Ashford & Ors v Southampton City Council

On 28 February 2014, in the Crown Court at Dorchester, His Honour Judge Jarvis dismissed applications brought by Joseph Ashford and 1st Active Drainage Ltd to vary and by 1st Active Ltd and 1st Active Car Sales Ltd to discharge restraint orders which he had granted ex parte on 24 September 2013pursuant to s. 41 of the Proceeds of Crime Act 2002 (“POCA”). The application by Mr Ashford and the three companies for leave to appeal these orders has been referred to the full court by the Registrar.

In the days leading up to the hearing of these applications, both parties supplied further evidence in the form of updated witness statements and exhibits. Part 73 of the Criminal Procedure Rules deals with appeals under POCA and, 73.7 makes it clear that appeals are limited to a review of the decision of the Crown Court although there is power to conduct a re-hearing where it would be in the interests of justice. Having invited submissions, it was common ground that the applications sought a review of the decision of 28 February 2014: on that basis, it would not be appropriate to admit the fresh evidence although it is worthwhile pointing out that it would be open to either side to apply back to the Crown Court should new circumstances or evidence justify such a course.

Joseph Ashford owns an emergency plumbing business which, until January 2013, was operated through 1st Active Drainage Ltd, a company of which he is the sole director. Thereafter, the operation of the business was carried out by Fast Response Maintenance Ltd, another company of which he was also the sole director as he is in respect of other limited companies including 1st Active Car Sales Ltd and 1st Active Ltd. These last two were holding companies and there is no suggestion that the plumbing business operated through either.

In May 2012, after receiving a large number of complaints regarding 1st Active Drainage Ltd, and later Fast Response Maintenance Ltd, Southampton City Council Trading Standards commenced an investigation into Mr Ashford and his corporate entities. The complaints, of which there are said to be in excess of 200 between January 2010 and November 2012, included allegations of unfair business practices that may constitute offences under the Consumer Protection from Unfair Trading Regulations 2008 and the Fraud Act 2006.

These complaints (and it must be emphasised that, at this stage, that is all they are) include overcharging for work done, taking money from victims’ credit cards without their authorisation and telling victims that their properties needed work which was not in fact needed. The principal targets of the investigation concern Mr Ashford and 1st Active Drainage Ltd but the two other applicant companies are said to be under investigation for money laundering. Fast Response Maintenance Ltd is not being investigated.

Having been made the subject of the restraint order without notice, on 1 October 2013, Mr Ashford was arrested and the orders were served upon him. He was then released on police bail. At the time of the substantive hearing before Judge Jarvis (and, in fact, to date, that is to say over two years since the investigation commenced), no charges have been brought: that only serves to underline that, at present, Mr Ashford and the companies face no more than allegations.

On 24 September 2013, ex parte, Judge Jarvis made orders restraining the applicants from dealing with property said to be worth in excess of £1 million; orders were also made requiring disclosure of identified information. At the hearing on 28 February 2014, the application made by Joseph Ashford and 1st Active Drainage Ltd was to vary the restraint orders so that they were limited to assets with a value of £500,000. The other two companies applied to have the restraint orders against them discharged on the grounds that they could not be justified in law.

By his ruling, Judge Jarvis explained the difficulties experienced in single court centres in ensuring sufficient time is dedicated to the hearing of ex parte applications for restraint orders and accepted that there were deficiencies in the prosecution witness statements and draft orders, particularly in relation to 1st Active Ltd and 1st Active Car Sales Ltd, which had clearly been prepared by ‘cutting and pasting’ parts of the other applications and had not been sufficiently (or, arguably, at all) focussed on the corporate entities against whom they were brought.

In consequence, Judge Jarvis conceded, in hindsight, that there may not have been sufficient evidence on which to make restraint orders against 1st Active Car Sales Ltd and 1st Active Ltd at the time of the original hearing. He went on, however, to consider the evidence as it stood at the date of the application. By that time, there was a further witness statement from the investigating authority which alleged the existence of evidence of money laundering in these companies. He found that the significant mixing of monies between the appellants asserted in the statement was grounds for not discharging the orders against 1st Active Ltd and 1st Car Sales Ltd.

