Smith, Re (Ruling - Piggott condition) (Rev 1)

When deciding whether to appoint receivers over property potentially available for confiscation, the court must balance three matters: preserving the property, avoiding disproportionate receivership costs, and protecting innocent third parties who may ultimately establish ownership.

A court may impose a modified Piggott condition leaving open whether the prosecutor must ultimately bear the receivership costs if the property is later found not to be realisable property of the defendant. A good arguable case does not require a greater-than-even probability of success. The possibility of a later costs order may be appropriate where the ownership issues are complex and third-party property rights may be engaged.

The application concerned the proposed extension of a restraint order and receivership to shares and assets said by the Serious Fraud Office to constitute realisable property of Dr Gerald Smith. The court had already held that it had jurisdiction under section 37 of the Senior Courts Act 1981 and sections 77 and 80 of the Criminal Justice Act 1988, and that there was a good arguable case that the property was realisable property.

The remaining issue was whether receivers should be appointed and, if so, whether the order should contain a modified Piggott condition preserving the possibility that the SFO would ultimately bear the receivership costs if third parties succeeded in establishing ownership.

1. Receivership order. The court held that a receivership order was justified because there was a severe risk that the assets or their proceeds would be dissipated, concealed or diminished in value. The order was necessary or desirable to preserve assets potentially available for a confiscation order or for persons ultimately found entitled to them.
2. Relevant considerations. The court identified three considerations: the need to preserve the property and its value; the extent to which receivership costs might diminish or extinguish that value; and the extent to which innocent third parties might ultimately bear costs from property to which they were entitled. The first consideration outweighed the risk that receivership costs would reduce the assets available.
3. Piggott condition. In re Piggott and Barnes v Eastenders Cash & Carry PLC established that receivership orders may contain conditions regulating the ultimate incidence of receivership costs. The condition sought here did not affect the receivers’ entitlement to remuneration or their ability to recover expenses from the property. It preserved only the possibility of a later order requiring the SFO to bear those costs.
4. Assessment of the future costs question. The good arguable case threshold did not require a probability of success exceeding 50 per cent. The SFO’s case was sufficiently arguable, but substantial contrary arguments remained. The court would be better placed to decide responsibility for costs after resolving the disputed property rights and assessing the reasonableness of the SFO’s position.
5. Third-party rights and public function. The statutory framework required attention to innocent third-party property rights. The unusual circumstances, including claims that third parties had helped identify and preserve the assets, created a real prospect that requiring them to bear all costs could constitute a disproportionate interference with their rights under Article 1 of Protocol 1. The SFO’s public-law function did not prevent the condition.
6. The modified Piggott condition was included. The receivership order was made in those terms.

Not an appeal. The judgment records earlier rulings on jurisdiction and the existence of a good arguable case, but no citation for a separate judgment is stated.