Fresh View Ruling Offers Clarity On Forfeiture Orders

By Joseph Sinclair (April 13, 2023) for Law360

On March 23, Judge Nicholas Mostyn dismissed Fresh View Swift Properties Ltd’s claim for judicial review of a £67,372 ($84,300) forfeiture order in the High Court of England and Wales made by Judge Neeta Minhas at Westminster Magistrates’ Court.

The decision, Fresh View Swift Properties Ltd. v. Westminster Magistrates’ Court & Ors, provides important definitional clarity to Section 242 in civil forfeiture proceedings under Part 5 of the Proceeds of Crime Act 2020.[1]

This judgment will be welcomed by enforcement authorities as long overdue. A pragmatic focus on the property, rather than specifically the wrongdoing of the defendants involved, will make forfeiture an easier task.

It is also likely to assist in cases where individuals are the recipient of the proceeds of corruption or other wrongdoing overseas. The decision is likely to embolden enforcement authorities who are increasingly turning to civil measures over criminal sanction.

Background

Michael Kaleajaiye operated an unlicensed money service business that remitted money between the U.K. and Nigeria. Fresh View had purchased £67,372 in the U.K. from Kaleajaiye in London for 40 million Nigerian naira ($86,900) in Nigeria.

The London Metropolitan Police obtained an account freezing order over a HSBC Ltd account held by Kaleajaiye containing the sum. A third-party associate had paid the sum into Kaleajaiye’s account.

On April 28 last year a Judge Minhas sitting in the magistrates’ court held that the sum was “recoverable property” under the Proceeds of Crime Act and ordered forfeiture. There was no evidence that the payment was unlawful in Nigeria and no findings were made as to the source of funds. However, Kaleajaiye’s unlicensed business was a criminal offense per Regulations 56(1)(b) and 86(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The company’s defence of good faith receipt and for valuable consideration was rejected. Judge Minhas found that the sum was intended for use in future unlawful conduct. The judge further held that forfeiture was proportionate under Article 1 of Protocol 1 to the European Convention on Human Rights, as:

• Money service businesses were heavily regulated to prevent the movement of funds derived from lawful conduct; and
• Fresh View and its directors knew it ought to have used a licensed provider

Grounds of Challenge

Fresh View challenged the district judge’s forfeiture decision on two grounds:

(1) The judge had erroneously directed that the entire proceeds were recoverable, including the customer’s money. It ought only to have been the fees paid to the money service business:

(a) The remitted sums were not obtained “by or in return for unlawful conduct” merely by reason of the money service business not being registered; and
(b) The sums remained the customers throughout and was not obtained by the money service business.

(2) Forfeiture of the sum was unnecessary and disproportionate to Fresh View’s Article 1
rights.

The company did not challenge the judge’s findings on its defence. On Oct. 4 last year, Judge Heather Williams granted permission in the High Court on ground 1(a) and refused permission on grounds 1(b) and 2. Fresh View renewed its application for permission on ground 2.

Judge Mostyn’s Decision
Ground 1(a): Recoverable Property

Judge Mostyn had to resolve the issue of whether the property was obtained by conduct that was unlawful — Section 242 of the Proceeds of Crime Act. There was no direct authority to interpret these words for the civil forfeiture under Part 5 of the act. The judge held that the meaning of the words are clear:

“Property”: Forfeiture applications under Part 5 were against the property, rather than judgment for a general and liquidated sum. In this case, it was the sum that is held guilty and condemned, citing the 2012 case of U.S. v. Contorinis.[2]

• “Obtained”: To come into possession of something. This did not mean that a person gained ownership or derived a benefit at any point or in any way. In this case, the placement of the sum in Kaleajaiye’s U.K. account satisfied this part of the question.
  
• “By”: Judge Mostyn said the word “forms a prepositional-adverbial phrase describing how something has happened. Here the happening is the obtainment, and the cause is the unlawful conduct.”
  
