Palmer, R. v

For confiscation purposes, whether a benefit derives from criminal conduct depends on the proper construction of the statute creating the offence. Regulatory offences do not form a single category.

The critical question is whether the statute criminalises the underlying activity, subject to a licensing exception, or merely penalises the failure to obtain a licence for an otherwise lawful activity. Section 3(1) of the Private Security Industry Act 2001 criminalises engagement in licensable conduct without a licence. Receipts from that conduct may therefore constitute benefit obtained from criminal conduct under the Proceeds of Crime Act 2002.

The respondent was convicted in the magistrates’ court of engaging in licensable conduct without a licence, contrary to section 3(1) of the Private Security Industry Act 2001. He had operated a security business involving manned guarding while unlicensed.

Following committal to Liverpool Crown Court, HHJ Hatton refused the prosecution’s application for a confiscation order. The judge considered the conduct analogous to that of Singh in McDowell and Singh [2015] EWCA Crim 173, where receipts from scrap-metal trading had not been treated as benefit from criminal conduct.

The prosecution appealed. The central issue was whether the statutory offence criminalised the security activity itself or only the respondent’s failure to obtain a licence.

1. Appeal allowed. The court remitted the matter to the Crown Court to proceed afresh with the prosecution’s confiscation application.

2. Under section 76 of the Proceeds of Crime Act 2002, the necessary inquiry is whether the conduct from which property was obtained was criminal conduct. That requires identification of the conduct proved or admitted by construing the statute that created the offence. A regulatory offence cannot be classified by analogy with other regulatory schemes.

3. The relevant distinction, drawn from McDowell and Singh [2015] EWCA Crim 173, is between a statute which prohibits and criminalises the underlying activity and one which penalises a failure to obtain a licence for an activity otherwise lawful.

4. Section 3(1) of the Private Security Industry Act 2001 makes it an offence to engage in licensable conduct except under and in accordance with a licence. Engagement in the designated activity of manned guarding was therefore an essential element of the offence. The provision criminalised that activity when undertaken without a licence; it did not merely criminalise an omission to obtain one.

5. The court declined the prosecution’s invitation to hold that the Singh decision was wrong. Its reasoning did not govern this case because the statutory schemes differed. The error below was to treat the two schemes as analogous rather than construe the provision creating the present offence.

• Court of Appeal (Criminal Division): allowed the prosecution appeal and remitted the confiscation application to Liverpool Crown Court to proceed afresh.
• Liverpool Crown Court: HHJ Hatton refused to make a confiscation order on 10 October 2015.
• Liverpool and Knowsley Magistrates’ Court: convicted the respondent on 25 June 2014 of engaging in licensable conduct without a licence.