In relation to the application to cap the restraint orders on Joseph Ashford and 1st Active Drainage Ltd, the judge found that this was potentially a criminal lifestyle case and as such, without Mr Ashford and the companies providing information to explain the movement of money, the time was not right to fix a cap. The judge thereby dismissed both applications but made it clear that, when the further expected evidence became available, it would be open both to Mr Ashford and the companies to renew their applications.

Part 2 of the POCA makes provision for confiscation orders following conviction and restraint orders to prevent prior dissipation of realisable assets by a person in respect of whom there is reasonable likelihood of a confiscation order being made. This purpose is reflected in the legislative steer provided by s. 69(2)(a) in these terms:

“The powers—

(a)

must be exercised with a view to the value for the time being of realisable property being made available (by the property’s realisation) for satisfying any confiscation order that has been or may be made against the defendant;”

It is, therefore, a necessary consequence that restraint orders can be made both before and after proceedings have commenced but, if prior to the institution of criminal proceedings, s. 40(2) of POCA requires that:

“(a)

a criminal investigation has been started in England and Wales with regard to an offence, and

(b)

there is reasonable cause to believe that the alleged offender has benefitted from his criminal conduct.”

If the condition in s. 40 is satisfied, s. 41(1) provides that the Crown Court may make a restraint order prohibiting any specified person from dealing with any realisable property held by him. This is subject to application to vary or discharge (s. 42) and to appeal to the Court of Appeal by any person affected by an order refusing to vary or discharge whereupon this court may “(a) confirm the decision; or (b) make such order as it believes is appropriate”: see s. 43(3) of POCA.

The challenge mounted on behalf of 1st Active Ltd and 1st Active Car Sales Ltd is that there was insufficient evidence before Judge Jarvis, both at the ex parte hearing and at the application to discharge, to justify the conclusion that there was reasonable cause to believe that these two companies had benefited from their criminal conduct. The relevant original evidence is said to be contained in the witness statements (dated 21 September 2013) of Rebecca Phillips, a financial investigator authorised by the Trading Standards Department of Southampton City Council, the authority in charge of proceedings in this matter.

Ms Phillips provided four statements, one in support of each application for a restraint order. Mr Kennedy Talbot, for the applicants, correctly identifies that the statements in relation to 1st Active Ltd and 1st Active Car Sales Ltd were nearly identical to that served in relation to Mr Ashford, and as a result included a number of references to Mr Ashford as the defendant. More particularly, these statements contain no reference to the offences the two companies are each alleged to have committed; it is asserted that the two companies were used by Mr Ashford “as the ‘vehicle’ to commit offences currently under investigation”. Based on this formulation, it is certainly arguably unclear whether the two companies were being investigated in their own right.

Although, when reviewing his original order, the judge recognised the paucity of this evidence, at the review hearing, he relied on the subsequent statement of Rebecca Phillips dated 22 January 2014 which provides a degree of elaboration. It suggests that 1st Active Ltd and 1st Active Car Sales Ltd are under investigation for money laundering and states:

“9.

From looking at bank statements for Mr Ashford’s personal bank accounts and the bank accounts of 1st Active Drainage Ltd, 1st Active Ltd and 1st Active Car Sales Ltd, there appears to be a significant level of mixing of the monies. As this stage of the investigation it has already been discovered that the turnover of the companies subject to the restraint orders is not separate from Mr Ashford’s finances.

…

c.

Account number … in the name of 1st Active Drainage Ltd. Debits can be seen to 1^st Active Ltd and 1^st Active Car Sales Ltd. Debits can also be seen leaving this account to the Bank of Ireland and personal credit cards held by Mr Ashford.

…

10.

Given the flow of money between the bank accounts and the potential money laundering offences that Mr Ashford and his companies are investigation for, I do not believe that discharging the restraint orders against 1st Active Limited and 1st Active Car Sales Ltd should be permitted. Both of these businesses have received money from the account identified in ‘c’.”

Ms Phillips does not exhibit the bank statements in support of these assertions, nor does she provide any indication of the scale or incidence of the transfers in her statement. Neither does she reflect on the undeniably honest and substantial cash generating business that Mr Ashford was conducting. This situation is not akin to the mixing by a drugs dealer of the proceeds of his dealing with other money which it cannot be established is so tainted. Mr Talbot argued that, given the number of complaints and the turnover of the business (said to be over £8.5 million from 2010 to date), without more, an assertion of mixing of personal moneyor money from one business with that of another, does not necessarily lead to the inference of money laundering.

