Sinclair v Glatt & Ors [2009] EWCA Civ 176

[2009] EWCA Civ 176Case No C1/2008/2240Case No C1/2008/2832
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
[2008] EWHC 798 (Admin)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMINISTRATIVE COURT
THE HONOURABLE MR JUSTICE MUNBY
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 13/03/2009
Before
THE RIGHT HONOURABLE LORD JUSTICE LONGMORETHE RIGHT HONOURABLE LORD JUSTICE STANLEY BURNTONTHE RIGHT HONOURABLE LORD JUSTICE ELIAS
Between
HEATH SINCLAIR IN HIS CAPACITY AS THE FORMER RECEIVERRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Louis Glatt (in person) The First Appellant for in personMr Michael Gadd (instructed by Olswang) for Second AppellantMr Andrew Bodnar (instructed by HCL Hanne & Co) for Third AppellantMr Andrew Mitchell QC & Ms Abigail Barber (instructed by Asset Forfeture Division, Revenue and Customs Prosecutions Office) for RespondentHearing Hearing dates : 26 th& 27 th February 2009
Judgment
[1]This appeal is about the entitlement of a receiver, appointed pursuant to section 77 of the Criminal Justice Act 1988 (“the Act”) to get in the assets of a money launderer who has been convicted of various money-laundering offences, to recover his remuneration costs and expenses. It is now settled that such a receiver, like a receiver at common law, is entitled to recover his remuneration, costs and expenses from the assets which he has been appointed to receive (“the receivership assets”). That is so whether or not he ought to have been appointed in the first place or the order appointing him has been discharged, see Mellor v Mellor [1992] 1 WLR 517. Even if the defendant, whose assets have been caught by the order appointing the receiver, is subsequently acquitted or has his conviction quashed, the receivership assets must bear the costs of the receivership; this is also the position if, as in the present case, a confiscation order is made but subsequently quashed, Hughes v Customs and Excise Commissioners [2003] 1 WLR 177. Even if the receiver carries on his receivership unnecessarily and should have agreed that his receivership should have been discharged at a time before a court application is made to terminate his receivership, the receivership assets bear those costs reasonably incurred up to the date he is actually discharged. Capewell v Revenue and Customs Commissioners [2007] 1 WLR 386.[2]This is all settled by authority. The question in issue on this appeal is whether the right of the receiver to recover his remuneration costs and expenses from the assets caught by the order extends to assets which do not belong to the defendant in the sense that they are not beneficially owed by him but by some other person e.g. a member of his family or a third party.[3]To some extent that will depend on the terms of the order of the court under which he is appointed. Obviously a receiver cannot recover sums due to him from assets which are not mentioned in the order. But suppose assets are mentioned in the order which either do not belong to the defendant at all or are not beneficially owned by him, what is then the position?[4]Sections 75-89 of the Act have a general title “Enforcement etc of Confiscation Orders”. Under this title the Act gives the High Court power to make a restraint order in aid of any confiscation order likely to be made in the future; this is a power to prohibit any person from dealing with “any realisable property”, (section 77(1)). Section 77(7) provides that an application to discharge or vary the order may be made by any person affected by it. Power is given to appoint a receiver to take possession of “any realisable property” and manage or otherwise deal with it whether pursuant to the restraint order before a confiscation order is made (section 77(8)) or after a confiscation order has been made (section 80(2)). In the latter case the court can order any person to give up possession of “realisable property” to the receiver and can empower the receiver to realise any “realisable property” (section 80(4) and (5)) but section 80(8) provides:- “The court shall not in respect of any property exercise the powers conferred by sub-section … (5)…. above unless a reasonable opportunity has been given for persons holding any interest in the property to make representations to the court.”[5]“Realisable property” is defined by section 74 of the Act to mean “any property held by the defendant” and any property held by a person to whom the defendant has made a relevant gift. (No question about gifts arises in this present case). Section 102(7) provides:- “property is held by any person if he holds any interest in it.”[6]Once a confiscation order has been made, sums in the hands of a receiver are to be applied on the defendant’s behalf towards the satisfaction of the confiscation order (section 80(1)). The receiver will usually hand the money in his hands to a chief executive of the justices because it is the receipt by the justices’ chief executive which will reduce the amount payable under any confiscation order. It is also the justices’ chief executive who applies the money so received in the manner specified in the section (section 81(3)). The order in which the money is to be applied is first the payment of any relevant insolvency practitioner and secondly the remuneration and expenses of any receiver (section 81(5)).[7]Section 82(2) provides that the powers of the court under sections 77-81 “shall be exercised with a view to making available for satisfying the confiscation order the value for the time being of realisable property held by any person by the realisation of such property.” Section 82(4) then provides:- “The powers shall be exercised with a view to allowing any person other than the defendant or the recipient if any such gift to retain or recover the value of any property held by him.”[8]Thus a third party, whose assets have wrongly been included in any order appointing a receiver, can, by virtue of section 80(8), prevent a court from empowering the receiver to realise the value of such assets at the time the receiver is appointed or at any time thereafter. He can also apply to amend the order by removing an asset he can show is his; he can also, by virtue of section 82(4), require the court to have regard to his interest at the time when it is contemplated that the value of realisable property is to be made available to satisfy the confiscation order, see Re Norris [2001] 1 WLR 1385 paras 16-17 per Lord Hobhouse of Woodborough, dealing with the comparable provisions of the Drug Trafficking Offence Act 1986.

