JUDGMENT
R (on the application of the Electoral Commission)
(Respondent) v City of Westminster Magistrates
Court (Respondent) and The United Kingdom
Independence Party (Appellant)
before
Lord Phillips, President
Lord Rodger
Lord Walker
Lord Brown
Lord Mance
Lord Kerr
Lord Clarke
JUDGMENT GIVEN ON
29 July 2010
Heard on 8 and 9 June 2010
Appellant Respondent
Patrick Lawrence QC Michael BeloffQC
Can Yeginsu Jasbir Dhillon
(Instructed by Moreland &
Co Solicitors)
(Instructed by the Treasury
Solicitor)
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LORD PHILLIPS (with whom Lord Clarke agrees)
Introduction
1. The Political Parties, Elections and Referendums Act 2000 (“the Act”)
introduced, for the first time in this country, restrictions on the donations that can
be made to registered political parties. All statutory references in this judgment are
to the Act.
2. Part IV of the Act specifies those from whom it is permissible for political
parties to accept donations. Donations from an individual may only be accepted if
the donor is on an electoral register. The Act confers on a magistrates’ court the
power, at the instigation of the Electoral Commission (“the Commission”), to
forfeit from party funds a sum equal to a donation that has been accepted from an
impermissible source. This appeal raises the question of the criteria that should
properly be applied by a magistrates’ court when exercising this power.
3. This question is of particular interest to the United Kingdom Independence
Party (“UKIP”), a small registered political party which has yet to succeed in
returning a member to Westminster. UKIP has relied for the majority of its funding
on a single supporter, Mr Alan Bown. Since 2003 Mr Bown has made donations to
the party, in one form or another, amounting to over £1 million. By inadvertence,
between 1 December 2004 and 2 February 2006, he ceased to be on any electoral
register. During this period his donations to UKIP amounted to £349,216. On 16
March 2007 the Commission made an application to the Senior District Judge in
the City of Westminster Magistrates’ Court for an order forfeiting the whole of this
sum. The Senior District Judge ordered the forfeiture of only a small proportion of
this sum. The Act gives a political party a right to appeal to the Crown Court
against a forfeiture order but no right of appeal is given to the Commission. UKIP
did not appeal against the order of the Senior District Judge, but the Commission
challenged his decision by an application for judicial review.
4. In a judgment delivered on 22 January 2009 [2009] EWHC 78 (Admin)
Walker J identified a wide range of matters to which the Senior District Judge
should have had regard when considering the forfeiture application. He held that
the Senior District Judge had failed to give adequate reasons for his decision and
ordered that the case should be remitted to the magistrates’ court for further
consideration.
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5. The Commission appealed to the Court of Appeal, and was successful
[2009] EWCA Civ 1078. On 19 October 2009, giving the only reasoned judgment,
Sir Paul Kennedy held that, on a true construction of the relevant provisions of the
Act, the discretion of the Senior District Judge was very tightly circumscribed.
There was a strong presumption in favour of forfeiture. Where a donation was
received by a political party from an impermissible source a forfeiture order should
follow as a matter of course in the absence of exceptional circumstances. The
magistrates’ court should, on remission, reconsider the matter in accordance with
this approach.
6. Before this Court Mr Patrick Lawrence QC for UKIP has sought to uphold
the approach of Walker J, whereas Mr Michael Beloff QC for the Commission has
urged that the analysis of the Court of Appeal was correct. The difference between
the two has been described as “the presumption issue”.
The relevant provisions of the Act
7. Part I of the Act establishes the Commission which is given a wide range of
regulatory powers and duties in relation to elections and political parties, including
keeping under review “the registration of political parties and the regulation of
their income and expenditure” (section 6(1)(e)).
