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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Scottish Ministers v. McGuffie & Ors [2006] ScotCS CSOH_34 (28 February 2006)
URL: http://www.bailii.org/scot/cases/ScotCS/2006/CSOH_34.html
Cite as: 2006 SLT 401, [2006] ScotCS CSOH_34, 2006 GWD 9-175, [2006] CSOH 34

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OUTER HOUSE, COURT OF SESSION

 

[2006] CSOH 34

 

 

 

 

 

 

 

 

 

 

 

 

OPINION OF LORD KINCLAVEN

 

in the Petition of

 

THE SCOTTISH MINISTERS

Petitioners

 

against

 

GEORGE McGUFFIE and Others

Respondents

 

for

 

An interim administration order in terms of the Proceeds of Crime Act 2002

and for warrant for inhibition and arrestment

 

________________

 

Petitioners: Cullen QC, Sheldon; Solicitor to the Scottish Executive

First Respondent: Woolman QC, Shead; Wilson Terris & Co, SSC

 

 

28 February 2006

 

Introduction

[1] This is a Petition by the Scottish Ministers for an interim administration order in terms of the Proceeds of Crime Act 2002 ("the 2002 Act").

[2] The case came before me for debate at the instance of the First Respondent, George McGuffie.

[3] The primary submission for the First Respondent was that the order sought is contrary to Article 7 of the European Convention on Human Rights and Fundamental Freedoms. It was submitted that the Petitioners were seeking to impose a retrospective criminal penalty on Mr McGuffie.

[4] Mr Woolman QC for the First Respondent invited me to uphold his argument in principle, to find that the Petitioners were seeking to impose a criminal penalty retrospectively and to put the case out By Order so that consideration could be given to a more limited form of order. Mr Woolman accepted that if there was no criminal penalty then his challenge to the Petition failed.

[5] Mr Cullen QC for the Scottish Ministers moved me to sustain the Petitioners' plea-in-law to the effect that the Respondent's case was irrelevant. He submitted that the Respondent's case should not be admitted to probation. I was invited to grant the prayer of the petition in so far as not already granted.

[6] Having heard counsel, I have decided that the Petitioners' submissions fall to be preferred. I was not satisfied that the First Respondent's arguments were well founded. I shall outline my reasons below.

[7] In the result, I shall sustain the plea in law for the Petitioners and repel the pleas-in-law for the First Respondent. I propose to grant the prayer of the present petition in so far as not already granted and I shall put the case out "By Order".

 

The Petitioners

[8] The petitioners are the Scottish Ministers. They are the enforcement authority in relation to Scotland for the purpose of the Proceeds of Crime Act 2002 (c. 29). By this petition the Scottish Ministers seek an interim administration order in terms of Chapter 2 of Part 5 of the 2002 Act and warrant for inhibition and arrestment. Section 286 of the 2002 Act provides, subject to certain exceptions which are not applicable in the present case, that orders under that Chapter may be made by the Court of Session in respect of a person wherever domiciled, resident or present. There is no dispute that this Court has jurisdiction.

 

The Respondents

[9] The respondents are the persons mentioned in Part I of the Schedule to the Petition. They are individuals who the petitioners aver hold the property mentioned in Parts II and III of the Schedule. The Petitioners aver that that property is recoverable property or as the case may be associated property within the meaning of the 2002 Act.

 

The Procedural Background

[10] The present petition is for an interim administration order. It was lodged on 2 March 2004.

[11] On 3 March Lord Brodie granted an order in terms of section 256 of the Proceeds of Crime Act 2002 for the detention, custody and preservation of the property mentioned in Parts II and III of the Schedule to the Petition. In outline, Lord Brodie granted paragraphs (i) to (iii) and (v) to (xiv) of the prayer of the petition. An interim administrator was appointed.

 

The Answers for the First Respondent

[12] Answers were lodged only by the First Respondent. As Mr Woolman very fairly stated the only substantive answer to the Petition is Answer 5.

[13] Answer 5 for the First Respondent includes the following:-

"5.1 Admitted that the respondent has a number of previous convictions. Quoad ultra denied. Explained and averred that, with limited exceptions, the petition seeks recovery of property in respect of criminal offences which were alleged to have been committed by the first respondent before the Act came into force. Separatim. Apart from the offences which have resulted in conviction it is alleged that the first respondent has committed a number of other offences. ... To invite the court to make the orders sought would be for the petitioners to act incompatibly with the first respondent's rights under Article ... 7(1) of the Convention. Such an act would be ultra vires. Reference is made to s.57 (2) of the Scotland Act 1998."

[14] The only argument which was advanced by the First Respondent relates to Article 7 of the Convention. The other arguments for the First Respondent (in his Answers and Note of Argument) were not insisted upon.

 

The Petitioners' averments and response to the Answers

[15] The Petitioners aver (in paragraph 5.3 of the petition) inter alia:-

" ... Explained and averred that section 316(3) of the Act provides that for the purpose of deciding whether or not property was recoverable at any time (including times before commencement of the Act) it is to be assumed that Part 5 of the Act was in force at that and any other relevant time. ... Further explained and averred that Article 7(1) is not engaged in the circumstances of the present case. The present proceedings are civil proceedings brought under and in terms of Part 5 of the Act. Part 5 has effect for the purposes of enabling the petitioners to recover in civil proceedings in the Court of Session property which is, or represents, property obtained though unlawful conduct. In the present application the petitioners seek the appointment of an interim administrator and certain other protective relief. The present proceedings were not initiated by nor are they being pursued by a prosecuting authority; they do not involve the arrest or charge of any person with a criminal offence; and they will not culminate in a conviction, the imposition of any penal sanction or the acquisition of a criminal record. The proceedings are being pursued in a civil court: which will apply civil rules of evidence and procedure. The present proceedings are directed against property. The petitioners are not seeking to re-open cases as averred by the first respondent. Further explained and averred ... that any decision to prosecute or to refrain from prosecuting in any particular case is a decision that lies within the exclusive responsibility of the Lord Advocate in his capacity as head of the Crown Office and Procurator Fiscal Service. Any such decision, and the reasons for it, do not raise issues that are relevant to the present proceedings. In any event, the petitioners have no responsibility for such matters. ...".

 

The central issue

[16] The central issue is whether, as the First Respondent argues, Article 7 of the Convention is engaged in the circumstances of the present case.

 

Article 7 of the Convention

[17] The Articles of the Convention are set out in Schedule 1 to The Human Rights Act 1998. In particular, Article 7 provides:-

"(1) No one shall be guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed.

(2) This article shall not prejudice the trial and punishment of any person for any act or omission which, at the time when it was committed, was criminal according to the general principles of law recognised by civilised nations."

[18] I also bear in mind, as I was invited to do, the provisions of Sections 1, 2 and 3 the 1998 Act.

 

Section 57(2) of the Scotland Act 1998

[19] Section 57(2) of the Scotland Act provides:-

"A member of the Scottish Executive has no power to make any subordinate legislation, or to do any other act, so far as the legislation or act is incompatible with any of the Convention rights or with Community law."

 

The Proceeds of Crime Act 2002 ("the 2002 Act")

[20] The Proceeds of Crime Act 2002 (c. 29) received the Royal Assent on 24 July 2002. It came into force in accordance with provisions made by the Scottish Ministers and the Secretary of State. Chapters 1 and 2 of Part 5 the Act came into force on 30 December 2002 and 24 February 2003 respectively (S.I. No 2002/3015 and S.I. No 2003/120).

[21] The 2002 Act describes itself as follows:-

"An Act to establish the Assets Recovery Agency and make provision about the appointment of its Director and his functions (including Revenue functions), to provide for confiscation orders in relation to persons who benefit from criminal conduct and for restraint orders to prohibit dealing with property, to allow the recovery of property which is or represents property obtained through unlawful conduct or which is intended to be used in unlawful conduct, to make provision about money laundering, to make provision about investigations relating to benefit from criminal conduct or to property which is or represents property obtained through unlawful conduct or to money laundering, to make provision to give effect to overseas requests and orders made where property is found or believed to be obtained through criminal conduct, and for connected purposes."

[22] In general terms, Part 5 of the 2002 Act enables the enforcement authority to recover property which is, or which represents, property obtained through unlawful conduct. Section 244 of the Act provides inter alia that proceedings for a recovery order may be taken by the enforcement authority in the Court of Session against any person who the authority thinks holds recoverable property. Subsection 266(1) of the Act provides that if in proceedings under Chapter 1 of Part 5 of the Act the court is satisfied that any property is recoverable, the court must make a recovery order. Subsection 266(2) provides that the recovery order must vest the recoverable property in the trustee for civil recovery (who is referred to as "the Trustee"). Subsection 267(6) of the Act provides that the Trustee has the powers mentioned in Schedule 7 to the Act. Part 5 of the Act also makes provision with regard to "associated property". Section 245 of the Act provides that "associated property" means "property of any of the following descriptions (including property held by the respondent) which is not in itself recoverable property - ... any interest in recoverable property ...". Section 316(1) of the Act provides inter alia that "property obtained through unlawful conduct" has the meaning given by section 242, "recoverable property" is to be read in accordance with sections 304 to 310 and "unlawful conduct" has the meaning given by section 241. Sections 304 to 310 also define the persons in to whose hands property may be followed.

 

The Statutory Provisions

[23] The following section of the 2002 Act were highlighted during the debate:-

"s 240 General purpose of this Part

(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.

 

s 241 'Unlawful conduct'

(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 or sheriff must decide on a balance of probabilities whether it is proved -

(a) that any matters alleged to constitute unlawful conduct have occurred, or

(b) that any person intended to use any cash in unlawful conduct.

 

s 242 'Property obtained through unlawful conduct'

(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. ...

 

s 244 Proceedings for recovery orders in Scotland

(1) Proceedings for a recovery order may be taken by the enforcement authority in the Court of Session against any person who the authority thinks holds recoverable property. ...

(3) If any property which the enforcement authority wishes to be subject to a recovery order is not specified in the application it must be described in the application in general terms; and the application must state whether it is alleged to be recoverable property or associated property.

 

s 245 'Associated property'

(1) 'Associated property' means property of any of the following descriptions (including property held by the respondent) which is not itself the recoverable property -

(a) any interest in the recoverable property,

(b) any other interest in the property in which the recoverable property subsists,

(c) if the recoverable property is a tenancy in common, the tenancy of the other tenant,

(d) if (in Scotland) the recoverable property is owned in common, the interest of the other owner,

(e) if the recoverable property is part of a larger property, but not a separate part, the remainder of that property. ...

 

s 256 Application for interim administration order

(I) Where the enforcement authority may take proceedings for a recovery order in the Court of Session, the authority may apply to the court for an interim administration order (whether before or after starting the proceedings).

(2) An interim administration order is an order for -

(a) the detention, custody or preservation of property, and

(b) the appointment of an interim administrator.

(3) An application for an interim administration order may be made without notice if the circumstances are such that notice of the application would prejudice any right of the enforcement authority to obtain a recovery order in respect of any property.

(4) The court may make an interim administration order on the application if it is satisfied that the conditions in subsections (5) and, where applicable, (6) are satisfied.

(5) The first condition is that there is a probabilis causa litigandi -

(a) that the property to which the application for the order relates is or includes recoverable property, and

(b) that, if any of it is not recoverable property, it is associated property.

(6) The second condition is that, if -

(a) the property to which the application for the order

relates includes property alleged to be associated property, and

(b) the enforcement authority has not established the

identity of the person who holds it,

the authority has taken all reasonable steps to do so.

(7) In its application for an interim administration order, the enforcement authority must nominate a suitably qualified person for appointment as interim administrator, but the nominee must not be a member of the staff of the Scottish Administration. ... '

 

s 257 Functions of interim administrator

(1) An interim administration order may authorise or require the interim administrator -

(a) to exercise any of the powers mentioned in Schedule 6,

(b) to take any other steps the court thinks appropriate,

for the purpose of securing the detention, custody or preservation of the property to which the order applies or of taking any steps under subsection (2).

(2) An interim administration order must require the interim administrator to take any steps which the court thinks necessary to establish -

(a) whether or not the property to which the order applies

is recoverable property or associated property,

(b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if so, who holds it. ... '

 

s 258 Inhibition of property affected by order

(1) On the application of the enforcement authority, the Court of Session may, in relation to the property mentioned in subsection (2), grant warrant for inhibition against any person specified in an interim administration order.

(2) That property is heritable property situated in Scotland to which the interim administration order applies (whether generally or such of it as is specified in the application). ... '

 

s 259 Duties of respondent etc.

(1) An interim administration order may require any person to whose property the order applies -

(a) to bring the property to a place (in Scotland) specified

by the interim administrator or place it in the custody of the interim administrator (if, in either case, he is able to do so),

(b) to do anything he is reasonably required to do by the

interim administrator for the preservation of the property.

(2) An interim administration order may require any person to whose property the order applies to bring any documents relating to the property which are in his possession or control to a place (in Scotland) specified by the interim administrator or to place them in the custody of the interim administrator.

'Document' means anything in which information of any description is recorded.' ...

 

s 261 Restriction on dealings, etc. with property

(1) An interim administration order must, subject to any exclusions made in accordance with this section, prohibit any person to whose property the order relates from dealing with the property. ... '

 

s 264 Reporting

(1) An interim administration order must require the interim administrator to inform the enforcement authority and the court as soon as reasonably practicable if he thinks that -

(a) any property to which the order applies by virtue of a claim that it is recoverable property is not recoverable property,

(b) any property to which the order applies by virtue of a claim that it is associated property is not associated property,

(c) any property to which the order does not apply is recoverable property (in relation to the same unlawful conduct) or associated property, or

(d) any property to which the order applies is held by a person who is different from the person who it is claimed holds it,

or if he thinks that there has been any other material change of circumstances.

(2) An interim administration order must require the interim

administrator -

(a) to report his findings to the court,

(b) to serve copies of his report on the enforcement authority and on any person who holds any property to which the order applies or who may otherwise be affected by the report.'

 

s 265 Arrestment of property affected by interim administration order

(1) On the application of the enforcement authority or the interim administrator the Court of Session may, in relation to moveable recoverable property to which an interim administration order applies (whether generally or such of it as is specified in the application), grant warrant for arrestment."

 

s 266 Recovery orders

(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 subsection (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 (c. 42)). ...

(5) In relation to a court in Scotland, the conditions referred to in subsection (3)(a) are that -

(a) the respondent obtained the recoverable property in good faith,

(b) he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,

(c) when he took the steps, he had no reasonable grounds for believing that the property was recoverable,

(d) if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.