Mr Talbot went on that these assertions represented the extent of the evidence against the two companies. In response, Mr Ethu Crorie for the prosecution, sought to rely on the witness statement, dated 18 February 2014, provided pursuant to the disclosure order by Mr Ashford, on behalf of 1st Active Car Sales Ltd. In particular, he identified that in the period to 31 August 2011 1st Active Ltd received £110,000 from 1st Active Drainage Ltd and in the period to 31 August 2012 received £265,021 (see paras. 13-14). In his statement on behalf of 1st Active Ltd, similarly dated, he explained:

“11.

In the period since 1 July 2013 1st Active Ltd has received £79,000 from Fast Response Maintenance Ltd.

12.

In the period to 30 June 2013 1st Active Ltd received £130,000, £75,000 from 1st Active Car Sales Ltd and £55,000 from Fast Response Maintenance Ltd

13.

In the period to 30 June 2012 1st Active Ltd received £360,000 from 1st Active Car Sales Ltd.”

Mr Talbot pointed out that these statements were provided in response to an order of the court and to allow the prosecution to use them to bolster a weak case (or at all) would be a breach of the protection from self-incrimination afforded by the common law and Article 6 of the ECHR. We do not have to decide this issue because he further argues that, in any event, in the main, these payments were from companies which are not said to have been involved in the underlying criminal offences. With that proposition we agree.

It is important to bear in mind the appropriate approach to reasonable cause in cases of this nature. In R v Windsor and others [2011] EWCA Crim 143, Hooper LJ recognised that certainty was not required at this preliminary stage of the investigation but that “uncertainly is not in itself a reason for making a restraint order” (at para. 53). He also made it clear (at para. 87) that:

“We do not see how the judge can rely upon such a broad and unsupported statement to find “reasonable cause”. Without being too prescriptive, it is vital that the judge is given material on which he can reach the conclusion himself that there is reasonable cause. He cannot find it just because he is told that an investigation has confirmed the suspicions of the Belgian authorities”.

Based on the evidence we have recounted, we conclude that Judge Jarvis was being asked to accept that the investigators had concluded that there was reasonable cause, rather than being presented with evidence sufficient to reach his own conclusion to that effect. In any event, neither are we satisfied on the facts of this case (where there were undeniably substantial sums held by Mr Ashford or in at least some of the companies which could not be said to be emanating from the proceeds of the criminal conduct being investigated) that the assertion of mixing of monies, without more, creates a reasonable cause to believe that the two companies were laundering money.

In the circumstances, we grant 1st Active Ltd and 1st Active Car Sales Ltd leave to appeal and discharge the restraint orders against both companies. If further evidence is available, or emerges, it remains open to the Council to pursue a further application.

Without making any admission, Mr Ashford and 1st Active Drainage Ltd concede that there was sufficient evidence, at least by February 2014, to allow the judge to conclude that there was reasonable cause to believe they had benefited from criminal conduct and there was no objection to the imposition of the restraint order. On their behalf, however, Mr Talbot does challenge its current unlimited scope and submits that the judge was wrong to refuse to vary the restraint order against them and impose a cap of £500,000.

In refusing to vary the restraint orders against Mr Ashford and 1st Active Drainage Ltd, Judge Jarvis relied on indications that the investigation had the potential to generate a finding of criminal lifestyle pursuant to the provisions of s. 6(4)(a) POCA, whereupon the court must apply the relevant statutory assumptions in s. 10 of the Act when calculating the benefit figure for a confiscation order.

Given the number of allegations then being investigated, the judge was right to be alive to this possibility but it is important to consider the practical operation of the section 10 assumptions in a criminal lifestyle case. The assumptions place the burden on the defendant to prove that any property obtained by him after the relevant date was not a result of his criminal conduct. Mr Talbot argued that 1st Active Drainage Ltd completed nearly 16,000 contracts for work from January 2011 (the date of the 1st complaint in the prosecution schedule) to date and, therefore, the number of cases in which complaints had been made represented 1.5% of turnover only.

