National Crime Agency v Azam & Ors (No. 2) [2014] EWHC 3573 (QB)

Case No ELQ/12/1039[2014] EWHC 3573 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 30 October 2014
Before
MRS JUSTICE ANDREWS DBE
Between
NATIONAL CRIME AGENCYClaimantAMIR AZAM AND OTHERSRespondents
Jonathan Hall QC (instructed by The National Crime Agency) for ClaimantAndrew Bodnar (instructed by Brett Wilson LLP) for Second RespondentHearing Hearing dates: 27 October 2014
Judgment
[1]In January 2011, the National Crime Agency (“NCA”) made a claim under s.243(1) of the Proceeds of Crime Act 2002 (“POCA”) for a Civil Recovery Order (“CRO”) in respect of various properties and accounts owned by the First Respondent, Amir Azam, (“Mr Azam”) or held in the names of various members of his family, including his then wife, the Second Respondent Kalsoom Sanam (formerly Kalsoom Amir) (“Kalsoom”) who has since divorced him. The NCA claimed that Mr Azam was a career criminal – chiefly a drug dealer and money launderer - and that the properties were all “recoverable property” derived from his criminal conduct.[2]On 31 July 2014, following the trial of the issue as to whether the claimed assets were “recoverable property”, I handed down a judgment [2014] EWHC 2722 (QB) in which I found that the NCA had proved its case in respect of all the assets claimed save one, a property in Spain. For ease of reference, in this judgment I shall refer to the parties and the properties by the same names as in my earlier judgment.[3]Since all the properties and accounts claimed by the NCA were the subject of a Property Freezing Order (“PFO”), at one stage in the proceedings Kalsoom made an application for an exclusion to enable her to seek advice from specialist counsel regarding any claim she might have in matrimonial proceedings against Mr Azam for financial relief. However that application, which the NCA opposed, was never heard by the court. Instead, a compromise was reached, leading to an order being made by consent by Singh J. on 14 May 2013. That order recited that: i) The NCA confirmed that for the purpose of determining whether any of the claimed property was “recoverable property” it made no allegation against Kalsoom of participation in her husband’s unlawful conduct; ii) Kalsoom confirmed that for the purposes of determining whether any of the claimed property was “recoverable property” she did not advance any positive case in relation to any alleged conduct by Mr Azam and “accepts that she will be bound by any findings made in this respect against Mr Azam”. iii) Kalsoom and Mr Azam both agreed that to the extent that either of them drew on funds that were subject to the PFO, such funds should be discounted from their entitlement to any share of their matrimonial assets on ancillary relief.[4]Paragraph 2 of the order directed that the trial of the claim would be heard in two parts: i) Part 1... to determine the issue of whether the property for the time being subject to the claim is in fact recoverable property by virtue of its having been obtained by or in return for unlawful conduct. ii) Part 2, to be heard following the handing down of Judgment in relation to Part 1 ... to determine the defence of [Kalsoom] and her interest if any under the Matrimonial Causes Act in any of the property for the time being subject to the claim. [Kalsoom] confirms that for the purposes of the trial of Part 2, the Claimant is not limited as to the allegations it may make against her. Paragraph 4 of the order made provision for directions to be given in respect of Part 2 of the trial either on the handing down of judgment following the trial of Part 1, or at a subsequent directions hearing convenient to the parties. In the event I gave those directions at a hearing on 24 September 2014.[5]Paragraph 3 of the order of Singh J directed that the trial should be heard by a judge with concurrent jurisdiction to sit in the Queen’s Bench Division and the Family Division, presumably because it was then contemplated that the judge would have to determine an issue between the NCA and Kalsoom as to Kalsoom’s “interest, if any, under the Matrimonial Causes Act in any of the property for the time being subject to the claim.” However, matters took a rather different turn, as I shall explain, and I have not been called upon to determine whether Kalsoom has any interest in any of the recoverable property under that or any other statute.[6]In the light of that order, Kalsoom and her legal representatives played no part in Part 1 of the trial. However, her first four witness statements and a further statement she made in proceedings brought by her stepson Sohail Amir in the Family Division on 26 July 2012 were in the trial bundle and were referred to in the course of evidence and submissions. So were the transcripts of interviews of Kalsoom which were carried out by Ms Davison of the NCA and another interviewing officer, Emma Smith (with the assistance of an interpreter, and in the presence of her solicitor) in July 2010. I also made references to her written evidence in the course of my judgment.[7]As I explained in that judgment, these proceedings were brought under CPR Part 8 and no order was ever made directing that they be made subject to the Part 7 procedure. Nevertheless the NCA served Points of Claim and some of the Respondents, including Kalsoom, served Points of Defence which helped to define what was in issue between them. The Points of Claim went through various amendments, including an amendment for which, exceptionally, I gave permission during the course of the hearing of Part 1 (whilst refusing permission for another): see paragraphs 45-54 of my previous judgment. Kalsoom’s counsel, Mr Bodnar, did not see that version of the Points of Claim until he received the trial bundles for Part 2.[8]Kalsoom’s Points of Defence was served in August 2011 together with Kalsoom’s 4th witness statement in which she deposed to the breakdown of her marriage in May 2011. She stated that she had not spoken to Mr Azam since then, and that she was in the process of preparing a power of attorney which would enable a lawyer in Dubai to issue and prosecute divorce proceedings. Once those proceedings were concluded, it was her intention to register the divorce in the United Kingdom. Her 5th witness statement, dated 21st October 2014, provided an update. There have been no formal amendments to the Points of Defence although, as I shall explain, Kalsoom’s case has undergone some refinements.[9]Half of the properties claimed in the proceedings (and declared by me to be recoverable property) were acquired prior to Mr Azam’s marriage to Kalsoom. I decided that one of those acquired afterwards, the Spanish Property, is not recoverable property. However, it is the subject of a freezing injunction. Quite apart from any difficulties posed by the fact that it is real estate situated outside the jurisdiction, any claim by Kalsoom for financial provision to be made for her and her daughter Zahra out of that untainted property or its net proceeds of sale would be competing with claims by the NCA for execution of the costs awarded to it against Mr Azam.[10]Offley Place was purchased in Mr Azam’s sole name in July 2002 at the time of the move to Dubai, largely using the proceeds of sale of Watery Lane. Kalsoom has made no claim to it, and it played no role in Part 2 of the trial. One of the two remaining properties, Thurza Court, was transferred into Kalsoom’s sole name by her father-in-law Mohammed Azam, then the registered owner, on 1 May 2002. Kalsoom’s Points of Defence denied that the transfer was an act of money-laundering, but accepted that she was unable to give any evidence as to the source of the funds used for its purchase. However, if it was established by the NCA that Thurza Court had been purchased with funds which were recoverable property, she sought to set up a defence to the NCA’s claim under s.266(3)(a) of POCA.