Serious Organised Crime Agency v Fenech

For the purposes of a freezing order, the qualifying condition under Proceeds of Crime Act 2002, section 317, requires a genuine suspicion that income arose from criminal conduct and an objectively reasonable basis for that suspicion. The criminal conduct need not be revenue-related, and the income need not be traced into the cash subject to the application. A tax liability remains due and payable unless postponed through the statutory process, and the statutory scheme is the principal framework for deciding whether there is a good arguable case. A real risk of dissipation may be established by the nature of the assets and surrounding circumstances without relying on spent convictions.

The claimant sought a freezing order concerning £227,760 in cash held pursuant to an interim order made by Stadlen J. The claim concerned assessed income tax and national insurance liabilities of £235,407.02. The Agency had adopted HMRC’s revenue functions under section 317 of the Proceeds of Crime Act 2002.

The issues were whether the Agency had a good arguable case on the statutory qualifying condition, whether it had established a good arguable case as to the quantified tax loss, and whether there was a real risk of dissipation. The defendant also challenged the admissibility of late evidence and relied on an accountancy report.

1. Freezing order granted. The Agency succeeded on all three live issues and the order was to be drawn up in accordance with the draft order.
2. Section 317 of the Proceeds of Crime Act 2002 involves a two-stage inquiry. First, the Agency must have formed a genuine suspicion that income arose from the respondent’s criminal conduct. Secondly, that suspicion must be objectively reasonable. Both requirements were satisfied on the evidence.
3. The qualifying condition may be based on criminal conduct of any relevant kind, including suspected mortgage fraud, theft, handling stolen goods and money laundering. It is not necessary that the suspicion concern an offence relating to the respondent’s tax affairs. Nor is it necessary to trace the income or gain into the particular cash subject to the freezing application.
4. The Agency’s statutory revenue machinery had been followed. Unless an out-of-time application to postpone the tax succeeded before the First-tier Tribunal, the assessed sums were due and payable. The statutory scheme was clear, and the accountancy report did not materially weaken the Agency’s good arguable case. The conventional Mareva principles were not wholly irrelevant, but their application was of little assistance in the circumstances.
5. There was a real risk of dissipation. The relevant factors included the physical nature of the cash, the unusual circumstances of its seizure, the respondent’s failure properly to account to HMRC, the substantial tax liability and his notice of the assessments. The court did not rely on the respondent’s spent convictions and therefore did not determine the statutory or Article 6 arguments concerning their admission.

This was an adjourned first-instance application. On 28 September 2010, Stadlen J adjourned the Agency’s freezing-order application and directed that the cash should continue to be held pending further order. The application was determined by the High Court (Queen’s Bench Division) on 13 January 2011.