Elie Taktouk v Benherst Finance Limited and Chestone Industry Holding, R (on the application of)

In our judgment it is of considerable importance that applications for orders from central funds under section 17(1) of the Prosecution of Offences Act 1985 comply with the CrimPR and the requirements explained in the authorities, now gathered in BDI. They are effectively made ex parte since the Lord Chancellor does not see them, and the defendant to the criminal proceedings is not interested, except that (at least theoretically) they would have an interest in the state paying the prosecutor’s costs so that they are not ordered to do so themselves. BDI does not make new law. It pulls together many decisions and sets the law out in a helpful way. Nothing in it should take an experienced private prosecutor by surprise. Any person making an ex parte application for public funds has an obligation to be candid with the court and to supply it with the information necessary to make an appropriate order. This should be done when the application is made and without requiring the court to give directions or make requests. These applications should be presented in such a way that they can be efficiently decided without imposing a substantial additional burden on judicial and HMCTS staff time.

The failure to supply the information required by CrimPR 45.4(5) is described as an “oversight” by Ms McMahon. We do not think that this is an adequate description of what occurred. Ms. McMahon explains in other contexts that EMM is a specialist firm conducting private prosecutions with a high level of expertise. This makes this failure very difficult to understand. Modern time recording systems make the Rule 45.4(5) information easy to provide. The bills in cases of this kind represent a substantial source of income for EMM and it is very surprising that this one, to the Court of Appeal, was not competently prepared. We were not told if this is true of all the bills, in all cases. Because it is exhibited to Ms McMahon’s witness statement, the court now has 7 pages of printed spreadsheet called the “Solicitors’ Worklog” comprising 159 lines each itemising a piece of work, giving a summary of the tasks done, the dates when they were done, the time taken, the name of the fee earner and the charging rate applied. A comparison of this with the first presentation of the claim in the Memorandum of Costs shows how grossly inadequate that document was. It says “costs including” reviewing four applications and drafting two Respondent’s Notices and gives the dates of those documents, one in 2023 and five in 2024, and “attendance at hearing”. We had originally read the Memorandum as meaning that the work on those documents was done of the dates given. We therefore pointed out that:-

“The Worklog does not include any work done in 2023. It shows that work to a value of £1,324.50 was done on the first date in 2024 identified in the Memorandum, 4April. The second 2024 date, 13 September, has £216 of work recorded. The third, 8 November, £2,609.33, and the fourth, 20 November £473. This means that the dates identified in the Memorandum actually involved work to a value of £4,622.83. That leaves £122,611.17 either for attendance at the one-day hearing or completely unexplained in the Memorandum. In our judgment, this document was prepared in a way which showed an unacceptable attitude to the Rules, to public funds, and to the court.”

When we circulated our judgment in draft, the prosecutor explained that the dates given in the Memorandum did not purport to be the dates when the work was done but only identified the documents on which work was done. Since CrimPR 45(5)(b) requires a statement of the dates on which items of work were done, we had wrongly assumed that the dates given were such dates. In fact the work described was done on different dates which are not stated. However, this does not invalidate the real thrust of our finding that the Memorandum was not only not compliant with CrimPR 45(5)(a)-(c) but also a “claim for what appeared to be an excessive sum without any attempt to comply with the Rules”, see [48] below, where we explain further what we mean by this. We had read it as a claim for work done on six days, whereas it is actually a claim for reading four documents and drafting two fairly short Respondent’s Notices. It is clear that additional work beyond simply drafting those documents was done, because they were lodged with bundles and notes from counsel, but none of that is described in the Memorandum. The contrast between this document and the Worklog remains stark.

