Flannigan, R (On the Application Of) v The Director of Legal Aid Casework the Lord Chancellor

This is Mr Frank Flannigan’s application for Judicial Review of decisions made on 24 April 2017 and 20 June 2017 by the Director of Legal Aid Casework (the first Defendant) requiring Mr Flannigan to reimburse legal costs paid to lawyers acting for Mr Flannigan in defence of certain criminal charges. The power to make the orders (in each case a Capital Contribution Order or “CCO”) is said to arise under the Criminal Defence Service (Contribution Orders) Regulations 2009. Permission to proceed was granted by His Honour Judge Platts on 10 December 2017.

The grounds relied upon by Mr Flannigan are that:

The Claimant was prosecuted for various environmental protection offences. He was tried on 5 counts in March 2009 in the Crown Court, convicted of 2, found not guilty on 1, no evidence was offered on the fourth and the fifth went to a re-trial. Before the re-trial commenced the Claimant entered a guilty plea to a lesser offence. He was sentenced at Newcastle Crown Court on 17 January 2014. Part of the sentence was a confiscation order.

On 26 February 2009, some time before trial, his assets were made subject to a restraint order made under the Proceeds of Crime Act 2002. The order is an interim order and prevents disposition or dealing. The assets caught by the order remained at all times Mr Flannigan’s property.

On 25 November 2011 (following an application made on 18 October 2011) the Claimant was granted criminal legal aid for trial at the Crown Court covering representation by a solicitor and junior counsel. The effect of the order was that the costs of defending the charges would be met by the State. The 2009 Regulations provide a mechanism for the State to reclaim the cost of representation (or part of it) where a represented party is convicted of an offence and has the means to pay. The regulations allow for 2 types of contribution order: an income contribution order (“ICO”) and a CCO.

An ICO was made and the Claimant was notified of the decision by letter dated on 2 December 2011. The letter includes the following reference to a CCO:

“if you plead or are found guilty on some or all counts in the Crown Court and your monthly [income] contributions have not covered your defence costs, you may have to make a further contribution – but only if you have £30,000 or more of assets, such as savings, equity in property or shares.”

On 17 July 2014 the confiscation order made as part of the Claimant’s sentence was settled and on 4 March 2015 the restraint order was discharged.

The total cost of the Claimant’s legal representation was assessed at £271,413.56. Counsel’s final fee was determined on 24 March 2014 (see footnote 1 to paragraph 4 of Mr Devery’s witness statement dated 23 April 2018) but not paid until 28 May 2015. The Claimant’s solicitors had submitted a claim for additional payments or “special preparation” on 19 February 2014. It appears that the application was rejected on 14 March 2014, but the rejection was not recorded in a timely fashion. The solicitor’s costs were treated as “pending” until 19 April 2017, when the claim was recorded as rejected. In April 2017 the calculation of the Claimant’s total defence costs was passed to Rossendales Limited whose job it was to assess the Claimant’s disposable capital and produce the CCO.

On 24 April 2017 Mr Flannigan received notice that he had been assessed to a CCO in the sum of £187,196.61. The order assessed the Claimant’s capital in the sum of £187,196.61. The order was re-determined and on 20 June 2017 increased to £263,986.56. On that date there was a reassessment of disposable capital in the sum of £1,268,843.61. That sum has not been paid.

On 23 June 2017, an order was made in the county court at Oxford permitting the second Defendant to enforce the CCO as if it were a judgment of the court. On 19 July 2017 an interim charging order was made over the Claimant’s interest in his home.

In summary of the above, at the date the CCO was issued by Rossendales Limited on behalf of the first Defendant (between 18 April and 24 April 2017) none of Mr Flannigan’s assets was subject to a restraint order. If the assessment had taken place in March 2014, when both counsel’s fee and the solicitor’s fee would have been dealt with if all systems had been implemented without hitch, the restraint order would have been in place at the time of the assessment.

The claim was issued on 20 September 2017. Mr John Devery, the Contract Support manager in the Legal Aid Agency’s Crown Court Means Testing Team provided a witness statement on 10 October 2017 addressing the delay in issuing the CCO. At paragraph 7, his evidence is that the Claimant’s solicitor had made a claim for “special preparation” costs which was rejected on 19 April 2017. The rejection caused the CCO assessment.

Mr Devery provided a second statement on 3 January 2018 in response to the detailed statement of facts and grounds submitted by the Claimant.

Mr Neil Smallwood (a costs draftsman with the Claimant’s solicitor) provided a witness statement on 5 April 2018 explaining that his claim for “special preparation” costs was not made in 2017, but had rather been on 19 February 2014 with the final due payment of the solicitor’s costs being made on 26 March 2014.

The Claimant’s skeleton argument prepared by Mr Armstrong was dated 5 April 2018. The Defendant’s skeleton is dated 13 April 2018 and is drafted by Mr Nicholas Trompeter. Mr Devery provided a third witness statement on 23 April 2018 in response to Mr Smallwood’s evidence. He confirms that the “special preparation” claim was made on 19 February 2014 and refused on 14 March 2014. He accepts that the rejection was not entered onto the relevant system.

On 26 April 2018 a note was lodged by way of a further skeleton argument from Mr Armstrong. Further submissions have been made since the conclusion of the hearing. I deal with them below.

In broad overview, the Criminal Defence Service (Contribution Orders) Regulations 2009 provide for a mechanism to allow the Legal Services Commission (and since 1 April 2013 the Director of Legal Aid Casework) to recover from an individual the cost of funding that individual’s legal representation in criminal proceedings when the individual has been convicted of an offence.

