Palmer, R. v

This is an appeal by the prosecution from the ruling of HHJ Hatton, sitting at the Crown Court at Liverpool and made on 10 October 2015, refusing to make a confiscation order against the respondent, Keith Palmer.

On 25 June 2014, the respondent had been convicted by the Liverpool and Knowsley Magistrates Court of an offence of engaging in licensable conduct otherwise than in accordance with a licence.

The particulars of the charge identified the conduct as the operation of a security business, Lock Up Security Ltd, other than in accordance with a licence issued under the Private Security Industry Act 2001 (‘PSIA’), contrary to s.3(1) and (6).

Following his conviction he was committed to the Crown Court for sentence and for consideration to be given to the making of a confiscation order.

On 6 October 2014, Judge Hatton sentenced the respondent to a term of 3 months imprisonment, suspended for 12 months, with a requirement to carry out 100 hours of unpaid work.

The prosecution appeal is brought under section 31(2) Proceeds of Crime Act (‘POCA’) 2002. This provision empowers this court either to confirm the decision of the Crown Court or, if it finds the decision to be wrong, either itself to proceed under section 6 of the POCA or direct the Crown Court to proceed afresh, see section 32(2).

Section 3 of the PSIA provides:

3.

Conduct prohibited without a licence

(1)

Subject to the following provisions of this Act, it shall be an offence for a person to engage in licensable conduct except under and in accordance with a licence.

(2)

For the purpose of this Act a person engages in licensable conduct if –

(a)

he carries out any designated activities for the purpose of, or in connection with, any contract for the supply of services …

…

(3)

In this Act ‘designated activities’ means such of the activities of a security operative as are for the time being designated for the purposes of this section by an order made by the Secretary of State …

…

(6)

A person guilty of an offence under this section shall be liable, on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale, or to both.

In his ruling, the judge recorded that the respondent had been convicted of an offence contrary to section 3(1) of the PSIA, which involved him trading between 25 March 2010 and 27 March 2012 as the sole principal of Lock Up Security Ltd. He required a licence for some of the activities which he had undertaken and did not hold such a licence. He identified the offence as one of strict liability. He rejected the respondent’s argument that it would be an abuse of the process of the court to make such an order; however he identified another issue which arose from the decision of this court in McDowell and Singh [2015] EWCA Crim 173, [2015] 2 Crim App R (S) 14, where the confiscation order of Singh was quashed on the basis that the criminal conduct was the failure to obtain a licence. In circumstances where his trading receipts were obtained as a result of trading activity as a scrap metal dealer that was lawful in itself, the court quashed a confiscation order based on his receipts. In the judge’s view, there was no basis for differentiating between the trading of Singh and the respondent. The respondent’s trading activity was not criminal conduct from which benefit accrued.

Mr Talbot QC, for the prosecution, submitted that the judge was wrong to hold that McDowell and Singh precluded the making of a confiscation order against the respondent. He argued that the case of Singh was different and distinguishable. In the present case, the respondent had been convicted of an offence contrary to section 3(1) of the PSIA. That was a provision which plainly criminalised engagement in licensable conduct and not simply the failure to obtain a licence. In contrast, Singh had been prosecuted under the Scrap Metal Dealers Act 1964; and, as explained at [58] of the judgment in that case, the relevant provision of the 1964 Act did not create or define a prohibited activity for which authorisation might be obtained upon application. Additionally, unlike the position of Singh, where registration or licensing was automatic, in the present case the licensing authority had to apply a fit and proper person test before issuing a licence.

He submitted that the present case was analogous with McDowell, who had been convicted of an offence contrary to the Trade in Goods (Control) Order 2003, which made it an offence to engage, without a licence, in conduct prohibited by article 4 of the 2003 Order: being knowingly concerned in the supply, delivery, transfer, acquisition or disposal of controlled goods (arms). The court held that the underlying transactions were, on analysis, prohibited and unlawful. As such, the income from such transactions were caught by POCA.

