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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Doraville Properties Corporation -v- AG [2017] JCA 029 (22 February 2017) URL: http://www.bailii.org/je/cases/UR/2017/2017_029.html Cite as: [2017] JCA 029, [2017] JCA 29 |
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Before : |
James McNeill, Q.C., President; John Martin, Q.C., and Sir David Calvert-Smith. |
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Between |
Doraville Properties Corporation |
Appellant |
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And |
Her Majesty's Attorney General |
Respondent |
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Advocate P. G. Nicholls for the Appellant.
M. T. Jowitt, Esq., Crown Advocate for the Respondent.
judgment
calvert-smith ja:
1. This appeal came before us following a decision of the Royal Court (Commissioner Clyde-Smith and Jurats Fisher and Grime - judgment 22nd July 2016 (Doraville Properties v AG [2016] JRC 128) following a three day hearing in May 2016) to dismiss an application by Doraville Properties Corporation ("Doraville") for a Property Restraint Order ("PRO") to be discharged. The chain of events which led to the grant of the order are more fully set out in the judgment of the Royal Court.
2. In short, the litigation in this jurisdiction arises because Doraville has assets held in its name in Jersey in respect of which the United States of America (the "US") wishes there to be a PRO in order to support asset forfeiture proceedings in the US. Those proceedings have resulted in judgment in rem against, among others, those Jersey assets.
3. The first matter for our decision concerned a preliminary question as to whether the would-be appellant, Doraville, had been required to apply for leave to appeal within 28 days of the decision below, or, if to be permitted to do so later, whether there had to be a proper explanation for the delay in so applying.
4. Crown Advocate Jowitt submitted that the judgment the subject of the proposed appeal was an interlocutory judgment within the terms of Article 13 of the Court of Appeal (Jersey) Law 1961 which states:
5. He did so for the following reasons:
(i) An application for a PRO is simply a necessary preliminary step to an application to register an External Civil Asset Recovery Order ("ECARO").
(ii) It is at that second stage that a final decision is made which may be appealed without leave, there being no question in this case of the application of the three exceptions set out in Article 13(1)(e).
6. Advocate Nicholls on behalf of Doraville submitted that the decision to grant a PRO was a free-standing, and therefore final, decision which should be amenable to an appeal without leave. If we were to reject that submission he argued that we should grant leave since if there had been a failure to do so in time that failure was not due to negligence but to a misunderstanding of the law, this being the first time that the court has had to construe the Civil Asset Recovery (International Co-operation)(Jersey) Law 2007 (the "2007 Law"), which introduced the concept of a PRO. In addition he submitted that the grounds passed the test most recently considered by this court in Crociani and Ors v Crociani and Ors [2014] JCA 089, paragraphs 50-53, 151 and 156 namely that an Applicant must show that:
(i) The appeal has a real prospect of success;
(ii) A question of general principle falls to be decided for the first time; or
(iii) There is an important question of law upon which further argument and a decision of the Court of Appeal would be to the public advantage.
7. We have no doubt that the submission for the Crown is correct. The obtaining of a PRO is indeed a preliminary step taken to secure assets which might otherwise be dissipated in advance of a decision to register an ECARO. At this latter stage, when the Royal Court has to consider the interests of justice, a final decision is taken which would attract an automatic right of appeal. We accepted however that since this is the first time that certain provisions of the 2007 Law have fallen to be construed, since the failure to apply for permission was not due to culpable neglect, and since the applicant's grounds were on their face arguable, we should grant leave.
8. The factual background leading to the application for a PRO is carefully set out in the Royal Court judgment. In summary,
(i) From 1993 to 1998 General Mohammed Abacha was President of Nigeria. During that period it is alleged - and there has been no suggestion in these proceedings that the allegation is false - that he stole millions of dollars of Nigerian public money. The monies were transferred to the US and, in this instance, to an account held with Deutsche Bank International in Jersey in name of Doraville (the "Bank Account"). General Abacha was assisted in the thefts by his second son, Mohammed Sani Abacha, and their associate Abubakar Atiku Bagudu.
