Hidden threats

On the 4 February 2010 the Master of the Rolls sitting together with Lord Justice Kay and Lord Justice Stanley Burnton in the Court of Appeal Civil Division delivered in R v City of Westminster Magistrates Court (ex parte Perinpanathan) [2010] EWCA Civ 40 what for many will prove to be an explosive judgment in relation to all proceedings involving the detention and or forfeiture of cash in magistrates' court proceedings under the Proceeds of Crime Act 2002.

The case involved an appeal from the Divisional Court, which in turn had endorsed a magistrates' court decision not to award any costs to P despite the fact that she had successfully defended an application made for the forfeiture of £150,000 by the Metropolitan Police. The appellant's costs defending the forfeiture hearing reached £9,000, and the case has far reaching consequences for all who find themselves involved in such work. Not only does the judgment say there is to be no presumption or principle that costs follow the event in such cases, but over and above that ordinarily no order shall be made against any prosecutor in cash detention/forfeiture cases.

We cannot comfort ourselves with any thought that there had been a failure to appreciate the significance of the case. This case was given the gravitas it deserved. The Master of the Rolls grasped the nettle at the conclusion of the proceedings when he said: 'The effect of our decision is that a person in the position of the appellant, who has done nothing wrong, may normally not be able to recover the costs of vindicating her rights against the police in proceedings under section 298 of POCA [Forfeiture Proceedings]...'

However, it is the judgment given by Lord Justice Stanley Burnton that provides everybody utilising these powers in the magistrates' court with a protection previously enjoyed by Achilles in his numerous battles during the Trojan War. His words provide murderous thrusts to any argument; which a weak-minded individual may have sought to use to place a litigant in no worse a position than they should be in seeking to protect their property rights in such cases.

They are pretty much terminal to the cause in the light of the 'assertion in relation to costs the starting point and default position is that no order should be made. I think it clear that financial prejudice necessarily involved in litigation would not normally justify an order...'

The court in P had been reminded of the case R v Uxbridge Justices ex parte Commissioner of Police of the Metropolis [1981] 1 QB 829, which involved an application for the return of cash made under section 1(1) of the Police Property Act 1897. Money had been taken from the home of a man during a criminal investigation. The investigation resulted in the conviction of the occupant for handling stolen currency notes from travellers at an airport. The applicant made an application for the return of the money and the police did not oppose the application. The Court of Appeal indicated that an award of costs against the police in relation to the £350 claimed by the applicant should not have been made.

The distinction in relation to cash forfeiture proceedings is that the authority which has seized the funds and/or is seeking the forfeiture of the funds in question is not acting merely as a custodian of property as in a Police Property Act case but as an interested party who will profit from a successful outcome.

So, what is the result of the judgment? The starting point is clearly that the litigant will not get costs even if it can be demonstrated that there is financial hardship as a result of the court's decision. The basis for the decision of the court appears to be that when the police bring these proceedings they do so, in effect, as a prosecuting authority carrying through what is essentially an administrative decision; i.e. the performance of a regulatory function as a public body and that this is in the public interest.

The Achilles heel

The Master of the Rolls sought to emphasise in his concluding remarks that the armoury provided to prosecutors in these cases was, just as in the case of Achilles, not one of complete immunity from attack. It will be possible to secure some costs if one can satisfy the court that, when scrutinising the actions of the police in relation to the seizure, detention and forfeiture proceedings, there is evidence of unreasonable or improper conduct. Such evidence rarely presents itself in other aspects of police work and there is no reason to believe that it would be any more prevalent in cash forfeiture proceedings under part 5 of POCA.

In practical terms, therefore, it is highly unlikely that any costs orders will be made in favour of victorious litigants in part 5 proceedings in the magistrates' court unless of course they happen to be the prosecuting authority; which incidentally, as a matter of course, seeks and obtains costs orders against individuals who have objected to its applications. They may, however, find the words of Stanley Burnton a little disconcerting: 'Where the principle applies, and the party opposing the order sought by the public authority has been successful, in relation to costs the starting point and default position is that no order should be made.'