(6) In deciding whether it would be just and equitable to make the provision in the recovery order where the conditions in subsection (4) or (as the case may be) (5) are met, the court must have regard to -

(a) the degree of detriment that would be suffered by the respondent if the provision were made,

(b) the enforcement authority's interest in receiving the realised proceeds of the recoverable property. ...

(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 of realising it.

(9) This section is subject to sections 270 to 278.

 

s 267 Functions of the trustee for civil recovery

(1) The trustee for civil recovery is a person appointed by the court to give effect to a recovery order.

(2) The enforcement authority must nominate a suitably qualified person for appointment as the trustee.

(3) The functions of the trustee are -

(a) to secure the detention, custody or preservation of any property vested in him by the recovery order,

(b) in the case of property other than money, to realise the value of the property for the benefit of the enforcement authority, and

(c) to perform any other functions conferred on him by virtue of this Chapter.

(4) In performing his functions, the trustee acts on behalf of the enforcement authority and must comply with any directions given by the authority.

(5) The trustee is to realise the value of property vested in him by the recovery order, so far as practicable, in the manner best calculated to maximise the amount payable to the enforcement authority.

(6) The trustee has the powers mentioned in Schedule 7.

(7) References in this section to a recovery order include an order under section 276 and references to property vested in the trustee by a recovery order include property vested in him in pursuance of an order under section 276. ...

 

s 288 Limitation ...

(2) After section 19A of the Prescription and Limitation (Scotland) Act 1973 (c. 52) there is inserted -

'19B Actions for recovery of property obtained through unlawful conduct etc.

(1) None of the time limits given in the preceding provisions of this Act applies to any proceedings under Chapter 2 of Part 5 of the Proceeds of Crime Act 2002 (civil recovery of proceeds of unlawful conduct).

(2) Proceedings under that Chapter for a recovery order in respect of any recoverable property shall not be commenced after the expiration of the period of twelve years from the date on which the Scottish Ministers' right of action accrued.

(3) Proceedings under that Chapter are commenced when -

(a) the proceedings are served, or

(b) an application is made for an interim administration order,

whichever is the earlier.

(4) The Scottish Ministers' right of action accrues in respect of any recoverable property -

(a) in the case of proceedings for a recovery order in respect of property obtained through unlawful conduct, when the property is so obtained,

(b) in the case of proceedings for a recovery order in respect of any other recoverable property, when the property obtained through unlawful conduct which it represents is so obtained.

(5) Expressions used in this section and Part 5 of that Act have the same meaning in this section as in that Part.' ...

 

s 316 General interpretation

(1) In this Part-‑ ....

'enforcement authority'-

(a) in relation to England and Wales and Northern Ireland, means the Director,

(b) in relation to Scotland, means the Scottish Ministers, ...

'interim administration order' has the meaning given by section 256(2),

'interim receiving order'has the meaning given by section 246(2), ...

(2) The following provisions apply for the purposes of this Part.

(3) For the purpose of deciding whether or not property was recoverable at any time (including times before commencement), it is to be assumed that this Part was in force at that and any other relevant time. ...".

 

 

 

The pleadings and averments of unlawful conduct

[24] The petitioners make the following averments in paragraph 5.1 of the petition:-

"5.1 That the following unlawful conduct has occurred. The first respondent has numerous criminal convictions dating from 1981 to 2004. Between 1981 and 1992 the majority of his convictions were for theft, poaching and assault. Between 1992 and 1998 his convictions were mainly for poaching and assault. On or around 31 August 1992 the first respondent was found guilty following a guilty plea of the possession and supply of approximately seven ounces of cannabis resin. He received eighteen months' imprisonment. A plea of not guilty was accepted by the Crown in relation to four other charges of possessing and supplying cannabis resin. In 1998 Trading Standards and police searched the first respondent's home following which HM Customs & Excise seized at those premises smuggled excise goods comprising 33,660 cigarettes, l0kgs of hand rolling tobacco and 8,000 cl of spirits. During this investigation the first respondent informed customs officers that he made 2,000 per week from poaching. The first respondent was fined 250. Later in 1998 the first respondent was stopped at Dover docks upon his return from France and 18kgs of hand rolling tobacco was seized from the motor vehicle in which he was travelling. On or around 14 December 1998 the first respondent was convicted of copyright offences and received a fine. On 7 October 2002 the first respondent was charged under the Misuse of Drugs Act 1971 with the possession of a small amount of amphetamine and valium. This case is still outstanding. In May 2003 he received a fine for possessing industrial fire works following conviction at Dumfries Sheriff Court on 26 May 2003. His last conviction in 2004 was under the Road Traffic Act on 7 January of that year when he was disqualified from driving for six months. The first named respondent has been involved in the illegal money lending business, charging extortionate rates of interest from at least February 2000. The first named respondent has also been involved from at least 1998 in the purchase and sale of 'bootlegged' tobacco and alcohol. The first named respondent has also been concerned in the sale and supply of drugs from at least 1992. In October 2000 the first respondent told a police officer that he did not do drugs but that he was the main supplier of bootlegged goods in Dumfries. He stated that he was no longer involved in poaching. In November 1999 the first respondent provided Thomas Hercus with drugs to sell. The first respondent is an associate of Thomas Hercus who was convicted in 2002 in relation to drug dealing offences which occurred in 1996 and between 2000 and 2001. In April 2001 the first respondent offered an off-duty policeman cheap cigarettes from Belgium and stated that he was going to start 'doing fuel' and obtain it from Belgium by using a tanker. On or around 25 June 2003 the first respondent was stopped in the vehicle in which he was travelling by the police and Virginia tobacco was discovered concealed within three cardboard boxes of Tetley teabags. A total of 34.95 kilos of hand rolling tobacco was seized by H.M. Customs & Excise together with the vehicle. ...".

[25] The substantive part of Answer 5.1 has already been set out above in paragraph [13].

 

 

The averments as to the income and lifestyle of the First Respondent

[26] The petitioners make averments about the First Respondent's income and lifestyle in paragraph 5.2 and 5.3 of the petition.

[27] Paragraph 5.2 begins with the averment "That Inland Revenue records disclose that the first respondent was last employed in 1996". There then follows averments about relatively small sums declared as income for various tax years and a period when the first respondent was in receipt of job seekers allowance. That paragraph ends with the averment that "There is no evidence of sufficient legitimate income to finance the first respondent's lifestyle."

[28] Answer 5.2 for the First Respondent is simply "Not known and not admitted".

[29] The petitioners further aver, in paragraph 5.3 of the petition, the following:-

"5.3 That the first respondent has two accounts with Lloyds TSB in Dumfries. On 21 February 2000 30,000 was transferred into one of these accounts from Thomas Hercus. On 14 March 2000 the first respondent received a further payment of 16,000 from Thomas Hercus. On 19 April 2000 he received a further payment of 4,800 from Thomas Hercus. Mr. Hercus is a convicted drug dealer and known associate of the first respondent. It is believed and averred that the funds paid by Mr Hercus to the first respondent were in respect of a drug debt. The first respondent purchased the flatted premises at 20 Abbey Lane, Dumfries in joint names with Beverley Walls (the second respondent) from the local authority in August 2000 for the sum of 10,640. The purchase price was paid from one of the first respondent's accounts with Lloyds TSB. It is believed and averred that the purchase price was paid from the finds received from Thomas Hercus. The first respondent has carried out significant improvements to his property. In February 2000 the first respondent purchased a 1992 Land Rover Defender. In March 2000 the first respondent purchased a Mitsubishi Evo motorcar for the sum of 26,000. In or around February 2001 the first respondent purchased new gym equipment. In or around May 2002 the first respondent sold his Mitsubishi Evo and purchased a new BMW motorcar for around the sum of 30,000. In September 2003 the first respondent purchased a Suzuki motorbike for the sum of 8,000. This vehicle was registered to the first respondent's brother, Kenneth McGuffie, the third respondent, but the first respondent holds the insurance cover and is named as the only driver. The first respondent keeps a twenty foot motor boat outside his home in Dumfries. The petitioner believes that the first respondent holds other significant assets, including further boats, land and cash. ...".

[30] Answer 5.3 for the First Respondent is as follows:-

"Admitted that the first respondent has the bank accounts referred to and that he received the sums of money from Thomas Hercus. Admitted that the first respondent purchased the Land Rover defender, the BMW and the gym equipment. Quoad ultra denied. Explained and averred that the Suzuki motorbike belongs to the third respondent."

 

The averments of recoverable property

[31] The petitioners' averments, in statement 6 of the petition, are as follows:-

"6.1 That there is a probabilis causa litigandi that the property mentioned in parts II and III of the Schedule is or includes recoverable property within the meaning of the Act and that if any of the property is not recoverable property it is associated property within the meaning of the Act. It is such property for the reasons set out in the following parts of this statement 6. Except as otherwise explained in statement 6.3 below, particulars of the persons who hold the property are contained in Part I of the Schedule.

6.2 That the property mentioned in Part II of the schedule (i) is property obtained through unlawful conduct or (ii) represents property obtained through unlawful conduct or (iii) is property obtained through unlawful conduct and is held by persons into whose hands it may be followed.

6.3 That the property mentioned in Part III of the Schedule is associated property within the meaning of the Act. In respect of each item of property therein mentioned, Part III of the Schedule specifies why it is associated property and identifies the recoverable property with which it is associated. Particulars of the persons (other than the respondents) who the petitioners think hold the associated property are contained in Part IB of the Schedule."

[32] Paragraphs 7 to 11 of the petition contain the formal details required to support an application for an interim administration order.

[33] The averments in paragraphs 6 to 11 of the petition are all simply denied by the First Respondent.

 

The Schedule to the Petition

[34] The Schedule to the petition is in three parts. Part I provides details of the Respondents. Part II itemises the property which is or includes recoverable property. Part III specifies associated property.

[35] Part II includes:-

"[10] Other property which the interim administrator believes to be recoverable property

[11] Other property which the interim administrator believes to be recoverable property but which is not held by the first respondent."

 

The Pleas in law for the First Respondent

[36] The pleas-in-law for the First Respondent were in the following terms:-

"1. The orders sought being ultra vires the petition should be dismissed.

2. The petitioners' averments being irrelevant et separatim being lacking in specification the petition should be dismissed.

3. The petitioners' averments, so far as material, being unfounded in fact the orders sought should not be pronounced.

4. There being no circumstances to justify the orders sought the prayer of the petition should be refused."

 

The Plea in law for the Petitioners

[37] The plea-in-law for the petitioners, on page 12 of the Petition as adjusted, is in the following terms:-

"The averments in answer for the first respondent being irrelevant et separatim lacking in specification should not be remitted to probation and the prayer of the petition should be granted de plano."

 

The Arguments for the First Respondent

[38] When developing his argument, Mr Woolman referred me to the statutory provisions and to the pleadings (outlined above) in some detail. He also explained that the present petition (for an interim administration order) was the first opportunity which the First Respondent had to maintain that the Scottish Ministers were acting in a way which offended against his Convention Rights. No prematurity point was taken by the Scottish Ministers.

[39] The main argument for the First Respondent can be outlined as follows:-

1. The Proceeds of Crime Act 2002 seeks to prevent persons from benefiting from crime. When there has been a conviction, the court can make a confiscation order (Part 3). Where there is no conviction, the Act introduced a completely new right of action. The 'enforcement authority' (the petitioners) can now bring proceedings to recover property which is, or represents, property obtained through unlawful conduct (Part 5).

2. These proceedings were raised in March 2004. The petitioners sought and were granted an interim administration order for inter alia the detention, custody and preservation of property. Such an order is made to ensure that property which may ultimately be held to be recoverable will remain available and have its value preserved while the issues are investigated and resolved.

3. The petitioners aver that the first respondent obtained property through unlawful conduct in the period from 1981 to 2004. Accordingly the interim administration order in this case is retrospective in effect. Any recovery order would also be retrospective.

4. Both the order granted and the one to be sought are contrary to Article 7 (1) of the European Convention on Human rights. The petitioners seek to impose a heavier penalty than the one that was applicable at the time the criminal offence was committed.

5. The concept of a 'penalty' is an autonomous Convention concept. It is for the court to assess whether a particular measure amounts to a penalty (Welch v United Kingdom 1995 20 EHRR 247; ... see also McIntosh v Lord Advocate [2003] 1 AC 1078.).

6. These proceedings are penal in nature having regard to the following:

6.1. Orders made under the Act involve a finding, direct or indirect, of guilt on the part of the respondent. This occurs in the absence of all the safeguards available to the accused in criminal proceedings.

6.2. If the court is satisfied that any property is recoverable, it must make a recovery order; subject to a very limited discretion (s.266 of the 2002 Act).

6.3. Orders may relate to property allegedly derived from conduct in respect of which the respondent has been acquitted many years before. It may also relate to conduct resulting in a conviction where the Crown chose not to seek a confiscation order.

6.4. Orders sought have no compensatory function because payment under a recovery order is made to the petitioners, not to the victim.

6.5. The property is recoverable because it derives from crime, not because anyone was unlawfully deprived of the property in the first place.

6.6. The enforcement agency seeks recovery of all property obtained by unlawful conduct, not just any actual enrichment or profit.

6.7. The powers which can be obtained against respondents by the petitioners go beyond those available to civil victims.

7. Although the 2002 Act classifies the proceedings as civil, this is the least important factor. Otherwise it would mean that domestic law could deprive individuals of the protection of their Convention rights.

8. Prior to the commencement of the 2002 Act, different provisions applied:

8.1. From 1988 until 1996, confiscation orders could only be made where there was a conviction for a drug trafficking offence (Criminal Justice (Scotland) Act 1987).

8.2. From 1996 until 2002 -

8.2.1. confiscation orders continued to be made in drug trafficking cases (Proceeds of Crime (Scotland) Act 1995).

8.2.2. In the case of non drug trafficking cases, the court could only make a confiscation order if it was satisfied that the accused had benefited from the commission of the offence concerned (Proceeds of Crime (Scotland) Act 1995).

9. The first respondent could not have been subject to confiscation orders in respect of certain of the unlawful conduct relied upon by the petitioners. In respect of other alleged unlawful conduct, it is highly unlikely that confiscation orders would have been sought or granted. This is because on the petitioners own averments (a) between 1981 and 1992, the majority of the first respondent's alleged 'crimes' were mainly for theft, poaching and assault; and (b) between 1992 and 1998, his convictions were mainly for poaching and assault.

