Capewell v HM Customs & Excise & Anor [2005] EWCA Civ 964

Case No C3/2004/0907[2005] EWCA Civ 964
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
[2004] EWHC 1049 (Admin)
ON APPEAL FROM QUEEN'S BENCH DIVISION (ADMINISTRATIVE DIVISION)
MR JUSTICE LINDSAY
Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Friday,29 July 2005
Before
LORD JUSTICE LAWSLORD JUSTICE LONGMORELORD JUSTICE CARNWATH
Between
ROBERT CAPEWELLAppellantCOMMISSIONERS FOR HM CUSTOMS & EXCISE & ANRRespondent
(Transcript of the Handed Down Judgment ofSmith Bernal Wordwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7421 4040, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Kennedy Talbot & Abigail Barber (instructed by Messrs Olliers) for AppellantDavid Perry & Mark Sutherland Williams (instructed by Tarlo Lyons and HM Customs and Excise) for Respondents
JudgmentLord Justice Carnwath :BackgroundDate 2005-07-29
[1]In December 2004, we gave judgment on an appeal by Mr Capewell. This started as an appeal against the order made by Lindsay J, dismissing his application for the discharge of a receiver appointed pursuant to section 77(8) of the Criminal Justice Act 1988. By the time the appeal was heard, the receivership had been discharged by agreement of the parties, given effect by an order of Davis J on 13th October 2004. In these circumstances, the principal substantive issue raised by the appeal was no longer live. However, the appeal remained relevant to orders in respect of costs and of the receiver’s remuneration and expenses. It raises questions of general importance as to the powers of the court in such circumstances.[2]In our judgment ([2004] EWCA Civ 1628), we reviewed the history of the case, beginning with criminal charges made as long ago as September 2002 against Mr Capewell, followed by a receivership order made by Jackson J on 4th February 2003. It is unnecessary to repeat that history, save to note with concern that the charges have still not been brought to trial. We must proceed on the basis that Mr Capewell has not been found guilty of any crime, and remains entitled to a presumption of innocence.[3]Jackson J’s order included a specific provision that the costs of the receivership should be paid “in the receivership”, in accordance with a letter of agreement between the receiver and Customs. That provided that the costs of the receivership should be “paid out of the monies you bring in during the course of this receivership”, and included an indemnity by Customs (subject to certain conditions) if the remuneration and expenses exceeded the sum realised. These provisions were not subject to appeal.

The present issues

[4]We are now concerned with consequential matters arising from our December judgment. Lindsay J refused to discharge the receivership, and ordered that the costs of the receiver (summarily assessed at £14,886.31) should be costs in the receivership, and that the Customs’ costs (assessed at £2,283.13) should be paid by Mr Capewell. We held that Lindsay J had taken too narrow a view of his role, and we set out the questions which should have been considered (judgment paras 51 - 53). We accepted that on the evidence before him it may not have been possible for him to answer these issues without further investigation. We thought that on proper consideration the date of discharge would have been brought forward by a number of months, to a date which we set as 1st June 2004 (paras 59 – 64).[5]Against this background, Mr Capewell now submits that: i) there should be no order in respect of costs before Lindsay J; ii) the Customs should pay his costs of the appeal; iii) in relation to the costs of the receivership he proposes the following[6]The need for a specific order in respect of the receiver’s costs can be illustrated by reference to the costs before Lindsay J. The order was that Mr Capewell should pay the Customs’ costs, and that the receiver’s costs should be costs in the receivership, thus, in effect, enabling them also to be met out of Mr Capewell’s assets. If we were to substitute no order for costs, the Customs would be left to bear its own costs. But, if we were to do no more, the receiver would still be able to look for payment of his costs out of the realised assets, with the result that they would fall on Mr Capewell by a different route.[7]Before turning to these issues, it is necessary to refer to the relevant provisions and recent authorities on the powers of the court in respect of the remuneration and expenses of receivers.

