National Crime Agency v Simkus

Applications under section 245C of the Proceeds of Crime Act 2002 to vary a property freezing order exclusion for legal expenses require a prospective assessment of the work reasonably required and its likely cost. They are not detailed costs assessments. The court must consider the reasonableness of the expenses, the desirability of representation, and the need to avoid undue prejudice to enforcement of any recovery order. Costs already incurred without prior approval should generally be left to assessment under the statutory scheme. A party should not repeatedly seek determination of the same exclusion application. Serious non-disclosure in an without-notice application may justify a substantial reduction in costs, even where the order itself is not discharged.

The judgment determined costs issues arising after the dismissal of the respondent’s application to discharge a property freezing order under Part 5 of the Proceeds of Crime Act 2002. The respondent sought a further variation of the exclusion permitting payment of legal expenses from frozen funds. The National Crime Agency sought its costs of resisting the discharge application.

The court considered whether the earlier variation order had already determined the exclusion issue, how that order should be construed, whether counsel qualified for the higher rate under the Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Proceedings) Regulations 2005, and the effect of material non-disclosure by the Agency in obtaining the original order.

1. Application for further exclusion. Section 245C required consideration of three matters: whether the proposed expenses were reasonably incurred or would be reasonably incurred; the desirability of the respondent being represented; and the need, so far as practicable, to avoid undue prejudice to enforcement of any right to recover property obtained through unlawful conduct. The exercise resembled costs budgeting and was not a technical costs assessment.
2. The statutory scheme distinguished prospective approval from final assessment. A court considering a future exclusion had to scrutinise the proposed work and reject an extravagant plan or work supporting a hopeless application. Costs already incurred without prospective approval should ordinarily be left to assessment under Part 4 of the 2005 Regulations. The higher rate for Queen’s Counsel was available only if the test in Regulation 17(2) was satisfied.
3. The respondent’s renewed application concerned substantially the same stages and costs as the application determined by McGowan J. There had been no appeal. The court had no power to determine the same application twice and would in any event refuse it as a matter of discretion. The earlier order was interpreted as having left the question of the higher rate open, while approving the continued instruction of leading counsel at an otherwise permitted rate.
4. The earlier order that costs were “costs in the case” meant that the costs of the variation application followed the substantive discharge application. The Agency was entitled to those costs, summarily assessed at £3,168 inclusive of VAT.
5. The respondent’s application before the court failed, but the Agency’s significant non-disclosure in the without-notice application warranted a costs sanction. The Agency’s costs were discounted by 50 per cent. The respondent was ordered to pay £3,460.

The judgment followed the court’s earlier decision dismissing the respondent’s application to discharge the property freezing order: [2016] EWHC 255 (Admin). No appeal is stated in the judgment.