The facts

[9]Louis Glatt, a solicitor, was arrested for money-laundering offences on 28th January 1997. A restraint order was made by Keene J on 16th April 1997 which remained in effect until Mr Louis Glatt was convicted on 12th February 2001 and thereafter. On the application of the prosecutor Morison J made a receivership order on 15th February 2001 and, in due course, on 29th May 2002 a confiscation order was made. It became apparent that various persons had claims on the assets caught by both the restraint order and the receivership order and on 2nd August 2002 Munby J ordered the executors of the estate of Mrs Chaja Glatt, Mr Louis Glatt’s late mother, to serve points of claim to make clear what assets they were claiming in that capacity. The executors were Mr Leslie Glatt (Mr Louis Glatt’s brother) and his wife Mrs Rita Glatt. They then claimed that they were entitled to the value of certain “Retained and Sold Shares” and a property known as the Chessington property in Finchley London N3. Mr Leslie Glatt had a further claim to further shares (“AB Ports Shares”) in his own capacity.[10]On 14th July 2003 an application by Mr Louis Glatt to discharge the receivership order failed, Re G [2003] EWHC 1732 (Admin). On 17th March 2006 the Court of Appeal quashed the confiscation order made on 29th May 2002 and on 25th April 2006 the restraint order and the receivership order were discharged. Mr Glatt’s appeal against conviction had already been dismissed. On 10th May 2007 it was decided that the executors of Mrs Glatt’s estate and Mr Leslie Glatt were beneficially entitled to the shares which they claimed although Mr Louis Glatt had the bare legal title. On 10th September 2007 the receiver asserted a lien for his charges against the assets caught by the receivership order. On 16th January 2008 the executors also succeeded in their claim to be beneficially entitled to the Chessington property, although Mr Louis Glatt had the legal title. On 13th May 2008 Munby J decided that the receiver had a lien for his charges against (inter alia) the shares and the Chessington property despite the fact that it had been decided that those assets belonged to the estate of Mrs Glatt or to Mr Leslie Glatt. Meanwhile the divorced wife of Mr Louis Glatt had made a claim that the receiver’s lien could only take effect subject to her claim for relief in the matrimonial proceedings which she had instigated against Mr Louis Glatt. Munby J dismissed that claim also and held that the receiver’s lien had the prior claim over all the assets of the receivership. The executors of Mrs Chaja Glatt, Mr Leslie Glatt, Mrs Esther Glatt and Mr Louis Glatt now all appeal against this decision.