For the respondent, Mr Cook submitted that the judge was fully entitled to refuse a confiscation order under section 6 of POCA, the respondent’s criminal conduct was sufficiently close to the conduct in Singh to justify his conclusion. The ‘suitable persons’ test under the Scrap Metal Dealers Act 1964 was similar and analogous to the fit and proper person test under the PSIA.

In our view, the starting point of any analysis is the interpretation provision in section 76 of POCA:

Conduct and Benefit

(1)

Criminal conduct is conduct which-

(a)

constitutes an offence in England and Wales, or

(b)

would constitute an offence if it occurred in England and Wales.

…

(4)

A person benefits from conduct if he obtains property as a result of or in connection with the conduct …

The issue in this type of case is whether the conduct in question, from which a benefit is derived, is ‘criminal conduct’ within the meaning of POCA.

In McDowell and Singh (above) Pitchford LJ, giving the judgment of the court, carried out a thorough analysis of the facts and the law; and it is convenient to identify some of the points raised by that case.

First, the argument of McDowell was that his criminal conduct comprised trading while unlicensed, and in Singh that his criminal conduct comprised trading while unregistered. Each claimed that his ‘benefit’ was acquired from lawful (albeit unlicensed or unregistered) trading not from criminal conduct (see [2(ii)] and [3(1)])

Secondly, the court considered two authorities, del Basso [2010] EWCA Crim 1119, [2011] Cr App R (S) 41 and Sumal and Sons (Properties) Limited v. London Borough of Newham [2012] EWCA Crim 1840, [2013] 1 WLR 2078; and summarised its view at [34]:

In our judgment these decisions of the court further demonstrate the importance of identifying the criminal conduct of the offender at the first stage of the assessment. It is not sufficient to treat 'regulatory' offences as creating a single category of offence to which POCA is uniformly applied. We respectfully agree with the conclusion of the court in Sumal that the question whether benefit has been obtained from criminal conduct must first depend upon an analysis of the terms of the statute that creates the offence and, by that means, upon an identification of the criminal conduct admitted or proved. It may be that, as in Sumal, the wider statutory context of the offence will assist to answer the critical question: what is the conduct made criminal by the statute – is it the activity itself or is it the failure to register, or obtain a licence for, the activity? In our judgment, there is a narrow but critical distinction to be made between an offence that prohibits and makes criminal the very activity admitted by the offender or proved against him (as in del Basso) and an offence comprised in the failure to obtain a licence to carry out an activity otherwise lawful (as in Sumal).

On this basis, the relevant question will be whether section 3(1) of the PSIA created an offence that prohibited and made criminal the activity proved against the respondent (as in de Basso), or an offence that comprised the failure to obtain a licence to carry out an activity otherwise lawful (as in Sumal). This was described in McDowell and Singh as the ‘narrow but critical distinction’.

Thirdly, the question where benefit has been obtained from criminal conduct must first depend on the proper interpretation of the statute which creates the offence, and by that means identify the criminal conduct which has been proved or admitted.

Fourthly, for this reason it will not necessarily be helpful to look at other statutes and other factual circumstances in order to answer, by analogy, the question that arises in any particular case. It is the wording of the statute in question that matters.

We turn then to the statutory provisions which apply in the present case: the PSIA, some of whose terms we have set out above. The preamble describes it as ‘an Act to make provision for the regulation of the private security industry’. Section 1 establishes a regulatory authority (the Security Industry Authority) (‘the Authority’). Section 3 and subsection (1) sets out conduct which is prohibited and criminal ‘except under and in accordance with a licence’. The designated activity, as defined in section 3(3) was manned-guarding, which was designated as such by the Private Security Industry Act 2001 (Designated Activities) Order 2006 [SI 2006/426]. Section 7 requires the publication of ‘Licensing Criteria’ by the Authority; and section 7(3) specifies that the applicable criteria,

(a)

shall include such criteria as the Authority considers appropriate for securing that the persons who engage in licensable conduct are fit and proper persons to engage in such conduct.

