Clause 255 - Restrictions on dealing etc. with property

Proceeds of Crime Bill – in a Public Bill Committee at 12:15 pm on 18 December 2001.

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Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 12:15, 18 December 2001

I beg to move amendment No. 351, in page 149, line 2, leave out 'must' and insert 'may'.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

With this it may be convenient to take amendment No. 386, in clause 263, page 152, line 20, leave out 'must' and insert 'may'.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

We come to the clause on restrictions on dealing with property during receivership. Clearly, the purpose of an interim order is that it should ordinarily prevent and restrict dealings with property, so that the property is not dissipated prior to the civil recovery proceedings taking place. It is also important that, in the interests of justice, as far as is possible before a final determination of any case has occurred, an individual should not be prejudiced or penalised by being prevented from meeting reasonable living expenses or carrying on his trade or business. Until the final determination of the issue and civil recovery, that person is entitled to the presumption that he is properly enjoying his assets and able to use them. For that reason we have tabled several amendments. Although they are being grouped separately—an arrangement with which I have no difficulty—they are, to an extent, interlinked as they offer a series of choices to the Committee as to how to approach an issue that may be of some complexity.

Amendments Nos. 351 and 386 would simply provide that it is a mandatory requirement that any person affected by the restriction on dealing should be able to

''meet his reasonable living expenses, or . . . to carry on any trade, business, profession or occupation, and''—

I stress this—

''may be made subject to conditions.''

I stress that last phrase because ''subject to conditions'' means that the individual would never have a complete freedom to do as he chose. Nevertheless, there would be a requirement that he should be able to do those two things. It should be borne in mind that we are not talking about criminal proceedings—the person is not likely to end up going to prison. Ordinarily, such individuals will outwardly be leading a respectable existence.

It might also be relevant to split the position of the respondent in the proceedings from that of any other person affected by the order. We shall discuss that issue when we debate the next set of amendments. With regard to the current batch of amendments, we should consider whether it should be mandatory for the order to allow for reasonable living expenses and the carrying on of a trade, business, profession or occupation subject to conditions. As a matter of principle, I believe that a person should be able

''to meet his reasonable living expenses''

and

''carry on any trade, business, profession or occupation''.

I believe that I can anticipate some of the Minister's arguments, but I should like that to be the goal that we aim at, even if the Minister informs us that it may lead to circumstances in which assets are dissipated.

If I cannot persuade the Minister of the case for the amendments, I shall not press them to a Division. Amendment No. 386 mirrors amendment No. 351 in respect of Scotland. When we move to the next group of amendments, I shall consider whether it would be proper for the respondent's proceedings to split from those of any other person affected by the receiving order.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The amendments would make it discretionary, rather than mandatory, for interim receiving orders to prohibit dealing with the property. If civil recovery is to be effective, the rights of the director—or, in the case of Scotland, Scottish Ministers—to recover property should not be frustrated because the respondent has dissipated the assets. That is why the civil recovery scheme allows an interim receiving order to be made if the necessary criteria are met.

An interim receiving order is an order for the detention, custody or preservation of property and for the appointment of an interim receiver. If the court agrees that the criteria for an interim receiving order are satisfied, it may make such an order under clause 251 or clause 259. The court is not required to do so even if it accepts that the conditions in clause 251(5) and (6) or the equivalent conditions in clause 259 are met. If, therefore, a court has decided to make an interim receiving order, it has decided that the property included in the order should be detained, taken into custody or preserved as appropriate.

In order to ensure that the property is given the protection intended under the interim receiving order, it is essential that the court prohibits any person whose property is covered by the order from dealing with it. As defined in clause 310, ''dealing'' with property

''includes disposing of it, taking possession of it or removing it from the United Kingdom''.

Such activities seem incompatible with the intention of an interim receiving order. We therefore think that it is right that the court should be required to make the prohibition, subject to its power to make exclusions as allowed under clause 255 and its Scottish equivalent, clause 263. Those clauses strike the right balance in that respect and adopt the approach applied to freezing injunctions in private civil litigation.

