Final countdown to the EU Settlement Scheme deadline
In December 2005, when the Government announced the introduction of the Asset Recovery Incentive Scheme (the Scheme) under the Proceeds of Crime Act 2002 (the Act), it could hardly have been envisaged that confiscation proceedings would be brought in respect of the range of offences that routinely now trigger financial investigations.
In practice, the Scheme offers the opportunity to local authorities to raise revenue by receiving a proportion of the monies recovered following the making (and of course payment) of confiscation orders. Fifty percent of confiscated assets go straight to the Home Office, whilst the remaining half is split between the investigator, the prosecutor and the enforcer.
What was the thinking behind the scheme? Was it designed for local authorities to promote the Act, thereby serving as a deterrent to would-be criminals, or was it actually conceived as a means of raising revenue? If so, who for? It is hard to imagine the law-makers were so prescient as to envisage the swingeing cuts that would be visited upon local authorities within four years of the Scheme’s inception.
Prior to the Scheme, it rarely, if ever, occurred to a local authority prosecutor to bring confiscation proceedings as they were considered complicated, costly and prolonged with no benefit apportioned to the local authority. Now, given the Incentive Scheme, on every occasion that they do initiate proceedings under the Act, the Home Office stands to benefit.
What has been the effect of the Scheme? First, local authorities are now taking on prosecutions that previously they would have balked at or sought to surrender to the safe custody of the Crown Prosecution Service, the Serious Fraud Office and more latterly the Serious and Organised Crime Agency. Second, confiscation proceedings are now being initiated following convictions for offences that previously would not have attracted them.
One such area that has seen a proliferation of confiscation proceedings is planning enforcement. Very often, the motivation for planning offences is financial and accordingly they lend themselves very well to the confiscation process.
The most common of these offences is failing to comply with the terms of an enforcement notice, contrary to section 179 of the Town and Country Planning Act 1990 (as amended by the Planning and Compensation Act 1991). Traditionally, planning breaches take place over a considerable length of time as the home owner/businessman/developer seeks to ‘remedy’ the breach through retrospective planning consent. In consequence, there may be an obvious financial benefit being derived from the ongoing offence, but of more concern to the defendant, should be that the lifestyle provisions of the Act tend to be applicable. The financial element of these offences is recognised at section 179(9) of the Act, which states:
(9) In determining the amount of any fine to be imposed on a person convicted of an offence under this section, the court shall in particular have regard to any financial benefit which has accrued or appears likely to accrue to him in consequence of the offence.
The question arises as to whether the purpose of this subsection is merely to act as guidance in assessing the criminality of the offence or whether the fine should mirror the benefit. If the latter, does this not create a possible tension with the confiscation regime?
A mirror provision also appears at section 9(5) of the Planning (Listed Buildings and Conservation Areas) Act 1990.
The reality on the ground is that those in breach of planning regulations now have much more to fear from confiscation proceedings than from the statutory financial penalties.
In the case of R v Del Basso  1 Cr.App.R. (S.) 41, the Court of Appeal loaded some heavy ordnance when firing a shot across the bow of those that would seek to ignore enforcement orders. The defendants ran a “park and ride” service on land they owned, in direct contravention of an enforcement notice prohibiting such use (an application for planning permission had been refused twice). The sentencing Judge had formed the clear view that the defendants had factored in the likely financial penalties as an operating expense, and concluded that it remained in their interests to continue the operation. If that was right, the Court of Appeal firmly disabused them of that notion. The fines received at first instance were limited - £3,000 on each of five counts for the first defendant, with £20,000 costs. The gross benefit of the operation, however, was assessed at £1,881,221.19.
The defendants had set up a limited company for the purposes of the Park and Ride operation, separate from their core business. They sought to argue that their conduct in setting-up and running the parking company was inherently lawful i.e. conducted towards lawful ends and using lawful means (the company was, in every other way, beyond reproach in the conduct of its business). Perhaps unsurprisingly, both the sentencing Judge and the Court of Appeal (Leverson, LJ, Treacy J, Coulson J) emphatically rejected that contention. The operation of the Park and Ride became unlawful the moment an enforcement notice was served and was not complied with.
Perhaps of even greater significance is the approach that the Court of Appeal took in respect of the determination of benefit. As has been observed, the parking companyoperated, aside from the defiance of the enforcement notice, as a legitimate business. It paid VAT, taxes, employees and third parties. The Court had to therefore determine whether the benefit accrued was net or gross of those legitimate business expenses. The Court of Appeal rejected the defence contention that the benefit ought to reflect the “real benefit”, that which the defendants “actually made”. Relying heavily on R v May  UKHL 28 and R v Nelson  EWCA Crim 1573, the Court held that a defendant “obtains” that which he owns, whether alone or jointly. In this instance, that was the gross receipts of the parking company. How those funds were used (here, in part, for motives described as “altruistic”), plays no part in the determination of benefit.
Del Basso adds nothing strikingly new to the law on confiscation. It does reaffirm that the swingeing provisions of the Act apply regardless of the nature and extent of the criminality. The property developer acting in defiance of planning regulations is every bit as much in jeopardy of forfeiting all and any “benefit” received as is a drugs king-pin.
Anecdotally, courts of first instance are seeing an enormous spike in the number of confiscation proceedings being brought by local authorities subsequent to planning enforcement proceedings. Recent examples include a £187,000 confiscation order made in respect of a conversion of a residential property without the proper consent. One local authority is seeking confiscation in amounts not dissimilar to Del Basso against a landlord that failed to have regard to the Houses in Multiple Occupation Regulations 2007 (relating to the conversion of single-dwellings into multiple flats). The message is clear – deliberate and concerted breaches of planning law are very much more than an operational expense: the consequences can go far beyond that which the miscreant property owner or developer could possibly envisage.
Richard Heller, Barrister, Dyers Chambers
Seth Levine, Barrister, Dyers Chambers
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