R v Matthew Hargreaves

This is a renewed application for leave to appeal against a decision at the Crown Court at Merthyr Tydfil on 23.9.24 by HHJ Kember (“the Judge”). By the impugned decision, the Judge refused to vary or discharge restraint orders made a decade earlier, on 25.9.14.

There was an underlying controversy about the applicant’s interests in three investment properties, each registered in the joint names of the applicant and her husband Matthew Hargreaves. The underlying controversy was whether and to what extent those interests constituted “tainted gifts” from Matthew Hargreaves for the purposes of s.77 of the Proceeds of Crime Act 2002 (“the Act”). All references below to legislative sections are references to sections in the Act, unless otherwise stated.

An important question before the Judge was this. Was the Judge obliged to determine the underlying controversy on the application for variation or discharge of the restraint orders? Or was it appropriate to decline to do so, and leave determination to the enforcement stage, when the confiscation order against Matthew Hargreaves came to be enforced? The Judge declined to make a determination on the controversy on the basis that such determination should be left to the enforcement stage.

The case has a long procedural history. Some of it can be seen in the case stated judgment of the Divisional Court in Matthew Hargreaves v Powys County Council [2022] EWHC 3176 (Admin). Given the nature of the issues and arguments, we can focus on the following key features.

On 14.6.16, three members of the Hargreaves family – Matthew, John and Jean – were convicted at the Crown Court at Caernarfon, having pleaded guilty. John and Jean Hargreaves are the parents of Matthew. As we have said, the applicant is Matthew’s wife. Matthew Hargreaves and his father John were convicted of participating in a fraudulent business. Jean Hargreaves was convicted of unfair commercial practice. Those offences related to a business of unlawfully selling tooth whitening products containing an unlawful level of hydrogen peroxide. The prosecutor was Powys County Council (“PCC”). Summonses had been issued on 19.9.14. The applicant was originally a co-defendant. At the same hearing on 14.6.16 the prosecution offered no evidence against her, and a verdict of not guilty of participating in a fraudulent business was entered in her case.

On 25.9.14, the Crown Court had granted two restraint orders pursuant to s.41. The applicant was the subject of those orders. In one, she was described as “the subject”. In the other, she was described as “wife of subject and co-accused”. As indicated, originally, she had been a defendant. Then, from 14.6.16, when no evidence was offered against her, she became an affected third party. The effect of the restraint orders was to prohibit dealings with various assets, including the three investment properties. The restraint orders have remained in force, the condition in s.40(3) being satisfied. There have been agreed variations to allow the three investment properties to be sold and the proceeds of sale preserved. One of the three has been sold.

The latest agreed variation of the restraint orders, dated 16.11.23, contains an undertaking by PCC. It is that, once Matthew Hargreaves’s beneficial interests in the listed assets have been realised and paid towards the confiscation order imposed on him, PCC will apply for an enforcement receiver (see s.50), able to order payment by the applicant of any court-ordered sum in respect of any beneficial interest held by the applicant as a tainted gift (see s.51). That would be at the enforcement stage of the confiscation order.

Following the sentencing of the three convicted family members in September 2016, there were confiscation proceedings culminating in confiscation orders against all three of them. In the case of Matthew Hargreaves, the confiscation order made on 24.5.18 determined his general benefit to be £2.5 million and the available amount to be £1.0965 million. In the course of making the confiscation order against Matthew Hargreaves and identifying his realisable assets, HHJ Harris-Jenkins included 100% of the value of the three investment properties. In his ruling, HHJ Harris-Jenkins said he was satisfied, for the purposes of making the confiscation order, that the applicant’s third-party interests in the three investment properties had been gifted from Matthew Hargreaves’s criminal activities.

