United States of America v Montgomery
| Jurisdiction | UK Non-devolved |
| Judge | LORD HOFFMANN,LORD COOKE OF THORNDON,LORD HUTTON,LORD HOBHOUSE OF WOODBOROUGH,LORD SCOTT OF FOSCOTE |
| Judgment Date | 25 January 2001 |
| Neutral Citation | [2001] UKHL 3 |
| Date | 25 January 2001 |
| Court | House of Lords |
[2001] UKHL 3
HOUSE OF LORDS
Lord Hoffmann
Lord Cooke of Thorndon
Lord Hutton
Lord Hobhouse of Wood-borough
Lord Scott of Foscote
and Another
My Lords,
The English proceedings
On 5 September 1997 Collins J made restraint orders under section 77 of the Criminal Justice Act 1988 against the appellants Kathleen Montgomery and her husband Lee Edwin Montgomery. The ordersrestrained them from disposing of various assets and required thedisclosure of financial information. They were made in aid of confiscation orders which had been made by a Federal District Court inthe United States against Mrs Montgomery and her former husband Larry Barnette, following the conviction of the latter in 1984 for fraud uponthe government of the United States. The power to make restraint orders in aid of confiscation orders made in the United States ("externalconfiscation orders") was conferred upon the High Court with effect from 1 August 1994 by the Criminal Justice Act 1988 (Designated Countriesand Territories) Order ( SI 1991/2873) ("the DCO") as amended by the Criminal Justice Act 1988 (Designated Countries and Territories)(Amendment) Order 1994 (SI 1994/1639).
On 20 February 1998, on the application of Mr and Mrs Montgomery, Latham J discharged the orders. He did so ontwo grounds. The first was that the powers of the Act could not be used in aid of American confiscation orders made before the DCO was appliedto the United States. The second was the orders of the Federal District Court did not qualify as external confiscation orders for the purposesof the DCO.
The government of the United States appealed to the Court of Appeal. There, Mr and Mrs Montgomery raised the preliminary objectionthat the court had no jurisdiction to hear the appeal. They said thatjurisdiction was excluded by section 18(1)(a) of the Supreme Court Act1981 which provides that "no appeal shall lie to the Court of Appeal … from any judgment of the High Court in any criminal cause or matter." The Court of Appeal (Stuart-Smith, Aldous and Swinton Thomas LJJ) [1999] 1 All ER 84 overruled the objection. They said that enforcementproceedings under the DCO were civil in nature. A restraint order wasnot a judgment in a criminal cause or matter. They proceeded to hearthe appeal and reversed the judge on both points. The restraint orderswere accordingly reinstated. Against this decision Mr and MrsMontgomery appeal to your Lordships' House.
The American proceedings.
My Lords, in order to follow the shape of the argument advanced to your Lordships, it is necessary to know something about what one American judge described as the prodigious litigation between thegovernment of the United States and Mr Larry Barnette and his then wife, now Mrs Montgomery, which has been proceeding in the Federal District Court for the Middle District of Florida since 1983. Mr Barnette is an American citizen who controlled companies which, between 1977 and 1982, enjoyed the benefit of profitable contracts to operate laundriesconstructed by the United States government in Germany to wash theclothes of American servicemen. During this period he defrauded the United States of some $15 million. Mr Barnette also laundered money. Part of the proceeds of the fraud were passed to a Panamanian companywhich he controlled called Old Dominion SA ("ODSA"). It transferredthe money to accounts in its name in such places as Switzerland and Liechtenstein.
In August 1983, shortly before he was indicted for the fraud, Mr Barnette transferred 800 of the 900 shares which he held in ODSA to Mrs Barnette (as she then was) and the remaining 100 to his children. After a lengthy trial in 1984, he was convicted on a number of counts of fraudand related offences, including offences under the Racketeer Influencedand Corrupt Organisations Act ("RICO"). On 15 October 1984, under apower contained in RICO, the District Court ordered that he forfeit hisinterest in the shares or common stock of ODSA. This forfeiture orderforms the origin and basis of the confiscation orders which the United States is attempting to enforce in these proceedings. On 2 November 1984 Mr Barnette was sentenced to a term of imprisonment and (under powerscontained in another statute) to pay dollar;7 million to the United States byway of restitution. Requested to clarify the relationship between theforfeiture and restitution orders, the judge ruled that the proceeds ofthe two orders were to be set off against each other, so that Mr Barnette's liability would be limited to $7 million or the value of the ODSA shares, whichever was the greater. In order to enable the value of the shares to be ascertained, Mr Barnette was ordered to provide fullinformation about ODSA's assets and liabilities.
