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||Neutral Citation Number:  EWCA Civ 143
||Case No: A2/2009/1013
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE HOLROYDE
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE RIX
LORD JUSTICE WILSON
SIR SCOTT BAKER
|| RONALD OLDEN
||- and -
||SERIOUS ORGANISED CRIME AGENCY
(Transcript of the Handed Down Judgment of
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Ivan Krolick (instructed by Mjp Justice Limited) for the Appellant
Kennedy Talbot (instructed by Legal Department, Serious Organised Crime Agency) for the Respondent
Hearing date: 30TH NOVEMBER 2009
HTML VERSION OF JUDGMENT
Crown Copyright ©
Sir Scott Baker:
- This appeal, which is brought by the permission of Aikens LJ, raises issues under Part 5 of the Proceeds of Crime Act 2002 ("The 2002 Act") in relation to property alleged to be or to represent the proceeds of the unlawful conduct of Mr Olden. On 25 March 2009, following a hearing lasting 7 days, Holroyde J allowed an application by the Serious Organised Crime Agency ("SOCA") and made a recovery order in respect of the following assets:
(1) The legal and beneficial interest in Flat 4, Plas Dyffryn, Parc-y-Bryn, Aberystwyth, SY23 2DI;
(2) The legal and beneficial interest in 1, Side Street, Penparcau, Aberystwyth, SY23 1BS;
(3) The credit balance in accounts numbered 60068124 and 60068116 at the National Westminster Bank in the name Messrs Bishop and Light, solicitors;
(4) A B K Carnival residential caravan at Aberystwyth Holiday Village;
(5) A Mitsubishi Shogun, registration number Y104 ENN;
(6) The proceeds of sale of a Mazda, registration number CU52 XPA held in a Nationwide Building Society account number 65221326 in the name of Mr Olden.
- The judge also made various ancillary orders that are not directly relevant to this appeal. On 31 March 2009, following further argument the same judge made possession orders in respect of 1, Side Street, the residential caravan and Flat 4.
- The background to the present civil proceedings is that in February 2006 Mr Olden was convicted in the Crown Court at Cardiff of 3 counts of obtaining property by deception, 17 counts of obtaining money transfers by deception and 2 counts of obtaining services (the use of bank accounts) by deception. He was sentenced to a total of 4 years imprisonment but his conviction was set aside by the Court of Appeal (Criminal Division) on 9 March 2007 on the ground that his conviction was unsafe because he had been unlawfully arrested and that the interview and searches that followed from that arrest were unlawful. The material discovered by the police in interview and by the subsequent searches was of considerable importance in the case and the appeal therefore had to succeed.
- Following the decision of the Court of Appeal (Criminal Division) the Assets Recovery Agency ("the ARA") received a referral from the South Wales Police and successfully applied to the High Court for a property freezing order to replace the restraint order that had been imposed by the Crown Court. The broad nature of the civil proceedings was that Mr Olden had been engaged in unlawful conduct in the form of mortgage frauds and other deceptions and that the ARA was entitled to bring civil recovery proceedings under Part 5 of the 2002 Act to retrieve what he had obtained. The case was largely about mortgage transactions and the adoption of false identities by Mr Olden. Having been made bankrupt in 1998, he bought properties in one of three false names, with mortgage advances under those false names using false employment references.
- The judge disbelieved much of what Mr Olden said in evidence and found in favour of SOCA in respect of all the assets which were said to be recoverable property and ordered that he deliver up possession of all those assets to the trustee for civil recovery (forthwith in respect of everything other than the flat in which he lived and after a short period of time in respect of that flat).
Background to the Legislation
- Before turning more specifically to the material legalisation it is desirable to say something about the relationship between criminal prosecution and the recovery of unlawfully obtained property under the 2002 Act.
- The present claim was started by the Director of the ARA in January 2008. At that time the 2002 Act was in unamended form. On 1 April 2008 the ARA and the Director of the ARA were abolished by the Serous Crime Act 2007 and the ARA's functions were transferred to SOCA, a statutory body itself created by the Serious Organised Crime and Police Act 2005 ("the 2005 Act"). The Home Secretary issued guidelines to the ARA in 2005 as required under the original unamended legislation and to SOCA in 2009 as required by the amended legislation.
- Part 1 of the 2002 Act created the ARA and the Office of the Director whose functions are set out in section 2. Neither the ARA nor its Director was ever a prosecuting authoring. They were given certain powers under the 2002 Act but had no power to conduct a prosecution or a criminal investigation. As Collins J put it in Director of the Assets Recovery Agency v He and Chen  EWHC 3021 at para 13:
"Thus, the approach of the Director must be to let criminal proceedings take precedence, as it were, and only act if such proceedings are either not being taken or for any reason may have failed, if notwithstanding their failure or the inability for whatever reason to take them, she takes the view that she can establish within the requirements of the Act that the property in question was unlawfully obtained."
