House of Lords
|Session 2001- 02
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|Judgments - In The Matter of Clifford Norris and In The Matter of The Drug Trafficking Offences Act 1986 and In The Matter of An Application by Teresa Wendy Norris
HOUSE OF LORDS
Lord Hope of Craighead Lord Browne-Wilkinson Lord Clyde Lord Hutton Lord Hobhouse of Wood-borough
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
IN THE MATTER OF CLIFFORD NORRIS
IN THE MATTER OF THE DRUG TRAFFICKING
IN THE MATTER OF AN APPLICATION BY TERESA
ON 28 JUNE 2001
 UKHL 34
LORD HOPE OF CRAIGHEAD
1. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Hobhouse of Woodborough. I agree with it, and for the reasons he gives I would allow the appeal.
2. The Court of Appeal held that Mrs Norris had a fair opportunity to put her case in the Crown Court where she and her husband were making common cause and she gave evidence. It was on that basis that Tuckey LJ said that it would be an abuse of process for her to relitigate the same issues in the High Court:  1 WLR 1094, 1101E-F. But, as my noble and learned friend has explained, the proceedings in the Crown Court and those in the High Court are designed to serve different purposes and the interests of Mrs Norris and her husband in the matrimonial home are not the same. Mrs Norris was not a party to the proceedings in the Crown Court, nor did the procedure which the statute lays down require her case that she had a beneficial interest in the property to be put at that stage.
3. At the stage when the proceedings were in the Crown Court the only question which had to be resolved was the value of the husband's interest in the house. The question for that court was the amount of the defendant's realisable property, as this was the upper limit on the amount of money which he could be ordered to pay under section 1(5) of the Drug Trafficking Offences Act 1986 by that court. It was not the function of the Crown Court to make any order which affected the interests that any third parties might have in the property whose value it took into account when determining the amount of the defendant's realisable property.
4. The scheme of the Act, so far as third party interests are concerned, is for their claims to be resolved in the High Court. The question for the High Court, when the proceedings reach this stage, relates not to the amount of money which the defendant must pay - that has already been fixed by the order made in the Crown Court - but to the powers which the receiver is to be authorised to exercise. It is at this stage that third parties are entitled to have their claims heard and determined. This is when, as a matter of both substance and procedure, representations may be made as to their interests, if any, in the property which the receiver wishes to realise. This is provided for expressly by section 11(8) of the Act, consistently with which RSC, Ord 115, r 7(4) lays down the procedure by which those holding any interest in the realisable property are to be notified.
5. Provisions designed to protect the interests of third parties are conspicuously absent from the rules of procedure that apply at the stage of the hearing in the Crown Court. Third parties are not entitled to participate in the criminal proceedings in that court. But the issue for the Crown Court is not whether any property in which a third party might have an interest is to be confiscated. The order which it makes is an order which is directed against the defendant only, and it is simply an order for the payment of a sum of money. The question of realisation, if the exercise of powers by a receiver is needed in order to make good the order which the defendant is required to satisfy, is reserved for the High Court.
6. I do not therefore, with respect, agree with the observation by Tuckey LJ that the situation which has arisen in this case is exactly that which the doctrine of abuse of process is designed to prevent:  1 WLR 1094, 1101F. The scheme of the Act itself shows that this proposition must be unsound. It cannot be an abuse of process for a third party holding an interest in property, to whom a right is given by section 11(8) of the Act to make representations to the High Court, to seek to exercise that right just because he or she gave evidence in the Crown Court in support of the defendant's case that the property was not to be valued and taken into account as realisable property. I agree with my noble and learned friend, Lord Hobhouse that there may be other cases where the position which a third party wishes to adopt may be regarded as an abuse of process which should not be allowed to stand in the way of the enforcement of a confiscation order. But, for all the reasons which he has given, that has not been shown to be the position in this case.
7. I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Hobhouse of Woodborough. For the reasons he gives I, too, would allow the appeal.
8. I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Hobhouse of Woodborough. For the reasons he has given, I, too, would allow this appeal.
9. I have had the advantage of reading a draft of the speech of my noble and learned friend, Lord Hobhouse of Woodborough. I agree with it and for the reasons he has given I, too, would allow this appeal.