Section 8 is a provision which deals with the grant of licences to engage in licensable conduct. Section 8(3) contains the Authority’s power to refuse to grant a licence, section 8(6) the power to impose conditions and section 8(7) its power to charge a fee for the grant of a licence.

In our view the statutory intent is clear: engagement in licensable conduct is an essential element of the offence under section 3(1). The section criminalises engagement in this conduct and not a failure to obtain a licence.

Furthermore, we see no reason in principle why it should make a difference whether an activity is unlawful by reason of a statutory prohibition except in a case of persons who have been granted a licence (on the one hand), or whether an activity which is otherwise lawful is prohibited by statute unless one has a licence (on the other). The result is the same: the activity is prohibited and the conduct is therefore ‘criminal conduct.’

In the present case section 3(1) makes clear that ‘it shall be an offence for a person to engage in any licensable conduct’, with an exception where it is engaged in accordance with a licence. It follows that the engaging in licensable conduct (manned-guarding) without a licence amounted to criminal conduct, within the meaning of section 340(2) of POCA.

Although (for the reasons we have given) we do not think it will be helpful to look at other statutory provisions and what may appear to be factually analogous situations, it is right that we address briefly the judge’s view that the conduct in the present case was ‘akin’ to the conduct of Singh in McDowelland Singh.

The case of McDowell concerned arms dealing. Arms dealing is, by statute, prohibited conduct. Article 4(2) of the Trade in Goods (Control) Order 2003 [S1.2765/2003]prohibits the export of ‘controlled goods’such as aircraft, accessories and ammunition without a licence. Article 4(8), however, provides an exception in that the Secretary of State may grant a licence ‘authorising any act otherwise prohibited under this Order’ (emphasis added). Thus, the 2003 Order makes it a criminal offence for anyone to engage in arms dealing without a licence. McDowell did not have a requisite licence and therefore his conduct in dealing in these controlled goods was consequently unlawful.

The Singh case concerned scrap metal dealing. Scrap metal dealing is not prohibited conduct. Section 1 of the Scrap Metal Dealers Act 1964 (‘SMDA 1964’) did not make scrap metal dealing an offence in itself. However, section 1(1) provided that ‘no person shall carry on business as a scrap metal dealer… unless [their particulars] are for the time being entered on the register …’ (emphasis added).Section 1(7) made it an offence for a person to carry on business as a scrap metal dealer without being registered, since it provided:

(7)

Any person who carries on business as a scrap metal dealer in contravention of subsection (1) of this section, or who fails to comply with the requirements of subsection (5) shall be guilty of an offence … (emphasis added).

On this basis Mr Talbot submitted that the words of section 1(7) of the SMDA 1964 made clear that it was not the failure to register which was the criminal offence or activity, but the carrying on of businessas a scrap metal dealer without registering. The conduct of carrying on business as a scrap metal dealer without being registered constituted an offence. The court concluded that the failure to register provision in section 1(5) of the SMDA 1964 was an ‘alternative means’ of committing the offence under section 1(7) of ‘carrying on business’ illegally, whereas in fact section 1(5) created a separate offence of failing to notify a change of circumstance. In any event, the provisions of section 1(5) could not affect the clear words of the first part of section 1(7).

To the extent that he was inviting us to decide that the case of Singh was wrongly decided, we must decline his invitation. The SMDA 1964 has now been replaced by the Scrap Metal Dealers Act 2013 so the particular case of Singh is of historical interest only. The present case is, however, an illustration of the dangers of an approach by reference to analogy rather than the analysis set out in [34] of McDowell and Singh.

For present purposes, it is sufficient for us to restate our clear view that section 3(1) of the PSIA created and defined a prohibited act and criminalised the activity of engagement in licensable conduct, not simply failing to obtain a licence.

For these reasons we allow the appeal and remit the matter to the Crown Court to proceed afresh with the Prosecution application.