Jersey Unreported Judgments

Judicial Review - reasons why the application for judicial review must fail

[2019]JRC161

Royal Court

(Samedi)

19 August 2019

Before     :

J. A. Clyde-Smith O.B.E., Commissioner, and Jurats Ramsden and Christensen

 

Advocate W. A. F. Redgrave and Advocate C. F. D. Sorensen for the Applicant.

Advocate H. Sharp Q.C. for the Respondent.

judgment

the COMMISSIONER:

1.        This is an application to judicially review and quash the decision of the Jersey Financial Crimes Unit ("the JFCU") taken on 8^th November, 2018, to maintain its refusal to consent to the normal operation of certain bank accounts.  The application was taken out against the Chief Officer of the States of Jersey Police as required under Article 25 of the States of Jersey Police Force Law 2012.

2.        The Applicant is the chief executive officer and beneficial owner of a company ("the advisor company") that acts as adviser to a hedge fund ("the hedge fund") which invests, inter alia, in equity positions and financing, in particular distress financing.  Both the Applicant and the advisor company are named as defendants in class actions commenced in the United States in August and October 2017, in which they are alleged to be involved, with others, in a series of manipulative share issuance - sales transactions in publicly quoted companies, described as "a fraudulent course of conduct."  The allegations are being investigated by the U.S. Securities and Exchange Commission ("the SEC"), the relevant regulatory authority in the United States.  Both the Applicant and the advisor company deny that they have acted improperly in any way.

3.        The Applicant is also a discretionary beneficiary of a Jersey proper law trust ("the Jersey trust"), which through a wholly owned BVI company ("the BVI company") has invested in, and received dividends from, the hedge fund.  In late July 2018, the Jersey administrators of the Jersey trust and the BVI company filed a suspicious activity report with the Jersey Financial Crimes Unit ("the JFCU"), following which a decision to withhold consent to the normal operation of its accounts was taken by the JFCU, the no consent letter being dated 31^st July 2018.

4.        Correspondence then ensued between Advocate Redgrave, acting for the Applicant, and Detective Sergeant Fitzgerald of the JFCU.  DS Fitzgerald is employed as a supervisor attached to the Financial Intelligence Unit which is part of the JFCU within the States of Jersey Police.  For convenience, we will continue to refer to the JFCU.  On 25^th September 2018, Advocate Redgrave and the Applicant's U.S. Attorney, Mr John Martin, attended a meeting with DS Fitzgerald at which further information in relation to the US proceedings was provided to DS Fitzgerald.

5.        On 25^th October 2018, Advocate Redgrave gave DS Fitzgerald notice that if the JFCU had not reviewed its decision and consented to normal operation of the accounts by 1^st November 2018, an application for leave for judicial review would be made immediately thereafter.  The JFCU did review the matter on 8^th November 2018, but maintained the no consent. 

6.        The application for leave to seek judicial review was filed on 14^th November, 2018 and leave was granted ex parte on 19^th November, 2018, at which point, certain privacy/anonymity orders were made and which were renewed by the Court on 8^th March 2019 (Prospective Applicant v Chief Officer of the States of Jersey Police [2019] JRC 032).  There was a further hearing on 2^nd April 2019 in relation to disclosure (Prospective Applicant v Chief Officer of the States of Jersey Police [2019] JRC 56B).

7.        In his first affidavit, the Applicant explains the Applicant's background in the asset management business and the Applicant's role as chief executive officer of the advisor company.  One of the strategies upon which it advised was for the hedge fund, or entities beneath it, to invest in publicly quoted companies in financial distress.  It is not necessary for the purposes of this judgment to go into the detail of the claims in the US proceedings, but very much by way of an overview, the U.S. proceedings concern transactions in shares in publicly quoted companies, which the claimants allege constituted a fraudulent scheme by which the value of their shares in those public companies was harmed, but which the defendants say were properly disclosed by the public companies themselves.

8.        The Applicant says that public companies in the U.S. funded by any financial institution, fund or other source, may face criticism or even lawsuits in the United States.  The Applicant says that nearly one quarter of the S&P 500 companies are currently being sued by class action plaintiffs and these lawsuits are brought on behalf of shareholders in these companies by contingency based, predatory law firms that make a living from bringing such lawsuits.  The U.S. proceedings, which involve subsidiaries of the hedge fund (but not the hedge fund directly) and related companies, make highly speculative, unfounded and false allegations against the public companies, their senior officers, subsidiaries, the advisor company and the Applicant.  Following media reports on these transactions, these class action lawsuits were commenced, and the SEC, a regulatory body with no criminal investigatory or prosecutorial functions, began an investigation, issuing subpoenas and document requests to various entities and individuals.  This process began nearly two years ago, but the Applicant has not been notified that the SEC intends to take any regulatory action, or that the Applicant and the advisor company are an intended defendant.  Nor has the Applicant been notified by any criminal authorities that the Applicant and the advisor company are a target of any investigation.

9.        Mr Martin went into more detail as to the speculative nature of the US proceedings in his letter to DS Fitzgerald of 28^th September 2018, which followed their meeting, saying this:-

"Specifically regarding the civil class action lawsuits which we discussed at our meeting, the types of securities litigation class action lawsuits at issue here are often used in the U.S. as play by sophisticated plaintiffs' attorneys to prey on vulnerable defendants and have been called 'excessive and sometimes abusive' by none other than former SEC Commissioner Paul Atkins.  Atkins further states that 'courts require plaintiffs to show only that the company's stock declined and that there was an alleged inaccuracy or omission in the company's public disclosures,' without any actual reliance on such misstatements.  This framework has led to 'an explosion of costly nuisance litigation and attempts to shake down corporations'.  Importantly, unlike in other jurisdictions in the world, a plaintiff in the U.S. does not face costs or any other penalty if a lawsuit such as this is dismissed.  A creative and ruthless plaintiff's attorney is free to file as many such lawsuits as he can, routinely seeking early settlement and a payout typically of 30-40% in contingency fees."

10.      He then gave an overview of the U.S. proceedings, noting that they relate to allegations of fraud or manipulation in respect of stock market transactions.

11.      Following these transactions, the BVI company received a redemption of approximately US$36.8 million from the hedge fund, of which some US$12 million is affected by the no consent letter.  The Applicant says there never has been any doubt as to the source of these funds, which are subject to the no consent letter, namely the share transactions involving the three publicly quoted companies.

12.      Quite separately, some US$1.45 million was contributed in early February 2013 into what we are told is a charitable company limited by guarantee ("the charity") administered in Jersey by the same Jersey administrators, which through a wholly owned corporate vehicle also invested in the hedge fund, and which on redemption of that investment received back some US$4 million.  These funds are also the subject of the no consent letter.  Whist not a director of the charity, the Applicant clearly has some involvement in it and he has declined to disclose the source of the original US$1.45 million.  He says he is unaware of any basis for an investigation into the source of these monies. 

13.      In discussion the Court raised some concern as to the locus of the Applicant to seek Judicial review of the decision in so far as it related to the $4 million, which we discuss later, but it was accepted by Advocate Sharp that the Applicant had sufficient interest as a discretionary beneficiary of the Jersey trust to seek judicial review of the decision in relation to the US$12million. No documentation in relation to Jersey trust or the charity was produced by the Applicant.

14.      DS Fitzgerald explained the original decision of the JFCU to issue the no consent letter on 31^st July 2018, and its maintenance on 8^th November, 2018 in his affidavit of 16^th January 2019.  He sets out a chronology in relation to the BVI company's investment in the hedge fund in May 2017, the commencement of the U.S. proceedings between August and October 2017 and the redemption of the investment on 22^nd November 2017 by which the BVI company received US$36.8 million, of which US$12 million is subject to the no consent letter. 

15.      His chronology in relation to the US$1.45 million shows that it was contributed into the charity on 1^st February, 2013, with the funds being invested in the hedge fund, and that investment being redeemed for US$4 million on 31^st May 2018. 

16.      It is the suspicion of the JFCU that the US$12 million held by the BVI company and the $4 million held by the charity represents the benefit of criminal conduct by way of "investor fraud/market manipulation which amounts to a conspiracy between the parties" based on:-

(i)        the claims in the U.S. proceedings;

(ii)       the SEC investigation;

(iii)      the movement of the funds described above;

(iv)      the coincidence of the US$1.45 million also being invested through the hedge fund.

17.      DS Fitzgerald said the Applicant had failed to explain the source of the US$1.45 million contributed into the charity or to provide firm evidence that the US$12 million held by the BVI company was the proceeds of legitimate activities.  He said that the pattern that emerges is of the hedge fund being stripped of assets in the face of an increasing number of lawsuits and the investigation of the SEC, or, as a minimum, there are reasonable grounds to suspect that this is what has happened.

18.      He went on to say that before and since the decision to withhold consent on 31^st July 2018, the JFCU had been busy gathering intelligence from a number of jurisdictions around the world (six in total) and is still waiting for some of that intelligence to come back.  Once all available intelligence and other relevant information had been collated, there would be a meeting between the relevant agencies in Jersey, to make an informed decision as to whether or not a full criminal investigation should be opened.  That decision has not yet been taken.  The JFCU were then liaising with overseas authorities, who have the authority to conduct criminal investigations.  No decisions have yet been taken, but it was possible that a criminal investigation could take place overseas. Prior to the hearing on the 13^th June, 2019, Advocate Sharp had confirmed that no criminal investigation had been commenced either in Jersey or elsewhere and gave no indication as to whether one was expected.

19.      Further affidavits have been sworn by the Applicant and by DS Fitzgerald, but we are not going to summarise the arguments and counter arguments, because ultimately, this Court is not in a position to determine the merits of the claims in the U.S. proceedings.  The fact is that the claimants allege a fraudulent scheme, involving the Applicant and the advisor company, to manipulate the price of the public companies concerned through a series of stock market transactions.  Those transactions are being investigated by the SEC.  It is also the case that the Applicant has declined to explain the source of the US$1.45 million contributed into the charity.

The international context

20.      In his skeleton argument, Advocate Redgrave reviews the wider international context of the "consent regime", adapted in the main from the World Bank 2014 study 'Suspending Suspicious Transactions' by Stroligo, Instscher & Davis-Crockwell, Chapter 2, to which Advocate Sharp took no objection, save to question its relevance when construing our own legislation.  It seems to us to be a balanced review, which we think is of sufficient interest to set out in this judgment and, in any event, the Applicant relies on some of the statistical information to support the Applicant's contentions.

