GALE v. THE UNITED KINGDOM

FOURTH SECTION

Application no. 25092/12
David GALE and Teresa GALE
against the United Kingdom
lodged on 16 April 2012

STATEMENT OF FACTS

The applicants, Mr David Gale and Ms Teresa Gale, are British nationals. Mr Gale (“the first applicant”) was born in 1950 and lives in Llandudno. Mrs Gale (“the second applicant”) was born in 1962 and lives in Bournemouth. They are represented before the Court by Rahman Ravelli, a firm of solicitors based in Halifax.

A. The circumstances of the case

The facts of the case, as submitted by the applicants, may be summarised as follows.

1. The background facts

The applicants met in England in 1979 but moved to Spain in around 1983. They left Spain in 1991 and lived for some time in the United States. In 1992 the Spanish authorities issued an international arrest warrant and indictment against the first applicant in respect of a drug smuggling operation in Spain. Although others were prosecuted in respect of that incident, the case against the first applicant was subsequently dropped.

In around 1994 the applicants moved to Portugal. In 1998 the first applicant was arrested in Portugal on drugs trafficking charges. The second applicant moved back to the United Kingdom. The first applicant was acquitted of the charges in Portugal in 2000. The court noted that “without a shadow of doubt” there were “no proven facts permitting the conviction” of the first applicant for the crimes of which he was charged. The first applicant subsequently moved to the United Kingdom.

In 2001, attempts at extradition having failed, the second applicant was tried in Portugal in her absence on charges of money laundering. She was also acquitted.

2. The Proceeds of Crime Act 2002

The Proceeds of Crime Act 2002 (“POCA”), as amended by the Serious Organised Crime and Police Act 2005, is designed to prevent the enjoyment of the fruits of criminal activity. Part 2 provides for confiscation of assets following a conviction where it is proved that a criminal has benefitted from criminal conduct. A conviction is a precondition to the power to confiscate under Part 2.

Pursuant to Part 5 of POCA, the Serious Organised Crime Agency (“SOCA”) is given the task of tracking down and recovering the fruits of criminal activity. The fruits of criminal activity can be recovered under Part 5 whether or not anyone has been convicted of the crimes that have produced them.

The domestic law is set out in greater detail below (see “Relevant domestic law”).

3. The civil recovery proceedings in the United Kingdom

(a) The commencement of proceedings

In 2005 the Assets Recovery Agency commenced civil recovery proceedings under the provisions of Part 5 of POCA against the applicants. The civil recovery proceedings concerned properties and other assets valued at approximately two million pounds sterling (“GBP”) alleged to be recoverable property owned by the applicants. The Assets Recovery Agency was subsequently abolished and its functions taken over by SOCA.

SOCA alleged that the first applicant’s wealth had been acquired through money laundering and tax evasion in the United Kingdom, Spain, Portugal and other jurisdictions and that notwithstanding the discontinuance of criminal proceedings in Spain against the first applicant for drug trafficking and his acquittal in Portugal of drug trafficking offences, there was clear evidence of drug offending in the United Kingdom, Spain and Portugal which had contributed to his wealth. SOCA further alleged that the second applicant had played an important part in the first applicant’s money laundering.

The applicants contended that the first applicant had acquired wealth by his honest endeavours in building work, property investment and business ventures of varying kinds, which included the sale of cars and boats. The applicants relied on the passage of time and delay to explain the absence of documentary business records and their inability to recall details of bank accounts.

