Guernsey Court of Appeal confirms who bears the burden in forfeiture applications

In our recent briefing (available here), we explained the helpful guidance provided by the Royal Court in His Majesty's Comptroller v Fidelity Management and Royal Bank of Canada (Channel Islands) Limited [2025]GRC004 (First Instance Decision).  The First Instance Decision confirmed that, whilst the burden of proof in forfeiture applications rests on the party opposing such an application, His Majesty's Procureur or Comptroller (the Law Officers) is still required to establish a causal nexus between the monies (or a relevant part of them) sought to be forfeited and unlawful conduct. According to the First Instance Decision, the requirement to establish a causal link is a necessary safeguard for a person seeking to defend their rights of property.

The proceedings before the Royal Court of Guernsey (the Royal Court) concerned an application by the Law Officers made under section 13(2) of the Forfeiture of Money etc. in Civil Proceedings (Guernsey) Law 2007 (Law)¹, to forfeit the monies standing to the credit of a bank account (the Account). 

The Royal Court dismissed the forfeiture application brought by the Law Officers. The Law Officers appealed the decision on the basis that:

1. The Royal Court erred in its interpretation of section 13(2) of the Law.
   
   
2. If the Royal Court's interpretation of section 13(2) of the Law was correct, it should have found that the Law Officers had made out the requisite positive case. 
   
   
3. The Royal Court erred in its approach to the burden of proof (in the event that its interpretation of section 13(2) was incorrect).
   
   
4. Regardless of (3), the Royal Court was wrong to find that Fidelity Management (FML) had discharged the onus of proof under section 13(2) of the Law.

On 21 August 2025, the Guernsey Court of Appeal (the CoA) handed down its decision (available here) and allowed the Law Officers' appeal, thereby granting the application by the Law Officers for the forfeiture of the funds in the Account. The CoA, having conducted its own assessment of the evidence, considered that it: 

'can, and should, as an appellate court, substitute our evaluation of the evidence for that of the Lieutenant Bailiff. We must therefore assess whether, based on the Lieutenant Bailiff’s own findings of fact, FML has discharged the onus placed on it by section 13(2). In our view, for the reasons we have given above, we think the correct conclusion is that the evidence was insufficient to prove on the balance of probabilities that the funds in the account were not the proceeds of any person’s unlawful conduct'. 

The CoA arrived at this conclusion by relying on the following key findings:

1. In relation to the interpretation of section 13(2) of the Law, the clear meaning '…is that the account holder bears the onus of proving that the funds in the account are not the proceeds of unlawful conduct, of any sort, committed by any person. Of course, what is entailed in that exercise will vary from case to case' [49].
   
   
2. Considering the discharge of the onus, '…if one can prove a lawful source of the funds, then one has demonstrated the absence of an unlawful source. In any case there is no question of the account holder having to prove anything as a matter of certainty. As to whether it will be 'extraordinarily difficult' to discharge the burden of proof on the balance of probabilities, in some cases that may be so, but in many cases (always assuming that the funds are not derived from unlawful conduct) it will not be difficult, as the Lieutenant Bailiff observes in the next paragraph, the obvious approach is to prove where the funds did come from, as observed by this Court in paragraphs 31(4) to (6) of the 2024 Appeal judgment' [50].
   
   
3. As to the operation of the Law, 'the Law operates to forfeit any asset where there are reasonable grounds for suspecting it is the proceeds of unlawful conduct, unless the account holder can prove otherwise". As a consequence, "to say that only assets which are the proceeds of unlawful conduct can be forfeited' creates tension between that proposition and the workings of the reverse burden of proof.
   
   
4. Considering how the Law operated it 'would be more accurate to say that it is possible to forfeit assets which cannot be proved not to be the proceeds of unlawful conduct, (provided always, of course, that [the Law Officers have] first satisfied the reasonable grounds for suspicion requirement)' [51].
   
   
5. In relation to the effect of section 13(2) of the Law (and its development) and "having regard to the clear effect of the wording which reverses the onus, it is hard to believe that the legislature intended, as the Lieutenant Bailiff held, nonetheless, to preserve a significant evidential burden on [the Law Officers]" [54].
   
   
6. Whilst agreeing with the Royal Court that 'where [the Law Officers] adduce…evidence of [their] own in support of the proposition that there is a criminal origin of the funds sought to be forfeited, the party resisting forfeiture will have to beat that case, as it were" the CoA went further and stated that the party resisting the forfeiture order "must also meet the statutory requirement of showing, on the balance of probabilities, that the funds are not the proceeds of unlawful conduct. If it does not surmount that hurdle, the funds must be forfeited. No reformulation of the test for avoiding forfeiture which removes that element can be justified'. 

Key takeaways

The CoA reinforced the significant burden placed on a party seeking to avoid the forfeiture of funds. However, the decision confirms that the account holder need not prove the lawfulness of the funds with absolute certainty. The standard is the balance of probabilities. 

Demonstrating that  the funds come from lawful transactions or sources is one means of surmounting the threshold but this is not necessarily the only way: as the CoA explained,  if the grounds of suspicion relied on by the Law Officers in obtaining the freezing order can be shown to be unfounded, and the funds can be shown to have originated from any person who can prove that they have a blameless record in all their financial dealings, that may well go a long way to persuading the Court that there is a lawful source for the funds.

_{1 While the Law is the legislation applicable to in the Royal Court proceedings, it has since been repealed and replaced by the Forfeiture of Assets in Civil Proceedings (Bailiwick of Guernsey) Law 2023.}