Social Landlords acting on Housing Fraud
Social Housing Fraud Prosecutions
The right of private prosecution is expressly preserved by section 6 of the Prosecution of Offences Act 1985.
On 23 May 2018 Lord Justice Gross and Mr Justice Sweeney handed down judgment in R (on the application of Martin Kay and Scan-Thors (UK) Limited) v Leeds Magistrates’ Court (Defendant) and Marek Karwan (Interested Party)  4 WLR 91, allowing a judicial review challenge to 2 decisions of a district judge at the Magistrates’ Court in Leeds:
1. Her refusal to dismiss summonses for offences of fraud between 2007 and 2012, which had been issued against the Claimants on the basis of an information laid at the behest of the Interested Party.
2. Her refusal to stay proceedings as an abuse of process, having decided that this issue should be determined in the Crown Court.
The District Judge’s decision and the summonses were quashed because of breaches of the duty of candour on the part of the private prosecutor, Mr Justice Sweeney concluding:
“38. As this case demonstrates, the grant of summonses, typically conducted ex parte, can have far reaching consequences. Compliance with the duty of candour is the foundation stone upon which such decisions are taken. In my view, its importance cannot be overstated.
39, The DJ undoubtedly had the power to deal with the breach of the duty of candour in this case by quashing the summonses. Logically, that was the first issue that she should have engaged with, but she failed to engage with it at all.
40. Whether breach of the duty of candour comes under the broad umbrella of abuse of process, or falls to be dealt with in its own right, applying the test most favourable to Mr Karwan (see  above), namely whether the inaccurate and/or non-disclosure would have made a difference to the judge’s decision, my answer is, unhesitatingly, “yes”, Even if the application had not been refused without more, it would inevitably have resulted in more focussed enquiries, the notification of the Claimants, and (in my view) the Claimants being heard.”
Costs were determined on 26 October 2018, they being awarded against the Interested Party on an indemnity basis, Mr Justice Sweeney explaining:
“21. In our view there is no merit in either the Interested Party’s principal or alternative submissions under this heading. He was the driving force in obtaining the summonses in significant breach of his duty of candour, and in persuading the District Judge to act as she did (whilst still failing to disclose the content of the Polish Regional Prosecutor’s second written justification). In all the circumstances we conclude that it is not appropriate to make an order for costs out of central funds in relation to the proceedings in the Magistrates’ Court or in this Court, nor to order that the Interested Party should only be liable for a portion of the costs. Put bluntly, these submissions are misconceived….
28. The Claimants underline that, for Orders on an indemnity basis, proportionality is irrelevant. They submit that Mr Kay is a man of 71 of impeccable good character who, when faced with serious charges of fraud, was entitled to instruct lawyers with the necessary skill and experience to deal with such a case, and that the amount of work that was carried out by his lawyers was entirely reasonable – including proper delegation with the majority of his solicitors’ work being done at associate rather than partner level. The Claimants draw attention to R (Haigh) v City of Westminster Magistrates’ Court  EWHC 232 in which the Court made an Order for costs of £190,000 against a private prosecutor for the Magistrates’ court proceedings alone (albeit that two sets of defence lawyers were involved). The Claimants went on to rebut each of Interested Party’s submissions in relation to particular items of expenditure.
29. We have considered these submissions and the Amended Costs Schedules, having regard to s.51 of the Senior Courts Act, CPR 44.2 and s.19 of the Prosecution of Offences Act 1985. In the result we have decided, in the exercise of our discretion, to assess costs summarily in the total amount of £250,000. We are satisfied that, looked at robustly and in the round, this figure does justice to both parties. Accordingly, we propose to make an Order in favour of the Claimants, here and below, in that total sum – payable within 28 days. The Claimants must draw up a draft Order accordingly.”
This case not only serves as a warning to would-be prosecutors that their duty of candour must be taken seriously but also, in the substantive judgment, provides a helpful update on the procedure applicable to bringing such a prosecution.