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High Court of Justice in Northern Ireland Queen's Bench Division Decisions
You are here: BAILII >> Databases >> High Court of Justice in Northern Ireland Queen's Bench Division Decisions >> Director Of The Asset Recovery Agency Re Fleming & Ors [2006] NIQB 70 (11 October 2006)
URL: http://www.bailii.org/nie/cases/NIHC/QB/2006/70.html
Cite as: [2006] NIQB 70
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Ref: MORF5666
IN THE MATTER OF THE DIRECTOR OF THE ASSET RECOVERY AGENCY
Morgan J
[1] On 7 December 2004 Mr Justice Coghlin granted an ex parte application made by the Director of the Assets Recovery Agency seeking an Interim Receiving Order appointing Louise Rivers as interim receiver over the property of Patrick Fleming, his wife Penny Jane Fleming and her mother Valerie Patricia Hook (the defendants) listed in schedule 2 of the Order. The Order contained an exclusion at paragraph 13 in the following terms: --"This Order does not prohibit the defendants from spending £250 per week each towards their ordinary living expenses. But before spending any money each must tell the receiver where the money is to come from."[2] On 4 July 2005 legal aid certificates were granted to each of the defendants but on 20 July 2005 the certificates were revoked. The reason for the revocation was that the disposable income of the defendants exceeded the statutory limits under the legal aid scheme. The defendants challenged that decision by way of judicial review but their application was adjourned to enable them to pursue an application for funding under section 252 of the Proceeds of Crime Act 2002 (the 2002 Act) as amended by schedule 6 of the Serious and Organised Crime Act 2005 (the 2005 Act). The first named defendant was killed shortly before that decision issued. [3] On 24 March 2006 Mr Justice Coghlin made an exclusion to the Interim Receiving Order in relation to the reasonable legal costs incurred by the defendants' solicitor and counsel from 1 January 2006. The issue which falls for determination in this application is whether the court has power to order an exclusion from the Interim Receiving Order to meet the costs of instructing a forensic accountant in the present case. [4] The original provisions dealing with restrictions on dealing with properly the subject of an interim receiving order contained in section 252 of the 2002 Act.
"252 Restrictions on dealing etc. with property
(1) An interim receiving order must, subject to any exclusions made in accordance with this section, prohibit any person to whose property the order applies from dealing with the property.
(2) Exclusions may be made when the interim receiving order is made or on an application to vary the order.
(3) An exclusion may, in particular, make provision for the purpose of enabling any person-
(a) to meet his reasonable living expenses, or
(b) to carry on any trade, business, profession or occupation,
and may be made subject to conditions.
(4) But an exclusion may not be made for the purpose of enabling any person to meet any legal expenses in respect of proceedings under this Part.
(5) If the excluded property is not specified in the order it must be described in the order in general terms.
(6) The power to make exclusions must be exercised with a view to ensuring, so far as practicable, that the satisfaction of any right of the enforcement authority to recover the property obtained through unlawful conduct is not unduly prejudiced."[4] This provision was amended by paragraph 14 of schedule 6 of the 2005 Act.
"14. (1) Section 252 (interim receiving orders: prohibition on dealings) is amended as follows.
(2) For subsection (4) (restriction on exclusions for legal expenses) substitute-
'(4) Where the court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that he has incurred, or may incur, in respect of proceedings under this Part, it must ensure that the exclusion-
(a) is limited to reasonable legal expenses that the person has reasonably incurred or that he reasonably incurs,
(b) specifies the total amount that may be released for legal expenses in pursuance of the exclusion, and
(c) is made subject to the required conditions (see section 286A) in addition to any conditions imposed under subsection (3).
(4A) The court, in deciding whether to make an exclusion for the purpose of enabling a person to meet legal expenses of his in respect of proceedings under this Part-
(a) must have regard (in particular) to the desirability of the person being represented in any proceedings under this Part in which he is a participant, and
(b) must, where the person is the respondent, disregard the possibility that legal representation of the person in any such proceedings might, were an exclusion not made, be funded by the Legal Services Commission or the Northern Ireland Legal Services Commission.'
(3) In subsection (6) (power to make exclusions not to be exercised so as to prejudice enforcement authority's rights to recover property), after 'must' insert ', subject to subsection (4A),."
This amendment was designed to deal with the type of issue which had arisen in this case. The original provisions in section 252(4) of the 2002 Act had been drafted on the basis that legal aid support would be available for those pursued by the Assets Recovery Agency. When a legal aid application was made the legal aid authorities took into account the amount excluded from the Interim Receiving Order by way of living expenses. As explained by Mr Justice Girvan in the related judicial review proceedings the effect of section 252(4) was to prevent those monies being used to fund legal representation.
[6] Although, as a consequence, it was now intended that legal expenses could be paid out of property that was allegedly recoverable it is clear that the legislature intended that the power should be circumscribed and schedule 6 to the 2005 Act added sections 286A and 286B to the 2002 Act."286A Legal expenses excluded from freezing: required conditions
(1) The Lord Chancellor may by regulations specify the required conditions for the purposes of section 245C(5) or 252(4).
