Perry & Ors v Serious Organised Crime Agency (Rev 1)

This appeal against the decision of Mitting J [2010] EWHC 1711 (Admin) [2010] 1 WLR 2761 raises the following issue:

Unusually I propose to give my answer to the question at this stage. I do so in order that the reader of this judgment can have in mind my answer when considering the various complex provisions which I shall be examining.

In my view, the court does have power to make such an order but in the case of property outside the jurisdiction, a civil recovery order gives the trustee for civil recovery a personal right against the person who is the subject of the civil recovery order to enforce the order and such other right, if any, to which the trustee is or becomes entitled under the law of the place where the property is situated. The effect of an order vesting property in the trustee is the same whether the property is here or abroad. If the property is situated here, the trustee has a personal right against the person who is the subject of the civil recovery order and such other conditional or unconditional rights to the property as English law (including POCA) provides. If the property is abroad, the trustee has a personal right against the person who is the subject of the civil recovery order and such other conditional or unconditional right to the property as the law of the place where the property is situated provides. The difference is that, in the latter case, it is unlikely that the law of the place where the property is situated will give the trustee the very full rights given to him by English law.

Part 5 of POCA grants the power to courts in the three jurisdictions of England and Wales, Scotland and Northern Ireland to make orders enabling the relevant enforcement authority (Footnote: ¹) to recover in civil proceedings property which is, or represents, property obtained through unlawful conduct (see section 240). Part 5 also includes provisions for making various interim orders preventing the disposal of such property. (Footnote: ²) Part 5 also contains provisions for the forfeiture by a magistrates’ court of cash found here, but these provisions are not relevant to the disposal of this appeal.

Part 5 as drafted and as subsequently amended is complex and contains some 100 sections, most of which (either wholly or partially) apply in all three of the jurisdictions. In so far as a particular provision applies in Northern Ireland and/or Scotland, then the interpretation given to the provision by a court in England and Wales should be the same as the interpretation which would be given to it in one or both of the other jurisdictions. In the instant appeal we have had to examine one particular section (section 286) which defines the scope of the powers of the Court of Session and which, so it is submitted by the appellants, is important when construing other sections. We have been provided with contradictory expert evidence about section 286.

Part 11 of POCA gives Her Majesty in Council power to make orders enabling the courts in the three jurisdictions to enforce overseas external requests. Although Her Majesty in Council is empowered to make provision for enforcing various POCA orders made in one of the three jurisdictions in the other two jurisdictions, that power does not include a power to make such provisions in respect of Part 5 orders.

We were not taken in oral argument to section 18 of the Civil Jurisdiction and Judgments Act 1982, which makes provision for the enforcement of United Kingdom judgments in other parts of the UK. I shall come back to that section later.

I have stated the issue in the way that I have (paragraph 1 above) because no part of the property with which this appeal is concerned is situated in Northern Ireland and Scotland. We therefore do not have to decide whether a court in England and Wales has the power under Part 5 of POCA to make a recovery order in respect of recoverable property in Scotland and Northern Ireland (or vice versa).

Recoverable property is defined as: “Property obtained through unlawful conduct” (section 304). By virtue of section 266 (1) if a court is satisfied that any property is recoverable, the court (subject to some exceptions not relevant to this appeal) must make a recovery order. By virtue of subsection (2), a recovery order “must vest the recoverable property in the trustee for civil recovery.” Thus if the answer to the question in paragraph 1 is in the affirmative (as the respondent submits), the court must vest the property in the trustee for civil recovery (whatever that may mean). Until that moment the property is not vested in the trustee even though there may be a freezing order in place, see Director of the Assets Recovery Agency v Creaven and others [2005] EWHC 2726 (Admin); [2006] 1 W.L.R. 622.

At least some of the difficulties associated with the respondent’s case might disappear if the court had been given the discretion to make a recovery order in relation to recoverable property situated outside this jurisdiction, as it has been given in relation to “associated property”. A court making a recovery order may also make an order vesting in the trustee for civil recovery “associated property” (and, other than in Scotland, “joint property”). In simple terms if a person holds a property interest in the recoverable property and that property interest is itself not recoverable property, then that property interest constitutes “associated property” (see further section 245). It follows that if the answer to the question in paragraph 1 is “Yes”, then the court may also vest in the trustee for civil recovery any associated property.

If property (recoverable or associated) is vested in the trustee for civil recovery by a court in this jurisdiction, the trustee will then dispose of the property (if able to do so) and account to the Serious Organised Crime Agency (“SOCA”) for the proceeds. I shall look later in more detail at the position of the trustee in relation to property in England and Wales which has been vested in him. In simple terms the trustee in English law (including POCA) automatically becomes the legal and equitable owner of that property. If to complete his title, the trustee needs the person holding the recoverable or associated property to execute a document, such as a conveyance or contract, and that person refuses to do so after being ordered by the High Court so to do (or cannot after reasonable enquiry be found), then the Court may nominate a person to execute the document and the document executed by that person shall operate as if it had been executed by the person originally directed to execute it. See section 39 of the Senior Courts Act 1981.

The respondent accepts that in the case of property outside England and Wales, whether moveable or immoveable, the vesting of that property in the trustee gives the trustee a personal right against the person who is the subject of the civil recovery order. To enforce that personal right, so it is submitted by the respondent, the trustee may obtain a court order here against the person who holds the property requiring that person to take steps to assist the trustee to dispose of the property, orders for the breach of which that person may be punished for contempt and/or by sequestration of that person’s property here. Counsel for the respondent appeared to accept in argument that section 39 of the Senior Courts Act could not be used in relation to property not within this jurisdiction.

If the answer to the question in paragraph 1 is in the positive, then, in addition to a personal right against the person who is the subject of the civil recovery order, it seems to me that the trustee for civil recovery will have such further rights to the property, if any, to which the trustee is or becomes entitled under the law of the place where the property is situated.