On 10 January 1985 Mr Barnette paid $7million into court in satisfaction of the forfeiture order. Whether hewas under any further liability depended upon the value of the ODSAshares. But the government had great difficulty in ascertaining whatthat value was. He did not comply with the order to provide information or subsequent orders for discovery. He claimed that the shares couldnot have been forfeited because when the order was made he no longerowned them. But the court ruled that under RICO the government's titleto the forfeited property related back to 3 August 1982, the date of the last criminal act of which he had been convicted. It thereforeantedated the transfer to Mrs Barnette and the children. Mr Barnettewas obliged to surrender the shares or their value whether he stillowned them or not. Mr Barnette also claimed that as his wife nowcontrolled ODSA, he could not provide the required information. She had left him in 1983 and taken up citizenship in the Caribbean andresidence in England. On 15 December 1992 the court made an order fordiscovery against Mrs Barnette but she was out of the jurisdiction anddid not comply.
In January 1995 the U.S. governmentlawyers had a success when they managed to persuade a Liechtensteinbank, which held $3,758,127.93 in an account in the name of ODSA, thatthey were entitled to give instructions on behalf of the corporation. They confiscated the money. The government then invited the court todetermine the value of the ODSA shares as at 15 October 1984 on thematerials available, so that the balance payable under the forfeitureorder could be ascertained. It also moved for orders that both Mr and Mrs Barnette were in contempt of court, first, for conspiring with eachother to frustrate the original forfeiture order and secondly, forfailing to comply with the discovery orders against them.
In a judgment dated 18 August 1995 thecourt found that the value of the ODSA shares as at 15 October 1984 was$11, 217, 833.01. That meant that, after giving credit for the $7million already paid, Mr Barnette owed the United States $4,217,833.01. The court held that Mr and Mrs Barnette were both in contempt and made an order against both of them for payment of the $4,217,833.01. Thisis the second of the confiscation orders upon which the US governmentnow relies.
Neither side was satisfied with this order and they both invited the court to revise it. Mr Barnette wantedcredit for the $3,758,127.93 which the government had seized in Liechtenstein. In addition, the $7,000,000 paid into court had earned$459,705.08 interest. If credit was given for both these sums, the debt to the government would be extinguished. The government, on the otherhand, said that the sum of $4,217,833.01 reflected only what shouldhave been paid in 1984. That sum should be increased to reflect thevalue to Mr and Mrs Barnette of having retained this forfeited propertyfor over 10 years. In addition, the Barnette's should pay thegovernment's legal, investigative and expert fees.
In order dated 15 November 1995 the court made an order giving effect to all these adjustments. Mr Barnette wasallowed credit for the Liechtenstein money and the interest. On theother hand, the sum to be forfeited was increased from $4,217,835.01 to$11,767,754 by applying US Treasury interest rates from January 1985 to June 1995. $326,275.58 was also ordered to be paid in respect of feesand expenses.
The order which the US government seeksto enforce is the revised forfeiture order of 15 November 1995, otherthan the sum awarded for fees and expenses, which it accepts does notqualify for enforcement under the DCO.
The question of jurisdiction
The jurisdiction to make a restraintorder under section 77 of the 1988 Act (whether in aid of a domestic orexternal confiscation order) is conferred upon the High Court. Ingeneral, appeals from the High Court lie to the Court of Appeal. Section 16 of the Supreme Court Act 1981 provides that "subject asotherwise provided by this or any other Act … the Court of Appealshall have jurisdiction to hear and determine appeals from any judgmentor order of the High Court." The only provision relied upon asexcluding this jurisdiction is section 18(1)(a), which excludes appeals "from any judgment of the High Court in any criminal cause or matter."
Mr Mitchell QC, who appeared for the USGovernment, submitted that whether the restraint order had been made in a criminal cause or matter or not, it was an "order" and not a "judgment" within the meaning of section 18(1)(a). In civil procedure there was a distinction between judgments and orders, which was discussed by Lord Esher MR in Onslow v Commissioners of Inland Revenue (1890) 20QBD 465. Put shortly, a judgment was a decision obtained in an action. Other decisions of the court were orders. But this distinction isimpossible to transpose into criminal procedure. Ever since the phrase "judgment of the High Court in any criminal cause or matter"...
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