[11]Thurza Court was the only property to which Kalsoom raised this (or any other) defence in her Points of Defence. The remaining property is 2a Wheatash Road. The land on which that property was subsequently built was purchased and registered in the joint names of Kalsoom and Mr Azam. Like Thurza Court, it was used as an investment; they never lived there. The NCA seeks a CRO in respect of Kalsoom’s share in that property as well as Mr Azam’s share. Paragraph 20.1 of Kalsoom’s Points of Defence stated that to the best of her knowledge the funds used to purchase the land were derived from the rentals of Thurza Court. In her 4th witness statement she said that she remembered paying £13,000 from her Barclays Account to solicitors named Simon & Co on 19 August 2003, and that the property was registered in (her and her husband’s) joint names because she was providing part of the purchase price from funds which had been intended for her exclusive benefit. She confirmed, as she had in interview, that she had no idea how the money to fund the development of that plot of land was generated. The development was managed entirely by Mr Azam.[12]In that witness statement Kalsoom stated that she was limiting her response to the NCA’s claim to Thurza Court and Wheatash Road (those being the two properties in which she had a proprietary interest). In my earlier judgment I found that both Thurza Court and Wheatash Road were acquired with the proceeds of Mr Azam’s criminal conduct or with funds derived from property acquired with the proceeds of such conduct. The findings that are of particular relevance so far as Kalsoom is concerned are in paragraphs 16 and 246-247 (Thurza Court) and 249-250 (Wheatash Road).[13]I rejected Mr Azam’s case that Thurza Court had been purchased by his father, Mohammed, with the proceeds of sale of property belonging to Mohammed in Pakistan. The contemporaneous documentary evidence pointed overwhelmingly to Mr Azam being the true purchaser, and to the property being put in his father’s name at his direction. Mr Azam had instructed St John’s solicitors in the acquisition of the property and provided them with funds in excess of £54,000 from his own bank account at Barclays bank prior to his being arrested in May 2001 and remanded in custody on charges of perverting the course of justice, which were later dismissed. He was denoted as the purchaser on their internal records and on the memorandum of sale. When he remained in custody, his father took over responsibility for instructing St John’s, and overseeing completion in September 2001, but only after Mr Azam had sent them a letter confirming Mohammed’s authority to “commence proceedings in [sic] the purchase of the said property in my father’s name for which the funds are with Mr SS Bamrah of St John’s solicitors, King Street, Southall”. The solicitors then wrote a letter to both Mohammed and Amir Azam acknowledging receipt of that letter “confirming authority to utilise funds received on account to purchase the property in the name of Mr M Azam”.[14]It followed from my findings that Mohammed Azam had no beneficial interest in Thurza Court at any material time. Unlike Great West Road, which had been purchased by Mr Azam in the name of Zarina Begum, there was no evidence that Thurza Court was purchased by him as a gift to his parent. He asserted that the property belonged to his father, and not to him, but only because he alleged that Mohammed had purchased it with his own money. It follows that at the time when the property was acquired in September 2001, Mohammed Azam held the legal title to it, but his son was the beneficial owner.[15]I also found that Thurza Court was not transferred to Kalsoom as a wedding gift, because if that had been the intention, it could have been put in her name when it was first acquired in Mohammed Azam’s name in September 2001. Moreover in his evidence to the court Mohammed, the transferor, did not give that as the reason for the transfer to her, which occurred shortly before she left the jurisdiction with the children to join Mr Azam in Dubai. I found Mohammed to be a generally credible witness, although his memory was impaired. The explanation he gave, in essence, was that the transfer of the property was a mark of his approbation of Kalsoom’s behaviour as a daughter-in-law, and especially of the way in which she had cared for his grandchildren as if they were her own. In his second witness statement he said that he “wanted Kalsoom to feel more secure here and so I gave her 5 Thurza Court as part of a trust”. Earlier in that statement he said “the property that I gave to Kalsoom was given on trust which I now consider has returned to our family”. He went on to explain that after a divorce, in Sharia law, the woman must give back everything that she was given as part of the marriage.[16]In the course of his oral evidence, however, Mohammed said, more than once, that he “gifted” the property to Kalsoom. That was consistent with the position he adopted in his original witness statement, namely, that he had no interest in any real property and was not the beneficiary of any trust. There was no suggestion by Mohammed that he and Kalsoom had executed any trust deed or that he had asked her to hold the property on trust for him. There is, however, a reference to a trust on the face of the TR1 which transferred Thurza Court to Kalsoom. I will consider the implications of that reference in due course.[17]I made no findings in my earlier judgment about any representations that were made to Kalsoom about why she was receiving Thurza Court; or as to her state of mind or knowledge at the time of the transfer. I also made no findings as to Mr Azam’s state of knowledge about, or attitude to, the transfer to Kalsoom. Those matters were irrelevant to the issue I then had to decide, which was whether Thurza Court was recoverable property.[18]So far as Wheatash Road was concerned, I found that the rental income derived from Thurza Court and other properties was insufficient to pay for the land, but even if rental income from Thurza Court had been used in part to finance the acquisition, the rental income was itself derived from a property representing the proceeds of criminal conduct. I made no definitive finding as to whether any of the income from Thurza Court had in fact contributed towards the original purchase price, as once again it was unnecessary for me to do so for the purposes of Part 1.[19]As for the subsequent development on the land, I rejected Mr Azam’s evidence that he borrowed the money from his father’s compensation. Mr Azam found the money from elsewhere, at a time well before the profits he made from “flipping” properties in Dubai. I concluded that he must have financed the development from the proceeds of his unlawful conduct or from property representing the proceeds of such unlawful conduct.[20]In consequence of those findings I declared Thurza Court and Wheatash Road to be “recoverable property.”[21]By the time the trial of Part I commenced, Kalsoom had divorced Mr Azam in Dubai. I knew that he had unsuccessfully appealed against the decision, but I did not have the benefit of the judgments of the First Instance Court of Sharia or the Sharjah Federal Appeal Court at that stage. Those judgments, together with certified translations, were adduced in evidence before me at the hearing of the trial of Part 2, and I shall return to consider them in due course.[22]Having obtained a divorce in Dubai, Kalsoom would need the leave of the English court to bring a claim for financial relief under Part III of the Matrimonial and Family Proceedings Act 1984, (“MFPA”) not the Matrimonial Causes Act 1973 (“MCA”). The background to and effect of Part III of the MFPA is set out in the judgment of Lord Collins in Agbaje v Agbaje [2010] 1 AC 628 at [4] – [14]. It is noteworthy that the Law Commission’s recommendation which led to the enactment of Part III was that the court should have power to make financial provision not only in cases where the foreign court has failed to do so, but in cases where such provision is made but is inadequate. Kalsoom would meet the jurisdictional requirements under s.15 of the MFPA for seeking such relief, because she has been domiciled in England since her return from Dubai in 2009.[23]Of course, any claim that Kalsoom might have made against Mr Azam for financial relief would not have been restricted to claiming a share of assets held jointly by the couple. If she made such a claim, any assets belonging to her outright or any share that she had in matrimonial property would no doubt be taken into account by the court in determining what, if any, financial provision should be made for her and Zahra, but so would any assets belonging to Mr Azam, whether or not they were held in his own name.