Islington landlord defeats claim for £1 million confiscation order in the Court of Appeal

Monday, October 12th, 2020 - By Richard Atkins QC and Ben Close, St Philips Barristers

In the recent Court of Appeal case of The London Borough of Islington v Bajaj, we successfully defeated a Local Authority attempt to obtain a near £1 million confiscation order and maintained the original order that we had argued for in the Crown Court of just £200.00.

We represented a landlord prosecuted by the Islington Borough Council for offences relating to unlicensed houses of multiple occupation. During protracted litigation concerning two properties in North London, the client was acquitted of over half the charges he faced following a trial at the Highbury Corner Magistrates’ Court and was then committed to the Crown Court for confiscation proceedings.

Once in the Crown Court, the Local Authority adopted what the Court of Appeal later described as “a highly complex (as well as indirect) approach” to calculating the landlord’s ‘benefit’ pursuant to the Proceeds of Crime Act 2002.

To maximise the potential confiscation order, the Local Authority argued that the landlord’s benefit amounted to the costs avoided in not providing lawful accommodation for the tenants overcrowded into the property. The Local Authority initially put four options before the Crown Court Judge:

• (1) constructing an extension at the property;
• (2) purchasing a new property;
• (3) leasing a property; or
• (4) building a new property.

The figures for the varying options, and thus the benefit alleged, and confiscation order sought, ranged from £345,840 to £917,000.

The Local Authority jettisoned the extension option when it realised that its planning department would not grant planning permission for an extension. We had no doubt that the other approaches were also flawed. First, it meant that the more land the landlord owned, the lower the benefit figure would be, as it was cheaper to build on already owned land than to purchase a new property. Second, as landlords will be aware, sometimes a Local Authority will require a landlord to provide alternative temporary accommodation where premises are deemed unsuitable. As the Court of Appeal noted in this case, however, the “cost of providing temporary hotel or hostel accommodation for the occupants seems not to have featured as part of the prosecution’s thinking.“

We argued that the Local Authority’s approach appeared designed to maximise the confiscation figure (of which they would receive over 35%) rather than trying to discern the correct level of benefit within the terms of the legislation. The Local Authority denied that this featured in their thinking when considering whether to pursue confiscation proceedings.

In the Crown Court, the Judge agreed that the Local Authority’s approach was incorrect. That left the prosecution with recourse, as we had argued, only to the rent which the landlord received.

On the particular facts of the case, because of the way it was charged, we were again able to argue, successfully, that it should be restricted to a single day’s rent of £200.00.

The Local Authority appealed the Crown Court Judge’s finding, but the Court of Appeal reached the “clear view” their application should be refused finding that their approach to benefit was “far too broad, indeed speculative” to have a sufficient connection with the conduct alleged. Key to the Court of Appeal’s decision was that there was no lawful obligation to house the 12 “overcrowded” occupants. The Court of Appeal was not impressed with the Local Authority’s approach and certified its judgment “as one which may be cited: so that other Local Authorities are aware of the prospective limitations on pursuing confiscation proceedings ‚Ķ in the way which occurred here.“

The judgment, however, also represents a warning to landlords. The Court of Appeal was sympathetic to the argument that the costs of putting the property into a proper state of repair could have been a benefit. The problem in this case was that the cost of repair was disputed and, procedurally, the Court of Appeal was unable to revisit the figure. It had been the subject of evidence in the Crown Court when we successfully argued that the Local Authority’s figures could not be relied upon. Confiscation orders in future cases may be sought on this basis.

The determination of the Local Authority in this case should though serve as a warning to landlords. If landlords fall foul of the law and are prosecuted (and the Court of Appeal suggested more emphasis should be placed on the Enforcement Notice regime when prosecuting), they can expect to face Crown Court confiscation proceedings. When that happens, there will need to be careful scrutiny of the prosecution’s approach to calculating benefit in this fast-changing area of law. Otherwise, landlords may find themselves the subject of expensive confiscation orders, with lengthy periods of imprisonment if the order is unpaid.

A copy of the Court of Appeal judgement can be viewed here.

The authors of this blog, Richard Atkins QC and Ben Close from St Philips Barristers are available for instruction in similar cases and can be contacted via Phil Jones (email crime@st-philips.com).

Please note that the views and opinions expressed in these blogs are those of the author and do not necessarily represent the views of London Property Licensing. These blogs are designed to stimulate discussion and debate within the property industry. This article does not represent legal advice and should not be treated as such.

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