Practice and Procedure


PUBLISHED April 29, 2003

It was inappropriate for a court to grant a declaratory relief in relation to the source of funds suspected of being the proceeds of crime without a full hearing and consideration of all the evidence adduced by the proper parties to the issue.Hearing to determine various issues and an application by the third defendant ('SFO') for proceedings against them to be stayed. The claimant ('AMT') was a ring dealing member of the London Metal Exchange. Following concerns about the integrity of one of its customers ('W'), AMT sought the consent of the first defendant ('FIU'), before paying out a credit balance of US$450,000 to W. In its response to AMT the FIU declined to give its consent. Consequently, AMT issued a claim against FIU seeking a declaration that the credit balance held by them was not the proceeds of criminal conduct. At the same time AMT issued a notice of application seeking an interim declaration in similar terms. When the application for an interim declaration came before the court it was decided that a trial of the matter was necessary, and therefore W was joined as second defendant to the proceedings. Subsequently, SFO was joined as third defendant as they had taken over the investigations started by FIU. SFO applied to have proceedings against them stayed on the basis that they were not in a position to add to the information already before the court and did not wish to prejudice their ongoing investigations. At the hearing to determine the issues the following matters arose: (i) ATM indicated that it was no longer pursuing its claim for interim declaratory relief, and that it would welcome a direction that it take no further part in proceedings until after the issue of whether the credit balance represented the proceeds of crime had been determined; and (ii) W applied to introduce a counterclaim seeking payment of the credit balance by AMT.HELD: (1) The essential futility of AMT's proceedings had been underscored by the position that it had adopted, namely, seeking declaratory relief yet also seeking to drop out of the proceedings, whilst having been unprepared to place before the court material upon the basis of which it might have been able to consider granting the relief claimed. (2) There had never been an issue between AMT and FIU as regards whether the credit balance represented the proceeds of crime. The only question asked of FIU by ATM was, in accordance with s.93A Criminal Justice Act 1988, whether they had consented to the payment being made. Accordingly, it had not been appropriate in the circumstances for ATM to have brought proceedings against FIU directed towards the determination of a question wholly different from that which they had asked. Further, it was unlikely that Parliament had intended such an outcome upon a proper withholding of consent. (3) The arising of disputes such as the one in the instant case had been one of the ordinary commercial risks that any financial institution would have had to face, and it was unlikely that a court would have granted interim declatory relief on the ultimate substantive question whether the credit balance had derived from criminal conduct. (4) The stay of proceedings sought by the SFO would be granted. (5) It was wholly inappropriate to grant declaratory relief at the present time. (6) Permission was granted for W to serve a defence and counterclaim. (7) It was inconceivable that there could be criminal proceedings brought under s.93 of the 1988 Act against a bank or other financial institution which had taken such steps as had been reasonable in all the circumstances to resist proceedings but had nonetheless been ordered by a court to pay over money which had subsequently been proved to be the proceeds of criminal conduct.Judgment accordingly

[2003] EWHC 703 (Comm)