Director of the Assets Recovery Agency v Szepietowski & Ors [2006] EWHC 2406 (Admin)

Case No C08611 2005[2006] EWHC 2406 (Admin)THE HIGH COURT OF JUSTICEQUEEN'S BENCH DIVISIONADMINISTRATIVE COURTVenue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday 29th September 2006
Before
MR JUSTICE SILBER
Between
THE DIRECTOR OF THE ASSETS RECOVERY AGENCYClaimantJOHN SZEPIETOWSKIFirst RespondentSUSAN ANN SERRYSecond RespondentMERCHANT TAYLOR LIMITEDThird RespondentsCOBHAM INVESTMENTS LIMITEDFourth RespondentsHIGHREALM LIMITEDFifth Respondents
(Transcript of the Handed Down Judgment ofWordWave International LtdA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7421 4040 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Jonathan Fisher QC and Nicholas Vineall (instructed by Bivonas) for First RespondentDavid Barnard and Piers Harrison (instructed by Treasury Solicitor) for ClaimantNone of the other respondents were represented or presentHearing Hearing date: 5 September 2006
JUDGMENT

I. Introduction

[1]The issue raised on this application is whether on an application for the appointment of an interim receiver over certain property, an enforcement agency (such as the Assets Recovery Agency) is entitled to rely on information about that property which had only come to light in result of investigations conducted pursuant to a previous interim receiving order which related to different wrongdoing by the proposed defendant.

