This judgment was handed down remotely at 2pm on 13 May 2025
by circulation to the parties by email and by release to the National Archives.
THE HONOURABLE MR JUSTICE PEPPERALL:
- On 9 August 2022, Timothy Schools was convicted of three offences of fraudulent trading, one offence of fraud by abuse of position, and one offence of transferring criminal property. He was sentenced to 14 years' imprisonment. At the subsequent confiscation hearing on 9 January 2025, the Crown Court found that Mr Schools' benefit from his general criminal conduct was over £146 million but determined that the available amount that could be confiscated was a mere £1,083,067.38.
- Despite the breathtaking scale of Mr Schools' criminality, the prosecution was unable to identify any bank balance in his name in excess of about £50. Further, there were no properties and the vast majority of the available assets comprised tainted gifts to his family and associates. Unless very substantial further assets are subsequently identified as available, confiscation proceedings will therefore be largely ineffective in recovering the proceeds of Mr Schools' crimes.
- The Serious Fraud Office ("the SFO") seeks to investigate this serious shortfall and identify any other assets that might have been obtained through Mr Schools' unlawful conduct. By this application, the SFO applied for an Unexplained Wealth Order and an Interim Freezing Order pursuant to the Proceeds of Crime Act 2002 ("the 2002 Act") against Mr Schools' former wife, Claire Schools. At the conclusion of the hearing, I made both orders. This judgment explains the reasons for making those orders.
SITTING IN PUBLIC
- This case was listed in private in accordance with paragraph 11 of the Practice Direction for Civil Recovery Proceedings which provides that an application for an Unexplained Wealth Order and a related Interim Freezing Order "will be heard and determined in private, unless the judge hearing it directs otherwise". At the outset of the hearing, I invited the parties and any press seeking admission to the hearing to address the court on whether I should make a contrary direction in this case.
- At first blush there is some tension between the Practice Direction and r.39.2(1) of the Civil Procedure Rules 1998 which provides the general rule that a hearing is to be held in public. A hearing may not be held in private unless and to extent that the court decides that "it must be held in private" applying the provisions of r.39.2(3). In other words, there is no discretion to sit in private but rather a strictly limited duty to do so in the circumstances provided by paragraph 3 of the rule.
- Rule 39.2(3) provides:
"A hearing, or any part of it, must be held in private if, and only to the extent that, the court is satisfied of one or more of the matters set out in sub-paragraphs (a) to (g) and that it is necessary to sit in private to secure the proper administration of justice—
(a) publicity would defeat the object of the hearing;
(b) it involves matters relating to national security;
(c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality;
(d) a private hearing is necessary to protect the interests of any child or protected party;
(e) it is a hearing of an application made without notice and it would be unjust to any respondent for there to be a public hearing;
(f) it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased person's estate; or
(g) the court for any other reason considers this to be necessary to secure the proper administration of justice."
- The interface between paragraph 11 of the Practice Direction and r.39.2 was considered by Murray J in National Crime Agency v. Hussain [2020] EWHC 432 (Admin), [2020] 1 WLR 2145. The judge identified that it was highly likely in these cases that r.39.2(3), and particularly sub-paragraphs (a), (c), (e) and (g), would be engaged such that the court would be under a duty to sit in private. No doubt that feature of this jurisdiction explains the starting point identified in the Practice Direction.
- Paragraph (3)(a) is often engaged where a party seeks a freezing order without notice since, if the applicant is right to assert that such relief is necessary to avoid the risk of dissipation of assets, liquid assets might well be dissipated before the court has an opportunity to rule upon the application. Plainly it is not engaged in a case such as this where the application is made on notice. Paragraph (3)(e) is also not engaged in this on-notice application.
- Paragraphs 3(c) and (g) may well be engaged where, as in Hussain, a respondent was suspected of involvement in serious criminality and the investigation remained at an early stage. Here, however, Mr Schools has been convicted and accordingly his criminality has already been proved to the criminal standard in a public trial in the Crown Court. He does not enjoy confidentiality in respect of his crimes and the interest in the public administration of justice, and particularly in the recovery of criminal property, plainly outweighs his interest in maintaining the confidentiality of his financial affairs.
