England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(THE ADMINISTRATIVE COURT)

		Royal Courts of Justice Strand London WC2
		14th June 2001

1. MR JUSTICE STANLEY BURNTON: This is an application for the judicial review of an Order made by His Honour Judge Rivlin QC, as judge at the Southwark Crown Court on 14th December 2000, in a criminal matter against one Lewis Daulby. The matter came before me originally in an application by Mr Daulby's solicitors, who are the Claimants in these judicial review proceedings, for directions in respect of the Restraint Order which had been made by the High Court in respect of Mr Daulby and restrained him from dealing with his assets in much the same way as a freezing injunction does in civil proceedings. I will come to the provisions of that order in a moment.
2. Following that original hearing proceedings for judicial review of His Honour Judge Rivlin's order were commenced. I gave permission for the application to be made and it has come before me today. In brief the application is to quash his order on the basis that he had no power to make it. The order in question came to be made in these circumstances: the High Court Order restraining Mr Daulby provided, as is normal in such cases, for him to be able to pay his solicitors out of the restrained assets the costs incurred by him in retaining their services to defend him. It is, of course, normal, in all orders of this kind, for the person restrained to be entitled to use his funds in order to pay his lawyers to defend him. That is so both in civil proceedings and criminal proceedings, but the importance of such a provision in criminal proceedings is, of course, much greater given that the liberty of the client (whose assets are restrained) is involved. This consideration, if anything, has become greater since the enactment of the Human Rights Act.
3. The original Restraint Order in this case permitted a very limited sum to be utilised in payment of legal fees. The Restraint Order was subsequently varied and ultimately, or almost ultimately, it was varied on 20th May 1999 to provide that the Defendants' solicitors, the present Claimants:

"shall be entitled to draw immediately the sum of £10,000 and then such other sums as have been actually, reasonably and properly incurred for legal costs in these and associated criminal proceedings."

4. The order went on to obtain a proviso, which I understand is standard in such cases, that read as follows:

"PROVIDED THAT:-

Before such other sums are released for this purpose the solicitor for the defendant shall notify the Serious Fraud Office in writing of the following matters:

a. the source of the fund to be used to pay the said costs, bthe general nature of costs incurred, cthe time spent and by whom...

d. the hourly rate applicable to the costs incurred, and

e. that, in the event that the Serious Fraud Office consider the claim to be in respect of costs that have not actually, reasonably or properly been incurred then the entitlement to draw such costs be restricted to 65% of the amount claimed and the whole claim for costs then be subject to taxation in accordance with Order 62 r15 without the provisions of Order 62 r15(2) applying."

5. Pausing there for a moment, those are various provisions of Order 62 relating to the manner in which costs would be taxed if there were to be a taxation. Of course the taxation would be on a solicitor and own client, or what is sometimes referred to as an indemnity, basis, rather than a party and party basis. That provision for payment of 65 per cent of the amount claimed was subsequently increased, I understand, to 80 per cent. Nothing turns on that. The order was also subsequently varied and ultimately varied on or about 5th December so as to provide specific assets to be utilised in the payment of legal fees.
6. Ultimately Mr Daulby pleaded guilty. The question of a Confiscation Order came to be considered by the learned judge and for that purpose he had to consider what assets were disposable in order to meet the liabilities of Mr Daulby concerned in the case. It was put to him that the monies, the subject of the Restraint Order, which remained as at the date when the matter first came before him, which was 6th December 2000, were in the region of a million pounds, but that the outstanding costs of the Claimants were in excess of a million pounds. Therefore there were no longer any monies available to meet any liabilities of Mr Daulby to any of those to whom he had defrauded. There were no disposable assets for the purposes of the Confiscation Order.
7. The Serious Fraud Office appeared, of course, at the hearing before His Honour Judge Rivlin QC and Mr Fisher has helpfully appeared as an interested party before me today to explain the SFO's position and has again helpfully supplied me with observations and authorities. It is quite clear from the transcript of the proceedings on the two occasions this matter came before the Judge, that is to say on 6th December and 14th December, that the SFO had come to the conclusion that there was no point in a taxation of the Claimants' costs because any reduction on taxation would nonetheless leave a balance outstanding greater than the amount available to meet those costs. Moreover any taxation would be expensive involving, as it would, considerable work on the part of the Claimants, and indeed, if the SFO were to participate in that taxation, on the part of the SFO.
8. The SFO clearly considered the matter carefully. They have considered the details they have been given of the work done by the Claimants and come to the conclusion that although the sums which had been paid, and were liable to be paid on account of the work done by them in the case, were exceedingly substantial, nonetheless they were reasonable and justifiable. In those circumstances they had not sought, did not seek, and never sought, to have the Claimants' costs taxed pursuant to the provisions of the High Court Order to which I have referred.
9. The Judge clearly was quite appalled at the level of costs in this case. He made remarks indicating that he considered that it may not have been coincidental that the amount claimed by way of costs approximated to the amount available to meet the liabilities of Mr Daulby generally. There was a long discussion on 6th December between counsel and His Honour Judge Rivlin concerning his powers. Ultimately the matter came back before him from 14th December when he made the order that he did. The position of the Claimants when he made that order was that he had no power to make it and the SFO agreed with that submission.
10. When he made his order His Honour Judge Rivlin purported to do so under section 72A of the Criminal Justice Act 1988. What he said is this:

