Assets Recovery Agency, R (on the application of) v He & Anor

MR JUSTICE COLLINS: The Proceeds of Crime Act 2002 established the Assets Recovery Agency. It is concerned with depriving persons of property obtained as a result of criminal activities. Parts 2 to 4 of the Act deal with confiscation in England and Wales, Scotland and Northern Ireland respectively, following conviction of criminal offences. Part 5, with which this case is concerned, is headed, "Civil Recovery of the Proceeds etc of Unlawful Conduct." Section 240, which introduces part five, reads under the heading, "General purpose of this part":

One of the weapons in the Director's armoury is an interim receiving order. Such an order appoints a receiver who may be authorised to take a number of steps for the purposes of identifying relevant property and ensuring that it is preserved. Section 247 sets out the functions of an interim receiver, and provides as follows:

Broadly speaking, recoverable property is property which has been obtained through unlawful conduct, and associated property is property which is mixed in with recoverable property. For example, if a person has an interest in the property and that interest was obtained by virtue of criminal conduct, associated property covers the interest of perhaps an innocent party who was not concerned in the criminal conduct and thus is regarded, or may be regarded, as associated property.

Schedule 6 to the Act contains very wide powers indeed. Broadly, the powers include seizure, the requirement of information, search of properties to discover whether there is other property there, or to obtain documentary information, and management of the property in question.

The application for an interim receiving order is subject to a number of conditions precedent. By section 246(1), if the enforcement authority (that is the Assets Recovery Agency, which I will refer to as the "the Director") may take proceedings for a recovery order in the High Court, she may apply to the court for an interim receiving order, whether before or after starting those proceedings. It may be made without notice to the person or persons affected by it, if such notice would prejudice any right of the Director to obtain a recovery order in respect of any property. The conditions precedent are set out in subsections (5) and, where applicable, (6). Subsection (5) of 246 reads:

Subsection 6:

In order to see whether there is sufficient evidence to establish a good arguable case for making an interim receiving order, the Director will normally make use of her powers to obtain information from third parties. The most usual of those powers is a Production Order, which is dealt with by section 345 of the Act. That provides, so far as material:

The period is normally seven days. Production Orders are usually made against financial institutions such as banks or building societies, or sometimes against solicitors who have dealt with property transactions of one sort or another, and is an obviously important and useful means of obtaining information for the Director to see whether there is a good arguable case which would justify, if that is thought necessary, the request for an interim receiver.

In this case, an interim receiving order was granted by Keith J on 21st July 2004 against the respondents. The application before me is stated to be for a variation of that order, but it is clear that the respondents are submitting that the order should be discharged. Mr De Mello has submitted that proceedings under Part 5 of the 2002 Act should be construed in such a way that they are regarded as criminal, or, if not, that the criminal standard of proof should apply. He submits, too, that Article 6, in relation to criminal proceedings, and Article 7 of the European Convention on Human Rights apply, and further that the application for and the granting of the interim receiving order is contrary to, and incompatible with, the Convention, in particular, in relation to Article 1 of the First Protocol.

He further submitted that in this case it amounted to an abuse of the process and that, on the facts, no unlawful conduct had been established. There is thus a wide general attack on Part 5 of the Act and a need to consider how its provisions should be construed. In addition, there is an assertion that the interim receiving order cannot be justified on the facts of this case.

That introduction leads me to set out further relevant statutory provisions. One starts with the introduction to the Act itself, in section 2. This deals with the Director's functions and subsection (5) of section 2 provides that:

Subsection (6) provides:

Thus, the approach of the Director must be to let criminal proceedings take precedence, as it were, and only act if such proceedings are either not being taken, or for any reason may have failed, if, notwithstanding their failure or the inability for whatever reason to take them, she takes the view that she can establish within the requirements of the Act that the property in question was unlawfully obtained.

I have already referred to section 240 of the Act, which is the introduction to Part 5 and which, by subsection (2), makes clear that the powers conferred by Part 5 are exercisable whether or not any proceedings have been brought for an offence. Section 241 defines unlawful conduct as meaning conduct which is unlawful under the criminal law of any part of the United Kingdom where that conduct occurred or, if it occurred outside the United Kingdom, is unlawful under the criminal law of that country and, if it had occurred in the United Kingdom, would have been unlawful within the United Kingdom as well.

