Ministry of Defence v Foxley & Ors [2007] EWHC 2874 (Admin)

Case No CJA/32/19921994 D. No. 647[2007] EWHC 2874 (Admin)Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 10/12/2007
Before
THE HONOURABLE MR. JUSTICE McCOMBE
Between
IN THE HIGH COURT OF JUSTICEClaimantQUEEN'S BENCH DIVISIONClaimantADMINISTRATIVE COURTClaimantIn the Matter of Gordon FOXLEYClaimantIn the Matter of the Criminal Justice Act 1988ClaimantIN THE HIGH COURT OF JUSTICEClaimantQUEEN’S BENCH DIVISIONClaimantBETWEEN:ClaimantThe Ministry of DefenceClaimantGordon FOXLEY and OthersDefendants
Mr. Charles DOUTHWAITE (instructed by C. J. Jones) for ClaimantMr. Andrew MITCHELL QC & Miss Linda SAUNT (instructed by CPS) for DefendantsHearing Hearing date: 6 November 2007(final written submissions delivered on 20 November 2007)
JudgmentThe Honourable Mr. Justice McCombe:
[1]Between 1952 and 1984 Mr. Gordon Foxley (“GF”) was a civil servant working in the Ministry of Defence. Between 2 August 1981 and 4 August 1984 he was Director of Defence Procurement in that Department, clearly a highly responsible post. Among his duties was the oversight of procurement of fuses and ammunition from arms manufacturers.[2]On 3 November 1993 in the Crown Court at Snaresbrook, before His Honour Judge Brookes and a jury, GF was convicted of 12 counts of corruption contrary to Section 1 of the Prevention of Corruption Act 1906. Each count alleged receipt by GF of a secret and corrupt payment from one of three foreign arms manufacturers. On 26 May 1994 he was sentenced by the learned Judge to 4 years imprisonment on each of the 12 counts, to be served concurrently (giving rise to a total custodial term of 4 years) and a confiscation order was made against him in the sum of £1,503,901.80 to be paid within 18 months. He was sentenced to an additional term of 3 years imprisonment in default of payment of the confiscated sum.[3]On 28 May 1992, in anticipation of the confiscation proceedings, a restraint order under the Criminal Justice Act 1988 had been made by Mr. Justice May (as he then was). That was the first step in the proceedings bearing the reference CJA No. 32 of 1992 (“the 1992 Proceedings”). The restraint order is still extant and is in fairly standard form for the time, freezing GF’s assets, some of which were specifically identified, and restraining certain members of GF’s family and others, from dealing with other assets which, it was claimed by the Crown, were beneficially owned by GF.[4]On 27 May 1994, the day after sentence in the Crown Court, the Ministry of Defence (“MOD”) began civil proceedings against GF, members of his family, the foreign arms companies and a company with which GF was connected. Those proceedings bear the reference 1994 D No. 647 (“the 1994 Proceedings”). On that day, Mr. Justice Curtis granted a Mareva injunction (a freezing order) in that action, expressed to be without prejudice to the effect of the restraint order in the 1992 Proceedings, restraining GF’s son, Paul Foxley (“PF”), from disposing of or dealing with his assets generally up to a value of £3,578,400. The order also restrained eight members of GF’s family from dealing with any assets (in excess of a value of £5000) transferred to them by GF since 1980.[5]Both the restraint order in the 1992 Proceedings and the freezing order in the 1994 Proceedings are still in force, with certain variations which I shall mention (so far as material) below.

