Andrew Bird QC appeared in this case for the Financial Conduct Authority.
The Proceeds of Crime Act 2002 (PoCA) came into force on 24 March 2003, and it continues to raise thorny legal issues and practical injustices.
Practitioners dealing with cases under PoCA need to be well versed in many different areas of law. In making a confiscation order the court needs to determine what property a defendant holds an interest in. This can require the application of difficult concepts of the law of property, company law and trusts. The case of R v Moore is a salutary reminder of the difficulties that can arise in the application of complex areas of law within confiscation proceedings.
The Factual Background
Mr Moore was a convicted fraudster who targeted elderly and vulnerable investors by selling them a variety of largely worthless investments. Mr Parker was one such victim; albeit he was not among the victims of the frauds that Mr Moore was prosecuted for.
In 2010, Mr Moore persuaded Mr Parker to invest in his company Manor Rose Ltd in order to purchase land and Mr Parker made an initial loan of £320,000. Shortly thereafter Mr Parker was persuaded by Mr Moore to invest in the purchase of Bockingford Court on the basis it could be refurbished and then sold at a good profit. It was Mr Parker’s understanding that Manor Rose would repay his loan by using it towards the purchase of the property, and he authorised Mr Moore to that effect. It was agreed that Mr Parker would own a percentage in the property corresponding to the amount of his financial contribution.
Mr Parker was also informed that Mr Moore’s stepfather would be an investor on the same basis. Nothing was put in writing and Mr Parker was not told that Mr Moore intended for the property to be his matrimonial home, which appears inconsistent with refurbishment and sale at a profit. The property was partly purchased by way of a “rather dubious” mortgage in Mr Moore’s stepfather’s name and Mr Parker’s contribution, which in the end was £260,000, amounted to 40% of the total purchase price of the property and 70% of the capital used to fund the deposit.
The prosecution case at the confiscation hearing was that Mr Parker had no interest in the property because there was as a matter of fact no express agreement between him and Mr Moore to that effect. They relied upon the lack of any contemporaneous documentary record of the arrangements said to have been made between Mr Parker and Mr Moore. What documents there were had been created by Mr Moore after his arrest.
The Judge’s findings of facts at the conclusion of the confiscation case were contrary to the prosecution arguments. The Judge found Mr Parker to be an entirely credible witness. In other words, he believed him in relation to the circumstances surrounding the purchase of Bockingford Court and in particular that he would receive a share of the property that reflected his percentage contribution to the purchase price.
The interesting part of the Judge’s decision is that having found against the prosecution on the facts he proceeded to agree with their argument in law that Mr Parker had no beneficial interest in the property. His reasoning was based on the lack of documentary evidence surrounding the agreement and that Mr Parker’s loan to Manor Rose Ltd had been mixed with funds of other investors.
Mr Parker appealed to the Court of Appeal pursuant to section 31(4) of PoCA.
Did Mr Parker have a beneficial interest?
The Court of Appeal were presented with a situation where the findings of fact made by the Judge did not obviously support the decision he had made. The application of fact to law can be a difficult exercise particularly when it involves consideration of constructive and resulting trusts. Mr Parker presented three alternative arguments in favour of his contention that the only correct application of the facts was that he had a beneficial interest in the property:
- A common intention construction trust.
- A fraud constructive trust.
- A resulting trust.
In Paragon Finance v Thakerar  1 All E.R. 400 Lord Justice Millett described a constructive trust as arising:
“by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property to assert his own beneficial interest in the property and deny the beneficial interest of another”.
A resulting trust arises where a person is presumed by law to intend to create a trust over property he holds. For example, it can be inferred when someone provides the purchase price for property to be legally held by another. The crucial factor in whether the presumption is made will often be the precise relationship between the parties. A presumption is more likely to be made in a commercial context rather than a familial one.
Whether there was an express agreement between the parties is a matter of fact to be decided on the evidence. In this case the Judge at the confiscation hearing decided on the facts that the £260,000 which came from Manor Rose Ltd originated from Mr Parker. He also accepted the explanation given by Mr Parker in relation to his dealings with Mr Moore.
The prosecution, faced with a finding of fact against them, sought to argue in the appeal that the parties had failed to reduce their express agreement into writing and accordingly it failed to comply with the requirement in section 53(1)(b) of the Law of Property Act 1925. The failure to reduce the express agreement to writing does not however affect the creation or operation of a resulting or constructive trust by virtue of section 53(2) of Law of Property Act 1925.
