IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
2 Park Street
B e f o r e :
| (1) ERIC EVANS
(2) DAVID ALAN WHITELEY
(3) FRANCES BODMAN
(4) STEPHEN DAVIES
(5) RICHARD WALTERS
(6) LEIGHTON HUMPHREYS
|- and -
THE SERIOUS FRAUD OFFICE
Philip Hackett QC and David Hassall (instructed by McSorely Lewis Law Ltd and Morgans Criminal Law) for David Alan Whiteley
Frances Bodman did not appear and was not represented
Michael J Beloff QC and Guy Ladenburg (instructed by Charles Russell Speechlys LLP) for Stephen Davies
Nicholas Purnell QC and Jonathan Barnard (instructed by Hugh James) for Richard Walters
John Charles Rees QC and Jonathan Elystan Rees (instructed by de Maids) for Leighton Humphreys
Michael Parroy QC and Allison Clare(instructed by the Serious Fraud Office) for the Respondent
Hearing dates: 14-16 January 2015
Crown Copyright ©
Mr Justice Hickinbottom:
i) in respect of the Dismissal Application, an order under section 19 of the Prosecution of Offences Act 1985 ("the 1985 Act"); and
ii) in respect of the VB Application, an order that the SFO pays his costs on the indemnity basis.
i) whether the statutory precondition for the exercise of the court's jurisdiction under section 19 of the 1985 Act (i.e. that the SFO as prosecutor was responsible for an "unnecessary or improper act or omission" that caused the Applicant to incur costs) is satisfied; and
ii) whether the Applicant's costs of the VB application (which the SFO concedes it should pay) should be assessed on the standard or indemnity basis.
STATEMENT OF OFFENCE
CONSPIRACY TO DEFRAUD contrary to Common Law.
PARTICULARS OF OFFENCE
ERIC EVANS, DAVID ALAN WHITELEY, FRANCES BODMAN, STEPHEN DAVIES, RICHARD WALTERS, LEIGHTON HUMPHREYS, between the 1st of January 2010 and the 31st of December 2010, conspired together to defraud Neath Port Talbot County Borough Council, Bridgend County Borough Council and Powys County Council ('the Mineral Planning Authorities') and the Coal Authority by deliberately and dishonestly prejudicing their ability effectively to enforce restoration obligations relating to open cast coal mining at sites known as East Pit, Nant Helen (Nant Gyrlais), Selar and Margam (Park Slip West and Kenfig) situated in South Wales by:
i) establishing companies registered in the British Virgin Islands, in the ultimate beneficial ownership of Eric Evans and David Alan Whiteley; and
ii) transferring the freehold title in the land containing and surrounding the opencast coal mining sites known as East Pit, Nant Helen (Nant Gyrlais), Selar and Margam (Park Slip West and Kenfig) situated in South Wales from Celtic Energy Ltd to those companies registered in the British Virgin Islands;
thereby intending that the financial liability to restore those open cast coal mining sites to open countryside and/or agricultural use would pass from Celtic Energy Ltd to those companies in the British Virgin Islands, thereby releasing some of the money set aside in Celtic Energy Ltd's annual accounts to restore those open cast coal mining sites, and allowing some of that money to benefit the Defendants personally.
STATEMENT OF OFFENCE
CONSPIRACY TO DEFRAUD contrary to Common Law.
PARTICULARS OF OFFENCE
ERIC EVANS, DAVID ALAN WHITELEY, FRANCES BODMAN, STEPHEN DAVIES, RICHARD WALTERS, LEIGHTON HUMPHREYS, between the 1st of January 2010 and the 31st December 2010, conspired together to defraud Neath Port Talbot County Borough Council, Bridgend County Borough Council and Powys County Council ('the MPAs') and the Coal Authority by deliberately and dishonestly prejudicing their ability effectively to enforce restoration obligations relating to open cast mining at sites known as East Pit, Nant Helen (Nant Gyrlais), Selar and Margam (Park Slip West and Kenfig) situated in South Wales ('the sites') by dishonestly agreeing:
i) to establish and control shell companies registered in the British Virgin Islands ('the BVI companies'), and
ii) to cause one or more than one of the BVI companies to act against its/their financial interests by entering into a transaction at an undervalue, by which it/they acquired the freehold title of the sites from Celtic Energy Ltd ('Celtic'), and assumed liability to undertake substantial restoration works in respect of the sites and/or to indemnify Celtic in respect of any liabilities it might have in respect of the sites, without receiving adequate consideration in return and in the knowledge that Oak would be unable to meet those legal obligations, and
iii) to conceal from, and/or misrepresent to, the MPAs and other relevant parties the true nature of the transaction as set out at 1 and 2 intending thereby that:
(a) the MPAs and/or Coal Authority and other relevant parties would accept that substantially all of the financial liabilities to restore the sites to open countryside and/or agricultural use had passed from Celtic to the BVI companies;
(b) the BVI companies would be unable to, and would not, meet any such liability;
(c) the MPAs and/or the Coal Authority would be unable, during any investigation they conducted, to discover the true nature of the transactions as set out at 1 and 2 above and the MPAs would thereby be inhibited or deflected from carrying out their duty to consider how best to secure compliance with the relevant planning conditions;
(d) the MPAs would be deterred from exercising their planning enforcement rights (including pursuant [sic] section 178 Town & Country Planning Act 1990) against the BVI companies;
(e) provisions in Celtic's accounts in respect of the liability to restore the sites would be significantly reduced;
(f) Celtic monies would be paid to the benefit of some or all of the conspirators personally."
As I have explained, Count 1 was in the same terms as the charge in the proposed indictment in the Dismissal Application before me; Count 2 was new.
i) the victims of the fraud were the three Mineral Planning Authorities ("MPAs") and/or the Coal Authority – and only those public authorities;
ii) the conduct relied upon as the means to effect the fraud was (a) the establishment of the British Virgin Islands ("BVI") company to which the freeholds of the sites was to be transferred, and (b) the transfer of the sites to that company – and only that conduct; and
iii) the conspirators intended the transfer of the freeholds to effect a transfer of the obligations to restore the sites to the BVI company.