Subsection (3) of section 241 is of vital importance in this case. It reads:

Section 242 defines what is meant by property obtained through unlawful conduct, and subsection (1) provides:

There is a refinement of that in subsection (2) but I do not need to burden this judgment with that.

Section 245 defines associated property as meaning:

Section 246 I have already referred to. It deals with the application for the interim receiving order and section 247, the functions. Again, I have already referred to that.

Section 251 provides, under the heading "Supervision of interim receiver and variation of order":

Then subsection (2) requires the court to hear anyone who would be affected and subsection (3) provides:

Again, subsection (4) provides that anyone who may be affected, and the receiver, must be given the opportunity of being heard.

There is a further section which deals with variation, or discharge, and that is section 254, because that requires, by subsection (1), a court to vary the order so as to exclude property which is not recoverable or associated property. It reads:

Thus, for example, property in which others than a respondent have an interest could be disposed of and only the value of a respondent's interest retained under that provision, which is clearly there to protect the interests of third parties in property in which a respondent has an interest.

Section 255 requires that there be included in an interim receiving order an obligation upon the interim receiver to inform the enforcement authority, the Director that is, and the court as soon as reasonably practicable if he thinks that any property to which the order applies by virtue of a claim that it is recoverable property is not recoverable property, and (b) makes the same obligation in relation to associated property and (c) the same in relation to property which has been discovered in accordance with section 247(2) of which the Director was unaware at the time that the interim receiving order was made, and so on. Equally, the obligation to inform extends to a situation where the interim receiver thinks that there has been some other material change of circumstances.

Subsection (2) of 255 requires that the interim receiver must report his findings to the court and serve copies on the enforcement authority and on any person who holds any property to which the order applies, or who may otherwise be affected by the report.

Section 266 deals with recovery orders and provides that if the court is satisfied that any property is recoverable, proceedings for a recovery order having been taken, the court must make a recovery order and that order will vest the recoverable property in the trustee for civil recovery. There are provisos which protect third parties who have obtained property in good faith and so on, but I do not need to go into the details of those.

Section 283 provides for the possibility of compensation subject to conditions if property to which an interim receiving order has at any time applied is not in the end decided to be recoverable property or associated property. Again, I do not need to go into the details of them.

Section 287 provides that there is a financial threshold for the recovery of property under Part 5. That threshold is £10,000. That is not in the Act, but that is the current threshold. Section 288 deals with limitation. The effect of it is that a claim for recovery under Part 5 can relate to property which was acquired up to 12 years before either a claim form is issued seeking recovery, or an application is made for an interim receiving order, whichever be the earlier.

Section 304(1) provides that:

Subsection (2) provides:

Subsection (3) provides:

There are various other exceptions and exemptions, which again it is not necessary for me to go into, and I do not think that I need to read any more provisions of Act. I have read quite enough as it is. But it is important that the scheme is understood, and that it is apparent that the powers given to the Director are wide-ranging and the purpose behind this part of the Act is, as I have indicated, to enable property which has been obtained by means of criminal conduct to be recovered from the person, or persons, who were involved in that criminal conduct, whether or not a prosecution has ensued or been successful.

Mr He, the first respondent, is a British citizen, having been in this country for over 17 years and having married a United Kingdom citizen. That marriage subsisted for a substantial time, but sadly ended in divorce, and the second respondent is Mr He's present wife. In January 2000, Mr He was investigated by NCS, having been suspected of involvement in human trafficking and laundering the proceeds. He was arrested in March 2001 but no charges were brought and the investigation concluded in July 2001. Subsequently, a further investigation was carried out by the Metropolitan Police in relation to similar suspicions, but again no charges were brought. However, the police informed the Director of their investigations and referred the fruits of them to her. These gave her reasonable grounds to suspect that Mr He and his wife were holding recoverable property and so a number of Production Orders were obtained during the first half of 2004 to obtain documents from banks, mortgagors and other financial institutions. Following that, an interim receiving order was applied for on the basis that there was a good arguable case that the property covered by it derived from crime.

