Irwin Mitchell has won approval to claim funds paid on account even though the client’s finances were later subject to a restraint order.

The national firm was acting for a client facing a Revenue & Customs investigation, who paid £5,000 on account of costs into its client account. A month later the Revenue & Customs Prosecution Office (RCPO) obtained the restraint order and objected when Irwins sought to transfer the money to its office account to settle the bill.

Judge Stone QC at Southwark Crown Court originally ruled that the firm would need a variation of the restraint order to do so and that the court had no power under the Proceeds of Crime Act 2002 to order one.

However, the Court of Appeal last week disagreed, saying that once the firm was entitled to payment of the sum, the client’s ‘"interest" in the relevant account became literally nominal’. The bill reflected work done and the firm had a contractual right to payment of the fees for which the money on account was paid, and so ‘we are unable to see that it would deplete the true value’ of the client’s assets or frustrate the purpose of the restraint order.

Irwin Mitchell partner Sarah Cleary told the Gazette the ruling would allow the firm to continue acting for privately paying clients facing serious tax fraud investigations.