The criminal courts are under great pressure dealing with cases brought by the state. Private prosecutions, which the state has not chosen to bring, are an additional demand on the system and it is of great importance that they are conducted efficiently. Because of the way this bill was prepared this court declined to make an order on the papers and without further consideration. A hearing was convened before a court of three judges which required a day to be set aside and significant reading time. That judicial time could have been spent on other work if the bill had been competently prepared, and the claim properly presented. In such situations prosecutors should be aware that CrimPR Part 45.4(6)(c) will be applied to reject the claim or allow it in a reduced sum. It is now established, and has been for some years, that the following things are relevant to whether to make an order at all, and should therefore be addressed in all costs applications:-

We would add that the facts of this case reveal a further area which should have been dealt with in a properly presented bill in this case. The failure to deal with this in this claim is less culpable. Where previous costs orders have been sought or made in the same proceedings, details should be given of what orders were made, when, and in respect of what work. This may help the prosecutor because their charging rates may have been accepted by previous determining officers. On the other hand it may also suggest that the work which had been remunerated previously would put the solicitors and counsel in an excellent position to deal with an appeal without having to do very much more work on it.

If, as in BDI, the court decides that public funds should not pay more for the particular exercise for which costs are claimed than it would have cost if done by public law enforcement and prosecuting agencies, then the bill needs to be broken down. Investigations in such cases are generally done by the police. That part of the solicitors’ work which is actually investigative needs to be identified. In a case prosecuted by the CPS, the lawyers will make charging decisions and deal with disclosure (in partnership with the police). There are many other tasks which they will do, which vary from case to case. Unqualified staff will deal with service of evidence, preparation of bundles and multiple other tasks. Information about what was done and by whom should be supplied so that the court can make appropriate decisions. This consideration underlines the importance of proper compliance with CrimPR 45.4(5) at the outset. The court may then, if necessary, order further particulars, information and documents under CrimPR 45.4(5)(d).

The misstatement of the law in the passage quoted at [5] above is regrettable. This court was actually aware of the correct position, so no harm was done except that the application was not swiftly dealt with on the papers, as described above. It is a matter of concern that busy Crown Court judges may have been misled in other cases (and perhaps in making earlier orders in this one). This is the kind of thing which will result in a costs penalty to ensure that better practice prevails in the future. Section 17(2A) of the 1985 Act gives the court a wide discretionary power to reflect matters of this kind.

The candid acceptance in the application of the court’s comments in the Appeal Judgment about the failure to disclose the intelligence reports is welcome. We do not, however, accept that a disclosure failure of this kind is incapable of justifying a direction under section 17(2A). This material should have been before the trial court when deciding on the available amount. It wasn’t because it was wrongly described as “Clearly Not Disclosable” on the MG6C. It is true that the defence, if they had been more alert, would have asked for it but this material was disclosable because it suggested that unsuccessful (but quite persistent) efforts had been made to find the wealth which it was claimed the appellant could access. That undermined the case on hidden assets which the prosecutor was urging on the judge. The result of that hearing “might or might not” have been different if disclosure had been given.

The failure to attempt to involve the police and state prosecuting authorities in bringing this case

It may be that neither the police nor any state prosecutor would have been willing to undertake the investigation and prosecution of this case. Ms McMahon gives compelling evidence to show why this is. However, this does not mean that the decision not even to try to involve them is without consequences when it comes to costs. BDI shows that it may lead to the section 17(1) costs order being limited to the rates which would have been incurred by the state if it had undertaken the prosecution. State prosecutors generally publish the rates which they pay counsel, and these are therefore easy for the determining officer to apply (Footnote: ¹). There may be greater practical difficulty in assessing the likely cost to the public of the legal work done by the state prosecutor which replicates that done by solicitors in a private prosecution. Similarly, the cost of investigative work when done by the police may not be easily established.

The scope of an order under section 17 of the 1985 Act is not limited to legal costs, and may include investigative costs because it covers “expenses properly incurred by [the prosecutor] in the proceedings”.

