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
		11/03/2011

Mrs Justice Nicola Davies :

1. This is an appeal by way of case stated from the decision of the Lewes Crown Court (Miss Recorder Evans and two Justices) dismissing an appeal from the decision of the magistrates' court who ordered the forfeiture of cash seized from the appellant on 20 December 2006 pursuant to section 294 of the Proceeds of Crime Act 2002 ("the Act"). An application for forfeiture of the cash was made pursuant to section 298 of the Act.

The Facts

2. On 20 December 2006, the appellant was stopped by BAA staff at Gatwick airport. £40,000 in cash was found in her handbag, wrapped in a handbag dustcover. The cash consisted of 13 bundles, £25,000 in Aspinalls Casino wrappings, £5,000 in Gala Casino wrappings, £10,000 was unwrapped. A customs officer spoke to the appellant who said that the money belonged to her mother who had lent it to her uncle in order to open a restaurant in the UK. The monies represented the repayment of the loan and had been given to her by her uncle over a period of some nine months. Following further conversation, the officer seized the cash pursuant to his powers under the Act.
3. On 20 February 2007, a solicitor acting on behalf of the appellant provided HMRC with the following details:

i) The appellant had been living in the UK for a number of years, her permanent home is in Hong Kong; Mrs S K Angus (Tse) is the mother of the appellant and a resident of Hong Kong where she owns a number of properties; Mrs Angus's brother is Mr Tse, a UK resident; Mr Richard Yong is a resident of Malaysia; he frequently visits the UK on business; he has a keen interest in gambling and is a frequent visitor to various gambling clubs including Aspinalls; Mr Yeung resides permanently in the UK and is a director of Dolphin Electric;

ii) In the summer of 2006, in Macao, Mr Yong borrowed the cash sum of £30,000 from Mrs Angus; Mr Yong repaid this loan with winnings obtained at Aspinalls on or around 28 November 2006 plus the further sum of £5,000 obtained from another casino. Mr Tse collected the cash in order to deliver it to Mrs Angus. In a separate and unrelated transaction, Mr Yeung borrowed £10,000 from Mrs Angus in 2006 when in Hong Kong. In December of that year, he repaid the sum in cash and gave it to Mr Tse with instructions to deliver it to Mrs Angus in Hong Kong. The solicitor's letter described how Mr Tse handed the total sum of cash to the appellant on 20 December 2006 having driven her to Gatwick airport. It was contended that the sum of £40,000 represented the repayment of the loans made by Mrs Angus to Mr Yong and Mr Yeung.

iii) An officer of HMRC wrote to the appellant's solicitor asking for an explanation for the discrepancies between the account given by the appellant on 20 December 2006 and the account in the solicitor's letter. By a letter dated 22 March 2007, the solicitor explained that the appellant had offered what she had thought was a plausible explanation for the cash although it was without a factual basis. She felt under suspicion and had never been stopped or questioned in this way before.

4. At the hearing at the Crown Court the appellant, Mr Yeung and Mr Tse gave evidence. It was accepted that the account given by the appellant at the airport was a lie. Uncontested evidence was before the court that Mr Yeung was a frequent visitor to Aspinalls and had been gambling large sums of money in and around 28 November 2006. Mrs Angus and Mr Yeung did not attend court to give evidence.
5. The findings made by the Recorder and the Justices included the following:

i) The appellant lied at the airport, the lies were persistent and detailed;

ii) It was accepted that £25,000 of the money seized originated from Aspinalls and £5,000 of the money seized originated from Gala Casinos;

iii) The accounts given to the court by Mr Tse and Mr Yeung were not accepted, the witnesses being described as evasive and inconsistent, their evidence was found not to be credible;

iv) Specifically the following findings were made:

"If £30,000 of the money was given by Richard Yong to Mr Tse, then we find that it may well have been the proceeds of money laundering. There are similarities in the way in which Mr Yong was gambling as described by Mr Livermore to the way in which Mr Kehoe described money laundering techniques at a casino.