If the answer to the question posed in paragraph 1 is in the affirmative, then a court in this jurisdiction must on the application of an enforcement authority make a civil recovery order even though the unlawful conduct occurred outside the jurisdiction, the person responsible for that unlawful conduct has and has had no connection with this jurisdiction and all the recoverable property is situated abroad. This is, of course, an extreme example but it demonstrates the consequences of the respondent’s arguments. In the words of the appellants, it would be startling if:

On the other hand if the answer to the question is in the negative, as the appellants submit, a court in this jurisdiction would be unable to make a civil recovery order in respect of land or other property in Spain bought with the proceeds of crimes committed here by a person resident here. Unable to obtain a civil recovery order, the enforcement authority could not take any steps here to require the person to hand over the property in Spain. Nor (so it appears) could the UK take enforcement action in Spain pursuant to the Strasbourg Convention (to which I return below) because there would be no order of the court to enforce. See paragraph 81 below.

The facts of this case may be taken shortly. In October 2007 Mr Israel Perry, a lawyer, was convicted by the Tel Aviv-Jaffa District Court of a number of offences arising out of a pension scheme which he set up in Israel in 1983. Mr Perry profited from his fraudulent activities in the amount, so it is said, of some £110 million. In February 2008 he was sentenced to a 12 year jail term (later reduced to 10 years on appeal) and a fine of 21,750,000 New Israel Shekels (approximately £3,184,200). The fine was paid on 17 April 2008. As at the time of the hearing of this appeal, there has not been a successful appeal against conviction.

The Israeli authorities have taken no steps to freeze any assets or to bring the Israeli equivalent of recovery proceedings against any assets belonging to any of the appellants either in or outside Israel.

SOCA became aware of funds totalling approximately £14 million in two bank accounts in London in the name of the first respondent or members of his family (see SOCA v Perry and others [2010] EWCA Civ 907 [2011] 1 WLR 542, in which the Supreme Court has given permission to appeal).

SOCA was ultimately granted by the Administrative Court (Footnote: ³) a worldwide property freezing order pursuant to the provisions of section 245A in Part 5 of the POCA. By virtue of that section a property freezing order may be made before the start of proceedings for a civil recovery order, as in this case, or afterwards. Listed within the order were properties in London, Tel Aviv, Jerusalem, New York and Villefranche-sur-Mer, bank accounts here, antiques and works of art by, amongst others, Chagall, Caro and Leger. There is no dispute that, in so far as there is property in England or Wales, there can be no challenge to the order freezing that property.

It is common ground that a freezing order may not be made by a court in respect of property situated outside the jurisdiction of England and Wales unless a civil recovery order could be made in respect of it under Part 5.

Before Mitting J the appellants unsuccessfully argued that a civil recovery order could not be made by a court in England and Wales in respect of property situated outside England and Wales. Mitting J, having rejected the argument in a careful judgment, declined to vary the freezing order by removing from its ambit property situated outside England and Wales.

In R v May (Raymond George) [2008] UKHL 28; [2008] 1 AC 1028 Lord Bingham summarised the history of confiscation orders following a criminal conviction:

In Cuthbertson, cited by Lord Bingham, the criminal trial judge had made orders forfeiting, amongst other things, the contents of safe deposit boxes abroad and moneys in foreign bank accounts. Lord Diplock said (at page 486):

Section 240 (a) provides that Part 5 has effect for the purposes of—

It is not necessary for any criminal proceedings to have been brought for an offence in connection with the property (section 240(2)).

Section 241, which is headed “Unlawful conduct” provides in subsection (1) that:

Section 241(2) deals with unlawful conduct outside the United Kingdom. It provides:

Section 242(1) provides that 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.”

Section 243 provides that in relation to proceedings for recovery orders in England and Wales and Northern Ireland:

There is no dispute that the words “wherever domiciled, resident or present” apply to both (a) and (b). Proceedings for a recovery order may be taken against any person who the authority thinks holds recoverable property and the claim form must be served on the respondent and any other person who the authority thinks holds any associated property, whether or not the respondent and such other person is domiciled, resident or present in this jurisdiction.

We are not concerned in this case with whether the claim form must be served on the respondent personally. I note that Part 5 does not, as I understand it, provide for the application of the Civil Procedure Rules to the method of service of the claim form. Reference was also made during the course of argument to SOCA v Perry and others (see above paragraph 18), which concerned the issue of the giving of information notices under a disclosure order under Part 8 of POCA on a person outside the jurisdiction.

Section 244 is in almost identical terms to section 243 but applies to Scotland.

Section 266(1) provides that “if the court is satisfied that any property is recoverable, the court must make a recovery order”. Given that the proceedings have been taken against a person who the authority thinks holds recoverable property, then the court must be satisfied that the person against whom the proceedings have been taken holds the recoverable property.

Section 316(5) – (7) provides that:

It is to be noted that there is no definition of interest in relation to land situate outside the three domestic jurisdictions.

Section 316(3) provides:

Section 266(2) provides that the “recovery order must vest the recoverable property in the trustee for civil recovery.” Subsections (3) – (6) set out an exception to the requirement that the court must make a recovery order. In summary the court must not make an order in respect of property obtained by the respondent in good faith provided that other conditions are satisfied and provided that it would not be just and equitable to make an order.

Sections 304 to 310 define “recoverable property”. Property obtained through unlawful conduct is recoverable property, but (in simple terms) if that property has been disposed of, then it is only recoverable property if held by a person into whose hands it may be traced. Section 308 provides:

Section 308 (2) provides that property ceases to be recoverable property if “vested, forfeited or otherwise disposed of in pursuance of powers conferred by virtue of this Part”. Thus, for example, if a court makes a civil recovery order vesting certain property in the trustee for civil recovery, it ceases to be recoverable property. Section 309 provides that by order the Secretary of State may provide that specified property is not recoverable (see POCA 2002 (Exemptions from Civil Recovery) Order 2003 SI/2003/336, which, amongst other things, exempts property which has been forfeited, e.g. drugs and firearms).