(B) The Applications and the history of the proceedings

[6]I have before me two applications, issued on behalf of GF and other interested members of his family on 10 January 2007, for orders striking out both sets of proceedings on the grounds of delay.[7]On 12 February 1996 Sir John Wood (sitting as a Judge of the High Court) granted summary judgment under RSC Order 14 in favour of MOD against GF and PF. The judgment against GF was for £415,439.00, DM 3,398,550.00 and 356,492 Norwegian Kroner. Judgment against PF was for £969,771. Both judgments were with awards of compound interest at one percent above bank base rate with yearly rests. GF and PF were made bankrupt on the basis of those judgments on 2 September 1996.[8]By an Order of Mr. Justice Turner made on 8 August 1996, in the 1992 proceedings, Mrs. Sara Dayman of the accountants’ firm BDO Binder Hamlyn was appointed receiver of assets subject to the confiscation order. I was told at the hearing that she was also appointed receiver for the purpose of the judgments in the 1994 Proceedings and became the trustee in bankruptcy of GF and PF. I have now been told that she was not PF’s trustee; that task was given to another Insolvency Practitioner. Mr. Justice Turner’s order also directed members of GF’s family within 28 days to make affidavits in respect of property received from GF since 1 January 1979. Cross-examination on the affidavits was directed within 21 days after service of the affidavits and a directions hearing was ordered to take place during October 1996. All the members of GF’s family ordered to serve affidavits (save for PF) did so. The directions hearing never took place.[9]GF applied to the European Court of Human Rights to set aside the confiscation order. His application in this country to stay the enforcement proceedings pending resolution of the application to the European Court was rejected by an Order of 25 February 1997. His application to the European Court was rejected as out of time and inadmissible on 12 October 1999.[10]Between July 1996 and September 1997 MOD settled their claims in the 1994 Proceedings against the foreign arms companies. I am told that the settlement sums amounted to £3,390,371.[11]Nothing has happened in the 1992 Proceedings since the making of Mr Justice Turner’s order in August 1996 and the filing of the affidavits of all but one of the family members pursuant to that order. Nothing has happened in the 1994 proceedings since the settlement of the claims against the arms companies. The only exception to what is said in the last two sentences is that in March 2000 two members of GF’s family, a daughter and son in law, applied in March 2000 to strike out both sets of proceedings against them and they were, I was told, discharged from the proceedings during 2002. Even this step prompted no further action in either set of proceedings by the CPS or MOD.[12]In a witness statement dated 6 December 2005 (apparently served on the parties under cover of a letter of 7 December 2005) Mr. Graham Grist of the Central Confiscation Branch of the CPS informs the court that the prosecuting authorities, concerned at the number of defendants who were failing to pay confiscated sums, have set up a “Task Force” dedicated to enforcing outstanding orders. He says that in November 2005 his office made enquiry of the Magistrates Courts accounts office as to the amounts recovered under the confiscation order in this case. They learnt that nothing had been recovered. (In passing, it seems to me surprising that after 11 years the CPS did not seem to know that fact from their own resources nor did they seem to know what the overall status of recoveries from the Foxley family was.) It appears that the setting up of the “Task Force” led to the issue of an application, over seven months later on 31 July 2006, for further directions in the 1992 Proceedings. On 10 January 2007 the applications to strike out both sets of proceedings were issued.

(C) Other recoveries by the Crown

[13]In addition to the money recovered in the settlements with the arms companies evidence has been put before me to the effect that since the convictions other sums of money have been recovered from various Foxley family sources amounting to about £800,000. The make up of this figure, as contended for by the Foxley family (and not substantially contested by the Crown) is set out conveniently in paragraph 2.11 of the written argument of Mr. Douthwaite of Counsel who appeared for the applicants before me. The principal specific items are GF’s share in the matrimonial home which was not included in the confiscation order (acquired by his wife for £453,513.70), the proceeds of sale of a flat in Switzerland (£85,000), money in a joint account of GF and his wife (£35,791.05) and part of the proceeds of a property in the name of another daughter and son-in-law of GF (£17,000). GF also points out that the MOD suspended payment of his pension in 1992 and declared it forfeit in May 1998: it is estimated on his behalf that the value of the pension forfeited to date is about £200,000.[14]The Crown Prosecution Service and MOD, who appeared before me by Mr. Mitchell QC and Miss Saunt, submit (probably technically correctly) that in fact nothing whatsoever has been paid pursuant to the confiscation order and that the bulk of the recoveries have been made from the foreign companies which made the corrupt payments in the first place and that the balance has come from the bankruptcies of GF and PF following the judgments in the 1994 Proceedings.