If £10,000 of the money was given by Danny Yeung to Mr Tse, then we find that he has had substantial income in the years since he filed his last tax return and has apparently paid no income tax. We find that it may well have been obtained through unlawful conduct namely cheating the public revenue.

We stress however that we do not feel able to rely on any of the evidence that has been called by the applicant to support her account of where the money originated. Our inability to rely on that evidence demonstrates in our view the reason why the HMRC are not required to specify the precise criminal activity alleged because cash leaves no audit trail.

In considering the context in which the lies were told at the airport, we find on a balance of probabilities that the lies in themselves in the context of the other matters set out at sub-paragraphs i) to vi) above establish that the source of the money is criminal activity.

In the circumstances, we find that there is an irresistible inference that the £40,000 seized from the applicant at Gatwick airport on 20^th December was property obtained through unlawful conduct and this appeal is dismissed."

6. The conclusion reached by the Recorder and Justices expressed in terms of "may well have" been the proceeds of identified criminal conduct have given rise to the issue in the case. It is most unfortunate that the court was not more clear cut in its findings.

Question for determination

7. Before this court it was agreed by the parties that the findings made by the Recorder and Justices amounted to a finding that the cash seized was obtained as a result of criminal activity but that such activity was neither specified nor identified.
8. The issue before this court is whether such a finding is sufficient for the purpose of section 242(2)(b) of the Act. It is the appellant's case that the finding does not satisfy the provision in that it fails to identify one of a number of kinds of conduct which would have been unlawful. It is the respondent's case that the finding of criminal activity as the source of the cash is sufficient for the purpose of the section.
9. The case stated raised four questions for consideration by this court. Having analysed the issues, this court considers that the four questions in essence amount to one question: in a case of cash forfeiture does a customs officer have to show that the property seized was obtained through conduct of one of a number of kinds each of which would have been unlawful conduct or is it sufficient for the officer to point to criminal conduct of an unspecified kind?

The Statutory Regime

10. The relevant statutory provisions contained within the Act are:

"Part 5, Chapter 1

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,

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

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

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.

(2) Conduct which—

(a) occurs in a country …. outside the United Kingdom and is unlawful under the criminal law … , and

(b) if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,

is also unlawful conduct.

(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.

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.

294 (as amended) provides that:

(1) A customs officer ……… 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.

(2) A customs officer ……… may also seize cash part of which he has reasonable grounds for suspecting to be –

(a) recoverable property, or

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

If it is not reasonably practicable to seize only that part.

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 the Commissioners of Customs and Excise or a constable,

(b) (in Scotland) to the sheriff by the Scottish Ministers.

(2) The court or sheriff 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.

(3) But in the case of recoverable property which belongs to joint tenants, one of whom is an excepted joint owner, the order may not apply to so much of it as the court thinks is attributable to the excepted joint owner's share.

(4) Where an application for the forfeiture of any cash is made under this section, the cash is to be detained (and may not be released under any power conferred by this Chapter) until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.

304 Property obtained through unlawful conduct

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

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

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

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

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

11. Although the requirements of section 242(2) are clear the "Explanatory Notes" to the Act gives a succinct summary:

"Section 242 "Property obtained through unlawful conduct"

296. Subsection (2)(b) provides that it is not necessary to show that property was obtained though a particular kind of unlawful conduct, so long as it can be shown to have been obtained through unlawful conduct of one kind or another. So it will not matter, for example, that it cannot be established whether certain funds are attributable to drug dealing, money laundering, brothel-keeping or other unlawful activities, provided it can be shown that they are attributable to one or other of these in the alternative, or perhaps some combination."

12. Section 240 distinguishes between two sets of proceedings: recovery in civil proceedings before the High Court and forfeiture of cash proceedings in the magistrates' court. Cash forfeiture proceedings are civil proceedings. The burden of proof rest upon the officer seeking forfeiture of cash. The court has to be satisfied on the balance of probability that the cash, or part of it, is recoverable property or is intended by any person for use in unlawful conduct. Recoverable property, as defined in section 304, is property obtained through unlawful conduct. Unlawful conduct is defined in section 242(2). For the purpose of this appeal the relevant provision is section 242(2)(b), in deciding whether any property was obtained through unlawful conduct "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".

