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 WC2A 2LL
		28 June 2010

1. MR JUSTICE MITTING: By an application issued on 22 December 2009, the first three respondents to this claim apply for an order limiting a property freezing order made by Cranston J on 28 October 2009 to those assets and that property which is within England and Wales.
2. The application raises a hard-edged question of principle: can the Serious and Organised Crime Authority ("SOCA") recover, by proceedings brought under Part 5 of the Proceeds of Crime Act 2002, property obtained through criminal conduct which is situated outside England and Wales? I approach the question by starting with an uncontroversial proposition of law, accepted as such by Lord Bingham in Al-Skeini v Secretary of State for Defence [2007] UKHL 26 at paragraph 11, and by Lord Mance in Masri v Consolidated Contractors International UK Limited (No 4) [2009] UKHL 43 at 10. The proposition is stated in Bennion on Statutory Interpretation, 5th ed. (2008), section 128(1):

"Unless the contrary intention appears, an enactment applies to all persons and matters within the territory to which it extends, but not to any other persons and matters."

The proposition is sometimes stated in shorthand as "the presumption against extraterritoriality", per Lord Mance in Masri at paragraph 16.

3. Perhaps more directly to the point is Lord Phillips' statement of the principle in Société Eram Shipping Co Ltd v Cie Internationale de Navigation [2003] UKHL 30 at 54:

"... it is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated within the jurisdiction of the foreign state or compelling its citizens to do acts within its boundaries."

4. In attempting to construe Part 5 of the Proceeds of Crime Act 2002, I therefore start with the presumption against extraterritoriality. Unless Part 5 clearly provides that recovery orders and ancillary orders can be made in respect of property situated overseas, then it is to be presumed that it does not.
5. The first relevant statutory provisions are as follows:

"240 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 ...

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.

...

243 Proceedings for recovery orders in England and Wales or Northern Ireland

(1) Proceedings for a recovery order may be taken by the enforcement authority in the High Court against any person who the authority thinks holds recoverable property.

...

266 Recovery orders

(1) If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.

(2) The recovery order must vest the recoverable property in the trustee for civil recovery.

...

304 Property obtained through unlawful conduct

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

...

316 General interpretation

(1) In this Part—

...

"recoverable property" is to be read in accordance with sections 304 to 310 ...

...

4) Property is all property wherever situated and includes—

(a) money,

(b) all forms of property, real or personal, heritable or moveable,

(c) things in action and other intangible or incorporeal property.

(5) Any reference to a person's property ... is to be read as follows.

(6) In relation to land, it is a reference to any interest which he holds in the land.

... "

6. It is common ground that, by dint of the definition of "property" as including all property wherever situated, Part 5 covers property obtained through unlawful conduct abroad. Section 242 therefore applies in relation to such property just as much as it does in relation to property acquired by criminal conduct in the United Kingdom.
7. Mr Peto QC, for SOCA, submits that, as a matter of ordinary language and by applying ordinary principles of statutory construction, if property includes property abroad for that purpose, then the breadth of the definition in section 316(4) is such that it must apply for the purpose of making a recovery order when, at the time when the order is made, and from wherever the property may have been acquired, it is situated abroad.
8. Mr Jones QC, for the three respondents, concedes that, as a matter of simple language, that must be right, and indeed if the construction of the statute were to stop there, Mr Peto's argument would be unanswerable. Although the principle against extraterritoriality applies, it is clearly rebutted by the clear words of section 316(4).
9. Mr Jones submits that when one examines the remainder of Part 5, the position becomes not only less clear in favour of such a construction, but clearly against such a construction. He draws attention to the following provisions. First, those which relate to the making of recovery orders rather than to the making of orders which are ancillary to them:

"266 ...

(7) A recovery order may sever any property.

...

269 Rights of pre-emption, etc

(1) A recovery order is to have effect in relation to any property despite any provision (of whatever nature) which would otherwise prevent, penalise or restrict the vesting of the property.

(2) A right of pre-emption, right of irritancy, right of return or other similar right does not operate or become exercisable as a result of the vesting of any property under a recovery order.