The prohibition on dealing with property is not inflexible. The court may make exclusions from the order, either when it is made or later. Any person to whose property the order applies can apply for an exclusion to allow dealing. However, it is right that the default position should be that dealing with property that is subject to an interim receiving order is prohibited. That seems the safest and fairest option; it will allow property to be excluded but will protect the rights of the director or Scottish Ministers to recover the property.

I do not think that the hon. Gentleman is intent on proving that he will withdraw the amendment once we have considered it. He said that the next group of amendments would allow the respondent to be dealt with differently from anyone else affected. The discretion is there; it is just the other way round from that which he would like to insert in the Bill.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I listened carefully to the Minister, and I am aware of the potential problems of providing a discretionary power in line 2 of the clause. In certain circumstances, the court might, if allowed, consider that it had an exceptional reason to allow dealings in the property. That said—and subject to the key issue, which is the need for compensation provisions for those who are adversely affected—I am mindful of the Minister's comments. Therefore I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 12:30, 18 December 2001

I beg to move amendment No. 362, in page 149, line 8, leave out 'any person' and insert 'the respondent.'

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

With this we may discuss the following amendments: No. 379, in page 149, line 11, at end insert—

'(3A) An exclusion must, in particular, make provision for the purpose of enabling any person other than the respondent—

(a) to meet his reasonable living expenses, or

(b) to carry on any trade, business, profession or occupation,

and may be made subject to conditions'.

No. 352, in page 149, line 12, leave out subsection (4).

No. 387, in clause 263, page 152, line 25, leave out 'may' and insert 'must'.

No. 388, in clause 263, page 152, line 30, leave out subsection (4).

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I now turn to the second group of amendments that we have tabled to the clause, which are more specific. They would allow for individuals to meet their living expenses and carry on trade or business that would require an ability to deal in the property that has been subject to the receiving order.

The amendments differentiate between the position of the respondent and the position of others who may be subject to the order. My principal concern is for innocent parties, who may be affected by the order and against whom the receiver acts solely in order to secure property, without any accusation of collusion's having necessarily been made against them. In the case of the respondent, I accept that discretion should be exercised as to whether he is allowed

''(a) to meet his reasonable living expenses, or,

(b) to carry on any trade, business, profession or occupation''.

However, in the case of another person, who is not the respondent to the proceedings, there is a powerful argument for a mandatory provision enabling him to meet his reasonable living expenses and carry on his trade, business, profession or occupation. That is the intention of the amendments.

Amendment No. 362 would remove the reference to ''any person'' and would insert the reference to ''the respondent''. Thus, subsection (3) would deal only with the respondent's position and leaves that as discretionary. Amendment No. 379 would introduce a new subsection (3A) to deal with the situation of any person other than the respondent, and makes the provisions mandatory. Thus, provision would have to be made for the reasonable living expenses and the opportunity to carry on the trade, business, profession or occupation.

In addition to those two principal amendments, we have tabled other amendments. Amendment No. 352 is important. Under subsection (4), no exclusion may be made

''for the purpose of enabling any person to meet any legal expenses in respect of proceedings under this Part.''

Can the Minister clarify what it is intended should happen in such circumstances? Will there be an automatic eligibility for legal aid? I suspect that the hon. Gentleman will refer to the fear that assets may be dissipated by the litigation and in running up legal fees. However, we are dealing with civil proceedings, not confiscation. There has always been the opportunity for a party to civil proceedings to pay his lawyers at the end of those proceedings, thus dissipating the potential assets available for recovery. It is one of the facts of life that individuals have to accept.

Does the Minister wish to intervene?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

It would not be worth my while, if I were to bring proceedings against an individual to recover several thousand pounds, and that individual could not pay me the money—he might have had the money at the start of the proceedings, but during the course of them he might have paid his lawyers, so that, when the case came to judgment, that money was not available. One must take account of the costs of legal proceedings when deciding whether to sue someone.

