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OUTER HOUSE, COURT OF SESSION

[2006] CSOH 176

P260/04

OPINION OF LORD DRUMMOND YOUNG

in the petition of

THE SCOTTISH MINISTERS

Petitioners;

against

LINDA DOIG, STEVEN DOIG AND DAVID DODDS CAMERON

Respondents:

________________

Petitioners: Currie, QC; Solicitor to the Scottish Executive

First Respondent: Shead; Drummond Miller WS

Third Respondent: Di Rollo, QC, Gilbride; Balfour & Manson

23 November 2006

The parties' averments

[1] The petitioners are the enforcement authority for Scotland for the purposes of the Proceeds of Crime Act 2002. They have presented a petition in which they seek a recovery order against the respondents in terms of Chapter 2 of Part 5 of that Act. The general scheme of Chapter 2 of Part 5 is that the petitioners as enforcement authority for Scotland are entitled to institute proceedings for a recovery order in the Court of Session against any person who is thought to hold recoverable property. Recoverable property is property obtained through unlawful conduct. Unlawful conduct is defined as including conduct in any part of United Kingdom which is unlawful under the criminal law of that part. In the present petition the allegation made against the respondents is that certain property held by them is recoverable property in the foregoing sense, and is accordingly recoverable by the petitioners. The petitioners' averments in support of that allegation were, however, the subject of detailed criticism by counsel for the third respondent; in particular he argued that the facts averred by the petitioners did not justify the inference that the property in question had been obtained through unlawful conduct. It is accordingly necessary to set out the petitioner's averments in some detail. Those averments are as follows.

[2 ] The petitioners aver that the following unlawful conduct has occurred. The third respondent has been, they say, concerned in the supplying of controlled drugs since at least 1997. He is said to have an extensive criminal history including numerous convictions for theft by housebreaking dating from 1964 to 1972. On 5 February 1997, following a guilty plea, he was convicted of a charge of being concerned in the supplying of controlled drugs under section 4(3)(b) of the Misuse of Drugs Act 1971 and sentenced to six months imprisonment. At the same time he was admonished in respect of a conviction under section 5(2) of the same Act, relating to possession of controlled drugs. It is further averred that on 16 August 2002 the third respondent was arrested by Tayside Police in Dundee for possessing 2 kg of amphetamine. The drugs, it is said, were found in a Land Rover Discovery vehicle which the third respondent was driving. It is averred that the third respondent had placed the drugs in that vehicle, and that possession of such a quantity of drugs indicated involvement in supply. The third respondent was charged with an offence under section 4(3)(b) of the Misuse of Drugs Act 1971, but proceedings in the High Court of Justiciary were deserted on 22 October 2003. That is said to have occurred because certain evidence was ruled to be inadmissible in the criminal proceedings.

[3 ] The petitioners further aver that the first respondent, who is the wife of the third respondent, assisted her husband in concealing the financial proceeds of the unlawful conduct previously specified. It is averred that the second respondent, the first respondent's son, has also assisted the third respondent in concealing the financial proceeds of unlawful conduct; he was not represented in the present proceedings. Details of property held by the first and third respondents are then given; these are as follows. The first respondent opened a Halifax instant saver account on 3 February 1997 with a £5,000 deposit. Regular lump sum cash payments have made into that account; no such payments were made during the period in 1997 when the third respondent was in prison. The majority of the lodgments were made by the first respondent. The total lodged in the account was £62,372.44, and the balance on the account stood at £29,000 in June 2002. The current balance is £5,460. Following the arrest of the third respondent on 16 August 2002, on 19 August, the first banking day thereafter, £25,400 was transferred from the Halifax instant saver account to a Halifax Cardcash account held by the second respondent. The second respondent made a further cash deposit of £7,000 into the Cardcash account on 31 August 2002. The current balance on that account, it is averred, is at least £32,000. The first respondent opened a Halifax bonus bond on 16 September 1998 with a single deposit of £5,000 from the Halifax instant saver account referred to above. The third respondent opened a gold deposit account with the Royal Bank of Scotland on 24 January 2001 with a £2,000 cash deposit. It is averred that regular lump sum cash payments have been made into this account, the majority of such lodgments being made by the first respondent. The total lodged in this account is said to be £34,316.64, and the current balance is said to be £115.83. The first respondent is said to have opened a gold deposit account with the Royal Bank of Scotland on 11 June 1996 with a transfer of £8,831 from another account with the Royal Bank. Further round sum deposits were made by the first respondent into this account; those totalled £3,526. The current balance of that account is £507.13. It is averred that the round sum lodgments in the various accounts were made in cash, consisting of coins and mixed denomination notes. In addition, two Britannic Assurance with profits endowment policies were taken out on the life of the third respondent by the first respondent, who was the beneficiary of the policies, in February and April 1999 respectively. The premium payable on each of those policies was £3 per week.

[4 ] The petitioners then make averments about the declared income of the first and third respondents. Those averments are detailed, and are broken down by financial or calendar years, but for present purposes it is sufficient to provide a summary. In her applications for the policies with Britannic Assurance, the first respondent stated that her joint income with the third respondent was £524 per month from benefits in one case and £362 per month from benefits in the other. As income, the first respondent received job seekers' allowance and invalidity benefits totalling £6,415.20 during the three years ended 5 April 1997, 5 April 1998 and 5 April 1999. During the three years ended 5 April 2001, 5 April 2002 and 5 April 2003 she received a total of £4,207.95 by way of disability living allowance and income support. The petitioners further aver that between 2001 and 2003 the first respondent visited a specified casino in Dundee on 311 occasions, placed £1,080 on gaming tables and received net winnings of £3,870. The first respondent further spent, it is said, approximately £160 per month on bingo at the casino. During the year 2003 she received income of £4,550 from the sale of dogs. It is averred that the first respondent had no other legitimate income over the period from 1995 to 2002, and that there were no Inland Revenue records for her over that period. During that period a total of £122,959.49 was deposited into three bank accounts in her name. It is averred that she gave no satisfactory explanation of the source of her income. Further property is averred to have been acquired by the first respondent. In May 2001, it is said, she purchased a house at 8 Ballantrae Place, Dundee, from the local authority at a price of £15,510 in cash. She further acquired three motor vehicles during 2001 and 2002, two of which she still has. In August 2002 she purchased, it is it is averred, a plasma screen television and digital box for £4,059.99. She also acquired a ring that was believed to contain diamonds.

[5 ] The income of the third respondent during the corresponding period is averred to be as follows. During the years ended 5 April 1997 and 5 April 1998 he received a total of £4,072.20 by way of income support. He received no benefits during the three financial years 1998/1999, 1999/2000 and 2000/2001. During the years ended 5 April 2001 and 5 April 2002 he received a total of £2,219.29 by way of job seekers' allowance or income support. It is averred that he had no other no legitimate income during the period from July 1995 to August 2002. There were no Inland Revenue records for him over that period. A total of £62,430.05 was deposited into two bank accounts in his name during the same period. Lodgments into these accounts were frequently in the form of round cash sums exceeding £1,000. When the third respondent was arrested on 16 August 2002 he was in possession of £1,142.30 in cash. At police interview he accounted for his possession of that cash by stating that it was the proceeds of safebreaking. He subsequently maintained that he had obtained income from the sale of cars and jewellery, but no records or accounts of such sales are available. In 1998 the third respondent acquired a Peugeot car on hire purchase for a sum in excess of £12,000. During 2001, 2002 and 2002 he placed bets totalling £9,070, losing all but £1,100 of that amount.

[6 ] The petitioners further aver that the acquisition of the property referred to above could not be attributed to any legitimate income, and that the first and third respondents' lifestyle indicated that they were living well above their legitimate means. Certain further averments are made in relation to the earnings and assets of the second respondent; it is unnecessary, however, to rehearse these because he was not represented and no submissions were made in relation to the averments concerning property in his name.

[7 ] On the basis of the foregoing averments, the petitioners contend that the property specified in Part II of the Schedule to the petition is (i) property obtained through unlawful conduct or (ii) property obtained through unlawful conduct held by persons into whose hands it may be followed or (iii) represents property obtained through unlawful conduct. The primary remedy sought in the prayer of the petition is a recovery order in terms of section 266 of the Proceeds of Crime Act 2002 in respect of the property mentioned in Part II of the Schedule to the petition. That property is as specified in paragraphs [3]-[5] above. It comprises the house at 8 Ballantrae Place, Dundee, the Halifax bonus bond, the sums at credit of the various Halifax and Royal Bank accounts, the two Britannic Assurance policies, the plasma screen television and associated digital box, two motor vehicles and a dress ring. A number of ancillary remedies are sought. These include the appointment of an official in the Civil Recovery Unit to be the trustee for civil recovery in respect of the property, to vest such property in the trustee, to confer certain powers on the trustee, and to grant decree for removal of the first respondent and her family from the house in Ballantrae Place.