The assessing authority, having considered financial information provided by the represented person (see regulation 5), is required to assess his gross annual income and (if the gross annual income is greater than £12,475) his annual disposable income. If the annual disposable income exceeds £3,398 then (see regulation 8(8)) the assessing authority must make an ICO. Such an order requires the individual to pay 6 (5 if the first 5 are paid on time) monthly payments to the Commission fixed according to a given formula and subject to a given maximum which varies according to the offence (regulation 9). The ICO was made in this case on or about 2 December 2011.

If the individual is convicted of any offence, the assessing authority must determine the cost of representation (regulation 11). Such cost is determined in accordance with the Criminal Defence Service (Funding) Order 2007. That determination was concluded in the present case in March 2014 but was only recorded as complete in mid-April 2017. The total costs payable to the Claimant’s legal team were £271,413.56. Those costs have been paid to the lawyers by the State.

If the individual is convicted of some, but not all, offences he may apply to a Judge (see regulation 21) for an order that he pay only a part of the assessed cost of representation on the ground that it would be “manifestly unreasonable to pay the whole amount”. Such an application must be made within 21 days of the date on which the individual is dealt with for the offence. Mr Flannigan made no such application and it is clear that such an application is very likely to be made before the regulation 11 determination of costs has concluded.

By regulation 12(1), if the costs assessed under regulation 11 exceed the total amount paid under any ICO, the assessing authority must assess the individual’s disposal capital. Regulation 12(2) makes it clear that regulations 13 to 18 apply “when the assessing authority is making such an assessment”. The first assessment was carried out in the present case between 18 and 24 April 2017 and the second shortly before 20 June 2017.

By regulation 13 of the 2009 regulations the assessing authority, when making its assessment:

“shall include the amount or value of every resource of a capital nature belonging to the individual at the date of the application for a representation order”.

By regulation 17 where the individual is restrained by order of the Court from dealing with a capital resource the assessing authority

“shall disregard that resource”.

Having assessed the individual’s disposable capital, the assessing authority must make a “CCO” requiring the individual to pay all or (where the disposal capital is less than the amount of costs) some of the costs of representation. Credit is given for amounts paid under the ICO (see regulation 19). A CCO must require the relevant amount to be paid to the Legal Aid Commission within 28 days or such further period as shall be agreed. The CCO, made on 24 April 2017 and varied on 20 June 2017 required Mr Flannigan to pay £263,986.56. If that sum was paid and payments under the ICO are taken into account, Mr Flannigan would have repaid his State-funded defence costs.

Regulation 27 contains an obligation for the individual “who has been granted a representation order” immediately to inform the assessing authority of any change in his financial circumstances which has occurred since the application for a representation order and which might affect the individual’s liability to an ICO or a CCO or the sums to be paid in respect of such an order.

Regulation 28 contains a general obligation on the assessing authority to re-calculate the individual’s capital or income if new relevant information comes to light and regulation 29 provides for the individual to have a right to apply to the assessing authority within 28 days of the making of an order to review an ICO or a CCO if there has been an administrative error or a miscalculation or financial hardship would result. I deal in a little more details with regulations 27 to 29 below.

The 2007 order deals with the calculation of counsel’s fees and solicitors’ costs when a representation order has been granted. Article 5 deals with counsel’s fees and Article 6 with solicitors’ fees.

Counsel fees are calculated in accordance with schedule 1 to the Order. This sets out the “advocate’s graduated fee scheme”. The scheme is well known and fixes payment according to whether the trial proceeded to a verdict or was cracked. Claims for fees must be “made and determined” in accordance with the provisions of that schedule and such claims must be made within 3 months of the conclusion of the proceedings. Once the fee has been calculated the appropriate officer is to notify the advocate of the fee payable.

Solicitors’ fees are to be calculated in accordance with schedule 2. A claim must be made within 3 months of the conclusion of the proceedings.

Certain constituent elements of both counsel’s and solicitor’s costs are fixed and ascertainable by reference to various tables set out in the schedule according to identified variables such as the type of offence, the seniority or counsel, the number of pages of prosecution evidence and the length of hearing. Other elements are not fixed in the same way. These include special preparation fees and fees for attendance at conference.

By Article 29 both counsel and solicitor may seek a redetermination by the appropriate officer of the fees payable to them which must be exercised within 21 days of receipt of notification of the fee payable. Article 30 provides a right to appeal a redetermination to a costs judge within 21 days of receipt of the determination. A possible further appeal lies to the High Court under Article 31 on a point of general importance.

The beneficiary of the legal services (here, the Claimant) has no involvement in the process of assessing costs under the 2007 Order and no right to be heard or consulted. It is important to note that the process of fee assessment under the 2007 Order must be complete before there is an assessment of the disposable capital of the convicted person (the Claimant) under the 2009 Regulation. It follows that (save perhaps for the sums paid under any ICO) when the fees are assessed, the outcome of the assessment of disposable capital is unknown, so that no-one knows if the convicted person will or will not need to reimburse the state for the cost of legal fees.

There are 3 points to resolve: the correct interpretation of the 2009 regulations, the A1P1 argument (which although dealt with succinctly raises a number of issues) and issues as to fairness and delay.

The Claimant argues that the assessment process under the 2009 Regulation should take no account of the capital assets which were subject to the restraint order on the date of the application for criminal legal aid. That, it is said, is the natural consequence of regulation 17 when read with regulation 13. The Defendant takes the opposite view and submits that the assets subject to the restraining order must be taken into account, because at the point of assessment, no restraining order was in place.

