Restraint orders

Section 40: Conditions for exercise of powers

85.     Section 40 sets out the circumstances under which a restraint order, as provided for in the ensuing sections, may be made. A restraint order has the effect of freezing property that may be liable to confiscation following the trial and the making of a confiscation order.

86.     Under the earlier confiscation legislation, a restraint or charging order may be made by the High Court where proceedings have been instituted or the defendant is to be charged, or an application in respect of further confiscation proceedings has been made or is to be made (for example, for a reconsideration of the defendant's benefit). The Act makes three fundamental changes to this scheme.

87.     Firstly, the power of the High Court to make a charging order is abolished as unnecessary. Secondly, the venue for restraint orders is changed from the High Court to the Crown Court, in accordance with the general principle in the Act of the Crown Court being the main venue for confiscation proceedings and related proceedings. Thirdly, the point at which a restraint order may be made is brought forward in the Act to any time after an investigation has been started (at present, although a restraint order may be made at the investigative stage, it is only possible to do so where charges are anticipated).

Section 41: Restraint orders

88.     Section 41 explains the nature and effect of a restraint order. It is an order prohibiting a specified person from dealing with any realisable property held by him (realisable property is defined in section 83). Thus it may be made both against the defendant or person under investigation, and any other person holding realisable property. Subsection (3) provides for exceptions to be made for reasonable living and legal expenses and for carrying on any trade, business, profession or occupation. Subsection (4) prevents funds under restraint from being released to the defendant or the recipient of a tainted gift for legal expenses incurred in relation to the offences in respect of which the restraint order is made. However, public funding for legal expenses, on the standard conditions, will be available to both instead.

89.     Subsection (7) gives the court the power to make such order as it believes is appropriate for the purpose of ensuring that a restraint order is effective. The provision ensures that the Crown Court has general powers available to it such as the residuary powers currently available to the High Court. These will include, for example, the power to order a person to disclose his or her assets. Failure to comply with a restraint order or an order provided for in subsection (7) will fall to be treated as contempt of the Crown Court. Subsection (8) provides that a restraint order cannot be made in relation to any property subject to a charging order under any of the earlier confiscation legislation, reflecting the principle that a restraint order and a charging order should not be made in relation to the same property.

Section 42: Application, discharge and variation

90.     Section 42 lays down who may apply for a restraint order under the Act, and sets out criteria like those in the earlier confiscation legislation for the variation or discharge of restraint orders. Under the earlier legislation, only the prosecutor may apply for a restraint order. The Act provides that application may be made by the prosecutor, the Director or an accredited financial investigator.

91.     The provision enabling the Director or an accredited financial investigator to apply for a restraint order is accordingly new. Accredited financial investigators are those accredited by the Director in accordance with section 3. They are likely to be employed primarily in force financial investigation units (FIUs) or by Customs and Excise. Under section 68, in order to ensure that the powers are only used in appropriate cases, applications will require the authority of a police officer of superintendent rank or the Customs equivalent or a financial investigator of the kind specified in an order made by the Secretary of State under section 453.

Section 43: Appeal to Court of Appeal

92.     There is a general right of appeal against any order of the High Court in section 16 of the Supreme Court Act 1981. It applies to restraint orders made by the High Court and orders ancillary to them. The general right of appeal in the 1981 Act does not, however, apply to the Crown Court. Therefore, it has been necessary to create a specific right of appeal in the Act in relation to restraint orders made (or not made) by the Crown Court.

93.     It is important to note that there is no right of appeal against the Crown Court's decision to make a restraint order. The appeal lies only against the Crown Court's decision to vary or discharge an order (or not to vary or discharge it). A person dissatisfied with a restraint order must first apply to the Crown Court for its variation or discharge before any appeal to the Court of Appeal is possible. This is because most restraint orders are likely to be made ex parte so the Crown Court will not have had the opportunity of hearing the defendant unless he applies to vary the restraint order.

