Appeal - forfeiture of assets
[2020]JCA098
Court of Appeal
1 June 2020
|
Before :
|
Jonathan Crow, Q.C., President;
David Perry, Q.C., and;
Sir William Bailhache.
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The Attorney General
-v-
Ian Joseph Ellis
M. T. Jowitt, Solicitor General appeared for
the Attorney General
Advocate P. G. Nicholls for the Respondent.
JUDGMENT
THE president:
Introduction
1.
This is
the judgment of the court. It
arises in the context of proceedings under the Forfeiture of Assets (Civil
Proceedings) (Jersey) Law 2018 (the “Forfeiture Law”).
The background facts
2.
For the
purposes of this appeal, the background facts may be summarized briefly on the
basis of the findings made by the Royal Court (Samedi Division), Commissioner
Clyde-Smith sitting with Jurats Olsen and Dulake, in a judgment dated 22 July
2019 AG-v-Ellis [2019] JRC 141 (the “July judgment”).
3.
The
Respondent was born and brought up in Scotland. About 35 years ago, he set up a
successful taxi business there. He
opened a bank account (the “Account”) in April 1988 with the Jersey
branch of Standard Chartered Bank (the “Bank”). Funds amounting in aggregate to about
£42,500 were credited to the Account in the period up to 1992, including
at least £18,000 in cash deposits made through various banks in
Glasgow. The funds were derived
partly from the Respondent’s taxi business and partly from the sale of
used cars: para. 39 of the July
judgment. The funds paid into the
Account accordingly derived from legitimate businesses, but the Respondent paid
the money 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”: para.
42 of the July judgment.
4.
Various
withdrawals were also made from the Account over time, but it has been dormant
since 1992. It currently holds just
under £34,000.
5.
On 4
September 2001, the Respondent was convicted in Scotland of drugs offences and
sentenced to 12 months’ imprisonment. A confiscation order was also made
against him. In the course of the
confiscation investigation, the existence of the Account came to light. On 11 October 2002, the Bank made a
suspicious activity report to the Joint Financial Crimes Unit
(“JFCU”) in connection with the Account. Consent to operate the Account was
withheld by the JFCU on 11 October 2002.
Efforts were then made, both by the Bank and by the JFCU, to obtain
evidence from the Respondent as to the source of the funds in the Account, but
at that stage he refused to cooperate.
6.
In 2003,
the Respondent moved to Cyprus. He
satisfied the Scottish confiscation order, but at about the same time an
investigation was launched here into the source of funds in the Account.
Procedural history & rulings in the court below
7.
Notice was
served on the Respondent under Article 10 of the Forfeiture Law on 3 December
2018 requiring him to show cause why the Account should not be forfeited. After an exchange of evidence, the
matter came on for hearing in the Royal Court, at which the Respondent was
represented by Counsel.
8.
Under
Article 11(4) of the Forfeiture Law, the burden was on the Respondent to
satisfy the court that the property was not ‘tainted property’
within the meaning of Article 2.
The Royal Court held that: “The respondent has failed to satisfy the
Court that the Account is not tainted property”: July judgment, para. 49(ii).[i] In particular, having described the
dishonest tax-evasion scheme (quoted in para. 3 above) the Royal Court went on
to say this: “The
Account was used in, or intended to be used in, that unlawful conduct”: para. 42 of the July judgment. This meant that “the
Account falls fully within the definition of tainted property in Article 2 of
the [Forfeiture Law]”:
para. 42 of the July judgment.
9.
Nevertheless,
the Royal Court refrained from making a forfeiture order at that stage. It noted the English judgment in Ahmed
v. HMRC [2013] EWHC 2241 (Admin), where the court held that an order made
under a comparable English regime had to be compatible with the right to
peaceful enjoyment of possessions under Article 1 of the First Protocol to the
European Convention on Human Rights (“A1.P1”). Taking that approach into account, the
Royal Court in this case noted that it had “no information on the amount of
tax evaded by the respondent” and decided that, since the funds
paid into the Account came from “legitimate businesses” the
court needed to be addressed “on whether it is proportionate to forfeit
the whole of the Account or just that part that represented the taxes evaded”: July judgment, para. 48.
10. A subsequent hearing before the Royal Court
(Commissioner Clyde-Smith sitting alone) led to a further judgment on 31
October 2019, AG-v-Ellis [2019] JRC 219 (“the October
judgment”). The issues at
that hearing where essentially threefold:
(i) first, whether A1.P1 was a relevant consideration at all, and if so (ii)
where the burden of proof lay in relation to the question of proportionality
under A1.P1, and (iii) what impact A1.P1 has on the scope of any appropriate
forfeiture order.
11. In dealing with the issues under appeal, it is
important to understand the precise nature of the learned Commissioner’s
findings, and also the sequence in which he reached them:
(i)
First, he
held that, as a matter of principle, “(i) the Forfeiture Law must be read
and given effect compatibly with A1.P1; (ii) a forfeiture order which does not
respect the principle of proportionality would involve a violation of A1.P1;
(iii) it is incumbent on the court to provide a remedy for any such violation;
(iv) the appropriate remedy lies in the duty of the court not to make an order
which involves such a violation”: October judgment, para. 22.
