Written by James Lake. Counsel to CPS. Led by Kennedy Talbot QC.
The case raises issues of principle as to the scope of living and legal expenditure which should be permitted by restraint orders granted pursuant to s.41 Proceeds of Crime Act. The court provided a non-exhaustive list of factors which would be potentially relevant in assessing the reasonableness of any living expenses. The court also held that the ‘other assets’ principle applies to restraint orders and that the defendant bears the evidential burden in relation to the unavailability of other assets. The court finally held that whilst s. 41(4) contains an absolute prohibition on permitting expenditure on ‘legal expenses related to the offence’ it 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.
The case provides helpful guidance to the CPS, defence practitioners and Judges when making an assessment of reasonableness in respect of living expenses. Whilst still a fact sensitive decision/exercise the court identified the following 7 factors which are relevant when assessing reasonableness.
By confirming that the ‘other assets principle’ applies to restraint proceedings in the same way as it applies to civil freezing orders, D’s are now going to bear the evidential burden to the unavailability of other assets. This will inevitably mean greater scrutiny by the CPS and the courts into the ability of spouses, friends and family to assist a restrained D meet his living and/or legal expenses.
The appellant was an independent financial advisor. He was alleged to have introduced clients to a fraudulent Ponzi scheme and stolen money from his clients. He was charged with offences of fraud and theft in 2018. 6 investors he introduced to the scheme commenced proceedings against him in the Chancery Division. They also obtained a freezing order which was discharged in December 2017, after which the CPS successfully applied for a restraint order.
The appellant applied to vary the restraint order to:
The Crown Court Judge refused the application the grounds 1-3 on the basis
(a)he was precluded from doing as they were payments to unsecured creditors.
(b) they were not reasonable living expenses.
In respect on ground 4 he said that he was precluded by s.41(4) of the 2002 Act which forbids provision for legal expenses which ‘relate to the offence’ which give rise to the restrain order; he held that the civil action fell within that prohibition because it had its factual origins in the fraud which was the subject matter of the criminal prosecution.
The court allowed the appeal in respect of legal expenses only. It found that,
Approved judgment – R v Luckhurst – 201904055 B2 24 Nov 2020
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