The Financial Conduct Authority (a company limited by guarantee) v WealthTek LLP (in special administration) & Anor

Where civil proceedings substantially overlap with a criminal investigation and a criminal restraint order is in force, the court may stay the civil proceedings under its inherent jurisdiction and under section 58(5) of the Proceeds of Crime Act 2002. The governing question is what the interests of justice require in the particular case. The court must exercise its discretion with care and have regard to the statutory objective of preventing diminution in the value of realisable property. Where the claimant is also a regulator and criminal investigator, the court may give priority to the criminal investigation. A real risk of serious prejudice leading to injustice remains relevant, but a stay is justified where the overlap is substantial, the stay is time-limited, and the defendant retains a fair opportunity to answer the allegations.

The Financial Conduct Authority brought civil proceedings under Part XXV of the Financial Services and Markets Act 2000 against WealthTek LLP and Jonathan Edward Dance, alleging regulatory breaches, dishonesty and diversion of client money. Proceedings against WealthTek had already been stayed following its entry into special administration.

The FCA obtained worldwide freezing relief and later a criminal restraint order under section 41 of the Proceeds of Crime Act 2002. It then applied for a 12-month stay of the civil proceedings while it pursued a criminal investigation and made a charging decision. Mr Dance opposed the stay, relying on delay, prejudice, disclosure and fair-trial concerns. The central issues were whether section 58(5) applied and whether a stay was required by the interests of justice.

1. Application granted. The High Court Proceedings were stayed for 12 months. Consequential orders, including whether the interim prohibitory injunction should be varied or discharged, were reserved.
2. Section 58(5) of the Proceeds of Crime Act 2002 was engaged. “Proceedings in respect of any property” extend beyond claims determining ownership. They include proceedings whose object is the underlying property, including claims requiring a defendant to take steps concerning property or pay compensation from it. The civil claims concerned diverted client funds and relief directly or indirectly referable to Mr Dance’s assets.
3. The same interests-of-justice test applied under the court’s inherent jurisdiction, recognised by section 49(3) of the Senior Courts Act 1981, and under section 58(5): whether a stay was required in the particular case. The discretion had to be exercised with great care and with the statutory steer in section 69(2) of the Proceeds of Crime Act 2002 to prevent diminution in the value of realisable property.
4. Relevant factors included that the applicant was the claimant in the civil proceedings, that it was a regulator performing statutory functions, the regulatory rationale for prioritising the criminal investigation, and any substantial prejudice to Mr Dance. The criminal investigation was properly prioritised because of the seriousness of the suspected conduct, the statutory public-interest functions of the FCA, and the substantial overlap between the proceedings.
5. A 12-month stay was proportionate. It allowed the FCA to progress the investigation and make a charging decision, while avoiding unnecessary duplication and further depletion of realisable property. It was unnecessary to decide at that stage whether any later general stay would be required.
6. There was no real risk of serious prejudice leading to injustice. Mr Dance had the evidence relied upon by the FCA, could respond to the factual allegations without the requested specific disclosure, retained Article 6 rights, and would have an opportunity to answer the allegations either in criminal proceedings or in the civil proceedings if he were not charged.

First-instance decision. The judgment records no appeal or earlier decision in this litigation. Proceedings against WealthTek had been stayed on 28 April 2023 following the appointment of joint special administrators.