By virtue of sections 270-272, the court may, amongst other things, vest associated property in the trustee for civil recovery, subject to respecting the rights of any person holding that property. Section 245 defines “associated property”.

Section 281 provides a safeguard for victims of unlawful conduct. I have included a reference to these provisions to show one of the consequences of vesting in the trustee property situated abroad in circumstances where the unlawful conduct occurred abroad. Section 281 provides:

Section 281 may be of only limited assistance to the Israeli victims of the first respondent’s fraud, even if they know about section 281, which may be unlikely. It is difficult to imagine that they could successfully trace the money which they lost to Mr Perry into the property for which SOCA will be seeking a civil recovery order. Furthermore they cannot themselves seek a civil recovery order.

Section 308(3) provides further protection for victims:

To avail themselves of this provision, the Israeli victims would have to sue the first respondent in this country (provided that a court here gave them permission to serve outside the jurisdiction under CPR Rule 6 and the accompanying Practice Direction) or in Israel or, so it seems, elsewhere.

If the victims succeeded before the making of a civil recovery order then, so it appears, there would have to be a variation of the freezing order in order to permit the first respondent to pay a sum of money or some property to the victims.

If they succeeded only after the making of a civil recovery order then, as I understand the statutory provisions, Part 5 gives the victims no remedy. See further section 267(5), paragraph 54 below.

A recovery order vests the identified recoverable property and any identified associated property in the trustee for civil recovery (section 266(2) set out in paragraph 37 and sections 270-272 set out in paragraph 40 above).

The trustee for civil recovery is a person appointed by the court and nominated by the enforcement authority to give effect to a recovery order (section 267(1) and (2)).

Section 266(7) provides that a “recovery order may sever any property”.

Section 266(8) provides:

Subject to that, section 267 (4) provides:

Section 280 provides that the realised proceeds of a civil recovery order (after deduction of various expenses) are to be paid to the enforcement authority.

Mr Jones QC points out that, subject to section 266(8), the trustee must comply with the directions of the enforcement authority and not the court.

Section 267 makes further provision for the functions of a trustee for civil recovery:

Schedule 7 lists the detailed powers of a trustee for civil recovery, which include the power to sell and manage the property vested in the trustee.

Section 269(1) sets out the effect of a recovery order. It provides:

In Olden v SOCA [2010] EWCA Civ 143, [2010] Lloyd’s Rep. F.C. 432, it was held that a vesting order in respect of leasehold property vests both the legal and beneficial interest in the trustee for civil recovery who (on the facts of that case) was entitled to make an immediate application for possession. During the course of argument we looked at the effect of a vesting order on registered land. A civil recovery order made in respect of registered property in this jurisdiction has the effect (so it appears) of vesting the property in the trustee for civil recovery and disapplying section 27 of the Land Registration Act 2002 (to which we were taken in argument), even though the relevant registration requirements have not been complied with. Section 27(1) provides:

The effect of section 269(2) and (3) is to ensure that the trustee’s rights to the property vested in him are not affected by the fact that another person has a right to the return of the property in the event of some specified event. An example would be a term of a lease which brought the lease to an end if the tenant was in breach of his obligations under the lease. The two subsections provide:

Section 273 – 277 makes provison for the situation which arises if recoverable property includes a right under a pension scheme. Mr Peto does not dispute that these provisions do not apply to a pension scheme administered outside the three domestic jurisdictions.

Section 282 lists certain persons and types of property in respect of which a civil recovery order cannot be made. For example a civil recovery order may not be made against the Financial Services Authority. Nor may such an order be made against a person in respect of recoverable property by reason of his acting or having acted as an insolvency practitioner, defined as meaning an insolvency practitioner under domestic legislation. Mr Peto accepts that section 282 would not exclude the making of an order against a person who under the domestic legislation of a country outside the United Kingdom was in an analogous position to a person falling within section 282 or in respect of property which, under the domestic legislation of a country outside the United Kingdom, was in an analogous position to the types of property falling within section 282. Although Mr Peto did not take us to section 282(1), it should be noted that the subsection gives the Secretary of State power to prescribe by order persons against whom civil recovery proceedings cannot be taken.

Section 316(2) provides that the provisions thereafter set out apply for the purposes of this Part. Section 316(4) provides:

Thus, so Mr Peto submits, when section 266(2) provides that the “recovery order must vest the recoverable property in the trustee for civil recovery” that includes property wherever situated in the world.

I return later to the arguments submitted by Mr Jones. Suffice it to say at this stage that Mr Jones accepts that the inclusion of the words “wherever situated”, if looked at in isolation, supports the respondent’s argument that a civil recovery order can be made in respect of property situate outside England and Wales. Mr Jones also submits that the words “wherever situated” would have had to be included in any event to allow for the situation where a person obtains through unlawful conduct personal property situated abroad and later brings it into this country. Once here, so Mr Jones submits, a civil recovery order could be made in respect of it (but not whilst it remains abroad).

Sections 245A-G (added by the Serious Organised Crime and Police Act 2005) make provision in England and Wales and Northern Ireland for property freezing orders and orders for the appointment of a receiver. Such orders may be made before or after the start of the proceedings for a civil recovery order. The court has a discretion whether to make such orders. Such orders may be made in relation to both recoverable property and associated property (see section 245A(4) - (6) and section 245E(2)).

Section 245F(3)(a) provides that the court may order any person in respect of whose property the receiver is appointed:

Section 245F(4) gives the court the power to require any person in respect of whose property the receiver is appointed to bring any documents relating to the property which are in his possession or control to a place (in England and Wales or, as the case may be, Northern Ireland) specified by the receiver or to place them in the custody of the receiver.

