Gale & Ors v Serious Organised Crime Agency

This appeal arises out of civil recovery proceedings brought by the Serious Organised Crime Agency (“SOCA”) as the “enforcement authority” under Part 5 of the Proceeds of Crime Act 2002 (“the 2002 Act”). The judge made a recovery order in respect of assets valued at some £2 million against David Gale and his former wife Teresa Gale. On 28 July 2005 Collins J had made an Interim Receiving Order (varied on 25 August 2005) under which Mr James Earp, an insolvency practitioner and partner of Grant Thornton was appointed as Interim Receiver. The findings of his report dated 11 January 2006 formed the basis of the commencement of proceedings for civil recovery on 3 March 2006. His final report was served on 3 July 2008.

For a summary of what he found, and SOCA’s consequent claim, it is sufficient to quote the judge’s introduction:

“2 In the Report, the Receiver stated he had identified receipts of money into identified bank accounts in the names of DG and TG in the period 1989 to 2005 of about £3 million from “unknown sources” and that between 1989 and 1991, over £1.3 million of this money was transferred by DG and TG into accounts in their name with Allied Dunbar, Isle of Man. He had identified no jurisdiction where, over the last 20 years, DG has declared income for tax purposes. He had been unable to identify any independent documentary evidence of any successful businesses run by DG and/or TG in the United Kingdom or in Spain and DG and TG had not provided any specific addresses for their business enterprises and many of the properties which they asserted they or JP owned. He stated the pattern and quantum of bankings into the Allied Dunbar accounts does not match the history of assets realisations which they have stated occurred in Spain prior to their moving to the United States of America in 1991. He found no evidence of a successful flying related business in the USA or of any documented commercial activity in Portugal once DG and TG had moved there in about 1993. The Executive Summary in the Report concluded:

‘We have not identified any independent documentary evidence which would support DG's and TG's assertion that the assets they have accumulated have been derived from legitimate activities. We have not identified evidence of declared income (or tax payments) in the UK, Spain, USA and Portugal which would provide evidence of the means to support the family and allow for the significant accumulation of wealth. There is evidence of unlawful conduct and in particular complex financial dealings indicative of money laundering and concealment. As a consequence, though it is for the Court to decide, it is not unreasonable to conclude that the property and assets have been obtained by unlawful conduct and are recoverable property.’

3 The Receiver identified, as recoverable property, 2 properties in Spain in the name of JP (Las Hortensias and Mezquita) together worth £2,088,000, the proceeds of sale of 120 Hurn Road, Christchurch, Bournemouth (£449,786), £218,302 in 5 frozen bank accounts and motor vehicles and a boat under construction together valued at £57,240. The total value was said to be £2,813,328 but this has been reduced by withdrawals towards living and legal costs and the fall in property values…

4 The claimant's case is that DG's wealth has been acquired through money laundering and tax evasion in the United Kingdom, Spain, Portugal and other jurisdictions and that notwithstanding the discontinuance of criminal proceedings in Spain against DG for drug trafficking (“the ‘Hanja’ incident”) and his acquittal in Portugal of drug trafficking offences (“the Gale Beach incident”), there is clear evidence of drug offending in the United Kingdom, Spain and Portugal which has contributed to his wealth. It is alleged that TG has played an important part in his money laundering and that assets in her name or in their joint names or in the names of nominees were acquired as a result of his criminal activities. It is alleged that the overall evidence establishes that DG has been leading a life of serial drug trafficking, money laundering 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 off-shore corporate fronts;

• ii) at least 68 bank accounts both on and offshore 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 UK to Spain, from Spain to the USA and from USA to Portugal via the Bahamas) when he feared the authorities were or maybe interested in his criminal activities….”

In a meticulous and comprehensive judgment, to which I pay tribute, Griffith-Williams J reviewed the evidence on which the claim was based, and broadly accepted SOCA’s case. He rejected Mr Gale’s case that he was “…a genuine businessman who acquired wealth by his honest endeavours in building work, property investment and business ventures of varying kinds…” I quote the judge’s general conclusion on the facts:

“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 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.” (para 140)

It is unnecessary to go into much of the detail, since the issues raised by the appeal are relatively limited, albeit important. In summary there are four issues before us, the first three raised by the appeal, and the fourth by the cross-appeal:

The scheme of the legislation has been reviewed in a number of decisions of this court. I refer to my own judgment in Olupitan v Director of Assets Recovery Agency [2008] EWCA Civ 104:

“8.

Part 5 of POCA 2002 created a new statutory scheme for the recovery in civil proceedings of property obtained through unlawful conduct. Unlike confiscation proceedings under Part 2, the powers are exercisable regardless of any criminal proceedings (s 240(2)). Examples are given in the Explanatory Notes:

"… civil recovery and cash forfeiture proceedings may be brought whether or not proceedings have been brought for an offence in connection with the property. Cases where criminal proceedings have not been brought would include cases where there are insufficient grounds for prosecution, or where the person suspected of the offence is outside the jurisdiction or has died. Cases where criminal proceedings have been brought may include cases where a defendant has been acquitted, or where a conviction did not result in a confiscation order." (para 290)

Section 240(1) gives power to the Director to recover in civil proceedings property which ‘is, or represents, property obtained through conduct unlawful conduct’ (s 240(1). Property so obtained is referred to as ‘recoverable property’ (s 304(1).” (para 8)

The Act was amended in 2005, on the establishment of SOCA under the Serious Organised Crime and Police Act 2005.

“Unlawful conduct” is defined by section 241:

“Unlawful conduct

(1)

Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.

(2)

Conduct which—

(a)

occurs in a country outside the United Kingdom and is unlawful under the criminal law of that country, and

(b)

if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,

is also unlawful conduct.

(3)

The court or sheriff must decide on a balance of probabilities whether it is proved—

(a)

that any matters alleged to constitute unlawful conduct have occurred…”

Also relevant is the following section 242 (“Property obtained through unlawful conduct”):

“(1)

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

(2)

In deciding whether any property was obtained through unlawful conduct—

…

(b)

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.”

It is to be noted that, although unlawful conduct is by definition “criminal”, recovery proceedings need not be related to criminal proceedings for any particular offences, nor even to criminal conduct of the person holding the property (subject to a limited “good faith” defence: see s 266 below). Nor is there any requirement for the particular offences constituting the unlawful conduct to be identified. As I said in Olupitan, following previous authority:

“…the Director need not allege the commission of any specific criminal offence, provided there are set out the matters alleged to constitute ‘the particular kind or kinds of unlawful conduct’ by or in return for which the property was obtained. This approach in my view follows from the wording of the Act. Use of the term ‘unlawful conduct’, rather than reference to a criminal offence or offences, is a clear indication that the power is not so restricted.” (para 22)

“Recoverable property” is defined by sections 304-310. It applies both to property obtained directly by unlawful conduct (“the original property”), and also to property which “represents the original property”, that is property obtained “in place of” the original property following its disposal (s 305). (In this judgment I shall refer to the latter as “replacement property”.)

Proceedings may be commenced by the enforcement authority in the High Court against any person who “the authority thinks holds recoverable property”. By section 243(23):

“If any property which the enforcement authority wishes to be subject to a recovery order is not specified in the claim form it must be described in the form in general terms; and the form must state whether it is alleged to be recoverable property or associated property”.

It is to be noted that there is no requirement for the claim to indicate whether the recoverable property is “original” property obtained directly by unlawful conduct, or “replacement” property representing such original property. (“Associated property” is a distinct concept, applying for example to interests of innocent third parties in the recoverable property: see s 245.)

Section 246 enables the enforcement authority to apply, before or after starting proceedings, for an “interim receiving order” (as happened in this case), providing for the detention, custody or preservation of property, and the appointment of an interim receiver. I shall need to return in more detail to the functions of the interim receiver, in connection with the cross-appeal (issue (iv)). If the court is satisfied that any property is recoverable it must make a recovery order, which will vest the property in “the trustee for civil recovery”. The only exceptions are if to do so would be incompatible with Convention rights (under the Human Rights Act 1998), or if certain conditions are met, and it would not be “just and equitable” to do so. The conditions, in summary, are that the respondent obtained the property in good faith, has changed his position, and in doing so had no notice that it was recoverable property, and that the order would be detrimental to him (s 266).

The 2002 Act inserted into the Limitation Act 1980 a new provision (s 27A) which provides a special limitation regime for proceedings under this Part:

“(2)

Proceedings under that Chapter for a recovery order in respect of any recoverable property shall not be brought after the expiration of the period of twelve years from the date on which the Director's cause of action accrued.

(3)

Proceedings under that Chapter are brought when—

(a)

a claim form is issued, or

(b)

an application is made for an interim receiving order,

whichever is the earlier.

(4)

The Director's cause of action accrues in respect of any recoverable property—

(a)

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

(b)

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

It is common ground that this provision is subject to section 32 of the 1980 Act (“Postponement of limitation period in case of fraud, concealment or mistake”):

“(1)… where in the case of any action for which a period of limitation is prescribed by this Act, either—

(a)

the action is based upon the fraud of the defendant; or

(b)

any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or

(c)

the action is for relief from the consequences of a mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it…”

Section 316(3) provides that –

“... for the purpose of deciding whether or not property was recoverable at any time (including times before commencement), it is to be assumed that this part was in force at that and any other relevant time.”

Accordingly, it seems, a limitation defence may be relied on against SOCA, even though it depends on events before the assets recovery regime was introduced in 2002, and even though SOCA itself was not created until 2005 (see Director of Assets Recovery Agency v Szepietowski [2007] EWCA Civ 766 at para 59, per Waller LJ).

Mr Lederman, for the Gales, argues that the claim was statute-barred under section 27A of the Limitation Act 1980. The action was commenced by an application for an interim receiving order on 28^th July 2005, so that the 12 year period under the section runs from 28^th July 1993. Section 316(3) requires one to assume that SOCA was in existence at that time. Although the properties subject to the application had been acquired since then, he says that the cause of action arose much earlier, well before July 1993, when the British authorities became fully aware of the essential elements of the case against Mr Gale. Mr Lederman refers in particular to the Commission Rogatoir sent by the Spanish police to the British police in March 1992, leading to an investigation by the Drugs Squad. A statement by DS Wrenn dated 12^th June 1992 made clear that Mr Gale had been well known to the British police since the early 1980s, and subject to a number of investigations which had revealed evidence of his apparent involvement in drug activities. The statement also gave details of bank accounts and other property apparently related to these activities.