A receiver was appointed to investigate the allegations and he prepared a report. In his report, he stated that he had identified receipts of money into identified bank accounts in the names of the applicants in the period 1989 to 2005 of about GBP 3 million from unknown sources and that between 1989 and 1991, over GBP 1.3 million of this money was transferred by the applicants to accounts in their name on the Isle of Man. The receiver had identified no jurisdiction where, over the last twenty years, the first applicant had declared income for tax purposes. The receiver had also been unable to identify any independent documentary evidence of any successful businesses run by the applicants in the United Kingdom or in Spain. The receiver further stated that the pattern and quantum of bankings into the Isle of Man accounts did not match the history of assets realisations which the applicants stated had occurred in Spain prior to their moving to the United States in 1991. The executive summary in the report concluded:

“1.19 We have not identified any independent documentary evidence which would support [the applicants’] assertion that the assets they have accumulated have been derived from legitimate activities. We have not identified evidence of declared income (or tax payments) in the UK, Spain, USA and Portugal which would provide evidence of the means to support the family and allow for the significant accumulation of wealth. There is evidence of unlawful conduct and in particular complex financial dealings indicative of money laundering and concealment. As a consequence, though it is for the Court to decide, it is not unreasonable to conclude that the property and assets have been obtained by unlawful conduct and are recoverable property.”

The receiver identified, as recoverable property, two properties in Spain in the name of the first applicant’s mother together worth GBP 2,088,000; the proceeds of sale of a property in Bournemouth amounting to GBP 449,786; GBP 218,302 in five frozen bank accounts; and motor vehicles and a boat under construction together valued at GBP 57,240. The total value was said to be GBP 2,813,328 but this was reduced by withdrawals towards living and legal costs and the fall in property values. SOCA alleged that there were, in addition, a number of other assets whose whereabouts and value were unascertainable.

(b) The judgment of the High Court

In its judgment of 12 May 2009, the High Court considered whether to make the recovery order sought by SOCA. It noted that the burden of proof was on SOCA and that the standard of proof that it had to satisfy was the balance of probabilities. The judge made a number of findings of fact, concluding:

“140. ... I am in no doubt that [the applicants] engaged in unlawful conduct – in [the first applicant’s] case, money laundering and drug trafficking, in [the second applicant’s] case, money laundering. There is also evidence of tax evasion in four jurisdictions. They have acquired capital and various assets as a direct consequence of the money laundering and/or drug trafficking but it is not possible to quantify the extent of the tax evasion or to estimate the extent, if at all, that it contributed to their capital wealth ... I am satisfied the Receiver has correctly identified recoverable property. I found [the first applicant] a witness whose evidence, on the central issues, was wholly unreliable. He was so often demonstrably lying. I am not prepared to believe the evidence of [the second applicant] insofar as she purported to confirm his account or to explain her involvement; she too was shown to be a liar about matters of real moment. While I am prepared to accept that [the first applicant] was the moving force behind all criminal conduct, she was hardly ignorant of what he was doing and played her full part in the money laundering ...”

He made a recovery order in the sum of approximately GBP 2 million.

(c) The judgment of the Court of Appeal

The applicants appealed, arguing inter alia that in deciding the factual issues on the balance of probabilities, rather than by application of the criminal standard of proof, the High Court judge contravened Article 6 of the Convention; and that the judge’s conclusions were not reasonably open to him on the evidence, having regard in particular to the conclusion of criminal proceedings against the first applicant in Spain and Portugal.

The Court of Appeal handed down its judgment on 7 July 2010. It held that the legislation could not be read in such a way as to permit a criminal standard of proof to be applied. It therefore rejected the first ground of appeal.

As to the impact of the acquittal in the Portuguese proceedings, the Court of Appeal endorsed the finding of the High Court judge to the effect that the concept of autrefois acquit did not apply to civil proceedings and concluded that the quality or availability of the evidence given to the Portuguese court, whether or not it overlapped with that given before the High Court judge, were not directly material to his decision. It also found that there was no formal link of any kind between the Portuguese criminal proceedings and the recovery proceedings in the United Kingdom and no reason to regard them as “concomitant” in the sense used in case-law of this Court. It considered that the High Court judge had been careful to observe the proper limits of his role: he had acknowledged without comment the acquittals in the Portuguese court and distinguished them clearly from the different nature and purpose of the allegations before him.