"2.1 The decision to prosecute… is a serious step that affects suspects, victims, witnesses and the public at large and must be undertaken with the utmost care.
2.2 It is the duty of prosecutors to make sure that the right person is prosecuted for the right offence and to bring offenders to justice wherever possible. Casework decisions taken fairly, impartially and with integrity help to secure justice for victims, witnesses, defendants and the public.
2.4 Prosecutors must be fair, independent and objective…. Neither must prosecutors be affected by improper or undue pressure from any source. Prosecutors must always act in the interests of justice and not solely for the purpose of obtaining a conviction.
3.5 Prosecutors should not start or continue a prosecution which would be regarded by the courts as oppressive or unfair and an abuse of the court's process.
3.6 Prosecutors review every case they receive from the police or other investigators. Review is a continuing process and prosecutors must take account of any change in circumstances that occurs as the case develops, including what becomes known of the defence case."
The Instruction of Ian Winter QC as Lead Prosecuting Counsel
i) asked for advice as to whether any offences had been committed under the Fraud Act or by way of conspiracy to defraud;
ii) asked for advice on whether the matter required notification to the Serious Organised Crime Agency ("SOCA");
iii) asked for advice on their rights as partners as against Mr Whiteley and Mr Evans: the three partners made clear that, upon the basis of the advice, they would consider action against Mr Whiteley and Mr Evans, including expulsion from the partnership; and
iv) emphasised the three partners' concerns about the reputation of the firm, and how to maintain it: they asked for advice as to how to minimise any adverse consequences of the scheme for the firm.
i) said that, in his opinion, there was at that stage no evidence of any offence of fraud contrary to the Fraud Act 2006; but that "there is good prima facie evidence of a conspiracy to defraud" (paragraph 72), on the basis that the Coal Authority and MPAs possessed rights enforceable against Celtic, namely "planning rights, the s106 contractual rights and the lease rights to enforce the restoration obligations"; the transfer transaction to Oak was a sham; and the authorities' rights were prejudiced "because [the transfer] at least risked the money not being available for the [restoration] work" (paragraphs 66-69);
ii) gave some limited advice as to publicity and public relations (paragraph 78); and
iii) advised that the three partners "plainly have the ability to remove the suspected partners from the [partnership] agreement": he advised immediate suspension of Mr Whiteley, giving him time to make representations before a decision was finally made as to his expulsion (paragraph 79).
"Those documents plus the annexures to the brief will place the authorities in the full position to make a decision as to what action should be taken."
"… the first clients [i.e. the three partners], witnesses of fact for the prosecution, should waive privilege. It was decided after careful consideration that they would not do so." (Mr Winter's Advice to the SFO dated 24 April 2013, paragraph 8).
"… [F]ollowing a discussion here with senior management about your role in providing an advice to the partners of M & A and any potential issue that the defence may make of this in the future, it was agreed that we would try and flush out the defence and ask them to articulate their concerns in this regard. I have given them until next Friday… to provide us with a response. We will then probably arrange a con to discuss next steps once you are back."
"9. In early 2013 witness statements were obtained from the first clients by the SFO. The witness statements go considerably further than they needed to in order to adduce the factual evidence and to produce the documentation. In particular the witness statements purport to give expert evidence to the effect that the activities of the three M & A solicitors (now defendants) were fraudulent. In the course of giving those opinions the first clients detailed the fact that they had sought advice from me and summarised the advice they had received.
10. I am of the view that in doing so the first clients have waived privilege. I have not, however,… been instructed that this is the case.
11. As a result of the witness statements having been taken in that fashion (and leaving aside for present purposes whether the purported expert opinion is admissible) those defending necessarily would become aware of the fact that the first clients had instructed and obtained advice from me….
12. I am of the clear opinion that not only am I not conflicted, the cab rank rule in the Bar Standards Board Code of Conflict [sic]… requires me to accept the instructions to prosecute the case….
13. The first clients are prosecution witnesses. Their position as a matter of fact is identical to the position taken by the SFO. They themselves have volunteered the information as to the fact that they had instructed me and the nature of the advice I gave them. The summary of that advice in their witness statements makes it clear that my position has been consistent throughout. I was given the same documentation (now augmented by the SFO's investigation) to advise the first clients and have taken the same view then as I do now…".
"There is no conflict of interest in Mr Winter QC acting for the SFO having previously advised M & A Solicitors. Even if there were it would be a matter for Mr Winter QC and the Bar Standards Board. Since it is not accepted that Mr Winter QC is not independent then his involvement in the drafting of the Prosecution Case Statement and in the detailed review of the case against your client does not vitiate the quality of that review."
The SFO remained relatively coy about disclosing documents relating to Mr Winter's instruction by, and advice to, the three partners; but his essential advice to them was disclosed.
"1. This application is for an order of stay of the… proceedings on the ground that it is impossible for the Applicant to have a fair trial and/or on the ground that a stay is necessary to protect the integrity of the criminal justice system…
2. The basis of the application is that the prosecution, and the decisions taken in connection therewith, lack independence, objectivity and fairness and/or are reasonably perceived to do so. These qualities are unarguably fundamental to the fairness of the criminal process and are supported universally by judicial dicta, prosecutorial Codes of Conduct, and the Bar Code of Conduct. In this case, however, the SFO chose to instruct leading counsel (Ian Winter QC) ('IW') knowing that he had prior to advising received instructions in writing and in conference from them, that he had expressed in writing the opinion to those clients inter alia that there was 'a clear prima facie case of fraud' and conspiracy to defraud, that 'there is sufficient evidence of dishonesty', that the scheme in question 'amounted to a sham'. That there was 'a number of unsatisfactory features' about the [Mr Davies'] written Opinion in this matter; and that [Mr Davies] must have known that it was a sham. IW's Opinion to his clients concluded (at paragraph 76) by stating '… that a copy of my instructions and a copy of this Opinion will be available to the police or the [SFO] should they desire to see them. Those documents plus the annexures to the brief will place the authorities in the full position to make a decision as to what action should be taken.'… The action that the SFO took was to instruct IW as its prosecution counsel. In doing so the SFO breached its Code and that of the Crown Prosecution Service. In accepting instructions IW contravened paragraph 603(d), (e) and (f) of the Bar Code of Conduct of England and Wales.
