Managing regulatory risks – costs in criminal proceedings
Recent changes regarding the recovery of costs in criminal proceedings will have major implications for companies charged with criminal offences (including health and safety and environmental prosecutions) as they will no longer be able to claim costs incurred in defending the prosecution if found not guilty.
The new practice direction on costs in criminal proceedings came into force on 7 October 2013 affecting criminal cases in Magistrates’ Courts, the Crown Court, the High Court and Court of Appeal. The practice direction seriously hinders the ability of companies to recover costs of defending criminal proceedings and largely reflects the changes introduced on 1 October 2012 by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (the “Act”).
Previously, the Magistrates’ Court and Crown Court could make a Defendants Costs Order (“DCO”) in favour of a corporate defendant where proceedings were discontinued or the company was acquitted. These typically allowed defendants to recover the costs of defending a prosecution (including advocacy costs, litigation services or experts fees). Following the changes, it is no longer possible for a DCO to be issued in favour of a company. This means that even if a company successfully defends a criminal prosecution, it will not be able to recover costs incurred in defending the proceedings.
The changes to recovery for costs for individuals are slightly less onerous but still significant. Where proceedings commenced on or after 1 October 2012, individual defendants may recover some defence costs but these will generally be restricted to Legal Aid rates. Where a defendant is acquitted, costs can be recovered in the Magistrates’ Court and on subsequent appeals to the high courts. Legal costs are not allowed in respect of proceedings on indictment. This means that where a case is heard in the Crown Court, defendants will be required to pay privately for representation unless they are able to qualify for Legal Aid. These changes will affect company directors who, for example, are charged with offences under the Health and Safety at Work Act 1974 or the Environmental Protection Act 1990.
The Act also included provisions to remove the maximum cap for offences sentenced in the Magistrates’ Courts where there is a stated maximum financial penalty of £5,000 or more. These provisions, which will allow magistrates to impose much higher fines, have not yet been brought into force and we await further guidance regarding how and when these reforms will be implemented.
The changes are principally driven by the Government’s desire to make cost savings and coincided with the introduction of the HSE’s fee-forintervention (FFI) Scheme - a cost recovery scheme which has resulted in increased costs for businesses where the HSE identifies a “material breach” of the law during a health and safety inspection.
Despite the escalating financial pressures it is likely that many companies will continue to defend prosecutions in order to prevent reputational damage which is one of the greatest risks associated with criminal prosecutions. However, many companies will now have to effectively pay for the privilege of being found not guilty of an offence, and it will be some time before the true impact of these changes can be assessed.
The publication of the new practice direction serves as a timely reminder that companies should focus resources on compliance solutions to avoid facing prosecution from regulatory authorities where possible. Robust procedures and policies should be put in place and appropriate legal advice sought to aid regulatory compliance and avoids breaches which may lead to prosecution. Companies should also review their insurance arrangements to check whether cover is in place for legal expenses/costs arising from criminal proceedings.
Scope of Aarhus Convention tested in private nuisance action
A recent High Court judgment has failed to clarify whether claimants in private nuisance actions can rely on the requirements of the Aarhus Convention that proceedings should not be “prohibitively expensive.” Therefore the litigation costs for an individual bringing such a claim are likely to be very significant following recent reforms on costs which mean that previous routes such as a Conditional Fee Agreement (CFA) plus After the Event (ATE) insurance are unlikely to be available.
The scope of the Aarhus Convention was tested in Alyson Austin v Miller Argent (South Wales) Limited when a resident living close to an opencast mining and a reclamation site brought a private nuisance claim for noise and dust pollution.
By way of background, the UK is under international obligation under the Aarhus Convention to guarantee rights of access to information, public participation in decisionmaking and access to justice with respect to environmental matters. The impact of the new cost rules in an environmental context will depend on whether a court is satisfied that an Aarhus Convention claim exists. The Civil Procedure Rules (“CPR”) defines an Aarhus Convention Claim as a “claim for judicial review of a decision, act or omission” subject to the UNECE Convention.
The Jackson reforms on costs integrate Convention rights into domestic law through codifying Protective Costs Orders (“PCOs”) in environmental claims. The rationale behind fixing costs in civil litigation is to ensure that any system for challenging decisions in environmental matters is open to members of the public and is not prohibitively expensive.
In the current case Mrs Austin sought an injunction to restrain the operation, and also claimed damages in respect of past nuisance. In the process, the claimant applied for a PCO so she should pay no costs to Miller Argent if she loses the claim, but that she should receive all her costs if she wins. A central argument in her case was that the nuisance arose because of a potential breach by Miller Argent of its planning permission, as required under the EIA Directive 2011/92/EU.
Referring directly to the treaty (rather than the CPR), Mrs Austin argued that the Aarhus Convention does not differentiate between private and public proceedings, and that as the claim would raise issues of public interest due to application of the EIA Directive, cost capping should apply.
The court held that the direct applicability of the Aarhus Convention is limited to those incorporated in the EIA Directive. Interestingly, the court did not directly deal with the question of the Aarhus Convention and private nuisance. Instead, it was decided that the EIA Directive was not engaged in this case, as the Directive only deals with the process leading to the grant of planning decision – not breach of planning conditions thereafter.
Had the EIA Directive been engaged, the court would have been bound to grant a PCO. In questioning the extent to which an injunction would have benefited the wider public, the court refused to make a PCO in favour of Mrs Austin. This issue is likely to continue to exercise the courts in 2014. Permission has been granted to the Court of Appeal to decide further on this matter and the issue will also be considered by the Aarhus Committee.
