JUDGMENT
Gale and another (Appellants) v Serious Organised
Crime Agency (Respondent)
before
Lord Phillips, President
Lord Brown
Lord Mance
Lord Judge
Lord Clarke
Lord Dyson
Lord Reed
JUDGMENT GIVEN ON
26 October 2011
Heard on 23 and 24 May 2011
Appellant Respondent
Andrew Mitchell QC Anthony Peto QC
Jonathan Lennon John Law
Robert Weekes
(Instructed by Rahman
Ravelli Solicitors)
(Instructed by Serious
Organised Crime Agency
Legal Department)
Intervener (Secretary of
State for the Home
Department)
James Eadie QC
(Instructed by Treasury
Solicitors)
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LORD PHILLIPS (WITH WHOM LORD MANCE, LORD JUDGE AND
LORD REED AGREE)
Introduction
1. The Proceeds of Crime Act 2002 (“POCA”), as amended by the Serious
Organised Crime and Police Act 2005, is designed to prevent the enjoyment of the
fruits of criminal activity. Part 2 focuses on the criminal. To the extent that it is
proved, in the manner prescribed, that a criminal has benefitted from criminal
conduct, a levy can be made upon his assets, whether or not those assets are
themselves the product of his criminal conduct, by a process inaccurately
described as “confiscation”. A conviction of the criminal is a precondition to the
power to confiscate.
2. Part 5 concentrates on the fruits of crime themselves. The Serious
Organised Crime Agency (“SOCA”) is given the task of tracking down and
recovering the fruits of criminal activity, whether they remain in the hands of the
criminal or have been passed on to someone else – subject to exceptions for which
POCA makes provision. The fruits of criminal activity can be recovered under Part
5 whether or not anyone has been convicted of the crime or crimes that have
produced them.
3. This appeal is concerned with Part 5 proceedings. SOCA has obtained an
order for the recovery of property to the value of some £2m (“the property”) held
by the appellants, David Gale and his former wife Teresa Gale. SOCA did so by
persuading Griffith Williams J, sitting in the High Court, that the property was
derived from criminal activity on the part of one or other or both of the appellants,
in the form of drug trafficking, money laundering and tax evasion in the United
Kingdom, Spain, Portugal and other jurisdictions. The judge so found
notwithstanding that David Gale had never been convicted of drug trafficking –
albeit that in Portugal he was prosecuted and acquitted of drug trafficking and in
Spain criminal proceedings against him for drug trafficking were brought but
discontinued.
4. In order to recover property under Part 5 SOCA has to prove that it was
obtained by unlawful conduct, or that it is property obtained in place of such
property. Section 241 defines unlawful conduct as being conduct which is
unlawful under the criminal law of the country in which it occurs, whether this is
the United Kingdom or elsewhere. The section requires the court to decide “on a
balance of probabilities” whether it is proved that any of the matters alleged to
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constitute unlawful conduct occurred. Section 242 provides that in deciding
whether property was obtained through unlawful conduct it is not necessary to
show that the conduct was of a particular kind if it is shown that the property was
obtained through conduct of one of a number of kinds, each of which would have
been unlawful conduct. Thus it is not necessary to prove that individual items of
property were derived from specific offences.
5. “Balance of probabilities” is the standard of proof applied in civil
proceedings under English law (“the civil standard of proof”). In criminal
proceedings guilt has to be proved “beyond reasonable doubt” (“the criminal
standard of proof”). In concluding that the property recovered was the product of
criminal conduct on the part of the appellants, Griffith Williams J applied the civil
standard of proof, albeit that he used language that suggested that the criminal
standard might well have been satisfied. It is the appellants’ case, advanced
without success in the Court of Appeal, that this was contrary to the Human Rights
Act 1998 in that it infringed their right to a fair trial under article 6 of the European
Convention on Human Rights (“the Convention”). They urge that, despite the
language of section 241(3), we should “read down” the subsection so as to accord
to it the meaning that the court must decide whether it is proved beyond
reasonable doubt that matters alleged to constitute unlawful conduct occurred.
Alternatively, they submit that the Court should declare the subsection to be
incompatible with the Convention pursuant to section 4 of the Human Rights Act.
This is the only issue concerning the recovery order that arises with regard to the
recovery order; other issues that were raised below have not been pursued.
6. There is a second issue. On 28 July 2005 Collins J made an Interim
Receiving Order pursuant to section 246 of POCA. The findings of the Interim
Receiver’s report formed the basis for commencing the proceedings for civil
recovery. At the end of those proceedings the judge made an order for costs
against the appellants. He refused, however, to direct that those costs should
include the costs of the Interim Receiver’s investigation and report. SOCA crossappealed successfully against that refusal. The appellants seek to reverse the Court
of Appeal on this issue and to restore the order of the judge.
Is there scope for reading down?
7. The Secretary of State, represented by Mr Eadie QC, has intervened
because of the possibility of a declaration of incompatibility. The Secretary of
State has supported the respondent, SOCA, in relation to the first issue. Mr Eadie
has submitted, however, that regardless of the merits of the human rights challenge
there can be no question of reading down section 241(3). This is because it
represents a clear, advised expression of Parliamentary intent lying at the heart of
the statutory scheme. This submission runs counter to an obiter view that I
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expressed at para 24 in R v Briggs-Price [2009] UKHL 19; [2009] AC 1026, when
dealing with analogous provisions of the Drug Trafficking Act 1994. Lord Rodger
of Earlsferry expressed the same view at para 79. I see the force in Mr Eadie’s
argument and, if necessary, it will be necessary to reconsider the views that I and
Lord Rodger expressed. The first issue is, however, whether section 241(3), if
given its natural and very clear meaning, is compatible with the Convention.
8. Section 241(3) forms part of a statutory code of some complexity. I do not
believe that for the purposes of resolving the issue raised on this appeal it is
necessary to give a more detailed explanation of the legislation than that which I
have given. A summary of the relevant provisions of POCA can, however, be
found in paras 5 to 11 of the judgment of Carnwath LJ in the Court of Appeal
[2010] EWCA Civ 759, [2010] 1 WLR 2881.
The judgment of Griffith Williams J
9. The judgment of Griffith Williams J [2009] EWHC 1015 (QB) runs to
nearly 60 closely printed pages. I would endorse the commendation of Carnwath
LJ of this “meticulous and comprehensive judgment”. The judge started by quoting
from the Executive Summary of the Report of the Interim Receiver to the effect
that there was no documentary evidence that supported the appellants’ assertion
that their assets had been derived from legitimate activities but, on the contrary,
evidence of unlawful conduct and complex financial dealings indicative of money
laundering and concealment.
10. The judge then addressed the burden and standard of proof. He held:
“9. The burden of proof is on the claimant and the standard of proof
they must satisfy is the balance of probabilities. While the claimant
alleged serious criminal conduct, the criminal standard of proof does
not apply, although ‘cogent evidence is generally required to satisfy
a civil tribunal that a person has been fraudulent or behaved in some
other reprehensible manner. But the question is always whether the
tribunal thinks it more probable than not’ – see Secretary of State for
the Home Department v Rehman [2003] 1 AC 153 at para 55, per
Lord Hoffmann.”
The judge went on to quote from Lord Carswell’s elaboration of this approach, in
which the other members of the House concurred, in In re D (Secretary of State for
Northern Ireland intervening) [2008] UKHL 33, [2008] 1 WLR 1499.
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11. In para 18 of his judgment the judge set out his approach to the evidence,
in the context of the question of the attitude that he should take to the acquittal of
David Gale by the Portuguese Court:
“It is not contended that the doctrine of issue estoppel applies and
clearly the criminal law principle of autrefois acquit has no
application in civil proceedings. On behalf of DG, it was submitted
that the Portuguese charges cannot be re-litigated without hearing
from all the relevant witnesses or considering a full transcript which
is not available. However, I do not accept this contention. To
consider the evidence adduced in the Portuguese proceedings is not
to re-litigate because what is in issue in these proceedings is not the
commission of the specific offences alleged against DG in Portugal
but whether on the evidence before this court of the material
considered by the Portuguese Court, together with the evidence
available to the Spanish Courts and other material not considered by
the courts in either jurisdiction, the claimant has proved on the
balance of probabilities that DG’s wealth was obtained through
unlawful conduct of a particular kind or of one of a number of kinds,
each of which would have been unlawful conduct: see section
242(2)(b) of POCA – that is to say drug trafficking, money
laundering and tax evasion.”
12. The judge gave detailed consideration to the acquisition of numerous
assets by the appellants and the explanations, or lack of explanations, proffered to
explain how these were funded. He examined the evidence that had led to the
Portuguese prosecution and the commencement of criminal proceedings in Spain,
which were subsequently discontinued “on account of prescription”. His
conclusions were summarised in the following passage from para 140 of his
judgment:
“I am in no doubt that DG and TG engaged in unlawful conduct – in
DG’s case, money laundering and drug trafficking, in TG’s case
money laundering. There is also evidence of tax evasion in four
jurisdictions. They have acquired capital and various assets as a
direct consequence of the money laundering and/or drug trafficking,
but it is not possible to quantify the extent of the tax evasion or to
estimate the extent, if at all, that it contributed to their capital wealth.
For reasons given during the course of the judgment and below, I am
satisfied the Receiver has correctly identified recoverable property. I
found DG a witness whose evidence, on the central issues, was
wholly unreliable. He was so often demonstrably lying. I am not
prepared to believe the evidence of TG insofar as she purported to
confirm his account or to explain her involvement; she too was
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shown to be a liar about matters of real moment. While I am
prepared to accept that DG was the moving force behind all criminal
conduct, she was hardly ignorant of what he was doing and played
her full part in the money laundering.”
The judge then summarised the facts that he had found earlier in his judgment,
which formed the basis for his conclusions. They ranged more widely than the
facts that formed the basis of the criminal proceedings in Portugal and Spain.
The appellants’ case
13. Article 6 of the Convention provides:
“1. In the determination of his civil rights and obligations or of any
criminal charge against him, everyone is entitled to a fair and public
hearing… ”
“2. Everyone charged with a criminal offence shall be presumed
innocent until proved guilty according to law.”
Article 6(3) lays down a number of procedural “minimum rights” to be accorded to
a person charged with a criminal offence.
14. Mr Mitchell QC’s submissions on behalf of the appellants founded upon
the fact that an essential stepping stone toward proving that the property owned by
the appellants was the product of crime was proof that the appellants had been
guilty of criminal conduct, in the form of drug trafficking and money laundering.
He submitted that in these circumstances article 6(2) applied. The appellants were
entitled to the presumption of innocence afforded by that article. Rebuttal of the
presumption of innocence required proof of guilt to the criminal standard, this
being implicit in the words “according to law”. He added to this the submission
that once David Gale had been acquitted of drug trafficking by the Portuguese
Court no adverse finding could be made that implicated him in the conduct of
which he had been acquitted.
15. As the legal basis for these submissions Mr Mitchell relied first on a
considerable body of Strasbourg jurisprudence and secondly on the analysis of this
jurisprudence of the House of Lords in R v Briggs-Price. In considering the
jurisprudence I acknowledge the assistance that I have derived from Mr Eadie’s
printed case. He has there propounded a number of principles to be derived from
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the Strasbourg cases, which were not challenged by Mr Mitchell and which I have
found to be both well founded and helpful.
The Strasbourg jurisprudence
16. “Charged with a criminal offence” has an autonomous meaning – see
Engel v The Netherlands (No 1) (1976) 1 EHRR 647. Thus the fact that POCA
unequivocally designates recovery proceedings as “civil recovery” does not
establish conclusively that they do not involve the charge of a criminal offence.
None the less, the classification of proceedings under national law is one of three
relevant considerations (“the three factors”) to which the ECtHR always has regard
when deciding whether or not article 6(2) is engaged. The second is the essential
nature of the proceedings and the third is the type and severity of the consequence
that may flow from the proceedings, usually described by the ECtHR as “the
penalty that the applicant risked incurring”. These three factors, and some of the
jurisprudence in which they feature, were identified by Kerr LCJ in Walsh v
Director of the Assets Recovery Agency [2005] NICA 6, [2005] NI 383, at para 20,
where he observed that they tend to blend into each other.
17. If the proceedings are properly analysed as civil rather than criminal,
article 6(1) applies, but not article 6(2) or (3). There is a possibility, however, that
the requirements of article 6(2) and (3) may creep in by the back door on the basis
that the notion of a fair trial demands that they be applied – see Bochan v Ukraine
(Application No 7577/02) (unreported) 3 May 2007.
18. I now come to a series of cases dealing with the application of article 6(2)
after a person has been acquitted in criminal proceedings. These are of relevance in
the present case having regard to Mr Mitchell’s contention that the Portuguese
acquittal posed a bar to reliance in these proceedings on the alleged conduct which
formed the basis of the Portuguese proceedings.
19. Some of these decisions are mutually inconsistent and it is not easy to
identify the principle underlying others. Before looking at these cases it may be
helpful to make some preliminary observations. Many signatories to the
Convention require guilt in criminal proceedings to be established according to an
enhanced standard of proof in comparison to civil or disciplinary proceedings. In
this jurisdiction the standard is proof beyond reasonable doubt. In such
circumstances it is perfectly obvious that failure to establish guilt according to the
required standard does not demonstrate that the defendant did not commit the
criminal act. It demonstrates simply that the evidence adduced against him was
insufficient to discharge the enhanced burden of proof. After acquittal, the
possibility exists that claims for relief by, or against, the defendant may be brought
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that are based upon, or involve consideration of, the evidence that was inadequate
to establish the defendant’s criminal guilt. The resolution of those claims may turn
on lesser standards of proof, or different criteria, from those which governed the
criminal proceedings. Examples are a claim by the defendant in respect of his legal
costs, a claim by the defendant for compensation for time spent remanded in
custody, disciplinary proceedings brought against the defendant in respect of the
alleged conduct that formed the subject of the criminal charge, or a claim for
damages by an alleged victim of that conduct.
