Barnes (as former Court Appointed Receiver) v The Eastenders Group & Anor

Factual and Procedural Background

On an ex-parte application by Agency A, the Crown Court appointed the Appellant— a former partner in an accountancy firm— as management receiver over the assets of Company A, a trading group with approximately 120 employees and an annual turnover of about £150 million. The appointment was granted under sections 41 and 48 of the Proceeds of Crime Act 2002 (POCA) on the basis of evidence from an Agency B investigator who alleged large-scale excise and VAT fraud by two individual defendants owning Company A.

After Company A lodged evidence showing that the overwhelming majority of its trade was legitimate, the Court of Appeal quashed both the restraint and receivership orders, holding that there had never been a good arguable case that the companies’ assets were the defendants’ property. The receivership had nevertheless run from 14 December 2010 to 26 January 2011, during which the Appellant incurred unrecovered remuneration and expenses of £772,547.

The Appellant applied to the Crown Court for permission to take those costs from Company A’s assets. Judge Underhill rejected the application, finding that doing so would violate Company A’s rights under Article 1 of Protocol 1 to the European Convention on Human Rights (A1P1). Exercising section 3 of the Human Rights Act 1998, Judge Underhill instead ordered Agency A to pay the receiver’s remuneration, disbursements and related legal costs.

Agency A appealed. A majority of the Court of Appeal (Judges Mitting and Edwards-Stuart) agreed that Company A’s A1P1 rights would be infringed by payment out of its assets, but held that POCA could not be interpreted to make Agency A liable. Judge Laws dissented, concluding that no A1P1 breach arose and that the receiver could be paid from Company A’s property. The result left the receiver without recovery.

The Appellant appealed to the Supreme Court. The core question was who—Company A, the Appellant, or Agency A—must bear the unrecovered costs.

Legal Issues Presented

1. Whether compelling Company A to satisfy the Appellant’s remuneration and expenses violates Company A’s rights under A1P1.
2. If such a violation exists, whether POCA or general law permits the court to require Agency A to pay those sums.
3. What powers, if any, are available to prevent similar impasses in future receiverships.

Arguments of the Parties

Appellant’s Arguments

• The historic common-law rule grants receivers a lien over receivership assets; applying that rule does not breach A1P1 (supporting Judge Laws’ dissent).
• Alternatively, if A1P1 bars recoupment from Company A, the court should uphold Judge Underhill’s order obliging Agency A to pay, because leaving a court officer unpaid is manifestly unjust.

Company A’s Arguments

• Taking its assets would constitute a disproportionate deprivation contrary to A1P1 because the companies were never defendants and the order should never have covered their property.
• The receiver might have a contractual or restitutionary remedy against Agency A, but that was a matter outside the companies’ concern.

Agency A’s Arguments

• Joined the Appellant in contending that no A1P1 breach would arise from charging Company A.
• If A1P1 prevents recovery from Company A, POCA provides no statutory power to shift liability to Agency A, and no contractual indemnity was promised to the Appellant.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Lawfulness under A1P1. Echoing Judge Laws, the Supreme Court held that the receivership order was valid until set aside; therefore the statutory and common-law framework met the “conditions provided for by law.”

2. Legitimate aim. POCA’s object—preserving assets pending confiscation—was plainly in the public interest.

3. Proportionality and fair balance. Unlike earlier cases where the receivership properly attached to a defendant’s property, Company A had never been a defendant and there was no reasonable basis for treating its assets as the defendants’. Requiring Company A to bear the Appellant’s costs would therefore impose an “individual and excessive burden,” breaching A1P1.

4. Avoiding a second rights-violation. Denying the Appellant remuneration would itself infringe his property rights. The court thus had to identify an alternative payment source.

5. Liability of Agency A. Although POCA contains no express indemnity, the Appellant’s appointment was induced by Agency A on the shared, fundamental premise that he could recoup from the companies’ assets. That premise having failed, Agency A was unjustly enriched. Applying the failure-of-consideration doctrine, the court held Agency A liable in restitution for the receiver’s properly assessed remuneration and expenses.

6. Prospective safeguards. The judgment endorses use of tailored “Piggott conditions” and stresses prosecutors’ duty of candour and courts’ responsibility to test evidence rigorously before granting ex-parte restraint and receivership orders.

Holding and Implications

HELD: (a) Ordering payment from Company A’s assets would breach A1P1. (b) Agency A must pay the Appellant’s reasonable remuneration, disbursements and litigation costs (subject to Crown Court assessment). Judge Underhill’s original order against Agency A is reinstated, though on restitutionary rather than interpretative grounds.

Implications: Company-owned assets cannot be used to satisfy receivership costs where their inclusion in the order lacked a proper evidential basis; instead, the prosecuting authority may be liable in unjust enrichment. The court signals that future restraint/receivership orders should incorporate protective conditions and that ex-parte applicants must observe strict candour, minimising risks of similar injustices.