Re Fraser (G)

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 23 June 2003
• Court: Grand Court (Cayman Islands)
• Date: 23 June 2003

Grand Court

(Smellie, C.J.)

IN THE MATTER OF FRASER

R.D. Alberga, Q.C. and B.L. Ashenheim for the applicant;

S. Hall-Jones, Ag. Solicitor General, and Ms. C. Richards, Senior Crown Counsel, for the Crown.

Cases cited:

(1) Euro Bank Corp., In re, 2002 CILR 497, applied.

(2) Gilbert v. EndeanELR(1878), 9 Ch. D. 259, dicta of Cotton, L.J. applied.

(3) Norris, Re, UNK[2001] 3 All E.R. 961; [2001] 3 F.C.R. 97, dicta of Lord Hobhouse applied.

(4) U.S. Govt. v. Montgomery, WLR[2001] 1 W.L.R. 196; [2001] 1 All E.R. 815, dicta of Lord Hoffman considered.

Legislation construed:

Grand Court Law (1995 Revision) (Law 8 of 1975, revised 1995), s.18(2):

‘In any matter of practice or procedure for which no provision is made by this or any other law or by any Rules, the practice and procedure in similar matters in the High Court in England shall apply so far as local circumstances permit and subject to any directions which the Court may give in any particular case.’

Grand Court Rules, 1995 (Revised), O.1, r.5:

‘(1) Except as provided in Order 75, r.2, the Rules of the Supreme Court 1965 shall cease to have any application to-

(a) every proceeding commenced on or after the commencement date; and

(b) any step taken or required to be taken after the commencement date in any proceeding pending on that date.

(2) Notwithstanding paragraph (1), The Supreme Court Practice may be relied upon where appropriate as an aid to the interpretation and application of these Rules.’

O.41, r.5: The relevant terms of this rule are set out at para. 16.

r.6: ‘The Court may order to be struck out of any affidavit any matter which is scandalous, irrelevant or otherwise oppressive.’

Proceeds of Criminal Conduct Law (2001 Revision) (Law 15 of 1996, revised 2001), s.3(1): The relevant terms of this sub-section are set out at para. 3.

s.5(1)–(3): The relevant terms of these sub-sections are set out at para. 32.

s.5(6):

‘The standard of proof required to determine any question arising under this Law as to-

(a) whether a person has benefited as mentioned in paragraph (b)(i); of subsection (2); or

(b) the amount to be recovered in his case by virtue of section 6,

shall be that applicable in civil proceedings.’

s.6(4): The relevant terms of this sub-section are set out at para. 35.

s.9: The relevant terms of this section are set out at para. 19.

s.10: The relevant terms of this section are set out at para. 19.

s.11(8): ‘An application for the discharge or variation of a restraint order may be made by any person affected by it.’

s.12(1): The relevant terms of this sub-section are set out at para. 30.

Criminal Procedure-proceeds of criminal conduct-restraint order-discharge-application by third party for variation/discharge ancillary and not interlocutory to criminal proceedings giving rise to restraint order-hearsay evidence in affidavit therefore inadmissible under Grand Court Rules, O.41, r.5(2)-application by third party may be heard at any point before completion of criminal proceedings against defendant

The applicant applied for the discharge of restraint orders.

The applicant”s husband (the defendant) had been charged with conspiracy to launder the proceeds of criminal conduct and the Crown had restrained property allegedly belonging to him, under the Proceeds of Criminal Conduct Law (2001 Revision). The Crown asserted that all the restrained property should ultimately become the subject of confiscation orders on the conviction of the defendant, who was a fugitive from the Cayman Islands and was currently in the United States awaiting sentence there for similar offences.

The applicant, who was not charged with an offence, claimed that some of the restrained property belonged to her. The Crown disputed this assertion and alleged that she held the property beneficially for the defendant. It adduced two affidavits from officers of the Financial

Reporting Unit as evidence to substantiate that allegation. The affidavits were very extensive, but contained mostly hearsay evidence. Both sides accepted that the information contained in them would only be admissible if the present proceedings were treated as interlocutory in relation to the criminal proceedings, rather than final in nature.

