Unlawful conduct - Violent disorder - Costs - Civil recovery proceedings

Gale and another v Serious Organised Crime Agency: SC (Lords Phillips (president), Brown, Mance, Judge, Clarke, Dyson, Reed): 26 October 2011

Section 241 of the Proceeds of Crime Act 2002, so far as material, provides: '(1) Conduct occurring in any part of the UK is unlawful conduct if it is unlawful under the criminal law of that part. (2) Conduct which (a) occurs in a country [or territory] outside the UK and is unlawful under the criminal law [applying in that country or territory], and (b) if it occurred in a part of the UK, would be unlawful under the criminal law of that part…’

Pursuant to part 5 of the Proceeds of Crime Act 2002 (the 2002 act), the Serious Organised Crime Agency (SOCA) had the power to recover property derived from criminal conduct. SOCA had to prove that the property in question was obtained by unlawful conduct, or that it was property obtained in place of such property.

Section 241 of the 2002 act required the court to decide ‘on a balance of probabilities’ whether it had been proved that any of the matters alleged to constitute unlawful conduct occurred. SOCA, in civil recovery proceedings, obtained an order for the recovery of property to the value of some £2m (the property) held by the defendants, D and his former wife, T. SOCA had obtained the order following a hearing before a judge sitting in the High Court, in which it had been held, applying the civil standard of proof, namely on the balance of probabilities, that the property was derived from criminal activity, including drug trafficking, money laundering and tax evasion in the UK, Spain, Portugal and other jurisdictions.

The judge had so found notwithstanding that the defendants had never been convicted of drug trafficking. D had been prosecuted and acquitted of drug trafficking in Portugal, and similar proceedings against him in Spain had been brought but discontinued. The defendants unsuccessfully argued before the Court of Appeal that the application of the civil, rather than the criminal, standard of proof violated their right to a fair trial as guaranteed by article 6 of the European Convention on Human Rights, that section 241(3) ought to be interpreted to require the application of the criminal standard of proof (beyond a reasonable doubt), or alternatively, that a declaration, pursuant to article 4 of the Human Rights Act 1998, that section 241 of the 2002 act was incompatible with the convention, ought to be made.

The defendants appealed to the Supreme Court on the article 6 point. It further appealed against the making of an interim receiver order, pursuant to section 246 of the 2002 act that they pay costs of a report by the interim receiver appointed by the court in respect of recovery proceedings against them. SOCA had successfully cross-appealed against the refusal of the High Court to make the order.

The issues for determination were: (i) whether the application of the civil standard of proof to civil recovery proceedings brought following an acquittal in criminal proceedings breached the defendants’ right to a fair trial under article 6 of the convention; and (ii) 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 2002 act could include the investigation costs incurred by an interim receiver appointed under section 246 of the act. The appeal would be dismissed.

(1) If confiscation proceedings did not involve a criminal charge, but were subject to the civil standard of proof, there was no reason in principle why confiscation should not be based on evidence that satisfied the civil standard, notwithstanding that it had proved insufficiently compelling to found a conviction on application of the criminal standard. Where a person had been acquitted in criminal proceedings and faced subsequent civil recovery proceedings, article 6 of the convention applied only in circumstances where there was a procedural link between the criminal prosecution and the subsequent confiscation proceedings (see [44] of the judgment).

Some of the Strasbourg decisions were mutually inconsistent and it was not easy to identify the principle in others. There were a number of cases, where the Strasbourg court had 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 those cases had been a procedural connection between the criminal trial and the subsequent proceedings. ‘Charged with a criminal offence’ had an autonomous meaning.

Thus the fact that the 2002 act unequivocally designated recovery proceedings as ‘civil recovery’ did not establish conclusively that they did not involve the charge of a criminal offence. Nonetheless, the classification of proceedings under national law was one of three relevant considerations to which the European Court of Human Rights always had regard when deciding whether or not article 6(2) was engaged. The second was the essential nature of the proceedings, and the third was the type and severity of the consequence that may flow from the proceedings, usually described by the European Court of Human Rights as ‘the penalty that the applicant risked incurring’ (see [16], [19], [21] of the judgment).

In the instant case, there was no procedural link between the criminal prosecution and the subsequent confiscation proceedings. The acquittal was in Portugal and the recovery proceedings were in England. Furthermore, the evidence in the latter ranged much wider than the evidence that was relied upon in the Portuguese prosecution. The commission by the defendants in the instant 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. The starting point was the possession of property by the defendants, for whose provenance they had been unable to provide a legitimate explanation.

There was an abundance of evidence which implicated them in criminal activity that provided the explanation for the property that they owned. It followed that the judge had rightly applied the civil standard of proof (see [44], [54]-[55] of the judgment).

(2) Investigative costs incurred by a receiver and reimbursed by SOCA, including the reasonable remuneration of the receiver, were costs of, or incidental to, civil recovery proceedings (see [79] of the judgment).

There was nothing in the 2002 act or the Civil Procedure Rules 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. 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.

That required investigative work to be done. It was entirely reasonable to appoint an interim receiver to carry out the investigation and to hold the ring in the meantime. There was no statutory rule or provision that led to the conclusion that such costs were not costs of, or incidental to, the civil recovery proceedings. The investigation was an essential part of the civil recovery proceedings and there was no reason in principle why the costs of the receivership could not at the same time be costs of, or incidental to, the civil recovery proceedings (see [80]-[81], [83], [84] of the judgment).

In the instant case, the costs which SOCA had been or was 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 defendants (see [109] of the judgment).

Andrew Mitchell QC and Jonathan Lennon (instructed by Rahman Ravelli Solicitors) for the defendants; Anthony Peto QC, John Law and Robert Weekes (instructed by Serious Organised Crime Agency Legal Department) for SOCA; James Eadie QC (instructed by the Treasury Solicitor) for the intervening party.