Mr Justice Walker :
- These judicial review proceedings concern the forfeiture by a Magistrates' Court of donations to a registered political party. Restrictions on such donations are found in Chapter II of Part IV of the Political Parties, Elections and Referendums Act 2000 ("PPERA"). References in this judgment to sections, Chapters, Parts and Schedules are, unless the context otherwise requires, references to PPERA.
- Sections 58-60 in Chapter II make provision for forfeiture in relation to donations made by impermissible or unidentifiable donors. I have been told by counsel that there is no previous reported case dealing with ss 58-60, and that the outcome of the present case may affect what will happen in a number of potential or pending applications for forfeiture. In these circumstances I think it desirable at the outset of this judgment to explain the role of this court on judicial review and to summarise my conclusions as to the principles governing this particular power of forfeiture.
Role of the Administrative Court on judicial review.
- An application for judicial review in this court usually involves assertions falling under one or more of three heads. The first head is that the body under review misunderstood or misapplied the law. This will include taking irrelevant considerations into account or leaving relevant considerations out of account. It will also include breaches of the Human Rights Act 1998 in cases where it requires compliance with certain provisions in the European Convention on Human Rights and subsequent protocols. The second head concerns a failure to adopt a fair procedure. It is convenient to include under this head a failure to give reasons where, or to the extent, required. The third head is that the decision under review went beyond the range of decisions reasonably open to the decision-maker. Other possible grounds of review have been canvassed, but it is not necessary to mention them for present purposes.
- Judicial review is often contrasted with a statutory appeal. A court dealing with a statutory appeal must identify from the statute the nature of its role. This will often be a role going beyond the limited task of the court on an application for judicial review.
- In s 58 Parliament has given to the Electoral Commission power to seek a forfeiture order and to the Magistrates' Court power to make such an order against a registered political party. In s 59 it has given the registered political party, where a forfeiture order is made, a right of appeal. In England and Wales this right of appeal lies to the Crown Court. No such right is given, however, to the Electoral Commission in the event that the Magistrates' Court refuses to make a forfeiture order or makes an order in an amount less than that sought by the Electoral Commission. The result is that the Electoral Commission's only means of challenge is by way of an application for judicial review.
Summary of general conclusions
- Below is a broad summary of my general conclusions. In each case I identify in brackets the paragraphs of this judgment where the conclusion is set out.
(1) One of the aims of PPERA as a whole is to enhance and maintain the integrity and propriety of and public confidence in the political process. (para 62)
(2) A motive for many of the provisions found in Part IV, including ss 54 to 60, is the undesirability of foreign donations. Political parties are involved in the democratic process taking place within the UK, what happens here is the concern of those who live and work here, and the approach taken by Parliament in this regard is motivated by an assessment that political parties should not be entitled to donations made by persons and corporations who have no genuine stake in the UK. (para 78)
(3) Practical considerations led Parliament to reject a recommendation that mere entitlement to be on an electoral register should qualify an individual to be a permissible donor. Instead as regards individuals Parliament adopted a policy that there should be a ban on donations by those not on an electoral register. (para 78)
(4) A specific purpose of s 54 is to give effect to that policy by (1) prohibiting parties from accepting donations from those who are not, at the time of receipt by the party, permissible donors and (2) defining an individual as a permissible donor only if that individual is registered on an electoral register. The main purpose of the forfeiture power in s 58(2) is to provide a method of enforcing s 54. It also seeks to deter future breaches of s 54, whether by the party in question or by others. (paras 44 and 81)
(5) Under s 58(2) the first stages for the Magistrates' Court involve determining two factual matters. It must first decide whether, in relation to any particular alleged donation, what has been brought to its attention by the Commission did indeed amount to a donation which by virtue of s 54(1)(a) or (b) the party was prohibited from accepting. If so it must secondly decide whether the party nevertheless accepted the donation. (para 49)
(6) If those factual matters are resolved against the party, then the final stage under s 58(2) is for the Magistrates' Court to consider whether to make a forfeiture order. At this final stage it must proceed on the basis that its task is to advance and not to frustrate the policy and objects of PPERA and, in relation to donations by individuals, the specific purpose of s 54 identified at (4) above. (para 43)
(7) This does not mean that there is a presumption in favour of forfeiture; the Magistrates' Court should exercise the power of forfeiture where this would advance the statutory purpose in a manner which would not be disproportionate. (para 71)
(8) If an ambiguity arises as to the true construction of a statutory forfeiture power such as s 58(2) then regard must be had to the common law principle that a statute should not be construed so as to interfere with property rights unless it is clearly intended to do so. (para 44)
(9) The Magistrates' Court must strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued. (para 48)
(10) In relation to any one donation, the power under s 58(2) is all or nothing: either there is an order forfeiting the amount of the donation or there is not. Accordingly, applying the principle at (9) above, if the Magistrates' Court considers that it would be disproportionate to order forfeiture of an amount equivalent to the value of the donation in question, then an order under s 58(2) cannot be made in relation to that donation. (para 117)
(11) At a hearing under s 58(2) the cogency of the submissions made on behalf of the Commission will fall to be considered and tested in the same way as any other submissions. (para 55)
(12) Subject to the above, the Magistrates' Court may decide, within a range of what is reasonably open to it, which potentially relevant factors it regards as relevant to a particular case and how much weight should be given to them: see the speech of Lord Bridge of Harwich in R v. Tower Hamlets LBC, ex parte Chetnik Developments Ltd  1 A.C. 858 at p. 873G. Factors which PPERA, on its true construction, does not rule out as a matter of law can be described as "potentially relevant" factors. Applying Lord Bridge's analysis in conjunction with the principles of proportionality described in the citations at paragraphs 47 and 48 below, some potentially relevant factors can be mentioned on the basis that they are not exhaustive and that whether they can reasonably be regarded as relevant may depend on the particular circumstances. At a general level potentially relevant factors include the type and degree of harm caused by the breach of s 54(1), the extent to which the party's actions or inaction deserve blame, concerns as to what may happen in the future, and the stance and current position of the party. At a more specific level, in relation to type and degree of harm there might be a need to examine the extent to which breach of s 54(1) means that in fact the party now has a benefit which it ought not to have had. A potentially relevant factor is whether the party has gained from a donation by foreign donor. When considering the relevance and weight of the presence or absence of this factor the Magistrates' Court must bear firmly in mind that Parliament's policy, for the common good, is that there should be a ban on donations by individuals not on an electoral register. In relation to blame potentially relevant factors include the following. Did the party know at the time of acceptance that the donation was impermissible? Ought it to have known? Has the party been in breach of s 54(1) in relation to previous donations by this or another donor? Is the impermissible donation under consideration an isolated incident or part of a series? Have there been breaches of other obligations imposed by PPERA, and if so with what consequences? As to concerns about the future, potentially relevant factors include that in order to counter a risk of future evasion it may be desirable to forfeit an amount equivalent to an impermissible donation even after return of that donation by the party, and that it is desirable to deter future breaches by the party in question and by others. In relation to the stance and current position of the party, an early admission by the party that it was in the wrong, accompanied by prompt remedial steps, might weigh in the balance as pointing against forfeiture. It is conceivable that circumstances could justify a merciful approach having regard to the impact of forfeiture, but the Magistrate's Court must bear in mind that every registered political party, no matter what its size, ought to ensure that its resources are deployed in a way enabling it to fulfil the duties imposed on it by PPERA. (paras 44, 68, 72, 81, 107, 111)
(13) The Magistrates' Court is under a duty to give reasons. The reasons should engage with the main arguments on each side, explaining in broad terms why it was or was not persuaded by those arguments. (para 120)
The facts of the present case
- In the present case the registered political party is the United Kingdom Independence Party ("UKIP"). The donations in question were made by Mr Alan Bown, who joined UKIP in 2003. From 1 December 2003 to 30 November 2004 inclusive Mr Bown was registered on an electoral roll. This meant that he was a permissible donor under s 54. However from 1 December 2004 to 31 January 2006 inclusive – which I shall refer to as "the impermissible period" – Mr Bown was not registered on an electoral roll. During the impermissible period Mr Bown made 69 donations to UKIP totalling more than £360,000. Some of these had a value of less than £200, and under s 52(2)(b) are to be disregarded. I shall refer to the remainder as "the impermissible donations". In what follows references to donations are to be taken as not including those of a value under £200. Under s 56(1) UKIP was obliged, unless it immediately decided to refuse the donation, to take all reasonable steps forthwith to verify relevant details listed in paragraph 2 of schedule 6. In the case of an individual such as Mr Bown, the details to be verified included (a) if his address was, at the date of receipt of the donation, shown in an electoral register, that address; and (b) otherwise, his home address (whether in the UK or elsewhere). Mr Bown during the impermissible period was not registered in an electoral register, and did not qualify in any other way as a permissible donor. It followed under s 56(2)(a) that within 30 days of receipt of any of the impermissible donations UKIP was obliged to send back to Mr Bown the donation or a payment of an equivalent amount. UKIP did not do so.
