Recent developments in costs

A central consideration for anyone contemplating a private prosecution is the question of cost.

The cost of investigating and bringing a private prosecution may be very substantial. Even those with the deepest pockets will be keen to understand whether they are likely to be able to recover any or all of the funds expended in the event of a successful, or indeed an unsuccessful, prosecution. They would also be well-advised to be aware of the possibility that they may be liable for the defendant’s costs in certain circumstances.

2020 saw some significant developments in the field of costs in private prosecutions, both in the courts and in the Palace of Westminster.

The general principle

The fundamental governing principle on the recovery of a private prosecutor’s costs is that in relation to indictable offences, the court may order the payment out of central funds of such amount as it considers reasonably sufficient to compensate a private prosecutor for any expense properly incurred by them in proceedings: (Section 17(1) Prosecution of Offences Act 1985 (“POA”)). Where the court considers that there are circumstances that make it inappropriate for the prosecution to recover the full amount mentioned in section 17(1), an order must be made for the payment out of central funds of such lesser amount as the court considers just and reasonable (section 17(2)).

Any prosecutor may alternatively recover costs from a convicted defendant pursuant to section 18 POA. However, this is contingent upon the defendant being convicted, and having the means to meet such an order.

It is clear that recovery is not automatic, and even when granted, the amount recovered will extend at most to that which the court considers to have been properly incurred.

2020 developments: section 17 POA

Choice of lawyer

Does the prosecutor’s choice of lawyer matter? Different lawyers may charge very different levels of fees. Whilst there is an increasing number of solicitors specialising in private prosecutions, many of them are based in central London and may charge at a rate materially higher than many other criminal solicitors. Is it reasonable to instruct a specialist in London when, for example, your case is to be brought elsewhere?

In January, Lane J in the Administrative Court provided some welcome clarity on this question. In Fuseon Limited v Senior Courts Costs Office[1], the claimant company brought a private prosecution against one of its directors for fraud offences against it, which had given rise to losses of approximately £100,000. The company had informed the police but they had declined to investigate, citing insufficient resources. The director was convicted and the company sought a costs order from central funds in the sum of £427,909.66.

The trial judge made a costs order, but the initial determination permitted only £150,000 to be recovered. This was increased on appeal to £200,000: still less than half of that claimed. And a further appeal to the taxing Master was refused. Hence the matter came before the Administrative Court for judicial review.

The disparity in the costs awarded and those claimed arose principally from two findings by the determining officer:

1. As local solicitors in Lancashire could have dealt with the case, there was no need to instruct the more expensive London specialists, Edmonds Marshall McMahon (“EMM”);
2. In assessing the “Singh discount” (assessed by standing back from the hours claimed for each task to judge whether, globally, the sum claimed is reasonable), it was appropriate to take into account the fact that much lower costs would have been incurred if the CPS had prosecuted the case.

Lane J held that both findings were wrong:

1. The issue was not whether there were other, local solicitors that might have been able to deal with the case for less, but the different question of whether the Applicant acted reasonably and properly in instructing the solicitors so instructed. In the circumstances of Fuseon’s case, it was indeed reasonable. The judge held that the instruction of EMM was something that an ordinary reasonable litigant would do in the circumstances. He noted that “The duties on prosecutors are, in significant respects, different from and more onerous than those placed on defence teams.”
2. There was no legal justification for pinning the prosecutor’s recoverable costs to the level which would have been incurred by the CPS. Both the determining officer and taxing Master had applied hindsight, which was not permitted in an exercise of this kind. Furthermore, the judge emphasised the important constitutional role played by private prosecutions. It followed that the right to bring a private prosecution should not be reserved only to those with deep pockets. However, the judge also noted that it might be appropriate to make a comparison with CPS rates in determining the recoverable costs if the private prosecutor had made no attempt to involve the police or CPS before embarking on their case. The logic, clearly, is that the public authorities might then conceivably have undertaken the job, and the public purse would have been troubled to a lesser degree.

The Master’s decision was quashed and the matter remitted to him for reconsideration.

Fuseon therefore not only confirms that the instruction of specialist firms may well be justified and their costs therefore potentially recoverable, it also provides a reiteration of the constitutional importance of private prosecutions.

Costs if no conviction?

Altogether more ambitious was the prosecutor’s claim for costs which gave rise to judicial review proceedings in July 2020 in R (on the application of Wollenberg) v Southwark Crown Court.[2]

As is clear from the wording of section 17, the fact that a private prosecution does not result in a conviction does not preclude the prosecutor from making a successful application for costs from central funds. However, it does not follow that such an order will be made in every case.

Mr Wollenberg brought a private prosecution against four individuals for alleged fraud against him as the victim. He obtained summonses in the Magistrates’ Court, but was met with applications to dismiss the transferred charges in the Crown Court. After a 2-day hearing, HHJ Taylor, the Honorary Recorder of Westminster, provided a detailed ruling in which she allowed the applications to dismiss. The defendants initially made applications for costs against the prosecutor pursuant to section 19 of the Prosecution of Offences Act 1985[3], but later withdrew them.

