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Cite as: [2005] ScotCS CSOH_130, [2005] CSOH 130

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Her Majesty's Advocate v. WMM [2005] ScotCS CSOH_130 (22 September 2005)

OUTER HOUSE, COURT OF SESSION

[2005] CSOH 130

P1906/05

OPINION OF LORD GLENNIE

in the Petition of

THE RIGHT HONOURABLE COLIN D BOYD, Q.C., Her Majesty's Advocate

Petitioner;

against

W M M

Respondent:

for

A Restraint Order in terms of section 120 of the Proceeds of Crime Act 2002

________________

Petitioner: B. McConnachie AD, Crown Agent

22 September 2005

[1] On 22 September 2005 the petitioner applied for a restraint order in terms of section 120 of the Proceeds of Crime Act 2002 ("the Act"). The application was made ex parte as permitted by section 121(2) of the Act. In accordance with the usual practice, a draft interlocutor was submitted with the application. The order sought was, so far as material, in the following terms:

"The Lord Ordinary, having heard Counsel, grants a Restraint Order in terms of Section 120 of the Proceeds of Crime Act 2002 interdicting the respondent M from dealing with any realisable property whether or not said property is described in this Order and including all realisable property transferred to said M after this Order is made and in particular and without prejudice to that generality with the property at [address], the sum at credit of [account number and sort code] held with [Bank name and branch] in the name of M and Mercedes motor vehicle [type and registration number] registered in the name of M; appoints the Petitioner to give notice of the Petition and this Order upon the persons named and designed in the Schedule appended to this Petition; grants Warrant for Inhibition and Arrestment."

The Schedule to the Petition named, amongst others, the manager of the branch of the bank identified in the draft Interlocutor.

[2] The Petition averred that M had appeared on indictment a few days earlier charged with a contravention of section.4(3)(b) of the Misuse of Drugs Act 1971 and contravention of section 327(1) of the Proceeds of Crime Act 2002. It averred that the drug recovered was cocaine with a potential street value in excess of £200,000. It recited that M was committed for further examination and released on bail. It averred that M had no known or visible means of income and that there were reasonable grounds to believe that M had benefited from his criminal conduct. It then went on to aver that M's realisable property included the heritable estate, the sum at credit in the bank account and the Mercedes car referred to in the draft Interlocutor; and concluded that the petitioner was desirous of obtaining a restraint order in the terms described above. The terms of the Petition and of the draft Interlocutor were similar to many that are brought before the Court every week.

[3] I refused to make an Order in the terms sought. I did, however, grant an Order in modified terms, the modifications being: (1) to allow the respondent, M, to make payments up to a certain amount per week for the purpose of his ordinary living expenses and to withdraw funds from the named account sufficient for that purpose; and (2) specifically to give leave to both parties to apply to the Court to vary the Order. I have, on a number of occasions, required the inclusion of a living expenses proviso before granting a restraint order on the application of the petitioner, but I am aware that this is by no means typical of the way in which such applications are dealt with. It is appropriate that I should set out my reasons for insisting on such a proviso in the Order.

[4] A restraint order is intended as a temporary measure, to prevent the dissipation of assets by a respondent until the Court is in a position, if satisfied that it is right so to do, to make a confiscation or forfeiture order. The power to make such an Order may be exercised when one of the conditions set out in section 119 is satisfied. In the present case, on the averments in the Petition, the "second condition" applies, namely (a) that proceedings for an offence have been instituted but not completed and (b) that there is reasonable cause to believe that the accused has benefited from his criminal conduct: section 119(3). It is apparent from this, as with the other conditions set out in the section, that a restraint order is sought, and may be granted, at a stage before there has been any determination of whether or not the respondent has been guilty of criminal conduct, let alone whether or not he has benefited therefrom. The Court must proceed on the basis of statements made ex parte on behalf of the Petitioner. The Court cannot assume that a confiscation order under the Act will be made in due course.

