The National Crime Agency v Robb

Victims may obtain a proprietary declaration under Proceeds of Crime Act 2002, section 281, only to the extent that the claimed property or its traceable proceeds represent property of which they were deprived by unlawful conduct. Section 281 is not a general compensation provision.

Where fraud supervenes on an initially legitimate transaction, the transaction may be rescinded and a constructive trust may arise, provided rescission is not barred by prejudice to innocent third parties, impossibility of substantial restitution or affirmation. Identifiable proceeds may be traced through mixed accounts. Where ordinary first-in, first-out tracing is impracticable, a proportionate allocation may be adopted if it is practical and consistent with contributors’ intentions.

The proceedings concerned applications by eight additional claimants for declarations under section 281 of the Proceeds of Crime Act 2002 in relation to money frozen in a bank account. The fund had previously been declared, subject to third-party claims, to be recoverable property obtained through Mr Robb’s unlawful conduct.

The claimants were investors in property developments operated by Mr Robb and AGA Developments Ltd. They alleged that their payments, or traceable proceeds, formed part of the fund. The issues included rescission for supervening fraud, the existence of a constructive trust, tracing through mixed accounts, the meaning of deprivation and belonging under section 281, and the availability of legal-cost exclusions from the freezing order.

1. Proprietary claims. Each lead claimant had a proprietary claim to part of the fund on ordinary principles of law and equity. The claims were enforceable through section 281, but only to the extent that the fund represented the claimants’ property or traceable proceeds.
2. Rescission and constructive trust. The court was bound by Banque Belge pour l'Etranger v Hambrouck [1921] 1 KB 321, Russo v Shalson [2003] EWHC 1637 (Ch), and El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 to treat a voidable transaction as revesting the victim’s property interest only upon rescission. Joining the proceedings to claim the property was a clear indication of rescission.
3. Fraud which supervened after a legitimate transaction did not, of itself, bar rescission or the subsequent constructive trust. The ordinary bars remained applicable: prejudice to innocent third parties, inability substantially to restore both parties, affirmation, and loss of the ability to identify the property or its traceable proceeds. None applied to the lead claimants.
4. Tracing. The investors’ money could be traced through the relevant mixed accounts. The assumption that non-investor money was dissipated first was applicable. Because a Clayton’s Case (1816) 1 Mer 572 analysis was impracticable, the court applied the proportionate approach in Barlow Clowes International Ltd v Vaughan [1992] 4 All ER 22. Each claimant’s share was calculated by reference to the proportion of investor payments represented by that claimant’s payments, carried through the successive accounts.
5. Section 281. The claimants were deprived of the relevant property by the continued retention of their money pursuant to the fraudulent conspiracy. Their rescission rights were property rights, and rescission retrospectively vested the proprietary interest in the traceable proceeds. Section 281 did not entitle victims to unrelated parts of the fund or operate as a substitute for compensation.
6. Costs. Section 245C(5) of POCA gave the court jurisdiction to exclude property from a freezing order for legal expenses incurred in Part 5 proceedings. That jurisdiction extended to the additional claimants, but no costs exclusion could be ordered at this stage because the procedural requirements for notice and evidence had not been satisfied. Determination of the lead claimants’ costs application was adjourned.

The proceedings began in the Queen’s Bench Division. Mackay J made an order dated 30 March 2012 declaring, subject to third-party claims, that the fund was recoverable property. The proceedings were then transferred to the Chancery Division, where the present judgment determined preliminary issues arising from the section 281 applications of eight additional claimants.