England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE QBCOF 98/0522/4

Royal Courts of Justice

Thursday, 25th February 1999

Before:

LORD JUSTICE HIRST

LORD JUSTICE ALDOUS

LORD JUSTICE WARD

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THOMAS CHARLES ANDREWS

Appellant

and

IN THE MATTER OF THE CRIMINAL JUSTICE ACT 1988

Respondent

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(Handed down transcript of

Smith Bernal Reporting Limited

180 Fleet Street, London EC4A 2HD

Tel: 0171 421 4040 Fax: 404 1424

Official Shorthand Writers to the Court)

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MR. V. JOFFE (instructed by Messrs Goldkorn Davies Mathias, London, WC1) appeared on behalf of the Appellant.

MR. A. MITCHELL Q.C. (instructed by the Commissioner for Customs & Excise) appeared on behalf of the Respondent.

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J U D G M E N T

(As approved by the Court )

Crown Copyright

LORD JUSTICE WARD:

This appeal gives rise to an interesting and difficult question in an arcane field at the intersection of the old equitable remedy of receivership and the modern procedures of the Criminal Justice Act 1988 designed to combat serious crime. The problem in a nutshell is this: if a receiver is appointed under that Act to receive and manage a defendant’s property and incurs costs and expenses in so doing, who bears that cost and expense if the defendant is subsequently acquitted by the Crown Court and awarded his costs of defence out of public funds?

Although there is some risk of obfuscating the clarity of that issue by a recitation of the facts where, as Robert Walker L.J. observed when refusing leave on paper, “there seems to have been a good deal of muddle,” I reluctantly set out more of the background.

In March 1994 the appellant and his son Daniel were arrested by officers of Customs and Excise and charged with VAT and later with PAYE offences to which Part VI of the Criminal Justice Act 1988 (“the Act”) applied. The officers seized the sum of £42,305 which they found in the appellant’s home. The Customs and Excise then applied ex parte in the High Court, Queen’s Bench Division, under sections 77 and 78 of the Act for restraint and charging orders against both father and son “in respect of the realisable property of the defendants” and also for the appointment of a receiver. The affidavit in support gave particulars of the fraud which it was alleged the father and son and Daniel’s wife, Christine, had committed. In essence the prosecution case was that a company , Avonmarsh Ltd, said to be controlled by Daniel and Christine, failed to render VAT returns. A second company, A J Kingsland & Sons Ltd, also under their control, had recovered VAT on invoices rendered by the third company, J & A Transport Ltd, which failed to declare the VAT due. J & A Transport Ltd also traded with Avonmarsh but did not account for missing VAT and used false invoices to distort the company’s trading position in order to reduce the VAT liability. J & A also paid wages to the drivers of the lorries engaged in the transport business and either under-declared those wages or failed to declare them at all for the purpose of collecting PAYE. In the result substantial losses in excess of £300,000 were suffered by Customs and Excise and the Inland Revenue. The affidavit referred to the Companies House records relating to J & A Transport Ltd which “confirmed (the appellant) as Director and showed Christine Andrews as a shareholder.” The allegation was that Daniel and his father “had full control of the business and assets of J & A Transport and A. J. Kingsland & Sons Ltd.” though there was no evidence from Companies House to show that the appellant had any interest in the latter company. The realisable assets which were believed would be available to satisfy a confiscation order if it were to be made under the 1988 Act at the conclusion of the criminal proceedings included a property owned by the appellant and his wife, the sum of £42,000 odd which had been seized from the appellant and 56 heavy duty transport vehicles owned, one notes, not by him but by the companies, J & A Transport Ltd and A. J. Kingsland Ltd. The other realisable assets of the appellant disclosed in the affidavit were a Mercedes motor car, and four bank accounts and one building society account in his name. The relief sought against each of the father and son was for restraint orders in relation to their known realisable property, and disclosure on affidavit of all their realisable property. The affidavit concluded:-

"17. The above evidence leads me to believe that the first defendant’s” (i.e. Daniel’s not the father’s) “interests are likely to be dissipated unless steps are taken to preserve and manage such assets pending the determination of this case.” (I have added the parenthesis and emphasis.)