10. Proceedings for recovery orders cannot be brought after the expiry of the period of 12 years from the date upon which the petitioners' right of action accrued (Proceeds of Crime Act 2002 s.288 (2) which inserts a new s.19B in the Prescription and Limitation (Scotland) Act 1973). Here the petitioners rely on events occurring 24 years ago. This is extremely prejudicial to the first respondent.

11. The Court cannot make any provision in a recovery order which is incompatible with a Convention Right (Proceeds of Crime Act 2002 s.266(3)(b); see also Scotland Act s.57 (2); Human Rights Act 1998 s.1).

[40] Mr Woolman also provided a list of references. In relation to the case of Welch the list was as follows:- McIntosh Ptr [2001] UK PC Dl; [2003] SC 89 (paras 22-25) per Lord Bingham; R v Rezvi [2002] UKHL 1, [2003] 1 AC 1099; R v Benjafield [2002] UKHL 2 para. 77 per Lord Woolf CJ, CA; Flynn v HMA [2004] UKPC Dl; [2004] SC (PC) 1 para 99 per Baroness Hale; and R (Uttley) v S of S for Home Dept [2004] UKHL 38; [2004] 4 All ER 1, paras 23-27 per Lord Phillips, paras 38-41 per Lord Rodger, and paras 45-46 per Baroness Hale. In relation to the Human Rights Act and retrospectivity Mr Woolman's list mentioned Wilson v First County Trust Ltd [2003] UKHL 40; [2004] 1 AC 816, paras 10-12 per Lord Nicholls, paras 95, 98 per Lord Hope, paras 153 per Lord Scott, and paras 174, 186-187 per Lord Rodger.

[41] Mr Woolman's primary submission was to the effect that the Scottish Ministers were seeking a retrospective criminal penalty which was in breach of Article 7. The orders sought were part of a regime of punishment akin to that in Welsh v United Kingdom. The Irish case of Cecil Walsh was not quite in point as it concerned a different question under Article 6 rather than Article 7. If, however, there is no criminal penalty then Mr Woolman accepted that the First Respondent's challenge failed.

[42] Mr Woolman stressed that it was the retrospectively nature of the proceedings which the First Respondent objected to. It was necessary, he submitted, to uncouple Article 6 and Article 7 and to consider each of them separately. It was suggested that the reasoning in the Irish case of Cecil Walsh was relevant only to Article 6 whereas the reasoning in Welch v United Kingdom was relevant to Article 7. In the whole circumstance, Mr Woolman submitted, there is a retrospectively criminal penalty in the present case and that accordingly these proceedings are ultra vires.

 

The Arguments for the Petitioners

[43] In reply, Mr Cullen moved me to sustain the Petitioners' pleas in law. He also referred me the statutory provisions and to the pleadings.

[44] The main arguments for the Petitioner can be outlined as follows:

1. The averments in the First Respondent's answers are irrelevant et separatim lacking in specification. The Answers do not disclose any relevant defence to the Petition. Accordingly, the averments in the Answers should not be remitted to probation and the prayer of the Petition, insofar as it has not already been disposed of, should be granted de plano.

2. The only substantive defence to the Petition is contained in Answer 5.1. The Petitioners submit that those averments are irrelevant. In summary, the First Respondent appears to maintain that the orders sought would be incompatible with his rights under Article ... 7(1) of the European Convention on Human Rights (`ECHR'). These arguments are, it is submitted, unsound for the reasons set out below. ...

4. The present proceedings do not seek to "re-open" any case or cases against the First Respondent ..... They are brought on an entirely new and separate legal basis from any criminal proceedings previously brought against the First Respondent. They are brought by the Scottish Ministers and not by the Lord Advocate acting in his capacity as head of the prosecution service in Scotland. ...

7. The First Respondent also relies upon Article 7(1) of ECHR. Article 7 applies only to criminal proceedings resulting in a conviction or the imposition of a penalty. The present proceedings are civil in nature and not criminal. Article 7 is not engaged in the circumstances of the present case. The proceedings are brought under Part 5 of the Proceeds of Crime Act 2002 ("the Act"). Part 5 of the Act enables the Petitioners to seek to recover in civil proceedings in the Court of Session property which is, or which represents, property obtained by unlawful conduct. The powers conferred by Part 5 of the Act may be exercised whether or not any criminal proceedings have been brought in relation to any offence in connection with the property sought. Reference is made to section 240(2) of the Act. In any event, the present proceedings to do not seek to impose any penalty upon the First Respondent, retrospectively or otherwise. In this respect, reference is made to the arguments set out in paragraph 8, below.

8. The present proceedings are classified as civil proceedings under domestic law. Reference is made to section 240(1) of the Act which provides that Part 5 has effect for the purposes of enabling the enforcement authority (in the present case the Petitioners) to recover, in civil proceedings in the Court of Session, property that is, or represents, property obtained through unlawful conduct. The present proceedings are being pursued in a civil court which will apply civil rules of evidence and procedure. It is clear that they have not been initiated by nor are they being pursued by a prosecuting authority. The First Respondent is not indicted in respect of any offence. The Petitioners do not seek (nor do they have power to seek) a conviction of the First Respondent in respect of any criminal offence. They do not seek to impose a penalty of any sort on the First Respondent in respect of any criminal offence. The First Respondent will not acquire a criminal conviction as a result of the present proceedings. The present proceedings are preventative and not punitive in character. They are not directed against any particular person. Their object is merely the recovery of property which the First Respondent has no right to and should not have - that is, property which is or which has been acquired by the proceeds of crime. Accordingly, the present petition does not engage the First Respondent's rights under Article 7 of ECHR. Reference was made to the following authorities: Assets Recovery Agency v Walsh [2004] NIQB 21 (High Court of Justice, Northern Ireland, 1st April 2004); Walsh v Director of the Assets Recovery Agency [2005] NICA 6 (Northern Ireland Court of Appeal, 26th January 2005.); Air Canada v United Kingdom (1995) 20 EHRR 150; R (McCann) v Crown Court at Manchester [2003] 1 AC 787, paras 22-34, 65, 71,72, 75, 76; R. (on the application of Mudie) v Kent Magistrates Court [2003] EWCA Civ 237, [2003] 2 All ER 631 paras 31, 35, 36; R v H [2003] 1 All ER 497, para.15-21; S v Miller 2001 SC 977, paras. 10-24;

9. The provisions of Part 5 of the Act have recently been considered by the Court of Appeal in Northern Ireland (Walsh v Director of the Assets Recovery Agency [2005] NICA 6). The Court held that civil recovery proceedings under the Act are properly classified as civil proceedings. They do not involve the charging of the respondent in such proceedings with a criminal offence. The primary purpose of such proceedings is to recover the proceeds of crime and not to punish the respondent in the sense normally entailed in a criminal sanction. Proof beyond reasonable doubt is not required. It is sufficient that the case against a respondent in such proceedings be established to the civil standard of proof. In proceedings of the present type the 'criminal dimension', as it was put by the Lord Chief Justice of Northern Ireland, is absent since there is no charging of a person with a criminal offence for the purpose of securing a conviction with a view to exposing that person to criminal sanction (para 41). No punishment is sought to be imposed beyond the recovery of assets that do not belong to the Respondent. The Court of Appeal's decision in Walsh is highly persuasive in relation to the issues raised in the present case. The Court's reasoning is respectfully adopted mutatis mutandis.

10. The First Respondent's averments are lacking in candour in response to a number of matters raised by the Petitioners that must be within his direct knowledge. The First Respondent meets the averments about these matters with a bare denial. These matters are: (a) the Petitioners' averments as to his criminal convictions in paragraph 5.1 of the Petition; (b) the Petitioners' averments in the same paragraph as to the seizure of goods in 1998 by HM Customs & Excise; (c) the Petitioners' averments in paragraph 5.2 as to his declarations of income to the Inland Revenue and the Department for Work and Pensions and (d) the Petitioners' averments in paragraph 5.3 as to his receipt of funds from Thomas Hercus, his association with Mr. Hercus, the purchase of property at 20 Abbey Lane, Dumfries, the source of the purchase price for that transaction, the carrying out of improvements to that property, the keeping of a boat outside his home in Dumfries, the source of funds used to purchase the Land Rover, BMW and gym equipment, the obtaining of insurance cover for the Suzuki motorbike and the fact that he is named on the policy document as the only driver of the motorbike. The First Respondent's failure to advance any substantive response to these averments relating to matters within his knowledge amounts to a failure to observe the basic rules of pleading. His pleadings are irrelevant for that reason.

[45] Mr Cullen also explained that there was another related petition, in a separate process, seeking a recovery order in terms of section 266 of the 2002 Act. A first order had been granted in that process on 19 January 2005. After service on the same three respondents that other petition had been sisted on 6 April 2005. Mr Cullen accepted that the present challenge by the First Respondent would apply equally to both petitions.

[46] In summary, Mr Cullen's primary submission was to the effect that in substance the orders sought in the present case are civil rather than criminal and involve no penalty such as would engage Article 7. He strongly commended the reasoning of the Court of Appeal in Northern Ireland which is set out in detail in the case of Cecil Walsh (see below). The orders sought in the present case do not amount to a penalty. Even if there was a penalty it does not necessarily follow that the proceedings fall to be categorised as criminal. They are in substance civil. The reasoning applicable to Article 6 also applies to Article 7. Article 7 is not engaged in the present case.

[47] Mr Cullen's information was that the Court of Appeal in Northern Ireland had refused leave to appeal to the House of Lords.

 

 

Discussion

[48] This case raises important issues concerning Human Rights and in particular the nature of the relationship between Article 7 of the Convention and Part 5 of the Proceeds of Crime Act 2002.

[49] In essence the First Respondent argues that Article 7 is engaged in the circumstances and he points to those factors (outlined above) which support the view that these proceedings seek to impose a retrospective criminal penalty.

[50] The Petitioners argue that Article 7 is not engaged and they highlight those factors (outlined above) which point in the opposite direction.

[51] There is no dispute the present proceedings are classified as civil proceedings in accordance with domestic law. There is no dispute that Part 5 of the 2002 Act has effect for the purpose of enabling the enforcement authority to recover in civil proceedings property which is, or which represents, property obtained through unlawful conduct (section 240 emphasis added). There is no dispute that conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part (section 241 emphasis added).

[52] The classification of these proceedings as civil in domestic law is no more than a starting point and it is not conclusive for the purposes of Article 7.

[53] Similarly, the definition of "unlawful conduct" provides some support for the First Respondent's arguments but it is not conclusive of a criminal penalty.

[54] The "civil/criminal" dichotomy lies at the heart of this case. So too does the disputed question of "penalty". How then are the apparent conflicts to be resolved?

[55] Clearly it has to be borne in mind that autonomous Convention concepts are involved.

[56] I have already outlined the legislation above.

[57] I have also set out the circumstances of this particular case.

[58] Against that background, I now turn to consider the authorities which counsel relied upon in support of their submissions.

 

M v Italy

[59] In v Italy, Application No 12386/86, (1991) 70 DR 59, the commission held that article 6(2) and article 7(1) of the Convention did not apply to confiscation of property belonging to a person suspected of being a member of a mafia-type organisation. The imposition of the order was not regarded as being punitive. The notion of a criminal charge was regarded as an autonomous concept. Someone against whom proceedings are brought concerning the application of preventive measures under the Italian Acts of 1956, 1965 and 1982 is not facing a criminal charge. Having reviewed the circumstances, the Commission reached the following conclusions (at page 98):-

"The Commission considers that this legal background confirms the preventive character of confiscation and shows that it is designed to prevent the unlawful use of property which is the subject of the order. It follows that the confiscation of the applicant's property does not imply a finding that he was guilty of a specific offence, any more than the compulsory residence order against him does.

The Commission further considers that the severity of the measure is not so great in this case as to warrant its classification as a criminal penalty for the purposes of the Convention. Confiscation is a measure not confined to the sphere of criminal law; it is encountered widely in the sphere of administrative law. Items liable to confiscation include illegally imported goods (see the issue examined by the Court and the Commission in the Agosi case, Eur. Court H.R. judgment of 24 October 1986, Series A no. 108), the proceeds from unlawful activities not classified as criminal offences (such as buildings constructed without planning permission), certain items considered dangerous in themselves (such as weapons, explosives and infected cattle) and property connected although only indirectly with criminal activity (cf. The confiscation under Italian law of the funds of secret societies pursuant to Law No. 17 of 15 January 1982).

Thus it can be seen from the legislation of the Council of Europe member States that measures of great severity but necessary and appropriate for protection of the public interest, are ordered even outside the criminal sphere.

The Commission notes that the impugned confiscation measure concerns property considered to be of unlawful origin. Its aim is to strike a blow against mafia-type organisations and the very considerable resources they have at their disposal to finance unlawful activities. The Commission therefore takes the view that the measure in question can be likened to those mentioned above.

That being the case, and in light of the Court's case-law, the Commission concludes that the confiscation complained of does not involve a finding of guilt subsequent to a criminal charge, and does not constitute a penalty. Consequently, the complaints of a violation of Article 6 para 2 and Article 7 of the Convention are incompatible ratione materiae with those provisions and must be rejected pursuant to Article 27 para 2."

[60] In my view a similar conclusion falls to be reached in the circumstances of the present case for the reasons discussed more fully below.

 

Air Canada v the United Kingdom

[61] Air Canada v The United Kingdom, European Court of Human Rights, case numbered 9/1994/456/537, concerned a dispute as to whether an aircraft was liable to forfeiture under the Customs and Excise Management Act 1979.

[62] In relation to the alleged violation of Article 6 Para. 1 of the Convention, the Court expressed the following views:

"49. The applicant further complained that it was, in effect, subjected to a criminal penalty. In the alternative, the seizure of the aircraft amounted to a determination, without court proceedings, of the company's civil rights and obligations in breach of Article 6 para. 1, the relevant part of which reads:

'In the determination of his civil rights and obligations or of any charge against him, everyone is entitled to a fair ... hearing ... by an independent and impartial tribunal ..'".

[63] In relation to questions of criminal charge the Court reached the following conclusion:

"50. Air Canada considered that it had been, in effect, fined by the Commissioners and that neither the condemnation proceedings nor the theoretical possibility of judicial review satisfied the requirements of Article 6 para. 1.

51. The Government, on the other hand, with whom the Commission agreed, pointed out that under domestic law no criminal charges had been brought and that the criminal courts had not been involved in the matter.

