R v Andrew John Luckhurst
| Jurisdiction | England & Wales |
| Judge | Lord Burrows,Lord Hodge,Lord Kitchin,Lord Hamblen,Lord Stephens |
| Judgment Date | 20 July 2022 |
| Neutral Citation | [2022] UKSC 23 |
| Court | Supreme Court |
[2022] UKSC 23
Lord Hodge, Deputy President
Lord Kitchin
Lord Hamblen
Lord Burrows
Lord Stephens
Appellant
Kennedy Talbot QC
Richard Hoyle
(Instructed by Crown Prosecution Service Appeals Unit)
Respondent
Benjamin Douglas-Jones QC
Nathaniel Rudolf QC
William Douglas-Jones
(Instructed by Jonas Roy Bloom Solicitors (Birmingham))
Heard on 7 June 2022
Lord Burrows ( with whom Lord Hodge, Lord Kitchin, Lord Hamblen, and Lord Stephens agree)
Following a conviction for a criminal offence, the Proceeds of Crime Act 2002 (“ POCA”) provides for the making of a confiscation order by the courts. The aim of such an order is to take away the fruits of crime by requiring a payment by the criminal to the State. In order to prevent the frustration of a confiscation order, and usually made in advance of such an order, POCA gives the courts the power to make a restraint order freezing the assets of the (alleged) criminal.
In this case, the Supreme Court is required to resolve a narrow but important point of law about restraint orders. The point of law, as certified by the Court of Appeal, is as follows:
“Does section 41(4) of POCA preclude an exception to a restraint order to make provision for reasonable legal expenses incurred by the defendant or the recipient of a tainted gift where those expenses incurred by the defendant or the recipient of a tainted gift are in respect of civil proceedings founded on the same or similar allegations, alleged facts and/or evidence as those of the offence(s) (within the meaning of section 41(5)) which gave rise to the making of the restraint order?”
The background to the question posed is that, while an exception to a restraint order may be made to allow the (alleged) criminal to incur reasonable legal expenses, that exception is precluded under section 41(4) of POCA where the legal expenses “relate to an offence” giving rise to the restraint order. It is clear that because they do relate to such an offence, the legal expenses of defending criminal proceedings for the offence itself, or of resisting a confiscation or restraint order in respect of that offence, are precluded. But does the preclusion extend to legal expenses in respect of a civil cause of action (for example, a tort or equitable wrong) founded on the same or similar alleged facts and/or evidence as the offence? Do those legal expenses relate to the offence?
The first legislation providing for confiscation and restraint orders in England and Wales was the Drug Trafficking Offences Act 1986 which, as the title indicates, was confined to the confiscation of profits from drug trafficking offences. Under section 8(1) of the 1986 Act, a restraint order could be made subject to such conditions and exceptions as were specified in the order; and rules of court (see RSC Order 115 rule 4(1)) explicitly referred to exceptions permitting the defendant to incur living expenses and legal expenses. Subsequently the provisions on confiscation and restraint orders were extended to all offences and are now contained in Part 2 of POCA (which has itself been subject to further amendments since it was enacted in 2002).
Section 40 of POCA enables a restraint order to be made in five circumstances which are expressed as five “conditions”. The two principal ones (and, in deciding this appeal, we do not need to consider the other three) are, first, where “(a) a criminal investigation has been started in England and Wales with regard to an offence, and (b) there are reasonable grounds to suspect that the alleged offender has benefited from his criminal conduct” (section 40(2)); and, secondly, where “(a) proceedings for an offence have been started in England and Wales and not concluded, and (b) there is reasonable cause to believe that the defendant has benefited from his criminal conduct” (section 40(3)).
Section 41 provides as follows:
“ 41. Restraint orders
(1) If any condition set out in section 40 is satisfied the Crown Court may make an order (a restraint order) prohibiting any specified person from dealing with any realisable property held by him.
(2) A restraint order may provide that it applies —
(a) to all realisable property held by the specified person whether or not the property is described in the order;
(b) to realisable property transferred to the specified person after the order is made.
(2A) A restraint order must be made subject to an exception enabling relevant legal aid payments to be made (a legal aid exception).