Receivers’ costs and CPR69.7

[8]In Hughes v Customs and Excise Commissioners [2003] 1WLR 177 (discussed in our main judgment) it was held that, in the absence of any special statutory rules, a receiver appointed under the Criminal Justice Act 1988 was to be treated in the same way as his common-law counterpart appointed under order of the court. It followed that a receiver was in principle entitled to recover his costs from the assets under his control, even where there had been no conviction and no confiscation order had yet been made.[9]The court followed another recent decision of this court, ReAndrews [1999] 1WLR 1236. In that case, the defendant and his son had been charged with offences relating to their joint business, and restraint orders were made. The son was convicted, but the defendant was acquitted and awarded his costs out of central funds. The taxing officer held that such costs did not include the costs of the receivership (amounting to some £10,000). The receiver sought to retain those costs out of the assets under her control. The defendant applied for an order that they be paid by the prosecutor, as costs of the receivership proceedings. That application failed. The court felt bound to apply the established common law practice that the costs of a court-appointed receiver are paid out of the realised assets (as stated in cases such as Boehm v Goodall [1911] 1 Ch 155, 161-2). The court’s discretion in relation to “the costs of and incidental to proceedings in the High Court” (Supreme Court Act 1981 s 51) did not extend to the costs of a receivership. Ward LJ said that he reached this conclusion with “unfeigned reluctance”, because it was “manifestly unfair” that the defendant, having been paid his costs out of public funds, should not also be indemnified for the loss caused by the ancillary receivership proceedings (p 1244B, 1246H).[10]Both Andrews and Hughes were decided under the old Rules of the Supreme Court, in which the only provision dealing specifically with a court-appointed receiver’s remuneration was Order 30 Rule 3. That provided that a receiver – “… shall be allowed such proper remuneration if any as may be authorised by the court.” That rule has now been replaced by CPR 69.7 (which applied from December 2002). Part 69 and the corresponding Practice Direction provide (in the words of the note to the White Book): “… a comprehensive procedural code dealing with appointment by the court of receivers and managers including provisions relating to the application for appointment, evidence required on such applications, security and remuneration”.[11]Rule 69.7 is headed “Receiver’s remuneration”. It provides that a receiver may only charge for his services if the court so directs and specifies the basis on which he is to be remunerated. Rule 69.7(2), which is directly relevant to Mr Capewell’s submissions, provides – “… the court may specify –(a) who is to be responsible for paying the receiver; and(b) the fund or property from which the receiver is to recover his remuneration.” Paragraph (4) provides that the court is to award “such sum as is reasonable and proportionate in all the circumstances”, and sets out the factors which are to be taken into account.[12]Reference must also be made to the Practice Direction. Paragraph 9, headed “Receiver’s remuneration – rule 69.7” confirms (para 9.2) that the court will normally determine the amount of the receiver’s remuneration in accordance with the criteria set out in rule 69.7(4), and adds - “Parts 43 – 48 (costs) do not apply to the determination of the remuneration of a receiver”. Paragraphs 9.4-5 set out procedural provisions relating to the determination of the amount of a receiver’s remuneration. Paragraph 9.6 provides– “Paragraphs 9.1 - 9.5 do not apply to expenses incurred by the receiver in carrying out his functions. These are accounted for as part of his account for the assets he has recovered, and not dealt with as part of the determination of his remuneration.”[13]The detailed provisions for controlling the level of a receiver’s remuneration appear to stem from the report of a working party under Mr Justice Ferris in 1998, which was set up in response to public concern at levels of remuneration and legal fees paid in insolvency cases. However, rule 69.7(2) appears to go beyond the scope of that report, since it enables the court, not merely to control the amount of remuneration, but to determine who is to be responsible for payment. On its face, therefore, it gives the court a much wider discretion than under the previous rule (as applied in Andrew and Hughes). As far as we are aware the rule has not been subject to consideration previously in this court, either in the context of the Criminal Justice Act or more generally. Neither counsel before us was able to provide any information as to the background of the provision.[14]For Mr Capewell, it is submitted that CPR 69 has the effect of “overruling” Hughes and gives the court a general discretion as to where the costs of the receivership are to fall. For the Respondents, however, it is said that the approach adopted in Hughes was not dependent on the terms of Order 30 rule 3, but was the application of well established common-law principles. There is nothing in the context of rule 69.7 to suggest that it was intended to make a radical departure from the existing law. In any event, if Mr Capewell desired to invoke any special powers of the court under this rule, the time to have done it would have been when Jackson J made the receivership order, not retrospectively after the receivership has come to an end.[15]For Customs, we were also referred to more recent secondary legislation, relating to the equivalent powers of the Crown Court under the Proceeds of Crime Act 2002. The Crown Court (Confiscation, Restraint and Receivership) Rules 2003 make provision for confiscation orders in the Crown Court. Rule 26 contains provision for the Receiver’s remuneration, and includes similar provision to Order 69.7 relating to the matters to be taken into account in assessing the remuneration. It has no equivalent to 69.7(2), but instead provides – “(5) A receiver appointed under Section 48 of the Act is to receive his remuneration by realising property in respect of which he is appointed, in accordance with section 49(2)(d) of the Act”. Section 49(2)(d) allows the Crown Court to confer on the receiver in relation to “realisable property” the power to realise so much as is necessary to meet his remuneration and expenses. Under that scheme, therefore, the court has no discretion as to how the receiver is to be paid; he “is to receive his remuneration” from realisable assets.[16]This comparison is interesting, but does not assist the argument. No principle of statutory construction would permit us to use a later statutory instrument as a guide to interpretation. If anything, it would be a point against a narrow interpretation of 69.7(2), because if that provision were as narrow as Customs now argues, it would not have been necessary to include a more restrictive provision in the Crown Court rules.