"I therefore fear, and have good reason to believe, that if I were now to make the order that there were no realisable assets, the victims of this fraud may possibly be wrongly deprived of large sums which should properly be theirs.

This is not a situation which can for the sake of convenience or expediency be glossed over. It must be looked into properly. Accordingly I propose to exercise my powers under section 72A of the Criminal Justice Act 1988, to require further information before coming to a determination in respect of the amount to be recovered in this case.

I order that this information be provided to me in the form of an examination of the fees by a Costs Judge, who must report to me. The solicitors must lodge a full breakdown of all the legal costs with the appropriate office at the Royal Courts of Justice by January 12th. I expect that this will be accompanied by the relevant entries in Dechert's Clients account. This Costs office will be put on notice by this court of the order I have made. I further order that examination by the Costs Judge should be expedited.

Mr Rees has argued before me that only the High Court has jurisdiction to consider taxation of costs paid under an order of that court. Mr Fisher on behalf of the prosecution does not submit otherwise. However, the Crown is in an invidious position in this matter, having already very reluctantly agreed to the proposition that all the assets have been eaten away by legal fees, and being concerned that a taxation of costs would take many months and be very costly. As it happens, the information which I require would be conducted by a Costs Judge of the High Court in an examination which proceeds in parallel to an order for taxation. It is quicker and less expensive, but for the purposes of the information I require, I believe it will be equally affective.

I do not agree that I do not have the power to order this exercise, or that the authorities drawn to my attention supports that submission. I am entitled to call for further information relevant to the question of whether realisable assets are available, and short of conducting or attempting to conduct a taxation of costs myself, I cannot see what course, other than the one I am taking, could answer my concerns."

11. He went on to say later in his ruling:

"If I am wrong in making this order, and it is one which can only be made by a High Court Judge, I believe that a High Court Judge should have the opportunity to consider whether this power should be exercised."

12. Section 72A to which His Honour Judge Rivlin referred: the statutory provision in question, dealt with the postponement of determinations of the benefits from criminal conduct and the amount to be recovered. It conferred on the Court no power to obtain information. It is assumed, therefore, that His Honour Judge Rivlin must have intended to refer to section 73A of the 1988 Act, which relates to provision of information by a Defendant. Section 73A is as follows:

"This section applies in a case where a person has been convicted of an offence of a relevant description if-

(a) the prosecutor has given written notice to the court for the purposes of subsection

(1)(a) of section 71 above; or

(b) the court is proceeding in pursuance of subsection (1)(b) of that section or is considering whether so to proceed.

(2) For the purpose of obtaining information to assist it in carrying out its functions under this Part of this Act, the court may at any time order the defendant to give it such information as may be specified in the order."