- The Electoral Commission ("the Commission") is established under Part I. During the impermissible period it expressed concern to UKIP about the status of Mr Bown's donations. It also expressed concerns about a donation from Nightech Limited, a company registered in the Isle of Man. On 16 March 2007 it applied to the City of Westminster Magistrates' Court ("the Magistrates' Court") for a forfeiture order under s 58.
- The marginal note to s 58 refers to "forfeiture of donations…". However s 58(2) does not use that wording. It says that the court may "order the forfeiture by the party of an amount equal to the value of the donation." The terminology adopted in the marginal note is convenient shorthand, and I shall use the expression "forfeiture of the donation" to refer to forfeiture of an amount equal to the value of the donation.
- After a three day hearing in July 2007 Senior District Judge Workman ("the Senior District Judge") made an order forfeiting £4,000 in relation to Nightech Limited's donation. As regards Mr Bown, he concluded that a forfeiture order should be made in relation to donations after a meeting between the Commission and UKIP on 19 June 2005. The Senior District Judge held that 7 of the impermissible donations were made after 19 June 2005, totalling £14,481. The Senior District Judge accordingly as regards Mr Bown's donations made a forfeiture order in the sum of £14,481. He explained that at the meeting of 19 June 2005 it was apparent that UKIP was aware that Mr Bown was not on an electoral register and that donations received from him thereafter during the impermissible period should not have been accepted. I shall refer to the date when UKIP was aware that Mr Bown was not on an electoral register as "the awareness date".
- It is now common ground that the Senior District Judge made a factual error. The meeting at which it was apparent that UKIP was aware that Mr Bown was not on an electoral register took place on 13 December 2005, not on 19 June 2005.
- If it had wished to do so UKIP could have appealed the Senior District Judge's decision to the Crown Court under s 59. It has not done so. Mr Alan Newman QC, who represented UKIP both in this court and at the hearing before the Senior District Judge, has stated that UKIP is content to abide by the Senior District Judge's order.
- The Commission is content with the Senior District Judge's order in relation to Nightech Limited's donation. It is not content, however, with the Senior District Judge's order as regards Mr Bown's donations. No appeal being available to the Commission under s 59, it brings these proceedings against the Magistrates' Court by way of judicial review. The Commission is represented in this court by Mr Michael Beloff QC and Mr Jasbir Dhillon, Mr Dhillon having appeared on behalf of the Commission at the hearing before the Senior District Judge.
- UKIP has been joined to these proceedings as interested party. Both it and the Commission agree that judicial review is the appropriate avenue for the Commission to seek to challenge the Senior District Judge's decision. Permission to apply for judicial review was granted by Silber J on 11 March 2008.
- In this court the Commission advances its case by reference to four grounds for seeking judicial review. Ground one concerns whether the Senior District Judge erred in his construction of PPERA. Under ground two the Commission asserts that the Senior District Judge's refusal to order the forfeiture of all of the impermissible donations was not "a valid exercise of the discretion under s 58(2)." Ground three concerns the Senior District Judge's mistaken date of 19 June 2005 for the meeting mentioned earlier. Ground four asserts that the Senior District Judge failed to give any or any adequate reasons for rejecting the Commission's case.
- I shall examine these grounds in turn. Before doing so I deal with the legislative history of PPERA, set out some key sections of PPERA, and describe basic legal principles.
Legislative history of PPERA
- Relevant features of the legislative history are largely undisputed. In my account of them below I draw substantially from the Commission's written submissions.
- At material times the Committee on Standards in Public Life was chaired by Lord Neill of Bladen QC. I shall refer to it as "the Neill Committee." In October 1998 it produced a report on the Funding of Political Parties in the UK ("the Funding Report"). The Funding Report recommended the establishment of a comprehensive regulatory system of requirements with respect to donations to political parties. According to the Neill Committee, this new framework was needed to provide public confidence for the future, to meet the needs of modern politics and to bring the UK into line with best practice in other mature democracies. As an essential part of the regulatory scheme, the Neill Committee recommended the establishment of a Commission to oversee compliance with recommended duties on each of the political parties to monitor donations received, to report some and to decline others, and to submit proper accounts.
- The Neill Committee recommended that political parties should in principle be banned from receiving foreign donations. It described the arguments for and against such a ban. Prominent among those for a ban was that parties were involved in the democratic process taking place within the UK. They should therefore be confined to seeking financial support from those entitled to vote subject to reasonable extensions to include UK registered companies, organisations and trusts. Put in its simplest form:
… what happens here is the concern of those who live and work here and the political parties should not be entitled to fill their coffers with donations from abroad, made by persons and corporations who have no genuine stake in the country.
- The Neill Committee found difficulties in producing a satisfactory definition of "foreign donation". Instead it recommended an approach which defined permissible sources from which donations could be received. For individuals, the Neill Committee recommended that registered voters in the UK, and those eligible to be put on the electoral register in the UK, should be permissible sources.
- The Neill Committee considered who should bear the responsibility for ensuring that only donations received from permissible sources were accepted. It considered that responsibility should be placed on each political party and, in particular, on the responsible officer of the party. It did not recommend that responsibility be placed on the donor. Nor did it recommend that any individual in the party other than the responsible officer should be made responsible.
- As to enforcement, the Neill Committee recommended that, as well as criminal sanctions, the court should have a power to order the defaulting political party to forfeit a sum of up to ten times the donation wrongfully accepted. The forfeiture power would apply even if the receipt was innocent or inadvertent. At paragraph 5.42 the Funding Report described the Committee's proposal in this way:
… If a party were to be guilty of a deliberate acceptance of a donation from a source outside the definition of a permissible source, criminal sanctions should attach to all responsible, and a sum of not less than the donation should be liable to forfeiture from the party's funds; in significant cases of attempted evasion of the rules a penalty of up to ten times the overspend might be levied. A forfeiture power should also apply even if the receipt were innocent or inadvertent, although courts would clearly take into account the degree of culpability in setting the level of forfeiture.
- In response to the Funding Report a White Paper ("the White Paper") dated 27 July 1999 set out the Government's proposals for legislation, including a draft bill which adopted most, but not all, of the Neill Committee's recommendations. The Government agreed with the Neill Committee that a regulatory scheme of some rigour was needed to enable the restrictions on donations to political parties to be enforced.
- The White Paper further endorsed the establishment of an independent and impartial Electoral Commission. It would be directly accountable to Parliament. The bedrock functions of the Commission were described as those relating to the new regulatory framework for controls on donations to political parties. These functions of the Commission were also described by the White Paper as crucial to maintaining public confidence in the UK's democratic institutions.
- The White Paper adopted the approach of the Neill Committee in defining the sources from which political parties should be entitled to receive donations as "permissible sources". The White Paper expressed the view that, as a consequence of the requirements to ensure that the donation was from a permissible source and to submit a quarterly donation report accompanied by a declaration to that effect from the party treasurer, the party's treasurer will be under an obligation to ensure that a check is made in respect of each and every donation to the party sufficient to establish that the donor is a permissible source. The White Paper also observed that it is important, if the scheme is to be workable, that such checks should be straightforward for the political parties to administer. This consideration was said in the White Paper to have a considerable bearing on its proposals for the definition of a permissible source.
- The White Paper, however, departed from the Funding Report by limiting acceptable donations to those individuals whose names appear on the electoral register. Individuals who were entitled to be on the register, but did not appear on the register, would not qualify as a permissible source. The reason for this departure was that checking that a particular donor appeared on the electoral register was a test that was both conclusive and simple to administer, whereas a test involving verifying whether a donor was entitled to be on the register was far less straightforward.
- As to enforcement, the White Paper accepted the proposed criminal offences. However, the White Paper did not accept the Neill Committee's recommendation that the court be granted a power to forfeit a sum up to ten times the amount of the donation wrongfully accepted. Instead the White Paper proposed that the court have the power to order the political party to forfeit a sum equal to the value of the donation wrongfully accepted. The White Paper said at paragraph 4.15:
In addition to these criminal sanctions the Government also accepts the Committee's proposal (R31) that where a party is found to have accepted a donation from other than a permissible source it should be liable to forfeit that sum. Clause 51 provides a power for the magistrates' court … to order the forfeiture of a sum equal to the value of a donation received from other than a permissible source. This will apply whether such a donation was accepted knowingly or not.
