This matter was recently addressed by the Supreme Court in R v Luckhurst [2022] UKSC 23. Within the case, the defendant was an independent financial adviser who ran a financial services business. When the business collapsed, the investors claimed Mr Luckhurst had been acting fraudulently and sued him for £2.71 million. This resulted in the defendant being subject to a worldwide freezing order. The proceedings were settled and the worldwide freezing order was discharged.
Then, the police brought a case against the defendant. The Crown Prosecution Service obtained a restraint order against the defendant under section 41 of the Proceeds of Crime Act 2002 (“POCA”). The defendant applied to vary the order so that he use £3,000 to gain legal advice on his civil proceedings. Specifically, he required advice on the terms of the settlement agreement.
A restraint order prevents legal expenses for the underlying criminal proceedings. However, it is uncertain whether legal expenses for civil proceedings, that are related to the underlying criminal proceedings are allowed. The court at first instance held that, the POCA does not have “an exception for legal expenses in respect of civil proceedings” in situation where the allegations, facts and/or evidence are the same as the restrain order. As such, the court refused the defendant’s claim for legal expenses on his civil proceedings.
However, the Court of Appeal held that section 41(4) of POCA “provides no bar to permitting reasonable legal expenditure in civil proceedings merely because they engage in whole or in part the same factual inquiry as will be engaged in the trial of the offence which gives rise to the restraint order’. This view was supported by the Supreme Court. The Supreme Court highlighted that the intended use of the restraint order was to ensure the alleged criminal can only incur certain expenses. Legal expenses for civil proceedings are to be controlled under the restraint order but not precluded.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email admin@audleychaucer.com or visit our Linkedin page at https://www.linkedin.com/company/audley-chaucer-solicitors/.
John Szepietowski
This information was correct as of November 2022