IESC 4 · Supreme Court

THE SUPREME COURT

102/01

Denham J.

Murray J.

Hardiman J.

Geoghegan J.

Fennelly J.

BETWEEN

F. McK.

APPLICANT

AND

A.F. AND J.F.

RESPONDENTS

JUDGMENT delivered the 30th day of January, 2002 by FENNELLY J.

This appeal raises an important about the procedures applicable to claims brought under the Proceeds of Crime Act, 1996 (“the

act of 1996"). Is the Criminal Assets Bureau obliged to deliver a statement of claim, or may it proceed by notice of motion after

the issue of the plenary summons?

THE PROCEEDINGS

On 20th July 2000, the Plaintiff issued a plenary summons against the respondents, claiming orders pursuant to sections 3, 4, 7

and 9 of the act of 1996. The present appeal concerns only the second-named defendant, whom I will call the appellant. The

orders sought relate to a number of land holdings and bank accounts named in a schedule to the plenary summons. As is clear

from the affidavits later filed, the proceedings are maintained by the Plaintiff as an officer of the Criminal Assets Bureau

established under the Criminal Assets Bureau Act, 1996.

On 28th July 2000, the Plaintiff issued a notice of motion, grounded on a number of affidavits, seeking orders pursuant to

several sections of the act of 1996. The principal grounding affidavit states that the appellant is joined because he is alleged to

be the joint holder of two of the bank accounts described in the schedule to the plenary summons and that no allegations of

criminality are made against him. On the hearing of the motion, the defendants gave certain undertakings in relation to the

property, the subject-matter of the proceedings.

The second named defendant entered an appearance on 21st September 2000 requesting delivery of a statement of claim . This

request was repeated in correspondence. The Chief State Solicitor, writing on behalf of the Plaintiff, replied as follows:

“The above proceedings are interlocutory in nature and the High Court has held that statement of claim is not a

prerequisite in these proceedings. Sufficient detail of my client’s case against your client is set out in the papers already

filed herein and served on your client. Therefore it is proposed not to furnish a statement of claim.”

The appellant brought a motion to dismiss the proceedings on the ground of failure to deliver a statement of claim. On the

hearing of that motion, Mr Justice O’Sullivan decided that he should follow a decision of Mr Justice O’Higgins in M v M

(unreported 4th June 1999). It is apparent that, as a general practice, the Plaintiff in Criminal Assets Bureau cases does not

deliver a statement of claim and that that position has been accepted in the High Court. The learned trial judge noted that the

point had arisen in many such cases and though it is desirable that the matter be decided by this Court.

THE RELEVANT STATUTORY PROVISIONS

The long title to the act of 1996 describes it as “an Act to enable the High Court, as respects the proceeds of crime, to make

orders for the preservation and, where appropriate, the disposal of the property concerned and to provide for related

matters.” In its judgment of 18th October 2001, in M v G.M. an others, this Court entertained and rejected a wide-ranging

challenge to the constitutionality of many of the provisions of the act of 1996. The Court described the legislation as

“unquestionably draconian.” (Page 41 of the unreported judgment). The act of 1996 enacts three substantive procedures for

the achievement of its objective.

- section 2 confers power on the High Court to make what is called “an interim order” preventing certain specified dealings with

property for a period of twenty one days; the application is to be made ex parte either by a member of An Garda Síochána not

below the rank of Chief Superintendent or by an authorised officer of the Revenue Commissioners;

- section 3, which I set out in full, provides for an application to be made to the High Court for what it calls “an interlocutory

order” in terms practically identical to the interim order;

- section 4 applies where an interlocutory order has been in force for not less than seven years. Then, the Court may, on

application make a “disposal order” which divests the respondents of their rights in the property.

The act of 1996 contains other important provisions including provisions for admitting hearsay evidence subject to specified

conditions.

