England and Wales High Court (Administrative Court) Decisions

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

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/07/2008

Mr Justice Mackay:

1. On the 12^th November 2007 a warrant issued under the Immigration Act 1971 was executed at commercial premises at Unit 1, Apsley Grove, Manchester by officers of the Border and Immigration Authority and police officers. The premises were occupied by Sarwar and Sons (Knitwear) Ltd ("the company"), who were manufacturers of garments.
2. In the premises the officers found 30 people working 16 of whom were illegal workers, as they have been called in these applications, namely people whose immigration status did not permit them to work or who needed but had no permits to work.
3. Also found in the premises in the office of Mr Sarwar, a director of the company, was £34,000 in a desk drawer, much of which was composed of Scottish bank notes, and further sums of £9,095 and €990, found in a safe.
4. On one of the illegal workers in the factory there was found a sum of £3,399.86 in cash, some of which was in Scottish banknotes. That sum has not been included in the subsequent orders made in this case.
5. The sums of money found in the desk and the safe were seized under Section 294 of the Proceeds of Crime Act 2002 ("the 2002 Act") which entitles the officer seizing to detain it for up to two days.
6. On 14^th November 2007 at Salford Magistrates' Court the Chief Constable obtained an order extending the period for which the cash could be detained under Section 295 of the 2002 Act. The issues raised by both these applications arise out of the Chief Constable's attempts to obtain a further extension of that period and the company's application for the return of the money.
7. It is perhaps appropriate to set out at the outset the relevant provisions of Part 5 of the 2002 Act so far as they affect these applications.

240 General purpose of this part

(1) This part has effect for the purposes of -……

(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…

241 "Unlawful conduct"

(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.

……..

(3) The court … 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.

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…

294 Seizure of cash

(1) A customs officer or constable may seize any cash if he has reasonable grounds for suspecting that it is –

(a) Recoverable property, or

(b) Intended by any person for use in unlawful conduct.

…….

295 Detention of Seized Cash

(1) While the customs officer or constable continues to have reasonable grounds for his suspicion, cash seized under Section 294 may be detained initially for a period of 48 hours

(2) The period for which the cash or any part of it may be detained may be extended by an order made by a magistrates' court…; but the order may not authorise the detention of the cash –

(a) Beyond the end of the period of three months beginning with the date of the order,

(b) In the case of any further order under this section beyond the end of the period of two years beginning with the date of the first order.

(4) An application for an order under subsection (2) –

(a) In relation to England and Wales… may be made by … a constable,

….

and the court…. may make the order if satisfied in relation to any cash to be further detained, that either of the following conditions is met.

(5) The first condition is that there are reasonable grounds for suspecting that the cash is recoverable property and that either –

(a) Its continued detention is justified while its derivation is further investigated or consideration is given to bringing … proceedings against any person for an offence with which the cash is connected, ….

(6) The second condition is that there are reasonable grounds for suspecting that the cash is intended to be used in unlawful conduct and that either –

(a) Its continued detention is justified while its intended use is further investigated or consideration is given to bringing … proceedings against any person for an offence with which the cash is connected.

297 Release of Detained Cash

(1) This section applies while any cash is detained under section 295.

(2) A magistrates' court … may direct the release of the whole or any part of the cash if the following condition is met.

(3) The condition is that the court… is satisfied, on an application by the person from whom the cash was seized, that the conditions in section 294 for the detention of the cash are no longer met in relation to the cash to be released.

298 Forfeiture

(1) While cash is detained under section 295, an application for the forfeiture of the whole or any part of it may be made –

(a) to a magistrates' court by …. a constable

(2) The court …. may order the forfeiture of the cash or any part of it if satisfied that the cash or part –

(a) Is recoverable property, or

(b) Is intended by any person for use in unlawful conduct.

8. As to the meaning of the phrase "recoverable property", which runs through these provisions, the definition section, s. 316 (1) states that it is to be read in accordance with sections 304 to 310. So far as is relevant to these applications these provisions enact that –

304 Property obtained through unlawful conduct

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

9. On the 13^th February 2008 at the Salford Magistrates' Court District Judge Finestein heard an application for the return of the money made by the company and an application by the Chief Constable for a further continuation of its detention.
10. The Chief Constable brings proceedings for a quashing order against his decision, which was to refuse the Chief Constable's application and to order the return of the money. He says this was wrong in law and a decision which no reasonable magistrate could come to. He has permission to bring this claim from Wilkie J who also granted a stay of execution on the order to return the funds pending the outcome of this application, to which the company is an interested party. The company has brought an application of its own seeking a mandatory order for the release of the money to it and the two applications are to be heard together.
11. The material before the District Judge included the following information, given in the form of witness statements from police officers involved in the search and seizure.

i) The warrants authorised a search for and seizure of, inter alia, any documentation or evidence relating to a section 8 [of the Asylum and Immigration Act 1996] prosecution. (This section creates a criminal offence, punishable by imprisonment, of employing a person subject to immigration control who has no leave to enter or remain in the UK or who is subject to a condition prohibiting him from taking up the employment.)

ii) The facts in paragraphs 2 – 4 above were set out.

iii) The manager of the company said that the money came from cash sales, and it is agreed that it was bundled in bank bags, giving the impression that it was about to be banked.

iv) Many of the illegal workers were in possession of Scottish notes, leading the officer to believe that the seized cash may also have been intended for the payment of wages.

v) Some workers said they were being paid at a rate significantly lower than the minimum wage.