- The White Paper's approach on the matters described above was accepted by Parliament. As will be seen below, key sections of PPERA gave effect to the policy described in the White Paper.
Key sections of PPERA
- Here, too, the Commission's written submissions gave a helpful account which is largely undisputed. In what follows I draw heavily on that account.
- Part II deals with registration of political parties. By s 22 no person purporting to represent a party may stand for election in the UK unless the party was registered with the Commission in the relevant part of the UK on the relevant date. Section 24(1) requires that for each registered party there is a person registered as the party's treasurer. Section 24(4)(a) provides that the registered treasurer of the party shall be responsible for compliance on the part of the party with the provisions of Parts III and IV of the Act
- Part III contains detailed requirements for the registered treasurer of a party to keep, to prepare, and to submit to the Commission proper audited accounts showing and explaining the party's transactions. These requirements are backed by criminal offences for failure to comply.
- Part IV establishes a system of control of donations to registered parties. "Donation" is defined broadly to include any gift to the party of money or other property and any money spent in paying any party expenses: s 50(2)(a), (d).
- Section 54 imposes a prohibition on the acceptance by any registered party of any donation from a person who, at the time of its receipt, is not a "permissible donor" in the following terms:
54.—(1) A donation received by a registered party must not be accepted by the party if –
(a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor . . .
(2) For the purpose of this Part, the following are permissible donors—
(a) an individual registered in an electoral register;
(b) a company –
(i) registered under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, and
(ii) incorporated within the United Kingdom or another member State,
which carries on business in the United Kingdom ... .
- If a registered party receives a donation which is subject to the statutory prohibition on acceptance contained in s 54(1), then, under s 56(2) , the registered party is required to return the donation to the donor within 30 days of its receipt:
(2) If a registered party receives a donation which it is prohibited from accepting by virtue of s 54(1) . . ., then –
(a) . . . the donation, or a payment of an equivalent amount must be sent back to the person whom made the donation or any person appearing to be acting on his behalf
. . .
within the period of 30 days beginning with the date when the donation is received by the party.
- Section 56(5) provides that a donation received by a registered party shall be taken to have been accepted by the party unless the donation is returned within 30 days and a record can be produced of the receipt of the donation.
- In addition, in relation to any donation (permissible or impermissible) which is not immediately refused, under s 56(1) , the registered party has a duty in the following terms
(a) a donation is received by a registered party, and
(b) it is not immediately decided that the party should…refuse the donation, all reasonable steps must be taken forthwith by or on behalf of the party to verify (or, so far as any of the following is not apparent, ascertain) the identity of the donor, whether he is a permissible donor, and (if that appears to be the case) all such details in respect of him as are required by virtue of paragraph 2 of Schedule 6 to be given in respect of the donor of a recordable donation.
Paragraph 2 of Schedule 6 requires the full name of the donor, his address if it is shown in the electoral register at the date of receipt of the donation, and otherwise his home address
- It may be noted here that registered parties are entitled to a free copy of the electoral register in hard copy or in electronic data form from the relevant registration officer for the purposes of complying with the controls on donations under Part IV: Representation of the People (England and Wales) Regulations 2001, regulations 102, 106.
- The prohibition on the acceptance of impermissible donations and the duty to return any such donations within 30 days of receipt contained in ss 54(1) and 56(2) are subject to criminal and civil enforcement regimes. The criminal enforcement regime is found in s 56(3) which makes the party and the treasurer guilty of an offence if the donation is not from a permissible donor and is not sent back to the donor within 30 days of receipt. The civil enforcement regime is found in s 58, by which the Court has a power to order forfeiture of an amount equal to the donation in the following terms:
58.—(1) This section applies to any donation received by a registered party—
(a) which, by virtue of section 54(1)(a) or (b), the party are prohibited from accepting, but
(b) which has been accepted by the party.
(2) The court may, on an application made by the Commission, order the forfeiture by the party of an amount equal to the value of the donation.
- It is on the construction and application of this provision that the outcome of this claim hinges.
- The court with jurisdiction to hear the application under s 58(2) is the Magistrates' Court: s 58(5). The applicable standard of proof on the application for forfeiture is the civil standard of proof: s 58(3). A forfeiture order may be made whether or not criminal proceedings are brought for an offence connected with the donation: s 58(4). Provision is made in s 59 for an appeal by a party from a forfeiture order. The amount forfeited by an order under s 58(2) is to be paid into the Consolidated Fund: s 60(3).
- Chapter III of Part IV requires the treasurer of a registered party to prepare and submit quarterly donation reports to the Commission which declare, to the best of the treasurer's knowledge and belief, that all of the recorded donations accepted by the party are from permissible donors: ss 62, 66. A failure to comply with any of the requirements for donation reports is a criminal offence unless it is proved that the treasurer took all reasonable steps and exercised all due diligence to ensure compliance with the requirements: s 66(4)-(5). There is also a power for the court to order forfeiture of a donation where the failure to comply with the donation report requirements was attributable to an intention to conceal the existence or true amount of a donation: s 66(6). It is also an offence if a person knowingly or recklessly makes a false declaration that the donations are permissible: s 66(5).
- Part X, s 145(1) provides that the Commission's general function is to monitor compliance with the restrictions and requirements imposed by provisions including Part IV. The Commission is given, as part of its enforcement powers, the power to compel political parties to disclose documents or information requested by the Commission with a reasonable period of time: s 146(1). This disclosure power is backed by criminal sanction: s 146(5).
Basic legal principles
- Relevant principles of the public law of England and Wales include the following. The exercise of discretion conferred by statute is subject to limits. It can only be used to promote the policy and objects of the statute, and not to frustrate those policies and objects, which are to be determined by the construction of the statute against the legislative background: Padfield v. Minister of Agriculture, Fisheries and Food  AC 997, 1030 (per Lord Reid). Moreover, as stated by Lord Bridge in R v. Tower Hamlets LBC, ex parte Chetnik Developments Ltd  1 A.C. 858 at p. 873G, in order to determine the width of the statutory discretion, the Court's task is as follows:
… before deciding whether a discretion has been exercised for good or bad reasons, the court must first construe the enactment by which the discretion is conferred. Some statutory discretions may be so wide that they can, for practical purposes, only be challenged if shown to have been exercised irrationally or in bad faith. But if the purpose which the discretion is intended to serve is clear, the discretion can only be validly exercised for reasons relevant to the achievement of that purpose.
- If an ambiguity arises as to the true construction of a statutory forfeiture power such as s 58(2) then regard must be had to the common law principle that a statute should not be construed so as to interfere with property rights unless it is clearly intended to do so: R (Assets Recovery Agency) v. Green  EWHC 3168 (Admin) at para. 43 (Sullivan J). This principle is common ground, but neither side sought to derive support from it for present purposes. It is also common ground that when construing a statute, the court is not confined to the literal meaning of the words used. In the present case, when seeking to ascertain the true meaning of PPERA, the court is entitled to have regard to the Funding Report and the White Paper. An object of a statutory forfeiture provision is deterrence both of the owner of the thing forfeited and of others: R v Maidstone Crown Court Ex parte Gill  1WLR 1405, 1412.
- Prior to the Human Rights Act 1998 there was much debate as to the extent to which common law review for unreasonableness included a review of the proportionality of a decision. The debate has less importance following that statute and the effect which it has given to the principle of proportionality in the context of rights under the European Convention on Human Rights. It may be noted, however, that long before the Human Rights Act 1998 the courts of England and Wales when considering penalties frequently used the language of proportionality: see Fordham, Judicial Review Handbook, (5th ed 2008) paragraph 58.3 (pp. 531-533), especially at 58.3.4.
- Under the Human Rights Act 1998 certain provisions of the European Convention on Human Rights and subsequent protocols have effect in relation to, among other things, the exercise of certain statutory powers. Among those provisions are Article 1 of Protocol 1 ("P1-1") and Article 3 of Protocol 1 ("P1-3"). These state:
PROTECTION OF PROPERTY
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties
RIGHT TO FREE ELECTIONS
The High Contracting Parties undertake to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature.
- It is common ground that a forfeiture order under s 58(2) can only be made if it complies with P1-1. Applying the principles in Sporrong and Lonroth v Sweden (1982) 5 EHRR 35 at paragraph 69, the Magistrates' Court must:
determine whether a fair balance is struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The search for this balance is inherent in the whole of the Convention and is also reflected in the structure of Article 1.