52. The Court agrees with the Government's observation. It is also noteworthy that the Court of Appeal specifically rejected the argument made by counsel for Air Canada that section 141 of the 1979 Act was tantamount to a criminal provision. In this connection, the Court of Appeal pointed out that the description of the relevant provisions as being 'civil' did not preclude it from finding that a provision was, in effect, 'criminal' in nature. However, the matter was resolved with reference to earlier cases which decided that section 141 provided a process in rem against, inter alia, any vehicle used in smuggling.

The Court is, for the same reasons, similarly persuaded.

Moreover, the factors referred to above - the absence of a criminal charge or a provision which is 'criminal' in nature and the lack of involvement of the criminal courts - taken together with the fact that there was no threat of any criminal proceedings in the event of non-compliance, are sufficient to distinguish the present case from that of Deweer v Belgium (judgment of 27 February 1980, Series A no. 35) where the applicant was obliged to pay a sum of money under constraint of the provisional closure of his business in order to avoid criminal proceedings from being brought against him.

53. It is further recalled that a similar argument had been made by the applicant in the AGOSI case (loc. cit.). On that occasion the Court held that the forfeiture of the goods in question by the national court were measures consequential upon the act of smuggling committed by another party and that criminal charges had not been brought against AGOSI in respect of that act. The fact that the property rights of AGOSI were adversely affected could not of itself lead to the conclusion that a 'criminal charge' for the purposes of Article 6, could be considered as having been brought against the applicant company (loc. cit., p. 22, paras. 65-66).

54. Bearing in mind that, unlike the AGOSI case, the applicant company had been required to pay a sum of money and that its property had not been confiscated, the Court proposes to follow the same approach.

55. Accordingly the matters complained of did not involve 'the determination of [a] criminal charge'."

[64] In my view, those conclusions are capable of being read across to the circumstances of this case and Article 7. The present proceedings are directed primarily at the property rather than the person. Their focus is civil rather than criminal.

 

Welch v United Kingdom

[65] In Welch v United Kingdom, before the European Court of Human Rights, (1995) 20 EHRR 247 the applicant was convicted in August 1988 of drug offences which had been committed in 1986. In addition to a sentence of imprisonment, the trial judge imposed a confiscation order pursuant to the Drug Trafficking Offences Act 1986, the operative provisions of which came into force on 12 January 1987. The applicant complained that the confiscation order constituted a retrospective criminal penalty contrary to article 7 of the Convention. It was held unanimously that there had been a violation of Article 7(1).

[66] The judgment of the Court in Welch was central to the First Respondent's arguments. It merits extensive quotation as follows (particularly from pages 260-263): -

"22. The applicant complained that the confiscation order that was made against him amounted to the imposition of a retrospective criminal penalty, contrary to Article 7 ...

He emphasised that his complaint was limited to the retrospective application of the confiscation provisions of the 1986 Act and not the provisions themselves.

23. He submitted that in determining whether a confiscation order was punitive the Court should look beyond its stated purpose and examine its real effects. The severity and extent of such an order identified it as a penalty for the purposes of the Convention.

In the first place, under section 2(3) of the 1986 Act the national court was entitled to assume that any property which the offender currently held or which had been transferred to him in the preceding six years, or any gift which he had made during the same period, were the proceeds of drug trafficking. In addition by seeking to confiscate the proceeds, as opposed to the profits, of drug dealing, irrespective of whether there had in fact been any personal enrichment, the order went beyond the notions of reparation and prevention into the realm of punishment.

Moreover, the fact that an order could not be made unless there had been a criminal conviction and that the degree of culpability of an accused was taken into consideration by the court in fixing the amount of the order also pointed in the direction of a penalty. Indeed, prior to the passing of the 1986 Act, the courts had regarded forfeiture orders as having the dual purpose of punishment and deterrence. Finally, confiscation orders had been recognised as having a punitive character in various domestic court decisions and in several decisions of the Supreme Court of the United States concerning similar legislation.

24. The Government contended that the true purpose of the order was two-fold: firstly, to deprive a person of the profits which he had received from drug trafficking and secondly, to remove the value of the proceeds from possible future use in the drugs trade. It thus did not seek to impose a penalty or punishment for a criminal offence but was essentially a confiscatory and preventive measure. This could be seen from the order in the present case, which had been made for the purpose of depriving the defendant of illegal gains. Had no order been made, the money would have remained within the system for use in further drug-dealing enterprises.

It was stressed that a criminal conviction for drug trafficking was no more than a 'trigger' for the operation of the statutory provisions. Once the triggering event had occurred, there was no further link with any conviction. Thus, the court could consider whether a person had benefited from drug trafficking at any time and not merely in respect of the offence with which he had been charged. Moreover, an order could be made in relation to property which did not form part of the subject-matter of the charge against the defendant or which had been received by him in a period to which no drug-dealing conviction related.

Furthermore, the fact that a period of imprisonment could be imposed in default of payment could be of no assistance in characterising the nature of the confiscation order since there were many non-penal court orders which attracted such a penalty in the event of non-compliance. Similarly the harsh effect of the order was of no assistance, since the effectiveness of a preventive measure required that a drug trafficker be deprived not only of net profits but of money which would otherwise remain available for use in the drug trade.

25. For the Commission, the order in the present case was not punitive in nature but reparative and preventive and, consequently, did not constitute a penalty within the meaning of Article 7 para. 1 of the Convention.

26. The Court first observes that the retrospective imposition of the confiscation order is not in dispute in the present case. The order was made following a conviction in respect of drugs offences which had been committed before the 1986 Act came into force. The only question to be determined therefore is whether the order constitutes a penalty within the meaning of Article 7 para. 1, second sentence.

27. The concept of a 'penalty' in this provision is, like the notions of 'civil rights and obligations' and 'criminal charge' in Article 6 para. 1 an autonomous Convention concept. To render the protection offered by Article 7 effective, the Court must remain free to go behind appearances and assess for itself whether a particular measure amounts in substance to a 'penalty' within the meaning of this provision.

28. The wording of Article 7 para. 1, second sentence, indicates that the starting-point in any assessment of the existence of a penalty is whether the measure in question is imposed following conviction for a 'criminal offence'. Other factors that may be taken into account as relevant in this connection are the nature and purpose of the measure in question; its characterisation under national law; the procedures involved in the making and implementation of the measure; and its severity.

29. As regards the connection with a criminal offence, it is to be observed that before an order can be made under the 1986 Act the accused must have been convicted of one or more drug-trafficking offences (see section 1(1) of the 1986 Act). This link is in no way diminished by the fact that, due to the operation of the statutory presumptions concerning the extent to which the applicant has benefited from trafficking, the court order may affect proceeds or property which are not directly related to the facts underlying the criminal conviction. While the reach of the measure may be necessary to the attainment of the aims of the 1986 Act, this does not alter the fact that its imposition is dependent on there having been a criminal conviction.

30. In assessing the nature and purpose of the measure, the Court has had regard to the background of the 1986 Act, which was introduced to overcome the inadequacy of the existing powers of forfeiture and to confer on the courts the power to confiscate proceeds after they had been converted into other forms of assets. The preventive purpose of confiscating property that might be available for use in future drug-trafficking operations as well as the purpose of ensuring that crime does not pay are evident from the ministerial statements that were made to Parliament at the time of the introduction of the legislation. However it cannot be excluded that legislation which confers such broad powers of confiscation on the courts also pursues the aim of punishing the offender. Indeed the aims of prevention and reparation are consistent with a punitive purpose and may be seen as constituent elements of the very notion of punishment.

31. In this connection, confiscation orders have been characterised in some United Kingdom court decisions as constituting 'penalties' and, in others, as pursuing the aim of reparation as opposed to punishment. Although on balance these statements point more in the direction of a confiscation order being a punitive measure, the Court does not consider them to be of much assistance since they were not directed at the point at issue under Article 7 but rather made in the course of examination of associated questions of domestic law and procedure.

32. The Court agrees with the Government and the Commission that the severity of the order is not in itself decisive, since many non-penal measures of a preventive nature may have a substantial impact on the person concerned.

33. However, there are several aspects of the making of an order under the 1986 Act which are in keeping with the idea of a penalty as it is commonly understood even though they may also be considered as essential to the preventive scheme inherent in the 1986 Act. The sweeping statutory assumptions in section 2(3) of the 1986 Act that all property passing through the offender's hands over a six-year period is the fruit of drug trafficking unless he can prove otherwise; the fact that the confiscation order is directed to the proceeds involved in drug dealing and is not limited to actual enrichment or profit (see sections 1 and 2 of the 1986 Act); the discretion of the trial judge, in fixing the amount of the order, to take into consideration the degree of culpability of the accused; and the possibility of imprisonment in default of payment by the offender - are all elements which, when considered together, provide a strong indication of, inter alia, a regime of punishment.

34. Finally, looking behind appearances at the realities of the situation, whatever the characterisation of the measure of confiscation, the fact remains that the applicant faced more far-reaching detriment as a result of the order than that to which he was exposed at the time of the commission of the offences for which he was convicted.

35. Taking into consideration the combination of punitive elements outlined above, the confiscation order amounted, in the circumstances of the present case, to a penalty. Accordingly, there has been a breach of Article 7 para. 1.

36. The Court would stress, however, that this conclusion concerns only the retrospective application of the relevant legislation and does not call into question in any respect the powers of confiscation conferred on the courts as a weapon in the fight against the scourge of drug trafficking."

[67] In my opinion, the case of Welch falls to be distinguished from the present case. The circumstances and the nature of the proceedings are different. Welch concerned a confiscation order imposed by a trial judge after conviction pursuant to the Drug Trafficking Offences Act 1986. The present case, however, concerns a new and different regime, namely, a civil recovery order to be made under and in accordance with Part 5 of the 2002 Act. In my opinion, for the reasons outlined below, a civil recovery order does not amount to a criminal penalty.

 

B v Chief Constable of Avon and Somerset Constabulary

[68] The case of B v Chief Constable of Avon and Somerset Constabulary [2001] 1 WLR 340, concerned an application by the Chief Constable for a sex offender order to made against B under section 2 of the Crime and Disorder Act 1998. It was held that the application was properly characterised as a civil, not a criminal proceeding. The nature of the issue concerned the prevention of further criminal activity by injunctive means, not the trial conviction and punishment of the offender. The initiating process was by way of complaint which was that normally used to commence civil proceedings in a magistrates court. The condition for making the order contained in section 2(1)(b) was an appropriate basis for administrative action not criminal conviction. Accordingly, inter alia, the justices were required to apply a civil standard of proof. Lord Bingham of Cornhill CJ said inter alia (at page 352 paragraph 25): -

"25 ... I am accordingly satisfied that, as a matter of English domestic law, the application is a civil proceeding, as Parliament undoubtedly intended it to be."

[69] Lord Bingham of Cornhill CJ also said at page 353 paragraph 28): -

"28 ... Miss Booth submitted, rightly, that the European Court of Human Rights does not regard itself as bound by the classification of proceedings in domestic law. In deciding whether there is a criminal charge for purposes of article 6 of the Convention the court has regard to the classification of proceedings in domestic law, but also to the nature of the offence itself and the severity of the penalty which may be imposed: see Lester & Pannick, Human Rights Law and Practice (1999), para 4.6.13. Here the proceedings are in my judgment classified as civil in domestic law. No offence is charged and the making of an order does not depend on proof of any offence. No penalty may be imposed. I am aware of no case in which the European Court has held a proceeding to be criminal even though an adverse outcome for the defendant cannot result in any penalty."

[70] In the present case, as noted above, Mr Woolman accepted that if there is no criminal penalty then his challenge under Article 7 fails.

 

 

 

S v Miller

[71] S v Miller 2001 SC 977 concerned childrens' hearings. The sheriff referred the case to the Court of Session. The First Division held, inter alia, that once the procurator fiscal has decided not to proceed with a charge against a child, so that there is no longer any possibility of proceedings resulting in a penalty, any subsequent proceedings under the 1995 Act are not criminal for the purposes of Article 6. The views of the Lord President in S v Miller are referred to with approval in subsequent cases mentioned below.

[72] Lord Macfadyen also reviewed the authorities. He continued (at page 1041B-D, at page 1041H to 1042B and at page 1043 D-I) as follows:-

"[32] In light of these authorities it is, in my view, clear that when considering whether proceedings involve determination of a 'criminal charge' for the purposes of Article 6(1) or whether a person is 'charged with a criminal offence' for the purposes of Article 6(3), the starting point is the classification of the matter in domestic law. It is also clear that such classification will not necessarily be determinative. If the domestic law classifies the matter as involving a criminal charge, it will be treated as involving a criminal charge for the purpose of the Convention. But if the domestic law classifies it as not involving a criminal charge, it is necessary to carry the inquiry further for the purposes of the Convention. If it were otherwise, national classification could lead to results incompatible with the purpose and objects of the Convention (Engel, para 81; ztrk, para 49) The autonomous concept of what is 'criminal' will be applied to overrule if necessary a domestic classification as non-criminal, but not to question a domestic classification as criminal: as was said in Engel at para 81, 'the "autonomy" of the concept of 'criminal' operates...one way only'. ... A neutral formulation of the issue is to be found in the Commission's Opinion in Benham, where at para 65 it is said: 'The first criterion is the nature of the matter in domestic law'. In my opinion the first criterion to be considered can properly be formulated as being whether or not the domestic law regards the person in question, placed in the position in which he has been placed, as a person charged with a criminal offence. If the answer to that question is in the affirmative, that is sufficient to result in there being a criminal charge for the purposes of the Convention. If, on the other hand, the answer is in the negative, the appropriate response is to note the domestic classification but to move on to consider the second and third criteria.

[33] ... I therefore come to the conclusion that the second criterion involves consideration of whether the situation in which the person concerned finds himself is of such a nature that he ought objectively for the purposes of the Convention to be regarded as 'charged with a criminal offence'. That will involve consideration of the nature of the allegation against him, and of the nature of the proceedings in which the allegation is made. It may involve consideration of the capacity in which the person making the allegation is acting. It may involve (at this stage rather than in the context of the third criterion) consideration of whether the imposition of a punishment or penalty is either the purpose or a possible outcome of the proceedings.

