What is a restraint order?
A restraint order under the Proceeds of Crime Act 2002 is an order made by a Crown Court judge, normally at the request of the police or other investigating or prosecuting authority, which effectively ‘freezes’ the assets (including bank accounts) of an individual or a company. A single restraint order may apply to several connected individuals and / or companies. A restraint order is typically designed to ‘freeze’ all the assets of the individual and company to whom it is directed, including assets legitimately acquired and even including assets outside the UK.
When can a restraint order be made?
A restraint order can be made at any time after a criminal investigation has commenced into suspected criminal conduct from which an individual or company is suspected to have benefited. It is not necessary for the investigation to have progressed as far as the arrest of anybody, nor is it necessary that anybody has been charged with an offence.
But the applicant for the restraint order must show that he has reasonable grounds to suspect that a benefit has been obtained from criminal conduct. Ordinarily a restraint order should be made only if there is genuinely a risk that assets will be dissipated (for example being spent, hidden, given away or removed from the country) in the absence of such an order.
How is a restraint order made?
A restraint order is normally made by a Crown Court Judge on an application by the police / Crown Prosecution Office or other authority. Before making the restraint order the judge will be provided with a witness statement (often supported by other documentary evidence) from the applicant for the order. However, the subject(s) of the order will NOT have an opportunity to challenge the making of the order at this stage and will NOT be informed of the application until after the restraint order has been made.
As a result, the subject(s) of the restraint order will normally be unaware of the application until they are served with a copy of the restraint order – by which time it will already be in force.
Who can be the subject of a restraint order?
An individual or company may be the subject of a restraint order if it is an alleged offender who is suspected to have benefited from an offence or is a person who (though not an alleged offender) has received assets from an alleged offender (by way of what is known as a ‘tainted gift’).
It follows that a restraint order may be drawn up to name as its subjects not only the alleged offender but also, for example, his spouse.
What is the effect of the restraint order?
The restraint order will prevent the assets of the subject being dissipated by preventing the sale or transfer of those assets and by ‘freezing’ the subject’s bank accounts. Technically the restraint order prohibits each subject from “dealing with” his assets. The restraint order will typically list known bank accounts and assets of the subject and will contain clauses designed to ensure that the order relates to those assets and accounts and to any other assets and accounts which are not shown on the list.
There is normally a provision in the restraint order allowing the subject to draw and spend a sum of money, typically £250 per week, to meet day to day living expenses.
The applicant who obtained the restraint order will normally serve copies of it on the subject(s) of the order and send copies of it to banks, etc at which the subject are believed to have accounts and to, for example, the Land Registry in relation to land and buildings owned by the subject.
Can a restraint order be challenged?
Yes. The subject of a restraint order can apply to have the order discharged (cancelled) or amended. The application will be heard by a Crown Court Judge who will hear submissions both from the applicant for the original order and the subject of that order.
Typically, a subject of a restraint order will apply to have the terms of the order relaxed, for example to allow a higher level of living expenses or to allow monies to be used to pay specific expenses (such as mortgage payments) or to remove one or more of the subjects from the scope of the order.
In some circumstances it may be appropriate for a subject to apply to the court to have the order limited to cover only specified assets.
The decision of the Crown Court Judge can be the subject of an appeal to the Court of Appeal and beyond.
Where the restraint order impacts upon a legitimate business it may be necessary to make careful arrangements in the order to allow the business to continue in operation – to pay employees’ wages and business expenditures, for example. One option in such a situation is for the court to appoint a management receiver (such as an independent accountant or insolvency practitioner) to operate the business whilst protecting the business assets from dissipation. However, this may prove expensive, and the management receiver’s fees are normally met out of the assets which he is managing, so in effect the subject pays his fees.
What is the purpose of a restraint order?
Ultimately the purpose of a restraint order is to preserve the assets of the subject so that they remain available to meet any confiscation order which the Crown Court may make after the alleged offender has been charged, tried and convicted of an offence.
What else might a restraint order require?
Commonly a restraint order includes clauses requiring the subject of the order to disclose further information to the authorities concerning their assets. This, information may then be used to assist in ensuring the effectiveness of the restraint in preventing the dissipation of assets and to assist the prosecution in confiscation proceedings following the conviction of the alleged offender. However, the information cannot be used by the prosecution during the alleged offender’s criminal trial.
A restraint order may also contain a requirement to return to the UK assets held overseas (such as monies in an overseas bank account).
What about paying the alleged offender’s legal fees?
Restrained assets cannot be used to meet any legal fees of the alleged offender in connection with his defence against any criminal charges arising from the investigation which formed the basis of the application for the restraint order. This means that the alleged offender will have to rely on legal aid (or gifts from friends) to meet his defence costs.
What about payments made to lawyers before the restraint order was made?
Where a solicitor holds funds in his client account which he has received from a person who has since become subject to a restraint order then the balance standing to the credit of the client is an asset of the subject which (like his other assets) is ‘frozen’ by the restraint order.
It is permissible for the solicitor to bill work done by him up to the date of the restraint order and pay himself for that work by transfer from the client account. But similar transfers cannot be made in respect of any subsequent legal work.
What is the effect of breaching the restraint order?
A person who breaches a restraint order may be held to be in contempt of court (this is a ‘civil’ contempt/, which can nevertheless result in imprisonment) or may be subject to prosecution for attempting to pervert the course of justice.
When does the restraint come to an end?
A restraint order will continue in force until it is lifted by the Crown Court. This could be on an application by the subject of the order, or where proceedings are not brought within a reasonable time as a consequence of a criminal investigation which has not resulted in anyone being charged, or on the acquittal of the alleged offender, or on the satisfaction of any confiscation order made by the Crown Court following the alleged offender’s conviction.
Even after a confiscation order has been satisfied or discharged a restraint order may continue in force & restrained assets may then be used to satisfy any outstanding legal aid contribution related to the criminal proceedings.