- The Court of Appeal analysed the relevant principles in Lindsay v C & E Commissioners (2002) 1 WLR 1766. At paragraph 52 Lord Phillips MR stated:
The Commissioners' policy involves the deprivation of people's possessions. Under article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is "to secure the payment of taxes or other contributions or penalties". The action taken must, however, strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued …
Ground 1: Construction of PPERA
- Under s 58(2) there are three stages for the Magistrates' Court. The first two stages are confined to the determination of factual matters. It must first decide whether, in relation to any particular alleged donation, what has been brought to its attention by the Commission did indeed amount to a donation which by virtue of s 54(1)(a) or (b) the party was prohibited from accepting. If so it must secondly decide whether the party nevertheless accepted the donation. If those factual matters are resolved against the party, the third and final stage arises. It is at this stage that the Magistrates' Court considers whether to make a forfeiture order. At this stage the Magistrates' Court must identify and apply the legal principles governing its task, and – depending on those legal principles and their application to the case in hand - it may have to decide factual questions.
- In his judgment the Senior District Judge stated – no doubt reflecting the submissions made to him – that the word "may" in s 58(2) vested the Magistrates' Court with a discretion. At the hearing in this court both the Commission and UKIP accepted that this was so, and that the observations by Lord Reid and Lord Bridge cited above governed the exercise of that discretion. I think it important to stress that these observations by Lord Reid and Lord Bridge were directed to the exercise of discretion by central and local government. The power under s 58(2) is, however, conferred not on government but on the Magistrates' Court. It is a judicial power. Plainly that power must be exercised so as to promote, and not to frustrate, the policy and objects of PPERA. I would not wish it to be assumed, however, that all characteristics of the exercise of governmental discretion will necessarily be applicable to the exercise of judicial power under s 58(2).
- The Commission's case on construction is put in three ways. First it says, in effect, that there is a presumption of forfeiture. Second, it complains that the Senior District Judge wrongly held that the statutory purpose was limited to banning "foreign" donations. Third, it says that the Senior District Judge in effect construed PPERA as requiring forfeiture only in cases where the party was aware that a donation was impermissible when it was accepted.
Ground 1(a): alleged presumption
- The Commission submits that on the true construction of s 58(2) the Magistrates' Court's discretion is limited to ordering forfeiture unless special circumstances in which a particular donation was made and accepted justify a refusal to order forfeiture. This is said to give rise to a "prima facie position" that the discretion to forfeit the impermissible donations should be exercised "unless there were good reasons in the particular case not to do so which did not frustrate or run counter to the policy and objects of PPERA." This "prima facie position" is in effect a presumption and I shall refer to this contention by the Commission as "the alleged presumption".
- The alleged presumption was put at the forefront of the Commission's skeleton argument for the hearing before the Senior District Judge. It is not, however, expressly addressed in the judgment of the Senior District Judge. He must nevertheless have rejected it, for he did not adopt any such presumption when considering how to exercise his power under s 58(2).
- It is convenient to mention at the outset two ancillary points made by the Commission in paragraphs 58 & 59 of its written submissions for the hearing before the Senior District Judge. Paragraph 58 was as follows:
When exercising its discretion under [s 58], the Court should take note that the source of the submissions and evidence in support of a forfeiture order is an independent and impartial body charged by Parliament with wide ranging responsibilities in relation to electoral affairs, including the regulation of donations to political parties. The Court should also note that the Electoral Commission has considerable expertise in these matters and can be expected to act with a proper sense of responsibility when seeking a forfeiture order.
- Mr Newman in his oral submissions described paragraph 58 as "dangerous." He characterised it as saying that the Commission would only seek forfeiture in proper cases, and commented that this deprived the court of jurisdiction. I have no difficulty in noting the matters which paragraph 58 urges the court to note. They are axiomatic. However they do not advance the Commission's case. Mr Beloff rightly has not suggested that the Magistrates' Court must exercise any degree of deference to the Commission. An analogy can be made with the presentation of winding up petitions by the Secretary of State. The court will note that the relevant government department has considerable expertise and can be expected to act with a proper sense of responsibility. Nevertheless the cogency of the submissions made on behalf of the Secretary of State will fall to be considered and tested in the same way as any other submissions: see Re Walter L Jacob & Co  BCLC 345 at 353 d-f. In the context of s 58(2) the points made in paragraph 58 of the Commission's written submissions for the hearing before the Senior District Judge are in my view legally neutral.
- Paragraph 59 of the Commission's written submissions for the hearing before the Senior District Judge concerned a different point. UKIP had suggested that it would be open to the Magistrates' Court under s 58(2) to forfeit only a proportion of any particular donation. In paragraph 59 the Commission denied that this was so. It said that the words "may … order the forfeiture by the party of an amount equal to the value of the donation" in s 58(2) plainly gave the Magistrates' Court a power, in relation to any particular donation, to deal with the matter only on an "all or nothing" basis. The Senior District Judge commented that he was not attracted to an argument which inhibited the court's discretion to such an extent. He added that this question did not arise for decision. Presumably this was because he had decided to forfeit the entire amount of particular donations, rather than some portion of one or more donations. Mr Beloff submits that it is nonetheless desirable for this court to decide the point. The reason is that a possible outcome of this case is that the matter may be remitted to the Magistrates' Court. The Commission's written submissions dealt with this under ground 2(c), and I shall do the same.
- In support of the alleged presumption the Commission's main submissions rely both on authority and on particular aspects of PPERA. The authority relied on is Chetnik, where the Commission draws attention to what was said by Lord Bridge at pages 877 & 880. In these passages Lord Bridge is concerned with the particular question arising in that case. This was whether a rating authority could refuse to repay rates which had been paid by mistake. At page 877 Lord Bridge placed reliance upon a broad consideration "that Parliament must have intended the rating authorities to act in the same high principled way expected by the court of its own officers and not to retain rates paid under a mistake of law… unless there were, as Parliament must have contemplated there might be in some cases, special circumstances in which a particular overpayment was made such as to justify retention of the whole or part of the amount overpaid." At page 880 he examined whether this broad consideration might not apply as regards rates which had been levied on behalf of a precepting authority. He concluded that because the primary objective of the power to refund rates was to remedy what would otherwise ordinarily be an injustice it was difficult to see any rational ground for making a distinction between rates levied for the rating authority's own purposes and rates levied to meet precepts by other authorities.
- At my request Mr Beloff and Mr Dhillon produced a helpful note analysing judgments in cases where the court considered other statutory provisions for forfeiture. In none of these cases was there held to be a presumption of the kind contended for by the Commission. Mr Beloff drew attention to a number of statutes (including the Drug Trafficking Act 1994 and the Proceeds of Crime Act 2002) which concern the confiscation of the proceeds of criminal offending. In R v. May  2 WLR 1131 at paras 8 and 9 the House of Lords explained that under such statutes:
… [w]here … a criminal has benefited financially from crime, but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value if he has them.
- At para 46 it was held that when the order that was made was for less than the criminal's realisable assets such order was:
entirely consistent with the legitimate objects of the legislation and … involves no injustice or lack of proportionality.
- The Commission submitted that a similar rationale underpins PPERA Pt IV, namely registered parties should not benefit from impermissible donations, and that a forfeiture of each such donation in its entirety was likewise proportionate. I do not accept the analogy. First, the relevant criminal offence under PPERA arises when there is a breach of s 56(2). An application for forfeiture under s 58 will not necessarily involve such a breach. Second, R v May is concerned with statutes where the court is required to adopt a mechanical approach. If the relevant criteria are met, a confiscation order must be made. Unlike s 58(2), the court has no discretion.
- Returning to the Commission's main submissions, in Chetnik the House of Lords concluded in effect that the statute in that case involved a presumption that discretion would be exercised in a particular way. The Commission relies on this by way of analogy. The analogy, however, will only be sound if there are factors affecting PPERA which point to a similar presumption.
- The first factor relied upon by the Commission is that the general purpose of PPERA is, using the words of the White Paper, to enhance and maintain the integrity and propriety of and public confidence in the political process. It is important that the Magistrates' Court's function under PPERA is exercised in a way that does not frustrate that purpose. This is common ground.
- The second factor relied on by the Commission seeks to identify "the specific purpose of Part IV," where s 58(2) is located. The contention for the Commission starts with the general purpose described above and asserts that to that end Part IV establishes a regulatory scheme of some rigour which, again using the words of the White Paper:
(i) lays down clear and workable restrictions on donations to political parties; (ii) places responsibility for compliance with these rules on each political party; (iii) lays down provisions designed to ensure that the restrictions on donations are not evaded; and (iv) establishes a system by which those restrictions will be enforced by a forfeiture order made by the Court.
- UKIP takes issue with this, asserting that the specific purpose of Part IV is to ban foreign donations to political parties. I shall consider this contention later in this judgment. For the purposes of ground 1(a) I assume in the Commission's favour that UKIP is wrong.