[8 ] Both the first and third respondents have lodged answers to the petition. The answers for the first respondent are fairly skeletal; they include a denial of the whole of the petitioner's averments relating to property held by the first and third respondents. Those answers do, however, contain a number of legal contentions, which were repeated in counsel's argument; I discuss those below. The answers for the third respondent are considerably fuller. The third respondent admits his conviction under section 4(3)(b). He further admits his arrest on 16 August 2002 by Tayside Police, the finding of 2 kg of amphetamine in a Land Rover Discovery vehicle which he was driving, that he was charged with an offence under section 4(3)(b) of the 1971 Act, and that the Crown had deserted proceedings in the High Court because certain evidence was ruled to be inadmissible. By way of explanation, however, he avers that he had not placed the amphetamine within the Land Rover Discovery vehicle and that the vehicle had previously been parked in an area where many people would have access to it. In relation to the averments of income and property acquired by the third respondent, he admits the receipt of state benefits in the years ended 5 April 1997, 5 April 1998, 5 April 2002 and 5 April 2003 in the amounts averred by the petitioners. The third respondent further admits the acquisition of the Peugeot car on hire purchase; he explains, however, that he was unable to maintain the hire purchase payments and that the car was repossessed. The third respondent further explains that during the period from 1997 to 2002 he acquired money from dealing in cars and jewellery, and won money in casinos; he states that in 2001 and 2002 he won approximately £10,000 in casinos.

The Proceeds of Crime Act 2002
[9 ] The petition is brought under Part 5 of the Proceeds of Crime Act 2002. Part of 5 is headed "Civil recovery of the proceeds etc. of unlawful conduct". The general purpose of the Part is stated in section 240, which is in the following terms:

"(1) This Part has effect for the purposes of --

(a) enabling the enforcement authority to recover, in civil proceedings before the ... Court of Session, property which is, or represents, property obtained through unlawful conduct,

...

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

Subsection (1) indicates that the proceedings contemplated by Part 5 are to be civil proceedings, pursued through the civil courts. Subsection (2) is important, because it makes it clear that criminal proceedings are not required for Part 5 to be applicable.

[10 ] Section 241 then defines unlawful conduct. So far as conduct within the United Kingdom is concerned, subsection (1) provides that conduct occurring any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part. Section 242(1) defines property obtained through unlawful conduct; it provides as follows:

"A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct".

These provisions make it clear that, for Part 5 to apply, what is required is the obtaining of property through conduct that is unlawful under the criminal law. The identity of the perpetrator is immaterial. That is clearly a major distinction from criminal proceedings. Moreover, it is immaterial whether the person from whom the property is recovered has been guilty of any criminal offence; the property is still recoverable, subject to an exception, contained in section 308, for persons who have acquired property in good faith, for value and without notice that it was recoverable property.

[11 ] Civil recovery in the Court of Session is dealt with in Chapter 2 of Part 5 of the 2002 Act. The main operative section for Scotland in that Chapter is section 244; section 244(1) provides as follows:

"Proceedings for a recovery order may be taken by the enforcement authority in the Court of Section against any person who the authority thinks holds recoverable property".

Under section 316 of the Act, the petitioners are designated the enforcement authority for Scotland. I was provided with a detailed explanation of how the petitioners exercised their jurisdiction as enforcement authority. Proceedings under Part 5 are instituted by the Civil Recovery Unit, which is the agency set up to carry out the functions of the petitioner as enforcement authority. References to the Civil Recovery Unit are made by the Financial Crime Unit, which is an operational unit of Crown Office. The Financial Crime Unit is responsible for making applications for confiscation orders under Part 3 of the Proceeds of Crime Act; a confiscation order, unlike a recovery order, can only be made against a person who is convicted of a criminal offence. I was informed that matters can only be referred to the Civil Recovery Unit if either a prosecution does not take place or a prosecution is concluded without a conviction, whether through desertion or a verdict of not guilty. The Civil Recovery Unit is responsible to the Lord Advocate, but only in so far as he exercises the role and function of one of the Scottish Ministers; I was informed that the Unit is not answerable to the Lord Advocate as the person responsible for the investigation and prosecution of crimes in Scotland. Counsel for the petitioners emphasized that the Civil Recovery Unit, in working for the petitioners as enforcement authority under the 2002 Act, performs no prosecutorial function. If the Civil Recovery Unit discovered any matter involving criminality, it was required to refer it to the prosecutor, in the form of the Financial Crime Unit or the Procurator Fiscal. The Unit played no part in any question of prosecution. The Unit was, however, an operational unit of Crown Office, and was responsible initially to the Deputy Crown Agent. Despite that, the Deputy Crown Agent had no physical access to the Unit's offices, and appropriate firewalls were placed in the Crown Office computer systems to prevent the Deputy Crown Agent and those with criminal functions from obtaining access to the Unit's files.

[12 ] Section 244(1) refers to "recoverable property". This is defined in section 304 in the following terms:

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

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

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

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

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

In the following sections provision is made for the tracing of property that represents recoverable property and for mixed funds that include recoverable property that has been inmixed with other property. All these provisions are subject to section 308, which provides a general exception for any person who obtains property in good faith, for value and without notice that it was recoverable property.

[13 ] The powers and duties of the court are set out in sections 266-280. Section 266 provides as follows:

"(1) If in proceedings under this Chapter [Chapter 2 of Part 5] the court is satisfied that any property is recoverable, the court must make a recovery order.

(2) The recovery order must vest the recoverable property in the trustee for civil recovery".

Subsection (3), however, places two important limitations on the making of recovery orders. In the first place, it provides that the court may not make in a recovery order any provision in respect of any recoverable property if the conditions specified in subsection (5) are met and it would not be just and equitable to do so. The conditions set out in subsection (5) deal with persons who obtain recoverable property in good faith and take steps in reliance on obtaining that property. That subsection was not invoked in the present case and it is accordingly unnecessary to say anything more about it. In the second place, under subsection (3)(b) the court may not make any provision in a recovery order which is incompatible with any of the Convention rights within the meaning of the Human Rights Act 1998. That provision was invoked, and I discuss its implications below. Section 266(2) refers to the trustee for civil recovery; the trustee's functions are described in section 267. The trustee for civil recovery is a person appointed by the court to give effect to a recovery order; his functions are to secure the detention, custody or preservation of any property vested in him by the recovery order and to realize the value of such property for the benefit of the enforcement authority. The net receipts from recovery orders are paid into the Scottish Consolidated Fund.

[14 ] Proceedings for civil recovery under Part 5 of the 2002 Act are subject to special rules for prescription and limitation. These are enacted by section 288 of the Act. Subsection (2) of that section enacts a new section 19B of the Prescription and Limitation (Scotland) Act 1973. This is in the following terms:

"19B Actions for recovery of property obtained through unlawful conduct etc.

(1) None of the time limits given in the preceding provisions of this Act applies to any proceedings under Chapter 2 of Part 5 of the Proceeds of Crime Act 2002 (civil recovery of proceeds of unlawful conduct).

(2) Proceedings under that Chapter for a recovery order in respect of any recoverable property shall not be commenced after the expiration of the period of twelve years from the date on which the Scottish Ministers' right of action accrued.

(3) Proceedings under that Chapter are commenced when --

(a) the proceedings are served, or

(b) an application is made for an interim administration order,

whichever is the earlier.

(4) The Scottish Ministers' right of action accrues in respect of any recoverable property --

(a) in the case of proceedings for a recovery order in respect of property obtained through unlawful conduct, when the property is so obtained,

(b) in the case of proceedings for a recovery order in respect of any other recoverable property, when the property obtained through unlawful conduct which it represents is so obtained.

(5) Expressions used in this section and Part 5 of that Act have the same meaning in this section as in that Part".

Subsection (1) has the effect of excluding all other periods of prescription and limitation from proceedings under Part 5. Such proceedings are subject to the special twelve year limitation period set out in subsection (2), that period being calculated in accordance with subsections (3) and (4). It is noticeable that under subsection (4) the Scottish Ministers' right of action accrues at the date when property is obtained, rather than the date of the unlawful conduct by which it was obtained. As in the provisions discussed previously, the emphasis is on the acquisition of property rather than on the commission of a crime.

[15 ] The civil recovery provisions in Part 5 of the Proceeds of Crime Act 2002 must be contrasted with the confiscation provisions in Part 3. The provisions governing the making of a confiscation order under Part 3 are found in section 92. The conditions for such an order are set out in section 92(2)-(4). These are, first, that an accused person is convicted of an offence; secondly that the prosecutor asks the court to act under the section; and, thirdly, that the court decides to order some disposal in respect of the accused. Section 92(5) then provides as follows:

"If the court acts under this section it must proceed as follows --

(a) it must decide whether the accused has a criminal lifestyle;

(b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct;

(c) if it decides that he does not have a criminal lifestyle is must decide whether he has benefited from his particular criminal conduct".

Section 92(6) provides as follows:

"If the court decides under subsection (5)(b) or (c) that the accused has benefited from the conduct referred to --

(a) its must decide the recoverable amount, and

(b) it must make an order (a confiscation order) requiring him to pay that amount".