(D) The arguments and discussion

[15]On these facts, Mr. Douthwaite, in an able argument for the applicants, submits that both sets of proceedings should be struck out. He argues that the 1994 Proceedings are subject to the automatic stay imposed on old proceedings in May 2000 under the transitional arrangements of the CPR and that the stay has not been and should not be removed. Further, he argues both actions should, in any event, be struck out under the Court’s inherent jurisdiction or for failure to comply with a rule, practice direction or order under CPR r. 3.4(2)(c).[16]Mr. Mitchell QC, in his persuasive argument, contends that the CPS and MOD have already indicated a willingness to restrict the ambit of the claims to what were called the “core” elements and that those core claims can still be fairly tried between the Crown and the various interested members of the Foxley family. He submits that while the Crown recognises, with regret, the delays that have occurred, public policy requires that proceedings to enforce confiscation orders should be brought to a proper conclusion wherever possible. It would be wrong, he said, to punish society at large for the failings of the CPS to prosecute the claims expeditiously and to permit property corruptly acquired to remain with the defendant, GF, or his family.[17]Part 51 of the CPR consigned the fate of proceedings issued prior to 26 April 1999 to a Practice Direction. In the Practice Direction such proceedings are called “existing proceedings”: see paragraph 1(1). Paragraph 19 of the Direction then provides as follows:
“(1) If any existing proceedings have not come before a judge, at a hearing or on paper, between 26 April 1999 and 25 April, 2000, those proceedings shall be stayed. (2) Any party to those proceedings may apply for the stay to be lifted. (3) Proceedings of the following types will not be stayed as a result of this provision: …(c) where the court is dealing with the continuing administration of an estate or a trust or a receivership, (4) For the purposes of this paragraph proceedings will not be “existing proceedings” once a final judgment has been given.”
[18]Mr. Douthwaite referred me expressly to paragraph 19(3)(c) which, in quite general terms, seems to exclude from the stay cases where the court “is dealing” with a receivership. In both the 1992 Proceedings and the 1994 Proceedings there are extant receiverships. I have queried in my mind whether the court can be said to be “dealing” with a receivership after such a long period of inactivity. However, I consider that the rule makers must have been concerned to enable receivers to act, to hold assets and to deal with them as required after the April 2000 date without the complication of having to apply for a stay of proceedings lifted and, therefore, made a general exception for receivership cases. Mr. Douthwaite did not address submissions to me as to how the general exception to the stay could be got round in this case. I hold, therefore, that the stay does not apply to either set of proceedings with which I am concerned. Further, of course, in the cases of GF and PF in the 1994 Proceedings final judgment has been given in favour of MOD.[19]I turn to the question of delay and the consequences.[20]Mr. Mitchell QC expressly accepted that the delays here, in each set of proceedings, were sufficient to bring into play the Court’s discretion to impose sanctions, including the jurisdiction to strike out. He was not concerned to attack the contention that the jurisdiction arose under the inherent jurisdiction or under the CPR. His argument was that the sanction of a strike out in either case was disproportionate and that other remedies were available to the Court to redress any injustice that might otherwise arise. He pointed out that the CPS had already accepted that it could no longer be just to seek the committal to prison of GF for failing to meet the confiscation order. It was open to the court to make a declaration that the parties’ rights under Article 6 of the European Convention on Human Rights had been infringed, as occurred in the case of CPS v Bentham [2005] EWHC 2013 (Admin) before Mr. Justice Henriques, a case to which I shall return. The Court could then concentrate on the “core elements” of the claims, affecting four properties only. A claim should not be struck out, Mr. Mitchell submitted, unless it was clear that a fair trial could not be had within a reasonable time within the meaning of Article 6 of the ECHR.