The judge did not accept this argument. He noted that

“… the limitation defences related to monies deposited in Allied Dunbar accounts between 1989 and 1992 and to the proceeds of sale of Casa Manana (purchased in 1988), which it was said were used to purchase Mezquita in 2002 and partly to purchase Las Hortensias in 2004.” (para 142)

and that the Authority relied on section 32 as defeating any such defence.

After a detailed discussion of section 27A, and its interaction with section 32, in the light of cases such as Sheldon v RHM Outhwaite (Underwriting agencies) Ltd [1996] 1AC 102, he gave four main reasons for rejecting the defence:

The submissions in this court have shown that the special limitation provisions of the 2002 Act, and their interaction with the concealment provisions of section 32, may raise questions of difficulty in some cases. On the facts of this case, however, and without disrespect to the judge, I think the matter can be decided on a simpler basis. That is that it was for the Gales to establish the facts necessary to make out a limitation defence, in particular a link with pre-limitation property, and they have failed to do so. Indeed, much of the argument before us seemed to start from the wrong end. The principal question under section 27A is not whether the relevant authorities had the makings of a cause of action in 1992, but when the present cause of action, that is in respect of the property now sought to be recovered, first accrued. Until that issue is resolved in the respondents’ favour the issue of concealment under section 32 does not arise.

That it is for the defendant to plead and prove a limitation defence is hardly controversial (see e.g. White Book Vol 2 para 8-6; Szepietowski para 114 per Moore-Bick LJ). It is therefore for him to show that the cause of action accrued before the relevant date, in this case before 28^th July 1993, that is more than 12 years before the application for the interim receiving order. The date of accrual for these purposes is identified by section 27A(4). It distinguishes between (a) proceedings for a recovery order “in respect of property obtained through unlawful conduct”, and (b) such proceedings “in respect of any other recoverable property”. In the former case, the date is when the property itself was obtained. In the latter, it is when “the property obtained through unlawful conduct which it represents” (in other words the “original” property: s 305) was obtained.

In seeking to apply that test in the present case, Mr Lederman faces the difficulty that all the items alleged to be recoverable property were themselves obtained within the limitation period, and there is no indication either in the claim form or in the other supporting documents, which of them, if any, are said to represent original property obtained at an earlier date. It is not possible, therefore, for him to point to any relevant property as having been obtained before the limitation period. He says that this is a defect in the pleadings, for which SOCA is responsible, and which should not be allowed to defeat the purpose of the limitation provisions. It was for SOCA to indicate which category was said to apply.

Although that submission may gain some theoretical support from the distinction between the two categories of property in section 27A(3) itself, it is contrary to the general scheme of the legislation, and unworkable for reasons well illustrated by the facts of this case. I accept that the Authority should as far as possible lay its cards on the table, but the contents of its hand will often depend to a large extent on what the respondent is able or willing to disclose. The Authority’s general position was made clear in the written statement accompanying the initial application by Ruth Davison (an investigator with the Assets Recovery Agency). She listed the items of property in respect of which there was said to be a “good arguable case” that they were recoverable property, all obtained since 2000, and stated:

“I believe that this property is recoverable property because it directly or indirectly represents the proceeds of unlawful conduct. Alternatively, it represents items which have been purchased with the proceeds of unlawful conduct over a period when the Respondents had no lawful income or their lawful income was insufficient to fund the purchase of the property listed.”

The subsequent claim form, dated 9^th March 2006, was stated to relate to recoverable property as identified in the final report of the Interim Receiver dated 11^th January 2006. The Interim Receiver’s final report is a very lengthy document (over 400 pages). The Executive Summary lists the property alleged to be recoverable. It describes the allegedly unlawful conduct identified as including drug trafficking, “money laundering and tax evasion”, and continues:

“Over the past 20 years we have not identified any jurisdiction where DG has declared income for tax. Notwithstanding this they have accumulated significant wealth. DG and TG are sophisticated users of offshore jurisdictions and companies and we have identified multiple bank accounts and transactions for which there is no discernible explanation.” (para 1.11)

That case substantially was upheld by the judge. He examined closely the evidence in respect of each of the items, and demonstrated the difficulty in each case of tracing the ultimate source of the funds used to acquire the various properties. Typical is what he says about the acquisition of Las Hortensias, a property in Marbella bought in June 2004:

“118 The source of the funds for the purchase of Las Hortensias required a complex tracing exercise involving many different transfer and bank accounts which would take some time to summarise… The Receiver's conclusions, with which I agree, are that there is evidence of unlawful conduct; there are unknown receipts into the Solbank account during the period of September 2001 to 2005 of E1.5m,… the pattern of those transactions is typical of money laundering; and the origin of the funds used to purchase Las Hortensias, Mezquita and 120 Hurn Road can all be traced back to unknown sources. I am satisfied that the Solbank 0938 account was used for the purposes of money laundering. DG, who admitted he was the beneficial owner of the account for the first time at the beginning of the trial, has, at no time, provided any credible explanation as to why the account could not have been in his name…” (para 118)

No doubt it is because of the difficulties faced by the enforcement authority in such a situation that the statutory requirements for the claim are not over-prescriptive. Thus, it is sufficient to state the “kinds” of unlawful conduct relied on, and there is no requirement to state whether the property is claimed as “original” or “replacement” property. It is of course open to a respondent to show that the funds used to acquire a particular property can be traced, through a sequence of dealings, to a pre-limitation source. If so the limitation defence will be made out. But Mr Gale was unable or unwilling to do that.

There is nothing unreasonable in putting the burden on the respondent to establish the necessary facts, since it is he who would be expected to have had the necessary knowledge. Conversely, there is nothing unreasonable in denying him a limitation defence, if his own conduct has made it practically impossible for anyone to discover the true source. In the present case, where there was evidence of unlawful conduct extending well into the limitation period, and of property acquired during that period with funds not traceable to any clear legal source, the judge’s conclusion was fully supportable.

I would reject this ground of appeal.

It is submitted that, since SOCA’s case depended on establishing criminal conduct by the Gales, Article 6 of the European Convention required the judge to apply the criminal standard of proof (“beyond reasonable doubt”), rather than the civil standard (“on the balance of probabilities”).

This point was not taken at trial. At first sight, it seems a bold submission, since the Act itself provides that an issue as to whether “matters alleged to constitute unlawful conduct have occurred” is to be decided “on the balance of probabilities...” (s 241(3)). Furthermore, arguments that the criminal standard of proof should apply to proceedings under Part V of the 2002 Act have been rejected by both the Court of Appeal in Northern Ireland (Walsh v Director of the Assets Recovery Agency [2005] NICA 6), and the Inner House in Scotland (Scottish Ministers v Doig [2009] CSIH 34).

In Walsh the court upheld the judge’s conclusion that proceedings under Part V were civil proceedings and did not engage article 6(2) of the Convention. Having reviewed the domestic and Strasbourg authorities (starting with the guidelines set by Engel v Netherlands (No 1) (1976) 1 EHRR 647), it concluded:

“The essence of article 6 in its criminal dimension is the charging of a person with a criminal offence for the purpose of securing a conviction with a view to exposing that person to criminal sanction. These proceedings are obviously and significantly different from that type of application. They are not directed towards him in the sense that they seek to inflict punishment beyond the recovery of assets that do not lawfully belong to him. As such, while they will obviously have an impact on the appellant, these are predominantly proceedings in rem. They are designed to recover the proceeds of crime, rather than to establish, in the context of criminal proceedings, guilt of specific offences. The cumulative effect of the application of the tests in Engel is to identify these clearly as civil proceedings.” (para 41)

In Doig the Inner House reached the same conclusion, after a detailed discussion of the more recent Strasbourg authorities (including Geerings on which the appellants rely – see below).

In the present case, the judge commented on the “burden and standard of proof”:

“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’” (para 9, quoting Secretary of State for the Home Department –v- Rehman [2003] 1 AC 153 para 55, per Lord Hoffmann).

Although that appears an impeccable summary of the law on the basis of the arguments presented, Mr Lederman submits that the position has been changed by the decision of the House of Lords in R v Briggs Price [2009] 1 AC 1026 (handed down some two weeks before the judgment in this case, but a considerable time after the hearing, and not cited in argument). That case concerned a claim under Part II of the 2002 Act. It was therefore concerned with the scope of the court’s powers to order confiscation of assets following conviction, rather than the powers of the enforcement authority under Part V, which do not depend on a criminal conviction.

The facts of the case were somewhat unusual, and the procedure adopted was described by the House as “unsatisfactory” (para 45-50, per Lord Rodger). The defendant had been convicted of offences relating to conspiracy to import heroin, but much of the supporting evidence concerned his involvement with a pre-existing network for the supply of cannabis, not itself subject to any separate charge. In subsequent confiscation proceedings under Part I of the Drug Trafficking Act 1994 the prosecutor sought to recover assets allegedly derived from the cannabis-related activities. Section 2(8)(a) of the Act provided that the standard of proof in determining any question “whether a person has benefited from drug trafficking” was to be “that applicable in civil proceedings”. However, the defence argued that, in deciding whether the assets had been obtained by criminal conduct, article 6 of the Convention required the judge to apply the criminal standard of proof. It was argued that section 2(8)(a) should be “read down” under section 3 of the Human Rights Act to achieve this result.

The House unanimously dismissed the appeal, holding that, whatever standard applied, the judge had found it satisfied on the facts of the case. However, there were three different views on the issue of standard of proof:

It is necessary to start by looking at the case which was at the heart of arguments in the House, that is the decision of the European Court of Human Rights in Geerings v Netherlands (2007) 46 EHRR 1222. In that case, the defendant had been convicted of a number of offences of theft and handling. Most of the convictions were quashed on appeal, but some were left standing. Under the relevant Dutch legislation a confiscation order could be made in respect not only of offences of which the defendant has been convicted, but also of offences where there were “sufficient indications” that they were committed by him. The Regional Court made an order in amounts limited by reference to the offences of which he remained convicted. On his appeal, the Court of Appeal not only dismissed the appeal, but substituted a confiscation order for a much higher amount based on the offences of which he had been acquitted on appeal, on the grounds that there existed sufficient indications that they were committed by him.