Provisions similar to sections 245A-E give the Court of Session the power to make “prohibitory property orders”, see sections 255A-F.

Sections 246 and following provide for the making of an interim receiving order in England and Wales and Northern Ireland. Section 250 is in similar terms to section 245F(3)(a) and (4) (see above paragraphs 65 and 66). Sections 256 – 265 make provision for similar orders in Scotland.

Under the auspices of the Council of Europe the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime was agreed in Strasbourg on 8 November 1990. The Convention entered into force in 1993. It was ratified by the United Kingdom in 1992, has been extended to include the Isle of Man and Guernsey and has been ratified by 47 members of the Council of Europe and one non-member, Australia.

The Preamble refers to the need to establish a well functioning system of international cooperation to deprive criminals of the proceeds of crime.

Article 1 (d) defines the term “confiscation” as meaning:

Mr Peto submitted that the Strasbourg Convention did not apply to civil proceedings resulting in a confiscation order. He submitted that the Convention did not apply to civil confiscation proceedings, because such proceedings were not available in 1990. Mr Jones submits that the Convention does apply to civil proceedings of the kind in Part 5. In my view Mr Jones is right. Paragraph 15 of the Explanatory Report (not referred to in the course of argument) and the note therein relating to the definition of “confiscation” makes it clear that the Convention applies to civil confiscation proceedings and to confiscation orders made by a judge, whether a criminal judge or not. Paragraph 15 states in part:

In Article 11, as I shall show below, the expression “proceedings for the purpose of confiscation” is used in a way to make it clear that such proceedings are not the same as “criminal proceedings”.

Furthermore Mr Peto’s submission is, in my view, inconsistent with the provisions of Part 11 of POCA for the enforcement of foreign requests and inconsistent with the position taken by SOCA in a letter to the appellants’ solicitors dated 12 November 2010 (SOCA Bundle 2, page 15) and in an application notice dated 1 December 2010 to rely on further evidence.

Article 2(1) provides:

The word “instrumentalities” is defined in Article 1(c) to mean “any property used or intended to be used, in any manner, wholly or in part, to commit a criminal offence or criminal offences”.

Article 5 provides:

Article 6 requires the parties to the Convention to adopt measures to create laundering offences.

Article 7 provides:

Article 8(1) provides:

Article 11 provides, under the heading “Obligation to take provisional measures”:

Article 13(1) is headed “Obligation to confiscate”. It provides:

This, other Articles discussed below and the Explanatory Note make it clear that the Convention only requires the requested party to enforce a confiscation order made by a judge in a court in the requesting party.

Article 13 is subject to, amongst other things, Article 18 which sets out circumstances entitling the requested party not to enforce an order.

Article 13(3) and (4) provide:

Article 14 provides:

Article 14 also provides:

Article 15 makes provision for the disposal of the confiscated property:

Article 16(1) provides:

The Explanatory Report (not referred to in argument) states:

Article 11 of the Validity Convention (European Convention on the International Validity of Criminal Judgments, The Hague 1970) provides :

Article 16(2), to which paragraph 56 of the Explanatory Note refers, provides:

Mr Peto submits that the effect of Article 16(1) is that a state which has made a request to another state to enforce a confiscation order may still enforce the order not only in the jurisdiction of the requested state but also within its own jurisdiction. Thus, he submits, state A may itself enforce a confiscation order in state B even though it has requested state B to enforce the order. Mr Jones disputes this interpretation and argues that all that Article 16(1) does is (sensibly) allow state A to continue to enforce the order in so far as property within state A is concerned. It seems to me that Mr Jones is right. It would be surprising if Article 16(1) had the effect for which Mr Peto contends.

Section 444 makes provision for external requests emanating from outside the United Kingdom. It provides, in part:

The Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 SI/2005/3181 is a substantial document consisting of 213 articles with Schedules. It has been amended by the Proceeds of Crime Act 2002 (External Requests and Orders) (Amendment) Order 2008.

Part V is headed: “Giving Effect in the United Kingdom to External Orders by Means of Civil Recovery”.

The Secretary of State is given the power to forward an external request to the enforcement authority (Article 142(1)). Section 447(4) of POCA defines an external order as an order which:

By virtue of Article 213(4) “property” is defined as “property wherever situated”.

It must, in my view, follow that the scheme of POCA and this Order envisages that an overseas court (defined in section 447(10) as “a court of a country or territory outside the United Kingdom”) may make an order for the recovery of specified property in the United Kingdom which will be recognised and enforced here. I reach that conclusion notwithstanding the use of the word “where” in section 447(2), which defines an external order as an order “made by an overseas court where property is found ... to have been obtained as a result of ... criminal conduct”.

Article 142(2) provides:

Articles 143(1) and (2) (which mirror section 243 of POCA, see above paragraph 29) provide:

Article 144 is in very similar terms and applies to proceedings in Scotland for recovery orders pursuant to the registration of an external order.

Article 146 makes provision for “associated property”.

Articles 147-176 make provision for freezing orders etc.

Article 177(1) – (3) provides:

Article 202 defines recoverable property as property or money “specified in an external order” but together with other Articles includes limited provision for tracing. There are many Articles in this Part of the Order which are similar to sections in POCA. Articles 184 and 186, for example, make provision for the situation where the recoverable property consists of rights under a pension scheme and Article 192 makes provision for the victims of the criminal conduct.

Article 191 provides that the realised proceeds of property vested in the trustee for civil recovery by a recovery order, after expenses etc, are to be paid to the enforcement authority. This accords with Article 15 of the Strasbourg Convention (see above paragraph 88) which provides that: “Any property confiscated by the requested Party shall be disposed of by that Party in accordance with its domestic law.”