- The Secretary of State's guidance reflected section 2 (6) which provided that it must indicate that the reduction in crime is in general best secured by means of criminal investigations and criminal proceedings.
- SOCA is a non-departmental public body sponsored by but operationally independent of the Home Office. It is directly accountable to the Government and is headed by the Director General.
- SOCA's powers and functions are set out in sections 2 – 5 of the 2005 Act. It is responsible, inter alia, for the gathering, storing, analysing and dissemination of information relevant to the prevention, detection, investigation or prosecution of offences or to the reduction of crime by other means or the mitigation of its consequences. Its function is in relation to crime at large, and not just to serious organised crime as it provides information to police forces, special police forces and other law enforcement agencies in the discharge of their functions. SOCA is not a prosecuting authority, there are however provisions in the legislation for the sharing of information between SOCA and prosecuting authorities. In the 2005 Act as originally enacted SOCA had no role in relation to civil recovery.
- The Serious Crime Act 2007 ("the 2007 Act") made a number of important changes. By section 74 (1) the ARA and Office of its Director were abolished. Schedules 8 and 9 of that Act were brought into effect.
- Schedule 8 Part 2 is headed "Transfer of Civil Recovery Functions". The scheme of this Part is to transfer the functions of the Director of the ARA to SOCA. By paragraph 91 of Schedule 8 Part 2 the definition of "enforcement authority" in the 2002 Act is amended so that the enforcement authority for England and Wales becomes SOCA, the Crown Prosecution Service, the Revenue and Customs Prosecutions Office and the Serious Fraud Office.
- Schedule 8 Part 4 is headed "Transfer of Investigative Functions". It amends Part 8 of the 2002 Act. The power of the Director of the ARA to obtain investigative orders shifts to SOCA and the other above-mentioned enforcement authorities. Paragraph 114 requires the Secretary of State to issue a code of practice governing the exercise of the powers of SOCA to use the investigative powers under Part 8 of the 2002 Act. Such a code has been issued.
- Other amendments to the 2002 Act include the replacement of section 2 with section 2A. Section 2A provides that a relevant authority, of which SOCA is one, must exercise its functions under the Act in the way which it considers best suited to the reduction of crime, and in doing so must have regard, in the case of SOCA, to any guidance issued by the Secretary of State. Section 2A (4) mirrors the old section 2 (6) and is in identical terms.
- Section 74 and Schedules 8 and 9 of the 2007 Act came into force on 1 April 2008. Departmental guidance under section 2A(4) of the 2002 Act, which was much more extensive than the Secretary of State's original guidance to the Director of the ARA, was issued on 5 November 2009.
- The philosophy of the legalisation remains that the public interest is best served by giving priority to criminal proceedings where they can be brought and it is in the public interest to bring them. The guidance gives a non-exhaustive list of circumstances where civil recovery proceedings might be appropriate and this includes in paragraph 5(f) cases in which there has been a prosecution that has not resulted in a conviction.
The relevant legislation
- Turning specifically to the relevant provisions in the legislation, Part 5 of the 2002 Act gives the High Court wide power to order recovery of property that is, or represents, the proceeds of unlawful conduct. Section 240 is headed "General Purpose of this Part". It provides:
"(1) This Part has effect for the purposes of:
(a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents property obtained through unlawful conduct,
(b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates court or (in Scotland) the sheriff.
(2) The powers conferred by this Part are exercisable in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property."
SOCA is an enforcement authority (see section 316 (1) as amended by the Serious Crime Act 2007).
- Section 266 provides:
"(1) If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.
(2) The recovery order must vest the recoverable property in the trustee for civil recovery.
(3) But the court may not make in a recovery order –
(a) any provision in respect of any recoverable property if each of the conditions in sub-section (4) or (as the case may be) (5) is met and it would not be just and equitable to do so, or
(b) any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998.)"
It is unnecessary for the purposes of this appeal to recite the detail of sub-sections 4 – 7 and 9.
"(8) A recovery order may impose conditions as to the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose or realising it."
"Recoverable property" is defined by section 304 as property obtained through unlawful conduct.
- Section 242 provides:
"(1) A person obtains property through unlawful conduct (whether his own conduct or another's) if he obtains property by or in return for the conduct.
(2) In deciding whether any property was obtained through unlawful conduct –
(a) it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out 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."
- Section 241 (1) provides that conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part. There are various statutory defences and exceptions to the making of a civil recovery order set out in section 266 and 308, but none is applicable in this case.
- Broadly, therefore, the position is that any property obtained by Mr Olden by or in return for crime has to be forfeited by vesting the property in the trustee for civil recovery. The trustee must pay the proceeds of realisation of such property to the enforcement authority (here SOCA - see section 280 (2)). The enforcement authority must then remit those proceeds to the consolidated fund.
