Articles 3rd Mar 2015
R v Evans & Others
Those with more than a passing interest in the litigation of serious fraud, criminal procedure or costs would do well to read the three excoriating judgements in R v Evans and others, the last of which was handed down in mid-February. The trilogy marks yet another humiliating episode for the Serious Fraud Office, at a time when it must demonstrate its competence in order to survive its political critics.
In summary, the allegation was that the defendants (including two partners of a solicitors firm and one commercial silk) had conspired to defraud various public bodies by constructing a scheme to transfer the freehold of Welsh open cast mining sites from a company owned by one of them (Celtic) to a BVI company which they had established (Oak). The (very extensive) liabilities to restore the sites would pass with the freehold to Oak. The SFO's original case was that this was a sham transfer, that it was not a genuine arms-length commercial transaction and that it was done to deliberately prejudice the public authorities, who would be left with the burden of restoration, and to the advantage of Celtic (and the defendants) which would be relieved of the expense.
Things began to unravel when it emerged that the SFO's lead counsel had previously advised three partners of the solicitors firm who had reported the activities of their fellow partners to SOCA. Despite recognising the potential difficulties, the SFO nevertheless instructed him to prosecute, citing, inter alia, cost savings of 70 hours because he would not have to read into the case. The fact that his former clients were now Crown witnesses and that he might become a witness in any civil action were among the more obvious reasons why this arrangement was clearly a bad idea. An application to stay on the basis of his potentially conflicted position was only averted by his replacement.
Following the instruction of new counsel, the premise of the SFO's case fundamentally changed. This was largely responsible for the wholesale dismissal of the proceedings by Hickinbottom J: [2014] 1 WLR 2817. The SFO abandoned the notion that the freeholds had never, in fact, passed to Oak and instead accepted that they had so passed but that this had prejudiced the interests of the public authorities. For the first time, it was also suggested that the defendants had committed offences under the Fraud Act 2006 and that the victims were Celtic and Oak and not the public authorities. Hickinbottom J observed that the SFO had not approached the case with "particular analytical precision" and disagreed with the SFO's contention that conspiracy to defraud could comprise lawful means to a lawful end.
The SFO responded to the dismissal by applying for a voluntary bill of indictment. Fulford LJ, emphasising that the granting of a voluntary bill is an "exceptional course", refused the application and gave the SFO's arguments short shrift: [2014] EWHC 3803 (QB). The SFO added what was described as the "fourth iteration" of its case, that the defendants had additionally committed offences under the Companies Act 2006 and the Insolvency Act 1986.
The Court found that Hickinbottom J had not erred in law and that it was not in the interests of justice to allow the prosecution to reformulate the legal basis upon which the case was brought: "The effect of granting a bill of indictment…would be to allow the prosecution to treat the original proceedings for all practical purposes as a dummy run, and, having realised that they had – on more than one occasion – chosen the wrong legal basis, to permit the SFO to bring virtually the same proceedings but in a form in which they could have been brought if proper thought had been given by the prosecution to them in the first place".
The denouement came in the form of the three day costs hearing: [2015] EWHC 263 (QB). In a caustic judgement, Hickinbottom J barely concealed his disapproval of the way in which the case had been conducted. He underlined that the familiar obligation on a prosecutor to mount a charge upon a clear basis lay particularly heavily with the SFO because of the complexity of the cases it dealt with and because it was concerned with both the investigation and prosecution of crimes.
The Court observed that, "as a result of the failure to analyse the case properly, the case presented to the Applicants changed with the wind, most iterations in turn collapsing under the slightest breeze, to the real prejudice of the Applicants. It is simply not acceptable for the SFO to pursue a substantial prosecution without having properly tested the legal basis upon which that prosecution is brought, and to maintain that prosecution through a number of fundamental changes still without performing such an analysis." The judgement continued: "The [various] iterations were attempts to save a fatally-holed ship…"and that the SFO were…"casting round for some means of saving the case and grasping at a succession of straws in the form of cases with, if anything, decreasing rather than increasing legal coherence and merit."
The total costs claimed exceed £7 million. The Court found that the SFO had acted improperly and were thus liable for the costs of the criminal proceedings under s.19 POA 1985 and were liable for the costs of the voluntary bill proceedings on an indemnity basis.