[21]Mr. Mitchell referred me in this respect to a letter of 3 May 2007 from the CPS to the applicants’ solicitors making an “open offer” to settle the confiscation proceedings on the basis of the proceeds of sale of three of the properties being applied towards satisfaction of the confiscation order while the other claims would be abandoned. Clearly, the cases were not settled, on that or any other basis, in the interim and I am not aware of any express abandonment by the CPS of any of the claims. I was not taken to any such offer on the part of MOD. Indeed, no such abandonment was made by Mr. Mitchell in his address to the court. Further, Mr. Mitchell maintained the Crown’s desire to proceed against one of the properties in respect of which, in May, there had been an apparent willingness to drop as part of a settlement (namely, 43 West Dean, Salisbury).[22]Mr. Douthwaite took me to the Points of Claim and Points of Defence served pursuant to an Order of Sir Michael Harrison (sitting as a Judge of this Court) on 24 January 2007. From those statements of case, he submitted, that there are clear factual disputes between the Crown and members of the Foxley family as to how the finance for the acquisitions of these properties (representing the “core claims”) was raised. He pointed out that the underlying transactions occurred between 15 and 25 years ago and argued that there must inevitably be severe prejudice to anyone trying to defend claims of this type at such a distance of time. Some of the acquisitions were not recent even at the time when the two sets of proceedings were begun in 1992 and 1994 respectively. One cannot be confident, he argued, that even the underlying documentation can readily be available.[23]I was referred by both Counsel to the well-known passage in the judgment of Lord Woolf MR (as he then was), dealing with sanctions for procedural delay, in Biguzzi v Rank Leisure plc [1999] 1 WLR 1926 at pp. 1932-4. In that passage, Lord Woolf was concerned to point out the array of sanctions made available under the CPR which might enable a court to do justice to the parties, after delay had occurred, without resorting to the draconian measure of a strike out order. The important factor remains, however, to deal with each case justly and not to strike out an action where, in spite of delay, there can still be a fair trial.[24]I was also reminded of the series of authorities, pre-dating and post-dating the CPR, in which the courts have stressed the importance of prompt progress to trial in case where a claimant has had, as in this case, the distinct benefit of freezing orders or search and seizure orders: see e.g. Lloyds Bowmaker Ltd. v Britannia Arrow Holdings plc [1988] 1 WLR 1337, per Lord Justice Glidewell at p. 1347 and per Lord Justice Dillon at pp. 1349-1350 and Annodeus Entertainment Ltd. v Gibson (Unreported) 2 February 2000, at pp. 5-6 of the transcript, per Mr Justice Neuberger (as he then was).[25]Mr. Douthwaite submitted that it was clear that neither the CPS nor the MOD had shown any interest at all in progressing these actions for very many years: the CPS had only been prompted by a trawl through long dead cases in 2005 and the MOD had achieved all they wanted in the 1994 Proceedings by the time of the settlement with the three arms companies in 1996 and 1997.[26]With regard to the last point, I was taken to a very recent witness statement of Mr. PR Messer, Assistant Treasury Solicitor, who states that subject to the resolution of the 1992 Proceedings MOD has no further interest in the 1994 Proceedings. He goes on to say, however, that if the 1992 Proceedings were to fail, that would revive the possibility of the trustee in bankruptcy of GF and PF pursuing the claims against the Foxley family. He states that the MOD would not regard an outcome which left the family with “bribe money” as being a proper outcome. In submissions, Mr. Mitchell argued that the MOD had quite properly remained in the wings with its 1994 Proceedings pending the outcome of the enforcement action in the 1992 Proceedings. However, I was not taken to any correspondence or other documents written during the long delays bringing to the attention of the other parties to the litigation that this was the attitude of MOD. Nor have I seen any evidence to show that MOD was making any attempt whatever to prompt the CPS to pursue the 1992 Proceedings.[27]I should finally refer to the Bentham case (supra) decided by Mr Justice Henriques. In that case, at the trial of a substantive claim for declarations of property rights in the context of confiscation proceedings under the Drug Trafficking Offences Act 1986, two interested parties sought to have the claims dismissed or stayed by reason of the delays in prosecution of the action. The history of the proceedings went back to original arrests and restraint orders in 1993. Reliance was placed upon Article 6 of the ECHR. The learned Judge found as a fact that there had been two periods of unreasonable delay amounting to about 23 months in total. He went on to consider the consequences and said, at paragraphs 54 to 57 of his judgment, the following:
“54. Has there been a breach of the reasonable time requirements? If the Court finds that there has been a breach of the reasonable time requirements: “it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.”
