Re Leon

• Jurisdiction: Cayman Islands
• Judge: (Sanderson, J.)
• Judgment Date: 18 August 2000
• Court: Grand Court (Cayman Islands)
• Date: 18 August 2000

Grand Court

(Sanderson, J.)

IN THE MATTER OF LEON and FOUR OTHERS

A. Bueno, Q.C. and C.G. Quin for the applicants;

Ms. J. Wilson, Crown Counsel, for the Crown.

Case cited:

(1) S.-L., In re, (Restraint Order: External Confiscation Order)ELRUNK, [1996] Q.B. 272; [1995] 4 All E.R. 159; sub nom. Re Londono(1995), 139 Sol. Jo. (L.B.) 166, applied.

Legislation construed:

Misuse of Drugs (Drug Trafficking Offences) (Designated Countries) Order, 1991, Third Schedule, s.2: The relevant terms of this sub-section are set out at page 342, lines 16–18.

s.16A(1): The relevant terms of this sub-section are set out at page 342, lines 20–23.

(3): The relevant terms of this sub-section are set out at page 342, lines 25–29.

s.16F(1): The relevant terms of this sub-section are set out at page 342, lines 31–39.

(4): The relevant terms of this sub-section are set out at page 342, line 40–page 343, line 2.

s.16G(1): The relevant terms of this sub-section are set out at page 342, lines 9–11.

(2): The relevant terms of this sub-section are set out at page 342, lines 12–15.

(3): The relevant terms of this sub-section are set out at page 345, lines 12–13.

Mutual Legal Assistance (United States of America) Law (1999 Revision, Law 16 of 1986, revised 1999), s.6(1):

‘…Where the execution of a request requires the issue under the law of the Cayman Islands of a subpoena, search warrant, order for the seizure of any article or other necessary order by a magistrate, justice of the peace or officer of a court, a certificate given by the Cayman Authority … shall be sufficient authority for the issue or making of the same without further enquiry.’

Criminal Procedure-proceeds of criminal conduct-restraint order-under Misuse of Drugs (Drug Trafficking Offences) (Designated Countries) Order, 1991, Third Schedule, s.16G, may prohibit dealings with Cayman funds even though no named ‘defendant’ in external confiscation order-s.16F(1)(a) satisfied by warrant of arrest in rem in designated country specifying funds as defendant property

Criminal Procedure-proceeds of criminal conduct-restraint order-scope of order limited to property specifically identified in external confiscation order

The applicants applied to set aside a restraint order in respect of moneys held in Cayman bank accounts.

The applicants were Colombian businessmen who had received US dollars illegally through the Colombian black market currency exchange. United States law enforcement officers obtained evidence that the funds paid into the applicants” accounts with a Cayman bank represented the laundered proceeds of Colombian drug-trafficking operations in the United States and Europe. The drug money was mixed with other unrelated funds in the accounts. Colombian currency provided by the applicants in payment for US dollars was deposited in accounts controlled by the drug traffickers. Whilst the applicants were not themselves involved in drug-dealing, it was commonly accepted that the Colombian black market currency exchange was driven by drug money. No criminal charges against the applicants were contemplated by the US authorities.

The US Department of Justice obtained a warrant of arrest in rem under which the Cayman authorities were requested to ‘arrest, seize and restrain the defendant property’ to prevent its alienation pending criminal proceedings in the Unites States against named drug-traffickers. The property was described as ‘all funds in all foreign accounts representing proceeds of narcotic drugs and money laundering,’ and the relevant Cayman accounts and the drug money in each were listed. The Crown, on the authority of a certificate issued by the Cayman Mutual Assistance Authority, obtained a restraint order from the Grand Court under the Misuse of Drugs (Drug Trafficking Offences) (Designated Countries) Order, 1991, Third Schedule, s.16G, prohibiting dealings with any of the funds in the accounts until further order.

