Friday 04 January 2013
Judicial Review - Garnet Investments Limited v the Chief Officer, Customs & Excise, Immigration & Nationality Service (now known as the Guernsey Border Agency)
On Tuesday 20 November 2012, the Judicial Committee of the Privy Council notified Garnet Investments Limited that it had refused its application to appeal the decision of the Guernsey Court of Appeal which had found in favour of the Chief Officer Customs & Excise, Immigration & Nationality.
The Privy Council's written decision advised Garnet Investments Limited that its "application for permission to appeal had been considered by the Board and permission to appeal had been refused because the application does not raise an arguable point of law and the Board is not persuaded that the decision of the Court of Appeal is arguably wrong."
By way of background, on 5 and 6 July 2011, the Guernsey Court of Appeal heard the Chief Officer's application for leave to appeal against the decision of Lieutenant Bailiff Newman QC's judgment, in favour of Garnet Investments Ltd (Garnet), who had applied for judicial review of the Financial Intelligence Service's (FIS) decision not to give consent for the bank BNP Paribas (BNP) to make payments, requested by Garnet from its account at the Bank.
A spokesperson for the Guernsey Border Agency (GBA) said:
"this is the final and binding judgement which is welcomed by the FIU on whose behalf the Chief Officer accepted service of the Judicial Review that was brought by Garnet Investments Limited. The Privy Council has supported the Guernsey Court of Appeal's decision which found in favour of the actions of the FIU in withholding consent concluding that "the refusal of consent [by the FIS] was not only rational but almost inevitable"".
Lieutenant Bailiff Newman originally gave judgment on 14 February 2011 in favour of Garnet on the basis that the FIS decision not to grant consent was irrational and inappropriate, constituting an excessive interference with Garnet's property rights and a breach of Article 1 of Protocol 1 to the European Convention on Human Rights.
On 1 August 2011, the Guernsey Court of Appeal issued a 23-page written judgment which granted leave to appeal, allowed the Chief Officer's appeal and dismissed Garnet's application for judicial review.
The Court of Appeal noted the overall purpose of sections 38 to 40 of the Guernsey Proceeds of Crime Law was clear. It is to create extremely wide ranging "all crime prohibitions on money laundering". In particular, "the width of the section 39 offence is clearly intended to have a powerfully dissuasive effect on money laundering activity and to restrict the ability of money launderers and criminals to introduce the proceeds of crime into the financial system of Guernsey or to facilitate the transfer of such proceeds out of Guernsey".
The Court of Appeal stated Garnet had failed to provide any further information to BNP and the FIS, as to the circumstances of the acquisition of certain funds relating to the sale of Lamborghini shares, so as to dispel the suspicion entertained by BNP and accepted by the FIS. The Court concluded that "the refusal of consent [by the FIS] was not only rational but almost inevitable".
The Court stated that Garnet could challenge the refusal to transfer the funds in a private law claim against the Bank and therefore the refusal of consent did not preclude judicial oversight by the courts.
The Court of Appeal also considered that the Lieutenant Bailiff erred in finding the decision of the FIS was an excessive interference with Garnet's prima facie property rights, unlawful and a breach of Article 1 of the first Protocol to the European Convention on Human Rights.
In the judgment the Court said: "in the context of this very wide ranging offence, the consent regime in subsection 39(3) of the Guernsey Proceeds of Crime Law serves two purposes. First the existence of the consent regime provides a strong incentive to persons who are suspicious of funds to report those suspicions before any transaction is effected. Second, the consent regime gives the FIS the operational freedom to grant relief from criminal liability in circumstances where it is considered to be in the interests of law enforcement so to do. Thus consent may be granted to avoid a suspected criminal becoming aware of the suspicions that are harboured in relation to him. This objective is also reinforced by the existence of offences in connection with tipping off [section 41 of the Law]. Consent may also be granted so as to permit a controlled transfer to take place so that funds can be traced for investigative purposes."
In the Judgment the Court identified the following facts.
- Garnet Investments Limited is a company controlled by Hutomo Mandaisa Putra (Mr Hutomo) also known as Tommy Suharto [or Soeharto] and was incorporated in the British Virgin Islands in March 1998. In July 1998 Garnet opened accounts with BNP Paribas in Guernsey.
- In 1998, funds which related to the sale of Lamborghini shares were placed into the Garnet accounts with BNP.
- At the time the Lamborghini shares were acquired, Mr Hutomo's father, Haji Mohammed Soeharto was the President of Indonesia. Mr Soeharto held that office between 1967 and 1998. This familial relationship has given rise to suspicions as to the circumstances in which Mr Hutomo might have obtained the personal wealth necessary at such a young age in order to make an investment of the size of the Lamborghini investment. His father was unlikely under the Indonesian Constitution to have been in a position to generate lawfully any significant familial wealth and there may also have been limits of propriety affecting Mr Hutomo's ability to develop a significant personal asset base through commercial activities in Indonesia.
- Despite the ostensible coincidence in time between the disposal of various assets, the funds flowing into Garnet and the loss of power by Mr Soeharto, Mr Hutomo denied in his affidavit that the timing was related to the resignation of his father in 1998.
- Following Mr Soeharto's loss of office in Indonesia, proceedings for corruption were brought against Mr Hutomo and he was convicted of corruption by a Judge sitting in the Supreme Court of Indonesia on 22 September 2000, in what was known as the "Goro" case. The Judge sentenced him to 18 months' imprisonment and fined him IDR (Indonesian Rupiahs) 30.6bn.
- Mr Hutomo went on the run, and was later convicted of planning the murder of the Supreme Court Judge who had found him guilty of corruption. On 20 November 2001, the Supreme Court verdict of corruption against Mr Hutomo was quashed.
- On 26 July 2002 Mr Hutomo was sentenced for murder, fleeing justice and illegal possession of firearms. The First Instance Court sentenced Mr Hutomo to 15 years' imprisonment. That sentence was later reduced to 10 years' imprisonment. He was released from jail in October 2006.
- In October 2002 Garnet issued instructions to BNP directing it to transfer funds totalling approximately €36.46 million from the accounts. BNP refused to comply with these instructions and on 1 November 2002 BNP notified the Guernsey Financial Intelligence Service (FIS) of those instructions. The FIS refused to consent to BNP acting on the instruction. The FIS's initial refusal of consent and subsequent refusals of consent (in particular the decision dated 29 June) formed the basis of Garnet's claim for judicial review.
Document download: the full background to the case is set out in sections 3 to 17 of the judgment for reference. Please see below document.