(ii) Second, he held that “as a
matter of construction” of the Forfeiture Law “it
would be disproportionate for the entire Account, comprising, as it does, the
respondent’s legitimately earned moneys, to be forfeited”,
adding that “As the Court found in Ahmed v. HMRC, the forfeiture order should
be limited to that part which represents the evaded tax and, arguably,
penalties and interest”:
October judgment, para. 23.
(iii) Third, he held that, since the Attorney-General
is the applicant in proceedings under Article 10 of the Forfeiture Law, the
burden is on him “to satisfy the Court that the forfeiture
order he is seeking is proportionate”: October judgment, para. 28.
12. Being dissatisfied with the learned
Commissioner’s rulings on (i) the application of A1.P1 and (ii) the
burden of proof, the Attorney General wished to appeal. It is common ground that the October
judgment was an ‘interlocutory judgment’ within the meaning of
Article 13(1)(e) of the Court of Appeal (Jersey) Law 1961 (the
“1961 Law”). As a
result, the Attorney General needed leave to appeal. That led to another ruling from the
learned Commissioner, dated 4 November 2018, AG-v-Ellis [2019] JRC 220
(“the November judgment”) in which he dealt with two issues:
(i)
First, he
considered whether the Attorney General could satisfy the test for permission
to appeal, as laid down in Crociani v. Crociani [2014] (1) JLR 426. So far as that is concerned, he said
that he was “provisionally of the view” that permission should be
granted, because (i) this is the first time the court has been asked to
construe the Forfeiture Law, and (ii) a decision of the Court of Appeal on the
two issues raised by the Attorney General would be to the public
advantage: para. 4 of the November
judgment.
(ii) He then considered whether the Attorney General
had any right of appeal in relation to an interlocutory ruling made in
forfeiture proceedings under Article 11 of the Forfeiture Law. So far as that is concerned, he held
that it was “arguable” that the Attorney General did not have a right
of appeal: paras. 8 & 9 of the
November judgment. Although he
expressed himself in this qualified way, he must be taken to have concluded
that there was no right of appeal, because he held that the Attorney General
had to demonstrate to this court that he has a right of appeal: para. 10 of the November judgment.
13. The matter then came before Bailhache JA,
sitting as a single judge of this court, on 27 February 2020. He directed the permission application
to be referred to the full court.
That is what is before us, together with the substance of the appeal if
permission is granted.
The issues on appeal
14. By his Notice of Appeal, the Attorney General
seeks an order from this court –
(i)
that the
burden in relation to proportionality under A1.P1 is on the Respondent;
(ii) that, since the Respondent had filed no evidence
on proportionality and did not raise the issue at trial, the issue did not
arise;
(iii) that there be a forfeiture order in relation to
the full amount standing to the credit of the Account, less a suitable sum in
respect of costs.
15. There are accordingly four issues that need to
be resolved:
(i)
first,
whether this court has jurisdiction to hear an appeal by the Attorney General
against an interlocutory ruling under the Forfeiture Law;
(ii) if so, whether permission to appeal should be
granted in this case;
(iii) if so, whether the Royal Court dealt correctly
with the issue under A1.P1;
(iv) if not, what order this court should make.
Issue (1):
jurisdiction
16. The issue on jurisdiction arises in this
way. Article 16 of the Forfeiture
Law provides as follows:
“16 Appeals against
forfeiture orders
(1) Any party (other than the Attorney
General) to proceedings in which a forfeiture order is made (whether under
Article 11 or Article 15) may appeal to the Court of Appeal against the making
of the order.
(2) On an appeal under paragraph (1) the
Court of Appeal may order the release of so much of the property in question as
it considers appropriate to enable the appellant to meet legal expenses in
connection with the appeal.
(3) Any person who is not a party to
proceedings described in paragraph (1), but is affected by such proceedings,
may appeal with the leave of the Court of Appeal against the making of a
forfeiture order.
(4) On hearing an appeal under this Article
the Court of Appeal may make such order and give such directions as it
considers appropriate” (emphasis
added).
17. In the November judgment, the learned
Commissioner observed that an application under Article 11 involved summary
proceedings, and since Article 16(1) expressly prevents the Attorney General
from appealing against a substantive forfeiture order “it
must be arguable that the greater includes the lesser” and that
“there can be no right of appeal against interlocutory decisions made by
the Court in the process leading up to the making of a forfeiture order”: para. 9 of the November judgment.
18. In our judgment, this court does have
jurisdiction to hear an appeal by the Attorney General (and, for the avoidance
of doubt, by a respondent) against interlocutory judgments in proceedings under
the Forfeiture Law.
19. The starting point for any discussion about
this court’s jurisdiction must always be Article 12 of the 1961 Law. Under Article 12(2), this court has
jurisdiction to hear and determine appeals from “any judgment or order”
of the Royal Court “when exercising jurisdiction in any
civil cause or matter” (emphasis added in both cases). The October judgment in this case is
plainly a judgment of the Royal Court in a civil cause or matter. As such, this court undoubtedly has
jurisdiction to hear the Attorney General’s appeal, unless that
jurisdiction has been excluded by some other legislative provision. The possibility of such exclusion is
expressly contemplated by the opening words of Article 12(2): “Subject as otherwise provided in
this Law or in any other enactment …”.
20. The question under this heading is,
accordingly, whether the effect of Article 16 of the Forfeiture Law is to
deprive this court of its jurisdiction.
