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Landlord who converted house in 12 flats loses appeal over £500k+ confiscation order

A defendant who turned a house into 12 flats without planning permission has lost an appeal over the subsequent imposition of a confiscation order for more than £500,000.

The appellant in London Borough of Haringey, R (On the Application Of) v Roth [2020] EWCA Crim 967, Boruch Roth, appealed against a sentence in the form of a fine of £20,000 imposed on 23 August 2018 by the Crown Court (Recorder Brompton QC) for failure to comply with the requirements of an enforcement notice served pursuant to the provisions of the Town and County Planning Act 1990.

In addition he also appealed, by leave granted by the Court of Appeal, against a confiscation order made in the Crown Court in the sum of £527,887.55.

The sole issue raised on the appeal against sentence was that the judge failed to give any due credit to the appellant for his early plea of guilt.

The issues raised on the appeal against the confiscation order were more wide ranging. They included arguments that the rents accruing to the appellant in respect of the property in question were not sufficiently linked, in terms of causation, to the breach of the enforcement notice so as to justify an order in the amount of the rents received; and in any event that it was disproportionate to make an order in the gross amount of the rents received.

“These are arguments, it has to be said, of a kind which are not altogether unfamiliar in this context,” said Lord Justice Davis, who heard the appeal with Mr Justice Fraser and His Honour Judge Michael Chambers QC.

The background to the case was that in April 2006 the appellant purchased a house in London N15 for £340,000. He subsequently executed a Deed of Trust with regard to the beneficial interest of the property in favour of a company which he controlled. However, the property at all times remained in his legal ownership and was registered in his name. The papers would suggest that the appellant in fact owns, directly or indirectly, several properties in London, Lord Justice Davis said.

On 4 May 2007 the appellant was granted planning permission to convert the property into three self-contained flats, comprising one three-bedroom flat on the ground floor and basement and two two-bedroom flats on the first and second floors. Attached conditions stipulated that the "development hereby authorised must be begun not later than the expiration of 3 years from the date of this permission, following which the permission shall have no effect." A further condition required the development thereby authorised to be carried out in complete accordance with the plans submitted to and approved by the local planning authority.

The appellant, however, “radically departed from, indeed flouted, this planning permission”, Lord Justice Davis said. Mr Roth chose, without any authorisation, to convert the property into 12 self-contained flats. This eventually came to the attention of the local planning authority,  Haringey Council.

On 6 September 2012 Haringey issued an enforcement notice. That required the appellant to cease to use the property as self-contained flats.

On 27 September 2012 the appellant lodged an appeal against the enforcement notice. However, he submitted no statement in support of this appeal and, having failed to comply with the requirement to do so, his appeal was dismissed on 9 November 2012. It was common ground that in the circumstances the time for compliance with the enforcement notice expired on 9 March 2013.

A visit by a planning enforcement officer from Haringey on 3 December 2013 revealed that no attempts at compliance had been made. The property was still in use as self-contained flats. For whatever reason, no action was taken at that time.

In March 2016 the officer then wrote to the appellant, requiring him to notify a mutually convenient date for further inspection of the property. There was no response; and a further written request in January 2017 was also ignored.

Eventually, on 18 May 2017 the planning enforcement officer was able to inspect the property, having been granted admittance by one of the occupants. It was still in use as 12 self-contained flats.

The Court of Appeal allowed Mr Roth’s appeal against sentence, saying he was entitled in principle to credit for his guilty plea. The court therefore substituted the sum of £13,333 as the amount of the fine.

In relation to the confiscation order, the Court of Appeal rejected the appellant’s first ground of challenge, a technical point on the drafting of the summons issued in the Magistrates’ Court. “What is said is that the charge contained in the summons, when read properly and strictly, is such that the offence charged was of breaching the requirements of the Enforcement Notice on just one day: that is, 18 May 2017. In consequence, a confiscation order reflecting a period of criminality in excess of four years is, it is argued, unsupportable.”