LORD HOBHOUSE OF WOODBOROUGHMy Lords
10. Mrs Norris, the appellant, is the wife of Clifford Norris, a convicted drug trafficker who is presently serving a sentence of 9½ years imprisonment passed upon him by Judge Brown at the Crown Court at Lewes on 24 June 1996. At the same time Judge Brown also made a confiscation order in the sum of £386,397, with 4 years imprisonment consecutive in default, under sections 1 and 6 of the Drug Trafficking Offences Act 1986. In February 1999 an ex parte application was made by HM Customs and Excise, the respondents to this appeal, to Latham J sitting as a judge of the High Court for the appointment of a receiver under s.11 of the Act and other orders. Latham J made the orders asked for on 4 February. One of the orders made was a declaration:
7 Berryfield Close was the house in which Mrs Norris and her three sons lived. They had lived there since she bought it in May 1988. She was registered as having the unencumbered title to the property. The order also required any person having possession of Mr Norris's assets forthwith to deliver up the same to the receiver, subject only to a period of 28 days from the date of the order being allowed before the requirement to deliver up 7 Berryfield Close should take effect.
11. Mrs Norris had only heard about the ex parte application a few days before as the result of a telephone call from Mr Norris's solicitors. She attended the hearing before Latham J but it is not suggested that she was then in a position to take any part. She was not represented. Following the making of the order, she took legal advice. She swore an affidavit dated 4 March 1999, with accompanying exhibits, and applied for the order to be varied so as to recognise her title or interest in 7 Berryfield Close. Her application was met by the response from the Customs and Excise that it was an abuse of process for her to make any such application the matter having been concluded by the order of Judge Brown. Latham J upheld the objection of the Customs and Excise and dismissed Mrs Norris's application without considering its merits. Her appeal to the Court of Appeal was likewise dismissed  1 WLR 1094. She has appealed here with your Lordships' leave.
12. In order to explain the issue which arises on this appeal, it is necessary to refer in greater detail to the scheme of the 1986 Act and the procedural history. To take the statute first, its purpose is stated in the preamble to be "to make provision for the recovery of the proceeds of drug trafficking ...". It was a new Act. Sections 1 to 5 deal with the making of what the Act calls "confiscation orders" (s.1(8)(a)). However, this is a misnomer. The orders are financial orders ordering a defendant convicted of a drug trafficking offence to pay sums of money to the State. Under the 1986 Act the order is to be made at the time of passing sentence and is subject to appeal to the Court of Appeal, Criminal Division, by the defendant as an appeal against sentence. When a defendant has been convicted of a drug trafficking offence, the statute requires the Crown Court, before sentencing him, to determine whether he has benefited from drug trafficking; this question is a general one and not confined to the offence of which he has been convicted. If the Crown Court concludes that he has benefited, it is then required to determine, in accordance with s.4, the amount to be recovered from the defendant and order him to pay that amount. It is this order to pay which is referred to as a "confiscation" order. S.4 requires the Crown Court to undertake a two stage process. First it must assess the value of the defendant's proceeds of drug trafficking: s.4(1). Secondly the court must decide whether the defendant has satisfied it that the amount which might be realised at the time the confiscation order is made is less than the value of the proceeds and, if it is so satisfied, then the order to be made is restricted to the lesser sum: s.4(3). The decision whether the defendant has benefited from drug trafficking and, if he has, the assessment of the value of those proceeds is to be made by the Crown Court making certain assumptions: s.2. These are, broadly, that, unless shown to be incorrect in the defendant's case, any property or money received by the defendant or any expenditure of the defendant, during the period of six years ending with the institution of the criminal proceedings against him represent the proceeds of drug trafficking. The inquiry is therefore a historical one extending back six or more years and requires the drug trafficker to show that there were, over this period, sources other than drug trafficking for his expenditure and acquisition or accumulation of wealth.