We are discussing ordinary civil proceedings. As the Minister often reminds the Committee, this is a civil recovery procedure: indeed, he is unhappy when I suggest that it is some new administrative law structure, introduced by the heavy hand of the state—he gets excited and worked up when I say that.

If we are dealing with ordinary civil proceedings, I am surprised that, in this section of the legislation, we should be preventing reasonable legal expenses from being provided for out of the defendant's—or, rather, the respondent's—money. I want the Minister to comment on that point. I have not decided whether to press the matter to a Division, as a serious issue is at stake.

Amendments Nos. 387 and 388 refer to the same matter in respect of Scotland, so I need not address them in detail.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Here I am, trying to foster the impression that I am totally unflappable, and the hon. Gentleman has seen through me; he realises how excitable I am.

Amendments Nos. 362 and 379 amend the clause to require the court to make exclusions, where a person other than the respondent is concerned. Amendment No. 362 would amend subsection (3) so that it applied solely to the respondent. Thus, the court would have discretion whether to make exclusions to enable the respondent to meet reasonable living expenses, or to carry on a trade, business, profession or occupation.

Amendment No. 379 would insert a new subsection, relating to any person other than the respondent. It therefore assumes that amendment No. 362 has been made. It would require that exclusions be made to enable such persons to meet their living expenses and to carry on their trade or profession.

The hon. Gentleman said that he wanted the same measures to apply to Scotland, although the amendments do not quite do that, due to a drafting error.

The effect of amendments Nos. 352 and 388 would be to allow the court to release assets to pay legal fees for proceedings under part 5.

As I explained in speaking to the previous amendments to clauses 255 and 263, for civil recovery to be effective, the right of the director to recover property should not be capable of being frustrated by the dissipation of assets by the respondent. That is why the civil recovery scheme that is set out in the Bill provides that an interim receiving order may be made, where the necessary criteria are met. We recognise, however, that there may need to be exclusions to the general prohibition on dealing with property, where an interim receiving order or interim administration order is in place. That is why the court is empowered to make exclusions. Particular reference is made to exclusions that would enable a person to meet his reasonable living expenses, or to enable him to carry on a business. However, exclusions could be made for other purposes at the discretion of the court.

Clause 255 and its Scottish equivalent thereby adopt the approach already applied in the case of freezing injunctions made in private civil litigation.

Mr. Grieve indicated dissent.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

The hon. Gentleman indicates that that is not so, and he is correct when considering people overall. However, when freezing orders are made in civil litigation, the only way in which they subsequently can be used to offset court costs is with the permission of the court. The situation is not always as he said, although I accept that factors must be considered in some circumstances that may occur.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

The Minister is absolutely right. He implied that discretion exists to allow that to occur. Under these provisions, there is no such discretion.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

That is right. There are other provisions, which we shall debate later.

As far as England, Wales and Northern Ireland are concerned, the amendments would require the court to make a provision to enable a person other than the respondent to meet the particular expenses described. A slightly different position applies to Scotland, but the hon. Gentleman did not intend to address that so we can leave it aside.

We do not believe, however, that it would be reasonable to make these exclusions mandatory, whether the expenses are those of the respondent or another person. The property that is subject to an order could, for example, be a painting or a piece of jewellery. In that case, it would not make sense to require the court to make an exclusion to enable a person to meet his reasonable living expenses. That would not be necessary in the likely event that he had another source of income. If a person's only assets were proscribed, the court has the discretion to allow for reasonable living requirements. However, if a person had a very good income and the means to represent himself, and if the goods being sought were a particular item, it would be unreasonable to allow the items to be released to defray living expenses. The amendment would make that mandatory. The court should be free to take decisions that pertain to the case before it.

If the order related to a person's bank account and he had no other source of income, the need to make an exclusion is—obviously—likely to be self-evident. It seems to me that courts are used to making assessments on such points. They will be able to take the most sensible and appropriate decisions. The requirement that the amendments would introduce is unnecessary and would be rather perverse in some circumstances.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

I hesitate to intervene, because I may, again, be missing the point. Is the point that there is a discretion vested in clause 255(2) about whether an exclusion order is made? If a case is made for an exclusion order, the order must be as provided under subsection (3)(a) and (b). Does that answer the point about the individual with the painting and other means that are not frozen?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

There is discretion within the exclusion order other than in the case of court and legal costs, which I was about to move on to. Is that the point that confuses the hon. Gentleman?

