Confiscation orders and beneficial ownership – yes, they can be subject to estoppel
The High Court heard a case on beneficial ownership of a property which was subject to a confiscation order under the Proceeds of Crime Act (PCA) 2002.
Background:
Mesut Baybasin is the registered proprietor of 3 Dukes Avenue and has three brothers Huseyin, Mehmet, and Abdullah. The three brothers have all been involved in serious criminal activity. Huseyin is serving a sentence of life imprisonment in the Netherlands for the offences of conspiracy to murder and conspiracy to export controlled drugs into the Netherlands. In 2011, Mehmet received a 30-year sentence for conspiracy to import between one and two tonnes of cocaine into the UK. Abdullah served a prison sentence in Turkey for setting up and directing a criminal network.
Since April 1998, the property has been subject to a High Court restraint and management order in support of proceedings brought by the Government of the Netherlands against Huseyin under the Drug Trafficking Act 1994. In December 2014, a Crown Court made a confiscation order against Mehmet in respect of the property under the Proceeds of Crime Act 2002 of £334,393.13. Mehmet failed to pay the sum and an enforcement receiver was appointed. In 2018, a Crown Court Judge declared that Mehmet had a 25% beneficial interest in the property based on the assumption that the brothers were equal beneficial owners.
Mrs. Bartlett was the enforcement receiver and sought to sell the property and for 25% of the net proceeds to be paid to her in her capacity as Mehmet's receiver. Mehmet and Abdullah have also applied jointly for the property to be sold and for each to receive the net proceeds. Huseyin resisted these applications by arguing that he was the sole beneficial owner of the property. Mrs. Bartlett, Mehmet and Abdullah argued that Huseyin is precluded from making such a claim by the Crown Court order.
Decision:
The Judge began by noting that both the Drug Trafficking Act 1994 and the ensuing Enforcement Order were pursuant to the Proceeds of Crime Act 2002 provide for the making of confiscation orders. Mr. Justice Eyre noted that “under each Act, the purpose of the provisions for the realisation of property is that there should be a means to ensure that the property of a person who is subject to a confiscation order is realised and the resulting funds used in paying the sums due under such an order. The purpose is not that property which belongs to a different person should be expropriated.”
The role of the courts is, therefore, to ensure that the order is realised without expropriating third parties.
Huseyin argues that a Crown Court order does not form an estoppel and his attempt to assert full beneficial ownership is not an abuse of process. The Judge rejected the argument, noting that the issue was the same as previously determined by the Crown Court and the fact that more recent parties became involved – in this instance the Government of the Netherlands – bears no relevance.
Huseyin is, therefore, prevented from reopening the question of beneficial ownership against the receiver or Mehmet himself. The Judge came to this conclusion based on the fact that Huseyin tried unsuccessfully to appeal the Crown Court’s decision.
Mr. Justice Eyre concluded, “As against Abdullah, there is no question of issue estoppel but again Huseyin is precluded from arguing that Abdullah does not have a 25% beneficial interest in the property because for him to do so would be an abusive collateral attack on the decision of a court of competent jurisdiction.”
Implications:
This decision is very much fact-specific, with three out of the four brothers being involved in criminal activities. It does however make it clear that, once a confiscation order is made and the judgement is final (res judicata), then it is not possible to resist the sale based on estoppel, even when one of the parties was not a party to such criminality, the Court made it clear that it would be “an abusive collateral attack on the decision of a court of competent jurisdiction”.
Confiscation orders can thus be made under both the Drug Trafficking Act 1994 and the Proceeds of Crime Act 2002 and could be made in favour of a foreign government, as was the case here.
