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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Hughes & Ors v HM Customs & Excise  EWCA Civ 670 (20th May, 2002)
Cite as:  EWCA Civ 670
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION (ADMINISTRATIVE COURT)
(Mr Justice Hooper) QBACF/2002/0013 & QBACF/2002/0025
(Mr Justice Collins) QBACF/2002/0573
London, WC2A 2LL
B e f o r e :
LORD JUSTICE LAWS
LADY JUSTICE ARDEN
| HUGHES & OTHERS||Claimants/|
|- and -|
|HM CUSTOMS & EXCISE||Defendant/|
|R & ANOTHER||Claimants/|
|- and -|
|THE CROWN PROSECUTION SERVICE||Defendant/|
|- and -|
|HM CUSTOMS & EXCISE||Defendant/|
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
(instructed by HM Customs & Excise) for the Appellant (02/0013)
G Brodie Esq
(instructed by Messrs Martyn Prowel) for the First Respondent (02/0013)
A Newman Esq, QC & P Spencer Esq
(instructed by Messrs Huttons) for the Second Respondent (02/0013)
A Mitchell Esq, QC & K Talbot Esq
(instructed by The Crown Prosecution Service) for the Appellant (02/0025)
N Purnell Esq, QC & Ms Alison Pople
(instructed by Messrs Burton Copeland) for the First Respondent (02/0025)
M Chawla Esq, QC
(instructed by Messrs Burton Copeland) for the Second Respondent (02/0025)
A Mitchell Esq, QC & Miss Fiona Jackson
(instructed by HM Customs & Excise) for the Appellant (02/0573)
The Respondent Anderson did not appear and was not represented (02/0573)
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Simon Brown:
“98. The receiver may not use an unconvicted defendant’s assets to meet the costs of the receivership. Subject to an exception where there has been unreasonable behaviour on the part of the defendant (paragraph 59 above), costs of a receivership may only be met out of a convicted defendant’s assets and out of the amount ordered to be paid by the defendant under any confiscation order subsequently made against him. It follows that an acquitted defendant or a third party affected by a receivership order is not required to bear the receiver’s costs out of those of his assets of which the receiver has taken possession. … the costs of a receivership may only be recovered from the assets of a defendant in the circumstances set out in section 81(5) [of the CJA], namely out of any amount paid by the receiver to the justices’ clerk in satisfaction of a confiscation order.”
The Legislative Framework
“77(8) Where the High Court has made a restraint order, the court may at any time appoint a receiver -
(a) to take possession of any realisable property; and
(b) in accordance with the court’s directions, to manage or otherwise deal with any property in respect of which he is appointed,
subject to such exceptions and conditions as may be specified by the court; and may require any person having possession of property in respect of which a receiver is appointed under this section to give possession of it to the receiver.”
“80(2) The court may appoint a receiver in respect of realisable property.”
The following subsections provide that the court may empower a receiver appointed under section 80(2) or under section 77 or in pursuance of a charging order inter alia to enforce any charge and may order any person to give up possession of realisable property to the receiver, and may empower the receiver to realise any realisable property and so forth (subsection (8) providing that a reasonable opportunity shall first have been given for persons holding any interest in the property to make representations to the court). Section 81 has loomed large in the argument and much of it I must now set out:
“Application of proceeds of realisation and other sums
81(1) Subject to subsection (2) below, the following sums in the hands of a receiver appointed under this Part of this Act or in pursuance of a charging order, that is -
(a) the proceeds of the enforcement of any charge imposed under section 78 above;
(b) the proceeds of the realisation, other than by the enforcement of such a charge, or any property under section 77 or 80 above; and
(c) any other sums, being property held by the defendant;
shall first be applied in payment of such expenses incurred by a person acting as an insolvency practitioner as are payable under section 87(2) below and then shall, after such payments (if any) as the High Court may direct have been made out of those sums, be applied on the defendant’s behalf towards the satisfaction of the confiscation order.
