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||Neutral Citation Number:  EWCA Crim 2001
||Case No: 200804436/C5
IN THE COURT OF APPEAL
||Royal Courts of Justice
London, WC2A 2LL
19 December 2016
B e f o r e :
LORD JUSTICE SIMON
MR JUSTICE HICKINBOTTOM
|| R E G I N A
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Mr R Whittam QC appeared on behalf of the Appellant
Mr A King appeared on behalf of Neumans Solicitors
Mr D Bedenbham appeared on behalf of the Lord Chancellor
FOR MENTION (Approved)
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- MR BEDENBHAM: My Lords, I appear for the Lord Chancellor. My learned friend, Mr Whittam, appears for Mr Patel and my learned friend, Mr King, appears for Neumans, now separately represented.
- This matter was last before the court on 15th June and on that occasion the court made various orders including that the Lord Chancellor file a statement of case and evidence in support of the case therein advanced and that Neumans and Mr Patel file a reply and file evidence in response. The Lord Chancellor filed the statement of case and supporting evidence within the time limit set by the order.
- LORD JUSTICE SIMON: Two witness statements of Mr Fitzgerald-Morris.
- MR BEDENBHAM: Indeed. Neither Mr Patel nor Neumans have filed any substantive response or reply. Mr Patel has, in the past week or so, indicated in correspondence that he does not oppose the court revisiting and revoking the DCO.
- LORD JUSTICE SIMON: We have a note to the court now from Mr Whittam which we take it, unless he tells us otherwise, is what he intends to say.
- MR BEDENBHAM: My Lord, of course it is ultimately a matter for the court whether it revisits and revokes but the Lord Chancellor is very concerned that £500,000 was paid out by way of a payment on account under this DCO and despite the issue being raised squarely in the correspondence and with Mr Patel's representatives, we are to date, not in a position where we have had any offers in relation to repaying that £500,000. My learned friend this morning said he has taken instructions on the point.
- LORD JUSTICE SIMON: Presumably he would have done that before now but we will hear from him.
- MR BEDENBHAM: What the Lord Chancellor does not want of course, is to end up in a position where this court disposes of the matter and the DCO is revoked; there is £500,000 owing and we have to commence separate proceedings where Neumans and Mr Patel point at each other and say: "It is your liability to repay", and we have to go through an entirely new set of proceedings.
- LORD JUSTICE SIMON: Why is Mr Patel not liable?
- MR BEDENBHAM: That is the primary position it is Mr Patel. You will see the same case the relief --
- LORD JUSTICE SIMON: The payment was made presumably to him to discharge his liability to his solicitors.
- MR BEDENBHAM: The payment was actually made to Neumans but of course for the account of Mr Patel and that is the reason why in the statement of case the relief sought is an order ordering Mr Patel to repay the £500,000. That said, in light of the uncertainty that exists, because we still have not established what the facts are, I am going to seek the court's leave to amend the relief sought in the statement of case.
- LORD JUSTICE SIMON: Let us have a look at that.
- MR BEDENBHAM: In the first file right at the front, internal page 17. It is paragraph 46. Rather than the carat D, I seek to amend so that 46D reads "order that Mr Patel and Neumans are jointly and severally liable to repay the £500,000 paid as a payment on account on or about 8th December 2011."
- LORD JUSTICE SIMON: "Severally liable to repay", "jointly and severally".
- MR BEDENBHAM: To repay the £500,000 paid as a payment on account, on or about 8th December 2011, and that £500,000 is to be paid to the Lord Chancellor, within I suggest 7 days.
- LORD JUSTICE SIMON: It seems a rather unseasonably short period.
- MR BEDENBHAM: I accept it is a large sum of money and if Mr Patel or Neumans had come to the Lord Chancellor and said: in fact the payment can be made in 21 days, 2 months, whatever it might be. We have not had that to date. If an offer is made today: the money can be paid in say 2 months, I am going to ask this court to not make a final order today and but rather to hold this matter over pending payment and once the payment then to finally dispose of this matter.
