Capper v Chaney & Anor

The Metropolitan Police have been investigating money laundering. Their investigations led them to a safety deposit business in Finchley Road in London. Acting under a warrant, on 2 June 2008 they seized cash held in safety deposit boxes there as evidence. Box number 1005 was rented by Mr Daniel Chaney. The police found about £330,000 in his box. On 14 August 2008 they re-seized it under powers contained in Part 5 of the Proceeds of Crime Act 2002 (“POCA”). On the following day the City of Westminster Magistrates Court made an order under section 295 of POCA detaining the cash on the ground that there were reasonable grounds to suspect that the cash was obtained through unlawful conduct or was intended for use in unlawful conduct; and its continued detention was justified while investigations into its derivation were ongoing. The magistrates have, by order, extended the period of detention several times. The case advanced by the Commissioner of Metropolitan Police (“the Commissioner”) is that the cash represents the proceeds of Mr Chaney’s criminal activities. On 11 May 2010 DS Pepperall of the Metropolitan Police applied for forfeiture of the cash under section 298 of POCA.

In the meantime, however, Mr Capper claimed that most of the cash was his. He applied to the magistrates for the release of £250,000 which he said belonged to him; and which he said he had entrusted to Mr Chaney for safekeeping. He gave evidence in support of his application. Mr Chaney consented to the release of the £250,000 to Mr Capper; but did not give evidence on that occasion. On 6 April 2009 District Judge Riddle refused that application. He said that he had not been satisfied that Mr Capper owned the cash; and that he was not satisfied that grounds for suspicion had ceased to exist.

On 22 July 2009 Mr Capper issued proceedings in the Chancery Division of the High Court. By his Part 8 claim form he claims a declaration that he is the beneficial owner of the £250,000. Mr Chaney is the first defendant to the claim. The Commissioner is the second defendant. Mr Chaney does not contest the claim; and never has. Indeed, he has made a witness statement in which he corroborates Mr Capper’s account of how the cash came to be entrusted to him. However, the Commissioner does contest the claim. Nevertheless the Commissioner has applied to strike out the claim not only against him but against Mr Chaney as well. In the alternative he has applied to stay the claim until after the determination of the forfeiture proceedings in the magistrates’ court. On 16 April 2010 Master Bowles refused both limbs of the application; but granted permission to appeal.

Section 204 of POCA describes the general purpose of Part 5 of the Act as follows:

“This Part has effect for the purposes of—

(a)

enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct,

(b)

enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates' court or (in Scotland) the sheriff.”

Two points emerge from this. First, POCA allocates jurisdiction in respect of the recovery of property to the High Court; but allocates jurisdiction over the forfeiture of cash to the magistrates’ court. Second, whether the court is concerned with the recovery of property or the forfeiture of cash, the proceedings are civil proceedings. Chapter 2 of Part 5 of POCA deals with recovery of property in the High Court. Chapter 3 deals with the recovery of cash in summary proceedings.

Where a constable (or customs officer) has reasonable grounds to suspect that cash is “recoverable property” or intended for use in crime he may seize and detain it for up to 48 hours: POCA ss. 294 and 295. The magistrates may extend the period for up to three months at a time; subject to a maximum of two years: POCA s. 295 (2). Before the magistrates may make such an order they must be satisfied of one of two conditions POCA s. 295 (5), (6). In summary, the relevant condition in our case is that there are reasonable grounds to suspect that the cash was obtained through unlawful conduct; and that either its continued detention is justified while investigations are ongoing into its derivation or consideration is being given to bringing proceedings for a criminal offence connected with the cash or such proceedings have been started: POCA s. 295 (5).

Cash detained under section 295 may be released in a number of circumstances. First, the police (or customs and excise) may agree to its release if satisfied that detention is no longer justified: POCA s. 297 (4). Second the person from whom the cash has been seized (in our case Mr Chaney) may apply to the magistrates for release of the cash. The magistrates may direct release if they are satisfied that the conditions in section 295 are no longer met in relation to the cash: POCA s. 297 (2), (3). Third, a victim or a third party who claims to own the cash may apply for release; POCA s. 301. This was the section under which Mr Capper made his unsuccessful application to the magistrates. I will come back to its provisions.

