Funding Arrangements

It is possible to apply to put in place funding arrangements pursuant to s303Z5 of the Proceeds of Crime Act 2002.

These provisions state that an exclusion may (amongst other things) make provision for the purpose of enabling a person by or for whom the account is operated:

1. to meet the person's reasonable living expenses, or
2. to carry on any trade, business, profession or occupation.

An exclusion may be made subject to conditions.

Where a magistrates' court exercises the power to make an exclusion for the purpose of enabling a person to meet legal expenses that the person has incurred, or may incur, in respect of proceedings under this Part, it must ensure that the exclusion:

1. is limited to reasonable legal expenses that the person has reasonably incurred or that the person reasonably incurs,
2. specifies the total amount that may be released for legal expenses in pursuance of the exclusion, and
3. is made subject to the same conditions as would be the required conditions (see section 286A) if the order had been made under section 245A (in addition to any conditions imposed under subsection (4)).

A magistrates' court, in deciding whether to make an exclusion for the purpose of enabling a person to meet legal expenses in respect of proceedings under this Part must:

1. have regard to the desirability of the person being represented in any proceedings under this Part in which the person is a participant, and
2. disregard the possibility that legal representation of the person in any such proceedings might, were an exclusion not made—
3. be made available under arrangements made for the purposes of LASPO.

There is an express power to grant an exclusion from the AFO for purpose of reasonable legal expenses (s303Z5)). This provides that such an exclusion specifies the total amount and ‘is made subject to the same conditions as would be the required conditions under s286A’.

These conditions are as follows:

1. restrict who may receive sums released in pursuance of the exclusion (by, for example, requiring released sums to be paid to professional legal advisers), or
2. be made for the purpose of controlling the amount of any sum released in pursuance of the exclusion in respect of an item of expenditure.

A required condition made for the purpose mentioned in subsection (2)(b) may (for example):

1. provide for sums to be released only with the agreement of the enforcement authority;
2. provide for a sum to be released in respect of an item of expenditure only if the court has assessed the amount allowed by regulations under section 286B in respect of that item and the sum is released for payment of the assessed amount.

Bizarrely, the ‘conditions’ are not contained in s286A, but in the regulations made under the section. Those regulations are the Proceeds of Crime Act 2002 (Legal Expenses in Civil Recovery Regulations) 2005. Also, as any exclusion for legal expenses from an AFO is to be the same as is from an PFO the CPR Practice Direction on Civil Recovery will apply. In reality, these conditions are relatively straight forward.

The Conditions

The regulations deal with a number of practical matters, including the rates that may be charged by solicitors and counsel; e.g. a ‘standard case’ is one where a solicitor of at least 8 years standing may charge £187.50 + 20% London uplift, or £225 ph + 20% uplift for London weighting for a so called ‘higher hourly rate’ case. There is no guidance on how to decide if the case is ‘standard’ or ‘higher’ – that issue alone could be the subject of an article.

The ‘required conditions’ in the regulations require that each variation (to a PFO) must deal with the legal costs by ‘stage’ – i.e. from X date to Y date, and set out what the maximum cost will be. That is then part of the Order itself – at least in a PFO case.

Then there are further ‘required conditions’ which relate to the release of the money to the lawyer. This is to the effect that the lawyer may bill every two months and if the bill is not agreed as reasonable then at least 65% must be released and the rest can be argued by assessment. Having one’s own legal costs assessed by a Magistrates’ Court, before the conclusion of the case, is a novel proposition for the Magistrates’ Court.

Self-Funding

In previous cases, there has been a requirement that a Statement of Assets be produced.

It will be slightly dependent on what position the Applicant takes in this respect. It may mean that the solicitor then has first of all to prepare a Statement of Assets in order to get access to the frozen monies. That could be complicated and time consuming. Even though this is no part of the requirements under the 2005 Regulations, if this hurdle is raised, it would have to be complied with.

In PFO cases there is effectively a presumption in favour of an exclusion in cases where there is some doubt that the Respondent may be lying and have other free assets available; see e.g. SOCA v Azam [2013] 1 WLR 3800. Suspicion is not enough, and the Respondent cannot be asked to prove a negative.