01 June 2007

Fraud and trust litigation news - summer: Civil recovery orders


The Director of the Assets Recovery Agency v Olupitan and Makinde [2007] EWHC 162 (QB), (Langley J)

This case, heard in January of this year, clarifies the position regarding the availability of Civil Recovery Orders under the Proceeds of Crime Act 2002 in two respects: first, in relation to the evidence which must be adduced by the Assets Recovery Agency in order to establish that property has been obtained through unlawful conduct; and, secondly, as to the approach to be taken where the property in question is part-owned or occupied by a third party. 

Facts of the case

Mr Olupitan was convicted of conspiracy to defraud in 2002.  At his trial, the prosecution conceded that he appeared only to have joined the conspiracy on the day on which the conspirators were arrested and there was no clear evidence as to the extent of his fraudulent activities

Mr Olupitan and Ms Makinde owned three properties between them.  One house, in which they lived with their children, was jointly owned and had been purchased with the aid of an 80% mortgage.  It was claimed that the remaining 20% of the purchase price had been contributed by Mr Olupitan and Ms Makinde in equal shares.  The second house was owned by Mr Olupitan alone and had been purchased by him with cash. The third house was owned by Ms Makinde alone and had been purchased by her with cash.  The second and third houses were rented to tenants.

The Assets Recovery Agency sought Recovery Orders, under Part 5 of the Proceeds of Crime Act 2002, on the basis that Mr Olupitan had obtained the mortgage on the first house by deception and that the funds used to buy the other two houses had derived from the proceeds of his unlawful conduct. 

Ms Makinde claimed that the house which she had purchased for cash had been bought by her with legitimate assets derived from the sale of land in Nigeria and that to make a Recovery Order in respect of the jointly owned house in which she, Mr Olupitan and their children lived would be contrary to those provisions of the Proceeds of Crime Act 2002 designed to protect innocent third parties and would also contravene her rights under Article 8 of the European Convention of Human Rights as being a disproportionate interference with her right to respect for her home.

The decision

Langley J granted Recovery Orders in respect of the jointly owned house and the house owned by Mr Olupitan alone but declined to make an Order in respect of the house owned by Ms Makinde alone.

In reaching this decision, Langley J had regard to an unreported decision of Sullivan J in The Queen on the Application of the Director of Assets Recovery Agency and Others v Green [2005] EWHC 3168.

In Green, Sullivan J had held that the Assets Recovery Agency did not have to prove the commission of a specific criminal offence or offences in order for a Recovery Order to be made, but that that it did have to identify and prove the matters which were alleged to constitute the kind of unlawful conduct by which the property which it was sought to recover was obtained.  In particular, he had held that in order to be able to conclude, on a balance of probabilities, that the assets in question must have been acquired with the proceeds of unlawful conduct, it was insufficient simply to establish that the respondent to the application for a Recovery Order had a lifestyle which was inconsistent with any identified lawful income. 

In the present case, Langley J was satisfied that the Assets Recovery Agency had established, on a balance of probabilities, that Mr Olupitan was dishonest. 

As to the house which was owned by Mr Olupitan alone, Langley J was not only satisfied that Mr Olupitan was ‘capable of criminal dishonesty' but also that he was ‘prepared to lie when he thinks it suits him'.  He said that he therefore had no hesitation in rejecting Mr Olupitan's evidence as to the source of the monies which had been used for its purchase and concluded that he was left with ‘no evidence of the lawful source of those funds and an attempt to give one which is a lie'.

As regards the house that Ms Makinde held in her own name, Langley J described himself as being ‘left in a mind of real uncertainty'.  Although the explanations given by Ms Makinde during the case did not give him any confidence in what she said, documentary evidence had been produced which showed that the monies used for the purchase had derived from Nigeria and on that basis, on a ‘fine balance', he held that the Assets Recovery Agency had not established that the third house was obtained through unlawful conduct and declined to make a Recovery Order in relation to it.

As to the house which was jointly owned by Mr Olupitan and Ms Makinde and in which they lived, Langley J was satisfied that the mortgage application which Mr Olupitan had made to fund its purchase had been fraudulent, and that the explanation which Ms Makinde had given for the source of the funds which she had used to provide ‘her' half share of the deposit was not reliable.  On a balance of probabilities, the entire deposit for that property had come from funds derived from Mr Olupitan which had, in turn, been derived from an unlawful source.

Points of interest

The Court found that as Ms Makinde had not been acting in good faith that it was “just and equitable” to make a Recovery

Order in relation to this property.  In addition, given the existence of protective provisions under the Proceeds of Crime Act 2002 for innocent third parties, it was not a disproportionate interference with Ms Makinde's rights to respect for her home to make a Recovery Order, so that Article 8 of the European Convention on Human Rights was not relevant in this case.

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