The Serious Fraud Office v Saleh [2015] EWHC 2119 (QB)

Case No HQ15X00464

[2015] EWHC 2119 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 21/07/2015

Before

MRS JUSTICE ANDREWS DBE

Between

THE SERIOUS FRAUD OFFICEClaimant

IKRAM MAHAMET SALEHRespondent

Andrew Mitchell QC and Jonathan Lennon (instructed by the Serious Fraud Office) for Claimant

Helen Malcolm QC and Nicholas Yeo (instructed by Stephenson Harwood) for Defendant

Hearing Hearing dates: 8 and 9 July 2015

Judgment

THE APPLICATION

[1]This is an application by the Respondent to discharge a property freezing order (“PFO”) made by Mostyn J under Part 5 of the Proceeds of Crime Act 2002 (“POCA”) on 29 July 2014 in respect of £4,400,000 plus interest credited to an account at the Royal Bank of Scotland Plc in the name of Computershare Investor Services Plc. (“CIS”).

[2]The money frozen by the PFO is the proceeds of sale of 800,000 shares in a Canadian oil and petroleum corporation named Caracal Energy Inc, formerly known as Griffiths Energy International Inc (“GEI”). I shall refer to them as “the GEI shares”. The whole of the issued share capital of GEI was purchased by Glencore Plc for £5.50 per share in or around July 2014 pursuant to an offer made by Glencore in early April 2014. CIS acted as the stock transfer agent, which is how the money came to be transferred into its bank account.

[3]The Respondent (“Mrs Saleh”) was the owner of the GEI shares. She acquired them in September 2009 for the sum of Can$0.001 per share (Can$800 or £454.40 in total) as part of a private placement, in the circumstances more particularly described later in this judgment.

[4]The SFO contends that the acquisition of the shares was one of a series of corrupt transactions involving Mrs Saleh and others connected to senior diplomatic staff at the Chadian Embassy in Washington DC that were entered into by GEI in order to promote its commercial interests in Chad. At that time, GEI was seeking to secure development rights over two oil blocks in Chad.

[5]At all material times, the Chadian Ambassador to the USA and Canada, based in Washington DC, was a man named Mahmoud Adam Bechir (“Mr Bechir”). His wife is called Nouracham Bechir Niam (“Mrs Niam”). Mr Bechir took up a different diplomatic post as the Chadian Ambassador to South Africa and moved there with his wife some time in 2012. Mrs Saleh is the wife of Youssouf Hamid Takane (Mr Takane”) who was at all material times the Deputy Chief of Mission for Chad in the USA, also based at the Embassy in Washington. Mr Takane left that post at some point between August 2014 and 18 March 2015. There is no evidence as to what has become of him since.

[6]There are essentially three surviving grounds of challenge to the PFO: i) The Claimant (“the SFO”) cannot establish that the shares (and thus the money representing them) are “property obtained through unlawful conduct”, and therefore recoverable property under ss.304 and 305 of POCA, because there has been a binding determination in Canadian forfeiture proceedings (consequential on Canadian criminal proceedings against GEI) that the GEI shares were neither crime related proceeds nor offence related property but were at all times from the date on which they were issued to Mrs Saleh her property lawfully acquired by her. The relevant Order of the Canadian court, made on 16 April 2014, (“the Order”) is expressed to operate as a judgment in rem. ii) The SFO is unable to satisfy the “dual criminality” requirements of s.241 of POCA by establishing that the behaviour complained of is not only an offence under the law of the foreign jurisdiction concerned (Canada and/or the USA) but would have been an offence under the laws of a part of the UK if it had occurred there; iii) The PFO was obtained by material non-disclosure.

[7]The first of these grounds raises a point of considerable importance which could potentially arise on any future occasion in which the relevant prosecuting authorities in a country where the alleged recoverable property happens to be located at that time decide to abandon proceedings for the confiscation or forfeiture of that property, and the property concerned or other property representing it (such as its sale proceeds) subsequently comes into this jurisdiction. If the consequences of the abandonment of the first set of forfeiture proceedings and an order of the court of that other country directing its return are that the property and its proceeds are thereafter to remain immune from forfeiture anywhere else in the world, this could have serious ramifications.

[8]Although it was originally a part of Mrs Saleh’s application to discharge the PFO that she was and is subject to diplomatic immunity as the spouse of a serving diplomat, Miss Malcolm QC, who together with Mr Yeo represented Mrs Saleh on this application, realistically accepted that Mrs Saleh (a Canadian national) has never had diplomatic immunity in this jurisdiction or in Canada, and it appears that by 18 March 2015 at the latest she ceased to enjoy any diplomatic immunity that she may have had in the USA. Consequently, the highest that Miss Malcolm could put her case is that the SFO would not be entitled to rely upon any evidence obtained in the USA in violation of the Vienna Convention on Diplomatic Relations 1961 at the time when Mrs Saleh did have immunity. At this stage of the proceedings that argument was not developed before me, and for the purposes of the present application I assumed in Mrs Saleh’s favour that in due course it might find favour with the Court and result in the exclusion of that evidence.

[9]This means that if Mrs Saleh failed in her primary contention that the matter is res judicata, in order to continue the PFO the Court would have to be satisfied that there is sufficient admissible evidence besides that which is alleged to be inadmissible to give rise to a good arguable case that the shares and their proceeds are “recoverable property”. For reasons that I shall explain in due course, I am so satisfied.

[10]The SFO contends that if the application to discharge the PFO is unsuccessful, Mrs Saleh has no defence to its related claim for a Civil Recovery Order (“CRO”) in respect of the money; however Mrs Saleh wishes to have the opportunity to serve further evidence. Since the two matters are inextricably linked, on 1 July 2015 Deputy Master Knapman made an order transferring the Part 8 Claim for the CRO from the Administrative Court to the Queen’s Bench Division. The Part 8 Claim has been listed for directions to be given immediately following my determination of the application to discharge the PFO.

BACKGROUND HISTORY

[11]On 19 January 2011, following protracted negotiations, GEI’s subsidiary Griffiths Energy (Chad) Ltd concluded a Production Sharing Contract (“PSC”) with the Ministry of Petroleum and Energy of Chad for the exploration and development of the two oil blocks. The PSC provided GEI with the exclusive right to explore and develop oil and gas reserves and resources in those blocks. Thereafter, plans were set in train to float GEI on the London Stock Exchange by the end of the year.

[12]The corruption was unearthed when an entirely new (and independent) management team was hired within GEI following the death of Brad Griffiths, its Chairman and one of its founding shareholders, in a boating accident in Ontario in July 2011.

[13]On or around 30 October 2011, in the course of due diligence in preparation for the planned IPO, two sequential (and materially identical) “consulting agreements” between GEI and a Nevada corporation called Chad Oil Consultants LLC (“Chad Oil”) were discovered. Under those agreements GEI promised to pay Chad Oil a “consulting fee” of US$2 million if it succeeded in securing the development rights to the two oil blocks in Chad. Mrs Niam was the sole officer, director and shareholder of Chad Oil.

[14]The sum of US$2 million had been paid to Chad Oil on 10 February 2011 pursuant to the second of those consultancy agreements, which was entered into in January 2011, very shortly before the PSC was signed. The directions concerning the banking information for the deposit of the funds into a bank account in Washington DC were given to GEI by Mr Takane.

[15]The Chad Oil consultancy agreements and the payment of the US$2 million “fee” were drawn to the attention of GEI’s board, which commendably wasted no time in taking action. It instructed legal counsel in Gowling Lafleur Henderson LLP (“Gowlings”) to conduct a thorough internal investigation into all consulting agreements and transactions. The planned IPO was put on hold. The investigation unearthed, among other matters, the following information.

[16]The first of the consultancy agreements between GEI and Chad Oil, dated 15 September 2009, replaced an earlier “consultancy agreement” in identical form entered into on 30 August 2009 between GEI and a Maryland company named “Ambassade du Tchad LLC” which was owned and controlled by Mr Bechir. That agreement had provided for a US$2 million fee to be payable to that company if GEI was awarded the oil blocks on or before 31 December 2009 (or such other date as the parties agreed). The agreement had been signed on behalf of GEI by Mr Naeem Tyab, the business partner of the late Mr Griffiths and another of GEI’s founder shareholders.

[17]In early September 2009, GEI’s external legal counsel advised Mr Tyab that the Ambassador was a government official and that GEI could not make an offer or give an advantage or do anything directly or indirectly with him. This advice led to the original consultancy agreement being rescinded - and replaced shortly afterwards by the first of the consultancy agreements between GEI and Chad Oil, that company having been incorporated in Nevada five days earlier, on 10 September 2009. The original agreement with Ambassade du Tchad was used by GEI’s lawyers as the template for the Chad Oil consultancy agreements.

