Forfeiture of assets
[2019]JRC141
Royal Court
(Samedi)
22 July 2019
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Before :
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J. A. Clyde-Smith O.B.E., Commissioner, and
Jurats Olsen and Dulake
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Between
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Her Majesty’s Attorney General
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Representor
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And
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Ian Joseph Ellis
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Respondent
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IN THE MATTER OF THE REPRESENTATION OF
HER MAJESTY’S ATTORNEY GENERAL
AND IN THE MATTER OF THE FORFEITURE OF
ASSETS (CIVIL PROCEEDINGS) LAW 2018
IN THE MATTER OF IAN
JOSEPH ELLIS
M. T. Jowitt Esq., Crown Advocate for the Representor.
Advocate P. G. Nicholls for the second
Respondent.
judgment
the COMMISSIONER:
1.
In this
case, the Attorney General applies for an order under Article 11(4) of the Forfeiture
of Assets (Civil Proceedings) (Jersey) Law 2018 (“the Forfeiture of
Assets Law”) forfeiting a bank account in Jersey in the name of the
respondent on the grounds that it is “tainted property”.
2.
Before
setting out the facts upon which the Attorney General relies in seeking this
order, it is helpful to set out the material provisions of the Forfeiture of
Assets Law.
Forfeiture of Assets Law
3.
Articles
10 and 11 of the Forfeiture of Assets Law provide for a “summary
procedure” for the forfeiture of accounts held at a bank in
Jersey, in other words a procedure conducted with less formality for the speedy
disposal of the matter. Under
Article 10(1), the Attorney General may give notice to a Jersey bank account
holder where the conditions set out in Article 10(2) are satisfied. Those conditions are as follows:-
“(2) The conditions mentioned in paragraph (1)
are that –
(a) the
Attorney General has reasonable grounds to believe that property held in the
bank account is tainted property;
(b) in
relation to the bank account or any property in the bank account, a consent
request has been made to an authorized officer;
(c) an
authorized officer refused the consent requested; and
(d) notification
of the refusal was given to the person making the request at least 12 months
before the date on which the notice is to be served.”
4.
“Tainted
property” is defined under Article 2(1) as follows:-
“2 Meaning of “tainted
property”
(1) For
the purposes of this Law, “tainted property” means property (as
further defined by paragraphs (2) to (7)) which is or, by the Attorney General
or any officer on whom powers are conferred by this Law, is reasonably
suspected to be or have been –
(a) used
in, or intended to be used in, unlawful conduct; or
(b) obtained
in the course of, from the proceeds of, or in connection with, unlawful
conduct.”
5.
An
immediate anomaly arises, in that Article 10(2)(a) requires the Attorney
General to have “reasonable grounds to believe” that the bank Account is “tainted property”,
whereas, within the definition of “tainted property” Article 2(1)
provides for the lower test of “reasonable suspicion” on the
part of the Attorney General.
“Reasonable grounds to believe” requires both an honest
belief and reasonable cause for that belief (see Sophianou v Defence
Committee [1987-88] JLR Notes – 17a). Bearing in mind the draconian nature of
this legislation, we think it right to apply the higher test of “reasonable
grounds to believe”.
6.
“Unlawful
conduct” is defined under Article 1(1) in this way:-
“unlawful conduct”
means conduct –
(a) constituting
an offence against a law of Jersey; or
(b) which,
if it occurs or has occurred outside Jersey, would have constituted such an
offence if occurring in Jersey;”
7.
The
definition of “tainted property” in the
Forfeiture of Assets Law is the same as that used in the Civil Asset Recovery
(International Co-operation) (Jersey) Law 2007, the parameters of which
were considered by the Court in Doraville Properties Corporation v AG
[2016] (2) JLR 44. Quoting from
paragraphs 123 and 124 of that judgment:-
“123 The
definition of ‘tainted property’ has two parts. Under the first part it means property
‘found’ to have been ‘used in, or intended to be used in,
unlawful conduct’. In broad
terms, this first part is concerned with property which is not necessarily the
proceeds of crime but the instrumentalities of crime. The second part is concerned with
property ‘found’ to have been ‘obtained in the course of,
from the proceeds of, or in connection with, unlawful conduct.’ This second part is concerned with the
proceeds of crime.
124 It
must be the case that the first part of the definition adds something to the
second part. If property
‘used in’ unlawful conduct has itself to comprise the proceeds of
crime, then the first part of the definition becomes redundant. Thus in the first part of the
definition, the property ‘used in’ unlawful conduct may comprise
property from legitimate sources that is used in unlawful conduct.”
8.
Article
10(2)(b) refers to a “consent request” made to an
authorized officer and that is defined under Article 10(3) as follows:-
“(3) For the purposes of paragraph (2)(b), a
“consent request” means a request –
(i) under
Article 32 of the proceeds of Crime (Jersey) Law 1999, for consent to do any
act or to deal with property held in the bank Account in any way which would,
apart from paragraph (3) of that Article, amount to the commission of an
offence under Article 30 or 31 of that Law; or
(ii) under Article 18 of the
Terrorism (Jersey) Law 2002, for consent to do anything which would, apart from
paragraph (1) of that Article, amount to the commission of an offence under
Article 15 or 16 of that Law,
made by a person making a
disclosure in accordance with either of those Articles.”
