S v Customs and Excise

Under Proceeds of Crime Act 2002, section 41, restrained assets cannot be released to meet legal expenses incurred in taking advice about, or applying to vary, the restraint order itself. Such expenses relate to the underlying offence for the purposes of section 41(4). The statutory scheme instead provides public funding for eligible restraint-order proceedings and prioritises preserving realisable property for confiscation. The need for legal assistance does not alter that construction. A restraint order is a temporary control on the use of property, pursued for the legitimate aim of preserving suspected criminal proceeds, and does not on that basis breach the Convention rights relied upon.

Customs and Excise obtained an ex parte restraint order against Mr S, his wife and a French company during an investigation into an alleged VAT missing-trader fraud. The order restrained assets worldwide and initially included a limited allowance for legal advice concerning the order.

Judge Elwen refused Mr S’s application to vary the order so that restrained funds could pay for legal advice and representation. Mr S appealed, contending that section 41 of the Proceeds of Crime Act 2002 permitted that expenditure and that the absence of legal assistance infringed article 6 and article 1 of the First Protocol to the Convention. The central issue was whether legal expenses incurred in relation to a restraint order “relate to” the investigated offence within section 41(4).

1. Appeal dismissed. Section 41(3) of the Proceeds of Crime Act 2002 creates a general power to make exceptions for reasonable legal expenses. Section 41(4), however, prohibits an exception for legal expenses incurred by the defendant or a recipient of a tainted gift where they relate to the relevant offence.

2. Legal expenses incurred in seeking advice about, or a variation of, the restraint order fall within that prohibition. Although the court initially considered the contrary construction attractive, the scheme and purpose of the Act compelled the wider reading. The inclusion of recipients of tainted gifts in section 41(4)(b) showed that the prohibition was not confined to defence costs in criminal proceedings. The public-funding amendments made with the 2002 Act supported the conclusion that eligible challenges to restraint orders should be funded publicly rather than from restrained assets.

3. Section 252(4), concerning interim receiving orders under another Part of the Act, was consistent with that construction because it expressly excludes legal expenses from permitted exclusions. The preservation of realisable property for a present or prospective confiscation order remained the statutory objective.

4. The article 6 argument failed. Mr S had in fact been represented and no unfair hearing was alleged. Further, restraint proceedings were not criminal proceedings: see R (McCann and Others) v The Crown Court at Manchester [2003] 1 AC 787. The circumstances did not show that the court could not do justice without further legal assistance.

5. The article 1 First Protocol argument also failed. A restraint order was a temporary control on the use of property, not a deprivation, and served the legitimate aim of preserving suspected criminal proceeds for confiscation: see Raimondo v Italy (1994) 18 EHRR 237.

Observations: restraint orders should clearly state that public funding is available, identify the appropriate processing unit, and ordinarily contain a short return date so that the court can supervise their draconian effect.

• Court of Appeal (Criminal Division) Granted leave and dismissed Mr S’s appeal against the refusal to vary the restraint order.
• Judge Elwen On 5 December 2003, refused to vary the restraint order to permit use of restrained funds for legal advice and representation concerning that order. No citation is stated.