Restraint Order Removed | Success as Court Rejects ‘Tainted Gift’ Claim
A Restraint Order is a court order that prosecuting authorities such as HMRC, the SFO, the FCA, the CPS and Trading Standards may seek to freeze certain assets linked to an individual or a business. It is usually sought during an investigation and before any criminal charges are brought.
If the court grants the order, it prevents the individual or business from selling, transferring, or otherwise managing the assets specified in the order. This helps preserve the assets during the investigation and any later criminal proceedings, so they remain available for a potential Confiscation Order if there is a criminal conviction.
Our team of solicitors has assisted both individuals and businesses to challenge a Restraint order in court for over two decades. We regularly advise individuals and businesses subject to Restraint Orders and Confiscation Orders under the Proceeds of Crime Act 2002.
Recently, we successfully assisted our client to secure the removal of a Restraint Order, issued in December 2021, obtained under Section 40(1) of the Proceeds of Crime Act 2002 (POCA). The Order was made against property that had been transferred to him and which represented partial repayment of funds he had inadvertently paid into a Ponzi Scheme investment fraud.
Our client had invested substantial funds into what he thought was a legitimate property investment business, which subsequently proved to be part of a sophisticated Ponzi scheme.
Nazaqat Maqsoom of KANGS explains the circumstances and the manner in which this highly successful outcome was achieved.
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The Circumstances
Our client was persuaded by an individual he believed to be an honest and experienced business man to invest in property investment opportunities and, over several years, he paid more than three hundred and thirty thousand pounds into that individual’s bank account. It was the belief of our client that he was involved in a legitimate business arrangement, whereby both parties would share any resulting investment profits equally.
It later became apparent that, unbeknown to our client, the individual was in fact operating a Ponzi Investment fraud involving multiple investors, and when the scheme collapsed, investors including our client were cheated out of their funds.
During the period of what appeared to be legitimate trading between our client and the fraudster, a property had been transferred into our clients’ name, which he thought represented a financial return on his investment.
The fraudster was subsequently prosecuted and convicted, and confiscation proceedings were commenced under POCA to recover the proceeds of crime. In those proceedings, the Prosecution questioned the intent behind the transfer of the property to our client, alleging it was intended to disguise its true ownership and avoid any subsequent possession proceedings to recover it.
As the property transfer to our client appeared to have been made by way of a gift, the Prosecution maintained that it amounted to a ‘Tainted Gift’ under Section 77 of POCA, enabling it to be set aside. Based on these beliefs, the Prosecution obtained a Restraint Order preventing our client from disposing of it or dissipating its value in any manner.
The Relevant Law
The Proceeds of Crime Act 2002 provides as follows.
S. 40 Conditions for exercise of powers
The Crown Court may exercise the powers conferred by section 41 if the following conditions are satisfied:
- a criminal investigation has been started in England and Wales with regard to an offence, and
- there are reasonable grounds to suspect that the alleged offender has benefitted from his criminal conduct.
S. 41 Restraint orders
If section 40 is satisfied, the Crown Court may make a Restraint Order prohibiting any specified person from dealing with any realisable property held by him.
A Restraint Order may provide that it applies to:
- all realisable property held by the specified person whether or not the property is described in the Order,
- realisable property transferred to the specified person after the Order is made.
S.77 Tainted Gifts
A gift is tainted if made at any relevant time.
A gift is tainted if it was made by the defendant and was of property which:
- was obtained by the defendant as a result of or in connection with his general criminal conduct or
- which represented in the defendant’s hands property obtained by him as a result of or in connection with his general criminal conduct.
How We Assisted Our Client
In seeking the withdrawal of the Restraint Order against our client’s property, the team at KANGS:
- attended our client discussing the circumstances leading to the imposition of the Restraint Order,
- advised our client upon his position, and the appropriate course to follow to secure the withdrawal of the Order,
- collated and examined all pertinent evidence,
- prepared and served all necessary documents and applications upon the Court and the Prosecution,
- conducted negotiations with the Prosecution in pursuit of an agreed settlement, which proved abortive,
- identified and instructed suitably experienced counsel to represent our client at court,
- attended our client and counsel at all material times.
The Court Hearing
As it proved impossible to achieve an amicable settlement with the Prosecution, our client’s claim proceeded to a formal Hearing at which, our contentions included:
- our client’s belief that the defendant was a legitimate business man who was to use his money for investment purposes, which resulted in the purchase of the restrained property, by way of an implied and or constructive trust accordance with Agarwala v Agarwala [2013] EWCA Civ 1763, [2014] WTLR 373.
- POCA is intended to deprive fraudsters of criminal proceeds, not innocent third parties, such as our client, of their property in order that other victims can be compensated,
- our client is nothing other than a victim of the fraud,
- the property was not acquired by way of a tainted gift.
The Successful Outcome
Having considered the detailed representations, the court accepted that the property which was transferred to our client did not amount to a tainted gift and was a legitimate transfer to our client. Accordingly, the Restraint Order was lifted thereby enabling our client to resume complete control of his property.
Naturally, our client was delighted with this successful outcome which provides an end to years of worry, stress and significant hardship.
How Can We Help You?
These successful proceedings, conducted on behalf of our client took place over an extended period and were extremely technical in nature, requiring a detailed understanding of POCA.
KANGS is recognised for its work in POCA matters and has acted on some of the UK’s highest value investigations. The independent legal directory Chambers UK has ranked KANGS among the leading law firms nationally for POCA and Asset Forfeiture for twelve consecutive years.
Our team of solicitors regularly advise and represent individuals and businesses who are subject to Restraint Orders and financial injunctions, across a wide range of circumstances.
If we may be of assistance, please contact our team using the details below who would be pleased to hear from you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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