The court held that Mr Parker had a beneficial interest in the property by way of a common intention constructive trust. The correct application of the facts in the case was that Mr Parker had provided Mr Moore with £260,000 for the purpose of it being used, at the material time, for the purchase of Bockingford Court. He had done so because it was expressly agreed between them that he would receive a beneficial interest in the property which corresponded to his monies. It was irrelevant that Mr Moore did not intend to treat the property as an investment and actually intended to use the property as his matrimonial home, because Mr Moore received Mr Parker’s monies and applied them in a way which was consistent with what had been agreed.
The argument that was advanced on behalf of the Defendant’s wife Carly Moore, that Mr Parker invested his money with Manor Rose Ltd before the question of any beneficial interest in Bockingford Court arose, was rejected. Mr Parker’s accepted evidence was that the investment in Bockingford Court was not being made through Manor Rose, rather it was his money that was ultimately used to purchase the property by way of Manor Rose repaying the loan he had previously made to it. Crucially there was never any intention that Mr Moore was borrowing the £260,000 from Mr Parker or that it was a gift.
The Court of Appeal went on to say at para. 98 of the judgment that had the purpose for which Mr Parker entrusted the £260,000 to Mr Moore been insufficient to obtain a beneficial interest in Bockingford Court, then they would have found that there was a Quistclose resulting trust. This appears to be dealing with the hypothetical alternative scenario whereby the monies were advanced as a different type of investment but in a way that clearly limited Mr Moore’s ability to deal with them.
The reality of the position emerges once it is accepted that Mr Parker did in fact contribute to the purchase price of Bockingford Court and he did so in circumstances that do not amount to a gift or loan. Either he did so:
- pursuant to and in reliance of an express agreement, in which case there is a common intention constructive trust; or
- there was no express agreement and he was duped into investing the money by Mr Moore who had no intention of agreeing to Mr Parker obtaining a beneficial interest in Bockingford Court in which case there is a fraud constructive trust; or in the alternative
- there was no express agreement and he was not duped, then a resulting trust arises because a presumption must follow that Mr Moore intended to create a trust over Bockingford Court, given the way the £260,000 was provided.
The problem with Third-Party Interests
Mr Parker’s case was an unfortunate one. It was accepted by the court that his solicitors were not aware that leave to appeal was refused on the papers; either by way of not receiving the notification or that it went astray. This contributed to the delay in appealing so that by the time Mr Parker was granted leave to appeal, Bockingford Court had been sold, the proceeds of sale used to pay the confiscation order and the compensation orders which had been paid out to the victims of Mr Moore’s offending. This left the court powerless to intervene to restore Mr Parker’s property to him because an appeal does not automatically operate as a stay on the compensation orders.
The court suggested that any future review of PoCA (such as that currently being undertaken by the Law Commission) or the Criminal Procedure Rules should include a system whereby the Magistrates’ Court is at least notified of the status of any appeal before compensation is paid out. This would have avoided the injustice of failing to protect a third party’s interest against any competing compensation orders.
LJ Andrews commented at paragraph 9 of the judgment that in complex cases involving the resolution of beneficial entitlement to property there should be an option to transfer the case into the business and property courts. Alternatively, a specialist judge should sit in the Crown Court to hear such cases.
This is a timely observation because it is one of the issues considered by the Law Commission in its consultation paper “Confiscation of the proceeds of crime after conviction”. At paragraph 10.140 the Commission provisionally proposed that:
“where the Crown Court considers that it is in the interests of justice to do so, it may refer an issue in confiscation proceedings to the High Court for a binding determination. We envisage such a step being taken in a small proportion of cases where complex or novel issues fall for determination."
It can only be hoped that these observations are heeded and that measures are implemented to prevent any further cases where a successful party is deprived of the relief that would normally follow from the successful resolution of the case in their favour.
Gary Pons is an experienced and highly proficient barrister who specialises in complex financial cases often with a multi-jurisdictional element. Ranked in Chambers and Partners and The Legal 500. Gary is a specialist in the field of asset forfeiture and confiscation. He is one of the leading experts on the enforcement of confiscation orders. In the modern world where assets are held worldwide, this is an area which regularly crosses the border. Gary advises in relation to international enforcement of confiscation order. He appeared in the case of Moss, which is the leading authority on the recognition of confiscation order in the European Union.
Anna Leathem is a first six pupil at 5SAH and is currently supervised by Ini Udom who specialises in regulatory work and complex criminal cases. Prior to commencing pupillage, Anna worked as a paralegal at a criminal defence firm and assisted the head of litigation in a variety of matters including murder, serious violence, drugs conspiracies, sexual offences and proceeds of crime. She prepared cases for trial in both the Crown Court and the Magistrates’ Court and gained particular experience in tackling vast amounts of evidence in multi-handed organised crime cases.