A right of return means any right under a provision for the return or reversion of property in specified circumstances.

...

271 Agreements about associated and joint property

...

(2) A recovery order which makes any requirement under subsection (1) may, so far as required for giving effect to the agreement, include provision for vesting, creating or extinguishing any interest in property.

...

272 Associated and joint property: default of agreement

(1) Where this section applies, the court may make the following provision if—

(a) there is no agreement under section 271, and

(b) the court thinks it just and equitable to do so.

(2) The recovery order may provide—

(a) for the associated property to vest in the trustee for civil recovery or (as the case may be) for the excepted joint owner's interest to be extinguished, or

(b) in the case of an excepted joint owner, for the severance of his interest.

...

273 Payments in respect of rights under pension schemes

...

(2) A recovery order in respect of the property must, instead of vesting the property in the trustee for civil recovery, require the trustees or managers of the pension scheme—

(a) to pay to the trustee for civil recovery within a prescribed period the amount determined by the trustees or managers to be equal to the value of the rights ...

(3) A recovery order made by virtue of subsection (2) overrides the provisions of the pension scheme to the extent that they conflict with the provisions of the order.

...

275 Pension schemes: supplementary

...

(4) A pension scheme means an occupational pension scheme or a personal pension scheme; and those expressions have the same meaning as in the Pension Schemes Act 1993 ...

...

282 Other exemptions

...

(3) Proceedings for a recovery order may not be taken against the Financial Services Authority in respect of any recoverable property held by the authority.

(4) Proceedings for a recovery order may not be taken in respect of any property which is subject to any of the following charges—

(a) a collateral security charge ...

(b) a market charge ...

(c) a money market charge ...

(d) a system charge ... "

10. The Proceeds of Crime Act 2002 (Exemptions from Civil Recovery) Order 2003 contain further exemptions: in summary, property forfeited in pursuance of powers conferred by the Customs and Excise Act, and property forfeited under a number of miscellaneous United Kingdom Acts.
11. When one looks at the provisions relating to ancillary orders, the position becomes, submits Mr Jones, even more clear. A property freezing order made under section 245A(4) has an automatic effect in relation to certain legal process and means of enforcement of property rights:

"245D restriction on proceedings and remedies

(1) While a property freezing order has effect-

(a) the court may stay an action, execution or other legal process in respect of the property to which the order applies, and

(b) no distress may be levied against the property to which the order applies except with the leave of the court ...

(3) If a property freezing order applies to a tenancy of any premises, no landlord or other person to whom rent is payable may exercise the right of forfeiture by peaceable re-entry in relation to the premises in respect of any failure by the tenant to comply with any term or condition of the tenancy, except with leave of the court and subject to any terms the court may impose."

