R v Luckhurst [2022] UKSC 23

The Supreme Court considered whether section 41(4) of the Proceeds of Crime Act 2002 precludes exceptions to restraint orders for legal expenses in civil proceedings founded on similar facts to the criminal offence. The Court held such expenses are not precluded, as they do not 'relate to' the criminal offence.

Facts

Andrew Luckhurst, a former financial adviser, was charged with fraud and theft offences relating to an alleged Ponzi scheme through which approximately £15.25m was collected from investors. Civil proceedings had been commenced against him by investors, and a restraint order was made against him under the Proceeds of Crime Act 2002 (POCA). Mr Luckhurst sought to vary the restraint order to permit £3,000 for legal expenses in defending the civil proceedings brought against him. The Crown Court refused the variation, holding that section 41(4) of POCA precluded such an exception because the civil proceedings had their factual origins in the criminal case. The Court of Appeal allowed the appeal on this point.

Issues

The certified question before the Supreme Court was whether section 41(4) of POCA precludes an exception to a restraint order for reasonable legal expenses where those expenses relate to civil proceedings founded on the same or similar allegations, facts and/or evidence as the offence giving rise to the restraint order.

Judgment

Natural Meaning of the Words

Lord Burrows, delivering the unanimous judgment, held that on a natural meaning of the words in their context, legal expenses in civil proceedings for a cause of action do not ‘relate to’ a criminal offence:

If one were to ask a judge or lawyer or litigant in such a civil case ‘which if any of the legal expenses being incurred relate to a criminal offence?’, the obvious answer would be ‘none of them’.

The Court found that the CPS’s proposed test would put a strained and unnatural gloss on the statutory language and would be fraught with practical difficulty.

Purpose of the Statutory Provision

The Court emphasised that the policy of restraint order provisions involves balancing the goal of ensuring confiscation with the need to permit certain reasonable expenses. The primary focus of section 41(4) was on legal expenses for defending criminal offences and resisting confiscation and restraint orders, with legal aid being provided as a quid pro quo:

the 2002 Act imposed a complete prohibition on such expenditure [ie expenditure on restraint order proceedings] but in exchange made sure that public funding was readily available.

Recognising judicial discretion over civil litigation expenses was the preferable approach, allowing the courts to follow the legislative steer in section 69(2) to strike the correct balance.

Previous Case Law

The Court distinguished R v AP and U Ltd, noting that judicial review proceedings in that case were ‘bound up with the criminal process’. Civil proceedings for causes of action independent of the criminal inquiry are different in nature.

Implications

This decision clarifies that section 41(4) of POCA does not create a blanket prohibition on legal expenses for civil proceedings merely because they involve similar facts to the criminal offence. Instead, such expenses fall within the court’s discretion under section 41(3), subject to reasonableness. This preserves the fundamental distinction between civil and criminal law and prevents unduly draconian outcomes while still protecting the confiscation regime’s objectives. The decision ensures that defendants subject to restraint orders retain access to justice in civil matters, with appropriate judicial oversight over the reasonableness of such expenditure.

Verdict: The appeal was dismissed. The Supreme Court held that section 41(4) of POCA does not preclude an exception to a restraint order for legal expenses in civil proceedings for causes of action, even where those proceedings are founded on similar facts to the criminal offence giving rise to the restraint order.

Source: R v Luckhurst [2022] UKSC 23