Discussion

[17]Without more information as to the background of the change, I would not wish to go further than is necessary for the present case. It is convenient to distinguish three separate issues: i) What is the appropriate form of order in respect of the costs here and below, under the court’s ordinary powers in respect of costs “of and incidental to” proceedings (“litigation costs”)? ii) In so far as that order leaves the receiver out of pocket in respect of any of his litigation costs, should he be able to recover them out of the realised assets in his hands, and, if not, how should they be met? iii) What if any order should be made in respect of the receiver’s general remuneration and expenses in the period from 1st June 2004 to 13th October 2004 (that is, other than his litigation costs)?[18]The first question is as to the litigation costs of the parties to the proceedings before Lindsay J and on appeal. The court’s jurisdiction in respect of such costs comes from Supreme Court Act 1981 s 51, by which such costs “shall be in the discretion of the court”. CPR44.3 (1) and (4) give the court discretion as to “whether costs are payable by one party to another”, and require the court to have regard to “all the circumstances”.[19]Before Lindsay J, I think the proper order is no order as to costs. In the light of our judgment, the honours would have been relatively even. Although Mr Capewell would not have succeeded in having the receivership order discharged then and there, he would have succeeded on the central point of principle as to the correct approach of the court to that issue, and would have opened the way to early discharge of the order. We also expressed the view that the obstacles to immediate discharge were at least in part the responsibility of the receiver (judgment para 58).[20]In this court, the only substantive issues have been in respect of the receivers’ costs and remuneration. Relative success can only be measured after we have arrived at a conclusion on those issues.[21]On issue (ii), if the proper view of the proceedings before Lindsay J is that each side should bear its own costs, then I see no reason why the receiver’s costs should not be treated as the responsibility of the Customs. They were on the same side on the only substantive issue, which was whether the receivership should continue. Subject to being assured of payment from some source (which was never in doubt, in view of the Customs indemnity), the receiver had no separate interest from Customs, and (sensibly) they were jointly represented. In order to prevent the receiver having any need to look for his costs from the realisable assets, I think we can and should make an order that they be paid by Customs. That seems to me to fall within the scope of the court’s ordinary powers as to litigation costs (under CPR44). These are not general receivership expenses (as in Andrews), but costs directly related to the particular proceedings. It is unnecessary therefore to invoke any special powers under CPR69.[22]Issue (iii) is concerned with general receivership expenses, rather than litigation costs, and the answer therefore cannot be found in CPR44. The logic of our main judgment is that the receivership should have come to an end on 1st June 2004, and there should therefore have been no need for any claim for remuneration or expenses thereafter. Justice therefore would seem to require that they should not come out of Mr Capewell’s assets, but should be borne by Customs. The question is whether we have power to achieve that result. I would not regard it as an obstacle that there was no appeal against the relevant terms of Jackson J’s original order. They may have been appropriate at the time, but the court is not precluded from reconsidering them in the light of the changed circumstances relied on in the application to discharge.[23]Rule 69.7(2) is relied on by Mr Capewell as giving us the necessary power. On its face, it gives us an unlimited discretion in respect of the receiver’s remuneration. Without more detailed information as to the background, I am prepared to assume that the rule was not intended to make a radical change to the previous practice. However, it seems clearly designed to give the court some discretion in the matter, at least in special circumstances where application of the ordinary rule would cause unfairness or hardship. Andrews may have been one example in the draftsman’s mind. Accordingly, if as I think justice requires that Customs should bear the receiver’s costs from 1st June 2004, rule 69.7(2) seems to give us the means to achieve it.