A number of important features appear from these provisions. First, a confiscation order can only follow a successful prosecution. Secondly, it can only be granted at the request of the prosecutor. Thirdly, such an order is made specifically against the accused person. Fourthly, under subsection (5) the court must consider the criminal conduct of the accused; the court's attention is thus directed towards criminal conduct per se rather than, as in Part 5, the acquisition of property through criminal conduct. Fifthly, under subsection (6) the court must determine a recoverable amount and make an order against the accused requiring him to pay that amount. That provision is directed against the accused person rather than against the property; it involves an entirely personal obligation. Under Part 5, by contrast, the court's order is for the recovery of specific property; that creates a right in the enforcement authority that is much more closely akin to a real right. These differences are not merely differences of wording; in my opinion they are differences of substance. Indeed, the entire structure of the civil recovery proceedings in Part 5 is wholly distinct from the structure of the confiscation proceedings in Part 3. This point is of some importance, for reasons that will appear subsequently.

Arguments for the respondents

[16 ] Counsel for the third respondent submitted that the petition should be dismissed on the ground that it was incompetent and ultra vires, and also on the ground of irrelevancy and lack of specification. He presented three arguments. First, he submitted that in the present proceedings the Scottish Ministers, one of whom is the Lord Advocate, made a specific allegation of criminal conduct on the part of the third respondent. They did so, however, in the face of an acquittal following prosecution; that acquittal had taken place under section 95(1) of the Criminal Procedure (Scotland) Act 1995, following desertion simpliciter by the Crown. To allege criminal conduct following an acquittal contravened the determination already made in the criminal proceedings; as such it amounted to a breach of article 6(2) of the European Convention on Human Rights, which prohibited the state from alleging that a person was guilty of an offence after he had been acquitted of that offence. Secondly counsel submitted that the petitioners sought to impose a penalty in respect of criminal conduct allegedly committed before the coming into force of Part 5 of the Proceeds of Crime Act 2002. That penalty, however, was heavier than any penalty that could have been imposed before that Act came into force. That was contrary to article 7(1) of the European Convention on Human Rights, because it was an attempt to impose a heavier penalty than was applicable at the time when the alleged criminal offence was committed. Thirdly, counsel submitted that a critical averment in the petition, to the effect that the third respondent had been concerned in the supplying of controlled drugs since at least 1997, was not supported by sufficient averments to allow evidence to be led that would permit the court to make such a finding, even on the balance of probabilities. The only unlawful conduct that was relied on to support the recovery sought was the supplying of controlled drugs as described in that averment. Consequently the court was not entitled to draw an inference that the property referred to in Part II of the Schedule to the petition was recoverable property within the meaning of the Proceeds of Crime Act 2002.

[17 ] The foregoing arguments appear to me to raise interesting and important questions as to the application of Part 5 of the Proceeds of Crime Act 2002, and I propose to deal with each of them individually. Counsel for the first respondent also presented certain arguments, which in part repeated the second argument for the third respondent. In addition counsel argued that the proceedings constituted an abuse of process and that they had not been brought within a reasonable time in terms of article 6(1) of the European Convention on Human Rights. I will deal with these arguments subsequently.

Significance of acquittal; article 6(2)

[18 ] The first argument for the third respondent was that the present petition involved a specific allegation of criminal conduct by the third respondent, but that contradicted the earlier acquittal of the third respondent following a criminal prosecution. That, it was said, involved a breach of article 6(2) of the Convention. Article 6(2) is in the following terms:

"Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law".

In a series of cases before the European Court of Human Rights it has been held to be implicit in the presumption of innocence that, following a person's acquittal of a criminal charge, no public authority should allege in any further criminal proceedings that that person has been guilty of the same offence. Counsel referred to the discussion of this issue in Sekanina v Austria, 25 June 1993, 21/1990 2/36 6/440. In that case the applicant was acquitted of murdering his wife. Following his acquittal he applied for compensation for being remanded in custody and the expenses of his defence. The Austrian court refused the application on the basis of a statute that permitted such refusal where there remained suspicion against the accused. It was held that the refusal of compensation contravened article 6(2). The European Court of Human Rights examined the reasons given by the domestic courts for refusing compensation; the domestic courts had held that, in the words of the Linz Court of Appeal, "The jury took the view that the suspicion was not sufficient to reach a guilty verdict; there was, however, no question of that suspicion's being dispelled". The European Court of Human Rights continued (at paragraph 30):

"Such affirmations -- not corroborated by the judgment acquitting the applicant or by the record of the jury's deliberations -- left open a doubt both as to the applicant's innocence and as to the correctness of the Assize Court's verdict.... The voicing of suspicions regarding an accused's innocence is conceivable as long as the conclusion of criminal proceedings has not resulted in a decision on the merits of the accusation. However, it is no longer admissible to rely on such suspicions once an acquittal has become final. Consequently, the reasoning of the Linz Regional Court and the Linz Court of Appeal is incompatible with the presumption of innocence".

"Thus, the compensation claim not only followed the criminal proceedings in time, but was also tied to those proceedings in legislation and practice, with regard to both jurisdiction and subject matter. Its object was, put simply, to establish whether the State had a financial obligation to compensate the burden it had created for the acquitted person by the proceedings it had instituted against him. Although the applicant was not 'charged with a criminal offence', the Court considers that, in the circumstances, the conditions for obtaining compensation were linked to the issue of criminal responsibility in such a manner as to bring the proceedings within the scope of Article 6(2), which accordingly is applicable".

In Y, the European Court of Human Rights held that a person acquitted of a criminal charge might still be liable in a civil compensation claim in tort or delict arising out of the same facts (paragraph 41). If, however, the national court's decision relating to compensation contained a statement imputing the criminal liability of the acquitted party, that might raise an issue falling within article 6(2) (paragraph 42). The Court therefore required to consider whether the domestic courts

"acted in such a way or used such language in their reasoning as to create a clear link between the criminal case and the ensuing compensation proceedings so as to justify extending the scope of the application of Article 6(2) to the latter" (paragraph 43).

The High Court in its judgment had found that it was "clearly probable that [the applicant] has committed the offences ... with which he was charged", and that judgment had been upheld by the Supreme Court. On this basis, the European Court held (at paragraph 46) that the language employed by the High Court overstepped the bounds of the civil forum and thereby cast doubt on the correctness of the acquittal. There was, accordingly, "a sufficient link to the earlier criminal proceedings which was incompatible with the presumption of innocence". That was so notwithstanding that the domestic courts had taken note of the applicant's acquittal of the criminal charges.

[20 ] The foregoing cases indicate that, following an acquittal, the state is prohibited by article 6(2) from doing two things. First, it may not raise criminal proceedings against the person acquitted on a basis that is inconsistent with that acquittal; double jeopardy (using that expression in a somewhat loose sense) is prohibited. Secondly, the state may not take action (including the refusal of a remedy that is otherwise available) against the person acquitted by means of proceedings that are so closely linked to the earlier criminal proceedings that they are incompatible with the acquittal. For the petitioners it was submitted that a petition for a recovery order under Chapter 2 of Part 5 of the Proceeds of Crime Act 2002 did not involve criminal proceedings. Thus the first prohibition did not apply. It was further submitted that, at least in the circumstances of the present case, a petition for a recovery order was not so closely linked to the criminal proceedings brought against the third respondent in 2002 and 2003 as to be incompatible with the third respondent's acquittal in those proceedings. I will consider those arguments separately.

Characterization of proceedings as criminal

[21 ] Article 6(2) applies only to criminal proceedings, or to proceedings which are so closely linked to criminal proceedings that they must themselves be considered criminal in nature. It refers to persons who are "charged with a criminal offence", an expression that is also used in article 6(3), which confers certain minimum rights on persons charged with criminal offences. Article 6(1) refers to the determination of "any criminal charge". The foregoing expressions have been the subject of considerable case law both in Strasbourg and in national courts. In the European Court of Human Rights the leading case on this issue is Engel v Netherlands, (no. 1), Series A No. 22; 1 EHRR 524. The majority opinion in that case is not easy to follow, largely because of the language used, but the case law has been authoritatively explained in Scotland in S v Miller, 2001 SC 977. That case raised the question of whether proceedings at a children's hearing were criminal in nature. It was held that, once the procurator fiscal has decided not to proceed with any criminal charge against a child, so that there is no longer any possibility of proceedings resulting in a penalty, any subsequent proceedings before a children's hearing are not criminal for the purposes of article 6. The most detailed discussion of the concept of criminal proceedings is found in the opinion of Lord Macfadyen, at paragraphs [32]-[34], and in the discussion that follows I adopt that analysis. I also draw on the analyses of the Lord President at paragraphs [10]-[12], [15] and [21]-[23] and Lord Penrose at paragraphs [30]-[50].