3. … The SFO has… been in possession of his Opinion to his clients dated 15 December 2010 since about the end of 2010 which it is to be presumed has informed or coloured this investigation.
4. … It is to be inferred that the SFO instructed IW after receipt of a copy of IW's Opinion and on the basis of the conclusions therein….
5. It is the submission of [Mr Davies] that the decisions, or the principal decision, taken to date in this prosecution are vitiated by a lack of independence, objectivity and fairness and that a stay should be ordered of these proceedings.
6. The principal problems are as follows.
(a) that the three private clients of IW are the complainants in relation to these events to SOCA and the SFO and are now prosecution witnesses
(b) that IW received lengthy written and oral instructions from them prior to writing his Opinion. The oral instructions and discussion are not known
(c) that on the basis of those instructions and material given to him by the private clients IW has expressed his Opinion in writing as to whether or not a fraud occurred and on [Mr Davies'] role
(d) that he had already reached conclusions and given firm advice prior to being instructed as prosecuting counsel
(e) that the SFO instructed him inferentially because of his existing involvement in the case and his conclusions
(f) that IW and his clients have, or are perceived to have, an interest in seeing their construction of events supported by a successful prosecution
(g) that the three private clients in fact would be likely to benefit from the 54.7% of the equity in M & A Solicitors belonging to Eric Evans and Alan Whiteley… if they had participated in a fraud with [Mr Davies]
(h) that the perception of IW going on to represent the prosecution agency to whom a copy of his Opinion and conclusions had been sent for the express purpose of triggering an investigation undermines the integrity of the criminal justice system
(i) that whether or not his private instructions concluded with the provision of his Opinion, IW owes a continuing professional duty to his clients to protect their best interests (Code paragraph 303)… and not to use confidential information received from them to their detriment (Code paragraph 702)
(j) that IW should not have been offered and/or accepted instructions by the SFO because it would be difficult for him 'to maintain professional independence' and/or 'the administration of justice might be or appear to be prejudiced' (Code paragraph 603)
(k) that a conflict, or the risk of conflict, clearly exists."
(a) must promote and protect fearlessly and by all proper and lawful means the lay client's best interests and do so without regard to his own interests or to any consequences to himself or to any other person (including any colleague, professional client or other intermediary or another barrister, the barrister's employer or any Authorised Body of which the barrister may be an owner or manager);
(b) owes his primary duty as between the lay client and any other person to the lay client and must not permit any other person to limit his discretion as to how the interests of the lay client can best be served…"
A barrister must not:
(a) permit his absolute independence, integrity and freedom from external pressures to be compromised;
(b) do anything (for example accept a present) in such circumstances as may lead to any interference that his independence may be compromised."
A barrister must not accept any instructions if to do so would cause him to be professionally embarrassed and for this purpose a barrister will be professionally embarrassed
(d) if the matter is one in which he has reason to believe that he is likely to be a witness or in which whether by reason of any connection with the client or with the Court or a member of it or otherwise it will be difficult for him to maintain professional independence or the administration of justice might be or appear to be prejudiced;
(e) if there appears to be a conflict or risk of conflict either between the interests of the barrister and some other person or between the interests of any one or more clients (unless all relevant persons consent to the barrister accepting the instructions)."
Whether or not the relation of counsel and client continues a barrister must preserve the confidentiality of the lay client's affairs and must not without prior consent of the lay client or as permitted by law lend or reveal the contents of the papers in any instructions to or communicate to any third person (other than another barrister, a pupil… or any other person who needs to know it for the performance of their duties) information which has been entrusted to him in confidence or use such information to the lay client's detriment or to his own or another's advantage."
"Even after winning the abuse argument (which we confidently expect to do) there remains the fact that the defence will undoubtedly continue to use their best efforts to bring your involvement with the prosecution witnesses into evidence. This could preclude you from examining certain witnesses. There is even a risk that you could become a witness of fact. As I am sure you will understand, we cannot afford to see the focus of any trial drawn away from the evidence to peripheral and unnecessary arguments to do with you. Quite apart from being an unfortunate distraction from the real matters in issue, we feel that it has the potential to place both the SFO and yourself in an embarrassing position".
The History of the Dismissal Application
The Development of the Prosecution Case
The First Iteration
The Second Iteration
The Third Iteration
The Fourth Iteration
"This has not involved a simple and understandable change of heart by the prosecution. Instead, it reveals, as Hickinbottom J mildly expressed the position, that the SFO has not approached this case with 'particular analytical precision' ([paragraph 130 of the Dismissal Ruling]). I am unpersuaded that it would be in the interests of justice to permit the prosecution to use this exceptional procedure to reformulate the legal basis of the charge or charges when the case should have been presented on the current proposed legal foundations at the time the case was sent for trial. I am reinforced in that conclusion by the repeated shifts in the prosecution's stance in this regard, which have operated to the real prejudice of the accused. One of the consequences of seeking a voluntary bill of indictment is that nearly a year after the submissions of the Dismissal Application concluded, the court is being asked to decide whether the prosecution can conduct a trial against the accused on a wholly new legal basis…. This would constitute a misuse of this exceptional procedure: the trial process should not be used, deliberately or otherwise, to explore in repeat proceedings – from a range of profoundly different options – the most sustainable legal basis for prosecuting alleged criminals."
Costs: Legal Background
"(1) Where –
(a) an information laid before a justice of the peace for any area, charging any person with an offence, is not proceeded with;
(b) a magistrates' court inquiring into an indictable offence as examining justices determine not to commit the accused for trial;
(c) a magistrates' court dealing summarily with an offence dismisses the information;
that court or, in a case falling within paragraph (a) above, a magistrates' court for that area, may make an order in favour of the accused for a payment to be made out of central funds in respect of his costs ('a defendant's costs order').