The receivership order

[11]The starting point must be the terms of Morison J’s order of 15th February 2001. Paragraph 1 of the order appointed Mr Sinclair (and another person since retired from the receivership) to act as receivers and managers of the assets of Mr Louis Glatt.[12]Paragraph 3 of the order conferred on the receivers the powers usual in such cases including (under paragraph 3(a)) “power to take possession of and manage the assets of the defendant” and (under paragraph 3(b)) “power to draw every month from the assets under his management such sums as are required by him to pay the costs of the Receivership”. Paragraph 5 of the order provided that “The costs of the Receivership shall be paid out of the assets received or so managed by the Receivers … but if no assets or insufficient assets are so received or managed the costs of the Receivership to the extent of the deficiency shall be paid by the Commissioners of Customs and Excise”. Paragraph 6 of the order required the receivers to act in accordance with their letter of agreement and paragraph 7 provided that they should be allowed remuneration in accordance with that letter.[13]Paragraph 13 of the order provided that:- “Reference in this order to “the defendant’s assets” or “assets of the defendant” means(i) any asset specified in the schedule to this order and(ii) whether or not so specified, any property in which the defendant has an interest or to which he has a right.”[14]The schedule to the order listed 19 items. Items (1)-(7) inclusive were each described as “The interest of the defendant in all that property and land known as …” (item (1) being the Chessington property). Item (8) was described as “Any interest of the defendant in” a property in Israel. Item (9) was described as “A Rover motor vehicle registration number [number]”. Items (10)-(15) inclusive were individual numbered accounts at Barclays Bank. Items 16 and 17 were described as “Life insurance policies with [insurer]”. Item (18) was described as “The defendant’s shareholding in the following companies …” (thirty companies then being listed). Item (19) was described as “The assets of Louis Glatt & Co, solicitors, …” which would, no doubt, include the firm’s client account.

The Submissions

[15]Mr Gadd, for the beneficial owners of the relevant shares and the Chessington property, submitted that since Mr Louis Glatt had only a bare legal title to those assets, those assets did not fall within the term “realisable property” as defined in section 74 of the Act. It was clear that they could not form any part of the assets by reference to which any confiscation order could be made or enforced against Mr Glatt and, therefore, they could not be exposed to any lien for the receiver’s charges. Mr Gadd’s submissions related only to the relevant shares and the Chessington property since that was the extent of his clients’ beneficial interest. It is thought that other assets caught by the order of Morison J will not have sufficient value to satisfy the receiver’s charges but, to the extent that they do, they will, in theory be available for that purpose.[16]Mrs Esther Glatt (and, to some extent, her ex-husband) therefore sought to maintain a broader argument, as already indicated, to the effect that all of the assets of Mr Louis Glatt which were the subject of the receivership order should not be utilised for the receiver’s lien until her own application for ancillary relief has been determined. Once that application is determined any property transferred to her (whether by order of the court or by consent) would, according to Mr Bodnar, fall outside the scope of the receiver’s lien. Alternatively he submitted that the court has a discretion, either now or once that application has been determined to balance the competing claims of Mrs Esther Glatt and the receiver and should now or might well in the future conclude that the receiver should look either to the statutory indemnity from the prosecutor given by section 88 of the Act or the contractual indemnity from the Revenue and Customs mentioned in the order of Morison J.