21.      Anti-money laundering legislation has its roots in the fight against organised international drug trafficking in the 1970s.  Authorities found themselves facing the twin problems of the social ills caused by drug dependency and the increase in corruption funded by the proceeds of the illicit drugs trade.  This gave rise to a concerted international drive to introduce effective anti-money laundering legislation.

22.      In the 1980s countries began to criminalise money laundering, and to develop regulatory and investigative tools to combat it.  In 1989 the Financial Action Task Force ("FATF") was set up by the G7 countries to monitor the implementation of such measures internationally.

23.      Measures were introduced to enable the detection of assets and transactions that might derive from criminal activities, and to identify persons owning, handling or transacting in such funds or assets.  These included measures aimed at encouraging, or requiring, those working in the finance industry to identify potential proceeds of crime and to report suspicions to the authorities.

24.      A key part of the FATF anti-money laundering ("AML") architecture was the creation of Financial Intelligence Units ("FIUs") in each country.  The role of an FIU is to receive reports of suspicions (called in Jersey "Suspicious Activity Reports" or "SARs") and to analyse and, where appropriate, forward the information to relevant investigative or prosecutorial bodies around the world.  The purpose of this is to enable criminal investigations and potentially prosecutions to take place and, where appropriate, to enable the formal freezing or seizing of suspect funds by court order, with a view to their confiscation in the event of a conviction.

25.      Different countries have implemented AML policies in different ways.  One important tool is a power in the hands of the FIU to prevent transactions taking place, on a temporary basis.  This is generically known as the "power to postpone suspicious transactions" and is also described as, variously, "blocking" or "suspending" a transaction or "withholding consent" to a transaction.  In Jersey, and in a number of other countries including the UK, the latter formulation is used.

26.      The power to postpone was introduced to enable FIUs to effect temporary postponements of potentially suspicious transactions, so as to prevent funds from being dissipated before the FIU has determined whether the transaction is likely to be related to criminal activity.  Without such a power there would be a risk of suspect funds being moved before the FIU has had time to assess the information and, if suspicious, to inform relevant authorities so that a court order restraining/freeing or seizing funds could be obtained.  That could mean the assets being lost for confiscation purposes in the event of a prosecution and conviction.

27.      Thus the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism (the "Warsaw Convention") in 2005 includes the following provision referring to the postponement power:-

"Article 14 - Postponement of domestic suspicious transactions

Each Party shall adopt such legislative and other measures as may be necessary to permit urgent action to be taken by the FIU or, as appropriate, by any other competent authorities or body, when there is a suspicion that a transaction is related to money laundering, to suspend or withhold consent to a transaction going ahead in order to analyse the transaction and confirm the suspicion.  Each party may restrict such a measure to cases where a suspicious report has been submitted.  The maximum duration of any suspension or withholding of consent to a transaction shall be subject to any relevant provisions in national law."  (his emphasis added)

28.      Article 32(7) of the EU Directive 2015/849, known as the EU's Fourth Directive on Money Laundering, states that:-

"Member States shall ensure that the FIU is empowered to take urgent action, directly and indirectly, where there is a suspicion that a transaction is related to money laundering or terrorist financing, to suspend of withhold consent to a transaction that is proceeding, in order to analyse the transaction, confirm the suspicion and disseminate the results of the analysis to the competent authorities".  (his emphasis added)

29.      Jersey is not formally bound by the EU Fourth Directive but its government has declared to the EU Parliament that "Jersey has historically implemented the EU anti money laundering directives on a voluntary basis."

30.      The Law Commission of England and Wales published a consultation paper on the operation of the English SAR regime in July 2018.  In it, the purpose of the FIU's "moratorium period" was described in these terms:-

"1.14 [...]  When a SAR is submitted, it is analysed and made available to law enforcement agencies who will investigate and decide whether to take further action.  Because of the time it takes to conduct an investigation and intervene to preserve criminal assets, the scheme obliges the bank to refrain from processing the transaction once a SAR is submitted.  This time allows the NCA to take a fully informed decision on whether to consent to the transaction." [...]

2.22  [...]         If consent is refused a moratorium period of 31 days begins, allowing law enforcement agencies additional time to investigate and consider any further action.  For example, the police might make an application to restrain criminal funds or an application to monitor a bank account as a result of the intelligence provided."

31.      It is clear, submitted Advocate Redgrave, what the purpose of the period of no consent is, namely, to give the FIU some time to investigate the alleged suspicion, including alerting other authorities, and for restraint orders to be applied for if appropriate.  It is apparent, he said, from the word "postponement" and the reference in the Warsaw Convention to maximum duration, that the measure is only intended to be temporary, not indefinite.

32.      Different countries have placed different time limits on the FIU postponement power.  The 2014 World Bank study set them out as follows:-

Maximum duration period of FIU postponement	Number of FIU'S (%)
Less than 24 hours	1(2)
1 working day	1(2)
2 working days	6(10)
3 working days	15(24)
5 working days	12(19)
7 working days	3(5)
12 working days	4(6)
30 working days	3(5)
3 months	3(5)
6 months	2(3)
Not regulated	8(13)
Other (combinations)	4(6)

33.      As the numbers above indicate, it is rare for a country's time limit on postponement power to exceed even 30 days.  Jersey was one of the 13% of jurisdictions (as at 2014) whose statutory framework does not impose any time limit to the withholding of consent.  Others include Guernsey and Hong Kong.

34.      In the United Kingdom since 2002 the police have seven days from the SAR in which to respond.  If no response is given they are deemed to have consented.  If they respond within the seven days and refuse consent, they have a further thirty one days in which to apply for a restraint order (the equivalent of a saisie judiciaire).  Since 2017, in certain circumstances the police may obtain further extensions by judicial order to a maximum of a further 186 days. Section 336A of the Proceeds of Crime Act 2002 provides that:-

"(1)     The court may, on an application under this section, grant an extension of a moratorium period if satisfied that -

(a)       An investigation is being carried out in relation to a relevant disclosure (but has not been completed),

(b)       The investigation is being conducted diligently and expeditiously,

(c)       Further time is needed for conducting the investigation, and

(d)       It is reasonable in all the circumstances for the moratorium period to be extended."

35.      FIUs do not typically carry out criminal investigations themselves; they have a triage or filtering function.  They are clearing houses, dealing with hundreds or thousands of SARs of varying quality.

36.      The proportion of SARs which result in an FIU postponement/withholding of consent varies between jurisdictions, but the proportion is consistently small.  The 2014 World Bank study summarised the position across all 62 countries that took part (including Jersey) for the period 2008-2010 as follows:-

Year	Number of STRs	Number of postponement orders	Number of FIU's issuing postponement orders
2008	1,984,695	1,281	34
2009	2,248,070	1,224	42
2010	2,578,771	1,412	43

37.      It can be seen that at that time well under one in 1,000 STRs (SARs) resulted in a postponement order. Statistics for certain countries are available for more recent periods:-

(i)        England and Wales - of 24,471 SARs where consent was sought (some FIUs distinguish in their reporting statistics between SARs in which consent was sought, as a defence to a potential money laundering prosecution, and other SARs) between October 2015 and March 2017, in 74% of cases consent was granted; in 12% there was deemed consent, and in 6% of cases consent was refused (Law Commission Report, AML - SARs regime consultation paper 20 July 2018, at para 2.22; National Crime Agency, Suspicious Activity Reports Annual Report (2017)).

(ii)       Isle of Man - the number of requests for consent that were refused rose from 1 out of 147 in 2015-16 (0.6%) to 13 out of 172 in 2016-17 (7.5%) to 80 out of 446 in 2017-18 (17.9%) (Isle of Man FIU Annual report 2017-2018).

(iii)      Guernsey - in 2017 consent was granted in respect of 85%, 13% were deemed "consent not applicable" and 2% were issued with "no consent" (Bailiwick of Guernsey Financial Intelligence Service Suspicious Activity Reports Annual Report (2017)).

(iv)      Jersey - in 2017 consent was withheld in only 4 cases out of a total of 1,874 SARs (0.2%).  In 2018 the figure was 11 out of 1,807 SARs (0.6%) (figures produced by Advocate Sharp).

Jersey anti-money laundering regime and withholding of consent

38.      The consent regime in Jersey is established by Part 3 of the Proceeds of Crime (Jersey) Law 1999 ("the Jersey Proceeds of Crime Law").

39.      Criminal conduct is defined in Article 1 as conduct that is an offence attracting at least one year's imprisonment in Jersey law, or would be such an offence if it had occurred in Jersey.  Article 29 defines 'criminal property" as property which is the proceeds of criminal conduct, where the alleged offender knows or suspects that it represents such property.

40.      Articles 30 and 31 create distinct criminal offences of money laundering, involving dealing in various ways with criminal property (e.g. acquiring, using, entering into an arrangement in respect of, concealing, disguising, transferring or removing it).  The maximum penalty for these offences is 14 years' imprisonment.

41.      Under Article 32, if, either before dealing with the property or as soon as practicable afterwards, a person makes a good faith disclosure to the police of a suspicion or belief that any property constitutes or represents proceeds of criminal conduct, and of any matter on which such suspicion or belief is based, then if the police provide consent it will not be an offence under Articles 30 or 31 to deal with the property.

42.      Under Article 34D of the Jersey Proceeds of Crime Law, introduced in 2008, financial institutions and their employees are compelled to make a report to the police if they know or suspect, or have reasonable grounds for suspecting, that a person is involved in money laundering or that any property constitutes or represents proceeds of criminal conduct, and this information comes to them through the course of their business.  Failure to do so constitutes a criminal offence punishable with 5 years' imprisonment.

43.      Thus, if a Jersey financial institution submits an SAR, and the JFCU grants consent to move funds, then the Jersey financial institution knows it will not be prosecuted for money laundering should the funds turn out to be the proceeds of crime, so it can be expected to carry out the transaction.  However if the JFCU refuses consent, then the financial institution would be taking a risk if it moved the funds, because if they turned out to be the proceeds of crime the institution would not have the defence under Article 32(3).  Invariably in such a position the institution will not move the funds on the basis that the risk of committing an offence entitles it not to act in accordance with the customer's instructions or requests for so long as the suspicion exists.  It is the Applicant's case that refusal of consent therefore causes a de facto indefinite freeze of the funds.