(2) Where –
(a) any person is not tried for an offence for which he has been indicted or sent for trial; or
(aa) a notice is given under a relevant transfer provision but a person in relation to whose case it is given is not tried on any charge to which it relates; or
(b) any person is tried on indictment and acquitted on any count in the indictment;
the Crown Court may make a defendant's costs order in favour of the accused.
(6) A defendant's costs order shall, subject to the following provisions of this section, be for the payment out of central funds, to the person in whose favour the order is made, of such amount as the court considers reasonably sufficient to compensate him for any expenses properly incurred by him in the proceedings.
In short, where a defendant was charged and he successfully defended that charge, as a general rule he would have been entitled to his costs of defending the charge from central funds. Given that the prosecutor would normally be the State, costs being paid to a successful defendant of central funds was usually broadly equivalent to the "loser" paying the costs of the "winner".
"A defendant's costs order may not require the payment out of central funds of an amount that includes an amount in respect of the accused's legal costs…".
That reverses the general rule so far as criminal legal costs were concerned. Since October 2012, a successful defendant in criminal proceedings has generally not been able to recover the legal costs of defending himself: the only costs that he is now able to recover under section 16 are out-of-pocket expenses, such as fares to court.
i) Section 19 (and regulations made under that section) provides that a court may make an order that one party pay the costs of another party to criminal proceedings, where it is satisfied that the receiving party has incurred costs as a result of an "unnecessary or improper act or omission by or on behalf of" the paying party. Such an order can only be made against a party, but that includes a prosecutor such as the CPS or the SFO. Because a successful defendant does not usually mind by whom his legal costs are paid (as long as he does not have to pay them himself), before the 2012 changes to section 16, orders under section 19 were generally confined to situations where it was not deemed appropriate for costs to be paid out of central funds, e.g. where there was a private prosecutor.
ii) Section 19A gives the court the power to make a costs order against a legal representative where costs have been incurred as a result of an "improper, unreasonable or negligent act or omission" of that representative or his employee. Such an order can only be made against an individual legal representative (whether a natural or non-natural person), and not against a party.
iii) Section 19B empowers the court to make a costs order against any third party, where he has been guilty of "serious misconduct".
Wasted Costs Orders under Section 19A of the 1985 Act
"While mere mistake or error of judgment would not justify an order, misconduct, default or even negligence is enough if the negligence is serious or gross." (Ridehalgh at page 227E).
"… where in any proceedings costs are incurred improperly or without reasonable cause or are wasted by undue delay or any other misconduct or default…".
Ridehalgh makes clear that, the expressions "improperly", "without reasonable cause" and "misconduct" were there to be understood in the sense given to them by the House of Lords in Myers v Ellman (Ridehalgh at page 228B).
"… where it appears to the court that costs have been incurred unreasonably or improperly in any proceedings or have been wasted by failure to conduct proceedings with reasonable competence and expedition…"
Thus, the implication that the relevant conduct must amount to professional misconduct was removed; and the reference to "reasonable competence" introduced, suggesting the ordinary standard of negligence and not a higher standard requiring proof of gross neglect or serious dereliction of duty (Ridehalgh at page 229H). That was, therefore, a relaxation of the criteria, making it easier to obtain a costs order against a solicitor, in respect of whom the jurisdiction was then unique.
"(1) In any criminal proceedings [the court] may… order the legal or other representative concerned to meet the whole of any wasted costs or such part of them as may be determined in accordance with regulations.
(3) In this section…
'wasted costs' means any costs incurred by a party –
(a) as a result of any improper, unreasonable or negligent act or omission on the part of any representative or any employee of any representative…".
i) The jurisdiction was extended to all representatives, including barristers.
ii) "Wasted costs" is a term of art, defined for the purposes of criminal proceedings in section 19A(3) of the 1985 Act (and, for civil proceedings, in identical terms, in section 51(7) of the Senior Courts Act 1981). Although sections 19 and 19B deal with costs that may be rendered unnecessary (and thus "wasted" in a lay sense), "wasted costs applications" is a term properly restricted to applications made under section 19A and its civil equivalent.
" 'Improper' means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgment limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code.
'Unreasonable' also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case, and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner's judgment, but it is not unreasonable.
The term 'negligent' was the most controversial of the three. It was argued that the 1990 Act, in this context as in others, used 'negligent' as a term of art involving the well-known ingredients of duty, breach, causation and damage. Therefore, it was said, conduct cannot be regarded as negligent unless it involves an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. We reject this approach. (1) As already noted, the predecessor of the present Order 62 rule 11 made reference to 'reasonable competence'. That expression does not invoke technical concepts of the law of negligence. It seems to us inconceivable that by changing the language Parliament intended to make it harder, rather than easier, for courts to make orders. (2) Since the applicant's right to a wasted costs order against a legal representative depends on showing that the latter is in breach of his duty to the court it makes no sense to superimpose a requirement under this head (but not in the case of impropriety or unreasonableness) that he is also in breach of his duty to his client.
We cannot regard this as, in practical terms, a very live issue, since it requires some ingenuity to postulate a situation in which a legal representative causes the other side to incur unnecessary costs without at the same time running up unnecessary costs for his own side and so breaching the ordinary duty owed by a legal representative to his client. But for whatever importance it may have, we are clear that 'negligent' should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.
In adopting an untechnical approach to the meaning of negligence in this context, we would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence : 'advice, acts or omissions in the course of their professional work which no member of the profession who was reasonably well-informed and competent would have given or done or omitted to do'; an error 'such as no reasonably well-informed and competent member of that profession could have made' (Saif Ali v Sydney Mitchell & Co, at pages 218D, 220D, per Lord Diplock).