Bare Legal Title

[17]The question is whether the receivership order and the receivership assets cover property “held” by Mr Louis Glatt. Mr Andrew Mitchell QC on behalf of the receiver accepted that, if the assets covered by the receivership order were not assets “held” by Mr Louis Glatt they could not constitute “realisable property” within section 74 of the Act and the owners of these assets would be able to come to court, prove their title and require that the assets which they owned should be taken out of the receivership order. He did not accept that the receiver’s lien would not attach to those assets, at any rate in respect of the costs of managing the property while any dispute was being determined. But that is not this case and no decision need be made on that point in this appeal because Mr Mitchell’s main case was that if Mr Louis Glatt had the bare legal title that was enough since he “held” the property for the purpose of section 74. Section 102(7) provided that property is held by any person if he holds any interest in it. A bare legal title is “any interest”.[18]For his part, Mr Gadd accepted that if Mr Louis Glatt had had any beneficial interest (however small) in the receivership assets at the time when the receivership order was made, then he held an interest in those assets, that those assets were rightly included in the order and the receiver’s lien for his costs would attach. But he submitted that since the whole purpose of the receivership order was to preserve the availability of assets belonging to the defendant for the purpose of satisfying any confiscation order that was made or to be made and since assets which were beneficially owned by third parties could not be available for the purpose of satisfying such confiscation order, it could not have been Parliament’s intention that such assets were to be caught by any receivership order or subject to the receiver’s lien.[19]He drew an analogy with the bankruptcy of individuals and the liquidation of companies saying that it had always been accepted that assets in respect of which the bankrupt or the company in liquidation was a bare trustee were never available to be distributed to creditors see e.g. Barclays Bank Ltd v Quistclose Investments Ltd [1970] A.C. 567 and the dictum of Lloyd J in Re SSSL Realisations (2002) Ltd [2005] 1 BCLC 1 para 60:- “It seems to me that for something to qualify as ‘property’, it must involve some element of benefit or entitlement for the person holding it.” cited with approval by Chadwick LJ in the Court of Appeal in that case [2006] Ch 610 para. 35.[20]There are, as it seems to me, a number of difficulties with this argument. In the first place, it is too simplistic to say that the purpose of the receivership order is to make available sums for the satisfaction of a confiscation order. Under the 1988 Act, a confiscation order is not made in respect of “realisable assets” as such, but in respect of “the amount that might be realised at the time the order is made”. This appears from section 71 of the Act which is the section empowering and requiring the court to make confiscation orders when appropriate. That section provides:
“(1) Where an offender is convicted, in any proceedings before the Crown Court or a magistrates’ court, of an offence of a relevant description, it shall be the duty of the court – a) if the prosecutor has given written notice to the court that he considers that it would be appropriate for the court to proceed under this section, or b) if the court considers, even though it has not been given such notice, that it would be appropriate for it so to proceed, to act as follows before sentencing or otherwise dealing with the offender in respect of that offence or any other relevant criminal conduct. (1A) The court shall first determine whether the offender has benefited from any relevant criminal conduct. (1B) Subject to subsection (1C) below, if the court determines that the offender has benefited from any relevant criminal conduct, it shall then – a) determine in accordance with subsection (6) below the amount to be recovered in his case by virtue of this section, and b) make an order under this section ordering the offender to pay that amount.”
Subsection (6) then provides:- “…the sum which an order made by a court under this section requires an offender to pay shall be equal to – a) the benefit in respect of which it is made; or b) the amount appearing to the court to be the amount that might be realised at the time the order is made, whichever is the less.” a) determine in accordance with subsection (6) below the amount to be recovered in his case by virtue of this section, and b) make an order under this section ordering the offender to pay that amount.” a) the benefit in respect of which it is made; or b) the amount appearing to the court to be the amount that might be realised at the time the order is made,[21]Section 74 (the definition section already referred to in connection with the concept of “realisable property”) provides:- “(3) For the purposes of this part of this Act the amount that might be realised at the time a confiscation order is made is – a) the total of the values at that time of all the realisable property held by the defendant, less b) where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations, together with the total of the values at that time of all gifts caught by this part of this Act. (4) Subject to the following provisions of this section, for the purposes of this part of this Act the value of property (other than cash) in relation to any person holding the property – a) where any other person holds an interest in the property is, i) the market value of the first-mentioned person’s beneficial interest in the property, less ii) the amount required to discharge any incumbrance (other than a charging order) on that interest; and b) in any other case, is its market value.” a) the total of the values at that time of all the realisable property held by the defendant, less b) where there are obligations having priority at that time, the total amounts payable in pursuance of such obligations, a) where any other person holds an interest in the property is, i) the market value of the first-mentioned person’s beneficial interest in the property, less ii) the amount required to discharge any incumbrance (other than a charging order) on that interest; and b) in any other case, is its market value.”[22]It is thus clear that a confiscation order is made in respect of the value of the realisable property rather than in respect of the realisable property as such and that it is at the time of ascertaining that realisable value that the beneficial interest in the property is to be taken into account. The express mention of “beneficial interest” in section 74(4) not only pinpoints the time when it is appropriate to have regard to the defendant’s beneficial interest instead of his legal interest but also itself militates strongly against the contention that property as defined in section 102(1) and (7) is only property in which the defendant has a beneficial interest. It is clear that the draftsman of the statute can differentiate between a beneficial interest and a legal interest when he wishes to do so (see also section 80(6) and 102(9)) and any such differentiation is notably absent from section 102(1) and (7).