[24]There is, however, a further complication. As its heading makes clear, rule 69.7 is dealing with the “remuneration” of the receiver. In ordinary language, that would not include his expenses. Although rule 69.7(2)(a) refers simply to responsibility for “paying the receiver”, which in a different context might include payment of expenses, I do not think it is possible to read that sub-paragraph on its own as extending beyond the subject-matter of the rest of the rule. The Practice Direction confirms that the distinction between remuneration and expenses is deliberate. That may make sense in relation to rules directed to determining the amount of remuneration. It is less clear why the distinction should be relevant to responsibility for payment. Ordinarily one would expect the same person to be responsible for paying both remuneration and expenses. However, I do not think that we can properly stretch the language of the rule beyond its natural meaning.[25]Accordingly, in my view, we can and should order under rule 69.7(2) that the Customs should be responsible for payment of the receiver’s remuneration from 1st June 2004. We can make no corresponding order in respect of his expenses, which will fall to be met from the realisable assets in the ordinary way.[26]Having arrived at that conclusion, it is possible to form a view as to the costs of the appeal. On the conclusions we have reached, Mr Capewell comes out the substantial winner, in that he has established his right to limit the receiver’s ability to recover costs from the realisable assets. However, he failed in an important part of his case: that Lindsay J should himself have discharged the receivership at the original hearing. In those circumstances, the fair order on the appeal is that Customs should pay one half of Mr Capewell’s costs and the whole of the receiver’s costs. Summary[27]For the above reasons, I would make the following orders: i) In relation to the proceedings before Lindsay J, there will be no order for costs as between Mr Capewell and Customs, but Customs will pay the costs of the receiver (as summarily assessed by Lindsay J); ii) In relation to the costs of the appeal Customs will pay 50% of Mr Capewell’s costs and the whole of the costs of the receiver (in each case, to be assessed if not agreed); iii) Customs will be responsible for payment of the receiver’s remuneration from 1st June to 13th October 2004; iv) The expenses of the receiver for the period 1st June 2004 to 13th October 2004 will be met from the assets of the Defendant which are subject to the receivership.

Lord Justice Longmore:

[28]I agree. I would only add a reference to para. 60 of the judgment of Simon Brown LJ in Hughes ([2003]) 1 WLR at page 194) where he said this:- “It is important that this legislation continues to be operated to strip criminals of their ill-gotten gains. But it is important too that the court keeps a close control over those it appoints to act as receivers on its behalf and that costs are not too readily incurred, particularly before any confiscation order is made.” It is only by making, in appropriate cases, orders of the kind we have decided to make in the present case that the courts can exercise the sort of control envisaged by Simon Brown LJ to be necessary. For the reasons given by Carnwath LJ, I consider that this is an appropriate case for the making of the orders which have been proposed.

Lord Justice Laws:

[29]I also agree.

order

“… the (Receiver) is not entitled to recover any costs, disbursements and expenses in relation to the Receivership from 1st June 2004 to 13th October 2004; or in relation to the costs of and occasioned by the hearing before Lindsay J on 5th and 6th April 2004; or in relation to the costs of and occasioned by the hearing of the appeal, from the Appellant’s realisable property.”

Cited in 1 later judgment