X, Re

A restraint order under the Criminal Justice Act 1988 does not automatically prevent payment of bona fide general creditors before conviction or confiscation. The court has a broad power to vary the order, subject to the statutory purpose of preserving realisable property for a possible confiscation order. That purpose is an important consideration, but it is not conclusive in every case. The court must balance preservation of assets against the interests of the defendant and other persons affected by the order. The decision in Re W was disapproved insofar as it treated Crown priority over general creditors as invariably decisive. The application to permit payment was nevertheless dismissed on the evidence.

A restraint order and receivership had been imposed over assets associated with X and Y Limited under section 77 of the Criminal Justice Act 1988. Z Limited claimed £873,972 for goods supplied to Y Limited and applied to vary the order so that the receiver could make payment. The claimant argued that the court had no jurisdiction to authorise payment to a general creditor, relying particularly on section 82 and Re W. The court first determined the jurisdictional issue and then considered whether payment was appropriate in the circumstances.

1. Jurisdiction. Section 77 conferred a broad discretion to prohibit dealings with realisable property, subject to specified conditions and exceptions. The power to vary the order under section 77(6) extended beyond living and legal expenses under section 77(2). It could include payment of trade debts where that was necessary or appropriate, for example to preserve the value of a business or prevent forfeiture of a lease.
2. Section 82 required the powers to be exercised with a view to making property available for a possible confiscation order. The words “with a view to” introduced flexibility and did not impose an absolute requirement that the value of the property always be maintained. Section 82(6), which required conflicting obligations to yield to the obligation to satisfy a confiscation order, applied after a confiscation order had actually been made.
3. The court was required to give substantial weight to the statutory purpose, described in Re Peters as a legislative steer. Before conviction, however, the defendant remained presumed innocent and might be acquitted. The court therefore had to balance preservation of assets against the interests of the defendant and other creditors. Reasonable expenditure could be permitted even though it reduced the realisable assets.
4. Re W was incorrectly decided insofar as it held that satisfaction of a confiscation order invariably gave the Crown priority over general creditors. It was declined and disapproved on that point, although the result in that case might have been justified on other grounds. The court expressed no view on the jurisdiction to vary a restraint order after conviction.
5. Z Limited was a person affected by the order and had jurisdiction to apply for variation. Having considered the evidence and the alleged nature of the trading, the court concluded that payment should not be authorised. The application was dismissed and the receiver was directed to retain the sum until further order.