Corporate Crime analysis: Barnaby Hone discusses the case of HMRC v Mann for Lexis Nexis. 

In cash detention proceedings in HMRC v Mann, the High Court agreed with the district judge that she had no power to extend the detention as the application was out of time, after the previous period had expired. This was despite the application having been lodged in time but, due to the effect of the coronavirus (COVID-19) pandemic (no fault being attributable to HMRC), was not heard until 26 April 2021. 

HMRC v Mann [2021] EWHC 1182 (Admin). This analysis was first published on Lexis®PSL on 7 June 2021

What are the practical implications of this case?

This is an interesting decision as it confirms that, once the time limits expire in cases where the money has been seized under the Proceeds of Crime Act 2002 (POCA 2002), there is no discretion for the order to continue. It opens two interesting questions: what to do in any case where an order has been extended out of time, and what should law enforcement do in cases such as this? The decision provides certainty about when an order of detention can be increased. The judgment confirms that there is no discretion, and the extension must be made within the timelines set out in the statute, even in a case like this where the facts were sympathetic to HMRC who had tried to get the matter listed in time. 

With the increasing use of civil-based asset recovery, such as account freezing and forfeiture orders, and asset detention and forfeiture orders, which follow a similar statutory framework as cash seizure, this decision clarifies the position of all three. It also highlights the fact that the legislative framework around cash, account and asset seizures should be interpreted strictly so as to provide safeguards to the subjects of the order.

It is likely, that though District Judge Green decided not to extend a time limit, some courts might have done so, as legal opinion was mixed before this decision as to whether an application could be made out of time. If any detention or freezing order (cash, account or asset) has been extended out of time, it can and should be challenged. The easiest way would be by making an application to discharge on the basis of this decision.

The next question is what should HMRC have done. There are two broad possibilities. First, for HMRC to hand back the money and then re-seize the money. This seems to be open to clear challenge as it appears to be clearly against the purpose of the law. This was what HMRC attempted in this case and it was denied at first instance by Wimbledon magistrates’ court. The other option is that they could have applied for forfeiture before the time ran out. This would be allowed under the law though it might create tough questions, such as how much time would HMRC be allowed to investigate before the final matter was heard. 

What was the background?

On 1 October 2019, officers of HMRC attended premises where they found boxes containing vodka worth some £220,000 in evaded duty and VAT. Next to the boxes they found two plastic carrier bags containing bundles of sterling notes totaling £35,000. The cash was seized under POCA 2002.

On 3 October 2019, the commissioners applied for a first detention of the cash under POCA 2002, s 295(2)(a) to Westminster magistrates’ court. The court authorised the detention of the cash for six months. On 26 March 2020, they applied for the detention to be extended by a further six months. This application was not due to be opposed. This application coincided with the lockdown which occurred to deal with the coronavirus pandemic. 

Between 26 March and 2 April 2020, HMRC made numerous requests by telephone and email to arrange for its application to be heard prior to the expiration of the six-month period. On 3 April 2020, the six-month period expired. Over three weeks later, on 28 April 2020, the court heard the application. District Judge Green heard the argument advanced by HMRC. She delivered an oral judgment on 1 July 2020 holding that the court had no jurisdiction to order continued detention of the cash beyond the expiration of the first period of detention, namely 3 April 2020. District Judge Green was asked to state the case for the opinion of the High Court.

What did the court decide? 

The court upheld the decision of District Judge Green and found that she was right that, once the period of detention expired, she did not have the power to extend the period of detention. This follows the case of R v Uxbridge Magistrates’ Court ex parte Henry [1994] Lexis Citation 2848, where Mr Justice Scott Baker found that, where a decision on initial detention had been made out of time by three hours, the court had no power to start the period of time. This followed a similar decision in R (on the application of Walsh) v Customs and Excise Comrs [2001] All ER (D) 96 (Jun) which dealt with a similar provision in the Drug Trafficking Act 1994.

Some practitioner texts had questioned whether Walsh was correctly decided. The court entirely disagreed with this idea, and adopted the approach in Walsh. The court pointedly refused to decide on whether or not it would be legal for a new application to be made by HMRC. We will see if this is challenged in future.

Case details:

  • Court: Administrative Court, Queen’s Bench Division, High Court of Justice

  • Judge: Lord Justice Bean and Mr Justice Cavanagh

  • Date of judgment: 20 April 2021

Barnaby Hone is a barrister with specialist expertise in all types of asset recovery and financial crime. He is ranked in Chambers and Partners and the Legal 500 for his knowledge within POCA, asset recovery, and forfeiture.  Barnaby writes the chapters on International Asset Recovery and Terrorism Finance for Millington and Sutherland Williams on POCA. He also lectures and writes articles on all aspects of POCA.