Rude awakenings

More than 130 police officers and investigators were involved in the dawn raids on the homes and business premises of Vincent and Robert Tchenguiz as part of the SFO's criminal investigations into the 2008 collapse of Kaupthing Bank.

Raids of this nature are authorised by order of the court, known as 'search orders' in civil claims and 'search warrants' in the criminal context. They are made without notice, such that a defendant is unlikely to know he is even being investigated until someone arrives at his door armed with such an order. The effect is dramatic. Consequently there are strict criteria to be met by the claimant before the court will authorise a raid.

Criminal claims

A search and seizure warrant pursuant to section 352 of the Proceeds of Crime Act 2002 authorises the search of premises and seizure of material where production orders are not complied with, or where production orders are likely to be ineffective. A production order requires a person to produce information in their possession and control about an alleged defendant's financial affairs (usually their bank accounts). In itself, a production order does not allow a claimant access to premises.

More commonly, however, an application for a search warrant is made under section 8 of the Police and Criminal Evidence Act 1984 (as amended) (PACE). Pursuant to this provision a search warrant will be issued if the court is satisfied that there are 'reasonable grounds' for believing that an indictable offence, for example fraud, has been committed. The pre-conditions to making a search warrant are less onerous than in a civil matter.

The prosecutor must satisfy the court that: (1) there are reasonable grounds for believing that there is material on the premises which is likely to be of substantial value to the investigation of the offence; and (2) the material is likely to be relevant evidence.

Unlike in civil claims, under PACE the prosecutor does not need to show that the purpose of a search may be defeated if the defendant is put on notice of the search. It is sufficient to show that it is not practicable to communicate with a person entitled to grant access to the premises, or if there are reasonable grounds to believe that entry to the premises will not be granted unless a warrant is produced.

Civil claims

The court has the statutory power to allow an applicant to enter premises within a respondent's control for the purpose of:

(1) inspecting documents or other articles; and/or

(2) taking custody of documents or other articles, pending trial or enforcement of a judgment.

The pre-conditions for a search order are far more onerous in civil claims. The court must be satisfied that the applicant has shown that there is:

(1) an 'extremely strong prima facie case' against the respondent;

(2) risk of very serious damage, potential or actual, for the applicant; and

(3) clear evidence that the respondent has in its possession incriminating documents or material and that there is a real possibility that it may destroy such material before any application can be made.

What should you do in a civil claim?

• If that knock on the door comes, it is essential that urgent advice is sought, where possible, before agreeing that the search can proceed. A respondent can request to delay the search to obtain legal advice.
• Make use of the short time allowed to respondents (usually up to two hours) to gather together any incriminating documents or privileged documents. The search order will be served by a 'supervising solicitor', who is an independent officer of the court, and he will assess these documents to see whether they are to be included; if he is unsure he can retain the documents pending further order of the court.
• Check the wording in the order as to what documents are included. Only items 'clearly' covered by the terms of the order can be removed.
• Be present when the search takes place; the premises can only be searched and items removed in the respondent's presence, or the presence of one of his employees.
• Request and retain a copy of the list of all the material removed from the premises to which the respondent is entitled.

Investigatory powers such as search orders and search warrants are a very powerful weapon in the armoury of claimants and investigation authorities, both in the fight against financial crimes and to effect civil recovery. The high threshold criteria for obtaining search orders means that their use in civil claims may remain relatively rare. However, the Tchenguiz raids clearly demonstrate that the criminal authorities are perfectly prepared to ask the court to make these draconian orders and to use them to their full advantage when they can.