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
		27/07/2016

Mr Justice Collins:

1. There are before the court two applications relating to orders made under the Proceeds of Crime Act 2002 (POCA) against the applicants. The first seeks to discharge a Disclosure Order (DO) made on 2 September 2011 by Simon J pursuant to section 357 of POCA and two Information Notices (IN) made pursuant to that order on 3 November 2015 and 17 November 2015 respectively. The second application seeks to discharge a Property Freezing Order (PFO) made by Phillips J on 19 October 2015 pursuant to section 245A of POCA. The DO and the PFO were made ex parte. Simon J made the DO on consideration of the documentation put before him. Before Phillips J there was a hearing.
2. A civil recovery investigation into the applicants commenced in February 2011. The basic suspicion against them was that the first applicant was controlling a UK based bank account through which some £8,000,000 had been laundered. The DO was used to obtain information from some 200 sources to enable the respondent to pursue its inquiries. These showed the use of over 100 bank accounts since 2001 and more recently mortgage transactions and redemptions of loans relating to potentially recoverable property. Some material has been obtained from abroad, particularly from Austria.
3. It is not necessary for the purposes of this judgment to go into any great detail of the nature of the conduct relied on against the applicants. Suffice to say that the court is entitled to make a DO if there are reasonable grounds for suspecting that the person specified holds or has held recoverable or associated property (s.358 of POCA). The applicants deny that they have been involved in any transactions which would justify civil recovery or that they are owners of or have any interests in any assets which could be liable to a civil recovery order. All I need to say is that the evidence relied on by the respondent establishes that the threshold of reasonable suspicion is surmounted.
4. In the application to discharge the DO and the two INs, the applicants have relied on three grounds. First, they submit that the lengthy passage of time since the DO was made in 2011 means that the use of it in 2015 by the issue of the INs was an abuse of process because fundamentally unfair. The DO itself is not subject to any limit of time: it remains effective until discharge whether by a court or by the respondent. It is said that no reasons were given for the imposition of the DO which, it is submitted, was a defect. Further, there should not have been requests for evidence from abroad after 25 July 2012, following the decision of the Supreme Court in SOCA v. Perry [2012] UKSC 35. That point has no substance in this case. Finally, the penal notice in the order was improper since it should not have referred to the failure to comply being a contempt of court but a criminal offence under s.359 of POCA. That followed from SOCA v. Perry. But the important point surely so far as the recipients of any IN were concerned was to know that they faced penal sanctions if they failed to comply.
5. Reliance was placed on a decision of Edis J in NCA v. Simkus [2016] EWHC 255 (Admin) in which he said that when a court granted a DO on paper there was a legal duty to give reasons (paragraph 42). I am afraid I am satisfied that that is clearly wrong. The practice of seeking DOs on paper was instituted by me when I was lead judge in the Administrative Court to save time and money in appropriate cases. It was and is open to a judge to require argument if the papers served do not persuade him that an order should be made. But he will only make the order if satisfied that the material put before him shows the grounds for making it are established. Thus the giving of reasons is otiose. Obviously if he thinks it right he can amend any of the requirements in the order sought. I am aware that many applications to the court for DOs have been made and no judge has prior to Edis J's decision considered it necessary to give reasons. The evidence upon which reliance was placed by the respondent will be disclosed once the particular individual against whom it is made is aware of its existence if he seeks to challenge it. That is the safeguard. I should note that in some cases there may be a need for redaction in order, for example, to protect informants. I am not persuaded that the need to uphold the targets' rights requires the giving of reasons for making a DO. I should add that I recognise that Article 1 of Protocol 1 of the ECHR is likely to be engaged, but the law permits the making of the order if the requirements are met and so there will be no breach.