- It is not alleged that Ms Schools was herself involved in her former husband's criminal activity. Nevertheless, these proceedings are designed to target assets that might be held in her name but which were obtained through her former husband's crimes. While it might be said that Ms Schools' ongoing relationship with her former husband is a personal matter upon which she is entitled to some confidentiality and that her legitimate sources of income and questions as to how she raised the funds to purchase and renovate her property involve confidential information relating to her own personal financial matters, no duty to sit in private arises unless the court is also satisfied that it is necessary to sit in private to secure the proper administration of justice. In view of the fact and scale of her former husband's proven criminality, I was not satisfied that it was necessary to sit in private in order to secure the proper administration of justice in this case. Accordingly, I directed that the hearing must proceed in public and I admitted the public and press to the hearing.
THE EVIDENCE
- The application against Ms Schools is supported by a witness statement made by Ian Price, a financial investigator employed by the SFO. I was also provided with some additional documents from the very recent confiscation proceedings. I allowed the SFO to rely on this additional material upon its undertaking to file and serve a further witness statement exhibiting these documents.
- Mr Price explains that Ms Schools married Timothy Schools on 16 March 2011 and that the couple had been in a relationship for some time before that. He says that he believes that they separated at some point between 2015 and 2016, and that a decree nisi was issued on 10 June 2016. The decree absolute was pronounced over 4 years later on 9 October 2020.
- Despite their divorce, Mr Price asserts that there is reason to believe that the couple are still in a romantic relationship, or at the very least that they remain close and in regular contact. Mr Price relies on two principal strands of evidence to support that position:
13.1 First, Mr Schools lived with Ms Schools at Hope Springs House in Matterdale, Penrith until his conviction in August 2022.
13.2 Secondly, there is evidence that Ms Schools regularly visits and talks daily to her former husband in prison. She is listed on the prison's records as his next of kin, his common law wife and his partner.
- Mr Price gives an account of Mr Schools' criminal offending and asserts that complex offshore arrangements were used as a mechanism to purchase and hold property, and to hold monies in bank accounts. He claims that known assets held through such structures included properties in the UK, Canada and France, companies in a number of jurisdictions, and bank accounts in the UK, France and Switzerland. Significant assets were realised through earlier High Court proceedings.
- Enquiries with HMRC revealed that Ms Schools declared dividends from UK companies in the tax years 2009/10 and 2010/11 totalling £230,000. Otherwise, she has declared minimal income since 2009/10. Mr Price asserts the SFO's belief that, with minimal other income, Ms Schools has used money made available to her via the divorce settlement and other means such as realising property purchased from the proceeds of her former husband's crimes.
- Ms Schools purchased Hope Springs House for £430,000 on 11 September 2018. The conveyancing file indicates that the purchase was primarily funded from the proceeds of sale of a chalet in France which had been owned jointly by Mr and Ms Schools through their French company, SCI Chalet Schools, prior to their divorce. Mr Price asserts that analysis of the French company's bank accounts and the corporate vehicles used by Mr Schools to perpetrate the fraud showed that the chalet was primarily funded by payments from companies instrumental in the fraud, namely Synergy (IOM) Limited and Noble Finance Limited.
- Mr Price says that the ownership of SCI Chalet Schools and therefore the chalet were transferred into Ms Schools' sole name as part of the divorce settlement. Nevertheless, in French law he remained a 50% co-owner albeit he asserted in his tax return that he held that interest as a bare trustee for Ms Schools. Indeed, when the chalet was sold the proceeds were paid to Ms Schools.
- In correspondence with the conveyancing solicitors, Mr Schools discussed transferring his shares in SCI Chalet Schools in order to protect the property in the liquidation of Axiom Funds.
- Mr Price therefore asserts:
"The SFO considers that the £400,031.78 transfer from Mr Schools to SCI Chalet Schools is the proceeds from the fraud for which he has been convicted, thus when it subsequently transferred to the Respondent … it continues to be recoverable property as defined under [the 2002 Act]."
