Sanam v National Crime Agency

Under Part 5 of the Proceeds of Crime Act 2002, property obtained through unlawful conduct must ordinarily be recovered, subject to statutory third-party protections and Convention rights. A wholly innocent recipient of a gift of crime-tainted property is not protected merely because recovery causes hardship or leaves her without assets. Article 1 of the First Protocol requires a lawful and proportionate interference which strikes a fair balance and avoids an excessive individual burden. A prospective claim for matrimonial financial provision is not a protected possession where it is unmade, requires leave, and lacks a sufficiently established legitimate expectation of success.

The National Crime Agency sought civil recovery orders under Part 5 of the Proceeds of Crime Act 2002 in respect of properties acquired with the proceeds of criminal conduct. The Administrative Court, following its judgment reported at [2014] EWHC 2722 (QB), ordered that two properties be vested in the trustee for civil recovery. It rejected the respondent’s statutory defence and her argument that a recovery order would interfere disproportionately with a possible claim for financial provision under Part III of the Matrimonial and Family Proceedings Act 1984.

Permission to appeal was granted on the Article 1 of the First Protocol issue. The central questions were whether the court had to consider an unpleaded Convention defence concerning existing beneficial ownership, and whether recovery would be disproportionate or would defeat a potential matrimonial claim.

The Court dismissed the appeal.

1. Part 5 of the Proceeds of Crime Act 2002 is directed to specific property obtained through unlawful conduct. Once the court is satisfied that property is recoverable, section 266(1) requires a recovery order, subject to the statutory protections for third parties and Convention rights. The structural differences between Part 2 and Part 5 do not require a different outcome for an innocent spouse whose property represents the proceeds of crime.
2. The defence under section 266(3)(a) and (4) is in substance a proprietary-estoppel-type defence. Good faith and lack of notice are insufficient. The respondent must have taken specified steps in reliance on obtaining the property, suffered detriment by reason of those steps, and satisfy the just and equitable requirement. Receipt of income or benefit without detrimental reliance did not satisfy the defence.
3. Section 266(3)(b) required the judge to consider an Article 1 of the First Protocol defence concerning Mrs Sanam’s existing beneficial interests, even though the proposed defence had not been pleaded. She should have been given a reasonable opportunity to advance it. The NCA’s fair-hearing rights and case-management concerns did not justify refusing the defence where no new facts were required and any delay could have been minimal.
4. The Article 1 of the First Protocol assessment required lawfulness, a legitimate aim and reasonable proportionality, including a fair balance and protection against an individual and excessive burden. The Court applied the principles stated in Axa General Insurance Ltd v HM Advocate [2011] UKSC 46 and treated crime reduction through forfeiture as a legitimate aim. Recovery was proportionate because the properties had been acquired entirely with criminal proceeds, transferred by way of gifts, and Mrs Sanam had not acted to her detriment in reliance on them. Her innocence and financial hardship did not outweigh the public interest. The Court distinguished Customs and Excise Commissioners v A [2003] EWCA Civ 1039 and found support in Richards v Richards [2006] EWCA Civ 849 and Veits v Estonia (Application No. 12951/11).
5. A potential claim for financial provision under Part III of the Matrimonial and Family Proceedings Act 1984 was not a possession. It was unmade, required leave under section 13, and did not amount to a sufficiently established legitimate expectation under Kopecky v Slovakia (2005) EHRR 43. It therefore could not take priority over the recovery order.

The recovery order in respect of both properties was upheld.

1. Court of Appeal (Civil Division): dismissed the appeal on 2 December 2015.
2. Administrative Court: judgment handed down on 31 July 2014, reported at [2014] EWHC 2722 (QB), followed by an order dated 30 October 2014 vesting the two properties in the trustee for civil recovery. The court rejected the statutory and Convention arguments and refused an amendment concerning existing beneficial ownership.