8. Part IV deals with “Control of Donations to Registered Parties and their
Members etc”. Chapter II imposes restrictions on the receipt of donations. Section
54(1) provides that a donation must not be accepted if the person seeking to make
it is not, at the time of its receipt, a permissible donor, or if his identity cannot be
ascertained. Section 54(2) identifies those who are permissible donors. These
include an individual registered in an electoral register and a company registered
under the Companies Act 2006, incorporated within the United Kingdom or
another member state, and carrying on business in the United Kingdom. Section
54(3) provides that a donation made in the form of a bequest will have been made
by a permissible donor provided that he was registered in an electoral register at
any time within the five year period that terminated with his death.
9. Section 56 imposes duties in relation to the acceptance or return of
donations and imposes criminal sanctions for breach of those duties. Where section
54 prohibits acceptance of a donation it must be returned within 30 days of receipt.
If it is not, both the party and the treasurer of the party are guilty of an offence,
albeit that it is a defence to prove that all reasonable steps were taken to verify or
ascertain whether the donor was a permissible donor and that, as a result, the
treasurer believed that he was a permissible donor. The effect of section 56(5) is
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that a donation will be deemed to have been accepted, even if it is returned within
30 days, unless a record can be produced of its receipt and its return.
10. Section 58 contains the provision that has given rise to this appeal. It deals
with forfeiture of donations that have been made by impermissible or
unidentifiable donors. Where these have been accepted, notwithstanding that their
acceptance was prohibited, section 58(2) provides:
“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.”
Section 58(4) makes it plain that such an order may be made whether or not
proceedings are brought against any person for an offence connected with the
donation. Section 58(5) provides that in England and Wales the “court” is a
magistrates’ court.
11. Section 60 provides that proceedings under section 58 shall be brought
against the party in its own name and not in the name of any of its members and
that any amount forfeited is to be paid out of the funds of the party.
12. It is notable that section 58 does not provide for the automatic forfeiture of
any donation that is accepted from an impermissible source. The provision that the
court may order its forfeiture confers a discretion on the court. Furthermore it has
been common ground, rightly in my view, that the Commission also enjoys a
discretion whether or not to make an application for forfeiture to the court. The
Act itself gives no indication of the criteria that should govern the exercise of
either discretion. It is the former discretion that is critical, but it would be strange
if the court’s discretion was narrower than that of the Commission.
The second issue of interpretation
13. The primary issue is the presumption issue. Does section 58(2) confer a
broad discretion on the court whether or not to make a forfeiture order, or is there a
strong presumption in favour of forfeiture? But section 58(2) raises a secondary
issue of interpretation. It confers on the court a power to order forfeiture of “an
amount equal to the value of the donation”. Where the court exercises this power,
does it have to order forfeiture of an amount equal to the total value of the
donation, or is it implicit that the court has a discretion to order forfeiture of a
lesser sum if it considers this appropriate? This has been described as the “all or
nothing” issue.
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14. There is a potential interrelationship between the presumption issue and the
all or nothing issue. The Commission argues that Parliament has deliberately
chosen a stringent regime in order to ensure that political donations come from
acceptable sources. There is no half-way house. Similar policy considerations
support both a strong presumption in favour of forfeiture and a requirement that
forfeiture should be total. Conversely a wide discretion whether to forfeit or not
sits better with a power to order partial forfeiture, so that the court has the
flexibility to tailor its order to the particular facts.
The approach to interpretation
15. The answer to the all or nothing issue will not, however, determine the
presumption issue. This is demonstrated by the fact that both Walker J and the
Court of Appeal held that the power conferred on the magistrates’ court by section
58(2) was an “all or nothing” power. In these circumstances I have not found it
helpful to try to answer the all or nothing issue first. The more helpful approach is
to consider the interpretation of section 58(2) having regard to the mischief at
which it is aimed. The parties are agreed that the discretion conferred by section
58(2) should be used to promote the policy and objects of the statute. This
proposition is supported by high authority – see Padfield v Minister of Agriculture,
Fisheries and Food [1968] AC 997 at 1030 per Lord Reid. This principle led Lord
Bridge to observe in R v Tower Hamlets London Borough Council, Ex p Chetnik
Developments Ltd [1988] AC 858, at p 873:
“Thus, 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 for 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.”
