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
		17/03/2011

Mrs Justice Rafferty:

1. The Crown applies to vary an Enforcement Receivership Order ("ERO") so as to exclude assets held outside the jurisdiction. The Defendant opposes it and makes a counter application for directions, seeking permission for the Enforcement Receiver ("ER") to pursue out-of-jurisdiction assets and thus to incur costs totalling some £185,000, reflecting enquiries in the UAE (£150,000) Tanzania (£30,000) and so as to realise a £2,000,000 insurance policy with Scottish Equitable (£5000) in the Republic of Ireland. Just before parties came to court some attempt had, sensibly, been made to achieve a pragmatic resolution of the position in respect of the Republic of Ireland. It was not successful.

The factual background.

2. On 12^th June 2006 the Defendant was convicted after trial of one count of cheating the revenue and one count of conspiracy to commit false accounting. On 27^th October 2006 he pleaded guilty to a count of laundering £6.24 million, the proceeds of another's criminal conduct. He was sentenced after trial to ten and a half years imprisonment and after plea to two years consecutive, a total of twelve and a half years. On 20^th November 2008 in joined confiscation proceedings HHJ Warner found the benefit to be £167,724,282.61 and the realisable assets £26,060,383.17, in which latter sum with the agreement of the parties he made a Confiscation Order. A list of the Defendant's assets was attached. He was ordered to pay £8 million within 12 months, the balance within 2 years, 10 years imprisonment in default. The Defendant's release is possible on 8^th April 2011 and an enforcement hearing set for 21^st March at Birmingham Magistrates' Court at which necessarily the default sentence will be considered.
3. On 23 September 2002 Moses J made a Restraint Order which inter alia appointed Nigel Sinclair as Management Receiver over all the Defendant's assets. The wording of the Order included but was not limited to assets listed in the schedule. Mr Sinclair on 18^th June 2009 in an unopposed application was converted to ER. The Crown now concedes that the ER was sought on an all-assets basis and that reliance was placed upon some being out-of-jurisdiction. Excluded from the power to sell were an aircraft, the House of Cars group of companies based in Dubai, and jewellery or other personal property.

The issue.

4. The question for the Court is agreed as identification of the most effective method of realising the out-of–jurisdiction assets, particularly those in UAE and Tanzania.

The Crown's stance

5. The Crown's stance on out-of-jurisdiction assets has over time been modified in response to a variety of changes. Most notable perhaps is the Treaty with the UAE which came into force in April 2008, but also the Crown's understanding that the ER has no locus in the UAE, or, if arguably he has, its existence has never been tested.
6. It is also anxious about the likely costs of the ER's enquiries abroad. I was referred to the schedule of expenditure to date, revealing outgoings of approximately £1,000,000 to secure recovery of approximately £3,595,753. It suggests what it contends is the viable alternative of Letters of Request ("LOR"), now issued to the UAE and Tanzania. The Crown submits they should run their course, not least after the 2008 Treaty with the UAE. It is agreed that LOR cannot run in tandem with the ERO's pursuit of the same assets.
7. It points to the ER's letters dated 13^th and 29^th July 2010 wherein he set out his proposals, but with an insufficiency of detail. (I should make clear that throughout a scrupulously fair and balanced presentation of the Crown's position Miss King was at pains more than once to explain there is no criticism of him, rather a ready understanding of the difficulties in which he finds himself.) The Crown relies on that paucity of detail as supporting its contention that the ER could do very little in these jurisdictions.
8. Further, in a letter of 19^th January 2011 he concedes he has no experience of effecting an order in Dubai, and assesses the likely prospect of success as dependent upon the identity of the judge and on both the full co-operation of the Defendant and on full and frank disclosure by third parties. Since the ER's locus in the UAE is far from established, what he could expect to achieve there and in Tanzania is far from certain, and success would depend on the cooperation of the Defendant, which in the contention of the Crown appears extremely unlikely to be forthcoming.
9. Prior to the ERO the Defendant had a history of obstructing the Management Receiver. Indeed his non-cooperation continued after the ERO. Trevor Millington for the Proceeds of Crime Unit ("POCU") deposes:

"Since the Confiscation Order……, the Defendant has purported to be more cooperative; he has met the Receiver and has met HMRC on two occasions. However, little new information seems to have been supplied. The Defendant stated to the Receiver ……that most of the assets on the schedule……..annexed to the Confiscation Order were not his, ……he …….had only agreed to the schedule on legal advice so as to avoid a hidden assets order. Such a stance does not give rise to much confidence that genuine cooperation would be forthcoming in respect of the out of the jurisdiction assets."