At any time during the period when cash is subject to detention, the magistrates’ court may, on application of the police, order its forfeiture. It may only do so if satisfied that the cash is recoverable property (i.e. the proceeds of crime) or intended to be used in crime: POCA s. 298. Mr Capper is, in principle, entitled to be heard on the application: Magistrates’ Courts (Detention and Forfeiture of Cash) Rules 2002 r. 11 (1). If the application goes against him he has a right of appeal to the Crown Court: POCA s. 299 (1).

Deciding whether the cash is or is not recoverable property may not be straightforward in some cases. Sections 304 to 308 contain elaborate provisions which enable property to be followed or traced from the property obtained through the original crime. Thus if, for example A steals a car and then sells it in return for a cheque, the cheque will represent the car and thus be recoverable property. If A pays the cheque into the bank so much of his credit balance will be recoverable property. If the account earns interest, and he then withdraws in cash both the original amount of the payment for the car and the interest, both the cash and the interest will be recoverable property. If he gives the cash to his wife, it will remain recoverable property. If she uses it to carry out improvements to the matrimonial home which she then sells, part of the proceeds of sale will be recoverable property. All these questions are potentially relevant to a determination by the magistrates in deciding whether cash should be forfeited.

Section 298 (4) says:

“Where an application for the forfeiture of any cash is made under this section, the cash is to be detained (and may not be released under any power conferred by this Chapter) until any proceedings in pursuance of the application (including any proceedings on appeal) are concluded.”

Now that forfeiture proceedings are on foot, the cash may not be released until those proceedings have concluded. Section 301 says (so far as relevant):

“(1)

A person who claims that any cash detained under this Chapter, or any part of it, belongs to him may apply to a magistrates' court … for the cash or part to be released to him.

(2)

The application may be made in the course of proceedings under section 295 or 298 or at any other time.

(4)

If—

(a)

the applicant is not the person from whom the cash to which the application relates was seized,

(b)

it appears to the court … that that cash belongs to the applicant,

(c)

the court … is satisfied that the conditions in section 295 for the detention of that cash are no longer met or, if an application has been made under section 298, the court or sheriff decides not to make an order under that section in relation to that cash, and

(d)

no objection to the making of an order under this subsection has been made by the person from whom that cash was seized,

the court … may order the cash to which the application relates to be released to the applicant or to the person from whom it was seized.”

I have quoted the section without the amendments introduced by the Policing and Crime Act 2009 (which have not yet come into force). Mr Clutterbuck (who did not appear below) submits on Mr Capper’s behalf that section 301 (4) (d) is designed to ensure that the magistrates do not become embroiled in complicated property disputes between rival claimants to a fund of cash. There is some support for this submission in the explanatory notes to the bill which ultimately became POCA. The notes to clause 301 say:

“Subsection (4) relates to the case of any other true owner who is not the person from whom the cash was seized. Here, if the court is satisfied, the cash may be released – but only if the person from whom it was seized does not object. That proviso is intended to prevent the court from becoming involved in a complicated ownership dispute between the person from whom the cash was seized and the rightful owner of the cash.”

Four points can be made about this. First, it does not prevent the magistrates from adjudicating between rival claimants to the cash (as long as the person from whom the cash was seized does not object). Second, it applies only to section 301 and does not prevent the magistrates from deciding complicated ownership disputes when deciding whether to order cash to be forfeited under section 298. Third, it does not help Mr Capper on the facts of this case because Mr Chaney did not object to his application under section 301. Fourth, even though the person from whom the cash was seized does not object, it must still appear to the magistrates that the cash belongs to the claimant before they can release it. In other words the court must still scrutinise the claimant’s case and must, if necessary, apply concepts of property and ownership in order to decide that question. This is plainly designed to prevent (among other things) collusive applications.