The applicant submitted that (a) in the present proceedings, the court could make a final determination as to her rights to the property (which would not be affected by the criminal proceedings against the defendant) and as such the proceedings were separate from the criminal proceedings, not interlocutory to them; (b) as these proceedings were not interlocutory, the Crown was precluded by the Grand Court Rules, O.41, r.5(2), from introducing its hearsay affidavit evidence; (c) as an affected innocent third party, she had locus standi to challenge the restraint orders in relation to her own property, and she also had standing to challenge all the restraint orders, even those relating to the defendant”s property; and (d) furthermore, the court should not wait until the end of the criminal proceedings against the defendant to determine the applicant”s summons, as this would cause injustice to her.

The Crown submitted in reply that (a) the present proceedings were merely interlocutory in respect of the main criminal trial and affidavit hearsay evidence was therefore admissible under O.41, r.5(2); (b) the applicant was not an affected innocent third party and she did not have locus standi to challenge the restraint orders, particularly insofar as they applied to the defendant; and (c) the court should wait for the completion of the criminal proceedings before making any decision on entitlement to the property.

Held, ruling the affidavits inadmissible:

(1) Since no specific rules for the admissibility of evidence had been made under s.38 of the PCCL, and no English rules applied, the admissibility of the affidavits was governed by the Grand Court Rules. Order 41, r.5(2) provided that the affidavits, as hearsay evidence, would be admissible only if the present proceedings were interlocutory. They were not in fact interlocutory because-

(a) a third party application, seeking the variation or discharge of restraint orders (to be fully contested between the Crown and the applicant) was capable of resulting in a final and determinative ruling as to the applicant”s legal entitlement to the property, subject only to a right of appeal; and

(b) in resolving third party applications, the court was exercising its separate civil jurisdiction, such orders being part of the civil scheme for the preservation of assets, rather than part of the criminal proceedings against the defendant (para. 13; para. 17; para. 43).

(2) The applicant”s locus standi to seek the variation or discharge of restraint orders, as a third party to the proceedings, was restricted to those orders which affected property alleged to be her own. She did not have the additional standing to seek the variation or discharge of all the

restraint orders, including those operating over her husband”s property. As the present application was civil in nature and separate from the criminal trial, it could be heard at any time before the conclusion of the criminal proceedings, and the burden of proving that the property in fact belonged to the defendant lay on the prosecution, to the civil standard of proof (the balance of probabilities) (para. 4; paras. 65–66).

1 SMELLIE, C.J.: These proceedings arise from the applicant”s summons, by which she seeks the variation or discharge of restraint orders made on October 25th, 2000, restraining property alleged by the Crown to belong to her husband. He is charged with the offence of conspiring with others to launder the proceeds of criminal conduct and will be referred to as ‘the defendant.’ The defendant is described as a fugitive from this jurisdiction and is reported to have been convicted of certain offences of fraud in the United States, which are related to the conspiracy/money laundering allegations here. I am told he awaits sentence there. The applicant has not been charged with any offence.

2 The restraint orders cover a very extensive list of properties, including real property in the Cayman Islands and abroad, bank accounts in the Cayman Islands and abroad in the joint names of the applicant and the defendant, and securities held for their benefit in the names of local and Canadian companies. The restraint orders also cover some identifiable property which, although held solely in the name of the applicant, is alleged by the Crown to be held beneficially for the defendant. Receivers have been appointed by this court at the instance of the Crown over all known properties and assets. The Crown asserts that all the restrained properties and assets should ultimately become the subject of confiscation orders, to be made by this court upon the conviction of the defendant.

3 The indictment against the defendant relates to the proceeds of his own criminal conduct as well as to the proceeds of the criminal conduct of others. So any property to be confiscated could include property held by the defendant which represents the proceeds of the criminal conduct of others. Thus the restraint orders bite upon property which is said to be either the defendant”s proceeds of crime or otherwise his realisable property, whether held by him for himself or for others or gifted by him, within the meaning of s.3(1) of the Proceeds of Criminal Conduct Law (2001 Revision) (‘the PCCL’), which provides:

‘In this Law-

“realisable property,” subject to subsection (2), means-

(a) any property held by the defendant; and

(b) any property held by a person to whom the defendant has directly or indirectly made a gift caught by this Law.’

Sub-section (2) exempts the proceeds of drug trafficking which is covered by the Misuse of Drugs Law.

4 The applicant claims that some of the property restrained belongs legally and beneficially...