13. The question of the amount that might be realised at the time the confiscation order is made involves a different exercise. It is an exercise to be undertaken as at the date of the making of the confiscation order. By s.5(3), the amount is the value at that time of the realisable property of the defendant together with the value at that time of any gift "caught" by the Act. It thus has to take into account as well property which, maybe, is no longer held by the defendant. "Realisable property" is defined in s.5(1) as meaning any property "held" by the defendant and any property held by a person to whom the defendant has directly or indirectly made a gift caught by the Act. Property is defined so as to have an all embracing meaning and property is "held" by any person if "he holds any interest in it": s.38(7). A gift is "caught" by the Act if it was made by the defendant at any time during the six year period or, if made by him at some other time, if it has been shown to have been, or to represent, the proceeds of drug trafficking: s.5(9). The presumptions in s.2(3) do not apply to s.5. The effect of sections 4 and 5 is that the amount that might be realised at the time the confiscation order is made is to be the market value of the property held by the defendant or donee or, where another also has an interest in that property, the market value of the defendant's or donee's beneficial interest in the relevant property: s.5(4). As stated previously, the burden of proof is upon the defendant to satisfy the Crown Court that this amount is less than the value of the proceeds. If he fails to do so the result is simply that the confiscation order is made in the sum that is equal to the value of the defendant's benefit as assessed, reflecting the presumptions which have been made against him.
14. All the requirements of sections 1 to 4 are to be performed by the Judge of the Crown Court for the purpose of his discharging his duty to make a confiscation order against the convicted defendant in the criminal proceedings and deciding as between the prosecution and the defendant whether he has benefited from drug trafficking and, if so, in what sum to make a confiscation order. S.3 and the Crown Court Rules provide for a procedure to be followed involving the service of statements by the prosecutor and the defendant in order to reduce the area of dispute. S.3(2) requires the defendant to particularise what he will rely on in disputing any allegation in the prosecutor's statement and if the defendant fails to do so he may be treated as having accepted the allegation. S.4 provides that the Crown Court may issue a certificate giving the court's opinion as to any matter about which it was satisfied, relevant to its determination of the amount that might be realised at the time the confiscation was made and the court shall issue such a certificate if it has been satisfied that the amount which might be so realised was less than the amount which it has assessed to be the value of the defendant's proceeds of drug trafficking. Nothing in sections 1 to 4 or the Crown Court Rules makes any reference to any right of any other person to intervene or be heard in the Crown Court in any way in connection with these matters.
15. Sections 6 to 13 and 15 to 18 deal with the enforcement of confiscation orders. S.6 gives the Crown Court and the Magistrates' Courts powers similar to those they have in relation to fines. Sections 7 to 13 confer powers on the High Court as part of its civil jurisdiction. They are of two types. Under sections 7 to 10, restraint and charging orders may be made to preserve property belonging or deemed to belong to the defendant; the definition in s.5(1) of "realisable property" is used. The jurisdiction commences at the time when criminal proceedings are instituted in England or Wales against a defendant for a drug trafficking offence and there is reasonable cause to believe that the defendant has benefited from drug trafficking. The jurisdiction subsists until the proceedings have been concluded, an expression which is broadly defined in s.38(12) so as to include any pending proceedings up to the complete satisfaction of any confiscation order that may have been made. Under s.8, the High Court may prohibit any person from dealing with any realisable property. S.8(4) expressly requires that a restraint order shall be applied for ex parte by the prosecutor to a judge in chambers and that the order shall provide for notice to be given to persons affected by the order. There are obviously two reasons for this latter requirement. The first is so that any such person shall be bound by the order. The second is so that any such person shall have the opportunity to apply to have the order discharged or varied. This was made explicit by RSC O.115 rules 4 and 5 which provide for an inter partes hearing and applications to discharge or vary the ex parte order. The judge may also under s.8(6) appoint a receiver to take possession of realisable property subject to a restraint order. The provisions in sections 9 and 10 for making a charging order follow a similar scheme. However, here, a distinction is made between the realisable property and the defendant's or donee's interest in it and the charge applies only to the interest. The question whether it should be a condition of the charging order that notice be given to any other person holding an interest in the property is left along with the question of the other terms of the order to the judge in chambers.