(ii) In 2003 Bagudu was arrested in the US on warrants issued in Jersey. He subsequently agreed to return more than US$163 million of Doraville's assets to the Nigerian government; an amount which he claimed represented his half share of Doraville's assets, the remaining money being that of Mohammed Sani Abacha. In return Jersey withdrew an extradition request and Bagudu was not returned to Nigeria for possible prosecution in that country. Since then the balance in the Bank Account has increased to approximately $287 million.
(iii) In 2012 Nigeria requested mutual assistance from the US in recovering further stolen assets, including the Bank Account.
(iv) Pursuant to that request, on 18th November 2013 a Verified Complaint for Forfeiture in rem was submitted by the US Department of Justice in the District Court for the District of Columbia. The US application was brought under 18 U.S.C.A. (United States Code Annotated) section 981(a)(1) which provides that "Any property, real or personal, involved in a transaction or attempted transaction in violation of section 1956, 1957 or 1960 of this title, or any property traceable to such property" is subject to forfeiture to the United States.
(v) On 6th December 2013 the Columbia District Court granted an arrest warrant in rem against the Bank Account.
(vi) On 2nd February 2014 the Royal Court granted the PRO with which we are concerned upon the application of the Attorney General.
(vii) On 6th August 2014 a Default Judgment (the "Default Judgment") was granted by District Judge Bates in the District Court of Columbia.
(viii) The Default Judgment formed the basis for the application under the 2007 Law. This appeal is concerned with the application of the 2007 Law to the Default Judgment.
9. The 2007 Law, which apparently has no direct equivalent in any other jurisdiction, is described under its heading as a law "to enable Jersey to co-operate with other countries in external civil asset recovery proceedings and investigations and for related purposes."
10. The concept of an External Civil Asset Recovery Order is defined in Article 1 of the Law:
11. In that Interpretation Article, "tainted property" is defined in this way:-
12. The Interpretation Article defines "unlawful conduct" as "the commission of an offence against a law of a country or territory, including Jersey."
13. Under Article 6(3) and (5), the Court may make a property restraint order on the application of the Attorney General in respect of any recoverable property specified in the application, where (for the purposes of this case) the following requirements are met:-
14. It is to be noted that Doraville accepts that these requirements were met when the PRO was made by the Royal Court.
15. Under Article 7, upon the making of a PRO, all of the recoverable property specified in the order shall vest in the Viscount; but under Article 7(5), any person affected may apply to discharge or vary that order.
16. Article 9 provides: -
17. No application has yet been made on behalf of the US to register the Default Judgment.
18. Doraville accepts that the Default Judgment was made other than in the course of criminal proceedings and that the US District Court is an external decision-making body (as defined) outside Jersey. Doraville also accepts that the order of the US Court specifies the property to be forfeited but it does not accept that it is "tainted property".
19. For Doraville, Advocate Nicholls began by repeating two of the grounds argued before the Royal Court concerning the proper application of the definition of "tainted property" set out in paragraph 11 above:
"a. Did the Default Judgment constitute a "finding" by an external decision-making body?
b. If it did was the property concerned, or any of it, "tainted property"?
We shall deal with each of these in turn below. A third ground concerning a possible breach of the appellant's rights under Article 1 of the 1st Protocol of the European Convention on Human Rights was not maintained before us.
20. We should record that, in order to assist the Royal Court both sides had called an expert witness in order to deal with the relevant US law. Their evidence was largely agreed and was allowed to stray some way beyond the narrow confines of their expertise in US law; but the Court was well aware of the boundaries and no complaint is made by either side to us as to the way in which the Court approached them. There was in any event a large measure of agreement between them. This appellate court is bound to accord the factual findings of the Jurats proper respect and will only interfere with such findings if they are shown to be "clearly wrong". As it is, it seems to us that little turns on the expert evidence.
21. There are two important matters which were placed before the Royal Court and repeated before us. They form the background against which the questions set out in paragraph 19 above regarding the definitions in the 2007 Law and their application to this case ought properly to be answered.
