Luckhurst, R. v

Factual and Procedural Background

After a career in professional sport, the Defendant set up a financial-services firm, Company A, which collapsed in 2016. In 2014 he and two colleagues (Individual A and Individual B) incorporated Company B to introduce clients to an investment scheme operated by Individual C and Individual D. The Crown alleges that the scheme was a fraudulent Ponzi operation and that the Defendant also misappropriated client monies. A criminal investigation began, leading to charges of fraud and theft in 2018; trial is listed for late 2022.

Parallel civil litigation commenced in 2016 when six investors sued the Defendant and others in the High Court. A worldwide freezing order was imposed but later discharged following a settlement between the investors and Company C (the investors’ solicitors). Shortly after discharge, Agency B obtained an ex parte restraint order against the Defendant under the Proceeds of Crime Act 2002 (“POCA”). The order covered all of the Defendant’s assets and allowed limited living expenses.

The Defendant applied to vary the restraint order to release funds for four heads of expenditure, including £3,000 in legal fees to defend the continuing civil claims. Judge Carr refused all variations, holding that s. 41(4) POCA barred release of funds because the civil proceedings arose from the same facts as the alleged offences.

On appeal, the Court of Appeal (Judge Popplewell, Judge McGowan and Judge Molyneux) upheld the refusal on three heads but allowed the £3,000 legal-expense request, ruling that s. 41(4) does not bar reasonable legal costs in civil proceedings even if the facts overlap with the criminal allegations.

Agency B appealed to the Supreme Court, which now resolves the certified question concerning the scope of s. 41(4).

Legal Issues Presented

1. Whether s. 41(4) POCA precludes an exception to a restraint order that would permit payment of reasonable legal expenses incurred by a defendant (or recipient of a tainted gift) in civil proceedings founded on the same or similar facts as the criminal offence(s) that led to the restraint order.

Arguments of the Parties

Appellant’s Arguments (Agency B)

• Contended that the statutory purpose of POCA is to maximise asset preservation for eventual confiscation; any dilution undermines victims’ compensation.
• Submitted that “legal expenses which relate to an offence” should include civil proceedings sharing the same or similar factual matrix, proposing a bright-line test based on factual overlap.
• Argued that practical difficulties of judicial discretion justify a categorical bar; any overlap (unless de minimis) should trigger the prohibition.
• Relied on the “legislative steer” in s. 69(2) POCA and on Court of Appeal authority in R v AP and U Ltd.

Respondent’s Arguments (Defendant)

• Maintained that on the natural meaning of the words, civil-proceeding expenses do not “relate to” a criminal offence; POCA draws a fundamental distinction between civil and criminal matters.
• Emphasised the draconian nature of restraint orders; where Parliament intended an exclusion, it used express language.
• Highlighted the practical unworkability of the Appellant’s overlap test (vagueness of “same or similar,” need for de minimis exceptions, etc.).
• Argued that a discretionary approach allows the court to protect confiscation objectives while preventing unfairness, and may even enhance the asset pool when civil proceedings increase available funds.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Natural meaning of the text. The Court held that, read in context, legal expenses in civil proceedings for private law causes of action do not “relate to” a criminal offence. The phrase naturally covers costs of defending criminal proceedings, resisting confiscation, or dealing with ancillary criminal applications, but not suing or defending in tort, equity, or contract.

2. Workability and fairness. The Appellant’s proposed test—exclusion wherever civil claims share “same or similar” facts—was deemed artificial, vague and unworkable, requiring ill-defined de minimis exceptions and risking unjust outcomes.

3. Statutory purpose. POCA seeks both to preserve assets for confiscation and to allow reasonable expenses. Historical materials show Parliament’s concern was with spiralling criminal-defence costs, addressed by legal-aid availability, not with ordinary civil litigation expenses. A discretionary approach respects that balance.

4. Precedent. Earlier authorities recognise the draconian nature of restraint orders and limit prohibitions to expenses truly connected to the criminal process. R v AP and U Ltd was distinguishable because the judicial-review claim was integrally linked to the money-laundering investigation.

5. Discretion under s. 41(3). Because civil-litigation costs are not automatically barred, the Crown Court retains discretion to decide whether proposed expenses are “reasonable,” guided by s. 69(2) POCA to protect the confiscation pool.

Holding and Implications

Appeal dismissed. The Supreme Court answered the certified question in the negative: s. 41(4) POCA does not preclude an exception permitting reasonable legal expenses for civil proceedings even where those proceedings arise from the same or similar facts as the alleged offence.

Implications: The decision preserves judicial discretion to authorise civil-litigation funding from restrained assets, subject to the “reasonableness” test. It clarifies that only expenses directly linked to the criminal process are mandatorily barred, and it does not create new precedent beyond interpreting s. 41(4).