SOCA produced evidence of the recognition by a Luxembourg court of an unrelated property freezing order made by the High Court here in respect of a bank account in Luxembourg. The Luxembourg court referred specifically to the Strasbourg Convention as justification for the recognition.

We were also taken to the Isle of Man’s Proceeds of Crime (External Requests and Orders) Order 2009 which is in very similar terms to the 2005 Order and which is made pursuant to the Island’s Proceeds of Crime Act 2008. Section 218 of the Act defines an overseas court as a court of a country or territory outside the Island. What I said in paragraph 99 above about the UK scheme envisaging the recognition and enforcement in the United Kingdom of an order for the recovery of specified property in the UK made by a court outside the UK applies equally to the Isle of Man.

Section 74 to be found in Part 2 of POCA dealing with confiscation orders made by criminal courts following conviction, makes special provision for the enforcement abroad of confiscation orders made in England and Wales. Similar provision is to be found in Parts 3 and 4 which deal with confiscation orders made by criminal courts following conviction respectively in Scotland and Northern Ireland (see sections 141 and 222).

Section 74 provides:

Mr Jones submits that the absence of a provision in Part 5 like section 74 shows that Parliament did not intend that civil recovery orders could be made in respect of property situated abroad. If it had so intended then Part 5 would have included a provision similar to section 74.

I do not agree. Having taken the view (contrary to the submissions of Mr Peto) that the Strasbourg Convention applies to the enforcement of orders made in civil proceedings (paragraph 72 above), SOCA may seek to enforce both interim and final Part 5 orders abroad in those countries in which the Convention is in force (or in which provisions similar to the Strasbourg Convention have been implemented). The case referred to in paragraph 108 is an example of this occurring.

I express no view as to whether section 74 was necessary in the light of the Strasbourg Convention.

Mr Jones points to the fact that section 443 makes provision for the function of a receiver appointed under Parts 2-4 to be exercised in other parts of the United Kingdom and that there is no such power for the functions granted to persons under Part V to be similarly exercised.

He submits that the absence of such a provision supports his argument that Part V was not intended even to apply to property in Scotland and Northern Ireland.

We did not focus in the course of argument on the enforcement in the courts of Scotland and Northern Ireland of a civil recovery order made by a court here on property situate in Scotland and Northern Ireland and vice versa.

Although we were not referred to this in argument, my rudimentary researches show that Part VII of Chapter 62 of the Rules of the Court of Session makes provision for reciprocal enforcement of orders in relation to confiscation of proceeds of crime and to forfeiture of property used in crime including orders made in other parts of the United Kingdom.

Are civil recovery orders made by a court in Scotland and Northern Ireland vesting in a trustee for civil recovery property in this jurisdiction enforceable here by virtue of section 18 of the Civil Jurisdiction and Judgments Act 1982? Section 18 includes within the list of enforceable judgments orders made under Part 8 of POCA. Part 8 makes provision for civil recovery investigations.

Sub-section 3 of section 18 provides that:

Parts 2, 3 and 4 make provision for orders made by criminal courts in the three domestic jurisdictions. It seems likely that section 18 does apply to civil recovery orders made by the courts of Scotland and Northern Ireland. However, I stress that we did not hear any detailed argument about this.

If section 18 does apply to make enforceable here civil recovery orders made by the courts of Scotland and Northern Ireland, that could explain why there is no provision for the function of a receiver appointed under Part 5 to be exercised in other parts of the United Kingdom.

Section 286 provides as follows:

It is to be noted that the section applies to all orders which may be made under Part V, the majority of which are not orders which the court must make. That could explain the use of the word “may” in all three subsections.

We have been provided with conflicting and detailed opinions on this section from Mr David Johnston QC, relied upon by the appellant, and Lord Davidson QC, relied upon by the respondent, both of the Scottish bar.

As I understand it, it is agreed by both of them that section 286 limits the power of the Court of Session to make an order in respect of moveable property outside Scotland of a person who is not domiciled, resident or present in Scotland unless the unlawful conduct took place in Scotland. It is also agreed that nothing in POCA alters the law of Scotland in so far as the law of Scotland already prevents any order being made in respect of immoveable property outside Scotland. Lord Davidson wrote in his first statement:

The explanatory note to the section reads:

Like Mr Johnston I do not understand the reference in this note to the definition section 316 which applies to all three jurisdictions.

The note proceeds on the assumption that there is a difference in the jurisdiction of the civil courts in Scotland and of the civil courts in the other jurisdictions.

Lord Davidson wrote in his second witness statement “in my view section 244 [in almost identical terms to section 243] does not appear to be seeking to establish jurisdiction for Scotland by means of service.” He states in his first opinion his view that “section 286 is a stand alone provision that enables the Court of Session to do what Scottish common law does not permit but only to the extent of moveables in the specific conditions provided for.”

Mr Johnston argues that the presence of section 286 shows that section 266 (see above paragraph 33) does not without more give a court the power to make a civil recovery order in respect of property situated abroad.

Not without some reluctance, I will venture an opinion on this issue starting with moveable property abroad.

By English common law (and by that I mean in this context the law of England and Wales and Northern Ireland) a court here has jurisdiction to make orders relating to moveable property abroad provided that the defendant has been properly served. Section 243 (2) (see above paragraph 29) makes provision for service of a claim form seeking a recovery order on the respondent wherever domiciled, resident or present.

The common law of Scotland (as I understand the opinions) is more restrictive notwithstanding section 244. To alleviate the restrictions to be found in the law of Scotland, section 286 permits the Scottish court to make a civil recovery order vesting moveable property outside Scotland in the hands of the trustee for civil recovery but only in the limited circumstances there set out.