[5] The grant of a restraint order is discretionary. Where averments are made such as those made in the present Petition, the Court will, no doubt, be minded to grant an Order. But its terms need careful consideration. The Order sought in the present case is very wide. It has the effect of interdicting the respondent from dealing with any of his realisable property, not only that specifically referred to in the Order. It also interdicts him from dealing with realisable property transferred to him after the Order is made. The Order takes effect immediately it is made, before intimation to the respondent: section 121(4). It will have the effect, when notified to the Bank, of stopping payment under any standing orders or direct debits, e.g. for rent or mortgage payments or for domestic or household bills. Any cheques already given by the respondent by way of payment will be dishonoured on presentation. The respondent will be prevented from paying amounts outstanding on his credit card, if he has one. He will be prevented from withdrawing cash from the Bank to pay for domestic necessities such as food and drink. In terms of the draft Order he will not be entitled to use any cash that he presently has for this purpose either. Nor can he fill his car with petrol or buy a bus ticket.

[6] There may be circumstances in which the Court can be justified in granting an Order in such wide and absolute terms at the ex parte stage. But such cases will be rare. In the ordinary case, an Order in such terms goes well beyond that required to prevent dissipation of assets; and is liable to cause serious hardship to the respondent for the reasons I have indicated.

[8] It appears that restraint orders were based on the English Mareva injunction, now known in England as a "freezing" injunction: see the notes to section 119 in Renton & Brown's Criminal Procedure Legislation at p.A-757. In dealing with such injunctions, the English Courts have insisted upon adequate provision being made in the Order for the defendant's reasonable living expenses: see e.g. P.C.W. (Underwriting Agencies) Ltd. v Dixon [1983] 2 Lloyd's Rep. 197, Colman, The Practice and Procedure of the Commercial Court, 5^th ed. at p.113. Such a provision is part of the wording of the Freezing Injunction now suggested in a Practice Direction 25PD.13 supplementing Part 25 of the English Civil Procedure Rules (the wording is set out at p.616 of Volume 1 of the White Book). The same approach was applied to a restraint order under the Drug Trafficking Offences Act 1986, a forerunner of the present Act, by the Court of Appeal in Re Peters [1988] 3 All E.R. 46. In the course of considering the terms of a variation to the Order granted in that case, Lord Donaldson MR said, at p.50:

"Mr. Peters, as an unconvicted person who might be acquitted, was entitled to ask that his son's education should not be interrupted, that he himself should be adequately clothed and that he should be able to pay for the costs of his defence".

Nourse L.J., at p.51, expressed his agreement. He said that the jurisdiction to make or vary restraint orders is closely analogous to the jurisdiction to make or vary Mareva injunctions. In both cases

"the object is to strike a balance at an interlocutory stage between keeping assets available to satisfy a final order, if and when one is made, and meeting the reasonable requirements of their owner in the meantime".

Mann L.J. also agreed. He said that

"the purpose of a restraint order is to prevent the dissipation of realisable property which may become subject to a confiscation order. In my experience a restraint order does not, and properly does not, prevent the meeting of ordinary and reasonable expenditure."

The decision in that case, upon which the Court of Appeal differed from the judge below, was that while the Court was prepared to allow the defendant to pay his son's school fees as they fell due, it would not allow the defendant to pay a sum by way of capitalisation of future school fees.

[9] The statements of principle which I have quoted appear to me to be entirely correct and, with one exception, provide a sound basis for approaching restraint orders under the 2002 Act.

[10] There is now statutory provision for a reasonable living expenses proviso to a restraint order. This is contained in section 120(3) of the 2002 Act which provides as follows:

"(3) A restraint order may be made subject to exceptions, and an exception may in particular -

(a) make provision for reasonable living expenses and reasonable legal expenses;

(b) make provision for the purpose of enabling any person to carry on any trade, business, profession or occupation;

In my opinion, a restraint order ought, from the moment it is granted on the ex parte application, to contain a proviso for reasonable living expenses unless good reason is shown why this should not be done in the particular case. When applying for such an order, and in submitting a draft, the petitioner should insert such a proviso into the draft Order sought; or, if he does not, he should come before the Court prepared to explain why, in the circumstances of the case, it would be inappropriate to include such a proviso; and the circumstances relied upon ought to be set out in the Petition.

[11] In a case where it is known that the respondent carries on a trade, business, profession or occupation, a similar approach should be taken, in line with the provisions in section 120(3)(b) of the Act.

