Restraint Orders

Restraint orders under the proceeds of crime act 2002

Introduction

Under the Proceeds of Crime Act 2002 the Prosecution is entitled to apply to a Court for an order that seeks to "restrain" the assets of an individual. The Prosecution can do this without giving notice to the individual concerned if there is a fear that assets may be dissipated or diminished in value. This procedure is known as  an "ex parte" application and is often used by the Prosecution. If successful, the Restraint Order will effectively "freeze" assets of the individual either in part or in their entirety.

In other situations an individual is put on notice that the Prosecution are seeking a Restraint Order and can make representations to the court. Even in the case of a Restraint order granted ex parte an individual always has the opportunity to make representations to the Court for it to be varied or discharged.

Justification

The justification for restraint orders is that property which may later, following a conviction, be the subject of Confiscation is required to be protected and preserved.

Confiscation proceedings follow a conviction of any individual who has been unjustly enriched by his criminal conduct. In this way if any individual has been convicted and has benefited from the crime, the Prosecution seek an order from the Court as to the amount he has benefited from his criminal conduct. Once the Court has made a determination of the criminal benefit, it has to decide what the individuals realisable assets are. The Restrained assets can then be utilised to satisfy the Confiscation Order for any amount up to the value of the criminal benefit.

When an order can be sought and made

Section 40 of POCA sets out the situations in which the Court can make a Restraint Order. The Prosecution can and regularly do, seek such an order even before an individual has been arrested or interviewed on suspicion of any criminal activity. What the Prosecution must show is that an ‘investigation’ has commenced and that there is a reasonable cause to believe that the alleged offender has benefited from his criminal conduct.

The Court when considering this question is not applying the standard of proof used in criminal cases, of being  "sure" or beyond reasonable doubt but a much lower standard of a balance of probabilities. Furthermore the court is not required to apply the strict rules of admissibility that apply in criminal trials. That effectively means the Judge can take account of evidence that could not be used in a criminal trial. Conversely, however the effect of this is that any information obtained in the restraint proceedings either by an individual volunteering it or by some other method, cannot be used in criminal proceedings. In theory at least a "Chinese Wall" exists between the team prosecuting the case and the team conducting the restraint proceedings.

Terms of an Order

The terms of a Restraint can be quite debilitating to an individuals business and on occasions can in fact cost him money (see below). Following an initial procedure which can involve an individual being ordered to provide information as to all his assets, the Order, if successfully obtained, will list the individuals property including, but not limited to, bank accounts ( business and personal), properties, businesses both in this jurisdiction and abroad. A failure to disclose property can lead to the prosecution applying to the Court to hold the individual in Contempt of Court for the failure. Care must be taken therefore when responding to a request or order for a list of assets. A finding that an individual has deliberately withheld information about his assets or their extent can and sometimes does lead to a period of imprisonment for the contempt. In those situations it is always advisable that an individual "comes clean" when the failure to disclose is discovered. The provision of accurate information even at this stage will be treated favourably by the Court and could avoid a jail term.

The Order will specify what  can and cannot be done in respect of the identified property. Usually the Order is couched in terms which are designed to ensure that the value of the property in question is not diminished or dissipated. So for example there may be an order that property cannot be sold or withdrawals from bank accounts cannot be made.

Ring fencing of certain assets or Partial Restraint of assets

The purpose of a Restraint Order is to preserve assets which may later be set off against a confiscation order  On occasions therefore, not all of an individual's property is made the subject of a Restraint Order. This usually applies where he owns more assets of greater value than the prosecution allege he has criminally benefited. This "ring fencing" of assets is however fairly rare. However, it can be a useful tool for an individual to employ when he wants to continue operating a business without all the inconvenience a Restraint Order over all of his assets.     

Living Expenses

As part of the Order an individual whose property and assets have been restrained will be allowed "reasonable" living expenses. The start point is usually a meagre £250 per week. However an individual can and should seek a variation of that by making representations to the Prosecution. Sometimes such representations are met with success but often an application needs to be made to the Court for a variation. Here it is hugely important to make only realistic demands. The Court will not entertain fanciful requests for increases in the allowance. What is required is a carefully set out analysis of all required expenses with justifications for the expenditure that is required.

Legal Expenses Not Allowed

Restrained assets cannot be used to fund legal advice in relation to the criminal offences with which an individual the subject of the Restraint Order is charged. However that person obviously will receive Legal Aid for such representation.

Management Receivers

The reason why a Restraint Order may prove costly to the individual concerned is this.
Under s.48 of the Act, if an individual's finances are complex the Court may appoint a Management Receiver to receive and manage the property.

Management Receiver duties are usually conducted by large well known and expensive accountancy firms. The  Court can grant Receivers very wide-ranging powers to take possession, control and management of some or all of the individual's property and assets.

In some cases Management Receivers take over the role of completely managing the individual's affairs. In other cases they adopt a role which oversees the running of the business. In either case the first port of call for their usually very significant fees is the individual or business that is the subject of the Restraint Order. The appointment of Management Receivers in any case could spell extreme financial difficulties and could be ruinous given their charging rates and should always be examined carefully and timeously and where appropriate be challenged. Again the Act gives an individual the right to challenge the appointment of Management Receivers or the extent of their powers.

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