22. The first concerns the background to the enactment of the 2007 Law, a matter stressed as important by the Crown. The second concerns the principle of "doubtful penalisation", a consideration upon which Doraville placed emphasis.
23. Consideration of the Crown arguments was clearly set out in the Royal Court judgment in terms which seem to us to be correct. In the analysis which we support below, it is not necessary for us to rely upon the background to the enactment of the 2007 Law. In view of the importance of the matter, however, we gratefully record what was said by the Royal Court. Dealing with the background to the enactment of the 2007 Law, the Royal Court stated:
24. Turning to the background issue highlighted on behalf of Doraville, Advocate Nicholls correctly submitted that the 2007 Law is a forfeiture statute which, by its very nature, is confiscatory and therefore penal. Courts are accordingly bound to apply the principle against doubtful penalisation when construing its terms. Bennion on Statutory Interpretation (6th edition) puts it thus:
25. Advocate Nicholls submitted that that, in reaching its conclusions, the Royal Court had not applied the principle set out in Methuen-Campbell v Walters [1979] QB 525 at 542 (Buckley LJ):
26. Advocate Nicholls listed specific criticisms of the judgment which, he suggested, showed that the Royal Court had failed to apply the principle.
(a) Instead of construing the term "found" in accordance with its natural meaning, the Royal Court effectively read it down thereby allowing foreign orders to be enforced in this jurisdiction even if the order contains no meaningful findings whatsoever.
(b) The Royal Court expanded the scope of "tainted property" by holding that the term "used in" includes property that had only been "involved in" unlawful conduct.
(c) Although the 2007 Law requires that property be specified as "tainted property" on the face of the relevant order, the Royal Court went behind the terms of the Default Judgment and considered the allegations made in the Verified Complaint.
(d) Instead of construing the allegations in the Verified Complaint carefully and in accordance with their meaning, the Royal Court construed them broadly and in the Respondent's favour.
(e) The Royal Court effectively placed the burden on Doraville to prove that Doraville's assets were untainted (e.g. at para 143). The Royal Court should have assumed that Doraville's assets were untainted unless the Respondent could prove that the US Court had found them to be tainted. To the extent that he could not do so, it was incumbent upon the Royal Court to discontinue the restraint order at least to that extent.
27. We have borne the principle in mind in approaching the 2007 Law and its application to the circumstances of this case. We deal with Advocate Nicholls criticisms as we discuss the two grounds of appeal, which we now proceed to do.
28. There was no dispute that the answer to this question should be reached by applying the definition set out in Black's Law Dictionary at page 499 - "a decision upon a question of fact reached as a result of a judicial examination or investigation by a court, jury, referee, coroner, etc."
29. In the Default Judgment are the following words (asset (a) being the Bank Account):
30. At first sight, the last sentence appears to be plain. The District Court made a finding. The finding referred to the whole of the Bank Account. Although not strictly necessary in view of the terms of the 2007 Law we have studied the Verified Complaint. The factual allegations within it amount to some 92 paragraphs which describe in detail the two methods used to steal the assets, the human agents involved in their removal and onward transfer, the entities they created and the bank accounts opened by those entities to receive the stolen funds. In particular,
(i) the history of the creation of Doraville in 1997 in the British Virgin Islands by Bagudu and the opening of the Doraville account in Jersey in 1998 by Bagudu and Mohammed Sani Abacha with false information as to the source of the deposits into it - paras 4(a) & (l), 11 and 16.
(ii) The methods used by General Abacha and his associates to steal funds from Nigeria via the "Security votes Fraud" and the "Debt Buy-Back Fraud" - paras 25-29, 36-44 & 48-50.
(iii) The payment of monies stolen in the Security Votes Fraud into the Bank Account - para 33.
(iv) The purchase with stolen monies of Nigerian Par Bonds and their deposit at ANZ Bank in London before onward transfer to the Bank Account - paras 53, 69-76.