The skeleton argument provided on behalf of the Director for the purpose of obtaining the interim receiving order summarised the evidence as follows:

The respondents are directors of a number of companies. Most important for the purposes of this case is a company called Futsing Finance Limited. The allegation is set out in paragraph 5.7 of the witness statement of Mr Cooper, who was the member of the Assets Recovery Agency who had charge of this case. For the purpose of obtaining the interim receiving order, he states as follows:

Police enquiries showed sums totalling £70 million had been passed through Mr He's associated bank accounts in the course of the year 2002 to 2003. There were multiple deposits of cash into various personal accounts and some five properties had been purchased during 2002, one in 1994 and one in 2003. The purchase price of those properties came to approximately £1.5 million. In addition, there are sums totalling £700,000 which have been frozen and were discovered in a large number of bank accounts. The present value of Mr He's and his wife's interest in the seven properties is approximately £500,000.

Mr Cooper summarises the matter in his first statement in paragraph 7.38 in these words:

One matter relied upon against Mr He is a conviction in Greece in 1999. This was, it is said, in connection with involvement in people trafficking. Mr He denies this. In a statement made on 26th July 2004, he said that he was questioned in detention for a day about his travel arrangements, but was unaware of any proceedings, and if he was convicted of anything he was unaware of it. Documentation has now been obtained from Greece. The court record shows that Mr He was in court, together with two other Chinese defendants, charged with fraud and that he gave evidence. The evidence against him was that he had given boarding passes to enable one of the other Chinese charged with him to get to Canada and another to London, he, Mr He, having brought a number of air tickets. He was convicted of attempted fraud and sentenced to 8 months' imprisonment, that sentence being commuted to a fine of 1500 drachmae per day. On the face of it, there is a strong implication that he was involved in people trafficking and the information from Greece is, it would appear, inconsistent with his original statement about it.

His case is that he provides a service to Chinese to enable them to transfer money to relatives or whomsoever they wish in China. He is not concerned with whether his customers have the right to work here; he cannot be expected to check that. He used personal accounts to transfer the monies in order to avoid bank charges. Documents accompanying the deposits showed on some occasions that the customer was not permitted to work, but those documents were obtained for identification purposes only and the representatives whom he used as collectors were unaware of the significance of those documents in respect of whether there was permission to work. He has refuted the allegations made against him and has given detailed explanations of his business practices.

In particular, in a statement of 8th November 2004, he says this, at paragraph 35:

In relation to that last sentence, I have seen a statement from Mr He which gives further details of the assistance that he has given in certain important respects to authorities in this country.

The receiver has produced an interim report. That is dated 8th September 2004. I shall refer now to its key findings. The interim receiver sets out in it an analysis of responses from identifiable clients, who had provided the money which made up the £700,000 which has been frozen. In paragraph 5.4.1 of her report, she records as follows:

She submits a copy questionnaire and continues:

She concludes her report in paragraph 8 thus:

That, submits Mr De Mello, is quite insufficient to justify any further investigation, let alone a claim to recover assets. There simply is not enough evidence to establish that any of the property is recoverable, whatever may be the standard of proof. Let me turn now to consider the nature of proceedings under Part 5.

There is no doubt that in domestic law they are classified as civil proceedings. That is made clear by the heading to Part 5, and section 240, which sets out the purpose of Part 5, namely to recover in civil proceedings property which is, or represents, property obtained through unlawful conduct, whether or not any proceedings have been brought for an offence in connection with the property.

That is but the starting point, when the jurisdiction of the European Court of Human Rights has to be considered. The leading case in this connection is Engel v The Netherlands (No.1) [1976] 1 EHRR 647. The tests set out in that case have been treated as giving authoritative guidance. Those tests are set out in paragraphs 80 to 82 of the report.

