Interim proceedings – Receiving order – Appellant agency claiming property under Proceeds of Crime Act 2002 – Appellant alleging unlawful conduct on respondents’ part – Twelve-year limitation period for recovering property – Possibility of extending limitation period in case of fraud or concealment – Whether appellant establishing good arguable case for extending time and recovering property – Appeal allowed
The respondents had acquired a substantial portfolio of properties, which had been allegedly both obtained and maintained with the proceeds of unlawful conduct involving mortgage finance. An issue arose as to whether the evidence revealed that two properties held by the respondents had been obtained with the proceeds of previous unlawful transactions when the appellant agency applied for an interim receiving order under section 246 of the Proceeds of Crime Act 2002.
By section 246(4) of the 2002 Act, the court might make such an order if there was “a good arguable case” that the property to which the application for the order related was, or included, recoverable property. Section 27A(2) of the Limitation Act 1980 provided that the recovery of any property under the 2002 Act should not be brought after the expiry of 12 years from the date upon which the cause of action accrued. However, section 32(1) stipulated that the period of limitation did not begin to run until the fraud and/or concealment was discovered or could have, with reasonable diligence, been discovered.
The respondents maintained that the two properties, which had been obtained in 1994, fell outside the limitation period and were not susceptible to an interim order as sought by the appellant. The latter contended that there was a “good arguable case” for making the interim order since the funds used to purchase the properties had been derived from the proceeds of other properties that had been obtained by mortgage fraud. Furthermore, the respondents had provided no creditable explanation of how they had funded the purchases.
At first instance, the judge granted an interim order, but that order was subsequently set aside on the ground that the extension allowed by section 32 of the 1980 Act did not apply.
The appellant appealed and the questions for the court were: (i) what constituted a “good arguable case” where the appellant was seeking an interim order to recover particular property under the 2002 Act; and (ii) whether the appellant could rely upon concealment with the effect that the 12-year limitation period began to run only when the facts were discovered and not when the purchases were made.
Held: The appeal was allowed.
(1) The appellant did not need to allege that any specific criminal offence had been committed but had to set out the matters that were alleged to constitute the particular kind of unlawful conduct by which the properties had been obtained. Given that the respondents had failed to give any adequate explanation, the court was entitled to conclude that no legitimate source of the moneys had been identified. Therefore, a good arguable case could be made that the properties had been dishonestly obtained in view of the background evidence of mortgage fraud on a grand scale in other dealings: Director of Assets Recovery v Green [2005] EWHC 3168 (Admin) applied.
(2) With regard to the limitation period, many criminal activities involved multiple offences and, in so far as the appellant’s claim was based upon alleged fraud on the part of the respondents, in those circumstances there was an entitlement to the benefit of the extended limitation period for which section 32(1) provided. Fraud, by its very nature, concealed its own wrongdoing and might not come to light until a considerable time after the event. The statutory language was broad and, as such, capable of extending to a case in which the claimant sued on a cause of action in which fraud was an essential ingredient.
Jonathan Swift and Piers Harrison (instructed by the legal department of the Assets Recovery Agency) for the appellant; Jonathan Fisher QC and David Povall (instructed by Devonshires) appeared for the respondents.
Eileen O’Grady, barrister