6. This was, as Ms Davison's statements make clear, a very substantial investigation. The first applicant was bankrupt in 2011 and it was reasonably considered that the bankruptcy proceedings should not be interfered with by any orders under POCA. The first applicant has been discharged from bankruptcy. Equally, it was felt that there was little purpose in issuing INs until as full a picture as possible had been painted.
7. I have no doubt that once a DO has been obtained it should be acted on as speedily as is reasonably possible. As Mr Garlick submitted, disclosure applications to third parties, perhaps in particular banks, with whom the applicants have had and may wish to continue to have dealings can prejudice them. But all will depend in a given case on whether the lapse of time and the actions of the respondent are justified. The magnitude of the investigation and the need to avoid any action which targets might take to frustrate any claim to be made against them is relevant. I am satisfied that the lapse of time was not such as to establish that the DO could not properly be used to issue INs in 2015. The need to establish so far as possible as full an understanding of the material in a very complicated case justified the obtaining of information from other sources before seeking information from the applicants and the difficulties which were caused by the bankruptcy of the first applicant fully justified the delay.
8. The second ground referred to in the applicants' skeleton argument was that the evidence in support of the DO was not disclosed until this application was made in December 2015. That was not pursued in argument. That is not surprising since, as I have said, the safeguard for targets is provided by the need to disclose so far as necessary if an application is made to discharge a DO or any IN served under it.
9. In the skeleton, breach of Article 8 of the ECHR and Articles 7 and 8 of the EU Charter was raised. But in the course of argument when the applications were before me on 5 May 2016 Mr Garlick widened his submissions and submitted that access to data held in computers, which include laptops and many mobile telephones, cannot lawfully be permitted unless there is in place a means of safeguarding an individual's rights under those Articles. This was an argument which, if successful, would affect all applications both by NCA and in criminal cases and would have a very far-ranging effect. Mr Sutcliffe wished to have time to deal with it and I agreed to adjourn on the basis that written argument would be presented and there would be a further hearing to deal with it. I indicated to Mr Garlick that I was against him on his other arguments which, to be fair to him, he did not press with any vigour.
10. Before dealing with this argument, I should refer to a further order obtained by the respondent. On 19 October 2015 it obtained from Phillips J, following an ex parte hearing of over 1 ½ hours together with the PFO, Search and Seizure Warrants (SSW) pursuant to section 352 of POCA. It is clear from the transcript of the hearing before Phillips J with which I have been provided that detailed consideration was given by Phillips J to whether all or any of the orders sought should be granted. The applicants' Article 8 rights were referred to, Mr Sutcliffe stating that an SSW was clearly a "significant intrusion on a respondent's Article 8 rights". But that was largely in connection with the possible filming of a search and seizure operation.
11. Upon execution of the SSW meant that a number of iPads and mobile phones were seized. They were protected by pin numbers or passwords. As a result, the IN required that details of the pin numbers or passwords should be given to enable the respondent to access the data on the devices. Mr Garlick accepted that there was no difference in principle between this requirement in relation to computer data and the combination of a safe to enable access to the material in it. Mr Garlick's real point is that access to data will inevitably constitute an interference with the individual's rights under the ECHR and the Charter and so there must be in place sufficient safeguards to ensure that such interference is lawful. He draws an analogy with the procedure adopted when there may be material which is subject to legal professional privilege which is to employ an independent counsel who can check any material to determine whether it can properly be disclosed to the NCA or indeed any agency able to obtain an order to access material without breaching legal professional privilege.
12. There were I gather some 29 items seized. It is said by the applicants that they contain personal family material and some belonged to their children. This material is, they say, not relevant to the investigation and its disclosure to any outsider, whether or not it is said that it will be ignored, is a serious breach of their rights.
13. Article 8.1 of the ECHR provides:-

