Crown Prosecution Service v Eastenders Group
| Jurisdiction | England & Wales |
| Judge | Lord Toulson,Lady Hale,Lord Kerr,Lord Wilson,Lord Hughes |
| Judgment Date | 08 May 2014 |
| Neutral Citation | [2014] UKSC 26 |
| Court | Supreme Court |
| Date | 08 May 2014 |
[2014] UKSC 26
Lady Hale, Deputy President
Lord Kerr
Lord Wilson
Lord Hughes
Lord Toulson
Appellant
David Perry QC Martin Evans
(Instructed by Peters & Peters Solicitors LLP)
1 st Respondent
Geraint Jones QC Marc Glover
(Instructed by Rainer Hughes Solicitors)
2 nd Respondent
Michael Parroy QC Rupert Jones
(Instructed by CPS Proceeds of Crime Unit)
Heard on 24 and 25 February 2014
Lord Toulson (with whom Lady Hale, Lord Kerr, Lord Wilson and Lord Hughes agree)
The contest in this case is about who should bear the costs and expenses of a receiver appointed under an order which ought not to have been made. The appellant, who is a former partner in a well known firm of accountants, was appointed to act as management receiver of the assets of a group of companies referred to as Eastenders ("the companies") on the application of the Crown Prosecution Service ("CPS"). The order was made under section 48 of the Proceeds of Crime Act 2002 (" POCA") but was quashed on appeal. The receiver's costs and expenses are put at £772,547. Who should bear those costs? There are three possible answers: the companies, the receiver or the CPS. The question has been considered by four judges who have arrived at three different answers.
The receiver applied to the Crown Court, after the order had been quashed, for permission to draw his remuneration and expenses from the assets of the companies. The application was refused by Underhill J (now Underhill LJ) in a judgment given on 4 April 2012. He held that to grant the application would infringe the companies' rights under article 1 of the First Protocol to the European Convention on Human Rights ("A1P1").
This provides:
"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 a 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."
In his judgment Underhill J held that in principle the liability for the receiver's remuneration and expenses should be borne by the CPS, but at that stage there was no such application before him. After a further hearing on 8 May 2012 he made an order including the following terms:
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i) The CPS was to pay the receiver's remuneration and disbursements, subject to an assessment by the taxing authority of the Crown Court under the Criminal Procedure Rules.
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ii) The CPS was to pay the legal costs incurred by the receiver in the exercise of his functions as receiver.
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iii) The parties were to lodge further evidence and submissions as to whether sums previously retained by the receiver should be repaid to the companies. (There is a potential argument that some of the expenses incurred by the receiver in the course of running the companies would have been incurred by them in any event, but on this appeal the court has not been concerned with points of that kind.)
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iv) The CPS was to pay the companies' litigation costs in respect of the various applications relating to the receivership order.
In making that order Underhill J held that it was possible to interpret POCA as giving the court the right, in circumstances such as those of the present case, to order that the receiver's remuneration and expenses be paid by the CPS and not by the companies.
The CPS appealed to the Court of Appeal Criminal Division. The majority (Mitting and Edwards-Stuart JJ) upheld Underhill J's decision that the companies' rights under A1P1 would be infringed by an order permitting the receiver's costs and expenses to be taken out of their assets. Laws LJ, dissenting, would have held that there was no such breach and that the receiver was entitled to recover those costs out of the companies' assets under the order made in the Crown Court. The court was unanimous that Underhill J was wrong in deciding that POCA could be interpreted as giving him power to order the CPS to pay the receiver's costs.
The result of the majority's decision was to leave the receiver unable to recover his costs either from the companies' assets or from the CPS. They acknowledged that the outcome of the appeal would be "clearly unsatisfactory to a receiver who has undertaken work and incurred expenses in the expectation that he would be both rewarded and recompensed out of assets identified for him by the CPS", and they added that their judgment did not "exclude the possibility that he may have a common law remedy against those who sought his appointment", but they said no more about what it might be, presumably because the matter had not been argued.
The receiver now appeals to this court. The principal argument advanced on his behalf by Mr David Perry QC was that Laws LJ was right and that the costs of the receivership should be borne by the companies. If that submission was rejected, his alternative submission was that Underhill J was correct to order that the costs be borne by the CPS. Mr Perry submitted powerfully that it could not be a just solution that the receiver, an officer appointed by the court, should be left without payment for acting as the court directed.
Mr Geraint Jones QC submitted on behalf of the companies that those judges (Underhill, Mitting and Edwards-Stuart JJ) who had concluded that to take the receiver's costs out of the companies' assets would be a breach of their rights under A1P1 were right. He also suggested that it was highly arguable that the contractual arrangements between the receiver and the CPS would entitle the receiver to remuneration by the CPS, but that was a matter between the receiver and the CPS.
Mr Michael Parroy QC on behalf of the CPS joined forces with Mr Perry in arguing that Laws LJ was right. If, however, the effect of A1P1 was to preclude recovery of the receiver's costs out of the companies' assets, Mr Parroy submitted that the Court of Appeal was right in its unanimous decision that POCA did not afford any basis for holding the CPS liable to the receiver. He also submitted that there was no substance in the argument that the receiver would have a contractual remedy against the CPS.
The first question is whether the companies' rights under A1P1 would be infringed by having their assets taken to pay the receiver's remuneration and expenses. If Laws LJ was right in his view that this would not involve an infringement of their A1P1 rights, no further question arises. But if the companies are right about that issue, the second question that arises is whether the receiver is entitled to look to the CPS for reimbursement.
When granting permission to appeal to this court, the leave panel asked the parties to address the additional issue "whether there are any powers which could be exercised to prevent this situation arising whatever the outcome of the appeal." It will be necessary to consider that too.
On 6 December 2010 the CPS applied ex parte to HH Judge Hawkins QC at the Central Criminal Court for restraint and receivership orders under sections 41 and 48 of POCA. The judge was in the course of trying a murder case and his time for hearing the application was limited. After a 40 minute hearing the judge signed the orders which he was asked to make. The evidence before the judge consisted of two witness statements made by Mr Alan Brown, a financial investigator employed by HM Revenue & Customs ("HMRC"), and their exhibits. In summary, he stated that HMRC was conducting a covert investigation into the activities of a serious organised criminal group which was believed to be responsible for evading excise duty and VAT on a large scale and laundering the proceeds. The suspected fraud involved alcohol products, which had been imported into the UK duty free, being released from bonded warehouses into the UK market without payment of duty in such a way that the true facts were concealed from HMRC by the use of buffer companies and bogus documents. The subjects under investigation included Mr Alexander Windsor and Mr Kulwant Singh Hare, referred to as the defendants in Mr Brown's statements. Company searches and other records showed that the defendants were the joint beneficial owners of the Eastenders Group parent company, which held between 50% and 100% of the shares in the other group companies. The parent company was a holding company and the trading companies were cash and carry outlets. Mr Brown suggested that the companies were a wholesale and retail arm of the criminal group responsible for the alleged fraud.
Mr Brown described the case as the most complex restraint and receivership case that he had ever managed in more than 20 years' experience of such work. He estimated the public loss at £23 million. Mr Brown invited the court to "lift the corporate veil" of the companies, to treat their assets as assets in which the defendants had an interest and to restrain them and the companies from dealing with those assets. He also asked the court to appoint a management receiver to run the companies. He described their activities in this way:
"It is through these companies that the non-duty and non-VAT paid alcohol is sold onto the legitimate market. It is probable that these companies also conduct legitimate trade, in the sense that they buy and sell duty and VAT paid goods as well. However I do not know the ratio of legitimate to illegitimate activity."
In these circumstances Mr...
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