9.
Article
10(4) provides that notice shall be by way of representation and shall be
served on both the holder of the bank account and the bank at which the account
in question is held. It must
specify the property in the bank account which in the opinion of the Attorney
General is tainted property and give the holder of the account a time to attend
before the Court to show cause why the property so specified is not tainted
property and should not be forfeited.
10. Under Article 11(1), if the account holder
fails to attend the hearing as required by the notice, the Attorney General can
apply forthwith for a forfeiture order, but if the account holder appears, then
Article 11(2) (3) and (4) set out the procedure to be followed in this way:-
“(2) If
the respondent appears (whether in person or by a legal representative) at the
hearing, the respondent may –
(a) at
the hearing, satisfy the Court that the property is not tainted property or
(b) request
that the question of whether or not the property is tainted property be
determined at such later date as the Court may order.
(3) If
the respondent makes a request under paragraph (2)(b), the respondent must
provide an affidavit in answer to the notice within the period of 21 days
beginning with the date on which the matter is placed on the list, satisfying
the court that the property is not tainted property.
(4) Unless
the respondent satisfies the court that the property is not tainted property,
the court shall, upon the application of the Attorney General, make a
forfeiture order in relation to the property specified in the notice or any part
of it.”
11. Article 26 of the Forfeiture of Assets Law
provides that proceedings under this part of the Law are civil proceedings and
any issue in such proceedings shall be determined on the balance of
probabilities. Article 29(4)
provides that the Attorney General shall not be liable in costs for any
proceedings under the Forfeiture of Assets Law, except where it is shown that
the proceedings were commenced or (having been lawfully commenced) were
continued in bad faith. That means
that absent proving bad faith on the part of the Attorney General, the cost to
the account holder of defending such a notice may become disproportionate to
the amounts involved in the case of bank accounts with modest sums.
Procedure in this case
12. In this case, the Attorney General served a
notice on the respondent by way of representation under Article 10 on the 3rd
December, 2018, and required the respondent to attend upon the Court on the 1st
February, 2019, to show cause why his account (“the Account”) at
Standard Chartered Bank, Jersey branch (“the Bank”) with a balance
of £33,804.52, should not be forfeited. Appended to the notice is the information
upon which the Attorney General based the application, comprising a Summary of
the Facts and the relevant supporting documentation. That was comprised within an affidavit
sworn by Ms Charlotte Compton of the Law Officer’s Department dated 21st
November, 2018, in support of an application for leave to serve the notice upon
the respondent outside the jurisdiction of Jersey.
13. The respondent, who now lives in Cyprus,
appeared through counsel on 1st February, 2019, and it was agreed
that the matter would be adjourned to be determined at a later date. The respondent complied with his
obligations under Article 11(3) by filing an affidavit dated 28th
February, 2019.
14. At a directions hearing on 22nd May,
2019, the Court refused an application by the Attorney General to order the
respondent to attend the hearing in order to be cross-examined on the basis
that no precedent in civil proceedings for such an order had been produced and
refused the Attorney General’s application for the hearing to be
adjourned, on the grounds that these were summary proceedings to be dealt with
quickly and with the minimum of formality.
15. Whilst Article 11(3) only refers to an
affidavit being filed on behalf of the respondent, it did not preclude the
Court permitting additional evidence to be filed, as requested by the Attorney
General, provided that the respondent was given a fair opportunity to respond to
it. Leave for the filing of further
evidence was given and a further statement dated 15th May, 2019, was
therefore filed on behalf of the Attorney General by Mr Glyn Nelson, employed
within financial crime compliance in the Bank. He exhibited the records of the Bank. An affidavit was also filed by Mr Jason
Tucker of the States of Jersey Customs and Immigration Service dated 31st
May 2019.
16. Advocate Nicholls questioned the admissibility
of Mr Nelson’s statement in that it referred to the Bank’s records
being produced pursuant to Article 65 of the Police Procedures and Criminal
Evidence (Jersey) Law 2003, and of course, these are not criminal
proceedings. However, we note that
the documentation was in fact produced by Mr Nelson pursuant to a production
order issued under Article 19 of the Forfeiture of Assets Law. Provided the documentation supplied did
not take the respondent by surprise, and it was not alleged that it did, the
Bank’s records in relation to the Account are clearly relevant and
admissible.
The facts upon which the Attorney General relied
17. On 4th September 2001, the
respondent was convicted in Scotland for drugs offences and sentenced to twelve
months’ imprisonment. In the
course of a confiscation investigation, it was discovered that he had the
Account. It had been opened on an
unspecified date in the 1980s and had been dormant since 1992.
18. On 11th October 2002, the Bank
submitted a suspicious activity report (“SAR”) to the Joint
Financial Crimes Unit (“JFCU”) in connection with the Account, as a
result of the copy of a Scottish restraint order being served upon it on 8th
October, 2002. Consent to operate
the Account was withheld by the JFCU on 11th October 2002. The respondent’s wife also had an
account with the Bank which also was the subject of an SAR at the same time,
but consent to operate that account was later given and it was closed.
