National Crime Agency v Westminster Magistrates' Court
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Collins Rice |
| Judgment Date | 19 October 2022 |
| Neutral Citation | [2022] EWHC 2631 (Admin) |
| Docket Number | Case No: CO/2690/2022 & CO/2941/2022 |
| Court | Queen's Bench Division (Administrative Court) |
The King on the application of
The King on the application of
[2022] EWHC 2631 (Admin)
THE HONOURABLE Mrs Justice Collins Rice
Case No: CO/2690/2022 & CO/2941/2022
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Jonathan Hall KC, Lyndon Harris & Alex Davidson (instructed by the Legal Department of the National Crime Agency) for the NCA
Adrian Waterman KC & Tim James-Matthews (instructed by Hickman & Rose) for Ingliston Management Ltd & Lodge Security Team Ltd
Hugo Keith KC & Rachel Scott (instructed by Gherson LLP) for Petr Olegovich Aven
Hearing date: 27 th September 2022
Approved Judgment
Introduction
Mr Petr Olegovich Aven is a Russian and Latvian national, and long-term UK resident. He has substantial financial interests and assets, here and abroad. He owns valuable real estate in the UK, including three residences (in London and Surrey). But he has never held (in his own name) a UK bank account.
Earlier this year, following the escalation of armed conflict in Ukraine, Mr Aven was sanctioned by the EU, and then the UK. The sanctions limit his freedom to deal with his assets.
Ingliston Management Ltd (IML) and Lodge Security Team Ltd (LST) are UK-registered companies owned and managed by a Mr Stephen Gater. Both have UK bank accounts, including with HSBC. IML is a ‘service company’ which has been running Mr Aven's three UK residences and managing the domestic and personal costs of Mr Aven and his family living there. Mr Aven supplied the funds for that. IML employed domestic staff, subcontracted for services, met household bills and expenses, and paid for the family's food, travel, school fees and so on. It gets its name from Ingliston House, Mr Aven's Surrey residence, said to be its ‘largest function’. LST provides security services, for the properties and also the family members personally. Although it has other clients, the Ingliston House contract is said to be its ‘largest’.
Near the time sanctions were imposed on Mr Aven, the National Crime Agency (NCA) was alerted by several banks to an ‘unusual’ pattern of activity in nine UK bank accounts held by six individuals and companies connected to Mr Aven. The HSBC accounts of IML and LST were among them. The NCA obtained from court, on a without-notice basis, freezing orders in relation to all nine accounts, and then a search warrant, and began further investigations.
IML and LST then went to court to try to have the orders freezing their accounts set aside and/or varied. The District Judge refused to set them aside, but did vary them to permit the accounts to be used for the benefit of Mr Aven and his family.
By these judicial review proceedings, the companies challenge the lawfulness of the refusal to set the orders aside, and the NCA challenges the lawfulness of the decision to vary them.
Legal Framework
Two, distinct, legal regimes provide the framework for the decisions challenged.
(a) The Russia (Sanctions) (EU Exit) Regulations 2019
The 2019 Regulations have their origin in the international response to the Russian annexation of Crimea in 2014. Their stated purpose (Regulation 4) is ‘ encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine’.
They contain a power for the Secretary of State to designate ‘involved persons’, according to specified criteria relating to that stated purpose. A designated person becomes subject to financial and/or immigration restrictions.
Regulation 11 provides for an ‘asset-freeze’ in relation to persons designated for the purpose of attracting financial restrictions. It makes it a criminal offence for anyone to ‘ deal with funds or economic resources owned, held or controlled by a designated person’ if they know or have reasonable grounds to suspect that they are doing so. There is a compendious definition of ‘dealing with’ in regulation 11(4)-(5). Regulation.11(6)-(7) expands on ‘owned, held or controlled’, which includes situations where assets are owned by a company and it is reasonable to expect that the designated person could, if they chose, achieve the result that the affairs of the company are conducted in accordance with their wishes.
Regulation 12 makes it a criminal offence for anyone to make funds available, directly or indirectly, to a designated person if they know or have reasonable grounds to suspect that they are doing so. Regulation 13 also makes it a criminal offence for anyone to make funds available to any other person for the benefit of a designated person on the same basis.