[24]S.13 of the MFPA provides that the court shall not grant leave to bring a claim under s.12 unless it considers that there is “substantial ground” for the making of an application for an order for financial relief. It acts as a filter mechanism, with the principal object of preventing wholly unmeritorious claims being pursued to oppress or blackmail a former spouse. The threshold is not high, but the Supreme Court held that it is higher than a “good arguable case” or “serious issue to be tried”. “Substantial” in this context means “solid”. It is clear from Agbaje v Agbaje that the court has the power to direct an inter parties hearing of the application for leave, if the former spouse is likely to raise significant objections.[25]The court is obliged to decide under s.16 whether it would be appropriate for such an order to be made by the English court, notwithstanding the fact that the divorce proceedings took place elsewhere. Factors relevant to that decision (which logically must also come into play in the exercise of the discretion to grant leave) would include the connection of the parties with this jurisdiction, the extent and nature of any financial provision for Kalsoom and for the child of the marriage, Zahra, made in the foreign divorce proceedings, whether Kalsoom omitted to exercise a right to apply for financial relief in the foreign proceedings, and if so why, the availability in England and Wales of any property in respect of which an order could be made in favour of the applicant, and the length of time which has elapsed since the date of the divorce.[26]If Kalsoom obtained leave, the substantive merits of that claim for financial relief would need to be determined. The court would then be required to have regard to the factors set out in s.18, with first consideration being given to the welfare while a minor of any child of the family who has not attained the age of 18 (Zahra is 11). Hardship is not a necessary prerequisite for the exercise of the jurisdiction, but is obviously a relevant factor. Some of the factors to be considered under s.16 would also come into play at that stage. It would also be at that stage that any argument that the claim for financial relief should take precedence over the effect of the statutory regime under POCA would arise, unless it had been raised at the stage of leave.[27]My own inquiries of the Family Division, which I made known to counsel, as to how long it would generally take from the issue of the claim for financial relief to the final determination of the claim (if leave were granted) revealed that it would take about a year.[28]Kalsoom has made no application for leave to make such a claim, despite the fact that the decision of the Federal Appeal Court of Sharjah was issued on 11 February 2013, around three months before Singh J made the consent order and well over a year before the trial of Part I. No such application was made to me at the hearing on 24 September; nor was I asked to give directions in respect of a proposed application for leave to make such a claim. The reasons why this state of affairs arose do not matter, though they were explained to me on 24 September; no criticism is to be attached to Kalsoom for what happened, particularly as she acted throughout on legal advice. I appreciate that Kalsoom has had limited resources available to her; her legal expenses have been financed, through exclusions from the PFO, out of the rent received from Thurza Court. She is living on benefits and on the charity of friends and family.[29]I also appreciate that, in the light of those limited resources, there was some sense in waiting to see if any of the claimed properties belonging to Mr Azam were found not to be “recoverable property” and, if so, making them the subject of the claim for financial relief rather than having a dispute with the NCA. Indeed, if I had found that Thurza Court had been bought by Mohammed Azam with his own money, it would have fallen outside the POCA regime altogether, and the likelihood is that Kalsoom would have kept it. That would also have meant that if part of the purchase price of the land at Wheatash Road had come from the Thurza Court rentals, at least some part of 2a Wheatash Road would be treated as “associated property” and carved out of the CRO under ss.271-272 of POCA.[30]Nevertheless, the order made by Singh J presupposes that at the Part 2 hearing the court would be determining a substantive claim by Kalsoom under the Matrimonial Causes Act (or the appropriate statute, i.e. the MFPA) to the property that ex hypothesi had been denoted as recoverable property after Part 1 of the trial. Mr Bodnar told the court on 24 September that it was understood by Kalsoom’s legal representatives that the consent order envisaged that any further application for an exclusion from the PFO to fund specialist legal advice, as a prerequisite to making such an application for financial relief against Mr Azam, would not be made to the court until after the determination of Part 1. Even though I have no reason to doubt that it was their understanding, it appears to me to fly in the face of the language of the order to which they consented. In any event, the idea that matters should be put on hold indefinitely so as to enable that advice to be given and for the hypothetical claim for financial relief to catch up, is not an appealing one.[31]On 24 September, after hearing submissions from Mr Bodnar on behalf of Kalsoom and Mr Sutcliffe QC on behalf of the NCA, I decided that the existence of a potential claim for the provision of financial relief out of any of the other assets besides Thurza Court and Wheatash Road that I had held to be “recoverable property” was no justification for my refusing to make a CRO in respect of those properties. Essentially, it was too late to put the proceedings on hold – Kalsoom had taken her chances on the outcome of Part 1, and the only property which the NCA had failed to establish was recoverable property was the Spanish Property. On the other hand, there was going to be a trial of the statutory defence raised in respect of Thurza Court. I felt that fairness required that Kalsoom should also have the opportunity to argue whether and if so how, as a matter of law, any claim she might have in respect of the two remaining properties in which she already had an interest (Thurza Court and Wheatash Road) would have an impact upon the obligation of the Court to make a CRO under s.266(1) of POCA.[32]Accordingly I made a CRO appointing Jonathan McAlister as the Trustee for civil recovery and vesting all the recoverable properties in him with immediate effect, save for Thurza Court and Wheatash Road. That effectively put paid to any prospective claim for financial relief to be provided out of the other recoverable properties. I also directed that this trial was to determine what (if any) claim Kalsoom had to Thurza Court or Wheatash Road. The language of paragraph 14 of the CRO of 24 September was wide; unlike Singh J’s order, it was not confined to any claim that Kalsoom might make to those properties or any interest she might have in them under the MCA or MFPA. Indeed, on the face of it, she would not need to make a claim against Mr Azam for financial relief in respect of Thurza Court, and it is doubtful whether her interest in Wheatash Road, as opposed to Mr Azam’s, would be the subject of such a claim. This is a point to which I shall return later in this judgment.[33]It was envisaged at that stage that the issue at the heart of this trial would be whether, as Mr Bodnar submitted, the approach to the conflicting claims of spouses and the NCA, adopted in the context of the criminal confiscation regime, and illustrated by cases such as Commissioners of Customs and Excise v A [2002] EWCA Civ 1039 [2003] Fam 55 and Gibson v Revenue and Customs Prosecution Office [2008] EWCA Civ 645 [2009] QB 348 applies in the context of civil recovery proceedings under Part 5 of POCA. In the event, that issue rather faded into the background and became, at its highest, the foundation for a submission by Mr Bodnar that it was legitimate for the court to adopt a similar approach when exercising its discretion under s.266(6) of POCA or in determining whether any provision in a recovery order in respect of any recoverable property would be incompatible with any rights arising under the European Convention on Human Rights (“ECHR”), see s.266(3)(b).[34]Against that background I turn to the relevant provisions of POCA and the way in which Mr Bodnar put Kalsoom’s case.