10. The Defendant reiterated to Her Majesty's Revenue and Customs ("HMRC") that he had agreed inclusion on the schedule of assets he did not own He seeks to explain this stance by reference to the Confiscation hearing asserting that on his behalf Mr Mitchell QC there preserved the position as regards third party claims. That may be so, but even if it were, Mr Andrew Munday QC for the Crown did not accept the figure under discussion, on the basis that there were third party claims. The Crown as it must accepts that third parties do not enjoy a right of audience at confiscation hearings but points out that virtually none of the Defendant's assets is held in his own name and that his interests are not legal but beneficial. Such pragmatic agreement not founded in accuracy does not in the contention of the Crown explain the reduced beneficial interest to which, it contends, he now elects to admit. To the topic of third parties I shall shortly return.
11. It challenges his claim that, from custody, he is compromised in assisting the ER, suggesting rather that he is in the best position to help recover assets almost invariably in the names of third parties. It invites attention to the ER's non-elaboration upon detail of the Defendant's regular telephone contacts, as they are"…….too numerous to list and have added little to the case".
12. To the ER it seems the Defendant's focus is his release. Whilst he describes the Defendant's improved cooperation post-Confiscation Order, the Crown relies on two points: numerous requests were necessary before certain requests were met, and that assets totalling £335,000 have been realised with the Defendant's help should be seen in the context of a Confiscation Order for £26,000,000.
13. The Crown remains unconvinced of the sincerity of the Defendant's protestations of willingness. It asks rhetorically, should the ER's success in the UAE and Tanzania be contingent or dependent upon his cooperation, what is the likelihood of success? It feels obliged to assess it as extremely low. In this regard it also relies on the note of dialogue during a 28^th October 2010 meeting between the Defendant and HMRC in which he said both that the money in Scottish Equitable belonged to Capewell (an individual of interest to the Crown) not to him, and that if it would make a member of the HMRC team feel better and relieve tension between them, he, the Defendant, would admit to owning Meaford Hall. None of this encourages the view that he is by now entirely straightforward and candid in all his dealings.
14. The Crown is acutely aware of its duty to ensure money destined for public funds is not used to reimburse the ER if it is known there is little prospect of success. Hence its view articulated by Mr Millington that it cannot '... sanction costs incurred by the Receiver in pursuit of assets held outside the jurisdiction without a clear and detailed proposal of what could be achieved. As such, the stance of POCU was that the Defendant's out of the jurisdiction assets should be pursued by POCU facilitating assistance from the authorities of the countries in question using Letters of Request. It is obviously the case that any costs incurred by way of Receiver's fees diminishes the amount that will ultimately be paid into public funds...'
15. Concluding her submissions Miss King underlines the in personam nature of the Confiscation Order. It follows that its satisfaction remains the responsibility of the Defendant, irrespective of the ERO, or of methods of approach to recovery.
16. Miss Small for the Defendant couched her submissions in terms of a realistic approach at this stage of proceedings. For his part the ER seeks a power of attorney ("PoA") so as to realise tangible assets in Dubai where he maintains an office. That there is no legislation in the UAE recognising the office of Receiver does not he urges preclude his selling assets in that jurisdiction. He is an officer of this court, which can be confident he would behave appropriately. Mr Millington of POCU in his witness statement of 7^th February 2011 states:-

"... The company requires someone to have power of attorney in order that the company can comply with its UAE statutory obligations... POCU have asked the Defendant's solicitors to suggest a reputable person or firm who would be acceptable. POCU believe that this is a matter that would need to be resolved whether the Receiver remained appointed over the out of the jurisdiction assets or not, particularly given what is set out above about the Receiver having no legal standing in the UAE..."

17. No LOR were sent before February 2010 despite the length of time over which these proceedings have been, to put it neutrally, developing. Certainly there has as a consequence been no recovery, despite the passing of more than a year. In any event LOR procedure cannot guarantee receipt of funds. The bilateral mutual assistance treaty between the UK and Dubai does not indicate whether money will be repatriated nor has counsel's research revealed any UAE domestic legislation giving effect to its provisions. The mechanics of the monies reaching these shores are unclear. The same can be said of the jurisdiction of Tanzania. As Miss Small put it, the effectiveness of LORs can be distilled thus: to date 100% of nothing is still nothing
18. There would be no call upon the public purse until assets had been recovered. Indeed the ER has offered to act on a conditional fee basis. The Defendant argues that any 'loss' – in any event a maximum 25% of what is realised - would be more than offset by the gain from realisation. As to the House of Cars group of companies, the Crown has invited nomination of a 'reputable person or company' to undertake the management of the group of companies, as indicated in correspondence. The ER is plainly one such.
19. As to third parties, the Defendant points out that the Crown has not sanctioned funding for the ER to pursue them, resisting his wish to obtain evidence to suggest the Defendant has no existing interest in the Scottish Equitable policy. Though the syntax was somewhat opaque, with the help of counsel some sense was made of a transcript of proceedings dated 20^th November 2008 which in part reads:-

"...MR MITCHELL: My learned friend says that he has declared the position with the defendant. I should add that we both that these assets have got other people's claims of interest in them. But I recognise that for the person in argument before you, as to what might be realisable but the benefit of any argument in that regard would have been against the defendant rather than for him because you just could not have resolved it. Both parties will, if they seek to resolve it through litigation in due course, as is their right under the Act but that is the position..."

20. This seems entirely to accord with the uncontroversial position as I summarised it above.
21. The Defendant not only disputes that he was initially uncooperative but also positively asserts that he has been co-operating with Mr Sinclair since the latter's status changed to that of ER. He has identified his interest in Woodlands Hall and in 39-41 Uttoxeter Road. The Crown points out that during his jury trial it was aware of both, so that to label this as cooperation might be generous. In the context of this case it hardly matters.
22. I am grateful to counsel for distilling the issues and for the balance and good sense of their submissions. It may be that the Defendant is not embracing the process as wholeheartedly as he protests he is, but the fact of the matter is that whatever method is employed, his help is an advantage. I shall permit the ERO to pursue the out-of-jurisdiction assets as Miss Small suggests. Though one understands and applauds the Crown's vigilance and its recognition of its status as guardian of the public purse, nevertheless it is now March 2011 and not a great deal has been achieved. LOR may be effective, but the likelihood is that the man of business who maintains an office in Dubai enjoys an advantage in finding and, it should be remembered, selling, assets if discoverable. The same energy I am sure will be devoted to Tanzania and to the Republic of Ireland. I am impressed by the restraint with which the ER has expressed himself in correspondence and by his willingness to operate on a conditional fee basis, thus exposing his firm to commercial risk. Though the arguments for the Crown have merit, it is plain to me that the better risk is in the use of the ER's skills and I shall consider draft directions when counsel have had an opportunity to confer.