19. On 8th November, 2002, HM Advocate,
the Right Honourable Colin Boyd, submitted a letter of request to the Attorney
General, requesting a formal restraint over the Account, but that was withdrawn
on 24th January, 2003, because the respondent had satisfied in full
his confiscation order in the sum of £95,898.
20. On 31st January 2003, a decision was
made to launch a local investigation into the source of funds in the Account,
and a production order was issued on 25th March, 2003. The documentation produced showed that
the original funds for the Account were credited in April 1988, and various
activities occurred until the Account became dormant at the end of 1992. A review revealed a total of
£42,500 being credited from unspecified origins during this period, which
included at least £18,000 in cash deposits in Glasgow via various banks.
21. On 5th February 2003, having refused
a request from the respondent to close the Account, the Bank was advised that
the JFCU would have no objection to it requesting its customer to provide
evidence as to the source of the funds in the Account. The Bank subsequently reported that the
respondent had refused to co-operate.
22. On 21st May 2003, the JFCU advised
the Bank that it had no objection to it notifying the respondent as to the
existence of the Jersey investigation, and on 5th June 2003, the
Bank wrote to the respondent at his Dumbarton address, requesting him to submit
evidence as to the source of the funds in the Account.
23. On 25th June 2003, the JFCU was
contacted by the respondent’s solicitor, Mr J Shields of Gallen & Co,
who stated that the respondent’s funds were derived from his taxi
business and that all his business records were held by the Criminal
Confiscation Unit in Edinburgh.
Matters were in hand for the documentation to be produced to the
JFCU. He also stated that the
respondent was now resident in Cyprus.
No evidence was, in fact, forthcoming.
24. On 9th July 2003, the Asset Recovery
Agency based in Edinburgh indicated that they were also investigating the
respondent, and that they were hopeful of issuing a tax assessment at the very
least. On 11th August,
2003, it indicated that the inquiry was now being passed to the Inland Revenue
to pursue.
25. On 28th October 2003, the Inland
Revenue was requested by the JFCU to assist in providing any information that
it may hold in order to identify the source of the funds paid into the Account,
but it responded on 16th February, 2004, saying that it was unable
to assist.
26. The JFCU contacted Mr Shields on 23rd
April, 2004, and again informed him that some form of documentary evidence was
required to identify the source of the funds in the Account. During this conversation, Mr Shields is
reported to state that he believed the funds were placed offshore for “tax evasion purposes”, and
that the only evidence was in the possession of the Crown in Scotland. It was suggested that he should make an
application to the Crown for the information.
27. No further communication has been received from
the respondent or Gallen & Co, and, in the Bank’s view, the
respondent had effectively refused to co-operate and had walked away from the
funds.
28. The Attorney General, whilst noting that the
initial introduction of funds into the Account took place 12 years before the
offending behaviour for which the respondent was imprisoned and that he has no
other relevant convictions, stated in the Summary of Facts that there were
still clear and reasonable grounds on which to base his application:-
(i)
£42,500
entered the Account between 1988 and 1992, and the respondent had failed to
explain the source of those credits, despite being given opportunities to do
so.
(ii) The respondent’s solicitor had failed to
provide evidence on his behalf, and indeed, had stated that the funds had been
placed in Jersey for the purpose of tax evasion.
(iii) Despite the relatively short period of
offending in respect of which the respondent was imprisoned, the size of the
confiscation order showed an ongoing involvement in serious crime. The Proceeds of Crime Act 2002
applied assumptions historically for a period of six years to all expenditure
and income received or incurred by the respondent.
(iv) The amount currently contained within the
Account was significant and the respondent had taken no recent steps to
establish the legitimate source of the funds or to obtain access to the money
in the Account.
29. Documents produced by Mr Nelson for the Bank
comprised in the main copies of all the bank statements over this period of
time, from which the following can be noted:-
(i)
There is
an account opening document indicating that the Account was opened on 7th
April 1988.
(ii) Between April 1988 and April 1989, the bank
balance increased with credits to some £25,875 and then on 16th
April 1989, £23,000 was withdrawn by way of cheque. Thereafter, the residue of £2,875
remained in the Account earning interest until 4th October 1992,
when £10,000 in cash was credited.
A further £8,000 was credited from another bank Account on 14th
October 1992, and thereafter, the Account remained entirely dormant, apart from
the crediting of interest.
30. The affidavit of Mr Tucker shows that in 2009,
the Attorney General conducted a review with a view to the funds within the
Account being seized under the terms of Article 4(1) of the Proceeds of
Crime (Cash Seizure) (Jersey) Law 2008. That turned out to not be possible,
because a bank balance was not covered by the definition of “cash” within Article 1 of
that law. He also exhibited:
(i)
an office
copy of a letter dated 5th June 2003, from the JFCU to the
respondent, inviting him to resolve the issue over the Account by submitting
evidence as to the source of funds.
Mr Tucker believed that letter would have been sent to the respondent.
