National Crime Agency v Richard Joseph Leahy
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hilliard |
| Judgment Date | 18 May 2020 |
| Neutral Citation | [2020] EWHC 1242 (QB) |
| Court | Queen's Bench Division |
| Date | 18 May 2020 |
| Docket Number | Case No: QB-2018-000250 |
[2020] EWHC 1242 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Hilliard
Case No: QB-2018-000250
Mr Andrew Sutcliffe QC and Mr Alexander Cook (instructed by National Crime Agency) for the Respondent
Mr Tim Owen QC and Mr Edward Craven (instructed by Stokoe Partnership Solicitors) for the Applicants
Hearing date: 29 th April 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The underlying claim in this case is for a Civil Recovery Order (“CRO”) under sections 243 and 266 of the Proceeds of Crime Act 2002 (“ POCA”) in respect of 43 real properties, together with rental income derived from them. The case for the National Crime Agency (“NCA”) is that the properties and the profits derived from them are, or represent, property obtained through unlawful conduct. The claim is opposed by all the defendants. The first defendant, Mr Richard Leahy, owns and controls the various corporate vehicles which make up the second to the eleventh and thirteenth defendants (“the Leahy defendants”). The twelfth defendant, Caxton Street North Limited (“CSNL”), is an entity in which Mr Leahy is said to hold a one-third share.
On 31 st March 2017, prior to the commencement of the claim, the NCA obtained a Property Freezing Order (“PFO”), pursuant to section 245A of POCA. I shall only deal with the main points of the history. The PFO originally covered 44 real properties. The NCA no longer seeks a CRO in respect of one property which has been released from the PFO. The NCA has also agreed to the release of two other properties (the CSNL properties) from the PFO. The PFO now covers 41 of the 43 properties which are the subject of the claim.
An application is now made by the Leahy defendants to discharge the PFO. In addition, there are a number of case management matters that I am required to resolve.
Application to set aside Property Freezing Order
Section 245A of POCA confers the jurisdiction to make a PFO. The court may make such an order if it is satisfied that there is a good arguable case that the property in question is or includes recoverable property, or is associated property. Subject to exclusions, the order prohibits any person to whose property the order applies from dealing with it in any way.
The NCA's case is that Mr Leahy has been involved in unlawful conduct including drug trafficking, fraud, money laundering and tax evasion which has facilitated the acquisition of the properties. It is said that he did not have access to sufficient legitimate funds to have acquired them, and that he has since raised finance which can be proved to be the proceeds of fraud or dishonesty. As a result, it is alleged that finance obtained against the properties and rental income or re-sale have been used on occasions to purchase further properties and so to expand Mr Leahy's property portfolio. In opposition, Mr Leahy disputes that property or finance has been obtained using the proceeds of crime and he says that all the transactions have been lawful. In particular, he says that he received loans or gifts from family and friends which were used on occasions to fund acquisitions.
By section 245B of POCA, the court “may at any time vary or set aside a Property Freezing Order.” Mr Owen QC has contended that the Leahy defendants are suffering significant and escalating detriment as a consequence of the continued “freezing” of the properties. I have had regard to all the matters which have been urged upon me, but in particular, it is said that as a consequence of the PFO, financial institutions which had previously provided the Leahy defendants with mortgages and credit facilities have terminated their relationships; as a result, the Leahy defendants have been forced to take out costly bridging loans to replace some of the mortgages and loans secured against the properties, costing at least £22,000 more each month. All this is on top of the very significant legal costs that Mr Leahy has incurred as a result of the claim. It has been explained that more generally, disruption has been caused to Mr Leahy's property business as a result of restrictions imposed by the PFO. It is said that contractors and suppliers have, for example, terminated relationships owing to Mr Leahy's inability to make payments as they fell due; there have been difficulties in obtaining funds to cover overheads, and significant time and resources have been expended in ensuring compliance with the requirements of the PFO. And there has been an impact upon Mr Leahy's personal and family life.
I acknowledge the burdens that a PFO of this kind will impose, all of course compounded by the public health crisis that we are facing. It is not easy to attribute precise proportions to the difficulties caused by the civil recovery claim on the one hand, and to the PFO on the other. Some of the difficulties may well have been contributed to by the very fact of the claim alone.
Against the background of those difficulties, Mr Leahy has offered to pay into court a sum of money in exchange for the release of the properties from the PFO. That sum of money has been calculated on the basis of an independent professional valuation of the properties conducted in April 2019 by Savills in accordance with the Royal Institute of Chartered Surveyors ‘Red Book’, and then adjusted for factors occurring between April 2019 and now. I accept that the Red Book valuation is a careful and thorough process, although there is of course an exercise of judgment involved in any valuation. Mr Leahy is content for there to be a condition that he establishes the lawful provenance of the monies to be paid into court. He is also prepared to pay into court a sum of money equivalent to the difference between the valuations estimated now and any greater sale price achieved in respect of any particular property if sold before the end of the proceedings, and to pay in any rental payments received in the same period.
Mr Owen QC relies on the fact that the NCA agreed to the release of the two CSNL properties. He says that this is inconsistent with the NCA's stance as regards the present application and that the distinctions suggested by the NCA to account for its different position now do not withstand scrutiny.
Mr Sutcliffe QC for the NCA argues that this application is, to use his phrase, “a non-starter”. It is agreed that the effect of granting the application would be to cap the claim at the amount of money paid into court. Mr Sutcliffe QC says that in the event of an increase in property prices over time, Mr Leahy would be able to continue to benefit from property which the NCA would have established was the proceeds of crime, in the event that their claim was successful. The longer he held the properties, the greater the benefit might be. Mr Sutcliffe QC points out that there were only two CNSL properties, as opposed to 41 here. He explains that the NCA agreed the valuations for the two properties which they do not for the 41. He says that the NCA were entitled to release the two properties without then being obliged to agree to this proposal. Mr Sutcliffe QC also says that a fuller picture of Mr Leahy's business activities shows that he has not been forced to take out bridging finance and that he could have adopted other solutions to pay down existing debt. Finally, he does not accept that the valuation put on the portfolio can safely be relied upon.
It is convenient to start by considering the nature of the exercise which I have to conduct at this stage. Mr Owen QC referred me to Director of the Assets Recovery Agency v Kean [2007] EWHC 112 (Admin) where, at paragraph 31, Stanley Burnton J (as he then was) said this:
“I do not accept that, on an application under section 245B to vary or to discharge a property freezing order so as to exclude from it identified property, it is necessary for the applicant to prove on the balance of probabilities that that property is neither recoverable property nor associated property. Section 245B(1) confers a general discretion on the Court to vary or to set aside the order. In my judgment, that discretion is to be exercised on familiar grounds applicable to interlocutory injunction including non-disclosure, although the exercise of that discretion will be affected by the fact that the ARA is a public authority exercising its functions in the public interest: see Jennings v CPS [2005] EWCA Civ 746…”
Mr Owen QC says that the “familiar grounds” include “the balance of convenience” and he referred to Donmar Productions Limited v Bart [1967] 1 WLR 740, decided 8 years before American Cyanamid Co. v Ethicon Ltd [1975] AC 396. In Donmar Productions Limited, Ungeod-Thomas J (quoting from...
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