R (on the application of City of York Council) v AUH and others and R (Birmingham City Council) v BIY and ARA Episode II – The Return of the Local Authorities
Lewis MacDonald appeared for ARA
In October 2022 the Court of Appeal ruled in the first instalment of conjoined appeals from preparatory hearings about the power of local authorities to prosecute consumer offences ( EWCA Crim 1113], summarised by Richard Heller here.
The Court, in a bench again led by the Lord Chief Justice, has now released its second ruling ( EWCA Crim 6).
Together the judgments clarify several important points of law in relation to local authority prosecutions for illegal money lending and other consumer offences.
- The Consumer Rights Act 2015 gives local authorities power to prosecute consumer offences irrespective of local expediency under section 222 of the Local Government Act 1972.
This was the point decided in the 2022 judgment. The Court decided, upholding the decision in the court below in the Birmingham prosecution and reversing the decision in the York prosecution, that a local authority does not need to satisfy itself that proceedings are expedient for the promotion or protection of the interests of the inhabitants of their area before bringing a prosecution for consumer offences. That meant that for example in the Birmingham case, it was acceptable for Birmingham City Council to prosecute money lending offences that occurred in London, with no link to Birmingham.
- An offence ‘originating from an investigation’ [into a consumer offence] means an offence which originates from the consumer offence[s] under investigation.
In the first of the points decided in the 2023 judgment, the Court adopted a middle way between the interpretations put forward by the parties in the lower courts. At first instance both local authorities argued that they were effectively entitled to prosecute any offence discovered during an investigation into consumer offences. Birmingham continued to argue for this interpretation on appeal. The defendants in both prosecutions argued that “originating from” meant the offence must be committed during the investigation; obstruction or perverting offences for example. The court adopted York’s interpretation on appeal- that the investigation includes the subject matter of the investigation. There must be a connection between the consumer offence investigated and the further offences revealed by the investigation. So money laundering and fraud originating from the consumer offences could be prosecuted, whereas a wholly unconnected offence such as child cruelty revealed during the investigation could not.
- Birmingham City Council did not require the DPP’s consent to prosecute illegal money lending contrary to section 23(1) of the Financial Services and Markets Act 2000 (FSMA).
Section 401 of FSMA provides that an offence under FSMA may be instituted only by certain specified prosecutors (normally the FCA), or with the consent of the DPP. Given the offence of illegal money lending on the indictment was contrary to section 23(1) of FSMA, the defence argued section 401 applied, and the prosecution had failed to obtain the DPP’s consent.
After examining the legislative history, whereby illegal money lending was previously an offence under the Consumer Credit Act 1974, and concluding that the DPP’s consent had not previously been required to prosecute those offences, the court found (perhaps surprisingly) that section 401(2) had no relevance to the present case. The local authorities’ power to prosecute was found in Article 9 of the Financial Services Act 2012 (Consumer Credit) Order 2013, as enabled by section 107(2)(h) of the Financial Services Act 2012. Those provisions did not limit that power by reference to the DPP, so the constraint in section 401(2) did not apply.
If there were ambiguity, which there was not, the court found that the Explanatory Note to section 107(2)(h) made clear that, from the perspective of the sponsoring government department at least, that weights and measures authorities may prosecute in this domain without the DPP’s consent.
The 2023 judgment also addresses two further issues:
- The York judge’s indication that he would invite the prosecution to elect between proceeding with the overarching conspiracy or money laundering counts. This was not a final ruling, and so not a decision that could be addressed on appeal from a preparatory hearing.
- The City of York were only able to conduct litigation in the Crown Court through an authorised lawyer, and had failed to do so (having done so through an employee of the council who was not a qualified lawyer), but that did not render the proceedings a nullity or an abuse of process.
This judgment brings important clarity to the combined effect of recent legislation on the extended jurisdiction of local authorities to bring consumer prosecutions. There remains scope for argument though: most commonly about whether section 222 of the LGA is fulfilled in non-consumer cases; and where the Consumer Rights Act does apply, the extent to which a particular offence may “originate from” a consumer investigation.
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