Master Bowles decided that there was nothing in POCA which excluded the ordinary jurisdiction of the High Court to determine civil claims. His starting point, therefore, was that the issues raised by the claim form were straightforward private law issues to be determined by the High Court and that Mr Capper should not be denied the right to bring his claim without a scrupulous examination of all the circumstances. The circumstances then prevailing were that there were no forfeiture proceedings on foot and no promise or undertaking that there ever would be. That of course has now changed. The Master also observed that the essential issue in any forfeiture proceedings would not be the ownership of the seized cash, but whether it derives from unlawful conduct or was intended to be used in furtherance of unlawful conduct. Ownership of the cash might help the magistrates to decide whether the cash fell within that description, but it was not the ultimate issue. Thus the Master concluded that the court was not being asked to determine an issue of which another court was already seised; and was not being asked to decide the very issue that that other court might be called upon to decide. He also held that any decision of the High Court would bind all relevant parties in any subsequent forfeiture proceedings. If the High Court decided disputed issues of ownership that would remove that issue from the ambit of any future forfeiture proceedings, with a concomitant saving of time and cost in the criminal courts. Master Bowles then embarked on a consideration of the summary procedure for release of detained cash. He held that the refusal of an application for release in advance of forfeiture proceedings did not amount to final relief and did not therefore amount to a res judicata or issue estoppel. His ultimate conclusion was that Mr Capper’s claim was a genuine claim and was intended to obtain a genuine determination of the issue raised. He did not consider that Mr Chaney’s decision not to challenge Mr Capper’s claim undermined that conclusion. Although he considered that Mr Capper intended that any determination of the High Court would bind the magistrates’ court, that did not make the High Court claim an abuse. As far as the application for a stay was concerned, the Master decided that because there were no forfeiture proceedings on foot, there was no warrant for a stay; but that if forfeiture proceedings were subsequently begun the question of a stay could be reconsidered.

The Commissioner’s argument on appeal can be summarised as follows:

In paragraph 28 of his judgment the Master said:

“I am not persuaded that the authorities relied on by the Commissioner make good the broad proposition… that in circumstances where a statutory scheme has been enacted to deal with a particular question or issue, the High Court should, for that reason alone, decline jurisdiction to grant declaratory relief in respect of any issue capable of resolution within such statutory scheme, or to treat proceedings which raised such an issue as, necessarily, an abuse of process.”

The Master may have been justified on the basis of the authorities that were cited to him. But he was not referred to a line of authority dealing with the jurisdiction of the High Court in relation to questions within the competence of the commissioners for income tax. If he had been referred to this line of authority I think he would have come to a different conclusion. In the most recent authoritative statement of the principle in Autologic Holdings plc v Inland Revenue Commissioners [2006] 1 AC 118 Lord Nicholls said:

“12Clearly the purpose intended to be achieved by this elaborate, long established statutory scheme would be defeated if it were open to a taxpayer to leave undisturbed an assessment with which he is dissatisfied and adopt the expedient of applying to the High Court for a declaration of how much tax he owes and, if he has already paid the tax, an order for repayment of the amount he claims was wrongly assessed. In substance, although not in form, that would be an appeal against an assessment. In such a case the effect of the relief sought in the High Court, if granted, would be to negative an assessment otherwise than in accordance with the statutory code. Thus in such a case the High Court proceedings will be struck out as an abuse of the court’s process. The proceedings would be an abuse because the dispute presented to the court for decision would be a dispute Parliament has assigned for resolution exclusively to a specialist tribunal. The dissatisfied taxpayer should have recourse to the appeal procedure provided by Parliament. He should follow the statutory route.

13I question whether in this straightforward type of case the court has any real discretion to exercise. Rather, the conclusion that the proceedings are an abuse follows automatically once the court is satisfied the taxpayer’s court claim is an indirect way of seeking to achieve the same result as it would be open to the taxpayer to achieve directly by appealing to the appeal commissioners. The taxpayer must use the remedies provided by the tax legislation.”

The principle is not confined to specialist tribunals. It also applies where Parliament has allocated jurisdiction to a court of summary jurisdiction, such as the magistrates’ court: Barraclough v Brown [1897] AC 615; Horner v Franklin [1905] 1 KB 479.

In the present case, Parliament has assigned the resolution of disputes about cash alleged to represent the proceeds of crime to the magistrates’ court (and on appeal the Crown Court). Mr Capper’s claim in the High Court to ownership of the cash is an indirect way of seeking to achieve the same result as would be open to him by presenting his case to the magistrates’ court when the Commissioner’s claim to forfeit the cash is determined. On that basis, as Lord Nicholls said, it is an abuse of process. Accordingly, in my judgment the Master’s decision began from the wrong starting point.

Even if there is a residual discretion in the High Court, the way in which that discretion should be exercised was encapsulated in a passage in the judgment of Robert Walker J in Glaxo Group Ltd v Inland Revenue Commissioners [1995] STC 1075 which Lord Nicholls expressly approved:

“It is not easy to discern any clear dividing-line between High Court proceedings which are, and those which are not, objectionable as attempts to circumvent the exclusive jurisdiction principle. Possibly the correct view is that there is an absolute exclusion of the High Court’s jurisdiction only when the proceedings seek relief which is more or less co-extensive with adjudicating on an existing open assessment: but that the more closely the High Court proceedings approximate to that in their substantial effect, the more ready the High Court will be, as a matter of discretion, to decline jurisdiction.”