The interlocutory order under section 3 is central to the argument in the present appeal and I set out its relevant provisions:

"3.(1) Where, on an application to it in that behalf by the applicant, it appears to the court, on evidence tendered by the

applicant, consisting of or including evidence admissibility by virtue of section 8 -

(a) that a person is in possession or control of -

(i) specified property and that the property constitutes, directly or indirectly, proceeds of crime, or

(ii) specified property that was acquired, in whole or in part, with or in connection with property that,

directly or indirectly, constitutes proceeds of crime,

and

(b) that the value of the property or, as the case may be, the total value of the property referred to in both

subparagraphs (i) and (ii) of paragraph (a) is not less than £10,000, the court shall make an order ("an

interlocutory order") prohibiting the respondent or any other specified person or any other person having notice of

the order from disposing of or otherwise dealing with the whole or, if appropriate, a specified part of the property

or diminishing its value, unless, it is shown to the satisfaction of the court, on evidence tendered by the

responsibility of any other person -

(I) that that particular property does not constitute, directly or indirectly, proceeds of crime and was not

acquired, in whole or in part, with or in connection with property that, directly or indirectly, constitutes

proceeds of crime, or

(II) that the value of all the property to which the order would relate is less than £10,000:

Provided, however, that the court shall not make the order if it is satisfied that there would be a serious risk

of injustice.

(2) An interlocutory order -

(a) may contain such provisions, conditions and restrictions as the court considers necessary or expedient, and

(b) shall provide for notice of it to be given to the respondent and any other person who appears to be or is

affected by it unless the court is satisfied that it is not reasonably possible to ascertain his, her or their

whereabouts.

(3) Where an interlocutory order is in force, the court, on application to it in that behalf at any time by the respondent

or any other person claiming ownership of any of the property concerned, may, if it is shown to the satisfaction of the

court that the property or a specified part of it is property to which paragraph (I) of subsection (1) applies, or that the

order causes any other injustice, discharge or, as may be appropriate, vary the order.

(4) The court shall, on application to it in that behalf at any time by the applicant, discharge an interlocutory order.

(5) Subject to subsections (3) and (4), an interlocutory order shall continue in force until -

(a) the determination of an application for a disposal order in relation to the property concerned

(b) the expiration of the ordinary time for bringing an appeal from that determination,

(c) if such an appeal is brought, it or any further appeal is determined or abandoned or the ordinary time for

bringing any further appeal has expired, whichever is the latest, and shall then lapse.

(6) not relevant

(7) not relevant"

Section 4 provides:

"4.(1) Subject to subsection (2), where an interlocutory order has been in force for not less than 7 years in relation to

specified property, the court, on application to it in that behalf by the applicant, may make an order ("a disposal order")

directing that that whole, or if appropriate, a specified part of the property be transferred, subject to such terms and

conditions as the court may specify, to the Minister or to such other person as the court may determine.

(2) Subject to subsections (6) and (8), the court shall make a disposal order in relation to any property the subject of

an application under subsection (1) unless it is shown to its satisfaction that that particular property does not

constitute, directly or indirectly, proceeds of crime and was not acquired, in whole or in part, with or in connection with

property that, directly or indirectly, constitutes proceeds of crime.

(3) The applicant shall give notice to the respondent (unless the court is satisfied that it is not reasonably possible to

ascertain his or her whereabouts), and to such other (if any) persons as the court may direct of an application under

this section.

(4) A disposal order shall operate to deprive the respondent of his or her rights (if any) in or to the property to which it

relates and, upon the making of the order, the property shall stand transferred to the Minister or other person to whom

it relates.

(5) The Minister may sell or otherwise dispose of any property transferred to him or her under this section, and any

proceeds of such a disposition and any moneys transferred to him or her under this section shall be paid into or disposed

of for the benefit of the Exchequer by the Minister.

(6) In proceedings under subsection (1), before deciding whether to make a disposal order, the court shall give an

opportunity to be heard by the court and to show cause why the order should not be made to any person claiming

ownership of any of the property concerned.

(7) The court, if it considers it appropriate to do so in the interests of justice, on the application of the respondent or, if

the whereabouts of the Respondent cannot be ascertained, on its own initiative, may adjourn the hearing of an

application under subsection (1) for such period not exceeding 2 years as it considers reasonable.

(8) The court shall not make a disposal order if it is satisfied that there would be a serious risk of injustice".