[18]On the same date as the first consultancy agreement with Chad Oil was signed, 15 September 2009, Mrs Saleh, Mrs Niam and a man named Hassan (a former religious teacher of the children of Mr Bechir and Mrs Niam) simultaneously subscribed for a total of 4 million “founders’ shares” in GEI, ostensibly as part of a private placement of 40 million common shares at the nominal price of 1 Canadian cent each. Each of the three signed subscription agreements was accompanied by payment for the shares.

[19]Mrs Niam subscribed for and was allotted 1,600,000 shares in her own name. GEI admitted in the criminal proceedings in Canada that Mrs Saleh and Mr Hassan were nominated by Mrs Niam to acquire a total of 2,400,000 founders’ shares in GEI on the same terms as those that she acquired. 1,600,000 shares were allotted to Mr Hassan; the remaining 800,000, the GEI shares whose proceeds are frozen by the PFO, were allotted to Mrs Saleh. Mrs Saleh’s payment for the GEI shares was made by means of a Western Union money transfer of US$745, the equivalent of Can$800 at the time. The share subscription agreement relating to Mr Hassan’s shares was signed by Mr Bechir, as was the Western Union money order paying for the shares in Mr Hassan’s name.

[20]The total amount of shares acquired by the trio was the equivalent of 10% of the shares on offer; and although the purchase price was the same for all the subscribers, they were the only three “outsiders” who were offered the opportunity to invest in GEI. On the face of it there appears to be no reason why any of them would decide to make an investment, however modest, in a recently-formed private Canadian oil and petroleum company which, as the subscription agreement made clear, there was no guarantee would ever be the subject of public floatation – unless, of course, they foresaw that in due course GEI would acquire the rights over the oil blocks in Chad.

[21]GEI accepted Mrs Saleh’s subscription offer on 24 September 2009 and the share certificate was issued to her on 1 October. It was kept at GEI’s registered office until 6 September 2011 when it was couriered to her at her request. On 3 October 2011 the share certificate was deposited with Canaccord Wealth Management (“Canaccord”), a division of Canaccord Genuity Corp, in Vancouver.

[22]It was admitted by GEI in the Canadian criminal proceedings that Mrs Niam subsequently took steps to have Mr Hassan’s shares transferred into her company’s, and then into her own personal account, using a Power of Attorney granted to Mr Bechir, which purported to give him authority over Mr Hassan’s shares. (Mr Hassan’s shares were eventually transferred to Mrs Niam, at her instigation, in the summer of 2014, shortly before the completion of the sale to Glencore).

[23]As a result of Gowlings’ investigation, which included interviews with many of the key players including Mrs Saleh and Mr Takane, the board of GEI made the decision that GEI should voluntarily report itself to the Canadian law enforcement authorities. Thereafter GEI co-operated fully with investigations by the police in Canada (“the RCMP”), even to the extent of waiving privilege over communications with its former external legal advisers. It was accepted by the Public Prosecuting Service of Canada (“PPSC”) that they would not have unearthed the corruption had it not been for GEI’s self-reporting, and this made them amenable to entering into a plea bargaining arrangement with GEI.

The Canadian criminal proceedings

[24]On 22 January 2013, at the Queen’s Bench Court of Alberta, Calgary, GEI pleaded guilty to one charge of violation of the Corruption of Foreign Public Officials Act (Canada), based upon an Agreed Statement of Facts between GEI and the PPSC. It was fined the comparatively modest amount of Can$10,350,000, because of its extensive co-operation with the authorities, and on the basis that the Crown was not alleging, and GEI was not admitting, that any influence was actually realised.

[25]It was unnecessary for the prosecution to prove that the corrupt payment and related opportunity to acquire the founder shares in GEI had been instrumental in bringing about the PSC. The relevant offence is committed where the defendant “in an attempt to obtain an advantage in the course of business, directly or indirectly provides a reward advantage or benefit to a person for the benefit of a foreign public official to induce the official to use his position to influence any acts or decisions of the foreign state for which the official performed duties or functions.” The person receiving the reward, advantage or benefit does not have to be the foreign public official himself, so long as the payment is made for the benefit of that official. The recipient does not have to be aware that he or she is receiving a bribe. What matters is the purpose of GEI providing the reward, advantage, or benefit in question.

[26]Prosecuting counsel informed the judge, Brooker J, at the hearing on 22 January 2013 that the Crown would be seeking forfeiture of the shares issued to Mrs Niam, Mrs Saleh and Mr Hassan under s.490.1 of the Criminal Code of Canada (“the Code”) as being the proceeds of crime under s.462.37 of the Code and “offence related property”. “Offence related property” has a wide definition in s.2 of the Code, which includes any property, within or outside Canada, by means or in respect of which an indictable offence under the Corruption of Foreign Public Officials Act is committed, or that is used in any manner in connection with the commission of such an offence.

[27]Of course, Mrs Niam, Mrs Saleh and Mr Hassan were not parties to the Agreed Statement of Facts. The judge was alive to this point. At the sentencing hearing he said to prosecuting counsel and counsel for GEI:

“It may well be, I don’t know, that some of these people have a different view of the facts than you folks have agreed to. So there has to be an effective means of providing notice to them before the Court grants a relief against them.”

[28]Counsel for GEI, Ms Robidoux, then informed the judge that although GEI had admitted that the opportunity to purchase shares by Mrs Niam constituted part and parcel of the unlawful compensation that was paid to her, and that indirectly it would benefit her husband, the foreign public official, there was no admission by GEI that the shares of Mrs Saleh and Mr Hassan were part of that [unlawful compensation]. However, Ms Robidoux understood that was the very nature of the application that the prosecutor planned to bring, and GEI would be taking no position on that.

The Canadian forfeiture proceedings

[29]Forfeiture proceedings were commenced by the issue of a Notice of Forfeiture Application by the PPSC on 11 February 2013 in respect of the shares issued to Mrs Niam, Mrs Saleh and Mr Hassan on the stated basis that “providing the ability to acquire founder shares in GEI was a direct or indirect reward, advantage or benefit given to a public official to induce the official to use his or her position to influence any acts or decisions of the foreign state… for which the official performs duties or functions.”

[30]In the course of the forfeiture proceedings, ex parte applications were made for search warrants in respect of the shares (which were granted and duly executed) and for a “Management Order” (which appears to be the Canadian equivalent of a PFO) supported by an Affidavit sworn by the officer in the case, Constable Babin. The way in which he put the claim in respect of Mr Hassan’s shares was based on the allegation that he was a nominee used by Mr Bechir to acquire a significant quantity of shares that were not traceable to Mr Bechir. The claim in respect of Mrs Saleh was based on the role played by her husband Mr Takane in endeavouring to ensure that GEI was successful in obtaining the relevant contract(s) in Chad. It was the prosecution case that she was being rewarded as an incentive to him, in the same way as Mrs Niam was receiving a “consultancy fee” via Chad Oil, plus the shares in GEI, as an incentive to her husband to use his influence with the Chad Government to smooth GEI’s path.

[31]On 14 June 2013 the Canadian court made a Management Order directing the Minister of Public Works and Government Services or his designate as represented by the Seized Property Management Directorate to take possession and control of, and manage or otherwise deal with the shares until they were “returned in accordance with the law or forfeited to Her Majesty”. The shares were described in that order as “common shares of Griffiths Energy International Inc” although by the time the Management Order was made, GEI had already changed its name to Caracal Energy Inc. The name change had occurred on 23 May 2013, and that was the name under which GEI eventually floated on the London Stock Exchange later that year. The share certificate relating to the GEI Shares was seized by the RCMP from Cannacord pursuant to the Management Order.

[32]On 7 August 2013, Brooker J commenced the first hearing in the forfeiture applications against Mrs Saleh and Mrs Niam. That was the first occasion on which they appeared by counsel in the Canadian proceedings. The only defence that was then put forward by Mrs Saleh (by Motion served on the same date) was that the Gowlings investigation had disregarded Mrs Saleh’s diplomatic status and that her property was protected from seizure under the Vienna Convention 1961. It is apparent from the transcript that the hearing on 7 August was a directions hearing, at which the topic that probably occupied the most time was disclosure.

[33]Mrs Saleh and Mrs Niam sought disclosure of what the judge was later to describe as “all the information the Crown has in respect to the prosecution of [GEI].” Of course some of that information was legally privileged material over which GEI had waived privilege in favour of the Crown, but only for the purposes of the prosecution. The judge stood the matter over to see if it could be resolved without his needing to make a ruling. The PPSC subsequently provided some disclosure voluntarily, including disclosure of the statements Mrs Saleh had made to the Gowlings investigators and copies of certain correspondence, but disputed that it had any obligation or requirement to make disclosure to third parties. Mrs Saleh and Mrs Niam contended that the voluntary disclosure was inadequate.

