Note: this article relates to the English court system but may be relevant to Scottish companies facing an English action.
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 from the date the costs are incurred in defending the prosecution if found not guilty.
The new practice direction on costs in criminal proceedings came into force on 7th October 2013 and affects criminal cases in Magistrates’ Courts, the Crown Court, the High Court and Court of Appeal. The practice direction hinders seriously 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.
Following the changes, a Defendant’s Cost Order (DCO) cannot be made in favour of companies in the Magistrates’ or Crown Court, so defendant companies are unlikely to recover their costs where proceedings are discontinued or acquitted.
Previously DCOs typically allowed defendants to recover the costs of defending a prosecution (including advocacy costs, litigation services or experts fees) where proceedings were discontinued or the company was acquitted.
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. However, these will be restricted generally 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. Therefore, in the Crown Court, defendants will be required to pay privately for representation unless they 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 on 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 driven principally by the Government’s desire to make cost savings and coincided with the introduction of the HSE’s fee-for-intervention (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 effectively have to 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 avoid 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.