Regulation 13 sets out the following:

“The assessing authority shall include the amount or value of every resource of a capital nature belonging to the individual at the date of the application for a representation order, except where it would be impracticable or unreasonable to do so.”

Regulation 17 sets out the following:

“Where the individual is restrained by order of the High Court or the Crown Court from dealing with a capital resource, the assessing authority shall disregard that resource.”

Regulation 13 clearly involves a 2-stage process. First the capital assets have to be identified, and then those assets have to be valued.

Stage 1 (identification) requires the assessing authority to identify the assets that belonged to the Claimant when he applied for a representation order. Because the restraint order made on 26 February 2009 prevented the Claimant from dealing with his assets but did not strip him of the ownership, the assets covered by the restraint order would be considered at stage 1.

Stage 2 (valuation) involves a consideration of the value of the assets. The question which lies at the heart of this issue is this: should the value be taken at the date the valuation exercise is carried out or should it be a historical valuation dating back to the point at which a representation order was made (which might be many years earlier)? In my view the duty must be to consider value at the date of the valuation exercise and not at any earlier point. Any requirement to attribute an historic valuation to the assets would in my judgment require clear direction to that effect in the regulation. Such direction is missing. The words “at the date of the application for a representation order” in regulation 13 can only apply to ownership of the asset. This conclusion means that the risk of an asset falling in value between the grant of legal representation and the date of the valuation lies with the State. That allocation of risk is in my view entirely appropriate. It would be unjust if the convicted person was assessed to make a capital contribution on the basis of an asset which although once valuable, through no fault of his own, had become worthless by the time his capital was assessed.

The requirement in regulation 17 that the assessing authority should “disregard” a restrained asset suggests that the asset has at an earlier stage been “included”. In other words, if it were not for the instruction to “disregard” an asset, it would be included in the valuation. In this way regulation 13 and regulation 17 can be read together and lead to a sensible conclusion. Regulation 13 would include assets that were restrained at the date of the application for a representation order. Regulation 17 would exclude those assets from the valuation exercise if they were restrained at the date of the valuation and include them if they were not restrained at that date.

This approach (of considering the issue of restraint at the valuation stage only) is consistent with the overall scheme of the regulation. The purpose of the order is to pay back to the public purse the cost of a service provided by the state at no initial cost to the individual. It makes sense that the order (which is an order to pay a sum of money) is based on an up to date (rather than a historic) valuation of disposable assets. There would be little sense in excluding from the available pot capital assets which the convicted person is free to dispose of but which were (perhaps some considerable time ago) restrained.

I am therefore satisfied that the assessing authority was required to take account of the assets which had historically been restrained but which were free of restraint in 2017, when carrying the assessment in accordance with regulations 13 to 18 and in particular in accordance with regulations 13 and 17. It follows that I am satisfied that the assessing authority acted in accordance with the powers given to it under the regulations.

The first ground of Judicial Review therefore fails.

Regulation 27 requires an individual who “has been granted a representation order” (who is in receipt of criminal legal aid) to report any change of financial circumstances to the assessing authority which “might affect the individual’s liability to a contribution order or the amount of such order”:

Regulation 28 requires the assessing authority to re-calculate an individual’s disposable income or disposable capital in 3 situations (a) if there has been a miscalculation (b) if there has been an administrative error or (c) new relevant information has come to light – whether from the individual, under regulation 27 or from any other source. Having recalculated, the assessing authority must make a contribution order if one is required in light of the re-calculation, or revoke or vary any existing contribution order in light of the calculation.

By regulation 29 an individual against whom a contribution order has been made may apply to the assessing authority for a review of that order (within 28 days of it being made) in 3 situations: (a) if there has been a miscalculation (b) if there has been an administrative error or (c) the individual is suffering or would suffer financial hardship as a result of making payments under the contribution order.

The obligation under regulation 27 is not subject to any express time limit. However, it seems to me (given that it cannot be open ended) the obligation is likely to cease once a CCO is made. I reach that conclusion for 2 reasons: first, the words “which might affect an individual’s liability to a contribution order” suggest that at the time the obligation arises, the liability has yet to be determined and secondly regulation 27(2), dealing with the consequences of the change in financial circumstances, refers only to changes in ICOs and makes no reference to CCOs. If the obligation continued after a CCO had been made, I would have expected regulation 27(2) to deal with variations of a CCO. The absence of any reference to a CCO supports the view that the calculation of the CCO would take place after the obligation has been complied with.

Regulation 28, like regulation 27 is not subject to a specific time limit. It does however refer to a “miscalculation of the individual’s…capital” and to a recalculation of capital. it follows that the obligation to recalculate must continue to apply after the calculation of disposable capital has been completed. Any recalculation of disposable capital is a repeat of the exercise described above as the stage 2 valuation. The value would need to be taken at the date of the recalculation exercise. I note that in R (oao Cleland) v the Lord Chancellor [2016] EWCA Civ 571 the argument that the “new information” would only be relevant if it concerned capital resources belonging to the convicted person at the date of the application for a representation order, was described as “doubtful” (see paragraph 21).

If the assessing authority conducts its initial assessment of capital when a restraint order is in place (and so disregards the restrained capital) but subsequently learns that the restraint order has been lifted, it seems that the assessing authority would be required (regulation 28) to re-calculate the individual’s disposable capital this time taking account of the formerly (but no longer) restrained capital. The effect of this is that, even if I am wrong in respect of my interpretation of the 2009 Regulations, the result would have been the same.