(ii) Investigation notes from the electronic police
file database covering the period of 3rd October 2002 to 23rd
April 2004, but he was unable to say who created the file or the exact date
that it was created.
31. An element of caution is required with having
recourse to these notes, but with that caveat in mind, we would extract from
them the following:-
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“16/05/03
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1430 call from [redacted] Ellis is now asking for his money and
[redacted] realises that they will have to make a commercial decision. It appears from statements that the
funds originate from early 90’s and were added to by way of cash
deposits although largely dormant since 1996. [redacted] asked if we would have any
objection to them asking client to evidence source of funds. No problem with that as his conviction
for D/T is in the public domain.
Bank having trouble retrieving docs from microfiche but are working on
it. [redacted] will contact when they are in a position to provide docs.
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21/05/03
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0930 returned call to Peter Hopper. He states that Ellis has been on the
phone and is demanding the release of his funds and stating that he is in
possession of the Scottish Court papers which prove the case has been dealt
with etc. Peter has refused to
discuss the issue with Ellis and considers that Ellis will not co-operate in
any way with the Bank re provision of any evidence of where the funds
originated from back in the 90’s.
Peter would like consent to tell Ellis that a local investigation has
commenced and that in order to expedite the situation it was in his interest
to produce evidence of the source of the funds. I told Peter that I would seek DI’s
approval. DI approval granted, bank notified and letter sent to Ellis at his
Dumbarton address.
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25/06/03
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Spoke with Joseph Shields (01414201441) who has represented Ellis.
He states that Ellis is now apparently living in Cyprus. Made him aware of our position of
which he was appreciative. Stated
that if Ellis had paid his tax he would not have got into so much bother. He
thought that the drug offence was fairly low scale. Quite open that the funds were derived
from his taxi business and sent to Jersey where interest rates were good at
the time. He was aware that Ellis
has a regular lawyer and would speak with him as he may be in a better
position to assist in providing more historic records and evidence of the
source of the money. He believes
that his past tax declarations etc. were all provided as part of the previous
case. He said that he had spoken
to Catriona from COS.
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11/8/03
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Call from Nick Bradshaw.
The result of the case conference is that the Ellis job will now be
passed to the Inland Revenue to investigate – Joe Cox (Special
Compliance Edinburgh 0131 3137800) is aware and will contact me in due
course.
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04/09/03
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Letter received from Gallen and Co Solicitors asking for an update
as Ellis is now resident in Cyprus and wants his money.
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22/04/04
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Letter received from Solicitor, advising that he requires the
nature of the evidence which we require to release the funds.
Referred to DS Troy and agreed that I should phone Mr Shields and
explain that we require any documentary evidence which can support the source
of funds that are held here in Jersey.
10.50 hrs telephone call to Mr Shields. He is in court and I have left a
message for him to contact me on his return.
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23/04/04
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11.40hrs telephone call to Mr Shields. I explained that he was made aware
last year that we needed documentary evidence to support the source of the
funds that Mr Ellis has here in Jersey.
Mr Shields asked if a letter from him would suffice, as he can say
that the funds represent income from Mr Ellis’s taxi firm. I told him that it would not suffice
and we would require documentation for example an Accounts ledger from the
business etc.
Mr Shields quite openly stated that the funds were placed in
Jersey for the evasion of tax and he believed that this was okay at that
time, he added that there is no documentation and anything that was available
was now with the Crown in Scotland.
I suggested that he put his comments in writing and also make
application to the Crown for any information they can provide to support the
funds here in Jersey. He will do
so.
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Respondent’s affisdavit
32. We would summarise the respondent’s
affidavit as follows:-
(i)
He is
currently 57 years of age. He was
brought up and raised in Scotland, leaving school at 15 and starting his own
business, District Taxis, at around the age of 23. It proved to be a very successful
business, and at one point, was one of the largest taxi firms operating in
Scotland, employing between 60 and 70 drivers and generating profits of up to
£150,000 per annum. In
addition, he was heavily involved in the used car trade, and could earn, on
average, around £4,000 per month, buying and selling used cars. In addition to his earnings, he also
inherited his parents’ home upon their death.
(ii) It had always been his intention to sell his
businesses and retire at age 55 to live in Cyprus. Accordingly, he sold District Taxis, and
moved to Cyprus in 2003, establishing a new business there, Ian Ellis Car Trade
Zone Limited, which operates out of Famagusta and is a used car dealership
dealing in the importation and sale of used cars in Cyprus.
(iii) He was convicted on 4th September
2001 of being concerned in the supply of two class C drugs, namely diazepam and
oxazepam, between 11th May and 11th August 2000, for
which he received a custodial sentence of twelve months. He served six months before being
released in May 2002. He was 49
years old at the time of his conviction and said he had very foolishly agreed
to try to sell a small quantity of class C drugs to make a quick and easy
profit, which he described as a very serious error of judgment on his part, for
which he paid a very heavy price.
(iv) Because of his conviction, he was made the
subject of confiscation proceedings, which he understands to be known as a
“lifestyle” offence, and a confiscation order was made in the sum
of £95,898, which, although he thought manifestly excessive, he arranged
to be satisfied in full in late 2002 early 2003. He has no other convictions.