(v) The arrest in 2003 of Bagudu and his return of $163,719,820 from Doraville to Nigeria - para 77.
(vi) The then current value of the assets in the Bank Account of approximately $287 million - para 78.
31. As is clear from the Default Judgment, Judge Bates had read the Verified Complaint and indicated that he found that the assets "were involved in transactions contravention of 18 U.S.C. sections 1956 and 1957, or are traceable to such property..."
32. The Royal Court judgment dealt with the issue as to whether there had been a finding at paragraphs 100-121. In particular the court stated:
33. We have considered that discussion and conclusion in the light of the contentions advanced before us by Advocate Nicholls which, essentially, repeated the submissions he had made to the Royal Court. Nothing in our own consideration has caused us to doubt the correctness of the Royal Court's conclusion that the Default Judgment embraced something "found" within the meaning of the Article 1 definition of "tainted property" quoted in paragraph 11 above. Further, and as indicated at paragraph 30 above, we have looked at the content of the Verified Complaint and have found ample material within it to justify such a finding. As the Royal Court held, the fact that the finding was made by way of a default judgment is immaterial. Orders under the 2007 Law will almost always be made in advance of substantive proceedings whether civil or criminal in nature so as to rule out the possibility that the subject assets may be dissipated before such proceedings. In this case the conclusion is strengthened by the fact that the appellant was given notice of the application and chose not to contest it, or to appeal it.
34. An additional submission was made to the Royal Court and repeated before us to the effect that even if the Default Judgment represented a "finding" within the meaning of Article 1 that finding was limited to the amount of US$11m as opposed to the total balance of funds in the account of some US$287 million. This submission was based on matters derived from the evidence of the expert witness called by Doraville before the Royal Court.
35. The Royal Court dealt with this submission at paragraphs 142-150. In summary the Court found that:
(i) The Verified Complaint made it plain that the allegation:
(a) involved all Doraville's assets none of which were derived from legitimate sources, and the interest which accrued during the life of the account;
(b) Included an allegation that lies were told to Deutsche Bank about the purpose of the account;
(ii) The Default Judgment was unequivocal. It concerned all the assets of the appellant.
(iii) Neither at the stage when the matter was before the US Court or since has there been any suggestion of a legitimate purpose for the establishment of the account or of the monies which have been deposited in it. As the Royal Court stated, and we agree:
36. We agree with that analysis and the conclusion. According to the Verified Complaint the account was opened to be used to receive the proceeds of theft. There has been no contention advanced either in the Verified Complaint or on behalf of Doraville that the funds whether by way of the deposit of fresh funds or the accumulation of interest on deposited funds were derived from legitimate sources, merely a suggestion that the contrary had not been proved. Indeed a careful analysis of the Verified Complaint - in particular of paragraphs 52-71 - shows that the US investigation has been able to trace all of the Doraville assets back to the thefts committed by General Abacha by way of the "Security Votes Fraud" or the "Debt Buy-Back Fraud". This was not a case therefore which depended on an assessment of the accuracy of witnesses' recollection or of their honesty, it relied solely on identifiable transactions within financial institutions. There is, therefore, no basis upon which to restrict the ambit of the "finding".
37. The argument for Doraville focused on the different elements of the definition of this phrase in Article 1 of the 2007 Law and an alleged conflict between those elements and the terms used in the Default Judgment. The definition, said Advocate Nicholls, encompasses property:
38. These elements can be characterised as categories; but before turning to the facts of this particular case it is perhaps worth stressing that the same property may at the same time fit one or more of these categories. Monies obtained in the course of a theft, or from the proceeds of theft or in connexion with it, may also be used in the commission of a money laundering offence. Even if there was evidence that some of the funds in an account were legitimate, provided there was sufficient evidence to indicate that the account had been set up to receive stolen money, the use of legitimate money in the account to conceal its principal purpose would mean that that legitimate money was being used in unlawful conduct. The disguise of criminally acquired assets with legitimate assets is precisely what money laundering is intended to achieve. In fact, in this case, as both the Default Judgment and Royal Court found, there is no suggestion let alone any evidence of that latter type of money laundering. The "laundering" alleged in this case simply involves the movement of stolen assets into different foreign jurisdictions and their subsequent disguise as Nigerian Par Bonds etc.