Section 8, insofar as it allows for reception of hearsay evidence provides:

"8.(1) Where a member or an authorised officer states -

(a) in proceedings under section 2, on affidavit or, if the court so directs, in oral evidence, or

(b) in proceedings under section 3, in oral evidence,

that he or she believes either or both of the following, that is to say:

(i) that the respondent is in possession or control of specified property and that the respondent is in possession or

control of specified property and that the property constitutes, directly or indirectly, proceeds of crime,

(ii) that the respondent is in possession of or control of specified property and that the property was acquired, in whole

or in part, with or in connection with property that, directly or indirectly, constitutes proceeds of crime,

and that the value of the property or, as the case may be, the total value of the property referred to in both

paragraphs (i) and (ii) is not less than £10,000, then, if the court is satisfied that there are reasonable grounds for the

belief aforesaid, the statement shall be evidence of the matter referred to in paragraph (i) or in paragraph (ii) or on

both, as may be appropriate, and of the value of the property.

2. The standard of proof required to determine any question arising under the Act shall be that applicable to civil

proceedings."

RELEVANT PROVISIONS OF THE RULES

No special rules have been made covering any of the proceedings under the act of 1996. The relevant rules relating to plenary

proceedings are the following.

Order 1, r. 1 provides:

"1. Save as otherwise provided in these Rules, civil proceedings in the High Court shall be instituted by a summons of the

Court to be called an originating summons".

Order 1, r 6 provides:

"6. In all proceedings (other than to take a minor into wardship) commenced by originating summons, procedure by

plenary summons shall be obligatory except where procedure by summary summons or by special summons is required

or authorised by these Rules".

Orders 2 and 3 provide respectively for proceedings by summary and Special Summons. It was not suggested that the present

proceedings could have been commenced by either of those methods.

Order 12 provides for the entry of an appearance. Rule 2(1) requires an appearance to a plenary summons to be entered within

eight days after service. Rule (5) states:

“In the case of a plenary summons, the memorandum of appearance shall include a notice stating whether the

defendant requires a statement of claim or not.”

Order 19, rule 1 provides:

“The Plaintiff shall, subject to the provisions of Order 20, and at such time and in such manner as therein prescribed,

deliver to the defendant a statement of his claim, and of the relief or remedy to which he claims to be entitled.....”

Order 20, rule 1 dispenses with the need for a statement of claim in cases commenced by summary or special summons.

Order 20, continues:

"2. Where the procedure is by plenary summons, the plaintiff may deliver a statement of claim with the plenary

summons or notice in lieu thereof, or at any time within twenty-one days from the service thereof.

3. Where the defendant enters an appearance to a plenary summons and, at the time of entering such appearance or

within eight days thereafter, gives notice in writing to the plaintiff or his solicitor, that he requires a statement of claim

to be delivered, the plaintiff, if he has not already done so, shall deliver a statement of claim within twenty-one days

from the receipt of such notice".

THE APPELLANT’S SUBMISSIONS

The appellant submits that, the procedure being by plenary summons, the rules provide for a statement of claim. He has asked

for one and Order 20, rule 3 obliges the plaintiff to deliver one. He goes on to allege that he is disadvantaged by the absence of

a statement of claim. He cannot seek particulars of the Plaintiff’s claim. He cannot put in a defence in the absence of a

statement of claim. In this case, no criminality is alleged against him and he is all the more entitled to a clear statement of the

case being made against him. The Plaintiff is in reality the Criminal Assets Bureau. There is no basis for according special

treatment to that body, especially given all the special advantages procedural and otherwise conferred on the Criminal Assets

Bureau by the legislation.

The relief sought by virtue of section 3 is not, in spite of the statutory name given to it in truth an interlocutory order. It is

substantive relief provided for by statute. This Court had observed in its ex tempore judgment in McK v G, McK v C (unreported

23rd July 2001) accepted that the interlocutory order could be regarded as the real issue.

