Olupitan & Anor v Assets Recovery Agency (includes Addendum)

Under Proceeds of Crime Act 2002 Part 5, civil recovery does not require proof of a specified criminal offence. The claimant must, however, identify the particular kind or kinds of unlawful conduct by or in return for which the property was obtained. Absence of lawful income cannot alone establish recoverability, but may materially support an inference drawn from the whole evidence.

A statutory recovery authority is not bound by a prosecution concession in separate confiscation proceedings. Property acquired using a mortgage obtained by fraud may be recoverable, subject to the statutory treatment of untainted contributions and the protection of a secured lender’s interest.

The Director of the Assets Recovery Agency obtained a civil recovery order under Part 5 of the Proceeds of Crime Act 2002 in respect of two properties and negligible bank balances held by or connected with Mr Olupitan. Langley J refused recovery of a third property.

The appellants challenged the sufficiency of the pleaded unlawful conduct, the effect of a Crown concession in earlier confiscation proceedings, the inferences drawn about the source of funds, the treatment of a mortgage obtained by fraud, Ms Makinde’s claimed protections, and costs. The central issue was whether the recovery order lawfully extended to the jointly owned home, including its mortgage-funded element.

Disposition

The appeal was dismissed. All members of the court agreed on the disposition, although Carnwath LJ dissented on the legal treatment of the mortgage-funded part of the jointly owned property.

1. The Director was not required to allege or prove a particular criminal offence. It was enough to identify the matters alleged to constitute the particular kind or kinds of unlawful conduct through which the property was obtained. The court adopted the approach in R (Director of Assets Recovery Agency) v Green [2005] EWHC 3168, as confirmed by Director of the Assets Recovery Agency v Szepietowski [2007] EWCA Civ 766. Lack of identifiable lawful income could not alone sustain the claim, but could form part of the evidential picture.

2. The Director was an independent statutory office-holder with powers exercisable regardless of criminal proceedings. The prosecution’s concession that Mr Olupitan had not benefited from the particular conspiracy offence did not bind the Director or determine whether assets were recoverable under the distinct Part 5 scheme.

3. Langley J was entitled, on the balance of probabilities, to infer from the whole evidence that the funds used to acquire Wellington Drive derived from unlawful conduct. The judge did not reverse the burden of proof. He evaluated the appellants’ untruthful explanations, absence of a legitimate source, and other evidence, while refusing recovery of the third property where the Director had not discharged that burden.

4. On the mortgage issue, Toulson LJ and the President held that the interest in Hazelmere Road was acquired through mortgage fraud. The borrower obtained a contractual right to the advance, which was property, and the acquired house represented that property. The lender’s secured interest was protected. Where a property is funded partly by untainted money, however, the statutory mixing provisions prevent recovery of the untainted portion. Carnwath LJ would have held that the ordinary mortgage mechanics prevented the mortgage-funded element from being recoverable, but accepted the majority conclusion and dismissed the appeal.

5. There was no evidential basis for finding that capital repayments had come from an untainted source. The costs order against Ms Makinde disclosed no sufficient error of principle, particularly in the absence of an adequate record of the judge’s reasons. The addendum refused leave to appeal and directed that any further application to exclude assets from the freezing order be made to the High Court on proper evidence.

1. Court of Appeal (Civil Division) — In Olupitan & Anor v Assets Recovery Agency [2008] EWCA Civ 104, dismissed the appeal from the civil recovery order. The court refused leave to appeal in the addendum.

2. High Court (Administrative Court) — Langley J made a recovery order concerning Wellington Drive and Hazelmere Road, but refused recovery of Wellstead Road.