II. The facts

[2]The background to this application is that the Director of the Assets Recovery Agency (“the applicant”) on a without notice application obtained an interim receiving order on 27 July 2005 (“the first order”) against John Szepietowski (“the defendant”), his wife and two companies, both of which were called Countess Investments Limited with one of them having been incorporated under the laws of England or Wales and the other having been incorporated under the laws of British Virgin Islands. Ms Sarah Dayman was appointed as an interim receiver under the first order.[3]While performing her duties under the first order, the interim receiver obtained information relating to alleged different wrongdoings and some of this information led to the applicant applying for and obtaining a second interim receiving order on 25 October 2005 (“the second order”) against the defendant, his wife and three different companies, which were Merchant Taylor Company Limited, Cobham Investments Limited and Cobham Investments Leisure Limited. Ms Sarah Dayman was also appointed as an interim receiver under the second order.[4]The defendant and his wife have applied for a discharge of the second order. The only application before me today is that of the defendant because his wife’s application for a discharge has been adjourned. The defendant has raised a substantial number of issues as to why the second order should be discharged. They include contentions first that there has been non-disclosure by the applicant when she applied for and obtained the second order, second that certain property covered by the second was not “realisable property” as it fell outside the regime of the Proceeds of Crime Act 2002 (“the Act”) and third that the applicant had delayed in serving a claim form. For a whole series of reasons, these matters could not be dealt with at the present hearing and have had to be adjourned.[5]The only issue left outstanding at the hearing in front of me was whether the defendant was entitled to use on the application for the second interim order information obtained on the first order but which related to different alleged wrongful conduct from that which led to the first order. The defendant submitted that the applicant was not so entitled while the applicant’s case was that she was entitled to use this information. This issue was heavily contested but during the early part of the application before me, Mr. Jonathan Fisher QC, counsel for the defendant, conceded that:
“the second interim receiving order was not granted on the basis of improperly obtained evidence when the Director of the Asset Recovery Agency relied on information obtained by the interim receiver as a result of the execution of the first interim receiving order”
[6]Mr. David Barnard, counsel for the applicant, then contended that as the issue had been fully ventilated in written skeleton arguments and as the Act did not deal with this issue, I should make a declaration as against the defendant that the applicant was entitled to use on the application for the second order information obtained on the first order but which related to different illegal conduct from that which led to the first order. He also said that the applicant and the interim receiver would welcome guidance on whether the permission of the Court had to be obtained by the applicant or by the interim receiver before such information could be used on the second application. I considered that I should if possible try to resolve these matters.[7]The Act contains various relevant provisions explaining the rights and duties of an interim receiver. As I will explain, it is noteworthy that the Act specifically refers to the powers of the interim receiver with regard to recoverable property “in relation to the same unlawful conduct”. The specific issue which I have to consider relates to the different position, which is where the property discovered by the interim receiver relates to different unlawful conduct.[8]The interim receiver’s functions are set out in section 247 of the Act, which provides (with my emphasis added) that: “(1) An interim receiving order may authorise or require the interim receiver-(a) to exercise any of the powers mentioned in Schedule 6,(b) to take any other steps the court thinks appropriate, for the purpose of securing the detention, custody or preservation of the property to which the order applies or of taking any steps under subsection (2). (2) An interim receiving order must require the interim receiver to take any steps which the court thinks necessary to establish- (a) whether or not the property to which the order applies is recoverable property or associated property, (b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if it is, who holds it. (3) If- (a) the interim receiver deals with any property which is not property to which the order applies, and (b) at the time he deals with the property he believes on reasonable grounds that he is entitled to do so in pursuance of the order, the interim receiver is not liable to any person in respect of any loss or damage resulting from his dealing with the property except so far as the loss or damage is caused by his negligence”. (b) to take any other steps the court thinks appropriate, for the purpose of securing the detention, custody or preservation of the property to which the order applies or of taking any steps under subsection (2). (2) An interim receiving order must require the interim receiver to take any steps which the court thinks necessary to establish- (a) whether or not the property to which the order applies is recoverable property or associated property, (b) whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if it is, who holds it. (b) at the time he deals with the property he believes on reasonable grounds that he is entitled to do so in pursuance of the order, the interim receiver is not liable to any person in respect of any loss or damage resulting from his dealing with the property except so far as the loss or damage is caused by his negligence”.[9]The interim receiver has reporting obligations under the Act which are owed to both “the court” which appointed him (which, in this case, is the Administrative Court) and to the ‘”enforcement authority” (which, in this case, is the body of which the applicant is the Director). Section 255 of the Act provides (with my emphasis added) that:
“(1). An interim receiving order must require the interim receiver to inform the enforcement authority and the court as soon as reasonably practicable if he thinks that- (a) any property to which the order applies by virtue of a claim that it is recoverable property is not recoverable property, (b) any property to which the order applies by virtue of a claim that it is associated property is not associated property, (c ) any property to which the order does not apply is recoverable property (in relation to the same unlawful conduct) or associated property, or (d) any property to which the order applies is held by a person who is different from the person it is claimed holds it, or he thinks that there has been any other material change of circumstances. (2). An interim receiving order must require the interim receiver- (a) to report his findings to the court, (b) to serve copies of his report on the enforcement authority and on any person who holds any property to which the order applies or who may otherwise be affected by the report.”