In this case it would appear that the investigation was substantially complete by November 2018 when Treasury Counsel advised that a prosecution could properly be brought, having regard to both parts of the Full Code Test. For our purposes we proceed on the basis that this was the first point when it would have been appropriate to report the matter to the Crown Prosecution Service. We do not mean to lay down any general rule here. This conclusion is limited to this case in which we are actually concerned only with one bill of costs among many and with a late and discrete stage of the proceedings. Difficulties in securing the investigation by the police through Fraud Action, or the Serious Fraud Office, are not relevant as at November 2018, because the investigation had been done. By that stage, the private prosecutor had a financial motive for seeking to pursue the criminal case with privately instructed lawyers because, whether it resulted in a conviction or not, the costs (including those incurred already in investigation) will be recoverable from public funds. This is a substantial advantage over a civil litigant who will only recover a costs order if they become the “successful party”, and who then may never be able to enforce that order and recover any money from the other party. It is also an advantage as against the case where the case is taken over by a state prosecutor. There, the investigative costs (incurred in this situation by the victim who does not become the prosecutor) may be added to a compensation order in the event of conviction, which may be recovered in confiscation proceedings where an order is made under section 13(6) of the Proceeds of Crime Act, but only if the convicted person has the means to pay that sum. In our judgment these substantial benefits should only accrue where it really is true that no state prosecuting authority is willing to conduct the case. This is not only because of the need to manage public funds with care, and to involve the appropriate public bodies in making decisions at a time when they can affect the outcome. It is also because prosecuting cases involves decisions about resources and the public interest which public bodies can take in a disinterested way. Two examples of questions which arose in the Appeal Judgment may be mentioned. We do so not in order to express any findings about them, or any disapproval of what was done, because we have not investigated them. We do so to show that the public interest and that of the private prosecutor may diverge:-

The power of the state to prosecute offenders and to subject them to punishment and the confiscation regime in respect of their proceeds of crime is a significant tool designed to protect and promote the public interest. Where a private prosecutor brings a prosecution without giving the state the opportunity to intervene, should it choose to do so, then it does so at risk as to its ability to recover costs under section 17(1) of the 1985 Act. That is the position established in terms in BDI but already evident in the previous authorities cited in that case. This does not depend on any direct correlation between expenditure on costs orders made under section 17 and the funding available for other cases which may be brought by the state.

These conclusions are reinforced in this case, because we are concerned with confiscation proceedings. After conviction, we consider that there would be a further obligation to determine whether the Crown Prosecution Service was willing to conduct the confiscation proceedings. It is common in complex cases for different legal teams to conduct the trial and the confiscation proceedings. In this case, different counsel was instructed for the prosecution by EMM at this stage. That was a natural point at which to consider again whether the case should continue as a private prosecution or whether it should be taken over by the specialist confiscation team employed by the CPS. Similarly, the testing of the market could be done at this stage to secure offers from a range of service providers. We are unconvinced by the Lord Chancellor’s concession that the immature market in 2017 means that this consideration is irrelevant.

We do not doubt Ms McMahon’s expertise or the genuineness of her belief that no state prosecutor would have taken up this case. However, an assumption advanced nearly seven years after the start of proceedings and four years after the start of the confiscation proceedings will never carry as much weight as an actual decision by the CPS or SFO on the case being referred to them.

In much the same way, Ms. McMahon believes on reasonable grounds that the rates which EMM and counsel charge are reasonable and that the level of expertise which they provide is such as to justify their instruction. She may be right, but her evidence assembled in 2025 to show that something which did not happen in 2017/18 would have made no difference is inevitably of less weight than an actual tendering process leading to an informed decision between different available providers.

The position here is that summarised by Leggatt J, as he then was, cited in BDI at [43]:-

“What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.”

and approved at [87]:-

“Fifthly, the principle stated by Leggatt J which we have quoted at paragraph 43 above, though expressed in the context of an award of costs between parties in civil litigation, is relevant to an application under s17. The decision to instruct particular legal representatives may be a reasonable one from the private prosecutor’s point of view; but the court must make an objective decision, and it will be assisted by knowing what was done to test the market. ”

“Beauty parades” have been an established way of recruiting legal teams for many years. There is nothing surprising or controversial in the court’s requirement that those who instruct lawyers and then seek to recover their fees from public funds should show that they took reasonable steps to secure the best deal they could.