It must follow from the presence of section 286, so Mr Jones and Mr Johnston argue, that section 266 (vesting recoverable property in the trustee for civil recovery) does not itself give a court in any of the three jurisdictions the power to make an order vesting property situated abroad in the trustee. If it did so then section 286 would make no sense. That power must be found elsewhere. In the case of Scotland it is to be found in section 286 (coupled with section 244) in so far as moveables only are concerned in the limited circumstances there set out. I agree with Mr Jones and Mr Johnston on this point.

I turn to immoveable property abroad.

In so far as immoveable property outside Scotland is concerned then (so it appears), the power of a Scottish court to vest immoveable property situated outside Scotland in the trustee is limited given, in the already quoted words of Lord Davidson, the “absence of any common law power whatsoever for the Scottish court to interfere with the ownership of heritage held overseas by a person not susceptible to the jurisdiction of the Scottish courts”.

Although a court here has no jurisdiction in relation to the title to foreign land (see Dicey, Morris and Collins, The Conflict of Laws, 14^th Edition, page 1142), there is not, as I understand it, any restriction at common law on making orders which relate to immoveable property abroad provided the court has jurisdiction over the defendant. Jurisdiction will be established if service is effected on the respondent “wherever domiciled, resident or present”.

The bankruptcy cases, to which I turn now, as well as cases dealing with world wide freezing orders, demonstrate the absence of any restriction at common law on making orders which relate to immoveable property abroad provided the court has jurisdiction over the defendant.

Section 283 of the Insolvency Act 1986 provides that the bankrupt’s estate for the purposes of the Act is defined as including all property belonging to or vested in the bankrupt at the commencement of the bankruptcy. Section 306(1) provides that the bankrupt’s estate shall vest in the trustee immediately upon his appointment taking effect. Section 306(2) provides that where property so vests it shall so vest without any conveyance, assignment or transfer. Property is defined in section 436(1) as every description of property “wherever situated”. As Sir Richard Scott V-C stated in Singh v Official Receiver [1997] BPIR 530, at 531:

Mr Jones writes:

Mr Jones continues:

Mr Jones points out that there are important limitations in relation to bankruptcy which are not present in Part 5. S.265(1) of the Insolvency Act provides as follows:

He points out that the court has a discretion whether to make a bankruptcy order, unlike a court making a Part 5 civil recovery order in respect of recoverable property.

He continues:

Mr Jones submitted that in Ashurst v Pollard Jacob J (at first instance) [2000] 2 All ER 772 and the Court of Appeal [2001] Ch 595 were wrong to hold that the effect of an order vesting land in Portugal in the trustee in bankruptcy was to create an English law trust of the husband’s interest for the benefit of the trustee in bankruptcy. Mr Jones submits on the basis of Trustee of the Property of FC Jones & Sons (A Firm) v Jones [1997] Ch 159 that the whole title to the husband’s interest in land in Portugal vested in his trustee in bankruptcy, albeit the husband remained in de facto possession and control of that interest. I do not agree. An English court has no power to vest the title to the land in Portugal in the trustee in bankruptcy, as the Court of Appeal in Ashhurst v Pollard makes clear. The Jones case concerned money in an account in this country.

Mr Jones’ arguments on the appeal were in large measure based on the proposition that a civil recovery order in respect of property abroad, like an order vesting property abroad in the trustee in bankruptcy, would vest the title to the property in the trustee. He submits that this would be the effect of an order in respect of property here. I disagree. As I said in paragraph 3 above,

I now turn to my conclusions.

Mr Jones points to a number of lacunae in the legislative scheme in so far as property abroad is concerned. Mr Jones submits that the lacunae are deliberate and show that it was never intended that recovery orders could be made in respect of property situated abroad. He writes in his skeleton argument:

Mr Jones refers to many other provisions which show, so he submits, that it was not intended that recovery orders could be made in respect of property abroad. He points to words like “severance”.

Mr Jones gives examples to show that Part 5 was not intended that recovery orders could be made in respect of property situated abroad. He gives an example of a recovery order made here in respect of a painting say in France held to be the recoverable property of the defendant. If that vests the title to the painting in the trustee and if the defendant sells the painting to a bona fide purchaser for value after the order is made and the purchaser brings the painting to this country, the trustee would be able to seize it.

There is in my view a fundamental fallacy in these arguments put forward by Mr Jones. To take the painting example, an order vesting the painting in the trustee would give the trustee a personal right against the defendant to enforce the order and such other right, if any, to which the trustee is entitled under French law whilst the painting is in France. It seems unlikely that French law would give the trustee any right to the painting at least in the absence of an order by a French court enforcing the civil recovery order made here and it may well be that under French law the title in the painting would pass to the bona fide purchaser.

Because the effect of a civil recovery order is to vest in the trustee a personal right against the defendant to enforce the order and such other right, if any, to which the trustee is entitled by the law of the place where the property is situated, there is no need in respect of property abroad for the kinds of complicated provisions listed by Mr Jones and no need to use language which is suitable for other legal systems.

Mr Jones is on stronger grounds when he relies for his argument on section 269 (see pargarph 58 above). Sub-section (1) provides:

However I see no difficulty in construing section 269(1) as applying only to provisions of English law. It can never have been intended to apply to provisions of the law of a foreign country in relation to property situated in that country. I reach that conclusion having regard to the authorities to which I turn shortly.

Mr Jones argues that section 266(2) cannot be interpreted in one way in respect of property situated here and in another way in respect of property situated abroad. Given that Mr Peto accepted that section 266(2) does not have the same effect on the title to property situated abroad as it does on the title to property situated here, it follows, so Mr Jones submits, that Parliament never intended that civil recovery orders could be made in respect of property abroad. In my view the answer to this submission is that Mr Peto was wrong to accept that section 266(2) does not have the same effect on the title to property situated abroad as it does on the title to property situated here. In my view section 266(2) does no more than vest the property in the trustee. The consequences of that will differ according to the law of the place where the property is situated. If the order is made here and the property is here, then a number of provisions both in POCA (e.g. section 269(2)) and in other Acts will come into play so that normally the trustee will have legal and equitable title to the property. If the order is made here and the property is situated abroad, then it is unlikely that the laws of the country where the property is situated will give the trustee title to the property at least in the absence of a court order.

