Scottish Court of Session Decisions

Noters: MacNeill QC, R. Pugh; BCKM

Respondent: Dewar QC. et. B. Divers; Scottish Government Legal Directorate

1 April 2010

Introduction

[1] The noters, Mr and Mrs Housley, seek recall of a restraint order made by the Lord Ordinary on 23 February 2006 in terms of section 120 of the Proceeds of Crime Act 2002 ("the 2002 Act").

The restraint order

[2] Section 120(1) of the 2002 Act provides:

"(1) If any condition set out in section 119 is satisfied the court may make an order (a restraint order) interdicting any specified person from dealing with any realisable property held by him."

Section 119 provides for a number of sets of conditions, any of which may provide a basis for making an order. In the present case the relevant condition which provided the basis for making the order was that set out in section 119(2):

"The first condition is that -

(a) a criminal investigation has been instituted in Scotland with regard to an offence, and

(b) there is reasonable cause to believe that the alleged offender has benefited from his criminal conduct."

[3] In the petition for the restraint order it was averred that Mr Housley, who was a partner in Gebals, a firm of solicitors in Bathgate, was the subject of a money laundering investigation by HM Revenue & Customs. He was alleged to have assisted in the laundering of the proceeds of a Value Added Tax offence committed by Michael George Voudouri totalling £3.04 million. Documents recovered under a search warrant demonstrated that funds were received into the client accounts of Gebals from companies alleged to be controlled by Mr Voudouri and that amounts totalling in excess of £4,000,000 were remitted to various other companies and individuals by Mr Housley. A criminal investigation in terms of section 154 of the Act had been instituted in respect of Mr Housley in respect of offences contrary to section 327 of the Proceeds of Crime Act 2002. It was averred that the investigation had demonstrated that Mr Housley was in the process of disposing of his assets. It was averred that the ongoing investigation would in due course determine the benefit alleged to have been received by Mr Housley. There was reasonable to cause to believe that he had benefited from his criminal conduct. He had resigned from Gebals at the end of January 2006. It was averred that Mrs Housley held a mortgage over the matrimonial home. Various items of property were either held by her on behalf of Mr Housley or were tainted gifts made by him. In the light of these averments the Lord Ordinary made the order.

[4] A restraint order is a discretionary order which operates as a temporary protective measure until, in the event of conviction, confiscation proceedings are set in train (see HM Advocate v M 2006 SLT 203). As was pointed out by Lord Glennie at para 4 in his opinion in M, the court considering whether to make an order cannot assume that a confiscation order will be made in due course.

Recall of the restraint order

[5] Section 121 provides for recall and variation of a restraint order. Subsections (5) to (9) provide as follows:

"(5) The prosecutor and any other person affected by the order may apply to the court to recall an order or to vary it; and subsections (6) to (9) apply in such a case.

(6) If an application under subsection (5) in relation to an order has been made but not determined, realisable property to which the order applies must not be realised.

(7) The court may -

(a) recall the order;

(b) vary the order.

(8) In the case of a restraint order, if the condition in section 119 which was satisfied was that proceedings were instituted or an application was made, the court must recall the order on the conclusion of the proceedings or of the application (as the case may be).

(9) In the case of a restraint order, if the condition in section 119 which was satisfied was that an investigation was instituted or an application was to be made, the court must recall the order if within a reasonable time proceedings for the offence are not instituted or the application was not made (as the case may be)."

For present purposes the relevant subsections are (7) and (9). Subsection (7) provides a wide discretion to recall an order while subsection (9) provides for mandatory recall if certain conditions are met, namely, if within a reasonable time proceedings for the offence are not instituted.

The section 121(9) argument

[6] The first argument advanced by Mr MacNeill QC, who appeared on behalf of the noters, was developed under reference to section 121(9). The question was whether the period between the making of the order and proceedings being raised was a reasonable time. The subsection should not be construed as indicating that once proceedings had been raised the provision of 121(9) was no longer engaged. Such a construction would mean that an individual who had made numerous expressions of concern about the passage of time could find himself in the position where, when he did decide to make an application for recall, proceedings were raised, thereby depriving him of the opportunity to make use of the provision. Such a construction would mean that in the face of an application for recall the Crown could simply raise proceedings. He submitted that the more appropriate construction was to consider the reasonableness of the time which had elapsed between the making of the order and the raising of proceedings in the case. In considering the reasonableness of the time it was necessary to look not merely at what might be considered a reasonable time for the investigation, but also the reasonableness of the time with respect to the impact on the person whose property was the subject of the order. An individual was presumed to be innocent and the court should not assume that there will be a confiscation order made in this case. Mr MacNeill submitted that the relevant period was one of three and half years between the making of the order in February 2006 and the point in the autumn of 2009 when Mr Housley appeared, along with others, on a criminal petition. He submitted that that was a lengthy period during which there was a manifest incursion into the general rights of the individual to deal with his property. He questioned whether, if the court at the point of making the order had been aware that it would be between three and four years before the investigation led to a criminal petition, it would have made the order at the time.

[7] In relation to the proper construction of section 121(9), Mr Dewar QC, who appeared on behalf of the Lord Advocate, submitted that the subsection applied only in a situation where no proceedings had been instituted. The latter part of subsection 9 was in the present tense which indicated that the subsection was dealing with a situation in which a restraint order was in place, no proceedings had been instituted, and the individual claimed that proceedings had not been instituted within a reasonable time. This meant that where, as in the present case, proceedings had been instituted, the stage at which section 121(9) applied had been passed.