We were invited to give the three adjectives (improper, unreasonable and negligent) specific, self-contained meanings, so as to avoid overlap between the three. We do not read these very familiar expressions in that way. Conduct which is unreasonable may also be improper, and conduct which is negligent will very frequently be (if it is not by definition) unreasonable. We do not think any sharp differentiation between these expressions is useful or necessary or intended."
i) Judgment in Ridehalgh was given in January 1994, after the section 19 jurisdiction had been established and indeed three years after the meaning of "improper" in the context of section 19 was considered in Director of Public Prosecutions v Denning (1992) 94 Cr App R 272 ("Denning") (see paragraphs 104 and following below). However, the judgment in Ridehalgh did not refer to section 19 or Denning or the post-Denning section 19 cases referred to below; nor was section 19 or any of those cases even referred to in argument in Ridehalgh.
ii) The court considered each of the terms "improper", "unreasonable" and "negligent" to be familiar expressions, the meaning of which was to be considered in a non-technical way, not as hard-edged highly particular terms of art. In particular, the court deliberately declined to give "improper" – or the other terms – a "specific, self-contained meaning", instead preferring to construe them as part of the phrase in which they appeared in a broader, non-technical way – although with a meaning informed by the specific context of conduct during the provision of legal services. Given the derivation of the jurisdiction, it is unsurprising that the meaning of these terms was considered driven by this specific context.
iii) The court were specifically considering the civil wasted costs jurisdiction; but, at page 239G-H, Sir Thomas Bingham said this, under the heading "Crime":
"Since the six cases before the Court are all civil cases, our attention has naturally been directed towards the exercise of the wasted costs jurisdiction in the civil field. Attention has, however, been drawn in authorities… to the undesirability of any divergence in the practice of the civil and criminal courts in this field, and Parliament has acted so as substantially (but not completely) to assimilate the practice in the two. We therefore hope that this judgment may give guidance which will be of value to criminal courts as to civil, but we fully appreciate that the conduct of criminal cases will often raise different questions and depend on different circumstances. The relevant discretions are vested in, and only in, the court conducting the relevant hearing. Our purpose is to guide, but not restrict, the exercise of these discretions."
I shall return to that passage, which is relied upon by Mr Parroy (see paragraph 140(iii) below).
Costs Orders under Section 19 of the 1985 Act
"The Lord Chancellor may by regulations make provision empowering magistrates' courts, the Crown Court and the Court of Appeal, in any case where the court is satisfied that one party to criminal proceedings has incurred costs as a result of an unnecessary or improper act or omission by, or on behalf of, another party to the proceedings, to make an order as to the payment of those costs."
"… [W]here at any time during criminal proceedings [the court] is satisfied that costs have been incurred in respect of the proceedings by one of the parties as a result of an unnecessary or improper act or omission by, or on behalf of, another party to the proceedings, the court may, after hearing the parties, order that all or part of the costs so incurred by that party shall be paid to him by the other party."
If the court makes an order under section 19, it must specify the amount of costs to be paid (regulation 3(3)).
"The court may find it helpful to adopt a three-stage approach (a) Has there been an unnecessary or improper act or omission? (b) As a result have any costs been incurred by another party? (c) If the answers to (a) and (b) are 'yes', should the court exercise its discretion to order the party responsible to meet the whole or any part of the relevant costs, and if so what specific sum is involved?".
"Unnecessary or Improper Act or Omission"
"… [I]t seems to me impossible to maintain that there were no grounds upon which the justices could reasonably conclude that there had been an improper omission on the part of the prosecutor. I would add in this connection that the word 'improper' in this context does not necessarily connote some grave impropriety. Used, as it is, in conjunction with the word 'unnecessary', it is in my judgment intended to cover an act or omission which would not have occurred if the party concerned had conducted his case properly… ."
On its face, that was a clear and unsurprising comment. An act or omission of a party is "improper" if it would not have occurred if the party concerned had conducted his case properly; in other words, if it results from, or is part of, the improper conduct of the case, no more and no less. The focus is therefore on the conduct of a party as a party.
"Where the application relates to a decision to prosecute, the Court should be careful to avoid being drawn into carrying out a close analysis either of a decision to prosecute or of a later review of such decision to see whether it was reasonable. There are a number of reasons for this. First, impropriety and not unreasonableness is the relevant test. Second, one of the principles underlying the wasted costs jurisdiction is summary disposal. In most cases where a wasted costs order is made, the conduct which is said to be improper will be clear, obvious and egregious. Thirdly, it is only in limited and confined circumstances that the Court will review charging decisions made by the CPS. The Court recognises that such decisions may be difficult and sensitive, see for example the decision of the Court of Appeal (Criminal Division) R v P  EWCA Crim 1130 ['R v P']."
"38. In my judgment the test for impropriety is the rigorous test set out in Ridehalgh and for the reasons I have set out above: namely 'conduct which would be regarded as improper conduct according to the consensus of professional (including judicial) opinion'. If that is right, then the conduct of the CPS does not come close to satisfying the test; but even if the word 'improper' is to be construed to mean 'an act or omission which would not have occurred if the party concerned had conducted his case properly' (see [Denning]), I am not persuaded that Mr Counsell has proved such conduct…. Whether and how to charge were difficult and sensitive decisions; and the conclusion that charges of manslaughter should be brought was neither perverse nor made in disregard of CPS policy. The HSWA count proceeded to trial and, although the court ruled that there was no case to answer, that fact alone does not establish conduct which should be met with a wasted costs order….
39. Litigation (whether civil or criminal) is inherently subject to uncertainty and contingency; and any advice is likely to highlight these risks: witnesses who do not come up to proof, new materials which may lead to experts changing or modifying their opinion and unanticipated flaws in the evidential basis of the charge. The Court cannot approach a wasted costs application with the vision of hindsight. It must take a robust but not over-analytical view of what occurred, and unless the impropriety is clear and egregious, it should not countenance a detailed forensic examination of what occurred with a view [to] making a wasted costs order."