The European Court held that there had been a violation of article 6(2). Since the correct interpretation of its reasoning has been the subject of much discussion in the House, and before us, I set it out in full:

“41.

The Court reiterates that the presumption of innocence, guaranteed by Article 6 § 2, will be violated if a judicial decision or a statement by a public official concerning a person charged with a criminal offence reflects an opinion that he is guilty before he has been proved guilty according to law (see Deweer v. Belgium, judgment of 27 February 1980, Series A no. 35, § 56; and Minelli v. Switzerland, judgment of 25 March 1983, Series A no. 62, § 37). Furthermore, the scope of Article 6 § 2 is not limited to criminal proceedings that are pending (see Allenet de Ribemont v. France, judgment of 10 February 1995, Series A no. 308, § 35).

42.

In certain instances, the Court has also found this provision applicable to judicial decisions taken following an acquittal (see Sekanina v. Austria, judgment of 25 August 1993, Series A no. 266-A, § 22; Asan Rushiti v. Austria, no. 28389/95, § 27, 21 March 2000; and Lamanna v. Austria, no. 28923/95, 10 July 2001). The latter 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 necessary costs, or compensation for detention on remand, and which were found to constitute a consequence and the concomitant of the substantive criminal proceedings.

43.

However, whilst it is clear that Article 6 § 2 governs criminal proceedings in their entirety, and not solely the examination of the merits of the charge, the right to be presumed innocent under Article 6 § 2 arises only in connection with the particular offence “charged”. Once an accused has properly been proved guilty of that offence, Article 6 § 2 can have no application in relation to allegations made about the accused's character and conduct as part of the sentencing process, unless such accusations are of such a nature and degree as to amount to the bringing of a new “charge” within the autonomous Convention meaning referred to in paragraph 32 above (Phillips v. the United Kingdom, no. 41087/98, § 35, ECHR 2001 VII).

44.

The Court has in a number of cases been prepared to treat confiscation proceedings following on from a conviction as part of the sentencing process and therefore as beyond the scope of Article 6 § 2 (see, in particular, Phillips, cited above, § 34, and Van Offeren v. the Netherlands (dec.), 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.

Firstly, the Court of Appeal found that the applicant had obtained unlawful benefit from the crimes in question although in the present case he was never shown to be in possession of 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.

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, judgment of 7 October 1988, Series A no. 141-A, pp. 15-16, § 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 Asan Rushiti judgment (cited above, § 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, no. 44320/98, § 31, 28 October 2003).”

It should be noted that there was a significant difference on the facts between Geerings and the present case. It was an important part of the Court’s reasoning that the defendant had not been shown to be “in possession of any assets for whose provenance he could not give an adequate explanation”, and that the Dutch Court of Appeal had relied instead on “a conjectural extrapolation based on a mixture of fact and estimate”. By contrast, the present case was clearly based on the identification by SOCA of specific properties in the respondents’ hands, the source of which they were wholly unable to explain by reference to any lawful activities.

Returning to Briggs-Price, Lord Rodger commented that the actual decision in Geerings was, in the light of cases such as Rushiti (cited by the court in para 44), -

“... scarcely surprising since the Dutch Court of Appeal's decision involved the clearest possible imputation that Mr Geerings had actually been guilty of offences with which he had been charged but of which he had been duly acquitted...

the Dutch Court of Appeal had done much more than merely voice suspicions about Mr Geerings' innocence of the charges of which he had been acquitted: they had proceeded on the basis that he had committed the offences in question.” (para 70)

That aspect of the decision, however, was of no direct relevance to the instant case, where there had been no actual acquittal in respect of the cannabis-related offence.

Lord Rodger went on to consider the implications of paragraph 47 of the judgment in Geerings:

“72.

The essence of the European Court's reasoning is to be found at the end of the penultimate sentence: the Court concluded that what the Dutch court had done could only be based on a presumption of guilt - so what it had done was incompatible with article 6(2). The Court reached that conclusion because, in their view, it had not been shown either that the applicant had committed the crimes in question or that he had derived any advantage from them. That being so, what other basis, apart from a presumption of guilt, was there for saying that the applicant had illegally obtained an advantage?

73.

In the particular context of an order made in respect of offences of which the applicant had been acquitted, the reasoning causes no particular difficulty. But, if it were applied more generally… it would run counter to the Court's approach in Phillips and Van Offeren....”

He observed that this part of the judgment did not help the appellant in the instant case, because, although he had not been charged with the cannabis-related offences, the prosecution had led evidence on which the judge was able to conclude “without doubt” that he had committed them:

“On any view, therefore, the presumption of innocence in article 6(1) was fully respected in the confiscation proceedings.”

He noted the difference of view among his colleagues whether article 6(2) applied, and commented:

“77.

Although I do not share (Lord Brown’s) 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.

...

79 By virtue of section 3 of the Human Rights Act 1998, I would accordingly read section 2(8)(a) of the 1994 Act as applying the civil standard of proof to any question as to whether a person has benefited from drug trafficking, but not to any question as to whether a person has committed a specific drug trafficking offence.”

As I have noted, there was a majority for the view that it was article 6(1) rather than 6(2) that applied, but only Lord Neuberger agreed with Lord Rodger’s approach to article 6(1). However, Mr Lederman, with that support, makes what I interpret as two separate submissions:

I have little hesitation in rejecting the first submission. In the first place, it is incompatible with the clear wording of section 241(3). Section 3 of the Human Rights Act, on which Lord Rodger relied to import the criminal standard of proof, requires legislation to be read compatibly with the Convention only “so far as it is possible to do so”. On the wording of the section under consideration in Briggs-Price it was so possible, without undue violence to the language of the relevant section (s2(8)(a) above of the 1994 Act). That applied the civil standard of proof in terms only to “any question as to whether a person has benefited from crime”. Lord Rodger did not disturb that position, but held that it should not extend to any question as to “whether a person has committed a specific drug trafficking offence”.

By contrast, in this case, section 241(3) of POCA 2002 refers expressly to “matters alleged to constitute unlawful conduct”, which are to be decided “on a balance of probabilities”. That, in my view, is expressed in terms too clear to admit of any equivalent reinterpretation. To an English lawyer proof “on the balance of probabilities” is the direct antithesis of proof “beyond reasonable doubt”. Even allowing for the breadth which has been allowed to section 3 in some cases (as to which see the full review in Clayton & Tomlinson: Law of Human Rights, 2^nd Ed, para 4.29ff), they do not in my view support the substitution of a wholly different test on a matter of central significance to the operation of the statutory regime.

I note in passing Mr Lederman’s reference to R(McCann) v Manchester Crown Court [2003] 1 Cr App R 27, as illustrating how even the civil standard may in some circumstances import a requirement of proof beyond reasonable doubt. I do not find the analogy helpful, since the context was quite different. It is to be noted that the precise effect of the civil standard in cases involving fraud or other allegations of serious misconduct has been revisited recently in the House of Lords (see Re D [2008] UKHL 33). However, in the present context, the draftsman has avoided any possible ambiguity by referring in terms to the “balance of probabilities”.

In any event, even if one disregards the differences of view in the House in Briggs-Price, Part V of the 2002 Act is quite different in purpose and effect from the provisions considered in that case, which correspond to the confiscation provisions of Part II. In such cases the confiscation proceedings are treated by the Strasbourg court as linked to the prior criminal proceedings, but analogous to the process of sentencing rather than establishing a criminal charge, and therefore not normally subject to article 6(2) (see e.g. Phillips v UK (2001) 11 BHRC 280; Van Offeren v Netherlands application no. 19581/04). By contrast Part V of the 2002 Act is not necessarily linked to criminal proceedings of any kind (see also Butler v UK (2002) application no 41661/98, relating to the separate forfeiture regime of Part II of the 1994 Act). The purpose is the seizure of property, not the conviction of any individual, and accordingly there is no reason to apply “article 6 under its criminal head”. I see nothing in Briggs-Price to justify us departing from the persuasive analysis of the Northern Irish and Scottish courts in Walsh and Doig.

Accordingly, I would reject the first submission based on Geerings. The second, which is directed to the matters on which the Gales were acquitted in Portugal, overlaps with the third ground of appeal, and is best considered in that context.

The third ground of appeal challenges the adequacy of the evidence to support the inference of unlawful conduct, having regard in particular to the acquittals in the Spanish and Portuguese Courts. This ground in substance repeats the submission made to the judge that the evidence did not establish drug trafficking, that Mr Gale’s acquittal in Portugal should have been treated as “conclusive of his innocence of the offending there alleged”, and that “the police intelligence reports the details of which he cannot challenge as they are based on untested hearsay have no evidential weight” (judgment, para 6). The importance of the Portuguese decision is now reinforced by reference to article 6, as applied in Geerings.

I deal first with the arguments as put to the judge. Mr Lederman points out rightly that (unlike the Spanish court’s ruling which was based on the expiry of time-limits) the Portuguese court’s decision was in no sense a “technical” acquittal. We were shown a translation of the judgment of the Silves District Court dated 23^rd May 2000 which records that Mr Gale was absolved of “the crimes of conspiracy to traffic drugs, the aggravated crime of drug trafficking and a crime of false declaration”. The earlier part of the judgment distinguishes between the matters which had been found proved, and “the unproven facts… based on a complete absence of convincing and credible proof”. For example, it had not been proved that the accounts held with his wife were “the exclusive fruit” of drug trafficking, or that he and his co-defendants had “formed the objective of together dedicating themselves to drug trafficking in Portugal”. The court went as far as to say that “without a shadow of doubt” there were “no proven facts permitting the conviction of the defendant” for the crimes of which he was charged.

