LAW REPORT: Restraint order against bank account upheld

LAW REPORT 16th august 1995

Re S-L; Court of Appeal (Lord Justice Evans, Lord Justice Pill and Lord Justice Otton) 5 July 1995

The High Court has power to make a restraint order prohibiting dealing with the alleged proceeds of drug trafficking referred to in an external confiscation order made in a foreign court in proceedings which were not against a named defendant but where property was described as the defendant.

The Court of Appeal dismissed an appeal from the refusal of Mr Justice Judge to discharge a restraint order made under the Drugs Trafficking Offences Act 1986 (Designated Countries and Territories) Order 1990 (SI no 1199).

The United States Government obtained a restraint order prohibiting any person dealing with money in bank accounts in London on the basis that the property identified was the realisable property of a putative defendant, JL, in putative criminal proceedings in the United States. The bank accounts were opened in the joint names of the parents of JL's then wife. In a New York action entitled United States of America v All funds on deposit in any accounts maintained in the name of H or E and all funds traceable thereto at the National Bank of Greece in London, England, an order was made that the "defendant funds and all proceeds traceable thereto are hereby forfeited and condemned to the use and benefit of the United States of America as being proceeds of illegal narcotics trafficking and illegal narcotics money laundering". There would be no criminal proceedings against JL as he was in Colombia which did not have an extradition treaty with America.

The account holders applied to set aside the restraint order on the ground that because no person was a defendant to the New York proceedings which were proceedings in rem where property rather than a person was described as the defendant, the powers of the High Court to make restraint order could not be exercised since proceedings in rem were alien to English law.

Robert Marshall-Andrews QC and Andrew Mitchell (Denton Hall) for the applicants; Paul Garlick (CPS) for the United States government.

Lord Justice Pill said that the power to make a restraint order could, on the wording of section 7 of Schedule 3 to the Order, be exercised. There was no doubt that an external confiscation order, as defined in section 1(1), had been made. The question was whether it had been made "in the proceedings" as contemplated in section 7(1)(c), when section 7(1)(a) required proceedings to have been instituted "against the defendant". The statement in section 1(3) that a person against whom an external confiscation order had been made was "referred to in this Act as 'the defendant' " did not of itself exclude the possibility of such an order being made under section 1(1) without there being "a person" named as defendant.

The word "defendant" in section 7(1)(a) was not limited to defendants who were persons. The description in section 1(3) to identify the person intended by the word "defendant" did not provide an exclusive definition of "defendant" for all purposes of the Act. Section 7 was concerned to identify the stage of proceedings, instituted to obtain an external confiscation order, at which a restraint order might be made. It did not require a particular form of proceedings or use "the defendant" in the limited sense described in section 1(3).

Weight must be given to the purpose of the 1990 Order and, in that context, the word "defendant" in section 7(1)(a) should not be construed as requiring proceedings in personam. The court should have regard to the substance of the proceedings and not the form.

The New York order did recognise that the persons who were or might be interested in the relevant funds had an opportunity to intervene. The expression "proceedings . . . ag- ainst the defendant" in section 7 would be construed so as to include proceedings in rem in which the standing of persons with a financial interest in the outcome was, as in the New York proceedings, plainly recognised.

Further support for that conclusion on section 7 was found in the fact that the paragraph of the 1990 Order which gave effect to the Schedule, paragraph 3(2), referred to proceedings in the designated country without limiting the nature of the proceedings or the parties thereto. The appeal would be dismissed.

Lord Justice Otton agreed and Lord Justice Evans concurred.

Ying Hui Tan, Barrister