In summarising them, I gratefully borrow from the decision of Coghlin J in The Director of the Assets Recovery Agency v Walsh [2004] NIQB 21. At paragraph 13 of his judgment in that case he says this:

The approach set out in Engel is one that should be applied domestically. That has been confirmed by the House of Lords in R v H [2003] 1 All ER 497.

A number of decisions in the High Court have established that condemnation forfeiture proceedings are to be regarded as civil proceedings: see Goldsmith v Customs and Excise Commissioners [2001] 1 WLR 1673 and R (Mudie and Anr) v Dover Magistrates' Court [2003] QB 1238. In Mudie reference was made to Butler v United Kingdom 41661/98, which concerned proceedings for the forfeiture of cash under the Drug Trafficking Act, now contained in Chapter 3 of Part 5 of the 2002 Act, and in which the European Court decided that such proceedings were civil, not criminal. No criminal charge was brought, nor did the liability for forfeiture depend upon a conviction of a criminal offence.

In Mudie, at page 1254, in the judgment of Laws LJ, who gave the only reasoned judgment, there is set out the citation from Butler which reads, so far as material, as follows:

On page 1259, in paragraph 36 of his judgment in Mudie, Laws LJ concludes thus:

Arcuri v Italy is one of a number of cases which have gone to the European Court concerned with the Italian legislation which is designed to frustrate the Mafia in their obtaining and possession of unlawfully obtained property. The Italian provisions are more draconian than ours, inasmuch as they provide for a reverse burden of proof in certain circumstances. Nonetheless, those provisions have consistently been held by Strasbourg to be civil proceedings, not criminal, and, furthermore -- a point that will be material when I come to consider later submissions -- not to contravene the principle of proportionality in connection with Article 1 of the First Protocol, or, as far as it may be material, Article 8.

Forfeiture of property which has been obtained by unlawful conduct is not regarded as a penalty. It would be helpful, I think, to refer specifically to a commission decision, M v Italy Application Number 12386/86, a decision of 15th April 1991. The finding was that Articles 6 and 7 of the Convention are not applicable to confiscation of property belonging to a person suspected of being a member of a Mafia-type organisation, decided in the context of proceedings for the application of preventive measures under various Italian Acts, as the measure does not involve a finding of guilt subsequent to a criminal charge and does not constitute a penalty.

The report provided to me on that case is 17 DR 59. At page 98, the Commission, in deciding that the claim was not admissible, said this:

The Commission then went on to say that they were also proportionate and that there was no breach Of Article 1 of the First Protocol.

I have no doubt that Coghlin J was correct in deciding as he did that these were civil proceedings. I do not need, I think, to say more than that I entirely agree with the reasons that he gives to reach that conclusion. His conclusion is entirely consistent with, and supported by, both domestic and Strasbourg jurisprudence.

The standard of proof appropriate in deciding whether any matters alleged to constitute unlawful conduct have occurred is the balance of probabilities: see section 241(3) of the Act. Notwithstanding that, Mr De Mello submits that there is a scale of probabilities and that to establish what amounts to criminal conduct requires that the top end of the scale is appropriate, and that is equivalent to the criminal standard. He refers me to Gough v Chief Constable of Derbyshire Constabulary [2002] 2 All ER 985. That case concerned football banning orders. Those, the Court of Appeal decided, were civil proceedings, but that an exacting standard of proof should be applied which was hard to distinguish from the criminal standard. The relevant provision was section 14(b) of the Football Spectator's Act 1989. The relevant provisions are set out in paragraphs 89 and 90 on page 1011 of the All England report.

The statute in that case did not refer to the balance of probabilities. Mr De Mello seeks support for his submission from a line of cases, the most well known of which is Hornal v Neuberger Products Ltd [1957] 1 QB 247. The County Court Judge, HHJ Leon, had said that he had found fraud to be established on the balance of probabilities, but would not have done so if the standard had been beyond reasonable doubt. The Court of Appeal stated that that was a correct approach, because the appropriate standard was the balance of probabilities. But at page 258 of the report, Denning LJ said this:

At page 260 Hodson LJ said:

Morris LJ, at page 266, said this:

