England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM The Crown Court at Lincoln: HHJ Heath
The Crown Court at Southwark: HHJ Taylor
The Crown Court at Teeside: HHJ Briggs
T2007/7065 + S2007/0406

		Royal Courts of Justice Strand, London. WC2A 2LL
		22/05/2009

LORD JUSTICE HOOPER:

1. This is the judgment in one appeal and two conjoined applications for leave to appeal, with the appeals to follow if leave granted. The Bar Council and the Law Society made written submissions in Crown Prosecution Service ["CPS"] v Susan Campbell, for which we are grateful. The CPS having abandoned the application for leave to appeal, it has not been necessary for us to consider the submissions.

CPS v Susan Campbell

2. The CPS as applicant applied both in writing and orally for an adjournment. We refused that application. The applicant then abandoned the application for leave to appeal. With hindsight we ought to have given our formal permission under Rule 72.3 (1) (b) of the Criminal Procedure Rules. For the avoidance of doubt we give permission.
3. On 18 February 2008 Susan Campbell ["Campbell"] pleaded guilty to one count of money laundering. On 16 October 2008 the issue of Campbell's representation at the related confiscation proceedings was considered by HHJ Heath. After a detailed inquiry by Campbell's solicitors, the court accepted that a suitably qualified advocate could not, at that stage, be found to conduct the proceedings. HHJ Heath ordered that a transcript of the ruling be forwarded to the Legal Services Commission ("LSC") and urged them to make an exception in this case to provide for adequate funding for an advocate, not least because substantial public funds, in the form of the potential confiscation order, were at risk. The LSC refused to make the requested exception.
4. On 20 February 2009 the confiscation proceedings came before HHJ Heath. Campbell was unrepresented at this hearing, despite there being a representation order in her favour. Her trial counsel had left the independent bar by the time of the confiscation proceedings and her solicitors were unable to find a suitably qualified replacement barrister willing to take the case due to the rate of remuneration under the applicable graduated fee structure: then a fixed daily rate of £178.25 or fixed half daily rate of £99.50 with no funding for preparation of the case unless it involved a very unusual or novel point of law or fact, which this case did not.
5. Campbell sought a stay of the confiscation proceedings on the basis that it would be an abuse of process of the Court to proceed when she could not secure appropriate representation and therefore could not have a fair hearing. HHJ Heath found that any freshly instructed barrister would need to do approximately 80 hours of preparation before a final hearing and that the notion that Campbell could have a fair trial without representation was "pie in the sky". He then granted her application, stayed the proceedings and made no confiscation order.
6. In support of the application for an adjournment reliance was placed on a witness statement prepared by Sarah Albon of the Ministry of Justice. She explains how the graduated fees scheme works. The scheme "works on the well-established basis of 'swings and roundabouts' where a number of proxies for case complexity determine the appropriate fee." She continues: "The fee in an individual case may or may not reflect the amount of work done on that individual case, but given a reasonable spread of cases, advocates will be adequately paid for their work overall." She had earlier written: "Generally the scheme was drawn up with the expectation that the same advocate will appear at trial and at the confiscation hearing, so will benefit from the swings and roundabouts principle."
7. Because of concerns about the way the scheme operated the Ministry of Justice established a Working Group in 2007 and the Ministry is now finalising the details of a change to the scheme that would in certain circumstances provide an additional graduated fee in certain cases. Consultation about these proposals will start within the next few weeks. We were told orally that it is hoped to enact the changes in June or July of this year. In the words of Mr Kirk, counsel for the Crown Prosecution Service, the result is that an adequately funded advocate may be available for Campbell.
8. We reached the conclusion that the fact that in the future an adequately funded advocate may be available was no justification for an adjournment. The problem identified in this case is not a new one: see e.g. the decision of HHJ Mole QC reported on BAILII as P [2008] EW Misc 2 (EWCC). That decision was handed down over a year ago.

Michael Joseph McInerney v. Financial Services Authority

9. This appeal raises issues concerning section 41 of the Proceeds of Crime Act 2002 ("POCA"). The trial judge purported to grant leave to appeal but in our view she had no power to do so as it is a matter for the Court of Appeal to consider (Rule 73.1 of the Criminal Procedure Rules). In any event, we grant leave to appeal.
10. Section 41(3) and (4) provide:

(3) A restraint order may be made subject to 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;

(c) be made subject to conditions.

(4) But an exception to a restraint order 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.