18. Sara Elizabeth Dayman, of Stoy Haywood, ... has agreed to act as receiver in accordance with the letter of agreement dated 1st July 1994” (which was exhibited).

19. I respectfully submit that this is an appropriate case for the appointment of a receiver in respect of the realisable property of the defendant” (which must have been a reference to the son not the father.)

The emphasis is added by me to make the pedantic point that the allegation of a feared dissipation of assets, which was the justification for appointing a manager of the assets, in which management the receiver incurred the expense of £10,011 now in issue, was not actually made against the appellant yet the order was sought against him. I wonder if this was drawn to the attention of the judge who heard the application.

The letter of appointment drew the receiver’s attention to the fact that she would become an Officer of the Court and would accordingly draw her authority and powers from the Court and she was referred to RSC orders 30 and 115. Her powers were said to include:-

"power to discharge all and any costs, charges and expenses of the receivership out of the assets and/or the proceeds of realisation thereof."

As for “remuneration”, it was provided that:-

"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 moneys you bring in during the course of this receivership. If the court declines to make such an order, or if you are unable to bring in sufficient assets to meet your costs they will be met by the Commissioners of Customs and Excise."

On 7th July 1994 four orders were made ex parte by Schiemann J, two against father and two against son. They were in similar terms. We are concerned only with the orders against the appellant. The one order restrained him from disposing of any of his assets and

"without prejudice to the generality of the foregoing in any way dealing with the undermentioned assets held in the following names:- Bank/Building Society Accounts”

(His four bank accounts and his building society account were referred to but so were the bank accounts of J & A Transport Ltd and A J Kingsland & Son Ltd.)

“ Vehicles”

(The list comprised not only his own Mercedes but the 56 vehicles in the names of J & A Transport and A J Kingsland & Sons Ltd.)

“Cash

1. HM Customs and Excise shall be at liberty to pay over to any Receiver appointed herein the sum of £42,305 seized from the defendant..."

Then a charging order was made of respect of the property he owned with his wife. He was ordered to file an affidavit of his means and the order recorded that that affidavit should not be used as evidence in the prosecution of an offence alleged to have been committed by the appellant. He was allowed to expend a weekly sum for his general living expenses. There was liberty to apply. Costs were reserved.

The second order was for the appointment of Ms Dayman ( “the receiver”)

“to take possession of preserve collect get in sell receive and manage any realisable property of the (appellant)."

It was further ordered that the appellant deliver his realisable property to the receiver that property including but not being limited to the items listed on a schedule which repeated the property which was subject to the restraint order. The order further provided:-

"That the Receiver have the following powers without prejudice to any existing powers vested in her by statute or otherwise:-

i. Power to take possession of preserve collect get in sell realise and manage the assets and/or the proceeds of realisation thereof."

The receiver was ordered to be bound to act in accordance with the letter of agreement. Paragraph 5 provided:-

"That the Receiver be allowed remuneration on a time cost basis and that the amount of such remuneration be agreed by the Commissioners of Customs and Excise or (in default of agreement) be determined by the Court."

There was liberty to apply. Curiously, in this order costs were not reserved but were ordered to be paid by the second defendant.

As will be seen there was no order that the receiver’s costs should be costs in the receivership as the agreement letter had stated would be done. Counsel was unable to tell us whether or not the court had declined to make such an order.

No steps were taken to discharge those orders when served upon the defendants. The appellant duly served an affidavit of his means in which he disclosed that he had been a Director of J & A Transport Ltd,

"of which I am also a 50% shareholder along with my daughter in-law, Christine Andrews. I therefore have an interest in all the assets and liabilities of J and A Transport Ltd. I hold no other Directorships or shareholdings."

He said that his wife (or members of his family) owned some of the £42,000 which had been seized.

From time to time various amounts, agreed for the purposes of this appeal to total £32,294, were released from the seized sum to cover the appellant’s legal costs of his defence. The balance of the sum is agreed to be £10,011. This is the sum now in dispute.

On 11th December 1995 the jury in the Crown Court convicted Daniel but acquitted the appellant on all the charges he faced. The appellant was allowed his costs to be paid out of central funds. On the taxation of those costs in the Crown Court, the Determining Officer held that the costs of the Queen’s Bench proceedings were not covered by the award of costs in the Crown Court.

