What Appeal Court criticism of profit-motivated enforcement means for councils

A north London council has been rapped by the Court of Appeal for pursuing a confiscation order based on the "improper motive" of achieving "financial advantage". Experts say the ruling should not inhibit authorities from such actions, but important lessons can be drawn from the case.

Islington Town Hall: council rapped by appeal court
Islington Town Hall: council rapped by appeal court

It isn’t a story that covers any of its participants in glory. A Court of Appeal decision on an enforcement case confirmed wrongdoing by both property developers and a planning authority. The case hinged on a dispute between the London Borough of Islington and property owners the Knightland Foundation and Jacob Friedman. The developers had obtained permission to build a five-storey extension to a mid-terrace property, which would subsequently be used as a house in multiple occupation (HMO), including two maisonettes and 14 bedrooms.

Contrary to the permission, however, the property was instead converted into 18 self-contained residential units. Having discovered the breach, Islington Council issued an enforcement notice requiring the developers to rectify the situation. The developers failed to comply and the council decided to prosecute under the Proceeds of Crime Act (POCA), which allows authorities to recoup any profits made by offenders as a result of criminal actions.

The case did not proceed as anticipated by the authority. In May, a Crown Court judge disallowed the prosecution on the basis that it amounted to an abuse of process. Court documents stated that after the enforcement notice had been issued, an Islington planning officer had "indicated" to the developers that the principle of an 18-room hotel "seemed acceptable to him". However, the application they submitted was subsequently refused. What’s more, the judgment said that email correspondence between the planning and enforcement teams at Islington revealed that "the enforcement team were determined to press ahead with the prosecution and to apply for a confiscation order under the Proceeds of Crime Act 2002".

Unhappy with the Crown Court decision, Islington council took its case to the Court of Appeal. This didn’t go to plan either. In a ruling published at the end of September – although actually made in July – the judge, Lady Justice Hallett, recognised that the developers were in breach of an enforcement notice. However, she also found that the council’s decision to prosecute "had an improper motive, namely the financial advantage to the applicant of a POCA order". She also concluded that officers "attempted, improperly, to influence the determination of the [retrospective hotel] planning application so that it would not impact adversely upon the prosecution and/or the prospects of... obtaining a POCA order".

Does the ruling stymie other planning authorities hoping to use POCA to prosecute people who refuse to comply with enforcement notices? Not according to Izindi Visagie, founder of Ivy Legal, who said: "The predominant criticism appears to be the apparent influence on the determination of the [second] planning application. But a secondary factor was the perception that the local authority prosecuted purely for the purposes of seeking a confiscation order." She added: "No doubt many defendants will try to challenge on the back of this decision, but the decision on this case was very much made on its facts and a fairly unique combination of events and circumstances."

A planning chief at another London council known for making use of POCA said the ruling showed that authorities pursuing enforcement action needed to "behave responsibly" and it was important that they dealt with cases "on their planning merits only". Similarly, planning lawyer Nicola Gooch, a senior associate at Irwin Mitchell, said the council enforcement team’s "desire for a specific enforcement outcome appears to have tainted the proper application of planning judgement in this case".

The case highlighted a "disconnect" between the council’s planning officers and their enforcement counterparts, said Gooch, adding that this is "usually down to a failure to communicate". "But it does not help the perception of fairness when two different parts of the same council take such different approaches to the same issue," she said. The judgment appeared to be a "one off", said Gooch, rather than indicating a wider problem. However, she said it served to remind councils of the importance of "exercising powers of prosecution fairly and taking into account all material factors". She added: "Criminal prosecution should always be a matter of last resort."

In response to a request from Planning, Islington Council said it did not wish to comment on the judgment.

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