Mr Jones relies heavily on the well known canon on statutory construction that requires clear language if an Act is to be given extra-territorial effect. He submits:

In my view it is clear that the effect of Part 5 of POCA is to vest in the trustee for civil recovery property wherever situate and whether owned by foreigners or not and wherever the unlawful act took place. Contrary to the submission of Mr Jones, there is nothing to suggest that Part 5 is limited so as to prevent the making of a recovery order in favour of the trustee for civil recovery in respect of recoverable property outside this jurisdiction, whether moveable or immoveable. I agree with Mitting J who said at paragraph 21 of his judgment that Part 5 is “by its clear terms” extraterritorial and that “nothing within it prevents it from being so.”

For these reasons I would dismiss the appeal.

Hooper LJ has set out all of the relevant statutory provisions and dealt so comprehensively with the many textual, contextual and other arguments addressed to us that I can express quite shortly my own reasons for thinking, in agreement both with him and with the judge, Mitting J, that the answer to the question which he poses at paragraph 1 of his judgment is plainly “Yes”. In my view the language of Part 5 of the 2002 Act, and in particular the expression “property is all property wherever situated” used in s.316(4) admits of no other sensible construction. The Parliamentary intention is clear.

At the outset of his address to us Mr Philip Jones QC for the Appellants said that it was the Respondent’s case that Parliament has conferred upon it power to confiscate property situated abroad which is held by persons who are not present, resident or domiciled in this jurisdiction and who have never had any such connection with the jurisdiction. With respect, that is not SOCA’s case and to characterise SOCA’s case in this way exposes a fundamental confusion which lies at the heart of this appeal.

As Carnwath LJ explained in Olupitan v Director of Assets Recovery Agency 2008 EWCA Civ 104, [2008] Lloyd’s Rep. F.C. 253, at paragraph 8:

Thus Part 5 of the Act is not concerned with confiscation at all. It is concerned with a new concept of an action in civil proceedings for the recovery of the proceeds of crime in circumstances where there may not have been any criminal proceedings brought in respect of the conduct of which the relevant property is said to be the proceeds.

Part 2 of the 2002 Act is concerned with confiscation. Part 8 of the Act, entitled “Investigations”, applies to investigations under both Part 2 and Part 5. Part 8 contains at s.357 a provision for the making of disclosure orders. It was that section which was under consideration in an earlier decision of this court, given in a dispute between these same parties – see Serious Organised Crime Agency v Perry and Ors 2010 EWCA Civ 907, [2011] 1 WLR 542. There the question was whether a notice under a disclosure order made under s.357 could be given to a person not physically within the jurisdiction. In deciding, by a majority, (Ward and Carnwath LJJ, Richards LJ dissenting) that it could, this court was influenced by the various indications in Part 5 that the Act is intended to have an impact which is not confined to the UK – see per Carnwath LJ at paragraph 13 and per Ward LJ at paragraphs 73 and 74. Carnwath LJ noted however that the decision of Mitting J in this case, to the effect that a recovery order may be made in respect of property outside the jurisdiction, was subject to the present appeal. Moreover the disclosure order, as I understand it from the judgments, related only to funds within two London bank accounts, so that the point as to the Act’s extra-territorial reach so far as concerns property did not arise.

Part 8 contains penal sanctions for failure to comply without reasonable excuse with a requirement imposed under a disclosure order – see s.359. Part 5 by contrast contains no sanctions and a recovery order made under s.266 imposes no requirement upon the owner or holder of property. It might be thought that this court’s decision to the effect that a notice under s.357 may be given to a person outside the jurisdiction, and the reasoning underlying it, effectively forecloses further argument in this court on the different question which we have to decide. However Mr Anthony Peto QC for SOCA did not so contend and since we heard the argument on this appeal the Supreme Court has given permission to appeal against the earlier decision. Nonetheless, it is to my mind a far more exorbitant exercise of jurisdiction to permit the giving outside the jurisdiction of a notice under a s.357 disclosure order than it is to contemplate that a recovery order may be made under s.266 in respect of property situated outside the jurisdiction, particularly when one has regard to the limited effect of such an order.

Mr Jones accepts that proceedings for a recovery order may be served outside the jurisdiction and moreover that the person upon whom such proceedings are served need have no connection with the jurisdiction. However he submits that on the proper construction of the Act, it is only property situated within the jurisdiction which can properly be made the subject of a recovery order, so to that extent the respondent upon whom the claim form is served will of necessity have a connection with the jurisdiction in the sense that he owns or holds property situated here. The concession is inevitable given the wording of s.243(2) which expressly so provides. The submission is difficult, given the statutory definition for the purposes of Part 5 of the Act of “property” as meaning “all property wherever situated” – s.316(4). Indeed, since s.316(4)(b) further provides that property includes all forms of property, real or personable, heritable or moveable, and does not provide that this definition applies only to proceedings before the Court of Session, the definition section itself presupposes that an English court may make a recovery order in respect of land in Scotland, thereby introducing an element of extra-territoriality.

S.286 provides a limitation on the circumstances in which the Court of Session may make an order under Part 5 in respect of moveable property situated outside Scotland. I do not find it necessary to enter into the debate about the differences between the inherent jurisdiction of the English and the Scots court, which may have informed the making of this provision. The one thing that is indubitably clear is that s.286 envisages the Scots court making, in the defined circumstances, a property freezing order or a recovery order in respect of moveable property not situated in Scotland, and moreover in circumstances where the person to whom the order is directed is not domiciled, resident or present in Scotland. S.286 therefore, in addition to s.316(4)(b), itself presupposes that Part 5 empowers a Scots court to make orders in respect of property outside the jurisdiction.

