Clause 252: Functions of interim receiver

297.     The detailed functions of an interim receiver will be conferred by the High Court's order itself. The Court's discretion to confer whatever powers it considers appropriate to the circumstances of an individual case are at large, provided always they are for the purposes set out at subsections (1) and (2), i.e. the detention, custody or preservation of the property or establishing whether it is recoverable or associated property or whether other property is recoverable property in relation to the same unlawful conduct.

298.     Subsection (1)(a) introduces Schedule 3, which makes explicit mention of some of the more significant powers that the court may choose to confer on an interim receiver. An explanatory note about Schedule 3 is included below.

299.     Although the High Court has a wide discretion over the powers and functions that may be conferred on an interim receiver, there are some duties under which he must always be placed. Subsection (2) sets these out. He will always be required to take the necessary steps to establish:

• whether in his view the property is to any extent recoverable or associated property, and

• whether there is any other property which is recoverable in relation to the same unlawful conduct and if so who holds it.

300.     Up until the interim receiving order or the issuing of the claim form (whichever comes first), the Director has access to the civil investigation powers set out in Part 8. Thereafter, the Director ceases to have access to these powers and the duty of taking whatever further steps are needed to establish the facts about the property is placed upon the interim receiver acting under the Court's direction.

301.     Subsection (3) provides legal protection for the interim receiver if he mistakenly, but honestly and reasonably, deals with property that is not the property specified in the order. He will have immunity from any legal claims in respect of loss or damage caused by such dealing, unless it can be shown that it was caused by his negligence.

Schedule 3: Powers of interim receiver or administrator

302.     Schedule 3 makes explicit mention of some of the more significant powers which the High Court or in Scotland the Court of Session may choose to confer on an interim receiver or interim administrator. These include powers to seize the relevant property (paragraph 1), and to obtain information about it and require persons to answer questions, irrespective of any restrictions on the disclosure of information which would otherwise apply (paragraph 2). Self-incrimination is therefore to be no answer to the requirement to answer questions, but evidence so obtained cannot be used in any prosecution of the person who provided it (other than in certain restricted circumstances, for example, a prosecution for perjury). Use of the evidence against that person is, however, permissible in civil recovery proceedings. The interim receiver or administrator may be given powers of entry, search and seizure (paragraph 3) and powers to oblige persons to assist him in the exercise of those powers (paragraph 4)). Under paragraph 5 an interim receiver or interim administrator may also be given powers to manage property which include:

• selling perishable or depreciating property,

• where the property in question comprises a trade or business, carrying on that trade or business, and

• incurring capital expenditure in respect of the property.

Clause 253: Duties of respondent etc.

303.     Clause 253 provides for certain duties to be placed on a person whose property is subject to an interim receiving order. The order may require the person to bring the property, or any documents relating to the property, to a place specified by the interim receiver or to the custody of the receiver. This could also apply where the property or documents are located outside the part of the United Kingdom where the order is made. The order may require the person to do anything the interim receiver reasonably requires him to do for the preservation of the property.

Clause 254: Supervision of interim receiver and variation of order

304.     An interim receiver, a respondent and anyone else affected by the receiver's actions (this includes the Director) will be able to ask the court to clarify the receiver's powers. All persons potentially affected will be able to put their views to the court before it acts. There is also power for the court to vary or set aside the interim receiving order. For example, the court may be asked by the interim receiver to extend the interim receiving order to additional property in respect of which evidence has come to light. Here too, the court must give an opportunity to be heard to any persons with an interest in the court's decision.

Clause 255: Restrictions on dealing etc. with property

305.     Subsection (1) provides that the interim receiving order must prevent any dealing with the property to which it applies, subject to any exclusions which may be made under the rest of the clause. This is to prevent the property being dissipated pending a resolution of the civil recovery case. 'Dealing' is defined in clause 310(1) to include disposing of the property, taking possession of it or removing it from the United Kingdom. A person who has notice of the order and contravenes it will be liable to be proceeded against for contempt of court.