Section 266 of POCA

[35]Section 266 of POCA provides, so far as relevant:(1) If in proceedings under this Chapter the court is satisfied that any property is recoverable, the court must make a recovery order.(2) The recovery order must vest the recoverable property in the trustee for civil recovery.(3) But the court may not make in a recovery order -a. Any provision in respect of any recoverable property if each of the conditions in subsection 4... is met and it would not be just and equitable to do so.b. Any provision which is incompatible with any of the Convention rights (within the meaning of the Human Rights Act 1998 (c42)).(4) In relation to a court in England and Wales... the conditions referred to in subsection 3(a) are that: a. The respondent obtained the property in good faith, b. He took steps after obtaining the property that he would not have taken if he had not obtained it or he took steps before obtaining the property which he would not have taken if he had not believed he was going to obtain it,c. When he took the steps, he had no notice that the property was recoverable,d. If a recovery order were made in respect of the property, it would, by reason of the steps, be detrimental to him.” (6) In deciding whether it would be just and equitable to make the provision in the recovery order where the conditions in subsection (4).. are met, the court must have regard to a. The degree of detriment that would be suffered by the respondent if the provision were made, b. The enforcement authority’s interest in receiving the realised proceeds of the recoverable property. (7) A recovery order may sever any property.[36]Section 266(3)(a) refers to the court making provisions in a recovery order, which on the face of it suggests that it is aimed at the terms of such an order rather than at the making of the order in the first place. However Mr Hall did not submit that it should be given so narrow a construction. In my judgment he was right not to make that submission. If, assuming the conditions in s.266(4) are fulfilled, the court may not make in a recovery order any provision in respect of the recoverable property that would not be just and equitable, it must follow that in such circumstances the court may not make any provision in such an order that mandates the transfer of the property to the Trustee, if that would not be just and equitable. Hence the court may not make a CRO in respect of that property at all.[37]So far as Thurza Court was concerned, Mr Bodnar submitted that Kalsoom satisfied all the requirements of subsection (4) and that on carrying out the balancing exercise under subsection (6) it would not be just and equitable to make a recovery order. The legitimate aim for which the statutory power of civil recovery was created would not be fulfilled by depriving her of the property. He pointed out that Part 5 of POCA was enacted to address and reverse the effect of the common law, as set out in the decision of the Court of Appeal in Costello v Chief Constable of Derbyshire [2001] 1 WLR 1437 that the police had no title to a stolen motor car and that possession of the car, whether obtained lawfully or not, vested in the possessor a title that was good against the rest of the world save anyone setting up or claiming under a better title. Part 5 of POCA enables the State to forfeit property which is, or which represents the proceeds of crime. However the creation of the statutory cause of action was not intended to place the NCA in the same position as a victim of wrongdoing or of a creditor in the context of bankruptcy. The NCA is fulfilling a public function, and although there is a power to order the recovery of property from those who are entirely innocent of wrongdoing, that public function and the underlying policy must be borne in mind when deciding whether to make such an order against a person who falls within s.266(4).[38]Mr Bodnar submitted that the legitimate aims of giving the NCA an “in rem” remedy were to ensure that the message is sent out to criminals that crime does not pay, and to remove the proceeds of crime from circulation. Neither of these objectives would be achieved by the expropriation of the property from Kalsoom in circumstances in which the court could be satisfied that she was entirely blameless. There was no chance of her ex-husband ever getting his hands on it again. She is in dire financial straits through no fault of her own. Moreover, in granting her the divorce the Dubai court envisaged that she would keep such of the properties from the marriage as were in her own name and Mr Azam would keep those which were in his name.[39]As regards Wheatash Road, Mr Bodnar realistically conceded that s.266(4) did not apply to that property. However he sought to rely upon s.266(3)(b) which he described as a legislative “safety valve”. He contended that Kalsoom had a legitimate expectation of obtaining effective enjoyment of a property right, in the form of ancillary/financial relief, so as engage the guarantees of Art 1 Protocol I of the ECHR (“A1P1”). Although he readily conceded that the civil recovery regime under Part 5 of POCA did not violate A1P1, the question for the court was whether any provision in the proposed CRO would be incompatible with Kalsoom’s rights under A1P1. He submitted that it would, because the balancing exercise came down in favour of not allowing POCA to “trump” the claim to ancillary/financial relief. The interference with that right in the particular circumstances of the present case would be disproportionate or as he put it, “too hard”.[40]I should mention that in the course of those submissions, about halfway through the hearing, just before the short adjournment, I raised a query about why the A1P1 claim was being put on a “legitimate expectation” basis, when on any view Kalsoom already had some proprietary interest in both Wheatash Road and Thurza Court. Vesting those properties in the Trustee would undoubtedly interfere with her enjoyment of those proprietary rights irrespective of any claim she might make for financial relief. In the light of the fact that this would potentially get over the obstacle of establishing that A1P1 was even engaged, Mr Bodnar understandably sought to adopt that analysis as an alternative argument. Mr Hall QC equally understandably protested that he had prepared the case on the basis that no defence was being raised under s.266(3)(b) (indeed his skeleton argument stated as much). Although he accepted that that subsection had been referred to in Mr Bodnar’s skeleton argument, those references had been within the very narrow confines of the issue of whether a claim under the MCA/MFPA to ancillary/financial relief should give way to the POCA regime if and when the court came to carry out a balancing exercise.[41]Mr Hall was prepared to deal with the arguments on that limited basis even though the point had not been pleaded and there had been no application for permission to amend the Points of Defence. However, he submitted that it was too late for Kalsoom to raise an entirely new case on A1P1 based on Kalsoom’s existing interest in the properties themselves, and that the NCA would suffer real prejudice, not least in costs, if I were to allow that to happen.[42]Although I had already heard some legal argument on the merits from Mr Bodnar de bene esse, and what could be described as an outline response from him in reply, Mr Hall insisted that in fairness I should rule on whether an amendment to the Points of Defence was necessary or appropriate, and thus on whether it was open to Mr Bodnar to run the new case. I came to the conclusion that it would be necessary to amend, just as it had been necessary to amend the Points of Claim at the trial of Part 1 in order to raise a new allegation even though it had been foreshadowed in argument: see paragraph 7 above. This gave rise to a very late application by Mr Bodnar (made at approximately 4.35pm) for permission to amend the Points of Defence to raise that alternative case.[43]After hearing argument from both counsel, I concluded, albeit with some regret, that it would not be in accordance with the overriding objective for me to accede to Mr Bodnar’s application. Kalsoom’s legal team had been given an adequate opportunity to prepare for the trial of Part 2, and however sympathetic to her plight the court might be, there were limits to the degree of indulgence that it was prepared to afford her, especially since a full argument on A1P1 would necessitate a further hearing and the consideration of many more authorities on the question of “fair balance”. This was not just a case of raising a different but related legal argument on uncontroversial facts, as might at first appear; the NCA would have been materially prejudiced, and not just by racking up further costs which were unlikely to be recoverable. I therefore refused Mr Bodnar’s application for permission to amend the Points of Defence.