(d) The judgment of the Supreme Court

The applicants were granted permission to appeal to the Supreme Court. On 26 October 2011 the Supreme Court unanimously dismissed the appeal. Lord Phillips, delivering the leading opinion, summarised the applicants’ case as follows:

“14. Mr Mitchell QC’s submissions on behalf of the appellants founded upon the fact that an essential stepping stone toward proving that the property owned by the appellants was the product of crime was proof that the appellants had been guilty of criminal conduct, in the form of drug trafficking and money laundering. He submitted that in these circumstances article 6(2) applied. The appellants were entitled to the presumption of innocence afforded by that article. Rebuttal of the presumption of innocence required proof of guilt to the criminal standard, this being implicit in the words ‘according to law’. He added to this the submission that once David Gale had been acquitted of drug trafficking by the Portuguese Court no adverse finding could be made that implicated him in the conduct of which he had been acquitted.”

After reviewing the case-law of this Court on the application of Article 6 § 2 to proceedings following acquittal, Lord Phillips explained that he inclined to the view that all that the cases established was that Article 6 § 2 prohibited a public authority from suggesting that an acquitted defendant should have been convicted on the application of the criminal standard of proof and that to infringe Article 6 § 2 in this way entitled an applicant to compensation for damage to reputation or injury to feelings. He emphasised:

“35. On no view does this jurisprudence support Mr Mitchell’s submission that the appellant’s acquittal in Portugal precludes the English court in proceedings under POCA from considering the evidence that formed the basis of the charges in Portugal. The link between the Portuguese criminal proceedings and the English civil proceedings, which Strasbourg would appear to consider so critical, is not there ...”

In respect of the applicants’ proposition that the criminal standard had to be applied to proof of criminal conduct in proceedings under POCA, Lord Phillips examined this Court’s judgment in Geerings v. the Netherlands, no. 30810/03, 1 March 2007. He considered that it could be read as supporting one or more of the following propositions in relation to confiscation proceedings:

“43. ... i) Where a defendant has been tried and acquitted of an offence no claim can be based upon an assertion that he committed that offence.

ii) In no case can confiscation be ordered unless it is proved to the criminal standard that the defendant committed the offences from which the property is alleged to have been derived.

iii) Where it is not proved by independent evidence that the defendant possesses or possessed property for which there is no innocent explanation, but asserted that this is to be inferred from the fact that he committed a crime or crimes, the latter fact must be proved according to the criminal standard of proof.”

He considered the first proposition to be contrary to principle, explaining:

“44. ... If confiscation proceedings do not involve a criminal charge, but are subject to the civil standard of proof, I see no reason in principle why confiscation should not be based on evidence that satisfies the civil standard, notwithstanding that it has proved insufficiently compelling to found a conviction on application of the criminal standard. At all events, insofar as other Strasbourg jurisprudence supports the first proposition, it is only in circumstances where there is a procedural link between the criminal prosecution and the subsequent confiscation proceedings. There was no such link in the present case. The acquittal was in Portugal and the recovery proceedings here in England. Furthermore, the evidence in the latter ranged much wider than the evidence that was relied upon in the Portuguese prosecution.”

The third proposition, he noted, would not put the High Court judgment in doubt since that decision was founded on property whose provenance had not been sufficiently explained which was in the hands of the applicants.

The critical proposition was the second one. Lord Phillips considered that this proposition was inconsistent with this Court’s earlier cases of Phillips v. the United Kingdom, no. 41087/98, ECHR 2001‑VII and Van Offeren v. The Netherlands (dec.), no. 19581/04, 5 July 2005 and could not properly be derived from Geerings. He therefore held that the commission by the applicants in the present case of criminal conduct from which the property that they held was derived had to be established according to the civil, and not the criminal, standard of proof. He concluded:

“55. The starting point in this case is the possession of property by the appellants for whose provenance they were unable to provide a legitimate explanation. There was an abundance of evidence, set out at length by the judge with great care, which implicated them in criminal activity that provided the explanation for the property that they owned. The judge rightly applied the civil standard of proof, but on my reading of his judgment he would have been satisfied to the criminal standard of the appellants’ wrongdoing ...”