[10]It will be noted that both sections 247 (2) (b) and 255 (1) (c) of the Act specifically contain the limiting words “in relation to the same unlawful conduct”. Thus under the terms of his or her interim receiving order, the interim receiver is obliged to take steps which the court thinks necessary to establish “whether or not any other property is recoverable property (in relation to the same unlawful conduct) and, if it is, who holds it.”It follows that where an interim receiver discovers “recoverable property” “in relation to the same unlawful conduct”, he or she must first inform the court and the enforcement authority as soon as reasonably practicable “if he or she thinks that …any property to which the order does not apply is recoverable property …or associated property” (section 255(1) (c) of the Act).[11]The Act is silent on the consequences of an interim receiver finding in the execution of the order recoverable property which is not in relation to the same unlawful conduct which led to the interim receiving order being made but which relates to different unlawful conduct. In my view, the absence of any provisions on this issue does not mean that the interim receiver cannot use this information and counsel for the defendant does not suggest otherwise. Four factors individually and cumulatively lead me to this conclusion and I will now set them out in particular order of importance.[12]First, if the applicant could not use information obtained by the interim receiver relating to different unlawful conduct, this would undermine what are described in the marginal note as “general purposes” of the civil recovery provisions in the Act and they are set out in section 240. They provide with my emphasis added that:
“(1) This part has effect for the purposes of- (a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct, (b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates court …” (a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct, (b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates court …”
[13]By passing to the applicant information about recoverable property even in relation to different unlawful conduct of a defendant from that involved in the first interim receivership order, the interim receiver would be taking a step which in the wording of section 240 (1) (a) of the Act would “enable the enforcement agency [in this case the applicant] to recover in civil proceedings before the High Court property obtained through unlawful conduct”. By the same token, by using that information obtained from the interim receiver, the applicant would be complying with and acting in a way consistent with the statutory purpose. Another way of expressing that point would be that to prevent the applicant from using this information would be to undermine the statutory purposes.[14]Second, there would be a serious loophole in the Act if the applicant and an interim receiver were not permitted to use the information and property relating to unlawful conduct of a defendant other than the wrongful conduct relied upon for the first application for interim relief; that state of affairs would in essence confer a form of immunity from the provisions of the Act on a wrongdoer who had property, which had been obtained through “unlawful conduct”. It goes without saying that such a position would be inconsistent with the general purpose of the Act as set out in section 40 and which I have set out in paragraph 12 above[15]Third, it was an accepted principle of common law before the Police and Criminal Evidence Act 1984 came into force that, in the words of Lord Denning MR, a constable equipped with a search warrant: “may seize not only the goods which he reasonably to be covered by the warrant, but also any other goods which he believes on reasonable grounds to have been stolen and to be material evidence on a charge of stealing or receiving against the person in possession of them or anyone associated with him” (Chic Fashions (West Wales) Ltd v Jones [1968] QB 299 at 313).[16]Salmon LJ in the same case explained that:
“If the preservation of law and order requires that a policeman shall have the power to arrest a man whom he believes on reasonable grounds to be a thief or a receiver, it is difficult to understand why the policeman should not have the power to seize goods on that man’s premises which the policeman believes on reasonable grounds that he has stolen or received”
(at page 319).[17]By analogy, it would follow that any material found by the interim receiver in executing the first interim receivership order indicating different unlawful conduct from that which was the basis of the first order could be used on a second application.[18]Fourthly, I conclude that there is no basis at common law for restricting the use of that information in the absence of a provision in the first interim receivership order preventing the use of the information obtained in executing that order. After I reached that conclusion, I came across the decision in L.T. Piver Sarl v S. & J Perfume Co Ltd [1987] FSR 159 in which a representative saw an article on premises which he was inspecting pursuant to an Anton Piller order which he thought infringed the rights of third parties. It was held that he was at liberty to report this to the third party concerned.[19]I have explained that Mr. Barnard asked me to give guidance on whether an enforcing Agency or an interim receiver has to apply to the court for permission to use in a second application for the appointment of an interim receiver information, which had been obtained following the appointment of a previous interim receiver and which related to different unlawful conduct from that relied upon in the second application. I have received a very thoughtful and illuminating letter from Ms Dayman. I can understand why this is important issue for her and for the applicant but I have concluded that it would be inappropriate to give such guidance in this case for two reasons.[20]First, this issue does not need to be determined in the present case as against the defendant because he has accepted that the claimant was entitled to rely on information discovered by the interim receiver while executing the first order. So I have not heard any submissions against the approach advocated by the claimant and by Ms Dayman..[21]Second, the issue might well not be totally straightforward and Gee on Commercial Injunctions (2004) shows the difficulties that might arise (see especially pages 746ff). To resolve this issue of principle, it would be necessary to have detailed submissions on a contested hearing. Not surprisingly, counsel did not envisage this issue arsing when they prepared their admirable written skeleton arguments in this case and in any event there is no dispute between the parties on this issue.[22]The claimant is entitled to a declaration as against the defendant that she and the interim receiver were entitled to use in the application for the second order information which had only come to light as a result of information obtained pursuant to the first order but which related to different alleged wrongdoing by the defendant from that relied upon to obtain the first order. It has not been necessary on this application to determine if the claimant or the interim receiver should have obtained the permission of the court to use on the application for the second order the information obtained by the interim receiver pursuant to the first order but which related to different alleged wrongdoing by the defendant