Cayman Islands: Receivers´ Fees In Money Laundering Cases: The Effect Of Acquittal And The Return Of Restrained Assets

The Chief Justice of the Cayman Islands has delivered an important judgment on the application of the Proceeds of Criminal Conduct Law (PCCL), which reflects the balance that the Law itself seeks to strike between the objective of securing assets to meet any confiscation order upon conviction and ensuring that the proprietary rights of third parties are not prejudiced.

In the matter of Donald Fraser, the defendant was the subject of charges under the PCCL for money laundering offences. A restraint order was made in respect of all his known assets, including assets of which he was said to be the owner, beneficiary or in any other way interested, and a receiver was subsequently appointed over them. Some of those assets were shares in a company held by a trust considered to have been settled by the defendant. The charges against Mr Fraser were later dropped; the restraint order was discharged and most of the assets were released, leaving the shares as the only asset of significant value under the receivers’ control. The question then arose whether the receivers could settle their fees and expenses out of those shares.

The Chief Justice held¹ that:

1. A receiver appointed by the court is entitled to reimbursement of fees and expenses reasonably incurred in the conduct of the receivership from assets covered by a relevant restraint order as being the realisable property of a defendant, whether or not that defendant is convicted. A receiver is thus entitled to exercise a lien over those assets notwithstanding a subsequent discharge or variation of the restraint order and notwithstanding a subsequent acquittal of the defendant.
2. An exonerated defendant is entitled to compensation for loss in consequence of anything done in relation to his property only in the event of serious default on the part of the prosecutorial authorities.
3. Where, however, the assets restrained are shown to the satisfaction of the court not to be or never to have been the realisable property of a defendant, but instead the property of an innocent third party, the receiver has no right of reimbursement from or lien over such property. Instead, the receiver must look to the Crown (or other party who applied for his appointment) for payment.

This decision was based on a recognition that the restraint, charging and confiscation powers conferred on the court and on a receiver appointed under the PCCL must be exercised in accordance with what he described as two "competing but equal imperatives": first, to make available for satisfying any confiscation order that may be made in a defendant’s case the value of realisable property held by any person, by realising that property; and second, to allow any person other than the defendant or the recipient of a gift caught by the Law, to retain or recover the value of any property held by that person².

In coming to the decision as to the receiver’s rights of reimbursement, the Chief Justice was prepared to adopt persuasive judgments of the English Court of Appeal construing equivalent provisions in the Criminal Justice Act³, and acknowledged that the overriding public interest the drives the confiscatory provisions of both statutes is the same. He considered that a requirement that the costs of proceedings to confiscate the proceeds of crime, including the costs of receiverships appointed over the assets, should be met from the public purse whenever a defendant is acquitted would place an undue fetter on the prosecutorial decision-making process. This position was also justified by adopting the common law principles which govern receiverships⁴: such costs were an incident of management assumed by the court’s appointment in the public interest, and not incurred at the behest of the party (here the prosecution) seeking such appointment, and so were properly recoverable from the assets under management.

Both exonerated defendants and innocent third parties who may have held property which was restrained or charged as realisable property may seek compensation for resulting loss, but their rights are circumscribed by a statutory requirement of showing serious default (words which the court considered connote "malice, wilful or gross neglect") on the part of the prosecuting authorities for having obtained the restraint or receivership order in the first place⁵. In light of these statutory provisions, the court has little discretion to assist those who are the ‘victims’ of unsuccessful PCCL charges.

However, the Chief Justice went on to find that receivers were not entitled to have their costs paid from assets under their control irrespective of whether those assets are the realisable property of the defendant, including where they belong bona fide to an innocent third party. In so doing, he had to tackle head-on the "competing imperatives" in s.15 of the Law. He found, on reviewing the wording of the various subsections, that it was not part of the legislative intent to confiscate or otherwise diminish the value of the assets of innocent third parties, such that the second of those competing imperatives should be preferred in this regard. This point was one which has not been specifically decided in any court before⁶, and the decision should be welcomed as providing some clarity in all jurisdictions where proceeds of crime legislation provide similar powers for the restraint of assets through the appointment of receivers.

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