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs) 12:45, 18 December 2001

I think that the point that the hon. Member for Orkney and Shetland tried to make was that clause 255(2) provides discretion for making exclusions when the interim receiving order is made. If there were a circumstance—as described by the Minister—in which a person had substantial sources of funds other than those subject to the receiving order, the question under subsection (3) would not arise. The amendment would provide that in the absence of such other sources of funds, it would be mandatory for provision to be made from the sums that were subject to the receiving order.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

If I did not have the clause in front of me, I would not have been able to answer the hon. Member for Beaconsfield. I cannot see the problem. The hon. Gentleman is suggesting that, while it is discretionary whether to make the exclusion, it should be mandatory in such circumstances to meet someone's reasonable living expenses. Clause 255(3) refers to the issues that courts should be willing—[Interruption.]

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. I am trying to listen to the Minister. If members of the Committee want to have a conversation, will they do so outside the Room?

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

Clause 255(2) is about the making of exclusions. If the provisions of clause 253 were made mandatory, there would not be such discretion. The court would have to decide whether to make the exclusion in the first place, not whether to allow for reasonable living expenses. Surely it should be able to consider the circumstances of the case when deciding whether reasonable living expenses need to be allowed for, not only whether to make the exclusion.

Although the Bill currently allows the courts to make exclusions, subsection (4) of clause 255—and clause 263—prohibits the making of an exclusion for the purpose of enabling a person to pay legal costs arising from proceedings under part 5. Amendments Nos. 252 and 388 would instead allow the court to release assets to pay legal fees. There is no doubt that respondents and third parties in civil recovery proceedings must have proper legal representation. The question raised by the amendments is whether they should be able to rely on the assets that are the subject of the proceedings to pay for that legal representation.

Having considered the options, our view is that respondents and third parties should meet legal costs from assets that are not subject to an interim receiving order or an administration order or, when they have insufficient further assets, their legal costs should be publicly funded. That is why clause 255(4) and clause 263(4) will prevent the court from excluding assets to meet legal expenses in civil recovery proceedings.

Assets that are frozen under an interim receiving order are the subject of dispute between the state and the holder of the assets. The order serves to preserve the assets so that, in the event that a recovery order is made, there should still be property remaining for the enforcing authority to recover. If the holder of the assets were allowed access to them to pay legal expenses, there is a risk that the expenditure may dissipate the property before the matter can be resolved. That would prejudice the state's right to recover the proceeds of crime in civil recovery proceedings.

When freezing orders are used in other civil proceedings, it is for the court to determine the uses to which the frozen assets can be put. We understand that the courts would look carefully at any application to unfreeze assets for legal expenditure. We believe, however, that in such instances it is preferable to make legal aid available when it is needed. I shall set out the arrangements for meeting legal costs. People who are not party to the proceedings may use assets that are not subject to an interim receiving order to pay for their legal expenses. If parties do not have sufficient means available to them to meet their legal expenses, they will be able to apply for public funding under the relevant scheme. Such funding will be made available to both respondents and third parties in civil recovery proceedings.

In order for an applicant to be granted public funding, they must satisfy both a means and a merits test. Parties to civil recovery proceedings will need to meet the standard means test. However, the standard merits test will be relaxed to the extent necessary to ensure that everyone has access to legal funding who needs it, and who qualifies financially.

If the director loses his case the court will, of course, be able to order him to pay the respondent's legal costs. Compensation will also be available under later provisions of the Bill.

We believe that these arrangements will ensure that people are properly represented in civil recovery proceedings, without unnecessarily risking the dissipation of any property pending the decision of the court on whether it is recoverable.