Mr Crorie confirmed that the 52 offences currently under investigation had a total value of £144,478. However, he submits that this was just a sample of the complaints the Council had received: at the time of the original application, these amounted to approximately 240. Although there has been reference to a seized file containing a larger number of complaints, it cannot be assumed that these relate to potential offences. Assuming that every complaint of the 240 is valid (or following a finding of a criminal lifestyle, the contrary cannot be proved) and given that Mr Ashford is likely to have a ready explanation for his income, for example by providing invoices for the work legitimately undertaken and in respect of which there are no complaints, the maximum value of a confiscation order in this case was five times the current value, approximately £720,000.

There has been no suggestion by the investigating authority that the offences for which Mr Ashford and 1st Active Drainage Ltd are being investigated represent a systemic policy of overcharging that could generate an adverse finding even in the absence of complaint. Thus, on the present evidence, at its most generous, and assuming that this investigation does indeed progress to a prosecution and conviction, it does not appear to us that there is a realistic possibility that a confiscation order will follow in excess of £720,000. In the circumstances, we would grant Mr Ashford and 1st Active Drainage Ltd leave to appeal and allow the appeal by imposing that cap (albeit in excess of the cap conceded by Mr Talbot).

In the light of the concessions made by Mr Talbot and our conclusions on the 1st two grounds, it is not necessary to deal extensively with the remaining grounds of appeal. 1st, Mr Talbot contended that the orders should not have been made at all because there was no risk of dissipation of assets. We note that where the alleged offences involve dishonesty, the risk of dissipation will generally speak for itself: see Jennings v CPS [2005] 4 All ER 391 at para. 61. Furthermore, where money is moved around corporate vehicles without apparent reason, the risk is even more obvious.

The second further ground concerns the procedural failings in the original Crown Court proceedings which Mr Talbot contended amounted to a serious procedural irregularity that, by itself, would require this court to allow the appeal. In particular, Mr Talbot argues that he was deprived of the opportunity to make a submission as to procedural unfairness because the transcript of the ex parte hearing was only provided to the Appellants (after considerable argument) on 28 February. Mr Crorie responded by submitting that either the failings did not apply to the hearing on 28 February or the Appellants did not take the opportunity to adjourn the hearing.

In the event, Mr Talbot accepted that this ground formed part of the background against which the court should determine the substantive issues that he raised and this court has proceeded on the premise of the material available for that hearing.

That is not, however, to say that we view the way in which the application was initially pursued with equanimity or that we are prepared to generate the belief among prosecutors that insufficient care in the original presentation of applications for orders such as these will be overlooked or not treated seriously. That is far from the case and it remains of the 1st importance that applications of this type are presented with scrupulous attention to the statutory requirements of the legislation, mindful that points which it is known can be made on behalf of an absent defendant are ventilated in the evidence. Equally, judicial scrutiny remains essential and courts recognise the absolute imperative that judges have sufficient time to master the papers in ex parte applications so as to be able to challenge prosecutors where appropriate and then to hear the application, setting out fully the reasons for its decision.

This case, unfortunately, is another example of the failure of investigating authorities and of the court in this regard: it is necessary only to repeat the observations of Lord Toulson SCJ in Barnes v The Eastenders Group and another [2014] UKSC 26 (at paras. 118-125), under the heading ‘Lessons for the future’.

Section 43(3)(b) POCA allows this court to make such order as it believes appropriate. In Windsor, where there was also fresh evidence, the court felt able to suspend its final order quashing part of the lower court’s decision in order to allow the prosecution to make a fresh application for restraint orders in the Crown Court. The court in Windsor confirmed that the quashing order would come into effect when the judge hearing the application announces his decision and, in any event, no later than a certain date fixed by the Court. Given that there is fresh evidence which we have not considered, subject to any representations to the contrary, we would be minded to make a similar order in this case.

Subject to the foregoing paragraph, these appeals are allowed in the cases of 1st Active Ltd and 1st Active Car Sales Ltd by quashing the orders in their entirety and in the cases of Mr Ashford and 1st Active Drainage Ltd by imposing a cap of £720,000 on the amount restrained. An agreed order should be submitted to the court; any issue remaining to be resolved (including costs) should be identified by skeleton arguments within 7 days and will be determined by the court in writing.