Saisies judiciaires

44.      There is separate provision within Articles 15 and 16 of Part 2 of the Jersey Proceeds of Crime Law for the Court, on application by the Attorney General, to make an order (a "saisie") restraining a person in Jersey from dealing with funds and vesting Jersey situate assets in the Viscount.  Such an order can only be made:-

(i)        Following a confiscation order made by the Royal Court, post-conviction (Article 15(1)(a)); or

(ii)       After criminal proceedings have been instituted in Jersey, if there are reasonable grounds to believe a confiscation order may be made upon conviction (Article 15(1)(b)); or

(iii)      Where the Court is satisfied that criminal proceedings are going to be instituted in Jersey and there are reasonable grounds to believe a confiscation order may be made upon conviction (Article 15(1)(c)); or

(iv)      Where a criminal investigation has been started in Jersey in respect of alleged criminal conduct and the Court is satisfied there is reasonable cause to believe the alleged offender has benefited from criminal conduct (Article 15(1A), inserted by amendment in 2014).

45.      Under Article 15(3) the Court must discharge a saisie that was obtained prior to proceedings being instituted in Jersey (i.e. in situation 44(iii) above) if proceedings have not been instituted within such time as the court considers reasonable.  Under Article 15(5) it shall not make a saisie if there has been undue delay in commencing proceedings.  Under Article 16(6)(b) a saisie made under Article 15(1A) when a criminal investigation has begun in Jersey may be discharged if there has been undue delay in commencing proceedings.

46.      Pursuant to Article 15, as modified by the Proceeds of Crime (Enforcement of Confiscation Orders) (Jersey) Regulations 2008, the above provisions also apply to enable the Court to grant saisies in support of overseas proceedings and confiscation orders.

Royal Court criticism of the Jersey consent regime

47.      The Royal Court has on a number of occasions remarked upon the potential for injustice arising from the application of the Jersey consent regime.

48.      In 2007 in Chief Officer of SOJP v Minwalla [2007] JLR 409, the Court (Sir Michael Birt, then Deputy Bailiff) contrasted the saisie provisions in Article 15, including the provision to discharge the order if proceedings have not been instituted within a reasonable time, with the unrestricted "informal freeze" achieved by the withholding of police consent under Article 32:-

"17     However, there is another provision in the 1999 Law which has the effect of achieving an 'informal' freezing of assets without the need for a court order.  The problem arises because of the terms of the money laundering offences such as Article 32 of the 1999 Law.  In broad outline, Article 32 provides that a person is guilty of an offence if he is concerned with an arrangement whereby the retention or control by or on behalf of A of A's proceeds of criminal conduct is facilitated in circumstances where the person knows or suspects that A is or has been engaged in criminal conduct.  There is a defence available where the person concerned has disclosed his suspicions to the police who have consented to his undertaking the transaction in question.

18       Applying this to the ordinary banking relationship, the consequence is that, if a bank forms a suspicion that its customer may be engaged in criminal conduct, it files a Suspicious Transaction Report (STR) with the police.  If the police then consent to the bank thereafter complying with its customer's instructions to pay out money from the account, all well and good; the bank is protected.  But if the police do not consent, the bank is on the horns of a dilemma.  On the one hand, it has its customer demanding that it make payment in accordance with the mandate.  On the other hand, it has a suspicion that its customer has been engaged in criminal conduct and, if it makes the payment, it will clearly facilitate the retention or control of the money by its customer.  Accordingly, if it were subsequently to transpire that the money in the account was in fact the proceeds of the customer's criminal conduct, the bank would have committed the criminal offence of money laundering under Article 32.  As the bank does not know at that stage whether the money in the account is in fact the proceeds of criminal conduct, it invariably errs on the side of caution and refuses to make the payment.  The result is that the account is informally frozen for so long as the bank has the relevant suspicion and the police do not consent.

19       This is clearly capable of causing great hardship and unfairness.  There may never be a prosecution, yet the bank may retain its suspicion.  The result may be that a person, against whom no criminal charges have been brought and where there lies only a suspicion, finds his assets informally frozen without there even having been any court order to achieve this.  Furthermore, the freezing of the account may continue for an indefinite period.

20       It is hard to reconcile this situation with the carefully structured protections provided in respect of a saisie, which are clearly intended to ensure that funds are not frozen indefinitely or for an unreasonably long period in the absence of criminal charges.  The potential injustice of the situation was recognised in the United Kingdom where the relevant legislation was amended in 2002 so as to provide that the police have seven days from the STR in which to respond.  If no response is given they are deemed to have consented to the bank dealing with funds in question.  If they respond within the seven days and refuse consent, they have a further thirty one days in which to apply for a restraint order (the equivalent of a saisie).  If they have taken no such action at the expiry of thirty one days after their refusal of consent, the bank may safely proceed.  In the recent case of K limited v National Westminster Bank Plc [2006] 4 All ER 907, the English Court of Appeal concluded that this struck a fair balance between the competing interests and that accordingly there was no need for the court to intervene to prevent an informal freeze, given that it could only last for a maximum of thirty eight days.  We would refer also to the recent decision of the English Court of Appeal in R ex p. UMBS Online Ltd v Serious Organised Crime Agency [2007] EWCA Civ 406 concerning the need to strike a fair balance between undue interference with personal liberties and the need to fight crime.  However, no such amendment to the 1999 Law has been made and we must therefore wrestle with the resulting difficulties."

49.      In paragraph 75 the Court concluded its judgment by commenting that the amended UK legislation, with its moratorium period and deemed consent provisions, struck a fair balance between the competing interests and then said "... we would urge that immediate consideration be given to introducing amendments similar to those which have been introduced in the UK".

50.      These concerns were repeated in Gichuru v Walbrook [2008] JRC 068 at paragraphs 36-38 in which the Court repeated its preference for the balance struck in the UK legislation and its recommendation that the statutory scheme be amended:- "such amendments could include the introduction of time limits coupled with the ability to obtain a saisie at an earlier stage than at present i.e. once a criminal investigation has begun." (paragraph 38)

51.      The amendment to permit a saisie at the start of a Jersey criminal investigation (Article 15(1A)), was introduced in 2014 (as set out above).  However, no corresponding amendment was made to limit the time during which consent may be withheld, and thus funds, using the words of Advocate Redgrave, were "informally frozen without a saisie."

Garnet

52.      At the centre of this case lies the decision of the Guernsey Court of Appeal in Chief Officer, Customs & Excise v Garnet Investments Limited [2011] 19/2011, and whether or not it should be followed.  Advocate Redgrave contends that the approach of the Guernsey Court of Appeal in Garnet was flawed in certain respects and/or is distinguishable on the facts, and that it would be wrong to apply it in the case of Jersey.

53.      We summarise briefly the facts.  A Guernsey bank held an account for Garnet Investments Limited, ("Garnet"), a company belonging to Mr Hutomo Putra.  Mr Putra was the son of General Suharto, the president of Indonesia from 1964 to 1998.  In 1998 and 1999, cash sums totalling $68 million were paid into Garnet's bank account.  Mr Putra was in his 20s at the time.  He was subsequently unable to explain the origin of the funds.  Mr Putra was convicted in Indonesia of corruption, though that conviction was overturned.  Mr Putra was imprisoned in 2002 for the attempted murder of the judge who had convicted him.  It is probably fair to say that the overwhelming inference was that the funds held in Garnet derived from corruption or theft by his father.

54.      Shortly after Mr Putra's imprisonment, Garnet sought to move $36 million from its account and BNP filed an SAR with the Guernsey FIU, which, unsurprisingly, refused consent to the transaction.  Garnet sued BNP on its mandate.  Indonesia obtained a freezing order in support of a proprietary claim to the funds, but that freezing order was later discharged by the Guernsey Court of Appeal (Garnet v BNP and Indonesia [2009-10] GLR 1).

55.      Garnet then made a further request in February 2009 to move funds, and police consent was sought.  On 16 June 2009, the Indonesian Government said it would lodge a formal request for mutual legal assistance in criminal matters, inviting the Attorney General of Guernsey to seek to restrain the use of the funds, on the basis that this request would be made within 90 days, but no such request was in fact made and no restraint order was sought by the time the Guernsey Royal Court hearing in 2010, apparently because the Attorney General of Guernsey did not have the power to seek one (see paras 14-16 of the first instance judgment).  The FIU withheld consent on 29 June 2009.  Garnet then sought a judicial review of the FIU's decision.

56.      The Court of Appeal referred to the money laundering offences contained within sections 38 and 40 of the Guernsey Proceeds of Crime Law (as defined in that case) and in particular, to the no consent provisions contained within section 39, which equate to the no consent provisions under Article 32 of the Jersey Proceeds of Crime Law.  It agreed that the issue as to the purpose of the consent provisions lay at the heart of the appeal. 

57.      The Lieutenant Bailiff at first instance had been persuaded that the consent provisions contained in section 39 were conferred for the purpose of permitting an informal freeze to be effected on behalf of the police over funds suspected of being the proceeds of crime, so that applications might later be made for criminal restraint orders and confiscation of those funds.  Quoting from paragraph 20 of the judgment:-

"20 The identification of this purpose led the Lieutenant Bailiff to conclude that, after a period of years, if no criminal proceedings had been started at all and no active criminal investigations were in train that could lead to some form of criminal proceedings, it was irrational and disproportionate for the FIS to refuse to consent to the transaction since there was no realistic prospect of any action being taken by any criminal law enforcement authority that might lead to the funds being retrained or confiscated."

58.      The Guernsey Court of Appeal found the overall purpose of the consent provisions to be as follows:-

"23     We consider that the overall purpose of sections 38, 39 and 40 of the Guernsey Proceeds of Crime Law is clear.  It is to create extremely wide ranging 'all crime' prohibitions in money laundering.

24       in the case of the section 39 offence the mental element of suspicion may be sufficient on its own to give rise to criminal liability if any person, with that suspicion, is party to any arrangement involving the proceeds of crime.  This means that in the context of most banking arrangements, when a banker becomes suspicious and is unable to determine the legitimacy of the funds with which he is concerned, he is at risk of incurring criminal liability should he continue to deal with the funds.

25       The width of the section 39 offence is clearly intended to have a powerfully dissuasive effect on money laundering activity and to restrict the ability of money launderers and criminals to introduce the proceeds of crime into the financial system of Guernsey or to facilitate the transfer of such proceeds out of Guernsey.