[34]At a further hearing on 28 February 2014, the judge took the view that the Crown’s written submissions recognized that procedural fairness required some degree of disclosure in the circumstances of this case. He ruled that the applicants were entitled to some disclosure from the Crown, but that the nature, extent and basis for the disclosure had yet to be determined. A date was fixed for that argument to be heard, together with an argument relating to fresh evidence (which appears to have related solely to Mrs Niam’s application for further disclosure) on 16 April 2014. It is of some importance to note that that hearing was not, and was never intended to be, the hearing of the substantive application for forfeiture of the shares.

[35]Meanwhile, on 6 November 2013 counsel for Mrs Saleh had filed a notice of motion seeking an order quashing and dismissing the forfeiture application in respect of her GEI shares, inter alia on the basis that the evidence upon which the PPSC sought to rely was inadmissible because it had been obtained in violation of the rules of the Vienna Convention. The complaint was made that the inadmissible evidence had been used to obtain the Management Order. A further point that Mrs Saleh’s counsel sought to argue was that it was impermissible to seek forfeiture of her interests if she had not been joined in a lawful criminal prosecution.

[36]That motion was never heard or ruled upon by the Canadian court, because on 4 April 2014 the Chief Federal Prosecutor informed the court and the lawyers for Mrs Saleh and Mrs Niam by letter that the Crown would be withdrawing the applications for forfeiture against them both. The letter said that Mr Rodych (prosecuting counsel) “will take appropriate steps to formalize that decision through filing notice on the record or addressing the matter before the court on April 16, 2014.” The reasons for that decision were not, and still have not been, explained.

[37]The transcript of the hearing on 16 April 2014 reveals that Mr Rodych formally withdrew the forfeiture application and then indicated that counsel for Mrs Saleh and Mrs Niam would have representations to make regarding the shares that had been seized. Mr Beresh QC, counsel for Mrs Saleh, then put a draft order before the court, which was not a consent order but which Mr Rodych had signed to signify his approval of its form, and asked the court to consider it. Mr Rodych said, in answer to a question by the judge, that he did not oppose the order. He added “there’s matters in there that are beyond my capacity but I don’t take issue with – and I leave it to the court to make an order in that respect.”

The judge then made this remark:

“Okay. The only thing I was questioning was the … I suppose I can get around it, in the sense that whereas no evidence has been presented by the Queen upon which I could find in favour of the … the 490 has been satisfied; therefore, appearing that Saleh is innocent of any complicity. All right, that’s just a recital, in any event.”

All right, that’s just a recital, in any event.”

[39]Mr Beresh responded “It is. It comes directly from the Criminal [Code].” Without hearing anything further by way of submission, Brooker J then granted the Order in the form that was put before him. He was not taken through it by counsel paragraph by paragraph with an explanation of why an order was being sought in those terms. Although, as I have said, it was not formally consented to, the Order was unopposed.

[40]Section 490.1(1) of the Canadian Criminal Code provides that, subject to sections 490.3 to 490.41, if a person is convicted of an indictable offence under the Corruption of Foreign Public Officials Act and the court is satisfied on a balance of probabilities that any property is offence-related property and that the offence was committed in relation to that property, the court shall make a forfeiture order. However, there is a requirement in s.490.4(1) that before making such an order the court shall require notice to be given to any person who, in the opinion of the court, appears to have a valid interest in the property.

[41]Section 490.4(3) empowers the court to order that all or part of the property that would otherwise be forfeited under s.490.1(1) be returned to a third party if the court is satisfied that the person concerned “is the lawful owner or is lawfully entitled to possession of all or part of that property, and that the person appears innocent of any complicity in, or collusion in relation to, the offence.” Although on a literal interpretation the section appears to be dealing with the position where the court would otherwise make a forfeiture order (and thus is satisfied that the requirements of s.490.1(1) have been met) there appears to be no other section in the Code that provides a mechanism for returning seized property to a third party lawful owner when those requirements have not been met. It is possible to interpret s.490.4(3) as covering that situation as well.

[42]Section 490.5 specifically deals with the situation in which any offence-related property is forfeited pursuant to an order made under s.490.1(1) and a third party claims an interest in that property. S.490.5(1) provides a mechanism for such a person to make an application by notice in writing for an order under sub-section (4). That sub-section empowers the judge, on hearing such an application, to make an order “declaring that the interest of the applicant is not affected by the forfeiture and declaring the nature and the extent or value of the interest.” Again, before making such an order, the judge has to be satisfied that the applicant “appears innocent of any complicity in any indictable offence that resulted in the forfeiture of the property or of any collusion in relation to such an offence.”

[43]The difference between the two scenarios covered by s.490.4 and 490.5 is that the former relates to the position before a forfeiture order is made by the court, whereas the latter relates to the position after such an order is made. The relief to be granted in those two scenarios is also subtly different. However in each case, the power of the court to make the order arises if it is satisfied on the information before it that the person concerned appears innocent of complicity or collusion in the offending: which is not the same thing as being satisfied that the person concerned is in fact innocent of such complicity or collusion.

[44]It appears that the judge’s comment related to one of the recitals to the Order which immediately followed a recital of the fact that the PPSC had served notice on Mr Beresh that it intended to withdraw the application for forfeiture of Mrs Saleh’s shares. That recital reads as follows:

“AND WHEREAS no evidence has been presented by the Applicant, Her Majesty the Queen, in the Right of Canada, upon which this Honourable Court could conclude in favour of the Applicant that section 490.5(4) has been satisfied and it therefore appearing that Ikram Mahamet Saleh is innocent of any complicity in any indictable offence that resulted in the RCMP seizure of her shares in [GEI] or that the said Saleh shares in [GEI] were likely to have been used in connection with the commission of an unlawful act by either Ikram Mahamet Saleh or by [GEI]”

[emphasis added].

[45]There is plainly a mistake in the recital, as both Miss Malcolm and Mr Mitchell QC, who appeared before me with Mr Lennon on behalf of the SFO, accepted. The recital states that there is no evidence upon which the court could conclude in favour of the Crown that s.490.5(4) had been satisfied. Section 490.5 was irrelevant, given that the Court had not yet made a forfeiture order, and the prosecution had withdrawn its application for such an order. In any event, if that section were satisfied, the court would be making a decision unfavourable to the Crown and favourable to the applicant, Mrs Saleh. If there was no evidence before the court that s.490.5(4) had been satisfied, the court would not be satisfied that the conditions had been made out for granting an applicant any relief under that subsection. The mistake cannot be cured by changing the phrase to “had not been satisfied”. Quite apart from the double negative that this would produce, the evidential burden under s.490(5)(1) plainly lies on the third party applicant to satisfy the court that an order should be made under subsection (4) despite the fact that the property is already subject to a forfeiture order. No factual evidence had been adduced by Mrs Saleh.

[46]The mistaken reference to s.490.5(4) in the recital must therefore either be a reference to s.490.1.(1) or to s.490.4(3). Since the context is that the Crown was adducing no evidence to satisfy the relevant provision of the Code mandating forfeiture, the former makes sense, and is grammatically accurate. However, the language about the applicant appearing to be innocent of any complicity is taken straight from s.490.4(3), albeit that it also appears in 490.5(4). Section 490.4(3) is the relevant section dealing with the return of seized property prior to the making of any order for forfeiture, and the purpose of the recital appears to be to record that the necessary conditions for the return of the seized share certificate to Mrs Saleh have been satisfied. Despite this, I have been unable to find a means of substituting s.490.4(3) for s.490.5(4) without re-writing the entire recital. This Court cannot act as if it were a court of appeal from the foreign court; the most that I can do is try to give the recital a sensible interpretation.

[47]Although, as the judge remarked, it is only a recital, the recital is of some importance because it, and the other recitals, are an aid to understanding what the court was actually determining in the body of the Order itself. Bearing in mind what the judge said when he was going through the draft, I construe the recital as recording that the Crown had presented no evidence upon which the Court could conclude in favour of the Crown that s.490.1(1) had been satisfied in respect of the GEI shares. Therefore (i.e. because the Crown had presented no evidence) it appeared to the Court that Mrs Saleh was innocent of complicity or collusion in relation to the offence committed by GEI. Interpreted in that way, the recital is recording that the statutory prerequisites for discharging the Management Order and making an order for the return of the shares to Mrs Saleh had been made out.