16. In applying the Padfield principle in this case there are two questions to be
asked. The first is: what are the objects of the forfeiture permitted by section
58(2)? The second is: why has Parliament chosen to give the court a discretion
whether or not to order forfeiture of a donation that has come from an
impermissible source rather than to make such forfeiture automatic? To answer
these questions it is necessary to look at the legislative history, which I believe
provides the answer to each question.
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The legislative history
17. The Labour Party’s 1997 Election Manifesto announced the following
intention:
“We will oblige parties to declare the source of all donations above a
minimum figure…Foreign funding will be banned.”
On 12 November 1997, shortly after taking up office, the Prime Minister extended
the terms of reference of the Committee on Standards in Public Life to add:
“To review issues in relation to the funding of political parties, and
to make recommendations as to any changes in present
arrangements.”
This led to the Fifth Report of the Committee, under the chair of Lord Neill of
Bladen QC, on “the Funding of Political Parties in the United Kingdom” (“the
Neill Report”), which was published in October 1998.
18. Chapter 4 of the Neill Report dealt with “Donations: Transparency and
Reporting”. It recommended the imposition on political parties of a duty to report
the sources of donations, backed by criminal sanctions:
“4.61 The reporting obligations of the political parties should be
backed by criminal sanctions. These should be so drafted as to
distinguish between inadvertent and deliberate failure to report a
disclosable donation. In the latter case those responsible could be
fined or imprisoned. In both cases the court would have power to
order the defaulting political party to forfeit a sum not exceeding the
unreported donation. Knowingly to make a false return should also
be an offence. Prosecutions would be put in the hands of the Director
of Public Prosecutions and should not be the concern of the Election
Commission. Private prosecutions should be allowable.”
19. Chapter 5 of the Neill Report dealt with “Foreign Donations”. After setting
out the arguments for and against a ban on foreign donations, the Committee
reached the following conclusion:
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“5.16…We have, therefore, concluded that, at a time when the whole
question of the funding of political parties is being re-examined, it is
right to take the opportunity to lay down the principle that those who
live, work and carry on business in the United Kingdom should be
the persons exclusively entitled to support financially the operation
of the political process here.”
20. The Report explained that the Committee had found it difficult to produce a
definition of foreign donations for the purpose of banning these. Accordingly they
decided to approach the problem from the opposite direction by defining
“permissible sources” from which alone donations could be received. The Report
explained:
“5.20 We begin by considering those individuals from whom the
political parties should be able to receive donations. We believe that
they come under two headings:
(1) those who are registered voters in the United
Kingdom; and
(2) those who are eligible to be put on an electoral
register in the United Kingdom.
5.21 As to the distinction between (1) and (2) above, we think that a
donation could be properly received from a person who was eligible
to be put on the electoral register because such a person already has,
under existing legislation, the right to participate in the electoral
process subject to taking the additional step of securing registration.
5.22 Categories (1) and (2) cover not only British subjects resident
here, but extend to Commonwealth citizens resident here, citizens of
the Republic of Ireland resident here, and citizens of the European
Union resident here. The categories also include persons known as
‘overseas voters’.”
21. The test of entitlement to be entered on an electoral register was a rational
basis for discriminating between donors with adequate connections with the United
Kingdom and “foreign” donors. British, Republic of Ireland, Commonwealth and
European Union citizens are entitled to register on an electoral register in the
electoral area in which they reside – section 4 of the Representation of the People
Act 1983. If a donor is not qualified to be entered on an electoral register in the
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United Kingdom it is not unrealistic to treat that donor as lacking sufficient
connection with the United Kingdom to be a desirable source of party funding.