[8] An issue arose as to what was the appropriate point at which, in this case, proceedings were instituted. Section 151 provides for the circumstances in which proceedings for an offence are instituted against a person. These include: ... (b) when he is charged with the offence without being arrested; ... [and] (e) when he first appears on petition on an indictment or complaint is served on him. In his submissions, Mr MacNeill took as the point at which proceedings had been instituted against Mr Housley the date in the autumn of 2009 when he had appeared on a criminal petition. However, Mr Dewar submitted that that approach was misconceived because Mr Housley had been charged with a relevant offence on 25 July 2007. I did not understand Mr MacNeill, in reply, to challenge that as the appropriate date in terms of section 151(b). Against that background, Mr Dewar submitted that the period between the making of the order and the institution of proceedings was a period between February 2006 and July 2007, which, in the context of a complex investigation such as this, could not be said to be an unreasonable time. It was clear from answer 11 that there had been a lengthy investigation. It was a complex investigation involving millions of pounds. It involved significant investigation in foreign countries and the translation of large amounts of material. At no time in the period during which the order had been in place had there been any identifiable gap in time during which nothing or little had been happening.

Discussion

[9] I am inclined to the view that the construction of subsection 121(9) for which Mr Dewar contended is to be preferred. In my opinion section 121(9) falls to be construed in the context of section 121 as a whole. Subsection (7) gives the court a very wide and unfettered discretion. The mandatory recall under subsection (9) applies in only one situation. That is where no proceedings have been instituted. In a situation such as that figured by Mr MacNeill, namely, where, in response to the raising of a note for recall the Crown instituted proceedings, that might be a strong consideration, perhaps a compelling consideration, in the exercise by the court of its discretion to recall in terms of subsection (7). Accordingly, in my opinion, subsection 121(9) has no application in the present case.

[10] Even if my interpretation of section 121(9) is wrong and, in a case where proceedings have been instituted, the court is entitled to examine the period between the making of the order and the point at which proceedings are instituted, with a view to seeing whether the mandatory recall applies, my view is that it could not be said that the period here was unreasonable. I am satisfied that the relevant period is the period between February 2006 and July 2007. I recognise that a restraint order is a temporary measure. I am also mindful that such an order does significantly interfere with the ability of the individual to deal with his property. However, having regard to the length, complexity and far reaching nature of the investigation, it cannot, in my view, be said that the period is unreasonably long.

The section 121(7) argument

[11] The second argument advanced by Mr MacNeill related to the proceedings raised in the criminal petition. The first charge was of fraud of over £58,000. The remaining charges against Mr Housley were contraventions of section 93A(1)(a) of the Criminal Justice Act 1988; section 328(1) of the Proceeds of Crime Act 2002; and section 330(1) of the Proceeds of Crime Act 2002. Mr MacNeill submitted that nowhere in these charges, apart from the fraud charge, or in the answers to the Note, was it averred that Mr Housley had benefited from the alleged criminal conduct. It could not be inferred that benefit had been received. The Crown had failed to satisfy the second leg of the condition in section 119(2) and, accordingly, there was no continuing statutory basis for making the order. In order to justify what was a very serious incursion into the ability of an individual to deal with his property there required to be a clear link between the benefit and the alleged criminal conduct. The court was entitled to inquire of the Crown what was the basis which gave reasonable cause to believe that there had been benefit from criminal conduct. It was quite likely that a further very considerable period might elapse before proceedings came to an end. The court could not assume that a confiscation order will be made. Thus, in the absence of a clear indication that there had been benefit from criminal conduct, it was unconscionable that the order should remain in force. In these circumstances the court should exercise its discretion to recall the order under subsection 121(7).

[12] In relation to Mrs Housley, Mr MacNeill submitted that beyond the averment that various items of property were held by her on behalf of Mr Housley or were tainted gifts from him, no further indication had been given.

[13] Mr Dewar accepted that a restraint order did give rise to a serious imposition on the individual in respect of whose property the order had been made. That had been taken into account by the various variations and consents which had been met; it was clear from answer 7 that the Lord Advocate had responded to a number of requests by the noters, allowing funds to be made available to them in the course of the period during which the order was in force.

[14] Mr Dewar submitted that one would not expect to find in the libel of the money laundering charges any averments setting out the benefit which Mr Housley had received. In relation to the absence of such averments in the answers Mr Dewar explained that the investigation was not yet complete. Accordingly, the Lord Advocate was not in a position to put in averments in answer to the Note details of the benefit from the criminal conduct. The position remained as it had been when the Lord Ordinary had made the order. There was, and continued to be, reasonable cause to believe, both in relation to the fraud charge and the money laundering charges, that Mr Housley had benefited from his criminal conduct. There were movements through the firm's accounts of large sums of money which would give rise to a reasonable inference that this was not something done for no benefit. The assessment of the benefit obtained by Mr Housley was part of the investigation which was not yet complete. The assessment of the benefit would ultimately be a matter for the confiscation part of the proceedings. In considering the exercise of discretion the court should take into account the full context in which the order was granted and how matters had been dealt with since it had been granted. It was clear from answer 11 that there had been a lengthy investigation and complex investigation.

Discussion

[15] I agree with the submission of Mr Dewar that a charge in a criminal petition would not necessarily set out the benefit said to accrue to the person facing the charge. While I do consider that the Lord Advocate could have been more forthcoming in the answers to the Note, I have come to the view, on the basis of what was set out in the petition for the restraint order and what was said by Mr Dewar as to the developing nature of the investigation, that there does continue to be reasonable cause to believe that the alleged offender has benefited from his criminal conduct. It is clear that this is a complex investigation involving large sums of money. It has included significant investigation in foreign countries. On the other hand, there has, on any view, been significant intrusion into and interference with the ability of Mr and Mrs Housley to deal with their property. However, when I have regard to the circumstances as a whole, including these considerations, I am unable to find a basis on which to exercise the discretion to recall the order.

Decision

[16] For the reasons discussed above, I shall refuse the Note for recall of the restraint order made on 23 February 2006.