- Recoverable property is not just the actual res which has been obtained "by or in return for" crime; property which represents the original recoverable property is also recoverable. Section 305 is headed "Tracing Property etc". It provides:
"(1) Where property obtained through unlawful conduct ("the original property") is or has been recoverable, property which represents the original property is also recoverable property.
(2) If a person enters into a transaction by which –
(a) he disposes of recoverable property, whether the original property or property which (by virtue of this Chapter) represents the original property, and
(b) he obtains other property in place of it,
the other property represents the original property.
(3) If a person disposes of recoverable property which represents the original property, the property may be followed into the hands of the person who obtains it (and it continues to represent the original property)."
- If recoverable property is mixed with untainted property to obtain further property the portion of the further property which represents the original recoverable property is also recoverable (see section 306). Profits accruing in respect of recoverable property are to be treated as representing the property obtained through unlawful conduct (see section 307).
Grounds of Appeal
- The grounds of appeal can be summarised as follows:
(1) The judge erred in law and/or the exercising of his discretion in admitting evidence that was obtained following Mr Olden's unlawful arrest.
(2) The initial stake of £12,000 in the acquisition of the first properties was not recoverable property.
(3) The judge was wrong in law to find that any of the properties represented recoverable property because the loan secured against the property had been repaid.
(4) The judge was wrong to hold that Mr Olden had obtained the houses (which he already owned) through fraudulent mortgage advances, notwithstanding that such transactions were effectively re-mortgages.
(5) The judge was wrong to find winnings from spread betting funded by recoverable property were themselves recoverable.
(6) The High Court has no jurisdiction to make an order for possession. Alternatively if it does it should not have exercised it.
Evidence following unlawful arrest
- Briefly, the facts of what happened are these. Mr Olden was declared bankrupt on 17 March 1998. In the Spring of 1998 he was unemployed and began using three false identities. (I should add that he had a conviction in June 1994 for four offences of making a false representation or statement in order to obtain a benefit.) In each case the false identity was of a real person with a date of birth not much different from his own. A police investigation began and Mr Olden was prosecuted for using false names to obtain properties and mortgages and thus take advantage of the rising property market.
- By August 2004 the police investigation was well advanced. DC Phillips of the South Wales Police was based in Cardiff and effectively the officer in charge of the case and, for the most part, was the officer conducting the investigation. He suspected the perpetrator of the frauds he was investigating was Mr Olden and it is not suggested he did not have reasonable grounds for his suspicions.
- On 5 August 2004 DC Phillips travelled to Aberystwyth with the intention of arresting Mr Olden for the purpose of interviewing him. He did not know his location but knew he was driving a Mitsubishi and he knew its registration number. DC Phillips had not obtained a warrant for the arrest but he spoke to DS Howells of the Aberystwyth Police. At the criminal trial there was a voir dire. DC Phillips gave evidence at the voir dire but DS Howells did not. DC Phillips said he told DS Howells that he wanted Ronald Olden, who was the driver of the Mitsubishi vehicle, arrested on suspicion of multiple mortgage frauds. DC Phillips said he told DS Howells that this was a mortgage fraud involving several different lenders and properties, where the person responsible had used a number of falsely obtained identities. He said he told the sergeant that it was his intention to arrest and interview him. At lunchtime DC Phillips left for Cardiff. There was no evidence as to the subsequent movements of DS Howells.
- At 2 p.m. PC Lodwig came on duty with PS Evans. Both gave evidence on the voir dire. They were briefed about the case by DS Richards, who did not give evidence. There was no direct evidence about what DS Howells had told DS Richards. PC Lodwig said he and PS Evans were told by DS Richards to keep observation for a silver Mitsubishi Shogun, given its number and told the driver was Ronald Olden who was to be arrested on suspicion of fraud on behalf of the South Wales Police. In his evidence in chief he was unable to recall any other details. In cross examination he said he could not remember any of the details of the alleged fraud. PS Evans produced the custody record for Mr Olden's detention at the police station and it recorded:
"Arrested on behalf of the Rumney Police for multiple mortgage fraud. DC Chris Phillips given info re offences."
- The judge at the trial said he was satisfied that DC Lodwig effected a perfectly lawful arrest. In the Court of Appeal (Criminal Division) Dyson LJ giving the judgment of the Court, allowing the appeal said at paragraph 21 of his judgment:
"The House of Lords in O'Hara v Chief Constable of the Royal Ulster Constabulary  1Cr App R 447 decided that the arresting officer must himself or herself have the necessary suspicion and reasonable grounds for such suspicion. The mere fact that the arresting officer has been instructed by his superior officer to effect the arrest is not of itself capable of amounting to such reasonable grounds (per Lord Steyn at pages 452G - 453D and Lord Hope at page 458C – E and 463B)"
- Dyson LJ then referred to Simon Brown LJ, as he then was, in Hough v Chief Constable of Staffordshire Police  EWCA Civ 39 at para 16 who observed that the critical question to be asked in all cases is what is in the mind of the arresting officer; he can never be a 'mere conduit' for someone else. Dyson LJ concluded at paragraph 26:
"We conclude that the judge did not address his mind to the question of PC Lodwig's state of mind and that had he done so he should have concluded that he did not have material on which to find that PC Lodwig had the necessary suspicion. It follows in our view that the arrest was unlawful and that the interview and searches that resulted from the arrest were also unlawful."