[22] In the European case law, three criteria have been treated as significant in determining whether proceedings are criminal in nature. The first criterion is the classification of the proceedings in domestic law; the relevant question has been formulated as "whether or not the domestic law regards the person in question, placed in the position in which he has been placed, as a person charged with a criminal offence": S v Miller, per Lord Macfadyen at paragraph [32]. If the proceedings are regarded as criminal by the domestic law, that is conclusive for the purposes of article 6. If not, it is necessary to go on to consider the second and third criteria. The second criterion is the objective classification of the situation in which the person concerned finds himself, bearing in mind the object and purpose of the Convention: ibid. at paragraph [33]. In this connection, the following remarks by Lord Macfadyen appear to me to be significant:

"Just as the approach of domestic law may focus in some circumstances on the nature of the offence and in others on the nature of the proceedings, so to the objective assessment of the nature of the situation of the person concerned may in some circumstances be determined by the nature of the offence and in others by the nature of the proceedings. That concentration exclusively on whether the 'offence' is objectively of a criminal nature cannot be appropriate is, in my view, demonstrated by the fact that an allegation of, for example, assault may be the subject of a criminal charge or the subject of a civil claim for damages. Thus although assault is a crime, it does not follow that in all proceedings in which it is alleged that the person concerned committed an assault, that person faces a criminal charge. Regard must also be had to the nature and purpose of the proceedings. One important element may be the identity of the person making the allegation. That the allegation is made by a private citizen pursuing a remedy for harm done to him as an individual may be sufficient to show that no criminal charge is involved. Another element that may, in my view, be significant is the purpose for which the proceedings are brought. If the purpose is to inflict punishment in the public interest, that will tend to support the conclusion that objectively proceedings involve the allegation of a criminal charge. Conversely, however, the absence of the possibility of punishment may support the conclusion that no criminal charge is involved ...".

The third criterion is the nature and severity of the punishment that may be inflicted as a result of the proceedings in question. In this connection, Lord Macfadyen points out that it is taken for granted that a criminal charge ordinarily involves a penalty or punishment of some sort: ibid. at paragraph [33]; the same point is made by the Lord President at paragraph [21]. Hence if there is no possibility of punishment in the proceedings, that is a strong indication that the proceedings are not criminal in nature. The third criterion is therefore concerned with cases which do not fall, or at least do not clearly fall, within the scope of article 6 by virtue of the application of the first two criteria: ibid. at paragraph [34].

[23 ] On the basis of the three criteria described in the last paragraph, I am of opinion that the present proceedings cannot be characterized as criminal in nature. So far as domestic law is concerned, the proceedings are clearly civil in nature. They are brought in a civil court, using civil forms of procedure. No indictment or complaint against any of the respondents is involved; no conviction is sought; nor is any sanction resulting from a conviction. The remedy sought in the proceedings is, in essence, the transfer of certain property to the trustee for civil recovery and the realization of that property by the trustee; that is clearly a civil remedy. Moreover, it can be regarded as a remedy directed against the property rather than the perpetrator of any criminal conduct. The proceedings are brought by the Scottish Ministers as enforcement authority acting through the Civil Recovery Unit; as explained in paragraph [11] above, the latter body is independent of the prosecutorial function in Crown Office. The powers in Part 5 can be exercised by the enforcement authority regardless of whether any criminal proceedings have been brought at any time. Finally, although in terms of section 240 of the 2002 Act it is necessary to demonstrate that conduct unlawful under the criminal law has occurred, it is not necessary to establish the identity of the perpetrator of that conduct, and it is immaterial whether the person against whom the order is sought has been guilty of such conduct: see paragraph [10] above. Establishing the identity of the perpetrator is an essential element in any criminal prosecution in Scotland, and the absence of such requirement is in my opinion a strong pointer towards the civil nature of the present proceedings. I am accordingly of opinion that the first of the criteria laid down in the European Court of Human Rights and affirmed in S v Miller is satisfied.

[24 ] So far as the second criterion is concerned, I am of opinion that proceedings under Chapter 2 of Part 5 of the 2002 Act must be classified objectively as civil in nature. In S v Miller, at paragraph [33], Lord Macfadyen identifies a number of factors that may be relevant to the classification of proceedings. These are the nature of the offence that is alleged, the nature of the proceedings themselves, the identity of the person making the allegation, and the purpose for which the proceedings are brought. Consideration of the purpose for which proceedings are brought appears to me to involve two aspects; the first is the remedy that is sought in the proceedings, and in particular its practical effect; the second is the ground or grounds on which the remedy is sought. In relation to the remedy, the question of whether punishment is involved is important. This list is clearly not intended to be comprehensive; nevertheless, it provides a useful starting point for consideration of the second criterion. I will accordingly deal with each of these factors in turn.

1. In relation to the nature of the offence that is alleged, the petition deals with property that is said to have been derived from the supplying of controlled drugs. It is expressly averred that the third respondent was concerned in that activity. This factor, accordingly, is consistent with the classification of the proceedings as criminal.

2. The proceedings themselves, however, are in my opinion plainly civil in nature. They are brought in a civil court, using civil forms of procedure. Moreover, for the purposes of proceedings under Chapter 2 of Part 5 of the 2002 Act, the identity of the perpetrator of the relevant criminal conduct is immaterial; that appears very clearly from sections 241 and 242 of the Act: see paragraph [10] above. That is a distinct pointer towards the classification of proceedings under Part 5 as civil. Finally, the remedy that is sought is in my opinion very clearly civil in nature; I deal with this matter separately.

3. The present proceedings are brought by the Scottish Ministers as enforcement authority acting through the Civil Recovery Unit. The latter body is kept separate from the parts of Crown Office that exercise the function of prosecuting crime, in the manner described in paragraph [11]. I am satisfied that the distinction between the Civil Recovery Unit and the remainder of Crown Office is real, and not contrived, and that the functions performed by the Unit do not involve the prosecution of crime. I accordingly conclude that the person making the allegations in the present case is a body whose responsibilities are civil rather than criminal in nature. The fact that it is an emanation of the state does not affect this result. The state is frequently a party to civil proceedings, including civil proceedings following criminal conduct; if, for example, a civil servant embezzled public funds, it is clear that proceedings could be brought for recovery of those funds or for damages regardless of whether a prosecution had taken place. The same principle applies to recovery orders under the 2002 Act.

4. The remedy sought in the present proceedings is a recovery order in terms of section 266 of the 2002 Act. The effect of such an order is to remove property from its existing owner and transfer it to the trustee for civil recovery. That amounts to a vindication of the property; as such it is an essentially proprietary remedy. No doubt there is a detriment to the person from whom the property is taken. Nevertheless, the primary function of such a remedy is not to cause loss to that person so much as to ensure that property is transferred to a person with a better right. Such a remedy is clearly civil in nature.

5. The ground on which a recovery order may be sought is that the property specified in the order represents the proceeds of criminal conduct. It is accordingly clear that the primary function of the proceedings is to secure the recovery of property that has been wrongfully obtained. In my opinion proceedings of that nature are closely analogous to proceedings brought to recover property obtained dishonestly or through breach of trust or breach of a fiduciary duty. A striking example of such proceedings is found in Reading v AG, [1951] AC 507. In that case an Army sergeant serving in Egypt accompanied civilian trucks transporting illicit spirits. He wore military uniform to avoid inspection by the police. For his services he received sums totalling nearly £20,000. It was held that the Crown, which occupied a position analogous to an employer, was entitled to recover those sums because they had been earned through the abuse of his official position, and thus in breach of his fiduciary duty. In cases under Part 5 of the 2002 Act, property has been obtained through unlawful conduct, in breach of the general duties imposed by the criminal law. The Crown, acting through the relevant enforcement agency, seeks to recover such property for the public benefit; and that may be regarded as justified because the unlawful conduct through which the property has been obtained represents the breach of duties imposed by the criminal law for the benefit of the public. In these circumstances the parallel with proceedings to recover property obtained dishonestly or in breach of trust or breach of fiduciary duty is very obvious. This parallel extends to the forms of remedy that are available. Under section 304 and the following sections of the 2002 Act property may be traced into the hands of transferees from the person responsible for the original unlawful conduct, and provision is made for mixed funds and profits accruing. These provisions are subject to a general exception, found in section 308, for bona fide onerous transferees. All of these provisions closely parallel the remedies that are available in respect of property obtained dishonestly or in breach of trust or breach of fiduciary duty. The analogy between proceedings of this sort and proceedings for a recovery order is in my opinion a strong indication that proceedings for a recovery order are civil and not criminal in nature.

6. The final issue that is relevant to the objective classification of the proceedings is the question of whether a recovery order involves punishment. In my opinion it does not. As indicated above, I consider that the primary function of a recovery order is the transfer of property that has been wrongfully obtained to the Crown for the public good. The detriment suffered by any person against whom such an order is made is not the primary function of the order; it is rather the inevitable consequence of the vindication of property by a person who has a better right (both morally and legally). A detriment of that nature is no different from the detriment that is inevitably suffered by a person who is ordered in civil proceedings to transfer property or to pay a debt or damages. It cannot in my opinion be considered "punishment", as that word is used in the case law on article 6. A further significant feature of a recovery order is that, if the court decides that property has been obtained through unlawful conduct, it is obliged to pronounce a recovery order in respect of such property; that follows from the use of the word "must" in section 266(1). There is no discretion to mitigate the effects of the order. Where a criminal penalty is imposed, however, except in relation to relatively minor offences, it is not common for a fixed penalty to be imposed; instead, the court is given a discretion as to the level of penalty, and that discretion must be exercised according to the circumstances of the particular case. In particular, the court is normally required to take into account the degree of culpability of the person on whom the penalty is imposed. That is a feature that is wholly lacking from the régime in Part 5 of the 2002 Act.