By Article 1 of the First Protocol:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The submissions in respect of the A1P1 argument were limited. Mr Armstrong for the Claimant reminded me that any interference with Mr Flannigan’s property must be proportionate and submitted that there must be a review mechanism enabling proportionality to be assessed. He submitted that interference must not be arbitrary and must be foreseeable. He says here the CCO was not “foreseen or foreseeable”, there were no procedural safeguards to speak of in particular in respect of the assessment of costs and there has been no assessment of proportionality.

The A1P1 point is succinctly addressed in the Defendants’ skeleton at paragraph 34. In short, it is said that the 2009 regulations do not involve any kind of interference with property and therefore A1P1 has no application. The summary grounds of defence (which stand as the detailed grounds of defence) assert that “there is nothing arbitrary about the operation of the 2009 Regulations and there is no arguable basis upon which [the Claimant’s] rights under [A1P1] have been insufficiently safeguarded”.

In oral submissions Mr Armstrong emphasised that the Claimant had available to him no process to complain about the level of fees assessed by the relevant authority so that there was no mechanism that would allow proportionality to be examined. The Defendant submitted that the liability under the 2009 regulation is equal to a benefit he has received – that is the cost of legal services. Another way to express the same point would be to say that the Claimant has been adequately compensated for any deprivation of property.

The issue of whether A1P1 is engaged, and whether there was any “deprivation” was further developed after the close of the hearing.

The authorities emphasise that A1P1 comprises 3 rules. The first rule is general in nature and sets out the principle of peaceful enjoyment: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions”, the second rule covers deprivation of property and subjects it to certain conditions: “No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law”. The third rule (set out in the second paragraph) deals with the control of use of property and recognises that contracting states are entitled to control the use of property in accordance with the general interest. The second and third rules are to be construed in light of the general principle set out in the first.

I was referred to a number of European Court of Human Rights (“ECtHR”) authorities. The phraseology used in the judgments is not always easy to follow, no doubt because often the English text has been translated from another language. Phrases such as: “the right of pre-emption did not apply systematically but only rarely and scarcely foreseeably” (see Hentrich v France 18 EHRR 440 at page 441 paragraph 2(d)) require some unravelling. For that reason (and partly because of the limited argument I heard) it is necessary to deal with the broad facts of each of the cases.

Mr and Mrs Hentrich bought 6,766 square metres of land in Strasbourg for 150,000 French Francs in 1979. The purchase was subject to the payment of duties and the sale was only registered when those duties had been paid. Some 5 months after registration of the sale, Mr and Mrs Hentrich were told that the tax authorities had concluded that the price they had paid was “too low”. In consequence, as permitted by relevant General Tax Code, the authorities had decided to exercise a right to buy the property with an uplift of 10% on the purchase price together with the expenses. This right is described by the court in Hentrich as a “right of pre-emption” given that English law would generally seem to define such a right as one which gives the grantee a right of first refusal but imposes no obligation to sell, the right might be better described as a right of expropriation.

Mr and Mrs Hentrich issued proceedings. The claim worked its way through the court system. In the tribunal de grande instance and in the Colmar Court of Appeal it was held that a dispossessed purchaser had no right to challenge the expropriation by adducing evidence of the value of the land (see pages 450 at paragraph 23 and 472 at paragraph 55). The case then came to the Court of Cassation (Commercial Division) who decided that the tax authorities must give written detailed reasons for its decision to exercise the power. Although it agreed that the reasons given to Mr and Mrs Hentrich in an attempt to justify the conclusion that the price they had paid was “too low” were inadequate, the court dismissed their case. Judgment was delivered in the Hentrich case and 3 other similar cases on 16 June 1987 (Footnote: ¹) (see page 450 paragraph 23 of the report). Mr and Mrs Hentrich were the only dispossessed purchasers who failed.

In the ECtHR (see 18 EHRR 440) they argued that they had not had a fair hearing and that there had therefore been a breach of Art.6(1). The State accepted (see page 472 paragraph 55) that there had been no opportunity to contest the finding that the price paid was too low. The ECtHR found a breach of Art.6(1).

Mr and Mrs Hentrich had had a rough ride. Whilst the Court of Cassation had found that they were entitled to full reasons why the decision to expropriate had been made, they had never had the chance to respond to that case.

The ECtHR also considered Mr and Mrs Hentrich’s claim that their A1P1 rights had been breached. The first point was that the tax authorities had failed to give reasons for the decision to expropriate and the Hentrichs had not been able to attack those reasons. On that basis it was said that the decision was “arbitrary”. The ECtHR decided (see page 469 paragraph 42) that the expropriation operated “arbitrarily and selectively and was scarcely foreseeable and …was not attended by basic procedural safeguards”. It was found that the operation of the relevant provision in the tax code in accordance with the law as it then stood (up until the time that the Court of Cassation made it clear that reasons had to be provided) “did not sufficiently satisfy the requirements of precision and foreseeability implied by the concept of law…”.

The court came on to consider proportionality. In essence (see paragraph 45 at page 470) it concluded that the exercise boiled down to consideration of what procedural protection the Hentrichs had against the arbitrariness of the expropriation. It was noted that the power was not exercised automatically in every case where sale at an undervalue was suspected (in the language of the ECtHR “systematically”). Rather the evidence before the Court was that the power had been exercised 25 times in 1980 in the whole of France and between 1980 and 1986 it had been exercised 88 times. This was described as “only rarely and scarcely foreseeably”. Another way to put it would be to say that the power was used in an unpredictable manner. The court also considered the compensation paid to the dispossessed purchaser (the uplift with expenses) and concluded that it could not be regarded as sufficient. In effect (paragraph 48) the deprivation operated as a penalty and there had a breach of their A1P1 rights.