(2B) A relevant legal aid payment is a payment that the specified person is obliged to make —
(a) by regulations under section 23 or 24 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, and
(b) in connection with services provided in relation to an offence which falls within subsection (5), whether the obligation to make the payment arises before or after the restraint order is made.
(3) A restraint order may be made subject to other exceptions, and an exception may in particular —
(a) make provision for reasonable living expenses and reasonable legal expenses;
(b) make provision for the purpose of enabling any person to carry on any trade, business, profession or occupation.
(4) But where an exception to a restraint order is made under subsection (3), it must not make provision for any legal expenses which —
(a) relate to an offence which falls within subsection (5), and
(b) are incurred by the defendant or by a recipient of a tainted gift.
(5) These offences fall within this subsection —
(a) the offence mentioned in section 40( 2) or (3), if the first or second condition (as the case may be) is satisfied;
…”
Section 42 deals, amongst other matters, with the power to vary a restraint order on the application of the person who applied for the order or any person affected by the order.
Section 69(2) provides that the powers under sections 41 and 42 to grant and vary a restraint order (and other powers):
“(a) must be exercised with a view to the value for the time being of realisable property being made available (by the property's realisation) for satisfying any confiscation order that has been or may be made against the defendant;
(b) must be exercised, in a case where a confiscation order has not been made, with a view to securing that there is no diminution in the value of realisable property;
(c) must be exercised without taking account of any obligation of the defendant or a recipient of a tainted gift if the obligation conflicts with the object of satisfying any confiscation order that has been or may be made against the defendant;
(d) may be exercised in respect of a debt owed by the Crown.”
This subsection has been referred to as giving a “legislative steer” to the courts towards exercising their powers so as to preserve the assets to satisfy the confiscation order (see In re S (Restraint Order: Release of Assets) [2004] EWCA Crim 2374; [2005] 1 WLR 1338, paras 32–33; and In re Peters [1988] QB 871, 879, referring to the predecessor of section 69(2)(a) and (b)).
After a career as a professional cricketer and footballer, the defendant, Andrew Luckhurst, set up a financial services business, BBT Partnership Ltd (“BBT”), through which he practised as an independent financial adviser for some 25 years before BBT collapsed in 2016. In 2014, Mr Luckhurst and Nicholas Shaw, his long-time colleague at BBT, set up a company, Aspirations Europe Ltd, together with Ian Bascombe, through which they introduced clients to an investment scheme run by a Mr Denton and Mr Oakley. It is the Crown's case that the scheme was a fraudulent Ponzi scheme; that of £15.25m collected from investors by Aspirations Europe Ltd, only £9.75m was invested; and that Mr Luckhurst stole other monies from his clients. He was charged with offences of fraud and theft in Spring 2018, together with others. His trial (which has been fixed for 12 weeks beginning on 31 October 2022) is to take place separately from that of Messrs Denton and Oakley, and after its conclusion.
In 2016, six of BBT's investors in the scheme commenced proceedings in the Chancery Division of the High Court against Mr Luckhurst, BBT, Messrs Shaw, Bascombe and Denton, and others, including a firm of solicitors, Locke Lord (UK) LLP (“Locke Lord”). On 30 September 2016 Barling J made a worldwide freezing order in those proceedings against Mr Luckhurst up to a value of £2.71m. It permitted him to spend £600 per week on ordinary living expenses and a reasonable sum on legal advice and representation. The living expenses amount was increased to £1,500 per week on 11 October 2016.
A settlement was reached in the civil proceedings on 8 December 2017 which resulted in the freezing order being discharged. Mr Luckhurst was not party to that settlement, which was between Locke Lord and the claimants, now numbering 48, but Mr Luckhurst has been told by Locke Lord's solicitors that the settlement included an assignment of the investors' claims against him and the other defendants. Mr Luckhurst therefore faces the investors' claims against him being pursued in Locke Lord's name; and Locke Lord also has its own Part 20 claim against him for an indemnity or contribution. Those claims have been pursued in correspondence by Locke Lord's solicitors, resulting in an offer of settlement on 9 April 2019.
At the time of the discharge of the freezing order on 8 December 2017, the police were already investigating the alleged fraud. A restraint order against Mr Luckhurst was considered but it would appear that the Crown Prosecution Service (“CPS”) took the view that such an order was unnecessary or could not be granted whilst the freezing order...
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