20. The Strasbourg Court has never suggested that it is unlawful to require a
defendant who has been acquitted to satisfy some additional criterion in order to
qualify for reimbursement of his costs, or for compensation for time spent on
remand: see for instance Leutscher v The Netherlands (1996) 24 EHRR 181. The
Strasbourg Court has also recognised that it is legitimate for a victim to bring a
civil claim for compensation in proceedings that apply a lesser burden of proof to
the issue of whether the defendant committed the acts that had formed the basis of
the criminal charge on which he was acquitted – see for instance Ringvold v
Norway (Application No 34964/97) (unreported) 11 February 2003. And the
Strasbourg Court has recognised that, after acquittal, it may still be legitimate to
bring disciplinary proceedings or care proceedings under which a lesser standard
of proof may be applied to the question of whether the defendant committed the
conduct that had formed the basis of the criminal charge of which he was
acquitted: see for example Moullet v France (Application No 27521/04)
(unreported) 13 September 2007; HK v Finland (Application No 36065/97)
(unreported) 27 September 2005.
21. Most of the cases to which I have just referred involved discrete
proceedings after the defendant’s acquittal in the criminal trial. There are a number
of cases, however, where the Strasbourg Court has held that the presumption of
innocence in article 6(2) was infringed by findings in subsequent proceedings that
cast doubt on the validity of a prior acquittal in criminal proceedings. The common
factor in these cases has been a procedural connection between the criminal trial
and the subsequent proceedings – the mantra oft repeated has been that the latter
proceedings were “a consequence and the concomitant” of the criminal
proceedings. The Court has also condemned as infringing article 6(2) statements
by public authorities suggesting that a person acquitted might none the less have
been guilty.
22. This line of authority starts with Sekanina v Austria (1993) 17 EHRR 221.
The applicant was tried and acquitted of a charge of murder. The jury gave as their
reason that there was no “conclusive evidence” on which to convict him. He then
claimed compensation for a year during which he was remanded in custody. Under
the relevant statute a defendant was entitled to compensation if he was acquitted
“and the suspicion that he committed the offence is dispelled”. He was refused
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compensation by the court which had presided over the trial on the ground that,
having regard to the evidence, his acquittal did not dispel suspicion of his guilt. He
alleged violation of article 6(2). The Commission in ruling the application
admissible adopted the following passage from X v Austria (1982) 30 DR 227:
“No authority may treat a person as guilty of a criminal offence
unless he has been convicted by the competent court and in the case
of an acquittal the authorities may not continue to rely on the charges
which have been raised before that court but which have been proved
to be unfounded. This rule also applies to courts which have to deal
with non-criminal consequences of behaviour which has been subject
to criminal proceedings. They must be bound by the criminal court’s
finding according to which there is no criminal responsibility for the
acts in question although this naturally does not prevent them to
establish, eg a civil responsibility arising out of the same facts.”
23. The ECtHR agreed that article 6(2) applied. In doing so it relied on a link
between the criminal proceedings and the compensation proceedings. It held at
para 22:
“Admittedly, the Linz Regional Court gave its decision rejecting the
claim on 10 December 1986, several months after the judgment
acquitting the applicant on 30 July 1986. In the Court’s opinion,
Austrian legislation and practice nevertheless link the two questions
– the criminal responsibility of the accused and the right to
compensation – to such a degree that the decision on the latter issue
can be regarded as a consequence and, to some extent, the
concomitant of the decision on the former. Moreover, as is the case
under the legislation of several other European countries in which a
right to compensation in respect of detention on remand is
recognised in the event of acquittal, the criminal court which tries
the case on its merits, in this instance the Linz Landesgericht, albeit
composed differently, in principle has jurisdiction in the matter.
Finally, the Austrian courts relied heavily on the evidence from the
Assize Court’s case file in order to justify their decision rejecting the
applicant’s claims, thus demonstrating that, in their opinion, there
was indeed a link between the two sets of proceedings.
The applicant can therefore invoke article 6(2) in relation to the
impugned decision.”
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Subsequently, at para 30, the ECtHR made the following comment on the Austrian
court’s affirmations that there were still grounds for suspicion of the applicant’s
guilt:
“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. Despite the fact that there had been a
final decision acquitting Mr Sekanina, the courts which had to rule
on the claim for compensation undertook an assessment of the
applicant’s guilt on the basis of the contents of the Assize Court file.
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.”
24. Sekanina was followed in Rushiti v Austria (2000) 33 EHRR 1331, a case
of essentially similar facts. The Court stated at para 31:
“ In any case, the Court is not convinced by the Government’s
principal argument, namely that a voicing of suspicions is acceptable
under article 6(2) if those suspicions have already been expressed in
the reasons for the acquittal. The Court finds that this is an artificial
interpretation of the Sekanina judgment, which would moreover not
be in line with the general aim of the presumption of innocence
which is to protect the accused against any judicial decision or other
statements by state officials amounting to an assessment of the
applicant’s guilt without him having previously been proved guilty
according to law (see Allenet de Ribemont v France (1995) 20
EHRR 557, para 35, with further references). The Court cannot but
affirm the general rule stated in the Sekanina judgment that,
following a final acquittal, even the voicing of suspicions regarding
an accused’s innocence is no longer admissible. The Court, thus,
considers that once an acquittal has become final – be it an acquittal
giving the accused the benefit of the doubt in accordance with article
6(2) – the voicing of any suspicions of guilt, including those
expressed in the reasons for the acquittal, is incompatible with the
presumption of innocence.”
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25. Taken at face value these decisions seem to convert a presumption of
innocence prior to conviction which is rebuttable into an irrebuttable presumption
of innocence after acquittal. Two matters demonstrate that this is not the case. The
first is the relief granted, or more significantly denied, to the applicants. Each of
the applicants sought damages by way of compensation for his detention on
remand – ie the relief he had sought in the domestic proceedings, to which he was
entitled under domestic law if suspicion of his guilt had been dispelled. This was
denied on the ground that there was no connection between the violation of article
6(2) and the damage in question. If, however, the acquittals had been conclusive of
the applicant’s innocence his right to compensation would logically have followed.
The other matter is the reasoning of the ECtHR in a number of subsequent
applications against Norway, which were heard together.
26. Ringvold v Norway (Application No 34964/97) (unreported) 11 February
2003 and Y v Norway (2003) 41 EHRR 87 each concerned a case where the victim
of conduct that had been the subject of an unsuccessful criminal prosecution was
awarded compensation. Under Norwegian criminal law guilt of an accused must be
proved beyond reasonable doubt. Under the Code of Criminal Procedure 1981 the
civil claim of a victim may be determined “in connection with” a criminal case
provided that the claim arises from the same act that forms the basis of the
prosecution. Under the Damage Compensation Act 1969 a purported victim is
entitled to claim damages for personal injury caused with intent or by gross
negligence regardless of the outcome of criminal proceedings. The standard of
proof in respect of such a claim is balance of probabilities.
27. In Y v Norway the applicant was charged with sexual assault and homicide
of his cousin. He was convicted and sentenced to 14 years’ imprisonment. In
linked civil proceedings he was ordered to pay compensation to the victim’s
parents. He appealed to the High Court, where the hearing was before three
professional judges and a jury. The jury acquitted the applicant. The next day the
three professional judges sat to consider the compensation order on the basis of the
evidence that they had heard. They upheld the order for compensation. The
applicant claimed violation of article 6(2) but did not claim pecuniary damages.
The ECtHR considered the three relevant factors to which I have referred in para
16 above. It held at para 40 that the compensation proceedings were classified as
civil under Norwegian domestic law. As to the second factor the Court held at para
41 that, notwithstanding that the compensation claim was based on the same
evidence and involved the same constitutive elements as the criminal offence, it
could not properly be said to render the defendant “charged with a criminal
offence”. The Court continued:
“Thus, the Court considers that, while the acquittal from criminal
liability ought to be maintained in the compensation proceedings, it
should not preclude the establishment of civil liability to pay
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compensation arising out of the same facts on the basis of a less
strict burden of proof (see, mutatis mutandis, X v Austria (1982) 30
DR 227; MC v United Kingdom (1987) 54 DR 162).
42. However, if the national decision on compensation contains a
statement imputing the criminal liability of the respondent party, this
could raise an issue falling within the ambit of article 6(2) of the
Convention.
43. The Court will therefore examine the question 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 as to justify extending the scope
of the application of article 6(2) to the latter.
44. The Court notes that the High Court opened its judgment with
the following finding (para 13 above):
‘Considering the evidence adduced in the case as a
whole, the High Court finds it clearly probable that
[the applicant] has committed the offences against
Ms T with which he was charged and that an award
of compensation to her parents should be made
under article 3-5 (2) of the Damage Compensation
Act. …’ (Emphasis added)
45. This judgment was upheld by the majority of the Supreme Court
(para 16 above), albeit using more careful language. However, that
judgment, by not quashing the former, did not rectify the issue,
which in the Court’s opinion, thereby arises.
46. The Court is mindful of the fact that the domestic courts took
note that the applicant had been acquitted of the criminal charges.
However, in seeking to protect the legitimate interests of the
purported victim, the Court considers that the language employed by
the High Court, upheld by the Supreme Court, overstepped the
bounds of the civil forum, thereby casting doubt on the correctness
of that acquittal. Accordingly, there was a sufficient link to the
earlier criminal proceedings which was incompatible with the
presumption of innocence.
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47. In the light of these considerations, the Court concludes that
article 6(2) was applicable to the proceedings relating to the
compensation claim against the present applicant and that this
provision was violated in the instant case.”
The Court awarded 20,000 Euros by way of non-pecuniary damages.
28. In Ringvold v Norway the applicant was charged with sexual abuse of a
minor, G, on whose behalf a claim was submitted for civil compensation. He was
acquitted and the claim for compensation dismissed. G appealed to the Supreme
Court against the failure to award compensation. The Supreme Court heard fresh
evidence but also had regard to the evidence given in the criminal proceedings.
The ECtHR considered the usual three factors and concluded that the
compensation claim did not amount to the “bringing of another ‘criminal charge’”.
It observed, however, that had the national decision on compensation contained a
statement imputing criminal liability to the applicant this would have raised an
issue falling “within the ambit” of article 6(2).
29. The Court then went on to distinguish Sekanina and Rushiti in the
following manner:
“41. The question remains whether there were such links between
the criminal proceedings and the ensuing compensation proceedings
as to justify extending the scope of article 6(2) to cover the latter.
The Court reiterates that the outcome of the criminal proceedings
was not decisive for the issue of compensation. In this particular
case, the situation was reversed: despite the applicant’s acquittal it
was legally feasible to award compensation. Regardless of the
conclusion reached in the criminal proceedings against the applicant,
the compensation case was thus not a direct sequel to the former. In
this respect, the present case is clearly distinguishable from those
referred to above, where the Court found that the proceedings
concerned were a consequence and the concomitant of the criminal
proceedings, and that article 6(2) was applicable to the former.”
30. Sekanina and Rushiti were, however applied, and Ringvold distinguished,
in Hammern v Norway (Application No 30287/96) (unreported) 11 February 2003.
The applicant in that case had been acquitted on charges of sexual abuse of minors.
He then sought compensation in respect of time during which he had been
remanded in custody. Under article 444 of the Code of Criminal Procedure he was
Page 14
entitled to this “if it is shown to be probable that he did not carry out the act that
formed the basis for the charge.” The ECtHR held at para 42 that the compensation
proceedings did not give rise to a “criminal charge” against the applicant, but went
on to hold that the linkage between the compensation proceedings and the criminal
proceedings had the consequence of bringing the former “within the scope” of
article 6(2). At para 44 the Court held that it was significant that the proceedings
engaged the responsibility of the state, not a private party. It went on to give the
following reasons for holding article 6(2) to be applicable:
“45. …Moreover, unlike in criminal proceedings – where it was for
the prosecution to prove beyond reasonable doubt that the defendant
had committed the incriminated act – in a compensation case of the
present kind it was for the acquitted person to show that, on the
balance of probabilities, it was more than 50% probable that he or
she did not carry out the act grounding the charge. Leaving aside this
difference in evidentiary standards, the latter issue overlapped to a
very large extent with that decided in the applicant’s criminal trial. It
was determined on the basis of evidence from that trial by the same
court, sitting largely in the same formation, in accordance with the
requirements of article 447 of the Code.
46. 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 subjectmatter. Its object was, put simply, to establish whether the state
should have a financial obligation to compensate the burden it had
created for the acquitted person by the prosecution it had engaged
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.”
31. Ringvold and Y were applied by the ECtHR when ruling inadmissible the
application in Lundkvist v Sweden (Application No 48518/99) (unreported) 13
November 2003. The applicant was charged with setting his house on fire after a
row with his wife. He was acquitted on the grounds that, while there was a strong
inferential case against him, it did not establish his guilt beyond reasonable doubt.
He then brought a civil claim against his insurers for the loss of his house.
Evidence was adduced, which included evidence that had been adduced at the
criminal trial. The court dismissed his claim, holding that the insurance company
had proved, on balance of probabilities that he was responsible for the fire.
Considering the three factors the Court held that the civil proceedings did not
involve bringing a “criminal charge” against the applicant. It went on to hold:
Page 15
“As to the further question of whether there were links between the
criminal case and the ensuing compensation case such as to justify
extending the scope of the application of article 6(2) to the latter, the
Court reiterates that the outcome of the criminal proceedings was not
decisive for the compensation issue. In this particular case, the
situation was reversed: despite the applicant’s acquittal it was legally
feasible to deny him insurance compensation for the destroyed
house. Regardless of the conclusion reached in the criminal trial
against the applicant, the compensation case was therefore not a
direct sequel to the former or a consequence and concomitant of it.”