39. In his written submissions Advocate Nicholls put forward a number of bases for his contentions that there had not been a "tainted money" finding.
40. First, there was no allegation in the Verified Complaint that the Doraville Assets were the proceeds of crime. This submission was based upon evidence given by the expert called on behalf of Doraville.
41. It is doubtful, to say the least, whether this evidence was admissible as expert evidence. The interpretation of the words of the Verified Complaint and the Default Judgment is a matter for the courts of Jersey to determine. The Royal Court determined that the words of the Verified Complaint meant, and that Judge Bates "found", that the assets were indeed the proceeds of crime, that being the only logical interpretation of the Verified Complaint and, accordingly, the consequent finding in the Default Judgment. The whole thrust of the Verified Complaint is to the effect that Doraville's assets represent the monies stolen from Nigeria and interest etc., derived from them.
42. Second, Advocate Nicholls founded upon the Department of Justice's decision to apply for judgment under Title 18 USCA, Section 981 (a)(1)(B) which focuses on property "involved in" transactions in violation of the federal money laundering provision rather than Section 981(a)(1)(C) which focuses specifically on the proceeds, or assets traceable to the proceeds, of such crimes.
43. We derived little assistance from the cases cited to us on this issue. Milne v the Queen [2014] HCA and Director of Public Prosecutions v King (2000) 49 NSWLR do no more than point out the ordinary meaning of the relevant phrases.
44. While of course there is a clear difference in many cases between things used to commit crimes and things which are or can be traced to the proceeds of a crime, there are many other occasions in which the same property falls into both categories. This is just such a case according to the Verified Complaint. The stolen assets in a bank account such as that of Doraville, which are then used to generate further assets, do not stop being "proceeds" because they have been "used" to generate further assets. To repeat the relevant part of the Default Judgment:
45. At paragraphs 149-150 the Royal Court said:
46. We agree. The Default Judgment is clear. It is based upon the allegations in the Verified Complaint which allege that the assets are all the proceeds of crime.
47. Third was a criticism which repeated the submission with which we have already dealt above at paragraph 34, namely the contention that only $11m or so of the Bank Account could be held to be the proceeds of crime.
48. The fourth criticism was that the Royal Court was wrong to derive any support for its conclusion from the claim in the Verified Complaint that Bagudu had returned $163m to Nigeria as his "half" of the stolen assets. We reject that criticism. The Royal Court was being asked by Doraville, supported by the expert called on its behalf, to construe the Default Judgment. Most of the submissions of the appellant involved looking at those passages of the Verified Complaint which gave rise to the Default Judgment. The claim concerning Bagudu's action was one of those passages. In the event, as we have said there was ample material without this point to justify the conclusions reached by the Royal Court.
49. The fifth and sixth criticisms concerned the Royal Court's findings concerning the "specificity" requirement contained in Article 1, namely that the ECARO:
50. Advocate Nicholls submitted that the Royal Court's reference in paragraph 142 of its judgment to "the (admittedly in part unquantified) interest payments on the Nigerian Par Bonds" meant that the Court was accepting that there was a lack of specificity. He further submitted that the Royal Court, having examined the Verified Complaint to ascertain whether the allegations in it fulfilled the requirements of the 2007 law, should not have returned to the Default Judgment to use it for the conclusion that the property had been suitably specified.
51. We reject these criticisms. The Verified Complaint and the Default Judgment are quite specific. They both refer to the whole of the assets of Doraville. The Royal Court dealt with these points, correctly in our judgment, at paragraph 143:
52. The Royal Court was entitled to conclude that the Default Judgment referred to the whole of the assets of Doraville. The fact that the balance between the original proceeds of crime and interest payments etc., was not "specified" made no difference to the finding or its "specificity". The suggestion, as we understand it, that a proper consideration of the Verified Complaint should have remained "off limits" to the Royal Court stands in stark contrast to Doraville's repeated references to it both in submissions and through the evidence of its expert.
