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Restraint and Freezing Orders

A Restraint Order is a very significant burden. It can entirely interrupt the normal use and operation of your bank accounts making the simple act of paying a bill a challenging ordeal. Freedom of movement, absent a working bank card can become a challenge.  Intended to ‘preserve assets’ for potential confiscation by the state in the event of a conviction, the impact of a Restraint Order leaves most recipients feeling anything other than ‘innocent until proved guilty’.

Prosecuting authorities can apply under the Proceeds of Crime Act 2002 for a Restraint  Order freezing your assets. They can do so even while you remain under investigation, before a decision to charge any offence has been made. Typically, the order is obtained in your absence and without notice. Once the Order is served it will provide details of how you may apply to have the Order amended or revoked.  You will be restrained from dealing with all of your assets (“an all-assets restraint order”) if the prosecutor is going to ask the court to conclude that you have a criminal lifestyle (as defined by the Act) and have benefited from general criminal conduct. If the prosecutor is not alleging this you may be restrained from dealing with specific assets which, when taken together,  have an equivalent value to the alleged amount of your benefit.

We have assisted our clients in respect of Restraint Orders for over 20 years. We understand how to seek variations to allow for essential expenditure as the Act is not intended to alter you and your family’s living standards – ordinary expenditure ought to be allowed to continue.   We ensure that any Order made is necessary and proportionate, and of suitable scope.  

We have acted in the most complex of Restraint cases, for example representing a Swiss based trust in proceedings where the SFO alleged the trust was a sham, created by the lead defendant in the case.  We work with the very best specialist barristers in this field.

Freezing Orders

Section 37 of the Senior Courts Act 1981 confirms the jurisdiction of the High court to grant a freezing injunction on an interim basis, providing it is “just and convenient” to grant relief. A court can grant an injunction in any case where it would be “right and just” to do so. We have experience of challenging and amending such orders; where appropriate, we work with specialist civil firms to do so.

How we can help

We can represent you wherever you are based, whether it be in the UK or overseas. We support our clients through every stage of the criminal justice process, including:

  • Representation at interviews
  • Pre-charge engagement to prevent charges being brought against you
  • Magistrates court proceedings
  • Crown court proceedings
  • Court of Appeal

For more information on any of the above click here, or if you have been requested to attend an interview or have notification of court proceedings, please contact us today.

The Law of Restraint - Legal Principles

A restraint order may be granted under s.41 and may have the effect of freezing property anywhere in the world with the aim of preserving that property so it is available to settle any confiscation order that may be made. It may be made both against a defendant or a person under investigation together with any other person holding realisable property.

The judge may only grant a restraint order pursuant to s.41 if any of the five conditions set out in s.40 are satisfied. The most common conditions are:
The first condition (s.40(2))  - The first condition is satisfied if a criminal investigation has been started in England and Wales with regard to an offence and there are reasonable grounds to suspect that the alleged offender has benefited from his criminal conduct.

Criminal conduct is conduct that either constitutes an offence in England and Wales or would constitute such an offence if it occurred in England and Wales. An alleged offender will be taken to have benefited from his criminal conduct if he obtains property as a result of or in connection with the conduct.

It is important to note that if a restraint order is granted on the basis that the first condition is satisfied the order ‘must’ contain a requirement that the applicant report to the court on the progress of the investigation ‘at such times and in such manner as the order may specify’ (s.41(7B)).

If the first condition was satisfied the restraint order ‘must’ be discharged if proceedings for an offence are not brought within a reasonable time. What amounts to “a reasonable time” will depend on the circumstances of individual cases, but it is particularly important that criminal investigations proceed with all due expedition when a restraint order is in force (s.42(7)).

The second condition s.40(3)  - The second condition is satisfied if proceedings for an offence have been started in England and Wales and not concluded, and there is reasonable cause to believe that the defendant has benefited from his/her criminal conduct. Proceedings are not concluded for the purposes of POCA until such time as any confiscation order made against the defendant has been paid in full.

The fourth and fifth conditions s.40(5) and (6) – arise where the prosecutor has applied (or is likely to apply) to the crown court to reconsider the benefit figure or the available amount.

The test: Is there a ‘real risk’ that assets may be dissipated?

In all cases, regardless of which s.40 condition is being relied on, the prosecutor must be able to show there is a real, rather than fanciful, risk that assets may be dissipated if a restraint order is not made.

As LJ Glidewell confirmed in Re AJ & DJ (Unreported, December 9, 1992, CA) a restraint order "should only be made if there is a reasonable apprehension that, without it, realisable property may be dissipated… if there is no such risk or the risk is merely fanciful, the order ought not to be made since, ex hypothesi, it would not be necessary for the achievement of its only proper purpose."

In many cases, particularly those involving charges of dishonesty, the risk of dissipation will speak for itself and will not prove problematic: see Jennings v CPS [2005] 4 All ER 391. However, prosecutors must be alive to the necessity to establish that such a risk exists. This is especially so in cases where there has been a delay in applying for the restraint order and there is no evidence to show the defendant has dissipated assets in the meantime.

