The Representation of Kaplan

JurisdictionJersey
CourtRoyal Court
JudgeBailhache, Bailiff and Jurats Le Breton and Clapham
Judgment Date29 April 2009
Date29 April 2009
ROYAL COURT
Bailhache, Bailiff and Jurats Le Breton and Clapham

J. Harvey-Hills for the representor;

A.J. Belhomme for the Attorney General;

A.J.N. Dessain for the Viscount.

Cases cited:

(1) Acturus Properties Ltd. v. Att. Gen., 2001 JLR 43, distinguished.

(2) Batalla-Esquival, In re, 2001 JLR 160, considered.

(3) Bird Charitable Trust, In re, 2008 JLR 1, considered.

(4) Esteem Settlement, In re, 2003 JLR 188, referred to.

(5) Illinois Dist. Ct., In re, 1995 JLR N-10, referred to.

(6) King v. Serious Fraud Office, [2009] 1 W.L.R. 718; [2009] 2 All E.R. 223; [2009] 2 Cr. App. R. 2; [2009] UKHL 17, dicta of Lord Phillips of Worth Matravers applied.

(7) Motorola Credit Corp. v. Uzan (No. 1), [2002] C.P. Rep. 69; [2002] 2 All E.R. (Comm) 945; [2002] EWCA Civ 989, distinguished.

(8) O (Restraint order: Disclosure of assets), Re, [1991] 2 Q.B. 520; [1991] 2 W.L.R. 475; [1991] 1 All E.R. 330, referred to.

(9) O'Brien, In re, 2003 JLR 1, followed.

(10) United States v. Schlotzhauer, 2008 WL 320717; US Dist. Ct., W.D. Mo., February 4th, 2008, referred to.

(11) Wimborne (Viscount), Ex p., 1983 J.J. 17, referred to.

Legislation construed:

Gambling (Jersey) Law 1964 (Revised Edition, ch.11.300, 2006 ed.), art. 2: The relevant terms of this article are set out at para. 26.

art. 10(4): The relevant terms of this paragraph are set out at para. 26.

Proceeds of Crime (Jersey) Law 1999 (Revised Edition, ch.08.780, 2009 ed.) (as modified by the Proceeds of Crime (Enforcement of Confiscation Orders) (Jersey) Regulations 2008 (Revised Edition, ch.08.780.60, 2009 ed.)), art. 1(1): The relevant terms of this paragraph are set out at para. 20; para. 25; para. 31.

art. 2(1): The relevant terms of this paragraph are set out at para. 30.

art. 15: The relevant terms of this article are set out at para. 20.

art. 16(4): The relevant terms of this paragraph are set out at para. 29.

Schedule 1: The relevant terms of this schedule are set out at para. 25.

Text cited:

Maxwell on the Interpretation of Statutes, 12th ed., at 201 (1969).

Criminal Procedure—proceeds of criminal conduct—saisie judiciaire—discharge—discharged as matter of discretion if Viscount unable to manage property; retired trustee unable to transfer assets to new trustees; no funds in Jersey to pay Viscount or trustee; and potential conflict with foreign freezing orders

The representor sought the discharge of a saisie judiciaire.

The representor had been charged in the United States with, inter alia, illegal gambling and conspiracy to conduct an illegal internet gambling business. He was a beneficiary and the de facto settlor of two Jersey trusts. In May 2007, on an ex parte application by the Attorney General at the request of the United States, the court granted a saisie judiciaire over the representor's realisable property pursuant to art. 16 of the Proceeds of Crime (Jersey) Law 1999.

Article 15(a)(ii) of the 1999 Law (as modified by the Proceeds of Crime (Enforcement of Confiscation Orders) (Jersey) Regulations 2008) provided that a saisie judiciaire could be made when proceedings had been instituted against a defendant overseas and it appeared to the court that there were reasonable grounds for believing that an external confiscation order would be made in those proceedings. External confiscation orders were made to recover property obtained as a result of "criminal conduct," which was defined in art. 1(1) of the Law as conduct corresponding to an offence specified in Schedule 1, i.e. one for which an offender could be sentenced to one or more years' imprisonment.

On the making of the saisie judiciaire, art. 16(4) of the 1999 Law provided that all the representor's realisable property held in Jersey vested in the Viscount, who had a duty to take possession of and manage it in accordance with the court's directions. Article 1(1) of the 1999 Law provided that "'property' means all property?.?.?. whether situated in Jersey or elsewhere." "Realisable property" was defined in art. 2(1)(b)(ii) as including "any property held by a person to whom the defendant has directly or indirectly made a gift?.?.?." In December 2007, the Viscount applied ex parte for directions concerning the management of the representor's realisable property. The trust assets were held by two companies which were registered and controlled in Jersey, although the underlying assets were outside the Island, i.e. an estate in Costa Rica and money held in Swiss banks.