12. Similar restrictions apply in relation to interim receiving orders (see section 253). Mr Jones also relies on the provision applicable only in Scotland (section 286), to which I will return in a moment.
13. I accept Mr Jones' submission that certain of the statutory provisions clearly can only apply in relation to property situated in England and Wales: for example, pension schemes. The definition of a "pension scheme" under section 275(4) only applies to those pension schemes which are recognised and operated under the Pension Schemes Act 1993 and other UK legislation relating to pension schemes. The provisions relating to pension schemes cannot have any automatic effect in relation to a pension scheme set up and administered in a foreign country. Likewise, section 269 cannot operate automatically to place a civil recovery order ahead of any right of pre-emption, of irritancy (in English legal language: forfeiture), right of return or reversion existing in the law of a foreign country where foreign real property is situated. Nor could a recovery order sever any such property under section 266(7).
14. As far as the interim or ancillary orders are concerned, it is obvious, and accepted by Mr Peto, that the provision in section 245D and 253(3) could not operate to prevent rights under a tenancy of a premises situated abroad vesting in the landlord, automatically to cease to be operable. The question therefore is whether these limitations on the effect of a recovery order or of ancillary orders made in support of it mean that, as a matter of language, the broad definition of "property" in section 316(4) must be cut down in all cases.
15. Mr Peto's answer to the proposition that it must is that these provisions are dealing not with the enforcement of a recovery order, but with the jurisdiction to make one. Enforcement may be problematic and will undoubtedly require the co-operation of foreign jurisdictions, at least in relation to immovable property. But the fact that enforcement may not be automatically available does not prevent the order from being made in the first place.
16. Subject to section 286, to which I will return in a moment, Mr Peto's argument seems to me to be correct. The courts have accepted jurisdiction to make worldwide freezing freezing orders in the commercial context, and to administer assets in insolvency proceedings wherever they may be situated. Indeed, the proposition that there is a territorial fetter on a bankruptcy court was summarily rejected by Sir Richard Scott (Vice-Chancellor) in Singh v the Official Receiver [1997] BPIR 530, 31 January 1996, in relation to a similar definition of "property" in section 436 of the Insolvency Act 1986. He stated that the proposition that jurisdiction only existed in relation to property within England and Wales was "wrong", and that it included real property in India or elsewhere.
17. It is true that the jurisdiction in insolvency proceedings is confirmed by residence, domicile, or recent residence of the bankrupt or insolvent entity. There is no such limitation here. Mr Jones accordingly submits that there would be nothing to prevent an English court making an order in respect of a foreign criminal whose activities were undertaken entirely outside the jurisdiction of England and Wales, whose victims were wholly resident outside England and Wales, and whose proceeds were similarly located. The answer to that proposition, it seems to me, lies not in narrowing the extent of the jurisdiction, but in limiting its exercise. The court is not required automatically to make a property freezing order under section 245A, nor is it required to appoint a receiver or an interim receiver in respect of such property; it has a discretion to do so: see for example the words of section 245A(4):

"The court may make a property freezing order on an application if it is satisfied that the condition in sub-section (5) is met ... "

18. It is true that there is no such discretion in relation to making a civil recovery order. Section 266 requires the court to make an order, hence the word "must", and, in consequence of the order, the recoverable property "must" vest in the trustee for civil recovery. But thereafter the consequences are not automatic. A recovery order need not "sever" any property; it may do so.
19. In relation to property outside England and Wales, all that the order achieves is vesting that property automatically in the trustee. Anything that is required to be done to realise that property is likely to require the co-operation of, and orders by, courts of the jurisdiction in which the property is situated. The fact that specific property subject to other forfeiture or forfeiture-type orders in England and Wales is excluded from the ambit of civil recovery, whereas there is no such provision in relation to similar foreign orders, does not prevent the authority, when seeking assistance of a foreign court, from accepting similar limitations in relation to orders made by that court or arising under the law of that country.
20. Ultimately, the foundation for a civil recovery order is, in practice, going to be dependent upon whether or not it can be enforced. In Mr Jones' example of the foreign criminal whose crimes and assets are all overseas, it is extremely unlikely that SOCA would seek an order, and if it were to do so, extremely unlikely that any court in England or Wales would make orders of a kind necessary to permit the orders to be enforced. It is difficult to conceive of the court being persuaded that it was right to make a property freezing order in the conditions summarised by Mr Jones. Accordingly, the control mechanism for ensuring that unrealistic orders about property which can never be brought within the reach of an English court are not made lies in the discretionary provisions and in the need, when a civil recovery order is made, to obtain the assistance of foreign courts.
21. Subject to section 286, I conclude, therefore, that starting out on the premise that the Act is not extraterritorial in reach, that by its clear terms it is, and that nothing within it prevents it from being so.
22. Section 286, which applies only in Scotland, undoubtedly however provides a puzzle:

"286 Scope of powers (Scotland)

(1) Orders under this Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present.

(2) Such an order may be made by the Court of Session in respect of moveable property wherever situated.

(3) But such an order in respect of a person's moveable property may not be made by the Court of Session where—

(a) the person is not domiciled, resident or present in Scotland, and

(b) the property is not situated in Scotland,

unless the unlawful conduct took place in Scotland."

