JSC BTA Bank v Ablyazov
| Jurisdiction | England & Wales |
| Judge | Lord Justice Pill,Lord Justice Sedley |
| Judgment Date | 27 October 2009 |
| Neutral Citation | [2009] EWCA Civ 1125,[2009] EWCA Civ 1124 |
| Docket Number | Case No: A3/2009/1958 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 October 2009 |
[2009] EWCA Civ 1124
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr JUSTICE TEARE
Lord Justice Pill
Lord Justice Sedley and
Lord Justice Moses
Case No: A3/2009/1958
Mr S Smith QC and Mr T Akkouh (instructed by Lovells LLP) for the Claimants
Mr B Doctor QC and Mr A Tolley (instructed by Clyde & Co LLP) for the First to Third Defendants
Mr J Cohen (instructed by Magrath LLP) for the Fourth to Seventh Defendants
Hearing dates: 29 th-30 th September, 2009
Lord Justice Moses :
The Appeal of Drey Associates Limited (4th Defendant)
The issue in the 4 th Defendant's appeal is whether s.13 of the Fraud Act 2006 has removed the privilege against self-incrimination in respect of an offence under s.328 of the Proceeds of Crime Act 2002 (“ POCA 2002”). The 4 th Defendant, Drey Associates Limited, contends that were it to comply with the order of Teare J, the information sought could be used to found a charge against it under s.328. The result was stated at the end of the hearing and these are the reasons.
Flaux J, in his judgment of 11 September 2009, concluded that Drey Associates Limited was not entitled to rely upon the privilege against self-incrimination because an offence under s.328 was a “related offence” within the meaning of s.13(4) of the Fraud Act 2006.
S.13 of the Fraud Act 2006 removes the privilege against self-incrimination in respect not only of offences under the Fraud Act 2006 but in respect of “related offences” defined by s.13( 4). S.13(4) provides:—
“'related offence' means –
a) conspiracy to defraud;
b) any other offence involving any form of fraudulent conduct or purpose.”
POCA 2002 S.328(1) provides:—
“A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property, by or on behalf of another person.”
The 4 th Defendant contends that the scope of that section is so broad that it embraces conduct which does not necessarily involve either fraudulent conduct or purpose. Accordingly, s.328 does not fall within the definition of “related offence”.
Before embarking upon any analysis of this submission, I should identify issues with which this appeal is not concerned.
Any person claiming privilege on the grounds of self-incrimination must satisfy the court that there are real and not fanciful grounds justifying his fear that the information sought would tend to incriminate him (see, e.g., Moore-Bick LJ, Kensington International Limited v Republic of Congo [2007] EWCA Civ 1128 [2008] 1 ALL ER (Comm 934, § 33) and Sociedade Nacional v Lundquist [1991] 2 QB 310 at 324F (per Staughton LJ)). The statements, placed before Flaux J, on which the claim to privilege were based were so lacking in substance and raised such questions as to who lay behind the claim for privilege that the 4 th Defendant sought an adjournment so as to flesh out what appeared to be so skeletal. Flaux J refused an adjournment; in the light of his ruling it was unnecessary. It does not seem to me, therefore, that it is open to the Bank, in this appeal, to rely upon any inadequacies in the way the claim to privilege was raised.
Flaux J noted that the claim against the 4 th Defendant was that it was used as a vehicle by which “its ultimate beneficial owners diverted monies away from the bank dishonestly and by deception, not disclosing their connection with the 4 th Defendant” [21]. The Bank contends that it is obvious that the 4 th and 5 th Defendants were aware of the Compensation Agreements at the heart of the alleged fraud and must have assisted, in England, in enabling the Bank's funds to be transferred. Moreover, on 13 August 2009, the date of Blair J's first order, Clyde & Co LLP, then acting on behalf of the 4 th Defendant, asserted that it was a shareholder in the Bank and that it had a claim, valued in the region of US $ 1.5 billion. These factual allegations suggested a conspiracy to defraud in which the 4 th Defendant had participated.
