Defining Reasonable Living and Legal Expenses under Restraint Orders: Insights from Luckhurst, R. v [2020] EWCA Crim 1579

Introduction

The case of Luckhurst, R. v [2020] EWCA Crim 1579 presents a pivotal examination of the scope of living and legal expenditures permissible under restraint orders pursuant to Section 41 of the Proceeds of Crime Act 2002 ("POCA 2002"). The appellant, AL, a former financial adviser accused of fraud and theft, sought to vary a restraint order that limited his ability to spend assets deemed to be proceeds of crime. The Court of Appeal's decision not only addressed the specifics of AL's application but also clarified broader legal principles governing such restraint orders.

Summary of the Judgment

The Court of Appeal dismissed AL's appeal to vary the restraint order, maintaining most of the original restrictions. However, it allowed a partial variation permitting the release of £3,000 for legal expenses related to settling civil proceedings. The judgment underscored the necessity of balancing the defendant's reasonable living needs with the statutory objective of preserving assets for potential confiscation orders. Crucially, the court rejected the Crown Prosecution Service's (CPS) argument for an absolute prohibition on legal expenses related to overlapping civil and criminal proceedings, instead emphasizing the discretionary nature of such variations.

Analysis

Precedents Cited

The judgment extensively referenced pivotal cases that shaped the court's approach to restraint orders and freezing orders:

• Director of The Serious Fraud Office v Lexi Holdings Plc [2009] QB 376 – Established that living expenses repaying unsecured creditors are generally impermissible under restraint orders.
• Vneshprombank LLC v Bedzhamov [2019] EWCA Civ 1992 – Affirmed that defendants under non-proprietary civil freezing orders are entitled to reasonable living expenses reflecting their pre-order lifestyle.
• Marino v FM Capital Partners Ltd [2016] EWCA Civ 130 – Differentiated between proprietary and non-proprietary freezing orders, emphasizing that living expenses in proprietary cases may be more restricted.
• Director of the Serious Fraud Office v X [2005] EWCA Civ 1564 and Serious Organised Crime Agency v Azam [2013] 1 WLR 3800 – Established the "other available assets" principle, where defendants must utilize any available assets outside the restraint to meet expenses before drawing on restrained assets.
• In re S (Restraint Order: Release of Assets) [2005] 1 WLR 1338 – Highlighted the importance of not interpreting statutory provisions in a manner that would frustrate the legislative intent.

Legal Reasoning

The court's reasoning hinged on interpreting Section 41 of POCA 2002, particularly differentiating between various types of freezing orders and their respective allowances for expenses:

• Restraint Orders vs. Freezing Orders: Restraint orders under Section 41 support confiscation orders by preserving realisable property, differing from freezing orders which can be proprietary or non-proprietary.
• Discretion in Varying Restraint Orders: The court emphasized the discretionary power granted under Section 42(5)(b), rejecting the CPS's contention that certain legal expenses should be categorically barred.
• Reasonableness of Expenses: The judgment outlined a multi-factor test to assess the reasonableness of living and legal expenses, including necessity, affordability, and the defendant's standard of living before the restraint.
• Other Available Assets Principle: Defendants must first exhaust all available assets outside the restraint order before utilizing restrained assets for expenses.

Impact

This judgment has significant ramifications for future applications to vary restraint orders:

• Clarification of Discretion: Courts are now guided to exercise discretion rather than adhere to an absolute prohibition when considering legal expenses related to civil proceedings connected to criminal investigations.
• Balanced Approach to Expenses: Establishes a balanced framework ensuring defendants can maintain a reasonable standard of living without undermining the integrity of confiscation orders.
• Enhanced Procedural Fairness: By allowing some flexibility in expenditure for legal advice, the judgment promotes fairness, particularly for defendants who may be innocent and reliant on legal counsel for their defense.

Complex Concepts Simplified

Restraint Orders and Freezing Orders

Under POCA 2002, both restraint and freezing orders are legal tools used to prevent the dissipation of assets derived from criminal activity. Restraint Orders are proactive measures to secure assets pending potential confiscation, whereas Freezing Orders can be either proprietary (protecting specific assets) or non-proprietary (limiting the defendant's ability to dispose of any assets).

"Other Available Assets" Principle

This principle mandates that before a defendant can use any assets under restraint for expenses, they must first utilize any other available resources outside the restraint. This ensures that the preservation of assets for potential confiscation is not unnecessarily compromised.

Reasonableness of Living and Legal Expenses

The court assesses whether the expenses sought are reasonable by considering factors such as the necessity of the expense, the defendant's financial situation, and the duration of the restraint. This ensures that defendants can maintain a basic standard of living without excessive expenditures that could deplete assets meant for confiscation.

Conclusion

The Court of Appeal's decision in Luckhurst, R. v [2020] EWCA Crim 1579 significantly refines the application of restraint orders under POCA 2002. By rejecting an absolute ban on certain legal expenses and emphasizing a discretionary, balanced approach, the judgment ensures that defendants can adequately defend themselves while upholding the statutory objective of asset preservation for confiscation. This decision not only clarifies existing legal frameworks but also enhances the fairness and effectiveness of restraint orders in combating financial crimes.