Re Euro Bank Corporation

• Jurisdiction: Cayman Islands
• Judge: (Henderson, Ag. J.)
• Judgment Date: 25 October 2002
• Court: Grand Court (Cayman Islands)
• Date: 25 October 2002

Grand Court

(Henderson, Ag. J.)

IN THE MATTER OF EURO BANK CORPORATION

IN THE MATTER OF CRYSTAL LIMITED

A.R. Mitchell, Q.C. and Ms. C. Richards, Crown Counsel, for the Crown;

Cases cited:

(1) Euro Bank Corp., In re, 2001 CILR 405; on appeal, sub nom.Att. Gen. v. Euro Bank Corp., 2002 CILR 334, referred to.

(2) Oxford v. MossUNK(1979), 68 Cr. App. R. 183; [1979] Crim. L.R. 295, followed.

(3) R. v. Preddy, [1996] A.C. 815; [1996] 3 All E.R. 481, followed.

(4) Randle & Pottle, Re, [1991] C.O.D. 369, considered.

(5) Sweet v. Parsley, [1970] A.C. 132; [1969] 1 All E.R. 347; (1969), 53 Cr. App. R. 221, applied.

(6) US Govt. v. Montgomery, [2001] 1 W.L.R. 196; [2001] 1 All E.R. 815, referred to.

Legislation construed:

Grand Court Rules, O.41, r.5(2):

‘An affidavit sworn for the purpose of interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.’

Penal Code (1995 Revision) (Law 12 of 1975, revised 1995), s.3: The relevant terms of this section are set out at para. 50.

s.118: The relevant terms of this section are set out at para. 27.

s.235(1): The relevant terms of this sub-section are set out at para. 50.

Proceeds of Criminal Conduct Law (2001 Revision) (Law 15 of 1996, revised 2001), s.2(1): The relevant terms of this sub-section are set out at para. 14.

s.2(5): The relevant terms of this sub-section are set out at para. 19.

(8): The relevant terms of this sub-section are set out at para. 14.

s.3(1): The relevant terms of this sub-section are set out at para. 22.

s.5(1): The relevant terms of this sub-section are set out at para. 15.

(2): The relevant terms of this sub-section are set out at para. 15.

(3): The relevant terms of this sub-section are set out at para. 15.

(4): The relevant terms of this sub-section are set out at para. 18.

(5)(a): The relevant terms of this paragraph are set out at para. 16.

(6): The relevant terms of this sub-section are set out at para. 20.

s.9(1): The relevant terms of this sub-section are set out at para. 23.

s.10(1): The relevant terms of this sub-section are set out at para. 22.

s.22(1): The relevant terms of this sub-section are set out at para. 11.

(2): The relevant terms of this sub-section are set out at para. 12.

(10): The relevant terms of this sub-section are set out at para. 12.

s.24(1): The relevant terms of this sub-section are set out at para. 11.

Criminal Procedure-proceeds of criminal conduct-restraint order-onus, under Proceeds of Criminal Conduct Law, s.9(1), of showing confiscation order reasonably likely includes proof on balance of probabilities that defendant will be convicted by criminal standard-criminal provisions determining whether defendant guilty of money laundering narrower than civil provisions governing confiscation of proceeds following conviction

Criminal Law-obtaining property by deception-property-neither legislation procured by deception of legislative body, nor paper on which printed, is ‘property’ under Penal Code (1995 Revision), s.3-proprietary interest in legislative act impossible

Criminal Procedure-proceeds of criminal conduct-‘proceeds’-property is proceeds of criminal conduct if commission of original offence caused or materially contributed to defendant”s acquisition-if property originated from third party, causal link required between original offence and third party”s transfer of property to offender

The Attorney General applied for two restraint orders in respect of assets held by or due to a depositor of a bank in liquidation.

The bank and some of its employees were charged with conspiring to commit money laundering offences. The Attorney General applied for a restraint order under s.10 of the Proceeds of Criminal Conduct Law to restrain the bank from dealing with funds held to the credit of one of its depositors, C Co., or which might become payable to that company in the course of the bank”s liquidation, on the ground that the funds were the proceeds of criminal conduct. A second order was sought against C Co. on the same basis.

The Crown obtained an ex parte order against C Co. on the basis of an allegation that the funds in the company”s account originated from the unlawful operation of a landfill site in Illinois in the United States, but the order was discharged when the Crown withdrew its application, recognizing that it could not prove that an indictable offence under s.167 of the Penal Code had been committed.