- The third factor relied upon by the Commission concerns "the specific purposes of the power to order forfeiture under s 58(2)." These are said to be:
(i) To prevent the political party, in breach of the statutory prohibition on acceptance of impermissible donations under s 54(1) and the statutory obligation to send such a donation back within 30 days of receipt under s 56(2), from retaining the benefit of a donation unlawfully obtained. The civil remedy prescribed by Parliament if the donation has been accepted is not the return of the donation to the donor but forfeiture of an amount equal to the donation to the Consolidated Fund. So the fact that the political party has spent the donation is not a bar to forfeiture. Moreover, forfeiture ensures that the regulatory scheme is not defeated by the impermissible donor, upon return of his donation, channelling the same sum back to the political party via a different but permissible source.
(ii) To deter the political party in breach of its obligations from breaching its obligations under PPERA in the future.
(iii) To deter other political parties from breaching their obligations under PPERA in the future. The specific and general deterrence purpose of PPERA is clear from the structure and provisions of the Act as well as the Government White Paper's observations that:
(a) a regulatory scheme of some rigour was needed to enforce the restrictions on donations to political parties;
(b) the power to order forfeiture would apply whether the donation was accepted knowingly or not
- Again I shall assume in the Commission's favour for the purposes of ground 1(a) that the contentions advanced in relation to this factor are sound. I shall make a similar assumption in relation to the fourth and final factor. This is that the forfeiture power under s 58(2) is the only civil enforcement sanction available under PPERA for acceptance of impermissible donations.
- The conclusion derived by the Commission is that it must have been Parliament's intention that the power of forfeiture under s 58(2) would be exercised by the Magistrates' Court in the usual or ordinary case, "otherwise there would be no effective sanction for breach of the restrictions on donations… and the purposes identified above would be frustrated, with a consequent reduction in public confidence in the regulation of political party funding." In support of this conclusion Mr Beloff urged that forfeiture would normally be needed to avoid unjust enrichment, as by definition the party would have accepted a donation which it ought not to have accepted.
- Here, even making the assumptions I have described in the Commission's favour, it seems to me that the conclusion does not follow from the premises. I suggested in argument that what could be derived from the Commission's submissions was a proposition that the Magistrates' Court should exercise the power of forfeiture where this would advance the statutory purpose in a manner which was not disproportionate. Mr Beloff accepted this summary provided that the Magistrates' Court took into account all the circumstances. Applying Lord Bridge's analysis in conjunction with the principles of proportionality summarised at paragraphs 47 and 48 above, it seems to me that it will be for the Magistrates' Court to identify which of the circumstances are relevant, provided that it correctly identifies and applies relevant legal principles – including the duty to ignore matters which on the true construction of the statute are legally irrelevant. Factors which PPERA, on its true construction, does not rule out as a matter of law can be described as "potentially relevant" factors. Some potentially relevant factors can be mentioned on the basis that they are not exhaustive and that whether they can reasonably be regarded as relevant may depend on the particular circumstances. At a general level potentially relevant factors include the type and degree of harm caused by the breach of s 54(1), the extent to which the party's actions or inaction deserve blame, concerns as to what may happen in the future, and the stance and current position of the party. At a more specific level, in relation to type and degree of harm, there might be a need to examine the extent to which breach of s 54(1) means that in fact the party now has a benefit which it ought not to have had. I deal at paras 74 to 81 below with the specific harm arising from a donor being "foreign." I also deal below with potentially relevant factors in relation to blame (para 107), concerns about the future (para 72), and the stance and current position of the party (para 111).
- In my view the desirability of an "effective sanction" does not warrant an inference that the court must ask whether the case before it is "usual" or "ordinary". An enquiry of that kind appears to me likely to be of little value, for there are many different factors which may lead an impermissible donation to be accepted, and ample scope to argue about whether any particular combination of factors is "usual" or "ordinary".
- Moreover it seems to me that s 58(2) is very different from the statutory provision under consideration in Chetnik. The presumption in that case protected the citizen. Without it, those paying council tax in error would be deprived of any remedy, and the state would be unjustly enriched at their expense. I do not see any true analogy with s 58(2). Of course an impermissible donation is something which the party should not have accepted, but we are not concerned here with ensuring that the state is not unjustly enriched at the expense of the citizen.
- I accept that an effective sanction is desirable. In my view it will be achieved, without the need for any presumption, if the Magistrates' Court correctly identifies the statutory purposes and seeks to advance them by making an order which is neither disproportionate nor unreasonable, taking account of those matters which the statute requires and such further potentially relevant matters as the Magistrates' Court considers appropriate. In using the expression "potentially relevant" I exclude any such matters as the statute on its true construction prohibits the Magistrates' Court from taking into account. In expressing the matter in this way I seek to do no more than to apply to s 58(2) well established principles of public law.
- Certain of the factors identified by the Commission can be put under the heading "Concerns about the future." I accept – and Mr Newman did not dispute – that in order to counter a risk of future evasion it may be desirable to forfeit a donation even after return, and that the desirability of deterring future breaches by the party in question or others is a potentially relevant factor. In principle it seems to me that the actual relevance of these factors to a particular case, and the weight to be given to them, are pre-eminently for the Magistrates' Court to decide.
- For all these reasons I reject the alleged presumption.
Ground 1(b): "foreign donations"
- Ground 1(b) concerns the conclusion of the Senior District Judge that the impermissible donations were not "foreign donations", and the significance which he gave to this. The expression "foreign donation" is not a precise one. It is not necessary to be a UK citizen in order to be an elector. Conversely not all UK citizens may vote. For most purposes the current position is that in order to vote an elector must be registered on an electoral roll, and that a UK citizen living abroad may be registered if that citizen was resident at a UK address within the last 15 years, and was registered at that address or was too young to be registered but a parent or guardian was registered at that address.
- The Senior District Judge stated in paragraph 16 of his reasons that in his view Part IV was designed to ban foreign donations. He said in paragraph 17 that Mr Bown's donations were not foreign donations and added that registration on the electoral roll was something to which Mr Bown was entitled.
- The Commission says that in this regard the Senior District Judge found that UKIP's retention of the impermissible donations did not have the effect of frustrating the purpose of s 58(2) because that purpose was limited to banning "foreign donations" and Mr Bown's donations were not foreign as Mr Bown was entitled to be registered on the electoral roll. UKIP does not dispute that this was indeed the Senior District Judge's reasoning. At issue is whether it involved a misconstruction of PPERA. The Commission's written submissions give four reasons for saying that it did:
(1) Section 54 defines a "permissible donor" as an individual donor on the electoral register at the time the donation is made; it does not use the term "foreign donor". The express terms of s 54 make clear that a donor's entitlement to be on the electoral register is insufficient to make a donation by him permissible for the purposes of PPERA. Mr. Bown's impermissible donations were prohibited by the express terms of s 54, as was accepted by UKIP and found by the Magistrate. The Magistrate's construction of s 58(2) was inconsistent with that finding.
(2) The Government White Paper and s 54 expressly rejected the Neill Committee's recommendation that individuals who were not on the electoral register but were entitled to be on it should qualify as permissible donors. The Magistrate's construction has the impermissible effect of introducing into PPERA the recommendation made by the Neill Committee but which was specifically rejected by the Government and Parliament.
(3) Once it is accepted that Mr. Bown's Impermissible Donations are in breach of s 54, then the Magistrate was obliged to have regard to the legislative purposes of s 58(2). Mr. Bown's impermissible donations undermine all of those purposes and the effectiveness of PPERA's regulatory scheme as a whole.
(4) The Magistrate's construction of s 58(2) leads to a highly unreasonable result that political parties will have no incentive to comply with the requirement under s 54 that individual permissible donors must be on the electoral register. That cannot have been the intention of Parliament.
- UKIP answers these contentions by referring first to the legislative history and second to the Home Office Explanatory Notes attached to PPERA ("the Explanatory Notes"). As to the legislative history, it is common ground that:
(1) The Neill Committee stated in paragraph 5.19 of the Funding Report that the best way of banning foreign donations was to define "permissible sources". Recommendation 26 was that the definition of a "permissible source" should cover, as to individuals, registered UK voters and those entitled to register as UK voters.
(2) The White Paper did not take issue with the aims and purposes stated by the Neill Committee in this regard. The only difference of significance appeared in paragraphs 4.5 and 4.6 in respect of Recommendation 26 of the Funding Report:
4.5 The Neill Committee recommended (R26) that political parties should be able to receive donations both from those who are registered voters in the United Kingdom and from those who are entitled to register to vote in the United Kingdom. Clause 50(2)(a) departs from this recommendation by providing that registered political parties may accept donations only from those individuals whose names appear on the electoral register. Entitlement to register, whether as a resident or overseas elector, will not qualify an individual as a permissible source.