In the present proceedings, the judge dealt specifically with the submission as it was then put:

“What should the court's approach be to the decision of the Portuguese Court to acquit DG? 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. It is therefore unnecessary to consider the evidence given in those proceedings by [the UK witness] as to her investigations into the financial affairs of DG or the court's apparent rejection of that evidence as probative of the matters specifically in issue in those proceedings.” (para 18)

As a comment on the relationship of the two sets of proceedings, apart from article 6, I can see no valid criticism of that reasoning. The judge had to reach a decision on the basis of the evidence presented to him. The quality or availability (or lack of availability) of the evidence given to the Portuguese court, whether or not it overlapped with that given before him, were not directly material to his own decision.

Similarly I can see no reason to criticise what he said about the hearsay character of material contained in the Receiver’s report:

“20 As to the status and evidential worth of the Report, I observe that the service of the Receiver's Report is itself notice of the claimant's intention to rely upon hearsay evidence and so there was no need to serve a separate hearsay notice but as the report contains, in a very large part, hearsay evidence, that is a matter which goes to weight. Therefore I have in mind the criteria in of section 4(2) of the Civil Evidence Act 1995. Mr Lederman QC did not challenge any of the factual detail although he took issue with the emphasis or interpretation placed upon it by the Receiver. In the result, very little turns on the accuracy of the factual content....” (emphasis added)

Mr Lederman relied on the recent judgment of the High Court (Hamblen J) in SOCA v Pelekanos [2009] EWHC 2307(QB). In that case the judge decided that he could attach “no real weight” to material in police reports which came from “un-attributed multiple hearsay accounts” which were effectively unchallengeable. However, I understand that comment to have been made on the evidence in the particular case. It is notable that, although the judgment in Gale was cited to him, he made no suggestion that he was departing from it as a matter of principle. In the present case, as the judge noted, much of the factual material in the Receiver’s report was uncontentious. When referring to such matters as police intelligence reports, he was careful to remind himself of the need for “considerable caution”, and to relate them to the other evidence (see e.g. para 125). In my view, there are no valid grounds for challenging the judge’s treatment of the evidence before whether by reference to the Portuguese proceedings or otherwise.

That leaves the more fundamental point, now raised by reference to the case-law under article 6, that the Crown’s case breached the “general rule” that:

“... following a final acquittal, even the voicing of suspicions regarding an accused's innocence is no longer admissible.” (see para 49 of Geerings cited at para 34 above)

If that is a complete and sufficient statement of the general rule, then SOCA is arguably in some difficulty. After a detailed account of the evidence relating to the events leading to his arrest and subsequent acquittal in Portugal (para 133-139), the judge set out the reasoning of the Portuguese court for finding the specific charges before it unproved, but then gave his own reasons for being satisfied on the balance of probabilities of the connection of the same events with “a wider conspiracy to smuggle cannabis”. It might be said that at the very least this implies “the voicing of suspicions” as to his innocence of the offences alleged in Portugal.

The answer, in my view, is that the short statement in Geerings, albeit sufficient on the facts of that case, was not a complete statement of the principle. I am content to follow the analysis of the Strasbourg case-law in Doig. The Inner House commented:

“24.

It is perhaps not immediately obvious as a matter of language that article 6(2) could ever be said to apply to proceedings in which a person is not charged with a criminal offence. It is nevertheless clear from decisions of the European Court of Human Rights that article 6(2) may be said to apply, and be said to be infringed, in the course of proceedings which are not criminal in nature but which follow an acquittal in criminal proceedings. In particular a clear strand of authority suggests (a) that article 6(2) would apply if the later proceedings can be said to be sufficiently linked (in particular by law and practice) as to be the consequence, and to some extent a concomitant, of the criminal proceedings in which the person was acquitted, and (b) that the article would be infringed in these later proceedings if it can be said that the court casts doubt on the soundness of the earlier acquittal.” (emphasis added)

The words in emphasis were almost a direct quotation from the judgment of the Strasbourg court in Rushiti, which was the authority relied on in Geerings. They apply typically to the case of civil compensation proceedings which in many jurisdictions are closely linked to criminal proceedings, often in the same court. The Scottish court also referred to Geerings itself, which (as has been seen above) related to confiscation proceedings, following a criminal proceedings in the same court. The Strasbourg Court had referred to the extension of article 6(2) to -

“...proceedings relating to such matters as an accused's obligation to bear court costs and prosecution expenses, a claim for reimbursement of his necessary costs, or compensation for detention on remand, and which were found to constitute a consequence and the concomitant of the substantive criminal proceedings.” (para 41)

The confiscation proceedings in Geerings itself were held to be sufficiently linked to the criminal proceedings as to make article 6(2) applicable, be subject to the same principle.

By contrast in Doig the Inner House took a different view of proceedings under Part V of the 2002 Act. It endorsed the conclusion of the lower court that the proceedings were “essentially proprietary in nature”, and sought “merely the recovery of property wrongfully obtained by some person at an earlier stage”, and could be brought regardless of whether there had been any criminal proceedings (para 31). That, however, “may not be the end of the matter”:

“… There are, in particular, apparently clear indications in Y v Norway that, following an acquittal, article 6(2) may be said to be applicable even in proceedings not thus linked by law and practice, and that it is capable of being infringed by the language used in such proceedings (indeed that such language could itself be regarded as providing the necessary link.)” (para 30)

Y v Norway had concerned the continuation of civil compensation proceedings in respect of an offence, following a successful appeal against conviction for the same offence. The Strasbourg court stated that it would examine the question -

“whether the domestic court 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.”

The Norwegian court was held to have done so by opening 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... …”

Although the Norwegian court had acknowledged the defendant’s acquittal of the criminal charges, it was held 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.” (para 46)

In Doig the Inner House was able to hold that, subject to concerns on one passage in the averments, the enforcement authority had not overstepped the mark.

In the present case, it seems to me that the position is even clearer. There is no formal link of any kind between the Portuguese criminal proceedings and the UK recovery proceedings, and no reason to regard them as “concomitant” in the sense used in cases such as Rushiti. Even if one accepts the wider approach discussed in Doig by reference to Y v Norway, the judge (in the passage quoted above), has been careful to observe the proper limits of his role. Unlike the Norwegian court, which referred in terms to the defendant’s “probable” commission of the offences of which he had been charged, the judge has acknowledged without comment the acquittals in the Portuguese court, and distinguished them clearly from the different nature and purpose of the allegations before him.

Accordingly, I would reject the third ground of appeal, even as reinforced by the article 6 point.

SOCA challenges the judge’s decision that the costs recoverable against the respondents should not include costs incurred by the Interim Receiver in connection with his investigations and report. In so holding the judge followed the judgment of the Northern Ireland Court of Appeal in SOCA v Wilson [2009] NICA 20, the correctness of which is therefore directly in issue. It is submitted on behalf of SOCA that we should depart from that decision because the Northern Ireland Court failed to take adequate account of the special statutory scheme under which the interim receiver was appointed. It is necessary therefore to look at that scheme in some detail, before considering the submissions.

As already noted, section 246 of the 2002 Act enables the enforcement authority to apply, for an interim receiving order, including the appointment of an interim receiver. In its application the enforcement authority must nominate a “suitably qualified person” for appointment, who may not be a member of staff of the authority (s 246(7)). In this case, the order (dated 25^th August 2005) specified James Earp of Grant Thornton as Interim Receiver.

The functions of the interim receiver are defined by section 247:

“(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.”

The interim receiver’s powers (defined by schedule 6) include power to “seize property” to which the order relates, to obtain information, to enter and search premises, and to manage the property to which the order applies. They do not include power to sell or dispose of assets, subject to limited exceptions such as sale of perishable or property of diminishing value (sched 6, para 5).

The interim receiver is required to report his findings to the court, and serve copies of the report on anyone affected by it (s 255(2)). In the meantime there is provision for any party to apply to the court for directions as to the exercise of his functions (s 251). He is required to report to the authority and the court as soon as practicable if he thinks that property included in the order is not recoverable property, or there are other changes of circumstances (s 255).

As already noted, the next stage, following the submission of the report, is the making of a recovery order (s 266). The recovery order vests the property in “the trustee for civil recovery”, who is the person appointed by the court to give effect to the recovery order (s 267(1)). Again, the enforcement authority must nominate a suitably qualified person for appointment as trustee. (In this case there is no exclusion of members of the Authority’s staff). Section 266(8A)-(8B) enables the order to provide for payment of “reasonable legal expenses” incurred by a person in the proceedings.

It is to be noted that there is nothing to prevent the interim receiver being appointed also as trustee, which is what happened in this case (see para 3 of the Recovery Order dated 9^th June 2008). However, it is important in considering the issues in the cross-appeal to bear in mind the different capacities in which Mr Earp, of Grant Thornton, was acting at different stages.

The functions of the trustee are defined by section 267(3)-(5):

“(3)

The functions of the trustee are—

(a)

to secure the detention, custody or preservation of any property vested in him by the recovery order,

(b)

in the case of property other than money, to realise the value of the property for the benefit of the enforcement authority, and

(c)

to perform any other functions conferred on him by virtue of this Chapter.

(4)

In performing his functions, the trustee acts on behalf of the enforcement authority and must comply with any directions given by the authority.

(5)

The trustee is to realise the value of property vested in him by the recovery order, so far as practicable, in the manner best calculated to maximise the amount payable to the enforcement authority…”

His powers are set out in schedule 7, the first being “power to sell the property or any part of it or interest in it”.

Section 280 (as amended by the Serious Organised Crime and Police Act 2005) provides for the application by the trustee of sums obtained by him, or representing “the realised proceeds of property” vested in him under the recovery order:

“(2)

The trustee is to make out of the sums—

(a)

first, any payment required to be made by him by virtue of section 272,

[(aa) next, any payment of legal expenses which, after giving effect to section 266(8B), are payable under this subsection in pursuance of provision under section 266(8A) contained in the recovery order,]

(b)

[then], any payment of expenses incurred by a person acting as an insolvency practitioner which are payable under this subsection by virtue of section 432(10),

and any sum which remains is to be paid to the enforcement authority.

[(3) The [enforcement authority (unless it is the Scottish Ministers)] may apply a sum received by [it] under subsection (2) 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.