[23]A further reason why Mr Gadd cannot be right to say that “realisable property” cannot include a defendant’s bare legal interest is its artificiality. He has to accept that, if a defendant had a 10% (or even 1%) beneficial interest in the property, it would then be realisable property and that the receiver’s lien would then attach. Such a construction would create anomaly and defy practical sense.[24]These conclusions are in no way at variance with Hughes v Customs and Excise Commissioners. Indeed they are consistent with that decision in which it was decided that the receiver could exercise his lien over the receivership assets even if the defendant had been acquitted or had his conviction quashed. The ratio of that case is contained in para 50 of the judgment of Simon Brown LJ where he says:- “… Statutory receivers are to be treated precisely as their common law counterparts save to the extent that the legislation expressly provides otherwise. The statute is not to be regarded as an entirely self-contained code incorporating nothing from the common law. The fact that, unusually (although not uniquely: consider such cases as F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 and Attorney General v Wright [1988] 1 WLR 164), the prosecutor cannot be required to give a cross-undertaking in damages (see RSC Ord 115, r 4(1)) does not constitute so fundamental a difference between statutory and common law receivers as to give rise to wholly discrete schemes for their remuneration.” It follows that the legislation recognises that the receiver’s costs should be paid from the estate rather than from the public purse.[25]Simon Brown LJ then considered whether Article 1 of the First Protocol of the European Convention on Human Rights had any impact and concluded that the statutory measures in relation to the receiver’s costs were in the public interest, appropriate for achieving their aim, proportionate and achieved a fair balance between the demands of the general interest of the community and the requirements of the protection of the individual’s right. (para 53) The same considerations apply in the present case although Mr Mitchell recognised that in an extreme case (for example where a party wholly unconnected with the defendant stood to lose an entire asset because it was eaten up by the receiver’s costs) Article 1 of the First Protocol might have a part to play when the court came to decide how much the receiver was entitled to claim and from which asset that amount was payable. In the present case, of course, none of the parties can say they have no connection with Mr Louis Glatt.[26]Simon Brown LJ then gave brief consideration to the position of third parties and said, referring to section 82(4) expressly and perhaps by implication to sections 77(7) and 80(8) that it would be difficult to regard the legislation as riding roughshod over the rights of innocent third parties (para 58). All these observations support the view that the receiver should be able to recover his costs against even those assets in respect of which Mr Louis Glatt had the bare legal title.[27]Finally it is necessary to refer to the last two sections under the general title of Enforcement etc of Confiscation Orders. They are sections 88 and 89:- “88. Receivers: supplementary provisions.(1) Where a receiver appointed under this Part of this Act or in pursuance of a charging order takes any action – (a) in relation to property which is not realisable property, being action which he would be entitled to take if it were such property; (b) believing, and having reasonable grounds for believing, that he is entitled to take that action in relation to that property, he shall not be liable to any person in respect of any loss or damage resulting from his action except in so far as the loss or damage is caused by his negligence.(2) Any amount due in respect of the remuneration and expenses of a receiver so appointed shall, if no sum is available to be applied in payment of it under section 81(5) above, be paid by the prosecutor or, in a case where proceedings for an offence to which this Part of this Act applies are not instituted, by the person on whose application the receiver was appointed. 89. Compensation. (1) If proceedings are instituted against a person for an offence or offences to which this Part of this Act applies and either – (a) the proceedings do not result in his conviction for any such offence, or (b) where he is convicted of one or more such offences – (i) the conviction or convictions concerned are quashed, or (ii) he is pardoned by Her Majesty in respect of the conviction or convictions concerned, the High Court may, on an application by a person who held property which was realisable property, order compensation to be paid to the applicant if, having regard to all the circumstances, it considers it appropriate to make such an order. (2) The High Court shall not order compensation to be paid in any case unless the court is satisfied – (a) that there has been some serious fault on the part of a person concerned in the investigation or prosecution of an offence concerned, being a person mentioned in subsection (5) below; and (b) that the applicant has suffered loss in consequence of anything done in relation to the property by or in pursuance of an order under this Part of this Act.”[28]Section 88(1) envisages a case where a receiver has taken action in relation to property which is not “realisable property” and gives him immunity from what would otherwise be tortious liability in relation to that action if he had reasonable grounds for believing he was entitled to take the action which he did. Mr Mitchell submitted that this immunity would be unnecessary if “realisable property” only included property in respect of which the defendant had a beneficial interest. I would not accept that submission because the section is primarily concerned with persons who have an interest in the receivership assets but no connection at all with the defendant (e.g. cases where the wrong address of a house or the wrong registration number of a car is given in the order). But the sub-section does show that Parliament did contemplate cases in relation to which the receivership order might cover assets not owned by the defendant. It might well be that the receiver incurs expenditure in preserving or managing such assets; in such cases he may be immune from suit but will still need to recover his costs out of the assets. This consideration militates against the view that his lien only extends to assets beneficially owned by the defendant.[29]Lastly, section 89 empowers the High Court to award compensation if no conviction occurs or the conviction is quashed or the defendant is pardoned in circumstances where there has been some serious fault on the part of a person concerned with the investigation or the prosecution of the offence. In those rare cases in which compensation can be awarded, it can only be done on the application of “a person who held property which was realisable property”. In that, albeit limited, context it would be odd if the person who could apply for compensation were only a beneficial owner while the holder of the bare legal estate was excluded.[30]For all these reasons I, like the judge, would hold that the receiver’s lien for his costs, expenses and remuneration extends to assets in which Mr Louis Glatt has a bare legal interest.

