Background

The respondent and a co-accused, Mr Ferraiulo, were connected with two properties in North London, 190 Seven Sisters Road and 147 Grosvenor Avenue. An agreement was reached, whereby Mr Ferraiulo would manage the properties for rental purposes. Mr Ferraiulo made substantial, unauthorised alterations to both properties which increased the number of rooms. Concerns of overcrowding and poor living conditions were reported to the Council. The maximum legal capacity of 190 Seven Sister Road is eight occupants, but there were 20 occupants. The situation was similar at 147 Grosvenor Avenue.

The trial was heard at Highbury Corner Magistrates’ Court. It was not disputed that the respondent was considered a manager of the properties under s.263, Housing Act 2004. A person managing a property is obligated by s.234 of the 2004 Act to comply with any regulations made pursuant to that section; not to do so is a criminal offence (s.234(3)). Overcrowding and several other charges relating to the squalid living conditions were breaches of the regulations. The respondent invoked s.234(4): “it is a defence if he had a reasonable excuse for not complying with the regulation”. The reasonable excuse advanced was that Mr Ferraiulo had sole responsibility for the management of the properties.

District Judge Williams found the charges not proven against the respondent concerning 147 Grosvenor Avenue but proven in relation to 190 Seven Sister Road. The judge reasoned that by 2016 the respondent had become aware of what was happening at 147 Grosvenor Avenue and, therefore, should have kept a “close eye” on 190 Seven Sisters. Instead, he chose to turn a blind eye to the situation.

The matter was committed to the Crown Court for confiscation and sentence. The Council submitted that the correct method for determining the pecuniary advantage to be confiscated was through calculating how much it would costs to provide accommodation to the 12 occupants who could not be lawfully housed on the premises. The Council advanced several alternative hypotheses and corresponding figures as to how this could be achieved, including constructing an extension at the property, by the acquisition of a new property or by lease of a new property, or by building a new property. The judge rejected the Council’s approach and determined confiscation at £200.

The appeal

The Council sought leave to appeal on the ground that “a sum of money equal to the pecuniary advantage” in s.76(5), 2002 Act extends to the advantage the respondent saved from not properly housing the 12 occupants who could not be lawfully housed on the premises. That was to be determined by the costs of providing alternative accommodation.

The judgment

The application to appeal was refused.

Lord Justice Davis held that the factual circumstances of this case do not lend themselves to a sustainable proposition that the notional costs of providing appropriate, regulation-compliant, alternative accommodation for 12 occupants are to be treated as a saving constituting a pecuniary advantage within the remit of s.76 of the 2002 Act. It is a far too broad, indeed speculative, approach to have sufficient connection with the alleged conduct. The respondent was not under a lawful obligation to house the 12 occupants.

The purpose of confiscation proceedings is to disgorge the proceeds of criminality, which is separate from the punishment of the offender. The case was viewed as a test case, therefore the Court certified that their judgment may be cited to inform other local authorities of the prospective limitations on pursuing confiscation proceeding in similar contexts. The Court observed that putting the property into the required condition and repair for the eight occupants who could lawfully be housed on the premises would fall within the remit of s.76 of the 2002 Act. That figure would be £14,305. However, this was not advanced by the Council as an alternative and the Court has no power to remit this to the Crown Court for further consideration.

The Court was concerned why this case had proceeded without any reference to planning legislation. It was assumed that the unauthorised changes had been made without planning consent. If so, an enforcement notice could have been served and, if not complied with, a criminal offence under s.176, Town and County Planning Act would have arisen. If that had been pursued, confiscation proceedings would then be available and might extend to the entirety of the gross rents received throughout the breach for all 20 occupants.

Summary by Shada Mellor, barrister, Trinity Chambers.

For the judgment, click here.