Commercial | Risk Advisory
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A recent trend of the last years has been for clients to seek economic redress for loss as a result of fraudulent activity through the criminal courts rather than (or more often, as well, as the civil courts).
There are plenty of compelling reasons why a person would wish to pursue such a course, not least because a rational Defendant is likely to engage in the trial process, given:
However there is plainly exposure to risk when pursuing a criminal case as a private business or individual.
The private prosecutor is able to recover (an assessed part of) their legal costs from central funds in most cases. Fraud is an offence which may be dealt with in the Crown Court so is 'an indictable offence'.
This has proven to be a significant relief to many clients and given them encouragement.
Plainly any sentencing proceedings that follow a conviction are also connected in this way – they too are in respect of an indictable offence.
So that deals with the costs in bringing the case to trial and any sentencing proceedings (confiscation under Proceeds of Crime Act 2002 for instance).
But what happens if the Prosecutor secures an Order following confiscation proceedings, but the Defendant doesn't pay?
It must follow, mustn't it, that the enforcement proceedings, designed to give effect to the confiscation order, were also “in respect of” an indictable offence and so costs in connection with such proceedings were recoverable from central funds?
Mr Mirchandani had successfully conducted a private prosecution against a former business associate, whom he alleged had defrauded him to the tune of millions of pounds. The successful conviction was followed by confiscation proceedings which culminated in a confiscation order being made in respect of the Defendant's assets. The Defendant failed to make good on the requirements of the order and so an action was commenced in the High Court to secure the appointment of an Enforcement Receiver. There then followed proceedings to determine whether payments from the Defendant to his (now ex) wife were 'tainted gifts' and so ought to be considered as part of the Defendant's pool of assets. The High Court Judge did not agree with Mr Mirchandani's and so he was liable to pay the costs of the successful ex-wife of the Defendant as well as his own. However the High Court Judge did order that Mr Mirchandani's costs in litigating the case through the High Court and those adverse costs for which he was now liable could be claimed from central funds. This came as unwelcome news to the Lord Chancellor who was somewhat perturbed at the prospect of the public purse being used in this way (and perhaps also given the total spend had by then exceeded £750,000!) The Lord Chancellor intervened in proceedings brought back before the High Court Judge, who decided that her original determination on the issue of costs was wrong. Mr Mirchandani duly appealed that decision to the Court of Appeal.
The Court of Appeal considered whether a private prosecutor may recover out of central funds:
Lord Justice Davis noted the Defendant had been convicted at trial in the Crown Court of fraud and that an Order for confiscation had been made. He concluded it was “very odd and strained then to say that, nevertheless, enforcement proceedings which are designed to give effect to the confiscation order are somehow not “in respect of” an indictable offence.” Such proceedings do not, he agreed, exist in "a bubble."
The Court also made clear that the word “expenses” i.e. costs, could, in principle, be capable of extending to the legal costs ordered to be paid by the prosecutor to a successful third party in the enforcement proceedings.
So good news for Mr Mirchandani and for all potential private prosecutors. The level of exposure to financial risk through litigating to the conclusion of the case and securing economic redress has reduced.
This decision is logical but and clearly in the public interest as well. If it is desirable for those who have suffered economic loss through fraudulent activity to secure redress through the criminal courts (which it plainly is) then it must also be in the public interest for such a party to be able to enforce the decisions made in the criminal courts without fearing excessive exposure to costs.t