11. An offence falls within subsection (5) if it is an offence in respect of which the restraint order was made.
12. It has been held that legal expenses incurred in defending the restraint proceedings are legal expenses relating to the offence in respect of which the restraint order was made: see S v The Commissioners of HM Customs and Excise [2004] EWCA Crim 2374. In that case the court said (in para. 47) that "looking at the Act as a whole we are satisfied that Parliament intended to make public funding available to question restraint orders" and that the order should make clear that public funding is available.
13. The Explanatory Notes to POCA state:

88. Section 41 explains the nature and effect of a restraint order. It is an order prohibiting a specified person from dealing with any realisable property held by him (realisable property is defined in section 83). Thus it may be made both against the defendant or person under investigation, and any other person holding realisable property. Subsection (3) provides for exceptions to be made for reasonable living and legal expenses and for carrying on any trade, business, profession or occupation. Subsection (4) prevents funds under restraint from being released to the defendant or the recipient of a tainted gift for legal expenses incurred in relation to the offences in respect of which the restraint order is made. However, public funding for legal expenses, on the standard conditions, will be available to both instead.

14. We were shown a passage from Hansard in which Lord Rooker, speaking for the Government, confirmed that legal aid would be available, as the last sentence of this Explanatory Note states (Hansard, House of Lords Committee, 27 May 2002, column 1102).
15. By virtue of section 41(7) the court may make such order as it believes appropriate for the purpose of ensuring that the restraint order is effective. The restraint order made in this case (which is in a standard form developed over the years by prosecuting authorities) tells the person or persons who are the subjects of the order that it is a contempt of court to breach the order and tells any person notified of the order that it is a contempt of court knowingly to assist in or permit a breach of the order.
16. On 30 October 2007 HHJ Goymer sitting at Southwark Crown Court made a restraint order against Mr Michael McInerney ("Mclnerney") under POCA in connection with alleged money laundering offences. The order restrained all known assets of McInerney, but allowed him £250 per week towards ordinary living expenses. (£250 is, we were told, a standard sum in practice put forward by prosecutors).
17. On 11 November 2008, McInerney applied to the LSC for public funding in order to review judicially the FSA's decision to commence a prosecution of the money laundering offences, the issue being whether the FSA has the power to prosecute substantive POCA offences and/or whether it has locus to commence a private prosecution as a statutory regulator. (We should add that in another case a trial judge sitting in the Crown Court has very recently ruled that the FSA does have the power to prosecute and has given leave to appeal).
18. On 12 February 2009, the LSC offered the requested public funding, subject to the condition that McInerney made a contribution of £117.66 per month from his 'Income". That assessment was made on the basis of his "income" of £250 per week, that being the sum excluded as living expenses from the terms of the restraint order. McInerney's solicitors argued that the assessment of his income should have been 'nil' due to the restraint order. The LSC rejected this argument. Confirmation was then sought from the FSA that the monthly contribution could be paid to the LSC from the ordinary living allowance. The FSA responded that the payment of the contribution would be a breach of section 41(4) of POCA as it was not possible to make an exception to the order for any legal expenses. McInerney applied to Southwark Crown Court for a variation of the restraint order to make it clear that he was not prohibited from paying the £117.66 contribution. Her Honour Judge Taylor refused to make the variation requested.
19. McInerney appeals against the decision of Her Honour Judge Taylor not to vary the restraint order. McInerney had sought a variation (or a declaration) the effect of which would be to permit him to pay part of the money allowed to him for reasonable living expenses to the Legal Services Commission as a contribution to the costs incurred in bringing the judicial review application.
20. The prosecuting authority, the Financial Services Authority (FSA), as respondent, submitted to the judge that she should not make the variation and submits to us that the judge was right to refuse it. Mr Khamisa QC who appears for the appellant now agrees that the judge was right to refuse the variation and asks that the appeal be dismissed, albeit expressing the hope that this Court can assist the appellant to resolve his difficulties with obtaining legal aid. Mr Moffett appears for the Secretary of State for the Home Department, the Secretary of State for Justice and the Legal Services Commission who came into the appeal because it was being submitted that this Court ought to make a declaration of incompatibility. That submission is no longer being made. However, Mr Moffett has sought to help us with the issues raised on the appeal. Mr Moffett submits that the appeal should be allowed and that the restraint order should be varied to make it clear that the appellant may use the money allowed to him for reasonable living expenses to make a contribution to the LSC.
