Confiscation proceedings increasingly form part of local authority prosecutions. The benefit to the defendant from the commission of the kind of offences prosecuted by local authorities is often not as easy to calculate as offences which the courts are more familiar with. This case showcases the kind of difficulties that the prosecution can experience and serves as a reminder of the importance of the criminal charges that form the basis of the conviction.

Gary Pons examines R v Arun Bajaj [2020] EWCA Crim 1111 in more detail and assesses the future implications of judgment for Lexis Nexis PSL.

What are the practical implications of this case?

  • It is important that the charges correctly reflect the full ambit of the prosecution case, as they are the starting point for calculating benefit.
  • Convoluted and speculative arguments in relation to benefit are to be avoided.
  • Dealing with discrete arguments in confiscation proceedings is to be avoided.
  • Closer cooperation between the planning and housing departments of a local authority is desirable.
  • A reminder that confiscation proceedings are designed to recover the proceeds of a defendant’s crime and not to punish.

What was the background to the case?

Mr Bajaj was involved in the business of renting out properties. One of these properties was 190A/190B Seven Sisters Road. He granted a lease to his co-defendant Mr Ferraiulo in respect of 190B and agreed that Mr Ferraiulo was find tenants for 190A and pass the rent on. Mr Ferraiulo made significant and unauthorised alterations to the property, designed to increase the number of rooms and therefore the rental income. These alterations led to overcrowding and poor living conditions, which eventually attracted the attention of Islington Borough Council. In summary, 20 people were living there when the lawful maximum was 8.

Mr Bajaj and Mr Ferraiulo were prosecuted for offences of failing to comply with the regulations that exist in relation to Houses in Multiple Occupation (“HMO”) under section 234 of the Housing Act 2004. They were both convicted, and the case was committed to the Crown Court for confiscation and sentence. The prosecution decided to pursue confiscation proceedings against Mr Bajaj alone. It is not clear from the judgment why that decision was made.

The way in which the charges were drafted meant that the relevant criminality took place on a single occasion rather than over a period of time. This led the prosecution to concede that the benefit from the commission of the offences was limited to a single day. (Panayi [2019] EWCA Crim 413).

The prosecution argued that Mr Bajaj’s benefit was the amount that he had saved by not properly and lawfully housing the 12 additional occupants at 190A/B Seven Sisters Road. Their argument was that this saving represented a pecuniary advantage to Mr Bajaj. The costs of bringing 190A/190B Seven Sisters Road up to a standard for 8 tenants was £14,305, for the additional 12 other occupants it was either £345,840, £431,000 or £917,000 depending upon whether or not additional land was needed and if it was whether it was leased or purchased.

HHJ Clarke QC decided that the purported savings did not amount to benefit. He was not satisfied that the defendant had a duty to house the tenants lawfully or that any benefit arose from breaching that duty. In his view the natural benefit here was the rent that was obtained. Accordingly, he assessed the amount of benefit was as £200, being the amount of rent that was obtained on a single day.

The prosecution appealed against that decision.

Why did the Court decide?

The Court expressed surprise that the prosecution did not:

  • Seek to calculate benefit with regard to the amount of rent that have been received during the breach of the Regulations.
  • Bring a prosecution for offences related to planning legislation. It is not known whether a planning enforcement notice was ever served. If it was not, it should have been.

The court was critical of the decision to determine whether or not the Defendant had obtained a pecuniary advantage as a preliminary issue. In confiscation cases dealing with particular issues as a discrete preliminary issue was an exceptional step (Parvaez [2017] EWCA Crim 873.

The court were firm in the conclusion that the prosecution’s approach to calculating benefit by reference to the notional costs of providing appropriate and regulation-compliant, alternative accommodation for the 12 occupants was too broad and too speculative. There is no doubt that avoiding costs that a defendant is lawfully obliged to pay can amount to a pecuniary advantage. In this case the Defendant was not under any lawful obligation to house the 12 occupants at all. Accordingly, what he obtained by unlawfully housing them was the rental income.

The court were concerned that the prosecution approach was unduly focused on the fact that the defendant was a man of means who needed to face financial consequences because of what he did. Punishment is a matter for sentence and not confiscation proceedings which are solely designed to recover from the defendant the proceeds of his criminal conduct.

The Court certified this case as one that may be cited so that other local authorities are aware of the limitation of bringing confiscation proceedings in cases like this.

What lessons relating to the prosecution of HMO offences should local authorities take from this case?

As Lord Justice Davis said in the final sentence of his judgment this case is a reminder of the importance of drafting the relevant charges correctly, because in the event that they are not, it will be impossible to properly assess benefit. Where a local authority is dealing with HMO and/or breaches of planning enforcement notices, the most obvious benefit from the commission of the criminal offence is the rent. In simple terms but for the commission of the offence the rental income would not have been received. The criminal charges need to reflect that this is the offending that is alleged and whether it has occurred over a period of time.

Case details

  • Court: Court of Appeal, Criminal Division
  • Judge: Lord Justice Davis, Mr Justice Sweeney and His Honour Judge Katz QC
  • Date of judgment: 21 August 2020

Gary Pons is a talented and dedicated barrister. His approach to cases is distinguished by its careful preparation and measured execution. Gary is ranked in both Chambers and Partners and the Legal 500 for his work in the field of POCA and Asset Forfeiture work (all circuits).