Human Rights Act S.8. Mr. Turner contends for a stay of the present proceedings and asks me to lift the restraint orders. 55. In assessing whether there has been a breach of the reasonable time requirements I must consider the facts of the case, the conduct of the parties and the reason for any delay. These are proceedings brought by the State to enforce a criminal order made in criminal proceedings against the Defendant. 56. In Attorney General’s Reference (N0. 2 of 2001) [2004] 2 WLR 1 at paragraph 22, Lord Bingham stated “the Convention is directed not to departures from the ideal but to infringements of basic human rights, and the threshold of proving a breach of the reasonable time requirement is a high one, not easily exceeded. Judges should not be faced with applications based on lapses of time which, even if they should not have occurred, arouse no serious concern. 57. There can be no doubting that there has been a departure from the ideal in the present case. Mr Talbot acknowledges that fact but contends that in the context of the circumstances of this case as a whole this is not an excessively long period and it cannot properly be characterised as an infringement of basic human rights.” “it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.” Human Rights Act S.8.[28]Weighing up the alleged prejudice to the parties that had been identified, Mr. Justice Henriques decided that the appropriate remedy for the breach of the Convention right, that he found had occurred, was to make a public announcement of the fact of the breach. He was not satisfied that any more was required as a proportionate response, balancing the interests of the individuals and the community as a whole. In his view, the delay had not prejudiced the fair hearing of the substantive issues.[29]In this case, however, the delays are far more serious. Nothing whatsoever has been done in either set of proceedings since 1997. For the reasons advanced by Mr. Douthwaite the potential prejudice is far more palpable. So far as balancing the interests of individuals and those of the public are concerned, it is not good enough for the Crown to say that a more favourable view must be taken of delay in efforts to recover the fruits of crime than of delay in ordinary civil litigation. What is in issue is whether these disputed assets are proceeds of crime at all. I have not been shown any material to demonstrate that this is a foregone conclusion. Real issues of fact require to be resolved. The real targets of these ancient proceedings are not GF himself, the convicted criminal, but other members of his family who protest their innocence.[30]I also take with a pinch of salt protestations of “the public interest” in a case when those charged with guarding that interest have shown as little enthusiasm in their duties in that regard as the CPS and MOD have done in this case. I think that it is clear that in reality the Crown (as custodians of the public interest) lost interest in these cases after the settlement with the arms companies and the other recoveries that I have mentioned. Interest only revived when the “Task Force”, referred to by Mr. Grist, resolved that something should be done to resuscitate the dead, amongst cases of this type generally.[31]In my judgment, it is clear that a fair trial of these proceedings is no longer possible, for the reasons mentioned, and I propose to strike them both out, save in so far as final judgments have already been obtained.[32]At the opening of his oral submissions at the hearing of these applications, Mr. Mitchell very frankly drew my attention to the fact (but not the text) of the decision of the European Court of Human Rights in Welch v United Kingdom [1995] 20 EHRR 247. In that case the Court held that a confiscation order made under the Drug Trafficking Offences Act 1986 constituted a breach of Article 7 of the Convention. The applicant had been convicted in August 1988 of drug offences committed in 1986. The relevant provisions of the 1986 Act came into force on 12 January 1987. The successful argument on his behalf was that the order imposed a retrospective criminal penalty on him in breach of Article 7.[33]GF was convicted of offences committed between 11 December 1979 and 7 August 1984. The relevant provisions of the Criminal Justice Act 1988 came into force on 3 April 1989. GF’s application to the European Court argued that a breach of Article 7 had occurred in his case also.[34]Full argument was not addressed to me on the Welch case at the hearing. It seems only to have come to Mr. Mitchell’s attention very late and had not been known to Mr. Douthwaite before Mr. Mitchell drew it to his attention. Accordingly, I directed written submissions to be lodged on the impact of this case.[35]Mr. Douthwaite now submits that but for GF’s application to the European Court having been lodged out of time it would inevitably have succeeded in the light of the decision in Welch’s case. It is argued that this feature makes it unjust for the Crown to try to maintain either set of proceedings.[36]For the Crown it is argued that it would always have been open to the Crown Court in GF’s case to have imposed a fine in addition to a term of imprisonment and that GF did not therefore receive a “heavier penalty” than that permitted at the time of the offences. It is pointed out that such was in substance the submission made on the merits at the time that GF’s application was before the European Court. It is said that, following the dismissal of the claim by the European Court, the Crown still considered its submissions on Article 7 in GF’s case to be correct in law and therefore the CPS “proceeded with the view that the confiscation order should be enforced” (see paragraph 5 of the Crown’s Note of 19 November 2007). However nothing whatever had been done to that end, even after GF’s application for a stay of the enforcement proceedings (pending the decision in Strasbourg) was rejected in February 1997 and still nothing was done after the European decision was known.[37]The merits of the point arising under Article 7 in this case have never been authoritatively decided and no reliance has ever been placed upon it by GF or by his family, in the context of either the 1992 or the 1994 proceedings, until now. I consider the point to be a neutral one in the context of the applications which I have before me. I do not consider that it adds to or detracts from the arguments on either side. However, for reasons already given, I shall strike out both sets of proceedings, save in so far as judgments have already been obtained in them.