Indemnity costs against Serious Fraud Office in up to £7m judgment

Indemnity costs against Serious Fraud Office in up to £7m judgment


The SFO has been ordered to pay what may be one of the largest costs bills in the fraud agency’s history, up to £7 million, after the collapse of its prosecution of former directors and legal advisors of Welsh coal mining company Celtic Energy.

The ruling of Hickinbottom J (available here) is now the leading authority on applications for costs against prosecutors under section 19 of the Prosecution of Offences Act 1985.

James Potts has acted in the case since 2013, after the SFO brought charges against six defendants of conspiring to defraud mineral planning authorities by transferring the restoration obligations for four open-cast coal mines in South Wales to companies in the British Virgin Islands. James was led by Jonathan Caplan QC in an application for the case to be stayed as an abuse of process, on the grounds that prosecution counsel had a conflict of interest because he had previously advised three prosecution witnesses. The charge was dismissed by Hickinbottom J in a ruling in February 2014.

James was then led by Michael Beloff QC and Gabriel Moss QC when an application by the SFO for a Voluntary Bill of Indictment to restart the prosecution was refused by Fulford LJ in November 2014 (see judgment here).

In the latest ruling, Hickinbottom J found the SFO’s conduct of the prosecution had been “improper” and unreasonable, and criticised the SFO for putting forward a “sequence of different cases that stood no real prospect of success” and “grasping at a succession of straws” in an effort to find some means of saving the case. There were “regular, cataclysmic” changes to the SFO’s case in “attempts to save a fatally-holed ship”, which operated to the “real prejudice” of the accused. The Judge ordered the SFO to pay costs of the criminal proceedings under section 19 of the 1985 Act, and indemnity costs of the Voluntary Bill application.

The ruling gave important guidance on the standard of conduct required to justify a costs order against a prosecutor, doubting the High Court’s previous decision in Director of Public Prosecutions v Sheffield [2014] EWHC 2014 (Admin). The judgment will be highly significant given that acquitted defendants no longer have the right to recover their legal costs from central funds following changes under the Legal Aid, Sentencing and Punishment of Offences Act 2012.

The case has been widely reported in the press:

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