The National Crime Agency v Namli & Anor

Under the Proceeds of Crime Act 2002, bare but-for causation is insufficient to establish that property was obtained through unlawful conduct. A false representation about the lawful source of a borrower’s funds may nevertheless be an effective cause of a lender’s advance where the lender relied on it. Reliance and inducement may be inferred from contemporaneous documents and inherent probabilities without direct evidence from the lender. A pleading may sufficiently allege fraud when read as a whole, even if poorly drafted, provided the defendant suffers no unfairness. Where a loan was obtained by fraud, the loan proceeds and profits derived from them may be recoverable property.

The Serious Organised Crime Agency, now the National Crime Agency, sought a recovery order under the Proceeds of Crime Act 2002 against monies held for Hakki Yaman Namli and Topinvest Holding International Ltd. Males J found that most of the funds represented proceeds of criminal conduct, but excluded profits attributable to loans made by Coutts because fraud on the bank had not been established.

The NCA appealed. The issues were whether the Coutts loans had been obtained by fraud and whether that case had been sufficiently pleaded. Mr Namli’s appeal against the underlying findings was stayed for failure to provide security.

Appeal allowed. The Court of Appeal held that the disputed dollar and euro funds were recoverable property.

1. Under sections 304 and 242 of the Proceeds of Crime Act 2002, more than bare but-for causation is required. The court must identify the relevant causal connection between the unlawful conduct and the property. A representation that the borrower’s funds were lawfully obtained may be the effective, or an effective, cause of the lender’s preparedness to lend when the lender relies on it.
2. The distinction drawn in Olupitan v Director of the Assets Recovery Agency [2008] EWCA Civ 104 between mere tainted-funds causation and a loan obtained by fraud was material. Unlike the seller in the mixed-property example discussed in that case, Coutts had been given information about the source of the funds and had relied on it in continuing the relationship and making the loans.
3. Inducement could be inferred from Coutts’s contemporaneous file and the inherent probabilities. The bank’s initial concerns had been addressed by Mr Namli’s explanations, and its records showed reliance on those explanations. Direct evidence from Coutts employees was not essential. The approach was consistent with St Paul and Marine Insurance Co Ltd v McConnell Dowell Construction Ltd [1996] 1 All ER 96. Assets Recovery Agency v Jackson and other [2007] EWHC 2553 supported the conclusion that a lender’s absence as a witness did not prevent such a finding.
4. The pleadings had to be read as a whole. Although poorly drafted, they identified the false source-of-funds representations, alleged that Coutts’s lending decision was made in reliance on them, and alleged that the loans were thereby obtained through unlawful conduct. The allegation was sufficiently clear and caused no unfairness.
5. Mr Namli’s representations were false and induced the June 2004 and September 2005 loans. The loan monies were therefore obtained by or in return for unlawful conduct, and the profits derived from them were recoverable under sections 304 and 307. The Court allowed the NCA’s appeal and declared the entirety of the T 312 dollar and euro monies recoverable property.

1. Court of Appeal (Civil Division): On 4 April 2014, allowed the NCA’s appeal and declared the disputed funds recoverable property.
2. High Court: Males J, in [2013] EWHC 1200 (QB), made a recovery order for most of the funds but excluded profits attributable to Coutts loans. Mr Namli’s appeal was stayed after he failed to provide the required security.