THE RESPONDENT’S SUBMISSIONS

Mr Richard Nesbitt, Senior Counsel for the Plaintiff, accepted that the application under section 3 was a proceeding for the

purposes of Order 1, rule 6. He also accepted that the need to deliver a statement of claim would produce no particular

difficulty for the plaintiff. In fact, hearsay and thus oral evidence is given and is the main evidence in these cases. He claimed,

however, that it was an advantage rather than an inconvenience for the defendant to have all the material upon which the

plaintiff intended to rely placed on affidavit. In justification of the procedure followed in this case, he made two principal

submissions:

Firstly, the order provided for by section 3 of the act of 1996 is, as it is called in the act, an interlocutory order. Its provisional

nature can be demonstrated by the terms of section 3 itself. The substantive relief is that provided for by section 4, the

disposal order. Until the disposal order is made, the interlocutory order is provisional. The court has power to vary and discharge

it. Not all interlocutory orders are made pending the hearing of an action. It is stated in Stroud’s Judicial Dictionary of Words

and Phrases (Sixth ed. Vol 2 G-P London 2000) that it is “not confined to an order made between writ and final judgment, but

meant an order other than final judgment; and, therefore, a receiver might be appointed under that section [referring to the

Judicature Act]....”

Secondly, no rules have yet been made, as already stated by this Court in M v G.M (see above). The rules do not automatically

apply. The decision of this Court in Inspector of Taxes v Arida Ltd. [1996] I.L.R.M. 74 shows that the application of the general

scheme of the Rules was subject to the condition that one could not identify “some contrary indication to the effect that the

rules are to be disapplied.”

CONCLUSION

The Plaintiff says, firstly, that the order sought under section 3, and there called an interlocutory order, is an interlocutory in

the everyday sense in which that expression is used, an order of a procedural character made pending the hearing of an action.

Hence, a statement of claim need not be delivered.

The true analogy for this purpose is, in my opinion, an application for an interlocutory injunction. Even if the plaintiff is correct

in his submission, it does not follow that a statement of claim need not be delivered. Accepting the hypothesis that the order

which can be sought under section 4 is to be equated with the substantive relief at the hearing of an action, the rules still

appear to require a plaintiff to deliver a statement of claim when one is demanded by a defendant. But the ‘hearing of the

action’ if that is what it is cannot take place for a least seven years, which illustrates the unreality of the analogy.

The solution must be found then by addressing directly the question of whether the section 3 order is truly an interlocutory

order in the ordinary sense. Taking the interlocutory injunction as the closest equivalent type of interlocutory order, I find that

the section 3 order lacks several of the essential attributes of such an order.

The purpose of an interlocutory injunction is to preserve the status quo between the parties, or putting it more cautiously, to

maintain a just equilibrium between the parties until their respective rights can be substantively determined. Implicit in this is

that the court must act urgently on the basis of limitations inherent in the impossibility of determining conclusively complex

disputed issues of fact or law. Implicit also is the assumption that the substantive issues will be determined as soon as is

reasonably possible. At that later stage, the entire substance of the material disputed at the interlocutory stage, may be

reopened.

The interlocutory injunction is a provisional measure granted for a time long enough but no longer than is necessary to ensure

that the rights of the parties are not prejudiced until they can be comprehensively determined.

The section 3 order is not of that character. It is not interlocutory in the sense of being ancillary to the substantive relief. It

does not bear that relationship to the section 4 order.

It is true that second 3 of the act of 1996 confers power on the High Court to make an order of the type known as a Mareva

injunction and that a Mareva order is interlocutory in the normal sense. It is designed to preserves a certain state of facts

pending the hearing of an action. It does not dispose finally of the property affected. It restrains any dealing with it for as long

as it remains in force.

Nonetheless, the interlocutory order under section 3 is, in my view a substantive remedy for several reasons.

Firstly, the restraint on dealing is itself a free-standing substantive remedy. It imposes a complete embargo on any dealing with

property.

Secondly, it is not ancillary to an order to be made in the future under section 4, as an ordinary interlocutory injunction is. In a

normal case, the plaintiff must at the trial of the action succeed in establishing his right to substantive relief. In the case of the

act of 1996, section 4(1) permits a disposal order to be made on the sole ground that an interlocutory order has been in force

for seven years. Nothing new needs to be proved.

Thirdly, in truth, the substantive allegation is that the subject property represents, directly or indirectly, the proceeds of crime.