In due time a confiscation order was made against Daniel. The Crown Court Judge found that the whole beneficial interest of J and A Transport Ltd belonged to Daniel and that the appellant was merely his nominee, Daniel being an undischarged bankrupt at all material times.

On 9th January 1996 the appellant applied in the Queen’s Bench proceedings for the discharge of all the orders, including the receivership order made against him. Customs and Excise filed evidence in that application and the affidavit asserted “the contention of the Prosecution that the true beneficiary of the shares in the companies is the defendant Daniel..."

On 19th January 1996 Keene J. ordered by consent that the restraint order against the appellant be discharged. Nothing was expressly said about the discharge of the receivership order against him. He was at liberty to apply in respect of his costs. The restraint order against Daniel and the order appointing the Receiver of his realisable property were varied, not discharged.

When the appellant’s property was released to him it was later realised by the appellant’s solicitors that the remaining £10,011 of the £42,000 odd which had been seized was not returned and they wrote and asked for it. The Receiver replied:-

"I confirm that there are no funds remaining to be returned to your clients. All balances have been used to defray the prior costs of the receivership."

Faced with that, the appellant made his application which is now the subject of this appeal. He applied for an order that:-

“the costs of (the appellant) of and occasion by these proceedings (inclusive of the fees, charges, disbursements, expenses and all other costs and remuneration of the Receiver appointed herein by order of the Hon. Mr. Justice Schiemann dated 7th July 1994) be paid to (the appellant) by HM Customs and Excise.”

No proper accounts of the receivership have been disclosed to us. The Receiver filed evidence and exhibited “an analysis of the balance in hand on the receivership account as at (the date of Keene J’s order)” but the figures in that analysis cannot be reconciled in any way with the agreed figures put before us. It seemed that in the course of her management of the assets, she had bought and sold heavy goods vehicles and had used the sale proceeds “to settle costs arising subsequent to (the appellant’s) acquittal.” She said:-

"The majority of costs incurred by me are attributable to monitoring of the business of J and A Transport Ltd. In addition to monitoring bank accounts of the business and dealing with queries arising from the trading and accounting, substantial time was incurred in discussing various vehicle sales and purchases with Mr Andrews in order to maintain the quality of the fleet."

That application came before Owen J. and on 3rd October 1997 he dismissed. it. The order as drawn is that there should be no order for the costs of the application but Mr Mitchell Q.C., who appears for Customs and Excise fairly concedes that he believed he had submitted to the appellant’s “ordinary” legal costs of the application being awarded to him. The order. may need to be corrected under the slip rule. The essence of the judgment set out in its conclusion was this:-

"In my judgment, it would not be at all proper to order Customs and Excise to repay the £10,000 as to which, as I have already indicated, the applicant may feel that he has been hard done by. The social explanation for that is that, as a result his son’s criminal behaviour, the order had to made and if he has lost this money, as he has, then he should put it down to his son’s criminal behaviour. There was nothing improper in the action of Customs and Excise, or in the order which was made by the court."

Although a number of features of the history puzzle me, we must proceed upon the following basis about which there has been no dispute:-

1. The orders of Schiemann J. stand. Thus it idle to speculate about the fact that there was then no evidence that the father had any interest in the companies (though he later asserted in his disclosure affidavit that he did). There was no suggestion that he - as opposed to his son - was likely to dissipate his assets so as to justify a receiver being required either to preserve them or to manage them. There was no order for the receiver to manage the business (as opposed to receiving the realisable assets, which was the company shareholding). The corporate veil was not so much lifted; it was treated as so transparent no one seems to have spotted it at all. But I must remind myself again not to be pedantic. No undertaking in damages was given by the plaintiff, Mr Mitchell Q.C. submitting that section 89 of the Act, to which I shall refer shortly, gave the defendant the only protection to which he was entitled.

2. It is agreed that after the release of the funds to cover legal expenses the balance of the seized sum, the £10,011 now in dispute, was taken by the receiver to recover her remuneration and/or expenses of the receivership incurred prior to the application to Keene J. There are no questions raised to challenge her entitlement to do so, to challenge whether the expenses were incurred in the preservation and management of this appellant’s assets as opposed to company assets to which the Circuit Judge found he was not beneficially entitled.