- My Lord, depending on the position adopted by the other parties --
- LORD JUSTICE SIMON: With liberty to apply.
- MR BEDENBHAM: Indeed I would ask if there is an indication that the money will be paid back over the next period you indicate whether in those circumstances, assuming it is paid back, you will be minded to revoke the DCO.
- LORD JUSTICE SIMON: Are you not asking for the DCO to be revoked? Why does that need to abide any further decision?
- MR BEDENBHAM: My Lord, I do not want to end up in a position which is functus, its finished its determination and yet the £500,000 promised does not come in and I am left in the limbo of not having any recourse to chase the £500,000 save to commence fresh civil proceedings.
- LORD JUSTICE SIMON: I can understand that but it is not very satisfactory that this matter rumbles on almost indefinitely.
- MR BEDENBHAM: I agree it is not satisfactory.
- LORD JUSTICE SIMON: Shall we hear what Mr Whittam and Mr King say.
- MR WHITTAM: My Lord, I do not think I disagree with anything my Lord has said. The order was made in favour of Mr Patel. My Lords are quite right it was actually paid - I have a copy of the cheque to Neumans Solicitors - acting as agents on his behalf. We stand by the note that we sent to the court. The only pause there was in the sense of how long it might take to pay was when we had - I say an extremely helpful exchange with the Court of Appeal office here - and the concern that the jurisdiction of this court might be being extended a little too far. We do not take any issue.
- LORD JUSTICE SIMON: In what way?
- MR WHITTAM: Only the exchange that came to us. It was indicated that the only course open to the court now is to confirm the order - I am not inviting the court to do that - quash the order which it can do if there are exceptional circumstances and then gave illustrations. There was a debate about precisely the point my Lord has landed upon, of ancillary directions or orders as to time to pay and the like. We were debating how that could be achieved. It is a large sum of money to pay back. Mr Patel --
- LORD JUSTICE SIMON: It is a very large sum of money to be claimed Mr Whittam.
- MR WHITTAM: Of course. I would be able to take instructions now.
- LORD JUSTICE SIMON: When you say "now", it is surprising that you have not taken instructions or at least you have not received instructions.
- MR WHITTAM: Because of the sum of money I had made the request. I was expecting the answer slightly earlier than ... I think it might be coming very shortly because Mr Patel has arrived. I was in consultation with my solicitors this morning and I expect there will be a very prompt reply. I may ask the indulgence of the court for a moment but I anticipate those things are in place. My Lord knows I came to the matter quite late and I hope will be taking a sensible and pragmatic course on behalf of Mr Patel in these proceedings.
- We would invite the court to make whichever order it wants to today rather than it rumble on. My Lord knows things have been hanging over Mr Patel for a very long time.
- LORD JUSTICE SIMON: Yes. It is possible that this will continue to hang over him for a period of time.
- MR JUSTICE HICKINBOTTOM: Speaking for myself, I do not see any reason why the DCO could not be revoked today, with an order that - to put it neutrally - Mr Patel and/or Neumans to pay £500,000 by a particular date, with liberty to apply to this court in respect of enforcing that obligation.
- MR WHITTAM: If the court is content with that we were responding to a note that we received from the Court of Appeal Office. I cannot imagine there will be resistance from our part. I might need the indulgence of the court to confirm that.
- LORD JUSTICE SIMON: We understand that.
- MR WHITTAM: I think it is unlikely I will be troubling the court.
- LORD JUSTICE SIMON: We will retire a moment but first of all we will hear from Mr King.
- MR KING: Yes, on behalf of Neumans I am very much on all fours with Mr Whittam. I do not seek to object to the amendment proposed Mr Bedenbham nor to revoking of the order today and time of the payment.
- LORD JUSTICE SIMON: Thank you very much. Do you want to say anything further about that or do you want to wait and see what Mr Whittam says?
- MR BEDENBHAM: I will wait and see what Mr Whittam, says.
- LORD JUSTICE SIMON: We will retire for 5 minutes.
- MR WHITTAM: My Lord, thank you for the time. I was going to ask for 28 days but because of the season there is an agreement that it should be 35 days which, if I am correct, will take us to Monday 23rd January. There is no issue as to costs which I understand are £15,000.