306.     Subsection (2) states that exclusions may be made either when the order is made or by variation. Subsection (3) states that an exclusion may in particular provide for property to be used for meeting any person's reasonable living expenses or to carry on a trade, business, profession or occupation. Living expenses would be likely to include the living expenses of dependants. But the court's discretion to release property is limited by subsections (4) (no release of property to meet legal expenses arising from civil recovery) and (6) (the court must ensure that the Director's right to recover the property (defined at clause 310(8)) is not be unduly prejudiced). Persons involved in civil recovery proceedings will be able to apply to the Community Legal Service scheme, or the Legal Aid scheme which applies in Northern Ireland, for their legal costs, or of course to use any unfrozen assets they may have available, so there will be no need for them to draw from the property subject to the order.

Clause 256: Restriction on proceedings and remedies

307.     This clause enables the existence of an interim receiving order to have an effect on collateral legal proceedings affecting the property in question. Subsection (1) allows the court which has made the order to stay any other legal process, including court proceedings, in respect of the property to which the order applies; and specifies that no distress may be levied against that property other than with the leave of the court.

308.     Subsection (2) allows any court in which proceedings are pending in respect of the property to stay them, or impose terms on their continuation. The Director (and, if appointed, the interim receiver) must be given an opportunity to be heard in the court in question on the matter of the exercise of this power (subsection (3)). Under subsection (4), a landlord may not exercise a right of forfeiture by peaceable re-entry on a property to which an order applies, other than with the leave of the court that made the interim receiving order.

Clause 257: Exclusion of property which is not recoverable etc.

309.     The court has the power to vary an interim receiving order at any time (clause 257(3)). This clause makes specific provision for variations of interim receiving orders to have the effect of excluding property from the proceedings altogether. The court may decide before the final trial of the action, for example on an application by an interested person or a report by an interim receiver (see clause 258), that some of the property to which the order applies is neither recoverable nor associated property. The court must in that event exclude this property from the terms of the interim receiving order. The court may also release associated property if satisfied that it may be excluded without materially affecting the right of the Director to recover in respect of the remainder. If so, it may vary the order accordingly and the excluded property will be released, with or without conditions.

Clause 258: Reporting

310.     An interim receiving order must, under this clause, require an interim receiver to take a number of steps to keep the Director and the court informed. He must report as soon as practicable if he forms the opinion that:

• any property to which the order applies which is claimed to be recoverable property is not in fact recoverable, or

• any property to which the order applies which is claimed to be associated property is not in fact associated property, or

• any property not subject to the order is in fact recoverable by virtue of the same unlawful conduct or is associated property, or

• any property to which the order applies is held by someone different to the person identified on the claim form.

311.     All these possibilities are matters to which the interim receiver is required to be alert under the provisions of clause 252(2). He must also report any other material change of circumstances. And he must finally make a formal report of his findings to the court, and serve copies of it on all those who may be affected by it. This report may comprise a comprehensive account of the nature and origins of, and interests in, the property in question. It will be capable of being used as a basis to establish agreed facts and to identify disputed matters that will fall to be resolved at the final hearing.

Interim administration orders (Scotland)

Clause 259: Application for interim administration order

312.     Clauses 259 to 266 make provision for 'interim administration orders' in Scotland; interim administration procedure may - but need not always - form the preliminary stage of civil recovery procedure.

313.     An 'interim administration order' is, as subsection (2) explains, a court order for:

• the detention, custody or preservation of property which is claimed to be recoverable property or associated property, and

• the appointment of an interim administrator in respect of that property.

Its characteristics are spelled out more fully at clauses 260 to 266, though under subsection (8) these clauses do not limit the extent of the power to make the order.