Mrs Esther Glatt’s position

[31]Mrs Esther Glatt has not yet obtained any property adjustment or other order in her matrimonial proceedings; she is, therefore, in no position to make any claim to the receivership assets in her own name. There is no suggestion by her or by Mr Louis Glatt that any assets (apart from the shares and the Chessington property already mentioned) are not properly the subject-matter of the receivership order. The fact that, if the confiscation order had not been quashed, Mrs Esther Glatt would have been afforded an opportunity before any asset was realised to show that she had an interest of her own in such assets (see Re Norris) is nothing to the point since she does not currently assert that she has any such interest. The most she has is the hope that, in due course, a court might make a property transfer order in her favour. If she does obtain such an order, and the receivership order had been outstanding, she might have been able to extract what by then would have become her assets but there is no reason why the receiver could not exercise his lien for his charge up to the time of any such transfer. It follows that there is no point in preventing the receiver from now exercising his lien and Mr Bodnar’s first argument that the entire proceedings should be deferred until after the resolution of Mrs Esther Glatt’s proceedings for ancillary relief must fail.[32]Mr Bodnar’s alternative argument that the court has (either now or once the matrimonial proceedings have been determined) a discretion to require that the receiver should look for a part or the whole of his costs to the prosecutor pursuant to section 88 of the Act must also be rejected. That would be contrary to the decisions of this court in Mellor and Hughes in which it was determined that a receiver appointed under the Act had the same powers as his common law counterpart and that he must be entitled to assess the value of the receivership assets included in the receivership order when determining whether or not to take on the receivership.[33]Any argument based on Article 1 of the First Protocol of European Convention is even more hopeless in the mouth of Mr Bodnar than it is the mouth of Mr Gadd since Mrs Esther Glatt has no property interest (and, therefore, no possession within the meaning of that Article) of which she would be deprived if the receiver exercised his lien.