In a separate opinion, Lord Brown agreed with Lord Phillips and added:

“115. Obviously, in all proceedings following an acquittal the court should be astute to ensure that nothing that it says or decides is calculated to cast the least doubt upon the correctness of the acquittal. But the point to be emphasised is that the acquittal is correct because, and only because, the prosecution failed in the criminal proceedings to establish beyond reasonable doubt that the defendant was guilty. Not having been proved guilty to the criminal standard, the defendant is not thereafter to be branded a criminal and no criminal penalty can properly be exacted from him. But, contrary to widespread popular misconception, acquittal does not prove the defendant innocent.

116. In the result, I too incline to the view expressed by Lord Phillips ... that perhaps the only logical explanation of the Strasbourg case law is that applicants are being compensated for reputational damage when by a court’s judgments or statements subsequent to an acquittal it appears nevertheless to be suggesting that the defendant should after all have been found guilty to the criminal standard.”

Lord Dyson also agreed with Lord Phillips but explained in greater detail why he considered that there was no “criminal charge” such as to engage Article 6 § 2:

“122. There can be no doubt that, on the basis of an application of these three criteria, recovery proceedings under Part 5 of POCA are properly to be characterised as civil for article 6 purposes. They are classified as civil under our domestic law: section 240(1)(a) of POCA provides that Part 5 has effect for the purposes of ‘enabling the enforcement authority to recover, in civil proceedings ... property which is, or represents, property obtained through unlawful conduct’ (emphasis added).

123. The essential nature of the proceedings is civil. The respondent to the proceedings is not charged with any offence. He does not acquire a criminal conviction if he is required to deliver up property at the conclusion of the Part 5 proceedings. None of the domestic criminal processes are in play. On the contrary ... ‘all the trappings of the proceedings are those normally associated with a civil claim’. These include the express provision that the standard of proof is on the balance of probabilities. The nature of the proceedings is essentially different from that of criminal proceedings. The claim can be brought whether a respondent has been convicted or acquitted, and irrespective of whether any criminal proceedings have been brought at all ... The purpose of Part 5 proceedings is not to determine or punish for any particular offence. Rather it is to ensure that property derived from criminal conduct is taken out of circulation. It is also of importance that Part 5 proceedings operate in rem. The governing concept is that of ‘recoverable property’ which represents both property obtained directly by unlawful conduct and also property which represents the original property.”

He considered the key question to be whether the subject-matter of the civil proceedings was so closely connected with some criminal proceedings that the Convention protections available in the criminal proceedings should also be available in the civil proceedings. In the applicants’ case, he said:

“133. ... I would hold that there is no sufficient link between civil recovery proceedings under Part 5 of SOCA and any criminal proceedings to justify the application of article 6(2) to the Part 5 proceedings. Indeed, there is no link at all. The Part 5 proceedings are not a ‘direct sequel’ or ‘a consequence and the concomitant’ of any criminal proceedings. They are free-standing proceedings instituted whether or not there have been criminal proceedings against the respondent or indeed anyone at all.”

He accepted that the language used might create the necessary link between the criminal case and the civil proceedings where it cast doubt on the correctness of an acquittal. However, if the decision in the civil proceedings was based on reasoning and language which went no further than was necessary for the purpose of determining the issue before that court and without making imputations of criminal liability, then the necessary link would not have been created. He explained:

“139. The idea seems to be that article 6(2) applies if the court treats the compensation proceedings as if they are proceedings in which the issue of criminal liability falls to be determined. The most obvious way of doing this is to state expressly or, perhaps by necessary implication, that the defendant was wrongly acquitted ...”

Lord Dyson noted that in the applicants’ case, the High Court judge had focused his attention on whether SOCA had proved that the applicants’ wealth had been obtained through unlawful means, and not whether the first applicant had committed specific offences in Portugal. He concluded:

“142. ... I accept ... that none of the judge’s findings specifically calls into question the correctness of Mr Gale’s acquittal in Portugal. As for the drug trafficking proceedings in Spain, these were discontinued. Even if (contrary to my view) the judge had made specific findings that Mr Gale was guilty of the Spanish offences, these findings could not be relied on by Mr Mitchell QC. That is because article 6(2) would only apply if there had been an acquittal on the merits and not one solely based on a time-bar (as the discontinuance in the Spanish proceedings was) ...”