There were times subsequently when PCC suggested that this was a finding of tainted gifts which was challengeable only by way of appeal against the confiscation order. So far as the applicant’s position is concerned, that was wrong. It is clear, and became common ground on this contested application for leave to appeal, that HHJ Harris-Jenkins did not make any determination binding against the applicant, which would be “conclusive” in connection with “realisation” or “transfer of an interest” so as to satisfy the confiscation order. There is a third party due process mechanism (s.10A(2)) which is a precondition for certain conclusive determinations (see s.10A(3)). Mr Sareen submits that no conclusive determination could be made, under s.10A, as to the existence or extent of a tainted gift. Whatever the precise scope of s.10A, the position is this. HHJ Harris-Jenkins made a finding about tainted gifts, but it was not a binding determination as against the applicant. The applicant’s third party rights were not conclusively determined in making the confiscation order: cf. R v Hilton [2020] UKSC 29 [2020] 1 WLR 2945 at paras 23 and 28. The Judge correctly recorded this, within the impugned Judgment, as being the position in law.

It was back on 25.2.22 that the applicant’s representatives had first filed an application on her behalf to vary or discharge the September 2014 restraint orders. Being now a non-defendant, she was applying as a third party affected by the orders (see s.42(3)(b)). Her case was that she should be able now to deal with her interests in the investments properties, unrestrained. That was because, she argued, those interests did not constitute tainted gifts. The adverse finding of HHJ Harris-Jenkins was not only non-binding. It was also, she argued, wrong on the merits. In a later witness statement (9.9.22) the applicant accepted that there was a tainted gift, but she said it was limited to £10,253.37. The application was amended (1.6.23). The fact that there was a conceded tainted gift enabled PCC to say that the applicant was “the recipient of a tainted gift”, so that her “free property” was itself “realisable property” (see s.83(b)) “held by” her for the purposes of a restraint order against her as a specified person (see s.41(1)). The application to vary or discharge the restraint order eventually came before the Judge, at a one day oral hearing on 23.5.24, after which there were detailed written submissions.

The Judge gave his judgment on 23.9.24. The applicant’s s.42(3)(b) application to vary or discharge the restraint orders was refused. In refusing the application, the Judge did not determine that the applicant’s property interests in the investment properties were tainted gifts. He did not determine that they were not tainted gifts (although, as set out above, the applicant admitted tainted gifts to the extent of some £10,250). He did not determine the extent of tainted gifts. He held that the appropriate stage for determining the point being raised – ie. whether the applicant was right in saying that her interests in the investment properties did not constitute tainted gifts beyond the £10,250 – was the subsequent enforcement stage. That would be when PCC as prosecutor came to seek to enforce against the applicant’s property interests any undischarged portion from the confiscation order against Matthew Hargreaves, acting in accordance with the undertaking to apply for an enforcement receiver.

The essential question for us is whether the proposed appeal against that decision has a realistic prospect of success. If the appeal is not arguable, there is no other compelling reason to hear it, and Mr Sareen rightly does not submit the contrary. In considering arguability we have been assisted by the written and oral submissions of both Counsel, for which we are grateful.

For the applicant, Mr Sareen’s original and primary argument was, in essence, as follows. The applicant is a third party whose property interests are the subject of ongoing restriction in the form of the restraint orders. There has been no binding determination against her on the issue of the existence and extent of tainted gifts. By making her application to vary or discharge the restraint orders, the applicant was invoking a statutory process, in which her property interests could be advanced and vindicated. She was squarely raising the question of whether and to what extent her interests in the investment properties constituted tainted gifts. She was entitled to a finding on the merits of her application. And that meant she was entitled to a finding on the merits of the question of tainted gifts. The Crown Court, in dealing with her application, was obliged to answer that question and make a determination. Unless satisfied that her interests in the investment properties were tainted gifts, the Crown Court was obliged to make an order varying or discharging the restraint orders, to release from constraint those interests wrongly being characterised as tainted gifts. The Judge was wrong to decline to determine the question. In doing so, the Judge declined to determine the application on its merits. Since that is at least arguably so, leave to appeal should be granted and the case should proceed to a substantive hearing.

In support of that argument, Mr Sareen also relied on the following points.