13. Section 73A contains no other provision concerning the power of a Crown Court Judge to obtain information. The information which ought to be provided in this case was not ordered to be provided by the Defendant: it was ordered to be provided by his solicitors. Of course in many circumstances, and for many purposes, solicitors are the agents of their client and they may be identified with him, but that is not so in relation to a matter such as the quantification of their costs. Clearly their interests are not the same as those of their client's. Their interests are independent of their client's, in a sense adverse to their client's. There was no way that the client in this case could have compelled his solicitors to provide the information required by his Honour Judge Rivlin other than himself requiring a taxation. In fact he was not required to provide the information. It was his solicitors who were required to do so. As I say, section 73A conferred no power on the Crown Court to order solicitors, as opposed to a Defendant, to give any information. It seems to me, therefore, that this order was clearly outside the statutory power conferred by section 73A.
14. Mr Rees makes a further point, namely that it is one thing for an order to be made for information to be given and a different thing for an order for taxation to be made. Nowhere in section 73A, nor in the part of the Criminal Justice Act 1988 which contains it, is there any power for a Crown Court Judge to order taxation of the costs in a case such as the present. The order in question is a High Court order. The High Court could order a taxation and indeed the order itself provided for a taxation at the instance of the Serious Fraud Office. So far as the 1988 Act is concerned, it conferred no relevant power on the Crown Court and Mr Fisher, who appears for the SFO, does not suggest that there is any other relevant statutory, or other power, conferred on a Crown Court to order such a taxation. For that reason too it seems to me clear that the order made by the Judge was outside his power.
15. For these reasons the order must be quashed. The ruling made by His Honour Judge Rivlin invited the High Court, in the event of the order that is held to be made about jurisdiction itself, to order taxation of the costs. I read carefully the exchange between counsel and His Honour Judge Rivlin. Of course the Court must be concerned at the level of costs incurred in any case, but the primary guardian of the public interest, so far as the monitoring of the Restraint Order in this case is concerned, was a Serious Fraud Office and the circumstances where they were satisfied that there was no good reason to order a taxation and nothing was put forward, or certainly nothing that I have seen, to indicate that the judgment and decision which they came to were clearly erroneous.
16. In my judgment it would not be appropriate for the Court to, so to speak, second guess the SFO and order taxation. I have some sympathy with the position of His Honour Judge Rivlin, but having regard to the very substantial work and costs that may properly be carried out and incurred in complicated commercial cases, I do not think that this is an appropriate case on the information before me to order such a taxation.
17. I would add only this: Mr Fisher brought to my attention that the Government proposes to change the procedure relating to confiscation and Restraint Orders to bring about a position in which the Crown Court will have greater control over such orders and the level of costs incurred. If the law is changed in accordance with what is now proposed the Crown Court will have much greater control and the situation will be very different from that which was before His Honour Judge Rivlin, so far as at least his powers are concerned. However looking at the matter under the law as it is at present, the simple fact is that he had no power to make the order that he did and accordingly it is quashed.

MR REES: May I make one observation and two applications which I do not think will detain Mr Fisher for very long. The observation is this, and I hope it is appropriate, His Honour Judge Rivlin made an allegation that the coincidence of the fees and the available funds caused him to be concerned about fraud. It may be worthy of note again, because it was mentioned in January, that in fact that was not the case.

MR JUSTICE STANLEY BURNTON: My understanding is that there were outstanding bills which took the level of fees above the level which was before His Honour Judge Rivlin. Indeed that was one of the reasons why the SFO took the position they did.

MR REES: The work done had been a figure coincidental, about the same. My instructing solicitors said this in discussion with the Serious Fraud Office. The amount had been passed some time before.

MR JUSTICE STANLEY BURNTON: I have not dealt with that expressly in my judgment. I think I have made it clear from my final observations that I did not consider that the matter warranted taxation and I think it follows from that that I did not see any material before me that there was any justification for that remark.

MR REES: I am grateful. There are two applications: can I take your Lordship back to the bundle, tab 5 at page 12? It is to do with an undertaking. In the order His Honour Judge Rivlin sought at page 12B of the transcript an undertaking – I hope your Lordship has it – from the Defendant and Dechert that "any sum which is in that account [the client account] or which comes into that account will remain there until this matter has been finally disposed of." Over at page 16 at the bottom at G is the equivalent of an undertaking. His Honour Judge Rivlin over the page was satisfied that that would mean that the money would not be dealt with in any way and any money that came into the account would be dealt with in any way.