In answering that question, the court will need to find clear
legislative language before concluding that its jurisdiction has been
excluded: see In the Matter of
the Désastre of Blue Horizon Holidays [1997] JLR 124, at 132, and Gosselin
v. Minister of Social Security [2017] JCA 074, at para. 12.
21. There is no such language in Article
16. Starting with the heading, the
indication is that the whole Article is dealing with “Appeals
against forfeiture orders” not “Appeals against interlocutory
judgments” or “Appeals generally”. (Headings form part of the legislation
and they are capable of being taken into account as an aid to construction
under English law (see for example R v. Okedare [2014] EWCA Crim 1173,
[2014] 1 WLR 4088, at para. 23), and we see no reason why the law of this
jurisdiction should not take the same approach.)
22. The conclusion that Article 16 is dealing with
appeals against substantive forfeiture orders, and nothing else, is reinforced
by the language of its operative provisions. In short, they say nothing at all about
interlocutory appeals.
23. The argument in favour of interpreting Article
16 as excluding this court’s jurisdiction is accordingly founded only on
inference. In our judgment, that
cannot satisfy the applicable test under Blue Horizon and Gosselin. A mere inference which is said to
be drawn by implication from the terms of the Forfeiture Law cannot constitute
‘clear legislative language’.
By definition, it does not constitute ‘language’ at all: rather, it is an implication. And it is not ‘clear’: rather, it is debatable.
24. Indeed, even without the strictures of the test
laid down in Blue Horizon and Gosselin, we would not draw the
inference that Article 16 impliedly excludes the jurisdiction of this
court. As noted above, that
inference is said to be derived from (i) the summary nature of the proceedings,
which imply that no interlocutory appeals should be allowed, and (ii) the
‘greater includes the lesser’ argument which appealed to the
learned Commissioner (see para. 17 above).
Dealing with those two points in turn:
(i)
Article 16
applies not only to summary proceedings under Article 11 but also to
proceedings brought under the ‘general procedure’ pursuant Article
15, which is not summary. It is
therefore false logic to suggest that interlocutory appeals must be excluded by
implication in order to serve the summary nature of the process.
(ii) The ‘greater includes the lesser’
argument is flawed because it proceeds on the assumed basis that a forfeiture
order will necessarily be made in every case. That is not a sound assumption.
25. More generally:
(i)
The
court’s function in conducting any exercise of legislative interpretation
is, first and foremost, to construe the words used by the legislator: see by analogy the English approach
expressed in Wilson v. First County Trust (No. 2) [2004] 1 AC 816, at
para. 56. Taking that approach,
there are no words in Article 16 which can be interpreted as producing the
result for which the Respondent contends.
Accepting the suggestion that the Attorney General is precluded from
bringing interlocutory appeals would involve judicial legislation, not
interpretation.
(ii) Turning from the language of the Article to a
more purposive approach, it is impossible to see why the legislator would have
wanted to exclude interlocutory appeals altogether. Even if Article 16 applied only in
relation to summary proceedings (which it does not) the requirement for leave
under Article 13(1)(e) of the 1961 Law would provide a sufficient control
mechanism for preventing unnecessary interlocutory appeals. By contrast, a blanket prohibition on
all interlocutory appeals would preclude this court from addressing potentially
important issues, such as those raised in this very case, which the learned
Commissioner himself recognized would benefit from a decision of this court.
26. It was pointed out in the course of argument in
this court that, although Article 16(2) provides for the release of funds to
cover the costs of an appeal against a forfeiture order, no equivalent
provision is made in respect of the costs of appeals against interlocutory
orders. That omission might be
taken to support the implication that no such interlocutory appeals were
contemplated. We acknowledge that
that is an oddity in the legislation, but it is nowhere near strong enough to
raise an inference that the unstated effect of Article 16 is to preclude all
interlocutory appeals.
27. The final point that needs to be addressed
under this heading is the suggestion made in argument that, if Article 12(2) of
the 1961 Law confers a right of appeal, and if Article 16(1) of the Forfeiture
Law does not preclude interlocutory appeals by the Attorney General, then
Article 16(1) is entirely otiose.
Its only express effects on that analysis would be (i) to confer a right
of appeal on parties who already have that right by virtue of Article 12(2) of
the 1961 Law, and (ii) to deny a right of appeal to the Attorney General in
relation to the making of a forfeiture order, which he would never want to
appeal anyway because the forfeiture order would presumably have given him
precisely what he was seeking.
28. In this context, there was some debate before
us as to whether Article 16(1) would preclude the Attorney General from
appealing against the scope of a forfeiture order. The question might arise in this case,
for example, if in due course a forfeiture order is made in relation to part
only of the credit balance in the Account.
In that eventuality, would an appeal by the Attorney General be
precluded under Article 16(1), being an appeal “against the making of the order”
(as the Respondent would contend)?
Or would it be allowed under Article 16(1), being an appeal not against
the forfeiture order that was made, but against the court’s refusal to
make a forfeiture order against the balance standing to the credit of the
Account (as the Attorney General would contend)?
29. At the permission hearing on 27 February, the
single Judge expressed provisional agreement with the argument on behalf of the
Attorney General. The issue does
not strictly arise and does not need to be decided for the purpose of this
appeal. For that reason, we will
not express a concluded view on it.