Discussion
32. With respect, I find unconvincing the attempts of the Strasbourg Court to
distinguish between claims for compensation by an acquitted defendant and claims
for compensation by a third party against an acquitted defendant. As the cases to
which I have just referred show, the link between the criminal proceedings and the
subsequent proceedings can be close in either case. The evidence may be common
to both proceedings, as may the judges who have to consider it. In each case the
compensation proceedings can put in issue the facts that were alleged as the
foundation of the criminal charges. In each case facts were held proved according
to the civil standard of proof which had not been established according to the
criminal standard in the earlier proceedings. How can it credibly be said that the
claim for compensation by the defendant is “consequential and concomitant” to the
criminal proceedings but not the claim by a third party? May it not be that the
Strasbourg Court took a wrong turn in Sekanina and Rushiti? It might be thought
that the judges who sat on the criminal proceedings will be well placed to
determine the outcome of issues that depend upon the application of a lesser
standard of proof to the same factual evidence; the Norwegian procedure,
illustrated in Y, proceeded on that basis. Yet this is something that the Strasbourg
jurisprudence appears to discourage. This confusing area of Strasbourg law would
benefit from consideration by the Grand Chamber.
33. What follows from the findings of the Strasbourg Court that claims for
compensation by acquitted defendants fall “within the scope” of article 6(2)? This
is a question to which I drew attention in para 25 above. It was considered in a
concurring opinion by Judge Greve in Hammern. The judge’s conclusion was that
the test laid down by the Norwegian Code of Criminal Procedure for recovering
compensation – could the defendant show that on balance of probabilities he did
not carry out the act that formed the basis of the charge -was simply not viable
because it violated article 6(2). The focus had to be on whether the prosecution had
been warranted on the facts known at the time. I comment that if this were correct
the effect of article 6(2) was to prejudice the rights of the defendant that it was
designed to protect.
Page 16
34. An alternative view is that all that the cases establish is that article 6(2)
prohibits a public authority from suggesting that an acquitted defendant should
have been convicted on the application of the criminal standard of proof and that
to infringe article 6(2) in this way entitles an applicant to compensation for
damage to reputation or injury to feelings. I am inclined to this view, albeit that it
involves a remarkable extension of a provision that on its face is concerned with
the fairness of the criminal trial – see my comment on Taliadorou and Stylianou v
Cyprus (Application Nos 39627/05 and 39631/05) (unreported) 16 October 2008)
in R (Adams) v Secretary of State for Justice [2011] UKSC 18, [2011] 2 WLR
1180.
35. On no view does this jurisprudence support Mr Mitchell’s submission that
the appellant’s acquittal in Portugal precludes the English court in proceedings
under POCA from considering the evidence that formed the basis of the charges in
Portugal. The link between the Portuguese criminal proceedings and the English
civil proceedings, which Strasbourg would appear to consider so critical, is not
there. Nor does this jurisprudence lend any support to the proposition that the
criminal standard must be applied to proof of criminal conduct in proceedings
under POCA. That proposition requires further consideration of Strasbourg
authority.
Consideration of Strasbourg jurisprudence resumed
36. Before the decision of the ECtHR in Geerings v The Netherlands (2007)
46 EHRR 1222 and the decision of the House of Lords in R v Briggs-Price [2009]
AC 1026 the law was not in doubt. Confiscation proceedings that proceed on the
basis that property in the hands of a convicted criminal was derived from other
criminal activity did not involve the defendant being “charged with a criminal
offence” in relation to the other offending, or engage article 6(2). The cases
supporting this proposition, and applying them to the United Kingdom
confiscation legislation, are analysed in detail in Briggs-Price and I do not propose
to repeat that exercise. I should record, however, that Mr Eadie referred the Court
to two lines of Strasbourg authority, not considered in Briggs-Price, that supported
this proposition. The first involved admissibility decisions in relation to
proceedings in Italy to seize and confiscate the assets of those associated with
Mafia activities: M v Italy (1991) 70 DR 59, Raimondo v Italy (1994) 18 EHRR
237; Arcuri v Italy (Application No 52024/99) (unreported) 5 July 2001.
37. M v Italy was a decision of the Commission. The application related to
confiscation of property on the ground that there was circumstantial evidence that
the property was derived from unlawful activities. The Commission considered the
usual three factors and concluded that the proceedings did not involve a criminal
charge so as to engage article 6(2). Rather they were preventative in character.
Page 17
38. In Raimondo v Italy the ECtHR made a similar finding at para 43,
although article 6(2) itself was not invoked. The position was the same in Arcuri v
Italy.
39. The other authorities were two admissibility decisions in relation to
seizure and confiscation of cash on the ground that it was the proceeds of, or
intended to be used for, drug trafficking, pursuant to sections 42-43 of the Drug
Trafficking Act 1994: Butler v United Kingdom (Application No 41661/98)
(unreported) 27 June 2002 and Webb v United Kingdom (Application No
56054/00) (unreported) 10 February 2004. In each case the ECtHR rejected the
contention that the proceedings involved a “criminal charge” and resulted in the
imposition of a penalty or punishment. It held that forfeiture was preventative and
not a penal sanction. Accordingly it was permissible that, pursuant to section
43(3), the standard of proof required to justify forfeiture was that applicable to
civil proceedings.
Geerings and Briggs-Price
40. Mr Mitchell did not deal in detail with earlier authority. Rather he
founded his argument on the decision of the Strasbourg Court in Geerings, as
applied by the House of Lords in Briggs-Price. I do not propose to repeat the
review of the earlier authorities that is to be found in the speeches in that case. The
relevant background to Geerings was the decision of the ECtHR in Phillips v
United Kingdom (2001) 11 BHRC 280 and in van Offeren v The Netherlands
(Application No 19581/04) (unreported) 5 July 2005. In each case the Court held
that confiscation proceedings in relation to the benefits of drug trafficking did not
involve charging the defendant with a criminal offence so as to bring them within
the scope of article 6(2). In each case the applicant had been convicted of drug
offences and the confiscation proceedings related to property held by him. The
issue was whether article 6(2) was infringed by a presumption that this property
was derived from similar offences. In holding that it was not the Court treated the
confiscation procedure as analogous to the sentencing process. It does not seem to
me that the analogy is very precise. The important point is, however, that the
ECtHR approved of the confiscation of property on the basis that it was derived
from drug trafficking without treating the proof that it was so derived as involving
criminal charges and thus involving the application of article 6(2).
Geerings v The Netherlands
41. The position in Geerings 46 EHRR 1222 was very different. The
applicant had been charged with a number of specific offences of theft and
handling stolen goods and initially convicted of these. On appeal most, but not all,
Page 18
the convictions were quashed on the ground that the evidence did not satisfy the
criminal standard of proof. None the less the Public Prosecutions Department
sought a “confiscation” order for payment by the defendant of a sum equivalent to
the benefit that he had derived from not merely the offences of which he had been
convicted, but also from the offences of which he had been acquitted. The
Supreme Court held that the Department was entitled to this order on the basis
that, for the purposes of the confiscation proceedings, the standard of proof that he
had benefited from the offences in question was less stringent than the standard of
proof that had been required to procure his conviction of them. Thus the fact that
he had been acquitted of the offences was no bar to the claims in respect of them in
the confiscation proceedings.
42. As a matter of strict logic I am in sympathy with the reasoning of the
Supreme Court. None the less there is something unattractive about a prosecuting
authority, which has failed to procure a conviction, proceeding to seek a
confiscation order on the basis that the defendant committed the specific crimes of
which he was acquitted. The ECtHR declined to accept this situation. The
following passage from the judgment of the Court sets out the basis upon which it
avoided doing so:
“44. The Court has in a number of cases been prepared to consider
confiscation proceedings following on from a conviction as part of
the sentencing process and therefore beyond the scope of article 6(2)
(see, in particular, Phillips, cited above, para 34; van Offeren v The
Netherlands (Application No 19581/04), 5 July 2005). The features
which these cases had in common are that the applicant was
convicted of drugs offences; that the applicant continued to be
suspected of additional drugs offences; that the applicant
demonstrably held assets whose provenance could not be
established; that these assets were reasonably presumed to have been
obtained through illegal activity; and that the applicant had failed to
provide a satisfactory alternative explanation.
45. The present case has additional features which distinguish it from
Phillips and van Offeren.
46. First, the Court of Appeal found that the applicant had obtained
unlawful benefits from the crimes in question although the applicant
in the present case was never shown to hold any assets for whose
provenance he could not give an adequate explanation. The Court of
Appeal reached this finding by accepting a conjectural extrapolation
based on a mixture of fact and estimate contained in a police report.
Page 19
47. The Court considers that ‘confiscation’ following on from a
conviction – or, to use the same expression as the Netherlands
Criminal Code, ‘deprivation of illegally obtained advantage’ – is a
measure (maatregel) inappropriate to assets which are not known to
have been in the possession of the person affected, the more so if the
measure concerned relates to a criminal act of which the person
affected has not actually been found guilty. If it is not found beyond
a reasonable doubt that the person affected has actually committed
the crime, and if it cannot be established as fact that any advantage,
illegal or otherwise, was actually obtained, such a measure can only
be based on a presumption of guilt. This can hardly be considered
compatible with article 6(2) (compare, mutatis mutandis, Salabiaku
v France (1988) 13 EHRR 379, para 28).
48. Secondly, unlike in the Phillips and van Offeren cases, the
impugned order related to the very crimes of which the applicant had
in fact been acquitted.
49. In the Rushiti judgment (cited above, para 31), the Court
emphasised that article 6(2) embodies a general rule that, following a
final acquittal, even the voicing of suspicions regarding an accused’s
innocence is no longer admissible.
50. The Court of Appeal’s finding, however, goes further than
the voicing of mere suspicions. It amounts to a determination of the
applicant’s guilt without the applicant having been ‘found guilty
according to law’ (compare Baars v The Netherlands, (2003) 39
EHRR 538, para 31).
51. There has accordingly been a violation of article 6(2).”
43. This passage might be read as supporting one or more of the following
propositions in relation to “confiscation” proceedings, by which I mean
proceedings that require payment by a defendant of a sum equivalent to the value
of property derived directly or indirectly from crime:
i) Where a defendant has been tried and acquitted of an
offence no claim can be based upon an assertion that he
committed that offence.
Page 20
ii) In no case can confiscation be ordered unless it is proved
to the criminal standard that the defendant committed the
offences from which the property is alleged to have been derived.
iii) Where it is not proved by independent evidence that the
defendant possesses or possessed property for which there is no
innocent explanation, but asserted that this is to be inferred from
the fact that he committed a crime or crimes, the latter fact must
be proved according to the criminal standard of proof.
44. The first proposition can readily be deduced from paras 48, 49 and 50.
None the less, as I have already indicated, I believe that this proposition is contrary
to principle. If confiscation proceedings do not involve a criminal charge, but are
subject to the civil standard of proof, I see no reason in principle why confiscation
should not be based on evidence that satisfies the civil standard, notwithstanding
that it has proved insufficiently compelling to found a conviction on application of
the criminal standard. At all events, insofar as other Strasbourg jurisprudence
supports the first proposition, it is only in circumstances where there is a
procedural link between the criminal prosecution and the subsequent confiscation
proceedings. There was no such link in the present case. The acquittal was in
Portugal and the recovery proceedings here in England. Furthermore, the evidence
in the latter ranged much wider than the evidence that was relied upon in the
Portuguese prosecution.
45. The third proposition is also one that can readily be derived from the
passages cited in para 44. That proposition would not, however, put the decision of
Griffith Williams J in doubt, for that decision was founded on property in the
hands of the appellant whose provenance had not been sufficiently explained.
46. The second proposition is the critical one in the present case. If it is sound
this appeal must be allowed, for Griffith Williams J applied the civil, not the
criminal standard of proof. In Briggs-Price I held that the proposition could not
properly be derived from Geerings. I remain of that view. The second proposition
is inconsistent with the decisions in Phillips and van Offeren. The ECtHR in
Geerings did not purport to depart from those decisions. On the contrary, in para
45 it expressly distinguished those cases on the basis that there were “additional
features” in Geerings.
Briggs-Price
Page 21
47. The procedural position in Briggs-Price was, happily, unusual. It is
summarised in paras 8 to 15 of my speech in that case. To summarise that
summary, the appellant had been convicted of conspiring to import heroin. The
conspiracy was, however, never implemented, so it produced no benefit. Evidence
was adduced at the trial, however, that the appellant had carried on substantial
dealings in cannabis. After his conviction the trial judge embarked on confiscation
proceedings under the Drug Trafficking Act 1994. He held, on the basis of the
evidence that he had heard about the appellant’s cannabis dealing that he was
satisfied that the appellant had benefited from such dealing to the extent of at least
£2,628,490 and made a confiscation order in that sum. The judge made it clear that
he was satisfied that the appellant’s involvement in dealing in cannabis had been
proved to the criminal standard.
48. The House was unanimous in finding that the judge had been satisfied on
the evidence to the criminal standard of proof that the appellant had benefited from
cannabis dealing to the extent found. Thus, even if article 6(2) applied to the
confiscation exercise, its requirement that the appellant’s criminal behaviour
should be established according to the criminal standard of proof had been
satisfied. The House gave, however, lengthy obiter consideration to the question of
whether, taking due account of the decision in Geerings, the confiscation order
could only be made if the judge was satisfied to the criminal standard of proof that
the appellant had committed the cannabis offences in respect of which evidence
had been led at his trial.
