D (UK) Ltd v Revenue & Customs Prosecutions Office

For the restraint regime in Part 2 of the Proceeds of Crime Act 2002, a defendant’s interest in property is not confined to an interest enforceable against fellow fraudsters. Where there is a good arguable case that money retained in a company’s account forms part of a fraudulent scheme in which the defendant participated, the defendant may have an existing beneficial interest in that money. The company’s legal title does not prevent the money from being treated as the defendant’s realisable property. It may therefore be restrained pending trial and a possible confiscation order.

Revenue and Customs alleged a VAT fraud involving purported transactions in computer processing units between several companies. It alleged that the goods did not exist and that the transactions created a paper trail to support improper VAT reclaims.

A Crown Court judge in Nottingham varied a restraint order to include about £366,000 held in the bank account of R. D (UK) Ltd appealed. It accepted, for the appeal, that there was a good arguable case of fraud involving Mrs S and the relevant companies, but contended that Mrs S had no interest in R’s money because no enforceable rights could exist between conspirators.

The central issue was whether money provided and retained in pursuance of an alleged fraud could comprise Mrs S’s realisable property under Part 2 of the Proceeds of Crime Act 2002.

1. Appeal dismissed. The court upheld the variation of the restraint order. The evidence gave rise to a good arguable case that the money in R’s account formed part of the assets available to Mrs S through the alleged fraud.
2. Under sections 41, 83 and 84 of the Proceeds of Crime Act 2002, the relevant question was whether Mrs S held an interest in the property. That expression was not confined to a legal or equitable right enforceable between the alleged conspirators.
3. If the alleged fraud was established, money retained during its execution was, for the statutory purpose, money in which its participants had a beneficial interest. R held legal title to the chose in action represented by its credited bank account. However, the beneficial interest could lie with a participant in the fraudulent scheme.
4. The court rejected the contention that Mrs S’s expected benefit was merely an inchoate future benefit. The evidence of her control over the disposition of payments supported the arguable conclusion that S2 and R held the money as her nominees. The restrained sum was therefore capable of being part of her available assets for confiscation if she were convicted.
5. The confiscation provisions supported that construction. They require assessment of the defendant’s benefit and available amount, which includes the value of all free property held by the defendant and tainted gifts. The restraint provisions mirror that scheme and are not confined to money which fraudsters have agreed to transfer between themselves.
6. The court summarily assessed the respondent’s costs at £3,673.75. It certified an agreed question of law of general public importance, but refused permission to appeal to the House of Lords.

• Court of Appeal (Criminal Division): Dismissed D’s appeal from the variation of the restraint order, certified a question of law of general public importance, and refused permission to appeal to the House of Lords.
• Crown Court, Nottingham: His Honour Judge Pert varied the restraint order to include approximately £366,000 held in R’s bank account. Citation not stated in the judgment.