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BLOG: Stopping a criminal investigation

08/09/2018

Jonathan Lennon examines the possible options in curtailing the reach of a criminal investigation.


Challenges to Production Orders

Production Orders (whether under s9, Schd 1 of PACE, s55 of the Drug Trafficking Act 1994 – or s345 of POCA) are usually pretty much ignored by defenders representing clients on a criminal matter.

This is for good reason; such orders appear routine, usually relating to the formal production of bank statements and bank account information only.  How does challenging the granting of a Production Order (PO) possibly help the client?

In this article I deal with a recent case that I was instructed in where there was a challenge to several Production Orders – all pre-charge.  The challenge led ultimately to the collapse of the criminal investigation and the return, with interest, of detained cash.  The case did not even get to a full hearing and involved a simple Crown Court application rather than a full-blown Judicial Review application – I will call it here the case of Mr. X.

In this article I consider specifically POs secured under the POCA regime, though the same principals could be applied in PACE or DTA cases.

What’s the Point?

If material has been obtained under a PO that has been quashed because the PO itself was unlawfully obtained then, on usual principals, the material garnered under it should be returned with no copies kept; see e.g. the search warrant case of R (Cook) v Serious Organised Crime Agency [2011] 1 WLR 144.  In the case of Mr X the order sought was the destruction of all banking material obtained under the POs without any copies being retained.

In search warrant cases, where the High Court quashes a warrant, s59 of the Criminal Justice and Police Act 2001 provides that the material seized may, on application, still be retained whilst another properly formulated application is made inter partes.  The police in other words can survive their mistakes.  The same does not apply to POs granted under the Drug Trafficking Act 1994 or s345 of POCA – although curiously it is technically possible in relation to Special Procedure Material obtained under a PACE PO (s9 and Schedule 1).

This is why a successful challenge to a PO can be so devastating to a criminal case or investigation.

Just as with search warrant challenges POs are secured ex parte, and with that comes the essential responsibility of the applicant to make full and frank disclosure.  But at least these days some search warrant applications PO applications are made with input from lawyers at some point – that does not seem to be the case at all with POs from my experience.  At best POs appear to be viewed as merely routine by officers.  At worst the Court is just there as a rubber-stamping exercise.  It is, in my view, an area where there is real potential for challenge given the perceived attitude by police/HMRC etc officers to such applications.  Mistakes are made – proper disclosure is missed.  But it doesn’t stop there.  The statutory test can be harder and harder for the applicant to make out as the investigation drags on and repeated PO applications are made – and in some cases it may be possible to demonstrate real prejudice to the client – as well as the obvious infringement of privacy that is inherent in such applications.

The Result

The High Court has not always been consistent when it comes to the effect of search warrants that have been obtained in ex parte proceedings where the applicant has failed to give full and frank disclosure.  On the one hand there is authority to suggest that the Court should put itself in the position that it would have been if the applicant had complied with the duty of candour see R (Golfrate Property Management Ltd) v Crown Court at Southwark [2014] 2 Cr App R 12.  

Other cases have found that if discipline is to be maintained and lessons learned then the result of a failure of the duty of candour in such cases is the quashing of the order; R v (Mills and anor) v Sussex Police and anor [2015] 1 WLR 2199 (from para 56).  Even though these cases all tend to be search warrant cases the point applies for all investigatory orders obtained ex parte – see e.g. a summons under a private prosecution that was quashed for want of candour in the ex parte application in R (Kay and another) v Leeds Magistrates’ Court [2018] 4 WLR 91.  Though the High Court in that case did not have to favour one line of authority over the other, it did in fact quash the summons in that case.  In my view that has to be the line taken where an Order has been obtained unlawfully.

In any event it is the Crown Court, not the High Court, that should be the fist port of call in PO challenges; s351 of POCA.

Brief Facts

Cash Seizure

It is necessary just to give a little detail about the case of Mr. X.  In November 2013 a money laundering investigation was opened by the police against Mr. X.  Between then and July 2016 there were around 8 separate applications, all ex parte, to various Crown Court Judges for dozens of different POs against numerous banks and financial institutions.  Though Mr X was interviewed under caution a year after the criminal investigation opened, there seemed no sign of any imminent charge – thus the continued ex parte PO applications.  Implicit in the final challenge to the POs included a ‘put-up or shut-up’ type demand; i.e. charge Mr X now or stop making any further applications.  The former, it transpired, could not be justified.