49. At paras 38 to 41 in Briggs-Price I gave my reasons for concluding that
Geerings did not support the proposition that, in confiscation proceedings, the
commission by the defendant of the offences from which benefit had been derived
had to be proved to the criminal, rather than the civil, standard of proof.
50. At paras 112 to 132 Lord Mance carried out a detailed analysis of the
Strasbourg jurisprudence, culminating in Geerings. He also decided that this did
not justify the conclusion that article 6(2) applied to the confiscation order
procedure, nor to proving the commission of criminal offences as part of that
procedure.
51. Lord Rodger expressed a contrary view at para 79. He concluded that in
confiscation proceedings the commission of the criminal offences from which the
relevant benefit was derived had to be proved to the criminal standard of proof,
although the derivation of the benefit could be proved to the civil standard. In para
77 he summarised his reason for so concluding:
Page 22
“Although I do not share his view that article 6(2) applies, I have
none the less reached the same conclusion as Lord Brown on the
standard of proof. If a presumption of innocence is implied into
article 6(1), then it, too, must require that the person be proved guilty
according to law. In the context of a criminal trial, the standard of
proof, according to our law, is beyond reasonable doubt. Indeed, if
that were not the position, the Crown could ask the court to make a
confiscation order on the basis of an alleged benefit from a specific
offence of which the defendant would have been acquitted if he had
been prosecuted for it.”
52. Lord Neuberger of Abbotsbury at para 152 agreed with Lord Rodger’s
conclusions on standard of proof.
53. Lord Brown of Eaton-under-Heywood concluded that Geerings established
the third of the propositions that I have set out at para 45 above. His reasoning is
set out in the following passage from his opinion:
“94. …I understand the Court’s reasoning in paras 46 and 47 to
amount to this: the prosecution must either demonstrate that the
defendant holds or has held assets the provenance of which he
cannot satisfactorily explain (as in Phillips and van Offeren: see para
44), or must establish beyond reasonable doubt that the defendant
has committed some other offence (or offences) from which it can be
presumed that he obtained advantage. In the latter case, of course,
article 6(2) applies but is satisfied.”
Conclusions
54. The views on standard of proof expressed in Briggs-Price by members of
the House were obiter but the application of the common ground in the views of
Lord Phillips, Lord Brown and Lord Mance leads to the following conclusion. The
commission by the appellants in the present case of criminal conduct from which
the property that they held was derived had to be established according to the civil
and not the criminal standard of proof. For the reasons that I have given that
remains my conclusion. It is a conclusion which, prior to Geerings, appeared to be
firmly founded on the decision of the Privy Council in McIntosh v Lord Advocate
[2001] UKPC D1; [2003] 1 AC 1078. In my view that foundation is unshaken.
55. The starting point in this case is the possession of property by the
appellants for whose provenance they were unable to provide a legitimate
Page 23
explanation. There was an abundance of evidence, set out at length by the judge
with great care, which implicated them in criminal activity that provided the
explanation for the property that they owned. The judge rightly applied the civil
standard of proof, but on my reading of his judgment he would have been satisfied
to the criminal standard of the appellants’ wrongdoing. For the reasons that I have
given I would dismiss the appeal in relation to the first issue.
LORD CLARKE (WITH WHOM LORD PHILLIPS, LORD MANCE,
LORD JUDGE AND LORD REED AGREE)
The first issue
56. Lord Phillips and Lord Dyson and, to a lesser extent, Lord Brown have
discussed the Strasbourg jurisprudence at some length. As I read their judgments,
however, their view that the appeal should be dismissed on the first issue does not
depend upon that analysis. I agree with Lord Phillips’ opinion expressed at para 35
(and those of Lord Brown at para 111 and Lord Dyson at para 133) that on no view
of the Strasbourg jurisprudence does it support the submission that Mr Gale’s
acquittal in Portugal precludes the English court in proceedings under POCA from
considering the evidence that formed the basis of the charges in Portugal. There is
here no procedural link between the two sets of proceedings.
57. As to the standard of proof, I agree with Lord Phillips that the Strasbourg
jurisprudence does not support the proposition (ie the second proposition in para
43 above) that in no case can confiscation be ordered unless it is proved to the
criminal standard that the defendant committed the offences from which the
property is said to have been derived. I agree with his conclusion and reasons
summarised in para 54 to the effect that the commission of criminal conduct from
which the property the appellants held was derived had to be established according
to the civil and not the criminal standard of proof. I also agree with his conclusion
in para 55 that there was ample evidence upon which the judge could find that the
civil standard of proof was satisfied.
58. Lord Dyson concludes at paras 141 and 142 that the judge did not impute
criminal liability to the appellants and that the judge’s approach to the evidence
was correct. I agree.
59. For these reasons I too would dismiss the appeal on the first issue. This
conclusion does not involve a detailed consideration of the issues raised by the
Strasbourg jurisprudence or a resolution of the issues or potential issue identified
by Lord Phillips and Lord Dyson. I would prefer to defer reaching definitive
Page 24
conclusions on them until they require a decision on specific facts. I would only
add two points.
60. First, I agree with Lord Brown that it is highly desirable that these issues
should be considered by the Grand Chamber in Strasbourg in order to clarify and
rationalise what he aptly calls this whole confusing area. Secondly, I note that in
the recent case of R (Adams) v Secretary of State for Justice (JUSTICE
intervening) [2011] UKSC 18; [2011] 2 WLR 1180, where some of these issues
were touched on, Lord Hope said at para 111 that the principle that is applied in
Strasbourg is that it is not open to a state to undermine the effect of an acquittal. It
appears to me that that is indeed the underlying principle and that if, as here and
indeed in Adams, the effect of the acquittal is not undermined there should be no
question of holding that there is any conflict with the presumption of innocence
enshrined in article 6(2) of the European Convention on Human Rights.
Issue 2 – Introduction
61. The second issue in this appeal relates to costs. It raises a single question of
principle. That question is whether an order for costs made in favour of SOCA
against a person against whom a recovery order has been made under section 266
of the Proceeds of Crime Act 2002 (“the 2002 Act”) can include the investigation
costs incurred by an interim receiver (“the receiver”) appointed under section 246
of the 2002 Act. Griffith Williams J (“the judge”) made a recovery order against
the appellants on 2 June 2009. By a later order of 6 July 2009, the judge ordered
the appellants to pay SOCA’s costs but refused an application that those costs
should include the remuneration of the interim receiver in respect of his
investigation.
62. The application for costs was made pursuant to the jurisdiction conferred on
the court by section 51(1) of the Senior Courts Act 1981 (“the SCA”). In refusing
to make the part of the order relating to the costs of the investigation, the judge
followed the decision of the Northern Ireland Court of Appeal in SOCA v Wilson
[2009] NICA 20; [2009] NI 28. In the instant case the Court of Appeal allowed an
appeal against that refusal. In doing so, it declined to follow SOCA v Wilson. On
29 July 2010 it ordered that the appellants pay SOCA’s legal costs of and
occasioned by the proceedings against them on an indemnity basis and that they
pay to SOCA the receiver’s remuneration for his investigative function on the
standard basis. It directed that in each case the costs should be subject to detailed
assessment. No such assessment has yet taken place. The question in this part of
the appeal is whether the Court of Appeal erred in principle in ordering the
appellants to pay to SOCA the costs of the receiver’s investigation.
Page 25
The appointment of the receiver and his powers and duties
63. On 28 July 2005, on the application of the Director of the Assets Recovery
Agency (the functions of which were transferred to SOCA on 1 April 2008),
Collins J made an interim receiving order and appointed Mr James Earp as the
receiver. The order was made under section 246 of the 2002 Act, which is
contained in Part 5. Paras 2 to 4 of the order, which appear under the heading
detention, custody, preservation and custody of property, provided inter alia that
the appellants must not remove the property identified in a schedule from England
and Wales or in any way dispose of or deal with the property and that they must
transfer monies to an account specified by the receiver and deliver certain property
into his possession. Under the heading of disclosure, paras 5 to 8 made detailed
provision for disclosure of the existence and whereabouts of the appellants’ assets.
64. Para 9 set out the powers of the receiver, which were stated to be in
accordance with Schedule 6 to the 2002 Act and to be without prejudice to any
existing powers that the receiver might have whether by statute or otherwise. It
included powers to seize property, to take possession of property and to manage it,
to enter and search premises, to execute all such documents on behalf of the
appellants as might be necessary to manage the property, to require the appellants
and others to take such steps as may be required to enable the receivership to be
conducted and to obtain information from the appellants and others. In addition it
included a power to appoint lawyers, accountants and others to advise and/or act
on behalf of the receiver and a power to bring proceedings in the name of or on
behalf of the appellants against any person having possession of relevant property.
In short the powers were very extensive indeed.
65. Paras 11 to 14 of the order set out the duties of the receiver. By para 11 it
provided that, pursuant to section 247(2)(a) of the 2002 Act, the receiver must
consider such information and documents as were obtained by him in pursuance of
the order to establish whether or not the property in the schedule was recoverable
property or associated property and, if the latter, to what extent. By para 12, it
provided that, pursuant to section 247(2)(b), the receiver must take all reasonable
and necessary steps to establish whether or not any other property was recoverable
property (in relation to the same unlawful conduct) and, if so, who was holding it.
The order also provided by paras 13 and 14 that the receiver must provide certain
information to SOCA and to the court and make a report to SOCA under section
255(1) and (2) respectively. It can thus be seen that the receiver had both extensive
powers and duties of investigation under the order. He also had powers of
management of the relevant property.
66. The order further provided, in para 26, that the receiver could charge for his
services and that he must prepare and serve on SOCA accounts in accordance with
Page 26
terms set out in a letter dated 19 July 2005 inviting him to accept nomination as an
interim receiver. The letter enclosed a draft Memorandum of Understanding
(“MOU”) and a draft of the proposed order. It also described the property in some
detail. It made it clear that the terms of the MOU formed part of the terms upon
which the receiver was to proceed. Although the MOU states that it was not (and
was not intended to be) a binding contract, it was a detailed document which
provided for the assessment that the receiver was to carry out and made provision
for the fees to be charged and the accounts to be kept. For example, it provided for
bills to be submitted and for them to be paid by SOCA within 28 days. The MOU
was signed by the receiver on 25 July 2005.
67. As stated above, the order was made under section 246 of the 2002 Act. By
section 246(2), an interim receiving order is an order for “(a) the detention,
custody or preservation of property, and (b) the appointment of an interim
receiver”. By section 246(7) SOCA may not nominate an interim receiver who is a
member of its staff. Section 247 defines the functions of the interim receiver, so far
as relevant, as follows:
“(1) An interim receiving order may authorise or require the interim
receiver –
(a) to exercise any of the powers mentioned in
Schedule 6,
(b) to take any other steps the court thinks appropriate,
for the purpose of securing the detention, custody or preservation of
the property to which the order applies or of taking any steps under
subsection (2).
(2) An interim receiving order must require the interim receiver to
take any steps which the court thinks necessary to establish –
(a) whether or not the property to which the order
applies is recoverable property or associated property,
(b) whether or not any other property is recoverable
property (in relation to the same unlawful conduct) and, if
it is, who holds it.”
68. Section 255 provides that an interim receiving order must require the
receiver to report his findings to the court. The combined effect of section 246(7)
and section 247(2) is that the interim receiving order must provide that the interim
receiver will conduct the investigation.
69. Schedule 6 provides for an interim receiver to have powers ancillary to
those contained in section 247. They include a power to seize property to which
Page 27
the order applies; a power (subject to certain safeguards) to obtain information or
to require a person to answer any question; and powers of entry and search. They
also include in paragraph 5(1) a power to manage any property to which the order
applies. By sub-paragraph (2), managing property includes (a) selling or otherwise
disposing of assets comprised in the property which are perishable or which ought
to be disposed of before their value diminishes, (b) where the property comprises
assets of a trade or business, carrying on, or arranging for another to carry on, the
trade or business, and (c) incurring capital expenditure in respect of the property.
The provision that there is a power to sell only where assets are perishable or
diminishing in value is consistent with the fact that the receiver is only an interim
receiver and that the order is intended to hold the ring until the question whether a
recovery order should be made is resolved.
70. It may be noted that these powers are different both from the powers of a
trustee appointed under a recovery order (see below) and the powers of a receiver
appointed under section 48, which is in Part 2 of the 2002 Act and applies where
the court makes a restraint order. Those powers are set out in section 49. By
section 49(2)(d) the court may confer on such a receiver the power to realise so
much of the property as is necessary to meet the receiver’s remuneration and
expenses. Moreover, by contrast with the position of an interim receiver set out in
paragraph 5(2), as explained above, where the power to sell property is limited to
perishable property or property of diminishing value, section 49(10) provides that
the power of managing or otherwise dealing in property referred to in section
49(2)(b) includes selling the property or any part of it.
The investigation
71. The receiver’s investigation took over three years, culminating in a final
report of over 400 pages. That was at least in part because of the failure on the part
of Mr Gale to co-operate with the receiver. Toulson LJ summarised the position at
[2010] 1 WLR 2881, paras 90-92 as follows:
“90. Obtaining the information ultimately set out in the receiver’s
report, which led to the judge making the recovery order, proved to
be a lengthy, complicated and expensive process, because of the
deliberately obscure way in which Mr Gale had conducted his
financial affairs and his persistent and deliberate failure to cooperate
with the receiver’s investigation.