- Mr Price says that Hope Springs House has undergone extensive renovations and estimates that some £750,000 has been spent on the property. He explains that one of the primary purposes in seeking an Unexplained Wealth Order is to obtain a detailed explanation from Ms Schools in respect of the costs and sources of funding for the renovation works. Ms Schools' bank statements support expenditure of about £740,000. Against that, there is little evidence of meaningful income. There is some rent totalling about £60,000 for the period between 2014 and 2020. Ms Schools' only other apparent source of funds to finance the renovations appears to have been the sale proceeds of another seven properties sold between March 2017 and August 2019 with total net proceeds of sale of a little under £1.2 million.
- Mr Schools had an interest in one of those properties, Headley House, until he transferred his interest to Ms Schools in 2004 for no consideration. She did, however, assume liability for a mortgage debt secured against the property. Mr Price adds that the SFO believes that the couple may have continued to live there together until Headley House was sold in March 2017 despite their divorce. During the criminal trial, there was evidence that Axiom Funds, a vehicle used for the fraud, paid off the mortgage on Headley House.
- Further, there is evidence that Noble Finance, another company involved in the fraud, loaned Ms Schools £500,000 in November 2010.
THE APPLICATION FOR AN UNEXPLAINED WEALTH ORDER
- Sections 362A and 362B of the 2002 Act provide that the Court may make an Unexplained Wealth Order where:
23.1 there is reasonable cause to believe that the respondent "holds" property with a value greater than £50,000;
23.2 there are reasonable grounds for suspecting that the known sources of the respondent's lawfully obtained income would have been insufficient for the purpose of enabling her to obtain the property, or that the property was obtained through unlawful conduct; and
23.3 there are reasonable grounds for suspecting that the respondent or someone connected with her is or has been involved in serious crime.
- Ms Schools is the registered freehold owner of Hope Springs House. Accordingly, there is clear evidence that she holds such property. Given that Hope Springs House was purchased for £430,000, has been substantially renovated, was being marketed for sale for £1.8 million last autumn, and the registered charge against the property secured a little over £168,000 as at May 2024, there is plainly evidence before me that it has a value well in excess of £50,000. Further, there is ample evidence of Ms Schools' connection with Timothy Schools; a convicted fraudster who has been involved in serious crime within the meaning of Schedule 1 to the Serious Crime Act 2007.
- I turn then to the income requirement. This requirement focuses on 11 September 2018 when Ms Schools purchased Hope Springs House for £430,000. The known sources of Ms Schools' then lawfully obtained income are limited:
25.1 As noted, she received substantial dividend income in 2009/10 and 2010/11. There is, however, no further evidence concerning the companies.
25.2 Ms Schools received modest income from employment in these tax years totalling £6,420 from companies connected to the fraud. There is no evidence of recent employment.
25.3 Ms Schools obtained some rental income.
25.4 Since 2017/18, Ms Schools has been in receipt of a pension of just over £11,000 per annum.
25.5 Ms Schools has no other known current associations with any UK company.
- I am therefore satisfied that there are reasonable grounds for suspecting that the known sources of Ms Schools' lawfully obtained income would have been insufficient to enable her to obtain Hope Springs House.
- The threshold conditions for an Unexplained Wealth Order are therefore established. In my judgment, it is appropriate to make such an order in this case for the purpose of investigating further the proceeds of Mr Schools' crimes and specifically whether Hope Springs House might be recoverable property. Such order may therefore assist in the statutory purpose of recovering the proceeds of crime.
- I have considered the questions that the SFO seeks to ask. They are, in my judgment, for the most part concise and proportionate questions properly asked by the SFO in order to probe seven areas:
28.1 First, any continuing personal and business connection between Mr and Ms Schools following their divorce.
28.2 Secondly, Ms Schools' assets and legitimate sources of income.
28.3 Thirdly, Ms Schools' purchase of Hope Springs House.
28.4 Fourthly, the funding of the renovation works.
28.5 Fifthly, rental income from the property.
28.6 Sixthly, the occupation of the property.
28.7 Seventhly, the current marketing of the property.
- I was, however, concerned that certain personal questions were neither necessary nor proportionate. Accordingly, I did not allow questions 1-4 about Ms Schools' early relationship with and initial separation from Mr Schools. The balance of the questions are properly asked in order to probe Ms Schools' unexplained wealth and I am satisfied that it is appropriate to make an order requiring her to answer such questions.