Section 44: Appeal to House of Lords

94.     Under section 44, only the parties to the Court of Appeal proceedings under section 43 may appeal further to the House of Lords. Any person who wishes to contest a restraint matter must, therefore, first do so in the Court of Appeal.

Section 45: Seizure

95.     Section 45 allows a constable to seize any property subject to a restraint order to prevent its removal from England and Wales. In the earlier confiscation legislation, realisable property may be seized by a constable to prevent its removal from anywhere in England and Wales or Scotland. That provision dates back to the Drug Trafficking Offences Act 1986, when there was no confiscation legislation in force in Scotland. This is not now the case and so (unlike the earlier legislation) section 45 does not need to apply to Scotland.

Section 46: Hearsay Evidence

96.     Under earlier confiscation legislation, applications for restraint orders in the High Court frequently rely on hearsay evidence. However, there are considerable limitations on the admission of hearsay evidence in the Crown Court. Section 46 makes it clear that hearsay is admissible in restraint proceedings in the Crown Court in the same way as in the High Court, in accordance with the general principle adopted in the Act of transferring tried and tested restraint procedures to the Crown Court.

Section 47: Supplementary

97.     Section 47 contains ancillary provision relating to restraint orders. It re-enacts provision from earlier confiscation legislation and takes account of the enactment of the Land Registration Act 2002. The main purpose of the section is to ensure that where a restraint order affecting land is applied for, its effect may be reinforced by taking action at the Land Registry to prevent the disposal of the land in question.

Management receivers

Section 48: Appointment

98.     The earlier confiscation legislation enables a receiver to be appointed by the High Court on the application of the prosecutor. In fact, receivers perform two quite different functions under the legislation. They manage property pending the defendant's conviction (and sometimes afterwards) and they dispose of it to satisfy the confiscation order. These receivers are known in practice as "management" and "enforcement" receivers respectively but the earlier legislation does not distinguish between them as such. The Act now deals separately with the two sorts of receivers' functions.

99.     Section 48 enables a management receiver to be appointed where a restraint order has been made. In accordance with the principle of the Crown Court as the main venue for confiscation, the appointment is made by the Crown Court, not the High Court. Section 48(1)(b) makes it clear that a receiver may only be appointed on application to the Crown Court by the applicant for the restraint order. However, the application need not be made by the same individual who applied for the restraint order (since that individual may, for example, become ill after applying for the order).

Section 49: Powers

100.     Section 49 sets out the powers that the court can confer on a management receiver. They are based on the powers that receivers use in practice under the earlier legislation to manage property pending conviction and confiscation. Subsection (7) prevents the powers from being exercised in relation to property subject to a charging order under earlier confiscation legislation in England and Wales or Northern Ireland (there was no provision for charging orders in the Scottish legislation).

Enforcement receivers

Section 50: Appointment

101.     Where a confiscation order has been made and the magistrates' court will be responsible for enforcing it, section 50 empowers the Crown Court to appoint a person to act as enforcement receiver to help enforce the confiscation order. This is another function transferred from the High Court to the Crown Court, in accordance with the general principle of the Crown Court as the main venue for confiscation. As in earlier confiscation legislation, the application for the appointment of an enforcement receiver, where the magistrates' court is enforcing the confiscation order, has to be made by the prosecutor. Thus, prosecutors will continue to be involved in confiscation order enforcement. The enforcement receiver may (but need not) be the same as the management receiver appointed under section 48.

Section 51: Powers

102.     Section 51 sets out the powers that the court can confer on an enforcement receiver. Again, these are based on the powers that enforcement receivers use in practice. The main difference between their powers and those of management receivers is the inclusion (for enforcement receivers) of powers to realise property (other than for their own remuneration and expenses). However, enforcement receivers may need to manage property before disposing of it and they are given the powers to do so. Managing property includes selling the property where, for example, this is necessary in order to maximise its value.

Director's receivers

Section 52: Appointment

103.     Where the Director is enforcing a confiscation order, the main enforcement tool will be the appointment of a receiver (the Director will also be able to make requests for assistance outside the jurisdiction and have a term of imprisonment in default imposed).

