Somaia, Re (Rev 1)

For the purposes of the Criminal Justice Act 1988, “gift” bears its normal legal meaning unless the statute clearly provides otherwise. A gift requires an effective transfer of both the legal and beneficial interests, an intention that the property will not be returned, and acceptance by the recipient. Section 74(12) extends that meaning to certain transfers at a significant undervalue; it does not create a complete code displacing ordinary property law.

Where property is transferred to a nominee or through another person’s bank account merely to enable the transferor to control or disburse it, the beneficial interest may remain with the transferor. Such a transfer is not a gift. The court also indicated that, had the transfers been gifts, the legitimate source of the money would have weighed strongly against taking them into account.

The proceedings concerned enforcement of a confiscation order made against Ketan Somaia following his conviction for fraud. The order was unpaid, and an application was made under section 80 of the Criminal Justice Act 1988 to appoint a receiver.

The Prosecutor sought declarations that seven transfers made by Mr Somaia to Alka Gheewala between April and August 2010 were gifts caught by section 74(10). The money came from a settlement in Kenya and was paid into an account in Ms Gheewala’s sole name before being disbursed to third parties. The central issue was whether the transfers were gifts or whether the account had been used to hold and transmit money for Mr Somaia.

1. The application for declarations was refused. The court declined to declare that the seven transfers were gifts caught by the Criminal Justice Act 1988.

2. Section 74(10) identifies when a gift is caught by the statutory scheme but does not define “gift”. Section 74(12) expands the ordinary legal meaning to include a transfer at a significant undervalue. The provisions therefore do not displace ordinary property law or determine what proprietary interest has been transferred. R v Richards [2008] EWCA Crim 1841 did not establish that the statutory provisions formed a complete code.

3. Adopting the approach in Meisels v Lichtman [2008] EWHC 661, an effective gift required: an effective transfer of property, including the legal and beneficial interests; an intention that the gift would not be returned, subject to the special context of tainted gifts; and acceptance by the donee.

4. The evidence showed that the Prime Bank account was used as a conduit for Mr Somaia’s money. The payments in issue were rapidly paid out for his purposes, using signed cheques, and Ms Gheewala was unaware of most of them. Mr Somaia did not intend the money to remain with her, and she did not accept particular transfers as gifts. The beneficial interest therefore remained with him.

5. The court confined the reasoning in R v The Maidstone Crown Court, ex p Dickens (unreported, 4 March 1991) to the proposition that an apparently supported transfer may be examined to determine whether there was real consideration. A transaction lacking bona fides was not thereby necessarily a gift.

6. It was unnecessary to decide whether it would have been appropriate to take the gifts into account. Had that issue arisen, the fact that the settlement monies themselves were not tainted by illegality would have weighed heavily against recovery from Ms Gheewala’s separate assets.