[34] As I have already indicated, the third criterion is not in my opinion concerned with whether or not the proceedings in question can result in the infliction of punishment. On the contrary, it assumes that punishment of some degree is involved, and addresses the nature and severity of that punishment. It is concerned with cases which do not fall (or at least do not clearly fall) within the scope of Article 6 by virtue of the application of the first or second criteria. If the approach adopted in Kadubec (at para 51) is to be accepted, it is an alternative to the second criterion, although it may be brought into account cumulatively where separate analysis of each criterion does not lead to a clear conclusion. The context, it seems to me, in which the third criterion comes to be of importance is where the objective nature of the offence or the proceedings is held not to be criminal (or to be not clearly criminal), and the second criterion is therefore not (or not clearly) satisfied. That may be, for example, because the offence may be characterised for Convention purposes as disciplinary, or because it is the subject of a legitimate scheme of decriminalisation. In that sort of situation, the effect of the third criterion may be to bring an offence or proceedings (which might otherwise be held not to involve a 'criminal charge') back within the scope of the criminal aspect of art 6 because of the nature or severity of the punishment. Application of the third criterion cannot, however, have the converse effect of rendering non-criminal for the purposes of the Convention something that is clearly criminal by its nature (ztrk, para 54)."

[73] In my opinion, applying a similar approach mutatis mutandis, the petitioners' arguments fall to be preferred in the present case.

 

Goldsmith v Customs and Excise Commissioners

[74] Goldsmith v Customs and Excise Commissioners [2001] 1 WLR 1673 concerned the importation of dutiable goods. In February 1999 G brought into the United Kingdom a substantial quantity (26 kg) of hand-rolling tobacco on which no duty had been paid. G could not prove to the satisfaction of the Customs and Excise commissioners that the tobacco was for his personal use and it was seized. The commissioners applied to the justices for an order under section 139 of, and Schedule 3 to, the Customs and Excise Management Act 1992 for condemnation of the forfeited tobacco. The justices granted the application and G's appeal to the Crown Court was dismissed. Subsequently, the Human Rights Act 1998 came into force and G appealed by way of case stated on the ground that forfeiture and condemnation proceedings involved the determination of a criminal charge and that, by placing the burden of proving that the goods were not for a commercial use on him, they infringed the presumption of innocence in article 6(2) of the Convention.

[75] On G's appeal by way of case stated it was held, dismissing the appeal, that taking into account all the relevant characteristics, condemnation and forfeiture proceedings were not criminal proceedings to which article 6(2) applied; and that, in any event, if the proceedings were criminal for the purposes of article 6(2), to place a burden on a member of the public who imported more than a specified amount of goods to establish that they were required for non-commercial purposes would be proportionate, reasonable and justifiable.

[76] In particular, Lord Wolf CJ said (at page 1679) inter alia: -

"22 I turn to the question of whether forfeiture proceedings are criminal. Full weight must be given to the consequence of goods being forfeited and condemned as forfeited. However, reference must also be made to the fact that the legislation categorises the proceedings as civil. Reference is also to be made to the fact that none of the usual consequences of a criminal conviction follow from condemnation and forfeiture proceedings. There is no conviction or finding of guilt. Under domestic law the person concerned is not treated as having a conviction. The person concerned is not subject to any other penalty, apart from the consequences of the forfeiture and loss of the goods."

[77] In my view similar considerations apply in the present case and support the view that the present proceedings are civil rather than criminal.

 

McIntosh v Lord Advocate

[78] McIntosh v Lord Advocate and another [2001] UKPC D1, [2003] 1 AC 1078, concerned a confiscation order. Upon the respondent pleading guilty to being concerned in the supply of heroin contrary to section 4(3)(b) of the Misuse of Drugs Act 1971 the prosecutor applied for a confiscation order against him pursuant to section 1 of the Proceeds of Crime (Scotland) Act 1995. In making the application the prosecutor indicated his intention to rely on the rebuttable assumptions which a court was entitled to make, pursuant to section 3(2) of the 1995 Act, that, inter alia, property transferred to or expenditure by a person convicted of a drug trafficking offence within the six years prior to his being indicted of the offence were the proceeds of drug trafficking and thus liable to confiscation. The respondent raised as a devolution issue the contention that those assumptions were incompatible with the presumption of innocence accorded by article 6(2) of the Convention and that under section 57(2) of the Scotland Act 1998 the Lord Advocate as prosecutor had no power to act incompatibly with the Convention. Lord Marnoch declined to make a declarator that the Crown had no power to invite the court to make the assumptions but the Appeal Court of the High Court of Justiciary (Lords Prosser and Allanbridge, Lord Kirkwood dissenting) allowed the respondent's appeal and made the declarator sought. On appeal to the Privy Council by the Lord Advocate and the Advocate General it was held, allowing the appeal, that the presumption of innocence guaranteed by article 6(2) applied only to persons "charged with a criminal offence"; that although a person against whom an application for a confiscation order was made faced a financial penalty (with a custodial penalty in default of payment) it was a penalty imposed for the offence of which he had already been convicted and involved no accusation of, or inquiry into, any other offence; and that, therefore, in relation to the application for a confiscation order made against him the respondent was not a person entitled to rely on the presumption of innocence guaranteed by article 6(2).

[79] Having reviewed the case law, Lord Bingham of Cornhill said inter alia (at page 1092, paragraph 25): -

"25. None of these authorities, in my opinion, provides substantive support for the respondent's contention. He cannot overcome the problem of showing either that he is 'charged' or that he is accused of any 'criminal offence'. He faces a financial penalty (with a custodial penalty in default of payment) but it is a penalty imposed for the offence of which he has been convicted and involves no accusation of any other offence. ...

28. In concluding, as I do, that article 6(2) has no application to the prosecutor's application for a confiscation order, I would stress that the result is not to leave the respondent unprotected. He is entitled to all the protection afforded to him by article 6(1), which applies at all stages, the common law of Scotland and the language of the statute. If the court accedes to the application of a prosecutor under section 1(1) of the 1995 Act, it will order an accused to pay 'such sum as the court thinks fit'. In making a confiscation order the court must act with scrupulous fairness in making its assessment to ensure that neither the accused nor any third person suffers any injustice."

[80] Having regard to the provisions of Part 5 of the 2002 Act, including section 266, it seems to me that the comments made by Lord Bingham of Cornhill can be read across mutatis mutandis to the circumstances of the present case and support the Petitioner's submission.

 

Porter v Magill

[81] Porter v Magill [2002] 2 AC (HL) 357 at 488 concerned the Local Government Finance Act 1982. In that case the auditor certified a very substantial sum due to the council as a result of wilful misconduct under section 201 of the 1982 Act on the ground that all expenditure arising from a policy relating to the sale of council houses was unlawful. The Court of Appeal quashed the auditor's certificates. On appeal by the auditor the sum certified by the auditor, as reduced by the Divisional Court, was restored in the House of Lords.

[82] In relation to whether the proceedings were civil or criminal Lord Hope of Craighead said (at page 487-488): -

"84 For the purposes of the Convention the category into which the proceedings are placed by domestic law, while relevant, is not the only consideration. The court is required to look at the substance of the matter rather than its form, to look behind the appearances and to investigate the realities of the procedure: Deweer v Belgium (1980) 2 EHRR 439, 458, para 44. The nature of the offence and the nature and degree of severity of the sanction must be taken into account also. As to the sanction, the question is whether, by reason of its nature and degree of severity, it amounts to a penalty in the sense of punishment: Engel v The Netherlands (No 1) (1976) 1 EHRR 647, 678-679, paras 82, 83; Lutz v Germany (1987) 10 EHRR 182, 197, para 54; Demicoli v Malta (1991) 14 EHRR 47, 62-63, para 34. ...

85 I consider that the nature of the proceedings under section 20 of the 1982 Act is compensatory and regulatory, not punitive. Section 20(1) provides that the amount certifiable by the auditor, where it appears to him that a loss has been incurred or deficiency caused by wilful misconduct, is the amount of the loss or deficiency and that both he and the body in question may recover that amount for the benefit of that body. The object of the procedure is to compensate the body concerned, and the measure of the compensation is the amount of the loss suffered. In the present case the amount certified was very large, but the nature of the proceedings does not alter depending on the amount certified. No fine is involved, nor does the section provide for a penalty by way of imprisonment. Section 20(4) provides for the respondents' disqualification from being members of a local authority. But this outcome is similar to that where a trustee is removed after being found to have been in serious breach of trust, or a person is disqualified from acting as a director of a company. In my opinion measures of the kind provided for by section 20, which apply to persons having a special status or responsibility and are compensatory and regulatory rather than penal in character, lie outside the criminal sphere for the purposes of article 6 of the Convention.

86 For these reasons I would hold that section 20 of the 1982 Act does not involve the making of a criminal charge within the meaning of article 6. But that does not mean that the respondents lack protection. They are entitled to all the protections afforded to them by article 6(1), the first sentence of which provides that in the determination of his civil rights and obligations everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law."

[83] Porter v Magill concerned a very different factual situation and very different legislation. The orders sought by the Scottish Ministers in the present case do not seek to compensate individuals who have suffered loss. However, the question as to sanction is whether by reason of its nature and degree of severity it amounts to a penalty in the sense of punishment. I am not satisfied that orders sought against the First Respondent amount to a penalty in that sense.

 

Regina (McCann and others) v Crown Court at Manchester and another

[84] In the first case in Regina (McCann and others) v Crown Court at Manchester and another [2002] UKHL 39, [2003] 1 AC 787, the Chief Constable applied to the magistrates' court for anti-social behaviour orders to be made against each of the defendants, three brothers aged 16, 15 and 13, pursuant to section 1 of the Crime and Disorder Act 1998. In the second case the local authority applied to the magistrates' court for an anti-social behaviour order to be made against the defendant.

[85] The House of Lords dismissed the appeal in the first case and declared that the House had no jurisdiction to hear the appeal in the second case. It was held inter alia that the proceedings could not be classified as criminal for the purposes of article 6 of the Convention.

[86] Lord Steyn dealt with the question of classification (at page 807-811) as follows: -

"VIII The classification under domestic law

19 It is necessary to consider whether under domestic law proceedings under the first part of section 1 should be classified as criminal or civil proceedings. In law it is always essential to ask for what purpose a classification is to be made or a definition is to be attempted. ...

20 In a classic passage in Proprietary Articles Trade Association v Attorney General for Canada [1931] AC 310, 324 Lord Atkin observed:

'Criminal law connotes only the quality of such acts or omissions as are prohibited under appropriate penal provisions by authority of the state. The criminal quality of an act cannot be discerned by intuition; nor can it be discovered by reference to any standard but one: Is the act prohibited with penal consequences?'

In Customs and Excise Comrs v City of London Magistrates' Court [2000] 1 WLR 2020, 2025 Lord Bingham of Cornhill CJ, expressed himself in similar vein:

'It is in my judgment the general understanding that criminal proceedings involve a formal accusation made on behalf of the state or by a private prosecutor that a defendant has committed a breach of the criminal law, and the state or the private prosecutor has instituted proceedings which may culminate in the conviction and condemnation of the defendant'. ...

22 Counsel for the defendants accepted that the purpose of Parliament was to cast proceedings under the first part of section 1, as opposed to proceedings for breach, in a civil mould. However, counsel submitted that objectively considered the objective was not achieved. They argued that in reality and in substance such proceedings are criminal in character. This is an important argument which must be carefully examined. The starting point is that in proceedings under the first part of section 1 the Crown Prosecution Service is not involved at all. At that stage there is no formal accusation of a breach of criminal law. The proceedings are initiated by the civil process of a complaint. Under section 1(1)(a) all that has to be established is that the person has acted 'in an anti-social manner, that is to say, in a manner that caused or was likely to cause harassment, alarm or distress to one or more persons not of the same household as himself'. This is an objective inquiry: mens rea as an ingredient of particular offences need not be proved. It is unnecessary to establish criminal liability. The true purpose of the proceedings is preventative. This appears from the heading of Part I. It is also clearly brought out by the requirement of section 1(1)(b): 'that such an order is necessary to protect persons in the local government area in which the harassment, alarm or distress was caused or was likely to be caused from further anti-social acts by him . ..' It follows that the making of an anti-social behaviour order is not a conviction or condemnation that the person is guilty of an offence. It results in no penalty whatever. It cannot be entered on a defendant's record as a conviction. It is also not a recordable offence for the purpose of taking fingerprints: see section 27 of the Police and Criminal Evidence Act 1984. ...

27 I conclude that proceedings to obtain an anti-social behaviour order are civil proceedings under domestic law. ...

IX The Classification under article 6 ...

33 The conclusion I have reached is reinforced by a cogently reasoned judgment on the interpretation of article 6 by the Lord President (Lord Rodger of Earlsferry) in S v Miller 2001 SC 977. Section 5 2(2) of the Children (Scotland) Act 1995 provides that a child may have to be subjected to compulsory measures of supervision when he 'has committed an offence'. The question arose whether in such proceedings article 6 is applicable. The Lord President observed, at pp 989-990:

"23 ... at the stage when S was arrested and charged by the police on 31 October, he was indeed 'charged with a criminal offence' in terms of article 6, since he was liable to be brought before a criminal court in proceedings which could have resulted in the imposition of a penalty. He remained 'charged with a criminal offence' in terms of article 6 until the procurator fiscal decided the following day - in the language of section 43(5) of the Criminal Procedure Act - 'not to proceed with the charge'. At that point the criminal proceedings came to an end and the reporter initiated the procedures under the 1995 Act by arranging a hearing in terms of section 63(1). In my view, once the procurator fiscal has decided not to proceed with the charge against a child and so there is no longer any possibility of proceedings resulting in a penalty, any subsequent proceedings under the 1995 Act are not criminal for the purposes of article 6. Although the reporter does indeed intend to show that the child concerned committed an offence, this is not for the purpose of punishing him but in order to establish a basis for taking appropriate measures for his welfare. That being so, the child who is notified of grounds for referral setting out the offence in question is not thereby ''charged with a criminal offence' in terms of article 6.

"24. It is not now disputed, of course, that the children's hearing proceedings involve the determination of civil rights and obligations. Article 6 therefore applies. But, since the proceedings are not criminal, the specific guarantees in article 6(2) and (3) do not apply."

I am in complete agreement with this reasoning as correctly reflecting the purpose of article 6. And it applies a fortiori to proceedings under section 1. After all, section 1(1) does not require proof of a criminal offence.

34 In my view an application for an anti-social behaviour order does not involve the determination of a criminal charge."

[87] Lord Hutton said in paragraph 113 of his opinion (at page 835):-

"The submissions of counsel on behalf of the defendants and on behalf of Liberty have laid stress on the human rights of the defendants. However, the European Court has frequently affirmed the principle stated in Sporrong and Lnnroth v Sweden 5 EHRR 35, 52, para 69, that the search for the striking of a fair balance 'between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights' is inherent in the whole of the Convention."

