England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT

		Royal Courts of Justice Strand London WC2A 2LL
		29 June 2010

1. MR. JUSTICE WYN WILLIAMS: In these proceedings brought by way of judicial review the claimant seeks an order directing the interested party to pay her costs of defending forfeiture proceedings which were brought by the interested party against the claimant in the Camberwell Green Magistrates' Court. At a hearing on 13th January 2009 District Judge Sawetz declined to make an order for costs in her favour. The District Judge decided that the appropriate order was no order for costs as between the parties.
2. The key background facts are as follows. On 24th October 2004 a man by the name of Endrik Girshaj was arrested on suspicion of dealing in drugs. At the time of his arrest he was driving a vehicle registered in the name of Carol Fontaine, the claimant's sister. In April 2005 he was sentenced to three and a half years' imprisonment. His imprisonment was short lived. In June 2005 he escaped from custody and he has not yet been apprehended. It later transpired that, prior to his escape, Girshaj had received a telephone call from the claimant and she had also visited him in prison. As a consequence of those matters and in the light of his escape the police decided to visit the claimant at her then home, 36 Egremont Road, in South London. On 25th October 2005 police officers went to that address. They searched it. They discovered a large amount of cash. Other officers stopped a motor car in which the claimant was a passenger. Substantial amounts of cash were found in the car. The total amount seized on that day was 25,750.71. The person driving the car in which the claimant was a passenger gave his name as Emiliano Bertolotti. Both the claimant and Bertolotti were arrested. Shortly afterwards the claimant's sister was arrested. Each of them was arrested on suspicion of money laundering, and it is clear that the police were very suspicious that the money seized was related to the drug dealing activities of Girshaj.
3. Following her arrest the claimant was interviewed under caution and asked to explain how the cash had been accumulated. She told the police that some of the money belonged to her. The rest belonged to Mr Bertolotti and her sister. She said that the cash owned by her was accumulated from various jobs that she had undertaken and the cash owned by the sister and Bertolotti had been accumulated in her sister's case from running the public house known as The King George IV and in Mr Bertolotti's case from his earnings. Following the interview the claimant was released on bail. Further inquiries revealed that Mr Bertolotti was actually a man by the name of Bushi. He was an Albanian national and a failed asylum seeker. Shortly after his arrest and the discovery of his true identity he was deported.
4. On 27th October 2005 the interested party applied for a detention order in respect of the cash which had been seized. The application was made to the magistrates' court at Camberwell Green pursuant to section 295 of the Proceeds of Crime Act 2002. A detention order was made. Under section 295 an order when made may subsist for up to three months. The court is empowered, however, to extend the period during which the cash is subject to a detention order, provided that the total period does not exceed two years from the date of the first seizure of the money. In this case a number of extensions were sought and obtained.
5. On 12th June 2007 the interested party applied for a forfeiture order in respect of the cash which had been seized. Such an order can be made by a magistrates' court pursuant to section 298 of the 2002 Act if the court is satisfied, on the balance of probabilities, that the property in question is either recoverable property or intended by a person for use in unlawful conduct - see section 298(2) of the Act. Recoverable property is defined by section 304 of the Act as being property obtained through unlawful conduct. Forfeiture proceedings are instituted by the completion of a particular form, Form G. In this case that form was completed by DC Ian Adams. He set out in detail the grounds upon which the application was to be pursued. The numbering of the grounds is rather eccentric. In paragraph 27 of the grounds, the principal reason why forfeiture was justified was set out in the following terms:

"The cash concerned is strongly believed to be recoverable property or intended for use in criminal conduct, namely to assist Girshaj ... to evade recapture or to purchase controlled drugs."

No explanation of why the money was said to be recoverable property was given by the officer. Form G was served at least on both the claimant and her sister, Miss Fontaine. Shortly thereafter, it is common ground that an agreement was reached with the interested party that the forfeiture proceedings would be adjourned generally to await the conclusion of any criminal proceedings.

