Capewell v. Revenue and Customs & Anor

The House of Lords allowed the appeal by the Commissioners for Her Majesty's Revenue and Customs. The court held that CPR 69.7, a procedural rule governing receiver's remuneration, did not displace the long‑standing equitable and statutory scheme under the Criminal Justice Act 1988 whereby a court‑appointed receiver's remuneration and expenses are ordinarily to be paid out of the assets subject to the receivership. The court applied and endorsed the approach in Hughes v Customs & Excise Commissioners and related authorities and held that the Civil Procedure Rules were not intended to make a fundamental change to that scheme. The Court of Appeal's order requiring Customs to be responsible for payment of part of the receiver's remuneration was therefore set aside. The court also relied on the fact that the original order appointing the receiver had specified the terms of payment and those terms could not be retrospectively altered.

Background and facts:

Mr Robert Capewell was charged in 2002 with alleged large‑scale value added tax fraud. A restraint order was made on 9 October 2002 and, on 30 January 2003, Jackson J appointed a management receiver (Mr Sinclair) under section 77(8) Criminal Justice Act 1988. The appointment order provided that the costs of the receivership should be paid in accordance with an agreement letter which envisaged payment from the receivership assets. Disputes arose about the scale of the receiver's remuneration. The receiver submitted successive reports claiming substantial fees while estimated net realisations were modest.

Procedural posture:

• Respondent applied to discharge the receiver on grounds of disproportionate costs; Lindsay J refused (6 April 2004).
• Davis J later discharged the receiver and made an interim award of £100,000 (13 October 2004).
• The Court of Appeal (Carnwath LJ and others) in its later judgment (29 July 2005) held that CPR 69.7 empowered the court in special circumstances to order the prosecutor (Customs) to pay the receiver's remuneration from 1 June 2004. Customs appealed to the House of Lords (appeal from [2005] EWCA Civ 964).

Relief sought and issues:

• Customs sought to overturn the Court of Appeal's order that Customs should pay part of the receiver's remuneration.
• The principal issues were (i) the effect of CPR 69.7 on the established position that receivers are indemnified out of receivership assets and (ii) whether the court could, in this case, make an order requiring the prosecutor to pay the receiver's remuneration rather than the receiver recovering it from the assets.

Reasoning and conclusions:

The House of Lords held that CPR 69.7 is procedural and not intended to override the statutory scheme enacted by Parliament in the Criminal Justice Act 1988 (and the related statutory regimes) under which a receiver's remuneration and expenses are to be met from the assets in his hands, subject to the statutory long‑stop (section 88(2)). The court emphasised established equitable principles that a court‑appointed receiver is entitled to indemnity from the assets and referred to authorities including Boehm v Goodall, Re Andrews and Hughes. The court also relied on the unchanged terms of Jackson J's original appointment order, which had not been appealed and which specified payment under the agreement letter; those terms could not be retrospectively altered to the receiver's detriment. For these reasons the Court of Appeal's order making Customs responsible for payment of the receiver's remuneration was set aside. The House of Lords invited written submissions on costs.

Appeal allowed. The House of Lords held that CPR 69.7 does not effect a fundamental change to the established rule that a court‑appointed receiver's remuneration and expenses are ordinarily payable from the assets in the receivership under the Criminal Justice Act 1988 and related statutes. The Court of Appeal's order requiring Customs to pay part of the receiver's remuneration was therefore set aside; additionally the original appointment order (Jackson J) fixing payment terms could not be retrospectively varied.

The matter began with Jackson J's appointment of a management receiver on 30 January 2003. Lindsay J refused the respondent's application to discharge the receiver (6 April 2004). Davis J later discharged the receiver and made an interim award of £100,000 (13 October 2004). The Court of Appeal (first hearing 26 October 2004; judgment 2 December 2004; further hearing 7 July 2005; judgment 29 July 2005) concluded that CPR 69.7 permitted the court in special circumstances to order Customs to pay the receiver's remuneration and ordered payment from 1 June 2004 (see [2005] EWCA Civ 964). The Commissioners for HM Revenue and Customs appealed to the House of Lords, which allowed the appeal on 31 January 2007 ([2007] UKHL 2) and set aside the Court of Appeal's order requiring Customs to pay the receiver's remuneration.