The conclusion in Hentrich is not surprising. Mr and Mrs Hentrich were in effect chance or near-random victims of a draconian power which had stripped them of an asset without any adequate compensation and in circumstances where they had had no opportunity to criticise and attack the basis on which the discretion to exercise the power had been exercised.

In Paulet v United Kingdom (2015) EHRR 39 the Applicant was living and working in the United Kingdom illegally. He was convicted of various offences and as part of his sentence a confiscation order was made against him in the sum of £21,649.90 which he had saved from his earnings in the 4-years he had been in the country. The trial judge accepted that he had paid tax and National Insurance on his earnings and that the money had been “truly earned”. The Applicant appealed to the Court of Appeal arguing that the earnings were not susceptible to confiscation and that the decision to seek a confiscation order was an abuse of process. In support of the abuse argument it was said that the order gave rise to a disproportionate or oppressive result. A1P1 was relied upon. The Court of Appeal concluded that the order had been imposed properly and in accordance with the relevant statutory provisions (in the Proceeds of Crime Act 2002 – “POCA”) and that to find that such an application was abusive would be to permit the court to disapply the statutory regime. It therefore concluded that there was no abuse. By the time the case came to the ECtHR the Supreme Court’s decision in R v Waya [2012] UKSC 51 was available. The Supreme Court held that POCA could operate in a manner which violated A1P1 so that the statute had to be interpreted in a manner compatible with A1P1. It concluded that the “better analysis” was for courts in the future not to consider whether the decision to seek a confiscation order was an abuse, but rather to consider if the order itself would produce a disproportionate effect.

In the ECtHR Mr Paulet argued that the confiscation order was a disproportionate interference with his A1P1 rights. The court found in Mr Paulet’s favour because the Court of Appeal (pre Waya) had not considered whether the order produced a disproportionate effect. Instead it had adopted too narrow a view and dealt (despite the best attempts of Mr Paulet’s legal team) only with the abuse argument. The scope of the review was too narrow, and there had been no attempt to consider proportionality.

To understand the Paulet decision, it is helpful to go back to Wayaand to understand how POCA could operate in a manner that was disproportionate. Examples are provided at paragraphs 28, to 34 of the judgment of the majority in Waya. Broadly put, where a convicted person has restored to the victim the proceeds of the crime it would be disproportionate to impose a confiscation order. The statutory objective is to remove the proceeds of crime from the wrongdoer, the imposition of a confiscation order where all benefits have been restored would simply be an additional financial penalty (see paragraphs 28, 29 and 32 of the judgment of the majority). POCA therefore admits of the possibility of a disproportionate order because it permits in practice the imposition of a penalty in circumstances where the aim of the statute is not to penalise. In such a case the order would be disproportionate because there would be no reasonable relationship of proportionality between (a) the means employed and (b) the aim sought to be realised. As it is put at paragraph 20 of Waya: “The clear rule as set out in the Strasbourg jurisprudence requires examination of the relationship between the aim of the legislation and the means employed to achieve it… the second must be proportionate to the first.”

The Paulet decision was based on the fact that POCA was capable of operating in a disproportionate manner. In order to ensure that it did not operate in that manner against Mr Paulet he was entitled to the procedural safeguard of having proportionality assessed. That was not done, proportionality was not considered, and therefore there was a violation of A1P1.

In considering the relationship between the aim of the 2009 regulations and the means employed to achieve it and asking if those means are proportionate to the aim, the court is asking if a fair balance has been struck. A number of factors must be considered (see Paulet page 1009 at paragraph 65). In particular the following is a non-exhaustive list of relevant matters to consider:

Two issues need to be resolved:

The assessing authority has made a claim to Mr Flannigan’s capital assets. The claim is fixed and, subject to the outcome of this application, unanswerable. An order has been issued requiring the payment of money. The order is, on its face, enforceable and steps have been taken to enforce it. Mr Flannigan is under an apparent enforceable obligation to satisfy the order.

Since I heard oral argument, the decision of Sir Ross Cranston in R (oao Haworth) [2018] EWHC 1271 (Admin) has been drawn to my attention and I have received detailed submissions on the question of interference with property rights. Whilst an important decision worthy of detailed consideration, Haworth is one in a long line of authorities dealing with the engagement of A1P1 in tax cases. I received email submissions on the case from Mr Trompeter on 1 June 2018. Mr Armstrong responded briefly on 4 June and on 5 June, in order to ensure that all parties were heard on the matter in the most cost-effective manner possible, I gave informal directions dealing with how I would receive any further written submission. In short I gave Mr Armstrong until 12 June to deal with Haworth in written submissions, Mr Trompeter an opportunity to respond by 19 June and Mr Armstrong the final word by close of business on 21 June 2018. Each party complied with those deadlines. Neither raised any objection to my dealing with the points in that way or sought a further oral hearing. Because Haworth does not raise any point of law which was unsettled at the hearing of this claim, I would have expected the cases which precede it (for example Kopecký, Rowe, and APVCO) to have been drawn to my attention earlier. I accept however that in the unusual circumstances of this case, and in particular the late evidential revelations as to timing, that the need to deal with these points may not have been immediately apparent. Because I did not have the benefit of oral submissions on theses authorities I can deal with them relatively shorty.

In Rowe taxpayers (who were members of partnerships) had participated in disclosed tax avoidance schemes and claimed loss relief. HMRC issued Partner Payment Notices requiring the taxpayers to pay over understated tax at a point when liability had not been determined. They asserted that that amounted to an interference with their A1P1 rights. Simler J at first instance dismissed the claims. Whether the money paid to HMRC was the Claimant’s “possession” was central to the outcome of the case.