When the foregoing matters are considered as a whole I am of opinion that they demonstrate clearly that proceedings under Part 5 of the 2002 Act are civil in nature. That is so despite the fact that the proceedings are based on averments that the third respondent had committed a criminal offence. As Lord Macfadyen points out in S v Miller, a criminal act may be the subject of a civil claim, and thus the existence of a criminal offence as an essential feature in the proceedings cannot be decisive in categorizing those proceedings. The same point is made by the Lord President at paragraph [15], where it is pointed out that in S the reporter was seeking to show that S had committed an assault to severe injury, a criminal offence. That was not decisive as indicating that S was "charged with a criminal offence"; in deciding the latter question it was necessary to have regard to the nature of the proceedings as a whole. Apart from the allegation of a criminal offence, the other factors listed above point clearly to the civil nature of the present proceedings.

[25] The third criterion only applies in cases where it appears that a punishment is inflicted, and the question of its nature and severity then becomes important. This criterion is perhaps most typically used to distinguish criminal from disciplinary proceedings. In the present case, however, I consider that no punishment is involved; the third criterion is accordingly not relevant. Overall, therefore, my conclusion is that proceedings under Part 5 of the 2002 Act cannot be characterized as criminal in nature, with the result that the prohibition on double jeopardy contained in article 6(2) does not apply.

[26 ] The foregoing conclusion is supported by the decision of the Court of Appeal of Northern Ireland in Walsh v Director of the Assets Recovery Agency, [2004] NIQB 21 (High Court); [2005] NICA 6 (Court of Appeal). In that case proceedings for the recovery of assets were taken by the enforcement agency in Northern Ireland against the appellant under Part 5 of the 2002 Act. At first instance Coghlin J. held that such proceedings were civil in nature and did not engage article 6(2) of the Convention. The appellant had been found not guilty of three charges of obtaining services by deception; nevertheless, the enforcement authority raised proceedings for recovery of assets. The Court of Appeal agreed that the proceedings were civil in nature for the purposes of article 6(2). In relation to the classification of the proceedings in national law, Kerr LCJ stated (at paragraph [26]):

"[W]e do not accept that it is in any way in inevitable that the recovery proceedings will be confined to an examination of specific offences committed by the appellant. We consider that it would be open to the agency to use evidence that the appellant had no legal means of obtaining the assets without necessarily linking the claim to particular crimes. Finally, the purpose of the recovery action is to obtain from the appellant property, it is claimed, he should not have -- property that has been acquired by the proceeds of crime. It is not designed to punish him beyond that or to establish his guilt of a precise offence".

In relation to the second of the criteria followed in the case law, the objective classification of the proceedings, the opinion of Lord Macfadyen in S v Miller was cited with approval. The court concluded that, objectively, the proceedings should be regarded as civil rather than criminal in nature. It then went on to consider whether a penalty was imposed. On this matter, Kerr LCJ commented (at paragraph [38]):

"A distinction between confiscation orders and recovery proceedings can be drawn in that, as Lord Bingham pointed out in McIntosh [v HM Advocate, 2001 SC (PC) 89], the sum ordered to be confiscated need not be the profits made from the drug trafficking offence of which the accused has been convicted, whereas recovery may only be ordered in relation to assets that have been acquired by proven unlawful conduct. The recovery of assets may more readily be described as a preventative measure, therefore. After all, the person who is required to yield up the assets does no more than return what he obtained illegally. It is clear, however, from the judgment in Welch that the European Court considered that a provision will not be classified as non-penal simply because it partakes of a preventative character and, since it is unnecessary for us to decide the point, we will refrain from expressing any final view on whether recovery of assets should be regarded as penal within the autonomous meaning of that term".

Despite those considerations, the court concluded that the even if the proceedings were to be regarded as imposing a penalty, that was not sufficient to require them to be classified as criminal for the purposes of article 6.

[27] The distinction between punishment and a civil remedy is clearly of critical importance. It is not easy to state any precise criterion for making this distinction, because criminal punishment and the remedies afforded by the civil law have important features in common; in particular, both are designed to enforce norms of conduct, and both are liable to have an adverse effect on the person against whom the order is made. Nevertheless, the best criterion for making the distinction is in my opinion the identification of the primary function of the court's order: if that primary function is the penalization of the person against whom it is made, it is likely that the order is a form of criminal punishment; if, by contrast, the primary function is the compensation or other benefit of the person in whose favour the order is made, that is likely to be a civil remedy. That criterion is not necessarily comprehensive, however; for example, contempt of a civil court may well be an exception. In determining whether an order of the court involves punishment or a civil remedy, analogy with other established forms of remedy may be helpful. In the present case, I consider the analogy with proceedings to recover funds obtained dishonestly or in breach of trust or breach of fiduciary duty to be pertinent. That analogy reinforces my conclusion, expressed above, that the primary function of a recovery order under section 266 is to transfer property to the enforcement agency as a person having a better right, rather than to penalize the person against whom the order is made. No doubt the latter person is penalized, but that is also true of the analogous remedy for property obtained dishonestly or in breach of trust; in neither case can be said that the penalty is the primary function of the court's order. This is recognized in Walsh, where Kerr LCJ stated (at paragraph [39]):

"Even if the proceedings in this case are to be regarded as imposing a penalty on the appellant, we are satisfied that this is not sufficient to require them to be classified as criminal for the purposes of article 6 .... [W]e consider that the predominant character of [a] recovery action is that of civil proceedings. The primary purpose is to recover proceeds of crime; it is not to punish the appellant in the sense normally entailed in a criminal sanction".

At paragraph [41] Kerr LCJ described proceedings for a recovery order as "predominantly proceedings in rem"; he continued "They are designed to recover the proceeds of crime, rather than to establish, in the context of criminal proceedings, guilt of specific offences". That summarizes the primary function of such proceedings.

[28 ] I should also refer at this point to the decision of Lord Kinclaven in Scottish Ministers v McGuffie, [2006] CSOH 34. That case involved a challenge to the provisions of Part 5 of the 2002 Act on the ground that they involved a retrospective criminal penalty, in contravention of article 7 of the European Convention on Human Rights. Lord Kinclaven rejected that contention; I deal with this matter later, at paragraph [39]. Nevertheless, at paragraph [134] of his opinion he drew attention to certain features of proceedings under Part 5 which are relevant to the application of article 6(2), and in particular to the question of whether proceedings for a recovery order are civil or criminal in nature. The relevant passage in his opinion is as follows:

"The present proceedings are clearly 'civil' rather than 'criminal' in our domestic law but that is only a starting point. They seek orders relating to civil recovery of property. They are at the instance of the Scottish Ministers. They are not at the instance of the Lord Advocate or prosecuting authority. They have been initiated by civil Petition. They have not been initiated by indictment or complaint or other form of criminal procedures. They are being heard in [the] Outer House of the Court of Session which is a civil court. They are not being heard in [the] High Court of Justiciary or other criminal court. The procedures involved for making and implementing the order are clearly civil rather than criminal. The rules of evidence and procedure which apply are civil rather than criminal. The proceedings are directed against property (in rem) rather than against Mr McGuffie's person. The recovery procedures are under the control of a civil court. Mr McGuffie's guilt is not in issue. He is not facing a criminal charge. He is not an accused person. He cannot be arrested or remanded or compelled to attend. There has been no formal accusation by the prosecuting authorities. He will not be subject to a criminal conviction or a finding of guilt. He will not be imprisoned. He will not receive a sentence. A civil recovery order will not form any part of his criminal record. There have been some criminal proceedings in the past but the present proceedings are of a different nature and character. The orders sought are separate and distinct from previous criminal proceedings. Those earlier criminal proceedings have been concluded. They have not been re-opened. The essential focus of Part 5 is the civil recovery of property rather than the imposition of a criminal penalty. Even if there is a 'penalty' in the sense of detriment it is a 'civil' matter and not a 'criminal' one. Part 5 seeks to recover property, reduce crime and benefit the community rather than to punish a particular respondent or visit him or her with a criminal sanction. In those circumstances, in my view, the Scottish Ministers are not seeking a retrospective criminal penalty".

I respectfully agree with those views.

