Judgments - Government of The United States of America v. Montgomery and Another

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    33. I would therefore dismiss the appeal.


My Lords,

    34. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Hoffmann. I agree with it and would dismiss the appeal.


My Lords,

    35. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Hoffmann. I agree with it, and for the reasons which he gives I, too, would dismiss the appeal.


My Lords,

36. This appeal has raised three points. On two of them I am in complete agreement with the rest of your Lordships. On the third, I was at the conclusion of the argument in favour of allowing the appeal but have now concluded that this ground of appeal must also fail.

    37. I agree that the orders made by Collins J and Latham J were not made in a criminal cause or matter. The parties to those proceedings were (and are) the US Government and Mr and Mrs Montgomery. They are proceedings brought in an English Court under the civil jurisdiction conferred on the High Court by the Criminal Justice Act 1988 and the 1991 Order. The order which was made by Collins J and discharged by Latham J was a restraint order made under s.77 of the Act. The argument that these proceedings are criminal is solely based upon the fact that Mr Barnette, the former husband of Mrs Montgomery, has been tried and convicted of offences of fraud in the US Federal District Court in Florida and forfeiture and restitution orders were made by that court in those proceedings. Mrs Montgomery was not a party to those proceedings and the US court had no criminal jurisdiction over her. She was subsequently cited in those proceedings because she was held to have been in civil contempt of the US court for aiding and abetting Mr Barnette in evading the restitution and forfeiture orders made against him and having received the 900 shares the subject of one of the forfeiture orders and not having returned them. Mr Montgomery has no connection at all with the US proceedings. All that is alleged against him is that he has in his possession property in England which can be traced though his wife back to money she received from Mr Barnette.

    38. This does not suffice to make the English proceedings criminal nor does it make the orders made in the English proceedings orders made in any criminal cause or matter. The restraint orders were not made in the US criminal proceedings: they were made in the English proceedings. Some cases may present a problem as to where the line is to be drawn. The present case is not such a case. The highest that it can be put is that the proceedings in which these orders were made, the English proceedings, were civil proceedings the commencement of which was indirectly consequent upon orders made in the US criminal proceedings against Mr Barnette.

    39. The present case is peculiar in that the jurisdiction point under s.18 of the Supreme Court Act 1981 is being taken by the individual litigants. Their submission is that there is no right of appeal at all from the decision of a High Court judge in respect of any matter arising under Part VI of the 1988 Act. This would be a remarkable state of affairs in that it would mean that the civil law property rights of individual citizens could be taken away without any possibility of appealing an adverse decision. The Crown do not support such a view of the law. The case of O [1991] 2 QB 520 decided that there is a right of appeal and that decision has as a matter of course been followed many times since. It was correctly decided. The appellants argued that that decision was inconsistent with what was said by Viscount Cave in Re Clifford and O'Sullivan [1921] 2 AC 570, at p.580 and by Viscount Simon LC in Amand v Home Secretary [1943] AC 147 at p.156. Those authorities stress the test of asking whether the court making the order in question was exercising or claiming a criminal jurisdiction and do not support the appellants' argument. The High Court neither has nor claims in these proceedings any criminal jurisdiction over either of the appellants, nor, if it be relevant, did the US court.

    40. It follows that the Court of Appeal was right in the present case to hold that it had jurisdiction to hear the appeal of the US Government. This ground of appeal fails.

    41. The second point upon which I agree with your Lordships is the question whether or not the relevant orders of the US court in their application to Mrs Montgomery were "external confiscation orders" within the meaning of s.71 of the Act of 1988 as applied by the 1991 Order and s.96(2) of that Act. The appellants submit that the order for the forfeiture of US$ 7.8 million odd was by way of punishment for civil contempt and thus outside the definition and was arrived at by making a calculation of notional damages for the delayed payment of money. I agree that this argument was rightly rejected by the Court of Appeal. The scope of the definition is widely drawn. It looks to the purpose of the relevant order of the foreign court. One of the purposes may be the purpose "(b) of depriving a person of a pecuniary advantage" obtained as a result of or in connection with the relevant criminal conduct, that is to say, the frauds practised by Mr Barnette. Mrs Montgomery had had the benefit of having the 900 shares since August 1983. It is clear that the US court was seeking to deprive her of the pecuniary advantage that she had thereby enjoyed and had resorted to the interest calculation as the best available way of assessing and quantifying that advantage. This is a legitimate approach under the common law as is illustrated by, for example, the law of restitution. (See also s.71(5) of the Act - s.71(4) in the 1991 Order - which likewise would authorise that approach.) This ground of appeal fails.

    42. But now, my Lords, I come to the third point upon which I was at one stage minded to allow the appeal. The point concerns the construction of sections 96 and 102(4) of the 1988 Act. It is a short point of vires depending upon the interrelation of the two statutory provisions. On ordinary principles s.102(4) would be construed as controlling, inter alia, the power to make orders by way of delegated legislation in s.96. If so, the 1991 Order would have to be read subject to an implicit limitation in the terms of s.102(4) or be held to be ultra vires. But it is necessary to examine the scheme of Part VI in order to see if this is the correct reading of these sections.