16. The second type of power conferred upon the High Court is directed to realising the value of realisable property and applying the proceeds so that the sum payable under the confiscation order can be fully discharged. This is achieved through a receiver appointed by the High Court under s.11. The drafting of s.11 and the associated sections 12 and 13 acknowledge that others besides the defendant and the donee of a gift caught by the Act may have an interest in the relevant property and that, whilst the receiver is given the power to take possession of the relevant property and realise its value, the order does not override or confiscate the interests of others in the value of that property. S.13(4) expressly provides that the powers shall be exercised with a view to allowing any person, other than the defendant or the recipient of a gift caught by the Act, "to retain or recover the value of any property held by him". This would be implicit even in the absence of an express provision since the confiscation order only applies to the convicted defendant and, indirectly through such defendant, donees caught by the Act. To apply it so as to confiscate the property of innocent third parties would be not only exorbitant but also outside the purpose of the Act. Any such confiscation would now also raise Human Rights issues. Sections 11 and 12 support this scheme by providing for others to make representations to the High Court. S.11(8) is expressed in mandatory terms:
The "court" which has the powers referred to is the High Court: see subsection (1). The respondents before your Lordships surprisingly sought to argue that in subsection (8) the court to which such persons were to have a reasonable opportunity to make representations was the Crown Court not the High Court. This argument had been advanced in the Court of Appeal and rightly rejected by Tuckey LJ ( 1 WLR at p 1100G). The relevant court is clearly the High Court seised of the enforcement proceedings. The person entitled to make representations is any person holding any interest in relevant property. The High Court must be prepared to hear representations from any such person (s.11(8)) and allow him to retain or recover the value of his interest in the property (s.13(4)). Again, this requirement of the Act has been carried through into RSC Order 115: rule 8(1) applies (inter alia) rules 4 and 5 to the exercise of the powers under s.11.
17. The scheme of the Act is thus to enable the monetary order made against the convicted defendant to be enforced by effecting recovery from the defendant's property including property which he has given away during the six year period. This extension of the statutory powers takes into account the obvious possibility that those engaging in drug trafficking may transfer their wealth to others in order to try and frustrate the attempts of the authorities to recover them but without affecting the trafficker's expectation that he will ultimately be able to benefit from the proceeds of his trafficking. The concept of realisable property is used both as a measure of the defendant's current wealth for the purpose of fixing the monetary amount of the confiscation order made and for defining what assets can be used for the purpose of enforcing the order and recovering the relevant sum. Property "held" being widely defined so as to include property in which any relevant person has an interest, it must be contemplated that there is realisable property in which two or more people will have an interest. It is therefore part of the structure of the Act that questions may have to be determined as to the respective interests of different persons in the same property. Although the extent of the defendant's interest is relevant to the Crown Court's assessment of the value of his realisable property, the question of what other persons, if any, have an interest and what is the extent of their interests must be decided by the High Court in the exercise of its jurisdiction.
18. Turning to the facts of this case, I will take them in chronological sequence. Criminal proceedings were instituted against the defendant, Mr Norris, by the issue of a warrant in May 1989; therefore the six year period started in May 1983. On 26 May 1989 an ex parte restraint order was made by Roch J in chambers restraining the defendant until further order from disposing of any of his property, including some specified items, and a charging order was made in respect of 7 Berryfield Close and Mrs Norris was restrained until further order from disposing of 7 Berryfield Close. This order was served on Mrs Norris. She did not apply to vary or discharge the order. She continued, as the registered owner of the property, to live with her three sons at 7 Berryfield Close as her home - her only home. She had no intention of moving or of disposing of it. The defendant disputed his guilt of the offences with which he was charged. He was tried and convicted. It appears that the evidence at his trial included evidence of observations made of his movements. Since 1988 he had been on the run and evading arrest. In June 1996, the defendant was brought before Judge Brown for sentence and the making of a confiscation order. The Customs and Excise and the defendant were represented. Defence counsel agreed the defendant's proceeds of drug trafficking in the sum of £1,350,000. The amount which might be realised was partly agreed as well but not whether anything should be included for the value of 7 Berryfield Close. The Customs and Excise, without adducing any evidence other than some documents relating to its purchase in 1988 and the purchase of a previous house in 1986, simply submitted that all the beneficial interest in the house was in the defendant and that the registration in the name of Mrs Norris was a sham. Counsel for the Customs and Excise relied upon the burden of proof being on the defendant to disprove this by calling evidence. Counsel for the defendant called Mrs Norris as a witness. She was sworn. She explained that she was on anti-depressants and produced a doctor's letter. She outlined the matrimonial history. The first matrimonial home was a house in Oakdene Road, bought in 1981 for £43,000. She put up £11,000 which she had been given by her grandmother and the defendant put up £12,000 with the balance of the purchase price, £20,000, being borrowed on mortgage. The defendant paid the mortgage instalments. The property and the mortgage was in their joint names. About £25,000 profit was made when in February 1984 they sold the Oakdene Road house. The next house, 9 Prince Consort Drive, Chislehurst, was registered in her own name alone. It was bought with the proceeds of Oakdene and a mortgage. The defendant paid the mortgage. In 1986 she sold Price Consort Drive for £195,000 and, using the proceeds, bought another house in Chislehurst called 'Northwood' with a mortgage for £70,000. She treated it as her house and it was registered in her name. She did not like the house and in 1988 she sold it for £460,000 which enabled her to pay off the mortgage and still have a surplus after paying £350,000 for 7 Berryfield Close. By this time in 1988 the defendant had gone on the run and was no longer living with her and the children. Counsel for the defendant also asked her about other matters relevant only to mitigation of sentence, including the defendant's relations with his brother (who had also been convicted) and his responsibility. He also asked her about her continuing belief in her husband's innocence.