(4)

Subsection (3)(a) does not apply in relation to the remuneration of the trustee if the trustee is a member of the staff of the [enforcement authority concerned] [(but it does apply in relation to such remuneration if the trustee is a person providing services under arrangements made by that enforcement authority)].]”

It is to be noted that the only specific statutory provision for payment of the remuneration and expenses of either the interim receiver or the trustee is the discretion given to the enforcement authority by section 280(3). This was introduced by section 99 of the Serious Organised Crime and Police Act 2005. The Explanatory Notes to section 99 stated:

“Section 99 has the effect of allowing the [enforcement authority] to meet the remuneration and expenses of a receiver in England, Wales and Northern Ireland from recovered sums after payments referred to in section 280(2) of the Proceeds of Crime Act 2002 have been made. The [enforcement authority] may meet the costs of an appointed interim receiver from sums received from civil recovery proceedings in a manner that directly mirrors that of the criminal provisions in Parts 2 and 4 of the Act. Similar provision is made in respect of interim administrators' fees and expenses in Scotland.”

There is separate provision for Scotland (s 284), where special statutory authority was apparently required. The 2002 Explanatory Notes to that section stated:

“This section makes provision for the payment of interim administrators and trustees for civil recovery in Scotland by the Scottish Ministers. No such provision is considered necessary in relation to England, Wales and Northern Ireland where it is envisaged such matters will be regulated by contract.”

In the present case the interim receiving order itself (para 26) permitted the interim receiver to charge for his services, for which he was to present accounts as provided in the letter of nomination. That letter did not provide for any particular party to pay his costs, but his appointment was subject to a separate agreement with the SOCA, which has in fact paid them. We were told that the amount of his investigation costs has totalled some £1 million, which if the judges’ order is upheld will have to be met out of public funds.

In Wilson the issue (as stated in the leading judgment of Girvan LJ) was whether the expenses and remuneration of an interim receiver appointed under Part V fell to be categorised “as part of the litigation costs of the agency”, and therefore recoverable by it as the successful party in the civil recovery proceedings. In that case, as in this, the costs had been paid by the Agency. The judge (Higgins J) had refused the claim, because it related to “remuneration and expenses for filling the statutory functions of the receiver and not litigation costs of or incidental to the proceedings”.

His decision was upheld. Girvan LJ referred to the long line of cases confirming “the basic principle of receivership” that a receiver is entitled to be indemnified in respect of his costs and remuneration out of the assets in his hands as receiver. He referred to Capewell v HMRC [2007] 2 All ER 370, in which Lord Walker had adopted the classic statement by Warrington J in Boehm v Goodall [1911] 1 Ch 155, 161:

“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.”

Girvan LJ referred to the various modern statutory regimes under which receivers can be appointed to support confiscatory proceedings related to criminal law. In Hughes v Customs and Excise Commissioners [2003] 1 WLR 177, Simon Brown LJ (para 50) had made clear that such statutory receivers are to be treated “precisely as their common law counterparts save to the extent that the legislation expressly otherwise provides”.

He noted that Re Andrews [1999] 1 WLR 1236 was the first case which considered the question of the receiver's costs under such a confiscatory regime (in that case Part VI of the Criminal Justice Act 1988). It was held by the Court of Appeal that the receiver’s remuneration was an expense of the receivership, which should be met out of the assets in the receivership, and was not a cost of or incidental to the proceedings for which a costs order could be made. The same approach had been taken in later authorities, most recently by the Court of Appeal in Sinclair v Glatt [2009] EWCA Civ 176 (again under Part VI of the 1988 Act). Girvan LJ regarded those authorities as establishing the position in respect of the analogous confiscatory regime in Part II of the 2002 Act, and he saw no reason to think that they should not apply equally to Part V. That view was supported by the standard textbook (Smith, Owen and Bodnar on Asset Recovery para 111.1.129) (para 15).

In the remainder of his judgment he made a number of supporting points which I hope I can summarise sufficiently:

Mr Lennon, who led on this issue for Mr Gale, supports the judge’s decision, essentially for the reasons given by the NI Court of Appeal.

Mr Peto for SOCA says that we should not follow that ruling, because the NI court was not addressed on the special features of the Part 5 regime which distinguish it from Part 1 and its predecessors, and that the court should have distinguished Re Andrews and the other cases relied on.

He says that those decisions turned on a statutory framework significantly different to that in issue here. In Andrews, Hughes and Capewell the terms of appointment of the receivers expressly provided that they were to look to the assets under their control, and there was no issue that they were entitled to do so, and to realise assets for that purpose (see Hughes at 190F-G). (It is noteworthy that Part 2 of the 2002 Act now contains a specific provision for a receiver under a restraint order to “realise so much of the property” as is necessary to meet his remuneration and expenses: s 49(2)(d)).

By contrast, there is nothing in Part 5 of the Act, or in the terms of appointment of the interim receiver, to give him an equivalent power. His powers under Part 5 are narrowly confined to those required to find and secure recoverable assets, pending the making of a receiving order. His limited powers may be compared with the much wider powers of the trustee for civil recovery, following the making of a recovery order, which include specific power to realise the assets. Furthermore, to allow the interim receiver to recover his expenses from the assets in his hands would be inconsistent with the carefully structured payment provisions of section 280, which ensure in particular that interests of innocent third parties in “associated property” are paid first (s 280(2)(a)).

The facts of Andrews were in any event quite different. The receiver had kept some £10,000 out of the assets of the receivership, in accordance with his agreement with the enforcement authority, and it was conceded that he had been lawfully entitled to make that deduction (p1242B-C). The defendant sought to recover an equivalent sum by way of an order for costs against the authority. The court held that this was in effect “a claim for compensation dressed up as an application for an award of costs”, in a scheme in which there was “a carefully regulated code for such a claim” (p 1248H per Aldous LJ).

With regard to the policy objection raised by Girvan LJ to adding to the defendant’s burden without statutory authority, Mr Peto observes that, if that were a valid objection, it would apply equally to SOCA’s ordinary costs of the litigation. Yet there is no dispute that they can be subject to an order. The statutory authority provided by section 51 of the Senior Courts Act 1981 is sufficiently wide to cover all SOCA’s costs, so long as they can properly be described as “incidental” to the proceedings, and there is no reason to apply a different rule to those paid to the interim receiver.

I have not found this an easy question to resolve. Although we are not bound by the decision of the Northern Irish Court of Appeal, it is a carefully considered judgment in relation to a jurisdiction which extends to the whole of the UK. We should not depart from it unless clearly satisfied that it was wrong.

I agree that Girvan LJ was not apparently presented with the same detailed arguments as we have heard on the distinctive features of the Part 5 statutory regime. I see considerable force in Mr Peto’s submission that the provisions applicable to an interim receiver, including the limited powers conferred by schedule 6, are inconsistent with a general right to deduct his expenses from the assets in his hands, particularly having regard to the need to protect interests of innocent third parties. As apparently was envisaged in 2002, the interim receiver’s position will be protected by his agreement with the enforcing authority, payment by which is now specifically authorised by section 280.

I would add that the absence in the original 2002 Act of any UK-wide equivalent for equivalent to section 284 (conferring specific powers in Scotland) does not seem to have the significance which Girvan LJ suggested (para 72(ii) above). As already noted, the 2002 Explanatory notes explained that corresponding provision was not thought necessary outside Scotland because “it is envisaged such matters will be regulated by contract”. It does not seem therefore that at that stage recourse to assets in the interim receivership was seen as the natural alternative.

As already mentioned, Girvan LJ also found support in the textbook, Smith, Owen and Bodnar. However, the current version (para III.1.118ff), which as yet makes no reference to the decision in Wilson, is inconclusive. The authors record the “settled” principles under Part 2 of the 2002 Act, but note that under Part 5 the issue remains undecided. They suggest that, although there is no provision expressly permitting an interim receiver to draw his remuneration from the assets in the receivership, it may be possible to rely on the “well established common law right applicable to all receivers”. They observe that in the field of criminal restraint orders it is well settled that a management receiver will be indemnified by the prosecutor if the assets in the receivership prove insufficient, adding that:

“In civil proceedings any money paid out by the claimant under such an indemnity may be recoverable as part of the costs of the claim or as part of the damages.”

Neither counsel before us found any help in the two cases mentioned in the footnote (Evans v Clayhope Properties [1988] 1 WLR 358; Maritime Transport v Unitramp (“The Antaios”) [1981] 2 LlLR 284).

Central to Girvan LJ’s reasoning, and that of Higgins J below, was the simple proposition that “remuneration and expenses for filling the statutory functions of the receiver” were not “litigation costs of or incidental to the proceedings”. That proposition was derived from the English Court of Appeal authority of Re Andrews, which is binding on us, if that is what it decided.

My first view was that, notwithstanding the significant differences in the facts and the statutory regime in Andrews, the principle which the court applied was stated in sufficiently general terms for it to be applicable also to the present case. For example, Aldous LJ, after referring to SCA section 51, and having considered the particular responsibilities of the receiver in that case stated the principle in general terms:

“The remuneration of a receiver is an expense of the receivership not costs incidental to the proceedings in which he is appointed.” (p 1248G)

The observation (on which Mr Peto relies) that the claim was one “for compensation dressed up…” appears in context as an additional point (p 1248H), rather than as one central to the reasoning. The judgment of Ward LJ was similarly expressed as one of principle. While he acknowledged the factual differences between different cases, he was particularly impressed by the difficulty of drawing a logical line between expenses which could be regarded as incidental to litigation and those which could not (p 1245H-C). He concluded:

“I am, with unfeigned reluctance, compelled to conclude that even if the expenses of the receivership are within the definition of costs, they are not costs 'of and incidental to the proceedings'. They must lie where they fall.” (p 1246H)

I note that the editors of Picarda: Receivers, Managers and Administrators 4^th Ed appear to have taken a similar view of the general effect of Andrews:

“It should be added that a receiver’s costs and expenses do not form part of the costs ‘of and incidental to’ the action in which he is appointed and therefore cannot be recovered by a party successfully applying for discharge of the receivership order. The receiver’s charges and remuneration are expenses of the receivership and once he has properly recouped his properly incurred costs from an asset which he has received, the costs of the receivership lie where they fall.” (p 515, citing Andrews.)