(2) If, after the amount payable under the confiscation order has been fully paid, any such sums remain in the hands of such a receiver, the receiver shall distribute them -
(a) among such of those who held property which has been realised under this Part of this Act, and
(b) in such proportions,
as the High Court may direct after giving a reasonable opportunity for such persons to make representations to the court.
(3) The receipt of any sum by a justices’ clerk on account of an amount payable under a confiscation order shall reduce the amount so payable, but the justices’ clerk shall apply the money so received for the purposes specified in this section and in the order so specified.
(4) The justices’ clerk shall first pay any expenses incurred by a person acting as an insolvency practitioner and payable under section 87(2) below but not already paid under subsection (1) above.
(5) If the money was paid to the justices’ clerk by a receiver appointed under this Part of this Act or in pursuance of a charging order, the justices’ clerk shall next pay the receiver’s remuneration and expenses.
(6) After making -
(a) any payment required by subsection (4) above, and
(b) in a case to which subsection (5) above applies, any payment required by that subsection,
the justices’ clerk shall reimburse any amount paid under section 88(2) below.
(7) The justices’ clerk shall finally pay any compensation directed to be paid out of any sums recovered under the compensation order under section 72(7) above.
(8) Any balance in the hands of the justices’ clerk after he had made all payments required by the foregoing provisions of this section shall be treated for the purposes of section 61 of the Justices of the Peace Act 1979 (application of fines, etc) as if it were a fine imposed by a magistrates’ court.” (Any balance goes in short into the Consolidated Fund and not to the prosecutor.)
I need not set out subsections (9) and (10).
“Receivers: supplementary provisions
88(1) Where a receiver appointed under this Part of this Act or in pursuance of a charging order takes any action -
(a) in relation to property which is not realisable property, being action which he would be entitled to take if it were such property;
(b) believing, and having reasonable grounds for believing, that he is entitled to take that action in relation to that property,
he shall not be liable to any person in respect of any loss or damage resulting from his action except insofar as the loss or damage is caused by his negligence.
(2) Any amount due in respect of the remuneration and expenses of a receiver so appointed shall, if no sum is available to be applied in payment of it under section 81(5) above, be paid by the prosecutor or, in a case where proceedings for an offence to which this Part of this Act applies are no instituted, by the person on whose application the receiver was appointed.”
89(1) If proceedings are instituted against a person for an offence or offences to which this Part of this Act applies and either -
(a) the proceedings do not result in his conviction for any such offence, or
(b) where he is convicted of one or more such offences -
(i) the conviction or convictions concerned are quashed, or
(ii) he is pardoned by Her Majesty in respect of the conviction or convictions concerned,
the High Court may, on an application by a person who held property which was realisable property, order compensation to be paid to the applicant if, having regard to all the circumstances, it considers it appropriate to make such an order.
(2) The High Court shall not order compensation to be paid in any case unless the court is satisfied -
(a) that there has been some serious fault on the part of the person concerned in the investigation or prosecution of the offence concerned, being a person mentioned in subsection (5) below; and
(b) that the applicant has suffered loss in consequence of anything done in relation to the property by or in pursuance of an order under this Part of this Act.
(Subsection (5) names various persons involved in the investigation and prosecution of offences.)
“4(1) A restraint order may be made subject to conditions and exceptions, including but not limited to conditions relating to the indemnifying of third parties against expenses incurred in complying with the order, and exceptions relating to living expenses and legal expenses of the defendant, but the prosecutor shall not be required to give an undertaking to abide by an order as to damages sustained by the defendant as a result of the restraint order.”
“8(1) Subject to the provisions of this rule, the provisions of Order 30, rules 2 to 8 shall apply where a receiver is appointed in pursuance of a charging order or under sections 26 or 29 [of the DTA, these being mirrored by sections 77 and 80 of the CJA].”
“3(1) A person appointed receiver shall be allowed such proper remuneration, if any, as may be authorised by the court.
(2) the court may direct that such remuneration shall be-
(a) fixed by reference to such scales or rates of professional charges as it thinks fit; or
(b) assessed by a costs judge or a district judge.”