However, having heard fuller argument than was possible at the hearing
before the single Judge, if we had had to decide the point, we would have been
minded to accept the Respondent’s argument instead, and hold that, if a
forfeiture order is made, the Attorney General is not entitled to appeal
against the quantum. Nevertheless,
for the purpose of this appeal it is sufficient to note that, on our
interpretation of Article 16(1), it is plainly not otiose: it has the express effect of precluding
the Attorney General from appealing “against the making” of “a
forfeiture order”, and the exact scope of that prohibition will
be a matter for final determination in another court on another day when the
issue needs to be decided.
Issue (2):
Permission to appeal
30. Having established that this court has
jurisdiction to hear an appeal, the next question is whether permission to
appeal should be granted. This was
not seriously contested by the Respondent.
In our judgment, all three of the criteria in Crociani are
satisfied: (i) the appeal has a
real prospect of success; (ii) it
raises questions of general principle;
and (iii) it also raises issues of law on which a decision of this court
would be to the public advantage.
Issue (3): The
disposal of the substantive issues in the appeal
Introduction
31. As noted above, there are essentially two
issues in the substantive appeal:
(i) First, what role, if any, does A1.P1 play in this case? (ii) Second, which party bears the
burden of proof in relation to the issue of proportionality under A1.P1?
32. In addition to the cases already discussed
above, the parties cited in argument a considerable body of case-law drawn from
this jurisdiction, from England and also from the European Court of Human
Rights (the “ECtHR”): R
v. Harvey (Jack) [2017] AC 105;
In re Doraville [2016] (2) JLR 44; Doraville Properties Corp v. Attorney
General [2017] (1) JLR 64; Gogitidze
v. Georgia (2016) 62 EHRR 14; Veits
v. Estonia (App. № 12951/11, 1 June 2015); AGOSI v. UK (1998) 25 EHRR CD
141; Džinić v. Croatia
(App. № 38359/13, 17 May 2016);
Telbis & Viziteu v. Romania (App. № 47911/15, 26 June
2018); Balsamo v. San Marino
(Apps № 20319/17 & 21414/17, 8 October 2019; Philips v. UK (App №
41087/98, 5 July 2001); Grayson
& Barnham v. UK (Apps № 19955/05 & 15085/06, 23 December
2008); Air Canada v. UK
(Apps № 456/94 & 537/94, 26 April 1995); Yildrim v. Italy (App №
38602/02); Ismayilov v. Russia
(App № 30352/03, 6 November 2008);
Boljević v. Croatia (App № 43492/11, 31 January
2017); Barnes v. Eastenders Cash
& Carry Plc [2015] AC 1; AXA
General Insurance Ltd v. HM Advocate [2012] 1 AC 868; R v. Waya (Terry) [2013] 1 AC
294; Arthur v. AG [2020] JCA
016; and R v. Fulton [2019]
EWCA Crim 163. With one exception
(mentioned below) it is unnecessary and undesirable to discuss these
authorities in any detail, partly because the legal principles are clear, and
partly because it can be dangerous to try drawing too much guidance from
judicial decisions dealing with comparable, but not identical, legislative
regimes in other jurisdictions.
A1.P1 and proportionality
33. The starting point is the Human Rights
(Jersey) Law 2000 (the “2000 Law”). Under Article 4(1), principal and
subordinate legislation must be read and given effect, so far as it is possible
to do so, in a way which is compatible with Convention rights. Under Article 7(1), it is unlawful for a
public authority (which includes a court) to act in a way which is incompatible
with a Convention right.
34. By virtue of Article 1(1) of the 2000 Law,
A1.P1 is a ‘Convention right’.
Both the terms of A1.P1 itself and also the case-law of the ECtHR make
clear that it does not confer an absolute right. In other words, an interference with the
peaceful enjoyment of a person’s possessions can be justified if it
pursues a legitimate public interest, it does so in accordance with the law,
and the interference is proportionate to the public interest that is being
pursued. It is accordingly trite
law under the jurisprudence of the ECtHR that the test of proportionality is
one of the tools used for ascertaining whether there has been a violation of
the right protected by A1.P1. It is
also clear that the application of the test in any given case depends on an
accurate identification of the precise public interest which the legislation
seeks to pursue.
35. On that basis, we would express our full
agreement with the findings of the learned Commissioner in para. 22 of the
October judgment (outlined in para. 11(a) above), subject to one small
refinement. To recap, he held that
(i) the Forfeiture Law must be read and given effect compatibly with A1.P1. That is plainly true by virtue of
Article 4 of the 2000 Law. He also
held that (ii) a forfeiture order which does not respect the principle of
proportionality would involve a violation of A1.P1. That too is plainly true on basis of the
ECtHR case-law. He also held that
(iii) it is incumbent on the court to provide a remedy for any such violation,
and (iv) the appropriate remedy lies in the duty of the court not to make an
order which involves such a violation.
We would respectfully repackage these two latter findings into a single
proposition. It is not so much a
question of the court remedying a violation of A1.P1. Rather, the fact that the court is a
public authority under Article 7 of the 2000 Law means that it cannot do
otherwise than make a forfeiture order which is compatible with the Convention
rights, including A1.P1, in the first place. It does that by (among other things)
applying the test of proportionality.
36. This analysis disposes of one of the
Attorney-General’s arguments.