- LORD JUSTICE SIMON: That is the principal sum of £500,000. What about interest?
- MR BEDENBHAM: We are not seeking any interest.
- LORD JUSTICE SIMON: Very well. There is an indulgence.
- MR BEDENBHAM: In case there is any confusion, we do seek our costs some £15,000 they are going to be paid with the £500,000.
- MR WHITTAM: I am quite happy to do that on the same timescale and the same time my Lord.
- LORD JUSTICE SIMON: Mr Whittam, Mr King, in the light of the history of this matter we are inclined to send the papers in the case to the DPP and the relevant Solicitors Regulations Authority. I think it is the SRA. Is there anything you want to say about that at this stage either of you?
- MR WHITTAM: My Lord, only that I think that it is a matter entirely for the court, and I noted my Lord's earlier observation when I addressed the court. Mr Patel has been the subject already of a police investigation, with which he co-operated entirely.
- LORD JUSTICE SIMON: I think the circumstances were rather different. I am not sure that it is either useful or sensible to debate it in open court now. I have indicated just in case you wanted to say anything at this stage.
- MR WHITTAM: Other than I think it was important I did make the observation I did on behalf of Mr Patel. I know --
- LORD JUSTICE SIMON: That is a point that can be made in due course.
- MR WHITTAM: I think it right that I raised it at this stage.
- LORD JUSTICE SIMON: Yes, certainly. Thank you very much. Do you want to say anything?
- MR KING: In view of your Lordship's comment there is nothing that I can do not to persuade you to do that of course. If it is simply a matter of handing the papers over for their consideration.
- LORD JUSTICE SIMON: Do you want to say anything?
- MR BEDENBHAM: My Lord no. The order will be --
- LORD JUSTICE SIMON: I will give a judgment and we can discuss the form of the order.
- LORD JUSTICE SIMON: The relevant history of this matter is set out in the judgment of this court given on 15th June 2016. In summary, following a successful appeal, this court, differently constituted, made a defence costs order on 20th January 2010 to the effect that Mr Patel's costs should be paid out of Central Funds under section 16(9)(b) of the Prosecution of Offences Act 1985 (the DCO).
- On 10th June 2011 a solicitor and own client invoice was signed in the sum of £2,916,396 exclusive of VAT. On 27th June a bill of costs was submitted to the Court of Appeal (Criminal Division) Office in the sum of £3,487,337 including VAT, together with documentation which purported to support this bill.
- On 8th December 2011 an interim payment of £500,000 on account was made out of central funds to Mr Patel's solicitors, Neumans. In the course of the subsequent assessment it became apparent that Neumans's bill of costs was based on an agreement to increase the level of fees charged by Neumans. The case was referred back to the Court of Appeal, and a hearing took place on 23rd April 2012, following which Mr Patel was ordered to make an affidavit explaining how this agreement had come about. He did so in an affidavit dated 12th May 2012.
- Following a hearing in June 2012 the court gave a judgment on 6th July 2012. At that point the court was faced with a number of features of the costs which were claimed by Mr Patel. First, there had been an initial retainer, dated 30th January 2006, when Neumans took over the conduct of the criminal trial from Mr Patel's previous solicitors. This initial retainer set out rates between £250 and £150 per hour for chargeable work in the Crown Court with leading and junior counsels fees agreed at £50,000 and £25,000 respectively. Secondly, there was an oral agreement made in January 2007 between Mr Sheik, the principal of Neumans, with Mr Patel that the solicitor's fees would be capped at £275,000 with leading and junior counsel's fees varied up to £100,000 and £75,000 respectively. We refer to that as "the capping agreement". Thirdly, a further oral agreement was said to have been made on 9th March 2009, between Mr Patel and Mr Sheik, to vary the capping agreement, and to allow the solicitors to charge at "commercial rates" for all the work they had done. This was said to be due to the "huge improvement" in Mr Patel's finances. A deed of agreement, with a date of 13th October 2009, appears to vary previous agreements and to provide an hourly rate of £500 for a senior solicitor and £350 for a junior solicitor.