There was no agreement as to whether that was argued before Flaux J. The suggestion that the 4 th Defendant was likely to incriminate itself in respect of an offence of conspiracy to defraud in relation to s.328 gave rise to two potential disputes: firstly, as to the territorial reach of conspiracy to defraud and secondly, whether the fact that the 4 th Defendant was as likely to incriminate itself in respect of conspiracy to defraud, expressly within the ambit of s.13(4), renders pointless a contention that s.328 was outwith its scope. These points could not be properly argued in the time available and should not, I suggest, divert the attention of this court from the question whether an offence under s.328 is a “related offence”.
The foundation for the 4 th Defendant's contention that an offence under s.328 falls outwith the definition of “related offence” is the proposition that the court is limited to consideration of the essential character or ingredients of the offence, rather than the particular manner in which it might have been committed. This contention derives from dicta of Moore-Bick LJ in Kensington. In that case Moore-Bick LJ, with whose judgment May LJ agreed, concluded that bribery was a related offence because offering or giving a bribe “necessarily involves a form of fraudulent conduct or purpose within the meaning of s.13(4)(b)”. [63].
Counsel for the party asserting privilege sought to argue that fraud was not a necessary or inevitable characteristic of corruption offences because a bribe might be offered in circumstances where there was no fraudulent conduct or purpose of any kind. Moore-Bick LJ appears to have accepted that if there were circumstances in which a corruption offence might be committed without fraudulent conduct or in the absence of a fraudulent purpose it could not be a related offence within the meaning of s.13(4)(b):—
“If he (counsel for the party claiming privilege) were right, corruption offences would not in my view be 'related offences' within the meaning of s.13(4)(b) since I agree that the matter has to be judged by reference to the essential character of the offence rather than one particular manner of committing it.” [62]
Moore-Bick LJ concluded, however, that offering or giving a bribe necessarily involves a form of fraudulent conduct or purpose [63].
But I must express some anxiety in applying Moore-Bick LJ's approach to an offence under s.328. S.328 is one of a series of offences (ss.327–329) which concern criminal property as defined by s.340 of the Proceeds of Crime Act 2002. S.340 provides:—
“(2) Criminal conduct is conduct which –
a) constitutes an offence in any part of the United Kingdom or
b) would constitute an offence in any part of the United Kingdom if it occurred there.
(3) Property is criminal property if –
a) it constitutes a person's benefit from criminal conduct or it represents such a benefit in whole or in part and whether directly or indirectly, and
b) the alleged offender knows or suspects that it constitutes or represents such a benefit.”
This offence has been described as “extraordinarily broad” (see Smith & Hogan (12 th Edition, page 954). In Bowman v Fells [2005] 1 WLR 3083, this court held that the provisions were not intended to cover or affect the ordinary conduct of litigation by legal professionals. But the very fact that the issue merited serious consideration demonstrates the wide scope of this part of the Act.
There is considerable difficulty in identifying the essential characteristics of an offence under s.328, particularly since it covers any criminal property, may be committed without any fraudulent intention, and embraces the broad and informal concept of an “arrangement”.
Moreover, it seems to me difficult to eschew any reference to the factual context in which the claim to privilege is asserted. After all, a person making such a claim may well need to establish that there are real grounds for fearing incrimination, for which purpose he may have to refer to the factual accusation he fears. Kensington itself refers to the factual context of the bribery charge to demonstrate that the fear of incrimination in respect of s.328 was fanciful [67].
In those circumstances, it is difficult to see why it should not be open to the Bank to contend that, if its allegations are true, the 4 th Defendant's conduct, if charged under s. 328, was clearly fraudulent and undertaken for a fraudulent purpose. The series of offences (ss.327–329), of which s.328 is one, is essentially parasitic. When the property is said to be derived from fraud, it is, as Mr Smith QC submitted, absurd that those who are thought to have defrauded the Bank of its property may be deprived of their privilege against self-incrimination but not those who assisted in its retention and concealment.
In the context of an urgent appeal, it is faintly ridiculous that this court should be required to give a binding ruling whether Moore-Bick LJ's approach in Kensington requires this court to identify the essential characteristics of s.328, applicable in every case, particularly when the participation of the 4 th and 5 th Defendants, if proved, is so obviously fraudulent, and the identity of who it is who is said to fear prosecution remains, as yet, so nebulous.
But this appeal has been heard as a matter of urgency, and a speedy...
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