Paragraph (b) of his Notice of Appeal sought to contend that “no issue of proportionality arose in this
case” because the Respondent “had not adduced any evidence supporting any finding of
disproportionality and had not raised it at the trial”. In our judgment, that submission is
untenable. Article 7 of the 2000
Act imposes an obligation on the court not to act in violation of Convention
rights. The court cannot be
exonerated from that express legislative obligation simply because one party or
the other has failed to raise the issue expressly or failed to adduce evidence
in relation to it. In any situation
where the court is being asked to make an order which impacts on a
party’s rights under A1.P1, the court must consider whether the order
would or would not be proportionate, and if the parties do not raise the point
themselves the court should do so of its own motion.
37. There is an entirely separate question of how
the court sets about ensuring that its decisions are compatible with Convention
rights. The answer to that question
in any given case may indeed be informed by the quality and the source of the
evidence before it. But it would be
wrong to say, as a matter of principle, that proportionality did not arise in
this case simply because the Respondent did not raise the issue or adduce any
evidence capable of supporting a finding of disproportionality. Indeed, it would also be wrong as a
matter of fact to say that the Respondent adduced no such evidence. Irrespective of his subjective intentions
in putting forward his affidavit and documentary evidence, and irrespective of
the legal purpose for which that evidence was in due course deployed in
argument by his lawyers, the fact is that the Respondent did put forward
evidence about the origin of the funds in the Account. That material provided an evidential
basis on which the court could have made a ruling on whether any particular
forfeiture order would or would not have been proportionate. That ruling may or may not have been
perfectly informed, given the limited evidence provided by the Respondent, but
if one side or the other chooses to withhold from the court evidence which is
available to him, he runs the risk that the court will make an adverse order
which it might not otherwise have made.
38. That leads into a consideration of where the
burden lies in relation to the issue of proportionality. Before turning to that question,
however, we would first deal with one other aspect of the October
judgment.
Fact-finding & proportionality
39. Having held (rightly) that proportionality was
a relevant test, the learned Commissioner then said this in para. 23: “I conclude that … it would
be disproportionate for the entire Account … to be forfeited”,
adding that “As the Court found in Ahmed v. HMRC, the forfeiture order should
be limited to that part which represents the evaded tax and, arguably,
penalties and interest”.
This wording indicates that (i) the learned Commissioner was making a
concluded finding of principle as to the outcome of the test of proportionality
and the resultant scope of the appropriate forfeiture order, and (ii) in doing
so, he regarded himself as following the decision in Ahmed. It was only after reaching these
conclusions that he proceeded, in paras. 24 – 29, to consider where the
burden of proof lay in relation to the test of proportionality.
40. In our judgment, this approach involved two
related errors in relation to the learned Commissioner’s application of
the test of proportionality:
(i)
Before
deciding what form of order would satisfy the test of proportionality, the
learned Commissioner should first have resolved the question of where the
burden of proof lies. In any
situation, the question whether any particular order would or would not be
proportionate is fact-based. It is
not a question of legal principle, or of binding precedent. The court must accordingly conclude its
fact-finding function first, before addressing the issue of
proportionality. And, in order to
complete its fact-finding function, the court must first determine where the
burden of proof lies.
(ii) The language quoted in para. 39 above indicates
that the learned Commissioner regarded himself as following the English
decision in Ahmed in holding that the forfeiture order in this case
should be limited to that part of the money standing to the credit of the
Account which represents the evaded tax (and, arguably, penalties and
interest). In our judgment, Ahmed
is not in any sense a precedent which should be followed. That is not because it is merely an
English decision, nor because we consider it to have been wrongly decided in
its own terms. Rather, it was a
decision on the facts of that case, applying the relevant English
legislation. It did not proceed on
the basis of any principle, other than the general proposition that forfeiture
orders must be proportionate. The
facts of this case are different, and the legislation here is different. The question in this case (as in all
cases that arise here under the Forfeiture Law) is whether, in the particular
circumstances of the case in hand, the order sought by the Attorney General is
proportionate. The answer to that
question will always be supplied by a consideration of the available evidence,
in light of the specific provisions of the Forfeiture Law. Other decisions in other jurisdictions
applying other law to other facts are liable to be of very limited use in
providing guidance in any cases here.
41. The facts under consideration in Ahmed
bore certain similarities to the facts of this case. There, the respondent had hidden
substantial quantities of cash in his home with a view to evading tax, but the
source of the cash was a legitimate business. In the event, the court held that (i)
the cash was ‘recoverable property’ (which was the applicable
concept under the English legislation) only to the extent of the unpaid
tax: ibid, at paras. 53 & 60,
and (ii) it would be disproportionate to make a forfeiture order other than in
relation to the unpaid tax. That
was the outcome which the learned Commissioner appears to have regarded himself
as following in this case.
42. However, the fact that that was the outcome in Ahmed
does not logically lead to the conclusion that the same outcome should
necessarily follow in this case.
The possibility of reaching a different outcome resulting from an
application of the test of proportionality in this case from that in Ahmed
can be illustrated by considering carefully the legislative regime under
consideration, and the reasoning in the judgment. In doing so, it is important to
understand the rationale for each of the two separate stages in the judgment in
Ahmad.
