National Crime Agency v Surin and Another (Defendants/Applicant)
| Jurisdiction | England & Wales |
| Judge | Judge Higgins |
| Judgment Date | 17 October 2013 |
| Neutral Citation | [2013] EWHC 3784 (QB) |
| Court | Queen's Bench Division |
| Date | 17 October 2013 |
| Docket Number | No: 1HQ/13/0325 |
[2013] EWHC 3784 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand
London
WC2A 2LL
His Honour Judge Higgins
(Sitting as a Judge of the High Court)
No: 1HQ/13/0325
Mr Mitchell (Mr R Osman for judgment) (Instructed by solicitors) appeared on behalf of the Applicant/Third Respondent
Mr Hall (Mr T Nersessian for judgment) (Instructed by the NCA Solicitors Office) appeared on behalf of the Respondent/Claimant
Approved Judgment
Thursday, 17 October 2013
The third respondent applies for exclusion from a property freezing order sums to cover her living and legal expenses. The application is opposed by the claimants. This matter has something of a history but very briefly the claimants seek as proceeds or a product of unlawful conduct, recovery of various assets from the first respondent who did not appear before the court on this application, and also the third respondent, who is the first respondent's wife, who did of course appear.
The first respondent is a convicted fraudster who has changed his name and now lives in Dubai, but the current proceedings do not relate to the fraud of which he was convicted, rather they relate to, as alleged, unlawful trading in the drug ketamine from which it is further alleged all of the relevant property was acquired, whether directly or indirectly. This the third respondent denies.
A property freezing order was obtained in September 2009, the claim being issued some 18 months later in May 2011, although it was not served until September 2011. A trial date has yet to be fixed and I am told that the first respondent has made many interlocutory applications to the court which it is said suggests that he is being intentionally obstructive.
The third respondent first made an application for exclusion in May 2012 and after going through various hearings leading to court judgments which were against her, the application in its current form came before this court on 15 October 2013 and 16 October 2013. That is yesterday and the day before. More particularly, the third respondent seeks £5,917.60 per month until the conclusion of the trial in respect of living expenses and between £180,000 and £200,000 in respect of legal expenses. Assuming trial within 12 months, this produces an aggregate claim on the frozen assets of between £250,000 and £300,000.
The frozen assets comprise, in the main, real property and expensive motor cars, but also cash in the region of £800,000 derived from the sale of an unfrozen property, the net cash receipt then being frozen. Further cash, in part from the sale of assets brings, I am told, the total cash held by the receiver to about £2 million. The aggregate value of the frozen assets runs to some millions of pounds.
As to the relevant law, the basic powers afforded to the court are to be found in section 245 in the Proceeds of Crime Act 2002, in particular 245C which says:
"Exclusions
(1) The power to vary a property freezing order includes (in particular) power to make exclusions as follows —
(a) power to exclude property from the order, and
(b) power, otherwise than by excluding property from the order, to make exclusions from the prohibition on dealing with the property to which the order applies.
(2) Exclusions from the prohibition on dealing with property to which the order applies (other than exclusions of property from the order) may also be made when the order is made.
(3) An exclusion may in particular make provision for the purpose of enabling any person —
(a) to meet his reasonable living expenses, or
(b) to carry on any trade, business, profession or occupation.
(4) An exclusion may be made subject to conditions.
(5) Where the court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that he has incurred, or may incur, in respect of proceedings under this Part, it must ensure that the exclusion —
(a) is limited to reasonable legal expenses that the person has reasonably incurred or that he reasonably incurs,
(b) specifies the total amount that may be released for legal expenses in pursuance of the exclusion, and
(c) is made subject to the required conditions (see section 286A) in addition to any conditions imposed under subsection (4).
(6) The court, in deciding whether to make an exclusion for the purpose of enabling a person to meet legal expenses of his in respect of proceedings under this Part —
(a) must have regard (in particular) to the desirability of the person being represented in any proceedings under this Part in which he is a participant, and
(b) must, where the person is the respondent, disregard the possibility that legal representation of the person in any such proceedings might, were an exclusion be made available under arrangements made for the purposes of Part 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, or funded by the Northern Ireland Legal Services Commission.
(7) ……….
(8) The power to make exclusions must, subject to subsection (6), be exercised with a view to ensuring, so far as practicable, that satisfaction of any right of the enforcement authority to recover the property obtained through unlawful conduct is not unduly prejudiced."
In effect, this clause also introducers into the legal framework the Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Proceedings) Regulation 2005 which, insofar as relevant, says this at clauses 4 and 5:
"Condition relating to work covered by exclusion
4. An exclusion from a property freezing order or interim receiving order must specify —
(a) the stage or stages in civil recovery proceedings to which it relates: and
(b) the maximum amount which may be released in respect of legal expenses for each stage to which it relates.
Condition relating to notification
5. If the solicitor acting for the person to whose legal expenses the exclusion relates becomes aware that -
(a) that person's legal expenses in respect of any stage in civil recovery proceedings have exceeded or will exceed the maximum amount specified in the exclusion for that stage; or
(b) that person's total legal expense in respect of all the stages to which the exclusion relates have exceeded or will exceed the total amount that may be released pursuant to the exclusion,
the solicitor must give notice to the [relevant enforcement authority] and the court as soon as reasonably practicable."
There was also a practice direction 7A.4 and 7A.7 which says this:
"The court —
(1) will not make an exclusion for the purpose of enabling a person to meet his reasonable legal costs (including an initial exclusion under paragraph 5B.1); and
(2) may set aside any exclusion which it has made for that purpose or reduce any amount specified in such an exclusion,
if it is satisfied that the person has property to which the property freezing order or interim receiving order does not apply from which he may meet those costs."
Then 7A.7:
"An exclusion made for the purposes of enabling the person to meet his reasonable legal costs will specify —
(1) the stage or stages in the civil recovery proceedings to which it relates;
(2) the maximum amount which may be released in respect of legal costs for each specified stage; and
(3) the total amount which may be released in respect of legal costs pursuant to the exclusion."
As to the correct approach to the application of these provisions, the court has the benefit of a very recent judgment of the Court of Appeal in the case of The Serious Organised Crime Agency v Amir Azam [2013] EWCA Civ 970. Lloyd LJ in delivery the judgment of the court quoted with approval the Master of the Rolls in the case of Re Peters, it is paragraph 35 of the Master of the Rolls' judgment:
""If a defendant against whom a restraint order has been made wishes to vary the order in order to enable him to use the funds or assets which are the subject of the order, which I will call "the restrained assets", in order to pay for his defence, it is for him to persuade the court that it would be just for the court to make the variation sought. I would call that the burden of persuasion. For example, if it were clear that the defendant had assets which were not restrained assets, the court would not vary the order because it would not be just to do so consistently with the underlying purpose of the restraint order."
Then at paragraph 43 of the judgment of the Master of the Rolls he says this:
"The question for the judge was whether X discharged the burden of proof or, as I would prefer to put it, the burden of persuasion. That depends upon an analysis of the facts. As I see it, on an application to vary a restraint order in a case of this kind, where the order relates to all the defendant's assets, the position in principle is that it is for the defendant to satisfy the court that it would be just to permit him to use funds which are identified as being caught by the order. If the court concludes that there is every prospect of the defendant being able to call on assets which are not specifically identified in the order, or assets which others will provide for him, I do not think that the court is bound to vary the order in the terms sought."
Lloyd LJ went on to review and analyse a range of cases and happily I need not repeat that exercise, because he summarised the position at paragraph 66 of his judgment. Insofar as relevant this is what he said:
"Accordingly, it seems to me that the position is...
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