In Re H (Minors) [1996] AC 563, the House of Lords was concerned with the standard of proof in sexual abuse allegations arising in care proceedings. The leading majority speech was given by Lord Nicholls. At page 586 he said this at letter D:

In The Secretary of State for the Home Department v Rehman [2003] 1 AC 153, at page 193, Lord Hoffmann adverted to this issue. Rehman was an appeal from the decision of the Special Immigration Appeals Commission, which was concerned with whether Rehman should be deported from the United Kingdom on the basis that he had links with a group involved in terrorism. Lord Hoffman said, at paragraph 55 under the heading, "The standard of proof":

Perhaps Lord Hoffmann might have chosen a park other than Regent's Park for his example, but the point is an obvious one. Finally, I should refer in this context to an unreported decision of the Divisional Court, Butt v HM Customs & Excise [2001] EWHC Admin 1066. That case concerned forfeiture of a substantial sum of money, which the appellant's nephew was seeking to take from London to Amsterdam, the sum in question being $695,000 in cash. The court, of course, decided that the proceedings were civil and Hallett J said this:

I note Hallett J's view that the allegation, which was that the money in question had been involved, or had resulted from involvement in, or was intended for drug trafficking, was not an inherently improbable allegation. As a general rule, no doubt, criminal conduct may be regarded as less probable than non-criminal conduct. But where there is evidence from which a court can be satisfied that it is more probable than not that criminal conduct has been involved, it does not seem to me that that is something that is so improbable as to require a gloss on the standard of proof. However, I recognise, and it is no doubt right, that since it is necessary to establish that there has been criminal conduct in the obtaining of the property, the court should look for cogent evidence before deciding that the balance of probabilities has been met. But I have no doubt that Parliament deliberately referred to the balance of probabilities, and that the court should not place a gloss upon it, so as to require that the standard approaches that appropriate in a criminal case. Apart from anything else, if that were necessary, the effectiveness of, in particular, Part 5 of the Act would be to a considerable extent removed. Since it is clear that Parliament intended that it should be used, even if criminal proceedings could not be successfully instituted, it is plain that Parliament deliberately imposed a lower standard of proof as the standard appropriate for these proceedings.

Mr De Mello submitted, as I have said, that to take these proceedings was an abuse of the process. It is said that previous inquiries which had led to no charges had exonerated Mr He. But that is not the position. He has not been exonerated. The decision has been that criminal proceedings should not be instituted, no doubt because it was considered that they would not succeed. But the fact that the matter was referred to the Director shows that the police did not believe that Mr He was to be regarded as an entirely innocent man. In any event, as I have said, Parliament has quite clearly indicated that a claim may be brought under Part 5 whether or not a prosecution is brought; see 2(6).

Mr De Mello submits that this is retrospective, and he relies on Article 7, in particular, of the European Convention on Human Rights. As far as material, Article 7 provides:

The authorities to which I have already referred make it plain that there is no question of any penalty involved in these proceedings. Furthermore, there has been no conviction of a criminal offence leading to a penalty. Of course, property cannot be recoverable unless, at the time it was acquired, it was obtained through unlawful conduct. That conduct must have been criminal at that time. To that extent, the prohibition against retrospectivity will apply, but only because the Act says that the property must be property which was obtained by criminal conduct. In those circumstances, it is quite clear that Article 7 has no application.

Reliance again is placed on Article 1 of the First Protocol. That is the Article which prohibits interference with property, but it is subject to the ability of the state to take measures which are in accordance with the law and which are regarded as necessary. Article 1 of the First Protocol reads:

I have already referred to M v Italy. Arcuri v Italy is another case to the same effect that this type of provision will not fall foul of Article 1 of the First Protocol provided that the measure in question is regarded as proportionate. In Arcuri v Italy, the circumstances were that the first applicant was suspected of being a member of a criminal organisation involving drug trafficking. Proceedings were instituted against him under the preventive measure, and by an order of 31st October 1995, the president of the division of the Turin District Court, who specialised in preventive measures, ordered the seizure of the assets in question, which included eight vehicles, several plots of land and flats, two private company shares and numerous documents. He noted that the inspections carried out by the national anti-Mafia brigade showed a discrepancy between the first applicant's financial means and his legal business activities and declared income. The test applicable was that it was reasonably probable that he was involved in a criminal association.