The starting point in any analysis of the meaning of “possessions” or “property” is Kopecký v Slovakia (2005) 41 EHRR 43 (see Rowe v HMRC [2015] EWHC 2293 (Admin) at first instance at paragraph 116 and in the judgment of McCombe LJ in the Court of Appeal reported at [2017] EWHC Civ 2105 at paragraphs 162 to 171).

The court in that case noted that a violation of A1P1 could only be alleged where the acts complained of related to the Applicant’s “possessions”. Possessions could be either (a) “existing possessions” or (b) assets, including claims which allow the applicant to argue that he has at least a “legitimate expectation” of obtaining effective enjoyment of a property right. A genuine dispute about title or a mere arguable claim to title would not be sufficient to give the applicant a legitimate expectation. I will refer to these types of possession as class A and class B.

In Kopecký v Slovakia the applicant (see McCombe LJ at paragraph 168) had never had a property right in the relevant property. He only had a claim. He therefore had no class A possession but was asserting that he had a class B asset. His claim did not pass the “legitimate expectation” test so that his claim to a class B possession failed and he had nothing that warranted the protection of A1P1.

In Rowe (paragraph 168) McCombe LJ noted that the facts of that case and those of Kopecký were very different. In Rowe the relevant possession was the Claimant’s own money and the State (HMRC) had a mere “money claim conferred on it by legislation, in anticipation of a possible future tax liability which may or may not be established. It makes no claim to the money as tax money. The Claimant’s money remains their money”.

HMRC’s position was (see paragraph 170) that it had “at least an arguable claim that the money was owed as tax” which was sufficient to mean that the possession was not to be treated as belonging to the taxpayer. They argued that the position was supported by domestic and Strasbourg case law including Kopecký . McCombe LJ proceeded to consider the case law relied on by HMRC:

In St.Matthews v HM Treasury [2015] EWCA Civ 648 (also referred to as APVCO after the first Claimant) Vos LJ (paragraph 46) noted, in a case concerning SDLT, that when the taxpayer Claimant entered into the relevant transaction, tax (SDLT) became due and payable. On the facts of that case the taxpayer entered into an option at the same time and so acquired an argument (under sect.45 of the Finance Act 2003) that SDLT was not payable by him. The taxpayer’s argument was not sufficient to make the taxpayer’s claim a “possession” within the meaning of A1P1 because (as was accepted) the claim was not sufficiently certain. Vos LJ went on to say that the “money available to pay SDLT must…be affected by the argument as to whether it is payable to HMRC.” The conclusion was that whilst the money is a possession in one sense, “it is impressed with an arguable claim by HMRC which prevents it being properly regarded as a possession for A1P1 purposes”. As McCombe LJ explains in Rowe this is the ratio of the case.

At paragraph 184 of Rowe, McCombe LJ notes that in APVCO HMRC’s claim to the fund was “not only arguable, it was unimpeachable” (see also paragraph 181). In APVCO the claimant asserted that he had a class A possession (see paragraph 178 of Rowe in the Court of Appeal and reference to “the money itself”). McCombe LJ appears to have been satisfied that that claim rightly failed because HMRC had an unanswerable claim to the money, not because it had a merely arguable claim.

It seems to me that McCombe LJ felt that APVCO (see paragraph 183) had therefore gone too far; a mere argument on the part of HMRC to be entitled to payment of a sum of money as tax would not prevent that sum from being the taxpayer’s “possession” (see McCombe LJ’s acceptance of the argument advanced by Ms Simor QC at paragraph 170: “a mere demand by the state that a citizen should pay money should not remove from the citizen’s cash its status as a possession for the purposes of A1P1”). He therefore felt that APVCO did not support HMRC’s argument in Rowe (that the money could not be regarded as the Claimant’s possession because HMRC had “at least an arguable claim that the money was owed as tax”).

It seems to me that McCombe LJ was interested in the point that in APVCO the Court of Appeal had used the language of a class B claim (arguability) to deal with a class A claim and applied that test to HMRC’s claim not to the taxpayer’s claim (as would happen in a class B possession matter).

The view expressed by McCombe LJ in Rowe on the nature of the taxpayer’s possession was however obiter.

In Haworth Sir Ross Cranston was dealing with claims concerning HMRC’s right to require a sum representing a potential tax liability to be paid to it pending determination of the liability (Simler J was concerned with a similar point in Rowe). In that case, the taxpayer sought to rely on the approach set out in the judgment of McCombe LJ in Rowe, namely that the taxpayer’s money remained the taxpayer’s money so that it was a possession capable of protection by A1P1. Sir Ross Cranston found (see paragraph 114) that there was no interference with the taxpayer’s possessions. Given the fact that McCombe LJ’s thoughts on the issue were obiter, the learned retired Judge felt himself bound to follow Rowe at first instance.

In essence, the Defendant’s argument on the facts of the present case is that they have an unimpeachable claim to the sum demanded and so (as in APVCO and Rowe) that sum should not be treated as the “possession” of Mr Flannigan.

In my view, it would not be appropriate to categorise the Defendant’s claim to the relevant sum as absolutely unimpeachable. Here, the Defendant’s claim to the sum depends on the outcome of these proceedings. If I was to find that the relevant sum of money was not Mr Flannigan’s possession, it seems to me that I would rob the Claimant of any real argument and allow the Defendant to deprive the Claimant of an A1P1 claim by the mere assertion of a claim to a sum of money. At this stage of the analysis it seems to me, because the issue is deeply contested, that I should not conclude that the State’s claim is answerable. Rather I should proceed on the footing that the money demanded is a possession of the Claimant and go on to consider the issue of proportionality.

