Court of Appeal

Published August 21, 2007

Director of Assets Recovery Agency v Szepietowski and Others (No 2)

Before Lord Justice Waller, Lord Justice Wall and Lord Justice Moore-Bick

Judgment July 24, 2007

On an application for an interim receiving order, the Director of the Assets Recovery Agency had to show that a criminal offence was committed and the property to be recovered was obtained by it or in return for it. It was not necessary to prove that a particular person committed a particular offence on a particular day.

The Court of Appeal so stated when allowing the appeal of the director against a decision of Mr Justice Mitting (unreported [2006] EWHC 3228 (Admin)) granting an application by John Szepietowski to set aside an interim receiving order in relation to two properties made against him, his wife, Ms Susan Ann Serry, Merchant Taylor Ltd, Cobham Investments Ltd and Highrealm Ltd. Mr Jonathan Swift and Mr Piers Harrison for the agency; Mr Jonathan Fisher QC and Mr David Povall for Mr Szepietowski, the other respondents did not appear and were not represented.

LORD JUSTICE WALLER said that the case raised issues of what constituted an arguable case on an application for an interim receiving order under the Proceeds of Crime Act 2002 and the proper approach to the 12-year limitation period for recovery of property obtained by unlawful conduct and the effect of section 32 of the Limitation Act 1980, which extended the limitation period when the action was based on fraud or relevant facts were concealed, on to that 12-year period.

The agency’s claim to the properties was on the basis that they represented original property unlawfully obtained. In the case of mortgage fraud, where the lender was deceived into lending money to purchase property, the relevant date was when the funds were obtained.

Where property was obtained by rents from properties obtained by mortgage fraud, the relevant date was the original obtaining of funds from which the property producing the rent was purchased. Good arguable case The agency must first establish a good arguable case that a certain kind of unlawful conduct occurred and then a good arguable case that property was obtained through that kind of unlawful conduct.

If there was evidence the properly was obtained through unlawful conduct, consideration needed to be given to any untruthful explanation or a lack of explanation where an opportunity had been given to provide it. Limitation In the present case the agency had established a good arguable case subject to limitation. On the assumption that evidence showed that mortgage fraud, which produced funds now represented by the properties, took place before October 23, 1993, namely 12 years before proceedings commenced, the agency might rely on the concealment provisions in section 32(1)(b) of the 1980 Act.

Two aspects of concealment relied on would be concealment from the outset by use of fictitious names and other dishonesty and concealment from the agency once its investigation began.

If section 32(1)(b) applied to actions brought by the agency, even if the concealment on which it relied was at a time when the 12-year period from the obtaining of the property through unlawful conduct had elapsed, that act of concealment at the very least arguably gave rise to the limitation period only commencing once the concealment was discovered or could have been discovered with reasonable diligence.

If section 32 applied in the way suggested the retrospectivity of the 2002 Act might be very great indeed. But, relying on Sheldon v Out-hwaite ([1996] 1 AC 102), the logic was to bring about that result.

In his Lordship’'s judgment, it was arguable that concealment from the agency during its investigation would lead to the limitation period recommencing once the concealment was discovered or with reasonable diligence could have been discovered.

What was the effect of section 316(3) of the 2002 Act, the retrospectivity provision, on deliberate acts of concealment prior to the agency’'s existence in 2003 which were originally acts of concealment from the mortgage lenders?

If it was to be assumed that section 316(3) required that Part 5 of the 2002 Act was in force at times prior to the agency’s commencement for the purpose of deciding whether or not property was recoverable, that must assume the existence of the agency with a cause of action to which prima facie the limitation would apply.

If so, deliberate acts to conceal participation in any unlawful conduct must also be assumed to be acts of concealment from the agency. Those acts took place within 12 years from obtaining the property, indeed contemporaneously with the obtaining of the property. That arguably extended that period to 12 years from the date of discovery or when with reasonable diligence the concealment could have been discovered.

At the interim stage therefore limitation would not provide a clear answer.

As the agency had established a good arguable case the appeal would be allowed and the interim order would be reinstated.

Lord Justice Wall and Lord Justice Moore-Bick agreed.

Solicitors: Mr Jeffrey King, Ludgate Hill; Devonshires.

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