At page 3 of the report I have, the relevant domestic law is identified thus:

Hence my reference earlier to the reverse standard. It was decided, at page 5, as follows:

The court went on to decide that it did and that the measure was proportionate. Whilst the situation in this country is not, I hope, as dire as that represented by the activities of the Mafia in Italy, nonetheless Parliament has quite clearly decided that these measures are necessary in order to fight crime, and in particular to ensure, as far as possible, that those involved in crime should be unable to enjoy the fruits of their criminal activities. The measure is not as severe as the Italian measure, in particular it raises no presumptions and there is no question of any reverse burden of proof. Nonetheless, it seems to me that it would be quite wrong for me to strike these provisions down, in effect, when I know that Parliament has decided that they are indeed necessary. In my judgment, therefore, the provisions in question are indeed proportionate.

Mr De Mello also raised Article 8, the right to a family and personal life, but it seems to me that, even assuming it applies, it adds nothing, and the question of proportionality applies equally to it as it does to Article 1.

The unlawful conduct relied upon now is the alleged laundering of money suspected to have resulted from breaches of the Immigration Act, in that asylum seekers or other Chinese entrants are working when forbidden to do so, or evading tax. In addition, there is some evidence that Mr and Mrs He's lifestyle is such as is incompatible with the declared income upon which he has paid tax. The evidence that Mr He himself is now involved in people trafficking is not strong. However, there is the Greek conviction to which I have already referred. But any change of emphasis in the identification of criminal conduct does not mean that there was not, when the interim receiving order was obtained, a good arguable case that the property was recoverable property.

Mr De Mello submits that, on an application to discharge or vary under section 251(3), or the exercise of the court of its obligations under section 254(1), a good arguable case is no longer the correct test; the Director must establish that the property is indeed, on the balance of probabilities, recoverable. The Act sets out the steps which could be taken to obtain recoverable property. The first steps are investigatory. First, there are production orders, in order to get documents and information. Then, if necessary, there may be an interim receivership order. Following that, at the end of what can be regarded as the investigatory stage, comes an application for a recovery order.

The obtaining of an interim receivership order is based upon a good arguable case. If a respondent wishes the court to discharge such an order, he must establish that the property is not recoverable, or if the court is to act of its own motion under section 254, or perhaps following an application, the court must be persuaded that the property is not recoverable.

The court should not, in my judgment, at that stage, consider in advance the issues which it will have to consider if a decision is made to make a recovery application. Nor is it appropriate to pre-judge the receiver's report. But, even if I am wrong about that and that puts the case too high against a respondent who applies to discharge or vary, I have no doubt that the good arguable test must continue to apply. There is nothing in the Act that suggests to the contrary, and it seems to me that, until the receiver's report comes through, then, unless property is regarded as not recoverable -- and no doubt the receiver may well get information at an early stage or during her investigations which establishes that property is not recoverable -- the receivership order can continue in relation to property in respect of which there is a good arguable case that it is indeed recoverable.

As I have said, Mr He has put forward a number of detailed statements in which he challenges the allegations made against him. I have already referred to the interim report of the receiver and her conclusions. Mr De Mello emphasises her use of the word "may" and that does not, he submits, measure up to the required test. But, as it seems to me, it is plain from her report that there are and remain real and well-founded concerns that Mr He has indeed been involved in money laundering and that the cash and the properties which have been obtained are, or may well be, recoverable property. In my judgment, it is plain that a good arguable case still exists.

However, it is plain that there is a need for expedition. The receiver has an obligation to report as soon as practicable and there is a serious interference with Mr He's property and his ability to carry on business if the reality is that he is not in any way involved in criminal conduct and this is not to be regarded as recoverable property. The matters which the receiver has to investigate are of some complexity, and it is not surprising that she is taking some time to resolve them. But the time is nigh when enquiries must be brought to a conclusion. It seems to me that in the very early part of next year those conclusions must be reached. I am prepared, therefore, to indicate that, in my judgment, there should be no variation or discharge of the interim receivership order at present. But if there has been no report by a particular time in the early part of next year, then it will be open to Mr He to make a further application to the court and the court will be highly sympathetic, unless there is a very good reason given for failure to conclude the enquiries. Subject to that, this application must be dismissed.

