F. McK. v D.C., S.T., and B.H. Ltd

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 26 May 2006
• Neutral Citation: [2006] IEHC 185
• Court: High Court
• Date: 26 May 2006

[2006] IEHC 185

THE HIGH COURT

[No. 15006 P/2002]

MCK v C (D) & ORS

BETWEEN

F.McK.

PLAINTIFF

AND

D.C., S.T. LIMITED AND B.H. LIMITED

DEFENDANTS

PROCEEDS OF CRIME ACT 1996 S2

PROCEEDS OF CRIME ACT 1996 S3

BAMBRICK v COBLEY 2006 1 ILRM 81 2005/3/573

O'MAHONY v HORGAN 1995 2 IR 411 1996 1 ILRM 161

ATKIN v MORAN 1871 IR 6 EQ 79

BRINKS MATT LTD v ELCOM 1988 3 AER 188

LLOYDS BOWMAKER LTD v BRITANNIA ARROW HOLDINGS LTD 1988 3 AER 178

DPP & ORS v HOLLMAN & ORS UNREP O'HIGGINS 29.7.1999 1999/8/1821

MCK v D UNREP FINNEGAN 31.7.2002 2002/20/5079

MCK v D 2004 2 IR 470 2004 2 ILRM 419

PROCEEDS OF CRIME ACT 1996 S9

PROCEEDS OF CRIME ACT 1996 S8(1)(a)

PROCEEDS OF CRIME ACT 1996 S2(2)

EXTRADITION ACT 1965 S55

CRIMINAL LAW

Proceeds of crime

Freezing order - Discharge - Material nondisclosure- Whether jurisdiction to vacate ex parte order - Whether material non-disclosure- Consequence of non-disclosure - Discretion of court - Bambrick v Cobley [2005] IEHC 43 (Unrep, Clarke J, 25/2/2005) followed - Proceeds of Crime Act 1996 (No 30), s 2 - Discharge of order refused (2002/15006P -Clarke J - 26/5/2006) [2006] IEHC 185 McK(F) v C(D)

Facts: The defendants sought an order vacating the order made by the President of the High Court under section 2 of the Act of 1996, freezing money held in a number of bank accounts in the defendants’ names on the grounds that the order was obtained as a result of material non-disclosure to the court.

Held by Clarke J. in refusing the application: That notwithstanding the fact that there was a material non-disclosure in relation to the arrest of the first named defendant and the non-availability of business documentation, those matters had only a marginal relevance to the issues the court had to consider on the application for an order under section 2 of the Act of 1996. Consequently, the court exercised its discretion against discharging the order made.

Reporter: L.O’S.

1 JUDGMENT of Mr. Justice Clarke delivered 26th May, 2006 .

1. Introduction

2 2 1.1 On 19th November, 2002 the plaintiff, as Chief Bureau Officer of the Criminal Assets Bureau ("Chief Bureau Officer")("CAB") applied to the President of this court for an order under s. 2 of the Proceeds of Crime Act, 1996 ("the Act"). Because of facts which it will be necessary to set out in more detail in the course of this judgment, the application was made in circumstances of some urgency. The application consisted of the submissions of counsel for, and the oral evidence, of the Chief Bureau Officer. The President made the order sought and money standing to the credit of a number of bank accounts in the names of the defendants was frozen. On the following day (the 20th of November) a further order was made which had the effect of extending the freezing order to three additional bank accounts. Subsequently, in February 2003, other assets of the defendants were made the subject of a similar order.

3 3 1.2 An application under s. 3 of the Act followed and has been adjourned from time to time while certain parallel applications were being progressed. Insofar as necessary, reference will be made to certain of those other applications in the course of this judgment.

4 4 1.3 However one of the matters canvassed on behalf of the defendants is a contention that there was material non disclosure on the part of the Chief Bureau Officer in the application to the President on 19th and 20th November, 2002. Arising out of that allegation, the application with which I am concerned was brought, seeking an order vacating the freezing order made under s. 2 on the grounds that it was obtained as a result of material non disclosure to the court.