6. On 13th November 2007 the claimant was charged with an offence of conspiracy to launder the proceeds of crime, four offences of false accounting and five offences of providing unlicensed security operative. She appeared at the magistrates' court on 27th November of that year and in view of the conspiracy charge was sent for trial to the Inner London Crown Court. In due course an indictment was preferred against the claimant which contained 12 counts. They were somewhat different to the charges which had originally been proffered against her. The indictment alleged three offences of cheating the public revenue, four offences of fraudulent evasion of VAT and five offences of providing unlicensed security operative. Each count related to the business known as Fontaine Security Limited and the claimant was jointly charged with her sister, Carol Fontaine, on each count. None of the offences related to the management of The King George IV Public House. Further, none of the charges of cheating the public revenue or fraudulent evasion of VAT related to the claimant's personal tax affairs.
7. On 30th June 2008 the prosecution offered no evidence against the claimant in respect of each of those counts. Not guilty verdicts were entered upon each count of the indictment in her case. Her sister pleaded guilty to all of the offences alleged against her and she was sentenced to suspended terms of imprisonment.
8. Following the conclusion of the criminal proceedings on 30th June 2008 the forfeiture proceedings fell to be determined. There is some dispute between the claimant and the interested party as to what occurred in the few months that immediately followed. The claimant alleges that on 2nd September 2008 at a hearing at the Camberwell Green Magistrates' Court, DC Adams stated in open court that the forfeiture application would be abandoned as against her as soon as an agreement was reached over the apportionment of the cash between the claimant, Miss Fontaine, and Mr Bushi. The police officer denies in a recent witness statement that he said anything to that effect, although it is to be observed that the claimant's allegation is supported by an attendance note which was made by her solicitor who was in attendance at the court at the time. Be that as it may, the forfeiture application was adjourned on 2nd September 2008 and relisted for 13th September 2008. On that date the case was further adjourned to 28th October since no agreement had been reached.
9. It is apparent from Mr Smyth's witness statement, Mr Smyth being the claimant's solicitor at the material time, that on 27th October a telephone conversation took place between Mr Smyth and DC Adams. Again Mr Smyth made a contemporaneous attendance note of that conversation. His note reads:

"spanner in the works. Alison Holloway at HMRC is chasing [the claimant] for unpaid tax. May be easiest to get [the claimant] to authorise release of cash to HMRC. Police always have to have option of seizing it as POCA if she doesn't agree."

The note ends by the solicitor saying that he will take instructions.

10. In view of this late development the case did not proceed on 28th October. Rather, it was adjourned again until 9th December 2008. On 17th November 2008 Mr Holloway of the Revenue wrote to the claimant demanding unpaid income tax and interest thereupon. The unpaid tax was said to arise from the claimant's earnings. Shortly thereafter the police officer proposed that the claimant should allow him to release her proportion of the seized cash directly to the Revenue to meet that tax liability. It is common ground, as I understand it, that the interested party made it clear that if the claimant refused to accept the proposal the forfeiture application would proceed.
11. Before the hearing which took place on 9th December 2008 the claimant signed a disclaimer allowing her cash to be sent directly by the interested party to the Revenue. The terms of that document, so far as relevant are these:

"I hereby authorise the Metropolitan Police Service to pay Her Majesty's Revenue & Customs the sum of 11,035.00 that is currently being held following a detention of cash seized under the Proceeds of Crime Act that totalled £25,750.71.

This payment is to be regarded by HMR & C as monies owed by me for outstanding income tax debts, interest and penalties under their reference...".

The reference is quoted:

"I accept this payment is owed by me and that this will settle the forfeiture action under the Proceeds of Crime Act 2002 for that proportion of the money seized under…"

…and the reference is given.