Costs

[34]There were originally appeals by all the appellants in respect of the costs orders made by Munby J in relation to the Chessington property proceedings and the lien proceedings. The position was that, when Munby J on 17th October 2006 made an order for directions in relation to the Chessington property claim and other matters, Revenue and Customs expressly undertook not to apply for any order that its costs would be paid by any party to the proceedings. The reason why that undertaking was given (and recorded in the order of 17th October 2006) was partly (if not mainly) because Revenue and Customs was given leave to intervene and to go on record on behalf of the receiver for the purpose of litigating the Chessington claims. No doubt Revenue and Customs thought that they could litigate the Chessington claim more cheaply than the receiver could. No doubt the other parties did not disagree.[35]The proceedings in relation to the Chessington property were lost by Revenue and Customs and won by the executors of Mrs Chaja Glatt. Any application by Revenue and Customs that its costs should be paid by any other party would, therefore, have been distinctly unpromising. Not surprisingly no such application was made. Instead Munby J in his order of 12th November 2008 said that the estate’s costs be paid by Revenue and Customs but added that Revenue and Customs was entitled to be indemnified in respect of such costs from the receivership. It does not seem to me that Revenue and Customs by seeking that order (and the judge in granting it) acted in breach of the undertaking given and recorded in the order of 17th October 2006 for the simple reason that the order does not relate to any claim by Revenue and Customs for its costs at all.[36]When it came to the costs of the lien proceedings, Munby J made an order on 12th November 2008 that Revenue and Customs were entitled to be indemnified in relation to its costs incurred in relation to the lien issue from the receivership. Mr Mitchell on behalf of Revenue and Customs recognised that, whatever might be the strict construction of the language of the undertaking, the order was against its spirit. He accordingly accepted that the order in relation to the costs of Revenue and Customs should not stand and should be excised from the order of 12th November 2008. For good measure he added that even if he won the appeal (which if my Lords agree with me he will have done), he would not seek his costs either from any party to the appeal or from the receivership estate.

Conclusion

[37]I would, therefore, dismiss all the appeals save to the minor extent indicated in the previous paragraph.[38]I agree.[39]It is plainly established that the receivers can recover their costs and expenses from the receivership assets: see Capewell v Revenue & Customs Commissioners [2007] 1 WLR 386. The effect of this is that the receiver may be entitled to recover his costs from innocent third parties who have the misfortune to have their assets tied up in some way with the defendant. These assets cannot be used to satisfy the confiscation order itself, but they can be used to meet the costs and expenses.[40]The legislation contains certain provisions which are designed to protect the interests of third parties, as set out by Longmore LJ at paragraphs 6-8 of his judgment. However, as Mr Mitchell QC, counsel for the receiver accepts - and indeed asserts - there may necessarily be circumstances where the only asset from which the receiver can recover his costs is one in which the third party has the entire beneficial interest. This would be so even where it had become immediately apparent to the receiver on taking possession of the property that all that the defendant has is a bare legal title. Still the third party would be at risk of bearing the whole costs of the receivership.[41]Mr Gadd seeks to avoid this potentially harsh consequence by defining receivership assets so as to exclude an asset in which the defendant has only bare legal title. For reasons given by Lord Justice Longmore, I think that is an impossible construction of the legislation. It would, if correct, mitigate against the harsh consequences that can result from this principle but only in a relatively arbitrary way since as Longmore LJ points out, if an innocent third party had less than full beneficial ownership of the asset, then on Mr Gadd’s own case the third party would still be at risk of costs and expenses.[42]Given the potential injustice of the operation of this principle, I would not rule out the possibility that in an appropriate case Article 1 of the First Protocol of the European Convention on Human Rights could limit the costs and expenses recoverable from an innocent third party, and I do not read the judgment of the Court of Appeal in Hughes v Customs & ExciseCommissioners [2003] 1 WLR 177 as excluding that possibility.[43]In all other respects, I agree entirely with the judgment that has fallen from my Lord, Lord Justice Longmore.

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