I therefore proceed on the basis that the money claimed by the state is the Claimant’s (Class A) possession for the purposes of A1P1 and that there has been a deprivation.

There is no suggestion that the 2009 regulations were not (whilst in force) applied in every relevant case. There was at the relevant time no element of unpredictability about their operation. Indeed, the evidence in this case suggests that when the ICO was made in December 2011 Mr Flannigan was warned that he may be called upon to make further payments if the ICO payments “have not covered your defence costs” (see paragraph 6 above). In contrast to the relevant provision considered in Hentrich, the 2009 regulations were not applied on an ad-hoc, unpredictable basis. I am satisfied that there is nothing arbitrary about the operation of the 2009 regulation, rather its operation was certain and predictable.

There is no suggestion that the 2009 regulations were capable of operating (when correctly applied) so as to impose a penalty. Such a penalty might arise if the mechanism of the regulation allowed the State to claim from Mr Flannigan more than it had paid out to the lawyers. But the 2009 regulations (see regulation 19) only permit re-imbursement in the “costs of the individual’s representation in the proceedings in the Crown Court” which is precisely the cost to be assessed under regulation 11 and the 2007 Order.

Further, there was no suggestion that the 2009 regulation could operate to produce any other result which was outside the aim of the regulatory regime (to require a person convicted of an offence to reimburse the state for the cost of state-funded legal representation, provided that person has the means to pay). That is in my view an important point because it distances the present case from Paulet where it was accepted that the relevant statutory regime (POCA) was capable on proper application of producing a result beyond its aim (as clarified by the Supreme Court in Waya).

It is helpful to consider the effect of the 2009 regulations and the 2007 order together. The same points apply in respect of the 2007 Order. The scheme’s aim was to find a structured and principled way to determine a fair price (as between the paying state and the receiving lawyers) for services provided by lawyers to persons charged with criminal offences who for one reason or another were not paying privately. The scheme covers not only those like the Claimant who on any sensible view is a wealthy man, but also those who are without any means at all. The assessment of costs was at the material time carried out in accordance with a regulatory scheme, which (although complex) was well publicised and accessible to anyone who cared to look for it. It was clearly well known to criminal solicitors and barristers. There was nothing arbitrary about the 2007 Order. In my view the 2007 scheme could not obviously operate in manner outside its scope, and even if it could, as far as the paying and receiving parties are concerned there are sufficient procedural safeguards.

The POCA regime considered in Paulet was not in any sense arbitrary. The absence of arbitrariness in a regulatory regime therefore does not mean that the application of that regime will always be proportionate. Both Hentrich and Paulet turned on the absence of procedural safeguards. In Hentrich the absence of such safeguards meant that the measure as applied was arbitrary. In Paulet the absence of the safeguards meant that the measure as applied was capable of imposing a result (in that case a penalty) which was so far beyond the aim of the relevant statute that it was disproportionate.

In the present case there is no arbitrariness and there is no suggestion that the measures could operate so as to impose a result beyond the aim of the regulatory regime. There is no obvious risk to the target of the regime (Mr Flannigan) that could only be cured by the presence of procedural safeguards. Nonetheless there were certain safeguards open to Mr Flannigan.

A further point arises. Although Mr Flannigan was convicted of only 3 out of 5 offences (one on a guilty plea) the costs assessed and which he is required to pay relate to the costs of defending him on all counts and to the entirety of the proceedings. It might be said that this is itself disproportionate. I do not accept that that is the case, because the aim of the regime is to require those convicted of any offence to re-imburse the state for the legal cost of the whole proceedings. However, if the operation of the regime against Mr Flannigan in this way was seen as disproportionate, it would be necessary to go on to consider if any procedural safeguards were in place to cure the issue (as in Paulet).

In my view there were. The Claimant had a reasonable opportunity to make a regulation 21 application to the court when he was not convicted of all offences, seeking an order that he should only pay a proportion of the cost of his state funded defence. The right is set out in the regulation and was clearly available to him. He accepts (see paragraph 2 of his witness statement) that he was told about it in January 2014 but was advised that an application was not necessary because his assets were restrained. The fact that he did not avail himself of the opportunity or (on his evidence) was advised he need not make the application is not relevant. I accept that such an application is almost certain to be made before the regulation 11 assessment of costs is complete (and often before it has started) but do not consider that to be relevant. It might have been perfectly reasonable for the Claimant to argue that it would be “manifestly unreasonable” to require him to pay the costs associated with those charges in respect of which he was not convicted. In my judgment, the right to make an application under regulation 21 is an important safeguard which allows the Crown Court to ensure that there is an appropriate balance between the rights of the individual and those of the depriving authority.

Further, when considering the procedural protection available to the Claimant it must be noted that he has the right under regulation 28 to inform the assessing authority of changes in his financial position which might reduce or cancel his liability to pay and has a right to reclaim (with interest) sums he has paid if his liability is reduced or cancelled. Further he has the more limited right under regulation 29 to seek a review within 28 days on the grounds of hardship.

