J in R (Director of the Assets Recovery Agency) v Jia Jin He [2004] EWHC 3021 (Admin) at [78] in support of this proposition. He submitted that what may conveniently be referred to as the principle in Hornal v Neuberger Products Ltd [1957] 1 QB 247, that the law requires "a degree of probability which is commensurate with the occasion", and the "The more serious the allegation the higher the degree of probability that is required" is excluded from proceedings under Part 5 of the Proceeds of Crime Act by section 241(3), and in that connection relied on the judgment of Collins J in Jia Jin He.

I do not accept that, on an application under section 245B to vary or to discharge a property freezing order so as to exclude from it identified property, it is necessary for the applicant to prove on the balance of probabilities that that property is neither recoverable property nor associated property. Section 245B(1) confers a general discretion on the Court to vary or to set aside the order. In my judgment, that discretion is to be exercised on familiar grounds applicable to interlocutory injunctions, including non-disclosure, although the exercise of that discretion will be affected by the fact that the ARA is a public authority exercising its functions in the public interest: see Jennings v CPS [2005] EWCA Civ 746. By subsection (4), that power must be exercised if the person proves that the property is neither recoverable property nor associated property, but in my judgment the duty which that subsection imposes is not a comprehensive statement of the powers of the Court: if it were, subsection (1) or subsection (4) would be differently worded. Mr Brettler's submission involves reading subsection (4) as "The Court may only vary or discharge a property freezing order if the Court decides …"

It is a precondition for the making of an order that the ARA has a good arguable case that the order relates to recoverable property or associated property: section 245A(5). If a person interested in property subject to an order can establish that the ARA does not in fact have a good arguable case, I see no reason why the Court should not discharge the order, or, if the ARA has a good arguable case in relation to only part of the property specified in the order, vary the order so as to confine it to the property in relation to which the ARA does have a good arguable case. This conclusion is supported by the fact that applications under section 245B are interlocutory, and it would not normally be appropriate or desirable for there to be disclosure of documents or oral evidence when they are heard.

In Jia Jin He Collins J said:

"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."

Collins J gave no reasons for what he said in [78]. I respectfully disagree with what Collins J said in that paragraph of his judgment, but I agree with what he said in [79]. In practice, however, the point may be academic. If the ARA is unable to show that it has a good arguable case, the Court is likely to decide that the property in question is neither recoverable property nor associated property.

In relation to the burden of proof, Collins J said this:

"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."

At [64] of his judgment, Collins J had cited as authoritative the well-known passage from the judgment of Lord Hoffman in The Secretary of State for the Home Department v Rehman [2003] 1 AC 153, at page 193:

"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."

This is, I think, the modern judicial statement of the principle in Hornal v Neuberger Products Ltd. It is clear that Collins J did not cast doubt on the general proposition that in a civil case more cogent evidence is required to establish a serious crime than less serious conduct. If Parliament had intended to exclude that principle, more specific wording was required than the relatively general and anodyne words of section 241(3). I therefore reject Mr Brettler's submission on the burden of proof.

On the other hand, I reject the suggestion, made in correspondence by Mr Kean's solicitors, that it is necessary for the ARA to specify the offence or offences which it alleges resulted in the moneys invested in the Property. It is implicit in the provisions of section 242(2)(b) that it is sufficient for the ARA to identify kinds of conduct, such as drug trafficking, as Sullivan J held in R (the Director of the ARA) v Green [2005] EWHC 3168 (Admin) at [17].

In my judgment, the evidence before me shows that the ARA does have a good arguable claim. Mr Kean invested £80,000 in the Property, all in cash. That is not the normal means of making large payments of, in this case, £40,000, £30,000 and £10,000. His admitted association with those involved in the drug trade, his false imprisonment of Mr Sansom, not the normal or lawful means of enforcing payment of a lawful debt, and Sansom's admission that he laundered a large sum of Mr Kean's drug money are sufficient. For present purposes, Sansom's plea of guilty is cogent, albeit hearsay evidence, against Mr Kean. No reason has been put forward for Sansom to have falsely confessed to laundering Mr Kean's proceeds of drug trafficking. The fact that Mr Kean was not questioned by the Police raises questions but does not mean that there is no good arguable case. The fact that the Crown was unable to prove to the criminal standard of proof that Mr Kean was a drug trafficker does not preclude a contrary finding in civil proceedings: The Queen on the application of the Director of the ARA v T [2004] EWHC 3340 (Admin) at [16]. Whether the ARA will be able to prove that Mr Kean is a drug trafficker at trial is something else. Similarly, the evidence does not justify the conclusion that, if it does so prove, there is no good arguable case that the proceeds of that drug trafficking were the moneys that resulted in the acquisition of the Property. There is evidence that Mr Kean had other sources of income; whether they resulted in large sums of cash has not been addressed in evidence. Moreover, the sum that Sansom admitted laundering was substantial.

In relation to Sansom's plea of guilty to money laundering, I bear in mind that it cannot have stood alone. It must have been the result of the evidence against him, although that may have been largely a confession. Nonetheless, I criticise the documentation originally put before the Court by the ARA. None of the statements or other documents which led to Sansom's plea of guilty have been exhibited. Nor has any transcript of the prosecution opening or of any plea of mitigation on Sansom's behalf. The relationship between the facts which he admitted by his plea and the charge against Mr Kean of which he was acquitted has not been explained in evidence.