21. Mr Moffett's primary submission was that on a proper reading of section 41 the Act places no limitations on what the defendant himself may do with any money allowed to him, for example, as reasonable living expenses. Thus if the judge decides that £250 per week is an appropriate sum for reasonable living expenses, then the defendant can do as he likes with that money without being in breach of the Act or in contempt of court. He can, if he wishes, use the money to pay for a lawyer to defend him in the restraint proceedings or on the criminal charges. He can make a contribution to the LSC in connection with and as a condition of the grant of civil legal aid. Section 41(4) forbids the court from making provision out of the restrained assets for legal expenses in connection with the offence with which he is charged. It does not, so it is submitted, prevent the defendant from using money allowed to him as reasonable living expenses for that purpose.
22. Because of the form of the order in this case, to which we turn shortly, we do not need to decide whether Mr Moffett's primary submission is right. However the submission, even if right in law, is of little practical significance. This is because of the terms of the standard form of the order now used and because, as Mr Moffett accepted, if the court became aware (as it surely would) that the defendant was using money to pay for a lawyer to defend him in the restraint proceedings or on the criminal charges, then the court would be entitled to reduce the amount of money made available to him for reasonable living expenses or impose a condition under section 41(3)(c). The court would be entitled to do so because if the defendant is using money allowed to him for that purpose to pay legal expenses, that would indicate that he was being allowed too much money out of the restrained assets. Indeed section 69 provides that the power to make a restraint order given to the court by section 41 and the power to vary it given by section 42 must be exercised with a view to the realisable property being made available for satisfying any confiscation order and with a view to securing that there is no diminution in the value of the realisable property. The effect of section 69 is that the court may well be bound to reduce the amount or impose a condition.
23. Mr Moffett also submitted that a contribution to the LSC in order to have legal aid to take judicial review proceedings is ''a living expense" for the purposes of section 41(3)(a) (the expression "living expense" is not defined in the Act.) Thus when seeking to persuade the judge to allow a particular sum for reasonable living expenses, the defendant is entitled to include within the list of his living expenses any contribution that he has to make. There are practical difficulties with that. If the LSC decides to require as a pre-condition of obtaining civil legal aid a contribution of £100 per month and if the judge decides that deducting that sum would mean that the defendant has insufficient funds for his other living reasonable living expenses, the judge might be persuaded to increase the sum. But having increased the sum, the LSC would then, presumably, recalculate the contribution and require the defendant to pay a greater sum.
24. To meet this problem Mr Moffett submitted that the parties might invite the court to reduce the amount of the provision for reasonable living expenses so that the LSC calculations would lead to a nil contribution. The decision as to the amount for reasonable living expenses would then effectively be made by the judge simply applying the formula which the LSC would use to calculate the contribution.
25. Mr Khamisa submitted that a contribution to the LSC does not fall within the ambit of 'living expenses." He showed us TDK Tape Distributor (UK) Ltd v Videochoice Ltd [1986] 1 WLR 141, [1986] 3 All ER 345, a case dealing with what are known now as freezing injunctions. He submits that the statutory regime of restraint orders has very much in common with the common law regime of freezing injunctions and that the draftsman of POCA would have had freezing injunctions very much in mind when drafting the provisions for restraint orders. Many of the obligations on the defendant are the same. The expression "reasonable living expenses" is very similar to the expression "ordinary living expenses", the expression used in the order against Mr McInerney and in the suggested Practice Direction "Interim Injunctions" which supplements CPR Part 25. Likewise the exception in section 41 (3)(b) (trade, business etc) is commonly made in freezing injunctions (see Smith, Owen and Bodnar, Asset Recovery, para II. 1.44, not cited in argument before us). When faced with the decision as to who was to meet the costs of management receivers the courts applied the well established common law principles (see Smith, Owen and Bodnar, para. II. 1.244). Mr Moffett asked us not to apply the common law authorities as to the meaning of "reasonable living expenses" and he did not refer us to any common law authority. We think that Mr Khamisa is right and that help as to the meaning of "reasonable living expenses" can properly be found in the common law authorities, some of which are conveniently summarised in Smith, Owen and Bodnar, para. II. 1.42.
26. In the TDK case, Skinner J said (page 146), that he was giving the expression "ordinary living expenses'¹ a reasonable interpretation. He continued:

In my judgment it is certainly possible to aggregate expenses like a monthly account with the grocer, rates' bills and fuel bills, recurrent expenses of that sort; but I think it is impossible to argue that a bill to a lawyer for a defence against a serious criminal charge amounting to £10000 is an ordinary living expense. Ordinary living expenses, in my judgment, mean ordinary, recurrent expenses involved in maintaining the subject of the injunction in the style of life to which he is reasonably accustomed. It does not include exceptional expenses like (an example given by Mr. Jacob) the purchase of a Rolls Royce or the equivalent in legal terms of the private employment of a Queen's Counsel to defend you against a serious criminal charge. That is not an ordinary living expense, and if it had been desired to create an exception from the injunction to cover that sort of expense, then an application to the court was necessary to effect it. (Emphasis added)