As the Court of Appeal held in Re B [2008] EWCA 1374 in such a case it is incumbent both on the prosecutor and the judge to explain how it can be said there is a real risk of dissipation in the future when the defendant has not dissipated assets in the past despite having every opportunity to have done so.

The amount of realisable property that can be restrained will depend upon the amount in which the confiscation order is likely to be made. The court will permit the prosecutor a degree of latitude in the assessment of the amount of benefit where enquiries into its extent have not yet been completed.

A defendant will be restrained from dealing with all of his assets (“an all-assets restraint order”) if the prosecutor is going to ask the court to conclude that the defendant has a criminal lifestyle and has benefited from general criminal conduct.

If the prosecutor is not alleging that the defendant has a criminal lifestyle and the court is going to be asked to decide whether the defendant has benefited from his particular criminal conduct, a defendant will be restrained from dealing with specific assets which, when taken together,  have an equivalent value than the amount of his benefit from particular criminal conduct (“a specific Restraint Order”).

Where the amount the defendant has benefited from particular criminal conduct exceeds the value of all his assets or the lifestyle provisions are triggered, it will often be appropriate to restrain the defendant from dealing with all of his assets.

Any person who holds assets jointly with the defendant may be specifically restrained from dealing with those jointly held assets. The recipient of a tainted gift may be restrained from dealing with any realisable property they hold up to the current value of the gift.

Free property - Property is free property (see s.82) unless it is the subject of:

  • A forfeiture order either under the Misuse of Drugs Act 1971 or the Terrorism Act 2000
  • A deprivation order under the Powers of Criminal Courts (Sentencing) Act 2000; or
  • An interim receiving order, a recovery order or an order for the detention or forfeiture of seized cash under the civil recovery provisions of the Proceeds of Crime Act 2002

Realisable property - Realisable property is defined in s.83 as any free property held by the defendant and any free property held by the recipient of a tainted gift.

The term “property” is defined in s.84 and covers all property wherever situated and includes money, real or personal property, a thing in action, or other intangible or incorporeal property.

A person “holds” property if he holds an interest in it. A person obtains property if he obtains an interest in it, and one person transfers property to another, if the first one transfers or grants an interest in it to the second.

References to an interest, in relation to property other than land, include references to a right (including a right to possession).

If the defendant or the recipient of a tainted gift has any interest in the property, the whole of the property is realisable property and may be restrained.

Companies enjoy their own legal personality separate and distinct from the defendant. In normal circumstances, therefore, assets of a company do not constitute realisable property of the defendant. However, a long line of authorities have established that where a defendant is the controlling mind of the company and it is a sham and/or has been used to facilitate the criminal conduct complained of, the court may ‘pierce the corporate veil’ of the company and treat it as the realisable property of the defendant: see the full consideration of the issues in R v Boyle Transport (Northern Ireland) Ltd [2016] EWCA Crim 19.

The court will not, however, permit the restraint order to operate at the pre-conviction stage is such a way as to preclude the company engaging in legitimate trading activity. The Restraint Order will need to make provision for company assets to be released to facilitate such activity. In cases of particular complexity, an application for the appointment of a management receiver may be necessary.

A gift is made if the defendant transfers property to another person for a consideration whose value is significantly less than the value of the property at the time of the transfer.

There are a number of ways that a gift will be tainted (see s.77):

  1. If the court has not made a decision as to whether the defendant has a criminal lifestyle or has determined that the defendant does have a criminal lifestyle a gift will be tainted if it was made after the first day of the period of six years ending with the day the proceedings were commenced against the defendant (or, if there are two or more offences and proceedings for them were started on different days, the earliest of those days); or
  2. If the court has determined that the defendant does not have a criminal lifestyle a gift will be tainted if it was made after the date on which the offence was committed (or the earliest date if the particular criminal conduct consists of more than once offence); or
  3. If the gift was made at any time and was of property which was obtained by the defendant as a result of, or in connection with, his general criminal conduct or which represented in the defendant’s hands property obtained by him as a result of or in connection with his general criminal conduct.

Although a court can apply the wider definition of tainted gifts at the restraint stage (i.e. at point 1 above), if it is clear at that time that the defendant does not have a criminal lifestyle and that therefore the narrower definition will apply at the confiscation hearing, the court will have to take this into account when making the Restraint Order.

S.41(7) gives the crown court jurisdiction to make any such ancillary order as it believes appropriate for the purpose of ensuring the restraint order is effective.

The two orders most commonly made under s.41(7) are provision of information orders and repatriation orders.

Provision of Information Orders - A provision of information order requires the defendant to provide information to the prosecutor in a witness statement, verified by a statement of truth, about the nature, extent and location of all his realisable property. Such an order may be appropriate if the value of the defendant’s known assets do not correlate with the value of the property known to have been obtained by him or her.

A Provision of Information Order may be made against a third party holding the defendant’s realisable property: see Re D (Restraint Order: Non Party) The Times, 26 January, 1995.