43. The court dealt first with the hard-edged
question of classification, i.e. whether the money was ‘recoverable
property’, as defined in the English legislation. In that context, the court noted that
the stated purpose of the legislation was to enable cash “which
is, or represents, property obtained through unlawful conduct”
(emphasis added) to be forfeited:
ibid., at para. 17. In other
words, it was dealing only with the proceeds of crime. As a result, the operative provision in
the Act which enabled the court to make a forfeiture order in relation to
‘recoverable property’ applied only to “property obtained through
unlawful conduct”:
ibid, at para. 19 (emphasis added).
The ratio of the case was that the English legislation “properly
construed” meant that “only that part of the sum obtained by the
appellant that represented evading tax or evaded tax was property obtained
through unlawful conduct”:
ibid, at para. 53.
Accordingly, the answer to the question of classification was expressly
dictated by an application to the facts of the specific definition of
‘recoverable property’ under the English Act.
44. Separately, the court in Ahmed also
considered whether it would have been proportionate in any event to make a
forfeiture order in relation to the full amount of cash, or only the unpaid tax
element (assuming, for the sake of argument, that the full amount had been
‘recoverable property’).
In that context, as noted above, A1.P1 required the court to consider
whether there was a reasonable relationship of proportionality between the
order sought and the purpose of the legislation. Accordingly, when the court in Ahmed
came to consider whether it would be proportionate to make a forfeiture order
in respect of the full amount of the cash or only in respect of the unpaid tax,
it had to take into account “the purpose of the Act, which was to remove
from criminals the pecuniary proceeds of their crime, rather than
deterrence”: ibid, at
para. 42 (emphasis added). Since
the source of the cash was a legitimate business, that led the court to
conclude that it would be disproportionate to make a forfeiture order in
respect of the full amount: ibid,
at para. 54.
45. By contrast, both the avowed purpose and the
operative provisions of the Forfeiture Law are different and much broader. The preamble describes its purpose as
including “the seizure and forfeiture … of cash and other assets suspected
to be property … intended to be used in unlawful conduct”
(emphasis added). As a result, the
definition of ‘tainted property’ under Article 2 of the Forfeiture
Law includes property “which is or, by the Attorney-General …
is reasonably suspected to be or have been (a) used in … unlawful
conduct” (emphasis added).
In other words, the application of the Forfeiture Law is not confined
merely to the proceeds of crime, but extends also to property used in unlawful
conduct (what is sometimes referred to as ‘instrumentalities’, as
opposed to ‘proceeds’).
These features need to be taken into account in any case where a
forfeiture order is being sought.
46. In this context, it is also important to
emphasise the relevant stage in the analysis where proportionality needs to be
considered. Any court which is
asked to make a forfeiture order will need to proceed in two distinct stages,
applying a different legal test at each stage. It is important not to elide the
distinction between these two stages, or to conflate the applicable legal
tests:
(i)
The first
step is to identify the tainted property.
This is a pure exercise of classification, involving an application of
the statutory definition in Article 2 of the Forfeiture Law to the facts under
consideration. In this connection,
we would mention one point in the interests of clarity. There was some discussion, particularly
in the court below, whether the Forfeiture Law needs to be ‘read
down’ under Article 4(1) of the 2000 Law in order to ensure that it is
compatible with Convention Rights.
In our judgment, that is unnecessary. To say that legislation needs to be
‘read down’ to ensure Convention compatibility is to say that, on
its face, the legislation is incompatible, and that its ostensible meaning needs
to yield. That approach is
unnecessary and would be wrong in relation to the interpretation of
‘tainted property’.
Concluding that an asset is tainted property involves no interference
with any Convention rights.
Accordingly, there is no basis for suggesting that the definition of
tainted property is not Convention compliant, and hence no basis for suggesting
that that definition requires to be read down. The only stage at which any potential
arises for interference with Convention rights is when the court comes to
decide the scope of any forfeiture order.
That is the next step.
(ii) Having correctly identified the tainted
property in any given case, the second step is for the court to decide what
forfeiture order to make. Built
into the Forfeiture Law is a recognition of the fact that the court will not necessarily
make a forfeiture order in respect of the whole amount of tainted property in
every case. Article 11(4)
specifically provides that, unless a respondent satisfies the court that the
property is not tainted, the court shall, on the application of the Attorney
General, “make a forfeiture order in relation to the property specified in the
notice or any part of it” (emphasis added). This wording clearly confers on the
court a discretion, to be exercised rationally and fairly by reference to all
the relevant circumstances of each case.
The provision was no doubt included in the legislation at least in part
because it was recognized that the definition of ‘tainted property’
is drawn extremely broadly, and it might not be proportionate to forfeit all of
it in every case. Having said that,
proportionality will plainly not be the only relevant test when it comes to the
exercise of the court’s discretion.
However, as noted above, in so far as the court is exercising its
discretion by reference to the test of proportionality, this is the stage where
it will need to consider the relationship of proportionality between the order
sought by the Attorney General and the purpose of the legislation.
47. In the interests of clarity, we would only add
this. Although one element in
Article 11(4) involves the exercise of a discretion, the provision as a whole
is expressed in mandatory terms:
“Unless the respondent satisfies the Court that the property is not
tainted property, the Court shall … make a forfeiture order in
relation to the property specified in the notice or any part of it”
(emphasis added). This wording
raises a question of interpretation as to whether the court, having decided
that there is tainted property, could, in exercise of the discretion conferred
by the last five words (“or any part of it”), choose not to make
any forfeiture order at all.