The key to understanding the apparent width of the power given to the court by s.266 lies in my view in the limited effect of a recovery order vesting the recoverable property in the trustee for civil recovery. As Hooper LJ has pointed out at paragraph 156 of his judgment, the consequences of that will differ according to the law of the place where the property is situated. This must be so, and moreover “vest” is simply an ordinary English word which takes its meaning from its context and is not here used as a term of art which carries with it inevitable consequences as to the effective transfer of title. It may be that within the domestic jurisdiction the recovery order will have statutory effect so that, in respect of property situated here, the trustee for civil recovery can assert as against the respondent all the rights attaching to legal and equitable ownership of the property the subject of the order. However even then, where the property is of a nature such as real property or shares where title can only be perfected by registration, the trustee for civil recovery will need to take the further measures required to achieve registration. Thus in Olden v Serious Organised Crime Agency 2010 EWCA Civ 143, [2010] Lloyd’s Rep. F.C. 432, where a recovery order was made vesting in the trustee the leasehold interest in a house and a flat in Wales, this court held that the effect was that the legal and beneficial interest was vested in the trustee but it was a matter for him, if he decided to do so, to apply for an order for possession. Where the property is moveable, unless voluntarily surrendered, the trustee for civil recovery will need to take further measures in order to assert and to give effect to his superior right to possession. Where however the property, whether moveable or immoveable, is situated outside the jurisdiction, whilst the civil recovery order may, as between the trustee for civil recovery and the respondent, vest the legal and insofar as relevant the beneficial interest in the trustee, the extent to which any practical effect can be given to that will be entirely dependent upon the availability to the trustee of remedies under the law and legal system of the place where the property is situated. Furthermore, as I have already noted, the Act provides no sanction for failure by the respondent to co-operate with the trustee in taking steps to perfect his title or failure to deliver up moveable property.

Whilst the procedure by way of recovery order under Part 5 of the 2002 Act is, so far as I am aware, novel and sui generis, I agree with Mr Peto that it has to some extent borrowed concepts from insolvency legislation and procedure. Lord Hoffmann pointed out in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 at paragraphs 13-15 that orders made in bankruptcy proceedings do not ordinarily fall to be characterised as having effect either in rem or in personam. Like the order there under consideration, so too the making of a recovery order is not a judicial determination of the existence of rights. Rather it is the provision of a mechanism for the recovery of property obtained through unlawful conduct, just as the order there under consideration was made in order to provide a mechanism of collective execution against the property of the debtor by creditors whose rights were admitted or established. The extent to or manner in which the mechanism can be utilised will vary from jurisdiction to jurisdiction.

Further analogies with insolvency were noted in argument. Thus in Singh v The Official Receiver [1997] BPIR 530, where is was decided that a bankrupt’s estate for the purposes of the Insolvency Act 1986 included property outside the jurisdiction, there in India, Sir Richard Scott V-C remarked that it was a separate question to what extent the Official Receiver could do anything about the realisation of those assets. Similarly, in Ashurst v Pollard [2001] Ch 595, a husband and wife domiciled in England jointly owned a villa in Portugal which was registered in the Portuguese register of titles in their joint names. A bankruptcy order was made in England against the husband, with the result that the husband’s interest in the villa became vested in his trustee in bankruptcy in England. The trustee in bankruptcy obtained from the county court an order for the sale of the villa with vacant possession and directions for the completion of sale to be conducted by the trustee. The husband and wife appealed against the order for sale on the ground that the English court had no jurisdiction to make it because the proceedings had as their object rights in rem in immoveable property in Portugal and the validity of entries in Portuguese public registers, in respect of which the Portuguese court had exclusive jurisdiction by virtue of Article 16(1) of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968, which was given effect in England by the Civil Jurisdiction and Judgments Act 1982. The question was whether the proceedings were to be regarded as bankruptcy proceedings to which, by virtue of Article 1, the Convention did not apply. It was held that they were. Of interest for present purposes are the observations of Jonathan Parker LJ which are equally applicable by way of analogy in the present context:-

There are of course specific statutory insolvency provisions conferring exemptions, limitations and so forth which are of no application in the field of recovery of property obtained through unlawful conduct. So the analogy is imperfect, but it suffices to demonstrate why the mere making of a recovery order, of itself, does not amount to an exorbitant exercise of extra-territorial jurisdiction in relation to property situated abroad. To what extent a trustee in recovery will be able to realise overseas property will depend upon the remedies available to him under the law and procedure local to that property. His task may in practice be easier where the owner or holder of the property is himself within this jurisdiction.

It is these reasons which lead me to the view that the words in s.316(4) of the Act should be given their natural meaning and reflect a Parliamentary intention to give to Part 5 a limited extra-territorial effect. Indeed s.243, which it is accepted permits service upon persons out of the jurisdiction of proceedings for a recovery order, is to my mind the more exorbitant aspect of the procedure introduced by Part 5.

Mr Jones submits that s.316(4) is drafted as it is in order to ensure that property acquired abroad may be made the subject of a recovery order if remitted or brought into this jurisdiction. He submits that without the words “wherever situated” a work of art acquired abroad, which is or represents property obtained through unlawful conduct and which is subsequently brought into the jurisdiction, could not be made the subject of a recovery order once here. I do not understand this submission. If one approaches the Act upon the assumption that a recovery order will only encompass property situated within the jurisdiction, I do not see why the addition of the words “wherever situated” is necessary to achieve the result that the painting bought in France but subsequently brought here may then be made the subject of an order. I can see no purpose for the addition of those words other than that which they naturally convey.

I too would dismiss this appeal.

For the reasons given in both judgments, I too would dismiss this appeal.