B. Relevant domestic law

Section 2A of POCA provides that a “relevant authority”, which includes SOCA, must exercise its functions under the Act in the way which it considers is best calculated to contribute to the reduction of crime. In making this calculation, SOCA must have regard to any guidance given to it by the Secretary of State. The guidance must indicate that the reduction of crime is in general best secured by means of criminal investigations and criminal proceedings.

As noted above, Part 5 of POCA allows SOCA to commence civil proceedings to recover the fruits of criminal activities. Section 240(1) explains the general purpose of Part V as follows:

“(a) enabling the enforcement authority to recover, in civil proceedings before the High Court or Court of Session, property which is, or represents, property obtained through unlawful conduct,

(b) enabling cash which is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a magistrates’ court or (in Scotland) the sheriff.”

Section 240(2) provides that the Part 5 powers are exercisable in relation to any property whether or not any proceedings have been brought for an offence in connection with the property. Examples are given in the Explanatory Notes:

“290. ... civil recovery and cash forfeiture proceedings may be brought whether or not proceedings have been brought for an offence in connection with the property. Cases where criminal proceedings have not been brought would include cases where there are insufficient grounds for prosecution, or where the person suspected of the offence is outside the jurisdiction or has died. Cases where criminal proceedings have been brought may include cases where a defendant has been acquitted, or where a conviction did not result in a confiscation order.”

Section 241 defines “unlawful conduct”:

“(1) Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part.

(2) Conduct which—

a) occurs in a country outside the United Kingdom and is unlawful under the criminal law of that country, and

(b) if it occurred in a part of the United Kingdom, would be unlawful under the criminal law of that part,

is also unlawful conduct.”

Section 241(3) provides that the court must decide on a balance of probabilities whether it is proved that any matters alleged to constitute unlawful conduct have occurred or that any person intended to use any cash in unlawful conduct.

Pursuant to section 242(1), a person obtains property through unlawful conduct (whether his own conduct or another’s) if he obtains property by or in return for the conduct. Section 242(2) provides that in deciding whether any property was obtained through unlawful conduct it is immaterial whether or not any money, goods or services were provided in order to put the person in question in a position to carry out the conduct and it is not necessary to show that the conduct was of a particular kind if it is shown that the property was obtained through conduct of one of a number of kinds, each of which would have been unlawful conduct.

Section 304(1) provides that property obtained through unlawful conduct is recoverable property. Pursuant to section 305(1), where property obtained through unlawful conduct (“the original property”) is or has been recoverable, property which represents the original property is also recoverable property

If the court is satisfied that any property is recoverable, it must make a recovery order (section 266(1)). Section 266(3) lists exceptions to the provisions that can be included in a recovery order.

COMPLAINTS

The applicants complain under Article 6 §§ 1 and 2 of the Convention that following the acquittal in the Portuguese proceedings there should have been no further State initiated proceedings making the same allegations in civil proceedings; or alternatively that the presumption of innocence required that the criminal burden of proof be applied in the civil proceedings.

QUESTIONS TO THE PARTIES

1. Were the applicants “charged with a criminal offence” for the purposes of Article 6 § 2 in the civil recovery proceedings in the United Kingdom?

2. If not:

(a) does Article 6 § 2 require consideration of whether there was a link between criminal proceedings and subsequent judicial proceedings where the two sets of proceedings took place in different States; and if so

(b) was there a link between the criminal proceedings in Portugal and the civil recovery proceedings in the United Kingdom?

3. Were the civil recovery proceedings compatible with Article 6 §§ 1 and/or 2 and in particular were either of those provisions violated as a result of the fact that:

(a) the first applicant had already been acquitted of some of the same allegations in criminal proceedings in Portugal;

(b) the civil, and not the criminal, standard of proof was applied?

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