In brief
The Court of Appeal has rejected arguments that a third party affected by restraint orders is entitled to have contested tainted gift issues determined at the variation or discharge stage. The applicant, Holly Hargreaves, applied to vary or discharge restraint orders affecting investment properties jointly owned with her convicted husband, arguing her interests did not constitute tainted gifts.
The Court found that whilst the Crown Court must determine such applications on their merits, it is not obliged to make a substantive determination on contested tainted gift issues at that stage. Such determinations can appropriately be deferred to the enforcement stage. The decision reinforces that restraint orders are holding orders which can be maintained on the basis of a good arguable case.
Background and issues
On 14 June 2016, Matthew Hargreaves and his parents were convicted of offences relating to a fraudulent business involving unlawful tooth whitening products. The prosecution offered no evidence against Holly Hargreaves and a not guilty verdict was entered. Restraint orders made on 25 September 2014 under section 41 of the Proceeds of Crime Act 2002 ("POCA") prohibited dealings with three investment properties registered in the joint names of Mr and Mrs Hargreaves.
A confiscation order made against Matthew Hargreaves on 24 May 2018 included 100% of the value of the three investment properties, with HHJ Harris-Jenkins finding that Mrs Hargreaves's third-party interests had been gifted from her husband's criminal activities. However, it became common ground that HHJ Harris-Jenkins did not make any determination binding against Mrs Hargreaves which would be "conclusive" under section 10A of POCA.
On 25 February 2022, Mrs Hargreaves applied to vary or discharge the restraint orders, accepting there was a tainted gift limited to £10,253.37. HHJ Kember refused the application on 23 September 2024, holding that determination of the extent of tainted gifts should occur at the enforcement stage.
The Court of Appeal's decision
The Court rejected the argument that the Judge was obliged to determine the tainted gift question, holding that restraint orders are holding orders by nature and Parliament did not require, as a precondition, the court to determine the existence and extent of tainted gifts. Restraint orders can be maintained on the basis of a good arguable case.
The fundamental flaw in the appeal was equating an entitlement to have an application determined on its merits with an entitlement to have the tainted gift issue determined on its merits. The Judge did determine the application but held that the tainted gift issue should be resolved at the enforcement stage.
The Judge properly emphasised the undertaking to trigger the appointment of a receiver, ensuring the applicant would not be in an open-ended limbo and that no confiscation could occur unless she had the opportunity to contest the tainted gift issues.
Impact on the proceeds of crime landscape
This decision confirms the Crown Court can defer contested tainted gift questions to the enforcement stage rather than resolving them at the restraint order variation stage. Third parties subject to restraint orders must recognise this will be a lengthy process and plan accordingly when considering their financial options and available assets. Critically, affected third parties should ensure appropriate mechanisms (such as undertakings to appoint enforcement receivers) are in place to trigger eventual determination, whilst accepting that immediate resolution is not an automatic entitlement and consider asserting third party interests under section 10A of POCA.