Director of the Serious Fraud Office v Claire Schools

A Practice Direction cannot displace the general rule in Civil Procedure Rule 39.2 that hearings are public. A hearing must be private only where one of the specified conditions is satisfied and privacy is necessary to secure the proper administration of justice.

An Unexplained Wealth Order may be made where the statutory conditions concerning the property, lawful income and serious-crime connection are met. The income inquiry focuses on the time when the respondent obtained the property. An Interim Freezing Order is justified where necessary to prevent a later civil recovery order being frustrated, but it should protect the value of sale proceeds without unnecessarily preventing a bona fide sale.

The Serious Fraud Office applied for an Unexplained Wealth Order and an Interim Freezing Order against Claire Schools under the Proceeds of Crime Act 2002. The orders concerned a property registered in her name, which had been purchased after her divorce from Timothy Schools and substantially renovated despite limited apparent lawful income.

The court first considered whether the hearing should be private under paragraph 11 of the Practice Direction for Civil Recovery Proceedings and Civil Procedure Rule 39.2. It then considered whether the statutory conditions for an Unexplained Wealth Order and the necessity condition for an Interim Freezing Order were established.

1. Public hearing. The Practice Direction’s starting point that applications of this kind are heard in private had to be read consistently with Civil Procedure Rule 39.2. The court had no general discretion to sit in private. Privacy was mandatory only where a condition in rule 39.2(3) was satisfied and a private hearing was necessary for the proper administration of justice. The analysis in National Crime Agency v Hussain [2020] EWHC 432 (Admin), [2020] 1 WLR 2145 was relevant to the interface between the provisions.
2. On the facts, the on-notice application did not engage the provisions concerning without-notice hearings or the risk that publicity would defeat the hearing. Although personal financial information was involved, the respondent’s former husband’s serious criminality had been publicly proved and the public interest in recovering criminal property outweighed the relevant confidentiality interests. The hearing therefore proceeded in public.
3. Unexplained Wealth Order. The conditions in sections 362A and 362B of the Proceeds of Crime Act 2002 were satisfied. The respondent held property worth substantially more than £50,000; there were reasonable grounds for suspecting that her known lawful income was insufficient to acquire it; and she was connected with a person involved in serious crime within Schedule 1 to the Serious Crime Act 2007.
4. The lawful-income inquiry focused on the date on which the property was purchased. The respondent’s known dividends, employment income, rental income and pension did not provide a sufficient apparent lawful source for the purchase. An Unexplained Wealth Order was therefore appropriate to investigate whether the property was recoverable property and to assist the statutory purpose of recovering criminal proceeds.
5. The questions ordered were required to investigate the respondent’s continuing connection with Timothy Schools, her assets and income, the purchase and renovation funding, rental income, occupation and marketing of the property. Questions concerning the early relationship and separation were excluded as unnecessary and disproportionate.
6. Interim Freezing Order. Under section 362J, an order was necessary because the property was being marketed and there was a real risk that a sale or dissipation of the proceeds would frustrate a later recovery order. The order was therefore made, but it did not prevent a sale to which the SFO consented in writing, with consent not to be unreasonably withheld or delayed.