3. Although no proper accounts have been produced to show what was done, when or how much it cost, there is no suggestion that the receiver acted improperly in recouping her expenses from the frozen fund.

4. 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?

I am bound to say that it comes as a surprise to me to learn that there is no reported authority which gives the answer to that question and there is apparently no settled practice to deal with the problem. Nonetheless the following principles seem capable of being stated:-

1. When the court appoints a receiver or manager the receiver/manager is an Officer of the Court not the agent of either party in the proceedings:- see Gardner -v- London Chatham and Dover Railway Company (1867) L.R. 2 Ch. App. 201, 211/212 per Cairns L.J. who added:-

"When the court appoints a manager of a business or undertaking, it in effect assumes the management into its own hands; for the manager is the servant or officer of the court, and upon any question arising as to the character and details of the management, it is the court which must direct and decide."

2. For their remuneration, the ordinary position was stated by Warrington J. in Boehm -v- Goodall [1911] 1 Ch 151, 161:-

"I think it is of the utmost importance that receivers and managers in this position should know that they must look for their indemnity to the assets which are under the control of the court. The court itself cannot indemnify receivers but can, and will, do so out of the assets, so far as they extend, for expenses properly incurred; but it cannot go further. It would be an extreme hardship in most cases to parties to an action if they were to be held personally liable for expenses incurred by receivers and managers over which they have no control. But the receiver here says this is not the ordinary case, because the judgment appointing him was by consent and, by consenting, all the parties have impliedly requested him to incur these liabilities. In my opinion that fact makes no difference at all. If I were to accede to that argument, I should have to hold in every case that the person who puts the court in motion and gets a receiver appointed would have to indemnify the receiver. But the fact that the order was made by consent does not, in my opinion, distinguish this case from the numerous cases in which orders have been made without consent."

This seems hallowed authority and although the point is made in the appellant’s favour of the “extreme hardship” of holding him personally liable for expenses incurred, the judgment is clearly dealing with expenses incurred in excess of the amount in the receiver’s hands. On the other hand the finding which is against the appellant is that the plaintiff does not, merely by making the application, become liable for the receiver’s remuneration and expenditure.

3. In Evans -v- Clayhope Ltd [1988] 1 W.L.R. 358, 362G, Nourse L.J. said:-

"Boehm -v- Goodall was a decision based on statements of principle of high authority. In my judgment it was correctly decided and it applies to this case. Moreover the decision is one of jurisdiction and, unless any part of the receiver and manager’s remuneration and expenditure can be treated as “costs” (see below), no question of discretion arises."

In that case this court held accordingly that where the court had by interlocutory order appointed a receiver and manager to manage property the subject of an action pending trial of the action, it had no power, before the issues in the action had been determined, to make an interim order requiring one of the parties to pay the remuneration or expenses of the receiver and manager; and that, accordingly, the receiver and manager was entitled to recover his remuneration and expenses only from such funds as were under the control of the court pursuant to the receivership.

4. That principle was extended by Mr Michael Hart Q.C., then sitting as a Deputy High Court Judge in Mellor -v- Mellor & ors [1992] 1 W.L.R. 517 where he held that the receiver’s lien over the assets gave him a continuing right to possession even after the discharge of the receivership order and accordingly he was entitled to an order charging all the assets available to him during the currency of his receivership with the amount of his costs and remuneration.

So much appears to be settled. The ordinary rule is that receivers should not accept their appointment unless satisfied that the receivable assets will 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 the Department of 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 position because section 88 (2) of the 1988 Act provides:-

"Any amount due in respect of the remuneration and expenses of the 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..."

Section 81 (5) provides that if the receiver has paid moneys in his hands to the Clerk of the Court in satisfaction of a confiscation order made against the defendant, then the Clerk shall pay the receiver’s remuneration and expenses out of that sum.

Unfortunately for us Vinelott J. in Evans -v- Clayhope [1987] 1 W.L.R. 225, 230 declined to express any opinion as to whether or not the remuneration and expenses incurred by the receiver could be treated as part of the costs of the action in which the receiver was appointed. In this court, Nourse and Purchas L.JJ. also concluded that that question could only be properly be decided if and when it arose. It now arises in this appeal and it falls to me to enter terram incognitam and give the first judgment on the question.