(v) He cannot recall when he opened the Account,
but believes it was at some point in the late 1980s. As to why he opened an account in
Jersey, he says this at paragraph 16 of his affidavit:-
“I distinctly recall,
however, doing so in response to an advertisement by the Bank promoting the tax
saving benefits of having a savings account in Jersey. I recall reading that advert in a Scottish
newspaper. From very distant
recollection I think it said something about “go offshore without being
offshore”, and in essence sought to promote the fact that monies
deposited in Jersey bank accounts were treated as being free of tax.”
Given that it always been his desire to
move to Cyprus, he said this advertisement was obviously attractive to him, and
as a result, the Account was set up.
(vi) As to the 7 credits in the Account, he no
longer had access to the statements, but working from a report that had been
prepared by Senior Customs Officer Holmes in July 2009, he said this about the
seven credits, totalling £42,500:-
“20 As to the Holmes Summary records, 4 of
these 7 credits came from Accounts with the Halifax Building Society and two
banks, Royal Bank of Scotland and Clydesdale Bank. These 4 credits (which were made over
the period 11 April 1988 to 16 February 1989 i.e. at least a decade before my
conviction) totalling £20,500 were made from personal savings Accounts in
my own name with the building society and two banks in question. These monies represented personal
savings which were transferred into the Account shortly after the Account had
been opened so as to avoid paying tax on the same whilst I continued to be
resident in Scotland.
21. The three remaining credits (which totalled
£22,000) represented cash which I directly deposited into the Account. That cash was derived from the sales of
used cars.
22. Whilst from a modern-day perspective
the 3 cash transactions may appear a little unusual (as far as I am aware banks
now rarely accept cash deposits), there was, as far as I was concerned, nothing
wrong or unusual in what I was doing. Indeed as I have sought to explain, I
only became aware that the money could be paid offshore because the Bank was
advertising such services.”
(vii) In relation to the debit of £23,000 on 26th
April 1989, he said this, at paragraph 23:-
“23 There is
reference in the Holmes Summary to a debit of £23,000 which was made on
16 April 1989. I cannot recall for
sure what this debit related to, but I think it related to cash which I took to
Cyprus in 1989 with a view to buying property in Cyprus.”
(viii) He states that to say he had failed to provide
evidence as to the origin of the sums paid into the Account overstates and
misconstrues the true position. The
Bank’s own records would have shown that four of the seven credits were
from his own savings Accounts with the Halifax Building Society, the Royal Bank
of Scotland and Clydesdale Bank, which evidence, he said, was incontrovertible,
and plainly within the Bank’s direct knowledge and information.
(ix) He contacted the Bank in January/February 2003,
requesting it to close the Account and transfer the balance to another account,
because he had moved to Cyprus, which the Bank refused to comply with. He subsequently received correspondence
from the Bank, which he had not retained, informing him that the Jersey police
would not permit the Bank to operate the Account in the usual way until the
source of funds was identified. He
subsequently instructed Mr Shields of Gallen & Co to contact the Bank to
try to resolve this ongoing impasse,
and he was aware that Mr Shields had advised the Bank:-
(a) That he was now resident in Cyprus;
(b) The funds in the Account had been derived from
his taxi business and
(c) All of his business records had been seized by
the Scottish authorities for the purpose of the confiscation proceedings.
Consequently, he was unable to provide
documentary evidence to identify the source of funds.
(x) His solicitor had made a number of attempts to
retrieve his historic business records unsuccessfully, and believes that those
records would by now have been destroyed.
He was also aware that Mr Shields had advised the Bank that the monies
in this Account were banked for tax reasons. In 2005, he instructed a firm of Jersey
lawyers to re-visit the issue, but they were unable to make much meaningful
progress.
(xi) It was not the case that he had effectively
refused to co-operate, or that he had walked away from the funds; that could
not be further from the truth. He
had made a number of efforts to unblock the Account, and was now caught between
a rock and a hard place, hampered by the fact that due to circumstances beyond
his control, he cannot provide the documentary evidence which the Jersey
authorities appear to insist that he provide. He also had no desire to continue to
throw good money after bad in dealing with the issue, and having instructed two
firms of lawyers to try to resolve the issue, he put the matter on the back
burner.
(xii) Whilst the sums in the Account were not
insignificant, they represent a small proportion of his net wealth. The monies had been derived from his
legitimate business activities. It
was paid into the Account simply to avoid paying tax, and he was advised by the
Bank at the time that there was nothing untoward about this.
