P v P (Ancillary Relief: Proceeds of Crime)

Approved Judgment

Hearing dates : 15 th– 17 th July

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.

Dame Elizabeth Butler-Sloss, P.

This judgment is being handed down in private on 8 ^th October 2003 It consists of 24 pages and has been signed and dated by the judge. The judge hereby gives leave for it to be reported.

An application was made to me on the 15 ^th July 2003 by Mr Mostyn QC, on behalf of the wife to seek the ruling of the court as to the effect of the Proceeds of Crime Act 2002 (" POCA") on his client's application for ancillary relief in divorce proceedings. Counsel and solicitors acting for the wife sought urgent directions from the court in respect of their obligations under the POCA. Exceptionally they did so without giving notice to the respondent (the husband), his solicitors or counsel. The genesis of these extraordinary events is apparent from the history of the wife's correspondence with the National Criminal Intelligence Service (NCIS) to which I shall refer later.

The family background

The husband and wife were married in April 1979. He is now 50 years old, and she is 52 years old. In January 2002, the wife filed her divorce petition. This court has not been asked to make any findings as to the parties' assets, but it is suggested by the wife that they are substantial and may exceed £19 million. The wife made her application for financial relief, and a Financial Dispute Resolution appointment was listed for July 18 ^th 2003 before a High Court judge.

The accountants' forensic reports were first made available in October 2002. The husband's accountant's reply to the wife's additional questions was supplied on the 2 ^nd May 200It was not until a conference was held with leading and junior counsel for the wife on the 16 ^th June that the wife's legal advisers became sufficiently concerned about the husband's financial position to consider that issues under Part 7 of the POCA might arise. In particular, her legal team was concerned about the possibility of committing an offence under section 328 of the Act. Based on the financial information they had seen and the advice of their forensic accountant, the wife and her legal team became suspicious that part of the matrimonial assets might be "criminal property" within the meaning of the Act. The wife's solicitors and counsel were worried that, in acting for the wife in the litigation and/or settlement of a financial dispute, they might fall foul of the section 328 prohibition and might become concerned in an arrangement which might facilitate 'the acquisition, retention, use or control of criminal property' by the wife. Accordingly, they sought to protect themselves and their client by invoking the protection offered by section 328(2)(a) and on 18 ^th June 2003 the wife's solicitors wrote to the NCIS making disclosure of the following information:

a) that the wife and the husband were involved in ancillary relief proceedings listed for trial in December 2003;

b) certain identifying information about the husband's business interests;

c) that the wife and her solicitors had suspicions that the assets might comprise criminal property;

d) that the wife would be seeking a substantial sum from the husband in the ancillary relief proceedings; and

e) that the disclosure was being made on behalf of the wife, her solicitors and counsel.

The solicitors' letter stated that an answer would be expected within 7 days as to whether the solicitors "should continue to take steps in the proceedings". Further, the letter sought advice as to whether in light of the "tipping off" rules, the letter could be disclosed to the husband's solicitors. The NCIS did not respond in writing to that letter. A number of telephone calls were made by the wife's solicitors to the duty officer at NCIS, whose advice (which NCIS now accepts was misleading) was that the decision to continue to act was purely a "business decision" for the solicitors. The officer advised that a report was only required if money were actually about to change hands. He also thought, however, that if the money were not to pass through the solicitors' hands that a report might not be necessary at all. This advice was wrong. Crucially, the NCIS officer also advised that the wife's solicitors were not permitted to tell either the other side, or their own client, that the disclosure report had been made, as it would contravene the tipping off provisions and/or the prohibition against prejudicing an investigation.

Having been instructed not to disclose the fact of their report to either the husband or the wife, nor to the husband's solicitors, the wife's solicitors felt that they were left in an extremely difficult position. Further attempts to seek clarification from the NCIS proved unsuccessful. Letters were sent on 25 ^th June and 9 ^th July, but by 15 ^th July a response had not been received.

On 15 ^th July I first heard this application on an urgent ex parte basis. Mr Mostyn, on behalf of himself and the wife's solicitors, submitted that they had been placed in an untenable position. It was impossible, he said, to reconcile the NCIS' instructions to them not to disclose the fact of the report, with their professional obligations to the court, his client, and the respondent. He could not see how they could proceed with the Financial Dispute Resolution on 18 ^th July whilst prevented from disclosing the full facts to either of the parties, the opposing solicitors or the court.

Given the complexity of the issues and the proximity of the FDR appointment, I saw no alternative but to vacate the listed FDR date. I also adjourned the ex parte application until 17 ^th July so as to afford the NCIS, the Inland Revenue, the Law Society and the Bar Council the opportunity to be heard. In light of the extremely unusual nature of the case I ordered that neither the husband nor his legal representatives were to be given a copy of any order other than my order to vacate the date of the FDR.

As it happened, on receipt of the order to vacate the FDR, the husband's representatives obtained from the Mechanical Recording Department, as they were quite entitled to do in the absence of any specific order of the Court, a copy of the transcript of the 15 ^th July hearing and immediately made an urgent application before me on 16 ^th July to attend the 17 ^th July hearing. I gave them permission to do so, on the condition that they were not to tell their client. That order was of a type rarely made in this court, and whilst clearly necessary at the time in the extremely unusual circumstances of this case, I hope that it will seldom be necessary in the future. In the result, the order endured for not more than 24 hours and I am satisfied that the temporary interference with the husband's Article 6 rights of the ECHR was necessary and proportionate in all the circumstances.

The wife's solicitors finally received a letter from NCIS, dated 15 ^th July and received on 16 ^th July, clarifying their response to the request for consent to act. In the letter the NCIS advised that:

"On this occasion NCIS consents to you proceeding with the transaction specified in [the] Disclosure Report [of 9 ^th July].

This is an 'appropriate consent' within section 335 of the Proceeds of Crime Act 2002, with the result that if you do proceed with that transaction you will not be committing an offence under section 327, 328 or 329 of that Act. …"

On 17 ^th July I heard submissions from the wife, the husband, the NCIS, the Inland Revenue, the Law Society and the Bar Council. I am particularly grateful to Mr Mitchell QC on behalf of NCIS, whose submissions have been most helpful in illuminating the workings of the Act. By agreement, I received further written submissions from all the parties, other than the Inland Revenue who supported the final submissions of NCIS.

The Proceeds of Crime Act 2002

The POCA came into force on the 24 ^th February 2003. Part 7 is headed 'Money Laundering'; Part 8 is headed 'Investigations'. Within Part 7 and 8, there are three key aspects of relevance to the present case: (i) acting in relation to an arrangement; (ii) tipping off; and (iii) prejudicing an investigation.

(i) Section 328 – An Arrangement

Section 328 makes it an offence to enter into or become concerned in a relevant arrangement. Section 328 reads as follows:

"328 Arrangements

(1) 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.

(2) But a person does not commit such an offence if—

(a) he makes an authorised disclosure under section 338 and (if the disclosure is made before he does the act mentioned in subsection (1)) he has the appropriate consent;

(b) he intended to make such a disclosure but had a reasonable excuse for not doing so;

(c) the act he does is done in carrying out a function he has relating to the enforcement of any provision of this Act or of any other enactment relating...