Director of the Assets Recovery Agency v Woodstock

Summary judgment is available in proceedings for a recovery order under the Proceeds of Crime Act 2002. It should be granted only where the respondent has no real prospect of defending the claim. Suspicion, an unexplained or undocumented source of funds, and the respondent’s criminal history do not by themselves establish unlawful conduct on the balance of probabilities. The burden remains on the claimant, although the respondent’s failure to explain the source of property may properly support adverse inferences. The court must take care not to reverse that burden or equate the absence of a regular legitimate source with proof of criminal origin. Where the respondent’s account is capable of being tested at trial and is not fanciful, the issue is triable and summary judgment is inappropriate.

The Director of the Assets Recovery Agency sought a recovery order under section 243 of the Proceeds of Crime Act 2002, alleging that the proceeds of sale of a house formerly owned by Robert Lloyd Woodstock were recoverable property under sections 241 and 304. The Director obtained summary judgment from Hodge J in the Administrative Court on 15 September 2005.

The evidence included unexplained cash deposits, Mr Woodstock’s criminal convictions, a retracted allegation that he had lived off immoral earnings, and his account that the purchase deposit had been advanced by friends. The central issue on appeal was whether that account raised a real prospect of defending the claim and therefore a triable issue. The court also considered whether summary judgment was available in recovery-order proceedings.

Appeal allowed. Lord Justice Hughes, giving the judgment with which Lord Justices Wilson and Tuckey agreed, held that rule 24.2 of the Civil Procedure Rules 1998 applies to recovery-order claims. There was no principled basis for excluding summary judgment, and it may be appropriate where a respondent has no real prospect of defending the claim.

1. The Director bore the burden of proving, on the balance of probabilities, that the money derived from unlawful, meaning criminal, conduct. Calling on the respondent to explain the source and drawing adverse inferences from an inadequate explanation may be a legitimate route to proof. The court must nevertheless avoid reversing the burden of proof.
2. The absence of a regular documented source of income or capital cannot be equated with proof of criminal origin. The evidence here gave the Director a prima facie case, but Mr Woodstock also had a prima facie case that the purchase deposit had been borrowed informally from friends. That account was supported by contemporaneous statements, statements from three alleged lenders, and seven cheques paid to the conveyancing solicitors.
3. The account might ultimately be rejected at trial, or the source of the money might then be inferred to be criminal. At the summary judgment stage, however, it was not fanciful and the witnesses were not bound to be disbelieved. The evidence created a triable issue, and suspicion alone was insufficient.
4. It was unnecessary to determine whether there was also a triable issue concerning mortgage repayments. The court likewise made no determination on the effect of further evidence not before the judge.

The appeal was allowed. Permission to rely on further evidence and additional further evidence was granted, with no order.

• Court of Appeal (Civil Division): The appeal from the Administrative Court was allowed. The court held that summary judgment was available under rule 24.2 of the Civil Procedure Rules 1998, but found that the evidence raised a triable issue.
• Administrative Court, Queen’s Bench Division: Hodge J granted the Director’s application for summary judgment on 15 September 2005.