"28. As we have set out in the judgment given by the judge in this case he relied upon the definition of 'improper' set out in the decision of the Divisional Court in [Denning]. Although we have determined that the order must be quashed as the judge had no jurisdiction to make it, it is important to draw attention to the later decision of the Court of Appeal in [Ridehalgh]…. [The Lord Chief Justice then quoted the passage concerning the definition of 'improper' from Sir Thomas Bingham MR in Ridehalgh, quoted above at paragraph 96].
29. It is clear from a further passage in the judgment of the court at page 239 that this was meant to apply to criminal as well as civil cases. Sir Thomas Bingham said at page 239:
'We therefore hope that this judgment may give guidance which will be of value to criminal courts as to civil, but we fully appreciate that the conduct of criminal cases will often raise different questions and depend on different circumstances.'
30. We therefore wish to express our agreement with the view recently expressed by Simon J in his ruling in [Counsell] when he made clear that the test for impropriety is the rigorous test as set out in Ridehalgh and not the test set out in Denning."
i) parties who enter litigation are not in the same position as general members of the public because, e.g., they do owe some duties to the court; and therefore the standard of their behaviour has to gauged against their position as litigants; and
ii) public prosecutors, who have a particular and unique role in criminal litigation (see paragraph 29 above) have a very different role and different obligations from a party to a civil claim or a criminal defendant who has no choice about his involvement; and so different factors apply to mould the standards of behaviour expected of them. As I have explained (see paragraph 22-29 above), different prosecutors have different roles, powers and obligations, and so what is expected of each may vary.
"Neither party has been able to discover any judicial authority directly dealing with the interpretation of section 82(12) of the Environmental Protection Act 1990. I emphasise that, because words such as 'proper' or 'improper' may be used differently in different statutes. In particular, I do not find that much assistance is obtained from the decision about wasted costs orders in [Ridehalgh]. When what is being contemplated is the making of an order that the legal representatives of a party do personally meet the costs of proceedings, one would expect to find that the failings on the part of the representatives have to be shown to be somewhat more serious in order to be considered improper conduct than would necessarily be the case in other contexts. The comment by Nolan LJ in Denning is to my mind somewhat closer to the situation with which this court has to deal, although even then it is to be noted that in Denning the court was dealing with the phrase 'an unnecessary or improper act or omission'. Nolan LJ was, as is clear from his statement, influenced by the presence of the word 'unnecessary' in that phrase, a word which does not appear in section 82(12) of the 1990 Act. Nevertheless, that is a decision which was dealing with the question of costs in criminal proceedings before a magistrates' court and to that extent at least it may be thought to have some bearing on the present problem."
"… [T]he question in this case was not whether the decision to prosecute was right or wrong. It is simply not the judge's function to sit on appeal from a decision of the Crown Prosecutor. There may be very rare cases where the decision is wholly unreasonable. [Oddy] was a different case altogether. That prosecution was brought by a private interest group in pursuit of a commercial objective. The point at issue was one of pure law. It had been decided previously against the prosecution. There could have been a challenge to the ruling by way of appeal to the High Court but there had been none. Unlike that case, in most cases such as the present, there will be room for a legitimate difference of opinion. It is important that the making of that decision should not be overshadowed by the fear that if a prosecution is continued and fails there may be an order for the payment of costs. An acquitted defendant will normally receive his costs from central funds unless there is a good reason why he should not. We do not say that there will never be a case where a decision to prosecute is so unreasonable that a costs order is appropriate, but we are satisfied that this case was not arguably such. Here, the complainant's evidence might have been assessed as likely to be accepted. The flatmate's evidence might have been assessed as capable of disbelief. There was, we note, some material which perhaps suggested possible partiality. There were, it was said, some possible injuries to the complainant. We want to make it clear that we simply do not know whether the decision to prosecute was right or wrong. It is clear that it was made in good faith. Supposing, however, that it was a wrong judgment on a difficult issue, that is not enough to justify an order for costs and it would not have been even if the relevant powers had been properly considered. The judge's pejorative reference to political correctness was ill-conceived and inappropriate. There was no basis for his conclusion that no thought had been given to this case."
i) Mr Parroy relied upon the canon of construction that a word has the same meaning within the same instrument (see, e.g., Bennion on Statutory Interpretation (6th Edition), Section 355). However, that presumption is necessarily not as strong where, as here, statutory provisions within the same instrument have different well-established sources which have been consolidated into one instrument. Given the different derivations of the two relevant provisions, the presumption here is extremely weak. In any event, if (contrary to my strong view) there had to be a single meaning of the word, then there would be a compelling argument that the meaning is as the word was construed in Denning, which was first in time (judgment being handed down on 7 March 1991) and, albeit after the 1990 Act had been passed, prior to section 19A of the 1985 Act coming into effect on 1 May 1991. Section 19A was the later statutory provision, and the established meaning of section 19 could not have been altered by the subsequent change to the statute incorporating section 19A. In this case, the presumption within this tenet of construction does not offer any significant assistance to Mr Parroy.
ii) As I have indicated, Nolan LJ in Denning and Sir Thomas Bingham in Ridehalgh each made clear that the word "improper" should not be construed in isolation, but as part of the phrase into which it fits, i.e. for section 19, "unnecessary or improper act of omission" and, for section 19A, "improper, unreasonable or negligent act or omission". Each judge said that it was unnecessary to have discrete and isolated definitions of each of the adjectives, preferring a broader consideration of the relevant phrase. Thus, Nolan LJ in Denning did not seek to define "unnecessary"; but held that that word coloured the meaning of "improper" so that the phrase covered acts and omissions that would not have occurred had the matter been properly conducted by the relevant party. Similarly, whilst, on its own, "unnecessary" (which appears to date to have escaped judicial consideration and comment) has the import of something which could have been avoided, it too has to be read in the light of its juxtaposition with "improper".
iii) Despite the reliance on the passage in the Sheffield case, where Sir Thomas Bingham in Ridehalgh referred to "the undesirability of any divergence in the practice of the civil and criminal courts in this field" (emphasis added) and the action of Parliament to assimilate the practice of the two, he was expressly referring to the respective "wasted costs jurisdictions", and not to section 19 to which, as I have emphasised, the court was not referred in that case. That passage (quoted at paragraph 97(iii) above) is of no assistance to Mr Parroy.
iv) For the sake of completeness, I should say that the academic writers to which I was referred also acknowledge the difference in meaning of "improper" between the jurisdictions, as identified in Ridehalgh and Denning (see, e.g., Hurst on Criminal Costs (2007), paragraphs 7.04 and 7.23 and following).