[29] The importance of the imposition of a penalty for the purposes of article 6 has been recognized in English cases, notably R (McCann) v Manchester Crown Court, [2003] 1 AC 787, where an anti-social behaviour order was held not to be a penalty, and B v Chief Constable of Avon and Somerset Constabulary, [2001] 1 WLR 340, where a sex offender order was likewise held not to be a penalty. In the former case, Lord Hope of Craighead stated (at paragraph 64):

"The underlying idea is that proceedings do not lie within the criminal sphere for the purposes of article 6 unless they are capable of resulting in the imposition of a penalty by way of punishment. In B v Chief Constable of Avon and Somerset Constabulary, [supra,] Lord Bingham of Cornhill CJ said that he was aware of no case in which the European Court has held a proceeding to be criminal even though an adverse outcome for the defendant cannot result in any penalty. I agree. Although there are other aspects of the procedure which suggest that in proceedings for the imposition of an anti-social behaviour order the person is not 'charged with a criminal offence', the critical question as I see it is whether the making of such an order amounts to the imposition of a penalty".

A similar view is expressed by the Lord President in S v Miller, supra; at paragraph [21] he points out that the French text of article 6 makes clear that a penal element is one of the defining characteristics of the term "criminal charge". In the present case I am of opinion, for the reasons stated at paragraph [24].6 above, that proceedings under Part 5 of the 2002 Act are not designed to result in the imposition of any punishment or penalty, but are rather designed to achieve the recovery for the public good of property that has been wrongfully obtained. That by itself would be a sufficient reason for holding that the present proceedings are not criminal in nature.

Linkage to criminal proceedings

[30] Article 6(2) contains a further prohibition on action by the state against a person acquitted of criminal charges by proceedings that are so closely linked to the earlier criminal proceedings that they are incompatible with the acquittal. Counsel for the third respondent relied on three factors as demonstrating linkage: the parties, he submitted, were the same in the earlier criminal proceedings and the present proceedings for a recovery order; the subject matter was the same; and the function of the present proceedings was in part to call into question the third respondent's earlier acquittal.

[31 ] In my opinion such linkage as exists between the present proceedings and the earlier criminal proceedings is not sufficient to indicate that the third respondent's acquittal in the earlier proceedings is called into question; thus there is no contravention of the prohibition contained in article 6(2). In the first place, I am of opinion that the parties to the criminal proceedings and the parties to the present proceedings are not the same. The present pursuers are the Scottish Ministers acting as enforcement authority under Part 5 of the 2002 Act; as such they have very specific functions under that Act. Criminal prosecutions, by contrast, proceed at the instance of the Lord Advocate as the country's chief prosecutor, or at the instance of the local procurator fiscal acting as a member of the prosecution service. Those functions, although they are carried out by an arm of the state, are quite distinct from the other functions of the state; this is an important constitutional point which runs through the whole administration of Scottish criminal procedure. The Lord Advocate and prosecution service cannot in my opinion be equiparated with the Scottish Ministers acting in another capacity.

[32 ] In the second place, I am of opinion that the subject matter of the present proceedings is not the same as the subject matter of the earlier criminal proceedings. Four points are of critical importance in this connection. First, the purpose of the present proceedings is to recover property that has been wrongfully obtained; thus the proceedings are essentially proprietary in nature. The earlier criminal proceedings, by contrast, were not concerned with that property, but rather with the question whether the third respondent had been guilty of the conduct libelled in the indictment. Secondly, for the present proceedings to succeed it is not necessary for the petitioners to prove that the respondent has been guilty of any criminal charge; it is sufficient that they prove that the property that they allege to be recoverable property represents the proceeds of criminal activity, although the criminal activity alleged is that of the third respondent. Thirdly, the proceedings do not seek a conviction, or any form of punishment, but merely the recovery of property that has been wrongfully obtained by some person at an earlier stage. Fourthly, the proceedings are conducted in a civil court, using civil forms of procedure.

[33 ] In the third place, I am of opinion that the function of the present proceedings is not to call into question the third respondent's earlier acquittal. In the present proceedings the court is not entitled to make any finding of guilt, to the effect that the third respondent committed any particular criminal offence. The function of these proceedings is rather to recover property that has been wrongfully obtained through criminal activity. That criminal activity need not have been that of the third respondent. In fact averments are made about such activity. Nevertheless, such averments are not essential. In Walsh v Director of the Assets Recovery Agency, supra, Kerr LCJ points out (at paragraph [26]) that the enforcement authority may rely on evidence that the respondent has assets which he had no legal means of obtaining; from that the inference may be drawn that those assets represent the proceeds of criminal conduct. Such averments are made, at considerable length, in the present case. That clearly demonstrates that the question of whether the third respondent committed any particular criminal activity is only of evidential significance; it is not a critical issue in the case.

[34 ] I accordingly conclude that there is no sufficient linkage between the present proceedings and the earlier criminal proceedings to contravene article 6(2). I should add that this conclusion is supported by the decision of the Court of Appeal in Northern Ireland in Walsh v Director of the Assets Recovery Agency, supra, and also by the decision in the English High Court of Collins J. in R (Director of the Assets Recovery Agency) v T and Others, [2004] EWHC 3340 (Admin).

Imposition of retrospective criminal penalty: article 7(1)

[35 ] The second argument for the third respondent was that in the present proceedings the petitioners were attempting to impose a penalty in respect of criminal conduct that had allegedly been committed before Part 5 of the 2002 Act came into force. That penalty, it was said, was heavier than any penalty that could have been imposed before the Act came into force; consequently there was a breach of article 7(1) of the European Convention on Human Rights. Article 7(1), which deals with punishment for criminal offences, provides as follows:

"No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed".

The second sentence of that article raises two important issues: first, whether the proceedings under consideration are to be characterized as relating to a "criminal offence" for the purposes of the article; and secondly, whether the remedy sought is a "penalty" within the meaning of the article. The two concepts are linked because, as indicated at paragraph [29], proceedings will not normally be considered criminal unless they may result in the imposition of a penalty.

[36 ] The concept of a "penalty" for the purposes of article 7(1) was considered by the European Court of Human Rights in Welch v United Kingdom, 1995, 20 EHRR 247. In that case the applicant had been convicted of offences concerning controlled drugs, for which he was imprisoned. In addition, the trial judge imposed a confiscation order under the Drug Trafficking Offences Act 1986. It was not in dispute that the provisions of the 1986 Act had retrospective effect in relation to the offences of which the appellant was convicted. Consequently the only issue was whether the confiscation order constituted a penalty within the meaning of article 7(1). The Court began by pointing out (at paragraph 27) that the concept of a "penalty" was an autonomous Convention concept. It continued (at paragraph 28):

"The wording of Article 7(1), second sentence, indicates that the starting point in any assessment of the existence of a penalty is whether the measure in question is imposed following conviction for a 'criminal offence'. Other factors that may be taken into account as relevant in this connection are the nature and purposed of the measure in question; its characterization under national law; the procedures involved in the making and implementation of the measure; and its severity".

Under the 1986 Act, before a confiscation order could be made the accused must have been convicted of a drug trafficking offence; that obviously pointed towards a penalty. It was accepted that the Act had been introduced to overcome the inadequacy of existing powers of forfeiture. Nevertheless, the Court concluded (at paragraph 33 and 34) that several further aspects of such an order were in keeping with the idea of a penalty. First, under the 1986 Act sweeping statutory assumptions were made that all property passing through the offender's hands over a six-year period were the fruit of drug trafficking unless he could prove otherwise. Secondly, the confiscation order was directed to the proceeds of drug dealing and not to actual enrichment or profit. Thirdly, the trial judge was given a discretion, in fixing the amount of the order, to take into consideration the degree of culpability of the accused.

[37] In my opinion proceedings for a recovery order brought under Part 5 of the 2002 Act are not to be characterized as relating to a "criminal offence" for the purposes of article 7(1). Nor is a recovery order to be considered a "penalty" within the meaning of that order. My reasons for these conclusions are essentially those set out in paragraphs [24] and [27] above in relation to article 6(2). First, the remedy sought, a recovery order, is proprietary in nature; its primary function is to enable property that has been wrongfully obtained to be recovered by the enforcement authority, acting in the public interest. Its primary function is not the punishment or penalization of the person from whom the assets are taken. Secondly, it is not necessary for the enforcement authority to establish that the person from whom the assets are recovered has been guilty of any criminal offence. Indeed, it is not necessary that any criminal proceedings should have been instituted, against that person or anyone else. Thirdly, no conviction is sought in proceedings for a recovery order; nor is any sanction for a conviction sought. Nor does the issue of the respondent's guilt or innocence of any crime arise in any such proceedings. Fourthly, the proceedings are brought in a civil court, according to civil procedures. There is nothing analogous to an indictment or complaint against the person from whom the property is to be recovered. Fifthly, the enforcement authority, although an emanation of the state, is distinct from the authority, in Scotland the Lord Advocate, Crown Office and the Procurator Fiscal Service, that is responsible for the prosecution of criminal offences. These features in my opinion indicate very clearly that the present proceedings should not be characterized as relating to a criminal offence. They indicate, moreover, that the remedy sought in the present proceedings is not to be considered a penalty; its primary function is the recovery of property in the public interest rather than the penalization of the person from whom that property is recovered. As with article 6(2), the analogy with civil proceedings for recovery of property obtained dishonestly or in breach of trust or in breach of fiduciary duty appears relevant.