91. In his judgment the judge said, at paras 4 and 5:
‘4. … It is alleged that the overall evidence establishes that DG
has been leading a life of serial drug trafficking, money-laundering
Page 28
and tax evasion; it is alleged that he went to extreme lengths to avoid
detection by using:
(i) a web of lies, false names, multiple passports,
nominees and offshore corporate fronts;
(ii) at least 68 bank accounts both on and off-shore and in
a number of different jurisdictions which together have
received millions of pounds from unidentified sources;
(iii) needlessly complicated bank transfers and
(iv) fleeing his country of residence (from the United
Kingdom to Spain, from Spain to the United States of
America and from the United States of America to Portugal
via the Bahamas) when he feared the authorities were or may
be interested in his criminal activities…
5. It is alleged that the absence – in large part due to his
deliberate failure to co-operate with the receiver’s investigation – of
any paper trail of records, financial documents, accounts, invoices,
receipts, bank statements and tax returns and any details of business
transactions, customers, suppliers and profits establishes that the
millions of pounds he acquired could not have been acquired through
a legitimate business or businesses.’
92. It is clear from the details set out in the judge’s comprehensive
judgment that he accepted the allegations that Mr Gale had gone to
extreme lengths to avoid detection, by the methods identified by the
receiver, and had deliberately failed to co-operate with the receiver’s
investigation. The material assembled by the receiver was therefore a
painstaking task and one which was necessary in order for the
agency to succeed in the civil recovery proceedings brought by it
against Mr Gale.”
72. SOCA has paid the interim receiver in respect of investigation costs said to
have totalled some £1m. It seeks to recover those costs from the appellants.
The recovery order
73. As already stated, on 2 June 2009, the judge made a recovery order under
section 266 of the 2002 Act against the appellants in respect of assets valued at
some £2m. By the same order, Mr James Earp was appointed trustee for civil
recovery pursuant to section 267(1) of the 2002 Act and the property was vested in
him. The functions of the trustee for civil recovery are set out in section 267. They
are of course much greater than the powers of an interim receiver because they
extend to realising the value of the assets for the benefit of SOCA. Unlike an
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interim receiving order, the purpose of a recovery order and the appointment of a
trustee for civil recovery is not merely to hold the ring but to sell the assets and
pay the proceeds of sale to SOCA.
Jurisdiction to award costs
74. The court’s jurisdiction to award costs in civil proceedings is governed by
section 51 of the SCA, which provides:
“(1) Subject to the provisions of this or any other enactment and to
rules of court, the costs of and incidental to all proceedings in –
(a) the civil division of the Court of Appeal,
(b) the High Court and
(c) any county court
shall be in the discretion of the court.
(2) Without prejudice to any general power to make rules of
court, such rules may make provisions for regulating matters relating
to the costs of those proceedings, including, in particular, prescribing
scales of costs to be paid to legal or other representatives or for
securing that the amount awarded to a party in respect of the costs to
be paid by him to such representatives is not limited to what would
have been payable by him to them if he had not been awarded costs.
(3) The court shall have full power to determine by whom and to
what extent the costs are to be paid.”
75. As I read that section, costs are in principle recoverable if they are either
costs of or incidental to the relevant proceedings. That is because both the costs of
and incidental to the proceedings are in the discretion of the court. As stated by
Aikens LJ at para 134 by reference to the judgment of Lord Goff in Aiden
Shipping Co Ltd v Interbulk Ltd [1986] AC 965, section 51 of the SCA 1981
confers a wide jurisdiction on the courts to make orders as to costs. That is so but,
as Lord Goff also observed, at p 975, the exercise of this jurisdiction may be
limited:
“It is, I consider, important to remember that section 51(1) of the Act
of 1981 is concerned with the jurisdiction of the court to make orders
as to costs. Furthermore, it is not to be forgotten that the jurisdiction
conferred by the subsection is expressed to be subject to rules of
court, as was the power conferred by section 5 of the Act of 1890. It
is therefore open to the rule-making authority (now the Supreme
Court Rule Committee) to make rules which control the exercise of
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the court’s jurisdiction under section 51(1). In these circumstances, it
is not surprising to find the jurisdiction conferred under section
51(1), like its predecessors, to be expressed in wide terms. The
subsection simply provides that “the court shall have full power to
determine by whom…the costs are to be paid”. Such a provision is
consistent with a policy under which jurisdiction to exercise the
relevant discretionary power is expressed in wide terms, thus
ensuring that the court has, so far as possible, freedom of action,
leaving it to the rule-making authority to control the exercise of
discretion (if it thinks it right to do so) by the making of rules of
court, and to the appellate courts to establish principles upon which
the discretionary power may, within the framework of the statute and
the applicable rules of court, be exercised.”
76. It follows that, as Aikens LJ correctly stated at para 133, the legal
framework yields two questions: first, are the expenses of the interim receiver
“costs of and incidental to the civil recovery proceedings” so that they can be the
subject of a costs order in the proceedings; and, secondly, if they are, is there any
statutory rule or provision or authority that prevents the court from having
jurisdiction to order that the appellants bear the costs of the receiver?
77. It is in my opinion appropriate to pose these two questions. It is important
to note that the question in this appeal is not what powers an interim receiver has
to charge for his services or how those powers may be enforced and against what
or whom. The receiver’s right to recover his remuneration is entirely contained in
the order of the court and the MOU. He is entitled to recover his reasonable
remuneration from SOCA. The question here is whether SOCA is in principle
entitled to claim against the appellants by way of costs the reasonable sums it has
paid or is liable to pay to the receiver in respect of his investigation carried out
pursuant to the interim receiving order. It is therefore appropriate to consider first
whether those costs are in principle costs of and incidental to the civil recovery
proceedings within the meaning of section 51 of the SCA and, if so, whether there
is a statutory rule or provision or authority that prevents the court from having
jurisdiction.
Are the expenses of the interim receiver “costs of and incidental to” the civil
recovery proceedings?
78. SOCA submits that the investigation costs which it has reasonably paid to
the receiver are part of the costs of or incidental to the civil recovery proceedings.
The essence of its argument is that the investigatory work carried out by the
receiver had to be done in order to bring the civil recovery claim and so the costs
of the investigation are properly costs of or incidental to the civil recovery
Page 31
proceedings. The appellants submit, by contrast, that the receiver’s remuneration is
an expense of the receivership and not a cost of or incidental to the proceedings in
which he is appointed. In support of this submission they rely on the judgment of
the Northern Ireland Court of Appeal in SOCA v Wilson, as well as the decisions in
Capewell v Revenue and Customs Comrs [2007] UKHL 2, [2007] 1 WLR 386,
Boehm v Goodall [1911] 1 Ch 155, Hughes v Customs and Excise Comrs [2002]
EWCA Civ 734, [2003] 1 WLR 177, In re Andrews [1999] 1 WLR 1236 and
Evans v Clayhope Properties Ltd [1988] 1 WLR 358.
79. Before discussing the cases, it is convenient to consider the position as a
matter of principle without reference to the authorities. The statutory question is
clearly identified. It is whether the particular costs claimed are costs of or
incidental to the proceedings. In the case of the investigative costs incurred by the
receiver and reimbursed by SOCA under the MOU (including the reasonable
remuneration of the receiver) the answer to the question is in my opinion plainly in
the affirmative. The position was succinctly put by Toulson LJ at para 93, after
paras 90 to 92 quoted above. He said this:
“Unless compelled by authority to hold otherwise, I would regard the
costs incurred by the agency in paying the receiver to investigate Mr
Gale’s finances and assemble that material as costs of the litigation,
which Mr Gale ought justly to pay, and I would not see such an order
as inconsistent with the statutory scheme.”
I entirely agree. I also agree with Aikens LJ’s conclusion to much the same effect
at para 134.
80. This can be seen clearly from both the powers and the duties of an interim
receiver under the order. In particular, it can be seen from the duties of such a
receiver set out above, namely (a) to consider the information and documents
obtained by him under the order in order to establish whether or not the property in
the schedule was recoverable property or associated property and (b) to take all
reasonable and necessary steps to establish whether or not any other property was
recoverable property (in relation to the same unlawful conduct) and, if so, who was
holding it. His duty was then to report to both SOCA and the court. In order to
bring a claim for civil recovery under Part 5 of the 2002 Act, SOCA had to obtain
sufficient information to demonstrate that property in the hands of the appellants
was recoverable property within the meaning of sections 304-310 of the 2002 Act.
This required investigative work to be done. It was entirely reasonable to appoint
an interim receiver in order to carry out the investigation and to hold the ring in the
meantime. Indeed, it is difficult to see how SOCA could in practice proceed
without the appointment of an interim receiver and, as stated above, section 246(7)
provides that it could not nominate a member of its staff to be the interim receiver
Page 32
appointed. In these circumstances, it seems to me that the investigation was an
essential part of the civil recovery proceedings. I can see no reason in principle
why these costs of the receivership cannot at the same time be costs of or
incidental to the civil recovery proceedings.
Is there any statutory rule or provision or authority that prevents the court from
having jurisdiction to order that the appellants bear the investigation costs?
81. This is the second question posed by Aikens LJ. There is to my mind no
statutory rule or provision that leads to the conclusion that these costs are not costs
of or incidental to the civil recovery proceedings. The powers of the receiver,
which are contained in section 247 of and Schedule 6 to the 2002 Act, are
described above. They do not include a lien on the property in respect of his fees
and do not entitle him to sell the property or part of it in order to meet his fees. Nor
does the order appointing the receiver in this case. As between SOCA and the
receiver, the latter’s right to remuneration is contained solely in the interim
receiving order and the MOU.
82. Some reference was made to section 280(3) of the 2002 Act, which
provides that SOCA may apply moneys received by it under a recovery order “in
making payment of the remuneration and expenses of – (a) the trustee or (b) any
interim receiver appointed in, or in anticipation of, the proceedings for the
recovery order”. That subsection must be set in its context. Section 266(2)
provides that any recovery order made by the court must vest the recoverable
property in the trustee for civil recovery. There is nothing to prevent the interim
receiver being appointed also as trustee, as occurred in this case, but the powers
and duties of a trustee are entirely distinct from those of an interim receiver and
the fact that they were the same person is irrelevant for the purposes of the issues
in this appeal. Section 267 states that in performing his functions the trustee acts
on behalf of the enforcement authority and must comply with any direction given
by the authority. The sums paid to SOCA by the trustee will be or include the net
proceeds of sale of the appellants’ property after the trustee has first made the
payments identified by section 280(2).
83. I agree with the view expressed by Aikens LJ at para 135 that there is
nothing in section 280(3), or any other provision of the 2002 Act, to prevent the
cost to SOCA of paying an interim receiver from being part of the costs of or
incidental to the civil recovery proceedings. As Aikens LJ put it, the subsection
simply grants SOCA the power to pay the interim receiver out of sums it receives
from the trustee for civil recovery, who is the person identified in the legislation
who will give effect to a recovery order made by the court. The fact that SOCA
has a discretion to use those sums to pay the interim receiver does not seem to me
to be relevant to the question whether the costs were “costs of and incidental to the
Page 33
proceedings”. As I see it, the liability, if ordered, to pay the costs of the
proceedings is distinct from, but ancillary to, the liability in the civil recovery
order itself.
84. I also agree with Aikens LJ at para 136 that there is nothing in CPR Pt 44 or
Pt 69 which precludes the court from making an order that a party to civil recovery
proceedings must pay as costs the remuneration of a court appointed receiver. CPR
Pt 44 contains general rules about costs. It is to be noted that by CPR r 44.4(1)
costs will not be allowed “which have been unreasonably incurred or are
unreasonable in amount”. CPR Pt 69 contains general rules about the court’s
power to appoint a receiver.
85. CPR r 69.7 provides:
“(1) A receiver may only charge for his services if the court –
(a) so directs; and
(b) specifies the basis on which the receiver is to be
remunerated.
…
(2) The court may specify –
(a) who is to be responsible for paying the receiver; and
(b) the fund or property from which the receiver is to
recover his remuneration.”
Under CPR r 69.7 the court has a discretion to specify who is to be responsible for
paying the receiver appointed by court order. It does not follow from the terms of
that provision, or by necessary implication, that the court may not make an order
that a party to civil proceedings pay to the other party costs which include the
remuneration of the interim receiver. CPR r 69.7 regulates the position as between
the receiver and others, whereas section 51 of the SCA 1981 and CPR Pt 44
regulate the position as between the parties to the litigation.
86. What then of the authorities? First, there is no question but that costs
incurred prior to proceedings, such as investigation costs, are capable in principle
of being recoverable as costs of or incidental to proceedings. This principle was
summarised by Lord Hanworth MR in Société Anonyme Pêcheries Ostendaises v
Merchants’ Marine Insurance Co [1928] 1 KB 750 at p 757:
Page 34
“There is power in the master to allow costs incurred before action
brought, and … if the costs are in respect of materials ultimately
proving of use and service in the action, the master has a discretion
to allow these costs.”
It is on the basis of this general principle that costs of attending an inquest have
been held to be recoverable as costs of related civil proceedings where evidence
referable to attendance at the inquest was potentially relevant to those proceedings:
see Ross v Bowbelle (Owners) (Note) [1997] 1 WLR 1159 and Roach v Home
Office [2009] EWHC 312, [2010] QB 256.
87. It is commonplace for parties to proceedings to instruct experts of all kinds
in connection with litigation. They include forensic accountants in a fraud case and
consultants of all kinds in the investigation of, say, a maritime casualty or a death
in a hospital. The reasonable amounts paid to such experts are treated as the costs
of and incidental to the proceedings. In my opinion reasonable sums paid by
SOCA to an interim receiver, at least in respect of his investigation should in
principle be regarded in the same way.
88. The appellants rely upon the cases referred to in para 78 above as support
for the general proposition that remuneration of a receiver is not a cost of or
incidental to civil recovery proceedings. It is convenient to begin with the decision
of the Northern Ireland Court of Appeal in SOCA v Wilson, which raised the very
question arising in this appeal. As in the instant case, SOCA sought to recover
expenses and remuneration paid to an interim receiver appointed under Part 5 of
the 2002 Act as costs of the civil recovery proceedings. Girvan LJ, giving the
judgment of the court, held that such expenses and remuneration were not costs of
or relating to the civil recovery proceedings.
