Reclaiming the fruits of crime will not be made harder, rules Supreme Court

4 November 2011 by

Gale & Anor v Serious Organised Crime Agency [2011] UKSC 49 – Read judgment

The Supreme Court has ruled that applying the civil standard of proof (‘balance of probabilities’) to confiscation proceedings does not breach Article 6 of the European Convention on Human Rights (right to fair trial).

David Gale and his ex-wife Teresa were accused of drug trafficking, money laundering and tax evasion in the UK, Spain, Portugal and elsewhere. They were never convicted. The Serious Organised Crime Agency (SOCA), whose job it is to identify and recover the fruits of criminal activity, nonetheless sought to recover these fruits from David Gale and Teresa (‘the appellants’) by recovering property worth about £2 million. SOCA obtained an order to do so under Part 5 of the Proceeds of Crime Act 2002 (POCA).

To obtain the order, SOCA had to prove, on the balance of probabilities, that the appellants got hold of the property by unlawful conduct (section 241 POCA). The appellants went to the Court of Appeal, arguing that the application of the civil standard to this issue was a breach of their right to a fair trial under article 6 ECHR, and that the appropriate standard should be the criminal one, namely ‘beyond reasonable doubt’. The Court of Appeal did not agree, and up to the Supreme Court it went.

When SOCA sought to obtain the order under Part 5, it appointed someone to investigate the issue, an interim receiver. The investigation proved monumental in scale, taking over 3 years and resulting in a report of over 400 pages, although the investigation was not assisted by the uncooperative behaviour of Mr Gale. The costs of the investigation were about £1 million, and the Court of Appeal reversed the High Court’s initial refusal to make the order for costs. The disgruntled appellants raised this as a subsidiary issue in this case.

The law

The report of the Interim Receiver was damning, pointing to evidence of unlawful conduct and suspicious financial dealings. This led the judge at first instance to conclude that the appellants were engaged in unlawful conduct, such as money laundering, drug trafficking, and tax evasion. The judge was also unimpressed by the appellants’ evidence, stating that David Gale and Teresa had lied repeatedly to the court.

The appellants pointed to Article 6(2) ECHR: ‘Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law’. This clause, argued the appellants’ barrister, entitled David Gale and Teresa to be presumed innocent and, if this presumption were to be rebutted, it would have to be so to the criminal standard of proof, not the civil one.

Lord Phillips turned to the Strasbourg jurisprudence to elucidate the meaning of ‘charged with a criminal offence’ in the context of Article 6(2) ECHR. Article 6(2) would not even be engaged if the proceedings were not held to be criminal in nature.

The case of Engel v The Netherlands (no. 1) (1976) 1 EHRR 647 put forward three factors when deciding whether or not a person is charged with a criminal offence:

  • The classification of the proceedings under national law (i.e., whether they are classed as civil or criminal proceedings);
  • The ‘essential’ nature of the proceedings;
  • The penalty that the applicant risks incurring.

Under UK law, the recovery proceedings are clearly civil (s240(1)(a) POCA). The essential nature of the proceedings is also civil, as the respondent is not charged with a criminal offence and not at risk of a criminal conviction. The purpose of the Part 5 proceedings is not to punish, as in criminal proceedings, but merely to ‘ensure that property derived from criminal conduct is taken out of circulation’ [123]. Yet, even if classified as ‘civil’ under the Engel criteria, a line of Strasbourg case law shows that 6(2) can still apply if the links between the criminal and civil proceedings are sufficiently close (more on this below).

Lord Phillips continued his trawl through the Strasbourg jurisprudence. He notes at [20] that the European Court of Human Rights (ECtHR) has recognised that a victim can legitimately issue civil proceedings for compensation following the Defendant’s acquittal in criminal proceedings. The much higher threshold of the criminal standard of proof means that a person can be found not guilty at the criminal court but ‘guilty’ of the same offence at the civil court.

Readers may well recall the infamous case of the former American football star O.J. Simpson in the 1990s. Mr Simpson was acquitted of murder as the prosecution could not prove the case beyond reasonable doubt, but Mr Simpson was found liable in the subsequent civil claim for wrongful death. Lord Brown at [115] comments, philosophically: ‘contrary to widespread popular misconception, acquittal does not prove the defendant innocent’.

While ‘not guilty’ does not entail ‘innocent’ in common parlance, the ECtHR has held that it is a violation of 6(2) to cast doubt in subsequent proceedings on the validity of a prior acquittal in criminal proceedings. Judges in the civil courts must choose their words carefully. The same goes for a public authority who suggests that a person found ‘not guilty’ may in fact have committed the offence. As mentioned above, however, this does not preclude a finding of civil responsibility arising from the same facts.

One common thread running through the Strasbourg case law was the requirement of a procedural connection between the criminal trial and the later civil proceedings. Only then would 6(2) apply to the civil claims. In the instant case, Lord Phillips found no link between the Portuguese criminal proceedings and the English civil proceedings and noted that the latter claim encompassed a far broader range of evidence. Lords Clarke and Dyson also referred to the absence of a link between the two claims, with Lord Dyson calling the civil recovery proceedings ‘free standing’. Lord Phillips summarised his position at [44]:

If confiscation proceedings do not involve a criminal charge, but are subject to the civil standard of proof, I see no reason in principle why confiscation should not be based on evidence that satisfied the civil standard

and this despite the fact that the evidence was not sufficient to secure a conviction on the criminal standard. In this case, there was ample evidence to show that the appellants acquired the property through unlawful activity.

The costs order

Section 51 of the Senior Courts Act 1981 governs the court’s jurisdiction to award costs in civil proceedings. Lord Clarke reduced the issues into two questions: 1. are the interim receiver’s expenses ‘costs of and incidental to the civil recovery proceedings?’ (s51(1)) and 2. if so, is there any law preventing the court from making a costs order in favour of the respondent?

Lord Clarke held that the receiver’s investigatory work was necessary to bring the civil recovery claim. Indeed, it was an ‘essential part’ of it. Thus, the costs were clearly ‘of and incidental’ to the claim. With regards to the second question,

Lord Clarke could not find any statutory rule or provision preventing the court from making a costs order in this matter. He drew an analogy with the recovery of costs for expert reports in ordinary litigation: ‘In my opinion reasonable sums paid by SOCA to an interim receiver, at least in respect of his investigation should in principle be regarded in the same way’ [87]. The recovery of the costs are still subject to CPR r44.4(1), namely that costs will not be allowed if ‘unreasonably incurred’ or unreasonable in amount.

 The Supreme Court dismissed the appeal.

Daniel Sokol is a pupil barrister at 1 Crown Office Row and Honorary Senior Lecturer in Medical Ethics at Imperial College London

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1 comment;

  1. ObiterJ says:

    A good and sensible result in my view. “Recovery” came much too late in our law. We used to see these criminals with luxury lifestyles and it really rubbed salt into the wounds of their victims. At least now, to some degree, the law bites back and seeks to recover their ill-gotten gains..

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