Mr Bird, we did, I think -- I cannot remember the details -- raise this in the course of argument and I think I omitted to make a note of time, because you did accept as I recall that it was reasonable to expect --

MR BIRD: Yes. I accepted the principle, and the information that we had from one of the receiver's employees, who was at court on the last occasion, was that it was hoped that by the end of the year or the earlier part of January, the report would be completed. If your Lordship were minded to say something like 15th or 21st January, one of those two dates, I suspect that sounds about right. 15th January?

MR JUSTICE COLLINS: Mr De Mello, do you have any observations on that?

MR DE MELLO: Yes, I would, of course, invite you to consider less time.

MR JUSTICE COLLINS: Of course, but I have to recognise that Christmas is nearly upon us.

MR DE MELLO: Yes. Christmas works in both ways, because, as you appreciate, the respondent in this case has a livelihood. I note that you have considered that in your judgment, and what I would respectfully submit is no longer than four weeks as from today, if you consider that to be appropriate.

MR JUSTICE COLLINS: Well, in fact, when you have regard to the fact that one has to take out the time over Christmas, when no work can reasonably be expected to take place, 15th January is not much longer than that. So I am prepared to say 15th January.

MR DE MELLO: Whilst I am on my feet, of course, as a matter of formalities, I ask for permission to appeal, but that may not turn out given that the 15th January may well come before.

MR JUSTICE COLLINS: I appreciate that this is -- I have dealt with quite a lot of points on this legislation, and as far as I am aware this is the first case which has dealt with it in this jurisdiction.

MR DE MELLO: Yes, the Northern Ireland cases have dealt with it, but it is the first case in this jurisdiction.

MR JUSTICE COLLINS: What do you say about it, Mr Bird?

MR BIRD: My Lord, we would say that this is a matter where, if there is to be permission to appeal, it should come from the Court of Appeal rather than your Lordship. Your Lordship has given a, if I may say so, extensive judgment dealing with all of the points on a broad ranging attack on the legislation. In my submission, your Lordship should be confident in your judgment and leave it to stand and leave my learned friend to ask the Court of Appeal to deal with it later on.

MR JUSTICE COLLINS: Yes. I am concerned about the practicalities more than anything, Mr De Mello. I mean I appreciate that this is the first time, but on the other hand I am persuaded that the conclusions that I have reached really are quite unlikely to be successfully appealed. That sounds a bit arrogant, but one has to form a judgment. No, I think that, in the circumstances, you must persuade the Court of Appeal.

MR DE MELLO: As I understand from the last part of your Lordship's judgment, the receiver will be given until the 15th January.

MR JUSTICE COLLINS: The effect of it is, as you rightly say, that if no report is forthcoming by then, because you have to be shown the report under the terms of the Act, then you have the right to come here -- and you will have a very sympathetic ear -- to discharge the order unless there is a very good reason given for any further delay.

MR DE MELLO: Thank you very much.

MR BIRD: My Lord, there is an application for costs. I hope my Lord has a schedule, which has been submitted to the court?

MR JUSTICE COLLINS: Was it produced earlier?

MR BIRD: It was sent to the court since the last hearing, I think.

MR JUSTICE COLLINS: In that case it has not been passed to me.

MR DE MELLO: I have not seen a copy. It has been served on my solicitors, but I do not know if my learned friend has a spare copy. (Handed).

MR JUSTICE COLLINS: First of all, costs in principle.

MR DE MELLO: My Lord, in principle, my observations are as follows. Effectively the respondent in this case applies for a variation of an order made. Secondly, the receiver has chosen not to attend the hearing. The third thing is that --

MR JUSTICE COLLINS: Well, that I do not think is material.