[12] In the Petition before me on this application there are no averments of circumstances suggesting that a reasonable living expenses proviso would be inappropriate. Nor was I told of any such circumstances. Indeed, since the petition recites that the respondent was released on bail, and I was told that whilst on bail he lives with a partner at the property identified in the draft Interlocutor, which is said to be his own property, it is to be inferred (absent some other explanation of how he lives) that he incurs and will continue to incur at the very least routine domestic and household expenses of the sort considered above. On this state of the evidence it would be unreasonable not to insert a reasonable living expenses proviso in the Order.

[13] There are a number of matters of detail that require to be addressed.

[14] First, there is the question of whether the proviso should simply allow the respondent to make payments of reasonable living expenses, or whether some monetary limit should be set. I was persuaded that it is generally appropriate to put a limit in the Order. This may restrict the scope for the Order to be flouted. Consistent with the principle that a person not convicted of any offence should not unreasonably be made to incur expenditure in coming to Court, the limit should err on the side of generosity. But I am conscious of the fact that at the ex parte stage it will not be possible to fix the appropriate limit with any accuracy. I would expect the petitioner, after the Order is granted, to attempt to reach agreement with the respondent as to the appropriate level of expenditure to be permitted by the proviso. If agreement is reached, the Order can be varied of consent; if not, either party can apply to the Court.

[15] Secondly, it seems to me to be plain that the expression "reasonable living expenses" covers the payment of ordinary debts as they fall due: c.f. the suggestion in Colman, The Practice and Procedure of the Commercial Court that a separate proviso may be required. If there is any uncertainty about this, an application can be made to Court.

[16] Third, there is the question of whether and, if so, how the proviso is to be policed. The possibility of appropriate policing arrangements was referred to by Lord Hamilton in Flemming Lief Hansen v HMA [2005HCJAC33] (4 March 2005, unreported) at para.[12] and is made possible, if statutory authority is required, by section 120(3)(c) of the 2002 Act quoted above. This would allow the Court to require the respondent, as a condition of making a proviso allowing payment of reasonable living expenses, to take certain steps designed to enable the petitioner to be aware of the level and type of expenditure and apply to the Court if he considers that it goes beyond what is permissible. For example, the respondent might be required to write to the petitioner setting out and justifying the amount he needs and the payments he requires to make. The Court might be persuaded, as a condition for granting the reasonable living expenses proviso, to require the respondent to identify the accounts from which he habitually makes payment of his ordinary living expenses. There may be other appropriate conditions. Alternatively, the respondent might be required to establish a separate account into which certain sums can be paid and from which payments can be made consistent with the Order. No policing requirement was sought on the application before me, but it is open to the petitioner to apply to vary the Order in this respect.

[17] Fourth, there is the position of the Bank. Clearly it cannot be required to ascertain whether a particular payment or withdrawal from the account is made for the purpose of the respondents' reasonable living expenses. The wording of the proviso in the Order granted by me, which I set out below, does not appear to me to put the Bank at risk of proceedings for contempt. However, if any difficulty is foreseen or encountered, an application to Court can be made.

[18] Fifth, there is the question of the respondent's reasonable legal expenses: see section 120(3)(a). By reason of section 120(4) the Court is not entitled under this provision to make an exception from the restraint order to allow the respondent to pay his legal expenses of defending the criminal case brought against him. It may be contemplated that he will be granted legal aid for this purpose. This is the exception to which I referred in paragraph [9] above. But the Court can, in making a restraint order, include a proviso allowing the respondent to incur legal expenses incurred in connection with the restraint order itself. I did not make such a proviso in the instant case, but it is for consideration whether it would be appropriate in the ordinary case so to do.

[19] The wording I required to be added to the draft Order was in the following terms (inserted before the words "Appoints the Petitioner ..."):

"... provided that nothing in this order is to be understood as preventing the respondent from making payments for the purpose of his ordinary living expenses or from withdrawing funds from said account for that purpose up to a maximum of £250.00 per week; the petitioner and respondent may apply to the court to vary this order ..."

No doubt the wording can be improved or refined as experience dictates. Although clearly the parties may apply to Court in any event to vary the Order, and this is set out in section 121(5), I consider it important that this is specifically drawn to the attention of the respondent who may not have immediate access to legal representation in connection with the restraint order. I therefore required this to be included in the Order.