He went on to say that since the material that was discovered by the police in the interview and by the searches was of considerable important in the case the appeal had to succeed.
- The argument of Mr Krolick, who appeared both in the criminal proceedings and before Holroyde J and ourselves in the civil proceedings is that the Court of Appeal (Criminal Division) having decided that the evidence ought not to have been admitted in the criminal trial, it would an abuse of process for the same evidence to be admitted in a civil trial in which the same factual issues fell to be decided. Also, that in the light of the conduct of the police, and the interference with Mr Olden's human rights, the court should exercise its discretion under CPR Part 32 by excluding that evidence, and with it such other material as was obtained in direct consequence of the knowledge of the unlawful material.
- Holroyde J rejected Mr Krolick's argument holding, having referred to the terms of the legislation, that (para 29):
"…. The Director may proceed even where criminal proceedings have failed, and may rely upon evidence which is admissible in the civil proceedings even if it was unlawfully obtained by the police and for that reason was ruled inadmissible in the criminal proceedings."
- For SOCA Mr Kennedy Talbot's argument runs thus. His starting point is that the 2002 Act gives the High Court power to make a recovery order divesting a respondent, in this case Mr Olden, of property in civil proceedings (section 240). If the court is satisfied the property is recoverable property the court must make a recovery order vesting the property in the trustee for civil recovery (section 266(1)). Recoverable property is property obtained through unlawful conduct (section 304). The next stage in his argument is that, as a matter of principle, rulings by a criminal court are not binding on a civil court. Otherwise, in the present case there would be a conflict with the statute. What happened in the criminal proceedings is, he submits, quite irrelevant.
- There is, I think, a considerable element of technicality in Mr Krolick's argument that admission of the evidence of arrest in the present proceedings is an abuse of process because of the binding ruling in the criminal trial. The factual position is that the officer with all the relevant information, DC Phillips, was not the arresting officer as he intended, but he could have been. The arrest was unlawful because it took place in the circumstances I have outlined. It was conceded by Mr Krolick that if the information about Mr Olden's offences which DC Phillips gave to DS Howells had been passed on to PC Lodwig that would have afforded him reasonable grounds to suspect Mr Olden had committed the offences. As Mr Talbot pointed out, quite apart from the unlawful arrest, the police would have discovered everything within a short space of time. Mr Olden's wallet was handed in to the police having been found in the street. It contained bank cards, membership cards and the like in four names, his own and the three false ones he had been using fraudulently.
- What the Court of Appeal (Criminal Division) found was that the arrest was unlawful and that in the discretion of the trial judge the evidence should not have been admitted. The ruling of the court was simply in the context of the admissibility of the evidence in those proceedings.
- The cornerstone of the admissibility of evidence in criminal proceedings is to be found in section 78 of the Police and Criminal Act 1984 which provides:
"(1) In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admissibility of the evidence would have such an adverse impact on the fairness of the proceedings that the court ought not to admit it.
(2) Nothing in this section shall prejudice any rule of law requiring a court to exclude evidence."
- As Lord Nicholls of Birkenhead pointed out in R v Looseley; AG's reference (No. 3 of 2000)  1 Cr App R 29 at paras 11 and 16, section 78 had reversed R v Sang  AC 402 on the admissibility of evidence obtained unfairly and that Sang had been overtaken by section 78 and the development of the common law doctrine of abuse of process.
- It seems to me that the question of admissibility of evidence has to focus on the particular proceedings with which the court is concerned and the fact that the evidence was ruled inadmissible in an earlier criminal trial is nothing to the point when considering its admissibility under the 2002 Act.
- In the event, the Court of Appeal (Criminal Division) did not direct a re-trial of Mr Olden when overturning his conviction. But it could have done if such a course was in the interests of justice, and on a re-trial the court would have had to consider afresh the admissibility of the evidence in the context of the fairness of those proceedings. The court could at that stage be considering additional or different evidence.
- In civil proceedings the court looks to different criteria to decide whether to exclude evidence. As Lord Hoffmann said in A v Home Secretary (No. 2)  2 AC 221 para 87: "There is a discretion in all cases to exclude admissible evidence if its admission would dishonour the administration of justice or compromise the integrity of the judicial process."
