Summary
In a civil recovery claim under Part 5 of the Proceeds of Crime Act 2002, the claimant must prove that the property was obtained by, or in return for, unlawful conduct of an identifiable kind. The claimant need not prove a transaction-by-transaction forward tracing exercise. The court may consider the whole picture, including evidence about the handling of funds, explanations given or withheld, lies and missing business records. Those matters may support an irresistible inference that property derives from crime, including where the respondent was not a party to the original unlawful conduct. Objective facts remain necessary, and the issue is one of mixed fact and law. Where the evidence and issues substantially overlap with matters requiring trial, summary judgment or strike out will generally be inappropriate.
Factual background
The Director of Public Prosecutions brought proceedings under Part 5 of the Proceeds of Crime Act 2002 seeking recovery orders concerning two London properties and rental proceeds held by Debora Krasniqi and her mother, Zina Krasniqi.
Debora Krasniqi applied for reverse summary judgment or strike out of parts of the claim concerning funds allegedly derived from fraud and money laundering by third parties. She argued that the DPP had failed to plead or establish a forward tracing exercise linking the unlawful conduct to the funds used to acquire the properties. The central issues were whether backward tracing and inferential proof were legally permissible, particularly against a non-party to the alleged unlawful conduct, and whether the issues could properly be determined summarily.
Held
- Application dismissed. The court refused reverse summary judgment and strike out of the challenged parts of the claim. The issues were closely connected with the remaining allegations, particularly the alleged mortgage frauds, and required a full trial.
- Under Part 5 of the Proceeds of Crime Act 2002, the DPP retained the burden of proving on the balance of probabilities that the property received was derived from, or represented, property obtained through unlawful conduct. It was necessary to identify unlawful conduct of an identifiable kind, but not necessarily a specific offence committed by a particular person at a particular time.
- The DPP could prove the connection either by showing that the property derived from specified unlawful conduct, or by evidence of the circumstances in which the property was handled giving rise to an irresistible inference that it could only be derived from crime. A transaction-by-transaction forward tracing exercise was not invariably required. The court could consider the evidence globally and work backwards from property received.
- The whole picture could include untruthful explanations, an absence of explanation, missing business records, concealment from lenders and the surrounding circumstances. The approach applied in principle to a respondent who was not a party to the original unlawful conduct, although greater caution might be appropriate because such a respondent might lack relevant knowledge.
- There could be no proper inference without objective facts supporting it. The question whether the required connection had been established was one of mixed fact and law. The court therefore declined to resolve the disputed tracing and inferential issues before the facts had been tested at trial.
- The allegations concerning the Ingmanson and Rexhepi funds had at least a real prospect of success. The alleged concealment in the mortgage applications, the nature of the documents and the absence of satisfactory explanations could materially illuminate the source and character of the funds. The argument concerning funds passing through Lithuania did not provide a knockout point at the summary stage.
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Key cases cited
21 authorities cited.
- Gale and another v Serious Organised Crime Agency [2011] UKSC 49
- In re CD (Original Respondent and Cross-appellant) (Northern Ireland) [2008] UKHL 33
- Price & Ors v Flitcraft Ltd & Ors [2020] EWCA Civ 850
- Anwoir & Ors, R. v [2008] EWCA Crim 1354
- DARA v Szepietowski and others [2006] EWCA Civ 766
- An, R (on the application of) & Anor v Secretary of State for the Home Department & Ors [2005] EWCA Civ 1605
- Ben Leeson & Anor v Donald McPherson [2024] EWHC 2277 (Ch)
- The Kingdom of Sweden v Max Emil Serwin & Ors. [2022] EWHC 2706 (Comm)
- Easteye Ltd v Malhotra Property Investments Ltd & Ors [2020] EWHC 2606 (Ch)
- National Crime Agency v Khan & Ors [2017] EWHC 27 (QB)
- The National Crime Agency v Robb [2014] EWHC 4384 (Ch)
- The Serious Organised Crime Agency v Namli & Ors [2013] EWHC 1200 (QB)
- Serious Organised Crime Agency v Bosworth & Anor [2010] EWHC 645 (QB)
- Serious Organised Crime Agency v Pelekanos [2009] EWHC 2307 (QB)
- Serious Organised Crime Agency v Gale & Ors [2009] EWHC 1015 (QB)
- Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch)
- DARA v Virtosu [2008] EWHC 149
- Olupitan v ARA [2007] EWHC 162
- Assets Recovery Agency v Jackson and other [2007] EWHC 2553
- Director of Assets Recovery Agency & Ors, R (on the application of) v Green & Ors [2005] EWHC 3168 (Admin)
- Partco v Wragg [2002] 2 BCLC 323
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Cases citing this case
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