12. We were told, without objection being taken, that since the hearing below 17 charges have been brought against Mr Sarwar under s.8 of the Asylum and Immigration Act 1996. Mr Mitchell undertook to provide copies of these, and duly forwarded a printout, apparently generated on 20^th June, of 17 such charges against Mr Sarwar and 17 against the Interested Party. It refers to a hearing date of 28^th July, and does not indicate the dates of the relevant information's, save to note that in each case the "offence exceeds 6 month time limit". At all events this information was not and could not have been in evidence before the lower court.
13. No evidence was led by the company, which relied on legal submissions made by counsel.
14. The argument addressed to the District Judge by counsel then appearing on behalf of the Chief Constable is recorded in the judgment as having been put under both conditions in s. 295, namely that it represented income generated by the illegal workforce and was therefore obtained by unlawful conduct, alternatively that it was intended for use in unlawful conduct namely the payment of wages to workers whose work was unlawful, in the sense that they were not entitled to work, and it was a criminal offence to employ them. Nevertheless it appears to be accepted (though it is not clear from the judgment itself) that ultimately counsel relied only on the first of these conditions. It therefore seems to me that it would not now be right, in reviewing the decision, for this court to take the second reason into account.
15. The District Judge's decision was in these terms. He said he was of the "clear view that the money … is not recoverable money" and he accepted the company's submission that -

" ….there is no authority for the proposition that legitimate money generated from [sic] somebody who employed illegal workers is unlawfully obtained and therefore recoverable. It follows that even if there are reasonable grounds to suspect that a significant number of the workforce were illegal workers it does not render the whole business unlawful with the consequence that money seized at those premises is recoverable money within the meaning of the Proceeds of Crime Act 2002."

16. Mr Mitchell QC in his submissions to this court for the Chief Constable stresses that these provisions are in play at an early stage of proceedings under this part of the Act, are summary in nature, and require a different and less onerous level of proof than is called for at later stages under the Act, such as when forfeiture is under consideration under s. 298. The constable seizing cash in these circumstances, and seeking an extension of the detention period, only has to show that there are "reasonable grounds for suspecting" that it is or represents property obtained "by or in return for" unlawful conduct either on the part of the holder of the cash or any other person.
17. He says that the combination of circumstances in this case, with a large sum of cash and a high percentage of workers apparently within the grip of s. 8 of the 1996 Act, easily passes the test of demonstrating reasonable grounds for suspicion that this was the case.
18. This "light touch" construction of this part of the Act is necessary, he argues, at such an early stage of proceedings, before the formulation of particular charges against particular persons can be embarked on. There are safeguards in that the money is required to be placed in an interest-bearing account, and the holder of the money has his rights under s.297. But the wording of that section is such that any applicant for release faces a burden of proving to the satisfaction of the court that the conditions for continued detention under s.295 are no longer met.
19. As to whether the cash found was or represented property obtained through unlawful conduct, that is to say property obtained "by or in return for" some unlawful conduct Mr Mitchell argues that, at least at the level of reasonable suspicion, this cash appears to have been generated by the business carried on by the company, and that business had been in substantial part generated by the work of the illegal workers, and therefore by the unlawful conduct of the company in employing them. Put another way, he says their work has made a material contribution to its acquisition, and that is enough for these purposes.
20. Mr Rees QC for the company concentrated his very able submissions, in essence, on what might be called the issue of causation. Even if there were reasonable grounds for suspecting that the company had committed offences, the money was not acquired as a consequence or result of the criminal act or acts in employing the workers but was the product of legitimate manufacturing by the company, which is not rendered unlawful in its entirety by the fact that it has been done in part by illegal workers. He says the Chief Constable must show what he called an "unbroken chain" between the crime and the obtaining of the money.
21. He distinguishes the cases where the very circumstances of the trading are themselves criminal. On that side of the line he put cases where an unlawful sale was the operative cause, as he put it, of obtaining the money ( he instanced selling goods by deception, or adulterated goods, or supplying workers to others as being legal when they are illegal). On the other side he placed those where there is criminal conduct incidental to the running of an otherwise legal business (for example not paying tax). I understood him to argue that if incidental criminal conduct were said to cause the obtaining of the money, in that some of the goods were produced by illegal workers, then logic would suggest that some form of apportionment would be needed; he argued there was no basis in law for that, it would be unworkable, and therefore further doubt is cast on any argument that such incidental criminal conduct is sufficient. He rejects Mr Mitchell's "material contribution" approach, for which he say there is no authority.
22. On that point the company seeks to derive support from a decision of Tugendhat J in Director of the Assets Recovery Agency v. John [2007] EWHC 360 QB, to which the District Judge was also referred. This was a claim under CPR Part 8 in which the defendant did not appear and was not represented. The issue was whether certain property of the defendant was recoverable under s. 242 of the Act, as being the product of three separate types of unlawful conduct. One of these was the fact that the defendant was operating as an unlicensed street trader. Another was supplying drugs, which the Judge found proved. Though he did not therefore need to consider the unlicensed trading allegation he went on to do so, in what is an obiter finding.
23. The Judge said this (Para. 69)-