- CPR 32.1(2) gives the court power to exclude evidence that would otherwise be admissible. That power must be exercised in accordance with the overriding objective in Part I of the CPR to deal with cases justly; see Lord Woolf C.J. in Jones v Warwick University  1 WLR 954 at para 27. That was a case in which an enquiry agent acting for a defendant's insurers had obtained evidence in an improper manner. The Court of Appeal upheld the judge's decision to admit the evidence. The Court pointed out in Jones, that the exercise of the court's power involves balancing any unlawfulness against the importance of the court reaching the correct decision on the basis of all the evidence available.
- The judge noted that the statutory provisions contemplated that SOCA might seek and the court grant a recovery order even though the respondent had either not been prosecuted or had been prosecuted and acquitted; even though the criminal and civil proceedings raise similar issues; and even though the evidence relied on in the civil proceedings is the same as, or includes, the evidence used in the unsuccessful prosecution. There is, as he said, therefore, built into the statute the prospect that there may be different outcomes to criminal and civil proceedings founded on the same evidence as is apparent from R (on the application of ARA) v He and Chen  EWHC 3021 (Admin) and R (on the application of ARA) v T  EWHC 3340 (Admin).
- We, as was the judge, were referred to Olupitan and another v Director of the Assets Recovery Agency  EWCA Civ 104. As Langley J, the trial judge in Olupitan, said at para 39, with the subsequent approval of the Court of Appeal:
"The Director is not to be equated with the Crown as prosecutor. The Director is independent with a different role and powers. That role and those powers exist regardless of criminal proceedings; section 240 (2) (the 2002 Act)."
- The position seems to me to be plain. Holroyde J had a quite separate discretion to exercise in the present case from that which fell to be exercised by the trial judge. His overriding consideration was that the proceedings should be fair (Article 6 of the ECHR) and that he should deal with the case justly (the overriding objective in the CPR). It is not disputed that there were reasonable grounds to suspect Mr Olden of criminal offences justifying arrest. The only criticism is that the police officer carrying out the arrest did not have personal knowledge of those grounds.
- Before us Mr Krolick argued that it was an abuse of process for the judge to have admitted the evidence in the present proceedings because of the ruling in the criminal proceedings. That was, however, not quite how he put it in his skeleton argument or before Holroyde J. In any event, I am unable to accept his argument. It is of course relevant that the evidence was ruled inadmissible in the criminal proceedings when the court in the civil proceedings comes to exercise its discretion whether to admit it, but it is not the fact that it was ruled inadmissible that matters, rather it is the circumstances, namely that it was obtained unlawfully and those circumstances fall for consideration along with all the other circumstances when the judge comes to apply the test I have identified. I cannot accept it was an abuse of process to admit the evidence. I think the man in the street would regard it as an abuse of process not to admit it.
- Mr Krolick in his original skeleton argument relied on Marcel v Metropolitan Police Commissioner  2 WLR 50 at 64 and he did so again in his written reply after conclusion of the oral hearing. He did not, however, develop any argument at the hearing. His point, as I understand it, is this. The police acted unlawfully in passing to SOCA the contents of Mr Olden's briefcase that was found in his car when it was unlawfully searched. Section 436 (1) of the 2002 Act provides that information which is held by a permitted person (in this case the police) maybe be disclosed to the Director for the purpose of the exercise by the Director of his functions. Mr Krolick argues that the section does not extend to information unlawfully obtained. Sir Nicolas Browne-Wilkinson decided Marcel at first instance on the basis that public interest demands that documents which have been seized by the police in exercise of their powers under the Police and Criminal Evidence Act 1984 should be used solely for police purposes for which the powers of seizure were conferred and for no other purpose whatsoever. The Court of Appeal, whilst endorsing the general principle, made the qualification "unless a subpoena has been served on the relevant police officer".
- I do not think Marcel is of any assistance to Mr Krolick's argument. The present case is concerned with powers conferred by the 2002 Act and, like the judge, I see section 240(2) as a complete answer to the point because it provides that the court's powers to make a civil recovery order are exercisable in relation to any property whether or not any proceedings have been brought for an offence in connection with the property.
The initial £12,000 stake
- Mr Olden's evidence was that at the time of his bankruptcy he had around £12,000 available to invest in property. His trustee in bankruptcy knew nothing about it because, he said, no-one had ever asked him about it. The judge rejected this as obviously untrue, saying he was satisfied Mr Olden must have known he was under a duty to disclose all his assets. He gave no explanation how he managed to keep some of the money from his trustee's knowledge; he gave no specific explanation of how he had acquired it and was very vague about how he had used it. He produced no documents to support his argument and could not explain why, if he had about £12,000 and he believed his bankruptcy debt was about £10,000, he did not take the obvious step of paying his debt.
- The judge found Mr Olden was untruthful when he tried to explain his payments or the early deposits by reference to the supposed sum of £12,000. He said it was possible that there was some money, but probably there was not. The probable explanation, he said, lay in some other deception or deceptions.