Why the lament?

There are several very important aspects to these proceedings which have been overlooked.

The first is a factor which will almost certainly influence and may potentially corrupt the use of these powers in the light of this removal of the normal exposure to the risk of costs. It introduces temptation. The cases cited by the appeal court in support of its judgment concerned in the one case (City of Bradford v Booth) a decision on whether or not to grant an alcohol license, and on the other (Baxendale-Walker v Law Society [2006] EWHC 643 (Admin)) the exercise of disciplinary action by the Law Society upon a member.

The distinction here is that the police are acting with a personal interest in the forfeiture proceedings. They get a proportion, or, to use the vulgar term, 'a cut' of the money forfeited under this legislation.

The Home Office incentivisation scheme

No reference was made to this during the course of proceedings. Reference to the scheme is found on the Home Office website. Recovery agencies receive 50 per cent of what they recover. The scheme includes cash forfeiture orders, confiscation orders, civil recovery and taxation cases. The value to the police of this source of funding cannot be underestimated.

A quarterly publication prepared for the financial investigation and asset recovery community called The Payback Times by the Proceeds of Crime Department of the Serious Organised Crime Agency, Issue 6, records that, between July and August of 2009, £26m was recovered of which £5m was handed to forces across England and Wales through the asset recovery scheme.

Proceedings in the High Court that are the subject of the CPR are not bound by this principle.

The court accepted that in any proceedings which enjoyed the protection of being governed by the CPR the principle could not apply. In such proceedings, the police enjoyed no special protection and were to be treated by the court as an ordinary litigant, accepting, therefore, the observations of Lord Justice Sedley in the case of Grimes v CPS [2003] EWCA Civ 1814: 'The Crown when it comes before the courts of this country does so as a litigant like any other.'

Grimes involved the prosecution seeking to enforce a confiscation order against a convicted defendant in the face of a competing claim by the wife of the defendant. Because the confiscation order pre-dated the implementation of the Proceeds of Crime Act 2002, the matter had to be determined by the High Court. The prosecution were clearly acting in their capacity as a public body in that case. Moreover, the Crown was seeking to give effect to an order of the Crown Court that flowed from a criminal conviction for wrongdoing.

It is difficult to see how the activities of the police in civil summary proceedings should be placed in a more privileged position than conducting satellite litigation flowing from criminal activity following a conviction in the criminal courts and a confiscation order.

What are the consequences?

The minimum amount that can be made the subject of a forfeiture application under part 5 is £1,000 (Proceeds of Crime Act 2002 (Recovery of Cash in Summary Proceedings: Minimum Amount) Order 2006, SI 2006/1699). The reality will be that the cost-benefit analysis for smaller sums will result in many individuals abandoning legitimate cash claims because it will cost more to recover it than the sum retained.

While lip service is paid to the possibility of civil legal aid being made available (see www.legalservices.gov.uk/civil.asp) it is invariably necessary for an interested party to represent themselves or to pay privately for their legal representations at these hearings because the only funding available is subject to both 'means and merits' tests.

Even in the case of greater sums, in order to obtain the return of funds it is usually necessary to provide complete paper trails in respect of the cash. My experience when dealing with such cases is that the starting point of the police is that no third party is believed. This often requires the use of accountancy services, all of which now will be an irrecoverable cost.

The police did not need this extra protection in an environment in which they are the direct beneficiaries of successful recovery proceedings.

There is no suggestion that the actions of the police have in some way been inhibited in proceedings in which the CPR applies; i.e. where costs normally follow the event, particularly when the CPR are relied on by both the police and the court as the means by which to case manage, argue for disclosure and restricting the rights of respondents to make submissions on the evidence.

What has happened is that there is a genuine assessment of the strength of each case because of the risks of costs being awarded against the unsuccessful party. No such assessment will be required now by those who seek to use the part 5 powers of detention/forfeiture. Provided the 'heel' is protected, P is a charter for litigation without risk against those who may be unable to protect themselves.