C Co. was charged in the Cayman Islands with assisting others to retain the proceeds of crime and concealing or disguising those proceeds to avoid prosecution or the confiscation of the proceeds, contrary to ss. 22(1) and 24(1) of the Proceeds of Criminal Conduct Law. None of the charges against the bank or C Co. specified the criminal conduct concerned. The Crown applied afresh for restraint orders in respect of moneys due to C Co., stating that criminal proceedings had been commenced in Illinois against the operators of the landfill site.

It submitted that (a) under s.9(1), the court could make a restraint order against the bank in respect of the C Co. funds, since there were reasonable grounds for thinking that a confiscation order would be made in criminal proceedings against the bank and/or C Co.; (b) under s.5(6), it need only show on the balance of probabilities that either had committed an offence to which the Law applied (in this case a money-laundering offence); (c) the relevant criminal conduct consisted of (i) the landfill site operators” giving false information to persons employed in the public service to persuade the local planning authority to re-zone the area for use partly as a recycling facility-enabling them to continue operating without a waste-disposal permit-with no intention of actually operating the facility, and (ii) obtaining property by deception, namely, the zoning Ordinance adopted by the planning authority on the basis of the operators” false representations; (d) the moneys in C Co.”s account represented the fees paid by companies to the site operators for the dumping of waste material, contrary to Illinois environmental legislation; and (e) under s.5(2)(b), the fees could be confiscated by a court convicting the bank or C Co., as the benefit obtained as a result of or in connection with the criminal conduct, because the bogus recycling scheme masked the illegal dumping operation.

The respondents submitted in reply that (a) for the purposes of s.9(1), the Crown had not shown reasonable grounds to think that a confiscation order would be made, since the court could only make one after convicting C Co. or the bank for a money-laundering offence; (b) although questions arising under the Law need be proved to only to the civil standard, the court nevertheless had to consider whether all the elements of the offence were likely to be proved to the criminal standard so as to secure the defendant”s conviction; (c) even assuming that the landfill site operators had improperly obtained the means of continuing to conduct an illegal dumping site, the Crown had not shown that the fees paid into C Co.”s account were the direct or indirect proceeds of either of the alleged original offences ascribed to the operators; and (d) the original offence of obtaining property by deception was not made out, since an Ordinance fell outside the definition of ‘property’ in s.3 of the Penal Code.

Held, dismissing the applications:

(1) To obtain a restraint order against the bank or C Co. in anticipation of a confiscation order being made, the Crown had first to show that a conviction was likely, namely that on the balance of probabilities it would

prove to the criminal standard all the elements of the offence charged. The civil provisions relating to confiscation orders under s.5 were broader than those creating money-laundering offences, since the Crown need only show that the offender had benefited from property obtained as a result of or in connection with the criminal conduct (which might not qualify as its proceeds). That benefit could include a pecuniary advantage derived in connection with the commission of an offence and in some other connection. However, to convict on a money-laundering charge under s.22(1) or 24(1) of the Law, the court would need to be satisfied that the moneys in C Co.”s account were property directly or indirectly representing the proceeds of criminal conduct (s.22(2)). Any ambiguity in the construction of the phrase ‘criminal conduct’ (which included, by s.22(10), conduct that would be an offence were it committed here), would be resolved in favour of the defendant (paras. 12–13; paras. 17–21; paras. 24–25; para. 44).

(2) There was no direct evidence that the operators of the US landfill site had deceived the planning authority, and the adoption of the zoning Ordinance giving the site a special use permit had not succeeded in disguising the illegal dumping activity from the environmental authorities. But, even accepting that the operators-having no intention of operating a recycling facility when they procured the adoption of the Ordinance-thereby committed one or more offences punishable under the Penal Code if committed here, the Crown had not shown that moneys in C Co.”s account represented their direct or indirect proceeds, since the commission of the alleged offence had not caused or materially contributed to C Co.”s acquisition of the moneys (para. 34; para. 36; paras. 41–43).

(3) Since the payments to the account originated from third parties, evidence was needed of a causal link between the site operators” alleged offences under the Penal Code and the transfer of funds from the third parties to the site operators. In this case, payments by companies for the illegal dumping of waste had begun before the application for re-zoning of the site and continued afterwards. The planning authority was not concerned with enforcing...