In order to protect the defendant’s privilege against self-incrimination, Provision of Information Orders are made subject to a strict condition that the statements may not be relied on in the criminal proceedings. It is of vital importance that this rule is adhered to at all times.

Once a defendant has been convicted, the provision of information statement may be relied on in the confiscation proceedings.

Repatriation Orders - Repatriation Orders are orders requiring a defendant to repatriate to England and Wales assets held overseas. They are most commonly used in relation to funds held in overseas bank accounts which are vulnerable to dissipation before a letter of request can be issued and actioned to secure them.

A Repatriation Order should only be sought where the realisation of assets held overseas will be necessary to satisfy a Confiscation Order in the amount of the defendant’s benefit. If there are sufficient UK based assets available, a Repatriation Order should not be sought. For more details on the court’s power to make a repatriation order, see DPP v Scarlett [2000] 1 WLR 515.

S.41(7D) specifically instructs the court, when considering “whether to make an order under subsection (7)”,i.e. an order “it believes is appropriate for the purpose of ensuring that the Restraint Order is effective” to consider whether any overseas travel restriction or prohibition “ought to be imposed for [that] purpose”. For more details on the considerations the court will take into account when considering whether or not to restrict or prohibit overseas travel, see R v Pritchard [2017] EWCA Crim 1267.

The restraint order can make provision for the continued detention of property seized or produced to the police pursuant to a relevant seizure power, namely:

  • S.47C POCA; or
  • S.352 OCA; or
  • Part 2 or 3 of the Police and Criminal Evidence Act 1984.

The detention provision must relate to specified property, property of a specified description or to all property covered by the Restraint Order. It can also relate to property that may be seized or produced in the future.

Variation or Discharge of a Restraint Order

By virtue of s.42(3) the person who applied for the restraint order, or any person affected by it, may apply to vary or discharge it.

In relation to an application to discharge a Restraint Order the court will take into consideration different factors depending on which condition in s.40 was satisfied when the order was granted.

The burden rests on the prosecution on a balance of probabilities test. By virtue of s.69(2) the power to grant a Restraint Order under s.41:

  • must be exercised with a view to the value for the time being of realisable property being made available (by the property's realisation) forsatisfying any Confiscation Order that has been or may be made against the defendant
  • must be exercised, in a case where a Confiscation Order has not been made, with a view to securing that there is no diminution in the value of realisable property
  • must be exercised without taking account of any obligation of the defendant or a recipient of a tainted gift if the obligation conflicts with the object of satisfying any Confiscation Order that has been or may be made against the defendant; and
  • maybe exercised in respect of a debt owed by the Crown

This provision has become known over the years as ‘the legislative steer’ from which it will be seen that, although the judge has a discretion whether or not to grant an application for a Restraint Order, the exercise of the discretion is far from unfettered.

Section 69 is much stricter than the equivalent sections in the old legislation and, as the Court of Appeal held in Serious Fraud Office v Lexi Holdings PLC (In Administration) [2008] EWCA Crim 1443, “must be taken to represent a deliberate tightening up of the legislation by Parliament.” In particular, restrained funds may not be released to enable unsecured third party creditors of the defendant to be paid. The decision to the contrary in Re X [2004] 3 WLR 906 is no longer good law.

Part 33.52(5) CrPR provides that the crown court may require the applicant to give an undertaking to pay the reasonable expenses of any person other than a person restrained from dealing with realisable property, which are incurred as a result of the Restraint Order.

Occasionally cases arise that are of particular complexity, raising issues far removed from those normally dealt with by a crown court judge. They may, for example raise difficult issues regarding trusts, company law, insolvency law, property law or family law. In such cases the principles set out in the judgment of Hughes LJ in Stanford International Bank v Serious Fraud Office [2010] EWCA Civ 137 should be followed.

Prosecutors should liaise with the appropriate courts administrator with a view to arranging for the hearing to take place before a judge with the necessary expertise. In urgent cases, the judge initially dealing with the application should make the Restraint Order, but impose a short return date when the matter can be considered by a judge with appropriate expertise.

The appeal procedure may be found in a combination of POCA, the Criminal Procedure Rules 2015 and in the Proceeds of Crime Act 2002 (Appeals under Part 2) Order 2003 (SI 2003 No. 82).

The Court of Appeal will allow an appeal where the decision of the crown court was wrong, or unjust because of a serious procedural, or other irregularity in the proceedings in the crown court. Any party to an appeal before the Court of Appeal may appeal with leave to the Supreme Court.

We accept instructions on a private basis. Third party funding will often be required as POCA does not allow for the release of restrained funds to fund legal advice in the Restraint proceedings.  The firm does conduct work funded through the Legal Aid system however there is no public funding for pre-charge Restraint Order work.  Please contact us to discuss private case costs and eligibility for legal aid.

For more information on any of the above click here, or if you have been requested to attend an interview or have notification of court proceedings, please contact us today.

Contact the team

Telephone: 020 7734 9700

Raymond Shaw Raymond Shaw
Partner
r.shaw@sgkllp.com
Madeleine Corr Madeleine Corr
Partner
m.corr@sgkllp.com
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