104.     Subsection (3) requires the Crown Court, in all cases where section 52 applies, to make an order authorising the Director to appoint any person as receiver to enforce the confiscation order. Thus, the court will authorise the appointment of a receiver but it will be for the Director to decide on who is appointed.

Section 53: Powers

105.     Section 53 enables the Crown Court to confer certain powers on the Director's receiver. The powers are the same as those that the Crown Court may confer on a person appointed as enforcement receiver under section 50, on the application of the prosecutor.

Application of sums

Section 54: Enforcement receivers

106.     Section 54 applies to an enforcement receiver appointed under section 50 on the application of the prosecutor (i.e. to cases in which the Director is not the enforcement authority). It specifies how any sums in the hands of the receiver are to be disposed of, after a confiscation order has been made. The sums are payable, subject to certain prior payments the Crown Court may order, to the enforcing justices' chief executive. Under subsection (3), once a confiscation order has been satisfied, the receiver is to pay any remaining sums in his hands to those with an interest in the property concerned, as directed by the Crown Court. The Crown Court must give those with interests in the property concerned a reasonable opportunity to make representations before making any directions under subsection (3).

Section 55: Sums received by justices' chief executive

107.     Section 55 sets out how an enforcing justices' chief executive must dispose of any monies received in satisfaction of a confiscation order, whether from a receiver appointed under section 50 or otherwise (for example, voluntary payments by a defendant or the proceeds of the chief executive's own enforcement activities). The provision is similar to the earlier confiscation legislation, with certain exceptions.

108.     Firstly, an earlier obligation of the justices' chief executive to reimburse the prosecutor out of confiscated monies for sums the prosecutor has paid to a receiver in advance has been abolished as unnecessary, as prosecutors do not make advance payments to receivers. Secondly, under the earlier legislation, victims who receive confiscated monies in satisfaction of a compensation order made in their favour in the same proceedings have to pay a share of the costs of enforcement. This obligation has also been abolished. Thirdly, where the confiscation order takes precedence over parallel bankruptcy proceedings and monies are left over in the receiver's hands after the confiscation order has been satisfied, they go into the bankrupt's estate, rather than being entrusted to the confiscation court to dispose of - see Schedule 11, paragraph 16, and the new section 306B(1)(d) and (2) which it adds to the Insolvency Act 1986.

Section 56: Director's receivers

109.     Section 56 is the equivalent, where enforcement by the Director's receiver is concerned, of section 54 in relation to receivers appointed on the application of the prosecutor. The provision is, with minor modifications, the same as section 54, except that in this case the sums must be paid to the Director instead of to the justices' chief executive.

Section 57: Sums received by Director

110.     Section 57 is the equivalent, where enforcement by the Director is concerned, of section 55 in relation to sums received by justices' chief executives. The provision is broadly similar to section 55, but there are two significant differences. Firstly, subsection (4) requires the Director to reimburse the expenses of any management or enforcement receiver appointed in the case, but subsection (6) makes it clear that this does not apply where the receiver is a member of the Director's own staff or providing services under arrangements made by the Director. These costs will be met out of the Director's budget.

111.     Secondly, the Director must pay the residue of any monies received directly into the Consolidated Fund (see paragraph 5(2) of Schedule 1) which will also be the eventual destination of the monies when they are received by a justices' chief executive.

Restrictions

Section 58: Restraint orders

112.     Section 58 prevents certain actions from being taken against property subject to a restraint order without the leave of the Crown Court. It also gives any court dealing with property proceedings the power to stay them, or allow them to continue, if it learns that a restraint order has been applied for or made. The earlier confiscation legislation is silent on this issue, but the High Court has in practice stayed other property proceedings occasionally where a restraint order has been made.

Sections 59 & 60: Enforcement receivers; Director's receivers

113.     Sections 59 and 60 make similar provision to section 58 for property in respect of which an enforcement or Director's receiver has been appointed after a confiscation order has been made.

