Receiver fees from assets discharged from restraint not compatible with ECHR

CPs v Eastenders Group [2012] EWCA 2436 is a fascinating decision of the Court of Appeal in which Lord Justice Laws gives the lead but ultimately dissenting judgment. The CPs had obtained restraint orders over the assets of two defendants and, by piercing the corporate veil, over company assets belonging to Eastenders and also an order appointing a management receiver. The defendants were being investigated for fraud on the basis of evasion of duty for alcohol and tobacco. The defendants were never charged with any offence and the restraint orders were ultimately discharged but the receiver exercised a lien over the assets of the company for payment of his fees and expenses. Eastenders sought an order for payment by the CPs for an amount of equivalent to that which the receiver was seeking from them. Mr Justice Underhill at first instance ruled that the CPs should pay the receivers fees and costs of the receiver and those of Eastenders. The CPs appealed. Lord Justice Laws examined the established common law principle that a receiver receives payment from receivership assets and that this remains the paradigm arrangement within the POCA regime by virtue of section 49(2)(d) of the Proceeds of Crime Act 2002. He found that any subsequent acquittal of the defendant or quashing of a confiscation order would not defeat that entitlement. The right of the receiver to recover his fees was derived from his agreement but could only be compliant with Article 1 of the European Convention on Human Rights (ECHR) in the event that his appointment was in accordance with the law (to which see the second sentence in Article 1). If the conditions upon which the restraint order was made and the receiver appointed are not satisfied then there is no lawful basis for the deprivation of the property and Article 1 is infringed. In this case, the Court of Appeal had already ruled they were not. Accordingly the CPs appeal against the decision that the receiver ought to be paid from the assets of the company was dismissed although its appeal against the decision that it ought to pay those expenses itself was allowed leaving the receiver only with a potential action at common law against the CPs.