23. On any view, section 286 creates an anomaly. Mr Jones submits, and I am inclined to agree, although neither he nor I are Scottish lawyers with any real knowledge of the subject, that section 286 appears to have been drafted on the premise that, unless the power of the Court of Session were to be expanded, it might conclude that its powers did not extend to any property, movable or immovable, situated outside Scotland.
24. He submits, and again I accept, that it would be extraordinary if section 286 limited the power of the Court of Session to deal with movable property in circumstances where it had unfettered power to deal with immovable property situated abroad.
25. Mr Peto's answer is that that is possible, although he, like me, does not claim to know the answer. The nearest that I can get to making sense of section 286 is to conclude that it is declaratory of the position in Scotland, ie it makes clear the conclusion which a court would, no doubt after argument on both sides, reach and does so for a simple reason. The likelihood is, in relation to a person domiciled, resident or present in Scotland that the Court of Session would conclude that it had the power to compel him to repatriate movable property then situated abroad, so that its powers would not be exercised in a vacuum or pointlessly. That I can understand.
26. What would then be more difficult is the further proviso that the power in relation to movable property exists when the unlawful conduct took place in Scotland. Neither Mr Jones nor I could think of any cogent reason for the existence of that proviso.
27. I do not claim to have an entirely coherent answer to the puzzle created by section 286. If there is inconsistency or a puzzle within it, then the existence of the discretion imported by the word "may" may come to the rescue. My ultimate conclusion is that, notwithstanding that section 286 presents a puzzle to which I cannot give a wholly satisfactory answer, it nonetheless does not have the effect in relation to the clear power granted to the High Court in England Wales of limiting that power. The anomaly or anomalies, if they exist, are for the Court of Session to resolve, not me.
28. For those reasons, I determine the question of principle that is posed by this application by the answer that a civil recovery order is available in relation to property, real and personal, immovable and movable, wherever situated, subject only to the statutory exception which I do not understand to be relevant for present purposes.
(Ancillary Applications Follow)
29. MR JUSTICE MITTING: I will now deal with three further applications ancillary to the question of principle which I have decided.
30. Mr Jones submits that, in relation to Mr Perry, the first respondent, and Leadenhall Property limited, the third respondent, paragraph 17 of the order of Cranston J should be varied. One variation was agreed - deletion of the words "source of funding and date of purchase" in the opening paragraph of paragraph 17, but three further deletions are in issue. The order as it stands requires Mr Perry and Leadenhall to give details of all trusts of which each of them is the beneficiary "or settlor". Paragraph 17(9) and (10) requires each of them to give "details of any assets or monies held in the UK since 1997 which have been transferred abroad, giving details of what has become of such assets or monies", and "the names, addresses and contact details of any persons who hold or have since 1997 held powers of attorney for the respondent". The date is fixed by reference to the primary limitation period of 12 years for these proceedings.
31. Mr Peto's answer to those submissions is that there is clear evidence of a pattern of conduct by the two relevant respondents, in particular by Mr Perry, of concealing assets behind veils of trusts and nominees so that merely requiring him to identify those trusts of which he is the beneficiary is inadequate to permit the authority to determine what assets he has which are the subject of the freezing order.
32. I am persuaded by that argument. On the factual premise advanced, it seems to me to be reasonable to require of Mr Perry and Leadenhall that each of them identifies those trusts in respect of which they are the settlor, simply so that enquiries can be put in train to see whether they are as well actually or ultimately beneficiaries of the trust, or whether the trusts can be applied to their benefit if they are discretionary.
33. As regards sub-paragraphs (9) and (10) of paragraph 17, these too seem to me to be no more than a request for information which will permit the authority to determine what assets each of the two respondents now has, to know what assets they have had in the past which they have apparently disposed of, enabling the authority reach an informed view about those assets which they actually retain even though they may be nominally owned by others. Accordingly, that part of the challenge to the order fails.
34. The second challenge is on behalf of Mrs Perry, the second respondent. No worldwide injunction has been obtained against her, nor even any order freezing any part of her assets generally. All that has been frozen are three specific assets: three freehold or leasehold properties (two in Israel, one in France); and a variety of objects which may be of value (paintings, furniture and precious artefacts).