However, Lord Justice Davis said the present case was plainly distinguishable from the earlier case of Panayi [2019] EWCA Crim 413.

“In the present case….. the summons did indeed identify the date from which the (criminal) non-compliance had started: that is, 9 March 2013. Although the summons is undoubtedly clumsily drafted, it thereby sufficiently, in our judgment, identifies the start date (9 March 2013),” he said.

“In our view, the charge was sufficiently worded. But if more was needed, there was more. Because in the accompanying Statement of Facts, it is again made clear that it is the entire period as identified which is the subject of the summons. The matter was clearly committed to the Crown Court on that basis: and the confiscation proceedings were also conducted on that basis.

“Indeed, the gross amount of the rent receipts for the relevant period was actually agreed for the purposes of calculating benefit. Throughout, therefore, the appellant knew the case he had to meet. So even if there were technical deficiencies in the drafting of the summons they are not fatal.”

The appellant’s second ground of challenge was based on an argument that the receipt of rents was not because of the breach of requirements of the enforcement notice but in spite of it.

It was submitted that the true source of the obtaining of the rent lay in the (lawful) tenancy contracts between the appellant (or his agent) and the individual tenants. The rents, it was said, did not derive from the ongoing breach of the enforcement notice.

However, Lord Justice Davis said it was “not possible to accept such an argument”. The Court of Appeal said the appellant was relying on the case of Sumal and Sons (Properties) Limited [2012] EWCA Crim 1840, like the case of Siaulys [2013] EWCA Crim 2083, but Sumal was a case on the Housing Act 2004. “It had nothing to do with the enforcement notice provisions of the 1990 Act.”

The obvious point of distinction had been made, “and correctly so”, in the case of Hussain [2014] EWCA Crim 2344, a case which did concern s.179 of the 1990 Act. The court in Hussain had rejected arguments, precisely corresponding to those advanced by counsel for Mr Roth, based on Sumal.

Lord Justice Davis continued: “Hussain, which also applied the corresponding approach taken in the enforcement notice case of Del Basso [2010] EWCA Crim 1119, [2011] Cr. App. R (S) 41, is directly in point. There is no basis or reason for departing from it.

“To the contrary, we endorse it. The fundamental point remains that had the appellant here complied with the requirements of the Enforcement Notice (as he should have done) by ceasing to use the property as self-contained flats, he could not have rented it out in the way that he did.”

The Court of Appeal also rejected a third ground of appeal, namely that it was wrong for the Recorder to have calculated benefit by reference to gross rental income, rather than net profit.

Lord Justice Davis said: “It is clear how the present case is to be categorised. Here, as we have indicated, the entire activity of letting out the twelve flats and receiving rents therefrom involved, and was inherently founded on, the criminally unlawful failure to comply with the requirements of the Enforcement Notice. The Recorder was, in such circumstances, unquestionably justified in assessing benefit by reference to the gross rents received.

“As stated in paragraph 26 of the judgment in Waya (and has been frequently stated in other cases), a proportionate order is capable of having the effect of requiring a defendant to pay over the whole sum which he has obtained by crime without enabling him to set off expenses. The benefit in the present case was properly adjudged to be the total value of the rents obtained, not the appellant's net profit after deduction of expenses and outgoings. The Recorder was accordingly justified in concluding that such a confiscation order was proportionate.”

Finally, the Court of Appeal noted that there was raised before the Recorder the proposition that at least benefit should be limited so as to reflect the fact that, under the 2007 planning permission, the appellant could lawfully have converted the property into three self-contained flats.

"As the Recorder crisply had said, the fact that the defendant could have done things differently had he chosen to do so was nothing to the point," said Lord Justice Davis. "That was correct. It is a general principle in confiscation proceedings that where a person obtains a benefit as a result of or in connection with his criminal conduct the benefit ordinarily is to be assessed as the full amount constituting that benefit, not the excess over any benefit which otherwise might lawfully have been obtained."