[38 ] Welch v United Kingdom is in my opinion readily distinguishable from proceedings for a recovery order brought under Part 5 of the 2002 Act. In the first place, for a recovery order to be made there is no requirement that the respondent should have been convicted of any offence. In this connection there is a clear contrast between a recovery order under Part 5 of the Act and a confiscation order made under Part 3; the differences are summarized at paragraph [15] above. That by itself is a major point of distinction from Welch. In the second place, Part 5 of the 2002 Act does not make statutory assumptions that any property has been obtained through a criminal offence; it is for the enforcement authority to prove, according to the ordinary civil standard of proof, that the property that it seeks to recover has been obtained through unlawful conduct. In the third place, the court's initial task in making a recovery order is confined to determining how much of the property that the enforcement authority seeks to recover has been obtained through unlawful conduct. The court has no discretion to take account of degrees of culpability, as occurred under the legislation considered in Welch; that is clear from the use of the word "must" in section 266(1). I accordingly conclude that nothing in Welch affects the conclusion that I have reached in the last paragraph.

[39 ] This conclusion is supported by the decision of Lord Kinclaven in Scottish Ministers v McGuffie, supra. His reasoning, with which I am in full agreement, is set out at paragraph [28] above.

Relevancy of petitioners' averments

[40 ] Counsel for the third respondent further submitted that one of the critical averments in the petition, namely the averments that the third respondent had been concerned in the supplying of controlled drugs since at least 1997, was not supported by sufficient averments to allow evidence to be led to support such a finding. That was so even on the civil standard of the balance of probabilities. Counsel submitted that the only unlawful conduct relied on by the petitioners to support the recovery order that they sought was the foregoing averment relating to the third respondent. That averment involved a specific allegation of particular criminal conduct; consequently it was incumbent on the petitioners to make detailed and specific averments of criminal conduct in such a way that the court might conclude that the allegation was proved on a balance of probabilities. In the present case, all that the petitioners founded on was a conviction, which was in fact spent, the facts that led to the failed prosecution of the respondent in 2003, and the respondents' lifestyle. That, counsel submitted, was not a sufficient to justify an averment of serious criminal conduct. Reliance was placed on Royal Bank of Scotland PLC v Holmes, 1999 SLT 564, where Lord Macfadyen stated (at 569K-L):

"It is in my view is essential for the party alleging fraud clearly and specifically to identify the act or representation founded upon, the occasion on which the act was committed or the representation made, and the circumstances relied on as yielding the inference that that act or representation was fraudulent. It is also, in my view, is essential that the person who committed the fraudulent act or made the fraudulent misrepresentation be identified".

Similar principles applied, it was submitted, to any allegation of serious criminal conduct.

[41 ] Counsel for the third respondent presented certain further arguments on the petitioners' averments of criminal conduct. First, counsel criticized an averment made by the petitioners which adopted the content and conclusions of the reports produced by the interim administrator in the present case and incorporated those reports into the pleadings brevitatis causa. Senior counsel for the petitioners immediately accepted the force of this criticism, which was plainly well founded, and deleted that averment from his pleadings. Secondly, counsel for the third respondent submitted that an averment to the effect that the third respondent had an extensive criminal history, including numerous convictions for theft by housebreaking dating from 1964 to 1972, was irrelevant, in that it had no bearing on the property that the petitioners sought to recover. Thirdly, counsel submitted that the petitioners' averment relating to the 1997 conviction (set out at paragraph [2] above) was irrelevant because that conviction was spent by virtue of section 5 of the Rehabilitation of Offenders Act 1974.

[42 ] In my opinion it is necessary for the petitioners to aver that property had been obtained by or in return for a particular kind, or one of a number of kinds, of unlawful conduct. This involves two elements. First, the petitioners must aver facts and circumstances from which one or more categories of unlawful conduct can be inferred. Secondly, the petitioners must make averments from which it can be inferred that property was obtained by that unlawful conduct. It is not necessary, however, that the petitioners should make averments sufficient to infer that any specific criminal offence has been committed. Those propositions have been accepted in England: see R (Assets Recovery Agency) v Green, [2005] EWHC 3168 (Admin), per Sullivan J. at paragraph 50. In addition, it seems to me that evidence of unexplained assets may assist the inference that unlawful conduct has taken place. All assets must have a source, and if no explanation is given all the source of substantial assets it can, I think, be inferred that those assets were obtained through unlawful conduct. This point is made by Kerr LCJ in Walsh v Director of the Assets Recovery Agency, supra, at paragraph [26], where it is indicated that the enforcement authority may rely on evidence that the respondent has assets which he had no legal means of obtaining to draw the inference that those assets represent the proceeds of criminal conduct. That does not, of course, indicate the particular form of unlawful conduct that was involved, and further evidence would be required to establish that matter.

[43] In the present case the petitioners make averments of unlawful conduct; they refer to the third respondent's conviction in 1997 for being concerned in the supplying of controlled drugs and to the events that are said to have occurred in August 2002, when amphetamine was found in a vehicle driven by the third respondent. In addition, elaborate averments are made about the respondents' unexplained sources of income; on the basis of these, it is said that the court can infer that property has been obtained by unlawful conduct, in the form of being concerned in the supplying of controlled drugs. In my opinion these averments are sufficient to satisfy the test of relevancy, which is whether, if all the averments are proved, the petitioners are bound to fail. If the averments in question are proved, it cannot in my view be said that the court will be unable to draw an inference that the property in question represents the proceeds of a course of unlawful conduct. The averment relating to housebreaking convictions in the period from 1964 to 1972, however, does appear to me to be irrelevant; such a long time has elapsed since then that I do not think that it would be proper to infer that any part of the third respondent's present assets is derived, to any significant degree, from housebreaking activities at that time. I may say that counsel for the petitioners made no attempt to defend this averment.

[44 ] Counsel for the third respondent's final point was based on the application of the Rehabilitation of Offenders Act 1974 to the 1997 conviction. Section 1 of this Act provides that, subject to certain exceptions, a person convicted of an offence shall, after the end of the relevant rehabilitation period, be treated as a rehabilitated person. None of the exceptions applies in the present case. The relevant rehabilitation periods are specified in section 5 of the Act; in the present case the relevant period is seven years, which had obviously expired. Thus the third respondent was a rehabilitated person. The effect of rehabilitation is set out in section 4(1) of the Act; this provides as follows:

"Subject to sections 7 and 8 below, a person who has become a rehabilitated person for the purposes of this Act in respect of a conviction shall be treated for all purposes in law as a person who has not committed or been charged with or prosecuted for or convicted of or a sentenced for any offence or offences which were the subject of that conviction; and, notwithstanding the provisions of any other enactment or rule of law to the contrary, but subject as aforesaid --

(a) no evidence shall be admissible in any proceedings before a judicial authority exercising its jurisdiction or functions in Great Britain to prove that any such person has committed or been charged with or prosecuted for or convicted of or sentenced for any offence which was the subject of a spent conviction;...".

One further provision of the Act is relevant. Section 7 provides certain limitations on rehabilitation. Subsection (3) is in the following terms:

"If at any stage in any proceedings before a judicial authority in Great Britain ... the authority is satisfied, in the light of any considerations which appear to it to be relevant (including any evidence which has been or may thereafter be put before it), that justice cannot be done in the case except by admitting or requiring evidence relating to a person's spent convictions or to circumstances ancillary thereto, that authority may admit or, as the case may be, require the evidence in question notwithstanding the provisions of subsection (1) of section 4 above, and may determine any issue to which the evidence relates in disregard, so far as necessary, of those provisions".

[45 ] Counsel for the petitioners submitted that, in considering the application of sections 1 and 4 to proceedings for a recovery order under Part 5 of the 2002 Act, it was important to bear in mind that such proceedings are not designed to establish that a particular respondent has committed any offence. The intention of such proceedings was rather to establish that assets represented the proceeds of criminal activity. In the present case, the petitioners sought to prove that the third respondent had been involved in a particular category of criminal activity, namely the supplying of controlled drugs. Nevertheless, the sole function of the reference to the 1997 conviction was to provide an adminicle of evidence in support of the foregoing contention. The distinction appeared to be between a reference to a spent conviction for the purpose of establishing the fact of the conviction, or the underlying offence, and a reference to a spent conviction as an indication of a general category of criminal activity.