The relevant facts

[44]Kalsoom’s Points of Defence set out something of the history of her relationship with Mr Azam, which she supplemented in her five witness statements and in her oral evidence at trial. Her 5th witness statement dated 21 October 2014 addressed events that had occurred since August 2011 when her 4th witness statement was made. For the purposes of this judgment it is necessary to say a little more about that relationship than I did in my previous judgment.[45]The marriage between Kalsoom and Mr Azam was arranged at the behest of Mohammed Azam, who was concerned by the fact that the three children of Mr Azam’s earlier relationship with Hardeep Grewal were growing up without a mother figure. Kalsoom’s father was a friend of Mr Azam’s uncle and Mohammed Azam met him in Pakistan when he went over there to attend a family wedding. Initially Mr Azam was very resistant to the idea of getting married again. Indeed in his 7th witness statement he explained how he originally went out to Pakistan to meet Kalsoom’s family, but he did not think he could go through with the wedding and left Pakistan before it could take place, which made Mohammed angry and upset. It was only because Mohammed had given his word, and was telling him that he was bringing shame on the family, that Mr Azam gave in to pressure a few months later, and went back to Pakistan and agreed to the marriage. This was hardly a promising start. He and Kalsoom met for the first time in Pakistan on their wedding day, 14 April 2001. She was a month short of her 24th birthday.[46]Arrangements were made between Mohammed and Kalsoom’s father for her family to provide her with a dowry; this consisted of some gold jewellery and 100,000 rupees. It is a tradition in Islamic marriages that the groom’s family will also provide the bride with a substantial wedding gift. Kalsoom’s understanding was that this gift is intended, at least in part, to make some provision for her if the marriage should fail. However, nothing was forthcoming from the Azam family at the time of the wedding.[47]Kalsoom’s understanding at that time was that some assurances had been given by Mohammed Azam to her father that she would be given something “as security”, but she was not a party to their discussions, and she did not know what that something would be, e.g. gold, property or something else of value. It was her father who told her that she would “get security”. She very frankly said that she did not know what her father’s reaction would have been if a promise or assurance had not been made to him that she would be given “security” and that maybe he would not have allowed the marriage to go ahead, but maybe he would. No evidence was adduced from Kalsoom’s father. It was obvious that Kalsoom had no say in the matter and would have done whatever she was told.[48]Kalsoom believed that her husband’s family were well off, and that he was a successful businessman dealing predominantly in property transactions.[49]The very day after Kalsoom arrived in England with her husband in May 2001 he was arrested. He remained in custody on remand until the charges against him were dropped in December 2001. Kalsoom therefore found herself in a strange country, with no resources of her own, and with three small children from her husband’s previous marriage to look after. She was entirely dependent upon her new husband’s family. She even had to take his sister Shazia shopping with her for groceries. Her passport remained with the Home Office for the completion of visa formalities for some time, and she did not get it back until shortly before her husband was released. When that happened, she stood by Mr Azam, who told her that he had been in the wrong place at the wrong time.[50]When Mr Azam was released from custody, Kalsoom busied herself in home-making and looking after the children. They were living at the time in Great West Road, the property that Mr Azam had purported to give to Zarina Begum. She said that although her husband was “fine with me” they were two different personalities. He just got on with his life and she got on with hers. So far as she was concerned, her husband was making his money through buying and renovating properties that had been damaged by fire or otherwise fallen into disrepair, and selling them at a profit. She described his car dealing as “occasional”. She did not ask questions about his business affairs; this would not have been welcome.[51]The only one of his business associates that she met in this period was Neeraj Makol, who was also a friend of the Azam family. She also met Mr Makol’s wife and his family, who visited the house. She never met any other business associate of her husband’s. She had no idea how much money he made, but confirmed that they did not live a lavish lifestyle in the UK. This was the period about which there was a dearth of evidence about what Mr Azam was actually up to, though it plainly was not legitimate business. He had ceased working for Astons and it appears he was closely associated with and working on something with Abid Malik, though Kalsoom never met that gentleman.[52]Kalsoom only discovered that she was going to get Thurza Court when Mohammed Azam told her that he was going to transfer the property to her. That conversation took place around a week before the transfer. Mohammed told her he was giving her a property as a wedding gift and that it was intended not only as a capital asset but as a source of income. Her only involvement with the transfer of the property was signing the TR1. She was shown that document in cross-examination. Both her signature and that of Mohammed were witnessed by Neeraj Makol. In Box 9 on the first page, which is entitled “consideration” the middle box has been crossed and the words “pursuant to deed of trust” have been typed in. Kalsoom was unable to shed any light on this.[53]No deed of trust has ever been produced relating to this transfer. The words “pursuant to deed of trust” are ambiguous. They could mean that the transfer was made by a trustee to the beneficiary under a pre-existing deed of trust, thus perfecting the transferee’s title. That would mean that Mohammed Azam was holding the land on trust for Kalsoom before the transfer. Alternatively the words could mean that the transfer was made in conjunction with a contemporaneous declaration of trust by the transferee (Kalsoom) in favour of the transferor (Mohammed). In the latter situation the words would indicate that the transferee would hold the bare legal title only. There is the further complication that within the Azam family, land was treated as belonging to the family collectively, and thus from a family perspective it was largely irrelevant whose name appeared on the land register. Thus it was common practice to make transfers of land without consideration and on an understanding that the transferee would give the land back or pass it on to someone else within the family on request from the original transferor. Against that background, trust deeds were not really necessary. The occasional trust deed was executed (such as the one in respect of Great West Road) but not necessarily by the right person. It is consistent with this that Mohammed said he had no real understanding of what a trust was until he came to make his second witness statement.[54]One thing is clear, however, and that is that Kalsoom was never told by anyone, at any time up to the divorce, that the property was not hers to deal with as she pleased. She did not execute a deed of trust in respect of that property. Despite the reference on the face of the TR1, no such document ever existed. She had no idea that her husband had bought the property in the first place and that it was her father-in-law’s in name only. She was not on notice of Mr Azam’s criminal activities at the time that she acquired it. Having observed Kalsoom giving evidence, it was plain to me that she was a truthful witness. Indeed she was sometimes so honest that she volunteered information that damaged her own interests.[55]It was plainly Mohammed Azam’s intention at the time of the transfer that Kalsoom should have Thurza Court and it was he who initiated the transfer. His wish to get it back, expressed in his second witness statement, clearly stemmed from his view that she should give it back because she was no longer a part of the family. That attitude is not entirely inconsistent with the notion that the gift was intended to provide her with security in case the marriage failed, because in the light of Amir Azam’s initial reluctance to get married, Mohammed may have feared that his son would not abide by the marriage. Of course, in such a marriage it is far easier for the man to get a divorce than it is for the woman. Mohammed’s attitude towards making provision for Kalsoom could well be different if she was the one who initiated the divorce, as turned out to be the case. For all these reasons, the transfer to Kalsoom was not an act of money-laundering.[56]Of course the property was not Mohammed Azam’s to give. Whether or not he believed at the time that it was, he would not have made the transfer without Mr Azam being aware of it. Mr Azam’s evidence in cross-examination in relation to the acquisition and transfer of Thurza Court was given on day 8 of the Part 1 trial, 17 July 2014. He was asked about the reference to the deed of trust on the TR1 and he said, in summary, at p.149 of the transcript, that he never saw the trust deed, that he thought Kalsoom held the property on trust for his father, and that he “did not know the ins and outs of it if he was away at the time.” In answer to Mr Sutcliffe’s question whether Kalsoom was holding the property on trust for him, he said:
“… no, no, I know it was something to do with my wife and he [Mohammed] gave her the gift or something and he was going to … he doesn’t want her to have it now actually from what I know.”