35. Paragraph 17 as drawn requires her to give a great deal of further information about her income and assets other than those that are the subject of the order. What Mr Peto's target really is is information from her about her husband's assets. That seems to me to be properly the subject of a disclosure order under section 357 of the 2002 Act, rather than an ancillary order to a freezing order, which this purports to be. I cannot see that, in relation to the assets owned by her which are the subject of the order, the information requested is relevant. Accordingly, I discharge her obligation to answer those questions. In so doing, I do not rule that any or all of them could not properly be pursued under an application under section 357, nor do I rule that she cannot properly be asked under section 357 details about her husband's sources of income and assets.
36. The third application is for an order requiring the authority not to make any use of the information obtained as a result of the disclosure elements of the freezing order, except for the purposes of policing the freezing order. I reject that application. The freezing order is itself ancillary to a recovery order if applied for and obtained. It is intended to preserve property, and in relation to that property, to find out more about it for the purpose of making and supporting such an order.
37. Furthermore, there may well arise circumstances in which the authority needs to secure the co-operation of other courts or authorities in other countries. Section 33 of the Serious Organised Crime and Police Act 2005, to which I have been referred, seems to permit that course. I can see no good reason for limiting the ability of the authority to use information disclosed pursuant to the freezing order for any purpose other than policing the injunction. The authority are, in my view, perfectly entitled to make wider, of course ultimately proper, use of the information for other purposes too.
38. MR JONES: I was not going to ask for permission to appeal in respect of that last point, but in relation to the earlier points, in my submission there is an important issue as to the scope of the disclosure order pursuant to the freezing order, and as we are going to be in the Court of Appeal in any event, would your Lordship -- otherwise I am going to have to make an application for that.
39. MR JUSTICE MITTING: You are going to have to apply for a stay anyway, and if you want an additional permission from the Court of Appeal, you will have to get it from them. Those matters are not important. They can be obtained by other means anyway, and whether they are tagged on to a freezing order is a matter of mere procedure.
40. MR PETO: My Lord, I am asking for leave to appeal on the paragraph 17 point, but I imagine I will get the same response.
41. MR JUSTICE MITTING: Yes, you do.
42. MR JONES: My only concern with the 14 days is that we get a transcript, and I am just concerned that your Lordship is not disappearing --
43. MR JUSTICE MITTING: I am not disappearing into another part of the country, I am confined to London, apart from one day's escape, for the whole of July.
44. MR JONES: My Lord, as I say, hopefully that will not cause a problem in getting your Lordship to approve the judgment.
45. MR JUSTICE MITTING: What do you want a transcript of? The main judgment, obviously. The one I have just delivered?
46. MR JONES: I need to take instructions as to whether we appeal that.
47. MR JUSTICE MITTING: So both of them?
48. MR JONES: Yes.
49. MR JUSTICE MITTING: But you do not need the submissions and interjections in between transcribed.
50. MR JONES: Certainly not, no. They will be there on the record if we ever need to look at them, but what I would like is just the formal judgment.
51. MR JUSTICE MITTING: I know that the shorthand writers are very efficient and produce judgments when asked with great speed.
52. MR PETO: My Lord, I am applying for the costs of this hearing on the basis that most of it is about jurisdiction, which we were successful on, and on the ancillary matters about the disclosure obligations and about the limit on the purpose for which we could use the answers, we were successful on all of those. The only thing we were not successful on was the Mrs Perry part of the order and disclosure. We were successful as regards keeping the freezing order. So, in those circumstances, I submit that we are substantially winners and ought to have the costs of this hearing. If there is to be any tiny discount in relation to the Mrs Perry disclosure point, then I would submit that it should be something like 90 per cent of our costs or something like that. It took up almost no time.
53. MR JONES: Apart from asking for a small discount for the small victory that we had in respect of Mrs Perry, I cannot oppose that order.
54. MR JUSTICE MITTING: No. The three respondents who made the applications must pay 90 per cent of SOCA's costs of those applications.
55. MR PETO: My Lord, thank you very much.