Mr Joffe, on the appellant’s behalf, supports his case in this way:-

1. He says that it would be manifestly unfair were the appellant not to recover the disputed £10,000. Owen J. was also of that view. So am I. His property was seized in the course of a criminal investigation. He was acquitted. He was ordered get his costs of his defence out of common funds. 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 proceeding. If I had any discretion to exercise, I would unhesitatingly exercise it in the appellant’s favour. Mr Mitchell observes- though he modestly does not quite put it as I do -that the acquittal became almost inevitable once the son gave evidence exculpating the father so that the father had no need to risk the fatal rapier thrusts of cross examination. That is as may be, but I consider it quite wrong for this court to countenance any secondary attempt to establish guilt or to heap such obloquy on the appellant through the innuendo that there is no smoke without fire, so as to support a submission that he brought it all upon himself and so cannot complain.. My forensic sympathy must continue to lie with the appellant.

2. Mr Joffe submits that it is an additional hardship upon him because the father’s funds were utilised to manage the property which the Crown Court Judge found to belong beneficially to the son. This is a more difficult argument for him to sustain. In these proceedings the father asserted his 50% shareholding in J and A Transport Ltd. That affidavit was not used in the confiscation proceedings brought against the son. It may be, or perhaps it may not be, that the High Court Judge would have given leave for the affidavit to be used for that purpose, father by then having been found not guilty and the affidavit no longer being used “as evidence in the prosecution”. To what extent, if at all, there is some issue estoppel by virtue of the finding of the Crown Court Judge may be an interesting point. For my part it is quite unnecessary to resolve that issue in the light of acknowledged right of the receiver to have applied the money as she did under the orders in the terms in which they were made.

3. So the case depends upon the submission that, on successfully applying for the discharge of the receivership order, costs should follow the success in that application and that the remuneration and expenses of the receiver are part of those costs. The steps in that submission are these.

Section 51 (1) of the Supreme Court Act 1981 provides that:-

"Subject to the provisions of this or any other enactment and to rules of court, the costs of an incidental to all proceedings in -

...

(b) The High Court, ...

shall be in the discretion of the court."

Section 51 (3) gives the court full power to determine by whom and to what extent the costs are to paid. Thence to the rules: RSC Ord 62, r. (4) defines costs in this way:-

"References to costs shall be construed as including references to fees, charges, disbursements, expenses and remuneration ..."

Those words find an echo in Order 33 which provides for the proper “remuneration” of the receiver. Mr Joffe submits that “remuneration” must bear the same meaning and accordingly that Section 51 (1) is wide enough to include the receiver’s remuneration as it is provided for by order 30.

He relies upon the speech of Lord Goff of Chieveley in Aiden Shipping & Co Ltd -v- Interbulk Ltd [1986] 1 A.C. 965, 975 to support the wide construction he urges. Lord Goff said:-

"It is, I consider, important to remember that Section 51 (1) of the Act of 1981 is concerned with jurisdiction of the court to make orders as to costs. Furthermore, it is not to be forgotten that the jurisdiction conferred by the subsection is expressed to be subject to rules of court, as was the power conferred by section 5 of the Act of 1890. It is therefore open to the rule-making authority (now the Supreme Court Rule Committee) to make rules which control the exercise of the court’s discretion under section 51 (1). In these circumstances, it not surprising to find that jurisdiction conferred under section 51 (1), like its predecessors, to be expressed in wide terms. The subsection simply provides that “the court shall have full power to determine by whom ... the costs are to be paid. Such a provision is consistent with a policy under which jurisdiction to exercise the relevant discretionary power is exercised in wide terms, thus ensuring that the court has, so far as possible, freedom of action, leaving it to the rule making authority to control the exercise of discretion (if it thinks it right to do so) by making rules of court, and to the appellate courts to establish principles upon which the discretionary power may, within the framework of the statue and the applicable rules of court, be exercised. Such a policy appears to me, I must confess, to be entirely sensible."

