R (on the application of the Electoral Commission) v City of Westminster Magistrates Court and The United Kingdom Independence Party

When a political party accepts a donation from an impermissible individual donor, there is an initial presumption in favour of forfeiture under section 58(2) of the Political Parties, Elections and Referendums Act 2000. The party bears the burden of showing why forfeiture should not follow.

The presumption is normally rebutted by proving that the donor was entitled to be entered on an electoral register. The court must then evaluate all the circumstances, including culpability, the donation’s size and the likely effect of forfeiture on the party. Forfeiture must be proportionate to the statutory purposes.

The power to forfeit an amount equal to the donation includes a power to order a lesser amount. This permits a sanction tailored to the facts where total forfeiture would be disproportionate.

UKIP accepted donations totalling £349,216 from a supporter who, through inadvertence, was absent from every electoral register between December 2004 and February 2006. The Electoral Commission applied under section 58(2) of the Political Parties, Elections and Referendums Act 2000 for forfeiture of the whole sum. The Senior District Judge ordered forfeiture of £14,481.

On judicial review, Walker J held in [2009] EWHC 78 (Admin) that the reasons were inadequate and remitted the case, while accepting that the discretion was broad. The Court of Appeal allowed the Commission’s appeal in [2009] EWCA Civ 1078. It held that forfeiture should ordinarily follow unless exceptional circumstances existed.

The Supreme Court considered whether section 58(2) created a broad or narrowly circumscribed discretion and whether it permitted forfeiture of less than the donation’s full value.

1. By a majority of four to three, the appeal was allowed. Lord Phillips, with whom Lord Clarke agreed, held that the section 58(2) discretion must be exercised to promote the objects of the Political Parties, Elections and Referendums Act 2000. Lord Mance and Lord Kerr agreed substantially with that analysis and the proposed disposal. Lord Rodger, Lord Walker and Lord Brown dissented.

2. The primary legislative object was to prevent foreign funding of political parties. Parliament used actual electoral registration as a conclusive and readily administered proxy for a sufficient connection with the United Kingdom. The forfeiture power also deters failures to comply with the statutory controls. The fact that actual registration was the statutory test did not make a donor’s eligibility to register irrelevant to the court’s separate forfeiture discretion.

3. Per Lord Phillips, acceptance of a donation from an impermissible source raises an initial presumption in favour of forfeiture. The party bears the burden of showing why forfeiture should not follow. It will ordinarily begin by proving that the donor was entitled to be entered on an electoral register and that the donation was therefore not foreign. If that cannot be shown, forfeiture should normally follow because retention would defeat the legislation’s primary policy.

4. Once the party proves that the donor could have registered, the initial presumption is rebutted. The court must then consider whether forfeiture is a proportionate sanction for the failures that led to acceptance. Relevant matters include culpability, the amount donated and the likely effect of forfeiture upon the party. Ignorance of impermissibility is not a defence, but may be an extenuating circumstance.

5. The majority held that section 58(2), properly construed in its statutory and legislative context, permits partial forfeiture. Its power to order forfeiture of an amount equal to the donation implicitly includes power to order a lesser sum. This construction allows the sanction to reflect the particular facts and avoids total forfeiture where that would be disproportionate, consistently with ordinary principles governing sanctions and article 1 of the First Protocol.

6. The minority considered the statutory language unambiguously all-or-nothing. In its view, a party retaining a donation which it was prohibited from accepting should ordinarily be required to disgorge the whole benefit, save in exceptional circumstances.

7. The amount ordered by the Senior District Judge adequately reflected the circumstances. His order forfeiting £14,481 was restored, avoiding a further substantive hearing.

1. United Kingdom Supreme Court: By a majority of four to three, allowed UKIP’s appeal in [2010] UKSC 40 and restored the Senior District Judge’s order.
2. Court of Appeal: Allowed the Electoral Commission’s appeal in [2009] EWCA Civ 1078. It held that section 58(2) created an all-or-nothing power and a strong presumption of forfeiture, displaced only by exceptional circumstances.
3. High Court, Administrative Court: Walker J held in [2009] EWHC 78 (Admin) that the Senior District Judge had given inadequate reasons. He ordered reconsideration but accepted a broad forfeiture discretion.
4. City of Westminster Magistrates’ Court: The Senior District Judge ordered UKIP to forfeit £14,481 from impermissible donations totalling £349,216.