The applicants applied to set aside the order. They submitted that (a)

the court had no power to grant a restraint order under s.16G of the Order, since no proceedings had been instituted against the traffickers in a designated country (the United States) as required by s.16F(1)(a), nor were any contemplated against them; (b) the arrest warrant in rem did not constitute an external confiscation order falling within the definition of ‘proceedings instituted’ (in s.16F(4)(b)), since by s.16A(3), an external confiscation order must be made against a person, ‘the defendant,’ and not against physical property; (c) the order should be set aside due to Crown Counsel”s failure to make full and proper disclosure of the fact that only the specified sums were to be frozen; and (d) in any event, the court had erred in freezing the whole of the funds in the accounts, since s.16G(1) and (3) expressly confined the power to restraining dealings with ‘realisable property’ specified in the external confiscation order, and the order should be varied accordingly.

Held, varying the restraint order:

(1) The court had properly granted a restraint order against the applicants” funds even though there were no criminal proceedings in the United States and no named defendants in the arrest warrant in rem issued by the US court. The references in the Third Schedule to the 1991 Order to proceedings instituted against ‘the defendant’ (s.16F(1)(a)) and to ‘the defendant’ as ‘a person against whom an external confiscation order has been made’ (s.16A(3)) did not preclude the making of a restraint order in response to proceedings in rem against specified property. Furthermore, having regard to the purpose of the 1991 Order, the applicants could be viewed effectively as defendants to the US proceedings as the holders of the specified accounts (page 343, lines 3–17; page 343, line 39 – page 344, line 43).

(2) However, the restraint order would be varied so that the applicants were prohibited from dealing only with those funds which had been specified in the warrant in rem as laundered drug money. Section 16G(2) expressly stated that a restraint order could apply to the property specified in an external confiscation order, and s.16G(1) referred to ‘realisable property,’ defined in s.2 (in relation to external confiscation orders) as ‘property specified in the order.’ The restraint order would not be wholly set aside on the basis of non-disclosure (which had not been established), since it had been phrased per incuriam and not as a result of deliberate misinformation. Even if Crown Counsel had failed to alert the court to the restricted nature of the order sought by the US authorities, the evidence before it had made that plain (page 344, line 44 – page 345, line 33; page 346, line 21 – page 347, line 7).

30	SANDERSON, J.: The applicants seek to set aside the ex parte order
of Murphy, J. made on December 9th, 1999. That order provided in part:
‘It is hereby ordered that:
1. Juan Carlos Arias Leon, Hector Fabio Botero Arroyave,
Armando Mogollon Barreto, Juan Arturo Montoya Diaz and
35	Samuel Vallejo Zapata, hereinafter referred to as “the defendants,”
whether by themselves or by their agents, directors, servants,
officers or otherwise howsoever until further order, be restrained
from transferring, assigning, withdrawing, removing from the
jurisdiction or otherwise disposing of or dealing with any funds
40	currently deposited to accounts No. 971051 in the name of A, No.
970483 in the name of B, No. 972984 in the name of C, No. 971077
in the name of D, and No. 970358 in the name of E ... at Banco
Bilbao Vizcaya, Grand Cayman for the benefit of the defendants,
and without prejudice to the generality of the foregoing, from in any
45	way whatsoever-

(a) transferring, assigning, withdrawing, removing from the
jurisdiction, disposing of or otherwise dealing with any
funds deposited to the above-mentioned accounts at Banco
Bilbao Vizcaya...’
5	The applicants are not ‘the defendants’ referred to in para. 1 of the order.
Those defendants are persons that the US Government alleges are
engaged in drug trafficking and money laundering. They have been or are
about to be charged with those offences in the United States. The
applicants in this case are the individuals mentioned in para. 1 of the
10	order, who have bank accounts in the Cayman Islands and have deposits
here. All of these bank accounts are with Banco Bilbao Vizcaya, Grand
Cayman, and are frozen by the order of Murphy, J.
The applicants argue that their bank accounts should not be frozen
because Murphy, J. did not have the statutory jurisdiction to make the
15	order he did. Alternatively, they say that only the specific amounts
identified in the affidavit material which are alleged to be ‘drug money’
should be frozen, and the balances, if any, should be made available to the
applicants. In the further alternative, the applicants argue that there was
not full disclosure of the material facts before the

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