[48]I note that a little later on during the same hearing, after the judge had made the Order in favour of Mrs Saleh in the terms requested, counsel for Mrs Niam, Mr James, told the judge that he did not believe the Order was properly granted under section 490.5 and that it was a different section. The judge responded “I didn’t look at the section, so I assume you’ve had the order correctly”. Mr James then said that “the effect was the same”. I can understand why he said that, because Sections 490.4(3) and 490.5(4) are two routes to achieving broadly the same objective – the recognition of the primacy of the interests of the lawful owner of property that has been seized in proceedings for forfeiture – premised on the same circumstances, namely, that the owner appears to be innocent of complicity or collusion in the wrongdoing. That exchange suggests to me that at the hearing everyone was focusing on the objective of getting the shares released to Mrs Saleh and Mrs Niam, and nobody was particularly concerned about whether the mechanism used to achieve it was accurately reflected on the face of the Order. In the event, nothing was done to correct the mistake.

[49]A further recital to the Order records that the Court has been advised that GEI had changed its name to Caracal Energy Inc since it entered its plea of guilty and that Glencore had made a cash offer to Caracal Energy Inc or to its shareholders to acquire the shares of the shareholders of Caracal Energy Inc. This recital was plainly designed to ensure that the change of name caused no impediment to the return of the GEI share certificate and its exchange for a certificate in the new name, for the purpose of enabling the sale to Glencore to proceed.

[50]The Order itself must have been made under s.490.4(3), rather than under s.490.5(4) as the recital seems to suggest, but nothing turns on this. The judge plainly had the power to make such an Order. The first paragraph discharges the Management Order, and the second directs the return of the share certificate for the GEI shares to Mrs Saleh. Thus far it is uncontroversial. It is paragraph 3 of the Order which is of paramount importance in this application, because that contains the “adjudication” relied upon by Miss Malcolm as giving rise to an estoppel. It provides as follows:

“IT IS FURTHER ORDERED AND ADJUDGED THAT This Order/Judgment of this Court is to be construed as a judgment in rem, in that the 800,000 common shares issued by [GEI] (now Caracal Energy Inc) to the Respondent, Ikram Mahamet Saleh, are neither crime related proceeds nor offence related property but were, at all times from the date those shares were issued to her, continuously to and beyond the date of this Order/Judgment, her property lawfully acquired by her.”

[51]A separate order was made by the judge on the same date releasing and directing the return of the other seized share certificates to Mrs Niam and Mr Hassan. It is a much simpler order. It does not contain a recital similar to the one with the mistaken reference to s.490.5 of the Code, nor does it contain a provision identical to paragraph 3 of the Saleh Order. It merely recites the Management Order, vacates that order and directs the RCMP or whoever holds the share certificates to return them forthwith.

[52]Miss Malcolm submitted that the Canadian court has definitively determined that the shares are neither the proceeds of crime nor offence related property, and that is a declaration as to their status binding as against the world. Therefore it is not open to the SFO to contend otherwise or to this Court to determine otherwise. Before addressing that issue and the other grounds for discharging the PFO relied upon by Miss Malcolm, I should briefly explain the circumstances in which this matter came before the English Court.

HOW THE SFO BECAME INVOLVED

[53]The SFO became involved in this matter in July 2014 following a mutual legal assistance request from the US Department of Justice in relation to the shares acquired by Mrs Niam (including those recently transferred to her by Mr Hassan). Those shares had been sold to Glencore for £17.6 million. The sale of GEI/Caracal was either about to complete or had just completed, and the US authorities asked the SFO to take steps to freeze that sum. By then, Mr Bechir had become the Chadian Ambassador to South Africa, and he and his wife had moved there, but Mr Takane still remained in his post in Washington DC. In the light of possible claims for diplomatic immunity, the US Authorities did not ask for any similar action to be taken in respect of Mrs Saleh’s shares. I understand from Mr Mitchell that their position may well have changed, now that Mr Takane is no longer in the Embassy in Washington DC.

[54]The SFO responded to that request and the proceeds of the Glencore acquisition of the Niam/Hassan shares, also in the CIS account at RBS, were frozen by an external restraint order of HH Judge Taylor made at Southwark Crown Court on 24 July 2014.

[55]The SFO acted of its own initiative in issuing proceedings for a CRO against Mrs Saleh under Part 8 of the CPR and taking steps to obtain the PFO in respect of the proceeds of sale of her GEI shares. It was unaware of the existence of the Order of 14 April 2014 when it made the without notice application for the PFO to Mostyn J. However the witness statement made in support of the application by the SFO solicitor, Stacey Barnes, stated at paragraph 5.1 that the Canadian authorities seized these physical share certificates for forfeiture in February and March 2013 but withdrew their action and released the shares. That is a sufficiently accurate description of what happened, albeit that there is no mention of the Order, and strictly speaking it was the Canadian court that released the shares.

[56]A copy of the Order was sent to the SFO by Mr Beresh QC by email on 13 August 2014 following the service of Mostyn J’s order on him (on behalf of Mrs Saleh). The Order was very properly drawn to the Court’s attention by Ms Barnes in a further witness statement dated 3 September 2014, to which it was exhibited together with the transcript of the hearing in the Canadian criminal proceedings on 22 January 2013. Given that the Order came to light in the course of the summer vacation, and it was obviously appropriate that the same judge who granted the PFO should see the further evidence and decide what to do about it, I do not consider that the SFO should be criticised about the time it took them to put the information before the Court.

[57]On 16 October 2014, Mostyn J made a ruling on the further information supplied to him by the SFO. He said that he had carefully considered whether the revelation of the existence of the Order should lead him, of his own motion, to fix a hearing to consider variation or discharge of the PFO, and that he did not consider that either the Order or the transcript of the hearing on 22 January 2013 should lead him to take that step. There was no question of his having been intentionally misled, and on the basis of the evidence before him he remained satisfied that there is a good arguable case for the existence of recoverable property. The PFO therefore continued, subject to the right of Mrs Saleh to apply to vary or discharge it.

THE MERITS OF THE CLAIM FOR A PFO

[58]One of the slightly unusual features of this case is that there is, as yet, no witness statement from Mrs Saleh herself, and she objects to the statement taken from her by Gowlings being used in evidence, on grounds of alleged violation of the protection afforded to her by the Vienna Convention at the time it was taken. Instead, she relies on a witness statement from her solicitor, Mr Ward of Stephenson Harwood, dated 10 December 2014. Mr Ward states that the facts in his witness statement are based on information and documents that he has been provided with by her Canadian lawyers. There is nothing in his witness statement dealing with Mrs Saleh’s factual defence to the allegation that the opportunity given to her to buy the GEI shares was part of the corrupt incentives offered by GEI to Mr Bechir and/or Mr Takane.

[59]Miss Malcolm submitted that the Crown could not establish its case for a CRO without recourse to inadmissible evidence. Mr Mitchell took issue with that submission; however, as both counsel accepted, that argument is for a future occasion. In my judgment, leaving aside the issue about the impact of the Canadian Order, at this juncture there is enough evidence whose admissibility is uncontroversial to cross the threshold of a good arguable case that the GEI shares and their proceeds are recoverable property, which is all that is required for a PFO.

[60]The SFO can establish, without recourse to any statements taken by Gowlings from Embassy staff, or to any documents produced in the course of the execution of anyone’s diplomatic duties, by reference to the Agreed Statement of Facts and GEI’s own documents (including copies of the relevant contracts), that: i) GEI initially sought to provide a corrupt incentive to Mr Bechir by offering to pay a $2 million “consultancy fee” to his own company if they closed the deal; ii) When it was advised that this would be unlawful, GEI decided to provide the same corrupt incentive by an indirect route. The $2 million “consultancy fee” was now promised to Chad Oil, swiftly incorporated for that purpose as a vehicle for Mrs Niam. iii) As an additional incentive to her husband, Mrs Niam was allowed to acquire founder shares in GEI at a nominal price. Those shares stood to be worth a huge amount of money if GEI got the deal that it wanted in respect of the oil blocks. Commercially, therefore, their acquisition was an even greater incentive than the “consultancy fee” would have been. iv) The three offers by Mrs Saleh, Mrs Niam and Mr Hassan to subscribe for a total of 10% of the founder shares in GEI all happened on the same day as the first consultancy agreement with Chad Oil was made, 15 September 2009. This was no coincidence. v) They were the only three “outsiders” who subscribed for founder shares; moreover, none of them had the level of income ostensibly required of an investor in GEI ($200,000) that they stated they had in the offer to subscribe; vi) Mr Hassan and Mrs Saleh were nominated by Mrs Niam to receive some of the founder shares. It does not necessarily follow from this that they were “nominees” in the sense of holding the shares on her behalf or on behalf of Mr Bechir. However, one legitimate inference that could be drawn from this nomination is that the incentive offered to Mr Bechir came in the form of the opportunity for Mrs Niam to acquire a total of 10% of the shares in GEI not only for herself, but for anyone else that she might wish to benefit and nominate as the recipient; vii) There are strong indicia that Mr Hassan was a nominee in every sense, not least the fact that Mr Bechir was instrumental in making the application in his name, and that Mrs Niam took so much trouble to get hold of his shares and eventually did so before the sale to Glencore. viii) Mrs Saleh had no apparent reason to be interested in investing in GEI; ix) Mr Takane, her husband, was plainly involved to some extent in furthering GEI’s interests. He was instrumental in directing payment of the “consultancy fee” to Chad Oil, and in the creation and execution of the second Chad Oil Consultancy Agreement in January 2011, although that company was ostensibly a vehicle for Mrs Niam used as the route for paying the “consultancy fee” originally offered to her husband Mr Bechir. x) Thus it could also be inferred that the acquisition of the shares by Mrs Saleh was an incentive to Mr Takane.

