The Director of The Assets Recovery Agency v Robert Alan Kean
| Jurisdiction | England & Wales |
| Judgment Date | 31 January 2007 |
| Neutral Citation | [2007] EWHC 112 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/6481/2006 |
| Date | 31 January 2007 |
[2007] EWHC 112 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Mr Justice Stanley Burnton
Case No: CO/6481/2006
Mark Cunningham QC (instructed by Hatch Brenner) for the Defendant
Jonathan Brettler (instructed by the Assets Recovery Agency) for the Claimant
Stanley Burnton J:
Introduction
This is an application by Robert Kean, the Defendant in these proceedings, to set aside the property freezing order dated 11 August 2006 made by Langstaff J on the Claimant's application without notice. The order, made on the evidence contained in the witness statement of Amy Nixon dated 17 July 2006, restrains dealings with the property known as 1b Charnleys Lane, Southport PR9 8HH, to which I shall refer as "the Property".
The application was heard by me on 9 November 2006. As mentioned below, the Claimant, the Assets Recovery Agency ("ARA") sought to rely on Mr Kean's application for a mortgage loan secured on the property, which it alleged was fraudulent. Since he had not had an opportunity to respond to that allegation, I gave leave for him to serve evidence and written submissions in relation to it. He did so. However, while my judgment was reserved, the ARA served voluminous additional evidence. This led to an application by Mr Kean for an order precluding the admission of that evidence. On its part, the Agency applied for permission to rely on that evidence in support of the continuation of the property freezing order. I heard these cross-applications on 13 December 2006 on strict time constraints, owing to my commitments elsewhere. I commend Counsel for having completed their submissions in these applications in the relatively short time available.
In this judgment I shall address first the issues addressed and the evidence before me on 9 November 2006 together with the evidence arising from the allegation that Mr Kean obtained his mortgage loan by fraud. I shall then consider the consequences of the ARA's new evidence.
The grounds of the application to set aside the property freezing order: the evidence relied
The grounds of Mr Kean's application are threefold: that the ARA has no good arguable claim to the Property; that the order was obtained by the Claimant in breach of her duty to make full and frank disclosure to the Judge; and that the proceedings are an abuse of process as constituting an attempt to relitigate an issue that has already been decided by a Court of competent jurisdiction.
The unlawful conduct alleged by the ARA was and is drug trafficking and money laundering the proceeds of drug trafficking. However, in a witness statement made on 8 November 2006, i.e., the day before the hearing before me, Amy Nixon, the financial investigator of the ARA who has made the witness statements on which it relies, alleged that the proceeds of the mortgage loan to which I refer below had been procured by Mr Kean's fraud, in that he had falsely represented to the lender that he was a partner in a partnership called Gary Richman Business Consultancy, with a 75 per cent interest, and had an annual income from that source of £74,500. It is common ground that Mr Kean has no interest in that business. The ARA relied on that alleged fraud as independently justifying the retention of the property freezing order in relation to the mortgage loan moneys obtained by it.
That allegation of fraud was made unavoidably late, since Miss Nixon had only received a copy of Mr Kean's mortgage application on the same day. Mr Kean had had no opportunity to address it. I therefore gave directions for him to serve and to file such evidence and submissions as he thought fit, and for the ARA to respond. I address the issues arising from the allegation of fraud separately below.
The statutory provisions
Civil recovery of the proceeds of crime is the subject of Part 5 of the Proceeds of Crime Act 2002, as amended by the Serious Organised Crime and Police Act 2005. For present purposes, the most relevant provisions are sections 241 to 243, 245A, 245B, 266, 304 and 305. Section 243 confers power on the ARA to bring civil proceedings for a recovery order, which, as provided in section 266, is an order vesting recoverable property in a trustee for civil recovery. Recoverable property is property obtained through unlawful conduct or property into which such unlawful property or its proceeds may be followed (or traced) (sections 304 and 305). Unlawful conduct is conduct which is criminal: section 241. Section 241(3) is as follows:
"(3) The court or sheriff must decide on a balance of probabilities whether it is proved—
(a) that any matters alleged to constitute unlawful conduct have occurred, or
(b) that any person intended to use any cash in unlawful conduct."
Section 242, so far as is material, is as follows:
"242 " Property obtained through unlawful conduct"
(1) A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct.
(2) In deciding whether any property was obtained through unlawful conduct—
(a) it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct,
(b) it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct."
Section 245A confers power on the ARA to apply to the Court for a property freezing order:
"(1) Where the enforcement authority may take proceedings for a recovery order in the High Court, the authority may apply to the court for a property freezing order (whether before or after starting the proceedings).
(2) A property freezing order is an order that—
(a) specifies or describes the property to which it applies, and
(b) subject to any exclusions (see section 245C(1)(b) and (2)), prohibits any person to whose property the order applies from in any way dealing with the property.
(3) An application for a property freezing order may be made without notice if the circumstances are such that notice of the application would prejudice any right of the enforcement authority to obtain a recovery order in respect of any property.
(4) The court may make a property freezing order on an application if it is satisfied that the condition in subsection (5) is met and, where applicable, that the condition in subsection (6) is met.
(5) The first condition is that there is a good arguable case—
(a) that the property to which the application for the order relates is or includes recoverable property, and
(b) that, if any of it is not recoverable property, it is associated property.
(6) (Not applicable)."
Variation and setting aside of property freezing orders are the subject of section 245B:
"(1) The court may at any time vary or set aside a property freezing order.
(2) …
(3) …
(4) If the court decides that any property to which a property freezing order applies is neither recoverable property nor associated property, it must vary the order so as to exclude the property.
(5) Before exercising power under this Chapter to vary or set aside a property freezing order, the court must (as well as giving the parties to the proceedings an opportunity to be heard) give such an opportunity to any person who may be affected by its decision.
(6) …"
Mr Kean's acquisition of the Property
Mr Kean's account of his acquisition of beneficial title to the Property is set out in his Amended Particulars of Claim in the proceedings in the Chancery Division to which I shall have to refer below. According to that pleading, the site of the Property had been purchased by a William McDonald. In 1990, Mr McDonald applied for planning permission for a 4-bedroomed detached house on the site. The planning permission was granted in September 1990. At some date thereafter, Mr McDonald began building what is now the house on the property. As a result of problems with its construction, Mr McDonald and Mr Kean discussed the building project together and "orally agreed that they would build the house together on the basis that (Mr Kean) would pay the remainder of the building costs". They agreed that the Property would be sold and the net proceeds of sale divided equally, after deducting their costs of the acquisition of the site and the construction work. Thereafter, Mr Kean provided cash to Mr McDonald of "approximately £40,000 to pay the building contractors" and "£30,000 for other expenses to be incurred by" Mr McDonald. Mr Kean was remanded in custody between November 1994 and February 1997, when he was acquitted of the charges brought against him. On his release, he found that Mr McDonald had been drinking and gambling heavily, had misapplied the cash sent to him and that the Property had still not been completed. In early 1997, following his release from custody, Mr Kean reached:
"an agreement, arrangement or understanding" with Mr McDonald whereby, in consideration of (Mr Kean) agreeing:
(i) to pay (Mr McDonald) £10,000;
(ii) not to pursue (Mr McDonald) for recovery of the sums paid to, but misapplied by him…; and
(iii) to finish the building work at the Property;
(Mr McDonald) agreed that (Mr Kean) should be, and treat himself as, the owner of the Property, and that, as evidence thereof, he would transfer to (Mr Kean) or his nominee or agent the Land Certificate and Title Deeds for the Property."
Mr Kean alleged that pursuant...
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