26       In our judgment, in the context of this very wide ranging offence, the consent regime in subsection 39(3) of the Guernsey Proceeds of Crime Law serves two purposes.  First the existence of the consent regime provides a strong incentive to persons who are suspicious of funds to report those suspicions before any transaction is effected.  Unlike other parts of the United Kingdom (see for example ss 330-332 of Proceeds of Crime Act 2003 (POCA)), Guernsey does not have a general offence of failing to disclose possible money laundering.

27       Second, the consent regime gives the police the operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement so to do.  Thus consent may be granted to avoid a suspected criminal becoming aware of the suspicions that are harboured in relation to him.  This objective is also reinforced by the existence of offences in connection with tipping off (see section 41).  Consent may also be granted so as to permit a controlled transfer to take place so that funds can be traced for investigative purposes.

28       It has been argued on behalf of Garnet that part of the purpose of the consent regime was to provide for the temporary freezing of funds through the refusal of consent.  However, the argument by Advocate Edwards on behalf of Garnet does not appear to us to be a tenable analysis as a matter of fact or law.

29       Any funds reported to the police or the FIS for the purpose of seeking consent are in effect frozen, not by virtue of any refusal of consent, but by virtue of the ordinary operation of the criminal law which in the absence of consent will make the person seeking consent unwilling to transact for fear of punishment."

59.      Although the Jersey Royal Court had referred to the effect being that of an informal freeze, in Minwalla and Gichuru, the Guernsey Court of Appeal said that was an observation as to the practical impact of the criminal law on the bank, rather than an accurate characterisation of the consent regime as an aid to the freezing of property.  Apart from the questionable legality of a power to informally freeze assets, there was nothing in the Guernsey Proceeds of Crime Law to suggest that such a power was conferred or intended to be conferred:-

"38     True it is that in practice the process of reporting suspicious transaction and seeking consent might be used by the reporting institution for delaying possibly difficult decisions as to whether to transact and may also in practice provide a period in which the police may consider whether they wish to commence an investigation or seek any restraint orders, but the practical utility of the hiatus that is created whilst an application for consent is pursued does not mean that this was the sole or dominant purpose of the consent regime and does not support the argument that this was the intention of the legislation.

39       For the reasons set out above we do not consider it was.  In our opinion the principal purpose of the consent regime was to provide an opportunity to the police to give an exemption from criminal liability by consent but only where it was in the interests of law enforcement to do so; it was not to create an informal mechanism to be used by the police for freezing funds.

40       It follows that we do not accept the basic premise contended for by Garnet and accepted by the Lieutenant Bailiff as to the statutory purpose of the consent regime to the effect that the FIS is able to deny a person access to their property by refusing to give consent and yet not seek judicial oversight of that refusal by applying for a restraint order'.

41       In our judgment, it is not the FIS that is denying Garnet access to its property and preventing judicial oversight, it is the impact of the width of the criminal law and its chilling effect upon the person holding the fund, namely BNP."

60.      This does not mean that refusal for consent precluded judicial oversight by the courts, because the Guernsey Court of Appeal said that could be challenged by a private law claim brought against the person holding the funds.  It did not consider the changes made to the statutory regime in England and Wales following the introduction of the Proceeds of Crime Act 2002, introducing a so-called "moratorium regime" assisted or supported the analysis of the Lieutenant Bailiff for these reasons:-

"44     Under POCA the consent regime in England and Wales provides that an automatic deemed consent will be taken to have been given 31 days from the notification of a suspicion to the authorities.

45       Guernsey has taken the considered and deliberate decision not to replicate these provisions within the Bailiwick.  As was pointed out in paragraph 4 of the letter dated 26 June 1997 attached to the Billet D'Etat XVI 1997, 30 July 1997, the Guernsey Proceeds of Crime Law is 'based largely upon the current [UK] legislation subject to such modifications as are either desirable or necessary as far as the Bailiwick is concerned.'

46       The reasons for the difference in approach between the moratorium regime under POCA and the consent regime under the Guernsey Proceeds of Crime Law appear readily explicable.  There are significant differences between the two jurisdictions and the differences in the regimes appear to us to reflect the different nature of the financial transactions that are of concern in the two jurisdictions.

47       In England & Wales, massive capital flows through the City of London and elsewhere, coupled with onerous reporting obligations enforced by criminal sanctions (see ss 330-332 of POCA) demand that some reasonable measure of certainty and finality is provided to financial institutions who report suspicious transactions namely that, unless the funds are restrained or there is a consent, after 31 days of reporting a suspicion (referred to as the moratorium period) the institution is free to transact.

48       For the well resourced law enforcement authorities in England & Wales 31 days provides a sufficient window of opportunity in which to make enquiries and commence any appropriate investigation or proceedings which may include civil recovery as well as criminal proceedings.  Steps may be taken to seek a court order freezing funds either by way of a freezing order in civil recovery proceedings under Part 5 of POCA or criminal proceedings under Part 2.

49       Guernsey by contrast does not have the same level of fast moving transactional business that might be damaged by absence of a deemed consent or that would necessitate a moratorium period followed by a deemed consent.  Its financial system is more concerned with the stable administration of funds through third party managers or trustees.

50       Funds in financial structures in Guernsey are often remote from the originating source of the funds because of the intervention of trust, corporate or other offshore structures (frequently connected with tax planning).  This means that there may be limits upon the amount of information available on Guernsey to explain the source of any funds.

51       The Guernsey law enforcement authorities, whilst they are clearly dedicated to the eradication of money laundering, do not always have the investigative resources or access to the levels of information that would allow them to determine the origin of funds or that would make it reasonable to expect that they should be able within a certain period of time to determine whether any particular transaction may or may not involve the proceeds of crime.

52       Guernsey also has a relatively limited range of mechanisms for restraining the suspected proceeds of crime.  It will often not be possible for the authorities to reach any clear view as to the origins of suspicious funds so as to be in a position to apply for restraint.  There is no power to seek the civil restraint of funds as there is no equivalent to the civil recovery proceedings that are available in England and Wales."

61.      Having referred to the history of the Guernsey Proceeds of Crime Law, and the desire to avoid criticism on the part of the Guernsey authorities, the Guernsey Court of Appeal said it would be surprising if it had been intended through the introduction of the consent provisions as a defence to the money laundering, to place any obligation on the Guernsey authorities to consent to a transaction that might result in funds suspected of consisting of "dirty money" being paid away simply because a particular amount of time had elapsed or because no information had emerged to justify any criminal investigation:-

"56 We do not therefore consider it is reasonable to imply into the statutory consent regime in Guernsey any period of time in which consent is to be granted to transact in order to avoid what may in practice be an extended effective freeze, even if we are wrong in our analysis of the purpose of subsection 39(3).  In any case where there is a suspicion that has not been dispelled, the police must be entitled to refuse consent whatever period of time has elapsed."

62.      The Guernsey Court of Appeal then turned to Article 1 of Protocol 1 of the European Convention on Human Rights and whilst finding that the circumstances of Garnet did not amount to a deprivation of property, it did find the second paragraph of Article 1 engaged, but concluded that the decision was not an excessive interference with Garnet's prima facie property rights, unlawful and a breach of Article 1 of the First Protocol.  We return to this in more detail later.

63.      Garnet was followed recently by the Hong Kong Court of Appeal in Interush v Commissioner of Police [2019] HKCA 70.  As in Guernsey and Jersey, Hong Kong places no statutory time limit on the length of a no consent.  The facts in that case were however rather different from the instant case.  A criminal investigation was already under way into an alleged pyramid fraud by the time of the no consent.  The investigation led in due course to a prosecution and a trial (and the acquittal of the accused).  A restraint order was imposed some 18 months after the refusal of consent and before the trial.

64.      The Hong Kong police had a manual which referred to "the underlying principle" being that "the operation of "No Consent" is reasonable, necessary and proportionate in the circumstances".  It required consideration of factors such as the prospect of successfully obtaining a confiscation order and the likelihood of obtaining a restraint order or a victim obtaining an injunction within a reasonable period of time.  It set out a procedure whereby if after three months no restraint order or civil injunction was in place the no consent should be reviewed monthly, and stipulated that letters of no consent "should normally last no more than six months from the date of issue."  Exceptional circumstances were required to go past six months and they had to be documented. The Jersey police have no such guidelines to guide and inform the exercise of discretion.

65.      Interush brought a systemic challenge to the legislative scheme on the basis that the scheme offended against the Hong Kong constitution because it imposed criminal liability without a time limit or compensation.  There was also a fact-specific challenge on the basis that the police had failed to take into account financial damage suffered by reason of the no consent and had failed to produce evidence that they had seriously considered the applicant's case.

66.      The Hong Kong Court of Appeal applied Garnet on the point that the purpose and effect of the consent regime is not to freeze funds.  It rejected the systemic challenge on the basis that the consent regime struck a reasonable balance and was not "manifestly without reasonable foundation" and rejected the fact-specific challenge on the facts of that case (in which a criminal investigation was under way, a restraint order was eventually applied for, and the police had followed their internal procedures).

67.      Advocate Redgrave submitted that Garnet should not be followed by this Court for the following reasons:-

(i)        The first reason given by the Guernsey Court of Appeal at paragraph 26 of Garnet, that Guernsey does not have a general offence of failing to disclose money laundering does not apply to Jersey, which does have compulsory reporting (Article 34D of the Jersey Proceeds of Crime Law).

(ii)       The second reason given at paragraph 27 flew, he said, in the face of all of the evidence, both as to the reason for which the consent regime was developed internationally and as to the way in which the consent power is in practice exercised.  As set out above, and supported he said by a wealth of authoritative publications, the whole system of SARs, FIUs and postponement/withholding of consent was established in order to delay a transaction temporarily, in order for the FIU to conduct inquiries and enable criminal investigative authorities to apply for restraint orders from a court.  The suggestion in paragraph 27 that the default position is to withhold consent in the face of a SAR, and that it is simply open to the police to give consent to a transaction where it suits law enforcement purposes, is simply not how it works in practice, as the statistics show that consent is refused very rarely.  FIUs generally regard granting consent as the default position, only refusing consent in exceptionally rare cases, where they consider that there is some good reason to do so.

(iii)      The "withhold consent as default" approach is plainly not followed in Jersey.  DS Fitzgerald said this at the meeting on 25^th September 2018:-

"Mike Fitzgerald advised that Jersey has a unique reputation that it must protect in terms of its probity on the world stage, that offshore jurisdictions have a spotlight that the UK does not have and must be proactive where there is suspicion of the POC being placed in this jurisdiction.  No Consent is only applied where absolutely necessary and a suspicion that the funds may represent the Proceeds of Criminal Conduct." (his emphasis)

(iv)      The Guernsey's Court of Appeal's observation, that the use by the Court in Jersey of the phrase "informal freeze" was "an observation as to the practical impact of the Criminal Law on the Bank, rather than an accurate characterisation of the consent regime, as aid to the freezing of property", amounts to sophistry, in circumstances where the obvious and inevitable consequence of a decision to withhold consent is to freeze the relevant funds.