[61]Although GEI made no admission in the Agreed Statement of Facts that the shares allotted to Mrs Saleh and Mr Hassan were a part of the corrupt incentives provided by GEI, there is easily sufficient circumstantial evidence to raise a good arguable case that they were, and that the GEI shares are “recoverable property” as defined in POCA. It is unnecessary for the purposes of POCA to show that the person who is the lawful owner of the “recoverable property” was himself or herself guilty of any criminal offence. It seems to me that this would be a paradigm case for making a PFO, unless the SFO is unable to show that s.241 of POCA is satisfied, or the Order of the Canadian court compels this Court to reach a different conclusion.

DUAL CRIMINALITY

[62]Logically the next issue to be determined is whether the “dual criminality” requirement under s.241 of POCA is satisfied. That requirement only applies in so far as the criminal conduct complained of took place outside this jurisdiction – thus it is a pertinent inquiry so far as the events of September 2009 are concerned.

[63]If the opportunity to buy the GEI shares and their allotment did indeed form part of GEI’s corrupt incentives to Mr Bechir and/or Mr Takane to assist them in obtaining the concessions over the oil blocks, then what GEI did was undoubtedly a criminal offence under the laws of Canada (to which it pleaded guilty). The shares were paid for by means of money emanating from a bank account in Washington DC and the relevant paperwork was completed by Mrs Saleh in that State. On the evidence of Ms Barnes in support of the PFO the acquisition of or the allotment of the shares in GEI as a corrupt incentive would also have been a criminal offence under various provisions of US Federal law including 15 USC 78dd-3 (the Foreign Corrupt Practices Act), 18 USC 1341 (Mail Fraud) and 18 USC 1343 (Wire Fraud).

[64]The only issue is whether, if those same acts had been committed in this jurisdiction, GEI would have committed a criminal offence. Miss Malcolm candidly accepted that she would not be pursuing this point were it not for the fact that the corrupt acts complained of occurred in 2009 and thus pre-dated the coming into force of the Bribery Act 2010. Rather than setting out a positive case, Miss Malcolm challenged Mr Mitchell to explain the basis upon which the SFO contended that the dual criminality requirement was satisfied.

[65]Mr Mitchell submitted that the allotment of the shares to Mrs Saleh was to be regarded as part and parcel of the same corrupt transaction involving the agreement to pay the consultancy fee to Chad Oil, and the allotment of the shares to Mrs Niam. GEI’s conduct taken in the round, had it occurred in this jurisdiction in 2009, would have amounted to an offence of bribery at common law, since Mr Bechir and Mr Takane were both agents of the Chadian Government at the material time. Mr Mitchell contended that it would be as unlawful at common law for the briber to pay or provide the corrupt incentive to the agent’s wife instead of the agent, or to a third person such as a company nominated by the agent or his wife to be the recipient, as it would be to provide it directly to the agent himself.

[66]Such a payment or provision of a corrupt incentive would also have been an offence contrary to s.1 of the Prevention of Corruption Act 1906 (which had been extended to agents outside the UK since 2002 by virtue of the Anti-Terrorism Crime & Security Act 2001). That section provides, insofar as relevant: “If any person corruptly gives or agrees to give or offers any gift or consideration to any agent as an inducement or reward for doing or forbearing to do… any act in relation to his principal’s affairs or business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal’s affairs or business … he shall be guilty of a misdemeanour”.

[67]Mr Mitchell also submitted that Mrs Saleh might also have committed at least one act of money-laundering under ss 327-329 of POCA, since on SFO’s case the shares were property obtained as a result of GEI’s criminal conduct (and thus “criminal property” under Part 7 of POCA) and they were transferred by her from Canada to England for the purposes of being sold to Glencore, then converted into cash in England by reason of the sale. The transfer or the conversion of criminal property would both be acts of money-laundering. Of course Mrs Saleh’s liability for money laundering in Canada and/or England would depend on her state of mind at the time of the transfer and sale respectively; she would have to have known or believed the property to be criminal property. If it was criminal property, however, in my judgment Mr Mitchell would not need to resort to money-laundering in order to establish that the matter was actionable in this jurisdiction.

[68]Suffice it to say that I am satisfied that if the opportunity to acquire the GEI shares afforded to Mrs Saleh was indeed part and parcel of GEI’s corrupt behaviour in 2009, (as there is a good arguable case that it was) it would have amounted to a criminal offence if GEI’s behaviour had taken place in England.

RES JUDICATA

[69]I now turn to the issue which occupied the most time at the hearing of this application and is clearly the most arguable of the grounds that are still pursued by Mrs Saleh.

[70]The relevant rules in respect of the recognition of foreign judgments are well established, and were largely uncontroversial. A foreign judgment which is final and conclusive on the merits is conclusive as to any matter thereby adjudicated upon, and cannot be impeached for any error of fact or of law. This principle, reflected in Rule 48 of Dicey, Morris and Collins on the Conflict of Laws (“Dicey”) 15th Edn, paragraph 14R-118, applies with equal force to foreign judgments in rem as it does to foreign judgments in personam.

[71]This was established by the House of Lords in Castrique v Imrie (1870) LR 4 HL 414. I agree with Mr Mitchell’s proposition that when that case was decided, their Lordships could not have anticipated the ease and speed with which, thanks to modern technology, assets can be moved from jurisdiction to jurisdiction so as to defeat the ends of justice; but that is no reason to assume that the principles in that case are no longer relevant or applicable in the modern era. It is important, however, that this Court should seek to achieve that, so far as is possible, those principles should not be applied in a manner that defeats the interests of justice.

[72]A judgment in rem is one which determines the status or disposition of property which is valid as against the whole world and not merely between the parties: Pattni v Ali

[2006] UKPC 51

[2007] 2 AC 85

, especially at [21], per Lord Mance. If the property in question (whether moveable or immoveable) is located in the jurisdiction of the court which delivers the judgment, it will be a court of competent jurisdiction. A foreign judgment will not be characterised as a judgment in rem unless the foreign court so characterises it.

[73]However, the characterisation by that court of its judgment as a judgment in rem is not the end of the matter so far as the rules of private international law in this jurisdiction are concerned, as Pattni v Ali itself demonstrates. In that case, an appeal from the Isle of Man, the Privy Council was concerned with the question whether a Kenyan judgment was in rem or in personam. It held that there was no reason why a judgment should be characterised as wholly in rem or wholly in personam; it could operate partly in rem and partly in personam, and the question of its operation is a matter of analysis. The judgment of the Kenyan court did not purport to transfer or deal with the property in question (some shares) but determined the contractual rights of the parties relating to them. Therefore, the order directing that the shares be transferred to one of the parties was held to be an order in personam directing specific performance of contractual rights under a contract of sale.

[74]In R(PM) v Hertfordshire County Council

[2010] EWHC 2056 (Admin)

, Hickinbottom J added the important rider (at [51]-[52]) that claims before the courts generally involve the rights and obligations of those – and only those – who are privy to the proceedings. A judgment may appear to determine an issue of status, but it is only a judgment in rem if it is made by a court or tribunal with the jurisdiction to determine proceedings where the function of those proceedings is to determine status or rights as against the world. Findings, even as to matters such as age, which are merely incidental to a determination that the court or tribunal is required to make in personam, are not binding on the world at large.

[75]Miss Malcolm submitted that the requirement that the foreign judgment should be a judgment on the merits was confined to judgments in personam, because the inquiry whether the judgment is “on the merits” is relevant only where the parties are the same, and the question is whether they can re-open a point that the first court has already decided in an action between them. Where the judgment is in rem, the parties do not need to be the same in order for the judgment to bind them.

