A restraint order has the effect of ‘freezing’ a defendant’s assets during a criminal investigation. Section 41 of the Proceeds of Crime Act 2022 (POCA) grants the court this power. Restrain orders are usually imposed to prevent assets from being moved or liquidated and protects them for potential confiscation if the Defendant is found guilty of the offence.

When faced with a restraint order, a defendant is unable to use their own funds to pay their own criminal legal expenses under section 41(4) of POCA. As it is preferred in the public interest to maintain the potential available amount for confiscation rather than allowing a Defendant to dissipate their own funds. Therefore, the defendant cannot seek to vary their restraint order to meet the costs of defending against criminal prosecution for the offence which gave rise to the restraint order.

However, section 41(3) of POCA provides the Crown Court a discretion to permit assets to be released for ‘reasonable legal expenses’. This discretion is usually implemented in unrelated civil matters for the Defendant.

R v Luckhurst – Court of Appeal (2022)

In the case of R v Luckhurst [2022] UKSC 23 the CPS opposed Mr Luckhurst’s application to vary the order so that he could fund legal representation in respect of civil proceedings brought against him.

Luckhurst was a financial adviser who was alleged to have introduced clients to a Ponzi scheme before stealing some of the money they had invested. Some of the investors brought civil proceedings against Luckhurst to recover their losses. The CPS opposed the variation, stating that Section 41(4) does not permit a variation to cover legal expenses for civil proceedings arising from similar facts to the criminal proceedings.

In the first instance, it was found that section 41(4) did not permit any such variation. The Court of Appeal disagreed. The Supreme Court then ruled unanimously to dismiss the appeal from the CPS, finding that the correct interpretation of the statute does allow for a variation order to be granted for covering costs of legal expenses in these circumstances. Although applications to vary orders in this way may be refused, they are not prevented by section 41(4).

Reasonable living expenses

In the same case, it was permitted that Luckhurst may spend £5,000 a month for his ‘reasonable living expenses’ to maintain the life he had prior to the restraint order being made in accordance with 41(3)(a).

The Crown submitted that Luckhurst’s previous lifestyle was in fact irrelevant and what is considered as ‘reasonable living expenses’ should be considered objectively. The appeal was allowed only in part.

Restraint orders differ from non-proprietary civil freezing orders. If there was no objective limit applied to the spending on ‘reasonable living expenses’ then there is a risk of injustice if the defendant is simply permitted to spend without any reasonable, objective limit applied to that spending. As per Section 69(2), the realisable property must be maintained to be available for meeting the value of any confiscation order. That objective is defeated if permitting the continuation of meeting one’s previous lifestyle reduces the amount which would have been available if a reasonable limit had been imposed upon that spending. Such permission would also contradict the overall objective of POCA 2002 by allowing someone under criminal investigation to have such a lifestyle. The fact that living expenses were incurred on unsecured credit did not prevent them being permitted under a restraint order. Serious Fraud Office v Lexi Holdings Plc (In Administration) [2008] EWCA Crim 1443 was followed in that respect.

Section 41(4) therefore produces a prohibition on releasing funds for “legal expenses relating to the offence”. The prohibition does not always apply to ‘reasonable legal expenses’ which have arisen in civil proceedings, even though the facts are similar to those in the criminal proceedings. Determining what is considered reasonable living expenses is an objective test. A defendant will not necessarily be allowed to maintain the lifestyle they had before the restraint order was made.