Summary of the Principles
i) When any court is considering a potential costs order against any party to criminal proceedings, it must clearly identify the statutory power(s) upon which it is proposing to act; and thus the relevant threshold and discretionary criteria that will be applicable.
ii) In respect of an application under section 19 of the 1985 Act, a threshold criterion is that there must be "an unnecessary or improper act or omission" on the part of the paying party, i.e. an act or omission which would not have occurred if the party concerned had conducted his case properly or which could otherwise have been properly avoided.
iii) In assessing whether this test is met, the court must take a broad view as to whether, in all the circumstances, the acts of the relevant party were unnecessary or improper.
iv) Recourse to cases concerning wasted costs applications under section 19A or its civil equivalent, such as Ridehalgh, will not be helpful. Similarly, in wasted costs applications under section 19A, recourse to cases under section 19 will not be helpful.
v) The section 19 procedure is essentially summary; and so a detailed investigation into (e.g.) the decision-making process of the prosecution will generally be inappropriate.
vi) Each case will be fact-dependent; but cases in which a section 19 application against a public prosecutor will be appropriate will be very rare, and generally restricted to those exceptional cases where the prosecution has acted in bad faith or made a clear and stark error as a result of which a defendant has incurred costs for which it is appropriate to compensate him. The court will be slow to find that such an error has occurred. Generally, a decision to prosecute or similar prosecutorial decision will only be an improper act by the prosecution for these purposes if, in all the circumstances, no reasonable prosecutor could have come to that decision.
Application of the Principles to this Case
i) The fact that, despite several fundamental changes in the way the case was put and an acceptance by the Applicants for the purposes of the relevant applications that each had been dishonest, the SFO never formulated even a legally coherent and arguable case against any of the Applicants (or Ms Bodman), such that each iteration of the case was inevitably either abandoned or summarily dismissed.
ii) The SFO appointed Mr Winter as prosecution Lead Counsel, in circumstances in which he had already advised several prosecution witness (i.e. the three partners) in respect of the same matters, so that the independence and impartiality of the prosecution review and pursuit of the case was compromised, in fact and/or reasonable perception.
i) The charge as set out in Count 1 in paragraph 8 above was certified by the Director of the SFO (and thus sent by the Magistrates' Court to the Crown Court) on the basis of the prosecution case as set out in the Case Statement settled by Mr Winter on 30 May 2013.
ii) There was an inconsistency between the charge and the Case Statement. In short, the Case Statement was based on the proposition that the financial liability to restore the site did not pass to Oak, the fraud being focused on the second (and allegedly dishonest, bogus and crucial) opinion of Mr Davies to the effect that it did. The charge alleged that the conspirators intended that the financial liability to restore the sites would pass to Oak. Nevertheless, as the Applicants understood, the prosecution case was clearly that set out in the Case Statement.
iii) However, there was at least one fundamental problem with the prosecution case. It was dependent upon Mr Davies' opinion that the restoration obligations did pass to Oak being, not only wrong, but bogus in the sense that it was so patently wrong in law that he must have appreciated (and he did in fact appreciate) that it was wrong, only giving that opinion because he was being paid a large sum of money to do so. Of course, no one is infallible in the law – but the allegation that a Leading Counsel had prepared an opinion that was bogus imposed a particularly high hurdle for the prosecution. In the event, it was the Applicant defendants' case that Mr Davies' second opinion was, not only not bogus, but correct in law.
iv) As I have described (paragraphs 61-65 above), that was intimated at the first hearing before Wyn Williams J on 4 April 2013; and the essential basis of the Applicant defendants' case in respect of dismissal was set out in the note prepared and served on behalf of Mr Davies for the 23 September 2013 hearing. At that hearing – and until the Dismissal Hearing itself in December 2013 – the SFO insisted on pursuing a case on the basis that the opinion was bogus.
v) However, whilst the SFO have consistently refused to accept Mr Davies' legal analysis, during the Dismissal Hearing, it abandoned the case as Mr Winter had put it, in favour of a case based upon the premise that the restoration obligations were, to a very large extent, in fact transferred as Mr Davies had opined. From a case based on the premise that the obligations had not been transferred, it changed to a case based on the premise that they had. Mr Parroy's submission that Mr Davies may have come to a conclusion that the prosecution came to accept, but on a wrong legal basis, is not to the point: the first iteration was grounded on the conclusion of Mr Davies' opinion, not the legal analysis by which he formed it. Nothing had occurred to warrant the whole of the SFO's case being changed, except a belated appreciation that there was no realistic prospect of that case succeeding. That appreciation appears to have dawned upon the SFO at some stage between 9 October 2013 (when Mr Parroy reviewed the case, and confirmed it would proceed on the basis of the Case Statement with its dependence upon the opinion being bogus), and the Dismissal Hearing in December 2013 during which that iteration was unceremoniously abandoned.
vi) In the meantime, most of the Applicants had prepared the Dismissal Application on the basis of the first iteration; and, in response to the separate prosecution specialist legal team, had instructed their own specialist legal teams including Leading Counsel who had fully prepared to argue the merits of the issues raised in the first iteration. Amongst other things, as Fulford LJ emphasised in the VB Judgment (at ), all of the expenditure of costs by the Applicants upon the issue were entirely wasted, in the sense that the issues to which the costs went did not arise in the case after the first iteration had been abandoned.