4.6 Checking that a particular donor appears on the electoral register offers a test that is both conclusive and simple to administer.
- UKIP comments, in my view rightly, that the White Paper does not differ in principle from the Funding Report. It simply suggests a more practical way of achieving the same purpose. The upshot is – and I do not understand the Commission to dispute it – that a motive behind Part IV was to ban donations from "foreign" sources: see paragraph 19 above. It must in principle be right that a court construing Part IV should have regard to this motive. At the same time, however, the court must not ignore the precise requirements which, animated by this motive, Parliament determined to impose. The Neill Committee identified good reasons why a negative criterion of "foreignness" would be unwise. It followed that the legislation would need to identify a positive criterion which, if satisfied, would have the practical effect of ensuring that "foreign" donations could not be made. This part of the Neill Committee's approach was adopted both in the White Paper and in PPERA itself. The next question is what that criterion should be. Here the White Paper and PPERA differed from the Neill Committee. They confined the criterion to actual registration and rejected the Neill Committee's additional proposal that entitlement to register should suffice. In summary, the Neill Committee's first conclusion was that a positive criterion should be identified; Parliament adopted that first conclusion, and reached a second conclusion that this positive criterion should be registration on an electoral roll. This second conclusion is not insignificant. Mr Newman stressed its pragmatic nature, and said that the motive of banning foreign donations was unchanged. I agree that the motive remained unchanged. Nevertheless this second conclusion, adopted by Parliament on pragmatic grounds, constituted the embodiment by Parliament of a policy adopted for the common good.
- In these circumstances I think it clear that the relevant Home Office Explanatory Note seeks only to explain the motive underlying Part IV. It makes no attempt to explain Parliament's positive requirement that a donor be registered on an electoral roll. That being so, I need not discuss whether UKIP is right in saying that the Explanatory Note is a permissible aid to construction, for the note does not assist UKIP's case.
- Thus a court construing Part IV must have regard not only to the motive of banning foreign donations but also to Parliament's policy decision that this required a ban on donations by those not on an electoral register.
- I return to the Commission's complaint of misdirection of law in ground 1(b). The analysis set out above leads me to two conclusions. First, the Senior District Judge was partially correct when he referred to "foreign donations to political parties" and said that Part IV was designed to deal with this. A concern about such donations was a motive underlying much of Part IV. Nothing in the Commission's four reasons cited above requires the Magistrates' Court to ignore this. Second, however, the Magistrates' Court was required to construe Part IV consistently with the policy adopted by Parliament that, as regards individual donors, permissible donations must generally be made by persons registered on an electoral roll. A specific purpose of s 54 is to give effect to that policy by (1) prohibiting parties from accepting donations from those who are not, at the time of receipt by the party, permissible donors and (2) defining an individual as a permissible donor only if that individual is registered on an electoral register. The main purpose of the forfeiture power in s 58(2) is to provide a method of enforcing s 54. It also seeks to deter future breaches of s 54, whether by the party in question or by others. When discussing what Part IV was designed to do the Senior District Judge referred only to the motive. In paragraph 17 of his judgment he noted that "an error in the registration of Mr Bown's name on the electoral roll" made the donations impermissible. That involved an indirect recognition that registration was the criterion which Parliament had determined on. There is no recognition in the Senior District Judge's judgment of the importance of that policy determination. He did not acknowledge that Part IV was designed to meet Parliament's concerns in a particular way and to that extent I conclude that the Senior District Judge misdirected himself in law.
Ground 1 (c): knowledge
- The Commission noted that the Senior District Judge relied on UKIP's awareness of the impermissibility of the donations which were forfeited, and conversely relied on a lack of such awareness in relation to donations which he decided should not give rise to a forfeiture order. The foundation for ground 1(c) is an assertion by the Commission that this reasoning indicates that the Senior District Judge construed s 58(2) as requiring, in effect, that the Commission establish that a political party was aware that a donation was impermissible when it was accepted in order to justify a forfeiture order.
- I do not accept this assertion. It is true that the Senior District Judge decided to forfeit only donations accepted after what he believed to be the awareness date. It does not logically follow that the Senior District Judge regarded himself as bound to adopt this approach. The Commission makes additional complaints that the Senior District Judge was not entitled to take UKIP's beliefs into account and that no, or no adequate, reasons were given for this aspect of the Senior District Judge's decision. I deal with these additional complaints below.
Ground 2: invalid exercise of discretion
- Ground 2 comprises four complaints. The first is that on the true construction of s 58(2) the Senior District Judge ought to have ordered forfeiture in respect of all impermissible donations. The second is that the Senior District Judge failed to take into account or gave wholly inadequate weight to relevant considerations. The third is that the Senior District Judge took into account irrelevant considerations. The fourth asserts that the Senior District Judge's refusal to order forfeiture of all impermissible donations was irrational.
Ground 2(a): presumption of forfeiture
- This complaint assumes that the Commission is right to assert that on the true construction of PPERA there is a presumption of forfeiture. For the reasons given above I do not accept that there is any such presumption. I do not propose to examine what the position would be if there were such a presumption, for that must depend on the precise nature and terms of any such presumption.
Ground 2(b): relevant considerations ignored
- Here and in ground 2(c) the challenge concerns what are or are not relevant considerations when the Magistrates' Court is performing its function under s 58(2). The modern principles are now well established. They are encapsulated in the speech of Lord Bridge set out at paragraph 43 above.
- Under ground 2(b) the Commission identifies five relevant considerations. The first is that each of the impermissible donations was received at a time when Mr Bown was not on an electoral register and accordingly was not a permissible donor under s 54(2). The second is that in respect of each of the impermissible donations UKIP was in breach of the prohibition on acceptance under s 54(1). These two considerations can be taken together. The Senior District Judge's judgment recognises, implicitly if not explicitly, that both these factors were present, for he accepts in paragraph 8 that he has jurisdiction to make an order under s 58(2). In the absence of either of these factors he would not have had such jurisdiction.
- In relation to both these considerations, for the reasons given in my discussion of ground 1(b) above, an important feature is Parliament's policy decision that an individual should be a permissible donor only if registered on an electoral register at the time the donation is received. This feature is so fundamental that I have concluded on ground 1(b) that as a matter of law the power under s 58(2) must be construed as designed to advance, and not frustrate, this policy. The Senior District Judge's judgment gives no weight at all to this feature. It follows that the Commission's complaint under this part of ground 2(b), which effectively mirrors ground 1(b), is justified. I turn to the fourth and fifth considerations, deferring the third for the time being.
- The fourth consideration is that UKIP failed to check the electoral register to see whether Mr Bown was on it at any relevant time, and thus in respect of each the impermissible donations, UKIP failed to comply with its duty under s 56(1) to take all reasonable steps forthwith to verify whether Mr Bown was a permissible donor and whether his address was shown in the electoral register.
- In this regard Mr Beloff referred to concerns articulated by the Commission on a number of occasions and failures to respond. UKIP, aware of relevant concerns, nevertheless continued to receive donations which were not checked as to their legitimacy. Mr Newman replied that there had been previous occasions when queries by the Commission had been shown to be unjustified.
- In relation to s 56 UKIP itself admitted that it had been negligent. Paragraph 15 of the Senior District Judge's judgment, among other things:
(1) Recorded UKIP's admission that it had not taken all reasonable steps to verify that Mr Bown was a permissible donor;
(2) Acknowledged that UKIP did not check the electoral roll between December 2004 and January 2006;
(3) Accepted the evidence of Mr Smith, the current treasurer of UKIP, that he sought the assurance of Mr Bown that he was indeed on the electoral roll; and
(4) Concluded with a finding that in "the unusual circumstances of this case, that [seeking the assurance of Mr Bown] was clearly insufficient."
- Although he dealt with these matters in paragraph 15, at no point in his judgment did the Senior District Judge expressly consider, in relation to any of the non-forfeited donations, whether the negligence of UKIP warranted forfeiture of the donation in question. However in his judgment the Senior District Judge, having discussed UKIP's negligence in paragraph 15, goes on to conclude that forfeiture should occur only for donations accepted after the the awareness date. In these circumstances it is a fair reading of the Senior District Judge's judgment that in relation to donations prior to the awareness date the Senior District Judge did not consider that UKIP's negligence warranted forfeiture.