- The court was concerned that the March 2009 agreement and what happened in relation to the preparation of the invoice and bill of costs might have been a sham which had been designed to obtain out of Central Funds a sum far larger than otherwise be due in the event the appeal succeeded. The fact that all this only emerged in August 2011, when the determining officer first learned of the arrangements was also a matter of concern. The court concluded that it had jurisdiction to re-open the decision on the DCO and on this basis directed the Registrar of Criminal Appeals, as the determining authority, to continue the assessment process with a view to considering whether there was any deliberate deception - see paragraphs 30 to 39 of the judgment.
- Between July 2012 and May 2015 the Registrar carried out an investigation. The explanation for the apparent delay in producing his report is explained in the judgment of 15th June 2016. In his report of the 20th May 2015 the Registrar concluded, among other findings, that first, very large sums had been claimed on a false basis. 2783 hours out of a claimed 3047 hours were, in his view, not properly recoverable; or to put it another way only 269 hours out of the 3047 hours claimed were genuine claims, under 9%. Secondly, there had been a deliberate decision not to disclose eight invoices totalling £275,000 which had been paid in respect of work up to 16th November 2007. Since these payments were consistent with the capping agreement the Registrar concluded that the creation and tendering of 10th June 2011 invoice in the sum of £2,916,166 excluding VAT without disclosing these invoices was dishonest and designed to procure payment out of Central Funds of more than Mr Patel was entitled to.
- At 16th June 2016 a hearing of a number of issues arose and it was sufficient to set out the court's conclusions. First, the court had not made any final determination in its decision of 6th July 2012 and therefore it was unnecessary to show the existence of "exceptional circumstances" which would otherwise be required to re-open an appeal. Second, in any event there were exceptional circumstances which would justify re-opening the costs issue in order to avoid real injustice where there was no alternative remedy - see paragraph 17 and 18.
- In the light of these conclusions the court made a number of directions preparatory to a fact-finding hearing which would consider whether to set aside the DCO in favour of Mr Patel. The Lord Chancellor was to file and serve a statement of case, together with any supporting witness statements and documents by 16th September 2016.
- Mr Patel and Neumans were to file and serve statements of case in response, with any witnesses statements and supporting documentations, by 9th December and there would be a directions hearing on 19th December, to consider further orders which might be required prior to a hearing of the Lord Chancellor's application to set aside DCO.
- The Lord Chancellor has filed and served a case in accordance with these directions together with a witness statement of Peter Fitzgerald-Morris, dated 16th September 2016 and a further witness statement explanatory of certain matters dated 18th November.
- The supporting documents include the Registrar's report. For present purposes it is sufficient to summarise the Lord Chancellor's case.
- First, a very large number of hours claimed in 27th June 2011 bill of costs were falsely claimed. The solicitor said to have worked on the case during the time cannot have done so - see paragraph 42A, page 8.
- Secondly, the alleged agreement in March 2009 to increase retrospectively the hourly rate and to dispense with the £275,000 cap previously agreed was a sham, in that it was never intended either by the solicitor, Mr Sheik, or the client, Mr Patel, to give rise to an actual liability but rather was entered into for the purpose of supporting a larger claim from costs out of Central Funds than could otherwise be properly claimed - see paragraph 42B, page 11.
- The effect of the alleged agreement was to increase Mr Patel's liability by approximately eight times in respect of work which at this point had been concluded and paid for under the invoices. The factual foundations for these two propositions are set out at paragraphs 42A(i) to (v) and 42B (i) and (viii) of the Lord Chancellor's statement of case.
- Thirdly, it follows that Neumans' invoices and bill of costs significantly overstated the fees to which Mr Patel was liable to them.
Fourthly, there was a deliberate failure to make reference to and disclose copies of the eight invoices which had been paid.
Fifthly, the claim on Central Funds was not an honest claim.