The contentions of the parties: the decision in Muneka

13. The appellant contends that the Act provides two regimes for recovery but section 242 applies to each. The respondent does not suggest that section 242 does not apply in civil asset recovery or cash forfeiture cases but submits that the test to be applied in cash forfeiture cases is different: no particular criminal conduct has to be identified. One reason for this difference is the difficulty in tracing the source of any cash seized.
14. In support of this proposition, the respondent relies upon the decision of Moses J (as he then was) in Muneka v Commissioner of Customs and Excise [2005] EWHC 495 (Admin).
15. This was an appeal by way of case stated from a decision of a district judge in respect of section 298 of the Act and a finding that cash found in the possession of the appellant was obtained as a result of unlawful conduct and was recoverable property for the purposes of the Act. The primary issue for the court was the weight to be attached to lies told by the person in possession of the money. In his judgment, Moses J stated:

"The only argument advanced on behalf of Mr Drury was that there was authority in a judgment of the Recorder of Cardiff in the case of Eric Williams v Chief Constable of the South Wales Police given on 11 August 2004, that it was incumbent upon the prosecution to identify the criminal source of the money or the offence for which it was intended to use that cash (see paragraph 17 of his judgment). I am not sure it would be fair to the Recorder of Cardiff to conclude that he was intending to set out any proposition of law other than commenting on the particular arguments and facts of that case, insofar as it is suggested that it is incumbent on the prosecution to identify the criminal activity, the source of the money or the criminal offence for which it is intended to use the money, that, in my judgment, is incorrect. All that has to be shown is that the source of the money was a criminal offence in the United Kingdom and that it was intended for criminal use, either in the United Kingdom or elsewhere. In the instance case, there is ample evidence of both and no other explanation."

16. At paragraph 12, having cited from the judgment of Sedley J (as he then was) in Nevin, Moses J continued:

"Those comments apply with added force in the context of the case where it is not necessary to identify any criminal activities such as drug trafficking. All that has to be identified is that the source was criminal activity or that the intended destination was used for criminal activity. A lie in that context may well entitle the fact finding body to infer what the source or intention for which the cash was to be used was in reality on the balance of probabilities."

17. It is of note that there was no examination or argument in respect of section 242(2)(b) in Muneka.

The decisions in civil recovery cases

18. Muneka was considered by Sullivan J (as he then was) in The Director of Assets Recovery Agency and Others v Jeffrey David Green and Others [2005] EWHC 3168 (Admin). In proceedings for civil recovery brought by the Director under Part 5 of the Act, Sullivan J considered a preliminary issue –

"Whether a claim for civil recovery can be determined on the basis of conduct in relation to property without the identification of any particular unlawful conduct, this first question to include whether the claimant can sustain a case for civil recovery in circumstances where a respondent has no identifiable lawful income to warrant the lifestyle and purchases of that respondent."

19. The answer was as follows:

"1. In civil proceedings for recovery in part 5 of the Act the Director need not allege the commission of any specific criminal offence but set out the matters that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained.

2. A claim for civil recovery cannot be sustained solely on the basis that a respondent has no identifiable lawful income to warrant his lifestyle."

20. In considering the provisions of sections 240 – 242 of the Act, Sullivan J stated:

"17. I readily accept Mr Crow's submission that sections 240 and 241 are framed so as to make it clear that the Director need not allege the commission of a specific criminal offence or offences. I further accept that Part 5 proceedings are not limited, as were the earlier forfeiture proceedings, to any particular kind or kinds of criminal offence, for example, drug trafficking, money laundering, et cetera, but it does not follow that the Director is not under any obligation to describe the conduct which is alleged to have occurred in such terms as will enable the court to reach a conclusion as to whether that conduct so described is properly described as unlawful conduct. For the purposes of sections 240 and 241 (1) and (2) a description of the conduct in relatively general terms should suffice, "importing and supplying controlled drugs", "trafficking women for the purpose of prostitution", "brothel keeping", "money laundering" are all examples of conduct which, if it occurs in the United Kingdom is unlawful under the criminal law. It is possible that more detail might be required if conduct outside the United Kingdom was being relied upon, but that is an inevitable consequence of the Director having to establish that the conduct in question was unlawful in both the foreign country and the United Kingdom.