(v)       Undermining the rationale in Garnet in respect of Jersey at least, the JFCU published a response to a Freedom of Information request in which it stated:-

"A small minority of SARs submitted to the JFCU receive 'no consent'.  This is not a formal 'freeze' or restraint on the account, although in practice the transactional effects are the same."

(vi)      The correct approach is to look at the practical impact of a no consent decision.  It is invariably to bring about an informal freeze.  As has been noted in academic commentary "using this indirect method, the police are able to achieve the same effects of a restraint order but without complying with all the strictures and safeguards of obtaining a restraint order from a judge" (Simon N M Young, Disproportionality in Asset Recovery: Recent cases in the UK and Hong Kong Chapter 20 of Palgrave Handbook of Criminal and Terrorism Financing Law, volume 1 (2018) at page 482).

(vii)     As to the suggestion that in England the banking industry requires a reasonable measure of finality and certainty, unlike Guernsey and by implication Jersey, there is a large number of banks in Jersey, with active bank accounts used to conduct important transactions.  Most Jersey SARs come from banks.  Many of those affected by Jersey-controlled assets being informally frozen would no doubt be surprised to be told they have less need to progress a transaction promptly than their UK counterparts.  The approach has a whiff of disapproval of offshore financial business; an assumption that the sort of people whose assets are suspected in Guernsey are more like to be guilty.  That cannot be said of Jersey today.

(viii)    As to the authorities in England being well resourced so as to investigate within 31 days, unlike Guernsey and by implication Jersey, resourcing is nothing to the point.  The English authorities may or may not be able to investigate every SAR adequately within 31 days. This will depend to some extent on the response they get from other authorities rather than their own resources, but an unreasonable or disproportionate decision is not rendered otherwise because of a lack of state resources.

(ix)      As to the suggestion that in Guernsey the funds held by trustees are more remote from the originating source, Advocate Redgrave said this was difficult to understand.  Under the money laundering regulations all financial services businesses, whether banks or trust companies, have to know the source of funds.  The fact that inquiries may need to be made abroad is not unique to Guernsey (or Jersey), and cannot justify the approach that the police may indefinitely maintain a refusal of consent regardless of the lack of prospect of any criminal conviction nor the flimsiness of the evidence suggesting criminality.

(x)       As to Guernsey having limited mechanisms for restraining suspected proceeds of crime, Jersey has ample court-controlled mechanisms for restraining the suspected proceeds of crime.  It permits saisies judiciaires from the start of a criminal investigation anywhere in the world.  It has civil forfeiture procedures (see the Forfeiture of Assets (Civil Proceedings) Jersey Law 2018 which came into force on 12^th July 2018, and replaced and extended the Proceeds of Crime (Cash Seizure) (Jersey) Law 2008 and applies to both cash and property held in bank accounts).

68.      Whilst acknowledging that there is no statutory time limit in Jersey, Advocate Redgrave asserted that the passage of time without any criminal investigation having been begun must have an impact on the reasonableness and proportionality of maintaining a refusal to consent.  The Court suggested as much in Gichuru at paragraph 35:-

"(1)     the case of umbs Online Limited is persuasive authority for the proposition that the police are under a duty to keep a refusal to consent to payment under regular review.  One can therefore see the argument that any difficulties caused by the time limits applicable too applications for judicial review could be addressed by the customer asking the police to review their refusal and then seeking to judicially review a decision not to grant consent following such review.

(ii)       One can also see an argument that a refusal to consent by the police which is entirely reasonable initially may become unreasonable and liable to be quashed through the effluxion of time, particularly bearing in mind the requirement in the 1999 Law for a saisie to be discharged if proceedings have not been instituted within a reasonable time and the corresponding provision in section 42 of the 2002 Act that a restraint order must be discharged if criminal proceedings are not started within a reasonable time." (his emphasis)

69.      This approach, he said, is plainly right.  The passage of such a long period of time since the 2016-2017 trading activity complained of, during which no criminal investigation has begun and no restraint or freezing order has been sought, must, he said,  rationally affect the position and be capable of turning what was initially a reasonable decision into an unreasonable one.  Whilst he did not concede that the initial decision to refuse consent in this case was reasonable, it plainly became less so with every passing day.

70.      Advocate Redgrave submitted that the Court should, at the very least, rule that a refusal of consent without a criminal investigation having begun will become unreasonable and liable to be quashed once a period of time has passed during which it was reasonable to expect such an investigation to have been and/or court orders to have been sought.  In this case, he said that period ended many months ago.

The Applicant's case

71.      Advocate Redgrave acknowledged that the Court was in no position to determine the merits of the claims in the US proceedings.  As to the SEC, it is not a criminal investigatory body (as accepted by Advocate Sharp) and has no prosecutorial powers.  It followed, he said, that the mere existence of an SEC investigation in no way indicated that a crime can rationally be suspected, still less that a criminal investigation is in prospect, let alone prosecution and confiscation.  The most recent relevant trading was in the autumn of 2017, and the SEC had been investigating for 22 months.  There is no criminal investigation in the USA (the only place where one could be opened, given that the trading was on a market located in the USA).  DS Fitzgerald was clear that at the moment, there are no criminal investigations involving the Applicant or any of the Applicant's companies.  Combining this with the fact that the lawsuits in themselves were not evidence, in Advocate Redgrave's view, of criminality, it was impossible, he said, to conclude that there is a good prospect of a criminal prosecution leading to a confiscation in this case.

72.      He said there were a number of defects in the JFCU's analysis:-

(i)        The timing of the redemption was not suspicious in itself.  The hedge fund acted entirely appropriately, once aware of the civil proceedings and the SEC investigation and as disclosed in the Applicant's third affidavit, the hedge fund had set aside $50 million by way of a "side pocket", which would not be paid out to investors in the hedge fund until the lawsuits and investigation are over.

(ii)       In the absence of expert assistance from the relevant US authorities, he questioned whether the JFCU was capable of properly assessing the significance of the US lawsuits, and the SEC investigation.

(iii)      The assertion that no evidence had been provided as to the $12 million being the proceeds of illegitimate activities. The JFCU knew that the money had come from the trading in 2016 and 2017.  We would interpose to point out that begs the question as to whether or not the activities were themselves legitimate, as they are being challenged in the US proceedings.

(iv)      The JFCU's process of analysing the material in order to consider suspicion was not one in which the Court could have confidence, because it was hampered by the complete absence of any notes indicating the reasoning process of the JFCU because no such notes had been exhibited and there were no guidelines as in Hong Kong to guide and inform the exercise of discretion.     

(v)       After consent had been refused in August 2018, Advocate Redgrave wrote to DS Fitzgerald seeking reasons and inviting a re-consideration.  There followed a meeting attended by Mr Martin, and an explanation as to the nature of securities class action lawsuits, and the SEC investigation was given.  Notwithstanding this, the JFCU stuck to its decision and refused to revise it in November 2018.

(vi)      It appeared that the JFCU placed reliance on the decision in Garnet as giving the police an unfettered discretion to maintain a no consent decision, no matter how inadequate the investigation, how much time had passed without a saisie or other court order, nor how unlikely a criminal prosecution is, so long as the police continue to say they are suspicious.

(vii)     The police did not have enough material to hold a genuine suspicion that these funds are the proceeds of crime, or in the alternative, such suspicion as they did hold is not a sufficient ground to justify the maintenance of the no consent in the circumstances.  The degree of suspicion, slight at the outset, must be substantially diminished as time passed, with the realisation that the police's "asset stripping" theory is false.  As more time passes, the no consent becomes every day more unreasonable and disproportionate, and the balance is now plainly in favour of the Applicant's individual property rights over the ever diminishing prospect of a confiscation order ever being made. 

(viii)    It is the function of the Court to police the boundaries of rational inference from the known facts as disclosed in the evidence now before the Court.

Traditional grounds for Judicial Review

73.      Advocate Redgrave referred to the traditional grounds for judicial review as identified by the Royal Court in Planning & Environment Committee v Lesquende Ltd [1998] JLR 1, namely, illegality, irrationality and procedural impropriety. 

74.      Illegality arises when a decision-maker misdirects itself in law, exercises a power wrongly or acts ultra vires.  Exercising a power wrongly can include taking account of an irrelevant consideration or not taking account of a relevant consideration.

75.      Irrationality (sometimes referred to as Wednesbury unreasonableness), arises when a decision-maker makes a decision which is so unreasonable that no sensible person who had applied his or her mind to the question to be decided could have arrived at it.

76.      Procedural impropriety arises when a decision-maker has not properly observed the relevant procedures or the principles of natural justice.

Applicant's grounds for review

77.      The Applicant put forward five grounds for judicial review.

78.      Ground 1 - illegality - ultra vires - it is outwith the legal power of the JFCU under the statutory scheme to withhold consent where there is no criminal investigation in existence or in immediate prospect.

79.      Ground 2 - illegality - failure to take account of relevant considerations - the JFCU failed to take account of relevant matters including the absence of a criminal investigation, the passage of time since the trading activity and the commencement of the SEC investigation and the absence of any saisie.

80.      Ground 3 - illegality - taking account of irrelevant considerations - the JFCU took account of matters such as the existence of the US proceedings and the SEC investigation and press reporting of the same.  Advocate Redgrave noted that the JFCU asserts through DS Fitzgerald's second affidavit that it has not been influenced by any improper desire or request to restrain funds for the benefit of civil proceedings.

81.      Ground 4 - irrationality - disproportionality - this concerns the excessive interference with individual property rights.  Article 1 of Protocol 1 of the European Convention on Human Rights ("ECHR") provides:-

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

82.      The Guernsey Court of Appeal in Garnet found that temporary seizure of property in criminal proceedings constitutes a control of use for the purposes of the second paragraph of Article 1, on which proportionality arose and the issue of the actions of the Guernsey FIU have to be judged.

