| CRIME — Restraint order — Solicitors acting for client facing investigation by RCPO — Client paying money on account — Solicitors’ professional fees amounting to more than money held — Restraint order made against client — Whether solicitors prohibited from transferring money from client account to office account in payment of their fees
Irwin Mitchell v Revenue and Customs Prosecutions and another [2008] EWCA Crim 1741; [2008] WLR (D) 282
CA: Toulson LJ, Jack J and Judge Mettyear (Recorder of Hull): 30 July 2008
The purpose of a criminal restraint order was not to prevent third parties from enforcing civil rights against a defendant if those rights would be unaffected by a confiscation order which might be made against the defendant at the end of the proceedings.
The Court of Appeal, Criminal Division, so held when allowing an appeal by Irwin Mitchell, solicitors, against a ruling on 14 March 2008 by Judge Stone QC at Southwark Crown Court that they could not apply the funds paid by Abdullah Allad on account of their legal costs in payment of their fees without a variation of the restraint order against Abdullah Allad and, secondly, that the court had no power under the Proceeds of Crime Act 2002 to make such a variation.
TOULSON LJ, giving the judgment of the court, said that in October 2007 Mr Allad had instructed solicitors, Irwin Mitchell, in connection with a Revenue and Customs (RCPO) investigation which he was facing and had paid £5,000 to them on account of their legal costs. The funds were paid into the firm’s client account. On 27 November the RCPO obtained a restraint order against Mr Allad under s 41 of the Proceeds of Crime Act 2002. The order was served on Mr Allad and Irwin Mitchell on 6 December, by which time the firm’s professional fees for work done under their retainer amounted to over £5,000. They wrote to the RCPO to inform it that, in compliance with r 19(2) of the Solicitors’ Accounts Rules 1998, they were about to issue a bill of costs to their client to allow transfer of the money from the client account to the firm’s office account. The RCPO objected on the basis that such a step was prohibited by the restraint order. Irwin Mitchell’s application to Southwark Crown Court for a variation of the order was dismissed by Judge Stone on the grounds that such a variation was prohibited by s 41(4) of the 2002 Act. On appeal Irwin Mitchell submitted that Mr Allad no longer had any beneficial interest in the relevant funds. The RCPO contended that the solicitors had a lien over the monies in the client account which lien conferred a right to possession but not to ownership; the beneficial interest in the money therefore belonged at all times to Mr Allad. In their Lordships’ judgment it was rightly accepted by the RCPO that the money in the client account could not be used to satisfy any confiscation order which might be made against Mr Allad in the future. Two questions had to be asked: would Mr Allad commit any breach of the restraint order if Irwin Mitchell acted as they proposed? Would Irwin Mitchell’s conduct be a contempt of court because such conduct would undermine the purpose of the restraint order by diminishing the assets available to satisfy any confiscation order? In their Lordships’ judgment the answer in each case was no. The £5,000 was paid for a single identified purpose, namely payment of Irwin Mitchell’s fees as and when they had earned them. Once they had earned that amount in fees, the value of Mr Allad’s interest in the fund was reduced to nil. Accordingly, payment of Irwin Mitchell’s fees would not deplete the true value of Mr Allad’s assets or frustrate the purpose of the restraint order. Irwin Mitchell were therefore entitled to take the course they had proposed without committing any contempt of court. It was right for them to notify the RCPO in advance, in case there was any challenge to the size or propriety of their bill, but their Lordships did not consider that any variation to the restraint order was required in order to enable them to utilise the fund in payment of their fees.
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