Accordingly, I had formed the view that, at this level at least, we should follow the reasoning of the NI Court of Appeal, and dismiss the cross-appeal.

I have now had the advantage of reading the judgment of Toulson LJ, and also the concurring judgment of Aikens LJ. I have been much helped in particular by Toulson LJ’s detailed consideration of Andrews and the other authorities. I am now persuaded, for the reasons given by them, that the reasoning of this court in Andrews is not directly applicable to the distinctive statutory regime applicable in this case. For the same reason, in view of the weight placed on that decision by the NI Court of Appeal, the persuasive force of the judgment in Wilson is materially reduced. Having reached that point, I am content simply to adopt their reasoning and conclusions on the cross-appeal.

For these reasons I would dismiss the appeal, but allow the cross-appeal. The consequence will be that the sums paid to the interim receiver will in principle be included in the costs for which Mr Gale is liable under the judge’s order, subject to assessment if not agreed.

I agree fully with Carnwath LJ’s reasons for dismissing the appeal against the recovery order made by Griffith Williams J. Like Carnwath LJ, I have found far more difficult the issue raised by SOCA’s cross-appeal whether the agency should be entitled to recover from Mr Gale costs in respect of the investigations and reports made by the receiver.

I start from the position that in principle it is just that the agency should be entitled to recover such costs from Mr Gale. The reasons can be shortly stated. At the time when the agency applied to the court to make an interim receiving order there was strong ground to suspect that Mr Gale, and the others against whom the order was made, held property that had been obtained through unlawful conduct, but much investigative work had to be done. The receiver was appointed in order to do it. Paragraph 9(viii) of the order empowered the receiver to obtain information from the respondents to the order, or to require them to answer any question, as provided for in paragraph 2 of schedule 6 to the Proceeds of Crime Act 2002 (“the Act”). The order provided that the receiver should be entitled to charge for his services in accordance with the letter of nomination exhibited to the witness statement made in support of the application. The letter of nomination provided that the receiver’s costs were to be paid by the agency.

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.

In his judgment the judge said:

“4.

…It is alleged that the overall evidence establishes that DG has been leading a life of serial drug trafficking, money laundering 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 off-shore 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 UK to Spain, from Spain to the USA and from USA to Portugal via the Bahamas) when he feared the authorities were or maybe 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.”

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 cooperate 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.

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 will not repeat the provisions of the Act set out in Carnwath LJ’s judgment but I must refer to certain of them which are particularly important.

Section 247 provides that an interim receiving order may authorise or require the receiver to exercise any of the powers mentioned in schedule 6 (including the power to obtain information to which I have referred).

Section 255 provides that an interim receiving order must require the receiver to report his findings to the court.

Section 266 provides that any recovery order made by the court must vest the recoverable property in the trustee for civil recovery.

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.

Section 280 sets out what the trustee must do with the realised proceeds of property vested in him. Section 280(3) empowers the enforcement authority to apply money received by it in making payment to the receiver, but the receiver has no right under the Act to payment from the proceeds of the receivership. In the present case the receiver’s only right to payment was his contractual right to payment by the letter of nomination which was sanctioned by the court in the interim receivership order.

It is not entirely clear why s280(3) gives express power to the enforcement authority to apply money received by it in making payment to the receiver. The Act says nothing more about the enforcement authority’s powers or duties in respect of funds received from the trustee, but s460(2) provides that any sums received by the Secretary of State in consequence of the Act are to be paid into the Consolidated Fund. We were told that in practice, at the end of the financial year, the agency makes payment direct to the Home Office Consolidation Fund of the total sums recovered by it after payments made under s280 and various other costs and expenses allowable under arrangements made between the agency and the department.

Section 51 of the Senior Courts Act 1981 (formerly the Supreme Court Act) 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 provision for regulating matters relating to the costs of those proceedings…

(3)

The court shall have full power to determine by whom and to what extent the costs are to be paid.

CPR 44 contains general rules about costs. CPR 69 contains general rules about the court’s power to appoint a receiver. CPR 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.”

In the present case the order appointing the receiver provided for the payment of his costs by the agency. The critical question is whether the authorities, to which I must turn, preclude the court from ordering Mr Gale to pay the costs which the agency paid to the receiver to carry out the investigations and assemble the evidence necessary to prove the case against Mr Gale.

The statement of Warrington J set out by Carnwath LJ at paragraph 70 was cited by Lord Walker in Capewell v HMRC [2007] 1 WLR 386 at paragraph 21 as authority for it being

“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.”

However, that general principle is inapplicable in the present case because it is inconsistent with the express terms of the statute and with the terms on which the receiver was appointed. Under the Act, on the making of a recovery order the property is vested in the trustee and the receiver has no entitlement to reimbursement from it. Similarly, although it may “in most cases” be an extreme hardship to parties to an action if they were to be held personally liable for expenses incurred by a receiver, I cannot see that this would be so in the present case. The receiver was appointed on terms that his remuneration should come from the agency, and on the facts of this case I can no see “extreme hardship” if Mr Gale were ordered to pay the costs of investigating the facts which he tried so hard to conceal and assembling the evidence which proved the case against him. For the reasons which I have given, I would regard it as eminently just.

A receiver was appointed under s77(8) of the Criminal Justice Act 1988, which provided that where a restraint order was made

“… the court may at any time appoint a receiver –

(a)

to take possession of any realisable property, and

(b)

in accordance with the court’s directions, to manage or otherwise deal with any property in respect of which he is appointed…”

As noted, it is ordinarily an incident of receivership law that a receiver is entitled to his proper charges from the assets of the receivership and the 1988 Act contained no contrary indication.

The property taken into receivership comprised a haulage company and a sum of £42,000. Most of the time of the receiver was spent in supervising the running of the company. For example, she spent time supervising the disposal and acquisition of lorries for the benefit of the company. In due course, the appellant was acquitted of the charges brought against him and the receivership order was discharged. Property was released to him, but the receiver retained approximately £10,000. At the time when the matter came before the Court of Appeal, the receiver had yet to produce income and expenditure accounts, but it was known that part of the expenditure would consist of her charges which were paid for, at least in part, out of money available from the £42,000 that had come from the appellant. The appellant sought an order that the costs of the receivership should be paid by Customs and Excise, who had brought the prosecution and obtained the receivership order. His application failed.

At the time when the receivership order was made, it was foreseeable that it might result in the appellant suffering loss in either or both of two ways. The receiver’s management of the company might be less successful than the appellant’s would have been; and the receiver’s charges for running the company might be greater than would have been the appellant’s management costs. By his application, the appellant was effectively seeking to recoup the loss which he had suffered, or allegedly suffered, by the receiver taking payment of her charges from the £42,000. The appellant based his application on s51(1) of the Supreme Court Act 1981 (now titled the Senior Courts Act 1981).

Ward LJ said that he did not find it an easy point to decide. However, he postulated the example of a case where by reason of prudent management by the receiver, an ailing business was made profitable to the benefit of the defendant, and he posed the question why in such circumstances the defendant should not pay for it. He noted that the appellant’s answer was that it could be dealt with by the court’s exercise of a discretion, but he was not happy with that answer. He did not consider that it was proper to engage in an analysis of the cost effectiveness of the receivership and management in order to determine whether the costs of the receivership should be treated as costs of and incidental to the proceedings within the meaning of s51. He continued:

“The true position, as it now appears to me, is 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 plaintiff for breach of the usual undertaking as to damages a plaintiff would normally be required to give.”

Under the 1988 Act, s89, 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.

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 s51.

Aldous LJ also adverted to 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. In his judgment, 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 s89 Parliament had laid down a carefully regulated code for such a claim. He concluded that s89 was the proper avenue for a compensation claim of the kind being made by the appellant.

The present case is different. By contrast with the position in Re Andrews, the agency’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. The agency is not seeking to recover what I would call conventional receivership costs, i.e. the costs of managing Mr Gale’s assets. The agency seeks to recover the cost which it has had to bear of the receiver carrying out investigations and assembling the evidence necessary to prove the case against Mr Gale, which would undoubtedly have been recoverable in principle as costs of the proceedings if the work had been done by anyone other than the receiver. The costs in their essential nature were not merely incidental but integral to the prosecution of the claim made by the agency against Mr Gale.

Receivership orders were made in proceedings brought under the Criminal Justice Act 1988 (“the 1988 Act”), or the Drug Trafficking Act 1994, pending parallel criminal prosecutions. The issue arose whether the receiver was entitled to use the defendant’s assets to meet the costs of the receivership prior to the conclusion of the High Court proceedings. In two cases the defendant’s trial on the criminal charges had yet to take place. In a third case the defendant had been convicted but no confiscation order had yet been made. In each case there had been a letter of agreement between the receiver and the prosecution that the prosecution would seek an order from the court that the receiver’s costs should be costs in the receivership, but the prosecution provided the receiver with a backup indemnity. The Court of Appeal held that the receiver was entitled to take his remuneration from the defendant’s assets.

Simon Brown LJ, giving the leading judgment, held that ordinary principles of receivership apply to statutory receivers except insofar as this would be inconsistent with the statute. On ordinary principles, the receiver would be entitled to take his remuneration from the assets of the receivership, and there was nothing in the statutory scheme to disapply that principle. On the contrary, he considered that what the defendants were really seeking was compensation for losses resulting from receivership proceedings ancillary to a prosecution (regardless of whether the claim was advanced under s51 of the Supreme Court Act 1981, or by seeking to read down the language of the 1988 Act so as to preclude receivers from recovering their remuneration and expenses from unconvicted defendants’ assets), and this was inconsistent with the limited provisions of the statutory scheme about compensation for an acquitted defendant.

There is no parallel between the issue in Hughes and the issue in the present case. Without repeating what I have said in paragraph 113, I consider that it would be a non sequitur to argue that because the receivers in cases such as Andrews and Hughes were entitled to take their costs of the receivership out of the assets of the receivership, the agency in the present case should not be entitled to recover its costs of obtaining and presenting the evidence necessary to prove its case against Mr Gale through the work done by the receiver.