By regulation 19 it is a criminal offence intentionally to ' participate in activities knowing that the object or effect of them is (whether directly or indirectly) to circumvent … or to enable or facilitate the contravention of any of these criminal prohibitions.
Regulations 64 and 66 and Schedule 5 provide for a system whereby the Treasury may in some circumstances issue a licence to a particular person, the effect of which is that doing things which would otherwise be prohibited by these provisions is no longer a crime. Schedule 5 lists the purposes for which a licence may be issued. These include (paragraph 2) to enable the ‘basic needs’ of a designated person and their financially dependent family to be met. Basic needs are non-exhaustively defined to include matters such as food, tax, insurance, rent/mortgage and utility payments.
(b) The Proceeds of Crime Act 2002
POCA constitutes a substantial and complex legal regime for the control and recovery, by law enforcement agencies such as the NCA and/or through the courts, of property connected in specified ways to the commission of crime.
By section 303Z1, it makes provision for the NCA to apply to a magistrates’ court for an account freezing order (AFO) ‘ if an enforcement officer has reasonable grounds for suspecting that money held in an account maintained with a relevant financial institution (a) is recoverable property’ – that is, in effect, the proceeds of crime – ‘or (b) is intended by any person for use in unlawful conduct’. An AFO prevents withdrawals and payments being made from the account.
By subsection (4) of that section, an application for an AFO may be made without notice ‘ if the circumstances of the case are such that notice of the application would prejudice the taking of any steps under this Chapter to forfeit money…’.
Section 303Z3 sets out the test a court must apply in deciding whether to make an AFO. It may make an AFO ‘ if satisfied that there are reasonable grounds for suspecting that money held in the account (whether all or part of the credit balance of the account) (a) is recoverable property or (b) is intended by any person for use in unlawful conduct’.
Section 303Z4 empowers a court at any time to set aside or vary an AFO. Section 303Z5 provides that that power includes a power to make exclusions from the prohibition on making withdrawals or payments from the frozen account (and that exclusions may also be made from the outset). Exclusions ‘ may (amongst other things) make provision for the purpose of enabling a person by or for whom an account is operated (a) to meet the person's reasonable living expenses, or (b) to carry on any trade, business, profession or occupation’. An exclusion may be made subject to conditions. By subsection (8), the power to make exclusions must be exercised:
with a view to ensuring, so far as practicable, that there is not undue prejudice to the taking of any steps under this Chapter to forfeit money that is recoverable property or intended by any person for use in unlawful conduct.
An AFO is a preliminary, and necessary, step in the investigatory procedures set out which may ultimately lead to the forfeiture of money in the frozen account (see section 303Z14). It is, for example, one of the preconditions for enabling the issue of a search and seizure warrant (section 352).
Outline of Events
(a) The imposition of sanctions and the opening of the NCA's investigation
The current armed conflict in Ukraine, begun in Crimea in 2014, was subject to major escalation by Russia from 24 th February 2022, to a level not seen in Europe since the Second World War. The immediate response in Europe and beyond included the imposition of sanctions on certain prominent Russians, including by way of restricting access to and use of assets held outside Russia.
On IML and LST's account of matters, a decision was made ‘in late February’ that a payment of £3.7m would be made from the Austrian bank account of a trust of which Mr Aven was the sole beneficiary, to IML in the UK. They say this was a normal funding stream for IML, and the sum represented an advance payment of six months' worth of regular funding. An invoice was raised accordingly on 27 th February, and instructed shortly after midday on 28 th February. Mr Aven was made subject to EU sanctions on the evening of 28 th February. The transfer was credited on 2 nd or 3 rd March.
According to the NCA, on 1 st March, Mr Aven's wife opened a new account into which IML paid £20,000. On 3 rd March, IML paid out in the region of £1m to a personal account Mr Gater held with HSBC, a further £1m to the LST account, and another £1m to a third HSBC account linked to Mr Aven. Between 3 rd March and the end of the month, Mr...
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