The court must, according to section 3, be satisfied of this essential fact at the time it makes the interlocutory order: the court

may make the order if “it [so] appears to the court, on evidence tendered by the applicant..” This evidence may, by virtue of

section 8 be hearsay. There would have been no need to introduce this provision, if the application were truly interlocutory.

Order 40, rule 4 of the Rules permits hearsay evidence on such motions subject to the deponent giving his means of knowledge.

In making this determination, the court does more than decide that there is a fair issue to be tried. It decides that the subject

property in fact represents the proceeds of crime.

Fourthly, once this order is made, it continues in force indefinitely unless either the applicant applies for it to be discharged

(section 4(4)), or unless the respondent can show to the satisfaction of the court that the property does not constitute the

proceeds of crime (section 4(3)). There does not even appear to be any obligation on the applicant to apply for a disposal order

at the end of seven years.

Fifthly, even if this last point is not high in the scale of importance, the fact that an interlocutory order must be in force for a

minimum period of seven years before the disposal order can be sought makes it impossible to regard it ac interlocutory in the

sense in which that word is used in the Rules of Court.

Geoghegan J., in his judgment, has examined the nature of an interlocutory. I agreed fully with his observations.

I turn now to Mr Nesbitt’s second argument, i.e. that there is sufficient contrary indication to show that the ordinary provisions

of the Rules of Court should not apply. Clearly, the fact that, as already stated, the order under section 3 is not an

interlocutory order in the sense of the rules removes one of the principal suggested indications.

The terms of the rules, as I have quoted them above are clear and explicit. Once it accepted, as obviously it had to be, that

the application under section 3, then Order 1 rule 6 mandates the use of the plenary summons procedure. That procedure is

peculiarly suited to the normal type of action where serious issues of fact are to be tried. The Summary Summons procedure is

specially designed to prevent defendants’ from delaying clear claims (particularly everyday debt claims) and obliging them to

swear an affidavit before being permitted to defend. It is notable, however, that, once that precondition is satisfied, the action

is sent for plenary hearing, essentially because that procedure is the one chose for disposing of disputed issues of fact.

I can accept, in principle, that a statute, introducing, as does the act of 1996, a new legal remedy, may lay down a particular

procedure so as to displace that provided for in the rules. That is, in effect what Egan J said in Inspector of Taxes v Arida Ltd.

Nonetheless, it is notable that, in the particular case, which concerned the jurisdiction of the Circuit Court to hear tax appeals,

he considered it “inconceivable, in the absence of any indication to the contrary, that the Oireachtas intended that the whole

paraphernalia of procedural regulation provided for by the by the Circuit Court Rules should be disapplied merely because a

particular jurisdiction is conferred upon the Circuit Court by legislation other than the Courts of Justice Acts.” (page 79 of the

report). I think that is also true of the act of 1996. The act contains no reference to rules of procedure. Section 2, it is true,

provides for an interim order to be made ex parte. By virtue of section 8, hearsay evidence may be given on affidavit under this

section. Section 3 contains no corresponding provision. It does not, in particular, state that the application is to be by motion.

Accordingly, the plenary summons procedure applies. The appellant having entered an appearance seeking a statement of claim,

the plaintiff is bound to deliver one.

While the above suffices to dispose of the case, it is right to add that this Court has described the legislation as draconian. It

permits a person to be deprived of the use of his property based on allegations of the most serious character potentially

supported by hearsay evidence. In important respects, it shifts the burden of proof. The plaintiff has not pointed to any

procedural disadvantages for him in being required to deliver a statement of claim. It became apparent at the hearing of the

appeal that applications under section 3 are almost invariably based on hearsay and, consequently, oral evidence. Thus the

central part of the procedure approximates closely to what occurs in a plenary proceeding. In such circumstances, and in the

absence of any indication of a legislative intent to the contrary, I think it is clear that the normal plenary procedure should be

followed.

It does not follow from this that the Court should grant the relief sought in the notice of motion, namely that the proceedings

be dismissed. The plaintiff has declined to deliver a statement of claim on a mistaken view of the law, but one which is in

accordance with existing High Court practice. The Court should grant an appropriate extension of time.