Can an English partnership be subject to confiscation under PoCA 2002?

The following piece was written for a different purpose and not for accountants - but I have reproduced it here in case some readers find it of interest.

 

An individual in England & Wales, who has been convicted of one or more offences of which he has benefited, can be subject to confiscation under Part 2 Proceeds of Crime Act 2002.  Most confiscation orders are made against individuals.

A company can also be subject to confiscation if it is the convicted defendant and the other conditions are met.  Although confiscation orders against companies are less common there are examples of them in the case law.  Mabey & Johnson Ltd was made subject to a confiscation order for £1.1 million in 2009.  The Weir Group PLC was made subject to a confiscation order for £13.9 million in 2011.

But what about a partnership?

In English law a partnership is not recognised as a legal entity in its own right (the legal position is different in Scotland).  But a partnership can be convicted of a criminal offence.  A partnership may be convicted, for example, where the offence is one of 'strict liability' - that is one which does not require mens rea or a guilty state of mind.

So it was that the partnership of W. Stevenson & Sons came to be convicted of charges which were brought under the Sea Fishing (Enforcement of Community Control Measures) Order 2000. The partnership was charged with failing "to submit a sales note which accurately indicated the quantities and price at first sale of each fish species" contrary to Article 3(1)(d) of the Order. The significance of this offence was that it facilitated the evasion of European fishing quotas.

Following these convictions the prosecution decided to seek confiscation orders against the eight partners in the firm.

Section 6 PoCA 2002 refers to "the defendant" and s88(3) defines defendant as "a person against whom proceedings for an offence have been started (whether or not he has been convicted)".

Is a partnership a "person" in English law? Well the Interpretation Act 1978 makes it clear that in any Act of Parliament 'person includes a body of persons corporate or unincorporate' (per schedule 1 to the Act) unless the contrary intention appears (per s5 of the Act).  A partnership is an unincorporated body of persons and therefore it is a 'person'.  So far, so good.

But the Court of Appeal in W. Stevenson & Sons (a partnership) v R [2008] EWCA Crim 273 concluded that "conviction of the partnership will not constitute conviction of the individual partners, nor render the individual partners liable to individual penalties".  The court added that "rights and other property acquired in the name of the partnership are owned jointly by the partners as partnership property, as is property that the partners agree to put into the partnership".

Since the individual partners had not been convicted of any offence the Court of Appeal concluded "confiscation proceedings cannot properly be brought against their personal assets on the foundation of the convictions of the partnership".

Where does that leave us?

In practice prosecutors have side-stepped any difficulty by charging individual partners (sometimes in addition to charging the partnership) with criminal offences.  The convictions of the individual partners (if obtained) can then safely be utilised as a basis for confiscation proceedings against those individuals.

So in the case of a business operated by an unincorporated partnership of a Mr Del Basso and a Mr Goodwin trading as Bishop's Stortford Football Club Members' Parking Association, prosecutors ultimately obtained convictions not only of the Parking Association but also of Mr Del Basso and Mr Goodwin.  Following those convictions confiscation proceedings were commenced against Mr Del Basso and Mr Goodwin personally on the basis that each of them had obtained (jointly) the gross receipts of the Parking Association.

It was the case that Mr Del Basso and Mr Goodwin were the only signatories to the Parking Association bank account, over which they had exclusive control.  Since the Parking Association had operated illegally in breach of a local authority planning enforcement notice those gross receipts were 'benefit' for the purposes of confiscation.  Mr Del Basso and Mr Goodwin were each found to have obtained a benefit of £1.8 million (the gross receipts deposited into the Parking Association bank account).

That decision was upheld by the Court of Appeal in Del Basso and Goodwin v R [2010] EWCA Crim 1119.

There may be some offences, and some circumstances, in which it is not appropriate for individuals, rather than the partnership or unincorporated body, to be charged with a criminal offence (see R v RL and JF [2008] EWCA Crim 1970) but these will be relatively uncommon in connection with possible confiscations.

So in practice confiscation proceedings will be taken against the individual partners, on the basis of their individual convictions, rather than against an English partnership.

David

Comments
carnmores's picture

on the basis of joint and several i presume it might make a diff

carnmores | | Permalink

what if they had been an LLP

davidwinch's picture

@Carnmores

davidwinch | | Permalink

Hi

I don't quite follow you.

One of the issues the court had in mind was that there might be, for example, 'sleeping' partners in a business, or partners whose role kept them away from any involvement in the wrongdoing of which the partnership had been convicted.  Clearly it would not be fair for those partners to be subject to confiscation proceedings.

A confiscation order is made for the lower of (i) the benefit obtained or (ii) the available amount.

Does a partnership have an 'available amount'?  If it does it must be based on the partnership assets (as distinct from the personal assets of the partners).  But that could produce some arbitrary results.  Suppose the partners own the premises from which the partnership trades.  Are those premises a 'partnership asset' or are they simply an asset which happens to be owned by the partners?

The whole situation could get messy - and that would be avoided by charging the individual partners personally with the criminal offence(s) and, following their convictions, taking confiscation proceedings against each of them individually.

In the case of Ian Perkes Fish Merchants the Crown prosecuted Mr Ian Perkes and Mr Sean Perkes personally, rather than the partnership (the business was transferred into a limited company after the period of the alleged offences).  Perhaps they had learned from the failure of confiscation in the Stevenson case.

David

carnmores's picture

thanks David

carnmores | | Permalink

the sleeping partner comment covers my ' comments' re J&S liability, thanks

would an  LLP be treted as a bog standard PShip or as a ltd co

davidwinch's picture

LLPs

davidwinch | | Permalink

Carnmores

An LLP is a separate legal entity and a body corporate.

So from a confiscation point of view I would see it as being similar to a limited company.

But I think a prosecutor could decide to charge the LLP, or could decide to charge one or more individual partners, or could decide to charge both the LLP and one or more individual partners.

What I have also seen done (and it is not uncommon) is to charge one or more individuals with an offence and then in confiscation treat the receipts of the business as their personal receipts.  If the individual is a director / shareholder of a company that involves inviting the court to 'pierce the veil' of incorporation.  In order to do that the prosecution have to show that the company has been involved in the director's wrongdoing and there are various legal 'routes' to piercing the veil.

A classic case was CPS v Jennings [2008] UKHL 29 in which it was said "the veil of incorporation has been not so much pierced as rudely torn away" because the entire business of the company was fraudulent.

David

carnmores's picture

many thanks

carnmores | | Permalink

i think you have hit the nail on the head as it were!

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