MR JUSTICE STANLEY BURNTON: Where is the undertaking you give?

MR REES: At the bottom of page 16 at G. I hope it satisfied your Honour. I am sure your Honour will understand why this is something we all want to consider carefully. No money that my instructing solicitors hold in any way will be moved. What I was anxious to do, because it was happening rather quickly, was not to give a legal undertaking but rather give an undertaking having quickly spoken to the party sitting behind me that there was no question whatever in the nature of the term undertaken that we would move the money at all. His Honour Judge Rivlin accepted that.

MR JUSTICE STANLEY BURNTON: If there had been a formal undertaking which had been given as part of his order it would be quashed with the order I have just made.

MR REES: Yes. I mention it because I was inviting your Lordship to say that as a result of your ruling today, whatever the form of the undertaking, that that no longer applies.

MR JUSTICE STANLEY BURNTON: Mr Fisher, do you want to say anything to me about that?

MR FISHER: No, it seems to us that it would follow.

MR REES: Finally I have an application for costs. I hope your Lordship has had a statement of costs.

MR JUSTICE: I have seen a statement of costs. Against who are you asking for an order for costs?

MR REES: My Lord, it seems to us that it is the Defendants. It probably amounts to this, that it is the Court Service.

MR JUSTICE STANLEY BURNTON: The Defendant at the moment is Suffolk Crown Court which is not a legal person. The normal situation is that the interested party, the prosecution, defends the order made by the Court below and the order for costs is made against the prosecution effectively. Can you point to any cases in the authorities for the making of an order against the Court itself?

MR REES: No I cannot point to any authorities.

MR JUSTICE STANLEY BURNTON: Does Mr Fisher have any views on this? I will come back to you Mr Rees. I am just interested to know what the position is. Mr Fisher, the SFO must have more experience about properties than I have.

MR REES: All I can say is that it would seem to us that the appropriate course for my Lord to take is simply to say, 'No order for either party in this case.'

MR JUSTICE STANLEY BURNTON: On the basis that it is inappropriate?

MR FISHER: Perhaps I need not say any more.

MR JUSTICE STANLEY BURNTON: Is there power to make an order?

MR FISHER: There may well be power. We would have to research it. Our invitation, as it were, to my Lord is that looking at this in the round the appropriate course for this Court to take is to say no order for either Dechert or for us.

MR JUSTICE STANLEY BURNTON: I am not going to make any order against you.

MR REES: I was thinking in our favour.

MR JUSTICE STANLEY BURNTON: You have not asked for any?

MR FISHER: My Lord, I was not going to.

MR REES: I do not have any authority. It must be the Court Service, in my submission.

MR JUSTICE STANLEY BURNTON: I do not know whether the Court Service know this application has been made against them.

MR REES: My Lord, I think they do. It is the Court Service who have certainly dealt with the Claimant and my instructing solicitors in correspondence. It is they who, for example, informed us that no opposition will be made to this application.

MR JUSTICE STANLEY BURNTON: Did they know that you were applying for costs against them?

MR REES: I think the answer to that is no. Whether or not that needs clarification it would be my submission that your Lordship does have power. If your Lordship has power certainly some costs should be ordered, especially as your Lordship knows the money ran out about a year ago.

MR JUSTICE STANLEY BURNTON: I understand the point. I am reluctant to order costs and certainly will not do so unless the Court Service is given express notice that you are seeking an order for costs against them so they have an opportunity to make submissions. I will adjourn that with liberty to apply. So far as the first matter is concerned, I make it clear that in so far as there is any legal undertaking given to His Honour Judge Rivlin on 14th December, the quashing of the substantive order that he made means that that undertaking must fall away with the quashing of the substantive order.

MR REES: I am grateful. Thank you.

MR JUSTICE STANLEY BURNTON: If I can help you further I shall. That is everything, is it not?

MR REES: Thank you for taking the case.

MR JUSTICE STANLEY BURNTON: My pleasure.