Smith, Re (Ruling - Piggott condition)

A defendant cannot use an application to discharge or vary an existing restraint order to obtain a new restraint over additional property held by a third party. Under Criminal Justice Act 1988, the prosecutor alone may apply for a restraint order, including an extension to additional realisable property. A defendant seeking to protect private rights must use the court’s private-law jurisdiction, principally under Senior Courts Act 1981, section 37, and satisfy the applicable safeguards. In any event, an applicant must show a good arguable case that the property is realisable property.

Dr Gerald Smith applied to vary a restraint order made in 2005 and subsequently varied in 2016. He ultimately pursued only approximately £20 million transferred by Legion to Phoenix in December 2012, or traceable proceeds of that sum.

He relied on section 77(7) of the Criminal Justice Act 1988, contending that the money was arguably his realisable property because it represented traceable proceeds of an earlier gift. The central issues were whether the court had jurisdiction to grant the relief sought and whether Smith had shown a good arguable case that the money constituted realisable property.

1. The application was dismissed. Section 77(7) of the Criminal Justice Act 1988 permits an application for discharge or variation by a person affected by an existing restraint order. It permits variation only in relation to the aspect of the existing order affecting that person. It does not provide a vehicle for imposing a new restraint over additional property held by a third party.
2. That construction is reinforced by section 77(5) (a), which provides that a restraint order may be made only on the prosecutor’s application. The statutory structure of Part 6 places responsibility for seeking restraint on the prosecutor. A defendant cannot invoke the statutory machinery where the prosecutor has chosen not to seek restraint over particular assets.
3. A defendant wishing to restrain the use of property held by a third party must invoke private-law rights, principally under section 37 of the Senior Courts Act 1981. Such an application requires proper notice and consideration of matters including the risk of disposal, interference with third-party rights and any cross-undertaking in damages. Those matters had not been addressed.
4. Even if jurisdiction existed, Smith had not shown a good arguable case that the money was his realisable property. The written transaction documents provided for consideration in loan notes, which were issued, so the transfer of the hotel-company shares was not shown to be a gift. The SFO’s different characterisation of the arrangements as a safekeeping agreement could not establish Smith’s case.
5. The 2016 confidential settlement deed also contained a release and waiver of claims, including tracing claims, against Phoenix and the relevant Legion funds. On the evidence, that agreement provided a complete answer to Smith’s tracing claim.