Abuse of process

Mr Kean does not suggest that the ARA's claim is barred by the principle of res judicata. He relies on the more flexible principle that the Court will not permit its procedure to be abused. He contends that the allegation that Property represented the proceeds was made by the Crown in the proceedings in the Chancery Division and was rejected, and that to raise the allegation again is to vex him twice with the same allegation, found by a court of competent jurisdiction to be unfounded, and is an abuse. Mr Cunningham referred me to the statement of the law of Lord Bingham in Johnson v Gore Wood & Co [2002] 2 AC 1, 30:

"It may very well be, as has been convincingly argued (Watt, "The Danger and Deceit of the Rule in Henderson v Henderson: A new approach to successive civil actions arising from the same factual matter" (2000) 19 CLJ 287), that what is now taken to be the rule in Henderson v Henderson has diverged from the ruling which Wigram V-C made, which was addressed to res judicata. But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice."

I have italicised the passage that Mr Cunningham submitted, in my judgment correctly, summarises the applicable principle.

Applying the need for "a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case", I have no doubt that the ARA claim is not an abuse of the process.

In the first place, the ARA is not to be identified with the CPS. True, both are emanations of the Crown. True, both are concerned with crime and its proceeds. But they have different objects, powers and discretions. In this connection I refer to the judgment of Collins J in T at [20]. Those differences are reflected in the difference between the object of the CPS's participation in the Chancery proceedings and the ARA's claim. In the Chancery proceedings, the object of the CPS was to prevent Mr Kean acquiring title to the Property. The present proceedings start from the position that he has title, and seek to show that he acquired it with the proceeds of crime.

Secondly, at most the finding of Mr Crystal QC related only to the sum of £10,000. It is clear that there was no finding as to the other £70,000 paid to McDonald which, on Mr Kean's account, resulted in his acquisition of the Property.

Thirdly, the issue had not been pleaded or the subject of disclosure of documents. As mentioned above, it was described by Mr Cunningham as a "stray point". Mr Parroy's skeleton was tentative in its submission on this, saying only: "If the Court is satisfied that the evidence represented by (Richman) is untruthful, as we submit it should be, then there is no certainty as to the legitimate source of funds paid to (McDonald)." It is difficult to see that the issue was fully investigated. If Mr Kean was vexed by the allegation, it was not by much.

Fourthly, I am not convinced that the issue was the same. In the Chancery Division proceedings, the issue seems to have been whether the sum of £10,000 was the proceeds of Richman's drug trafficking activities, rather than Mr Kean's: see paragraph 91 of Mr Parroy's skeleton argument and paragraph 5.9 of Mr Cunningham's.

Fifthly, it is not clear that the deputy High Court judge in fact made any finding in relation to the origin of the £30,000. Mr Cunningham's skeleton submitted that the point was irrelevant or should be rejected for procedural reasons. The last sentence of paragraph 5.9 was as follows:

"The notion that the Property should be informally confiscated from Mr Kean (by rejecting his otherwise sound claim) because the Court might be troubled by the legitimacy of Mr Richman's monies is self-evidently preposterous."

The last sentence of paragraph 9 of the judgment may be no more than the deputy Judge's acceptance of these submissions, which would have obviated the need for a factual finding. However, I make it clear that my decision would have been the same even if the deputy Judge had made a clear factual finding.

Non-disclosure

Mr Cunningham submitted that the first witness statement of Miss Nixon contained material misrepresentations or failed to make disclosures of relevant facts or evidence:

(a) It gave the impression that Mr Kean had been convicted of criminal offences, including acquisitive crimes, throughout the period 1964 to 2002. In fact, he had no convictions between 1986 (when he was aged 39) and 2002; and his conviction in 2002 was for false imprisonment, not an acquisitive crime. He has no convictions for drug trafficking offences. It stated that "He is also believed to be involved in drug trafficking", without specifying any facts or matters on which that belief was based, so that the statement was evidentially worthless but prejudicial.

(b) Miss Nixon stated that she believed that Mr Kean was offering the Property offered for sale at an undervalue in order to obtain a quick sale, and that there was therefore a serious risk of dissipation. In fact, the price was above market value, and had to be reduced.

(c) Langstaff J was not shown or informed of the judgment of Michael Crystal QC. He should have been informed of paragraph 9 of that judgment, and in particular the last sentence.

Mr Brettler accepted that the Judge should have been informed or pointed to paragraph 9 of the judgment. He also accepted, I think, that the statement that the Property was being offered for sale at an undervalue was incorrect. He submitted that Miss Nixon's errors were excusable, and should be excused, having regard to the urgency of the application. He did not accept that Mr Kean's criminal record had been misrepresented.

In my judgment, the account of Mr Kean's criminal record in Miss Nixon's first witness statement was misleading. It gave the impression that he had a continuous and continuing criminal record, when in fact there had been a protracted period during which he had no convictions. It would have been greatly preferable for the written record of his convictions to have been put before the Judge, although that would not of course have excused a misleading summary. It was wrong to state that Mr Kean was suspected of involvement in drug trafficking without setting out the facts and matters relied upon in support of that allegation, although Mr Sansom's plea would normally have been sufficient. It is not clear to me that the conviction for false imprisonment was not an acquisitive crime, since it is alleged by the ARA that its object was debt collection by force.

The misrepresentation in relation to the value of the Property and the price it was on the market is entirely excusable. In the Chancery Division trial, a Mr Hornby, an estate agent, gave evidence. He was asked by the Deputy Judge what he thought the Property was worth. He said he was not a valuer for sale purposes, but the Deputy Judge said:

"I am not thinking of buying it. Subject to that, can you help us? We have got some valuations of about £450,000 in the documents before me. Is that about right?"

Mr Hornby answered: