(1) R Merida Oil Traders Ltd v Central Criminal Court (1st Defendant) Commissioner of Police for the City of London (2nd Defendant) Hammersmith Magistrates Court (3rd Defendant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Gross |
| Judgment Date | 11 April 2017 |
| Neutral Citation | [2017] EWHC 747 (Admin) |
| Docket Number | Case No: CO/3917/2016 and CO/4192/2016 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 11 April 2017 |
[2017] EWHC 747 (Admin)
IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Gross
and
Mr Justice Leggatt
Case No: CO/3917/2016 and CO/4192/2016
(1) Rupert BowersQC (instructed by Abbey Solicitors) for the Claimant
Andrew Bird (instructed by The Comptroller & City Solicitor, City of London Corporation) for the Second Defendant
(2) David PerryQC andKatherine Hardcastle (instructed by Peters & Peters) for the Claimants
Andrew Bird (instructed by The Comptroller & City Solicitor, City of London Corporation) for the Interested Party
Hearing date: 14 March, 2017
Judgment Approved
This is the judgment of the court to which Mr Justice Leggatt has made a very substantial contribution.
Introduction:
Protecting market integrity is of the first importance. Money laundering and other forms of corruption are corrosive and destructive of confidence. It is therefore essential that the London financial markets are honest and seen to be so. Where necessary, strong policing action must be taken and will be supported by the courts.
At the same time a core reason why the London financial markets enjoy confidence internationally is that they are subject to the rule of law. Investors in or through the London markets rely on the security of knowing that their assets will not be confiscated or seized other than through the due process of law, applied fairly to all.
The present case raises for consideration how these two laudable objectives are to be reconciled in the exercise of powers conferred on law enforcement agencies by the Proceeds of Crime Act 2002 (" POCA").
We cannot avoid giving expression to certain concerns arising from this case. It is or ought to be clear that applications are only to be made without notice when there is good reason why notice cannot be given – either because of extreme urgency or because it would defeat the purpose of the application. Further, when applications are made without notice, there is a duty of disclosure. The essence is the need for a fair presentation. Law enforcement agencies are entitled to support when engaged in proper and vigorous activity; but they cannot expect carte blanche and will lose support when, for no good reason, they keep relevant information from the very court whose assistance they are seeking. This is not a criticism of any individual; it is more a matter of the mindset underlying the making of the applications which led to the orders now under challenge.
The facts:
These two claims for judicial review, which have been heard together, arise out of the same facts. The claimant in the first action ("Merida") and the first claimant in the second action ("Bunnvale") are both companies incorporated in the British Virgin Islands which traded in energy derivative contracts on the Intercontinental Exchange ("ICE") in London. The trading was conducted through a broker, Archer Daniels Midlands Investor Services International Limited ("ADM"), which holds a clearing account with the ICE. The second claimant in the second action ("TICOM") is a Russian company affiliated with Bunnvale. TICOM had an agreement with ADM under which it was entitled to receive commissions on transactions undertaken by ADM for clients introduced by TICOM.
In May 2015 the ICE made a suspicious transaction report to the Financial Conduct Authority ("FCA") concerning the trading activities of Merida, Bunnvale and another company, Intoil SA. The essential concern identified in the report was that Bunnvale appeared to be making money on all of its transactions with Merida and Intoil. The report suggested that this could be indicative of fraud or money laundering, although innocent explanations were also possible.
It does not appear that any action was taken by the FCA. However, in February 2016 the City of London Police ("CoLP") began an investigation into the activities of Bunnvale, Merida and Intoil and also into the activities of two employees of ADM, Mr Niadvetski and his assistant Mr Osbourne, who conducted the relevant trading on behalf of Bunnvale. On 23 March 2016 Mr Niadzetski was arrested and interviewed under caution. At about the same time ADM suspended the two ADM employees and froze the client accounts of Bunnvale, Merida, Intoil and also TICOM.