27. Mr Moffett also submitted that it was the intention of Parliament that contributions to the LSC would fall within the expression "living expenses." He points to the passage in the Explanatory Note which states that public funding for legal expenses, on the standard conditions, will be available to the defendant. Mr Moffett submits that "conditions" would include making required contributions. In our view, if the draftsman had had in mind that the LSC might require a contribution, then the draftsman would have included a particular provision dealing with that issue. If the draftsman had had in mind that the LSC might require a contribution, then he or she would have been concerned about the meaning of "living expenses" and would have been concerned whether such a contribution would fall foul of section 41(4) and would have inserted a particular provision.
28. In the present case the judge decided that a contribution to the LSC "cannot on any reasonable construction be treated as" a living expense. We agree.
29. We turn now to the order in force against McInerney in the present case.
30. The order prevents him from in any way using his assets. Paragraph 14(1) provides:

This order does not prohibit MM, [McInerney] on the proviso that he is not in prison, from spending up to £250 per week towards his ordinary living expenses ... But before spending any money MM must tell the Prosecutor where the money is to come from.

31. We have no doubt that by virtue of this wording McInerney is prohibited from spending the sum of up to £250 per week for other than ordinary living expenses. If Mr Moffett's primary submission is right, then the court making the order has imposed a condition under section 41(3)(c) as to the use of the money allocated to him from his assets.
32. We asked Mr Moffett to draft an amendment to the order the effect of which was to make it clear to the defendant that he was entitled to make a contribution to the LSC. The amendment had a similar effect to the amendment being sought before HHJ Taylor, being the amendment which she did not allow. She said that a contribution to the LSC "cannot on any reasonable construction be treated as" a living expense. The amendment which HHJ Taylor rejected was in the following form:

This order does not prohibit MM ... from paying £117.66 per month to the Legal Services Commission in contribution to CLA funding for the judicial review claim ... The money is to come from MM's HSBC internet account number. ..."

33. We agree with the judge. Payments to the LSC are not ordinary living expenses and thus McInerney would be in contempt of court to pay money to the LSC and the LSC would be in breach of the restraint order to receive it. Furthermore section 41(3)(a) makes a distinction between living expenses and legal expenses and if a contribution to the LSC is a legal expense (to which we turn now), a payment to the LSC would not be a payment towards ordinary living expenses.
34. Even if payments to the LSC do come within ordinary living expenses, that, so Mr Khamisa submits, is not the end of the matter. He submits that HHJ Taylor was right to hold that making a contribution to the LSC is the payment of a legal expense within the meaning of section 41(4). She described the application to make the amendment as an "attempt to do serious injury to the wording of the statute" and said that the amendment was expressly prohibited by section 41(4).
35. Even if Mr Moffett's primary submission is right that the defendant can under the Act do what he likes with the money allocated to him as reasonable living expenses, the judge, on learning that a contribution was being made to the LSC, would, so it is submitted, be bound to impose a condition that the money not be used for this purpose because such a contribution would be a breach of section 41(4).
36. Mr Moffett submits that it was the intention of Parliament that contributions to the LSC of this kind would not fall foul of section 41(4) because Parliament intended public funding on standard conditions to be available. We have rejected a similar argument above (see paragraph 27).
37. Mr Moffett submits that the payment of a monthly sum by the appellant to the LSC does not constitute the payment of "legal expenses". He argues that it is a payment of a different kind to a public body as a condition precedent to that body funding (in full) the legal costs of his proceedings. That payment is different from "legal expenses". We were not invited to look at the primary legislation but we did look at the terms of the LSC's offer and the accompanying documents. The money required from the appellant is described as a "contribution". That must mean a part payment towards a larger whole, that whole surely being the legal expenses of the action. The view that the appellant is making a contribution to his legal expenses is supported by the accompanying document entitled "Important Information about your Public Funding", which expressly says: "If you accept the offer you will have to pay some money towards the cost of your case "(our emphasis).
38. In our view the judge was right. A contribution to the LSC to institute judicial review proceedings in connection with the offence in respect of which the restraint order was made is a "legal expense".
39. It follows that a judge who discovers that a contribution is being made to the LSC is likely to impose a condition that no such contribution should be made, indeed if not bound to do so in the light of sections 41 (4) and 69.
40. For these reasons we dismiss the appeal.