Receivers: further provisions

Section 61: Protection

114.     Section 61 protects receivers from liability for anything done by them to property which is not realisable property (as defined in section 83), unless they are negligent. It replicates earlier legislation and protects the receiver if he inadvertently deals with the property of third parties.

Section 62: Further applications

115.     Section 62 relates to receivers appointed under section 48, 50 or 52. The section enables such receivers to apply to the Crown Court for directions as to the exercise of their powers. It also enables any person affected by any action taken or to be taken by such receivers to challenge the action in the Crown Court. The person affected may be the defendant, the recipient of a tainted gift from the defendant or some other person.

Section 63: Discharge and variation

116.     Section 63 explains who may apply for the variation or discharge of a receivership order. It also indicates when the court has to discharge a management receivership order .

Section 64: Management receivers: discharge

117.     Section 64 results from the new formal distinction in the Act between management and enforcement receivers. Its purpose is to ensure that any property in the hands of a management receiver is handed over to an enforcement receiver when appointed (except property realised for the management receiver's remuneration and expenses).

Section 65: Appeal to Court of Appeal

118.     This section provides rights of appeal to the Court of Appeal against decisions of the Crown Court relating to receivership matters. Like section 43, it is required because the general right of appeal which exists under earlier legislation against a decision of the High Court in a confiscation receivership matter does not apply to receivership decisions of the Crown Court under the Act.

Section 66: Appeal to House of Lords

119.     This section provides a right of appeal to the House of Lords against a decision of the Court of Appeal under section 65. As with section 44, it is not possible for new parties to come forward at this stage. Only people who were already party to the proceedings at the Court of Appeal stage may appeal to the House of Lords.

Seized money

Section 67: Seized money

120.     Section 67 provides the magistrates' court with a new power to order any realisable property in the form of money in a bank or building society account to be paid to the justices' chief executive in satisfaction of a confiscation order. The power is only available where a confiscation order has been made, time to pay has expired, the confiscation order is being enforced by a justices' chief executive (i.e. not by the Director) and the money is subject to a restraint order.

121.     The new power provides an alternative to garnishee proceedings to enable justices' chief executives to seize money held by the defendant in a bank or building society account. A garnishee order is an order to a person who owes a debt to one person (the defendant) to pay it to another (the justices' chief executive). It is usually used to seize money of the defendant's in a bank account. A garnishee order can only be made by the civil courts (the High Court or a county court). Unlike garnishee orders, the new order will be made by the magistrates' court.

122.     Section 67 also enables justices' chief executives to confiscate money in the form of cash which has been seized from defendants as evidence and subsequently paid into a bank account. Under earlier legislation, the only legal means of getting at the money without the defendant's consent is by having a receiver appointed. Subsection (6) enables the magistrates' court to order a bank or building society which fails to comply with one of the new orders to pay a sum of up to £5,000. It also provides that this sum is to be treated as if it were adjudged to be paid by a conviction of the court. The effect of this is that the fine enforcement powers in Part 3 of the Magistrates' Courts Act 1980 are available to enforce payment of this sum.

Financial investigators

Section 68: Applications and appeals

123.     Section 68 sets out general rules for applications for restraint and receivership orders made by accredited financial investigators. It provides in particular that steps in a case after the initial application need not be taken by the same investigator who made the initial application. This is intended to ensure that no problems are caused by, for example, the subsequent ill health of the investigator who makes the initial application for a restraint order.

Exercise of powers

Section 69: Powers of court and receiver

124.     Section 69 makes provision about how the Crown Court and receivers appointed under the Act are to exercise their powers. It largely re-enacts earlier legislation in that it emphasises, for example, that the satisfaction of a confiscation order takes precedence over any other obligations of the defendant or the recipient of a tainted gift from the defendant.