53. The next submission amounted to a restatement of a ground presented below and which we have already covered. It returned in essence to the proposition that without a full hearing on the merits, whether in civil or criminal proceedings, it would be impossible to trigger the operation of the 2007 Law. As indicated above, we concur with the conclusions of the Royal Court. Their consideration of this issue at paragraph 116 of the judgment needs no greater exploration.
54. Finally under this head it was submitted that the Royal Court was wrong to conclude at paragraph 164 of the judgment that "in the field of money laundering there is no meaningful distinction between 'used in' and 'involved in'". As a matter of plain English anything "used in a crime" is obviously "involved" in it, whereas not everything "involved in crime" will have been "used" in it. However the clear finding to which we have already referred more than once was that the assets in the Account were the "proceeds of crime" so that the distinction is truly one without a difference. The Australian cases cited in the judgment, namely Studman v Commonwealth Director of Public Prosecutions [2007] NSWCA 285, Re Commissioner of the Australian Federal Police [2012] NSWSC 1533, and Commissioner of the Australian Federal Police v Mulder [2013] NSWSC 993 simply illustrate the point already made. The asset created, in the first two of those cases, when an account is opened in a false name and monies deposited in it can be said to "used in crime". If, as in this case, the asset also represents the proceeds of crime it has clearly been "involved in crime" as well.
55. As we noted in paragraph 26 above, Advocate Nicholls complained that the Royal Court had been in error in, effectively, placing on Doraville the burden of proving that Doraville's assets were untainted (e.g. at para 143). We disagree. As Crown Advocate Jowitt pointed out, this litigation in Jersey proceeds from an application by Doraville to have the PRO discharged. The burden is therefore on Doraville to persuade the court that such an order should be granted in its favour. At one level, this argument is merely a different formulation of the argument that a full hearing in the US on the merits is required; and we have dealt with that at paragraph 53 above. Once that latter point has been rejected, it is clear that the general burden is upon Doraville. Whilst there are many instances when a court will be astute to appreciate that an evidential burden might shift from one party to another, the point perceptively made here by the Royal Court as paragraph 143 is that nothing has been put before the Royal Court or this court to suggest that there may be doubt as to the colourable circumstances of Doraville's acquisition of its assets.
56. This appeal is therefore dismissed.
57. The Royal Court was informed that in separate proceedings issued by Nigeria in Jersey against Doraville on 11th May 2016, shortly before the hearing of Doraville's application to discharge the PRO, it is asserted by Nigeria that on 14th July 2014, Mohammed Sani Abacha entered into an agreement with it in full and final settlement of all claims between them and under which all assets held in the Bank Account would be transferred to Nigeria. It is alleged in those proceedings that all of the assets within the Bank Account were misappropriated or otherwise unlawfully obtained from Nigeria by Mohammed Sani Abacha, Abubakar Bagudu and others and Nigeria seeks a declaration that the monies held in the Bank Account are held as constructive trustee for Nigeria, or alternatively that it is beneficially entitled to the same. The US has applied to intervene in these proceedings and procedural directions have been given. Advocate Nicholls told us at the outset of his submissions that Doraville had entered into a binding contract to return all the funds in the account to Nigeria. He suggested further that were the PRO to remain in force and to be followed in due course by registration under Article 9 of the 2007 Law, the funds would be shared between the governments of the US and Jersey rather than returned to the Republic of Nigeria from which they originated. We were also made aware of a recent (23rd January 2017 Federal Republic of Nigeria-v-Doraville Properties Corporation [2017] JRC 019) Judgment of the Royal Court in those proceedings in which the same submission was made and a submission made in reply to it on behalf of the Attorney General. Neither the submission nor the Judgment had any relevance to the points at issue in this appeal and have therefore not formed any part of the reasoning in this judgment.