[88] In the circumstances of McCann, Lord Hutton went on to say:-

"I consider that the striking of a fair balance ... requires the scales to come down in favour of the protection of the community and of permitting the use of hearsay evidence in applications for anti-social behaviour orders."

[89] Lord Hobhouse of Woodbrough and Lord Scott of Foscote agreed with Lord Hutton (at paragraphs 116 and 117 on page 836).

[90] In my opinion, the general characteristics of criminal proceedings outlined by Lord Steyn in paragraph 20 are not present in the current case. On the contrary, many but not all of the factors mentioned in paragraphs 22 and 33 can be read across mutatis mutandis to the present case contra-indicating criminal proceedings. In my view, striking the fair balance referred to by Lord Hutton requires the scales to come down in favour of the petitioners' arguments.

 

Regina v Benjafield and Regina v Rezvi

[91] In Regina v Benjafield [2002] UKHL 2 and Regina v Rezvi [2002] UKHL 1, {2003] 1 AC 1099 the appellant R was charged with theft and deception. The Crown served a prosecutor's statement under section 71(1)(a) of the Criminal Justice Act 1988 stating that it was appropriate to proceed with confiscation proceedings under section 72AA. The judge heard evidence and argument and concluded that the appellant's realisable assets should be assessed at 214,839 and made a confiscation order in the latter sum. He sentenced the appellant to concurrent terms of 15 months' imprisonment..

[92] The appellant B pleaded guilty to two counts of conspiracy to supply drugs between 6 May and 24 July 1997. He was sentenced to 14 years' and 5 years' imprisonment respectively and concurrently. The court made a confiscation order under sections 2 and 4 of the Drug Trafficking Act 1994 in the sum of his benefit of 327,971.

[93] The appellants appealed against the confiscation orders. In the House of Lords it was held dismissing the appeals that since confiscation proceedings under the 1988 and 1994 Acts did not involve a fresh criminal charge but were part of the sentencing process following conviction, a defendant against whom a confiscation order was sought was not "charged with a criminal offence" and therefore article 6(2) of the Convention did not apply although the defendant was entitled to the full protection of a fair hearing under article 6(1). The statutory assumptions in section 72AA of the 1988 Act and section 4(3) of the 1994 Act were not wider than was necessary to achieve the legitimate aim in the public interest of depriving professional and habitual criminals of the proceeds of their criminal conduct and were not, in putting a persuasive burden on the defendant, disproportionate to the objective so as to be incompatible with the defendant's Convention rights. On the facts, there had been no injustice to the defendants and the judges had been entitled to make the confiscation orders.

[94] When dealing with the proportionality issue, Lord Steyn said (at paragraph 14, [2003] 1AC 1099 at page 1152): -

"14. It is a notorious fact that professional and habitual criminals frequently take steps to conceal their profits from crime. Effective but fair powers of confiscating the proceeds of crime are therefore essential. The provisions of the 1988 Act are aimed at depriving such offenders of the proceeds of their criminal conduct. Its purposes are to punish convicted offenders, to deter the commission of further offences and to reduce the profits available to fund further criminal enterprises. These objectives reflect not only national but also international policy. The United Kingdom has undertaken, by signing and ratifying treaties agreed under the auspices of the United Nations and the Council of Europe, to take measures necessary to ensure that the profits of those engaged in drug trafficking or other crimes are confiscated: see the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (19 December 1988); Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Strasbourg, 8 November 1990. These Conventions are in operation and have been ratified by the United Kingdom. ...

16. In agreement with the unanimous views of the Court of Human Rights in Phillips v United Kingdom [2001] Crim LR 817 I would hold that Part VI of the 1988 Act is a proportionate response to the problem which it addresses."

[95] Bearing in mind that a person against whom a confiscation order is sought is not necessarily "charged with a criminal offence" for the purposes of Article 6 does it follow that the First Respondent (in recovery proceedings under Part 5 of the 2002 Act) is being subjected to a retrospective criminal penalty for the purposes of Article 7? In my opinion it does not, at least not in the circumstances of this particular case.

 

Butler v the United Kingdom

[96] In Francis John Butler v the United Kingdom, Decision as to the admissibility of Application No. 41661/98 by the European Court of Human Rights sitting on 27 June 2002, the applicant maintained that the seizure, detention and forfeiture proceedings under sections 42 and 43 of the Drug Trafficking Act 1994 ("the 1994 Act") infringed his right to be presumed innocent, in breach of Article 6 (2) of the Convention ... .

[97] The Court said in relation to "Applicability of Article 6 of the Convention under its criminal heading" (The Law section B.) inter alia: -

" The Court notes that criminal charges have never been brought against the applicant, nor against any other party. It is the applicant's contention that the forfeiture of his money in reality represented a severe criminal sanction, handed down in the absence of the procedural guarantees afforded to him under Article 6 of the Convention, in particular his right to be presumed innocent.

The Court does not accept that view. In its opinion, the forfeiture order was a preventive measure and cannot be compared to a criminal sanction, since it was designed to take out of circulation money which was presumed to be bound up with the international trade in illicit drugs. It follows that the proceedings which led to the making of the order did not involve 'the determination ... of a criminal charge. ... It further observes that the applicant's reliance on the above-mentioned Phillips judgment does not improve his argument on the applicability of Article 6 under its criminal head to the forfeiture proceedings. The confiscation order impugned in that case followed on from the applicant's prosecution, trial and ultimate conviction on charges of importing an illegal drug. It did not give rise to the determination of a separate or new charge against the applicant. The confiscation order was found by the Court in the Phillips case to be analogous to a sentencing procedure (ibid. 34 and 39), and, to that extent, attracted the applicability of Article 6. As previously noted, the circumstances of the instant case are different.

It also notes that in its Phillips judgment the Court attached weight to the facts that the purpose of the confiscation order in that case was not the conviction or acquittal of the applicant and that the making of the confiscation order had no implications for his criminal record (ibid. 34). For the Court, these are also relevant considerations for concluding that Article 6 under its criminal head does not apply to the forfeiture proceedings in the instant case.

The Court finds further support for this conclusion in the above-mentioned Air Canada and AGOSI judgments. ... ."

[98] In my view, a similar conclusion falls to be reached in the present case. A purpose of the civil order is to take property out of circulation and away from the holders. It does not follow that the recovery proceedings are criminal rather than civil.

 

Regina (Mudie and another) v Dover Magistrates' Court and another

[99] In Regina (Mudie and another) v Dover Magistrates' Court and another [2003] EWCA Civ 237, [2003] QB 1238 the claimants were returning to England from France when they were stopped by customs officers. The officers, in exercise of their powers under sections 139 and 141 of the Customs and Excise Management Act 1979, seized a quantity of tobacco and alcohol on which the claimants had not paid duty and also the claimants' motor car in which those dutiable goods were being carried. The claimants disputed that the seized items were liable to forfeiture. The Customs and Excise Commissioners issued proceedings in the magistrates' court under the 1979 Act for condemnation of the seized items on the ground that the dutiable goods were held for a commercial purpose and not for the claimants' own use. Although paragraph 8 of Schedule 3 classified condemnation proceedings as "civil" proceedings, the claimants applied to the justices for a representation order under the Access to Justice Act 1992, claiming that the proceedings constituted a "criminal charge" within the meaning of article 6 of the Convention and that they were therefore entitled to legal assistance in accordance with the right contained in article 6(3)(c). The justices refused the application, holding that the proceedings were civil and not criminal and that they accordingly had no jurisdiction to grant the order. The claimants sought permission to claim judicial review of the justices' decision, which was refused. On the claimants' appeal it was held, dismissing the appeal, that in determining whether proceedings for condemnation constituted a "criminal charge" for the purpose of article 6 of the Convention the court had to consider whether, in the light of the classification of the proceedings in domestic law, the nature of the conduct complained of and the severity of the potential penalty, the proceedings were in substance in the nature of a criminal charge in that they were an instance of the use of state power to condemn or punish individuals for wrongdoing; that, although their classification as "civil" by the Customs and Excise Management Act 1979 carried little weight and was to be treated as no more than a starting point, since condemnation proceedings were concerned only to determine whether the goods were liable to seizure and did not necessarily involve proof of blameworthy conduct, and since the court under paragraph 6 of Schedule 3 to the 1979 Act merely declared whether goods were liable to forfeiture and imposed no penalty, they were not in substance in the nature of a criminal charge for the purposes of article 6; and that, accordingly, the claimants' Convention rights under article 6(3)(c) were not engaged.

[100] Law LJ said (at paragraph 36 [2003] QB at page 1259C-F): -

"36. I would just add these observations. Lord Steyn's remarks in R (McCann) v Crown Court at Manchester [2003] 1 AC 787, although made in the domestic context, show that some care needs to be taken in the application of the Engel test. It is certainly beyond contest that the concept of 'criminal charge' possesses an autonomous meaning in the European Court of Human Rights jurisprudence. It is also true that the first of the three criteria, that is the domestic classification of the proceedings, is treated as no more than a starting point. But that proposition should not distract the court from the question whether, given the three criteria, the proceedings in issue are in substance in the nature of a criminal charge. Are they an instance of the use of state power to condemn or punish individuals for wrongdoing? The European Court of Human Rights and our own courts have held that condemnation proceedings are not in any such category. The emphasis on the in rem nature of such proceedings in Air Canada v United Kingdom 20 EHRR 150, Lord Woolf CJ's judgment in Goldsmith v Customs and Excise Comrs [2001] 1 WLR 1673, Lord Steyn's observations in the McCann case [2003] 1 AC 787, and the European Court of Human Rights' own discussion in Butler v United Kingdom 27 June 2002, combine, in my judgment, to underline the force of that conclusion.

37. For all these reasons I would dismiss this appeal."

[101] Similar reasoning, in my opinion, supports the petitioners' arguments in the present case. Seeking to recover property, reduce crime and benefit the community does not necessary involve condemnation nor punishment of the First Respondent.

 

Director of the Assets Recovery Agency and Cecil Stephen Walsh (Coghlin J)

[102] The decision of Coghlin J in the matter of Director of the Assets Recovery Agency and Cecil Stephen Walsh [2004] NIQB 21 and the decision in the subsequent appeal (see below) were heavily relied upon by the Petitioners.

[103] Walsh concerned an application by the Assets Recovery Agency for a recovery order in accordance with Part 5 of the Proceeds of Crime Act 2002 under the terms of which the Agency sought to vest certain property held by or on behalf of Cecil Stephen Walsh ("the respondent") in the trustee for civil recovery. The application had been made under the provisions of Section 266 of the 2002 Act.

[104] When considering whether the proceedings were criminal for the purpose of Article 6 Coghlin J considered inter alia the three principle criteria identified in Engel v The Netherlands (No 1) (1976) 1 EHRR 647 at paragraph 82. He did so under the heading of "The correct approach".

[105] In paragraph [13] Coughlin J said:-

"The three principle criteria identified in Engel are:

(i) The manner in which the domestic state classifies the proceedings. This normally carries comparatively little weight and is regarded as a starting point rather than determinative - see Ozturk v Germany (1984) 6 EHRR 409 at 421 and 422.

(ii) The nature of the conduct in question classified objectively bearing in mind the object and purpose of the Convention.

(iii) The severity of any possible penalty - severe penalties, including those with imprisonment in default and penalties intended to deter are pointers towards a criminal classification of proceedings - see Schmautzer v Austria (1995) 21 EHRR 511.

In Lauko v Slovakia (1998) ECHR 2613 8/95 the court observed that these criteria were alternatives and not cumulative although a cumulative approach might be adopted where a separate analysis of each criterion did not make it possible to reach a clear conclusion as to the existence of a 'criminal charge'."

[106] Coghlin J then addressed the three criteria in paragraphs [14] to [20] of his judgment. Firstly, as appears in paragraph [16], Coghlin J was satisfied that in terms of domestic law the proceedings could properly be classified as "civil". Secondly, as appears in paragraph [19], he reached the view that the essential focus of the statutory scheme was recovery of property and not the conviction and punishment of individuals for breaches of the criminal law. Thirdly, Coughlin J set out his views in relation to the severity of any possible penalty. He did so in paragraph [20] as follows:-

"[20] As I have already noted, it seems to me that the purpose and function of the civil recovery procedure is to recover property obtained through unlawful conduct but not to penalise or punish any person who is proved to have engaged in such conduct. In R v H Lord Bingham observed at page 507 paragraph [19]:

'But the fact that the procedure cannot culminate in any penalty is not neutral. The House was referred to no case in which the European Court has held a proceeding to be criminal even though an adverse outcome for the defendant cannot result in any penalty. It is, indeed difficult if not impossible to conceive of a criminal proceeding which cannot in any circumstances culminate in the imposition of any penalty, since it is the purpose of the criminal law to proscribe, and by punishing to deter, conduct regarded as sufficiently damaging to the interests of society to merit the imposition of penal sanctions'."

[107] Finally Coughlin J said in paragraph [21]:-

"[21] In the circumstances, I have come to the conclusion that civil recovery proceedings within the meaning of Part 5 of the PoCA should be classified as civil rather than criminal. It will be appreciated that such a classification will not in any respect detract from the ability of a respondent in such proceedings to rely upon the full range of rights and privileges available at common law and by virtue of Article 6(1) of the Convention. In this context I bear in mind the words of Lord Bingham in Her Majesty's Advocate v McIntosh [2001] 3 W.L.R. 107 ... at paragraph [28] (mentioned above)."

[108] In the result Coghlin J held that that the application made by the Director of the Assets Recovery Agency under Part 5 of the Proceeds of Crime Act 2002 for the recovery of assets from Cecil Walsh were civil proceedings and did not engage article 6(2). His decision was appealed.

[109] Bearing in mind that the present case also concerns the 2002 Act (PoCA), it may be helpful to set out the reasoning and decision of the Court of Appeal in Northern Ireland in the case of Walsh in some detail (as follows).

 

 

Cecil Walsh v Director of the Assets Recovery Agency (Court of Appeal)

[110] In Cecil Walsh v Director of the Assets Recovery Agency [2005] NICA 6 the opinion of the Court was delivered by Kerr LCJ.

