West Law Report

Payment of fees does not frustrate restraint order

Posted in Times Law Report by mrkooenglish on September 3, 2008

From The TimesAugust 27, 2008

Payment of fees does not frustrate restraint order
Irwin Mitchell (a Firm) v Revenue and Customs Prosecutions Office and Another in the Court of Appeal, Criminal Division
Court of Appeal, Criminal Division

Published August 27, 2008

Irwin Mitchell (a Firm) v Revenue and Customs Prosecutions Office and Another

Before Lord Justice Toulson, Mr Justice Jack and Judge Mettyear

Judgment July 30, 2008

It was not the purpose of a criminal restraint order to prevent third parties from enforcing civil rights against a defendant if those rights would be unaffected by a confiscation order which might be made against the defendant at the end of criminal proceedings against him.

The Court of Appeal, Criminal Division, so held when allowing an appeal by solicitors, Irwin Mitchell, against a ruling by Judge Stone, QC, on March 14, 2008, at Southwark Crown Court that (i) they could not apply the funds paid by Abdullah Allad on account of their legal costs in payment of their fees without a variation of the restraint order against him and (ii) that the court had no power under the Proceeds of Crime Act 2002 to make such a variation.

Mr Kennedy Talbot for the appellant; Mr Jonathan Hall for the Revenue and Customs Prosecutions Office; Mr Allad did not appear and was not represented.

LORD JUSTICE TOULSON, giving the reserved judgment of the court, said that in October 2007, Mr Allad had instructed Irwin Mitchell in connection with a revenue and customs investigation which he was facing and had paid £5,000 to them on account of their legal costs.

Subsequently a restraint order was made against Mr Allad by which time the firm’s professional fees for work done under their retainer amounted to over £5,000.

They wrote to the Revenue to inform it that, in compliance with rule 19(2) of the Solicitors’ Accounts Rules 1998, they were about to issue a bill of costs to their client to allow transfer of the money from the client account to the firm’s office account. The Revenue objected on the basis that such a step was prohibited by the restraint order.

Irwin Mitchell’s application to Southwark Crown Court for a variation of the order was dismissed by Judge Stone on the ground that such a variation was prohibited by section 41(4) of the 2002 Act.

On appeal, Irwin Mitchell submitted that Mr Allad no longer had any beneficial interest in the relevant funds. The Revenue contended that the solicitors had a lien over the moneys in the client account which conferred a right to possession but not to ownership; the beneficial interest in the money therefore belonged at all times to Mr Allad.

The Revenue accepted that the money in the client account could not be used to satisfy any confiscation order which might be made against Mr Allad in the future.

Two questions had to be asked: would Mr Allad commit any breach of the restraint order if Irwin Mitchell acted as they pro-posed? Would Irwin Mitchell’s conduct be a contempt of court because their proposed conduct would undermine the purpose of the restraint order by diminishing the assets available to satisfy any confiscation order?

In their Lordships’ judgment, the answer in each case was “No”. The £5,000 was paid for a single identified purpose, namely payment of Irwin Mitchell’s fees as and when they had earned them.

Payment of Irwin Mitchell’s fees would not deplete the true value of Mr Allad’s assets or frustrate the purpose of the restraint order. Irwin Mitchell were therefore entitled to take the course they had proposed without committing any contempt of court.

It was right for them to have notified the Revenue in advance, in case there was any challenge to the size or propriety of their bill, but their Lordships did not consider that any variation to the restraint order was required in order to enable them to utilise the fund in payment of their fees.

Solicitors: Irwin Mitchell; Solicitor, Revenue and Customs Prosecutions Office.

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