The defendant was charged with conspiracy to carry out a VAT carousel fraud. A restraint order was made under the 1988 Act in respect of his assets, and a receiver was appointed in respect of his realisable assets under s77 of the Act. Under the terms of the order the receiver’s costs, remuneration and expenses were to be costs in the receivership. The receivership order was discharged while the prosecution was still pending. The defendant argued that the receiver should not be entitled to any costs, disbursements or expenses during the last few months of the receivership. The Court of Appeal made an order under CPR 69.7 that from a certain date Customs and Excise should be responsible for payment of the receiver’s remuneration but that his expenses should be met from the assets of the receivership in the ordinary way. The House of Lords held that the Court of Appeal was wrong to make that order for two reasons.

First, CPR 69.7 could not override the scheme inherent in the detailed provisions of the 1988 Act. That scheme provided for the receiver’s remuneration and expenses to be paid out of the receivership assets, subject to a statutory right of the defendant to compensation under s89 in some circumstances. Parliament had deliberately framed the right to compensation in narrow terms and that was an aggrieved individual’s only right to compensation for loss resulting from the receivership (aside from his right to challenge the amount of the receiver’s remuneration).

Secondly, the receiver had been appointed on terms that the costs of the receivership, including the receiver’s remuneration, were to be paid in accordance with the letter under which the receiver had accepted appointment, and the receiver was entitled to the security of knowing that the terms of his appointment would not be changed retrospectively.

As I have already said, I do not see that it would be inconsistent with the structure of the 2002 Act for Mr Gale to be required to pay the costs which the agency has paid to the receiver for carrying out the investigation and assembling the evidence necessary to prove the case against him. There is also no question in this case of seeking to vary retrospectively the terms on which the receiver agreed to act.

Unlike the other authorities to which I have referred, SOCA v Wilson is directly in point and is persuasive authority in support of the view taken by the judge. Girvan LJ, giving the judgment of the court, began with the basic principle of receivership that the receiver is entitled to be indemnified in respect of his costs and remuneration out of the assets in his hands as receiver. From that starting point, he went on to consider modern criminal confiscatory legislation under statutory schemes which involved the appointment of a receiver. He cited Re Andrews and Hughes as confirmation of the applicability of the general principles, under which a receiver has a lien for his costs and remuneration against the assets even after the discharge of the receivership order. He was unimpressed by the argument that receivers under the 2002 Act have wide ranging investigatory powers the exercise of which should be treated as akin to the investigating costs of the agency itself. As to this argument he said at 16:

“However, such a distinction is not a true distinction leading to or justifying a different approach to the recovery of receivership costs in Part 5 cases. Receivers appointed by way of equitable relief charged with the collection and management of assets, for example the assets of a company in receivership, will frequently have to carry out extensive investigations to enable them to get in and collect and protect the assets over which they have been given receivership powers. It has never been suggested that the costs of such investigations fall to be treated differently from other management costs. Thus the mere fact that a receiver has to carryout investigation work does not of itself make the position of the interim receiver under Part 5 different in principle from other receivers.”

My approach differs from that of Girvan LJ in a number of ways. As to the starting point, I have commented on the general principle stated by Warrington J in Boehm v Goodall and the question of its applicability in the context of the present case in paragraph 104. As to Re Andrews and Hughes, I have also made my comments. In short, I do not see that the present claim by the agency runs foul of the statutory scheme.

I do not think that it would be critical to the issue in the present case whether or not the receiver would have been entitled to claim a lien over the assets of the receivership; but, insofar as the point formed part of Girvan LJ’s reasoning, I see force in Mr Peto QC’s argument that such a lien is inconsistent with the provisions of the Act about the vesting of the property in the trustee on the making of a recovery order and the provisions of s280(3), which on their face make it a matter for the discretion of the enforcement authority whether the receiver’s costs and remuneration should be met from the property which forms the subject matter of the recovery order.

I must finally address Girvan LJ’s response to the argument about the nature of the investigative work giving rise to the costs claimed by the agency. Girvan LJ observed that the ordinary management functions of a receiver may involve extensive investigations, and he said that the position of the receiver should be no different regarding other investigative work.

That is to examine the matter from the view point of the receiver and his right to remuneration. In this case the receiver’s right was against the agency and not the assets, but in any case I do not see why costs which are costs of the receivership may not also properly be regarded as costs of the civil recovery proceedings, as between the agency and Mr Gale, to the extent that they represent the cost to the agency of obtaining and presenting the evidence to prove the agency’s case.

In my opinion the receiver’s report and the investigations which lead to it fall under that category, and the cost to the agency of their work should properly be regarded as costs which the court may order Mr Gale to pay, unless that were inconsistent with the statutory scheme. I do not consider that any of the authorities require this court to hold that it would be inconsistent with the statutory scheme.

For those reasons I would allow the agency’s cross appeal.

I also agree with Carnwath LJ’s reasons for dismissing the appeal against the recovery order made by Griffiths Williams J. In relation to the “limitation” issue, I would note three things. First, these are civil recovery proceedings. Although there are no specific provisions in the CPR which deal with proceedings under Part 5 of the Proceeds of Crime Act 2002, it seems to me that the Civil Procedure Rules must generally apply to such proceedings unless there is something in the CPR or the 2002 Act (or other relevant legislation) that states that they shall not. Secondly, that means that the provisions in the CPR about pleadings must apply, save as modified by such provisions as section 243(3) of the 2002 Act and case-law.

Thirdly, the provisions of section 243(3) of the 2002 Act, (set out at [10] of Carnwath LJ’s judgment), stipulate expressly that the enforcement authority must either specify the property it wishes to be the subject to a recovery order in the claim form that the authority must serve, or such property must be described in the claim form in “general terms”. Furthermore, the claim form must state whether the property sought to be subject to a recovery order is alleged to be “recoverable property” or “associated property”. Carnwath LJ rightly points out (at [10] above) that the enforcement authority does not have to indicate in the claim form whether the recoverable property is “original” property or “replacement” property as defined in the 2002 Act. But, in my view, the description in the claim form of the recoverable property must be sufficiently well defined to enable a defendant to plead in response, (if so advised), that the property sought to be made subject to a recovery order was obtained through unlawful conduct more than 12 years (now 20 years) before the claim form was issued or an application for an interim receiving order made, under section 27A of the Limitation Act 1980.

On the cross-appeal, I agree with Toulson LJ’s conclusion that SOCA can, in principle, recover as costs the expenses and remuneration of the interim receiver. As I am differing from the conclusion of the NI Court of Appeal on this issue, I will state my reasons.

The interim receiver was appointed by order of Collins J on 28 July 2005. The order provided, in paragraph 26, that the receiver could charge for his/her services. It did not say who would be responsible for their payment. However, the letter to Mr Earp dated 19 July 2005 inviting him to be nominated as interim receiver referred to a Memorandum of Understanding (MOU) which contained terms on the payment of the interim receiver’s fees and expenses by the Assets Recovery Agency. I infer those terms were agreed between the interim receiver and the ARA. Subsequently the functions of the ARA were taken on by SOCA under the provisions of the Serious Crime Act 2007. Therefore, SOCA became contractually obliged to pay the interim receiver’s expenses and remuneration.

The interim receiver engaged in a great deal of work to investigate the activities of Mr and Mrs Gale and then he had to marshal and present the results of the investigation. SOCA has paid the interim receiver for that work in accordance with its agreement. The total cost is over £1 million. SOCA now claims it is entitled to recover that sum as “costs of and incidental to” the civil recovery proceedings, within the terms of section 51(1) of the Senior Courts Act (“SCA”), which Toulson LJ has set out at [101] above. We were told that if SOCA cannot obtain an order against the Gales then the interim receiver’s costs will have to be paid out of public funds.

So the questions that arise are as follows: (i) are the expenses and remuneration of the interim receiver, which have been paid for by SOCA, prima facie “costs of and incidental to the civil recovery proceedings” so that they can be the subject of a costs order in the proceedings? (ii) If so, is there any statutory or rule provision or authority that prevents an order being made that those costs are to be borne by Mr and Mrs Gale against whom SOCA have obtained a recovery order?

Lord Goff of Chieveley pointed out, in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 at 975 that section 51(1) of the SCA is concerned with the jurisdiction of the court to make orders as to costs. He said that the jurisdiction was framed in wide terms. The manner of exercising the jurisdiction as set out in section 51(1) is subject to the rules set out in the CPR and the case law, of course. But if, as a matter of prima facie impression, I ask the question: do the costs paid by SOCA to the interim receiver for his remuneration and expenses in this case come within the words “costs of and incidental to” the civil recovery proceedings, I would have to say “yes, they do”. They are part of the costs that SOCA, the party that applied to the court for the appointment of a receiver, has agreed to pay to the interim receiver for the services that the receiver has done in order to investigate the facts and marshal the materials needed to bring the civil recovery proceedings to a successful conclusion on behalf of the SOCA.

In my view, the provisions of section 280(3) of the 2002 Act do not either expressly or impliedly prevent costs of an interim receiver that have been paid for by the enforcement authority, viz. SOCA, from being “costs of and incidental to” the civil recovery proceedings. Section 280(3) simply grants the enforcement authority 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.

Is this conclusion on the application of section 51(1) of the SCA and section 280(3) of POCA 2002 precluded by rules of court or authority? There is nothing in CPR Pt 44, which deals with costs generally, from reaching this conclusion. CPR Pt 69 deals with the court’s power to appoint a receiver. Toulson LJ has set out CPR Pt 69.7(2) (at [102] above) which stipulates that the court may specify who is to be responsible or paying the receiver appointed by court order and also the fund or property from which the receiver is to recover the remuneration. I agree with Toulson LJ that CPR Pt 69.7(2) does not, by its terms, prevent a court from making an order that a party to civil proceedings must pay, as costs, the expenses and remuneration of a court appointed receiver that have been paid for in the first instance by the other party to those proceedings under an agreement with the receiver. Such a costs order can only be imposed on the footing that the interim receiver’s costs are “costs of and incidental to” the civil recovery proceedings. Therefore, if those costs prima facie are capable of coming within the ambit of the words “costs of and incidental to” the civil recovery proceedings then, as Toulson LJ says, the only basis on which a court is precluded from making such an order must be because this court is bound by authority so to conclude.