314.     Under subsection (1), the first step in the procedure is for the Scottish Ministers to make an application to the courts for an interim administration order. The Scottish Ministers may do this even though they have not yet served the application which marks the start of court proceedings. And they may do so without putting any interested party on notice that they are doing so if giving notice would prejudice the Scottish Ministers' right to recover the property (subsection (3)). It may be necessary to act swiftly and without alerting potential parties, for example, to prevent property from being concealed or disposed of.

315.     Subsections (5) and (6) set out the conditions which must be satisfied before the court can make an interim administration order. The Scottish Ministers must satisfy the court that:

• there is a 'probable cause of action', that the property in question is either recoverable or associated property, and

• if the property in relation to which the order is sought includes associated property, the Scottish Ministers have taken all reasonable steps to establish the identities of everyone who holds the property (if the order is made or the proceedings otherwise go ahead, the Scottish Ministers will have to put these persons immediately on notice of the action under clause 249(2)).

316.     The Scottish Ministers must also, under subsection (7), nominate someone suitable to act as interim administrator. The interim administrator on appointment becomes an officer of the court and his functions (set out in clause 260) require him to act to secure the detention, custody or preservation of the property pending resolution of its fate.

Clause 260: Functions of interim administrator

317.     The detailed functions of an interim administrator will be conferred by the court's order itself. The court's discretion to confer whatever powers it considers appropriate to the circumstances of an individual case are at large, provided always they are for the purpose set out at subsection (1) and (2).

318.     Up until the interim administration order, or the raising of proceedings (whichever comes first), the Scottish Ministers have access to the civil investigation powers set out in Part 8. Thereafter, they cease to have access to these powers and the duty of taking whatever further steps are needed to establish the facts about the property is placed upon the interim administrator acting under the Court's direction.

319.     Schedule 3, which is introduced by subsection (1)(a), makes explicit mention of some of the more significant powers that the court may choose to confer on an interim administrator. These are explained above.

320.     Although the court has a wide discretion over the powers and functions which may be conferred on an interim administrator, there are some duties under which he must always be placed. Subsection (2) sets these out. He will always be required to take the necessary steps to establish:

• whether in his view the property is to any extent recoverable or associated property, and

• whether there is any other property which is recoverable in relation to the same unlawful conduct.

321.     Subsection (3) provides legal protection for the interim administrator if he mistakenly, but honestly and reasonably, deals with property which is not the property specified in the order. He will have immunity from any legal claims in respect of loss or damage caused by such dealing, unless it can be shown that it was caused by his negligence.

Clause 261: Duties of respondent etc

322.     Clause 261 provides for certain duties to be placed on a person whose property is subject to an interim administration order. The order may require the person to bring the property, or any documents relating to the property, to a place specified by the interim administrator or to the custody of the administrator. This would apply for example where the property or documents are located outside Scotland.

Clause 262: Supervision of interim administrator and variation of order

323.     An interim administrator, a respondent and anyone else affected by the administrator's actions will be able to ask the court to clarify the administrator's powers. The Scottish Ministers, and others potentially affected, will be able to put their views on the proposition to the court before it acts. There is also power for the court to vary or set aside the interim administration order so that it applies to new property that it considers to be recoverable. Before it does so, it must give an opportunity to be heard to the Scottish Ministers and other potentially affected.

Clause 263: Restrictions on dealing etc. with property

324.     Subsection (1) provides that the interim administration order must prevent any dealing with the property to which it applies, subject to any exclusions which may be made under the rest of the clause. This is to prevent the property being dissipated while the order is in force, pending a hearing in the Court of Session. 'Dealing' is defined in clause 310(1) to include disposing of the property, taking possession of it or removing it from the United Kingdom. A person who disobeys these provisions will be in contempt of court.

325.     Subsection (2) states that exclusions may be made either when the order is made or by variation. Subsection (3) states that an exclusion may in particular provide for property to be used for meeting any person's reasonable living expenses or to carry on a trade, business, profession or occupation. Living expenses would be likely to include the living expenses of dependants. But the court's discretion to release this property is limited by subsections (4) and (6); the legal expenses of a person involved in proceedings may be met through the legal aid scheme, so there will be no need for them to draw from the property subject to the order.