 

The Background

[111] Kerr LJC outlined the background as follows:-

"[3] On 13 June 2003 by direction of Her Honour Judge Kennedy, Mr Walsh was found not guilty of three charges of obtaining services by deception contrary to article 3(1) of the Theft Act (Northern Ireland) 1978 and one charge of obtaining property by deception contrary to section 15A of the Theft Act (Northern Ireland) 1969. These offences were alleged to have occurred between July 2000 and January 2001.

[4] On 16 June 2003 an assistant chief constable in the Police Service for Northern Ireland (PSNI) made a referral to the agency concerning property held by Mr Walsh. The referral document included the statement that PSNI believed that certain property held by Mr Walsh derived from criminal activity on his part. On foot of the referral, on 27 June 2003 the agency obtained an order for a Mareva injunction restraining Mr Walsh from removing from Northern Ireland or from disposing of or dealing with certain property specified in the order.

[5] On 2 July 2003 the agency caused to be issued an originating summons under Order 123 rule 4 of the 1980 rules. By this, the agency applied for a recovery order in respect of the assets that had been specified in the Mareva injunction. On 10 November 2003 Coghlin J conducted the hearing of a preliminary issue as to whether recovery proceedings under Part 5 of PoCA should be classified as civil or criminal. He subsequently delivered a reserved judgment holding that they were to be regarded as civil proceedings. It is from that decision that the present appeal is taken."

 

Statutory History

[112] In relation to the statutory history Kerr LJC said:-

"[6] The Hodgson Committee report, 'The Profits of Crime and their Recovery, Howard League for Penal Reform, 1984' recommended the introduction into English law of a sentence of confiscation designed to catch the profits of major crime. Following this recommendation, a confiscation regime in relation to drug trafficking was introduced in England and Wales by the Drug Trafficking Offences Act 1986. As well as including the powers of restraint and confiscation the Act created a statutory assumption that a drug trafficker's assets were the proceeds of crime and were therefore liable to confiscation. In 1988 the Criminal Justice Act provided for a new power to make a confiscation order in respect of certain crimes other than drug trafficking. Equivalent provisions to those contained in the 1986 and 1988 Acts were introduced in Northern Ireland by the Criminal Justice (Confiscation) (Northern Ireland) Order 1990.

[7] The 1988 Act was then amended by the Criminal Justice Act 1993, the Criminal Justice and Public Order Act 1994 and the Proceeds of Crime Act 1995. Among the amendments was that the standard of proof required to determine whether a person had benefited from the proceeds of crime was to be that applicable in civil proceedings (section 71(7A) of the 1988 Act as inserted by section 27 of the Criminal Justice Act 1993). The amendments made to the 1988 Act by the Proceeds of Crime Act 1995 enlarged the powers of the criminal courts to make confiscation orders. In Northern Ireland the 1990 Order was subsequently repealed and replaced by the Proceeds of Crime (Northern Ireland) Order 1996 which replicated in this jurisdiction the changes to the confiscation legislation which had been made in England and Wales in 1993, 1994 and 1995.

[8] Before PoCA, therefore, the statutory confiscation regime in Northern Ireland was contained in the 1996 Order. The following features of the regime are relevant: where a defendant appeared before the Crown Court to be sentenced in respect of an offence to which the Order applied, the court was obliged to hold a confiscation inquiry if either the prosecution asked it to do so or the court considered it appropriate; the court was required to determine whether the defendant had benefited from relevant criminal conduct or from drug trafficking; article 12(6) of the 1996 Order provided that the standard of proof in determining whether a person had benefited from drug trafficking or the amount to be recovered from him, should be that applicable in civil proceedings; and under article 10, the court was required to make a number of assumptions in determining the question of benefit and the amount of proceeds of drug trafficking. Some of these assumptions were discussed by this court in the case of R v McKiernan [2004] NICA 18."

 

The issues in the appeal in Welch

[113] The central question arising in the appeal in Welch was whether the agency should be required to establish that the appellant was engaged in unlawful conduct to the criminal standard i.e. beyond reasonable doubt. That is clear from paragraph [17]. The case also concerned Article 6 which was set out in paragraph [18}

 

The determination whether the issue is criminal or civil

[114] In relation to the determination whether the issue is criminal or civil Kerr LCJ said:-

"[19] In Engel v Netherlands (No 1) (1976) 1 EHRR 647 at 678-679, ECtHR provided what has come to be recognised as authoritative guidance on the approach to be adopted in deciding whether an issue is to be regarded as criminal for the purpose of article 6. In that case the European Court held that the matter was to be examined by the application of three tests. These are set out in paragraph 82 of the judgment:‑

'... it is first necessary to know whether the provision(s) defining the offence charged belong, according to the legal system of the respondent State, to criminal law, disciplinary law or both concurrently. This however provides no more than a starting point. The indications so afforded have only a formal and relative value and must be examined in the light of the common denominator of the respective legislation of the various Contracting States.

The very nature of the offence is a factor of greater import. ...

However, supervision by the Court does not stop there. Such supervision would generally prove to be illusory if it did not also take into consideration the degree of severity of the penalty that the person concerned risks incurring. In a society subscribing to the rule of law, there belong to the "criminal" sphere deprivations of liberty liable to be imposed as a punishment, except those which by their nature, duration or manner of execution cannot be appreciably detrimental. The seriousness of what is at stake, the traditions of the Contracting States and the importance attached by the Convention to respect for the physical liberty of the person all require that this should be so (see, mutatis mutandis, the De Wilde, Ooms and Versyp judgment of 18 June 1971, Series A no. 12, p. 36, last sub-paragraph, and p. 42 in fine).'

[20] These three tests:- (1) the classification of the issue in national law; (2) the nature of the offence alleged against the individual; and (3) the seriousness of what is at stake or the nature of the penalty to be imposed, have been applied in England and Wales in R v H [2003] UKHL 1 and in this jurisdiction in Lord Saville of Newdigate v Harnden [2003] NI 239 in deciding whether a particular form of proceeding should be recognised as criminal or civil. Some of the factors that arise in each of the tests are common to more than one and the tests tend to blend into each other to some extent but it is necessary to consider each in turn and then to make some observations about their cumulative effect in the present case."

 

The classification in national law

[115] In relation to the first test "the classification in national law" Kerr LCJ said:-

"[21] As Lord Bingham of Cornhill pointed out in R v H this test is far from decisive, for the practical reason that if it were possible to avoid the engagement of article 6 by domestic legislation, the aim of achieving broadly equivalent standards among the member states of the Council of Europe would be defeated. But it is a starting point and it is, therefore, important that section 241(3) of PoCA expressly states that the court must decide on a balance of probabilities whether it is proved that any matters alleged to constitute unlawful conduct have occurred. Although this obviously connotes the civil standard of proof, the classification, even in the domestic setting, cannot be determined by a mere statement to that effect. The question is whether the statutory provision under consideration belongs to the criminal law of the state. This is to be determined, not only by reference to the indications given by the legislation, but also by examining whether it has the appurtenances of the criminal law - see, for instance, Lauko v Slovakia (1998) ECHR 26/38/95.

[22] In S v The Principal Reporter and the Lord Advocate[2001] SC 977 the Lord President (Lord Rodger) discussed the terms of article 6 by reference to both the English and the French texts. He pointed out that the expression 'criminal charge against him' in the English text appears as 'en matire pnale dirige contre lui' in the French. This emphasises the penal nature of the provision and the fact that it must be directed against the individual as a criminal charge. In other words, for the criminal part of article 6 to come into play, there must be a criminal charge directed to the person who seeks its protection and it must carry a penalty. ...

[23] As Lord Hope of Craighead pointed out in R (McCann & others) v Crown Court at Manchester [2002] UKHL 39 (paragraph 60), the expression 'charged with a criminal offence' has an autonomous meaning in the context of the convention - Adolf v Austria (1982) 4 EHRR 313 at 322 paragraph 30. And so it is relevant that in the present case proceedings for the recovery of assets do not involve the preferring of a charge against the appellant. He does not acquire a criminal conviction if he is found liable to deliver up the assets to the agency. True it is that there is an examination of whether he has been guilty of unlawful conduct (i.e. conduct that is contrary to the criminal law) but this does not take place in a criminal setting. He is not required to plead to a charge, no bill of indictment is preferred and all the trappings of the proceedings are those normally associated with a civil claim.

[24] Mr McCollum (for the appellant) invited us not to follow the reasoning of Lord Rodger in S v The Principal Reporter and the Lord Advocate. He suggested that the opinion of Lord Prosser in the earlier case of McIntosh v Her Majesty's Advocate [2001] JC 78 was to be preferred. ...

[25] The decision of the High Court of Justiciary in the McIntosh case was reversed in the Privy Council. Mr McCollum suggested that the reasoning of Lord Prosser in the passage quoted above remains intact and that the decision of the Privy Council was reached on different grounds. We do not accept that argument. At paragraph 14 of his judgment Lord Bingham said:‑

'It was not contended on the respondent's behalf in the Court of Appeal that, in relation to an application for a confiscation order, he was a person charged with a criminal offence as that expression would be understood in Scots domestic law (see the judgment of Lord Prosser, 2001 JC 78 at 81 (para 6)). There are a number of compelling reasons why he would not be so regarded. (1) The application is not initiated by complaint or indictment and is not governed by the ordinary rules of criminal procedure. (2) The application may only be made if the accused is convicted, and cannot be pursued if he is acquitted. (3) The application forms part of the sentencing procedure. (4) The accused is at no time accused of committing any crime other than that which permits the application to be made. (5) When, as is standard procedure in anything other than the simplest case, the prosecutor lodges an application under s 9, that application (usually supported by detailed schedules) is an accounting record and not an accusation. (6) The sum ordered to be confiscated need not be the profit made from the drug trafficking offence of which the accused has been convicted, or any other drug trafficking offence. (7) If the accused fails to pay the sum he is ordered to pay under the order, the term of imprisonment which he will be ordered to serve in default is imposed not for the commission of any drug trafficking offence but on his failure to pay the sum ordered and to procure compliance. (8) The transactions of which account is taken in the confiscation proceedings may be the subject of a later prosecution, which would be repugnant to the rule against double jeopardy if the accused were charged with a criminal offence in the confiscation proceedings. (9) The proceedings do not culminate in a verdict, which would (in proceedings on indictment) be a matter for the jury if the accused were charged with a criminal offence. It is of course true that if, following conviction of the accused and application by the prosecutor for a confiscation order, the court chooses to make the assumptions specified in s 3(2) of the 1995 Act or either of them, an assumption is made (unless displaced) that the accused has been engaged in drug trafficking which, as defined in s 49(2), (3) and (4), may (but need not) have been criminal. But there is no assumption that he has been guilty of drug trafficking offences as defined in s 49(5). The process involves no inquiry into the commission of drug trafficking offences. Unless Strasbourg jurisprudence points towards a different result, I would not conclude that a person against whom application for a confiscation order is made is, by virtue of that application, a person charged with a criminal offence.'

[26] Many of the characteristics identified in this passage are present in the case of recovery proceedings. Their presence points clearly to the same outcome in the current case. But Mr McCollum focussed on the statement that the confiscation proceedings did not involve any inquiry into the commission of drug trafficking offences and suggested that, if such an inquiry had been required, the Privy Council would have held that the respondent had been charged with a criminal offence. Again we do not accept that submission. We do not regard the fact that there was no inquiry into drug trafficking offences as pivotal to the decision. This was referred to, we are satisfied, merely to highlight the difference in the type of proceeding involved in the confiscation proceedings from a criminal trial. Moreover, we do not accept that it is in any way inevitable that the recovery proceedings will be confined to an examination of specific offences committed by the appellant. We consider that it would be open to the agency to adduce evidence that the appellant had no legal means of obtaining the assets without necessarily linking the claim to particular crimes. Finally, the purpose of the recovery action is to obtain from the appellant what, it is claimed, he should not have - property that has been acquired by the proceeds of crime. It is not designed to punish him beyond that or to establish his guilt of a precise offence.

[27] We are satisfied that all the available indicators point strongly to this case being classified in the national law as a form of civil proceeding. The appellant is not charged with a crime. Although it must be shown that he was guilty of unlawful conduct in the sense that he has acted contrary to the criminal law, this is not for the purpose of making him amenable as he would be if he had been convicted of crime. He is not liable to imprisonment or fine if the recovery action succeeds. There is no indictment and no verdict. The primary purpose of the legislation is restitutionary rather than penal."

 

The nature of the proceedings

[116] In relation to the second test, the nature of the proceedings, Kerr LJC said:-

"[28] Much of what we have had to say about the first of the Engel tests applies to this question also. Mr McCollum drew our attention to a formulation of the issue that appeared in the opinion of Lord Macfadyen in S v Lord Advocate where he said at paragraph 33:‑

'... the second criterion involves consideration of whether the situation in which the person concerned finds himself is of such a nature that he ought objectively for the purposes of the Convention to be regarded as "charged with a criminal offence". That will involve consideration of the nature of the allegation against him, and of the nature of the proceedings in which the allegation is made. It may involve consideration of the capacity in which the person making the allegation is acting. It may involve (at this stage rather than in the context of the third criterion) consideration of whether the imposition of a punishment or penalty is either the purpose or a possible outcome of the proceedings.'

[29] This approach, which we believe has much to commend it, illustrates the difficulty in considering each of the Engel criteria on a strictly segregated basis for, ultimately, a decision on whether a particular form of proceeding is civil or criminal must be made by a comprehensive evaluation of all its characteristics. Be that as it may, the factors outlined in this passage, when applied to recovery actions, again compellingly point to the conclusion that the proceedings are civil in character. The allegation made against the appellant does not impute guilt of a specific offence; the proceedings do not seek to impose a penalty other than the recovery of assets acquired through criminal conduct; and they are initiated by the director of an agency, which, although it is a public authority, has no prosecutorial function or competence. In this context what Lord Bingham said about the nature of criminal proceedings in Custom and Excise Commissioners v City of London Magistrates' Court [2000] 1WLR 2020, 2025 is relevant:‑

"It is in my judgment the general understanding that criminal proceedings involve a formal accusation made on behalf of the state or by a private prosecutor that a defendant has committed a breach of the criminal law, and the state or the private prosecutor has instituted proceedings which may culminate in the conviction and condemnation of the defendant."

