CRIME — Proceeds of crime — Recovery of assets — Application for interim receiving orders in relation to defendant’s properties — Order set aside for lack of evidence of fraud and because statute-barred — Condition of “good arguable case” that property obtained by unlawful conduct — Whether necessary to prove particular person committing particular offence — Whether time bar applicable at interim stage — Limitation Act 1980, s 32 — Proceeds of Crime Act 2002, s 246

Director of Assets Recovery Agency v Szepietowski and others[2007] EWCA Civ 766

CA: Waller, Wall and Moore-Bick LJJ: 24 July 2007

On an application for an interim receiving order under s 246 of the Proceeds of Crime Act 2002 the Director of the Assets Recovery Agency had to establish a good arguable case that the property to be recovered or other property it represented had been obtained by unlawful conduct. It was sufficient to show that a criminal offence had been committed and the property had been obtained by it or in return for it. It was not necessary to prove that a particular person committed a particular offence on a particular day.

The Court of Appeal so stated when allowing the appeal of the Director of the Assets Recovery Agency against a decision of Mitting J on 28 November 2006 [2006] EWHC 3228 (Admin) granting an application by the defendant, Mr John Szepietowski, to set aside an interim receiving order in relation to two properties made against him, his wife Ms Susan Ann Serry, Merchant Taylor Ltd, Cobham Investments Ltd and Highrealm Ltd.
Mitting J held that there was insufficient evidence that the properties were obtained by funds obtained by unlawful conduct, as required by ss 246(5) and 304 of the 2002 Act. He also held that the agency’s application was time-barred under s 27A of the 1980 Act and that s 32 of the 1980 Act did not allow the agency to argue that the limitation period only commenced once it had discovered “the fraud”.

WALLER LJ said that the agency’s claim to the properties was on the basis that they represented original property unlawfully obtained. In the case of mortgage fraud where the lender was deceived into lending money to purchase property the relevant date was the date on which the funds (the original property) were obtained. Where property was obtained by rents from properties obtained by mortgage fraud the relevant date was the date and transaction of the original obtaining of funds from which the property producing the rent was purchased. The agency must first establish a good arguable case that a certain kind of unlawful conduct occurred and then a good arguable case that property was obtained through that kind of unlawful conduct. The agency was not required to establish a good arguable case that any property was obtained through a specific criminal offence, even of the general kind alleged. If there was some evidence the property was obtained through unlawful conduct, consideration needed to be given to any untruthful explanation or a lack of explanation where an opportunity had been given to provide it. In the present case the agency had established a good arguable case subject to limitation. On the assumption that evidence showed that mortgage fraud, which produced funds now represented by the properties, took place before 23 October 1993 (ie 12 years before proceedings commenced), the agency might rely on the concealment provisions in s 32(1)(b) of the 1980 Act. At the interim stage therefore limitation would not provide a clear answer. As the agency had established a good arguable case the appeal would be allowed and the interim order would be reinstated.

WALL and MOORE-BICK LJJ gave concurring judgments.

Appearances: Jonathan Swift and Piers Harrison (Legal Department, Assets Recovery Agency) for the agency; Jonathan Fisher QC and David Povall (Devonshires) for the defendant; the other respondents did not appear and were not represented.

Reported by: Alison Sylvester, barrister