19 ……. When read in the context of sections 240 and the remainder of 241, it is plain that Parliament envisaged that in civil recovery proceedings the Director would identify the matters alleged to constitute unlawful conduct in sufficient detail to enable the court, not to decide whether a particular crime had been committed by a particular individual, but to decide whether the conduct so described was unlawful under the criminal law of the United Kingdom (or the criminal law of the United Kingdom and the foreign country in question).

20. That view is reinforced when one turns to consider section 242. Subsection (1) states that a person obtains property through unlawful conduct "if he obtains property by or in return for the conduct" (my emphasis). Again, these words inevitably prompt the question: what conduct? If the answer is simply (unspecified) unlawful conduct, why did the draftsman not say property is obtained "through unlawful conduct" if it is obtained "by or in return for unlawful conduct". He did not do so because Parliament envisaged that the Director would not simply make a general allegation that there had been unlawful conduct, but would set out the matters which were alleged to constitute a particular kind or kinds of unlawful conduct: see paragraph (b) of subsection (2) to section 242 . Mr Crow submits that paragraph (b) sets out what the Director need not show. It does not say that she must show that conduct was of any particular kind.

21. I am unable to accept that submission, since the draftsman could have achieved that objective by omitting all the words after "kind" where it first appears in the paragraph, so that subsection (2)(b) simply read: "in deciding whether any property was obtained through unlawful conduct — (b) it is not necessary to show that the conduct was of a particular kind." I do not consider that the remaining words in paragraph (b) should be treated as though they were otiose. If the Director is not alleging that the property was obtained by or in return for one of a number of kinds of unlawful conduct, then she has to show that the conduct was a particular kind of unlawful conduct. It is important that paragraph (b) in subsection 242(2) is not considered in isolation but in the context of sections 240 and 241, and in particular subsection 241(3). When the three sections are read together it is plain that the submission on behalf of the Director, that she does not have to allege any matters showing that the unlawful conduct was of any particular kind or kinds, would result in a strained and unnatural interpretation of Part 5.

25 ….. Part 5 proceedings are not concerned with any property, however obtained. They are concerned only with property which has been obtained through conduct which is unlawful under the criminal law…….. In my judgment, the Act deliberately steered a careful middle course between, at the one extreme, requiring the Director to prove (on the balance of probabilities) the commission of a specific criminal offence or offences by a particular individual or individuals and, at the other, being able to make a wholly unparticularised allegation of "unlawful conduct" and in effect require a respondent to justify his lifestyle…."

21. Although Sullivan J was considering a High Court civil recovery claim, Muneka was relied upon as authority for the submission that the Crown did not have to allege any particular criminal conduct. The judge appears to have distinguished Muneka upon the basis that he was considering asset recovery in civil proceedings and not cash forfeiture litigation.

The decision in Anwoir

22. Muneka was also considered in R v NW [2009] 1 WLR 965 which decided that in considering money laundering allegations under Part 7 of the Act, it was not enough for the prosecution merely to rely on single possession of a large quantity of cash, the Crown had to identify at least the class of crime in question. The appellants in R v Anwoir & Others [2008] EWCA 1354 relied upon the authority of NW. In Anwoir it was argued that for the purpose of a prosecution under section 328 of POCA (entering into money laundering arrangement) the prosecution, whilst it did not have to establish precisely what crime or crimes had generated the property in question, did have to establish at least the class or type of criminal conduct involved. The Court of Appeal found at paragraph 21 that:

"We consider that in the present case the Crown are correct in their submission that here are two ways in which the Crown can prove the property derives from crime, (a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or those kinds in unlawful; or (b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime. This in our judgment gives proper effect to the decision in Green, and is consistent with the decisions of this court in R. v Gabriel [2006] EWCA Crim 229; [2007] 2 Cr App R 11 (p.139); [2007] 1 WLR 2272; R.v K (I) [2007] EWCA Crim 491; [2007] 2 Cr App R 10 (p.128); [2007] 1 WLR 2262 and, of course, Craig. We consider that it is also consistent with the approach of this court in R. v El Kurd [2001] Crim. L.R. 234."

