Capewell v Customs & Excise & Ors

When deciding whether a statutory management receivership should continue, the court must identify its specific purposes, assess what has been achieved, determine whether a receivership remains necessary rather than a restraint or lesser order, and balance its prospective cost against the likely financial gain and fairness to the defendant.

Assessment of accrued remuneration under Civil Procedure Rules 1998 r 69.7 is not a prerequisite to considering discharge. Although disproportionate accrued costs may be addressed through assessment, prospective cost remains material to whether continued receivership serves the statutory objective. Fairness includes interference with the defendant’s personal and business life, not merely financial loss. Close judicial control may require active directions and focused evidence.

A receiver was appointed over the appellant’s assets under section 77(8) of the Criminal Justice Act 1988 following charges arising from an alleged VAT carousel fraud. The receivership was intended to preserve and manage assets, investigate business interests and guard against dissipation.

As the receiver’s costs increased substantially, the appellant applied for discharge. Lindsay J refused the application in [2004] EWHC 1049 (Admin). He held that disproportionate costs could not properly be evaluated until their assessment under the Civil Procedure Rules 1998 and that the risk of dissipation remained.

Before the appeal was decided, Davis J discharged the receiver on pragmatic grounds. The central remaining questions were whether Lindsay J had applied the correct approach to discharge and what consequences followed for receivership and litigation costs.

1. No substantive order was made on the appeal because the receiver had already been discharged. The court nevertheless held that Lindsay J had asked the wrong questions and had wrongly postponed consideration of discharge until assessment of the receiver’s costs. Consequential questions concerning costs were adjourned for further argument.

2. The overriding consideration on an application to discharge is whether the receivership continues to serve a valid purpose within the objective prescribed by section 82 of the Criminal Justice Act 1988. The court should identify the specific purposes for which the receivership was authorised, determine how far they have been achieved or overtaken, and decide whether continued receivership remains necessary rather than a restraint or lesser order. It must then decide whether the additional cost is proportionate to the likely financial gain and fair to the defendant.

3. Fairness is not confined to financial loss. A management receivership may seriously interfere with the defendant’s business, personal life and family. The court must balance all public and private benefits and burdens, while recognising the public interest in preserving assets for a possible confiscation order.

4. Lindsay J treated information-gathering and a continuing risk of dissipation at too high a level of generality. He should have examined the specific concerns which had justified receivership instead of a restraint order and determined whether each remained current. The evidence raised substantial questions about whether continued involvement in the appellant’s small business and other assets could produce sufficient benefit to justify the projected costs.

5. Assessment under r 69.7 of the Civil Procedure Rules 1998 protects a defendant against unreasonable or disproportionate remuneration. That protection does not prevent the court from considering projected costs when deciding whether the receivership itself should continue. The court may begin with the receiver’s own estimate as representing the cost which the receiver considers reasonably necessary.

6. The close control required by Hughes v Customs and Excise Commissioners [2002] EWCA Civ 734 may require an interventionist approach. The court may direct the receiver to identify each remaining purpose, the unresolved issues and the likely costs and recoveries, and may impose a short timetable. A receiver’s failure to seek directions does not by itself justify discharge unless it amounts to actual misconduct.

• Court of Appeal (Civil Division): Held in [2004] EWCA Civ 1628 that Lindsay J had applied the wrong approach to discharge. No substantive order was required because the receivership had already been discharged. Consequential costs applications were adjourned.
• High Court, Queen’s Bench Division (Administrative Court): Lindsay J refused discharge in [2004] EWHC 1049 (Admin), directed further exchanges and reporting, and left the receiver’s remuneration to assessment.
• High Court, Queen’s Bench Division: Before determination of the appeal, Davis J discharged the receiver from 13 October 2004 on pragmatic grounds and directed detailed assessment of costs.