"Unlicensed trading is not conduct in return for which the trader receives his property (the money). He receives the money in return for the goods he has sold to the customer who gives him the money"

And later (Para. 77) –

"I do not have to decide the scope of s. 242 (1). For the purposes of this case it would be sufficient for me to decide (as I would if it were necessary for me to do so) that money received in exchange for goods sold, where the sales were not otherwise unlawful, does not become unlawful conduct solely because it is a criminal offence if the sales are conducted without a licence in a place where trading is required to be licensed. I do not by that intend to suggest that unlicensed trading could never give rise to a civil recovery order. Whether it can or not, and if so in what circumstances, is a point I leave open." (My emphasis)

24. So far as it goes this case lends some support to Mr Rees' case, but rightly, in view of the nature of the case and the limitations on the relevant finding which the judge himself stressed, he did not put it at the forefront of his argument.
25. Equally, care must be taken when considering another authority. Mr Mitchell drew to our attention R v Neuberg [2007] EWCA Crim 1994, which concerned confiscation proceedings under the Criminal Justice Act 1988, and where the test under consideration was whether certain property, namely the turnover of a company over a specific period, had been obtained "as a result of or in connection with" the commission of the offence of trading under a prohibited style contrary to a provision of the Insolvency Act 1986. As Mr Mitchell pointed out this is a rather wider test than that which we are considering.
26. The Appellant had argued that the turnover of the company was the product of lawful sales to customers in a lawful business, and her use of the prohibited style was merely an incidental part of that activity. The trial judge had found that the use of the name was one of the causes of the benefits she had received. Elias J giving the judgment of the court said it was a clearly established principle that the test was whether the criminal acts had been "a cause (in the sense of having materially contributed to) of obtaining the property."
27. But Mr Mitchell stresses the point that at this interim stage all that he has to show is reasonable grounds to suspect that this money was in the company's hands because the illegal labour, whose services were available to it as a result of a series of criminal acts by it, and who represented roughly half of the workforce on the day of seizure, had made a material contribution to its acquisition. If the company wish to challenge that at the forfeiture stage they will be able to do so. If they wish to do so at the interim stage then they have a burden of proof to discharge to the civil standard, to show that there is no basis in law on which the money could reasonably be suspected of having been obtained through criminal conduct. The District Judge was therefore not asking himself the right question, which was whether there were reasonable grounds for suspecting that this money derived to a material degree from the labour of people whom it was a criminal offence to employ, and whether its further detention was justified pending investigation of its derivation, or consideration was given to bringing proceedings against any person "for an offence with which the cash is connected". Instead he appears to have been approaching the matter on the basis that the Chief Constable had to show that the apparent criminality of the company had rendered the whole business unlawful.
28. The arguments are well balanced, but I find myself persuaded that the Chief Constable's approach and analysis is right, and fits best with the scheme of this legislation. The "material contribution" approach advocated by Mr Mitchell is familiar from other areas of our law, both civil and criminal, and is one with which the courts are familiar and which they find no difficulty in applying in practice. There are safeguards for the erstwhile holder of the seized property, and he has the ability at any time, if he thinks he can show that its continued detention is unwarranted, to seek its return.
29. I accept the argument that s. 297 (3) puts the burden on him in this connection, to the civil standard, to prove what I have set out at paragraph 27 above. It is to my mind significant that at the forfeiture stage the position is different; there is then a clear burden on the applicant constable to satisfy the court of the matters in s. 242, and the express reference to "the cash or any part of it" support Mr Mitchell's argument that this is the stage at which the exercise of apportionment, if it is appropriate, should be carried out.
30. It is plain, in my judgment, that Parliament envisaged that s. 295, by contrast, would or might be invoked at a time when what has been described in this application as the causation issue is in doubt and therefore not capable of resolution; s. 295 (5) (a) prescribes as a reason for ordering further detention the fact that further investigation of the "derivation" of the property needs to be carried out. This seems to me incompatible with a requirement to be able to prove the unbroken chain or operative cause for which Mr Rees contended in his submissions.
31. I am therefore of the view that the approach of the District Judge was such that he misdirected himself in law and asked the wrong question, as Mr Mitchell has argued, alternatively that he reached a conclusion that no reasonable tribunal could have reached on these applications. I would allow the application, quash the decision of the 13^th February 2008, and leave the form of the relief to be agreed between counsel or, in default of agreement, to be decided on the basis of written submissions. Consideration would need to be given as to whether, if there were to be an order for extension of detention, it should run from the date of this court's order, or whether it should run from the date of the lower court's decision.

Lord Justice Richards :

32. I agree.