Before the magistrates’ court the essential factual issue is whether Mr Capper or Mr Chaney is the owner of the cash. The issue raised in the High Court is precisely the same. Thus even if the magistrates’ court does not have exclusive jurisdiction, the High Court ought, as a matter of discretion to decline jurisdiction. I respectfully disagree with the Master that the issue is not the same. But even if the Master was, in very formal terms, right he did not go on to consider how closely the issue in the High Court proceedings approximated to the issue before the magistrates in its substantial effect. Had he done so he must have concluded that there was a very close approximation.

Mr Clutterbuck said that there were procedural advantages to Mr Capper in continuing his claim in the High Court. The principal advantage was the availability of disclosure including, if necessary, third party disclosure. Although the magistrates’ court has power to issue a summons requiring a person to attend to give evidence or to produce documents (Magistrates’ Courts Act 1980 s. 97) this power does not entitle the magistrates’ court to order general disclosure of documents: R v Derby Magistrates’ Court ex p B [1996] 1 AC 487, 500. There may be some theoretical advantage to Mr Capper, although since the issue is whether he is, as he claims to be, the owner of the cash, one would expect that all the relevant documents would already be in his own possession or control. But even accepting that there may be some procedural advantage to him, what the submission really amounts to is a submission that Parliament has chosen the wrong forum for the adjudication of disputes relating to seized cash. Parliament having made its choice, the courts must respect that choice. In my judgment the supposed procedural advantages do not outweigh the other considerations I have mentioned.

Mr Capper originally argued that the Commissioner was joined to the proceedings simply because he was a bailee of the cash. In his skeleton argument before the Master (not prepared by Mr Clutterbuck) Mr Capper asserted:

“It is not open to the [Commissioner], against whom no claim is made, to interfere in private litigation between [Mr Capper] and [Mr Chaney]. Even if he had an interest in the outcome of that dispute (and, for the reasons set out below, he does not) this is a dispute between two individuals which they need to resolve in order to ascertain the destination of the Fund after it is released from the custody of the [Commissioner].”

This, with all respect, is a preposterous submission. There was no dispute between Mr Capper and Mr Chaney. Some three months before the proceedings in this court were issued Mr Chaney had already consented to the release of the cash to Mr Capper. He said in his acknowledgment of service that he did not contest the claim. And as I have said he provided a witness statement in support of Mr Capper’s case. If and when the fund is released from the custody of the Commissioner there is no reason to suppose that he will refuse to pay it over to Mr Capper, if that is what Mr Capper and Mr Chaney agree. In those circumstances the finite resources of the court should not be wasted on dealing with an illusory dispute which is not a test case and has no impact on anyone except the parties to it.

In addition, if as Mr Capper said no claim is made against the Commissioner, why join him at all? The answer is, as Mr Clutterbuck accepted and asserted, that Mr Capper wishes to use a decision of the High Court in order to create an issue estoppel as between him and the Commissioner for use in proceedings before the magistrates’ court.

In other words, Mr Capper’s real objective in bringing these proceedings is to pre-empt a decision by the magistrates on a question that Parliament has entrusted to them. In my judgment the use of the procedural machinery of court A to achieve a result in court B where court B is a domestic court of competent jurisdiction is properly characterised as a collateral objective. The remedy which he seeks from the High Court is of no practical use to him except to pave the way for a favourable decision from the magistrates’ court. To bring an action for a collateral purpose is itself an abuse of process.

In addition Mr Capper has already tried and failed to persuade the magistrate that he is the owner of the cash. Either that decision creates an issue estoppel or it does not. If it does, then that is an additional reason why this action is an abuse of process. But if it does not, then Mr Capper may make out his case again when the application for forfeiture is determined. To bring proceedings in the High Court following his failure to persuade the magistrate is, in my judgment, undesirable forum shopping.

I have considered whether to stay rather than strike out the proceedings. But to my mind there is no point in a stay. If the Commissioner succeeds in the application to forfeit the cash it will be because the magistrates’ court will have decided that it does not belong to Mr Capper. In that case the result of the action is a foregone conclusion. If the Commissioner fails in that application it will be because the magistrates’ court will have decided that the cash does belong to Mr Capper after all. In that case the Commissioner will pay over the cash to him; and this action will serve no useful purpose.

In those circumstances I will allow the appeal and strike out the claim.