Restraint Orders involve significant intrusions into the lives of restrained individuals. Orders made ex parte normally make it impossible for the restrained individual to operate their businesses or discharge normal outgoings.
Yet the law contains safeguards and places requirements upon the prosecution and the court which if exercised properly should ensure that orders are used appropriately and proportionately, particularly when businesses are involved.
The paragraphs below explore the circumstances in which an order could be imposed together with opportunities for variation and discharge as well as the ongoing obligations on the prosecution to keep the court (and the defence) appraised of the up to date position of an investigation.
What is the purpose of a Restraint Order?
A restraint order is intended to restrain assets ensuring they are preserved in the event of a criminal conviction. Upon conviction assets are then available to satisfy any Confiscation or Compensation Order. A restraint order prevents such assets being dissipated prior to a conviction.
What are the duties of the Court and the Prosecution?
Guidance given by the President of the Queen’s Bench Division in the leading case of Rawlinson & Hunter Trustee and Others, Regina (on The Application of) -v- Central Criminal Court and Another; Admn 31 Jul 2012 applies to the duties of the court and the prosecution in making and applying for a restraint order.
It is important to remember the prosecution have a high duty of disclosure. In Rawlinson and Hunter the President stated:
“It is common ground that the Director must place before the Judge not only all the necessary material so the Judge can satisfy himself that the statutory conditions for the grant of the warrant are fulfilled, but there must be full and complete disclosure to the Judge, including disclosure of anything that might militate against the grant.”
In the case of Stanford International Bank Ltd, Re; CA 25 Feb 2010 it was stated that the prosecution advocate must “put on his defence hat and ask himself, what, if he was representing the defendant or a party with a relevant interest, he would be saying to the Judge”.
The Court in Rawlinson and Hunter went on to deal with the prosecution’s obligations where the nature of the business involved was such that specialist knowledge would be required for the judge to make an informed decision.
Paragraph 88 of the judgment states:
“ Given there is no practice to provide the underlying documentation, it was accepted that there is a very heavy duty placed on the SFO to ensure that what is put before the Judge is clear and comprehensive so that the Judge can rely on it and form his judgment on the basis of a presentation in which he has complete trust and confidence as to its accuracy and completeness. That background must be set out in the written presentation to the Judge. The transactions must then be explained in a coherent and analytical manner. The allegations of reasonable suspicion must then be set out. What is alleged must be verified by person’s expert in the market or accounting practices whose independent advice has been expressly sought. A record of that verification should be retained by the SFO”.
In relation to the duties of the court, the President stressed that the Judge must be personally satisfied that the statutory criteria for the making of an order are met.
What are the pre-requisites for a Restraint Order?
The power to make a restraint order is contained in Section 40(2) of the Proceeds of Crime Act 2002 which provides as follows:
“that – (a) a criminal investigation has been started in England and Wales with regard to an offence, and (b) there is reasonable course to believe that the alleged offender has benefited from his criminal conduct.
So, from the passages cited above, the Judge must personally conclude that there are reasonable grounds to believe that each of the applicants have benefited from identifiable criminal conduct. In order to reach such a conclusion the Judge must be satisfied there is adequate material and must examine it critically.
Where an application is made ex parte, the provisions of CPR rule 59.1 apply. This provides that “the application may be made without notice if the application is urgent or there are reasonable grounds for believing that giving notice would cause the dissipation of realisable property which is the subject of the application”.
In many circumstances the prosecution will take the view that there are reasonable grounds for believing that notice might cause the dissipation of assets. Defendants are immediately on the back foot and, in due course it might be appropriate to consider obtaining a transcript of the ex parte hearing to see not only what was said but to examine how long the hearing lasted to form a view as to how much consideration was given to the decision.
How do Restraint Orders affect company assets?
It needs to be understood that a company has an independent legal identity/personality of its own and its assets do not belong to its Directors, but to the company itself.
There are circumstances, however, where the court will treat the assets of a company as the assets of an individual. Whether this is described as piercing the corporate veil or merely as looking at the reality of whether the assets represent criminal property which belongs to an individual, it is not sufficient to say that the individuals connected with the company or suspected of crime. The company itself must have been used as a vehicle for crime.
In any event, and even if the court is prepared to treat the company assets as the assets of the restrained individual, there needs to be an expressed order restraining the assets of the company.
How can Restrained Individuals pay legal fees?
A restrained individual cannot meet legal expenses from restrained funds, to do so would be a contempt of court. However, a third party can meet legal expenses. Moreover, a company, even if owned by the restrained individual, can meet expenses provided company assets are not restrained (see above). For example, it may well be that the restrained individual is a Director of that company. If the company is to meet the fees of the individual then it is advisable that a properly minuted decision is made by Company Directors to meet the fees of the individual. Indeed it may well be in the interest of the company for the individual’s legal fees to be met so that they are best placed to continue with their role in the company.
Keeping the Court updated
There is an ongoing obligation upon the prosecution to update the Court as to progress with regard to the criminal investigation. Unless pressed this will not happen. Resources are such that the police and prosecution are unlikely to prioritise this obligation.
Moreover, after six months there is every possibility that input from the Crown Prosecution Service thus far has been modest and may be limited to the work undertaken by asset recovery lawyers dealing with the original Order. There may be no input to date from reviewing lawyers likely to have conduct of a prosecution. The failure on the part of the prosecution to update the court may well be relevant to a future application to vary or dismiss the Restraint Order. Additionally, where the obligation is complied with, possibly as a consequence of a threat of variation or discharge, then the defence are better placed to understand the direction of the investigation and to consider what proactive steps can be undertaken during the course of the investigation.
Conclusion
There is now a high duty upon both the prosecution and the court. If these duties, are not complied it may pave the way to a successful application to vary or discharge a restraint order, particularly one made ex parte. There are circumstances in which funds can be released to meet legal costs. Finally, the obligation to keep the defence appraised of the up to date position in the investigation can lead to a tactical advantage.
Matthew Claughton – Specialist Criminal Defence Solicitor
Written by Matthew Claughton. Matthew specialises in defending allegations of fraud, serious crime and sexual offences and is renowned for his proactive defensive approach. He is rated as a Top Tier criminal lawyer in the 2015 edition of the Legal 500 and Chambers 2015 Guide. He won the Lawyer of the Year Award at the Modern Law Awards 2015 and is also the Manchester Legal Awards Partner of the Year 2015.