- Thus I conclude that the Senior District Judge must have applied his mind to the question whether UKIP's failure to comply with s 56(1) warranted forfeiture of donations accepted prior to the awareness date. He concluded that it did not. This failure occurred time after time, culminating in the period leading up to the awareness date and despite repeated queries by the Commission. It is difficult to envisage how the Senior District Judge could reasonably have concluded, at least as regards donations in the period leading up to the awareness date, that forfeiture was not warranted. However without knowing more about the facts I cannot condemn the outcome as so unreasonable as to be explicable only as the result of a misdirection in law.
- Accordingly I cannot say that there was a failure by the Senior District Judge to have regard to the Commission's fourth consideration. The Commission has an additional complaint that the Senior District Judge did not expressly say why he reached the conclusion that he did. I shall examine this additional complaint below.
- The fifth consideration is that by as early as 2001 UKIP was well aware of the requirements of ss 54 & 56 and of the need to check that individual donors were on the electoral register as a result of an episode concerning the return of donations made by Sir Jack Hayward. The Commission's case before the Senior District Judge stressed what had happened in relation to these donations. UKIP did not dispute that:
(1) A donation of £50,000 was received by UKIP from Sir Jack Hayward, jointly with Lady Hayward, in May 2001. It was accepted by UKIP. By a letter dated 9 August 2001, the Commission informed UKIP that Sir Jack Hayward was not on the electoral register for the address UKIP had provided to the Commission. By a further letter dated 21 September 2001 the Commission asked UKIP for an explanation as to the systems it had in place in order to check the permissibility of donations and, in particular, that donors were registered on the electoral register. On 27 September 2001 UKIP's treasurer and representatives of the Commission held a meeting to discuss the issues raised in the Commission's letters of 9 August and 21 September 2001.
(2) At the 27 September 2001 meeting the then treasurer of UKIP, Mr De Roeck, informed the Commission that UKIP had added to its internal donation report form a request for the electoral register address of any individual donor ("the registered address request").
(3) However between May 2004 and May 2006 the subsequent treasurer of UKIP, Mr Smith, removed the registered address request in order to simplify the report form.
- These matters are not mentioned in the Senior District Judge's judgment. Mr Beloff urged that they showed that UKIP had no valid excuse for its failure to comply with Part IV between 2004 and 2006. Moreover, as a previous offender it was more culpable than a first time offender. It was even more culpable when, as here, there had been a deliberate decision by the responsible official to remove from the form a request that was critical to compliance and the only justification was that it made the matter more simple.
- However, the position as it seems to me is that the Hayward incident, and the addition and removal of the registered address request, are simply factors which might potentially have a bearing when considering whether UKIP's failure to comply with s 54(1) warranted forfeiture. They form part of the background. For the reasons given earlier, I am satisfied that in order to fulfil its functions under s 58(2) the Magistrates' Court was required to consider whether there had been a failure to comply with s 54(1) and if so whether this failure warranted forfeiture. The Commission's submissions seek, in effect, to graft on a legal requirement to have regard to this particular part of the background. In my view this strains the statutory construction too far. The Magistrates' Court must advance and not frustrate the purposes of s 58(2). It is perfectly consistent with this that the Magistrates' Court should form its own view as to the relevance or otherwise of the Hayward incident and the addition and removal of the registered address request. A Magistrates' Court, depending upon its analysis of the circumstances, might – I stress might – reasonably conclude that it did not significantly increase UKIP's culpability. Whether there was a failure to give adequate reasons in this regard is a matter which I consider hereafter.
- This brings me to the third relevant consideration. Here the Commission notes that UKIP failed to comply with its duty under s 56(2) to send the impermissible donations, or a payment of an equivalent amount, back to Mr Bown within 30 days from when the donation was received – indeed they did not do this at any stage.
- The Senior District Judge noted at paragraph 6 of his judgment that an impermissible donation, or a payment of an equivalent amount, must be sent back to the person who made the donation within the period of 30 days beginning with the date on which the donation is received by the party. His judgment thereafter makes no reference to the fact that UKIP was in breach of this obligation. In relation to the donations which the Senior District Judge decided to forfeit there can be no complaint by the Commission about this failure. The question remains whether the Senior District Judge was obliged, but failed, to have regard to this aspect of UKIP's conduct in relation to donations prior to the awareness date.
- As a matter of statutory construction it does not seem to me that s 58(2) has as its purpose the enforcement of the requirement in s 56(2). Section 56 has its own enforcement revision. This is found in s 56(3) which makes failure to comply with s 56(2) a criminal offence.
- It does not follow that failure to comply with s 56(2) is legally irrelevant to the Magistrates' Court's function under s 58(2). It may be that in relation to a party's duties under s 56 there have been actions or omissions by the party or by the Commission which have a bearing on the appropriateness of forfeiture under s 58(2). Whether that is so or not appears to me to be a matter for the Magistrates' Court to decide. Applying the principles cited in the speech of Lord Bridge I do not consider that the Senior District Judge was legally obliged to have regard to the Commission's third consideration.
Ground 2(c) irrelevant considerations
- The Commission submitted that the Senior District Judge took into account considerations which were irrelevant and which could not lawfully be relied on to justify the refusal to order forfeiture of the impermissible donations. It identified three specific matters in this regard. It then went on to discuss a contention by UKIP that the Magistrates' Court, having regard to the degree of the political party's culpability, could forfeit, in relation to an impermissible donation, an amount less than the amount of that donation. This is the point identified at paragraph 56 above. I shall deal with it after analysing the three specific points.
- The first specific point concerned reliance by the Senior District Judge on the fact that Mr Bown was entitled to be on the electoral register and was not a "foreign donor". However for the reasons given earlier in this judgment I consider that the Magistrates' Court was entitled to have regard to the motive behind Part IV, and accordingly to the absence of anything "foreign" about Mr Bown. The real ground of complaint is not that put forward in ground 2(c), but that the Senior District Judge failed to have regard to Parliament's policy: see the discussion in relation to ground 2(b) above.
- Second, the Commission complains that the Senior District Judge relied on the fact that Mr Bown and UKIP believed that Mr Bown was on the electoral register and was a permissible donor at the time the impermissible donations were accepted. The circumstances in which Mr Bown ceased to remain on the register are dealt with in the Commission's arguments on its third specific point, and I shall deal with Mr Bown's belief under that head. As to UKIP's belief or knowledge of impermissibility the Commission says that if these considerations were relevant to forfeiture it would be all too easy for any political party to evade forfeiture and the controls in Part IV by claiming it or the donor believed the donation was permissible. That general assertion in my view underestimates the judicial process. The Magistrates' Court is well equipped to determine whether or not a particular witness is truthful and accurate. Concerns in this regard are not in my view demonstrated to be part of the statutory purpose and do not show that the party's knowledge or belief as to impermissibility is necessarily irrelevant. The Commission observes that s 58(2) does not require that the party be aware at the time of acceptance that the donation was from an impermissible donor, and that the legislative history makes clear that the power to order forfeiture would apply whether or not there was such belief or knowledge. I agree. It does not, however, logically follow that the presence or absence of such belief or knowledge by the political party is legally irrelevant to the exercise of the power to forfeit. The Commission draws attention to s 65. This deals with requirements for the submission of donation reports. Subsections (3) & (4) create criminal offences for failure to supply timely donation reports and for delivering a donation report which does not comply with requirements as to the recording of donations in such a report. Subsection (6) permits the Commission to make an application to the Magistrates' Court asserting that a failure to comply with reporting requirements was attributable to an intention on the part of any person to conceal the existence or true amount of a donation. If the Magistrates' Court is satisfied that this was the case, then it is given power to order forfeiture by the party of an amount equal to the value of the donation. The failure to include a similar express requirement as to intention in s 58(2) is said to provide a strong indication that no such requirement was intended by Parliament under s 58(2). I readily accept that Parliament did not make such a requirement of intent. It does not follow that the presence or absence of intent is legally irrelevant when the Magistrates' Court is considering whether or not to make a forfeiture order under s 58(2).
- The third specific matter concerns reliance by the Senior District Judge on his finding that Mr Bown's failure to remain on the electoral register was due to an inadvertent error. This seems to me to encompass reliance by the Senior District Judge on Mr Bown believing that he was a permissible donor at the relevant time. The Commission stresses that the relevant statutory duties to check permissibility and to reject impermissible donations are placed solely on UKIP. I agree that this is so. While in many cases this may mean that the belief of the donor or others will not assist the Magistrates' Court, I see no reason to rule out the logical possibility that in some circumstances such a belief might be relevant because it has an impact on some other relevant feature of the case. Whether such circumstances have arisen seems to me be to be pre-eminently a matter for the Magistrates' Court.
- I turn to the question whether, in relation to an impermissible donation, the Magistrates' Court can forfeit an amount less than the amount of that donation. The written submissions on this aspect of the case canvassed a number of factors. Some of them were said by the Commission to be inapplicable because they were generally irrelevant for any exercise of power under s 58(2). I shall deal with those factors before returning to the specific question of level of forfeiture in relation any one donation.