“5(1) A receiver shall submit such accounts to such parties at such intervals or on such dates as the court may direct.
(3) Any party who is dissatisfied with the accounts of the receiver may give notice specifying the item or items to which exception is taken and requiring the receiver within not less than 14 days to file his accounts with the court …
(4) Following an examination by or on behalf of the court of an item or items in an account to which objection is taken the result of such examination must be certified by [the relevant court] and an order may thereupon be made as to the incidence of any costs or expenses incurred.”
“11. The costs of the Receivership shall be paid out of the assets received or managed by the Receiver and in priority to any other payment required or provided for by this Order (other than the costs of realisation provided by paragraph 8(f) above [which gave the receiver power to discharge from the proceeds of the realisation of the defendant’s assets the costs of and incidental to such realisation]) but if no assets or insufficient assets are so received or so managed the costs of the Receivership to the extent of the deficiency shall be paid by HM Customs & Excise.
12. The Receiver shall act in accordance with the letter of agreement [exhibited] and the Receiver shall supply to the defendant copies of any accounts and reports supplied to HM Customs & Excise in accordance with the said letter of agreement.”
It is proposed to seek an order from the Court that your costs in this matter should be costs in the receivership; that is to say that your costs shall be paid out of the monies you bring in during the course of this receivership. Before drawing any remuneration you shall obtain the written approval of HM Customs & Excise to the payment being made and in default of agreement your remuneration shall be determined by the High Court. In all cases HM Customs & Excise reserves the right to insist upon taxation of all your costs and the costs of any solicitors instructed by you. You will be allowed to draw such remuneration and pay any disbursements from any realisations every two calendar months provided that accounts have been submitted to and approved by HM Customs & Excise.
Should your remuneration and expenses exceed the sum realised, HM Customs & Excise is prepared to indemnify you to the extent of the sum inclusive of your remuneration, costs expenses and disbursements although exclusive of VAT less any sums available to you from the property under your management. …”
“12. At the time of the receivership [the company] had a cash balance in its account of some £160,000. [The company] was, so the applicants say, trading healthily and making a profit. With the arrest and subsequent remand in custody of the applicants [the company] ceased trading. The costs of the receivership are some £40,500. The substantial portion of those costs was incurred in following up and bringing into the receivership other assets of Nicholas, said by the receiver not to have co-operated as fully as he might. This is challenged.
16. Insofar as C is concerned, a man of modest means and very aggrieved by what has happened (so I am told), the costs of the receivership order incurred in the period from April 2000 to 30 November 2000 [ie between the receivership order and C being charged with an unconnected offence] amounted to some £34,000. Those costs were apparently incurred in tracing down his assets.”
“Should there be an issue as to unreasonable obstructive behaviour which the [prosecutors] wish to have decided, I shall do so at some appropriate time.”
R & Another
“4. In the event of the discharge of this order and the acquittal of the respondent in the criminal proceedings against him, the CPS will pay to the respondent the costs paid by him to the receiver under this order.
5. If the court later finds that this order has caused other loss to the respondent, and decides that the respondent should be compensated for that loss, the CPS will comply with any order the court may make.”
The letter ended:
“We consider that the onerous nature of the restraint orders and the time and expense demanded of our clients in complying with them are such that they ought properly to be reflected in undertakings to compensate the respondents in the event of the prosecution failing. Given the court’s inability to impose such terms upon you without your consent, you will note that, if we do not receive a positive response from you within 14 days, we propose to apply to the court for the discharge of the orders.”
“21. The receiver has so far invoiced some £376,000 [we are told that this has now increased to some £440,000] in respect of her costs including VAT. All the receiver’s costs, whether incurred in the management of [the company] or otherwise, are being paid by the company. The total bill is expected to be in the region of some £500,000 by the end of the criminal proceedings.”
“(1) … the costs of and incidental to all proceedings … in the High Court … shall be in the discretion of the court.
(2) … rules of court … may make provision for regulating matters relating to the costs of those proceedings … [it being provided by rule 43.2 that ‘“costs” includes fees, charges, disbursements, expenses, remuneration …’].”