MR DE MELLO: But the important thing is that he has applied for an order to discharge the receivership order which was imposed upon his own property, and it would be wrong we say, in principle, unless there are exceptional circumstances otherwise to justify the making of an order for costs in circumstances where he has been unsuccessful. We also ask you to consider that he has to fund this himself without drawing any --

MR JUSTICE COLLINS: Well, this is what is slightly perturbing. I have not rechecked the order, but is this one that extends to all property, or is it merely the property which is in the freezing order?

MR BIRD: It is only in relation to specific property scheduled to the freezing order, there is not an all property provision.

MR DE MELLO: But everything that actively comes in terms of funding comes from the Futsing property, and he has no other sources other than.

MR JUSTICE COLLINS: I understand. His source of income is very, very substantially decreased because of his inability to run the company at all for the moment.

MR DE MELLO: Exactly. It is tied with the business, the Futsing business -- that is where his income is from, and that is what the receiver also agrees, that his lifestyle is closely linked to that business.

MR JUSTICE COLLINS: Mr De Mello, I think in principle it is difficult to resist an order for costs. What I would propose to do, subject to Mr Bird, is to make an order that it be not enforced until further order, having regard to the constraints upon your client's use of property for the moment.

MR DE MELLO: Yes, and it may be well be that on 15th January, if the receiver does not provide --

MR JUSTICE COLLINS: If there are no proceedings, then, of course, you may have the right to apply for compensation under section 283. Of course, if you win in due course, Mr He again may have the right to compensation. But these costs would normally be "in any event" costs, because you have failed to succeed in obtaining the variation or discharge.

MR DE MELLO: Another way you may look at it, my Lord, is to see whether it is best that the question of costs should be deferred until after 15th January.

MR JUSTICE COLLINS: I see the point, but, no, I think, as I say, this would normally be "in any event". I think the fairest way of dealing with it, and the one which I hope will protect your client's interests, is if in due course the matter does not go ahead, or if he succeeds, as I say, to make an order but to say that it should not be enforced without leave of the court.

MR DE MELLO: Thank you.

MR JUSTICE COLLINS: Now, as far as quantum is concerned, Mr De Mello, have your solicitors had chance to consider that? (Pause). I do not want to bounce you into anything. Obviously you must have the opportunity of considering it.

MR BIRD: My Lord, if it assists, we have received a schedule from my learned friend's side in the normal way and his costs are significantly higher than ours.

MR JUSTICE COLLINS: I am bound to say that, on the face of it, they do not look at all unreasonable.

MR BIRD: They are for two hearings, of course. In the hearing before McCombe J, costs were reserved. Our total costs are £37,812. My learned friend's are £49,609. So on that basis --

MR JUSTICE COLLINS: On the other hand, of course, you are entitled, if you so wish, to a detailed assessment.

MR DE MELLO: Yes.

MR JUSTICE COLLINS: I tend to be fairly reluctant to go into summary where there are real disputes about the amount of time and so on, because, frankly, one needs usually rather more information for those sorts of disputes. Shall I leave it like this: you have an opportunity to consider, if you agree a sum, then of course I will make an order in that sum. If, between you, you take the view that you want me to make a summary assessment -- and, as I have indicated, I am not sure I really have the sufficient information -- then come back this afternoon. If you cannot agree, and if you accept that summary is perhaps not possible, then it will be a detailed assessment.

MR DE MELLO: As far as coming back this afternoon, I am likely to be in some difficulty, my Lord.

MR JUSTICE COLLINS: Then do it in writing, if the need arises.

MR BIRD: My Lord, can I then suggest that in fact the order that my Lord makes is the Director's costs to be the subject of a detailed assessment if not agreed?

MR JUSTICE COLLINS: Yes.

MR BIRD: Not to be enforced without further order of the court?

MR JUSTICE COLLINS: I think that is probably the sensible order. If you want me to change that, you can come back, or if you reach an agreement it does not need a further order. I think that is probably the most sensible thing to say at the moment, do you not, Mr De Mello?

MR DE MELLO: Yes.

MR JUSTICE COLLINS: In which case that is what I will order. I am sorry it has taken rather a long time to read that out, but it did cover quite a lot of ground. Thank you.