12. On 9th December the forfeiture claim was finally determined. The order made by the court on that date shows that the sum of £14,715.71 was forfeited. It is clear that what occurred was that the agreement to which I have just referred was put into effect, so that £11,035 was retained by the police for onward transmission to the Revenue. The balance of the sum seized was forfeited under the terms of the order.
13. In advance of that hearing on 9th December 2008 DC Adams made a very long witness statement setting out in great detail the events which I have attempted to summarize much more briefly in the course of this judgment. The issue of costs as between the claimant and the interested party was not mentioned at the hearing on 9th December 2008. The claimant was unrepresented, and I am quite able to accept that there was no discussion between the unrepresented claimant and the representative of the interested party as to the costs of the forfeiture proceedings. After the hearing on 9th December, however, the claimant's solicitors wrote to the court, in effect making an application for the claimant's costs. A hearing was listed for 13th January 2009 specifically to resolve that issue. In effect, at that hearing the claimant argued that the costs which she had incurred, which were said to be a sum of £3,384.04, should be awarded against the interested party. The interested party resisted the order. The stance he took was that there should be no order for costs. The District Judge accepted that position and declined to make an order.
14. It is important in my judgment to recount the points apparently taken before the District Judge on behalf of the claimant. They were set out in a skeleton argument which was presented to the court. Essentially, the points taken were that the statutory provision governing the award of costs was section 64 of the Magistrates Courts Act 1980, that the complaint by which the proceedings for forfeiture had been instituted had been dismissed on 9th December 2008, and that in those circumstances costs should follow the event. The interested party also prepared a skeleton for that hearing. The interested party accepted that section 64 was the applicable statutory provision. However, the thrust of the submissions made on behalf of the interested party were that he had acted entirely reasonably in the conduct of the forfeiture proceedings; he was exercising a public function and in those circumstances it was not appropriate to make an order for costs against him. Further, he made the specific submission that the claimant had failed to demonstrate that any real financial harm would follow in the event that no order for costs was made in her favour.
15. In this court the submission has been made on behalf of the claimant that the appropriate statutory provision was not section 64 of the Magistrates Courts Act 1980 but rather section 52 of the Courts Act 1971. To repeat, that was not the stance taken before the District Judge. I do not propose to deal specifically with the issue of whether or not the correct statutory provision governing the situation that arises in this case was section 64 or section 52. In my judgment it is appropriate to deal with this case on the basis as presented before the District Judge. To repeat, she was asked to consider section 64 and that is what she did. It will be quite a difficult point and one which may arise in cases of this sort in the future as to whether or not the governing statutory provision should be section 64 or section 52. The resolution of that issue is better left to a point in time when it will resolve the case before the court.
16. The District Judge gave oral reasons for her decision to make no order for costs. They are to be found attached to the acknowledgement of service in this case, in the sense that there has been transcribed what the District Judge said and a verbatim record included in the acknowledgement of service. Having explained the nature of the issue before her, she expressed herself in these terms as justifying the order which she was about to make:

"The relevant legislation confers a discretion to award or deny costs.

I have considered the history of this case and any financial prejudice to the respondent and I find on the facts of this particular case that it is not just and reasonable to award any costs to the respondent. I emphasise that I have reached my decision on the facts of this particular case.

There are no higher court cases which sets any general precedent on this point. Even in the cases supplied the exercise of discretion is paramount and must be considered on the facts of each case.

Although the 11000 was not forfeited under the Proceeds of Crime legislation it was agreed by both sides that it should be applied by the police to cover her outstanding tax liability. The arrangement entered into was clearly a sound one saving further unnecessary costs to either side.

It is not in my view just and reasonable in these circumstances that the respondent should recover her costs."

Earlier in her short reasons the District Judge had also referred to the fact that, had the compromise agreement not been reached, the interested party would have pursued a forfeiture application, although the District Judge said that the forfeiture application would be pursued "under other legislation, not under the 2002 Act.

17. Section 64 of the Magistrates' Courts Act 1980 is in the following terms, so far as is relevant to this case:

"(1) On the hearing of a complaint, a magistrates' court shall have the power in its discretion to make such an order as to costs -

(a) on making the order for which the complaint is made, to be paid by the defendant to the complainant;

(b) on dismissing the complaint, to be paid by the complainant to the defendant, as it thinks just and reasonable."