- The initial point taken by the Commission was that degree of culpability is irrelevant because knowledge or belief as to impermissibility of a donation is a legally irrelevant consideration. It is not clear to me why this would prevent the court from taking account of the degree of a political party's culpability. In any event, however, this submission does not get off the ground as I have rejected the contention that such knowledge or belief is necessarily irrelevant. They are among many factors which may be potentially relevant to blameworthiness. These include the following. Did the party know at the time of acceptance that the donation was impermissible? Ought it to have known? Has the party been in breach of s 54(1) in relation to previous donations by this or another donor? Is the impermissible donation under consideration an isolated incident or part of a series? Have there been breaches of other obligations imposed by PPERA, and if so with what consequences?
- UKIP says that the court should have regard to the danger that depriving smaller parties of much needed finance would have a chilling effect on the democratic process.
- P1-3 (see paragraph 46 above) is cited by UKIP in support of the reason why this factor is said to be important when considering the true construction of s 58(2). The reason is that it is conducive to "the free expression of the opinion of the people" that there should be a wide spectrum of candidate choice available to the electorate.
- The Commission disputes that any consideration of the finances of smaller parties can have relevance to the construction of s 58(2), whether under P1-3 or otherwise. It contends:
(1) There is no difficulty in practice for UKIP to comply with the requirement to check that donations it receives from individual donors are from persons on the electoral register. UKIP is entitled to a free copy of the electoral register for this purpose: Representation of the People (England and Wales) Regulations 2001, regulations 102, 106. If the donor is not on the register and is not entitled to be on the register then UKIP cannot accept any donation from that person. If the donor is entitled to be on the register but UKIP's check reveals the donor is not on the register, then UKIP is required to return the donation. Thereafter the donor can take steps to be registered and after such registration donations can be accepted by UKIP.
(2) The Senior District Judge did not rely on this matter; nor did he make any finding that forfeiture of the impermissible donations by UKIP would deprive it of finance.
(3) If UKIP does not have the resources to carry out the simple task of checking whether a donor is on the electoral register (and there is no evidence establishing that it does not have such resources) then that is merely an indication that UKIP does not meet the qualifying criteria, set by Parliament, for the rights granted to a registered political party under PPERA. It is not an impermissible assault on democracy as UKIP suggest.
- In my view the observations by the Commission do not establish that regard to the finances of smaller parties is legally irrelevant. The points made by the Commission might strongly support a contention that in a particular case a plea about of lack of finance does not deserve any great weight. I do not however feel able to say that there could be no circumstances in which this consideration could have relevance. The stance and current position of a wrongdoer may affect the appropriateness of forfeiture. An early admission by the party that it was in the wrong, accompanied by prompt remedial steps, might weigh in the balance as pointing against forfeiture. It is conceivable that circumstances could justify a merciful approach having regard to the impact of forfeiture. When arriving at a fair balance the Magistrate's Court must not act in a manner inconsistent with P1-3. It must also bear in mind that every registered political party, no matter what its size, ought to ensure that its resources are deployed in a way enabling it to fulfil the duties imposed on it by PPERA.
- I return to the question whether in respect of an impermissible donation a forfeiture order under s 58(2) may be for an amount less than the value of that donation. If that is otherwise a legitimate construction, none of the points identified above provide reasons in themselves for refusing to adopt that construction. The question remains whether it is indeed a legitimate construction.
- Here the most difficult hurdle for UKIP to overcome lies in the words adopted by Parliament. On the face of s 58(2) Parliament speaks of forfeiture by the party of "an amount equal to the value of the donation." UKIP submits that Parliament, when saying that there "may" be forfeiture of such an amount, must be taken to have proceeded on the basis that the greater includes the lesser. A discretion to forfeit the whole of a donation thus imports a discretion to forfeit a lesser amount where the interests of justice so require. If it were otherwise, UKIP submits, the power of forfeiture becomes an instrument of oppression.
- I do not accept that UKIP's construction is necessary in order to prevent the power of forfeiture becoming an instrument of oppression. If the Magistrates' Court thought that exercise of the power to forfeit would be oppressive, then this can be avoided by simply refusing to forfeit the amount of the donation. Moreover, Mr Beloff accepted that if the Magistrates' Court thought full forfeiture would be disproportionate then the only choice would be between a disproportionate full forfeiture and no forfeiture at all. As it is accepted that the Human Rights Act prohibits a disproportionate forfeiture, this means that in these circumstances it would not be possible to make an order under s 58(2). By the same token the Commission's construction involves no impairment of P1-3: see paragraph 111 above.
- In support of its construction, UKIP relies upon observations in the Funding Report at paragraph 5.42:
If a party were to be guilty of a deliberate acceptance of a donation from a source outside the definition of a permissible source, criminal sanctions should attach to all responsible, and a sum of not less than the donation should be liable to forfeiture from the party's funds; in significant cases of attempted evasion of the rules a penalty of up to ten times the overspend might be levied. A forfeiture power should also apply even if the receipt were innocent or inadvertent, although courts would clearly take into account the degree of culpability in setting the level of forfeiture.
- However, the legislative history does not, on analysis, assist UKIP. It is true that paragraph 5.42 contemplated, in relation to any particular donation, that the court would set the level of forfeiture. Nevertheless this must be read in the context of the recommendation that the court should have a power to set the level of forfeiture at up to ten times the donation wrongfully accepted. The Government did not accept this recommendation. Instead the White Paper proposed the following civil enforcement regime:
In addition to these criminal sanctions the Government also accepts the Committee's proposal (R31) that where a party is found to have accepted a donation from other than a permissible source it should be liable to forfeit that sum. Clause 51 provides a power for the magistrates' court … to order the forfeiture of a sum equal to the value of a donation received from other than a permissible source. This will apply whether such a donation was accepted knowingly or not.
- It does not seem to me possible to read s 58(2) in the way that UKIP suggest. The word "may" in s 58(2) has the ordinary meaning that if the Magistrates' Court thinks it appropriate then it has a power to do what is set out in the remainder of s 58(2), namely to order the forfeiture by the party of an amount equal to the value of the donation. For the reasons set out above what was said by the Neill Committee does not assist UKIP.
Ground 2(d): Unreasonable refusal to order forfeiture
- The Commission's written submissions on this ground assumed success on other grounds. Some of these other grounds have succeeded. Others, however, have not. In the latter cases I have considered whether the outcome is only reasonably explicable as arising from misdirection in law – in other words, whether if the Senior District Judge had correctly directed himself the outcome would not fall within the range of reasonableness. I have not been able to reach that conclusion in major relevant respects. Accordingly, I do not accede to the suggestion that the Senior District Judge's decision is open to challenge on grounds of unreasonableness alone.
Ground 3: Erroneous finding as to awareness date
- As mentioned above, both sides agree that the awareness date was wrongly determined by the Senior District Judge. This finding disadvantaged UKIP alone. UKIP make no complaint about it. It does not seem to me that it can give rise to any relief at the instance of the Commission. Mr Beloff acknowledged that the Senior District Judge's error in this regard was not of concern to the Commission.
Ground 4: reasons
- The Magistrates' Court has a duty to give reasons: English v. Emery Reimbold & Strick Ltd.  1 WLR 2409, paras. 15-21. The reasons must engage with the main arguments on each side, explaining in broad terms why it was or was not persuaded by those arguments. Mr Beloff described the Senior District Judge's judgment as succinct to the point of sparseness. The Commission provided to the Senior District Judge detailed written and oral opening and closing submissions as to its case, in particular on the proper construction of PPERA. Nevertheless the Senior District Judge failed – in the view of the Commission – to give any or any adequate reasons for rejecting the Commission's case.
- Although brevity is commendable, I am satisfied that in this case the Senior District Judge gave reasons which were too brief. He did not deal with the Commission's postulated presumption of forfeiture. He did not deal with the Commission's argument as to the purposes of s 58(2). He said what he thought Part IV was designed to do. However the Commission had advanced detailed contentions as to the aim of that Part and of s 58(2) in particular, supported by references to the Funding Report and the White Paper. He gave no reasons for rejecting these contentions. He failed to mention factual matters. The Hayward incident appears to me to be borderline, but the series of occasions when the Commission raised queries in my view was an important feature which called for mention, along with discussion of UKIP's actions and omissions in response to those queries.
- For the reasons I have given I conclude that the Commission's challenge succeeds in part. The parties are agreed that in consequence the Senior District Judge's decision must be quashed, and the matter must be remitted to the Magistrates' Court to consider the Commission's application afresh.