23. Before this court, the respondent relied upon the authority of Anwoir as support for the proposition that in respect of money laundering allegations a particular crime does not have to be identified and proof of antecedent offending may be proved by inference. In the context of this case, the authority is of limited effect. Anwoir was concerned with criminal proceedings, the relevant provisions were contained within Part 7 of the Act, section 242 formed no part of the court's consideration. Put shortly, what was being scrutinized by the court was a different section in a different part of the Act.
24. The approach as to what is required to be proven in civil recovery proceedings was further considered in ARA v Szepietowski [2007] EWCA Civ 766. Green was considered by both parties; neither challenged its correctness. In Szepietowski the Court of Appeal considered an interlocutory point from civil recovery proceedings in the High Court regarding the proof required for the making of an interim receiving order. At paragraph 107 Moore Bick LJ, in considering the conclusions of Sullivan J in Green stated:

"....In my view Sullivan J. was right, therefore, to hold that in order to succeed the Director need not prove the commission of any specific criminal offence, in the sense of proving that a particular person committed a particular offence on a particular occasion. Nonetheless, I think it is necessary for her to prove that specific property was obtained by or in return for a criminal offence of an identifiable kind (robbery, theft, fraud or whatever) or, if she relies on section 242(2), by or in return for one or other of a number of offences of an identifiable kind…."

25. Green was also approved by Carnwarth LJ in Olupitan & Others v Assets Recovery Agency [2008] EWCA Civ 104; Carnwarth LJ emphasised the word "solely" in Sullivan J's "second declaration".

Conclusion

26. None of the authorities relied upon specifically considered or heard argument upon the provisions of section 242(2)(b) in the context of a cash forfeiture case. In Muneka, Moses J did not examine still less consider submissions upon section 242(2)(b), the specific point was not addressed. We do not read the decision of Sullivan J in Green as authority for the proposition proposed by the respondent. The judge did identify the two statutory regimes and in particular the implications of possession of cash in today's "cashless society". His specific findings were in respect of civil recovery of assets in the High Court and the interpretation of sections 240 – 242 of the Act. Sullivan J's approach to the interpretation of these sections, which reflects the words contained therein, has been upheld and followed in cases of civil recovery. It is an interpretation which in our view has to apply to a cash forfeiture case in order to give proper effect to the wording of section 242(2)(b) of the Act.
27. Part 5 of the Act is concerned with civil recovery. It provides two statutory regimes for recovery, it does not distinguish between the two regimes in the statutory provisions which identify what has to be proved in order to succeed in the relevant proceedings. The effect of the respondent's submission would be to create two different ways of interpreting section 242(2)(b) depending upon whether the litigation is High Court civil recovery proceedings or magistrates/Crown Court cash forfeiture. The section makes no such distinction, the wording is clear, the Explanatory Note underlines the unified approach. Had it been the intention of Parliament to create two separate tests for one section, it would have been made clear in the wording of the statute. To read into section 242 two separate tests, is to place upon it a meaning which is not simply strained and unreasonable, it is wrong in law.
28. A further submission was made on behalf of the respondent: the wording of section 242(2)(b) is not exhaustive; there is a third alternative. Quite what that is was never successfully identified. Counsel for the respondent valiantly sought to provide an example. This difficulty served only to demonstrate the clarity of the wording of the section; as we have said, the Explanatory Note in our view correctly summarises the meaning of that sub-section.
29. Applying the provisions of section 242(2)(b) of the Act, our answer to the question is as follows: in a case of cash forfeiture, a customs officer does have to show that the property seized was obtained through conduct of one of a number of kinds each of which would have been unlawful conduct.
30. Accordingly, this appeal is allowed.

Lord Justice Thomas:

31. I agree.