- Mr Olden's case was that whatever subsequent unlawful conduct was proved against him it could not be said that all of his assets constituted recoverable property without identifying the dishonest source of the £12,000. The finding that the £12,000 had been obtained as a result of another deception or deceptions was not enough. Accordingly, a detailed tracing exercise was necessary.
- Mr Krolick's further point with regard to the £12,000 is that on the assumption Mr Olden had the money and failed to disclose it to his trustee in bankruptcy, his failure to disclose the money did not make it into recoverable property because even if the failure amounted to unlawful conduct Mr Olden did not thereby obtain the property.
- In short, Mr Krolick's point is that the £12,000 was not shown to be property obtained from unlawful conduct and it was thus necessary for a tracing exercise to be conducted through subsequent property transactions in order to establish what was and was not recoverable property. Other than the £12,000 there was no evidence of any other "untainted" money being introduced into the property transactions.
- The answer to Mr Krolick's argument on the £12,000 is, I think, to be found in Olupitan in the judgment of Carnwath LJ citing with approval the earlier decision of Sullivan J., as he then was, in R (Director of Assets Recovery Agency) v Green  EWHC 3168:
"In civil proceedings for recovery under Part 5 of the Act the Director need not allege the commission of any specific criminal offence but must set out the matters that are alleged to constitute the particular kind of unlawful conduct by or in return for which the property was obtained."
- It is true that the judge made no finding specifically as to where the money had come from. Mr Olden's evidence, but he was not believed, was that he obtained it from bank or building society demutualisations but he did not identify the source and produced no documents.
- The identifiable income was state benefit that was paid into accounts in Mr Olden's name but there was no evidence that money from these accounts was used to fund property purchases.
- The evidence as a whole showed Mr Olden was behaving in a fraudulent and dishonest way and the finding that some other deception or deceptions was the most likely source of the £12,000 is in my judgment an unassailable finding of fact. Put shortly, the facts were such that there was an onus on Mr Olden to show that there was an honest source of this money and he failed to discharge it.
- In these circumstances Mr Krolick's bankruptcy point does not arise although it does seem to me the answer to his argument that you cannot obtain something that you are holding already may be that Mr Olden was holding the money for the trustee in bankruptcy. The judge held that keeping the money back from the trustee would itself be an offence under section 354 of the Insolvency Act 1986 and that the money retained would be property obtained through unlawful conduct. I would prefer to put it on the basis that the property obtained with the £12,000 (and one or two of the first properties were so obtained) was obtained by the unlawful conduct of failure to deliver up the £12,000 to the trustee. The only issue was whether causation was established and in my view, on the facts found by the judge, it plainly was.
- In the absence of any evidence that Mr Olden had deployed any 'untainted' money in the property transactions Mr Krolick realistically accepted that he was in difficulty on grounds (3) and (4) which he did not pursue.
- The judge dealt with spread betting at paras 88 and 89 of his judgment where he said:
"88. The only other source of income which needs to be considered is the winnings from Mr Olden's gambling. I accept that Mr Olden did take part in a form of spread betting with two organisations, IG Index and City Index. I heard evidence from Mr Mukhida of IG Index. In essence, Mr Olden made forecasts or "took positions" in respect of the future movements of various financial indexes. If events turned out in his favour, he received a payment; if events turned out against him, he had to pay his loss. The IG Index account was opened and operated in the name Batters: Mr Mukhida gave evidence that IG Index do not allow customers to use false names. He also gave evidence that an initial payment had to be made when the account was opened, and that a deposit had to be paid before bets could be placed.
89. Overall, I did find that Mr Olden made a loss of several thousand pounds on each account: that is not disputed in relation to City Index, and I accept Mr Mukhida's evidence to that effect in relation to IG Index. It follows that this gambling cannot be the source of any of monies now remaining in the restrained bank accounts. It is nonetheless the case that from time to time there was money in one of the bank accounts which came from a successful gamble, and Mr Krolick submitted that such money could not be recoverable property. I do not accept that submission. In a more straightforward case if a man takes a cash sum out of his proceeds of crime, uses it to place a conventional bet on a horse, and successfully doubles his money, it seems to me that the increased sum is caught by POCA 2002 s307 and all of it is recoverable property. The mechanics of this form of spread betting is more complex, but the essence of it is the same; Mr Olden needed to start with some money in order to open his accounts and place his bets, and it is SOCA's case – which I accept has been proved as the matter of probability – that the money used was the proceeds of his unlawful conduct. In that basis, it seems to me that if he won, his winnings were "profits accruing in respect of recoverable property". If he lost, he diminished his recoverable property.
