Re McCorkle

• Jurisdiction: Cayman Islands
• Judge: (Zacca, P., Georges and Collett, JJ.A.)
• Judgment Date: 30 July 1998
• Court: Court of Appeal (Cayman Islands)
• Date: 30 July 1998

Court of Appeal

(Zacca, P., Georges and Collett, JJ.A.)

IN THE MATTER OF W.J. McCORKLE and C. McCORKLE

S. Bulgin, Senior Crown Counsel, and A. Akiwumi, Crown Counsel, for the appellant;

A. Jones, Q.C., C.G. Quin and J. Lawless for the respondents.

Cases cited:

(1) Carltona Ltd. v. Works Commr., [1943] 2 All E.R. 560, distinguished.

(2) Sherman, In re, 1996 CILR 33, considered.

Legislation construed:

Proceeds of Criminal Conduct Law, 1996 (Law 15 of 1996), s.2(1): The relevant terms of this sub-section are set out at page 229, lines 22–27; lines 28–30.

s.2(4): The relevant terms of this sub-section are set out at page 230, lines 41–44.

s.29(1): The relevant terms of this sub-section are set out at page 229, lines 31–42.

Schedule, para. 1: The relevant terms of this paragraph are set out at page 233, lines 8–12.

para. 2(2)(b): The relevant terms of this sub-paragraph are set out at page 230, lines 6–8.

para. 3(1)(b): The relevant terms of this sub-paragraph are set out at page 233, line 25 – page 234, line 6.

para. 5: The relevant terms of this paragraph are set out at page 235, lines 17–25; lines 27–38.

para. 6(1): The relevant terms of this sub-paragraph are set out at page 230, lines 9–10.

para. 8(e): The relevant terms of this sub-paragraph are set out at page 240, lines 10–11.

(h): The relevant terms of this sub-paragraph are set out at page 240, lines 21–22.

Mutual Legal Assistance (United States of America) Law, 1986 (Law 16 of 1986), Schedule, art. 1.2: The relevant terms of this paragraph are set out at page 228, lines 35–39.

art. 16: the relevant terms of this article are set out at page 228, line 42 – page 229, line 3.

Criminal Procedure-proceeds of criminal conduct-restraint order-power to make order restricted by Proceeds of Criminal Conduct Law, 1996, s.2(4) whether proceedings instituted in Islands or in designated country-order may be retrospective if criminal acts part of ongoing scheme continuing after commencement of Law

Criminal Procedure-proceeds of criminal conduct-restraint order-discharge-for purposes of Proceeds of Criminal Conduct Law, 1996, Schedule, para. 5(2), application for order made when filed in court, not when heard-to be discharged under para. 5(3)(b) if more than seven days elapse before application for external confiscation order-Interpretation Law (1995 Revision), s.8 governs computation of time

Criminal Procedure-proceeds of criminal conduct-restraint order-Attorney General to inform court of procedures in designated country affecting time-scale for external confiscation order or institution of criminal proceedings which may influence application for restraint order

The respondents applied to the Grand Court for the discharge of a restraint order made under the Proceeds of Criminal Conduct Law, 1996.

The respondents were under investigation in the United States for fraud and money laundering but had not yet been charged with any offence. The first respondent transferred funds from the United States into Cayman bank accounts held by himself, his wife (the second respondent) and companies controlled by them during 1996 and early 1997.

In response to a request from the United States as a designated country under the Mutual Legal Assistance Treaty, supported by affidavit evidence from an attorney of the US Office of International Affairs and the prosecutor assigned to the respondents” case, the Cayman Central Authority issued a certificate requiring the Attorney General to apply for a restraint order under para. 6 of the Schedule to the Law. He filed an application on May 20th, 1997 and the Grand Court made an order the next day restraining the respondents from disposing of or dealing with the funds in their Cayman accounts.

On May 28th, 1997, an application was filed in the United States for civil forfeiture in rem in respect of those funds. However, at the time of the respondents” application for discharge, the US proceedings had not been heard and investigations by a grand jury to determine whether there

was sufficient evidence upon which to base criminal charges were ongoing. The Grand Court (Harre, C.J.) discharged the restraint order on the ground that the application in the US court had not been made within seven days of the application for the restraint order, as required by para. 5(3)(b) of the Schedule to the Law, and also on the basis that the order related to the proceeds of alleged offences committed before the commencement of the Law in December 1996, contrary to s.2(4).