As Mr Sutcliffe pointed out to Mr Azam, he was not away at the time because he did not move to Dubai until July 2002 and the transfer was made in May 2002. Indeed there is positive evidence from Kalsoom herself that he was at least around at the time of the transfer, though it is unclear whether he was physically present when the TR1 was signed.[57]It is plain that Mr Azam knew that the transfer of Thurza Court was ostensibly a gift, and that he raised no objection at the time or afterwards. However there is more to it than that. In her 2nd witness statement, of 18 June 2010, Kalsoom said that she remembered signing some documents “which my husband told me concerned the transfer of the property into my name” [emphasis added]. Her evidence to the NCA in interview on 27 July 2010 was to the same effect. She said that her husband had said to her that the property was a gift from her father-in-law. That evidence was not challenged by Mr Hall, and it was not denied in any of Mr Azam’s witness statements. I therefore find that Mr Azam not only knew about, but was actively instrumental in encouraging and procuring that transfer to his wife, and in creating the impression that she was receiving an outright gift of the property.[58]The transfer made no difference to Mr Azam treating the rentals from Thurza Court as his to dispose of, just as he did with the rentals from other family properties. The rental income from Thurza Court was paid into Kalsoom’s Barclays account (as indeed were the rentals from other properties) but she did not touch the money until later on when Mr Azam told her to sign a cheque in favour of Simon & Co. As I found in my previous judgment, UK tax returns prepared for Kalsoom for the tax years 2002/2003 and 2004/2005, when the family were living in Dubai, showed that she earned a modest rental income from letting out Thurza Court and 1 Offley Place.[59]On the evidence before me, including Kalsoom’s evidence about signing the cheque, it is more likely than not that some part of the money used to purchase the land at Wheatash Road did come from the rentals of Thurza Court. It is impossible to say how much was attributable to Thurza Court or that it contributed as much as half. However I accept that some money, which Kalsoom believed to be her money, derived from the rental of her property, went towards the purchase of the land at Wheatash Road. That is why the land was registered in her name as well as Mr Azam’s, unlike Offley Place which he purchased in his sole name, although much later it became the family home. Of course, as Mr Hall pointed out, Kalsoom would not have been in the position to earn any money from renting out Thurza Court if her husband had not purchased that property with the fruits of his criminal activities in the first place.[60]It was suggested to Kalsoom in cross-examination that she enjoyed living an affluent lifestyle in Dubai. She readily agreed that after initially living in rented accommodation they moved to a three bedroom house and then, after 1 or 2 more years, to a “really luxurious” property in Emirates Hills. In her 4th witness statement she described it as a “happy time”. However in her oral evidence she painted a far from rosy picture of her lifestyle in Dubai because she said it was just as it had been in England – she was busy looking after the home and the children, and Mr Azam was busy with his life and his business. Although she was well provided for, the relationship was not that good. She explained to the court that Mr Azam indulged his three older children, and nothing was too good for them, but she and Zahra were not treated in the same way. The impression I get is that there was mutual tolerance, and a degree of respect, but not much more.[61]The relationship plainly deteriorated still further after Mr Azam’s arrest and incarceration in Dubai in 2006 although she did stand by him for some considerable time and believed him to be innocent. For around three years she tried to maintain a semblance of financial order in the household, living off the limited funds permitted to her by the authorities in Dubai.[62]In September 2009 the pressures on Kalsoom had become too great and she moved back to the UK with the four children, moving in to Offley Place. She remained in regular telephone contact with Mr Azam whilst he was in prison in Dubai. Mr Azam’s elder son Sohail moved out to live with his grandmother, Zarina Begum, in 2010. When Kalsoom saw the NCA’s evidence against her husband she began to realise the truth about his criminal activities. That was the beginning of the end. In May 2011 there was a very heated telephone conversation between husband and wife in which Mr Azam told her to take Deen and Aisha to his sister’s home and to leave Offley Place, with Zahra. Kalsoom made the necessary arrangements, and in July 2011 Deen and Aisha went to live with their aunt and Kalsoom and Zahra went to live elsewhere.[63]Kalsoom decided to initiate divorce proceedings in Dubai because at the time her husband was in prison in Sharjah and she felt that this was the quickest and easiest way to achieve a divorce. She remained in England, and matters were handled by lawyers instructed by her brother to whom she had given power of attorney. The Sharia Court of First Instance issued a Khula (divorce by relinquishment of marital rights) on 1 August 2012. Although the translated decision is not that easy to interpret, it would appear that the basis on which she sought a divorce was that her husband had been imprisoned for more than six years. There is reference to her “fear of falling under God’s penalties because she is neither a wife nor a divorced [person] during that period of time”. It is tolerably clear from the decision that Mr Azam refused Khula and objected to the divorce. He demanded that she should give back all gold that she received, all expenses of the wedding ceremony that he paid, and, most significantly in my judgment, “all real estate that he registered under her name”. The Sharia Court was not prepared to accede to his demands and granted the divorce on terms that Kalsoom waived her rights to her dowry but each party to the marriage would keep the property registered in their own names.[64]Mr Azam appealed, but the Sharjah Federal Appeal Court dismissed the appeal on 11 February 2013. Mr Azam’s lawyer was arguing that the Khula gave Kalsoom the right to half his property according to English law. Kalsoom’s response was that Thurza Court was a gift from her husband’s father and was not included in the Khula, and she had no rights in properties and buildings registered in the name of the appellant and he had no right in properties registered in her name. The appeal court held that “the Khula includes dowry and alimony only, and [the] parties [are] free with regard to the civilian rights in dispute between them.”[65]It is unnecessary for the purposes of this judgment to spell out Mr Azam’s behaviour towards Kalsoom since the relationship broke down irretrievably. Suffice it to say that I accept without question her evidence as to the constant harassment and threats that she has had to endure, which are deposed to in her witness statements, and as to the effect that these and indeed the whole experience has had upon her health and wellbeing. I also accept her evidence as to her parlous financial position.[66]Kalsoom is a complete innocent caught up in the web of her former husband’s wrongdoing, as is her little daughter. She has done nothing to deserve the situation in which she has found herself. This is not a case of a wife who was happy to live “high on the hog” from the proceeds of crime with no questions asked, turning a blind eye to where the money was coming from. She was a dutiful young woman who entered without question into an arranged marriage and moved to a strange country where she had no friends and family in order to be a mother to her husband’s three children by an earlier relationship. She did her best to be a good wife and mother to them and even Mr Azam had to concede that she treated her stepchildren as if they were her own. She followed her husband to Dubai, again without question, and continued to run the household and take care of the children, including their own daughter, whilst he carried on his business.[67]She genuinely believed that Thurza Court was hers to keep as a wedding gift; that was what she was told by both Mohammed and Mr Azam, although it was not in fact the truth. Although the marital relationship does not appear to have been a particularly compatible one, she made the best of it and stood by her husband, believing in his innocence, throughout most of his incarceration in Dubai. She has waived her right to alimony in Dubai and relinquished her dowry (which is among the assets frozen in Dubai). Her chance of obtaining financial provision in respect of the other properties has vanished. If the court had an unfettered discretion as to what should happen to the property registered in her name, there would be much to be said in favour of allowing her to keep it.[68]However, the court does not have an unfettered discretion or indeed any discretion at all. Part 5 of POCA is a statutory scheme which is deliberately structured in favour of the making of a CRO once the court has determined that a particular property is “recoverable property”. The position of a bona fide purchaser for value without notice (and others upon whom the regime might otherwise impact unduly harshly) is expressly catered for in other sections of the statute, and the property which such persons acquire cannot be recoverable even if it was originally acquired with or otherwise represents the proceeds of crime.[69]Section 266 provides the only statutory defence once a finding has been made that the property is recoverable, and that must be a deliberate decision on the part of Parliament. As I said in my earlier judgment, the impact of Part 5 is that people who are wholly innocent of wrongdoing may end up having to give up their property. With those fact findings and with the statutory framework in mind, I turn to consideration of the issues I have to decide in Part 2 of the trial.

