Eastenders in Supreme Court: A1P1 filling in the gaps

EastEnders_TitleBarnes v. The Eastenders Group [2014] UKSC 26 read judgment

Not Albert Square, but it could be. The Crown Prosecution Service suspect two individuals of a massive duty/VAT fraud in their cash and carry businesses. The CPS go to the Crown Court (in the absence of the individuals) and get an order to appoint a receiver (i.e. a paid manager) to run the affairs of companies (Eastenders) in which the individuals are involved, as well as a restraint order against the individuals. Both receivership and restraint orders are set aside some months later by the Court of Appeal, on the basis that the HMRC investigator’s statements were largely “broad and unsupported assertions”. Problem: by then the receiver had run up £772,547 in fees.

Simple issue. Who bears those fees? The receiver, the CPS or the companies against whom the order was made? And A1P1 (the right to possessions) made the difference.

As Lord Toulson wryly observed about the lower courts’ approaches

the question has been considered by four judges who have arrived at three different answers.

The problem, as often, is that the statute (Proceeds of Crime Act 2002) assumed everything would be done by the book, and did not (except in strong circumstances – “serious default” by e.g. the CPS ) deal with what happened when it did not happen like that. Except for this provision, POCA contained no express power to make the prosecutor pay.

The starting point was the common law, under which a court-appointed receiver is entitled to look to the assets he manages for his costs. But the problem here is that the assets belonged to companies who were not defendants or indeed prospective defendants.

The Supreme Court was thus asked to consider whether that common-law rule was compatible with A1P1.

Underhill J had decided that it would be a breach of the companies’ A1P1 rights if they had to bear the costs out of their assets. He went on to decide that section 3 of  HRA enabled him to interpret POCA so that the court had the power to interpret POCA in such a way that the CPS picked up the tab.

The CA disagreed, and ordered the receiver to bear his own costs. Laws LJ started by pointing out that the Crown Court order had the force of law until set aside, and the setting aside could not retrospectively deprive the receiver of his right to remuneration under it: see this principle in my recent post on the Tchenguiz litigation against the SFO about unlawful search warrants.

The Supreme Court agreed with this reasoning by Laws LJ. But it preferred Underhill J’s conclusion that the CPS should pay the bill, albeit for slightly different reasons.

The SC struck the fair balance required by A1P1 in favour of the companies over the general interest of the community in investigating fraud and preserving assets potentially obtained through fraud. It then observed that the receiver had A1P1 rights by virtue of his common-law lien (or right to be paid from the assets) which the court should also respect. As Lord Toulson put it at [96]:

Unless it is within the power of the court to ensure that the receiver receives his recompense for which the lien is a security by some other means, the court will be left in the invidious position of violating the companies’ A1P1 rights if the receiver’s application is allowed and violating the receiver’s A1P1 rights if it is refused.

The Supreme Court disagreed with Underhill J that a power to charge the CPS could be found in POCA. However, it construed the relationship between the CPS and the receiver as giving rise to a right to claim in unjust enrichment, because the CPS had requested such work and there had been a failure of the basis on which the receiver was asked and agreed to do its work, because the receiver’s lien has been defeated.


The reasoning is necessarily complex (we have not blogged much on UKHRB about a receiver’s lien, for good reason) but the message is simple. A1PI stopped the companies from bearing over £750,000 of costs which at common law they would have borne. And A1P1 doubtless helped the Supreme Court to fashion a remedy for the receiver out of some abstruse law on unjust enrichment. As will be seen from the list of posts below, it is by no means the first time that the courts have made sure that an innocent party is not deprived of a remedy for the consequences of another’s unlawfulness.

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