Assets Recovery Agency, R (on the application of) v He & Anor

Proceedings under Part 5 of the Proceeds of Crime Act 2002 are civil, preventive proceedings, not criminal proceedings. The court must decide whether unlawful conduct is proved on the balance of probabilities. The seriousness of the allegation may require cogent evidence, but it does not create a heightened or quasi-criminal standard.

An interim receiving order is an investigative and protective measure. On an application to discharge or vary it, the court should not prejudge the eventual recovery proceedings or the receiver’s report. The order may continue while there remains a good arguable case that the property is recoverable, subject to expedition and protection of affected persons’ interests.

The Director of the Assets Recovery Agency sought to maintain an interim receiving order made against Jia Jin He and Dan Dan Chen under Part 5 of the Proceeds of Crime Act 2002. The order concerned property alleged to represent the proceeds of unlawful conduct, including money laundering, unlawful employment-related activity and tax evasion.

The respondents sought variation or discharge. They argued that Part 5 proceedings were criminal in substance, that the criminal standard of proof and Articles 6 and 7 of the Convention applied, and that the order infringed property and family-life rights. They also argued that the evidence no longer established the statutory threshold and that continuation of the receivership was abusive.

1. Nature of proceedings. Part 5 proceedings are civil proceedings in domestic law and, applying the approach in Engel v The Netherlands (No 1) [1976] 1 EHRR 647, civil in substance. The proceedings are directed to recovering property, not convicting or punishing a person. Articles 6 and 7, insofar as they concern a criminal charge or penalty, therefore did not apply. The conclusion was supported by The Director of the Assets Recovery Agency v Walsh [2004] NIQB 21, Goldsmith v Customs and Excise Commissioners [2001] 1 WLR 1673, R (Mudie and Anr) v Dover Magistrates’ Court [2003] QB 1238 and the Strasbourg authorities.
2. Standard of proof. Section 241(3) expressly requires the court to decide on the balance of probabilities whether alleged unlawful conduct occurred. Serious allegations may call for cogent evidence because of their inherent improbability, but they do not require a different standard or a gloss approaching proof beyond reasonable doubt. The court followed the reasoning in Re H (Minors) [1996] AC 563 and The Secretary of State for the Home Department v Rehman [2003] 1 AC 153.
3. Convention rights. Recovery of property obtained through criminal conduct is not a penalty and is not retrospective merely because the relevant conduct occurred before the Act was applied. The statutory scheme was proportionate for the purposes of Article 1 of the First Protocol and, assuming Article 8 applied, the same proportionality conclusion followed. The scheme contained no reverse burden of proof and afforded affected persons judicial protection.
4. Continuation of the interim order. The initial order required a good arguable case. On an application for discharge or variation under sections 251 or 254, the court should not determine in advance the issues reserved for a recovery order or prejudge the receiver’s final report. The good arguable case test continued to apply. The evidence disclosed continuing, real and well-founded concerns, so the order remained justified.
5. Disposition and safeguards. The application to vary or discharge was dismissed. The receiver was expected to complete and report by 15 January 2005. If no report was produced by then without a very good reason, the respondents could renew their application and would receive a sympathetic hearing. Costs were ordered in principle against the respondents, subject to detailed assessment if not agreed, but were not to be enforced without further order.