He rejected other grounds raised by the respondents for the discharge of the order, including, inter alia, that the request to the Cayman Central Authority and supporting evidence did not comply with the requirements of the Treaty or the Schedule and that the application for a restraint order was an abuse of process, since no criminal proceedings had been commenced in the United States. The proceedings in the Grand Court are reported at 1998 CILR 1.

The Attorney General appealed against the discharge of the order and the respondents sought its affirmation, not only on the grounds on which the Chief Justice had relied but also on those rejected.

The appellant submitted that (a) the Grand Court had power to restrain dealings with the proceeds of foreign offences committed before the commencement of the Law, since s.2(4) did not apply to the Schedule to the Law and any other construction would derogate from the Islands” obligations under the MLA Treaty; (b) even if the court could not make an order in respect of the proceeds of a single offence committed before December 1996, it could restrain dealings with the proceeds of an ongoing criminal enterprise occurring both before and after that time; (c) since the application for civil forfeiture in rem had been made to the US court within seven days of the making of the restraint order, proceedings as described in para. 2(2) of the Schedule had been instituted on time, and the Grand Court had erred in holding that an application had been made only when it was heard; (d) the request from the US authorities complied with the requirements of the Schedule and the Proceeds of Criminal Conduct (Designated Countries) Order 1997; and (e) there had been no abuse of process, since the US authorities had followed the correct legal procedure for the investigation of offences there, the respondents had had the opportunity to challenge the application for civil process in rem, and no attempt had been made to mislead the Cayman court.

The respondents submitted in reply that (a) it was clear from the wording of s.2(4) that the court had had no jurisdiction to make a restraint order in respect of the proceeds of any offence committed before the commencement of the Law, and the MLA Treaty required that assistance be given only so far as was permitted by the laws of the parties; (b) the alleged criminal acts occurring after December 1996 did not operate to bring those committed beforehand within the ambit of the PCCL; (c) the Grand Court had properly discharged the restraint order under para. 5(3)(b), since whatever the proper interpretation of the word ‘application,’ at least seven days had elapsed before the application for civil forfeiture in the US court; (d) neither the deponents of the affidavits

supporting the US request nor the contents of those affidavits satisfied the requirements of the Treaty and the Schedule; and (e) the request was an abuse of process, since there had been no intention of expediting proceedings in the United States.

Held, dismissing the appeal:

(1) It was clear from s.2(4) that a cut-off date applied to prevent the restraint of the proceeds of offences committed in or outside the Cayman Islands before the commencement of the Law, and there was no justification either in the wording of the Law itself or the MLA Treaty for construing the sub-section as applying only to domestic offences. However, since the alleged criminal activity in this case was an ongoing scheme of deception both before and after the commencement date, a purposive construction could be applied to permit assistance under the Law. Accordingly, the Grand Court had erred in discharging the restraint order on this basis (page 231, line 24 – page 232, line 1; page 232, lines 22–45; page 234, lines 8–17; page 234, line 38 – page 235, line 12).

(2) However, the court had properly discharged the order under para. 5(3)(b) of the Schedule on the ground that proceedings in the United States had not been instituted within seven days of the application for the restraint order. Although the court had wrongly held that the application had been made when it was heard-it was made when the application was filed on May 20th, since that date was easily ascertainable and the applicant could have no control over when the application was heard-the effect of s.8(a) and (d) of the Interpretation Law was that more than seven days had elapsed before the application for an external confiscation order was filed in the United States on May 28th. The Grand Court Rules on the computation of time obviously did not apply to those proceedings (page 236, lines 8–40; page 237, lines 12–22; page 237, line 43 – page 238, line 7).

(3) The Grand Court had properly found no substantial irregularity in the request for judicial assistance from the US authorities. Nor was the request an abuse of process. Whilst the court might not have made the order ex parte had it known that the US civil forfeiture proceedings would not be heard immediately and criminal charges laid shortly, the application had not been deliberately misleading. In future, however, any differences in the respective procedures of the designated country and the Cayman Islands which might influence the court”s consideration of the application should be brought to the court”s attention by the Attorney General (page 239, lines 10–22; page 239, line 36 – page 240, line 28...