Thurza Court – the statutory defence

[70]I shall consider first whether the factual premise for Mr Bodnar’s s.266(3)(a) defence in respect of Thurza Court has been made out. The first question is whether Kalsoom satisfies the conditions in s.266(4). Mr Hall submitted that Kalsoom did not “obtain the recoverable property” even if she acted in good faith when she received it, because Mohammed Azam could not transfer a better title to the property than the title which he had (the bare legal title). Since Kalsoom did not have the beneficial interest in the property, and that is what is “recoverable,” vesting her legal title in the Trustee would make no appreciable difference to her position. However, that submission ignores the fact that the property in question is real estate. When registered property is transferred and the new owner’s name appears on the register, he or she has title to that property as against the whole world, unless there is an arrangement made at the time of that transfer under which he or she is holding it on trust or as an agent for someone else. That was not the case here. Kalsoom did not agree to hold Thurza Court on trust or as a nominee. There was no resulting trust because she was intended to have the property for herself.[71]Mohammed Azam’s transfer of property in which his son had the beneficial interest theoretically could have been a breach of trust actionable at the behest of Mr Azam, but the fact that registered land is transferred in breach of trust does not adversely impact on the title of the transferee. He or she is the owner of that land, unless and until the original beneficial owner manages to have the register rectified.[72]Moreover, in this case, Mr Azam, the beneficial owner, not only knew about but intended that the property be transferred to his wife, and indeed that it was being treated as a gift to her made by his father. He did not ask her to hold it as his nominee. Thus he must have consented to his beneficial interest being transferred to his wife together with the legal title held by his father. Although Kalsoom provided no consideration for the transfer, I am satisfied that she “obtained the recoverable property” within the meaning of s.266(4)(a) and that she did so in good faith.[73]The next, and crucial, question is whether Kalsoom took steps before obtaining “the property” that she would not have taken if she had not believed that she was going to obtain it. Kalsoom did not know that she was going to receive Thurza Court until shortly before the transfer, and that is probably enough to take this case outside s.266(4)(b) since in my judgment “the property” referred to must be the “recoverable property” referred to in subsection (4)(a). It is true that she was expecting to receive a substantial wedding gift from her husband’s family as “security” in case the marriage should fail. However, even if “the property” could be interpreted as extending to “some unspecified type of property not necessarily confined to real estate” her evidence did not go so far as to suggest that she would have refused to marry him if she had not believed that she was going to obtain that gift. The reality is that she would have done whatever her father agreed with Mohammed she would do, and she very honestly could not say what her father’s attitude to the marriage would have been if the assurances that she would be given security had not been given to him by Mohammed.[74]Moreover it was not Kalsoom’s evidence that she stuck by the marriage and did not return home to Pakistan because she was expecting to receive the wedding gift. The gift was not forthcoming until she had been married a year. When asked by Mr Hall why she did not go back to Pakistan after her husband was arrested in May 2001, she frankly said that she had no passport and no money. Therefore even on the most generous interpretation of “the property” in s.266(4)(b), Kalsoom has not proved that she satisfies the requirements of that subsection.[75]She would have satisfied subsection (c) because she had no knowledge that Thurza Court was purchased with her husband’s money, let alone that her husband was a drug dealer and money launderer; but subsection (d) would also have been problematic for her. The person resisting the CRO has to show that if such an order were made in respect of Thurza Court it would “by reason of the steps” [i.e. the steps taken in (b)] be detrimental to him or her. There is no link between the detriment that Kalsoom would suffer – deprivation of an asset which she believed was designed to give her some financial security in case of divorce – and any steps she took in the first year of her marriage in expectation of receiving it, for the simple reason that there was no link between the promise and what she did in that period. This is not a case where, even in the widest sense of the concept, Kalsoom has relied to her detriment on the promise of receiving Thurza court or the unspecified “security” and taking the property away from her would cause her to suffer detriment because of any steps she took in the year after her marriage that she would not otherwise have taken.[76]Section 266(4) really appears to be aimed at a proprietary estoppel type of situation in which an individual has been promised an interest in identified or identifiable property, and in reliance on that promise acts to his or her detriment, for example by renovating it at his own expense, or working on the land for no reward, in the legitimate expectation of receiving it, then actually receives the property from the transferor (e.g. as a testamentary gift) only to find that it has been purchased with the proceeds of crime.[77]If that person had not received the property he was promised, he would have been in a position to invoke the doctrine of proprietary estoppel to force the testator’s estate to make good his promise, because it would be inequitable to allow the testator to renege on it. It follows that if the testator had actually made good his promise and transferred the property, then he would have taken the just and equitable course. Depriving the transferee of the property would put the transferee in back in the very situation, pre-transfer, in which equity would have required it to be transferred to him and overridden any change of mind on the part of the testator. The recovery order would be detrimental to him not only because he would lose the property itself, but because he would lose the value of whatever he had expended on it in the expectation of receiving it. That is why subsection (d) is so important. The loss of the property is not enough, in and of itself, to justify interfering with the public interest in recovering the proceeds of crime.[78]It is worth noting that even if someone fulfils all the requirements of s.266(4) he still has no automatic right to keep the property, as would have been the case if he were a bona fide purchaser. In those circumstances, Parliament provides a means for the court to consider the competing interests of the transferee and NCA by balancing the detriment the transferee will suffer from the CRO with the interest of the NCA in receiving the realised proceeds of the recoverable property under s.266(6). The court may still reach the conclusion that the transferee should lose the property. In the example that I have given, the court could still decide to make a recovery order on terms that some of the money realised on sale should be paid to the transferee to compensate him for any improvements that he had carried out which had enhanced the value of the property.[79]That illustrates just how high a hurdle the innocent owner of the property who is a bare donee has to overcome in order to make good a defence under s.266(3)(a). The difficulty of establishing that defence also has a bearing on the way in which the court must approach and interpret s.266(3)(b), because Parliament cannot have intended that a bare donee who cannot fulfil the criteria under s.266(4) can nevertheless set up an easier defence by claiming that the recovery order is a disproportionate interference with his or her human rights.[80]To conclude on this issue, Kalsoom does not satisfy the requirements of s.266(4) and thus the court’s powers under s.266(6) do not come into play. It is therefore unnecessary for me to express any view about how the court might have resolved the matter after carrying out the balancing exercise.[81]I therefore turn to the arguments about the claim for financial relief, which it was said affected both properties, although they were primarily directed towards Wheatash Road. S.266(3)(b) prohibits the court from making any provision in a CRO which is incompatible with any of the Convention rights under the ECHR. There is no greater specificity than that, but it is clear that the fact that someone who is innocent of all wrongdoing, who comes into possession of property purchased or acquired with the proceeds of crime without notice of its criminal provenance, is going to be deprived of that property, will not in and of itself make the CRO incompatible with his or her Convention rights.[82]A1P1 provides, so far as material, that “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary… to control the use of property in accordance with the general interest….” As I have already said, Mr Bodnar made it clear that he was not submitting that the Civil Recovery regime under Part 5 of POCA in and of itself violated A1P1. Plainly, it does not. Parliament has determined that it was necessary in the public interest to enact a law which enables the enforcement agency to confiscate property whose ownership may have passed out of the hands of criminals but which still represents the fruits of their criminal activities.