The prosecutor then made his own application for costs from central funds, pursuant to section 17 POA. HHJ Taylor dismissed it on the basis that the proceedings were not brought or continued with reasonable or good cause. She found that:

1. Mr Wollenberg’s motivation and behaviour towards one of the defendants was vindictive from an early stage. His predominant motivation for the prosecution was not the bringing to justice of sustained fraud, but both revenge and in order to leverage a civil settlement. There was no sign of any public interest in bringing a prosecution;
2. The weight of the evidence was entirely against any criminal conspiracy on the part of the defendants;
3. The manner in which the expert evidence was obtained and presented was for the most part not compliant with CPR 19, giving rise to difficulties with integrity incompatible with the CPR and the role of a Minister of Justice;
4. The approach taken and continued in his statements was partial from beginning to end, with a sustained ignoring of points obviously against the prosecution’s approach.

Mr Wollenberg sought permission for a judicial review.

In the High Court, Goose J concluded that the 8 grounds advanced in support of the claim did not amount to a reasonably arguable case such that permission should be granted.[4]  The detail of the grounds is unimportant for present purposes. But the judgment summarised the principles that a court should apply in considering an application for prosecution costs under section 17:

1. The general rule is that costs should be paid from central funds unless a lesser sum is appropriate; the amount of costs to be paid are those that the court considers to be reasonably sufficient to compensate the prosecutor for any expenses properly incurred;
2. There is a discretion to decline to make an order if, for example, the prosecution was started or continued unreasonably, or there is some other good reason for not doing so; examples include where proceedings have been instituted or continued without good cause or there has been misconduct;
3. Whilst those examples are given in the Practice Direction and in the rules, they are not determinative of the extent of the discretion upon whether to refuse costs to the prosecution. The touchstone is objective reasonableness and proper conduct. Therefore, if the prosecution haa behaved unreasonably and/or improperly then the court may refuse to award costs from central funds. Whether the private prosecutor’s conduct of the prosecution can be reasonably described as unreasonable or improper is essentially a fact-specific question: each case will depend on its own facts such that reference to other decided cases on their facts is of little assistance.

Whether there is a conviction or not, in considering a section 17 application, the court will wish to be satisfied that the prosecution was nevertheless brought with reasonable or good cause. Whilst this may be somewhat difficult to argue when all charges are dismissed at the outset, the first instance judge’s reasons for refusing to award costs in Wollenberg went beyond a simple absence of evidence, to include improper motive and prosecutorial misconduct. Goose J was careful to note that HHJ Taylor’s reliance upon the evidence being insufficient (which she was entitled to consider as a factor in her assessment of the costs application) was not determinative of that application. She made a separate assessment and applied the correct test.

So, a private prosecutor who brings and continues a prosecution for proper motives, and behaves properly and reasonably in the conduct of the case, might expect to be able to recover their costs from central funds, whether or not a conviction is secured. Whilst evidential insufficiency is not determinative of this issue, it is plainly a relevant factor.

Costs in confiscation proceedings

This theme was confirmed in another context in Mirchandani v The Lord Chancellor.[5]

The background to this appeal to the Court of Appeal (Civil Division) was a private prosecutor’s section 17 application for costs from central funds, in respect of the enforcement of a confiscation order made pursuant to the Criminal Justice Act 1988 (“CJA”).

Enforcement of CJA confiscation orders takes place in the High Court. Having obtained a significant confiscation order in his private prosecution for fraud offences against a former business associate (Mr Somaia), Mr Mirchandani successfully applied to the High Court for the appointment of an enforcement receiver when the order went unpaid. He also brought proceedings against Mr Somaia’s former wife, in order to recover as tainted gifts, significant sums of money that had been transferred to her by the defendant.

The proceedings against the former wife before Jefford J were unsuccessful and Mr Mirchandani was ordered to pay her costs.

He then successfully sought costs from central funds pursuant to section 17 POA, both in respect of his own costs in the proceedings, and the sum that he had had to pay in respect of the former wife’s costs. However, this was short lived. The Lord Chancellor intervened in the proceedings in order to make representations. Having heard those representations, Jefford J then reversed her decision on both heads.

The prosecutor appealed, and the Court of Appeal overturned Jefford J in both respects.

The principal issue was the question whether s17 POA applied to civil enforcement proceedings before the High Court: section 17 applies to proceedings, “in respect of an indictable offence”. The subsidiary issue was whether the word “expenses” in section 17 included the legal costs of a third party that the prosecutor had been ordered to pay.

