Proceeds of Crime Act 2002, section 266

Recovery orders

Part 5 Civil recovery of the proceeds etc. of unlawful conduct

(1)If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.

(2)The recovery order must vest the recoverable property in the trustee for civil recovery.

(3)But the court may not make in a recovery order—

(a)any provision in respect of any recoverable property if each of the conditions in subsection (4) or (as the case may be) (5) is met and it would not be just and equitable to do so, or

(b)any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998 (c. 42)).

(4)In relation to a court in England and Wales or Northern Ireland, the conditions referred to in subsection (3)(a) are that—

(a)the respondent obtained the recoverable property in good faith,

(b)he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,

(c)when he took the steps, he had no notice that the property was recoverable,

(d)if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.

(5)In relation to a court in Scotland, the conditions referred to in subsection (3)(a) are that—

(a)the respondent obtained the recoverable property in good faith,

(b)he took steps after obtaining the property which he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,

(c)when he took the steps, he had no reasonable grounds for believing that the property was recoverable,

(d)if a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.

(6)In deciding whether it would be just and equitable to make the provision in the recovery order where the conditions in subsection (4) or (as the case may be) (5) are met, the court must have regard to—

(a)the degree of detriment that would be suffered by the respondent if the provision were made,

(b)the enforcement authority’s interest in receiving the realised proceeds of the recoverable property.

(7)A recovery order may sever any property.

(8)A recovery order may impose conditions as to the manner in which the trustee for civil recovery may deal with any property vested by the order for the purpose of realising it.

[F822 (8ZA)If the recoverable property in respect of which the Court of Session makes a recovery order includes heritable property, the Court of Session must, on the application of the enforcement authority, also grant decree of removing and warrant for ejection, enforceable by the trustee for civil recovery, in relation to any persons occupying the heritable property.F822]

[F823 (8A)A recovery order made by a court in England and Wales or Northern Ireland may provide for payment under section 280 of reasonable legal expenses that a person has reasonably incurred, or may reasonably incur, in respect of—

(a)the proceedings under this Part in which the order is made, or

(b)any related proceedings under this Part.

(8B)If regulations under section 286B apply to an item of expenditure, a sum in respect of the item is not payable under section 280 in pursuance of provision under subsection (8A) unless—

(a)the enforcement authority agrees to its payment, or

(b)the court has assessed the amount allowed by the regulations in respect of that item and the sum is paid in respect of the assessed amount.F823]

(9)This section is subject to sections 270 to 278.

Definitions used in section 266 7

the court

(10) In this section, sections 120 to 140 and Schedule 3 “the court” means—

(a)the Court of Session, where a trial diet or a diet fixed for the purposes of section 76 of the Procedure Act in proceedings for the offence or offences concerned is to be, is being or has been held in the High Court of Justiciary;

(b)the sheriff exercising his civil jurisdiction, where a diet referred to in paragraph (a) is to be, is being or has been held in the sheriff court.

Defined in s.119(10) · see it in the full Act

“the court” (except in sections 253(2) and (3) and 262(2) and (3) and Chapters 3, 3A , 3B, 3C, 3D, 3E and 3F ) means the High Court or (in relation to proceedings in Scotland) the Court of Session,

Defined in s.316(1) · see it in the full Act
recovery order

“recovery order” means an order made under section 266,

Defined in s.316(1) · see it in the full Act
recoverable property

“recoverable property” is to be read in accordance with sections 304 to 310,

Defined in s.316(1) · see it in the full Act
respondent

“respondent” means—

(a)

where proceedings are brought by the enforcement authority by virtue of Chapter 2, the person against whom the proceedings are brought,

(b)

where no such proceedings have been brought but the enforcement authority has applied for a property freezing order, an interim receiving order, a prohibitory property order or an interim administration order, the person against whom he intends to bring such proceedings,

Defined in s.316(1) · see it in the full Act
enforcement authority

“enforcement authority”—

(a)

in relation to England and Wales, means the Financial Conduct Authority, Her Majesty's Revenue and Customs, the National Crime Agency , the Director of Public Prosecutions ... or the Director of the Serious Fraud Office,

(b)

in relation to Scotland, means the Scottish Ministers,

(c)

in relation to Northern Ireland, means the Financial Conduct Authority, Her Majesty's Revenue and Customs, the National Crime Agency , the Director of the Serious Fraud Office or the Director of Public Prosecutions for Northern Ireland,

Defined in s.316(1) · see it in the full Act
interest

“interest”, in relation to land—

(a)

in the case of land in England and Wales or Northern Ireland, means any legal estate and any equitable interest or power,

(b)

in the case of land in Scotland, means any estate, interest, servitude or other heritable right in or over land, including a heritable security,

Defined in s.316(1) · see it in the full Act

“interest”, in relation to property other than land, includes any right (including a right to possession of the property),

Defined in s.316(1) · see it in the full Act
part

“part”, in relation to property, includes a portion,

Defined in s.316(1) · see it in the full Act

Cases considering section 266 51

Perry and others v Serious Organised Crime Agency

[2012] UKSC 35 · 25 July 2012Interprets

Section 266 requires a recovery order when property is recoverable and provides for its vesting in the trustee for civil recovery. Read in statutory context, the power is confined to property within the territorial jurisdiction of the court making the order (see paras [43]-[53]; [74]-[78]).