THE APPLICATION FOR AN INTERIM FREEZING ORDER
- Section 362J of the 2002 Act provides that, where the court has made an Unexplained Wealth Order in respect of any property, it may make an Interim Freezing Order if such order is necessary for the purpose of avoiding the risk of any subsequent civil recovery order being frustrated.
- Here, there is clear evidence that Hope Springs House is being offered for sale. Once sold, there is a risk of dissipation of the proceeds of sale. Indeed, given the absence of evidence that Ms Schools has any other substantial legitimate source of income, there is a real risk that the proceeds of sale will simply be dissipated in supporting her lifestyle.
- Upon being served with this application, Ms Schools emailed the SFO on 14 January 2025 confirming that she was committed to cooperating fully to ensure that the matter could be resolved efficiently and effectively. She acknowledged that her former husband had been convicted and that a confiscation order had been made. She added that she was prepared to contribute the proceeds from the sale of her property, Hope Springs House, towards settlement of this order. She expressed concern, however, that a freezing order would hinder the resolution process. She argued that a freezing order over her property might deter buyers, force a rushed sale and potentially reduce the sum realised.
- Ms Schools then explained that a viewing was scheduled for 24 January. She added that a potential buyer had indicated a "strong intent" to purchase the property and that the buyer was hoping to begin to release funds from a family trust in February 2025. Ms Schools added:
"To encourage a quick sale, I have already reduced the asking price from £1.8 million to £1.5 million and reuploaded the listing to rightmove.co.uk"
- Ms Schools added that she did not have the financial means to obtain legal representation and that her bank balance was currently £1,500. She added:
"In light of advice received, it could be seen as counter-productive for the SFO to impose a Property Freezing Order that might delay or prohibit the sale of Hope Springs House. Such a delay could postpone payments to investors in the Axiom Funds under the Compensation Order made in the confiscation proceedings.
Instead, I propose an alternative approach that may be more conducive to an expeditious resolution: I am willing to provide a written undertaking or accept a charge against the property, to sell Hope Springs House with the consent of the SFO and to use sale proceeds to discharge the Confiscation Order amount. If there is … some type of undertaking that you require, can you please send me draft [wording] to consider.
This approach would ensure the property sells for its maximum market value and that the proceeds are directed appropriately, without unnecessary complications."
- Ms Schools referred to earlier civil proceedings in 2013 and maintained that she had complied with all obligations at that time. She said that she remained fully willing to cooperate to address the issue in full. She committed to maintaining the property in excellent condition to maximise its value; to provide monthly updates on the sales process; and to cooperate fully with the SFO.
- In her oral submissions, Ms Schools urged the court not to make an Interim Freezing Order arguing that such an order might negatively impact the planned sale of Hope Springs House. She insisted that she was the best person to market and sell the property in order to achieve full value.
- I am satisfied that it is necessary to make an Interim Freezing Order to avoid the risk of any subsequent recovery order being frustrated. Ms Schools might well be right to have reduced the purchase price by £300,000 after failing to secure a buyer at £1.8 million, but her own suggestion that that was done to achieve a "quick sale" rather than on professional advice as to the property's true value gives rise to the risk of a sale at an undervalue. Further, given her very limited means, there is a real risk that the net proceeds of sale might be diminished without the protection of a freezing order.
- The purpose of avoiding the risk of any subsequent recovery order being frustrated is, however, achieved by protecting the proceeds of sale and not by impeding a bona fide sale for value of the property. Accordingly, I granted a freezing order subject to the caveat that my order did not prevent Ms Schools from disposing of the property in a sale to which the SFO consented in writing, such consent not to be unreasonably withheld or delayed.