Attorney General’s submissions
33. Crown Advocate Jowitt made the following
submissions in summary:-
(i)
The burden
of satisfying the Court that the property is not tainted property rests on the
respondent by way of his affidavit;
(ii) The definition of tainted property in the 2018
Law is wide and covers not only property which is directly the proceeds of
unlawful conduct, but property obtained in the course of or in connection with
unlawful conduct, and property which, though itself from a legitimate source,
is property used in or intended to be used in unlawful conduct;
(iii) Leaving aside the Attorney General’s
initial primary assertion that there were reasonable grounds to believe that
the property was tainted property on the grounds that it was probably derived
from drug offending, the respondent has now filed an affidavit in which he
repeatedly admits that he banked money in Jersey to avoid paying tax on it in
the United Kingdom;
(iv) The factual nature of the respondent’s
conduct, on his own admission, is thus necessarily that he falsely understated
his income to the UK tax authorities as part of which process and to facilitate
it he obtained a chose in action - namely the bank balance at the Jersey bank,
which is the property in this case – by which chose in action he
concealed some of that income from the UK tax authorities;
(v) The 2018 Law defines ‘unlawful
conduct’ to include both conduct constituting an offence against
a law of Jersey and conduct which, though it occurred outside Jersey, would
have constituted an offence had the conduct occurred in Jersey;
(vi) The making of a deliberately false statement
about the true amount of a person’s income to a tax authority would
constitute, if it occurred in Jersey, the offence of Foster fraud. Under Jersey law, the customary law
offence of fraud is committed when a person makes a deliberately false
representation with the intention and consequence of causing thereby actual
prejudice to someone, and actual benefit to himself or another (Foster v AG
[1992] JLR 6). Fraudulently making an incorrect return is also an offence under
Article 137(1) of the Income Tax (Jersey) Law 1961;
(vii) As the Court of Appeal said in Michel v AG
[2006] JLR 287 at paragraph 16:-
“Further, we are not
persuaded that a material distinction exists between traditional fraud and tax
evasion by reason of any consideration that, in instances of tax evasion, the
money is, in the first instance, ‘legitimately’ in the hands of the
tax payer. As soon as a taxable
event has occurred, the receipts in the hands of the taxpayer are receipts for
which the taxpayer is bound to account to the revenue authorities. False representations in respect of
those receipts cause prejudice to the States (or the Revenue) and benefit to
the taxpayer just as in the case of any other fraudulent activity (Michel v
Attorney General 2016 JLR 287) at paragraph 16).”
(viii) The property in this case – the chose in
action which is the balance at the Jersey bank – is thus both property
obtained in the course of or in connection with unlawful conduct, and property
used in or intended to be used in unlawful conduct and is thus tainted
property;
(ix) Moreover, the respondent’s admissions
amount to an admission that the property is criminal property within the
definition in the Proceeds of Crime (Jersey) Law 1999, such that any use
by him of the property now would constitute the Jersey offence of money
laundering and would thus fulfil the 2018 Law definition of tainted property as
property ‘intended to be used in
unlawful conduct’.
(x) The respondent on his own case cannot satisfy
the Court that the property is not tainted property and the Court must
accordingly make a forfeiture order in respect of it.
Respondent’s submissions
34. Advocate Nicholls made the following
submissions in summary:-
(i)
Provided
the Attorney General was able to satisfy the Court that the preconditions in
Article 10(2) were met, he agreed that the burden shifts on to the respondent
to satisfy the Court that the Account is not tainted property.
(ii) The precondition under Article 10(2)(a) had not
been met, in that there were no reasonable grounds upon which the Attorney
General could have believed that the Account was tainted property. The Attorney General had shifted from contending
that the monies within the Account were derived from drug offending to
contending that the respondent had committed tax evasion. This very obvious volte face on the part of the Attorney General demonstrated in
clear and unequivocal terms that he cannot have had reasonable grounds when he brought
the proceedings to believe that the Account was tainted property. Furthermore, the Attorney General had
fallen into the familiar error of failing to distinguish between tax avoidance
and tax evasion. The
respondent’s evidence is that he had responded to an advertisement by the
Bank that said he could legitimately avoid tax by opening an account in Jersey.
(iii) The Inland Revenue had been fully aware of the
Account for some years, but had taken no steps to investigate or prosecute the
respondent. The suggestion that the
respondent had made false statements in his UK tax returns was little more than
baseless conjecture.
(iv) Whilst Advocate Nicholls accepted that the
English common law offence of cheating the Inland Revenue may be committed by
omission, the HMRC’s own guidance notes made it plain that where an
account holder has failed to disclose a potential liability to tax, it can be
remedied with retrospective effect, and without criminal sanction.
(v) If Crown Advocate Jowitt’s submissions
were accepted, it would necessarily mean that any UK resident with a Jersey
offshore account established to shield earnings from potential tax liabilities
in the UK would be committing a criminal offence, and also that the bank in
question would be holding criminal property for the purposes of the Proceeds of
Crime Law. Put another way, if the Attorney General was correct, it must follow
that any UK resident with an undeclared offshore account is committing tax
evasion, and logically, that such account would now be susceptible to civil
forfeiture.
(vi) The Forfeiture of Assets Law was not intended
to seize the proceeds of Jersey bank accounts where an account holder may have
a potential tax liability to a foreign revenue authority. If that were the case, it would
necessarily mean that anyone with an undeclared offshore account is a criminal,
and that any institution that facilitated the establishment of such an account
would, by extension, be now involved in criminal activity, through criminal
facilitation.
(vii) The condition in Article 10(2)(c) had not been
fulfilled because the original “no
consent” letter had not been produced.