Nothing in this judgment should be read as expressing any view on the
correct answer to that question. It
does not arise in this case, we have not heard argument on it, and we do not
need to decide it.
48. In this case, Royal Court properly recognized
the two separate stages outlined in para. 46 above. In the first stage, we understand it to
have concluded that the full amount of money standing to the credit of the
Account (i.e. not just that part representing the unpaid tax) is tainted
property: see the passages quoted
in para. 8 and footnote 1 above. In
our judgment that is an entirely sound conclusion. The Account was opened for the purpose
of committing unlawful tax evasion.
That purpose was achieved not simply by withholding the tax that was due
but by hiding the funds in the Account from the UK tax authorities. The money (all of it) was paid into the
Account for that purpose, and hence the money (all of it) was ‘used
in’ the Respondent’s unlawful conduct within the meaning of Article
2. As the Royal Court said in its
July judgment, “the Account” (i.e. the
continuing contractual relationship between the Respondent as customer and the
Bank as banker) was a facility “used in … unlawful conduct”. As such, it is not merely the unpaid tax
that is tainted property. Rather,
it is the entire balance standing to the credit of the Account from time to
time. That was why the Royal Court
then considered it necessary to consider the extent to which forfeiting the
full amount in the Account would be proportionate.
49. It was at the second stage of the analysis that
the learned Commissioner fell into error.
He formed his assessment of proportionality in this case, at least in
part, by avowedly following Ahmed.
The problem with that approach is that the purpose of the English
legislation is different. The
proportionality of forfeiting the full amount of money standing in the Account
must be assessed by reference to the purpose of the Forfeiture Law, not by
reference to the purpose of any English legislation. As noted above, the purpose of the
Forfeiture Law (unlike the purpose of the English legislation considered in Ahmed)
is not confined to confiscating the proceeds of crime. Rather, it extends also to forfeiting
property which is ‘used in’ unlawful conduct. If, as appears to be the case, the Royal
Court concluded that the full amount standing to the credit of the Account was
used in the Respondent’s unlawful conduct, then it would serve the
purpose of the Forfeiture Law for the full amount to be forfeited. We are not suggesting that the Royal
Court was constrained to find that a forfeiture order in respect of the full
amount standing to the credit of the Account would necessarily be
proportionate. Nor are we
suggesting that the Royal Court would have been constrained to make a
forfeiture order in respect of the full amount in the Account purely because it
would serve the purpose of the legislation in a proportionate manner to do
so. As noted above, the court has a
discretion under Article 11(4), and the discretion must be exercised rationally
and fairly by reference to all the circumstances of the case, not solely by
reference to the test of proportionality under the 2000 Law. But we are saying that the Royal Court
was wrong to conclude that it was disproportionate by reference to the decision
in Ahmed.
50. In our judgment, the learned Commissioner also
fell into error in reaching a firm conclusion on proportionality before
deciding where the burden of proof lay in relation to that issue. That is the final question under this
heading.
The burden of establishing proportionality
51. The Forfeiture Law makes express provision as
to the burden of proof on the question whether property is, or is not,
‘tainted property’.
Article 11(4) expressly provides that “Unless the respondent
satisfies the Court that the property is not tainted property”
(emphasis added) the court shall make a forfeiture order. The burden in relation to that issue is,
therefore, plainly on a respondent.
52. The Forfeiture Law makes no express provision
as to the burden in relation to the issue of proportionality. In our judgment, however, it is
abundantly clear that the burden again lies on a respondent. This conclusion is based on an
accumulation of factors:
(i)
First,
there is very nature of the inquiry.
As noted above, the test of proportionality requires the court to make
an assessment of the extent to which there is a fair balance between the impact
of the proposed forfeiture order on a respondent and the public interest which
the legislation seeks to pursue.
Once it has been established, in any given case, that the property in
question is tainted property, the purpose of the legislation would by
definition be served by making a forfeiture order in respect of that
property. If, in those
circumstances, a respondent wishes to persuade the court to make some lesser
order, it should logically fall on him to persuade the court accordingly.
(ii) Closely related to that is a purely practical
consideration, which would have been clearly in the mind of the legislator when
the Forfeiture Law was being drafted and enacted. Any relevant evidence as to the severity
with which a forfeiture order would impact on a respondent will almost
inevitably be entirely in the hands of that respondent. That being the position, it would impose
an impossible burden on the Attorney General if the legislation required him to
prove (for example) how much tax this Respondent evaded by setting up and
depositing cash in the Account nearly twenty years ago. The test of proportionality is not
simply an indulgence afforded to respondents. Rather, it involves a balancing
exercise, giving due weight both to private and public interests. Accordingly, the Forfeiture Law must not
be construed as throwing onto the Attorney General, representing the public
interest, an insuperable obstacle to satisfying the test of proportionality.
(iii) Third, there is the overall structure of the
summary procedure:
(a) The Attorney General can only initiate the
summary procedure by serving a notice under Article 10(1) if he has reasonable
grounds to believe that money held in a bank account is tainted property, and
if a ‘consent request’ (as defined in Article 10(3)) has been made
and has been refused more than 12 months before the notice is to be
served: Article 10(2). In other words, it is only available in
respect of suspect funds in dormant accounts.