[76]I do not accept that submission, for which there is no authority. In their commentary on Rule 48 the learned editors of Dicey make no such qualification: indeed, both the language of the Rule itself and the tenor of that commentary appear to contradict it. Regardless of the nature of the proceedings, the inquiry to which the question whether the judgment is “on the merits” is directed is the same, namely, whether the first decision was of a nature that should be regarded and recognized as finally determinative of the issue (either as between the parties or against the world). If anything, that question seems to me to be all the more important in the context of a judgment in rem, where the person seeking to re-open the matter may not have had any opportunity to put arguments before the first court or to influence the outcome.

[77]The present case is not strictly concerned with so-called “cause of action estoppel” because, insofar as there is a statutory “cause of action” under POCA, it is not the same as the “cause of action” under section 490.1(1) of the Criminal Code of Canada. The argument that Miss Malcolm is advancing is essentially one of issue estoppel. The question that I have to determine is whether it is open to the SFO to contend that the GEI shares were “recoverable property” prior to their sale, in the light of the Canadian court’s findings, expressed to be in rem, that they are neither offence related property nor the proceeds of crime as defined by the Code.

[78]A decision “on the merits”, as explained by Lord Brandon in The Sennar (No. 2)

[1985] 1 WLR 490

at 499 means that:

“[it] is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned.”

In the same case at 494A-C Lord Diplock, who agreed with Lord Brandon’s conclusions and reasons, added that the moral overtones which the expression “on the merits” tends to conjure up may make it misleading. What it means in the context of judgments delivered by courts of justice is that the court has held that it has jurisdiction to adjudicate upon an issue raised in the cause of action to which the particular set of facts give rise, and that its judgment on that cause of action is one that cannot be varied, re-opened or set aside by the court that delivered it or any other court of co-ordinate jurisdiction.

[79]A judgment or order on the merits will not include an order dismissing a case for want of prosecution, or for a technical objection, or for a default of pleading. Nor will it include an order made by consent, for the obvious reason that even if it gives its approval to the agreement made between the parties, the court has not itself adjudicated upon the matters in issue between them. The position in respect of foreign judgments entered in default is the subject of some academic debate, which it is unnecessary to rehearse for present purposes, since I am not concerned with a default judgment.

[80]Neither the SFO nor Mrs Saleh’s legal team were able to find any authority addressing the status, in this context, of a judgment or order made by a court resulting from the decision made by a claimant to abandon or withdraw the claim either before or at the trial or substantive hearing. The nearest they got were what appear to be inconsistent decisions of the Supreme Court of Canada on the question whether the situation where the prosecution offers no evidence at a criminal trial or withdraws the case before any evidence is adduced, and the charge is dismissed, can give rise to an estoppel per rem judicatem. Those cases, R v Riddle (1979) 48 CCC (2d) 365 and R v Selhi [1990] 53 CCC (3d) 576 concerned the specific question whether the plea of “autrefois acquit” is available to a defendant in criminal proceedings in such circumstances, where the prosecution later seeks to prosecute him for substantially the same offence.

[81]In Riddle, the main prosecution witness did not turn up on the day of the trial and the judge refused an adjournment; the Crown offered no evidence and the charge against the defendant was dismissed by the judge. The issue that the Supreme Court was asked to determine was whether the plea of “autrefois acquit” was available in respect of a summary conviction offence. The court held that it was. There was an ancillary issue as to whether in the circumstances the information (or charge) had been dealt with by the court “on the merits” because there was no certificate of acquittal. Dixon J, who delivered the judgment, said that he was unsure what the phrase “on the merits” meant, but that it did not necessarily mean “after a trial”, and that where the criminal charge had been dismissed by the court, whether as a result of no evidence being adduced by the Crown or insufficient or inadequate evidence, the defendant would be entitled to a certificate of acquittal. That in turn would enable him to argue that he should not be put in double jeopardy.

[82]In Selhi, by contrast, the same judge, by now the Chief Justice of Canada, delivered a ruling that the plea of “autrefois acquit” was not available to a defendant to a summary proceeding where the Crown had withdrawn the information before any evidence was adduced against him. It held that the withdrawal of the information could not be characterised as being in the nature of an acquittal.

[83]In R v SCC (2001) ABQB 959, a decision of Lee J. in the Court of Queen’s Bench of Alberta, the judge formed the view that Selhi must be taken to have implicitly overruled Riddle even though there was no mention of that case in Dixon CJ’s judgment. He decided, consistently with the reasoning deployed in Selhi, that the withdrawal of a case by the prosecution before any evidence was called would not be sufficient to give rise to the plea of “autrefois acquit”. He considered that as a matter of common sense, a defendant would not be put in any jeopardy (of conviction) until evidence was called against him.

[84]It is always difficult to translate principles of (or akin to) issue estoppel or res judicata from the context of criminal proceedings to civil proceedings, even where (as in the present case) the civil proceedings are an adjunct to and brought in the context of earlier criminal proceedings. In any event, the question whether the Order was “on the merits” falls to be determined by the conflict of laws principles of this jurisdiction, so the approach to that question that might be taken domestically by a Canadian court is, at best, of persuasive value. Insofar as these Canadian criminal cases afford any assistance, it is of very limited scope, although the approach taken by the Supreme Court in Selhi and by Lee J in SCC superficially supports, or is at least consistent with, the proposition that an order or judgment made in consequence of the withdrawal of proceedings before any evidence is heard, is not “on the merits”.

[85]I prefer not to rest any part of this judgment on those cases, which concerned the effect of an acquittal or the dismissal of criminal charges. An acquittal of a criminal offence, either in a domestic or foreign court, is no bar to the successful institution and conclusion of forfeiture proceedings under POCA against the person who has been acquitted, let alone against a third party. Cases about the effect of withdrawal of criminal proceedings on the position of the defendant if he is charged with the same offence a second time are so far removed from the issue that I have to determine that it is very difficult to discern any principled reasoning from them that can be safely applied in the present context.

[86]It appears, therefore, that the issue before me is one on which there is no previous authority, although the scenario is unlikely to be unique.

[87]This jurisdiction is not the only one in which it is considered to be an important policy objective that those who commit criminal offences should be deprived of the fruits of their criminal activity, including any profits they may have made. This spells out the message that crime does not pay. That policy objective has to be balanced against the other important policy objective of achieving finality in litigation that underlines the principle of res judicata.

[88]The claim for a CRO is an action in rem; the claim under Part V of POCA is made against the property itself, and not against any particular individual, and a CRO, if and when granted, transfers title to the property to, and vests that title in, the trustee: POCA sections 266 and 269, and see SOCA v Perry (Nos 1 and 2)

[2013] 1 AC 182

, at paras 123-5 per Lord Phillips. As one might expect, the same appears to be true of forfeiture proceedings in Canada (Martineau v Minister of National Revenue 2004 SCC 81 [2004] 3 RCS 737, although that was a case dealing with a different forfeiture regime) and in the USA (see United States of America v Abacha and others

[2015] EWCA Civ 1291

[2015] 1 WLR 1917

at paragraphs 65 and following).

[89]Therefore, if an order for forfeiture or recovery of the proceeds of crime is made in proceedings of that nature, it confers title to the property upon the person to whom it is transferred by court order – in this jurisdiction, the Trustee – and that title will be, and has to be, good against the world in order for the forfeiture to be effective. It does not necessarily follow that the converse must be true, and that if an order for forfeiture is not made, the decision will be (or has to be) binding on the whole world.

[90]An order or judgment made in those circumstances will not confer title to the property upon anyone; if it says anything at all on the subject, it will maintain the status quo by declaring the existing owner to be the lawful owner. If the property has been seized as an interim protective measure, it will direct its return to him or her. If the owner then moves the property out of that jurisdiction or sells it and the proceeds are received in a different jurisdiction, then it would frustrate the whole objective of depriving criminals of their ill-gotten gains if the relevant authorities in that jurisdiction, even if they had much stronger evidence than the authorities in the first jurisdiction, were forced to sit on their hands and let the property or its proceeds go free.

[91]The POCA regime operates in a way that will often cause a person who is the lawful owner of property to be deprived of it, and it can have adverse effects on innocent third parties, including members of the offender’s immediate family, although there are limited safeguards built in to the legislation so as to protect, among others, bona fide purchasers without notice.

[92]In Canada, as in England and Wales, the fact that someone other than the defendant is the lawful owner of the property is no answer in itself to a claim for forfeiture: this much is clear from the provisions of the Canadian Criminal Code to which I have referred earlier in this judgment. However, a person who appears innocent of collusion or complicity in the defendant’s wrongdoing may prevent an order for forfeiture of his or her property from being made, or may obtain a declaration that his or her interest in that property is not affected by an order for the forfeiture of it. Thus even an order for forfeiture is not the final determination against the whole world of who has interests in or title to the property, since it will be open to someone adversely affected by that order to make an application for relief under s.490.5(4) of the Code.