5 5 1.4 It will, again, be necessary to go into the allegations of non disclosure in more detail in the course of this judgment. However the defendants group their contentions into three main areas. They are as follows:-

6 (a) it is clear that in the immediate run-up to the applications made to the court on 19th and 20th November, 2002 there was a very significant investigation taking place both in Ireland and in the United Kingdom in respect of what was believed to be a so called a "VAT carousel" fraud. In simple and very general terms such a fraud operates on the basis of a circular series of sales of goods (hence the term carousel) involving two countries within the European Union (in this case Ireland and the United Kingdom). The net effect of the series of transactions is that the instigator of the fraud becomes entitled to a significant VAT refund from its country (in this case the United Kingdom). There is a largely corresponding VAT obligation on the part of one of the traders in the sequence who then "disappears" leaving that liability to pay VAT undischarged.

7 It is contended that there were a number of material failures in respect of disclosure concerning the status and fact of the parallel investigations in the United Kingdom.

8 (b) It is contended that the court was materially misled in the manner in which it was suggested that there might be a VAT liability in the State. The background to this aspect of the application concerns the question as to whether the Act, in the form in which it was at the time when these proceedings were commenced and the applications to the President were made, provided for the making of orders in respect of the proceeds of crimes where the crimes concerned were committed outside the jurisdiction. It will, again, be necessary to return to this matter in more detail. It is said, on behalf of the defendants, that the court was not given full information as to factors from which it might be contended that the funds sought to be frozen were not the proceeds of a crime committed in the State.

9 (c) It was suggested on behalf of the Chief Bureau Officer to the court that an appropriate order to make would be a freezing order, ex parte, under s. 2, but with liberty to the defendants to apply on 48 hours notice to set aside the order. In that context it is contended that there was a material non disclosure in the failure to inform the court that D.C. had already, at the time of the application, been arrested in the United Kingdom and was in custody. Furthermore it is said that there was a material non disclosure in the failure to inform the court that there had been, on foot of warrants, to which it will be necessary to refer later in the course of this judgment, a seizure of a large volume of documentation from the defendants and that such documents had been transmitted to the United Kingdom. On those bases, it is suggested that the court was not aware of materials relevant to the practicality of the exercise of the liberty to apply on short notice.

10 6 1.5 This application (that is to say the application to vacate the s. 2 order) was brought in conjunction with an application based on a contention that the defendants were not in a position to properly defend the proceedings because of the non availability of the seized documents to which I have referred. However that matter is no longer before the court. Judicial review proceedings were instituted for the purposes of quashing the warrants on foot of which the relevant documents were seized. Those judicial review proceedings were substantially successful and the relevant warrants were quashed. Thereafter an order, on consent, was made that the relevant documentation would be retrieved from the United Kingdom and brought back to this jurisdiction for the purposes of being given to the defendants. That has, to a large extent, been done, although there remain some disputes between the parties as to the absence of some documents. However no order is now sought in relation to that aspect of the defendants application.

11 7 1.6 The application to vacate on the grounds of the absence of documents and on the grounds of material non disclosure first came before the President on 13th January, 2004. As a result of developments at the hearing, the matter was adjourned and for reasons which I have briefly set out above the documentary aspect of the application has largely resolved itself. The hearing before me was a resumed hearing in respect of that part of the application that was based on a contention of material non disclosure. This judgment is, therefore, confined to a consideration of whether it is appropriate in all the circumstances of the case to vacate the s. 2 order on the basis of any material non disclosure that may be established. Before going on to consider and resolve the disputes which have arisen between the parties as to the allegations of material non disclosure it seems to me that it is important to set out the legal basis for the exercise of the courts jurisdiction to vacate. That is an issue to which I now turn.

2. The Jurisdiction to Vacate

12 2 2.1 The jurisprudence of the courts, both in this jurisdiction and in the United Kingdom, has identified an obligation on parties who seek onerous orders ex parte to act with candour in disclosing all material matters to the court on the ex parte application concerned. Most of the cases involve the exercise by the court of its jurisdiction to grant injunctions in the commercial field. Over the last number of decades a jurisprudence has developed in respect of the grant, ex parte, of significant orders, such as Mareva and Anton Pillar orders, which have the effect of freezing assets or authorising the seizure of materials, in circumstances where the party applying satisfies the court that a prima facie case exists for such orders and that the making of the order concerned without notice to the person to whom the order is directed is necessary for the purposes of protecting the legitimate interests of the applicant.

13 3 2.2 The obligation of full disclosure is seen as a quid pro quo for the...