83.      In Interush the Hong Kong Court of Appeal at page 46 adopted the four-step proportionality test (overlapping in nature) applied in English and European jurisprudence to decide whether a measure infringing a right is justified:-

(i)        Whether the intrusive measure pursues a legitimate aim;

(ii)       If so whether it is rationally connected with advancing that aim;

(iii)      Whether the measure is no more than necessary for that purpose, and

(iv)      Whether a reasonable balance had been struck between the societal benefits of the encroachment and the inroads made into the rights of the individual, in particular whether it resulted in an unacceptably harsh burden on the individual.

84.      Advocate Redgrave accepted that the no consent power in principle pursues a legitimate aim, namely that of postponing a transaction in order to investigate whether funds may be the proceeds of crime and to enable appropriate court applications to be made in anticipation of a confiscation order.  However on the facts of this case he said the maintenance of the no consent decision is not rationally connected with that aim, is unnecessary for that purpose, and results in an unacceptably harsh burden, thus failing to strike a reasonable balance.

85.      In Paulet v United Kingdom [2014] (Application no. 6219/08), the European Court of Human Rights in Strasbourg held that a confiscation order made in the United Kingdom was disproportionate and ruled that the Court of Appeal had failed to balance individual property rights against the public interest.  The Strasbourg Court found that the UK courts' scope of review of Mr Paulet's case had been too narrow.  The majority objected to the fact that the domestic courts had simply found that the confiscation order against Mr Paulet had been in the public interest, without balancing that conclusion against his right to peaceful enjoyment of his possessions as required under the ECHR.

86.      If an order for confiscation can be held to be a disproportionate interference in the individual's property rights then Advocate Redgrave submitted that the continued and indefinite withholding of consent to deal with property, nearly 20 months after the latest of the events concerned and when there is no criminal investigation in relation to the funds in any jurisdiction, is a highly disproportionate interference with the property rights of the Applicant.

87.      Advocate Redgrave argued that Courts can achieve proportionality via two methods:-

(i)        Interpretive proportionality: where the court interprets the words in the legislative scheme restrictively so as to give effect to the principle; or

(ii)       Supervening proportionality: where the court applies proportionality as a separate legal doctrine that supervenes or corrects the initial outcomes of the statutory scheme (see Simon N M Young, Disproportionality in Asset Recovery: Recent cases in the UK and Hong Kong,  and Chapter 20 of Palgrave Handbook of criminal and terrorism financing law, vol 1 (2018) at pages 474-475.)

88.      This would be consistent, we note, with Article 4(1) of the Human Rights (Jersey) Law 2000 which requires the Court to read and give effect to legislation in a way which is compatible with Convention rights and Article 7(1) which requires any public authority to act in a way which is compatible with Convention rights.  Advocate Redgrave submitted that given that the Jersey Proceeds of Crime Law does not have an in-built mechanism for ensuring proportionality, and the JFCU has no guidance to encourage it to act proportionately (unlike in Hong Kong), this court should apply supervening proportionality to ensure that the JFCU's no consent power is not applied unreasonably or excessively.

89.      A recent analysis of the applicability of proportionality to asset recovery cases concluded that "proportionality needs to be reckoned with and applied as an applicable and essential safeguard in the operation of the no-consent scheme.  Disproportionality will be at risk where a no-consent restraint is in place longer than the reasonable time needed to complete the investigation for obtaining a restraint order in the circumstances of the particular case." (Simon N M Young, Disproportionality in Asset Recovery: Recent cases in the UK and Hong Kong,  and Chapter 20 of Palgrave Handbook of criminal and terrorism financing law, volume 1 (2018) at page 482).

90.      Ground 5 - procedural unfairness - failure to give reasons - the JFCU declined to give adequate reasons for its decision despite many requests in correspondence.  It has provided explanations in affidavits only because this application was brought.  The JFCU should give reasons, save where it cannot do so for operational reasons.

91.      In conclusion, Advocate Redgrave submitted that the Court should hold that the police are under an obligation to use the consent power in a way which is proportionate to the legitimate objective for which it is conferred.  Where there is no imminent prospect of a restraint order freezing the funds for confiscation purposes, consent should be promptly given because in such circumstances the effective freezing of funds is a disproportionate interference in the rights of the individual.

92.      On the facts of this case the grounds for suspicion are flimsy.  The evidence has been poorly analysed and understood by the police.  Almost two years have passed since the events in issue, without any criminal investigation commencing or any court order restraining the funds.  The balance has very firmly shifted against the continuation of this position being reasonable, proportionate or lawful.

The Respondent's case

93.      Advocate Sharp raised an initial argument relating to the disclosure by the Applicant in the Applicant's third affidavit of 2^nd May 2019 that the hedge fund had set aside $50 million in respect of the US proceedings in or around October 2017.  This had not been previously disclosed to the Court.  The existence of this "side pocket" sat in contrast, he said, with the earlier affidavit evidence of the Applicant that the US proceedings were without foundation.

94.      Advocate Sharp referred to the high duty of candour in an application for judicial review owed to the Court and that a failure to discharge that duty can result in the Court setting aside leave, irrespective of the merits of the application.  He cited in support the cases of Tshikangu v London Borough of Newark [2001] WL 98077 and Secretary of State for Home Department v Ketowolgo 6^th April 1992.  He also said that the application for leave had failed to cite Garnet, which was clearly an important decision which, in Advocate Sharp's view, was fatal to the application. 

95.      Advocate Sharp drew the Court's attention to the low threshold for refusing consent. In Amalgamated Metal Trading Limited v City of London Police Financial Investigation Unit & Others [2003] 1 WLR Tomlinson J observed at paragraph 27 that for the purposes of analogous English anti-money laundering legislation:-

"The existence of a suspicion is sufficient to ground a proper refusal of consent".

96.      "Suspicion" was defined in K Limited v National Westminster Bank plc (Revenue and Customs Commissioners and another intervening) [2007] 1 WLR 311 at paragraph 16 as being where a person thinks that there is a possibility, which is more than fanciful, that the relevant facts exist, subject to the suspicion so formed being of a settled nature.

97.      It was not in dispute that:-

(i)        The Applicant has never disclosed the source of the US$1.45 million that was contributed into the charity in February 2013.  These funds were invested in the same hedge fund, resulting in proceeds of US$4 million.

(ii)       Separately, a number of individuals in the USA have commenced litigation against the Applicant and others, alleging that they have been engaged in a sophisticated investor fraud, against which it has been belatedly disclosed that a "side pocket" of US$50 million has been set aside to cover any liability.  The Applicant concedes that neither the Court nor the JFCU are in a position to decide the merits of these claims.

(iii)      The SEC was investigating the same matters raised in the litigation.

98.      There is a strong coincidence, he argued, that the Applicant, who declined to explain the origins of the US$1.45 million invested in the hedge fund in 2013, is separately accused of fraudulent activities relating to other hedge fund activities.  He said on any view, the suspicion that these assets are the proceeds of crime is more than fanciful and is reasonable.

99.      Advocate Sharp then went into the history of the legislation, which goes back to the Drug Trafficking Offences (Jersey) Law 1988, which contained provisions for confiscation and the imposition of a saisie judiciaire.  Article 17 created the offence of "Assisting another to retain the benefit of drug trafficking" and introduced consent provisions by which immunity from prosecution could be given by the police if the act done was with the consent of the police.  It was clear, he said, that the consent provisions were set in the context of this substantive criminal offence and which enabled the police to provide immunity if they wished to do so.  It had nothing to do with the imposition of informal freezes.

100.   The Drug Trafficking Offences (Jersey) Law 1988 formed the basis for the Jersey Proceeds of Crime (Jersey) Law 1999, which came into force on 1^st July 1999 and which extended to the laundering of the proceeds of all crimes.  It incorporated the same consent provisions in the context of these new substantive offences.  As the commentary contained in the Projet at page 18 makes clear, the purpose of the consent provisions was to provide a defence.

101.   We were concerned here, he argued, with two concepts:-

(i)        The formal restraint of a person's assets, and

(ii)       The granting of immunity from prosecution.

102.   These were materially different concepts and were not to be confused.  The granting of immunity had nothing to do with restraining a person's property.  Only the Attorney General had the power under the general Law to grant immunity, which was done rarely and in the context of specific facts.  For the police to grant immunity required legislation.  It was a very significant step and departure from the general rule that all laws were to be obeyed.

103.   Advocate Sharp is supported in these submissions by Garnet in that the Guernsey Court of Appeal also looked at the similar history of the consent provisions in Guernsey saying this at paragraphs 34 - 39:-

"34     Consent provisions were a feature of anti money laundering legislation before there was any developed legislative system permitting the restraint of funds during the investigation of crime.  Under the Drugs Trafficking Offences Act 1986, for example, a restraint order could only be granted after proceedings for a drug trafficking offence had commenced.

35       This legislative history does not suggest that the consent provisions as they originally emerged were intended to enable the regime of consent to be used informally in aid of the formal systems of restraint or confiscation.

36       The only lawful mechanisms for freezing suspected proceeds of crime in Guernsey are the powers conferred on the courts under sections 26(1), 27(1) and 28(1) of the Guernsey Proceeds of Crime Law.  It appears to us to be highly unlikely that the consent provisions in the Guernsey Proceeds of Crime Law were intended to confer unregulated and informal freezing powers on the police to be exercised before the courts are involved without any mechanism for review or limitations on the circumstances in which any informal freeze could be imposed.

37       Apart from the questionable legality of such a power, there is nothing in the Guernsey Proceeds of Crime Law to suggest such a power was conferred or intended to be conferred."

104.   The Jersey Proceeds of Crime Law provides for the Attorney General and not the police to obtain a saisie to secure assets by court order.  These powers are found in Article 15 and 16 in Part 2 headed "Confiscation Orders".  The consent provisions are contained under Part 3 headed "Money Laundering", and whilst it may be, he said, that a refusal to provide consent will result in a bank declining to make the transaction, that is not a legal consequence of the withholding of consent.  Rather the absence of consent may cause a bank to refuse payment on the grounds it does not want to make a transfer and commit a criminal offence by so doing. That is the normal operation of the criminal law.  A bank which may be affected by the refusal of the police to consent is doing little more than dealing with the consequences of the commercial risk it accepted when the assets were taken on in the first place.  The deliberate demarcation between statutory powers to obtain a saisie and the specific statutory defence of consent to particular offences can be seen and traced back to the relevant parts of the Drug Trafficking (Jersey) Law 1988.