ADM decided that it wished to terminate its relationships with these companies and obtained the consent of the National Crime Agency ("NCA") and the CoLP to liquidate the trading positions of Bunnvale, Merida and Intoil. On 29 March 2016 Bunnvale and TICOM gave instructions to ADM to return the funds held in their accounts, but ADM replied that it was unable to accept these instructions. On 5 April 2016 English solicitors instructed by Bunnvale made a similar demand. On 8 April 2016 ADM sought consent from the NCA and the CoLP to pay the closing balances to the account holders. Such consent was refused.
On 19 April 2016 a meeting took place between Mr Brimble, the Director of Legal and Compliance at ADM, two representatives of ADM's solicitors, Eversheds, and two officers from the CoLP. At this meeting DC Dainty of the CoLP said that he could obtain a court order for the production of material including cheques or bankers' drafts. He invited ADM to create such cheques or drafts for the closing balances payable to their clients before he obtained such an order. ADM agreed to do so.
It appears that the position of TICOM was not discussed at this meeting but a few days later DC Dainty learnt from Mr Brimble that ADM also wished to terminate its relationship with TICOM, a company closely linked to Bunnvale which also held an account with ADM and acted as an introducing agent. DC Dainty told Mr Brimble that the CoLP would include TICOM in its investigation.
On 20 April 2016 ADM had informed Bunnvale that any queries relating to the freezing of its funds should be directed to Detective Inspector Mullish of the CoLP. Solicitors acting for Bunnvale attempted to contact DI Mullish on several occasions over the following days but the only response received was an email sent on 25 April 2016 saying "I will endeavour to contact you within the following 14 days".
The arrangements for the creation and production of cheques for the balances payable to the four companies were confirmed in an email sent by DC Dainty to ADM on 4 May 2016. This stated:
"As discussed, we intend to seize this cash by means of Special Procedure Production Orders, which will require ADM to produce for the City of London Police the business material it holds for Bunnvale Ltd, Intoil SA, Merida Oil Traders Ltd and TICOM. This order will also specify the cheques or bankers drafts (payable to the account holders) for the outstanding balances on the five trading accounts ADM has for the companies. Please can you ensure these cheques or bankers drafts are in existence prior to the date or [sic] the Production Orders will be Friday 6 May 2016."
On the same day, Mr Brimble notified DC Dainty that the closing balances for which cheques would be drawn by ADM were as follows:
• US$13,431,590.26 in Bunnvale's trading account;
• US$2,819,328.12 and US$781,313.01 in the two trading accounts held by Merida;
• US$4,690,429.41 in the trading account of Intoil; and
• US$131,958.57 in the account of TICOM.
On 6 May 2016 DC Dainty applied to the Central Criminal Court for orders under section 345 of POCA requiring ADM to produce material relating to each of the five accounts, including cheques for the amounts set out above. The application was made without notice to the companies to whom the cheques were payable and was therefore heard in their absence. The application was heard by HHJ Gordon, who made the orders sought. Officers from the CoLP then attended the offices of ADM's solicitors and took possession of the cheques.
Also on that day (which was a Friday), Bunnvale obtained an account statement from ADM which referred to a payment by cheque to the CoLP for the entire balance in Bunnvale's account. Bunnvale's solicitor tried to contact DI Mullish by telephone and managed to speak to him. However, DI Mullish refused to explain what had happened in relation to the funds in Bunnvale's account, saying only that all would be revealed the coming Monday.
On Monday, 9 May 2016 the CoLP sent emails to the companies to whom the cheques were payable attaching a written application, to be heard at 10am the next day at Hammersmith Magistrates' Court, for an order under section 295 of POCA authorising the continued detention of cash seized from the companies in the amounts of the cheques. The email intended for Merida was sent to the address of its trader in Moscow. The day on which it was sent was a holiday in Russia, and the email was not seen until after the hearing. The email giving notice of the application to Bunnvale and TICOM was sent to their English solicitors, who attended the court in which the application was listed on 10 May 2016 with counsel to oppose the application. However, the application was heard in a different court in their absence. At the hearing District Judge Coleman made an order authorising the continued detention of the cash for a period of six months.
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