[30] The reference in Lord Macfadyen's judgment to the purpose of the proceedings is a theme that featured in Phillips v United Kingdom (2001) EHRR (Application no. 41087/98). In that case the applicant had been convicted of the importation of a quantity of drugs. Subsequent to his conviction a confiscation order was made. The applicant contended that a statutory assumption applied by the Crown Court when calculating the amount of the confiscation order breached his right to the presumption of innocence under article 6 (2) of the Convention. The European Court gave its decision on this argument in paragraph 34 of its judgment as follows: ‑

'... the purpose of this procedure was not the conviction or acquittal of the applicant for any other drug-related offence. Although the Crown Court assumed that he had benefited from drug trafficking in the past, this was not, for example, reflected in his criminal record ... In these circumstances, it cannot be said that the applicant was "charged with a criminal offence". Instead, the purpose of the procedure under the 1994 Act was to enable the national court to assess the amount at which the confiscation order should properly be fixed. The Court considers that this procedure was analogous to the determination by a court of the amount of a fine or the length of a period of imprisonment to be imposed on a properly convicted offender. This, indeed, was the conclusion which it reached in Welch (judgment cited above) when, having examined the reality of the situation, it decided that a confiscation order constituted a 'penalty' within the meaning of Article 7.'

[31] This passage makes clear that, even though the confiscation of the applicant's property was to be regarded as a penalty within the meaning of article 7 of the convention, since the purpose of the confiscation procedure was not to secure the conviction of the applicant, it did not constitute the preferring of a charge against him within the meaning of article 6. In particular the right to be presumed innocent under article 6(2) arose "only in connection with the particular offence charged." - paragraph 35. Likewise in the present case, the purpose of the recovery proceedings is not to prosecute the appellant for any offence or to secure a criminal conviction on any specific charge. Whether or not it can be regarded as a penalty, it does not constitute the charging of the appellant with a criminal offence.

[32] The purpose of Part 5 of PoCA can be viewed on a more general basis as the state's response to the need to recover from those who seek to benefit from crime the proceeds of their unlawful conduct. Although said in relation to confiscation orders, the words of Lord Steyn in R v Rezvi [2002] UKHL 1 are apposite (see the words quoted above at paragraph [14] hereof) ... :

[33] Lord Steyn referred to the partly dissenting opinion in Phillips of Sir Nicolas Bratza (in which Judge Vajic joined) which suggested that the majority had taken too narrow a view of article 6(2). Lord Steyn commented that if article 6(2) was held to be directly applicable, it would tend to undermine the effectiveness of confiscation procedures generally. We respectfully agree and would add that the same can clearly be said of recovery proceedings. If recovery proceedings could only be taken on proof beyond reasonable doubt that the person from whom recovery was sought had benefited from crime, the efficacy of the system would be substantially compromised.

[34] In this context it is relevant that significant safeguards are in place to ensure that innocent persons are not penalised by the recovery procedures. Quite apart from the provisions of section 266 (3), (4) and (6) and sections 281 and 282 (which we have referred to in paragraphs [14] and [15] above), the appellant is entitled to the protection afforded by article 6 (1) of the convention. Lord Bingham referred to this (albeit in relation to confiscation proceedings) in McIntosh (at paragraph 28 quoted above) ... "

[35] Analogous rights and duties arise in relation to recovery proceedings. The appellant cannot be deprived of assets unless it is established to the requisite standard that these were obtained by unlawful conduct, specifically conduct that was contrary to the criminal law of Northern Ireland. The proceedings by which the agency will seek to establish that proposition will be subject to the requirements of article 6 (1) of the convention. The court is specifically enjoined to have regard to the rights of the appellant and innocent third parties by the terms of the sections that we have referred to in the preceding paragraph."

 

Is a penalty imposed - if so, what is the nature of the penalty?

[117] In relation to the third test, the nature of the penalty, Kerr LJC said:-

"[36] The expression 'penalty' in article 6, like the expression 'criminal charge', involves an autonomous convention concept, - see, for instance, X v France judgment of 31 March 1992, Series A no 234-C, page 98, paragraph 28. In Welch v United Kingdom judgment of 9 February 1995, Series A no. 307-A the European Court acknowledged the 'preventive purpose' of confiscation orders but concluded that "the aims of prevention and reparation are consistent with a punitive purpose and may be seen as constituent elements of the very notion of punishment". It decided therefore that a confiscation order constituted a penalty.

[37] In R v Benjafield [2002] UKHL 2 the Court of Appeal in England and Wales was disposed to accept this reasoning and that a confiscation order was penal - see paragraph 82 of the judgment of Lord Woolf CJ. Likewise in Rezvi Lord Steyn accepted that one of the purposes of confiscation proceedings was 'to punish convicted offenders' - see paragraph [31] above. The learned trial judge in the present case did not consider that recovery proceedings involved a penalty. At paragraph [20] of his judgment he said: ‑

'... the purpose and function of the civil recovery procedure is to recover property obtained through unlawful conduct but not to penalise or punish any person who is proved to have engaged in such conduct ...'

[38] A distinction between confiscation orders and recovery proceedings can be drawn in that, as Lord Bingham pointed out in McIntosh, the sum ordered to be confiscated need not be the profit made from the drug trafficking offence of which the accused has been convicted, whereas recovery may only be ordered in relation to assets that have been acquired by proven unlawful conduct. The recovery of assets may more readily be described as a preventative measure, therefore. After all, the person who is required to yield up the assets does no more than return what he obtained illegally. It is clear, however, from the judgment in Welch that the European Court considered that a provision will not be classified as non-penal solely because it partakes of a preventative character and since it is unnecessary for us to decide the point, we will refrain from expressing any final view on whether recovery of assets should be regarded as penal within the autonomous meaning of that term.

[39] Even if the proceedings in this case are to be regarded as imposing a penalty on the appellant, we are satisfied that this is not sufficient to require them to be classified as criminal for the purposes of article 6. Indeed, Mr McCollum accepted that this attribute alone could not achieve that result. For the reasons that we have given earlier we consider that the predominant character of recovery action is that of civil proceedings. The primary purpose is to recover proceeds of crime; it is not to punish the appellant in the sense normally entailed in a criminal sanction."

 

The cumulative effect of the Engel tests

[118] In relation to the cumulative effect of the Engel tests, Kerr LJC said:-

"[40] Mr McCollum argued that the effect of the recovery action in terms both of its impact on the appellant and in the way that it was instituted and presented militated strongly against a finding that these were civil proceedings. He pointed out that the proceedings were initiated by a public authority on referral from PSNI, a state agent. The agency would rely on material adduced in the criminal trial of the appellant. It would seek to establish his guilt of criminal conduct and, if successful, the proceedings would have a direct impact on him by depriving him of his personal property. It was invidious that he should be stigmatised with having been guilty of criminal conduct if that was not proved beyond reasonable doubt. Viewed cumulatively, the Engel tests should be applied to this case, he claimed, to identify the proceedings as criminal in character.

[41] We cannot accept these submissions. The essence of article 6 in its criminal dimension is the charging of a person with a criminal offence for the purpose of securing a conviction with a view to exposing that person to criminal sanction. These proceedings are obviously and significantly different from that type of application. They are not directed towards him in the sense that they seek to inflict punishment beyond the recovery of assets that do not lawfully belong to him. As such, while they will obviously have an impact on the appellant, these are predominantly proceedings in rem. They are designed to recover the proceeds of crime, rather than to establish, in the context of criminal proceedings, guilt of specific offences. The cumulative effect of the application of the tests in Engel is to identify these clearly as civil proceedings."

 

Conclusions in Walsh

[119] The conclusions in Walsh were expressed by Kerr LCJ as follows:-

"[42] None of the arguments advanced on behalf of the appellant has been made out. The appeal must be dismissed. It follows that the application for a declaration of incompatibility must likewise be dismissed."

[120] In my opinion, the reasoning and the conclusions reached in the case of Cecil Walsh are highly persuasive and mutatis mutandis they are directly applicable to the present case. In the circumstances of the present case I have concluded, for the reasons summarised below, that the recovery of assets under Part 5 of the 2002 Act should not be regarded as a criminal "penalty" within the autonomous meaning of Article 7.

 

General Considerations - Human Rights Law and Practice

[121] Human Rights Law and Practice (LexisNexis UK, Second Edition, edited by Lord Lester of Herne Hill QC and David Pannick QC) deals with Article 7 at page 255 (paragraph 4.7) et seq.

[122] The learned authors state inter alia:-

"4.7.1 Article 7 creates a non-derogable prohibition on the retrospective application of the criminal law. ...

4.7.2 Article 7 applies only to criminal proceedings resulting in a conviction or the imposition of a criminal penalty. It does not therefore apply to extradition, or deportation, to alterations in the rules governing parole, to changes in the law of evidence, to rules governing the entry of a conviction on a person's criminal record, or to the conditions under which a prisoner is held. Nor does it apply to internment or other forms of preventative detention which do not depend upon a criminal conviction or sentence. Article 7 does not generally apply to civil proceedings. But proceedings which are defined as civil in domestic law may nevertheless qualify as criminal proceedings for this purpose. The ECt HR and E Com HR have adopted an autonomous approach to the term "criminal" in arts 5 and 6 which also extend to art 7."

[123] In the section headed "Retroactive penalties", the learned authors also state inter alia: -

"4.7.5 The second limb of art 7(1) prohibits a retroactive increase in the penalty applicable to an offence. The term 'penalty' has an autonomous meaning, defined by reference to criteria analogous to those which apply to the terms 'criminal charge' in art 6. Providing the measure was imposed following conviction for a criminal offence, the ECt HR will examine its substance and severity in determining whether or not it amounts to a penalty. Thus in Welch v United Kingdom (1995) 20 EHRR 247 a confiscation order was made under the Drug Trafficking Offences Act 1986 in respect of an offence committed before the Act entered into force. In deciding that the confiscation order was an additional penalty, and therefore a violation of art 7(1), the ECt HR noted that the measure had punitive as well as preventative and reparative aims; that the order was calculated by reference to 'proceeds' rather than profits; that the amount of the order could take account of culpability; and that the order was enforceable by a term of imprisonment in default. ...

4.7.6 The reasoning in Welch v United Kingdom was applied in Ibbotson v United Kingdom [1999] Crim LR 153 (ECt HR) , where it was held that a statutory provision which obliged convicted sex offenders to register with the police was not a penalty and in R v Field [2003] 1 WLR 882. In Field, the Court of Appeal held that the making of an order under section 28 of the Criminal Justice and Court Services Act 2000 (CJCSA 2000), under which the appellant had been disqualified indefinitely from working with children was not a penalty. In drawing that conclusion, the court stated that in determining whether or not a particular measure was a penalty for the purposes of art 7 of the Convention, it is necessary to consider the following matters. The starting point is whether the measure is imposed following a criminal conviction, but the following matters are also relevant: the nature and purpose of the measure, its characterisation in national law, the procedures involved in the making and implementation of the measure; and its severity. Lastly, the court will look at the substance, rather than the form, in determining whether the measure forms part of a 'regime of punishment'."

[124] That is a very helpful summary of the general considerations. It supports the petitioner's view that criteria relevant to Article 6 are also relevant to Article 7.

[125] The critical issue remains. What conclusion falls to be drawn in the circumstances of the present case?

 

Conclusion

[126] As noted at the outset, Mr Woolman very fairly accepted that if there is no criminal "penalty" then his challenge based on Article 7 of the Convention fails.

[127] In my opinion, on a fair evaluation of all the circumstances, the orders sought by the Scottish Ministers in the present case do not amount to a retrospective criminal "penalty" within the meaning of Article 7.

[128] The petition is presented in terms of Part 5 of the Proceeds of Crime Act 2002 and in particular sections 256 to 265 of the Act and the relative provisions of the Rules of the Court of Session.

[129] The weight of authority, outlined above, in my view favours the petitioners.

[130] I agree with the reasoning of Kerr LCJ in Cecil Walsh.

[131] Looking to the substance rather than the form, it seems to me that the orders sought by the present petitioners are part of a regime for the civil recovery of property which is, or represents, property obtained through unlawful conduct rather than a regime of punishment.

[132] The recovery process is not taking place in a criminal setting. The purpose of the present proceedings is to obtain property from the relevant holders rather than to punish the Respondents or to establish their guilt or innocence of any particular offence.

[133] The Civil Recovery Unit is the branch of the Scottish Executive responsible for the administration and implementation of the Part 5 of the Act. It is not, I was informed, part of Crown Office.

[134] The present proceedings are clearly "civil" rather than "criminal" in our domestic law but that is only a starting point. They seek orders relating to civil recovery of property. They are at the instance of the Scottish Ministers. They are not at the instance of the Lord Advocate or prosecuting authority. They have been initiated by civil Petition. They have not been initiated by indictment or complaint or other form of criminal procedures. They are being heard in Outer House of the Court of Session which is a civil court. They are not being heard in High Court of Justiciary or other criminal court. The procedures involved for making and implementing the order are clearly civil rather than criminal. The rules of evidence and procedure which apply are civil rather than criminal. The proceedings are directed against property (in rem) rather than against Mr McGuffie's person. The recovery procedures are under the control of a civil court. Mr. McGuffie's guilt is not in issue. He is not facing a criminal charge. He is not an accused person. He cannot be arrested or remanded or compelled to attend. There has been no formal accusation by the prosecuting authorities. He will not be subject to a criminal conviction or a finding of guilt. He will not be imprisoned. He will not receive a sentence. A civil recovery order will not form any part of his criminal record. There have been some criminal proceedings in the past but the present proceedings are of a different nature and character. The orders sought are separate and distinct from previous criminal proceedings. Those earlier criminal proceedings have been concluded. They have not been re-opened. The essential focus of Part 5 is the civil recovery of property rather than the imposition of a criminal penalty. Even if there is a "penalty" in the sense of detriment it is a "civil" matter and not a "criminal" one. Part 5 seeks to recover property, reduce crime and benefit the community rather than to punish a particular respondent or visit him or her with a criminal sanction. In those circumstances, in my view, the Scottish Ministers are not seeking a retrospective criminal penalty.

[135] It would also be fair to say that, on the information before me, there are no outstanding "criminal" proceedings against the First Respondent.

[136] In this case, in my opinion, striking a fair balance (between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights) requires the scales to come down in favour of the Scottish Ministers.

[137] The Petitioner's arguments fall to be preferred.

[138] First Respondent's well presented challenge fails.

 

Decision

[139] In the result, and for the reasons outlined above, I shall sustain the plea-in-law for the Petitioners and repel the pleas-in-law for the First Respondent. I propose to grant the prayer of the present petition in so far as not already granted.

[140] I shall put the case out "By Order" so that parties can address me on the terms of the appropriate interlocutor having regard to the order already pronounced by Lord Brodie on 3 March 2004.


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