(b) The notice under Article 10 then provides the
account holder with the opportunity of persuading the court under Article 11(4)
that the funds in the account are not tainted property. Although that is a separate question
from the issue of proportionality in terms of the applicable legal test, there
is a close connection between the two in terms of the relevant evidential
material which the court will need to consider in any given case.
(c) The legislation allows the court to make a
forfeiture order in respect of the whole of the tainted property. That is the order the Attorney General
will generally be seeking. Given
the overall context of the summary procedure, as outlined above, the starting
point in any given case must be that there is a working assumption that a
forfeiture order is likely to be appropriate in respect of the entire balance
in the account. That assumption
would need to be rebutted, if at all, by the respondent.
(d) Taking into consideration the relevant stage in
the process when the question of proportionality will be engaged, it is again
logical to infer that the burden would be on the respondent. If he has failed to disprove that the
property is tainted, but nevertheless wishes to try persuading the court not to
make a forfeiture order in respect of the entirety of the tainted property, the
logic of the regime requires him to make his case in that regard.
(e) For these reasons, in our judgment it goes with
the grain of the legislation to conclude that the evidential burden is on the
respondent in respect of the issue of proportionality.
53. We have used the expression ‘evidential
burden’ because we consider it inappropriate, in this context, to talk in
terms of a legal ‘burden of proof’ for two reasons.
(i)
The test
of proportionality involves a judgmental exercise, balancing the degree of
interference with a respondent’s peaceful enjoyment of his possessions
against the public interest objective pursued by the legislation. That being the nature of the exercise,
it does not lend itself to ‘proof’ one way or the other.
(ii) The need to satisfy the requirement of
proportionality arises by virtue of the obligation which is imposed on the
court by s. 7 of the 2000 Law. As
such, it is not in any ordinary sense an ‘issue’ which arises
between the parties, to be ‘proved’ by one and contested by the
other.
54. Para. 52(c)(iii) above speaks of a working
assumption that a forfeiture order will be made in respect of all the tainted
property. That is the logical
starting point where the onus is on a respondent. For the avoidance of doubt, however, it
is only a starting point for the exercise of the court’s discretion under
Article 11(4). It is a working
assumption, not a legal presumption, and it can be rebutted in any case by a
respondent adducing suitable evidence.
No doubt, it will be difficult for a respondent to persuade the court not
to forfeit the proceeds of crime; but, in cases involving instrumentalities,
the question whether all or some of the tainted property should be forfeited
(or potentially none of it, depending on the answer to the question identified
in para. 47 above) will depend on the particular facts of the case, taking into
account for example the degree of proximity between the property and the
unlawful conduct in question.
55. In conclusion, for the reasons set out in this
judgment, the correct interpretation of the Forfeiture Law is that the
evidential burden in relation to proportionality is plainly on the Respondent.
Issue (4):
disposal of the appeal
56. For the reasons outlined above, the learned
Commissioner fell into error (i) in reaching a concluded view on the appropriate
scope of the forfeiture order before considering where the burden lay in
relation to proportionality, (ii) in reaching that conclusion ostensibly on the
basis of Ahmed which does not provide any relevant guidance, and (iii)
in concluding that the burden is on the Attorney General in relation to
proportionality.
57. As noted above, the Attorney General invites us
to make a forfeiture order. We do
not consider that to be appropriate.
No forfeiture order has yet been made by the Royal Court, so there is nothing
in respect of which we can substitute our own judgment.
58. In the circumstances, there is no alternative
to remitting the matter for further consideration by the Royal Court in light
of this judgment. We do so with
considerable reluctance, because there will now have to be a fourth hearing
before the Royal Court in what is meant to be a summary process. It would have been fully within the
Royal Court’s discretion to reach a concluded and final view on all
issues, including proportionality, on the basis of the evidence which the
parties had chosen to deploy at the hearing which led to the July
judgment.
59. Looking to future, although we cannot dictate
the outcome of any case-management decisions the Royal Court may need to take
before finally disposing of this case, we would nevertheless express the clear
view that the Respondent should have adduced all the evidence he wished the
court to consider before the hearing that led to the July judgment. Proceedings under Article 11 are meant
to be summary, and it would plainly be preferable if all relevant issues could
be determined at a single hearing.
Adjourning the case for further evidence and/or further argument would
be an indulgence to a respondent.
In the present case, if the Respondent now makes an application for
leave to put in further evidence, the Royal Court will no doubt require a
satisfactory explanation of why the evidence was not adduced earlier and why it
will make a difference to the substantive outcome.
Authorities
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AG-v-Ellis
[2019] JRC 141.
Ahmed v HMRC [2013] EWHC 2241 (Admin)
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Court of Appeal (Jersey) Law 1961
AG-v-Ellis
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Crociani
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R v. Okedare
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R v. Harvey (Jack)
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Gogitidze v. Georgia
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Veits v. Estonia (App. №
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Džinić v. Croatia (App.
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Telbis & Viziteu v. Romania (App.
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Philips v. UK (App № 41087/98,
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Grayson & Barnham v. UK (Apps
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Air Canada v. UK (Apps № 456/94
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Yildrim v. Italy (App №
38602/02.
Ismayilov v. Russia (App №
30352/03, 6 November 2008.
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Barnes v. Eastenders
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AXA General Insurance
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R v. Waya (Terry)
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Arthur
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R v. Fulton
[2019] EWCA Crim 163.
Human Rights (Jersey) Law 2000