Director of the Assets Recovery Agency v Olupitan and another
[2007] EWHC 162 (QB), [2007] All ER (D) 112 (Feb)
Queen’s Bench Division
Langley J
8 February 2007
The test for unlawful conduct under the Proceeds of Crime Act 2002 (PCA 2002), Pt 5, is whether it is more probable than not that a person alleged to have committed fraud or money laundering has obtained the property in issue through the unlawful conduct alleged; it is not sufficient solely to establish a lifestyle inconsistent with any identified lawful income.
James Eadie (instructed by the Assets Recovery Agency) for the claimant.
Ivan Krolick (instructed by Stephen Fiddler & Co) for the respondents.
The claimant was the enforcement authority under PCA 2002, Pt 5.
It alleged that the first (but not the second) respondent had undertaken unlawful conduct as defined in s 241, namely mortgage fraud, conspiracies to defraud and money laundering. That conduct was alleged to have led directly to the purchase of real property or to have created the funds from which three properties were purchased in the first respondent’s name and that of his partner, the second respondent, and their joint names. The conduct was also alleged to have realised funds found in two bank accounts in the first respondent’s name. The claimant applied for a recovery order pursuant to Pt 5. The respondents denied any unlawful conduct. They provided evidence about the sources of the funds used to buy the properties and, in respect of one of the properties, produced documentary evidence that funds had been sent from Nigeria for the purchase.
MR JUSTICE Langley:
PCA 2002, Pt 5 provided:
“241(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is
unlawful under the criminal law of that part...(3) The court...must decide on a balance of probabilities whether it is proved—(a) that any matters alleged to constitute unlawful conduct have occurred...
242(1) A person obtains property through
unlawful conduct (whether his own conduct or
another’s) if he obtains property by...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.”
The effect of the provisions in ss 240 and 241 was that the claimant could recover property which was, or represented, property obtained through conduct which was unlawful under the criminal law of England and Wales. To succeed in such a claim for recovery the claimant had to prove, on a balance of probabilities, that the matters alleged to constitute unlawful conduct occurred. Section 242 applied to an innocent party, but one who had obtained property by the unlawful conduct of another.
Property obtained through unlawful conduct (s 242) was recoverable property: s 304(1). Where property was or had been recoverable property, property which represented it was also recoverable property: s 305.
PCA 2002, ss 306, 307 and 308 dealt with mixing property. The effect of those provisions was that where eg a property acquired was in part recoverable property and in part not, eg where a house was bought with funds both unlawfully and lawfully provided, only the portion attributable to the unlawful element was recoverable: s 306. An example of the effect of s 307 would be income by way of rent received from a house which was recoverable property; the rent would itself be recoverable. PCA 2002 gave no guidance about what portion of a mixed property was attributable to recoverable property beyond the language itself used in
s 306(2).
PCA 2002, s 266 dealt with the vesting and realisation of recoverable property. It provided that “if...the court is satisfied that property is
recoverable the court must make a recovery order”: 266(1). Such an order vested the relevant property in “the trustee for civil recovery”.
To date, no final decisions on a contested application under PCA 2002 had been reported. His Lordship referred to a decision on a preliminary issue—R (on the Application of the Director of Assets Recovery Agency and Others) v Green [2005] EWHC 3168 (Admin), [2005] All ER (D) 261 (Dec)—and a decision of Mr Justice Dobbs, [2006] EWHC 1906, [2006] All ER (D) 346 (Jul), on an application by the respondents to strike out the claim in the instant case.
On the basis of the first decision, as s 242(2)(b) provided, the claimant did not have to prove the commission of a specific criminal offence or
offences but had to identify and prove the matters alleged to constitute the kind or kinds of unlawful conduct by which the property was obtained, and it was not sufficient solely to establish a lifestyle inconsistent with any identified lawful income. It was for the court to decide on a balance of probabilities whether the matters alleged to constitute unlawful conduct had been proved: s 241(3).
His Lordship added that there was a danger in seeking to identify absolutes where questions of proof were in issue. The question in this case was whether the first respondent had obtained the property in issue through the unlawful conduct alleged. The test was whether it was more probable than not that such was the case. The evidence had covered a number of matters, some more compelling than others, and including oral and documentary evidence from both respondents.
It was the whole picture which had to be balanced. For example, it was one thing to point to an unexplained lifestyle, it might be another if an explanation was offered but rejected as untruthful; and taken with other evidence either might be more or less persuasive.
His Lordship considered the facts and held that, save for one property, the claimant had proved that the first respondent was a dishonest man who had employed dishonesty to obtain or seek to obtain property and accordingly was entitled to a recovery order. Furthermore, the second respondent was not to be believed save in respect of the one property where there was documentation about the source of the funds used to purchase the property.