89. Girvan LJ began his analysis by observing at para 11, by reference to
Hopkins v Worcester and Birmingham Canal Proprietors (1868) LR 6 Eq 437, that
the equitable jurisdiction to appoint a receiver is of ancient origin. He stated the
principle as being that the receiver, being appointed by the court, is an officer of
the court, and his duty is to act impartially in administering the property to which
the receivership extends and to do so under the direction and supervision of the
court. He referred to the statement by Lord Walker in Capewell v Revenue and
Customs Comrs [2007] UKHL 2, [2007] 1 WLR 386, at para 21 that it has always
been a basic principle of receivership that the receiver is entitled to be indemnified
in respect of his costs and expenses, and his remuneration if he is entitled to be
remunerated, out of the assets in his hands as receiver. Lord Walker approved the
principle stated by Warrington J in Boehm v Goodall [1911] 1 Ch 155 at 161 as
follows:
Page 35
“Such a receiver and manager [that is one appointed by the court] is
not the agent of the parties, he is not a trustee for them, and they
cannot control him. He may as far as they are concerned, incur
expenses or liabilities without their having a say in the matter. I think
it is of the utmost importance that receivers and managers in this
position should know that they must look for their indemnity to the
assets which are under the control of the court. The court itself
cannot indemnify receivers but it can, and will, do so out of the
assets so far as they extend, for expenses properly incurred; but it
cannot go further. It would be an extreme hardship in most cases to
parties to an action if they were to be held personally liable for
expenses incurred by receivers and managers over which they have
no control.”
Lord Walker noted that some doubts had subsequently been expressed as to
whether a receiver’s remuneration could be recovered as litigation costs.
90. Lord Walker further approved the statement by Simon Brown LJ in Hughes
v Customs and Excise Comrs [2003] 1 WLR 177 at para 50 that statutory receivers
are to be treated precisely as their common law counterparts save to the extent that
the legislation otherwise provides. At para 23 Lord Walker set out this passage
from para 45 of the judgment of Simon Brown LJ, saying that it sets out the
argument accepted by the Court of Appeal:
“Mr Mitchell’s central argument to the contrary focuses, first, on the
use of the word ‘receiver’ to describe the person being appointed
under this legislation to conserve, manage and realise assets. A
receiver is a recognisable creature of the common law, an officer of
the court, someone whose essential rights, powers and duties have
been established down the years. It is not apparently disputed that a
receiver appointed under the CJA – despite the statute’s silence on the
matter – will have the right, for example, to bring an action or to sell
property. Why then, unless the statute expressly so provides, should
he be denied the other ordinary consequences of his receivership,
including not least the right (indeed the requirement) to recover the
costs of the receivership from the assets under his control?”
91. Girvan LJ regarded those principles as applicable here, that is under Part 5
of the 2002 Act. He noted at para 12 that, under Part 2 of the 2002 Act dealing
with confiscation proceedings, management receivers may be appointed in
England under section 48 and enforcement receivers under section 50 and that in
Northern Ireland the equivalent provisions are sections 196 and 198. Similar
provisions apply in Part 3 in relation to confiscation proceedings in Scotland, the
Page 36
equivalent of a receiver there being called an administrator. Under the earlier
confiscatory statutory provisions in the Criminal Justice Act 1988 (“the CJA
1988”) and the Drug Trafficking Act 1994 statutory powers had also been
introduced for the appointment of receivers. I return below to the question whether
the principles in those cases apply to the investigation costs of an interim receiver.
92. Girvan LJ further referred to the decision in In re Andrews [1999] 1 WLR
1236. In that case the defendant was acquitted of the offence in respect of which a
receivership order had been made. He was awarded his costs out of central funds
but the taxing master held that these costs did not include the costs of the
receivership proceedings. The receiver deducted her expenses out of the property
released in consequence of the discharge of the order. The defendant applied for
an order that the prosecution pay his costs of the receivership proceedings. The
court concluded that the receiver was entitled to recover her remuneration and
expenses from the assets under the court’s control. A party seeking appointment of
a receiver is not thereby liable for his remuneration. A receiver had a lien for his
costs and remuneration against the assets which gave him a continuing right to
possession of the assets even after discharge of the receivership order. The
receiver’s remuneration was an expense of the receivership and not a cost of or an
incidental to the proceedings and thus not within the court’s discretionary
jurisdiction to award costs. As Aldous LJ put it succinctly at [1999] 1 WLR 1236,
1248F-G:
“The remuneration of a receiver is an expense of the receivership,
not costs incidental to the proceedings in which he is appointed.”
93. Girvan LJ also relied upon the principle stated by Longmore LJ in Sinclair
v Glatt [2009] EWCA Civ 176, [2009] 1 WLR 1845, at para 1:
“It is now settled that such a receiver [appointed pursuant to section
77 of the Criminal Justice Act 1988], like a receiver at common law,
is entitled to recover his remuneration, costs and expenses from the
assets which he has been appointed to receive (‘the receivership
assets’). That is so whether or not he ought to have been appointed in
the first place or the order appointing him has been discharged, see
Mellor v Mellor [1992] 1 WLR 517. Even if the defendant, whose
assets have been caught by the order appointing the receiver is
subsequently acquitted or has his conviction quashed, the
receivership assets must bear the costs of the receivership; this is
also the position if, as in the present case, confiscation orders are
made but subsequently quashed, Hughes v Customs and Excise
Comrs … Even if the receiver carries on his receivership
unnecessarily and should have agreed that his receivership should
Page 37
have been discharged at a time before a court application is made to
terminate his receivership, the receivership assets bear those costs
reasonably incurred up to the date he is actually discharged: see
Capewell v Revenue and Customs Comrs …”
94. Girvan LJ noted that in In re Andrews and Sinclair v Glatt the Court of
Appeal held that the expense of a receiver appointed under the confiscatory regime
in Part 6 of the CJA 1988 was an expense of the receivership which should be met
out of the assets in the receivership. He rejected the submission made on behalf of
SOCA that the position of interim receivers appointed under Part 5 of the 2002 Act
could be distinguished from other statutory receivers on account of the wideranging investigatory powers given to interim receivers in Part 5 cases. He
observed that receivers appointed by way of equitable relief or under confiscatory
statutory provisions frequently have to carry out extensive investigations to enable
them to get in and protect the assets and that it had never been suggested that such
investigation costs fell to be treated differently from other management costs.
95. Girvan LJ further noted that Part 5 of the 2002 Act had been enacted
following case law such as In re Andrews. In the light of that case law it was to be
inferred that in England and Wales and Northern Ireland express provision for the
costs of interim receivers was considered unnecessary because of the standard
receivership lien on the assets for the receiver’s costs. I respectfully disagree. In
my opinion the regime set out in Part 5 of the 2002 Act is distinguishable in
important respects from that in the other legislation discussed in the cases.
96. As paras 79 to 86 show, Carnwath LJ was initially inclined to follow the
decision in SOCA v Wilson. However he was persuaded by the analysis of Toulson
and Aikens LJJ that the cases relied upon by the appellants are distinguishable
from this on the ground that the scheme under Part 5 is significantly different from
those discussed in them. I am also persuaded by the reasoning of Toulson and
Aikens LJJ for these short reasons.
97. The critical feature of the other cases is that the receiver was left to look for
his indemnity to the assets in his hands which are under the control of the court, as
it was put in Boehm v Goodall in the passage quoted in para 89 above. Then in the
passage quoted at para 90 Simon Brown LJ described the receiver in Hughes as
being the person appointed to conserve, manage and realise assets with the right to
sell property. He asked why, unless the statute expressly so provides, the receiver
should be denied the other ordinary consequences of his receivership, including the
right (and requirement) to recover the costs of the receivership from the assets
under his control. Similar principles were stated by Longmore LJ in Sinclair v
Glatt.
Page 38
98. The position of an interim receiver appointed under Part 5 of the 2002 Act
is significantly different. He has no power to sell the assets unless they are
perishable or diminishing in value and he has no lien on the assets. He is however
entitled to recover his costs and remuneration from SOCA. The power to sell is
vested in the trustee, not in the interim receiver, and then only once a civil
recovery order has been made. Moreover the powers of the interim receiver are not
merely to take possession of and to conserve the assets but to carry out an
investigation into the question whether or not the assets are the proper subject of a
recovery order. More generally, I agree with the analysis of Aikens LJ at paras 137
to 140.
99. It was further said in the passage from Boehm v Goodall that it would be a
hardship for parties to be held liable for the remuneration of receivers over whom
they have no control. However, that does not apply to these facts. There is a much
closer relationship between the parties and an interim receiver appointed under
Part 5 of the 2002 Act than there was in the cases referred to. The 2002 Act draws
a clear distinction between a receiver appointed under Part 2, as for example under
section 49 which, as already noted, by section 49(2)(d) expressly provides for
payment of the costs of receivers appointed under Part 2 of the 2002 Act out of
receivership assets and an interim receiver appointed under Part 5. I would infer
that the draftsman made an express decision not so to provide in the case of
interim receivers appointed under Part 5. I agree with Toulson LJ that, as he put it
at para 104, there will be no “extreme hardship” if Mr Gale is ordered to pay the
costs of investigating facts which he tried so hard to conceal and the costs of
assembling the evidence which proved the case against him.
100. Although In re Andrews did involve a consideration of section 51 of the
SCA, it was a very different case from this under a very different statute: see per
Toulson LJ at paras 106 to 113. In particular, he quoted a passage from the
judgment of Ward LJ in which he said that it appeared to him that the true position
was that the investigation of whether or not the defendant has suffered loss by
reason of the receivership is an investigation which should be and ordinarily would
be conducted in deciding whether or not damages should be awarded against the
claimant for breach of the usual undertaking as to damages he would normally be
required to give. Under the Criminal Justice Act 1988 (“the CJA 1988”),
compensation for loss resulting from a receivership was not to be ordered unless
the court was satisfied that there had been some serious default on the part of a
person concerned in the investigation or prosecution of the offence concerned. As
Toulson LJ said at para 111, in those circumstances Ward LJ concluded, with
reluctance, that the expenses of the receivership were not to be regarded as costs of
and incidental to the proceedings within the meaning of section 51 of the SCA.
101. I should however refer to the statement of Aldous LJ in In re Andrews
quoted in para 92 above that the remuneration of a receiver is an expense of the
Page 39
receivership, not costs incidental to the proceedings in which he is appointed.
Taken at face value, that might suggest that the remuneration of a receiver can
never be recoverable as costs of or incidental to litigation under section 51 of the
SCA. If Aldous LJ intended to state such a broad proposition, I respectfully differ
from him. I do not however think that he did. As Toulson LJ observed at para 112,
he was concerned with the problem which would result if the receiver’s
remuneration for running the company were to be treated as a cost of the
proceedings recoverable by the successful appellant in circumstances where the
company would not have traded as profitably as it did without the accountancy
advice of the receiver. He considered (like Ward LJ) that the application was really
a claim for compensation dressed up as an application for an award of costs, and it
was therefore very significant that by section 89 of the CJA 1988 Parliament had
laid down a carefully regulated code for such a claim. He concluded that section
89 was the proper avenue for a compensation claim of the kind being made by the
appellant. That is not to say that a claim by a party to proceedings who has
obtained an order for the appointment of a receiver in respect of costs or
remuneration which he has paid to a receiver can never be recovered from the
other party to the proceedings under section 51 of the SCA. All will depend upon
the circumstances.
102. As Toulson LJ observed at para 113, this is a very different case from In re
Andrews under a very different statutory scheme. By contrast with the position in
In re Andrews, SOCA’s claim is not a concealed claim for a form of compensation
for which the statute provides a regulated code. It is a genuine claim for litigation
costs and not a dressed up claim for something else. Moreover, SOCA is not
seeking to recover that part of the receiver’s costs or remuneration which relates to
the costs of managing Mr Gale’s assets. It only seeks the costs of the investigation.
I agree with Toulson LJ that those costs would undoubtedly have been recoverable
in principle as costs of the proceedings if the work had been done by anyone other
than the receiver. I also agree with him that the costs in their essential nature were
not merely incidental but integral to the prosecution of the claim made by the
agency against the appellants. Finally, I agree with Aikens LJ’s approach to In re
Andrews at paras 141 to 144.
103. The decisions in Hughes and in Capewell are also distinguishable on much
the same basis. Again I agree with the approach of Toulson LJ to both cases at
paras 114 to 116 and 117 to 120 respectively and with the approach of Aikens LJ
at para 146.
104. I note in passing that section 283 of the 2002 Act contains detailed
provisions for compensation but there is, as I see it, no conflict between those
provisions and the conclusion that the costs claimed here are within section 51 of
the SCA.
Page 40
105. Finally, I should refer to three further points made by Girvan LJ in SOCA v
Wilson. First, he noted that section 284(1) of the 2002 Act provides that Scottish
Ministers are to reimburse an interim administrator or trustee for civil recovery
appointed under Part 5 of the 2002 Act. He expressed the view at para 17 that it is
inherently unlikely that Parliament intended to confer protections on defendants in
relation to administrator’s fees and costs in Scotland and not in England and Wales
and Northern Ireland in relation to receivers’ fees and costs. The problem with this
reasoning is that it ignores the clear differences between section 284(1), which
makes special provision for Scotland in order to meet the requirements of the
Scotland Act 1998, and section 280(3), which (as stated above) gives the
enforcement authority in England and Wales the power to apply any sum received
by it from the trustee for civil recovery to make payments of the remuneration and
expenses of a interim receiver appointed in the proceedings for the recovery order.
