Restraint Orders – Recent Developments

April 24, 2020

By Ian Whitehurst

Restraint Orders are a draconian measure which can have an adverse impact upon a client facing financial charges and in recent years have been increasingly deployed by Prosecutors pre charge.

The impact of a restraint order pre charge can affect the maintenance of a client’s business, professional and contractual relationships and adversely impact upon the right to a private and family life.

Whilst the provisions are enshrined in the Proceeds of Crime Act 2002, the granting of the order is still subject to the exercise of discretion by a Crown Court Judge. There is a growing concern however that the granting of such an order can appear to be somewhat of a “rubber stamp” process and there is an absence of any rigorous scrutiny by a Judge normally faced with such an application at short notice on an ex parte basis in the middle of a busy list.

Thus it is always important to remind the Crown Court when considering an application to discharge the order of the comments of Hughes LJ in the Court of Appeal in the case of Re Stanford International Bank Ltd v Serious Fraud Office [2010] EWCA Civ 137 at [191]:

“it is essential that the duty of candour laid upon any applicant for an order without notice is fully understood and complied with. It is not limited to an obligation not to misrepresent. It consists in a duty to consider what any other interested person would, if present, wish to adduce by way of fact, or to say in answer to the application, and to place that material before the judge…The prosecutor may believe that the defendant is a criminal, and he may turn out to be right, but that has yet to be proved. An application for a restraint order is emphatically not a routine matter of form, with the expectation that it will routinely be granted…. In effect a prosecutor seeking an ex parte order must put on his defence hat and ask himself what, if he were representing the defendant or a third party with a relevant interest, he would be saying to the judge, and, having answered that question, that is what he must tell the judge. … This application came close to being treated as routine and to taking the court for granted. It may well not be the only example.”

Furthermore, the prosecution are expected to proceed expeditiously once a restraint order has been obtained from the court and to prosecute any alleged criminality without delay.  This principle, applied previously by the civil courts in relation to the related field of freezing orders; see Lloyds Bowmaker Ltd v Britannia  Arrow Holdings Ltd [1988] 1 WLR 1337, has a statutory footing in relation to restraint orders which is contained in section 42(7) of the Proceeds of Crime Act 2002 which states as follows;

“If the condition in section 40 which was satisfied, was that an investigation was started or an application was to be made, the court must discharge the order, if within a reasonable time proceedings for the offence are not started or the application is not made (as the case may be)”.

In recent years, this principle seems to have been widely ignored by prosecutors and clients have had restraint orders imposed without any meaningful developments taking place in relation to the criminal investigation and charging process for months if not years.

This problem seems likely to only get worse in the current climate when one considers the recent guidance provided in relation to the prioritising of cases to be charged issued by the National Police Chiefs Counsel and the Crown Prosecution Service.

Cases of financial misconduct are likely to be deemed a Category C (low priority) case. In short, cases with a financial aspect to them are not going to be considered for charge anytime soon and probably not until the backlog of cases is cleared [potentially 6 – 9 months].

However, the relatively recent decision by the Court of Appeal in the case of  R v S [2019] EWCA 1728  gives guidance and now some hope to clients on how the key provision, section 42 (7) of POCA should be applied to individual cases and how the term “reasonable time” should be assessed on a case by case basis by the Crown Court.

The following is of particular note and may assist in a client making a decision to apply to discharge the restraint order on the grounds of delay by the prosecution:

a) The length of time that has elapsed since the Restraint Order was made;
b) The reasons and explanations advanced for such lapse of time;
c) The length (and depth) of the investigation before the Restraint Order was made;
d) The nature and extent of the Restraint Order made;
e) The nature and complexity of the investigation and of the potential proceedings;
f) The degree of assistance or obstruction to the investigation undertaken by the client;

In reaching a conclusion as to whether the prosecutor has, or is, acting expeditiously in the prosecution of suspected criminality leveled against the client, the following points may be of assistance in drafting submissions to persuade a court to discharge the order:

a) The progress of the investigation from the time it started and not just from the date on which the restraint order was made;
b) The date the restraint order was made on and whether any charges have been brought or even indicated as likely to be made by a certain date;
c) The explanation (if any) proffered by the Prosecution for the delay in charging;

The next few months are of course going to be challenging for all parties but in order to be pro – active in the defence of client’s rights and managing their expectations and needs, a purposeful approach to restraint orders may well present an opportunity to challenge and probe the prosecution case against clients at an early stage of the criminal process.