vii) Following the abandonment of the case as set out in the Case Statement at the Dismissal Hearing, the SFO developed the second iteration. It contended that this did not amount to a substantial change in its case; but, clearly, it was fundamental. As I have indicated, the object of this conspiracy was the actual transfer of the relevant restoration obligations, by the means of the establishment of Oak and the transfer of the freehold titles to Oak. However, during the course of the Dismissal Hearing, the SFO conceded – if I might say so, entirely properly – that both the object of the conspiracy and the means were lawful. As a result, on conventional jurisprudence, the charge was bound to fail. I raised the issue of whether it was alleged that a criminal conspiracy could comprise lawful means to a lawful end; and, although Mr Parroy ran with that hare and put the arguments for it as well as they could have been put, I held that such a concept was unknown to the common law; and, in the VB Application, it was not suggested that that was wrong as a matter of law.
viii) The third and last iteration of the prosecution case that was raised in the Dismissal Hearing was clearly designed to find some illegality upon which to hang the conspiracy. At the reconvened hearing in February 2014, the SFO suggested for the first time that the establishment of Oak in the beneficial ownership of the conspirators and the transfer of the freeholds to Oak necessarily involved the conspirators committing offences under the Fraud Act 2006 and obtaining secret profits at the expense of Celtic.
ix) This new case was fraught with difficulties. As I have noted, Mr Winter had opined that there were no statutory offences here. In any event, as I commented in the Dismissal Ruling (at ), a charge of conspiracy to defraud various public authorities and only them, reliant for its illegality only on conduct amounting to statutory offences against two private companies (i.e. Oak and Celtic), would be a strange creature that, whilst conceptually possible, is hitherto unknown to, or at least undiscovered by, the common law.
x) But, in the event, I did not determine the merits of this new case – I did not have to – finding that, in all the circumstances, the prosecution should not be allowed to bring forward such a fundamentally changed case at that stage. That was a decision with which Fulford LJ agreed (see VB Judgment at ).
"I fear the SFO in this case failed at the outset to identify the proper legal underpinnings of the charges, and instead it varied its case in law against the accused as the arguments unfolded and in response to the restrained but penetrating enquiries on the part of Hickinbottom J."
"… the matter is one in which he has reason to believe that he is likely to be a witness or in which whether by reason of any connection with the client or with the Court or a member of it or otherwise it will be difficult for him to maintain professional independence or the administration of justice might be or appear to be prejudiced".
That is now reflected in Guidance Note gC73 of the Bar Standards Board Handbook.
Costs of the Dismissal Application: Conclusion
Costs of the VB Application
i) Proportionality has no place in indemnity costs. On the standard basis, claimed costs are recoverable only if they are reasonable and proportionate; on the indemnity basis, costs are recoverable if they are simply reasonable. Given the serious nature of the issues in this case, the room for costs that were reasonably but disproportionately incurred might be – indeed, should be – less than in some other cases.
ii) The burden of proof. On the standard basis, the burden of proof of showing the claimed costs are reasonable and proportionate lies on the receiving party; on the indemnity basis, the burden of showing the claimed costs are not reasonable generally falls upon the paying party.
i) where a party maintains a claim or application which it knew or ought to have known was doomed to fail on its facts and on the law (Wates Construction Limited v HGP Greentree Allchurch Evans Limited  EWHC 2174 (TCC) and Noorani v Calver  EWHC 592 (QB));
ii) where a party changes its case making it more difficult for another party to understand and respond to it (see Select Healthcare (UK) Cromptons Health Care Limited  EWHC 3055 (Pat) at - per Mann J: in which the judge noted that the case changed "with decreasing rather than increasing clarity"); and
iii) where a party casts its case disproportionately widely and requires an opponent to meet such a claim (Digicel (St Lucia) v Cable and Wireless Plc  EWHC 888 (Ch) at ).
i) For the purposes of the VB Application, the SFO accepted that a conspiracy to defraud must incorporate some unlawfulness, either in its object or its means. They had conceded at the Dismissal Hearing that both object and means relied upon were lawful.
ii) In relation to the third iteration – based on the premise that the conspiracy did involve unlawful means because the conspirators had committed Fraud Act offences – Fulford LJ found that that the application was based upon a misunderstanding of my Dismissal Ruling, which was that I declined to rule on that fundamentally new case.
iii) With regard to the "new case", Fulford LJ found – in two succinct paragraphs – that it was not in the interests of justice (and would be a misuse of the voluntary bill procedure) to permit the SFO fundamentally to reformulate its case when, if the SFO had wished to pursue such a case, it could and should have been formulated at the time the case was sent for trial. He said he was reinforced in that view by "the repeated shifts in the prosecution's stance in this regard, which have operated to the real prejudice of the [Applicants]" (VB Judgment at ).
i) The application sought to bring a voluntary bill against the Applicants following a Dismissal Application during which, as I have found, the SFO's conduct of the case was "improper" within the meaning of that word in section 19 of the 1985 Act, in that, even after the deficiencies in the prosecution case had been presented to it, the SFO failed adequately to analyse the legal case against the Applicants with the result that it pursued against them a number of iterations of case, each of which as formulated had, from its advent, no realistic chance of success. That pre-VB Application conduct is a relevant factor in relation to this issue. The failure legally to analyse the case against the Applicants – and the consequences of earlier failure so to do – continued through the VB Application.
ii) The application was brought without proper cognisance of the high hurdle a prosecutor has to overcome in relation to a voluntary bill. The application in respect of the charge brought before me was summarily dismissed by Fulford LJ. The application in respect of the iteration based on Fraud Act illegality was (Fulford LJ found) founded on a misunderstanding of the way in which I dealt with that issue in the Dismissal Hearing: if I might say so, I do not see how that (mis)understanding could have reasonably been formed, given what I said in the Dismissal Ruling. Fulford LJ ruled that the other, new iteration was simply too late, and that it would be a misuse of the voluntary bill procedure to allow the SFO to try and proceed on that basis. He found that there was no merit in any ground.
iii) In respect of the new iteration, that was the subject of full argument over several days, involving specialist Counsel. As with the specialist Chancery and commercial Counsel before me, the costs of those issues were in any event wasteful, because the basis of charge was disposed of by Fulford LJ summarily. On any view, the SFO tried to widen the scope of the claim beyond its proper limits.