Finally under this heading of proportionality, and looking at matters in the round, it is important to recall that the 2007 order is designed to identify the cost of a service. Counsel’s fees are calculated on the fee scheme set out in schedule 1 and solicitor’s costs in accordance with schedule 2 and based upon a claim submitted by a lawyer. The process is subject to certain safeguards as between the lawyer who will be paid and the state who will pay. A request to redetermine certain fees, to review certain decisions and to reclassify an offence may be made to an appropriate officer. If the receiving party is unhappy with the result an appeal lies to the costs judge and from that decision to the High Court Judge. Such applications and appeals are essentially adversarial; with the paying state wishing to ensure (in accordance with its general duties) that tax payers’ money is not wasted on inflated claims and the lawyers wanting to be paid appropriately for the work they have done. The processes are similar to costs assessments that happen every-day in the civil courts. In my judgment the interest of state and of the party who has benefitted from the provision of legal advice are practically (if not entirely) co-extensive. The state has no idea at the costs assessment stage if it will be re-imbursed the costs or not because no capital assessment has taken place.

In my judgment the absence of a right to be heard on the amount of costs payable to his lawyers does not render the actions of the first defendant a violation of Mr Flannigan’s A1P1 rights. It is difficult to see, given the strictness of the regulatory regime and the method of calculating fees, what Mr Flannigan might have added to the process.

The essence of the fairness challenge mounted by Mr Flannigan is delay. The evidence shows in that the assessing authority’s systems were set up to facilitate a swift assessment of disposable capital once the legal fees had been fixed. Final fees should have been inputted into the Crown Court Litigator Fess payment system (“CCLF”) and then onto the Means Assessment Administration Tools which is the interface between the Legal Aid Authority and Rossendales. The issue (see paragraph 9 of Mr Devery’s third witness statement) appears to have been that no one “click[ed] the refusal button on CCLF”.

The relevant delay arose between the point at which the assessment could (and perhaps should) have been made and the date that it was undertaken. The delay was of almost 3 years. It is important to note that the 2009 regulations mention no time within which the assessment must be made. Whilst it is correct to say that the assessment of disposable capital (regulation 12) will follow the regulation 11 assessment of costs, it is important to bear in mind that the assessment procedure itself could be lengthy:

It follows that there is an inherent possibility of delay built into the regime. A good deal of time could elapse between the end of the trial and the final assessment of costs and so the assessment of disposable capital. I accept however that it is unlikely that the period of 3 years and 1 month would elapse.

There is no suggestion (other than the argument I have rejected about taking into account restrained assets) that Mr Flannigan has in any way been prejudiced by the delay. The reality of the situation is that Mr Flannigan applied for criminal legal aid and was aware that he would need to re-imburse the cost of that representation (see the letter of 2 December 2011) if he could afford to do so. At no point was Mr Flannigan told or encouraged to believe by the State that it had waived its right to re-imbursement or the right to assess his disposable capital. If he was told by his legal advisers that he would not have to repay that is irrelevant.

Regulation 37 of the 2009 regulations allows any overdue sum due under a CCO (that is a sum not paid within 28 days) to be recovered as a civil debt. The limitation period that would then apply, after which proceedings could not be issued, would be at least 6 years and possibly 12 years. It seems to me that these limitation periods provide a sensible yardstick against which to assess the delay. The delay is regrettable, but in my view is not so serious that it would right to conclude that the right to re-imbursement has been lost.

If the assessment had taken place in March 2014 when the Claimant’s assets were restrained, the assessing authority would have been obliged to recalculate the capital assessment under regulation 28 when it became aware that the restraint order had been discharged. It appears that the assessing authority only became aware of the date on which the restraint order had been discharged on 11 October 2017 (see the email from the Environment Agency on that date at page 13 of the exhibit to Mr Devery’s third statement), although it is accepted the authority was aware that that the order had been discharged by 15 June 2017. Even if the assessment had taken place in 2014 when the assets were restrained, and assuming (as I am prepared to do for the purposes of this application) that Mr Flannigan was unaware that the restraint order had been discharged before the CCO was made, the assessing authority would have come under an obligation to re-assess Mr Flannigan’s liability to a CCO when it became aware of the discharge (see regulation 28).

I am satisfied that procedural errors made by the assessing authority do not render the deprivation unfair. The delay in dealing with the CCO was in my judgment immaterial and in any event not fundamental. If the assessment had taken place in 2014 when assets were restrained the assessing authority would have come under an obligation to re-assess in June 2017 when it became aware that the restraint order was no longer in place.

In my view there is nothing in the delay point or the unfairness point. The delay of the assessing authority was not so egregious that it renders the assessment inherently unfair and even in the absence of a delay the result would have been the same as I have explained above. I can see no basis on which to conclude that the power has been exercised improperly.

I can see no basis on which the decision to issues CCOs was irrational. To the contrary in my judgment it was lawful and correct.

The final issue to deal with is justiciability. I am satisfied that the matters raised by the Claimant are justiciable. The Court of Appeal thought so in Cleland [2016] EWCA Civ 571 on an appeal against a refusal to grant permission to proceed with judicial review.

The Claimant refers to the Criminal Legal Aid (Contribution Orders) Regulations 2013 and to changes made to those regulations by amendment regulations in 2015. In my judgment neither provides any assistance with the task at hand.

The aim of the 2009 Regulations and the 2007 Order was no doubt to ensure that those facing criminal prosecutions in circumstances where their assets had been restrained had a fair art.6 compliant trial with the benefit of representation which, in the absence of the Regulations they would not be able to afford. There is an overwhelming public interest in ensuring that those who are convicted repay the credit the State has afforded them in the form of legal fees. The value of the benefits received by Mr Flannigan are balanced by the payment he is to make. He has been adequately compensated for any deprivation of property. For that reason alone in my view the deprivation is not sufficient to warrant a finding that his A1P1 rights have been breached.