Divisional Court Rules Delayed Cash Detention Application Lawful

Whenever cash is seized in relation to a criminal investigation, the Magistrates' Court has to decide whether or not it can be detained beyond an initial 48 hours.

A recent judgment by the Divisional Court, helpfully summarised by The Law Society Gazette, has determined that an application made to the Magistrates' Court beyond 48 hours can, under certain circumstances, still be lawful despite technically being made out of time.

Relevant legislation

Section 294 of the Proceeds of Crime Act 2002 allows a constable or certain other authorised individuals to seize cash they have reasonable grounds to believe is either recoverable property (e.g. that obtained by unlawful conduct) or intended for use in unlawful conduct.

Cash is defined quite broadly to include things like coins and banknotes in any currency, cheques, travellers cheques, postal orders, gaming vouchers, betting slips and fixed-value casino tokens.

Section 295 of the Act permits that cash seized under section 294 can be detained for an initial period of 48 hours, after which time an application for its further detention, up to a maximum of 6 months, needs to be made to the Magistrates' Court (this is a power exercisable by a single Justice of the Peace).

Weekends and Bank Holidays are not taken into consideration when calculating the initial 48 hour detention period.

The court may grant the application if satisfied that either of the following conditions are met:

• Either: that there are reasonable grounds for suspecting that the cash is recoverable property and that either-
• (a) its continued detention is justified while its derivation is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cash is connected, or 
• (b) proceedings against any person for an offence with which the cash is connected have been started and have not been concluded.

• Or: that there are reasonable grounds for suspecting that the cash is intended to be used in unlawful conduct and that either- 
• (a) its continued detention is justified while its intended use is further investigated or consideration is given to bringing (in the United Kingdom or elsewhere) proceedings against any person for an offence with which the cash is connected, or 
• (b)proceedings against any person for an offence with which the cash is connected have been started and have not been concluded.

Background to Kingdom Corporate Ltd v Commissioners for HMRC

In the case of Kingdom Corporate Ltd (KCL) v Commissioners for HMRC the Divisional Court considered an application for a judicial review brought in relation to the Magistrates' Court granting a cash detention application made just outside the initial 48 hours' detention period.

On 16th January 2023 HMRC conducted a search of KCL's premises in accordance with section 289 of the Act.

At 1738 hrs officers recovered and initially detained banknotes totaling £350,000 Sterling and £50,000 in foreign currency.

The following morning, 17th January, HMRC contacted the Magistrates' Court and asked that an application for the continued detention of the seized cash be considered at 1400 hrs on 18th January. The request included the information that the initial detention period expired at 1738 hrs that day.

An officer of the Magistrates' Court replied and confirmed that the application had been listed at 1400 hrs on 18th January at Thames Magistrates' Court.

The parties duly attended Thames Magistrates' Court at 1400 hrs on 18th January, with each side being represented by counsel. The application was initially listed in Court 3, which was handling custody cases. The list caller explained to the parties that HMRC's application would have to wait until the custody cases had been dealt with.

At around 1600 hrs, with the 1738 hrs deadline looming ever closer, counsel for HMRC went to address the Bench in Court 3, reiterating the urgency with which the application had to be heard. The Bench was steadfast in its view that the custody cases took priority.

At 1700 hrs, having now completed its custody work, Court 3 closed for the day. The parties were told that Court 7 would deal with the HMRC application, once it had completed its own custody work.

At 1720 hrs the application was finally called on in Court 6, which had a Bench of two lay Justices. The Bench was handed the relevant documentation, which it took them a further 12 minutes to read through.

At 1732 hrs HMRC officer Imogen Johnson, who had laid the information, was cross-examined by counsel for KCL.

At 1748 hrs the Bench retired to consider its decision.

At 1750 hrs the Bench returned to announce its decision to grant the application.

Counsel for KCL immediately objected on the basis that time had run out at 1738 hrs and therefore the order was made out of time.

The court Legal Advisor confirmed that they had informed the Bench that the application was valid, as the case had been called on before 1738 hrs.

On 20th January (a Friday) an HMRC lawyer emailed KCL's solicitors and informed them of HMRC's intention to re-seize the cash on 23rd January and apply for a "fresh" detention order on 24th January. KCL's solicitors were informed that the "administrative" re-seizure would take place at HMRC's offices in Stratford, should they wish to be present and observe it.

On 23rd January HMRC officer Keith Hedinburgh re-seized the cash at the organisation's Stratford offices. The task was performed there owing to the obvious security risks of moving the cash elsewhere for re-seizure.

On 24th January the second application was heard at Thames Magistrates' Court by District Judge Jane McIvor. The application was made by HMRC officer Becerra, who said that it was accepted that the original application was granted outside the 48 hour time limit and was therefore unlawful.

Counsel for KCL opposed the second application, arguing that the original order had been made in excess of the court's jurisdiction and was void ab initio.

Having considered matters, DJ McIvor granted the second application. The notes she made at the time say: "I am satisfied that HMRC was entitled to lawfully re-seize money yesterday.

"It would be absurd if the cash had to be physically returned to the Respondent (including by way of electronic transfer) simply in order for it to be immediately re-seized. This is £350,000 in cash and it has to be properly cared for.

"I rule that HMRC's re-seizure of the cash yesterday was lawful and their application for a cash detention order can be renewed under section 295 of POCA 2002."

DJ McIvor expressed the view that the first detention order, granted on 18th January, had been null and void.

The claim for judicial review

KCL's application for judicial review was in respect of three issues:

(i) The lawfulness of the HMRC's decision of 20th January 2023 to issue a "fresh" application for a cash detention order;

(ii) The lawfulness of the re-seizure of the cash on 23rd January 2023;

(iii) The lawfulness of the District Judge's ruling of 24th January 2023.

The claimant's central argument was that there is no power under section 294 to re-seize cash that has previously been seized under that provision. That being the case, there was doubt over the lawfulness of DJ McIvor's ruling.

The decision of the court

Lord Justice Bean, with the agreement of Mrs Justice Tipples, dismissed the application for judicial review.

The Judge summarised the Claimant's position as thus: "As the court clock moved to the time of 1738 hrs the authority of HMRC to detain the cash expired; the Magistrates therefore made the order 12 minutes too late; and that was a defect that could never be cured either by re-seizure of the cash or by any order of the Magistrates' Court. In other words, at 1738 hrs the cash, though still suspected - for very good reason - to be 'recoverable property', had acquired immunity from seizure or detention."

He added: "I appreciate [counsel for KCL's] point that the decision of Parliament to specify a 48 hour time limit, and the fact that it has remained unaltered save to make provisions for weekends and bank holidays, is a point in the Claimants' favour.

"But it is not sufficient to persuade me that Parliament must have intended that a second application to a court, following a re-seizure, must be unlawful. It would be extraordinary if the 48 hour time limit on lawful detention had such a decisive effect."

Responding to [counsel for KCL's] claim that DJ McIvor gave insufficient reasons for granting the second application, the Judge said: "I disagree. It is simply a very brief summary of the conclusions which I have set out at greater length, namely that the re-seizure was lawful and that there was no reason why a second application could not be made."