Assets Recovery Agency Director v Szepietowski & Ors

For an interim receiving order, the Director must show a good arguable case that property was obtained through an identified kind of unlawful conduct, or represents such property. The Director need not identify or prove a particular criminal transaction. Evidence of widespread fraud, inadequate legitimate income, and false, inconsistent or absent explanations may support that inference.

The twelve-year period under Limitation Act 1980 section 27A runs from the acquisition of the original unlawfully obtained property, not from a later representative asset. Section 32(1)(b) can extend that period where relevant facts were deliberately concealed from the Director.

The Director of the Assets Recovery Agency appealed against Mitting J’s decision in the Administrative Court, [2006] EWHC 3228 (Admin), to discharge an interim receiving order so far as it affected the first respondent’s interests in 6 Holland Road and Ashford House.

The Director alleged that the properties were recoverable under Part 5 of the Proceeds of Crime Act 2002. The case was that they had been bought with funds obtained by mortgage fraud, or with rents and profits derived from property bought by mortgage fraud. The respondents had provided no reliable account of the source of the purchase funds.

The central issues were whether the Director had a good arguable case that each property represented the proceeds of unlawful conduct, and whether the civil-recovery claim was barred by the twelve-year limitation period in section 27A of the Limitation Act 1980.

1. Appeal allowed unanimously. The court restored the interim receiving order over both 6 Holland Road and Ashford House. Mitting J had taken too narrow a view of the evidence and of the limitation issue.

2. Under section 246 of the Proceeds of Crime Act 2002, the question was whether there was a good arguable case that the properties were recoverable. Following R (Director of Assets Recovery Agency) v Green [2005] EWHC 3168 (Admin), the Director did not have to prove a particular criminal offence or identify each particular fraudulent transaction. She had to identify the kind of unlawful conduct alleged and show a good arguable case that the property was obtained through it, or represented its proceeds.

3. The evidence justified an inference that the respondents had engaged in extensive mortgage fraud. The court was entitled to consider the wider evidential picture, including use of false names, very limited declared income, inconsistent accounts of the source of funds, and refusal to provide a credible explanation. Those matters made it arguable that the money used for 6 Holland Road came from mortgage fraud or its proceeds. The evidence concerning the mortgage and stated purchase price of Ashford House independently made fraud on the lender arguable.

4. Section 27A required attention to the date when the original property obtained through unlawful conduct was acquired. A representative asset was time-barred only if the original property was obtained more than twelve years before proceedings began. The respondent could not establish that defence at the interim stage because the source and date of the relevant funds remained unidentified.

5. Section 32(1)(b) of the Limitation Act 1980 applied in principle to the period prescribed by section 27A. Deliberate concealment of facts relevant to the Director’s right of action could postpone time until discovery or reasonable discoverability. The court did not need finally to resolve every factual issue about concealment, or the availability of section 32(1)(a), in order to restore the order.

• Court of Appeal (Civil Division) — In Assets Recovery Agency Director v Szepietowski & Ors [2007] EWCA Civ 766, the court allowed the Director’s appeal and restored the interim receiving order over both properties.

• Administrative Court (Queen’s Bench Division) — Mitting J, in [2006] EWHC 3228 (Admin), had discharged the order in respect of the first respondent’s interests, holding that the evidence was insufficient and that the limitation claim succeeded.

• Administrative Court (Queen’s Bench Division) — Stanley Burnton J had made the original interim receiving order on 26 October 2005 under section 246 of the Proceeds of Crime Act 2002.