Lawyers warn that the FCA’s prosecution powers remain “vulnerable” despite the overturning of a controversial decision to throw out a land banking fraud case.
In April 2013 the FCA charged eight men with land banking fraud and carrying out a regulated activity without authorisation.
A judge earlier this month threw out the case against five of the individuals on the basis that they would not receive a fair trial because they could not get proper legal representation following cuts to legal aid.
The case was classified as a “very high-cost case”, meaning the trial was expected to last over 60 days. The Government has introduced a 30 per cent cut to fees paid to solicitors and barristers for VHCCs as part of plans to cut £220m from the £2bn annual legal aid budget.
The Court of Appeal has now overturned the original ruling following an appeal by the FCA.
Handing down the judgment at the Royal Courts of Justice in London last week, Sir Brian Leveson said the ruling involved “errors of law or principle”.
He urged the Government and legal profession to resolve the dispute over legal aid cuts but said the case may still be thrown out if representation cannot be found.
Sir Brian said: “We are not saying there could not come a time when it may be appropriate to order that this indictment be stayed. That time, however, remains very much in the future and problems about representation will have to have developed considerably before such an exceptional order could be justified.”
The defendants will now seek legal representation ahead of a potential trial date in January 2015. They have 28 days to decide whether to appeal the latest decision.
DWF Fishburns partner Harriet Quiney says: “It is not clear if the defendants will be able to find representation in time for a trial in January.
“This could still go pear-shaped for the FCA so its strategy of prosecuting high-profile cases remains vulnerable. The question is how long the defendants’ search for representation will be allowed to go on for.”
The defendants have already approached 70 sets of chambers without success. They could also approach the Public Defender Service, a department of the Legal Aid Agency, but experts say it is unclear whether enough barristers would be available.
According to the Court of Appeal judgment, at the end of April the PDS had no barristers available, although at least a dozen are due to join the service later in the year. The PDS will allocate barristers in upcoming VHCC cases on a “first come, first served” basis.
Pinsent Masons corporate crime partner Barry Vitou says: “There is a very limited number of barristers in the PDS who could take on a case of this nature and they will be in high demand.
“The most likely outcome is that the defendants will be forced to represent themselves. In practice, the judge will have to play the role of defence counsel to give some semblance of fairness to the process and the criminal court process will become clogged and more expensive.”
4 Pump Court barrister Peter Hamilton says: “If it goes to trial without representation, the judge may have no choice but to throw the case out because justice cannot be done.”
The charges relate to Plott UK, European Property Investments and Stirling Alexander, which are alleged to have taken over £5m from investors between 2008 and 2011.
The regulator says: “The FCA welcomes the Court of Appeal’s decision. It is committed to pursuing criminal action in appropriate cases and is pleased that this case can
now proceed towards trial.”
ADVISER VIEW: Dennis Hall
“We need protection for markets so it is important that the FCA is able to prosecute. But on the other hand, everyone deserves a fair trial. It seems the Government’s costcutting measures are working against the public interest.”
Dennis Hall is managing director at Yellowtail Financial Planning
I thought the case had been decided?
The case was thrown out by Southwark Crown Court earlier this month but the FCA appealed and the ruling has now been overturned by the Court of Appeal. The defendants could launch a further appeal at the Supreme Court.
What happens now?
The defendants will seek representation again from chambers and the Public Defender Service. If representation can be found, the case will proceed to trial in January 2015. If it cannot, the case could be delayed further, proceed without representation or be thrown out.
Could the Government change its position on legal aid cuts?
Court of Appeal judge Sir Brian Leveson said the “impasse” between the Government and the Bar is standing in the way of justice. Some say this case has been embarrassing for the Government and may prompt it to act but others argue it is unlikely to change its position.
How important is this case for the FCA?
Lawyers say if the FCA fails to get the case to trial it will have to completely rethink its strategy of credible deterrence through high-profile prosecutions. Cases relating to insider dealing, boiler room fraud and Libor manipulation would all be classified as “very high-cost cases”.