Serious Fraud Office & Anor v LCL & Ors (Ruling)

When considering a restraint order under the Criminal Justice Act 1988, the court asks whether there is a good arguable case that the property is realisable property and whether there is a real risk of dissipation that could frustrate enforcement. The court must exercise its powers both to protect third-party interests and to secure satisfaction of the confiscation order. A restraint order may properly be granted even where other private claimants may benefit incidentally, provided the statutory conditions are met. Compared with an undertaking, it may provide additional protection in bankruptcy and enable a Land Registry restriction to be registered.

The Serious Fraud Office applied to vary an existing restraint order so as to prohibit Sinead Irving and Catherine Irving from dealing with interests in two properties. The application arose against the background of a confiscation order against Dr Smith and earlier restraint orders over assets allegedly transferred through companies connected with him.

The properties had been acquired with funds derived from assets already subject to restraint. The SFO alleged that the properties were realisable property because they were beneficially owned by Dr Smith, held on trust for him, or transferred at a substantial undervalue. The central issues were whether there was a good arguable case on realisable property, a relevant risk of dissipation or bankruptcy, and a sufficient justification for replacing or supplementing existing undertakings with a statutory restraint order.

1. Application granted. The existing restraint order was varied to cover the Irving Properties, subject to express provision giving Catherine Irving liberty to apply concerning her legitimate interest in the Moor Lane property.
2. Under section 77(1) of the Criminal Justice Act 1988, the court may restrain any person from dealing with realisable property in which a person subject to a confiscation order has an interest or right, and property held by a recipient of a gift. A gift includes a transaction at a significant undervalue.
3. The court was satisfied that there was a good arguable case that the properties were traceable to funds constituting realisable property. Whether Sinead Irving gave value for the payments was a disputed factual issue reserved for trial.
4. The evidence established an objective risk of dissipation. The court also identified an objective risk of bankruptcy, which was capable of becoming more acute with time. Those risks justified protective relief.
5. Section 82 required the powers to be exercised with a view to allowing third parties to retain or recover the value of their interests, while otherwise seeking to secure satisfaction of the confiscation order. The fact that other private claimants might benefit from the order did not make the SFO’s application abusive or justify refusing relief where the statutory conditions were satisfied.
6. A restraint order offered advantages not provided by undertakings, including priority for enforcement of the confiscation order over unsecured creditors in a subsequent bankruptcy under section 84 and the ability to register a Land Registry restriction. The additional prejudice to the respondents appeared limited in the circumstances.

First-instance ruling on the Serious Fraud Office’s application to vary an existing restraint order. No appellate history was stated in the judgment.