The statutory provisions of Part 5 of POCA 2002 and the cases have been considered by both Carnwath and Toulson LJJ. The first group of cases is that in which courts have said that a receiver appointed by the court, either under its own jurisdiction, originally an equitable jurisdiction, or under statute, is entitled to be indemnified for his costs and expenses out of the assets in the hands of the receiver. The basic principles that (a) a receiver is an officer of the court, (b) is not the agent of either party to the proceedings and that (c) a receiver is entitled to be remunerated out of assets in his hands as a receiver, are not in question. But it does not follow, in my view, that these basic principles preclude SOCA from claiming the interim receiver’s expenses and remuneration as costs of and incidental to the proceedings in this case and under the POCA 2002.

Under the provisions of sections 246 and 247 of POCA, an interim receiver is appointed to exercise any of the powers mentioned in Schedule 6 of the Act and to take any other steps the court thinks appropriate for the purpose of securing the detention, custody or preservation of the property to which interim receiving order applies. Under section 266(2) of POCA, if a court makes a recovery order in respect of “recoverable property” then the order must vest the recoverable property in “the trustee for civil recovery”. Although an interim receiver has the power to seize and to manage any property to which an interim receiving order made under section 247 relates, property seized by the interim receiver does not vest in him. On the contrary, once the court has made a recovery order under section 266(2) and “recoverable property” is realised, then that property remains vested in the trustee for civil recovery until disposed of in accordance with section 280(2). Once any orders have been made under that provision, then any sum remaining has to be paid to the “enforcement authority”.

Accordingly, it seems to me that at no stage will the interim receiver who is appointed under sections 246 and 247 be entitled to remunerate himself out of assets in his hands. The wording of section 280(3) of POCA appears to confirm this, because it states that the “enforcement authority” may apply a sum received by it under section 280(2) to make payment of the remuneration and expenses of any interim receiver appointed in the proceedings for the recovery order. That provision would not be necessary if, under the other statutory provisions I have mentioned, the interim receiver is entitled to recover his remuneration and expenses from any property that he seizes or manages in accordance with powers conferred on interim receivers appointed under POCA by Schedule 6 of that Act. Doubtless it was because of the terms of section 280(3) of POCA that there was an express agreement between SOCA and the interim receiver that POCA would be responsible for his expenses and remuneration.

It seems to me, therefore, that the principle established by this first group of cases is not applicable in the present case because the statutory regime is different. In this regard, I agree with the view of Toulson LJ, at [123] above, that the statutory framework of POCA 2002 is also inconsistent with the grant of any lien over property seized or managed by the interim receiver who is appointed by the court under Part 5 of POCA.

The next group of cases concerns the responsibility for the expenses and remuneration of receivers appointed pursuant to powers contained in statutes concerning the recovery of the proceeds of crime. The first is In re Andrews [1999] 1 WLR 1236, which has already been analysed in detail by both Carnwath and Toulson LJJ. Proceedings under Part VI of the Criminal Justice Act 1988 had been brought against the defendant and the court had made a restraint order against his property and appointed a receiver to take possession and manage the defendant’s property. Eventually the defendant was acquitted of criminal charges and the restraint order was discharged. The receiver had taken assets of the defendant to cover his remuneration. The defendant attempted to recover, as costs in restraint proceedings, the sum that the receiver had taken from assets of the defendant which the receiver had managed after his upon appointment by the court.

Both Ward and Aldous LJJ (with whom Hirst LJ agreed) characterised the defendant’s application as an indirect attempt to recover compensation for the receiver taking the defendant’s assets to cover the receiver’s remuneration. It is to be noted that Ward LJ records, at page 1239 of his judgment, that the letter of appointment of the receiver stated that an order of the court would be sought that the receiver’s costs would be costs in the receivership, “…that is to say that your costs shall be paid out of the moneys you bring in during the course of this receivership”. But the court made no such order: see page 1240C.

Ward LJ concluded (at page 1246H) that the expenses of a receiver who was appointed pursuant to Part VI of the Criminal Justice Act 1988 did not constitute costs of and incidental to proceedings taken under Part VI of that Act, although he did accept that the expenses of the receivership were “within the definition of costs”. He did not expand on his reasoning for this conclusion. Aldous LJ said, at page 1248, that the receiver’s charges could not be costs incidental to the proceedings because “…those charges are expenses in the receivership and are therefore not recoverable by a successful party in proceedings in which a receiver had been appointed”. I read that statement as one that applied to the facts and statutory provisions applicable in that case.

I agree with Toulson LJ’s remarks, at [113] above, that the situation in the present case is different. The investigation of the interim receiver was an integral part of SOCA’s preparation and presentation of its civil claim against the Gales. In my view the decision of this court in Re Andrews does not bind this court to reach the conclusion that the interim receiver’s remuneration and expenses in this case cannot be recovered by SOCA as costs of and incidental to the proceedings.

I agree with Toulson LJ’s analysis of Hughes v Customs and Excise Commissioners [2003] 1 WLR 177, [2003] EWCA Civ 734 and Capewell v Revenue and Customs Commissioners [2007] 1 WLR 386, [2007] UKHL 2. I agree also with his conclusion that neither case precludes this court from holding that SOCA can recover the interim receiver’s remuneration and expenses as costs of and incidental to the proceedings in the present case. I should add that, in my view, the remarks of Longmore LJ in [1] of his judgment in Sinclair v Glatt and others [2009] 1 WLR 1845, [2009] EWCA Civ 176 do not add anything to the present debate.

Lastly and most importantly, there is the decision of the Court of Appeal of Northern Ireland in SOCA v Wilson [2009] NICA 20. This case concerns the same statute. SOCA sought also to recover, as litigation costs, the expenses and remuneration of an interim receiver appointed under Part 5 of the 2002 Act in civil recovery proceedings against Mr Wilson. The Northern Ireland Court of Appeal upheld the decision of Higgins J that such expenses and remuneration could not, in principle, be regarded as litigation costs.

Toulson LJ has referred to or set out the relevant parts of the judgment of the court, given by Girvan LJ. I wish to comment on two further matters of importance that are dealt with by Girvan LJ. First, Girvan LJ points out that section 284(1) of POCA 2002 specifically provides that Scottish Ministers are to reimburse any fees or expenses incurred by an interim administrator or trustee for civil recovery appointed by the Court of Session under Part 5 of POCA 2002. He states, at [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”. I do not make the same inference. Section 284(1) places the obligation to pay fees or expenses of an interim administrator appointed by the Court of Session on Scottish Ministers. By contrast, section 280(3) gives the “enforcement authority” in England and Wales, ie. SOCA, the power to apply any sum received by it from the trustee for civil recovery, to make payments of the remuneration and expenses of any interim receiver appointed by the High Court in (or in anticipation of) the proceedings for the recovery order. Section 280(3) says nothing about what the “enforcement authority” may or may not do thereafter to recover sums paid to an interim receiver for his remuneration and expenses. I also note that section 280 does not deal with the case where an interim receiver is appointed by the High Court, incurs expense and a recovery order is obtained but no assets are vested in the trustee for civil recovery or paid to the enforcement authority. Who is then to pay for the interim receiver’s costs and expenses?

Secondly, Girvan LJ states, at [18], that the policy of civil recovery proceedings under Part 5 of the 2002 Act is to strip a defendant of criminal assets; but the policy is not necessarily also to strip the defendant of further assets in order to pay, as costs in the proceedings, the remuneration and expenses of an interim receiver’s investigation in the civil proceedings where SOCA has paid those costs to the interim receiver. Girvan LJ says, in the same paragraph, that the interim receiver’s costs “…cannot sensibly be considered as costs of the Agency since the interim receiver is independent and separate from the Agency…”, because they are the expenses “…incurred by a third party in furtherance of carrying out a statutory function…as an independent person appointed by and answerable to the court”. Therefore, Girvan LJ concludes, the interim receiver’s costs “…cannot be considered as costs incurred by the Agency as part of its costs of and incidental to the proceedings”.

In my view, Part 5 of POCA 2002 says nothing either way on whether an unsuccessful defendant should have to pay for the costs incurred by an interim receiver to investigate the question of whether the enforcement agency can recover property obtained by unlawful conduct. The broad effect of Part 5 is to create a statutory right of action in civil proceedings against a person who has obtained property by unlawful conduct. Normally, in England and Wales, if a claimant has incurred costs in pursuing a civil claim against a defendant, the claimant is entitled to recover costs of and incidental to the proceedings to enforce that claim. If, as part of the process of determining whether or not the enforcement agency has a civil claim to recover property obtained by unlawful conduct by a defendant, the court has the power to appoint an interim receiver to investigate the position and the enforcement agency incurs costs in relation to the interim receiver’s work, I would regard it as consistent with the general policy of Part 5 of the 2002 Act to give the court jurisdiction to make an order that the enforcement agency may recover such costs from the defendant. Whether it is fair and just to exercise that jurisdiction in any particular case is a matter of the discretion of the court, not an issue of jurisdiction.

For similar reasons I cannot, with respect, agree with Girvan LJ’s conclusion that because the interim receiver is appointed by the court and is answerable to it, therefore any remuneration and expenses of the interim receiver that have been paid by the enforcement agency, SOCA, pursuant to an agreement to do so, cannot be costs of and incidental to the proceedings. I accept the position may be different where there is no such agreement; I do not need to decide that point. Where, as here, there is such an agreement, then I have concluded that there is nothing in either Part 5 of POCA 2002 or the authorities to prevent the court from having jurisdiction to make an order that an unsuccessful defendant to civil recovery proceedings must pay, as costs, sums paid out by SOCA to an interim receiver for his remuneration and expenses incurred in work done pursuant to an order of the court in the proceedings.

Accordingly, with all respect to the conclusion expressed by Girvan LJ in SOCA v Wilson, I find that I am unable to agree with it.

For these reasons, as well as those advanced by Toulson LJ, I would allow the cross-appeal. Any costs order made against Mr Gale will, of course, have to contain a term that costs must be assessed if not agreed.