The Court (Davis LJ giving judgment) concluded that confiscation proceedings were part of the sentencing process and were plainly “in respect of an indictable offence”. It followed that confiscation enforcement proceedings must also be in respect of an indictable offence. He observed that enforcement proceedings do not exist in a bubble. Further, confiscation proceedings were “toothless” unless accompanied by adequate enforcement proceedings. It was argued on behalf of the Lord Chancellor that this interpretation of section 17 was too wide, in circumstances where a defendant could not claim their costs in the same proceedings. However, the Court dismissed this argument, noting that there are policy reasons why provisions governing payment to a private prosecutor are more favourable than those applying to a defendant, namely, a desire not to deter private prosecutions. Parliament had determined that, in appropriate cases, private prosecutions serve the public interest, as do confiscation proceedings related to those prosecutions. It would be a substantial deterrent to a private prosecutor initiating confiscation proceedings at all if they were unable in any circumstances to recover their costs in enforcing those orders.

As to the subsidiary issue, the Court held that the prosecutor’s entitlement to costs included the satisfaction of the order for the former wife’s costs, provided that the actions of the prosecutor in contesting that issue had been undertaken reasonably.

Given that the number of remaining CJA confiscation cases is limited, and even more so in respect of private prosecutions which require enforcement proceedings, it might be thought that this judgment is of equally limited value. However, this is to ignore two points:

1. The Court of Appeal stressed that contrary to the suggestion of Jefford J below, section 17 POA would also apply to enforcement proceedings brought by a private prosecutor pursuant to the Proceeds of Crime Act 2002;
2. The judgment is authority for a private prosecutor to recover costs paid to a third party in respect of an unsuccessful application against them, so long as the prosecutor acted reasonably in bringing the application. This reinforces the suggestion that a private prosecutor acting reasonably should be able to recover their costs of unsuccessful applications more generally.

It is understood that the Court of Appeal’s judgment in Mirchandani may be the subject of a further appeal.

Less welcome news on costs: the Justice Committee Report

Whilst the above authorities provided some welcome news to private prosecutors in the area of costs, the same cannot be said for the Report of the House of Commons Justice Committee: “Private Prosecutions: safeguards” published in October 2020.

The report is considered more generally by Fiona Roberston and Laura Stephenson elsewhere in this newsletter which can be found here.

However, of central relevance to the issue of costs is the Committee’s conclusion at paragraph 37 of its report:

“The Committee agrees with the CPS that the Government should urgently review funding arrangements for private prosecutions in order to address the inequality of access to the right; to ensure a fair balance between the prosecutor and the defendant; and to ensure the most cost-effective use of public funds. We acknowledge the proposal made by the Centre for Women’s Justice that private prosecutors’ recoverable costs should be capped at legal aid rates. We think there should be no disparity between the claims that can be made from central funds by prosecutors and defendants. We also support the proposal made by the CLRNN that defendants prosecuted by private prosecutors should pay no more than would be paid had they been prosecuted by the CPS.”

There may well be an inequity under the current rules between would-be private prosecutors of different means. However, a capping of private prosecutors’ recoverable costs to legal aid rates would plainly have a significant effect on the availability of private prosecutions to private citizens. It may be thought that this would only work to ensure that a two-tier justice system was more likely, not less. Few if any solicitors will be able or willing to bring a private prosecution at legal aid rates. The option of private prosecution will then be confined to those who not only have the wherewithal to bring a prosecution in the first place, but who can afford not to recover a major proportion of their costs from the State, however reasonable their approach to the case, and whatever the result.

Whilst one justification for this recommendation appears to be that the current regime prevents further funds being provided to the police and CPS to investigate and prosecute fraud, it remains to be seen whether any saving would in fact be passed on to those organisations.

Similarly, it might be argued that any inequity between private prosecutors and defendants is caused by an unfair costs recovery regime for acquitted defendants. Meeting this inequity by making sure that the rules are equally unfair to all, is hardly a just solution.

Conclusion

As matters stand, the availability of costs recovery for a private prosecution brought and continued reasonably and for proper motives, ensures that this important constitutional mechanism remains a viable option for many victims of crime for whom the State fails to provide any remedy. The significance of this principle was again recognised and reiterated by the higher courts in 2020.

However, legitimate concerns about the impact of the current costs recovery rules – particularly in the context of limited funds being available to acquitted defendants and public prosecuting agencies – has led the Justice Committee to recommend changes that risk confining the right to bring a private prosecution to only the very wealthiest organisations and individuals.

There must be a risk that those changes will result in even fewer offences of fraud being investigated and prosecuted, whether by the State or by the victims themselves.

Whether, and if so, when those recommendations are implemented, remains to be seen.

Chris Foulkes

[1] [2019] EWHC 126 (Admin)

[2] [2020] EWHC 1915 (Admin)

[3] Costs incurred as a result of an unnecessary or improper act or omission by, or on behalf of, another party to the proceedings.

[4] Given that the application was in relation to a criminal cause on indictment, it could only come within the judicial review jurisdiction if it was established that there were defects in the Crown Court judge’s decision that were so severe as to amount to jurisdictional errors so as to deprive her of the jurisdiction to make it.

[5] [2020] EWCA Civ 1260