Szepietowski v Assets Recovery Agency

In civil recovery proceedings, the limitation period is generally governed by section 27A of the Limitation Act 1980. Section 32(1)(a) does not ordinarily extend that period merely because the unlawful conduct giving rise to the claim was fraud. Civil recovery proceedings are claims against property, not personal claims against the respondent. Property obtained through pre-limitation mortgage fraud therefore cannot ordinarily support a recovery claim. A freezing or receiving order requires a good arguable case that the property is recoverable. Speculative inferences, unsupported by evidence capable of identifying a significant recoverable part of the property, do not satisfy that threshold.

The Director of the Assets Recovery Agency obtained freezing and interim receiving orders over property and chattels associated with John Szepietowski and Susan Anne Szepietowski. The Director alleged that the properties had been acquired with proceeds of mortgage fraud and undeclared income. She later conceded that the chattels were not recoverable property and abandoned reliance on cheating the Revenue as the underlying unlawful conduct.

The claimant applied to discharge the orders concerning two properties. The central issues were whether there was a good arguable case that the properties were recoverable property and whether claims based on mortgage fraud committed before the relevant limitation date were statute barred.

1. Orders discharged. The freezing and interim receiving orders were discharged in relation to the claimant’s interests in the two properties. The evidence did not establish a good arguable case that either property, or a significant identifiable part of its purchase price, was recoverable property.
2. Under sections 240(1)(a), 266, 304, 305 and 306 of the Proceeds of Crime Act 2002, civil recovery concerns property obtained through unlawful conduct, property representing it, and the attributable portion of mixed property. The proceedings are claims against property. They are not personal proceedings against the apparent owner, although that person is joined as a respondent.
3. The applicable limitation provision was section 27A of the Limitation Act 1980. Section 32(1)(a) did not ordinarily extend the period where fraud was simply the criminal conduct alleged to have generated the property. Such an extension would produce the anomalous result that fraud-based recovery claims received different treatment from claims based on other serious acquisitive crimes. The court left open the theoretical possibility that fraud connected with the proceedings, such as deliberate concealment, might have a different effect.
4. The evidence showed extensive mortgage fraud and some funds generated by identified transactions. It did not, however, identify a significant proportion of either property’s purchase price as derived from post-limitation unlawful conduct. The inference that the whole or a substantial part of the properties was funded by mortgage fraud was speculative, particularly in light of evidence of substantial living expenditure.
5. The Director was ordered to pay 50 per cent of the claimant’s costs, subject to detailed assessment, together with an interim payment of £30,000 plus VAT. Permission to appeal on the limitation point was refused because the issue arose on an interim application and the preliminary view would not bind the judge at trial.