Mr X was running a bureau de change business.  It was heavily dependent on cash and his business included involvement in Hawala type transactions with clients in the Middle East.  Mr. X made most of his money by giving better rates than banks when it came to transfers of large sums of money.
One client who was based in Saudi Arabia was a British doctor who wanted to buy property in the UK.  He used Mr. X’s agent in the Middle East for a Halwala type transaction.  The upshot of this was that cash from Mr X’s premises had to be put into the businessman’s bank account here in the UK.  After the Saudi end was dealt with this meant that Mr. X had to get the money from his premises into the doctor’s UK bank account.  Physically that meant Mr X’s employee taking 3 tranches of cash, over a number of days, from the office – for a short walk to the bank.

It seems the bank may have got suspicious given the large cash transactions and, in all likelihood, made a Suspicious Activity Report (under the POCA reporting regime) to the authorities.  The third and final instalment was around £90,000.  Whilst the employee was en route between business and bank he was stopped by plain clothes police officers, he was searched, the money was located, he was arrested on suspicion of money laundering and the money was seized.  The defence always asserted that this arrest was just a rouse to seize the cash.  Clearly the police were acting on information.  The employee was promptly de-arrested at the police station and the money retained under the cash forfeiture provisions in Part 5 of POCA.

Police/Defence Engagement

Mr. X engaged lawyers and what happened over the ensuing months was a dialogue between Mr. X (through his solicitors and accountant) and the police.  The lawyers were operating on the understanding that they were trying to persuade the police that the money was the proceeds of legitimate business and not crime so that the cash could be released from the civil forfeiture regime.

The police made enquiries with the doctor in Saudi Arabia and the legitimacy of that transaction was established.  However, the police wanted to go further and wanted to know where the physical cash came from in Mr. X’s office to fund the attempted £90,000 deposit.  Mr. X explained the answer was his business – it operated on cash.  The police said they wanted effectively an ‘audit’ of the company’s accounts to demonstrate that the cash could be accounted for.  The defence at time said that all this was just a fishing exercise and refused to hand over documents relating to other clients – i.e. so that the origin of cash deposits could be investigated.
The police later relied on other arrests and cash substantial cash seizures in the area of the business as well as an arrest involving the same employee to justify their suspicions that in fact Mr. X’s business was, or at least included, a laundering operation.

Then one day in April 2014 one of the officers involved in the investigation walked into the business with a PO against the business.  The Order had been obtained at a without notice hearing.  It had the standard 7 day warning on it – i.e. the warning to produce the documents stated within 7 days of the granting of the Order or be in contempt (s345(5)).  Mr X’s brother had taken service of the Order and queried the 7 day limit because the Order had been made over a month earlier!  Mr. X refused to act on the Order.  I was instructed and we applied to quash the Order; s351 of POCA (and now Crim PR Pt 47.4(d)).  There was a hearing at the Crown Court where the Order was made – in fact before the Judge that made it.

The Crown Court quashed the PO – the police in the end accepted that it was not a lawful order by the time it had been served.  The police had to pay a significant costs bill.  The concession on the legality of the Order however meant that the cat was now well and truly out of the bag so to speak.  There could be no reason for any more without notice applications and it was accepted in Court that if no progress could be made by agreement, then any further applications would have to be on notice.

What happened next was that the police went to different Courts to get further POs.  They did this ex parte.  Instead of renewing the application against Mr. X’s business the approach now was to keep the applications secret (despite what was said in open Court) and to find out the contact details of some of Mr X’s cash clients from the banks; i.e. POs against the banks.  This way the client would not know that the investigation was continuing as it was.  The police were able to identify clients who had used Mr. X’s business and contacted them to ask questions about their dealings with Mr X.  Those police investigations were highly destructive to Mr. X’s business as clients fell away after being asked about their dealings with Mr X by the police.  Eventually Mr. X noticed the fall in trade and got wind that some of his clients were being contacted, despite him not having handed over the contact details.