"Everyone has the right to respect for his private and family life, his home and his correspondence".

Article 8.2 prohibits any interference with this right save such as in accordance with the law and is necessary in a democratic society in the interests inter alia of the economic well-being of the country or the prevention of crime. Internet and computers were of course unknown in 1951, but Mr Garlick recognises and indeed the ECtHR has also recognised that correspondence also includes communications. That word is used in Article 7 of the Charter which otherwise repeats Article 8.1 of the ECHR. Similar protection to that contained in Article 8.2 of the ECHR is covered in Article 8 of the Charter (which deals in addition with the rights of individuals to access data collected concerning them). A submission that the NCA is concerned with civil rather than criminal proceedings which means that it is not within the prevention or investigation of crime was not pursued.

14. Mr Garlick submitted that what was required was the instruction of an independent counsel who could take the necessary instructions from the target and the agency which obtained the order in questions. There was, he initially submitted, no obligation on the target to raise any specific matters relevant to his convention rights. He recognised that his submissions would include seizure of documents as well as computer data. So far as I am aware, the submission made by Mr Garlick has not been put forward since the coming into force of the Human Rights Act or the Charter.
15. As Mr Sutcliffe submitted, Mr Garlick's submissions would lead to considerable expense and delays in pursuing investigations which could be into serious crime. That some safeguards should apply to avoid access by the relevant agency to personal material which could have no relevance to the particular investigation was accepted by Mr Sutcliffe. Where, as here, a number of iPads and mobile phones have been seized, the target should identify those which are said to contain sensitive family material. Those which did not belong to the target but, for example, to his children should also be identified. This Mr Garlick accepted was reasonable. It must be recognised that in an investigation such as is being pursued in this case family material may be relevant. But it may be desirable for those executing a warrant to ask the target to identify those which he contends would fall outside any investigation.
16. Mr Sutcliffe referred me to the Code of Practice issued under section 377 of POCA. Paragraph 14 requires that, because a SSW is the most invasive of the powers open to the NCA, because of the interference with privacy and the right given to obtain personal information, consideration must be given to whether less intrusive means of pursuing the investigation can suffice. In particular, consideration must be given as to whether notice can be given to the target to see whether the necessary information can be given without the need for a court order. In this case, as Phillips J accepted, it was reasonably considered that prior notice could mean destruction rather than provision of the required information. Phillips J was well aware of this when he granted the SSW. What the NCA proposes is primarily to make keyword searches of the seized items which will serve to eliminate those which would not be of interest and identify those which would. This safeguard is in my view sufficient to provide a reasonable basis for protection of the applicants' Convention and Charter rights. And it would suffice in general where there was a concern raised that irrelevant personal material should not be seen by the NCA.
17. I accordingly dismiss the application to discharge the DO and the INs served in pursuance of it. There has been no challenge to the lawfulness of the SSW.
18. I must now deal with the application to discharge the PFO. This was argued by Mr Ganesan. He relied essentially on two grounds. First, he submitted that in order to justify the making of a PFO it is necessary for the NCA to establish a risk of dissipation of any asset to be included in the order. Section 245A of POCA does not include the need to show a risk of dissipation. It requires that there be a good arguable case that the order relates to or includes recoverable or associated property (s.245A(5)). Section 245A(3) provides:-

"An application for a [PFO] 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".

Reliance is placed on observations of Edis J in NCA v. Simkus where he said that s.245A(3) would usually mean that there was a risk of dissipation of the assets if notice of the application were given.

19. In my view, a judge asked to grant a PFO will consider the general background and concerns raised by the NCA. What is needed is a good arguable case that knowledge of the investigation and the identification of assets could lead to dissipation so as to frustrate any recovery order. If the judge considers that the general background does not show a good arguable case that there is a risk of dissipation of assets or any particular asset, he will not be likely to grant the order. But it has never been considered nor does s.245(A) require that a risk of dissipation had to be proved. Once the order is made, it is open to any one affected by it, whether the target or a third party, to apply to the court to release any asset. Ms Davison in her statement which was before Phillips J set out clearly why the order was in her submission needed and it is not surprising given the background of the extensive investigation that there was a real need to ensure that the assets were and remained available for recovery.
20. In particular, Mr Ganesan has submitted that Phillips J was misled by assertions in relation to particular assets, the White Horse Hotel and the Laundry House. These had been transferred to a Mr Grove. It was said that the first applicant still maintained an interest as beneficial owner of the properties and that Mr Grove was in effect his nominee. This Mr Grove has denied and he has since been interviewed. But there is evidence that the properties were sold at an undervalue and investigations are still being carried out to establish the true position. For good reason, Mr Grove's statements are not necessarily accepted. Further, if now the applicants have no interest in the properties, Mr Grove can apply to remove them from the PFO. I do not accept that Phillips J was in any way misled.
21. The PFO contains in Paragraph 8 an obligation to provide information in the form of a witness statement of the circumstances in which the various assets were acquired by the applicants and the details of financial arrangements made in relation to their acquisition. This Mr Ganesan submits is impermissible. He relies on observations of Lord Phillips in Perry. Lord Phillips said (no argument on the point having been put to the court) that if the court is invited to include an order requiring disclosure of assets it must be satisfied it has jurisdiction to do so. Paragraph 8 does not require disclosure of additional assets but of the manner in which identified assets were acquired. Such an order is ancillary to the order which falls within the broad words in s.37(2) of the Senior Courts Act 1981 enabling an injunction to be made "on such terms and conditions as the court thinks just". Disclosure requirements such as the one contained in this PFO have been regularly made by judges exercising this jurisdiction and I have no doubt that there is power to make them.
22. Concern has been expressed by the applicants about the adverse effect on their ability to have dealings with third parties, in particular banks and prospective mortgagers. That I am afraid can to an extent be the effect of any PFO but it cannot show that the order was unlawfully made or is now unlawful. This is not nor has it been said to any third party to be a criminal investigation. Perhaps the title of the NCA is unfortunate since it could convey to others that crime is being investigated, but that does not affect the lawfulness of any order made in pursuance of its civil investigation. No doubt it could transpire that criminal offences have been committed but those would require a different investigation bearing in mind that compulsory disclosures cannot usually be used against an individual as evidence in a criminal prosecution.
23. It follows that the application to discharge the PFO is refused.
24. The applicants must forthwith make the disclosure required by the INs and Paragraph 8 of the PFO.