As Aikens LJ points out at para 147, neither provision prevents the enforcement
authority from seeking to recover those sums as costs of and incidental to the
recovery proceedings.
106. Secondly, Girvan LJ states, at para 18, that the policy behind civil recovery
proceedings is to strip the defendant of criminal assets. He points out that this
objective is achieved by the recovery order even if part of the defendants’ assets go
to the receiver. Requiring them to meet the costs of the interim receiver’s
investigation work would strip them of further assets and clear statutory wording
would be needed to establish the state’s right to do so. It is correct that clear
statutory language is needed in order to require a party to meet such costs, but, in
my opinion, for the reasons given above, such language is found in section 51 of
the SCA 1981.
107. Thirdly, Girvan LJ makes the point that the costs and fees of the interim
receiver cannot sensibly be considered as costs of SOCA since the interim receiver
is independent and separate from SOCA so that his costs cannot be considered as
costs incurred by SOCA as part of its costs of and incidental to the proceedings. I
respectfully disagree. On the facts here SOCA had to bear the costs of the interim
receiver in order to pursue the civil recovery proceedings and in order to obtain a
recovery order. In these circumstances, as I said earlier, they seem to me to be
costs borne by SOCA in much the same way as other costs of instructing an expert
would be.
108. Finally, it is important to note that this appeal is only concerned with the
recovery by way of costs of investigation costs incurred by SOCA as a result of
liability to the interim receiver. It is not concerned with management costs. I
would leave open the question whether management costs could be treated as costs
of or incidental to civil recovery proceedings until it arises for decision in a
particular case.
Page 41
CONCLUSION
109. For these reasons, which are largely the reasons they gave, I agree with
Toulson and Aikens LJJ that the Court of Appeal in Northern Ireland reached the
wrong conclusion in SOCA v Wilson. The costs which SOCA was or is liable to
pay to the receiver in respect of his investigation were costs of or incidental to the
civil recovery proceedings and are in principle recoverable from the appellants. I
would therefore dismiss the appeal on this issue. I would only add that by CPR r
44.4(1) costs will not be allowed “which have been unreasonably incurred or are
unreasonable in amount”. It follows that whether a particular item of costs claimed
is recoverable in whole or in part will of course be a matter for the costs judge.
LORD BROWN
110. I too would dismiss both limbs of this appeal for the reasons given
respectively by Lord Phillips and Lord Clarke with whose judgments I agree.
111. As will readily be appreciated, the conclusion arrived at by Lord Phillips on
the standard of proof issue is in no way dependent on the view one takes with
regard to the Sekanina v Austria (1993) 17 EHRR 221/ Ringvold v Norway
(Application No 34964/97) (unreported) 11 February 2003) line of Strasbourg
authority. As Lord Phillips observes (para 35): “On no view does this
jurisprudence support Mr Mitchell’s submission that the appellant’s acquittal in
Portugal precludes the English court in proceedings under POCA from considering
the evidence that formed the basis of the charges in Portugal.”
112. None the less however, it has been necessary to consider this jurisprudence
in some detail and there appears to be some difference of opinion between us as to
how logical and satisfactory it is. Lord Phillips in the Discussion section of his
judgment (para 32) “find[s] unconvincing the attempts of the Strasbourg Court to
distinguish between claims for compensation by an acquitted defendant and claims
for compensation by a third party against an acquitted defendant” and concludes
that: “this confusing area of Strasbourg law would benefit from consideration by
the Grand Chamber.”
113. Lord Dyson by contrast (para 131) “would be less critical of the Strasbourg
jurisprudence” – although he does not indicate whether he would exempt it from
all criticism and, if not, what concerns he has about it.
Page 42
114. I have to say that for my part I share Lord Phillips’ views on this matter. Of
course, as Lord Dyson more than once points out, judgments which determine an
acquitted defendant’s entitlement to costs and/or compensation for detention on
remand are in one sense closely linked to the criminal trial itself: but for the
defendant’s acquittal these issues as to costs and compensation would simply not
arise. But it by no means follows from this that the criminal standard of proof
(presumably with the burden still on the state) should apply equally to these linked
claims, “consequential and concomitant” though clearly they can be characterised.
Lord Dyson suggests (para 132): “If the outcome of the criminal proceedings is
decisive for the ‘civil’ proceedings, then there is a sufficiently close connection for
article 6(2) to apply.” That assertion, however, to my mind begs the very question
it purports to answer. As already explained, the outcome of the criminal
proceedings is only “decisive” for the civil proceedings in the sense that, but for
the acquittal, these civil proceedings would not arise. Unless, however, Strasbourg
is really saying that a state has no option but to compensate an acquitted defendant
for his costs incurred in securing his acquittal and his detention in custody
meantime – for which article 6 appears to me to provide no warrant whatsoever – I
cannot for the life of me see why the state should not decline to reimburse legal
costs and withhold compensation for detention on remand unless the defendant can
show on the balance of probabilities that he was in fact innocent. Take a case
where, following a defendant’s acquittal for rape, at one and the same time he is
seeking compensation for his detention on remand and his victim is seeking
compensation for his violation of her. Is it really to be said that his claim falls to
be determined on the criminal standard of proof (and must, therefore, be met); hers
on the civil standard (and so may also be found established)? That seems to me
nonsensical.
115. Obviously, in all proceedings following an acquittal the court should be
astute to ensure that nothing that it says or decides is calculated to cast the least
doubt upon the correctness of the acquittal. But the point to be emphasised is that
the acquittal is correct because, and only because, the prosecution failed in the
criminal proceedings to establish beyond reasonable doubt that the defendant was
guilty. Not having been proved guilty to the criminal standard, the defendant is not
thereafter to be branded a criminal and no criminal penalty can properly be exacted
from him. But, contrary to widespread popular misconception, acquittal does not
prove the defendant innocent.
116. In the result, I too incline to the view expressed by Lord Phillips (para 34)
that perhaps the only logical explanation of the Strasbourg case law is that
applicants are being compensated for reputational damage when by a court’s
judgments or statements subsequent to an acquittal it appears nevertheless to be
suggesting that the defendant should after all have been found guilty to the
criminal standard.
Page 43
117. I repeat, however, that what surely is now required is an authoritative Grand
Chamber decision clarifying and rationalising this whole confusing area of the
Court’s jurisprudence.
LORD DYSON
118. The Proceeds of Crime Act 2002 (“POCA”) provides for two distinct
mechanisms for the recovery of proceeds of crime: (i) confiscation by the Crown
Court following conviction (Part 2); and (ii) civil recovery proceedings in the High
Court, which may be instituted by the “enforcement authority” (The Serious
Organised Crime Agency) to recover property which “is, or represents, property
obtained through unlawful conduct” (recoverable property) (Part 5). Section
241(1) provides that “conduct occurring in any part of the United Kingdom is
unlawful conduct if it is unlawful under the criminal law of that part”. Section
241(3)(a) provides that the court must decide “on a balance of probabilities”
whether it is proved “that any matters alleged to constitute unlawful conduct have
occurred”.
119. I substantially agree with the reasons given by Lord Phillips (as well as
those given by the Court of Appeal) for deciding the first issue in favour of SOCA
and concluding that article 6(2) of the European Convention on Human Rights
(“the Convention”) does not apply to civil recovery proceedings under Part 5 of
POCA. Because of the general importance of the issue, I wish to say in my own
words why I have reached this conclusion.
120. Article 6(2) provides: “Everyone charged with a criminal offence shall be
presumed innocent until proved guilty according to law”. The question raised by
the first issue is whether proving unlawful conduct in civil recovery proceedings
amounts to the bringing of a criminal charge so as to engage article 6(2).
121. The criminal procedural guarantees in article 6 apply to proceedings in
which a person is, within the autonomous ECHR meaning, “charged with a
criminal offence”. Three criteria are taken into account when deciding whether a
person is charged with a criminal offence, namely (i) the classification of the
proceedings under national law, (ii) their essential nature and (iii) the type and
severity of penalty to which the person is potentially exposed (see Engel v The
Netherlands (No 1) (1976) 1 EHRR 647 at para 82) as applied in many decisions
of the ECtHR such as, for example, Ringvold v Norway (Application No 34964/97)
(unreported) 11 February 2003, at para 36. These criteria are not hermetically
sealed from each other. As is made clear at para 82 of Engel, the classification
Page 44
under national law is only a starting point and the essential nature of the
proceedings is of greater importance.
Application of the Engel criteria
122. There can be no doubt that, on the basis of an application of these three
criteria, recovery proceedings under Part 5 of POCA are properly to be
characterised as civil for article 6 purposes. They are classified as civil under our
domestic law: section 240(1)(a) of POCA provides that Part 5 has effect for the
purposes of “enabling the enforcement authority to recover, in civil proceedings …
property which is, or represents, property obtained through unlawful conduct”
(emphasis added).
123. The essential nature of the proceedings is civil. The respondent to the
proceedings is not charged with any offence. He does not acquire a criminal
conviction if he is required to deliver up property at the conclusion of the Part 5
proceedings. None of the domestic criminal processes are in play. On the contrary,
as Kerr LCJ put it in Walsh v Director of the Assets Recovery Agency [2005]
NICA 6, [2005] NI 383, at para 23: “all the trappings of the proceedings are those
normally associated with a civil claim”. These include the express provision that
the standard of proof is on the balance of probabilities. The nature of the
proceedings is essentially different from that of criminal proceedings. The claim
can be brought whether a respondent has been convicted or acquitted, and
irrespective of whether any criminal proceedings have been brought at all. This
was a factor which weighed with the ECtHR in Ringvold v Norway at para 38
when the court was considering whether article 6(2) applied to a claim for
compensation by the alleged victim of a sexual offence against the alleged
perpetrator. The purpose of Part 5 proceedings is not to determine or punish for
any particular offence. Rather it is to ensure that property derived from criminal
conduct is taken out of circulation. It is also of importance that Part 5 proceedings
operate in rem. The governing concept is that of “recoverable property” which
represents both property obtained directly by unlawful conduct and also property
which represents the original property.
124. But the fact that, on an application of the Engel criteria, it is plain beyond
argument that Part 5 proceedings are properly to be characterised as civil
proceedings for the purposes of article 6 is not determinative of the question
whether article 6(2) applies. There is a line of Strasbourg decisions which show
that, even if proceedings are properly characterised as civil on the basis of the
Engel criteria, article 6(2) may nevertheless apply if the links between the
proceedings and criminal proceedings are sufficiently close.
Page 45
Sufficiently close link between criminal proceedings and civil proceedings to
engage article 6(2).
125. It is explained in Ringvold at para 36 and the cases cited there that, in
certain circumstances article 6(2) may apply to proceedings instituted after the
discontinuation of criminal proceedings or following an acquittal, even if on an
application of the Engel criteria those proceedings would be characterised as civil.
As the court said: “Those judgments concerned proceedings relating to such
matters as an accused’s obligation to bear court costs and prosecution expenses, a
claim for reimbursement of his (or his heirs’) necessary costs, or compensation for
detention on remand, matters which were found to constitute a consequence and
the concomitant of the criminal proceedings”. The focus of the inquiry is on
whether the proceedings were the “direct sequel” or “a consequence and the
concomitant” of the criminal proceedings (ibid at para 41). Claims by an accused
person following a discontinuation or acquittal for costs incurred as a result of the
criminal proceedings and claims for compensation for detention are paradigm
examples of such proceedings. The link between such claims and the criminal
proceedings is so close that article 6(2) applies to both of them. The claims for
compensation flow from the criminal proceedings. But for these proceedings, there
would be no claims. As will become clear, the link was absent in Ringvold
because, despite the applicant’s acquittal, the victim’s claim for compensation
could succeed. The compensation case was, therefore, not a direct sequel of the
criminal proceedings. Put another way, the outcome of the criminal proceedings
was not “decisive for the compensation case” (Ringvold para 38).
126. There are several reported decisions of the ECtHR where an applicant,
acquitted of a criminal charge offence, complained that his claim for compensation
for detention and reimbursement of costs had been rejected in violation of article
6(2). In Sekanina v Austria (1993) 17 EHRR 221, the relevant legislation gave a
right to compensation to a person who (i) had been remanded in custody or placed
in detention on suspicion of having committed a criminal offence and (ii) was
subsequently acquitted or otherwise freed from prosecution, where (iii) the
suspicion that he had committed the offence was dispelled or prosecution was
excluded on other grounds. It was held by the ECtHR that the relevant Austrian
legislation and practice linked the question of the accused’s criminal responsibility
and the right to compensation “to such a degree that the decision on the latter issue
can be regarded as a consequence and, to some extent, the concomitant of the
decision on the former” (para 22). Accordingly, article 6(2) applied to the
compensation proceedings.
127. As regards the question whether there had been a breach of article 6(2), the
Austrian court rejected the applicant’s claim for compensation saying that, in
acquitting him, the jury took the view that the suspicion was not sufficient to reach
a guilty verdict, but “there was, however, no question of that suspicion’s being
Page 46
dispelled” (para 29). The ECtHR said at para 30 that this left open a doubt as to the
correctness of the acquittal and:
“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.”
128. Accordingly, there had been a violation of article 6(2). The same approach
to the application and violation of article 6(2) was taken in the similar case of
Rushiti v Austria (2000) 33 EHRR 1331. The rationale for these decisions appears
to be that voicing any suspicions of guilt in proceedings following an acquittal is
incompatible with the presumption of innocence. The general aim of the
presumption of innocence is “to protect the accused against any judicial decision
or other statements by state officials amounting to an assessment of the applicant’s
guilt without him having previously been proved guilty according to law” (para
31). The same reasoning was adopted, with the same result, in Hammern v Norway
(Application No 30287/96) (unreported) 11 February 2003, paras 47 to 49.