[83]Mr Hall submitted that the argument based on s.266(3)(b) fell at the first hurdle because Kalsoom’s prospective claim for financial relief under Part III of the MFPA is not a “possession” for the purposes of A1P1. He referred to Kopecky v Slovakia (2005) EHRR 43. Whilst a “possession” for the purposes of A1P1 may include claims in respect of which the applicant can argue that he or she has at least a “legitimate expectation” of obtaining effective enjoyment of a property right, the claim must be a currently enforceable claim that is sufficiently established. The “legitimate expectation” must be something of a nature more concrete than a mere hope, and it must be based on a legal provision or a legal act such as a judicial decision.[84]Moreover, no legitimate expectation can be said to arise where there is a dispute as to the correct interpretation and application of domestic law – as there plainly is a dispute in the present case as to the interaction between the provisions of Part III of the MFPA and Part 5 of POCA. The Strasbourg case law does not contemplate the existence of a “genuine dispute” or an “arguable claim” as a criterion for determining whether there is a “legitimate expectation” protected by A1P1. A claim may be regarded as an “asset” only where it has sufficient basis in national law, for example where there is settled case law of the domestic courts confirming it.[85]I accept Mr Hall’s submissions on this point. In the present case, there is no settled domestic case law or statutory provision confirming that a claim to financial relief by a spouse, (particularly an unresolved claim for which leave has not been granted) should take precedence over the right of the NCA to recover the proceeds of crime under Part 5 of POCA. Parliament has enacted no such provision in Part 5 of POCA. That appears to be deliberate.[86]At first blush it may seem odd if Parliament intended that a wholly innocent wife should be in a worse position if her husband has not been convicted of any criminal offence but it has been established to the (lower) civil standard that property held in their joint names was purchased with the proceeds of his criminal activities, than she is if he is charged and convicted with the criminal offence and the State then applies to confiscate the property. However, as Mr Hall pointed out, the confiscation regime under Part 2 is very different; it operates in personam, and its focus is on the benefit of the defendant, and thus on who owns the property.[87]Even in the Part 2 context, case law does not establish that a claim for ancillary relief under the MCA (or for financial relief under Part III of the MFPA) invariably takes precedence over a claim for confiscation or vice versa. On the contrary, at least until the impact of s.69(2)(c) of POCA has been fully considered by the court, neither an ancillary relief claim nor a confiscation order enjoys automatic priority, the one over the other, and a lack of complicity by the spouse claiming the ancillary relief is only a starting point in determining whether the claim should succeed: see Commissioners of Customs and Excise v A (above) and Stodgell v Stodgell [2009] EWCA Civ 243 especially at [8] and [14]. As the Court of Appeal explained in Webber v Webber [2007] 1 WLR 1052, the relationship between the two regimes is a complex one. The case law in that context is highly fact-sensitive, see e.g. Gibson v Revenue & Customs Prosecutions Office (above). In that case, unlike the present, there was a finding that the wife of the defendant was complicit in his wrongdoing. The Court of Appeal drew a distinction between declining to order the transfer to a complicit spouse of property that was not hers, and confiscating property which she already owns. It held that as far as the latter was concerned, it was for Parliament to confer such a power on the enforcement agency.[88]Parliament has conferred a power of that nature on the NCA in the very different regime under Part 5 of POCA, which does not focus on ownership of the property concerned, and it has not confined that confiscatory power to complicit spouses. A1P1 entitles a State to enact such laws as it deems necessary to control the use of property in accordance with the general interest. As Mr Hall pointed out, the true question in an A1P1 context is whether that legislation strikes a fair balance between the competing interests concerned. In this case it is effectively common ground that Part 5 has done so, because Mr Bodnar does not challenge its compatibility with A1P1.[89]Thus there is no analogy that can be drawn between Part 2 and Part 5 of POCA so as to give any support for Mr Bodnar’s contention that the innocent wife’s claim for financial relief in respect of recoverable property, even if it were highly meritorious, would, or even could, take priority over the making of a CRO.[90]In any event, there seems to me to be a more fundamental objection to this argument. Kalsoom’s claim to Thurza Court and her half share of Wheatash Road would never derive from any claim for financial relief she made under Part III of the MFPA because those properties are already hers. Mr Azam has no control over what happens to Thurza Court and never did from the moment it was transferred into her name. If she were to launch proceedings for financial relief, those proceedings would surely be aimed at Mr Azam’s properties, or his share of those in joint ownership, in this case Wheatash Road. Her own properties would only come into the equation if he were to challenge her right to keep them as part and parcel of any financial settlement, or possibly if he was in a position to impede her ability to enjoy the fruits of her share in Wheatash Road.[91]Even if I were to assume in Kalsoom’s favour that Wheatash Road would or could be the subject of a claim for financial provision, in that she might ask the court at least for an order directing that it be sold and her half share of the proceeds remitted to her, or for an order for half the rentals to be paid to her, in my judgment she would still not have a legitimate expectation of effective enjoyment of a property right for the purposes of A1P1 by reason of that prospective claim under Part III of the MFPA. The prospective claim falls a long way short of meeting the “legitimate expectation” criteria set out in Kopecky. It is not a currently enforceable claim that has been sufficiently established.[92]It is far from certain that Kalsoom would even get across the threshold of leave to bring her claim, let alone succeed in achieving an order, in the light of the terms of the Dubai divorce and the existence of the finding after Part 1 of the trial that the property concerned is “recoverable property”. It seems certain that any application for leave would be opposed by the NCA and possibly also by Mr Azam. The court to which that application would be made might well come to the conclusion after hearing the competing legal arguments that Part 5 makes it clear where the balance is to be struck, absent a s.266(4) situation, and therefore there is no “solid” basis for an order for financial relief to be granted if the applicant cannot bring herself within that subsection. At most the position is arguable, and that is not good enough to satisfy the Kopecky test.[93]It is possible to think of different situations in which s.266(3)(b) might be engaged. Mr Hall gave the example of a purpose-built property designed to meet the needs of a severely disabled child, where the making of a CRO might be regarded as a disproportionate interference with the child’s rights under Article 8 ECHR. However the contention that a CRO would be incompatible with Kalsoom’s rights under A1P1 fails because any claim she might make for financial relief under Part III of the MFPA in respect of Wheatash Road (or Thurza Court) does not engage that Article.

Conclusion

[94]It follows that the court is not in a position to accede to Mr Bodnar’s submissions that a CRO should not be made in respect of Thurza Court or Wheatash Road. Indeed, the court is obliged to make such an order under s.266(1). Despite the sympathy which the situation of Kalsoom and her little girl inevitably invokes, it must not be overlooked that these two properties were investments, and that she never lived in either of them. Indeed, apart from writing the cheque in respect of part of the price for the land at Wheatash Road she does not appear to have made much, if any, use of the rentals from Thurza Court until the exclusion from the PFO which enabled her to use them to fund her legal representation. Even if I am mistaken about this, and she had depended on them as a source of income for a period before the PFO was made, the reality is that she would never have been in a position to enjoy the rentals from either of those properties if her husband had not been a drugs dealer and money launderer.[95]The policy underlying Part 5 of POCA would be frustrated if a CRO were not to be made in a case such as this, even though the impact will be to deprive this most unfortunate lady of the very property that she believed to have been given to her to safeguard her financial position in the event of a divorce from the man she had the great misfortune to marry. As Hughes LJ put it in Stodgell v Stodgell at [11]:
“This is not a case of punishing the wife for the husband’s crime. Sadly, if one spouse turns out to be a spendthrift the result may be that the other suffers an absence of assets from which to seek ancillary relief. The same may happen if he turns out to be a criminal”
. Those observations are equally true where the result of the application of the statutory scheme under Part 5 of POCA is that the wife is effectively deprived of assets from which to seek financial relief under Part III of the MFPA.[96]I shall therefore make the orders sought by the NCA in respect of Thurza Court and Wheatash Road.

Cited in 1 later judgment