I was about to finish speaking but I give way.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

I should have intervened earlier. The Minister made an important point when he said that the merits test would be relaxed. I assume that he meant that the merits test would be disregarded, because I cannot see how the matter could be fairly dealt with unless one were to say that, if such proceedings were brought against someone, they must, as of right, have an entitlement to legal aid if they do not have sufficient means. If that were confirmed, it would help me to decide how to respond to the matter.

Photo of Bob Ainsworth Bob Ainsworth The Parliamentary Under-Secretary of State for the Home Department

As I have said, we would have to ensure that everyone was legally represented. The merits test will not be met by everyone. If they do not have other assets, they will have to be represented, and, therefore, they will need to be subjected to the means test—and the means test only.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

I have a few observations to make.

With regard to the question of mandatory elements to an exclusion, there is a two-stage process. The court will consider whether an exclusion should be made, and if the court is satisfied about that, that would be done under subsection (2). If the court is persuaded that an exclusion should be made in relation to any person other than the respondent, it would be proper if the exclusion were mandatory.

With regard to that matter, the Minister said that he could not see a problem. I do not think of the issue that I am raising as a problem. However, what I am proposing would be an important safeguard for the rights of third parties, and it would send an important message to anyone who might become involved, as a third party, with litigation under the Bill.

I do not understand the thinking behind subsection (4). It seems to me to be part of the Government's current general fatwa against lawyers.

Hon. Members:

Hear, hear.

Photo of Mr Nick Hawkins Mr Nick Hawkins Conservative, Surrey Heath

In rising to intervene, I should declare that I have an interest in the matter under discussion; I am a member of the Bar, although I am not currently in practice.

Does the hon. Gentleman not find it extraordinary that there is such a divergence of views about lawyers within the Government? Whenever Ministers who are not lawyers want to attack lawyers, they do so, but the Government are packed full of lawyers—and the leading one is the Prime Minister. Therefore, there are Ministers who do not spend all their time attacking lawyers: only the Lord Chancellor enjoys the best of both worlds, by attacking lawyer fat cats although he is one of the fattest of all the fat cats.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. Perhaps it is because I am not a lawyer, but I can discover no relationship between the hon. Gentleman's remarks and the amendment under discussion.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change), Liberal Democrat Spokesperson (Energy and Climate Change)

I will say nothing about the office of the Lord Chancellor and its current holder, other than that, in my experience as a highlander born and bred, that is all that can be expected of people from Lairg. I will say no more than that.

I am heartened by the Minister's comments with regard to the availability of legal aid, in particular in relation to the means test. I would hope that in practice that would be sufficient to meet our concerns.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

In the circumstances, I would want to press to a Division the amendments that would make it mandatory for the third party to have an opportunity to provide for his reasonable living expenses or carrying on his trade, business, profession or occupation if the court has, under subsection (2), as the hon. Member for Orkney and Shetland and I discussed, considered that it would be right to make certain exclusions. I do not want to make a meal of the matter. Perhaps the sensible approach would be to put amendment No. 379 only to the vote.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. The hon. Gentleman will have to press amendment No. 362, too.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Home Affairs)

Then I shall put amendments Nos. 362 and 379 to the vote as rapidly as possible.

On the other amendments, and the matter relating to legal aid, the fact that there will be no merits test provides me with substantial reassurance, although I entirely share the view of the hon. Member for Orkney and Shetland that the provision is a fatwa against lawyers. However, as long as the money comes from somewhere to pay for such legal expenses, subject to declaring my interest, which I suppose that I should, I shall not move that amendment formally.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Just so that hon. Members are clear, amendment No. 379 is consequent on amendment No. 362. The question put will relate to amendment No. 362, because if amendment No. 362 is lost, so is amendment No. 379.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 12.

Division number 20 Adults Abused in Childhood — Clause 255 - Restrictions on dealing etc. with property

Aye: 5 MPs

No: 12 MPs

Aye: A-Z by last name

No: A-Z by last name

Question accordingly negatived.

Further consideration adjourned.—[Mrs. McGuire.]

Adjourned accordingly at two minutes to One o'clock till this day at half-past Four o'clock.