105.   Advocate Sharp then turned to Garnet, and submitted that the decision of the Guernsey Court of Appeal was highly persuasive in Jersey.  He referred the Court to Knight v Thackeray's Limited [1997] JLR 279, in which it was held that although decisions of the Guernsey Court of appeal were not binding, they were highly persuasive, particularly since its judges were largely the same as those comprising the Jersey Court of Appeal.  The Guernsey Court of Appeal in Garnet comprised Sir John Nutting QC, Clare Montgomery QC and James McNeil QC, who all served on the Jersey Court of Appeal.  The Guernsey Court of Appeal in Garnet rejected substantially the same legal arguments now being advanced by the Applicant in relation to similar legislation.

106.   The fact that compulsory reporting in Jersey was introduced in 2008 does not assist in understanding the origin of the consent provisions.  The purpose of statutory construction is to discern the intention of the States of Jersey (see AG v Smith [2004] JRC 168A) and whatever practice may have been developed by the police since the Jersey Proceeds of Crime Law came into force, is not relevant to discerning that intention. 

107.   Notwithstanding the criticisms voiced by the Court in Minwalla and Gichuru, the fact is the States of Jersey has not introduced moratorium statutory provisions equivalent to those brought in by the UK parliament in 2002, and he argued that this was readily understandable, owing to the sheer number of SARs being filed in the UK. 

108.   Having said that the decision in Garnet was highly persuasive, when it came to the issue of proportionality, Advocate Sharp suggested that it may have gone too far, in that in his view, Article 1 of Protocol 1 was simply not engaged at all, on the basis that the withholding of police consent had no legal consequence.  It was difficult to see how the refusal to provide immunity from prosecution constituted a breach of a person's human rights to the enjoyment of their property.

Decision

109.   We take first the failure to disclose the "side pocket" of $50 million and the case of Garnet which Advocate Sharp argues justifies the leave given in this case being set aside.

110.   Whatever the perceived merits of the claim against the defendants in the US proceedings, it would be prudent, in our view, for the hedge fund, which has a number of third party investors, to set aside monies to meet any possible liability.  The fact that it has done so does not undermine the view of the Applicant that the claims are without foundation.  The Applicant exhibited the relevant minutes of the hedge fund which show that the investors were seeking to redeem part of their investments and did not wish to make a commitment to repay redemption proceeds if the hedge fund needed to satisfy liabilities relating to these claims.  It was therefore resolved to create a "side pocket" to meet that potential liability.  The minutes show that these decisions were taken with the benefit of advice from legal counsel in the relevant jurisdictions.  We do not regard the failure to mention the "side pocket" at the outset as sufficiently material to justify leave being set aside.

111.   Ketowolgo was concerned with an application tainted by misrepresentation and that is not the allegation here.  Tshikangu was concerned with the non-disclosure of a material fact, namely that the applicant had received suitable accommodation and had no personal need for judicial intervention.  This non-disclosure was found not to be deliberate or due to any intention to mislead the Court. Stanley Burnton J said this at paragraph 30:-

"30     The question arises whether I should discharge the order of Elias J granting permission.  Mr Luba has brought to my attention the judgment of Popplewell J in Grazyna Beecham [1996] Imm AR 87, in which he stated that only rarely would the court set aside leave where the misrepresentation to the court had been innocent, and that, if in the light of all the material there was an arguable case, ordinarily leave should not be set aside.  With respect to Popplewell J. I think that this statement is unduly restrictive of the discretion of the court in cases of non-disclosure.  It is inconsistent with the judgments of the Court of Appeal in Lloyds Bowmaker v Britannia Arrow [1988 1 WOR 1337, in which the following propositions were approved by Gildewell LJ at 1341:

'A party who seeks relief ex parte is under a duty to the court to make the fullest disclosure of all material facts.  He must disclose any defence he has reason to anticipate may be advanced.  If he does not comply, he will be deprived of the fruits of his order without consideration of the merits and irrespective of whether, had he made such disclosure, he would or would not have obtained the order.  It matters not whether the non-disclosure is deliberate or innocent.  The court may allow a limited latitude for a slip, but only where the party seeking relief has corrected the error quickly.'

Lloyds Bowmaker v Britannia Arrow contains a useful review of the authorities.  It was not a judicial review case, but the same basic principle applies to all applications without notice."

112.   Two points arise from this.  Firstly, failure to refer to potentially adverse case law is not an omission of fact.  Secondly, whilst the application for leave was heard ex parte the granting of leave was not challenged within the two week period provided for in Royal Court Rules 16/6 on the grounds of non-disclosure or any other ground.

113.   On all the material before us the Applicant has an arguable case and in the exercise of our discretion, we do not think it appropriate on these particular facts to set leave aside.

114.   In terms of the grounds of appeal, we see no merit in any of Grounds 1, 2, 3 and 5.

Ground 1 - illegality - ultra vires

115.   There is no authority to support the contention that the police have no power to refuse consent where there is no current investigation in existence or in immediate prospect.  Amalgamated Metal is clear authority for the proposition that the existence of a suspicion is sufficient to ground a proper refusal of consent.

Ground 2 - illegality - failure to take account of relevant considerations

116.   There is no evidence that the JFCU failed to take into account the absence of a criminal investigation, the passage of time since the trading activity and the commencement of the SEC investigation, and the absence of any saisie.  It is manifest from DS Fitzgerald's first affidavit that all of these matters were taken into account.

Ground 3 - illegality - taking account of irrelevant considerations

117.   This ground is somewhat inconsistent with Ground 2, but in any event, the existence of the US proceedings and the SEC investigation were indeed relevant considerations and properly taken into account.  To the extent that press reporting of the US proceedings was taken into account that too would be relevant to any inquiry by the JFCU into the matter.  DS Fitzgerald has confirmed in his second affidavit that the JFCU has not been influenced by any improper desire or request to restrain funds for the benefit of civil proceedings.

Ground 5  --  procedural unfairness - failure to give reasons

118.   The obligation upon the JFCU, if any, to provide reasons for any consent decision was considered by the Guernsey Court of Appeal in Garnet.  It said this at paragraph 72 - 75:-

"72     The obligation of the police to provide reasons for any consent decision was debated before us.  It was conceded by Advocate Edwards on behalf of Garnet that there was no general duty on the police to give reasons for consent decisions.  Rather Advocate Edwards argued that in this case, because all the relevant facts were in the public domain, reasons should have been given.

73       We consider that the concession as to the general duty to give reasons was correctly made.  In many instances it will not be possible to give reasons for a consent decision without running the risk of tipping off suspects or revealing sensitive details of the state of police inquiries in Guernsey and elsewhere.  The Court of Appeal in R (oao UMBS Online Ltd) v SOCA [2008] 1 All ER 465 at 477 paragraph 39 pointed out that in the context of consent decisions it may not be appropriate to disclose to the person affected or his legal representatives relevant material by way of reasoning because to do so might alert others or frustrate the purposes of the overall inquiry.

74       There is however no doubt that if the police are able to give reasons there are obvious policy and practical reasons for that to be done.  The giving of reasons will allow the persons affected to understand why the consent decision has been made and will put them in a position to take meaningful advice on what remedies may be open to them.

75       However a failure to give reasons does not automatically give rise to a decision being quashed even if reasons could and should have been given."

119.   Accepting that approach, we have reviewed the correspondence between the JFCU and the Applicant's legal representatives and the notes of the meeting that took place on 25^th September 2018.  DS Fitzgerald did explain the concerns in relation to the US$1.45 million and its investment (e-mail of 3^rd August 2018) and to the funds relating to the US proceedings (e-mail of 8^th August 2018).  DS Fitzgerald also made it clear at the meeting that the JFCU suspected investor fraud.  In our view the JFCU was not under any obligation to go further and, in particular, to respond to the detailed interrogatories put forward by Advocate Redgrave.

Ground 4 - irrationality - disproportionality

120.   It is on the issue of proportionality, in our view, that the Applicant has a substantive case based upon Article 1 of Protocol 1 and the right to the protection of property.  In relation to the $12 million the Applicant is not in the position of a customer of a bank whose rights to a "chose in action", which a bank account represents, are directly affected, but we are prepared to accept (without having heard adversarial argument on the point) that as a beneficiary of a discretionary trust whose assets are subject to a no consent, the Applicant's convention rights to property are engaged.  Beneficiaries of a discretionary trust have a right to be considered for distributions, but as a consequence of the no consent letter the reality is that the trustee is no longer able to exercise its discretion in favour of any of the beneficiaries.

121.   The position in relation to the US$4 million held under the charity is different, because, as we understand it, the Applicant is not an office holder.  Advocate Redgrave told us that the Applicant has an "interest" in the affairs of the charity (about which the Court has scant disclosure), but was not prepared to say who had contributed the original sum of US$1.45 million.  The assertion of an undefined "interest" seems to us too vague to engage the Applicant's Article 1 of Protocol 1 rights to property.  There is also some doubt as to whether the Applicant has sufficient locus to seek judicial review of this part of the JFCU's decision.  Faced with these concerns, Advocate Redgrave suggested that the Court should separate out the US$4 million and leave the decision in respect of that sum in abeyance for the time being.  We see no point in doing so.

122.   We have considered the arguments put forward by Advocate Redgrave in respect of Garnet, but as Advocate Sharp submitted, it is a decision of the highest persuasive authority in respect of equivalent legislation and legislative history and we have no doubt that this Court should follow its findings as to the applicable law.  The fact that at the time of the decision in Garnet Guernsey had no general offence of failing to disclose possible money laundering is of no consequence in our view to the Guernsey Court of Appeal's analysis, and evidence of how the no consent regime is used today does not, in our view, undermine the Guernsey Court of Appeal's conclusion as to the legislative purpose of the consent regime.  The fact is that very similar arguments to those now being put forward were put forward in that appeal and rejected.

