Sumal & Sons (Properties) Ltd v London Borough of Newham

For confiscation under the Proceeds of Crime Act 2002, property must have been obtained as a result of, or in the requisite connection with, the criminal conduct. An offence of controlling or managing a house without the licence required by section 95(1) of the Housing Act 2004 does not, without more, make the landlord’s receipt of rent criminal benefit.

The 2004 Act preserves the enforceability of rent obligations in an unlicensed tenancy and supplies its own sanctions, including rent repayment orders and financial penalties. Rent lawfully receivable under that scheme is not the product of the licensing offence. A confiscation order based on that rent would operate as an additional fine and is unavailable.

The appellant company was convicted in its absence by Stratford Magistrates’ Court of controlling or managing a privately rented house in a selective licensing area without a licence, contrary to section 95(1) of the Housing Act 2004. It was committed to the Crown Court under section 70 of the Proceeds of Crime Act 2002.

The Inner London Crown Court fined the company £2,000, ordered costs, and made a confiscation order for £6,450.83, representing rent received while the house was unlicensed. The company appealed against the committal, the alleged abuse and oppression of the proceedings, sentence, and principally the availability of confiscation.

The central issue was whether rent received under an otherwise valid tenancy was property obtained as a result of or in connection with the licensing offence.

1. Appeal allowed in part. The confiscation order was quashed. The appeal otherwise failed, save that the Crown Court costs order was reduced to £3,000.

2. Section 70 of the Proceeds of Crime Act 2002 permits a magistrates’ court, on the prosecutor’s request, to commit a defendant convicted of an offence to the Crown Court for confiscation to be considered. Its language is not confined to offences triable either way. Section 70(5), which separately addresses either-way offences, confirms rather than undermines that conclusion. The committal was therefore valid.

3. There was no abuse of process or oppression. The local authority was entitled to decide in this case to prosecute and seek confiscation. A stay may exceptionally be available in a regulatory prosecution, but no improper policy departure, unfair procedure, or other circumstance justified one here. Nor was advance notice of a section 70 request required; on a request the magistrates’ court had to commit under section 70(2)(a).

4. The court applied the ordinary confiscation inquiry stated in May [2008] UKHL 28: whether the defendant benefited from the relevant conduct, the value of any benefit, and the recoverable amount. The first question was decisive. Although “in connection with” in section 76(4) is wider than “as a result of”, the connection must be narrowly construed.

5. Read as a whole, the Housing Act 2004 treats the failure to obtain a licence as unlawful, but does not make the continuing tenancy or receipt of rent unlawful. Section 96(3) keeps rent obligations enforceable. Sections 96 and 97 provide a separate rent-repayment regime, and section 98 supplies a further tenancy-related sanction. There was no prohibition on continuing to let merely because the house lacked a licence.

6. Accordingly, the rent was not the product of the offence and was not obtained as a result of or in connection with it. Confiscation would also create an unacceptable potential for recovery both through a rent repayment order and through confiscation. Consistently with Jennings [2008] UKHL 29, confiscation deprives an offender of the product of crime; it does not impose an additional fine.

7. The £2,000 fine was not excessive. A fine under section 95(1) may properly reflect the circumstances and means of a professional landlord and carry an appropriate financial sting.

• Court of Appeal (Criminal Division): In [2012] EWCA Crim 1840, allowed the appeal only to the extent of quashing the confiscation order and reducing the Crown Court costs order.
• Inner London Crown Court: On 3 October 2011, fined the appellant £2,000, ordered prosecution costs of £3,821.96, and made a confiscation order for £6,450.83.
• Stratford Magistrates’ Court: On 8 April 2011, convicted the appellant in its absence of the section 95(1) licensing offence and committed it to the Crown Court under section 70 of the Proceeds of Crime Act 2002.