Since the saisie judiciaire had been made, the administration of the trusts had reached a stalemate. The original trustee had retired but had been prevented by the saisie judiciaire from transferring the assets to the new trustees. Neither the original trustee nor the new trustees were therefore able to perform their fiduciary duties. The Swiss assets had been frozen in 2008 and the administration of the property in Costa Rica was paralyzed. There were no longer any liquid assets in Jersey to meet the Viscount's costs and expenses (which would have to be paid out of public funds) or the trustee's fees and expenses.

The representor sought the discharge of the saisie judiciaire. He submitted that (a) it was for the Attorney General to prove that the saisie judiciaire should be maintained; (b) it should be discharged because there were no reasonable grounds for believing that an external confiscation order would be made in the US proceedings; (c) the dual-criminality test was not satisfied, i.e. the conduct alleged in the US proceedings would not amount to criminal conduct in Jersey and, even if it did, it would not constitute "criminal conduct" as defined in the 1999 Law; (d) he had no realisable property in Jersey, as the trust assets were not realisable property and were not in any case situated in Jersey; and (e) the court should discharge the saisie judiciaire as a matter of discretion.

The Attorney General opposed the representation, submitting that (a) the burden of proof fell to the representor to show that the saisie judiciaire should be discharged; (b) the requirement, under art. 15(a)(ii) of the 1999 Law, that there were reasonable grounds for believing that an external confiscation order might be made in the US proceedings was satisfied by a US Attorney's belief to that effect; (c) the dual-criminality test was also satisfied, as the US indictment charged the representor, who had a previous conviction for illegal gambling, with further gambling offences, for which, in Jersey, art. 10(4) of the Gambling (Jersey) Law 1964 provided a sentence of up to 12 months' imprisonment; (d) the trust assets constituted realisable property situated in Jersey; and (e) the saisie judiciaire should not be discharged as a matter of discretion.

Both parties contended that the court was functus officio in certain respects following the Viscount's application for directions in December 2007.

Held, discharging the saisie judiciaire:

(1) On an application seeking an exercise of the court's discretion in public law proceedings of this kind, it was inappropriate to consider whether the burden of proving that the saisie judiciaire should be discharged or maintained fell on the representor or the Attorney General. The court should instead consider whether, having regard to the policy objectives of the Proceeds of Crime (Jersey) Law 1999, i.e. to deprive criminals of the proceeds of criminal conduct, it was fair, reasonable and proportionate to maintain the order in force. All relevant considerations should be weighed in the balance ( paras. 16-17).

(2) The court was satisfied that there were reasonable grounds for believing that an external confiscation order might be made in the US proceedings, which was a requirement under art. 15(a)(ii) of the 1999 Law for the making of a saisie judiciaire. It was insufficient, for the purposes of art. 15(a)(ii), that a US Attorney believed the trust assets to be liable to forfeiture, as the court had to satisfy itself that such reasonable grounds existed ( paras. 22-24).

(3) The saisie judiciaire had also been properly made because the dual-criminality test was satisfied, i.e. the US indictment charged the representor with criminal conduct (the proceeds of which could be recovered by an external confiscation order) which corresponded to "criminal conduct" under art. 1(1) and Schedule 1 of the 1999 Law, i.e. "any offence?.?.?. for which a person is liable on conviction to imprisonment for a term of one or more years?.?.?." A broad, purposive approach would be taken to the construction of the 1999 Law to accommodate the widely differing procedures in other jurisdictions designed to penalize the concealing or laundering of the proceeds of serious crime. The US indictment alleged, inter alia, a conspiracy to conduct an illegal internet gambling business. Internet gambling had not been legalized in Jersey and was therefore an offence under art. 2 of the Gambling (Jersey) Law 1964. In Jersey, a conspiracy to commit an offence was itself an offence, for which an offender could be sentenced to imprisonment for one or more years. The allegations in the US indictment therefore corresponded to "criminal conduct" under Jersey law. Alternatively, again taking a broad approach to the 1999 Law, the representor had a prior conviction for a gambling offence and the US indictment alleged several further offences of illegal gambling. Assuming equivalent offence(s) existed in Jersey, the alleged conduct constituted "criminal conduct" because art. 10(4) of the Gambling Law provided a sentence of up to one year's imprisonment for a second or subsequent offence ( para. 19; paras. 27-28).

(4) The underlying assets of the trusts constituted "realisable property," pursuant to art. 2(1)(b)(ii) of the 1999 Law, as the representor had made a gift of them, directly or indirectly, to the trustee to hold on trust. Furthermore, the trust property was situated in Jersey...

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