[46 ] The foregoing distinction appears to me to be somewhat fine. Section 4(1)(a) is quite plain in its terms: "no evidence shall be admissible ... to prove that any such person has committed or been ... convicted of ... any offence which was the subject of a spent conviction". Even if a reference to a spent conviction is designed to support a more general proposition, such as the contention that a respondent was concerned in the supplying of controlled drugs, a reference to the conviction must still be made, and that seems to fall within the terms of section 4. That, as counsel pointed out, may create a difficulty when section 4 is considered along with section 10 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1968. The latter section provides that, in any civil proceedings, the fact that a person has been convicted of an offence by a court in the United Kingdom shall be admissible in evidence for the purpose of proving that he committed that offence. The Rehabilitation of Offenders Act 1974 does not refer to section 10, and the interrelationship between section 10 of the 1968 Act and section 4 of the 1974 Act did not appear to be within the contemplation of Parliament when the latter statute was enacted. When section 10 and section 4 are considered in isolation, the result may be that, once a conviction is spent, it cannot be referred to even under the power in section 10. That need not cause any serious practical difficulty, however, when the dispensing power in section 7(3) of the 1974 Act is taken into account. The latter provision is in my opinion of considerable importance. In effect, it empowers a court to allow reference to a spent conviction in any case where that is essential to achieve justice. I can see no reason for giving this provision a restrictive interpretation; it permits a general equitable control over the prohibition in sections 1 and 4 where the circumstances of the case so demand. In proceedings for a recovery order under Part 5 of the 2002 Act, I am of opinion that the equitable power in section 7(3) is one that might readily be exercised. The recovery of the proceeds of criminal conduct is based on very elementary considerations of public policy, and the obvious justice of proceedings for such recovery will frequently be sufficient to override the prohibition in sections 1 and 4 of the 1974 Act. Nevertheless, the decision as to whether evidence of a spent conviction should be permitted in terms of section 7(3) must be made at the stage where such evidence is actually led. The 1974 Act in general, and section 7(3) of the Act in particular, are concerned with the admissibility of evidence, and the decision on that matter in any particular case must normally be made at proof. Consequently it is sufficient at this stage for me to hold that the judge who hears the proof would be entitled to exercise the power in section 7(3) to permit a reference to the 1997 conviction; whether he actually does so is a matter that must await proof.

Relevancy of respondents' case

[47 ] The petitioners further submitted that the defenders' averments were irrelevant and that decree should be pronounced de plano. The respondents' answers are summarized in paragraph [8] above; in effect nothing is said by the first respondent, but the third respondent does make a number of substantive averments. Counsel for the petitioners submitted that the only basis advanced by the third respondent against the contention that the specified assets were recoverable property was that he had acquired money through the sale of cars and jewellery and through gambling. Counsel submitted that those allegations were inspecific and unvouched. That did not amount to a relevant defence. As an alternative, counsel submitted that I should follow the approach taken by Lord Penrose in Scottish Ministers v Buchanan, 5 January 2006, where in proceedings for a recovery order he allowed a preliminary proof on the question of whether the respondent had engaged in unlawful conduct of the kind averred.

[48 ] It would not in my opinion be appropriate to grant decree de plano in the present case. The petitioners have averred that the third respondent has been concerned in the supply of controlled drugs since at least 1997. That averment is clearly based on an inference from certain further averments, in particular those relating to the conviction of 5 February 1997 and the events of 2002 leading to the unsuccessful prosecution in the following year. Some support may also be derived from the existence of unexplained assets. In those circumstances the critical question is whether the inference that the petitioners seek to draw is appropriate. That in my opinion is a matter that can only be decided following proof. That is particularly so in view of the averments by the third respondent that, in August 2002, he had not placed the amphetamine within the Land Rover Discovery vehicle and that the vehicle had been parked in an area where others would have had access to it. It is no doubt true, as counsel for the petitioners pointed out, that the defender does not aver that the vehicle was unlocked, or that it was broken into. If no such evidence is available that may make it difficult for the defender to establish his averments, which may obviously have an effect on the persuasiveness of the petitioners' case. Nevertheless, I am of opinion that the third respondent is entitled to put the petitioners to proof on this part of the case.

[49 ] The other matter that the petitioners must establish is that the property that they seek to recover is recoverable property. To do that, they must demonstrate that the assets in question have been obtained through unlawful conduct; in other words, a link must be shown between the unlawful conduct and the assets that the petitioners seek to recover. In the present case the petitioners offer to prove such a link as a matter of inference, from unlawful conduct on the part of the third respondent and the existence of substantial assets for which no legitimate explanation has been given. On this part of the case the petitioners' averments are very detailed and the third respondent's averments are rudimentary; he states that between 1997 and 2002 he acquired money from dealing in cars and jewellery and won money in casinos; in particular, he states that in 2001 and 2002 he won approximately £10,000 in casinos. These averments were described by counsel for the petitioners as unspecific and unvouched, and that criticism is amply justified. In the circumstances I propose to follow the course adopted by Lord Penrose in Scottish Ministers v Buchanan, supra. In that case, detailed financial averments were made by the petitioners, and the respondents met these with bare denials, failing to point to a single source of legitimate income that had not already been identified and dealt with by the interim administrator. Lord Penrose continued (at paragraph [42])

"It would be an abuse of the processes of the court to put the petitioners to proof of the financial position as set out in this case at this stage, when that might prove to be wholly unnecessary as events develop".

A preliminary proof was allowed, but to the extent only of allowing the petitioners an opportunity to establish that the relevant respondent had engaged in unlawful conduct of the kind averred. Lord Penrose pointed out that, if that were established, it might be that it would then be an irresistible inference that the property identified by the petitioners was recoverable property; requiring proof of that aspect of the case was not justified at that stage.

[50 ] In the present case, the third respondent has made certain averments about the source of funds, but these are wholly unspecific and are not supported by any form of vouching. At least in the case of the sale of cars and jewellery, it would be expected that some documentation would be available; at the very least, it should be possible to link transactions to entries in bank or building society accounts. No attempt is made to make any such case, however. In these circumstances I am of opinion that the present case is not distinguishable from Buchanan, and I propose to follow the same course of action. I will accordingly allow a preliminary proof, but to the extent only of allowing the petitioners an opportunity to establish that the third respondent engaged in unlawful conduct of the kind averred. For the avoidance of doubt such proof is not confined to the averments in statement and answer 5, which deal with the specific instances of unlawful conduct that are said to have occurred; it extends to the specific issue that I have identified.

Arguments for first respondent

[51 ] Counsel for the first respondent presented two arguments which were not adopted by counsel for the third respondent. First, he argued that the proceedings constituted an abuse of process, in that they were designed to act as a substitute for a prosecution. That applied in particular to the failure of the Crown to prosecute the third respondent for being concerned in the supplying of controlled drugs during the period between 1997 and 2002. It was submitted that article 6(1) of the European Convention on Human Rights applied; that provision, it was said, is not confined to the fairness of the proceedings themselves but has a wider import, extending to the fairness of the conduct of the state authorities as a whole. Reference was made to Teixeira de Castro v Portugal, 44/19, 97/82, 8/134, 9 June 1998, a case dealing with entrapment by police officers, and to Brown v HM Advocate, 2002 SCCR 684. I do not doubt that the protection afforded by article 6(1) extends more widely than the fairness of the court proceedings themselves, and may apply to anything in the entire process of investigation and prosecution that amounts to an abuse of process. In the present case, however, I am quite unable to discover anything that can be regarded as an abuse of process in this sense. The present proceedings are for the recovery of certain assets that are said to represent the proceeds of criminal conduct. For the reasons discussed at length above, that does not involve a criminal prosecution; nor can it be described in any intelligible way as a substitute for a criminal prosecution; its function is totally different. The failure of the Crown to prosecute the third respondent between 1997 and 2002 is a matter that is quite extraneous to proceedings for a recovery order.

[52 ] Secondly, counsel for the first respondent argued that the present proceedings had not been brought within a reasonable time in terms of article 6(1) of the European Convention on Human Rights. He submitted that, in view of the plea of guilty in 1997, an application for a confiscation order could have made at that stage; the time that had elapsed since then was not reasonable. I asked counsel whether there was any authority on this matter, and he made reference to the "general standards of civilized legal systems"; he was unable to cite any authority. In my opinion this argument is wholly without foundation. In Scots law, except in relation to the enforcement of certain categories of obligation, the standard period of prescription is 20 years. That must be taken as the domestic norm, and the present proceedings are well within that period. The 2002 Act makes special provision for prescription and limitation in section 288, which is quoted at paragraph [14] above. Section 19B of the Prescription and Limitation (Scotland) Act 1973, enacted by that section, provides for a limitation period of 12 years after a right of action accrues to the Scottish Ministers. That 12 year period is well within the norm applied in Scots law. In the absence of any authority in the European Court of Human Rights, I do think that it can possibly be argued that that limitation period contravenes the right to a hearing within a reasonable time. The present proceedings have, of course, been raised well within the statutory limitation period.

Conclusion

[53 ] For the reasons stated, I will repel the first and second pleas in law for each of the respondents; these challenge the petition as incompetent and the remedy sought as ultra vires and, in the case of the first respondent, oppressive. I will, however, sustain the third respondent's third plea in law to the extent of refusing probation of the averments relating to housebreaking activities identified at paragraph [43] above. The third respondent has a further plea in law to the effect that the order sought involves a disproportionate interference with his convention rights; that plea was not argued, and I will accordingly repel it. Quoad ultra I will allow a preliminary proof, confined to the question of whether the third respondent engaged in unlawful conduct of the kind averred in the petition.