As I read the conclusions to Lord Goff’s speech, it seems to me that at the heart of his decision on the exercise of the discretionary jurisdiction conferred by the statute lies an evaluation of the interests of justice. Since the unfairness to the appellant is manifest to me, Mr Joffe’s argument is attractive.

Mr Mitchell Q.C. submits that the regime for dealing with the receiver’s costs provided in order 30 is distinct and separate - see the special provisions for taxation in RSC Ord. 30, R. 3(3). He submits that the costs of the receivership are not costs “of and incidental to the proceedings” but are management costs requiring this independent treatment.

I have not found this an easy point to decide. Eschewing, as I have, any suggestion that the appellant can count himself lucky to have been acquitted, 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. My first inclination is to accept Mr Joffe’s invitation to give a consistent meaning to “remuneration” in Order 30 and Order 62 and accordingly in section 51 (1).

On reflection there is another consistency of approach which is more compelling. If the costs of the receivership are to be costs of and incidental to the proceedings, then the costs of the receivership should be costs of the proceedings at all stages of those proceedings and in all events. That produces the difficulty I have.. Consistency is impossible if one takes two extremes of its application. Suppose, I asked Mr Mitchell in the course of argument, the ex parte order was made, the receiver moved in immediately and properly incurred expenses in the receivership and was entitled to be remunerated for his efforts. The defendant then applies at the very first moment he has to discharge the order and puts up a compelling case to establish his innocence beyond question. Surely it would wrong, I asked, for him to have suffered loss in such an event. I think he saw the lack of merit in his position. It is, however, Mr Joffe who has problems at the other extreme. Suppose that, as may well often happen, there is long delay between the making of the order and the conclusion of the criminal proceedings with an acquittal which leads to the discharge of the receivership order. Assume, however, that by reason of prudent management by the receiver an ailing business is in fact made profitable to the benefit of the defendant, then why should the defendant not pay for it? Mr Joffe’s answer is that could be dealt with by the court’s exercise of discretion. I am not happy with that answer. I do not consider that it is proper to engage in an analysis of the cost effectiveness of the receivership and management in order to determine whether the costs of the receivership should be treated as costs of an incidental to the proceedings so as to give the court discretion in the first place.

The true position, as it now appears to me, is that the investigation of whether or not the defendant has suffered loss by reason of the receivership, is an investigation which should be and ordinarily would be conducted in deciding whether or not damages should awarded against the plaintiff for breach of the usual undertaking as to damages a plaintiff would normally be required to give. Such an investigation would enable justice to be done. Here no undertaking was given and none ordinarily is. Mr Mitchell submits that Section 89 of the Act provides a defendant with the only relief to which Parliament thought he was entitled. Section 89 provides as follows:-

"(1). If proceedings are instituted against a person for an offence or offences to which this part of the Act applies and either -

(a) The proceedings do not result in his conviction for any such offence...

the High Court may, on application by a person who held property which was realisable property, order compensation to paid to the applicant if, having regard to 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) there has been some serious default on the part of a 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 pursuance of -

(i) an order under this Part of this Act..."

The Commissioners of Customs and Excise are included under subsection 5 but, quite properly, there is no suggestion in this case that the officers have been guilty of any default in their investigation or prosecution of these offences. Section 89 simply does not provide an adequate remedy.

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.

We have had no argument addressed to us as to whether or not the events which have happened could amount to a breach of Article 1 of the First Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms which provides that:-

"No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by the law..."

As Nourse L.J. said in Evans -v- Clayhope Ltd , this question can only be properly decide if and when it arises.

I would dismiss the appeal.

Aldous:L.J.:

Ward L.J. has set out in full the facts relevant to this appeal and the submissions of the parties. I will therefore confine my judgment to the particular issue that arises. It is - may a successful party recover from the unsuccessful party, by way of an order for costs, the costs (including expenses and remuneration) incurred by a receiver appointed by the Court pursuant to part VI of the Criminal Justice Act 1988.

Part VI of the 1988 Act gives to the Court jurisdiction, in certain circumstances, to confiscate property of an offender. Ancillary to such jurisdiction is the power to make an order, known as a restraint order, which prohibits a person from dealing with any realisable property. Where a restraint order is made

"... 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 ...." (section 77(8)).