The relevance of involving the state prosecutor and testing the market when instructing solicitors and counsel was explained in Zinga, see the discussion in BDI at [38]-[41], and nothing in this judgment should take anyone by surprise.

We do not know what effect the courts gave to these two issues in making earlier orders in favour of the prosecutor in the total sum of £3,847,285.38.

We are content to accept the observation by the prosecutor that the complex way in which governmental budgets operates means that the funds available to state investigators and prosecutors are not directly reduced because orders for costs from central funds are made under section 17 of the Prosecution of Offences Act 1985. We doubt if the court in BDI meant to suggest otherwise at [79] in the passage quoted above. We do not know how these costs orders are funded or out of whose budget. In a broader sense that passage is certainly accurate, in that it is always important to ensure that public money is, as far as possible, wisely spent. At all events, the passage in BDI which is criticised was not essential to the decision in that case and, as we have explained, plays no part at all in our decision.

It would be open to us to decline to make any costs order under section 17 in this case because of the serious failure in presenting the claim. This would be an application of CrimPR 45.4(6)(c). A witness statement made 4 months later does not remedy the problem. This application has absorbed far more public resource than it should have done because of the claim for what appeared to be an excessive sum without any attempt to comply with the Rules. We say that the claim was apparently excessive because the prosecutors were responding to a fairly short appeal. We are here not making a finding that the claim was in fact excessive, but recording the concerns which led to the court to decline to make the order sought at that stage and to give further directions. The prosecutors instructed leading counsel who had conducted the confiscation hearing before the judge and who was fully aware of all the facts of the case. The bulk of the work preparing for an appeal generally falls on counsel and solicitors acting for the appellant. This is especially so in a fresh evidence appeal, such as this one. Leading counsel charged a substantial sum for pre-hearing work and the total fees charged for solicitors and counsel for work not included in counsel’s brief fee was £178,275. It seemed highly likely that there was duplication in the work done by different lawyers in this case. The appearance of the bill as presented indicated that it could not be endorsed without further enquiry. We decided to facilitate that enquiry rather than simply declining to make an order.

Instead, we propose to take a more generous approach because this judgment, and BDI, will, we hope, explain to the profession how the courts will approach these issues. Future non-compliance with CrimPR 45.4(6)(c) may well result in the court simply declining to make any order, and not expending any further public and judicial resources on prosecutors who cannot manage to present a bill of costs properly.

We will therefore make an order for the payment out of central funds which requires the determining officer to assess the sum which is reasonably sufficient to compensate the prosecutor for any expenses properly incurred by them in this appeal. We make the following observation for the benefit of the determining officer:-

Having determined the reasonably sufficient sum in this way, we find under section 17(2A) of the Prosecution of Offences Act 1985 that it is inappropriate for the prosecution to recover this sum in full, and the payment out of central funds shall be for a lesser sum. The court considers that it is just and reasonable that this lesser sum shall be calculated by reducing the reasonably sufficient sum by 50%. This, for the avoidance of doubt, applies only to the costs which we have been asked to deal with, namely the costs of this appeal.

This reduction is made to reflect a combination of matters:-

We have applied a percentage discount rather than capping the costs at CPS rates because we see some force in the prosecutor’s submission that it may not be possible easily to identify such a rate. It will be impossible in respect of investigative work which the CPS does not do, difficult in the cases of work done by CPS lawyers and paralegals, and rather more straightforward in assessing what counsel would have been paid. In this case, it is relevant that the failure to invite the CPS to take over conduct of the case is only one of the factors which have caused us to make a direction under section 17(2A).