Sanam v National Crime Agency

[2015] EWCA Civ 1234 · 2 December 2015Interprets

Section 266 establishes the mandatory recovery-order scheme, statutory third-party defences and Convention-rights limitation. The Court applied the provision as the governing framework for the appeal (see paras [19], [60]-[72]). Once the court is satisfied that property is recoverable, it must make a recovery order. The mandatory starting point applied because the properties represented proceeds of unlawful conduct (see paras [46], [60], [65]). A recovery order vests recoverable property in the trustee for civil recovery, who secures the property and realises its value for the enforcement authority. That consequence formed part of the statutory comparison with Part 2 (see para [46]). The defence requires the statutory conditions to be met and the court to conclude that making the order would not be just and equitable. Good faith and absence of notice did not overcome the failure to prove reliance steps and detriment (see paras [63]-[64]). The court cannot make a recovery order containing a provision incompatible with Convention rights. The judge therefore had to consider an Article 1 of the First Protocol defence concerning existing beneficial ownership, even though it was not pleaded (see paras [65]-[70]). The statutory defence requires good faith, specified reliance steps, lack of notice and detriment caused by those steps. The Court confirmed that the cumulative requirements were not met (see paras [63]-[64]). Good faith is one cumulative condition of the defence. Although the recipient was wholly innocent, that condition alone did not prevent recovery (see paras [63]-[64]). The respondent had to show reliance steps before or after obtaining the property which would not otherwise have been taken. Mrs Sanam’s dealings with the investment properties did not satisfy that requirement (see paras [23], [63]-[64]). The defence also requires that the respondent had no notice that the property was recoverable when the relevant steps were taken. That condition could not alone defeat recovery because the reliance and detriment requirements also failed (see paras [63]-[64]). The required detriment must result from reliance on obtaining the property or on the expectation of obtaining it. Receiving income and benefiting from the properties without detrimental reliance did not satisfy this requirement (see paras [63]-[64]). Where the section 266(3)(a) conditions are met, the court must balance the respondent’s detriment against the enforcement authority’s interest in realised proceeds. The Court treated this as the type of balancing exercise required by Article 1 of the First Protocol (see para [63]).

Serious Organised Crime Agency v O'Docherty (aka Mark Eric Gibbons) & Anor

[2013] EWCA Civ 518 · 16 May 2013

A civil recovery order must vest recoverable property in the trustee for civil recovery. The court held that this statutory vesting occurred immediately under the final order. (see paras [40]-[43])

31 more judgments, and what each says about section 266, are in the case-law panel in the full Act.

Explanatory note

348.This section sets out what the court must do if it finds any property to be recoverable. Under subsection (1), if the court finds, on the trial of a civil recovery action or after a proof in Scotland, that any property is recoverable, it must order its recovery. Under subsection (2) a recovery order vests the recovered property in the trustee for civil recovery, whose appointment and functions are set out at section 267. The making of the order is subject to the limitations set out in subsections (3), (4), (5), (6) and (8), and to sections 270 to 278. There are also certain exemptions set out in sections 281 and 282.

349.Under subsection (3) a court may not make any provision in a recovery order that would contravene the European Convention on Human Rights. Under subsections (3) to (5) the court may not make a recovery order if all of the following conditions apply and it would not be just and equitable to make the recovery order. The conditions for England, Wales and Northern Ireland are:

  • the respondent obtained the recoverable property in good faith;

  • before or after the respondent obtained the property, without knowing that the property was recoverable, he took action which he would not have taken if he had not anticipated receiving or had not received the property (for example, he spends his own money as a result of receiving the recoverable property);

  • the making of a recovery order would be detrimental to the respondent, due to the action he had taken in relation to the property.

349.Subsection (5) makes similar provision in relation to Scotland.

350.In deciding whether it would be just and equitable to make provision in a recovery order in such cases, the court must weigh the detriment to the respondent if the provision were to be made against the interests of the enforcement authority, as well as any other factors that would go to the justice and equity of the case (Subsection (6)).

351.The recovery order may sever the recoverable element of the property from the remainder if recoverable property and associated property subsist in the same property, for example, where property is mixed under section 306 (subsection (7)). The order may also impose conditions on how the trustee may deal with the property (subsection (8)).

All the explanatory notes for the Act

Amendments and notes

3 notes from legislation.gov.uk

Amendments

  1. F822S. 266(8ZA) inserted (27.4.2017 for specified purposes, 31.1.2018 for E.W.S. in so far as not already in force) by Criminal Finances Act 2017 (c. 22), ss. 29(3), 58(1)(6); S.I. 2018/78, reg. 3(l)
  2. F823S. 266(8A)(8B) inserted (1.1.2006) by Serious Organised Crime and Police Act 2005 (c. 15), s. 178(8), Sch. 6 para. 15; S.I. 2005/3136, art. 3(c)

Commencement

  1. I247S. 266 in force at 24.2.2003 by S.I. 2003/120, art. 2, Sch. (with arts. 3, 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)