Tuesday, 18 December 2018

Eye-watering confiscation orders


I drew attention more than eight years ago in this blog (in June 2010) to the confiscation orders that can be made by the Crown Court under the Proceeds of Crime Act 2002 (‘POCA’). The Act was primarily intended to enable the confiscation of the proceeds of drug-dealing and similar organised crime, and it took LPAs some time to appreciate that the Act was not limited to that type of criminal activity, but could be used in any case where a criminal offence has continued for more than six months and where the offender has ‘benefitted’ from the conduct which constitutes the offence, to the tune of not less than £5,000, provided that they are either convicted in the Crown Court, or sent to the Crown Court for sentencing.

The case which originally prompted me to blog on this topic was Basso & anor v. R. [2010] EWCA Crim 1119, which established that the proceeds of crime in respect of which a confiscation order can be made are the gross proceeds, and not simply the ‘profit’ which the offender made (net of any overheads, expenses, etc.).

Despite this and other examples to which I drew attention in this blog in 2010 and 2011, it seemed to take LPAs a long time to make full use of confiscation orders under POCA in the Crown Court. However, when they began to do so more frequently, some spectacularly large confiscation orders began to be made. Noting this trend, I have been meaning to write the present blog post for some time, because anyone who is tempted to ignore an enforcement notice that has taken effect (either in the absence of an appeal or following the dismissal of an appeal) should be warned that non-compliance could become extremely expensive for them if they are deriving significant income from the unlawful development.

It is not unusual nowadays for confiscation orders in respect of failing to comply with an enforcement notice to run into hundreds of thousands of pounds. Orders of over a million pounds are not unknown, and the highest amount of an order of which I am currently aware totalled more than £4,330,000! (This confiscation order was backed by a threat of 8 years’ imprisonment if the sum was not paid.)

These cases are usually concerned with unauthorised residential conversions or extensions, which have then been let out, and the amount of the confiscation order simply reflects the gross receipts from that illegal activity, calculated from the date by which the enforcement notice should have been complied with. Airport parking is another activity which might well be vulnerable to a confiscation order, and there are no doubt other developments which yield a significant income and which could therefore be the subject of an application to the Crown Court under POCA.

I have no sympathy with the offenders who have been on the receiving end of these confiscation orders. They knew that what they were doing was a breach of planning control, they knew that once the enforcement notice took effect they had to comply with it, and they knew (or should have known) that from the date on which the compliance period expired they were committing a criminal offence for which they were likely to be prosecuted.

There is, however, one little word of warning for LPAs, in the form of the decision of the Court of Appeal in R. v Knightland Foundation and another [2018] EWCA Crim 1860. This was a case where planning permission had been granted for a 14-bed HMO, but an 18-bed HMO had been created. However, officers of the LPA (Islington LBC) indicated that an 18-bed hotel might be acceptable in planning terms, notwithstanding that an enforcement notice against the unauthorised development had taken effect by this time. The council’s enforcement team were nevertheless determined to press on with a prosecution in respect of non-compliance with the enforcement notice and to apply for a confiscation order under POCA, whatever the result of the planning application for the alternative development that had by now been awaiting determination for some considerable time.

When the application for a confiscation order came before the Crown Court, the judge found that the council’s enforcement team had not given material consideration to the pending 2016 planning application in their decision to prosecute and to press for a confiscation order. The judge accepted that the defendants may not have had a legitimate expectation that their planning application would be granted, but they did have a legitimate expectation that it would be determined on its merits measured against relevant criteria. The evidence indicated to him that, despite the enforcement officer’s efforts to influence members of the Planning Team against giving permission, the recommendation of the team would have been to grant permission.

It seems that the Planning Team were then persuaded to refuse permission, irrespective of its merits, solely or mainly due to the potential impact that a grant of planning permission might have on the prosecution and associated POCA proceedings. The judge concluded that the basis of the decision-making process was that nothing should hamper the prosecution or the POCA proceedings. The judge described the way in which the 2016 application had been handled as "improper". He found that it tainted the whole process, both as regards the planning decision and the initiation and continuation of the prosecution. The prosecution had as its focus maximising the returns to the authority from a POCA order.

It was this decision that the LPA sought to challenge in the Court of Appeal, but their appeal was dismissed and the judge’s refusal to entertain an application for a confiscation order under POCA in this case was upheld.

Offenders who have failed to comply with an enforcement notice can take little comfort from this case, which clearly turned very much on its own facts, but Knightland nevertheless serves as a warning to LPAs not to get carried away by their determination to obtain a confiscation order under POCA. They must maintain an objective approach, and deal with each matter on its merits, taking all material considerations into account, including any pending planning application if there is some likelihood that this might be granted.

© MARTIN H GOODALL

2 comments:

  1. Martin, thank you for another interesting post. I have been observing the eye-watering amounts of some of the awards under the POCA but often wondered whether these amounts are practically recoverable or do they serve more as a headline deterrent to others. For example, if the breach of planning is made by a limited company and the proceeds have been received by the limited company, the company can be structured, so that it holds little assets in way of land, buildings, machinery or stock. These can be held by other companies and individuals but used by the company in breach through finance arrangements, leases etc. If the company in breach of planning and the subject of the order has little or no assets is there anything that can be practically confiscated or does the Proceeds of Crime Act have the power to follow the money to other companies and individuals?

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    1. I do not know the precise details of the spectacular £4.3 million confiscation order earlier this year to which I referred in this blog post, but there was certainly a default order in that case that would have resulted in a lengthy term of imprisonment in the event of non-payment. In many of these cases, the defendants are individuals, and so are susceptible to such a threat. Where a company is concerned, I appreciate that “it has neither a body to be kicked, nor a soul to be damned”, but it may be possible (subject to the evidence) to put individual directors in the frame as well as the company. Not being familiar either with company law or with criminal procedure, I am unable to say how this can be achieved in practice, but I suspect that there may well be ways of ‘lifting the corporate veil’.

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