Eventually the police, through their solicitors, accepted that POs had been obtained ex parte.  This was only discovered in November 2016.  Once that information was known then, on usual principals, the defence were able to request, not just the POs, but all the information used in support of the applications, as well as the reasons giving for granting the applications; see e.g. R (Rawlinson and Hunter Trustees) v Central Criminal Court; R (Tchenguiz) v SFO [2013] 1 WLR 1634.

My experience is that if demanded the police will readily disclose ex parte applications but if there is any difficulty the Court may order the release of copies as part of their case management powers once a discharge application has been issued, or instead release their own copies, as well as disclosing the Court’s own notes of the hearing; see Crim PR r5.7.

In Mr. X’s case the disclosure of the applications for POs raised a number of serious issues and led to numerous challenges to a total of 34 separate POs.

Why Without Notice?

This was essentially the first challenge.  If a client has been arrested or has been subject to a cash seizure then there might be no good reason to keep secret the fact that the police want to ask his bank for information.  That is precisely what happened in Mr. X’s case – the police essentially failed at the first hurdle; see R (Merida Oil Traders Ltd) v Central Criminal Court [2017] I WLR 3680; 73.

Duty of Full and Frank Disclosure

There were blatant omissions in some of the earlier PO applications.  This included the fact that at an early stage the police had asked the CPS to consider applying for a Restraint Order and the CPS it transpired refused.  There is a plethora of case law on this topic in relation to search warrants – which is equally applicable in PO cases – see e.g. In re Stanford International Bank Ltd [2011] Ch 33, para 191.
Further, Lord Hughes LJ (as he was then) said in SFO v A [2007] EWCA Crim 1927, para 6:

Because the initial application is commonly made without notice, the court will not at that stage hear argument on both sides. For this reason, as with other without notice applications, the court insists on full and complete disclosure by the Applicant of everything which might affect the decision whether or not to grant the order. There is a high obligation upon such an Applicant to put everything relevant before the Judge, whether it may help or hinder his cause.
 

Article 6

Mr. X’s solicitors had been engaging with the officers initially in what they thought was a civil cash forfeiture process. They had disclosed documents and presented their client to answer questions on that basis.  When the PO applications were received it became apparent that the earlier applications had stated that the matter was being dealt with on a without notice basis as the police did not want to tip-off the suspects that there was an on-going criminal investigation.
The defence argument was the police could not have it both ways – they could not question the ‘suspect’ about civil matters and not tell him that what he said would be used in support of an application to secure a PO for a criminal investigation.  Mr. X had not been cautioned as was required under Code C when he was questioned by the police about the cash.  That questioning still attracted the full protection of Art 6 even though it was not a formal PACE interview (see R v Sparks [1991] Crim LR 128).

Statutory Test

In any event it was argued that the statutory tests were not made out.  The test is set out in s346 of POCA.  This includes that in a money laundering investigation there must be reasonable grounds for suspecting that the subject of the investigation has committed a money laundering offence.  The longer that investigation continues without charge the more that ‘reasonable suspicion’ test becomes difficult to justify.  Further, the officer has to demonstrate that there are reasonable grounds ‘for believing that the material is likely to be of substantial value (whether or not by itself) to the investigation…’ (s346(4)).  Here there was criticism of the way the investigation was proceedings.  If the police were trying to show that the cash in the office came from some drugs dealer for example then it would be an odd sort of laundering for that cash to then be used in the way that it was – i.e. paid into the legitimate doctor’s bank account.

Conclusion

Once the application was issued the Crown Court made directions – most of which were agreed.  In the end the police could not defend their own applications.  After the defence Skeleton Argument was served the police conceded.  The result was (in July 2018) the police confirming in writing that the criminal investigation was over and that no charges were to be laid.  The seized cash would also be returned.

The moral of the story is that it is worth sometimes, especially in pre-charge cases when the investigation has been dragging on for some time, to consider asking the police/HMRC etc to disclose any POs made and their applications.

08/09/2018

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