Decision
35. Taking first the precondition in Article
10(2)(a) of the Forfeiture of Assets Law, there is a presumption that in
exercising his powers under the Forfeiture of Assets Law the Attorney General
was acting properly (see Acturus v AG [2001] JLR 43) and the onus is
upon the respondent to show that there were no reasonable grounds upon which he
could have come to the belief that the Account was tainted property.
36. The respondent has not discharged that burden
and in any event we are satisfied that the Attorney General did have reasonable
grounds to believe that the Account was tainted property on the information
then available to him. As set out
in the Summary of Facts upon which the notice was issued, there were three
grounds for such belief put forward:-
(i)
The
failure of the respondent to explain the source of funds credited to the
Account when asked to do so.
(ii) The respondent’s own lawyer saying that
he believed the funds had been paid in to Jersey for the purposes of tax
evasion.
(iii) The respondent’s drug conviction.
Although that conviction was on 4th September 2001, some thirteen
years after the Account appears to have become active, and some nine years
after the last transaction, the confiscation order was in a substantial sum and
as it states in paragraph 24 of the Summary of Facts:-
“It should also be noted
that a confiscation enquiry under the provisions of the Proceeds of Crime Act
2002 is far-reaching and applies assumptions historically for a period of 6
years to all expenditure/income etc received or incurred by the Respondent;
these are the ‘lifestyle’ provisions intended to capture
criminality engaged in beyond the mere fact of the conviction, which may only
be a ‘snapshot’ of the overall illicit proceeds generated from the
respondent’s participation in criminal conduct.”
37. It is the case that the actual no consent
letter or a copy of it has not been produced; it is thought to have been
destroyed. The Attorney
General’s review of 25th July, 2009, states that an SAR was
submitted by the Bank on 11th October, 2002 and a no consent letter
issued that day, and re-affirmed on 31st January 2003. It is not seriously contended by the
respondent that the JFCU did not refuse the consent requested at that time and
we are satisfied that it was refused.
The refusal was at least twelve months before the date of the Attorney
General’s notice pursuant to Article 10(2)(d).
38. All of the conditions set out in Article 10(2)
were therefore fulfilled at the time the notice was served by the Attorney
General. That being the case, we
start with the presumption that the Account is tainted property, as believed by
the Attorney General, and the
burden now falls upon the respondent to satisfy the Court on the balance
of probabilities that the Account is not tainted property.
39. The respondent has satisfied the Court that the
monies credited to the Account came from his legitimate taxi and car dealing
businesses, and not from any involvement on his part in the drugs trade. The only evidence of his involvement in
the drugs trade is his conviction and the associated confiscation order. The last credits to the bank Account
were on 12th October 1992 (£10,000 in cash) and 14th
October 1992 (£8,000 by way of bank transfer), nine years before his
conviction. The connection between
the two is too tenuous.
40. However, the respondent has not satisfied the
Court that the Account was used for the purpose of legitimate tax avoidance and
not illegitimate tax evasion.
Making allowances for the fact that the Account was opened in the late
1980s, we think it improbable in the extreme that the Bank, or indeed any bank,
would have put out by way of an advertisement in a Scottish newspaper, that UK
residents can avoid UK tax by the simple expedient of opening an account in
Jersey or that such accounts would be treated by the Inland Revenue as being
free of UK tax. The respondent has
not produced any of his tax returns, the clear implication being that the
interest earnt on the Account was deliberately not disclosed to the Inland
Revenue. If that had occurred in
Jersey it would be an offence of either Foster fraud or under
Article137(1) of the Income Tax (Jersey) Law 1961. It is conduct, therefore, which comes
within the definition of “unlawful
conduct”.
41. The fact that tax liabilities in the United
Kingdom can be discharged without criminal sanction and the fact that there has
been no criminal charge in the United Kingdom, in our view has no bearing on
whether or not there is unlawful conduct as defined, which is concerned with
transposing the conduct to Jersey.
In any event a number of policy considerations would apply to the
bringing of a prosecution by the Inland Revenue, including the amounts
involved, which are not substantial.
The police notes show the case being passed to the Inland Revenue on 11th
August 2003 by which time the respondent had moved to Cyprus, and by 16th
February 2004, the Inland Revenue stated to the JFCU that it was no longer able
to assist.
42. We agree with Advocate Jowitt that the obvious
inference from the respondent’s affidavit is that the respondent paid
monies into the Account as part of a dishonest scheme by which he
under-declared the true amount of his income to the United Kingdom tax
authorities, which would have involved him in filing tax returns which falsely
under-stated his true income, and that would be an offence under our law if it
had occurred here. The Account was
used in, or intended to be used in, that unlawful conduct. In short, his conduct means that the
Account falls fully within the definition of tainted property in Article 2 of
the Forfeiture of Assets Law. This
accords with English authority. The
case of Ahmed v HMRC (2013) EWHC 2241 (Admin) concerned a respondent who
hid cash in his home as part of a scheme to under-declare takings from his
company to the revenue. Carr J said
(at paragraph 37) “It is sufficient to prove that the sum or
part of it was part and parcel of a dishonest scheme to cheat the Revenue
…”.