125.     Subsections (2)(b), (3)(c), (4) and (5) are new. Where a confiscation order has not yet been made, they require the powers to be exercised with a view to maintaining the value of the amount available for confiscation. This will enable management receivers to dispose of depreciating assets. Subsection (4), however, enables the defendant or the recipient of a tainted gift to challenge the management receiver's decision to dispose of a particular asset on the grounds that the asset is irreplaceable. The provision has regard to the fact that the defendant has not been convicted at this stage and should not, therefore, be obliged to lose irreplaceable assets. It does not apply to enforcement receivers because at the enforcement stage, any realisable property can be used to satisfy a confiscation order.

Committal

Section 70: Committal by magistrates' court

126.     Section 70 needs to be read in conjunction with section 6(2)(c). Its effect is that a person may be committed to the Crown Court for confiscation proceedings following a conviction of any offence, indictable or summary, in the magistrates' court. Where the prosecutor asks the magistrates' court to do so, the court must commit the defendant to the Crown Court under this section. The power to have a person committed is granted only to the prosecutor, not to the Director of the Agency. However the Director can assume responsibility for the subsequent confiscation proceedings in the Crown Court.

127.     Where the defendant is convicted of an either way offence, subsection (5) requires the magistrates' court to state whether it would have committed the defendant to the Crown Court for sentence anyway. This subsection is required because, under section 71, the Crown Court's sentencing powers following a committal for confiscation are normally limited to the sentencing powers the magistrates' court would have had in the same case.

Section 71: Sentencing by Crown Court

128.     Section 71 provides that, where a person is committed to the Crown Court for confiscation proceedings, the Crown Court will also assume responsibility for the sentencing process.

Compensation

Section 72: Serious default

129.     Section 72 provides for compensation to be paid to a person whose property has been affected by the enforcement of the confiscation legislation. Compensation is only payable where an investigation is started but proceedings are never brought, or the defendant is not convicted of an offence, or his conviction is quashed, or he is pardoned. In all cases, there must have been a serious default on the part of one or more of the enforcement authorities specified in subsection (9). The restriction to serious default cases is based on the principle that the restraint and realisation of property is ancillary to a criminal trial in the same way as the detention of a person pending trial. In neither case is compensation paid on acquittal as a matter of course.

130.     Section 72 is largely based on earlier legislation except that the provisions have been extended to cover the situation where an investigation is started but proceedings are never brought. Under the Act, it will be possible for a restraint order to be made as soon as a criminal investigation has been started (at present, this is only possible where proceedings have been started or are about to be). Therefore, compensation will in future be payable, subject to criteria including the serious default test, from the beginning of an investigation, not only where proceedings have been started.

Section 73: Order varied or discharged

131.     Section 73 allows compensation to be paid where a person absconds before trial, has a confiscation order made against him, and subsequently secures a variation or discharge of the order by the Crown Court. The provision is not limited to serious default (as in section 72) because it is considered that the court should be able to exercise a more flexible approach in circumstances where a confiscation order has been made without the defendant having been tried.

Enforcement abroad

Section 74: Enforcement abroad

132.     Section 74 sets out the conditions under which requests for assistance in the freezing and realisation of property may be made by authorities in England and Wales to other jurisdictions outside the United Kingdom. Although requests of this nature have been made for many years, the earlier legislation is largely silent as to the respective roles and powers of the various authorities involved. The Act places outgoing requests on a fully statutory footing. Section 74 applies only to requests relating to Part 2 of the Act.

133.     All outgoing requests must be made either by the prosecutor or by the Director, and may only be made with the authority of the Secretary of State. In practice, this means that all outgoing requests must pass through the United Kingdom Central Authority for mutual assistance in criminal matters in the Home Office. Requests may be made for a prohibition on dealing with property or additionally, where a confiscation order has been made, the realisation of property. It will be noted that under subsection (1)(a), a request may be made where any of the conditions in section 40 is satisfied. This will enable the prosecutor or the Director to request an asset freeze abroad before any restraint order has yet been made in England and Wales, as long as the conditions for making a restraint order are satisfied at the time.