The Medicines and Healthcare Products Regulatory Agency v. Graeme Trevor Carlton

41. We turn to the third application for leave to appeal.
42. At the outset of the hearing the applicant, Medicines and Healthcare Products Regulatory Agency ("MHRA") sought an adjournment. We decided that we should first decide whether to grant leave to appeal. We heard briefly from Mr Talbot for the MHRA and from Mr Moffett intervening, at our request, on behalf of the Secretary of State for the Home Department, the Secretary of State for Justice and the Legal Services Commission. Mr Moffett supported the application for leave and counsel for Carlton, Mr Soppitt, adopted a neutral stance.
43. We decided to grant leave and will give brief reasons below for so doing.
44. The Court having granted leave, Mr Talbot sought an adjournment for the same reasons as had been put forward in the CPS v Campbell case. We refused the adjournment. We reached the conclusion that the fact that in the future an adequately funded advocate may be available was no justification for an adjournment. Mr Talbot having been told that we refused the application for an adjournment, then abandoned the appeal with our permission (see rule 73.4(1) of the Criminal Procedure Rules). It was Mr David Ruffin of the Criminal Appeal Office who drew our attention to this Rule and we are grateful to him for his help in this respect and generally in the preparation of the cases.
45. On 18 September 2007 Graeme Carlton ("Carlton") pleaded guilty to offences of supplying and advertising for sale an unlicensed medicinal product. The case was then committed to the Crown Court for it to consider confiscation proceedings. On 1 February 2008 HHJ Briggs at Teesside Crown Court made a restraint order against Carlton restraining all of his known assets.
46. Carlton had a representation order in his favour for the confiscation proceedings but was unable to secure the services of a suitably expert and experienced barrister for the confiscation proceedings. This was again due to the size and complexity of the proceedings and the fact that counsel's ordinary preparation is not remunerated under the Graduated Fee Scheme. As all of his assets were restrained, Carlton was unable to instruct an advocate privately.
47. On 20 February 2009, an application was made to HHJ Briggs to vary the restraint order to allow some of the property and income listed therein to be removed from the order, thus enabling Carlton to use that property and income to pay for legal expenses made by the prosecutor. HHJ Briggs ruled that he could not do so, being prohibited from doing so by section 41 (4) of POCA.
48. The prosecutor applied for leave to appeal against this decision on the grounds that the judge erred in holding that he was prohibited by section 41(4) of POCA from making the variation of the restraint order sought.
49. We give our reasons for granting leave to appeal.
50. Rule 73.1 of the Criminal Procedure Rules (not cited in argument) provides that:

(1) Leave to appeal to the Court of Appeal under section 43 or section 65 of the Proceeds of Crime Act 2002 will only be given where—

(a) the Court of Appeal considers that the appeal would have a real prospect of success; or

(b) there is some other compelling reason why the appeal should be heard.

51. Mr Talbot submitted, that the way out of the impasse created by the fact that Carlton would be unrepresented because no advocate was willing to be instructed at the rates offered by the Legal Services Commission was to vary the order by removing from it assets which could then be used to instruct an advocate. The only unpalatable alternative could well be a stay of proceedings.
52. Section 41(1) provides that the Crown Court may, in certain circumstances, make a restraint order prohibiting any person from dealing with any realisable assets held by him. Section 41(2) envisages that the court may exclude realisable property from the scope of the restraint order. It provides:

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;

53. Section 42 makes provision for varying orders already made.

53. Thus Mr Talbot argues that if there are realisable assets which do not fall within the scope of the restraint order then section 41(4) does not bite and the defendant is free to do as he likes with the realisable property not subject to the restraint order.
54. Mr Talbot and Mr Moffett submitted that in what were described as "exceptional circumstances" the court may remove realisable assets from the ambit of the restraint order. Exceptional circumstances would arise where a court is minded to stay an application for a confiscation order for lack of proper legal representation.
55. Section 69, not relied upon by Mr Talbot in his skeleton argument, provides that the power to make a restraint order given to the court by section 41 and the power to vary it given by section 42 must be exercised with a view to the realisable property being made available for satisfying any confiscation order and with a view to securing that there is no diminution in the value of the realisable property.
56. Thus it could be said that the power to exclude realisable property may be exercised in the exceptional circumstances envisaged because, if not exercised, there will be a stay and no confiscation order will be made.
57. HHJ Briggs said no more than that he took the view that he had no jurisdiction to vary the order in order to enable the respondent to finance his legal representation given the restrictions in section 41.
58. In the light particularly of what appeared to us to be the somewhat surprising position adopted by the Secretary of State for the Home Department and the Secretary of State for Justice, we felt that it was appropriate to grant leave. However, given that the appellant has abandoned the appeal and given that we have not heard full argument, we are not in a position to decide whether HHJ Briggs was right.