    43. The primary scheme of Part VI of the 1988 Act is domestic. It is drafted by reference to proceedings in England and Wales and confers on the Crown Court and Magistrates' Courts an extensive power to make confiscation orders in relation to benefit convicted offenders may have obtained from 'relevant' criminal conduct (s.71). This primary provision is then fleshed out with a number of sections some of which are procedural in character but others of which can have a substantive impact on others. Thus, s.74(1) defines "realisable property" and includes not only property held by the defendant but also "any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Part of this Act". Gifts are caught by the Act regardless of whether they were made before or after the commencement of Part VI provided that they were made after the commission of an offence to which the proceedings relate and the court considers it appropriate in the circumstances to take the gift into account (s.74(10)). Sections 76 to 89 confer jurisdiction on the High Court to make various orders including restraint and charging orders, appointing receivers, ordering the realisation of property, making orders in respect of the estate of bankrupt defendants or in respect of companies holding relevant property which are being wound up and other cases of insolvency. The exercise of these powers will or may impact on the rights of others and the provisions recognise that confiscation orders may prejudice others or compete with their rights.

    44. The sequence which the scheme of Part VI follows is (i) the offence/criminal conduct by the offender; (ii) the institution of criminal proceedings against the offender; (iii) the conviction of the offender; (iv) the making of a confiscation order; (v) proceedings in the High Court consequential on the making of the confiscation order. Into this sequence there may be inserted two other material events. A third party may have acquired a benefit from the offender: this may be interposed at any time after stage (i). A restraint or charging order may be made in anticipation of a confiscation order provided that the relevant criminal proceedings have been instituted (s.76): it may therefore be interposed after stage (ii).

    45. Unsurprisingly, the draftsman of Part VI found it necessary to have an interpretation section. This is s.102: "Part VI - Interpretation". This includes some 16 subsections. Most deal with points of interpretation or definition. Subsections (3) to (5) deal with points of application. Subsection (4) provides -

    "References in this Part of this Act to offences include a reference to offences committed before the commencement of this Part of this Act; but nothing in this Part of this Act confers any power on any court in connection with proceedings against a person for an offence instituted before the commencement of this Part of this Act."

This subsection, therefore, addresses how the sequential structure of Part VI is to fit in with the commencement of Part VI. Since Part VI has a largely procedural content, one approach open to those deciding upon the policy of the Act could have been to provide for the Part fully to come into force but to qualify the substantive provisions. But, instead, it provides that Part VI applies to offences whenever committed and gifts made at any time after the offence was committed and applies the cut-off point at what I have called stage (ii), the institution of the criminal proceedings. This is the criterion used for the commencement of the application of Part VI. Part VI does not apply where the proceedings were instituted prior to the commencement date.

    46. It is not in dispute that this is the effect of s.102(4) in the domestic context, that is to say where the criminal proceedings are taking place in England or Wales and the confiscation order has been or will be made by a court in England or Wales pursuant to the powers given to that court by the earlier sections in Part VI. Those proceedings must have been instituted after Part VI came into force otherwise, under s.102(4), the court will not have the power to make a confiscation order and the rationale of the rest of Part VI will be absent. Where however the confiscation order is an "external confiscation order" made by a foreign court, the external order does not depend for its validity on any provision of the 1988 Act. The powers of the foreign court depend upon the law of the foreign country and must be determined, if disputed, by the courts of that country. The role of the English courts is confined to one of recognition and enforcement under sections 96 and 97 and consequential matters. There is therefore a distinction to be made. The question of construction is whether the distinction should be made having regard to the strong and comprehensive language - "nothing in this Part of this Act confers any power on any court ...." - used in s.102(4).

    47. So far I have been examining Part VI of the Act without referring to s.96(1) which is the subsection which authorises delegated legislation to enable external confiscation orders, as defined in s.96(2) to which I referred earlier, to be enforced in the High Court, in particular by registration under s.97. S.96(1)(a) provides -

    "Her Majesty may by Order in Council -


    direct in relation to a country or territory outside the United Kingdom designated by the Order ("a designated country") that, subject to such modifications as may be specified, this Part of this Act shall apply to external confiscation orders and to proceedings which have been or are to be instituted in the designated country and may result in an external confiscation order being made there;"

    "Modifications" is further defined in subsection (2) as including,

    "in this Part of this Act", "additions, alterations and omissions".

    48. The question of construction is whether this liberty in s.96(1)(a) to specify modifications empowers the making of delegated legislation which overrides s.102(4) so that the delegated legislation can apply to external confiscation orders made in foreign proceedings instituted before the commencement of Part VI. There is a literal contradiction of s.102(4) since that subsection refers to any power on any court and the English court is acting "in connection with" proceedings, albeit foreign proceedings, for an offence instituted before the commencement of Part VI and provides that nothing in Part VI, ie including s.96, should confer such a power. On this reading it would not assist the respondent that s.96 authorises Orders in Council which specify alterations and omissions in the application of Part VI "to external confiscation orders and to proceedings which have been or are to be instituted in" a designated country: it would still be subject to the overriding limitation in s.102(4). The 1991 Order would have omitted s.102(4) in excess of the powers given by Part VI.

    49. The logic of this argument and the drafting of s.102(4) are persuasive that the 1991 Order cannot validly apply where, as here, the relevant foreign proceedings were instituted before the commencement of Part VI. However I have come to the conclusion that the full breadth of s.102(4) should be read as only applicable to domestic proceedings. Where the relevant proceedings are in a foreign court and it is that court which has made or is to make the external confiscation order, it is appropriate and unobjectionable that s.102(4) should be modified or omitted. As I have already observed, the powers of the foreign court are not the concern of the English courts nor are they derived from Part VI. It is therefore for the draftsman of the Order in Council to consider whether the Order should, as the 1991 Order does, omit s.102(4). If the omission is specified, the omission is within the vires of the order making power in s.96(1).

    50. It appears that the ultra vires argument as put to and rejected by the Court of Appeal was different from that which I have been discussing. The argument on the construction of Part VI is more persuasive but likewise fails.

    51. Accordingly, I agree that the appeal should be dismissed.


My Lords,


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