19. She was cross-examined by counsel for the prosecution. She was asked about the matrimonial history and the financing of the various house purchases. It was put to her:
to which she responded:
She was questioned about various details presumably with a view to undermining her credit - or her memory since she did not have access to the relevant documents. In re-examination she was asked further about various details which again she had to answer without seeing relevant documents. Nothing new was put forward in the final speeches and counsel for the defendant devoted his main submissions to mitigation and the relative parts played by the various defendants. Counsel agreed the net value of 7 Berryfield Close at £300,000. The Judge then gave his judgment. He summarised the evidence of Mrs Norris and the submissions of counsel and concluded:
He made a confiscation order in the sum of £386,397, the limiting factor being the amount which might be realised, £300,000 for the house and £86,397 for other items of cash and chattels. He sentenced the defendant to 9½ years imprisonment. No certificate under s.4(2) was issued (perhaps because a reasoned judgment had been given).
20. From the point of view of Mrs Norris, the next thing which happened was the ex parte application under s.11 for the appointment of a receiver and a declaration which was heard by Latham J on 4 February 1999. She has stated in her uncontradicted affidavit that she only heard about this application as a result of a telephone call from the defendant's solicitors two days before. She applied on affidavit to set aside or vary the order so far as it related to 7 Berryfield Close. The affidavit (dated 4 March 1999) sets out on oath and with supporting documents her case for submitting that she had at least a 50% interest in the property. The Customs and Excise have filed no affidavit in response to that of Mrs Norris but simply relied upon the affidavit dated 19 January 1999 which had led the ex parte application. That affidavit had been made by an employee of the Customs and Excise on the basis of a perusal of the papers in the case. It referred briefly to the order that had been made by Judge Brown and the fact that he had found that the defendant held the entire beneficial interest in 7 Berryfield Close after he had heard and rejected the evidence of Mrs Norris who had been called by the defendant. The transcript of the Crown Court hearing of 24 June was exhibited. The declaration was asked for on the basis that "Mrs Norris has been heard, cross-examined and failed in an attempt to persuade a court of competent jurisdiction that she has an interest in the property". This was the basis upon which the Customs and Excise applied to strike out the application of Mrs Norris as an abuse of the process of the court. They did not apply on the basis that she had no interest in making her application; she patently did have such an interest. They do not have any evidential basis for suggesting that she is making her application in bad faith. Nor do they say that the facts stated in her affidavit, corroborated by the documents which she exhibits and which are presently uncontradicted, do not, if accepted, provide a good arguable case that she has at least some interest in 7 Berryfield Close. In her affidavit she has been able to exhibit independent corroboration for the fact that at the time of her purchase of the Prince Consort Drive property in July 1984, she had borrowed £20,000 from each of her sister and brother in law, sums which were subsequently repaid when the property was remortgaged in December of that year. Similarly she has been able to find evidence that the £35,000 cash deposit which she paid when purchasing Berryfield Close in 1988 had been borrowed from a Mr Thompson, whose address is given and whom she describes as a family friend, and subsequently repaid out of the proceeds of the sale of 'Northwood'. The Customs and Excise simply submitted that it was an abuse of process to raise in subsequent civil proceedings a case which had earlier been rejected in the criminal proceedings, notwithstanding that she had not been a party to those proceedings and had had no right to be represented and had simply been called as a witness. She says in her affidavit that she had never been independently advised about her own legal position.