“I am, with unfeigned reluctance, compelled to conclude that, even if the expenses of the receivership are within the definition of costs, they are not costs ‘of and incidental to [the] proceedings’. They must lie where they fall.”
“The case therefore boils down to this. A receiver and manager properly appointed properly recoups her properly incurred costs of the receivership from an asset she has received. Now that the receivership order has been (or is treated by the parties as having been) discharged, should those costs of the receivership lie where they fall?”
“So much appears to be settled. The ordinary rule is that receivers should not accept their appointment unless satisfied that the receivable assets shall be sufficient to meet their claim for costs and for remuneration or that they would be otherwise indemnified, by contract or by order of the court, by the party responsible for their appointment. In this case there was an agreement between the receiver and HM Customs and Excise that Customs and Excise would indemnify the receiver if she were unable to bring in sufficient assets to meet her costs. That did no more than replicate the statutory provision [under section 88(2) of the CJA] …” (p1243)
“Though the receivership proceedings were not part of the criminal trial as such, they were incidental to it and my sense of fairness dictates to me that he should be indemnified in respect of any loss he has suffered through these ancillary proceedings. If I had any discretion to exercise, I would unhesitatingly exercise it in the appellant’s favour. [p1244]
… the unfairness to the appellant is manifest to me … I find it intrinsically unfair that the appellant should be indemnified in the Crown Court but not in the Queen’s Bench Division where the proceedings should stand or fall with the criminal proceedings.” (p1245)
“I would add that in my judgment Mr Mitchell was right in his submission that this really was a claim for compensation dressed up as an application for an award of costs; and it is therefore most significant that by section 89 Parliament laid down a carefully regulated code for such a claim. Consequently, in my judgment, section 89 is the proper avenue for a compensation claim of this kind, provided of course the claimant can bring himself within the rather strict requirements of the section. I should add as a footnote that RSC Ord 115, r 4(1) specifically stipulates that ‘the prosecutor shall not be required to give an undertaking to abide by an order as to damages sustained by the defendant as a result of the restraint order.’”
“… the scheme of the legislation is that the receiver’s costs should be met by the prosecutor and then if the defendant is convicted and a confiscation order is made the prosecutor will be reimbursed from the sums paid in satisfaction of the compensation order.”
“If he is acquitted, [the accused person’s] assets are unfrozen. The question essentially is: should the innocent individual pay the costs of taking part in proceedings initiated by the Commissioners of Customs & Excise or should the public at large? In my judgment it should be the public at large. Prosecutions are launched on our behalf, and if someone is acquitted by the verdict of the jury, them one can see in retrospect that he should not have been troubled in the matter. There is no blame to be attached to Customs & Excise, but it seems right to me that in principle the public should pay.”
“… should a defendant increase the costs of the receivership by unreasonable obstructive behaviour, the receiver could have a remedy against a convicted defendant against whom a confiscation order has been made, by seeking payment of the increased amount under section 81(1) and could have a remedy against an acquitted or convicted defendant under section 51 [of the Supreme Court Act, 1981].”
(Hooper J added in paragraph 60 that “the receiver could also, of course, seek an order from this court preventing the obstructive behaviour”)
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No-one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of the State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
“96. In my judgment to deprive an unconvicted defendant of his assets or to deprive a third party of his share of lawfully obtained assets which he jointly owns with a defendant (whether unconvicted, convicted or acquitted) to pay for the costs of receivership is a disproportionate measure in the fight against crime and thus a breach of Article 1 of the First Protocol. It would upset the fair balance which should be struck between the protection of property and the general interest.”
Lord Justice Laws:
Lady Justice Arden:
The Statutory Construction issue
The Convention point
“The receiver’s remuneration must be authorised by the court. Unless the court directs it to be fixed by reference to some fixed scale, or percentage of rents collected, it is assessed by the court, but in the first instance the receiver should submit his remuneration claim to the parties for approval. If the claim is accepted by the parties, the court should not normally be concerned to intervene, but it must at least formally authorise the remuneration.”