123.   Problematic for the Applicant is the Guernsey Court of Appeal's statement in paragraph 56, which we set out again:-

"56 We do not therefore consider it is reasonable to imply into the statutory consent regime in Guernsey any period of time in which consent is to be granted to transact in order to avoid what may in practice be an extended effective freeze, even if we are wrong in our analysis of the purpose of subsection 39(3).  In any case where there is a suspicion that has not been dispelled, the police must be entitled to refuse consent whatever period of time has elapsed." (our emphasis)

124.   This might suggest that a no consent could remain in place indefinitely so long as there is a suspicion that had not been dispelled.  However, this was said in the context of an analysis of the Guernsey Proceeds of Crime Law and before the Guernsey Court of Appeal had turned its attention to Article 1 of Protocol 1.  When it did so, it found that there had been no de facto deprivation of rights, which would apply where the applicant has no means whatsoever of dealing with the property, but it did find that the second part of Article 1 was engaged.  The question of proportionality did arise and upon which the actions of the Guernsey FIS had to be judged:- 

"100    The temporary seizure of property in criminal proceedings constitutes a control of use for the purposes of the second paragraph of Article 1 of the first protocol: see Raimondo v Italy.  It is on this matter that the question of proportionality arises and the issue as to the actions of the FIS have to be judged.  However, whilst there must be a reasonable relationship of proportionality between the means employed and the aim pursued, the Strasbourg Court recognises that states enjoy a wide margin of appreciation with regard both to choosing the means of enforcement and in ascertaining whether the consequences of enforcement as justified in the general interest: see Chassagnou and Others v France (2000) 29 EHRR 615.  However, where delays imposed an excessive burden amounting to freeholders being kept out of their property for some eleven years, with no possibility of compensation for losses arising, an Italian system of postponing the enforcement of eviction orders - in order to preclude a flood of tenants having to find alternative housing - was found not to meet this balancing: see Spadea and Scalabrino: (1996) 21 EHRR 481; see also Matos e Silvia, cited above.  In addition, in Sporrong, it was found that where lengthy restrictions were imposed on the use of property there should be provision for periodic re-assessment."

101     In our judgment the circumstances of the present case do not disclose a lack of proportionality between the overall aim of the States of Guernsey to tackle money laundering and the inability of Garnet to have access to its funds for the time being." (our emphasis)

125.   The Guernsey Court of Appeal took first the importance of the aim of tackling money laundering, and said this at paragraph 102:-

"102  The importance of the aim of tackling money laundering needs little by way of adumbration.  The particular importance to the States of Guernsey in tackling money laundering is also well known, given Guernsey's reliance on the attraction of international financial business and given well publicised concerns, over the past ten or fifteen years, expressed by outside sources as to the efficacy of its policies in this regard."

126.   It then turned to the position of Garnet, and found it "jejune of Garnet to submit....that merely because the Government of Indonesia had not made out any proprietary claim to the funds, that the Government of Indonesia had currently no proceedings outstanding against [Mr Putro] or Garnet anywhere in the world and that no allegation of corruption has ever been established before a court against either Garnet or [Mr Putro] anywhere in the world, the maintenance of the lack of consent was disproportionate". Perhaps not surprisingly, given the facts of that case, and the overwhelming inference of corruption, it found the circumstances far removed from freeholders being kept out of their property for eleven years and that the Lieutenant Bailiff had erred in finding that the decision was an excessive interference with Garnet's prime face property rights, unlawful and a breach of Article 1 of Protocol 1. 

127.   Accordingly and notwithstanding its finding as to the legislative purpose of the consent regime, the Guernsey Court of Appeal did consider the de facto position, namely the practical effect of the no consent letter, and found that Garnet's Article 1 of Protocol 1 rights were engaged.  It is implicit in its finding that there could come a point when the continued imposition of no consent would become disproportionate.  Advocate Sharp argued that it had gone too far in doing so, but he cannot on the one hand argue that we should follow Garnet to the extent that it supports his arguments and on the other hand argue that we should not follow it, where it does not do so. Garnet permits an examination of the actions of the JFCU in the context of the Applicant's rights under Article 1 of Protocol 1 and whether they are to be judged as proportionate.

128.   Taking the four step proportionality test referred to in Interush above and applying them to the facts in this case, we find the first three steps, following Garnet, are met.  It is the fourth part of the test, namely whether a reasonable balance has been struck between the societal benefits of the encroachment and the inroads made into the rights of the individual, in particular whether it results in an unacceptably harsh burden on the individual, that following Garnet now comes into play.

129.   The facts of this case are quite different to those in Garnet.  In Garnet:-

(i)        $68 million was paid into the account of Mr Putra's company, Garnet, at a time when he was in his twenties and the son of the President of Indonesia.

(ii)       He has been unable to explain the source of this very considerable wealth. As the Guernsey Court of Appeal said at paragraph 105 "it would be surprising if [Mr Putro], still in the prime of his life, would not remember such an acquisition at the very may-morn of youth".

(iii)      He was convicted of corruption, and although subsequently acquitted, was then convicted of the attempted murder of the judge who had convicted him of corruption.

(iv)      The Government of Indonesia has asserted (but apparently not pursued) a proprietorial claim to these monies. 

130.   Given these facts and the sheer strength of suspicion, one can readily understand the Guernsey Court of Appeal deciding that the decision by the Guernsey FIU to maintain the no consent letter was proportionate.  In the case before us:-

(i)        There appears to be no issue as to the source of the $12 million held by the BVI company. It represents the proceeds of an investment in a hedge fund to which the Applicant, though the advisor company, acts as investment advisor.

(ii)       The inference is that these transactions, being transactions in publicly quoted shares, were conducted openly.  Indeed the transactions form the basis of the US proceedings.

(iii)      The only allegations of illegality are those made in the US proceedings, which are civil proceedings, which could take years, with appeals, to reach a final determination. Even then, if there are adverse findings against the Applicant and/or the advisor company, they will be findings of a civil court and it does not follow that criminal proceedings will then ensue.  It would seem reasonable to infer that the plaintiffs in the US proceedings have not themselves filed a criminal complaint against any of the defendants in those proceedings.

(iv)      The transactions have been investigated by the SEC, a regulatory not criminal investigatory body, for nearly two years without any regulatory proceedings ensuing.  The only contact with this jurisdiction has been with our regulator, the Jersey Financial Services Commission.

(v)       There is no criminal investigation anywhere into these transactions, the existence of which is a necessary precursor to any application for a saisie.

(vi)      The hedge fund that undertook these transactions (through underlying entities) has set aside $50 million, a sum which on advice given to it is sufficient to meet the claims in the US proceedings. It would seem therefore that that if the US proceedings are successful, then the disaffected shareholders will be compensated substantially, if not wholly.

(vii)     There is an issue as to the source of the $1.45 million invested by the charity, the source of which the Applicant has declined to disclose with no real explanation as to why he has declined to do so.

131.   The position of the SEC is, we think, important because it is the relevant regulatory authority and it is in a position to notify the relevant criminal authorities if, in its view, there are circumstances warranting a criminal investigation. It is significant, therefore, that after nearly two years of investigation it has not apparently instigated a criminal investigation with any relevant criminal investigatory authority.

132.   There is no judicial guidance on the point at which the maintenance of a no consent will become disproportionate, and we are not in a position to give such guidance, as requested, because it seems to us that each case will depend on its own facts.  In this case:-

(i)        The transactions concerned took place in 2017;

(ii)       The US proceedings and the SEC investigation commenced in 2017;

(iii)      The no consent letter was issued in July 2018.

133.   Advocate Redgrave argues that in all of these circumstances the point at which the maintenance of the no consent letter becomes disproportionate has already been reached and he urges the Court towards conclusions similar to the Lieutenant Bailiff in the first instance decision in Garnet, criticised by the Guernsey Court of Appeal at paragraph 20, to repeat:-

"... that, after a period of years, if no criminal proceedings had been started at all and no active criminal investigations were in train that could lead to some form of criminal proceedings, it was irrational and disproportionate for the FIS to refuse to consent to the transaction since there was no realistic prospect of any action being taken by any criminal law enforcement authority that might lead to the funds being retrained or confiscated."

134.   That criticism was made on the particular facts in Garnet and, as we have said, the facts here are very different.  Even so it behoves this Court to keep in mind the considerable weight placed by the Guernsey Court of Appeal on the importance of the aim of tackling money laundering, which, as it said, needs little by way of adumbration.  We also remind ourselves that we are reviewing a decision to maintain the no consent taken by the JFCU on the 8^th November 2018.  As at that date the no consent had only been in place for some three months and the JFCU was still in the process of gathering and collating evidence.

135.   Given the importance of tackling money laundering, it simply cannot be said that as at the 8^th November 2018 the practical effect of the no consent letter over the $12 million placed an unacceptably harsh burden on the Applicant.  In the case of the $4 million, it is difficult to see what burden has been placed upon the Applicant at all, as the funds are held within a charity.  The Court has been given scant information about this charity and has heard nothing from it.  In addition the Applicant has declined, without any real explanation, to disclose the source of the $1.45 million invested through the hedge fund.

136.   For all of these reasons the application for judicial review must fail, as the decision in respect of both amounts was, as at the 8^th November 2018, reasonable and proportionate.

137.   This does not mean that the no consent can be maintained indefinitely, because Garnet has established that there can come a point when its maintenance would become disproportionate. It is not possible for this Court to say when that point will be reached, because it will depend upon all of the circumstances then prevailing, but the ongoing absence of a criminal investigation, a necessary precursor to a saisie, will be a key factor.

Authorities

States of Jersey Police Force Law 2012. 

Prospective Applicant v Chief Officer of the States of Jersey Police [2019] JRC 032. 

Prospective Applicant v Chief Officer of the States of Jersey Police [2019] JRC 56B. 

Proceeds of Crime Act 2002

Proceeds of Crime (Jersey) Law 1999. 

Proceeds of Crime (Enforcement of Confiscation Orders) (Jersey) Regulations 2008. 

Chief Officer of SOJP v Minwalla [2007] JLR 409. 

Gichuru v Walbrook [2008] JRC 068. 

Chief Officer, Customs & Excise v Garnet Investments Limited [2011] 19/2011.

Garnet v BNP and Indonesia [2009-10] GLR 1. 

Interush v Commissioner of Police [2019] HKCA 70. 

Forfeiture of Assets (Civil Proceedings) Jersey Law 2018. 

Proceeds of Crime (Cash Seizure) (Jersey) Law 2008. 

Planning & Environment Committee v Lesquende Ltd [1998] JLR 1. 

Paulet v United Kingdom [2014] (Application no. 6219/08). 

Human Rights (Jersey) Law 2000. 

Tshikangu v London Borough of Newark [2001] WL 98077. 

Secretary of State for Home Department v Ketowolgo. 

Amalgamated Metal Trading Limited v City of London Police Financial Investigation Unit & Others [2003] 1 WLR. 

K Limited v National Westminster Bank plc (Revenue and Customs Commissioners and another intervening) [2007] 1 WLR 311

Drug Trafficking Offences (Jersey) Law 1988. 

Proceeds of Crime (Jersey) Law 1999. 

Knight v Thackeray's Limited [1997] JLR 279. 

AG v Smith [2004] JRC 168A.  

Royal Court Rules 16/6