Clause 264: Restriction on proceedings and remedies

326.     This clause enables the existence of an interim administration order to have an effect on contemporaneous legal proceedings affecting the property in question. Subsection (1) allows the court that has made the order to sist any other legal process, including court proceedings, in respect of the property to which the order applies.

327.     Subsection (2) allows any court in which proceedings are pending in respect of the property to sist them, or impose terms on their continuation. The Scottish Ministers (and, if appointed, the interim administrator) must be given an opportunity to be heard in the court in question on the matter of the exercise of this power (subsection (3)).

Clause 265: Exclusion of property which is not recoverable etc.

328.     The court has the power to vary an interim administration order at any time (clause 262(3)). This clause makes specific provision for variations of interim administration orders to have the effect of excluding property from the proceedings altogether. The court may decide before the final hearing of the action, for example on an application by an interested person or a report by an interim administrator (see clause 266), that some of the property to which the order applies is neither recoverable nor associated property. The court must exclude this property from the terms of the interim administration order. The court may also release associated property, if satisfied that it may be excluded without materially affecting the claims of the Scottish Ministers in respect of the remainder. If so, it may vary the order accordingly and the excluded property will be released, with or without conditions.

Clause 266: Reporting

329.     An interim administration order must, under this clause, require an interim administrator to take a number of steps to keep the Scottish Ministers and the court informed. He must report as soon as practicable if he forms the opinion that:

• any property to which the order applies which is claimed to be recoverable property is not in fact recoverable, or

• any property to which the order applies which is claimed to be associated property is not in fact associated property, or

• any property not subject to the order is in fact recoverable by virtue of the same unlawful conduct or is associated property, or

• any property to which the order applies is held by someone different to the person identified on the claim form.

330.     All these possibilities are matters to which the interim administrator is required to be alert under the provisions of clause 260(2). He must also report any other material change of circumstances. And he must make a report of his findings to the court, and serve copies of it on all those who may be affected by it. This report may comprise a comprehensive account of the nature and origins of, and interests in, the property in question. It will be capable of being used as a basis to establish agreed facts and to identify disputed matters that will fall to be resolved at the final hearing.

Vesting and realisation of recoverable property

Clause 267: Recovery orders

331.     This clause sets out what the court must do if it finds any property to be recoverable. Under subsection (1), if the court finds, on the trial of a civil recovery action or after a proof in Scotland, that any property is recoverable, it must order its recovery. Under subsection (2) a recovery order vests the recovered property in the trustee for civil recovery, whose appointment and functions are set out at clause 268. The making of the order is subject to the limitations set out in subsections (3), (4), (5) and (7), and to clauses 270 to 278. There are also certain exemptions set out in clauses 280 and 281.

332.     Under subsection (3) the court may not make any provision in a recovery order that would contravene the European Convention on Human Rights. Under subsections (3) to (5) the court may not make a recovery order if all of the following conditions apply and it would not be just and equitable to make the recovery order. The conditions are:

• the respondent obtained the recoverable property in good faith;

• before or after the respondent obtained the property, without knowing that the property was recoverable, he took action which he would not have taken if he had not anticipated receiving or had not received the property (for example, he spends his own money as a result of receiving the recoverable property);

• the making of a recovery order would be detrimental to the respondent, due to the action he had taken in relation to the property.

333.     In deciding whether it would be just and equitable to make provision in a recovery order in such cases, the court must weigh the detriment to the respondent if the provision were to be made against the interests of the enforcement authority, as well as any other factors that would go to the justice and equity of the case.

334.     The recovery order may sever the recoverable element of the property from the remainder if recoverable property and associated property subsist in the same property, for example, where property is mixed under clause 304 (subsection (6)). The order may also impose conditions on how the trustee may deal with the property (subsection (7)).