[93]It follows that a declaration by the Canadian court that Mrs Saleh is the lawful owner of the GEI shares (or was before they were sold to Glencore) is immaterial to the issues that I have to determine. Indeed the fact that she paid the asking price for the GEI shares and acquired the legal title to them in 2009 has never been a matter of controversy. The reason why her ownership of and title to those shares was a matter of any concern in the forfeiture proceedings was that only the owner could sell them. Mrs Saleh could not participate in the sale to Glencore whilst there was any danger that they might be forfeited to the Canadian authorities.

[94]The Canadian prosecuting authority withdrew its claim for forfeiture of all the shares (not just Mrs Saleh’s shares) at a stage in the proceedings after interim steps had been taken to stop their disposal (the Management Order) but before the Canadian Court heard the claim for forfeiture, or even heard the motion to dismiss it. The forfeiture proceedings had been going on for over a year, but the only matters that had been dealt with during that time were of an essentially interlocutory nature, and the hearing at which the Order was put before the judge was not the hearing of the substantive claim (or of the motion for dismissal). There was no necessity for such a hearing, as the prosecution withdrew its claim.

[95]The proposition that an order for the restoration of the shares to their lawful owner in consequence of the abandonment of forfeiture proceedings in Canada against them, somehow precludes the prosecuting authorities anywhere else in the world from initiating proceedings under their domestic legislation against the proceeds of sale of those shares located within their jurisdiction, and does so irrespective of the existence of a good arguable case in the second jurisdiction that they are recoverable property, is not an immediately attractive one. It appears even less attractive when one considers that the same argument could not be raised in respect of Mrs Niam’s and Mr Hassan’s shares, since the order directing their restoration did not contain the paragraph (or indeed the recital) upon which Miss Malcolm relies.

[96]In my judgment, the Order does not have the effect for which Miss Malcolm contends. There are a number of reasons for this. First, although it was undoubtedly made by a Court of competent jurisdiction and it appears to have finally disposed of the forfeiture proceedings in Canada, it was not a judgment on the merits. It could not have been a judgment on the merits of the claim for forfeiture, because that claim had been withdrawn. In consequence of that withdrawal, when he made the Order, the judge was not adjudicating upon that claim. He was dealing with the aftermath of the claim being withdrawn, and making an order that was designed primarily to release the property from the (interim) Management Order and restore the GEI shares to Mrs Saleh in order that they could be replaced by Caracal shares, which could then be sold on to Glencore as part of the buy-out of GEI/Caracal.

[97]By reason of the failure by the Crown to present any evidence, which is recorded in the recitals to the Order, Brooker J. never considered whether the case was, or would have been, a suitable one for forfeiture. He did not consider any legal arguments on the issues and, as the transcript of the hearing makes plain, he did not even have the relevant provisions of the Code before him, but took Counsel’s word for it that he was making the order under the correct section.

[98]I should make it very clear that these observations are not intended to be a criticism of the learned judge or of the Order that he made, let alone an attempt to embark upon what Rule 48 of Dicey makes it plain this Court should never do, namely, an examination of whether the foreign judgment or order was right or wrong. That is not a matter with which I am concerned. I am merely explaining that there are factors in this case which demonstrate that the process of adjudication on the merits of a claim or the issues arising in that claim described by Lord Brandon, and concurred in by Lord Diplock, in “The Sennar”(No 2) was absent. The situation is analogous to the situation in which a claim is dismissed for reasons unconnected with the merits of the issues that the court would have to determine, for example, for want of prosecution, or for non-compliance with directions. In this case the Order did not even dismiss the claim. Instead, it correctly recorded, in the recitals, that the Prosecution had served notice that it intended to withdraw the claim and that no evidence had been presented by the Crown.

[99]The recitals make it plain that the court was making the order because, there being no evidence adduced to the contrary, it appeared that Mrs Saleh was innocent of collusion in or complicity in GEI’s criminal conduct and thus the preconditions in the Code for making an order in those terms had been met. As Mr Beresh rightly told the learned judge, that repeated the language of the Code. Although the Order correctly records that the court heard representations from all the parties, it is not a ruling on the evidence or the competing legal arguments. Moreover, although the Order was not made by consent, it was unopposed, and prosecuting counsel went so far as to agree its terms and to sign the draft to signify this. In this specific context, its nature was not materially different from a consent order, which would not be a judgment “on the merits”.

[100]Secondly, even if I am wrong about this, on proper analysis the relevant paragraph of the Order operates partly in rem and partly in personam. Insofar as any part of the Order operates in rem it must be the part dealing with title to the GEI shares. The whole purpose of this Order was to restore the shares to their lawful owner, Mrs Saleh. Above and beyond making it clear to anyone who might be concerned about it that she had title to the shares, and could confer clean title on a purchaser, the Court was not seeking to achieve a final ruling on their status that would bind the whole world.

[101]I have not yet mentioned paragraph 4 of the Order, which supports that conclusion. This provides that Mrs Saleh shall be entitled to provide a certified copy of the Order to Caracal Energy Inc’s transfer agent and registrar, or to CIS when she surrenders her share certificates “evidencing her ownership of common shares in [GEI] (now Caracal Energy Inc) in exchange [for] share certificates to be issued by Caracal Energy Inc.” The declaration by the Court that Mrs Saleh is (and was at all material times) the lawful owner of the shares is therefore part and parcel of the mechanism designed to facilitate the exchange of the GEI shares for Caracal shares, so as to enable the Glencore acquisition to proceed. There was understandable concern that the registrar would not have gone ahead with issuing substitute Caracal shares to Mrs Saleh if there remained any possibility that someone other than Mrs Saleh would acquire title to them through the mechanism of the forfeiture proceedings.

[102]By contrast with the declaration of title, the adjudication that the shares “are neither crime related proceeds nor offence related property” is entirely incidental. Miss Malcolm submitted that the finding was a necessary step in order to make a finding that Mrs Saleh was entitled to the return of the shares. That cannot be right. It was unnecessary for the court to pronounce upon that matter in order to achieve the objective of transferring the shares back to Mrs Saleh so that she could sell them, because, even if the shares were offence related property, the fact she appeared innocent of complicity or collusion in GEI’s criminal inducements to Mr Bechir and/or to her husband, Mr Takane, would have been sufficient for an order to have been made for their transfer back to her under s.490.4(3) of the Code.

[103]Moreover, the issue of whether the GEI shares were crime related proceeds or offence related property arose in the specific context of a claim for forfeiture by the Canadian prosecuting authorities under the provisions of the Canadian Code. Viewed in that context, the court’s adjudication on that issue could only have been intended to operate in personam between the Canadian prosecuting authorities and Mrs Saleh because, to the extent that it was an issue in the forfeiture proceedings, it was only an issue that arose between them. It was for the prosecution to prove that the requirements of s.490.1(1) of the Code were satisfied; but the Code is domestic Canadian legislation and these were domestic forfeiture proceedings. Therefore what was said in paragraph 3 of the Order on that subject cannot be interpreted as a declaration of the status of the shares that was intended to be binding on the world at large. That was not the function that the Canadian court was being asked to perform or purporting to perform by making such an Order.

[104]The third reason is related to the second. On Miss Malcolm’s case the adjudication that the shares are not “crime related proceeds” or “offence related property” is a determination of their status, in the sense that it determines once and for all time that they are and were untainted by any criminality on the part of GEI (or Mrs Saleh herself). I respectfully disagree with that analysis. Those two expressions are terms of art used and defined in Canadian legislation for the purposes of that legislation. An Order that they are not “offence related property” is self-evidently not the same thing as a declaration that they are not “recoverable property” as defined by POCA. To the extent that there has been any adjudication about their “status”, above and beyond declaring who their lawful owner is, it goes no further than a final ruling that the shares cannot be forfeited by the authorities in Canada.

[105]In order to run an argument of estoppel per rem judicatem, Miss Malcolm would have to rely on the underlying statutory definition of those terms of art, and submit that the Order necessarily means that the Canadian Court has made fact-findings and declarations, binding on the whole world, that the shares are not property by means of or in respect of which GEI committed the criminal offence to which it pleaded guilty, or that was used in any manner in connection with the commission of that offence and that because of this, it is not open to the SFO to run a factual case that seeks to prove otherwise. However as soon as one spells them out it becomes apparent that these implicit findings are not findings as to the status of the shares (in the sense of being findings as to their standing in criminal or civil proceedings that might arise outside Canada). They are fact-findings that are only binding as between the parties, i.e. the Canadian prosecuting authorities and Mrs Saleh (or possibly, anyone deriving title through her who might be regarded as “privy” for the purposes of res judicata/issue estoppel arguments).

