Re Gambling Law (1996 Revision)

• Jurisdiction: Cayman Islands
• Judge: (Sanderson, J.)
• Judgment Date: 08 July 2004
• Court: Grand Court (Cayman Islands)
• Date: 08 July 2004

Grand Court

(Sanderson, J.)

IN THE MATTER OF THE GAMBLING LAW (1996 REVISION)

IN THE MATTER OF THE CRIMINAL PROCEDURE CODE (1995 REVISION), SECTION 190

A. Horsbrugh-Porter for the bank;

D.T. McGrath for W;

K. De Freitas, Q.C., Solicitor General, and P. Patterson for the Crown.

Case cited:

(1) K (restraint order), Re, UNK[1990] 2 All E.R. 562, distinguished.

Legislation construed:

Criminal Procedure Code (Law 13 of 1975) (1995 Revision), s.190(1): The relevant terms of this sub-section are set out at para. 3.

s.193: The relevant terms of this section are set out at para. 4.

Proceeds of Criminal Conduct Law (Law 15 of 1996) (2001 Revision), s.10: The relevant terms of this section are set out at para. 15.

Drug Trafficking Offences Act 1986 (1986 c. 32), s.8: The relevant terms of this section are set out at para. 12.

Criminal Procedure-proceeds of criminal conduct-seizure order-bank”s contractual right to combine and set off accounts not affected by order under Criminal Procedure Code, s.190(1) against customer”s account-court to be informed of implications and bank given opportunity to be heard, or order may be set aside as per incuriam

Criminal Procedure-proceeds of criminal conduct-seizure order-order against customer”s bank account ineffective to seize customer”s funds since no longer owns funds but only chose in action for recovery-bank may apply within 12 months under Criminal Procedure Code, s.190(1) for ownership of funds remaining

Criminal Procedure-proceeds of criminal conduct-seizure order-order under Criminal Procedure Code, s.190(1) changes ownership of assets seized-court may not reserve right to make further order or give previous owner right to apply for review

The applicant bank applied to vary a previous seizure order of the Grand Court to allow it to set off a debt owed to it by W against the credits in W”s accounts.

The bank held accounts in the name of W in which there were credit balances totalling approximately US$672,500 and CI$52,500. W also owed the bank approximately $213,500 which was secured by a lien over one of the accounts with a credit balance of US$568,425.20. The Grand Court (Henderson, J.) ordered, pursuant to s.190(1) of the Criminal Procedure Code (1995 Revision), that moneys standing to the credit of certain listed accounts of W be seized (believing them to be part of the

proceeds of criminal conduct) and that the bank be restrained from paying out or disposing of them without leave of the court. It also purported to give itself the right to make a further order and to give W the right to apply for a review.

The bank and W submitted that (a) as a matter of common law the bank was entitled to combine all W”s accounts to arrive at a net amount remaining to his credit; and (b) as a matter of contract, it was entitled to set off the credits in W”s accounts against his debt to it.

The Crown submitted that (a) the bank could not claim a set-off against assets in the accounts that had been seized since the funds now belonged to the Government; (b) the bank had not obtained within 12 months an order establishing its right to any of the money, as required by s.190(1) of the Criminal Procedure Code; and (c) the money to be seized under the order was equal to the total amount deposited, being the proceeds of crime, which could not therefore be reduced by a contractual arrangement between the bank and W.

The court also considered whether the order of the Grand Court should be set aside on the basis (a) that it was made per incuriam; or (b) that there had been material non-disclosure by the Crown on the ex parte application for seizure.

Held, setting aside the order:

(1) The seizure order, being limited to ‘moneys’ in W”s accounts did not have the effect of seizing any actual funds, since he only had a chose in action (a contractual right to claim against the bank), as the property in the ‘moneys’ had passed to the bank upon deposit. The order, even if it had effectively seized W”s property, did not affect the bank”s rights to combine W”s accounts and set off his loan against the sums credited and the chose in action thus became limited to the sum remaining after combination and set-off (paras. 19–22).

(2) It followed that it was not open to the bank to apply under the Criminal Procedure Code, s.190(1) to establish its right to seized property, since no property had in fact been seized, and its combination of accounts and set-off had allowed it to reduce the size of the chose in action. Had the remaining property been effectively seized, the bank could have applied for ownership within 12 months under s.190(1) (paras. 39–40).

(3) Nevertheless, the order of the Grand Court had been made per incuriam and would be set aside. It had not been advised by the Crown that if a seizure order were made, the bank might lose its right to combine accounts or claim set-off (given that a seizure order entailed change of ownership of the property seized whereas a restraint order merely froze property pending further order); the language of the order, in giving the court the right to make a further order and W the right to apply for a review, was totally contrary to the concept of seizure and ultimate forfeiture to the Crown without further order as contemplated by

s.190(1); the Crown never drew the court”s attention to the 12-month period for establishing a right to seized property in s.190(1); and, if properly informed, the court should not have deprived the bank of any legal entitlement without giving it the opportunity to be heard on such matters (para. 26; paras. 30–35).

(4) The Crown was also guilty of non-disclosure in the ex parte application in failing to advise the court of all material facts and arguments that militated against granting the application, with regard to the possible forfeiture of the bank”s right to combination or set-off and the need to establish its property rights within 12 months as required by s.190(1). Moreover, the Crown had indicated in writing to the bank that it recognized the common law right of combination and set-off, had indicated to W that he could withdraw funds from his accounts to pay legal fees and had therefore waived reliance or was estopped from relying on the 12-month limitation period (paras. 36–37; paras. 41–44).

1 SANDERSON J.: On April 17th, 2003, Henderson, J. issued orders pursuant to s.190 of the Criminal Procedure Code (1995 Revision) that-

(a) moneys standing to the credit of certain listed accounts belonging to, or in the name of, David Watler-Lyons be...