18. The primary submission made on behalf of the claimant before this court is that, certainly in the period between the end of the criminal proceedings and the raising of the personal tax issues on 27th October 2008, the conduct of the interested party was such that it would have been just and reasonable to make an order for costs against him when subsequently the issue of costs was determined by the District Judge. There is no suggestion, so far as I can see, from the documentation in this case that that was the primary submission put to the District Judge. Quite the contrary, as I see it. She was being asked to order costs simply on the basis that the claimant in this court was in truth the successful party before her. To repeat, the claimant's submissions did not focus upon the conduct of the interested party at all. The interested party, however, addressed the issue of conduct full square. In a skeleton argument presented by the interested party he made the submission that his conduct throughout the proceedings had been reasonable and that he was properly discharging his public function.
19. I have looked closely at the history of events as they unfolded in September and October 2008. It seems to me that the likelihood is that DC Adams did acknowledge that once the precise amount which was owed to the claimant had been determined from the total sum of £25,000 he would return that money to her, but in the period September and October 2008 there was still genuine and ongoing discussion as to how much precisely was owed to the claimant. There is no evidence, in my judgment, that the police, the interested party, were unreasonably holding on to that money, quite the contrary; the evidence shows that proper discussions were taking place about how much should be returned to the claimant. From the 27th October the picture changed. There seems to me no basis for concluding that the interested party's conduct in the autumn of 2008 was such that it would be just and reasonable to make an order for costs against the interested party.
20. As I have said, that was not a point raised before the District Judge and that of itself might be sufficient to dispose of the argument, but on analysis I can find nothing to support the submission which is made about conduct in that period.
21. So far as the conduct of the interested party is concerned following that period, it seems to me that it should be analysed in this way. Once the interested party became aware that the claimant owed substantial sums of money to the Revenue, it was duty bound to consider how the sum seized should be dealt with. In this case Mr. Metzer on behalf of the claimant has accepted that the money seized from the claimant was recoverable property within the 2002 Act. In my judgment, he had no option but to make that concession since the claimant has always acknowledged that the money represented her savings from earnings, and yet she has also accepted that she paid no or virtually no tax on those earnings. Accordingly, as it seems to me, the money seized was recoverable property and what the interested party had to consider was whether to pursue forfeiture proceedings in relation to it or deal with it in some other sensible and practical way. What he chose to do was enter into the compromise agreement to which I have referred.
22. In my judgment, there was nothing unreasonable about that conduct. The consequence of the compromise agreement was that a substantial amount of money was paid to the Revenue in discharge of a debt and interest. Had the forfeiture proceedings proceeded to a full hearing the claimant would have been left in the unenviable position of having the £11,000 forfeited and still owing the Revenue a very substantial sum of money. Accordingly, in my judgment when the conduct of the interested party is analysed there is no basis for concluding that his conduct was such that an order for costs should be made against him. That probably is sufficient to dispose of this application for judicial review. However, very briefly I refer to the other grounds which were advanced in writing.
23. It is first said that the District Judge failed to give proper reasons for her decision. In my judgment there is nothing in that point. Her reasons were short and succinct but they addressed the issues which had been addressed to her. She dealt with financial hardship to the claimant. She dealt with the compromise agreement. In my judgment, those were the features which were most important in any consideration of her discretion.
24. It is next said that she wrongly referred to the fact that the interested party would pursue forfeiture under other legislation. Quite clearly that was an error on her part but it is not material in any sense. It is common ground that it would have been open to the interested party to pursue forfeiture under the 2002 Act and, for the reasons I have given in my judgment, that application was likely to succeed.
25. Finally, it is said that she did not exercise her discretion in accordance with the decision of the Court of Appeal in Perinpanathan v Westminster Magistrates' Court and Another [2010] EWCA (Civ) 40. A number of points can be made about that. First, that decision was handed on down on 4th February 2010, a long time after the District Judge made her decision. Second, it was an appeal from a Divisional Court decision which itself was handed down after the District Judge had determined this case. Third, and much more importantly, it is clear that the principles relied upon by the interested party in his skeleton argument before the District Judge are precisely the same principles which are approved in Perinpanathan by the Court of Appeal.
26. Accordingly, in my judgment there is nothing in the suggestion that the District Judge did not proceed on the basis of that decision. For all these reasons I have reached the conclusion that this application for judicial review must fail. I would dismiss this application.
27. LORD JUSTICE MOSES: I agree. I would stress that neither I nor my Lord resolve the question as to whether the District Judge had jurisdiction at all to make an order for costs. On one view of the circumstances in which the matters were resolved neither section 52(3) of the Courts Act 1971 nor section 64(1) of the Magistrates' Courts Act 1980 apply. It is arguable in those circumstances that no jurisdiction to award costs arose at all. I emphasize, for the very good reasons advanced by my Lord, that that question does not fall for decision today. I too would that dismiss this application.
28. MR. FORTT: I have an application for costs in the sum of £3,086. They have not been served on my learned friend.
29. LORD JUSTICE MOSES: Would you like to see it? It would be disastrous to go for assessment. We will rise whilst you look at it. If you say that it is too late we will understand. Have you any grounds for resisting an order?
30. MR. METZER: Permission was granted. Observations were made in the granting of leave. There were concerns about the way in which the District Judge dealt with the issue in the light of the points about whether the conduct of the interested party was addressed. These were properly arguable points. In relation to the jurisdictional point it is not a straightforward point. I resist the application.
31. LORD JUSTICE MOSES: Have a look at this. We will make a decision on your resistance…
32. MR. METZER: We have had a look at the assessment. We have put a counter proposal which has met with agreement in relation to the quantum. The main fee earner rate we took issue with was in relation to the 250.
33. THE JUDGE: What should the figure be?
34. MR. FORTT: I do not have a schedule now to deal with the calculation. We have agreed a figure subject to whether you think it appropriate to award costs.
35. LORD JUSTICE MOSES: We do consider it appropriate. Work out the figures and let the associate have that. We will order costs in that amount.