[106]Finally, even if those findings were declarations of the status of the shares in Canada, binding on the whole world, the issue in the English proceedings is whether the GEI shares were “property obtained through unlawful conduct”. There can be no doubt that there was unlawful conduct by GEI, and that the opportunity to acquire the seedcorn shares only arose because GEI allowed Mrs Saleh to nominate two other people to receive them. The focus in England, under POCA, is on whether there was a causal connection between Mrs Saleh obtaining the shares and GEI’s criminal conduct, and not on the use to which the shares themselves were put by GEI or the role they played in GEI’s offending. Therefore, there is not necessarily an irreconcilable conflict between the underlying fact-findings inherently encompassed in the relevant parts of paragraph 3 of the Order and the facts that the SFO would need to prove in order to obtain a PFO or CRO in the proceedings in this jurisdiction.

[107]For all those reasons I am not persuaded that there is anything in the terms of the Canadian Order that precludes the SFO by reason of estoppel per rem judicatem or issue estoppel from obtaining a PFO in this jurisdiction.

ALLEGED MATERIAL NON-DISCLOSURE

[108]The case on non-disclosure to Mostyn J appeared to me to be somewhat nebulous. It was not at the forefront of Miss Malcolm’s submissions and, as Mr Mitchell submitted, if Mrs Saleh had been truly concerned about non-disclosure, it seems likely that her legal team would have acted more swiftly to have the PFO set aside.

[109]Miss Malcolm initially submitted that on the “without notice” application the court was not told about the length of time that the Canadian forfeiture proceedings had been on foot before they were withdrawn, and that the picture painted at the hearing of the “without notice” application was misleading because counsel then instructed by the SFO failed to correct a remark by the judge in which he appeared to be labouring under the misapprehension that the warrant for the shares had never been executed. Miss Malcolm contended that there could be a host of reasons why a warrant was not executed, but the fact the action was withdrawn would naturally raise an enquiry whether there was something wrong with the evidence or with the merits of the claim for forfeiture.

[110]However, as I have already indicated, Ms Barnes’ first witness statement stated that the shares were seized for forfeiture in February and March 2013 and that the Canadian authorities withdrew their action and released the shares in April 2014. It seems to me that this must have been what Mostyn J had in mind when he asked counsel why the Canadian authorities gave up, and counsel truthfully replied that he did not know. Even if, instead of using slightly loose terminology to describe what occurred, Mostyn J was truly labouring under a misapprehension and counsel failed to correct him, it still seems clear from the transcript that he had enough of a flavour of what had happened in Canada to make a fair evaluation of whether it should affect his decision to grant or refuse the PFO. That must have been the view that Mostyn J himself took, when the SFO came back and told him about the Order.

[111]Miss Malcolm next sought to criticize the SFO for not taking steps to find out from the Canadian authorities themselves why the proceedings were withdrawn before the SFO sought the PFO. She submitted that it was incumbent on the SFO not only to put forward anything material to Mrs Saleh’s likely defence of which it was actually aware, but to make reasonable inquiries of the PPSC to find out why it was that, after over a year, they had decided not to go ahead with the forfeiture claim. Although Miss Malcolm acknowledged that there was a degree of urgency involved in seeking a PFO, the SFO was not operating under such time constraints as to make these inquiries impracticable.

[112]Indeed, it had only emerged much later, in a further witness statement of Ms Barnes dated 30 January 2015 in support of the application for a CRO, that before making the “without notice” application, the SFO had been in touch with the US Department of Justice on receipt of their Letter of Request in order to try and find out from them why the PPSC had withdrawn the forfeiture application. The US Department of Justice said they had asked the Canadians that question several times, but the Canadians had said they were unable to disclose the information unless the US authorities signed a non-disclosure letter that acknowledged that the information was protected by attorney-client privilege and that they would not disclose it further. The US Department of Justice had declined to sign the letter.

[113]It can be inferred that a direct approach by the SFO to the Canadian authorities would have produced a similar response. Indeed it appears from Ms Barnes’ latest statement that this is what did happen in September 2014 when the Canadians were approached, after the PFO had been granted. The Canadians were more than happy to share the reasons with the SFO but they wanted the SFO to sign a Non-Disclosure Agreement. Ms Barnes exhibited a copy of that Agreement to her statement of 30 January 2015. I am bound to say, having read it, that it would be very risky to assume that it would permit the SFO to tell the Court what it learned from the Canadian authorities, which could potentially place the SFO in a real difficulty if it signed up to the agreement and the reasons were such as would oblige the SFO to reveal them to the Court. Miss Malcolm submitted that the SFO could and should have reverted to the Canadians to seek clarification that they could tell the Court the reasons, or to seek express permission to do so, but there is no knowing whether it would have been forthcoming, especially if the Canadians did not want Mrs Saleh or her legal advisors to know what those reasons were.

[114]One of the problems with the non-disclosure argument is that the reasons still remain a mystery. That being so, there is no basis for supposing that if the reasons had become known in consequence of further steps being taken by the SFO to press the Canadians to tell them, it would have made any difference to the exercise of the Court’s discretion. The best outcome from Mrs Saleh’s perspective would be if the reason was that the view was taken by their legal advisors in Canada that the Canadian prosecutors could not prove the claim against her without resorting to inadmissible evidence, (as Miss Malcolm contended was highly likely). However even if I were to assume that to have been the reason, it does not mean that there would have been no justification for granting a PFO in this jurisdiction – the position here is that there is ample evidence besides that which is challenged as having been obtained in breach of the Vienna Convention, to raise a good arguable case on the underlying claim for a CRO.

[115]In any event, a perceived need to rely on inadmissible evidence in order to make good their case is not the only possible reason why the Canadian prosecuting authorities gave up when they did. If that were the reason, I find it quite surprising that the abandonment of the proceedings did not follow immediately on Mrs Saleh’s motion to dismiss, but five months thereafter, and some two months after the judge had made a ruling in principle on contested issues of disclosure that was adverse to the prosecution.

[116]It is possible that the PPSC did not wish Mrs Saleh or Mrs Niam to see certain information that GEI had disclosed in the criminal proceedings and were unwilling to take the risk that the judge would compel them to disclose it at the hearing due to take place on 16 April. Alternatively, it is possible that the decision to abandon the claim for forfeiture, which more or less coincided with Glencore’s offer, was somehow related to that offer. The claim against Mrs Niam’s and Mr Hassan’s shares was also withdrawn, and so far as I am aware they had not issued a similar motion to dismiss it. The case regarding Mrs Niam’s own shares was far stronger, and could be proved on the Agreed Statement of Facts without resorting to evidence obtained from her or from other Embassy staff. It seems odd that the PPSC would have decided to give that up, regardless of the position concerning the far smaller parcel of shares belonging to Mrs Saleh.

[117]If the shares remained subject to the Management Order it might have been a fatal impediment to the buy-out of GEI/Caracal, which would increase their value substantially if it went ahead. Maybe the PPSC had its own reasons for wanting that sale to go ahead. Maybe it believed at the time (at least, before the Order was drafted by Mr Beresh) that withdrawing the claim for forfeiture before any consideration was given to it by the court might leave open the possibility of resurrecting it if the sale proceeds were paid to Mrs Saleh in Canada, as then seemed quite likely.

[118]All of these theories are matters of pure speculation, and I mention them only to make it clear that Miss Malcolm’s preferred explanation is by no means the only plausible candidate. At the end of the day I do not consider that the SFO was at fault in failing to contact the Canadians before it made its “without notice” application for the PFO. It is unlikely to have been any better informed if it had. The SFO’s lawyers told the Court what they knew, and when they found out about the Order they told Mostyn J about it. He plainly did not feel that he had been misled in any material respect or that the SFO should be criticized (e.g. because they should have found out about it sooner than they did) which is why he ruled that the PFO should continue without another hearing.

[119]In Jennings v Crown Prosecution Service

[2006] 1 WLR 182

, the Court of Appeal made it clear that even if there is a non-disclosure of material facts in a case such as this, the fact that the prosecution acts in the public interest will generally militate against discharging an order if, after consideration of all the evidence, the court considers it is appropriate to make such an order. The conduct complained of has to be particularly egregious to justify what the Court of Appeal described as the “ultimate sanction” of discharge. Even if I had been satisfied that there was material non-disclosure in the present case, which I am not, this is nowhere near the type of scenario in which it would be appropriate to exercise the court’s discretion to discharge a PFO which is otherwise clearly justified.

CONCLUSION

[120]For the reasons set out above, despite Miss Malcolm’s valiant efforts to persuade me otherwise, Mrs Saleh’s application to discharge the PFO fails on all grounds. That application is therefore dismissed.

Cited in 1 later judgment

Saleh v Director of the Serious Fraud Office 2017