We have been unable to accept that it is arguable that the Judge was under a duty to make – and the applicant had an entitlement to – a determination on the contested question of the existence and extent of tainted gifts. Our reasons are as follows. A restraint order is, by its nature, a holding order. As Mr Sareen rightly accepts, Parliament did not by s.41(1) and s.83(b) require, as a precondition for a restraint order, the court making a determination on any contested question of the existence and extent of tainted gifts. Parliament could easily have said this, if it were intended.

A restraint order could be initially imposed – including being maintained on any return date hearing at which an affected person is before the court – on the basis of a good arguable case: see Compton para 38. Indeed, we understood Mr Sareen to accept this. The so-called statutory steer in s.69 requires that a range of powers be exercised “with a view to” achieving certain outcomes, including “realising” no more than the value of a tainted gift. The word “realising” reflects the ultimate enforcement stage. Powers can be exercised “with a view” to achieving outcomes, without a court being required to proceed to a substantive determination of all controversial points. The applicability of a good arguable case test is consistent with the statutory steer in s.69. Denisova is about effective challenge to property-interfering measures and is itself a case which arose out of the enforcement stage.

The flaw at the heart of the appeal is that it equates an entitlement to have an application for variation or discharge determined on its merits with an entitlement to have the tainted gift issue determined on its merits. The Judge did determine the application on its merits. But in doing so, he held that there was no entitlement to have the tainted gift issue determined on its merits, ahead of the enforcement stage, which was the preferable time for the issue to be determined.

That disposes of the argument about the Crown Court’s suggested duty and the applicant’s suggested entitlement. There is no separate proposed challenge to the way in which discretion was exercised. Nor would it be arguable if pursued. We think it is appropriate to make the following points about the discretion and the Judge’s decision as to its exercise.

In his oral submissions, Mr Sareen also argued that, if the applicant had no entitlement to a determination on the merits of the tainted gift issues, there needed at least to be a finding against her that there was a “good arguable case” for saying that the investment properties constituted tainted gifts, if the restraint orders against her were to survive. This was not an issue raised before the Judge.

The position before the Judge was this. PCC was saying to the Judge that a good arguable case was sufficient, in deciding whether to maintain a restraint order. On that point, Mr Rees KC showed us In re Ahmed [2024] EWHC 363 (Admin) at 71. The applicant’s answer was to say to the Judge this was wrong, and that the Judge had to make a substantive determination. It was no part of the applicant’s argument to the Judge, even in the alternative, that there was not even a good arguable case. So, there was no contest before the Judge as to whether the threshold of a good arguable case was met. Nor, when this proposed appeal was launched and pursued, was it argued that the Judge failed to identify a good arguable case. This point did not feature in the grounds of appeal or the skeleton argument. It is not a viable or fair criticism of the Judge below.

For all these reasons, which accord with what the single judge said when refusing leave to appeal on the papers, we refuse the renewed application for leave to appeal.

In response to this judgment circulated in draft, PCC has sought its costs of resisting leave to appeal, in the sum of £32,046.45. The applicant does not oppose a costs order, but she resists any costs assessed by us above around £10,000. It is common ground that costs are in the discretion of the court (s.89(4)(a)). We have decided to order that the applicant pay PCC’s costs, and that it is appropriate to assess those costs ourselves in the sum of £22,000. That is the order we make. The applicant has pursued an application which is without legal merit. She has done so, in circumstances where the Judge below had found in her favour that HHJ Harris-Jenkins’s adverse finding was not binding against her, and had identified the practical route to resolution of the contested issue. She has also pursued her application, notwithstanding the clear reasons of the single judge on the papers. In pursuing leave to appeal, voluminous materials were placed before this Court, despite the central point being in essence a simple legal argument. The application called for a response from PCC, and called for thorough preparation. Mr Sareen’s oral arguments involved a change of tack. Mr Rees KC materially assisted the Court. Having said all that, we have in mind that the materials and arguments were familiar to the parties from the court below. We have in the end applied a broad brush reduction in PCC’s costs, to arrive at a level which in all the circumstances is reasonable and proportionate.