The Crown Prosecution Service v G
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Treacy: |
| Judgment Date | 21 May 2010 |
| Neutral Citation | [2010] EWHC 1117 (Admin) |
| Docket Number | Case No: CJA/50/2009 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 21 May 2010 |
[2010] EWHC 1117 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Treacy
Case No: CJA/50/2009
Mr M Evans (instructed by The Crown Prosecution Service)
Mr K Talbot (instructed by Sonn McMillan) for D.W Croft and companies affected by the order
Hearing dates: 4th May 2010
On 8 th May 2009 a restraint order was made by Cranston J on an application made without notice by the Crown Prosecution Service ("CPS") over the assets of G, who was at the time under investigation for money laundering. G has since been charged with five counts of money laundering. The allegations arise from the theft of more than $15 million from a bank in Germany by two of its employees. They have since been convicted in Germany and are serving sentences. It is alleged that G assisted in the laundering in part of the $15 million.
As part of that process it is said that on D's instructions some £200,000.00 was transferred on 29 th April 2001 from an Australian bank account held by a man called Bryer to the British NatWest account held in the name of Prolink Holdings Limited ("Prolink"). Prolink had been incorporated on 27 th March 2001 specifically for the purpose of purchasing an existing timber business, AA Timber, which operated out of a yard at Romford Road, Romford, Essex. G, together with Derek Croft and John Kennedy, was a director of Prolink. They held shares in Prolink in the proportions 34%, 33%, and 33% respectively. Ownership of the yard was vested in Powervale Limited. That has the same directors as Prolink and is a wholly owned subsidiary with Prolink owning all its shares.
The £200,000.00, together with funds raised by way of bank loan, was used to purchase the existing business, AA Timber. The Crown asserts that since that money is directly traceable to the money stolen from the German bank, part of what is alleged to be G's alleged benefit from his involvement in the money laundering can be traced into AA Timber and the yard. The order made by Cranston J was served on G and also Derek Croft and John Kennedy, Prolink, and Powervale Limited.
Initially before me there were two applications. The CPS was seeking to vary the order to add certain specific assets to it and to seek disclosure. They indicated at the outset of the hearing that they did not intend to pursue their application and accordingly I dismiss it.
The second application was made by Derek Croft. He is the father-in-law of G. He seeks variation of the order so as to discharge himself and the companies from it. The parties have agreed that insofar as paragraph 5(a) of the original order restrained the assets of Prolink, it should be discharged and that that part of the order should be varied to refer to shares held by G in Prolink, together with rights held by him pursuant to the £200,000.00 loan made on 29 th April 2001. The real battleground in relation to this application is paragraph 5(b) of the order which restrained "all shares and assets held in the company Powervale Limited and in particular (i) the properties known as 383, 383(a), 397, and 397(a) Romford Road, Romford, and land at the rear of 383 to 397 Romford Road, Romford, Essex, registered under title number NGL112637". In addition variation is sought of that part of the order stating that the assets of Powervale Limited are to be treated as the personal assets of G. Paragraphs 6 and 8 of Cranston J's order had restrained Derek Croft and Powervale Limited from dealing with the assets of Powervale Limited as referred to paragraph 5(b).
It became clear during the hearing that the Crown's true interest related to the land and properties at Romford Road. They have recently been valued and show an equity worth in excess of half a million pounds. For the purposes of the application the essential facts are not in dispute. In the autumn of 2000 a business opportunity arose to buy an established timber business at Romford Road. The holding company Prolink was set up in March 2001 on financial advice as a vehicle for buying the business as a going concern. The purchase was then financed by a combination of a bank loan and a loan of £200,000.00 from G in May 2001. There is strong evidence to show that that money represented funds stolen from the German bank. There is no suggestion that the structure of Prolink acting as a holding company for Powervale and with different aspects of the business incorporated under other names is anything other than legitimate, and the result of bona fide professional advice. It is accepted that the timber business was a going concern when purchased and has been run since 2001 to date as a lawful and legitimate business. Until very recent times the business was run by Messrs Croft and Kennedy with significant increase in turnover. Kennedy has recently departed and in recent months Croft has been running the business in association with G, who has recently returned to this country from America. G's involvement in Prolink in terms of his directorship and share registration has been properly declared. The company's accounts show that the sum of £200,000.00 was a loan. There is internal company documentation created prior to any restraint proceedings making open reference to the fact of the loan by G and referring to interest payments due under the loan, as well as also showing what has been so far repaid.
It is also agreed that there is no evidence that Croft or Kennedy knew of or suspected the unlawful source of the loan provided by G. None of the forgoing matters is disputed on behalf of the CPS. It enabled Mr Talbot, on behalf of Mr Croft, to submit that the timber business associated with the Prolink group was a legitimate group of companies which had not been set up to launder money. Moreover, there was no evidence that it had been purchased for any reason other than to run a legitimate business. The question before the court is whether this court had jurisdiction to restrain dealings in the assets of Powervale Limited. It was common ground that the court could only do this if it was correct to treat Powervale Limited's assets as those of G by lifting the corporate veil. It was agreed that ordinary principles of company and property law applied to a consideration of the order made pursuant to s77 of the Criminal Justice Act 1988 which enables the High Court to prohibit any person from dealing with any "realisable property". Section 74(1)(a) defines "realisable property" as "any property held by the Defendant". Section 102(7) provides that "property is held by any person if he holds any interest in it". Section 102(1) provides that "interest in relation to property includes right".
The parties agree that assets or property owned by a company are not the property of its shareholders. See for example Salomon v Salomon and Co [1897] AC 22, and more recently, R v Seager and Blatch [2009] EWCA Crim 1303 at paragraph 54. The relevant case law starts with the decision of the Court of Appeal in Re H and others (Restraint Order) [1996] 2 A.E.R 391 where the court held that where a Defendant has used the corporate structure as a device or façade to conceal his criminal activities, the court could lift the corporate veil and treat the assets as the realisable property of a Defendant under the Criminal Justice Act 1988. In that case there was a prima-facie case that the Defendants controlled the companies concerned; that the companies had been used for fraud on a massive scale in relation to the evasion of excise duty; that the Defendants regarded the companies as carrying on a family business; and that company cash had been used to benefit the Defendants in substantial amounts. It was held appropriate to lift the corporate veil in those circumstances. A submission that whilst the veil could be lifted if a company was set up solely for the purpose of criminal activity, but could not be lifted or pierced if the business had been set up or used for purposes which, to a significant or substantial extent, were illegitimate, was not successful.
CPS v Compton [2002] EWCA Civ 1720 is a case where the company was initially a legitimately run business, albeit apparently struggling, but which had been transformed by a series of injections of laundered drug money. The Court of Appeal held it appropriate to lift the corporate veil. At paragraph 48 Simon Brown LJ said "Where, as here, it is established upon a full investigation of the facts...
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