43. The onus is of course on the respondent to show
that the Account was not tainted in this way and he has not satisfied us.
Proportionality
44. The case of Ahmed raises a further point
upon which we have not been addressed by counsel. It was concerned with forfeiture under
section 298 of the Proceeds of Crime Act 2002 of “Recoverable
Property”, namely property obtained through conduct that is
unlawful under the Criminal Law of the UK.
At paragraph 37, Carr J referred to the decision of the Supreme Court in
R v Waya [2012] UKC 51:-
“The Supreme Court held,
allowing the appeal, that a confiscation which did not conform to the test of
proportionality would constitute a violation of a defendant’s right to
peaceful enjoyment of his property as guaranteed by Article 1 of the First
Protocol to the Convention. In
order to avoid such violation it was appropriate pursuant to section 3 of the
Human Rights Act 1998 to read down section 6(5)(b) of the Act (which required a
court to make a confiscation order in the recoverable amount against a
defendant who had benefited from criminal conduct) as being subject to the
qualification that a confiscation order should not be made if it were
disproportionate and thus a breach of Article 1. In order to be proportionate a
confiscation order had to bear a proportionate relationship to the purpose of the
Act, which was to remove from criminals the pecuniary proceeds of their crime,
rather than deterrence.”
45. Carr J then quoted extensively from the
judgment of the Supreme Court, but we would summarise the position in the
Jersey context as follows:-
(i)
Article 1
of the First Protocol of the Convention is one of the Convention rights to
which the Human Rights (Jersey) Law 2000 applies.
(ii) That means that under Article 4, legislation
must be read and given effect in a way which is compatible with that Convention
right.
(iii) That means that the Forfeiture of Assets Law
must be read and given effect which avoids violation of that Convention right.
(iv) A forfeiture order which does not conform to
the test for proportionately will constitute such a violation and it is
incumbent upon this Court to provide a remedy for any such violation.
(v) The appropriate remedy lies in the duty of the
Court not to make an order which involves such violation by applying to the
Forfeiture of Assets Law the rule of construction required by Article 4 of the
Human Rights Law.
46. Article 11(4) of the Forfeiture of Assets Law
provides that unless the respondent satisfies the Court that the property is
not tainted property, the Court “shall, upon the application of the Attorney
General, make a forfeiture order in relation to the property specified in the
notice or any part of it.” (our emphasis)
47. Carr J said that Part 5 of the Proceeds of
Crime Act 2000 provides for a civil, not a criminal, sanction, as does the
Forfeiture of Assets Law, and therefore compensatory rather than punitive
considerations naturally come into play.
Quoting from paragraphs 46 - 48 of the judgment:-
“46 To the proportionality argument, the
respondent in this case counters by saying that the Act is a draconian piece of
legislation. It is civil and it is
summary in its nature. It has at
its roots the entirely legitimate objective that those who choose to conceal
monies, even if from legitimate businesses, as an integral part of a scheme
that is dishonest, leave themselves at the mercy of the Act. This court or any court should not be
concerned with assessing taxable liabilities in this context.
48 But,
in my judgment, properly construed, only that part of the sum obtained by the
appellant that represented evading tax or evaded tax was property obtained
through unlawful conduct for the purpose of section 242 of the Act. I repeat that it was not alleged the
claimant had stolen that money from the company.
48 Further,
or in the alternative, I accept the appellant’s submissions that to order
forfeiture of the entire sum would be wholly disproportionate. Whilst the precise amount of evaded tax
has not yet been assessed, I understand there are assessment proceedings in
play.”
48. We have no information on the amount of tax
evaded by the respondent, but bearing in mind that we are satisfied that the
monies credited to the Account came from his legitimate businesses, we need to
be addressed on whether it is proportionate to forfeit the whole of the Account
or just that part that represents the taxes evaded.
Conclusion
49. In conclusion:-
(i)
We find
that the conditions set out in Paragraph 10(2) of the Forfeiture of Assets Law
were fulfilled.
(ii) The respondent has failed to satisfy the Court
that the Account is not tainted property.
(iii) The Court needs to be addressed as to whether
the forfeiture of the entire Account is proportionate.
Authorities
Forfeiture of Assets (Civil
Proceedings) (Jersey) Law 2018.
Sophianou
v Defence Committee [1987-88] JLR Notes 17a.
Civil Asset Recovery (International
Co-operation) (Jersey) Law 2007.
Doraville
Properties Corporation v AG [2016] (2) JLR
44.
Police Procedures and Criminal
Evidence (Jersey) Law 2003.
Proceeds of Crime Act 2002.
Proceeds of Crime (Cash Seizure)
(Jersey) Law 2008.
Foster
v AG [1992] JLR 6.
Income Tax (Jersey) Law 1961.
Michel
v AG [2006] JLR 287.
Proceeds of Crime (Jersey) Law 1999.
Acturus
v AG [2001] JLR 43.
Ahmed v HMRC (2013) EWHC 2241 (Admin).
Human Rights (Jersey) Law 2000