- These points are specifically addressed and developed in Mr Fitzgerald-Morris' first witness statement and the points are summarised at paragraph 71:
"Whatever the truth about the cap and its removal the evidence annexed to the Registrar's report and Mr Selby's witness statement creates a strong inference that neither Mr Patel or Mr Sheik has been honest in their dealings with the court, over this application for costs to be paid under a defendant's costs order. The evidence also demonstrates that this court can have no confidence over the accuracy of significant proportions of work claimed in the bill of costs. The issue over a concealment of the eight invoices and the inconsistent reasons given for the lack of time recording all pointed to there having been a significant lack of good faith in this claim."
- On this basis the Lord Chancellor sought an order that the DCO be revoked, that there be an order that Mr Patel should not recover any of his costs from Central Funds in respect of the criminal proceedings and that no DCO order should be made in his favour, and finally that there should be an order that £500,000 paid by way of interim payment should be repaid.
- Neumans has served a statement of case settled by Mr Winter QC and dated 9th December 2011. They are represented today by Mr King. The Neumans statement of case points out that Mr Patel is now represented by separate solicitors and leading counsel. It also states Neumans's understanding that Mr Patel does not contest the Lord Chancellor's application to revisit and revoke the DCO and order him to return the£500,000 paid, with a direction that no costs be recovered out of Central Funds. This did not, at least until this morning appear to be Mr Patel's position in point of fact. He has not served a statement of case in response, instead Mr Whittam QC lodged a note for the hearing on his behalf dated 13th December.
- In summary he recognises the court has jurisdiction to review and set aside the defence costs order and that if it had been aware of facts, particularly the existence of the eight statute bills and ex post facto voluntary assumption of liability for the large sums claimed, the court would not have made the DCO; and that Mr Patel's affidavit of 30th May 2012 was neither clear nor frank, and there were failures in relation to information it provided or omitted as identified by the Lord Chancellor's statement of case (paragraph 44 and 45(i) to (iv)).
- The present position is as follows. The Lord Chancellor submits, and Mr Patel and Neumans both accept, that the DCO should be revoked. In our view, this is plainly right. The facts are set out in the Lord Chancellor's case and in the witness statements of Mr Fitzgerald-Morris, including the points by reference to the detail in the Registrar's report and the conclusions are clear. They have not been answered by either Mr Patel or Neumans and they are in no position to contest the facts. If the true facts had been known, we are clear that the court would not have made the original DCO. Additionally on the basis of largely unchallenged facts, as they have now belatedly emerged set out in the Lord Chancellor's case and evidence, we are quite satisfied the DCO should be revoked and we so order.
- Since the DCO should never have been made Mr Patel is plainly to account for payment of the £500,000 which he procured. There was an issue initially as to when and how this should be done, but in the light of Mr Whittam's concession, we propose to order that Mr Patel and Neumans are jointly and severally liable to repay the sum of £500,000 which was paid as an interim payment on or about 11th December 2011, and that this sum be paid on or before Monday 23rd January 2017. We reserve to this court any matters relating to this payment but we hope that none arise.
- We also order that Mr Patel pays the costs of this application, which we summarily assess in the sum of £15,000. That has not been in issue as between the Lord Chancellor, Mr King and Mr Whittam QC.
- Finally, we intend to send the papers in this case to the Director of Public Prosecutions so that she may consider whether the matters to which we have referred and the evidence lodged by the Lord Chancellor should be the subject of a prosecution. We also intend to refer the conduct of Neumans to the relevant regulatory authority which we understand to be the Solicitor Regulation Authority so they too can consider the matter.
- Is there anything else?
- MR BEDENBHAM: Save to clarify that the £15,000 summarily assessed costs is also payable by 23rd January.
- LORD JUSTICE SIMON: Yes. Is there any issue about that?
- MR WHITTAM: None at all my Lord.
- LORD JUSTICE SIMON: I will add that: payable by 23rd January 2017. Is there anything else Mr King?
- MR KING: Nothing from me.
- LORD JUSTICE SIMON: Mr Whittam?
- MR WHITTAM: No thank you.
- LORD JUSTICE SIMON: Thank you very much for your attendance and assistance.
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