(2) A required condition may (in particular)-
(a) restrict who may receive sums released in pursuance of the exclusion (by, for example, requiring released sums to be paid to professional legal advisers), or
(b) be made for the purpose of controlling the amount of any sum released in pursuance of the exclusion in respect of an item of expenditure.
(3) A required condition made for the purpose mentioned in subsection (2)(b) may (for example)-
(a) provide for sums to be released only with the agreement of the enforcement authority;
(b) provide for a sum to be released in respect of an item of expenditure only if the court has assessed the amount allowed by regulations under section 286B in respect of that item and the sum is released for payment of the assessed amount;
(c) provide for a sum to be released in respect of an item of expenditure only if-
(i) the enforcement authority agrees to its release, or
(ii) the court has assessed the amount allowed by regulations under section 286B in respect of that item and the sum is released for payment of the assessed amount.
(4) Before making regulations under this section, the Lord Chancellor must consult such persons as he considers appropriate.
286B Legal expenses: regulations for purposes of section 266(8B) or 286A(3)
(1) The Lord Chancellor may by regulations-
(a) make provision for the purposes of section 266(8B);
(b) make provision for the purposes of required conditions that make provision of the kind mentioned in section 286A(3)(b) or (c).
(2) Regulations under this section may (in particular)-
(a) limit the amount of remuneration allowable to representatives for a unit of time worked;
(b) limit the total amount of remuneration allowable to representatives for work done in connection with proceedings or a step in proceedings;
(c) limit the amount allowable in respect of an item of expense incurred by a representative or incurred, otherwise than in respect of the remuneration of a representative, by a party to proceedings.
(3) Before making regulations under this section, the Lord Chancellor must consult such persons as he considers appropriate."
Thereafter the Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Proceedings) Regulations 2005 came into force on 1 January 2006. Part 2 of the Regulations dealt with required conditions, Part 3 dealt with the release of interim payments and Part 4 dealt with the assessment of expenses at the conclusion of civil recovery proceedings. Part 5 dealt with the basis for assessment of legal expenses. It was provided in Regulation 16 that the court would assess a person's legal expenses on the standard basis as defined in Order 62 Rule 12 of the Rules of the Supreme Court (Northern Ireland). Regulation 17 dealt with rates of remuneration for solicitors, their employees and counsel.
[7] For the Agency Mr Horner QC submitted that there was no power within the legislative framework to make an exclusion in respect of expenditure relating to the services of a forensic accountant. He submitted first that "legal expenses" should be construed so as to include only the remuneration of solicitors and counsel retained to represent the defendants. Secondly he submitted that the general power to exclude in section 252(2) had to be construed against the background of the investigative role of the interim receiver and the statutory objective in section 252(6) that the right of the enforcement authority to recover property obtained through unlawful conduct should not be unduly prejudiced. For the defendants Dr McGleenan submitted that the cost of a forensic accountant was an expense incurred by a solicitor in the defendants' case and was, therefore, a legal expense. If he was wrong on that he submitted that such an expense could be excluded pursuant to the general power in section 252 (2). [8] I do not accept the Agency's primary submission that there is no power within the legislative framework to provide an exclusion in respect of the expense of a forensic accountant. It is common case that there is no express prohibition in respect of such an exclusion. By way of contrast where the legislature intended to prohibit exclusions by way of legal expenses as it did in the original provisions of the 2002 Act it did so expressly. I entirely accept that the statutory objective in section 252(6) must bear heavily on the issue of whether it is appropriate in any particular case to provide such an exclusion taking into account the role of the Interim Receiver. But there may be cases where the fair trial rights of the defendant under common law or the Convention require that an exclusion should be made in respect of such costs and the Court must be free to do so. [9] That leaves the issue of whether the exclusion should be considered on the basis that this is a legal expense or whether it should be considered under the general power section 252(2). I consider that the starting point is to examine what the term "legal expenses" meant in the original provision in section 252 (4). I have been assisted by the explanatory notes to that section which make it clear that it was anticipated that persons involved in civil recovery proceedings would be able to apply to the legal aid scheme for their legal costs so that there would be no need for them to draw upon the property subject to the order. The legal aid scheme, if applicable, would have funded the remuneration of the lawyers but also would have covered costs such as those of a forensic accountant. The original provisions in my view intended to achieve the statutory objective in section 252(6) by directing proposed defendants to their unfrozen assets or to the legal aid fund for all of the expenses incurred in respect of the defence of the case. Those expenses were comprised in the term "legal expenses". I consider that this interpretation is supported by the provisions of section 286B(2)(c) of the 2002 Act which refers to expenses other than those by way of remuneration of representatives and I further consider that the interpretation is supported by the fact that the statutory scheme for the exclusion of legal expenses is now highly circumscribed so as to achieve the statutory objective in section 252 (6) as far as is practicable. The scheme of the 2002 Act strongly supports the view that any exclusion for forensic accountancy services in connection with the defence of the case should be similarly circumscribed. [10] I consider, therefore, that the court has power in an appropriate case pursuant to section 252(4) of the 2002 Act to make an exclusion in respect of some or all of the proposed costs of a forensic accountant. I will hear submissions as to how I should proceed on the facts of the present case.