In this case the Court granted a restraint order and appointed a receiver to take possession and manage the property of the appellant and his son. In substance that property consisted of about £42,000 obtained from the appellant and the haulage company known as J & A Transport Limited which I refer to as the company.

Upon appointment the receiver became an officer of the Court, deriving her authority from the court order. Thus the Court assumed control of the property affected by the order. The powers of management gave her authority to carry on the business of the company which she did. A substantial part of her time was incurred in supervising vehicle sales and purchases in order to maintain the quality of the fleet of vehicles operated by the company. For the work done the receiver was entitled to such reasonable remuneration as may be authorised by the Court (Order 30 rule 3 of RSC). Although the appellant did at one stage claim an interest in the company, it was established that it was owned by his son. Thus the only property of the appellant that was held by the receiver was the £42,000 odd. All but about £10,000 was returned to the appellant to cover his legal costs and expenses. It is that £10,000 the appellant submits forms part of his costs of these proceedings. As he was the successful party, the order for costs should follow the event with the result that the £10,000 should be paid to him by the unsuccessful party.

The power to order costs arises from section 51 of the Supreme Court Act 1981. It states:

"51. (1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in -

(a) the civil division of the Court of Appeal;

(b) the High Court, and

(c) any county court,

shall be in the discretion of the court.

(2) Without prejudice to any general power to make rules of court, such rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representatives.

(3) The court shall have full power to determine by whom and to what extent the costs are to be paid.

......."

The only relevant rule is contained in O.62 r1(4) as follows:

"(4) References to costs shall be construed as including references to fees, charges, disbursements, expenses and remuneration and, in relation to proceedings .... also include references to costs of or incidental to those proceedings."

The appellant submitted that the remuneration of a solicitor or expert fell within the definition of costs and therefore there was no reason why the remuneration of a receiver should not also do so. Thus if the remuneration of the receiver was "incidental" to the proceedings, as it was, it was recoverable by the successful party pursuant to section 51 of the 1981 Act.

Despite the persuasive submissions of Mr Joffe who appeared for the appellant, in my judgment the remuneration of the receiver was not costs incidental to proceedings in the civil division of the High Court. By order of the Court the receiver assumed control of the company and of the £42,000. Most of the time of the receiver was spent in supervising the running of the company. For example, she spent time supervising disposal and acquisition of lorries for the benefit of the company. As yet the receiver has not produced accounts but they will show expenditure and income. Part of the expenditure will consist of her charges which were paid for at least in part out of the money available from the £42,000 that came from the appellant. Such charges cannot in my view be costs incidental to these proceedings. Those charges are expenses of the receivership and are therefore not recoverable by a successful party in proceedings in which a receiver has been appointed. That conclusion can be demonstrated to be right if it be assumed that the only property that was taken into receivership was the company. If so, receiver's remuneration would be incurred as a charge for running the company which hopefully would have made a profit even after the remuneration of the receiver had been deducted. It would by no means have been certain that the same position would have been achieved without the accountancy advice of the receiver. In such a case would the receiver's remuneration be recoverable by the owners of the company, if they were successful in the proceedings in which the receiver was appointed? If so, would the amount recoverable be the amount charged by the receiver or that sum less the income derived from work done by the receiver? I believe the first question should be answered in the negative. The remuneration of a receiver is an expense of the receivership not costs incidental to the proceedings in which he is appointed. To answer in the affirmative would lead to the difficulty posed by the second question.

I realise that on the facts of this case the appellant may seem to have been treated unfairly by the conclusion that I have reached, as his £10,000 was used up as an expense of the receivership and therefore cannot be recovered. That in my view is the result of the type of proceedings and the conditions for recovery laid down in the Act. Parliament in section 88 of the Act specifically limited the right to recover from a receiver to cases where negligence is established. It is accepted for the purposes of these proceedings that there was no negligence.

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 Order 115 rule 4(1) specifically stipulates that "The prosecutor shall not be required to give an undertaking to abide by any order as to damages sustained by the defendant as a result of the restraint order".

I believe the judge came to the right conclusion and agree with Ward L.J. that this appeal should be dismissed.

Hirst L.J.:

I also agree.

Order: Appeal dismissed; application for leave to appeal to House of Lords refused.