• “Conduct”: Section 242 required demonstration of some human action or steps to a particular end. Kaleajaiye engaged in conduct by: (a) offering his services to others as a money service business; (b) setting up at least one bank account to receive money; (c) arranging for payment of funds to be paid by the third party; (d) providing the details of that account to that third party; and (e) arranging the date and time for the transfer of funds.
  
• “Unlawful”: The only requirement was that the property was obtained by someone’s unlawful conduct, whether in the U.K. or elsewhere. As the action was against the property, it did not matter who was guilty of the unlawful conduct. Here Kaleajaiye had breached the regulations by operating an unlicensed money service business.

It was not realistic that Kaleajaiye’s receipt of the sum was purely passive. In respect of the discretion to order forfeiture under Section 303Z14(4) of the Proceeds of Crime Act, the judge held that generally findings leading to it being exercisable will invariably lead in favour of forfeiture.

The statutory requirements were met, and Judge Mostyn concluded that the district judge was right to order forfeiture.

Ground 2: Proportionality

Fresh View argued that it was merely a customer of an unlicensed money service business and had committed no wrongdoing. Following the decisions of R v. Waya in the U.K. Supreme Court in 2012 and Boljević v. Croatia in the European Court of Human Rights in 2017, the company argued that it was disproportionate to forfeit the whole sum.[3] The Metropolitan Police accepted that Article 1 was engaged. However, it argued that:

• Fresh View knew the money service business was unlicensed;
• Their defence was rejected;
• The machinery engaged to transfer the sum was entirely unlawful;
• This was not a case where the controller of a lawful business was engaging in unlawful activity;
• The policy objective of the legislation in the case of illegality is that the entire sum is recoverable;
• This is a proportionate response to meet the high societal need to eradicate money laundering; and
• Fresh View’s arguments did not meet the high standard of challenge on judicial review, i.e., “it is clearly satisfied that the proposed forfeiture would be a manifestly disproportionate response to the conduct in question.”

The judge agreed, observing:

[Counsel for Fresh View] rightly and colourfully put it that if you swim with sharks you should not be surprised if you get bitten. He disputed that his clients were swimming with sharks, but it is clear that they were.

Discussion

Account freezing orders and forfeiture have been oft-used in the magistrates’ court with little to no judicial scrutiny at the appellate level. This decision will be a welcome clarification to those enforcement authorities applying to forfeit sums under Part 5.

Unlicensed money service businesses are often used by students and family members to evade currency controls in countries such as India and China with the proceeds of the sums in the U.K. deriving from criminal wrongdoing. The focus on the property rather than individual wrongdoing will also assist in other areas of law enforcement where dirty money is held in the U.K.

However, the decision may be of some concern to the innocent recipients of property deriving from unlawful conduct. It sets a low bar in which mere knowledge or suspicion of unlawful conduct may be sufficient for the entire proceeds to be forfeited.

Giving such weight to the public interest in Article 1 against individual rights does not sit well with a fair balance. The findings suggest that the sum in Fresh View was for onward unlawful conduct and the negative findings to its defence were not challenged.

It may be that it is necessary to wait for another case to determine the floor in which knowledge or suspicion is sufficient.

At the end of Judge Mostyn’s decision, he attached an order that included his decision on permission to appeal. Although there was no authority to support his meaning of the words in Section 242 of the Proceeds of Crime Act, he said his interpretation was “totally clear and thus indisputable.”

Reading the judgment in its entirety it appears the judge may have adopted a light touch to
dismissing the authorities. There may be some sense in doing so, given the significant differences in the criminal and civil Proceeds of Crime Act regimes. Nevertheless, it appears that consideration by the Court of Appeal may be on its way.

Joseph Sinclair is pupil barrister at Mountford Chambers.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

A pdf of the article can be viewed here.

[1] Fresh View Swift Properties Ltd. v Westminster Magistrates Court & Ors. [2023] EWHC 605 (Admin).
[2] U.S. v. Contorinis 692 F.3d 136, 146 (2d Cir. 2012).
[3] R v Waya [2012] UKSC 51 and Boljević v Croatia [2017] ECHR 10