129. In Hammern, an acquitted person brought proceedings for compensation for
damage suffered as a result of the prosecution. The relevant legislation provided
for compensation where a person had been acquitted if it was shown to be probable
that he did not carry out the act that formed the basis for the charge. The link
between the compensation proceedings and the prosecution was sufficiently strong
for article 6(2) to apply. The ECtHR emphasised the following points: (a) the
decisions on compensation were taken under domestic criminal law provisions
pursuant to which a person who had been charged could seek compensation with
respect to matters directly linked to the criminal proceedings against him; (b) time
limits for bringing the claim were directly linked to the conclusion of the criminal
proceedings; (c) if possible the composition of the court had to be the same; (d) the
damage engaged the responsibility of the state, not of a private party; (e) the
outcome of the criminal proceedings was a “decisive factor, it being a prerequisite
that the person charged had been acquitted…”; and (f) there was a “very large
extent” of overlap between the issues in the criminal trial and those in the
compensation proceedings, the latter being “determined on the basis of the
evidence from the [criminal] trial.”
130. On the other hand, in Ringvold the applicant faced a criminal charge of a
sexual offence against a young person (G) and a claim for compensation by G.
Both proceedings were heard before the same jury at the same time. The jury
Page 47
acquitted the applicant of the offence and rejected G’s claim for compensation.
The Supreme Court allowed G’s appeal and awarded her compensation. The
ECtHR decided that article 6(2) did not apply to the compensation proceedings.
The court held (para 38) that the second and third of the Engel criteria did not
point to the compensation proceedings being a “criminal charge”. In particular, the
civil claim was to be determined on the basis of principles that were proper to the
civil law of tort. The outcome of the criminal proceedings was not “decisive for
the compensation case”. The victim had a right to claim compensation regardless
of whether the defendant was convicted or acquitted and the compensation issue
was to be the subject of a separate legal assessment based on criteria and
evidentiary standards which in several important respects differed from those that
applied to criminal liability. At para 41, the court dealt explicitly with the question
whether the links between the criminal proceedings and the compensation
proceedings were sufficient to justify extending article 6(2) to apply to the latter. It
concluded that the compensation case was not a direct sequel to the criminal
proceedings because it was “legally feasible” to award G compensation despite the
applicant’s acquittal.
131. Lord Phillips says at para 32 that the distinction between claims for
compensation by an acquitted defendant and claims for compensation by an
alleged victim of an acquitted defendant is unconvincing and that it is not credible
to say that the claim for compensation by the acquitted defendant is “consequential
and concomitant” to the criminal proceedings but the claim by the victim is not. I
would be less critical of the Strasbourg jurisprudence.
132. In the view of the ECtHR, the crucial question is whether the subject-matter
of the civil proceedings is so closely connected with some criminal proceedings
that the Convention protections available in the criminal proceedings should also
be available in the civil proceedings. If the outcome of the criminal proceedings is
decisive for the “civil” proceedings, then there is a sufficiently close connection
for article 6(2) to apply. This will occur, for example, where an acquitted
defendant claims compensation for his detention on remand and the costs he
incurred in the criminal proceedings. The defendant would not have been detained
or incurred the costs which he claims in the civil proceedings but for the criminal
proceedings. The position of the person who claims damages as the victim of the
defendant is different. As was said in Ringvold, the victim of the alleged crime has
a right to claim damages regardless of whether the defendant has been convicted or
acquitted. The victim’s claim is not even dependent on the defendant being
prosecuted at all. There is, therefore, no link between the civil proceedings and any
criminal proceedings that may have been instituted. The court held that the fact
that an act may give rise to a civil claim in damages and also constitute a crime is
not sufficient. There is also the point that, as was pointed out by the court in
Ringvold, if the position were otherwise, article 6(2) would have “the undesirable
effect of pre-empting the victim’s possibilities of claiming compensation under the
Page 48
civil law of tort, entailing an arbitrary and disproportionate limitation on his or her
right of access to a court under article 6(1) of the Convention.” This is a further
indication that there is a real distinction between claims for compensation by an
acquitted defendant and claims by an alleged victim of an acquitted defendant.
133. To return to the present case and applying the Strasbourg jurisprudence, I
would hold that there is no sufficient link between civil recovery proceedings
under Part 5 of SOCA and any criminal proceedings to justify the application of
article 6(2) to the Part 5 proceedings. Indeed, there is no link at all. The Part 5
proceedings are not a “direct sequel” or “a consequence and the concomitant” of
any criminal proceedings. They are free-standing proceedings instituted whether or
not there have been criminal proceedings against the respondent or indeed anyone
at all.
The link with criminal proceedings is created by language used by the court in the
civil proceedings
134. But the Strasbourg jurisprudence shows that there may be a yet further route
by which article 6(2) may apply to proceedings which (i) are not civil on an
application of the Engel criteria and (ii) do not objectively have the necessary
close link with criminal proceedings. There is a principle that, if in the civil
proceedings, the court’s decision “contains a statement imputing the criminal
liability of the [applicant]”, that of itself will be sufficient to create the necessary
link for article 6(2) to apply in those proceedings. The clearest statement of this
principle is to be found in Y v Norway (2005) 41 EHRR 87. The applicant was
convicted of sexual assault and homicide. In linked civil proceedings he was
ordered to pay compensation to the victim’s parents. On appeal, he was acquitted
of the criminal charges, but the lower court’s compensation order was upheld. His
appeal against the compensation order was dismissed by the Supreme Court.
Before the ECtHR, he complained that the award of compensation, despite the
acquittal, violated article 6(2). Applying the approach to which I have referred at
para 132 above, the court held that the acquittal did not in principle preclude the
establishment of civil liability to pay compensation arising out of the same set of
facts on the basis of a less strict standard of proof. If, however the national
decision on compensation “contains a statement imputing the criminal liability of
the respondent party, this could raise an issue falling within the ambit of article
6(2) of the Convention” (para 42). The court continued:
“43. The Court will therefore examine the question 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 as to justify extending the scope
of the application of article 6(2) to the latter (emphasis added).
Page 49
44. The Court notes that the High Court opened its judgment with
the following finding:
‘Considering the evidence adduced in the case as a
whole, the High Court finds it clearly probable that
[the applicant] has committed the offences against Ms
T with which he was charged and that an award of
compensation to her parents should be made under
article 3-5 (2) of the Damage Compensation
Act….(emphasis added)
45. This judgment was upheld by the majority of the Supreme Court,
albeit using more careful language. However, that judgment, by not
quashing the former, did not rectify the issue which in the Court’s
opinion thereby arises.
46. The Court is mindful of the fact that the domestic courts took
note that the applicant had been acquitted of the criminal charges.
However, in seeking to protect the legitimate interests of the
purported victim, the Court considers that the language employed by
the High Court, upheld by the Supreme Court, overstepped the
bounds of the civil forum, thereby casting doubt on the correctness
of that acquittal. Accordingly, there was a sufficient link to the
earlier criminal proceedings which was incompatible with the
presumption of innocence.
47. In the light of these considerations, the Court concludes that
article 6(2) was applicable to the proceedings relating to the
compensation claim against the present applicant and that this
provision was violated in the instant case.”
135. Thus, the court has held that the necessary link between the criminal case
and the civil proceedings can be created by the language in which the decision in
the civil proceedings is expressed. In Y v Norway, the ECtHR held that the court
had “overstepped the bounds of the civil forum” by deciding that the applicant had
committed the criminal offences. It is worth considering two cases where this
principle was applied to reach the opposite conclusion. The first is Moullet v
France (Application No 27521/04) (unreported) 13 September 2007. The applicant
was a former manager of the transport, workshop and warehouse department of
Marseilles. He was charged with accepting bribes and aiding and abetting fraud.
He was discharged by the criminal court and the proceedings terminated on the
grounds that they were time-barred. The Mayor of Marseilles then ordered the
Page 50
applicant’s compulsory retirement on the grounds that the evidence showed that
the applicant had received bribes and that, although the criminal court had found
the proceedings to be time-barred, disciplinary action by the local authority was
not subject to any time limitation. The Mayor’s decision was the subject of
challenge in administrative court proceedings. The Conseil d’Etat upheld the
Mayor’s decision on the grounds that the disciplinary board and the disciplinary
appeals board had based their findings on “accurate facts” and the reasoning
behind the impugned sanction was not faulty and the reasons on which the
decision was based were not “materially or factually incorrect”.
136. The applicant complained to the ECtHR that there had been a violation of
the presumption of innocence in breach of article 6(2). He contended that the
Conseil d’Etat should not have relied on the facts which formed the basis of the
criminal charges. The court considered whether the Conseil d’Etat “used such
language in its reasoning as to create a clear link between the criminal case and the
ensuing administrative proceedings and thus to justify extending the scope of
article 6(2) to cover the latter”. The court noted that the applicant was not
“formally declared guilty of the criminal offence of accepting bribes by the
Conseil d’Etat”. The Conseil d’Etat had confined itself to determining the facts
“without suggesting any criminal characterisation whatsoever”. It had confined
itself to assessing
“the impact of the alleged facts on the duties and obligations of
probity incumbent on all local and regional government staff….In
other words, the domestic authorities managed in the instant case to
keep their decision within a purely administrative sphere, where the
presumption of innocence the applicant relied on did not obtain.”
137. The second example is Ringvold where the ECtHR said at para 38 that the
impugned national ruling awarding compensation to the alleged victim of sexual
abuse following the defendant’s acquittal “did not state, either expressly or in
substance, that all the conditions were fulfilled for holding the applicant criminally
liable with respect to the charges of which he had been acquitted”. The Supreme
Court acknowledged that the standard of proof was stricter than the balance of
probabilities, but less strict than that applied to establish criminal liability. It
emphasised that its decision was taken independently of the decision in the
criminal case and did not undermine the acquittal.
138. It seems, therefore, that the necessary link can be created by this route only
if the court in the civil proceedings bases its decision adverse to the defendant
using language which casts doubt on the correctness of an acquittal. The rationale
must be that in such a case the court has chosen to reach its decision by explicitly
finding that a criminal charge has been committed. If it chooses to reach its
Page 51
decision in that way, then the protections afforded by article 6(2) should be
available as if the civil proceedings were criminal proceedings. But if the decision
in the civil proceedings is based on reasoning and language which goes no further
than is necessary for the purpose of determining the issue before that court and
without making imputations of criminal liability, then the necessary link will not
have been created. The distinction can be illustrated by reference to the common
example of the case where A is acquitted of assaulting B, but B brings a claim for
damages in tort. The ECtHR recognises in principle that article 6(2) does not apply
to the claim for damages: see, for example, Ringvold para 38. Thus the acquittal
ought to stand in the compensation proceedings, but it does not “preclude the
establishment of civil liability to pay compensation arising out of the same facts on
the basis of a less strict burden of proof”. The fact that the findings of fact in the
compensation proceedings may implicitly cast doubt on the acquittal is not enough
to import article 6(2). What is required is that the decision in the compensation
proceedings contains a “statement imputing criminal liability” (emphasis added) (Y
v Norway para 42) for article 6(2) to be imported.
139. The idea seems to be that article 6(2) applies if the court treats the
compensation proceedings as if they are proceedings in which the issue of criminal
liability falls to be determined. The most obvious way of doing this is to state
expressly or, perhaps by necessary implication, that the defendant was wrongly
acquitted. There is, of course, no need for the court to create the link with the
criminal proceedings in this way because, as the ECtHR explains in Ringvold, the
compensation proceedings are not directly concerned with the outcome of the
criminal proceedings.
140. It will be seen that the circumstances in which the necessary link can be
created when otherwise it would not exist echo the circumstances in which article
6(2) may be violated where the link is otherwise sufficiently close. In practice,
therefore, if the court imputes criminal liability to an individual, article 6(2) will
apply whether or not the link between the two proceedings is otherwise sufficiently
close. But the analysis adopted by the ECtHR suggests that the issue should be
addressed sequentially in the way that I have described.
141. I can now turn to consider whether Griffith Williams J did impute criminal
liability to the appellants or cast doubt on their acquittal. SOCA’s case is that the
wealth of Mr and Mrs Gale has been acquired through money laundering and tax
evasion in the United Kingdom, Spain, Portugal and elsewhere. Criminal
proceedings for drug trafficking offences were started against Mr Gale in Spain,
but these were discontinued because the relevant time limits had been exceeded.
He was acquitted of drug trafficking offences in Portugal after a trial.
Page 52
142. At para 18 of his judgment, Griffith Willams J said that what was in issue
before him was not “the commission of the specific offences alleged against DG in
Portugal” but whether on all the evidence (including but not limited to the
evidence considered by the Portuguese Court and that which was available to the
Spanish Courts) SOCA had proved that the wealth of Mr and Mrs Gale had been
obtained through unlawful conduct. Nowhere in his judgment does the judge
depart from this view of the case. I accept the submission of Mr Peto QC that none
of the judge’s findings specifically calls into question the correctness of Mr Gale’s
acquittal in Portugal. As for the drug trafficking proceedings in Spain, these were
discontinued. Even if (contrary to my view) the judge had made specific findings
that Mr Gale was guilty of the Spanish offences, these findings could not be relied
on by Mr Mitchell QC. That is because article 6(2) would only apply if there had
been an acquittal on the merits and not one solely based on a time-bar (as the
discontinuance in the Spanish proceedings was): see Leutscher v The Netherlands
(1996) 24 EHRR 181 and R (Mullen) v Secretary of State for the Home
Department [2005] 1 AC 1 para 10.
143. For these reasons, I would dismiss the appeal on the first issue. I should add
that I do not find it necessary to express any view on the application of Geerings v
The Netherlands (2007) 46 EHRR 1222 or R v Briggs-Price [2009] AC 1026 to the
present case. On the second issue, I agree with the judgment of Lord Clarke.
