Crown Prosecution Service v G

A company’s assets are not ordinarily the assets of its shareholders. In restraint proceedings, the corporate veil may be lifted only where the evidence shows that the company was used as a device or façade to conceal criminal activity or its benefits. The mere injection of allegedly criminal funds into a legitimately established and operated business is insufficient. The court must examine the whole factual context, including whether the transaction was openly recorded, whether genuine trading occurred, and whether innocent shareholders or directors were involved. Alleged failures of full and frank disclosure justify discharge of a without-notice restraint order only where they are sufficiently serious to outweigh the public interest in effective confiscation proceedings.

A restraint order was made without notice over the assets of G, who was later charged with money laundering. The order also restrained assets of Prolink Holdings Limited, Powervale Limited and their directors. G had advanced £200,000 to Prolink, which, together with bank finance, was used to acquire and operate a genuine timber business. The money was alleged to represent proceeds of crime, but the loan was recorded in the companies’ books and the other directors were unaware of its source.

Derek Croft sought variation or discharge of the order so far as it affected him and the companies. The central issue was whether Powervale’s land and property could be treated as G’s realisable property by lifting the corporate veil. A further issue concerned alleged failures by the Crown to make full and frank disclosure when obtaining the order.

1. The application by the Crown Prosecution Service to vary the restraint order and seek disclosure was dismissed when it was not pursued.

2. Under sections 77, 74(1)(a) and 102 of the Criminal Justice Act 1988, restraint could extend only to realisable property held by G, including property in which he held an interest or right. Ordinary company and property law applied. The assets of a company were not the property of its shareholders: Salomon v Salomon and Co and R v Seager and Blatch.

3. The corporate veil could be lifted where the corporate structure was used as a device or façade to conceal criminal activity or its benefits. The question required a close examination of the facts. It was not enough that criminal funds had been introduced into a company.

4. The business had been a genuine going concern, had continued legitimate trading, and had been operated by directors who were unaware of the tainted source of the loan. The loan and its repayment obligations were openly recorded. These facts did not show a substantial arguable case that Prolink or Powervale had been used as a façade to conceal G’s crime or its proceeds.

5. The observations in Re D did not establish a freestanding basis for piercing the veil whenever criminal and innocent assets were intermingled. They had to be read in the context of the earlier authorities and the materially different facts of that case. The relevant parts of the restraint order concerning the corporate assets were therefore discharged.

6. G’s shares in Prolink and his rights under the £200,000 loan remained realisable property in his hands and continued to be restrained.

7. The alleged failures of full and frank disclosure had some force but were not sufficiently serious to justify discharge or variation of the order. The public interest in maintaining effective confiscation legislation prevailed. The remaining order was to be formalised by agreement.