Clause 268: Functions of the trustee for civil recovery

335.     Where it makes a recovery order, the court must appoint a trustee for civil recovery. The enforcement authority is required by subsection (2) to nominate someone suitably qualified, and may do so from its own staff (this is because unlike the interim receiver the trustee acts in the interests of the enforcement authority following the court's judgment in favour of that authority and has no investigative functions). Subsection (3) places the trustee under a duty to secure the property which will be vested in him; in Scotland, to register the inhibition in the register of inhibitions and adjudications if he considers it necessary; and to liquidate non-cash assets for the benefit of the enforcement authority. Subsection (4) states that the trustee acts as such on behalf of the enforcement authority and on its instructions. Subsection (5) places the trustee under a duty to maximise the amount realisable from the property vested in him. These provisions together make clear that the trustee must approach his functions with a view to giving the fullest effect to the enforcement of the authority's right of recovery.

Schedule 4: Powers of trustee for civil recovery

336.     Schedule 4, which is introduced by clause 271(6), sets out the principal and ancillary powers of the trustee for civil recovery.

Clause 269: Rights of pre-emption, etc

337.     Subsection (1) establishes that a recovery order will override any provisions that would otherwise prevent, penalise or restrict the vesting of the property in the trustee for civil recovery. Under subsection (2), rights relating to the property such as those specified here do not automatically come into effect or become exercisable as a result of the vesting of the property. However, under subsection (3), following a recovery order, any such rights will continue to have effect when the property is vested in the trustee as if no transfer of property has taken place. This applies to any interests created by the recovery order (see clause 272(3)(b)), as well as any interests transferred by the order. So a person who has the first right to buy property when it changes hands will not be able to exercise his right to prevent the vesting of recoverable property in the trustee by the recovery order. But he will have first right to buy the property when the trustee comes to sell it on (paragraph 1 of Schedule 4 gives the trustee the power of sale).

338.     If a person holding such rights suffers loss as a result of property vesting in the trustee, he may apply to the court for compensation under clause 282(6) and the court may require compensation to be paid under clause 282(7).

Clause 270: Associated and joint property

339.     This clause introduces clauses 271 and 272, which explain how associated property and joint property are to be dealt with when a recovery order is made.

340.     Under subsection (2) these clauses apply where the property to which the proceedings relate includes both recoverable property and associated property (as defined in clause 250), where the associated property is specified in the claim form, or in Scotland the application, and the form has been served on the person who holds the associated property (if different from the respondent).

341.     Under subsection (3) these clauses also apply where the property belongs to joint tenants, and one of the tenants is an 'excepted joint owner', as defined in subsection (4). Specific provision is needed for joint tenants because joint tenants are treated as though they were a single owner of the property at issue. Joint tenancies may arise, for example, where two people have a joint bank account or own real property jointly. But it might be the case that one of the joint tenants has acquired his joint tenancy with recoverable property and the other has acquired his with non-recoverable property. If so, the second would be an "excepted joint owner" whose interest would not be recoverable (subsection (4)).

Clause 271: Agreements about associated and joint property

342.     Subsection (1) provides for the situation where a person who holds associated property, or an excepted joint owner, comes to an agreement with the enforcement authority to make a payment to the trustee in lieu of the recoverable property. Where an agreement is reached, the recovery order may then require the person to make the payment to the trustee, rather than vesting the property in the trustee. The order may reflect the agreement by including provision for vesting, creating or extinguishing an interest in the property (subsection (2)). For example, title to the recoverable property may be transferred to the owner of the associated property or the excepted joint owner in exchange for a payment - in effect, he buys out the enforcement authority's interest.

343.     Provisions relating to the amount to be paid are at subsection (3). Subsection (4) provides that any payment may take account of any loss suffered by the holder of the property as a result of an interim receiving order or interim administration order applying to the property. Subsection (5) establishes that where there is more than one item of associated property or excepted joint owner, the payment to be made is to be agreed between all of them and the enforcement authority. The recovery order must provide that the property concerned ceases to be recoverable (subsection (6)).