Corporate Crime analysis for Lexis Nexis PSL: Although the Serious Fraud Office (SFO) did not bring to the court’s attention a Supreme Court decision (that held a notice issued under a disclosure order could not be sent to someone outside the jurisdiction) that did not invalidate the disclosure order itself and the non-disclosure was not sufficient to merit the discharge of the disclosure order.
Written by James Fletcher, barrister, at 5 St Andrews Hill.
Faerman v Director of the Serious Fraud Office [2020] EWHC 1849 (Admin)
What are the practical implications of this case?
This case is a reminder that:
- if the sole purpose of an application for a disclosure order is to serve a notice to obtain information from a person outside the jurisdiction, then the application would be impermissible
- however, if the disclosure order is to be used to obtain information from a wide variety of persons within the jurisdiction then, notwithstanding the subject of the investigation is resident overseas, the disclosure order would not be invalid
- furthermore, law enforcement cannot seek to get around the prohibition on serving a notice on someone outside the jurisdiction by simply removing the penal notice from the disclosure order and suggesting that compliance with a notice is voluntary
- the case is also an example of non-disclosure which, on the facts and surrounding circumstances, was not sufficient to merit discharge of the order
What was the background?
The Administrative Court considered an application to discharge a disclosure order.
The SFO was conducting a civil recovery investigation into assets held by Mr Faerman, a Brazilian national, to decide if those assets had been obtained through unlawful conduct. As part of their investigation they made an application for a disclosure order.
Disclosure orders are investigative tools available in different types of investigation under the Proceeds of Crime Act 2002 (POCA 2002). Disclosure orders may be sought from the court to authorise an appropriate officer to give written notices to any person whom they consider has relevant information. Upon receipt of the notice, that person has to provide information, answer questions or produce documents relevant to the investigation. A disclosure order is a powerful tool as it provides a continuing power for the investigator to require persons to give information without further recourse to the court. The power to grant a disclosure order is discretionary.
To grant a disclosure order in a civil recovery investigation, the court has to be satisfied that there are reasonable grounds for suspecting property has been obtained through unlawful conduct, information which may be provided would be of substantial value to the investigation and the application is in the public interest (POCA 2002, s 358).
The application for discharge was made on two bases
- firstly, that pursuant to the judgment of the Supreme Court in Serious Organised Crime Agency v Perry [2012] UKSC 35, the court had no jurisdiction to grant the disclosure order as it only named Mr Faerman as a respondent and he was resident outside of the jurisdiction
- secondly, it was submitted that failing to bring the authority of Perry to the attention of the judge amounted to material non-disclosure.
In Perry the Supreme Court held that because it was a criminal offence pursuant to POCA 2002, s 359 not to comply with a notice issued under a disclosure order, it would be contrary to international law to compel an answer from an overseas recipient in Country B where Country A could criminalise their conduct. A notice under a disclosure order could not therefore be sent to persons out of the jurisdiction.
The SFO argued that Perry did not preclude the making of a disclosure order where the subject of the investigation was outside the jurisdiction. It was only a notice made under authority of the disclosure order that could not be sent to an overseas person. The SFO also argued that although Mr Faerman was named as the subject of the investigation, a notice under a disclosure order could be sent to any person who had relevant information.
As to the allegations of breach of the duty of full and frank disclosure, the SFO accepted that Perry was not brought to the attention of the court, but maintained that the non-disclosure was inadvertent. It was submitted that the court would still have granted the disclosure order, but may have made clear a notice could not be served on Mr Faerman. There was no male fides and there was a compelling public interest in the disclosure order remaining.
What did the court decide?
The court considered that the test for the granting of a disclosure order had been met. It considered Perry and agreed that Perry was authority for the proposition that no notice could be issued pursuant to the disclosure order to persons outside the jurisdiction. The fact that Mr Faerman was the only named respondent did not limit those to whom the SFO may send notices, including those within the jurisdiction. The court did not therefore consider the disclosure order itself was unauthorised or defective.
However, the court was critical of the SFO serving a notice and a copy of the disclosure order on Mr Faerman’s solicitors with the penal notice redacted. The court rejected the SFO’s submission that this ensured the notice complied with Perry. There was no power to issue a notice requiring information from Mr Faerman who was resident in Brazil. The court noted that once objection had been raised by Mr Faerman’s solicitors, the SFO withdrew the notice. Although the court dismissed the application, it marked its displeasure at the attempt to serve the notice on Mr Faerman in this way by making no order as to costs in favour of the successful respondent.
The court considered that although there had been non-disclosure it would not be appropriate to discharge the disclosure order because:
- had the judge been told about the Perry case the disclosure order would still have been made, but the court would have noted that a notice could not be served on Mr Faerman outside the jurisdiction
- the SFO did not act in bad faith
- there was no prejudice to Mr Faerman, as he did not answer the notice sent by the SFO
- there was a compelling public interest in maintaining the disclosure order
Case details
- Court: Queen’s Bench Division, Administrative Court (London).
- Judge: Mrs Justice Cutts DBE.
- Date of judgment: 10 July 2020.
This article was first published by Lexis®PSL on 17/07/2020.
James Fletcher practises in both civil and criminal law. He is a specialist in Asset Recovery and Proceeds of Crime work. He has significant expertise in dealing with Account Freezing and Forfeiture applications. He is instructed on behalf of businesses, by individual members of the public and by Government departments. This year he has acted for both the HMRC and the NCA in their first contested applications for Account Forfeiture Orders, assisted a client to obtain the return of sums frozen pursuant to an Account Freezing Order and provided advice to a foreign national on Unexplained Wealth Orders. He is ranked in both Chambers & Partners and The Legal 500 for his work in Asset Recovery and POCA.
