Bowman v Fels

Proceeds of Crime Act 2002, section 328 does not apply to the ordinary conduct of litigation by legal professionals. Proceedings, steps taken to obtain a judgment or order, and genuine settlements within an ordinary litigious context are not arrangements facilitating the acquisition, retention, use or control of criminal property.

In any event, section 328 contains no sufficiently clear language to override legal professional privilege or the restrictions governing documents obtained through compulsory disclosure. A lawyer may therefore continue ordinary litigation despite suspecting that its outcome could affect criminal property. A purported settlement serving merely as a pretext for dealing with criminal property may fall outside this protection.

The claimant asserted a beneficial interest under a constructive trust in a house registered in the defendant's name. Her solicitors suspected from disclosed documents that the defendant had improperly included domestic building costs in business accounts and VAT returns. Believing that section 328 of the Proceeds of Crime Act 2002 required disclosure to the National Criminal Intelligence Service and prevented further action without consent, they obtained an adjournment without notice.

Judge Cowell discharged the adjournment and held that the solicitors could disclose why it had been sought and could continue preparing for trial. The parties settled while the claimant's appeal was pending. The Court of Appeal nevertheless heard the appeal because it raised an important, discrete question of statutory construction affecting the administration of litigation.

The central issue was whether section 328 applied to the ordinary conduct and consensual resolution of legal proceedings and, if so, whether it displaced legal professional privilege or restrictions upon using disclosed documents.

1. Appeal dismissed. The Court upheld Judge Cowell's order, although on different grounds. The claimant's solicitors had no proper basis for obtaining an adjournment while awaiting consent from the National Criminal Intelligence Service.

2. Section 328 of the Proceeds of Crime Act 2002 does not cover the ordinary conduct of litigation by legal professionals. A judgment or court order is not an “arrangement” within the section. Nor is a step taken to issue or pursue proceedings, obtain interim relief, or secure final disposal by judgment. Litigation is a state-provided mechanism for determining rights and duties according to law, protected by the fundamental right of access to justice: paras [52]–[84].

3. The same conclusion generally applies to negotiations and settlements forming an ordinary part of genuine civil litigation. It would be incoherent to exclude litigation to judgment while criminalising its consensual resolution. The position may differ where a supposed settlement does not reflect the legal and practical merits and is known or suspected to be merely a pretext for dealing with criminal property: paras [99]–[102].

4. Alternatively, section 328 contains neither express words nor a necessary implication overriding legal professional privilege. General language cannot abrogate the fundamental confidentiality attaching to lawyer-client communications. Section 338(4), which protects an authorised disclosure from restrictions upon disclosure, is insufficiently clear to produce that result: paras [85]–[87].

5. Section 328 likewise does not authorise a lawyer to breach the obligation restricting use of documents obtained through compulsory disclosure. Clear Parliamentary sanction would be required before a solicitor could disclose such documents or information to an external body: paras [88]–[90].

6. Even if litigation could constitute a relevant arrangement, no section 328 offence would arise merely from an intermediate step before the arrangement was made. The court left open whether earlier advice or participation in negotiations could retrospectively become criminal when an arrangement was later concluded: paras [67]–[69].

7. Section 328 contains no requirement that the participant share a purpose of facilitating money laundering. Knowledge or suspicion that the arrangement facilitates the relevant dealing is sufficient; the participant's motivation is not directly relevant: para [98].

8. The contrary parts of P v P (Ancillary Relief: Proceeds of Crime) [2003] EWHC 2260 (Fam) were not to be followed. The appeal was dismissed, with no order as to costs: paras [106]–[110].

1. Court of Appeal (Civil Division): The appeal was dismissed. Judge Cowell's order was upheld on different grounds. The court held that section 328 of the Proceeds of Crime Act 2002 did not apply to the solicitors' ordinary conduct of the litigation.
2. Central London County Court, Judge Cowell: On 25 March 2004 the judge discharged Judge Crawford Lindsay QC's earlier order vacating the trial. He held that the claimant's solicitors could explain the reason for seeking an adjournment and could continue preparing the action for trial.
3. Central London County Court, Judge Crawford Lindsay QC: On 23 March 2004 the judge vacated the trial without notice and directed that the action be relisted after the claimant's solicitors reported their suspicion to the National Criminal Intelligence Service.