- The essence of Mr Krolick's argument, as I understand it, is that the receipt of funds from the spread betting company cannot be said to have been obtained in place of property (whether recoverable or not) and thus any tracing exercise must come to an end. Mr Krolick expands his argument in this way. Section 305 cannot apply because no property was acquired in place of whatever deposits or payments were made by Mr Olden. He submits that consideration of whether the betting company held the deposit in trust for Mr Olden or what rights Mr Olden and the company had in relation to the money are immaterial and cannot be resolved because there was no relevant finding by the judge who treated the "winnings" as if they were winnings from conventional gambling.
- He further submits as to section 307 of the 2002 Act that the section provides that the further property must be "profits accruing " and that this does not extend to additional property acquired as a result of effort, skill or knowledge. "Accrue", he argues, means increase incidentally by growth eg interest. If the legislature intended that additional property obtained as a result of the use of recoverable property was to be included then the expression "consisting of profits accruing" would not have been used.
- The judge dealt with spread betting under section 307 of the 2002 Act but I agree with Mr Talbot the position can also be analysed under section 305. Mr Olden opened an account with spread betting syndicates; he used recoverable property to do so. He then placed further recoverable property on deposit with the syndicates. It was a condition precedent for the placing of bets that money was deposited. The money once deposited became the property of the spread betting company and gave rise to a set of rights in Mr Olden.
- The judge's finding that in order to start spread betting Mr Olden had to start with some money to open his accounts and place some bets is not in dispute. Monies added later were also recoverable property. In these circumstances, it seems to me that the profits for any sums won and paid to Mr Olden at any given time are "profits accruing in respect of recoverable property". I agree with Mr Talbot's submission that the words "in respect of" in section 307 (1) are broad words that are intended to encompass circumstances where otherwise it would have been necessary to use the tracing provisions in section 305. Thus the money is recoverable either by section 305 or by section 307. Spread betting does not engage the mixed property provisions in section 306. The "innocent" property envisaged in section 306 has to be property and not just effort or skill on Mr Olden's part in predicting market movements.
The Possession Order
- Following the hand-down of his judgment on 25 March 2009 Holroyde J adjourned SOCA's application for orders of possession until 31 March 2009. Having heard further argument he gave judgment the same day and ordered that:
"1. All persons in possession of 1, Side Street, Penparcau and B K Carnival residential caravan forthwith give vacant possession to the Trustee.
2. The Trustee may not (1) complete any sale in respect of Flat 4, Plas Dyffryn ("the occupied property") or require Mr Olden to give vacant possession of the occupied property to him until 10 a.m. on Friday 1 May 2009.
3. Mr Olden shall:
i) by 10 a.m. on Friday 1 May 2009 give vacant possession of the occupied property to the Trustee and may occupy the said property as a licensee until that time; and
ii) forthwith hereafter comply with any reasonable request made by the Trustee for the purpose of marketing for sale, selling or preparing for sale of, the occupied property."
- Mr Krolick's submisson to the judge was that the court had no jurisdiction to make an order for possession and if he did the court should not exercise its discretion to do so in this case. The judge said the answer to the first question was dependant on the proper construction of Part 5 of the 2002 Act, but the Act is silent about whether a recovery order can include an order for possession. The judge accepted Mr Talbot's submission which was on the following lines. As a result of the recovery order the property has vested in the Trustee so the Trustee has the right to possession of it and Mr Olden has no such right. If Mr Olden remains in possession of any of the property he continues to profit from crime which is the opposite to the 2002 Act's intention. Accordingly, on the true construction of the Act, a recovery order can include an order to deliver up possession of the recoverable property.
- Mr Krolick's argument before the judge was that the Act provided only for the making of a recovery order. It did not turn Mr Olden into an immediate trespasser and did not entitle the SOCA to seek an order for possession; the Trustee for civil recovery would be entitled to apply for an order for possession but not SOCA. In any event no such application had been made. Mr Krolick further argued that the occupied property was Mr Olden's home. It was bought for that purpose and he lived there as such. He was entitled to continue living in it until the court made an order for possession under CPR 55 on an application by the Trustee.
- Although a stay was sought in the notice of appeal, no order for one was made by Aikens LJ, no doubt because the stay imposed by the judge had run out before the notice of appeal was filed. Mr Olden left the occupied property before 1 May 2009 because, we were told, he was subject to a penal notice. It was SOCA who obtained the possession order, not the Trustee.
- In my judgment the starting point is section 266(2) of the 2002 Act which provides that the recovery order must vest the recoverable property in the Trustee for civil recovery. Sub section (3) goes on to provide that the court may not make in a recovery order any provision (1) where certain conditions apply and it would not be just and equitable to do so (not relevant to the present case) or (2) where to do so would be inconsistent with any Convention rights under the European Convention of Human Rights.
- The court's order duly vested the recoverable property in David Wallace of SOCA, who was appointed Trustee (see paras 2 and 3 of the court's order of 25 March 2009). It seems to me that on the correct analysis the Trustee became in effect the landlord and was acting as the agent for SOCA. The legal and beneficial interest was vested in the Trustee as the owner with the consent of the court. Section 266(8) provides that a recovery order may impose conditions as to the manner in which the Trustee may deal with any property vested by the order for the purpose of realising it. None was made in this case. Among the functions of the Trustee (section 267) is the function, in the case of property other than money, to realise the value of the property for the benefit of the enforcement authority.
- Three questions seem to me to arise. First, has the judge any jurisdiction to make a possession order in proceedings under the 2005 Act or at common law? If so, had he jurisdiction to make the order he did in the present case in favour of SOCA? Thirdly, if he had jurisdiction was he correct to exercise it and to make the order that he did? In my judgment the 2005 Act contains no express power to make a possession order and the court should not imply such a power.
- Mr Talbot submits that notwithstanding the statute, the court has inherent jurisdiction. He relies on Gorulnick v Gorulnick  P47, submitting that the court has inherent jurisdiction to order a person to vacate property (which he submits is in effect an order for possession). He draws attention to section 37(1) of the Supreme Court Act 1981 and the High Court's power to grant an injunction in all cases where it appears to the court to be just and reasonable to do so. Then he argues that an order for possession is an ancient common law writ and that all the common law's jurisdiction of the High Court is preserved by Section 19(2)(b) of the Supreme Court Act 1981. Rules of court, such as Part 55 are procedural and do not affect the extent or nature of the court's jurisdiction to grant orders for the possession of land : see University of Essex v Djemal and Ors  1WLR 1301.
- If the jurisdiction problem can be overcome in the present case by using the inherent jurisdiction of the Court the claimant, SOCA, immediately runs into the difficulty that the person who should have been seeking possession was the Trustee who was the recipient of the vesting order of the property.
- Mr Talbot submits that the Trustee is effectively the agent of SOCA and there is no distinction in legal personality between SOCA and the Trustee and therefore there is nothing in the point that the possession order was made in proceedings in which the Trustee was not the claimant. I cannot accept this. The 2002 Act very clearly identifies the Trustee as an individual with his own functions and under Section 266(8) the court can impose conditions upon him as to the manner in which he can deal with vested property in order to realise it.
- My analysis of the situation is as follows. The 2002 Act makes no provision for the possession of property as opposed to a recovery order, the purpose of which is to vest the property to be recovered in the Trustee. The Trustee's function is then, in the case of land, to realise the value of the property for, in this case, SOCA, (see section 267(3)(b)). How he does it is a matter for him. As Mr Krolick points out there may be circumstances in which the best course is not to obtain an immediate order for possession. In my view it is significant that the 2002 Act nowhere gives the court power to make an order for the recovery of possession of land.
- Mr Talbot invites the court to imply such a power but to do so would give the court a power not subject to any of the safeguards provided by Part 55 of the CPR. The courts are naturally cautious of ordering the possession of land, in particular a dwellinghouse, without the appropriate steps having first been taken. As Mr Krolick pointed out in argument it is always possible that some third party may have a right or claim to have a right over the property in question. Someone other than the defendant could be living in the property.
- Once the property has been vested in the Trustee by the recovery order it is up to the Trustee, if he decides to do so, to apply for an order for possession. Further, he must do so under the provisions of Part 55. It seems to me it would be quite wrong to use any inherent jurisdiction of the court as the vehicle to obtain a possession order in a case such as the present. Whether or not it could be said that the Trustee is a landlord or licensor within the meaning of Part 55.2(1)(a), Mr Olden is certainly, following the recovery order, a trespasser under Part 55.2(1)(b).
- One argument advanced by Mr Talbot why Holroyde J was entitled to make a possession order was the delay that would be caused by separate Part 55 proceedings. I do not see this as an insurmountable problem. While Part 55 applications are ordinarily brought in the County Court there is power for them to be brought in the High Court (Part 55.3(2)). In my view, following the making of the recovery order on 25 March 2009, the correct course was for the Trustee immediately to have taken Part 55 proceedings. I do not see why they could not then and there have been commenced before Holroyde J who could have made whatever orders for abridgment of time he considered necessary and appropriate in the light of the circumstances. Thus an early possession order could have been made in favour of the Trustee.
- My understanding is that no one was residing in 1 Side Street, Penparcau or the residential caravan and it is the occupied property, Flat 4, to which the possession point is really directed. The point is now to an extent academic because Mr Olden vacated the property following service of the order with a penal notice attached.
- In my judgment the order of 31 March 2009 was unlawful because it was made in favour of SOCA when the application for a possession order should have been made by the Trustee. It was further unlawful because it was made without recourse to the provisions of Part 55.
- I would therefore allow the appeal to the extent of setting aside the order of 31 March 2009.
Lord Justice Wilson : I agree.
Lord Justice Rix : I agree.
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