22. The following paragraph of the Report dealt with “enforcement and
penalties” in relation to the ban on foreign donations:
“5.42 In essence, what we said in Chapter 4 at paras 4.60 and 4.61
should apply here too with necessary modifications. Thus, the
Election Commission will have statutory powers to call for
information and to institute an investigation into any donation which
it suspects has not come from a permissible source. 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 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 the courts
would clearly take into account the degree of culpability in setting
the level of forfeiture.
R30 The Election Commission should have wide powers to call for
information and to institute investigations into any suspect
foreign donations received by a political party or a sub-unit.
R31 Criminal sanctions should attach to a deliberate acceptance of
a donation from a source falling outside the definition of a
permissible source. There should be a power for the court to
order a defaulting political party to forfeit a sum of up to ten
times the donation wrongfully accepted.”
23. There is a contrast between the power of forfeiture recommended in para
4.61, “a sum not exceeding the unreported donation”, and that in para 5.42, “a sum
not less than the donation”. The reason for this contrast seems likely to be the
following. Para 4.61 was providing for a sanction for failure to report a donation
from a permissible source. Para 5.42 was dealing with the receipt of a donation
from an impermissible and, under the Neill Committee’s scheme, a foreign source.
In the latter case the forfeiture of the entire donation was likely to be desirable,
regardless of whether or not the breach of the regulations had been deliberate. It is
noteworthy that the Committee recommended that, where acceptance of an
impermissible donation was innocent or inadvertent, there should still be a power
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of forfeiture but that the courts would take into account the degree of culpability
when setting the level of forfeiture.
24. The Government published a White Paper (Cm 4413) to which was
annexed a draft Bill dealing with the funding of political parties. Clause 51 of the
Bill does not differ significantly from section 58 of the Act. At the beginning of
Chapter 4, which dealt with the sources of funding, the Government welcomed the
Neill Committee’s endorsement of the manifesto commitment to ban the foreign
funding of political parties. Dealing with permissible sources of funding the White
Paper commented as follows:
“Individuals
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. It
would be far less straightforward for political parties to verify that a
donor not appearing on the register was nevertheless entitled to do
so. It is in the interests of the parties to have available a test which
offers certainty as to the eligibility of a donor. With the introduction
of rolling registration it would be open to anyone who was entitled to
be registered as an elector, but was not on the register for whatever
reason, to take the necessary steps at any time to secure his or her
registration. Once registered, it would then be open to a political
party to accept a donation from such a person. In practice, therefore,
little is lost by the proposed departure from the Neill Committee’s
recommendation.”
The objects of the legislation
25. The legislative history provides a particularly clear picture of the objects of
Chapter II of Part IV of the Act. The primary object is to prevent donations to
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political parties from foreign sources. From the Labour Party manifesto in 1997
the concern in relation to the source of funds has focussed exclusively on foreign
donors. The Neill Committee recommended that the exclusion of foreign funding
should, in the case of individual donors, be achieved by prohibiting donations from
anyone who was not a registered voter in the United Kingdom or eligible to be put
on an electoral register in the United Kingdom. As I have observed this test drew a
realistic line between domestic and foreign donors. Eligibility to be placed on an
electoral register demonstrated a sufficient connection with the United Kingdom.
Ineligibility demonstrated a lack of such connection.
26. Parliament made a significant change in restricting permissible donors to
those on an electoral register, excluding those eligible to be put on one. This
change was made not because there is anything intrinsically undesirable about
parties being funded by those who are not on an electoral register, provided that
they are eligible to be placed on one. So far as connection with the United
Kingdom is concerned there is no distinction between a person who is on an
electoral register and one who is entitled to be placed on an electoral register. The
change was made for purely pragmatic reasons. It is much easier to demonstrate
that a person is not on an electoral register than it is to demonstrate that he is not
entitled to be placed on an electoral register.
27. Two facts demonstrate that Parliament did not consider that entitlement to
vote was, of itself, an essential quality in a donor, rather than a convenient test of
the donor’s connection with the United Kingdom. The first is that section 54
permits donations from corporations, trade unions, building societies, limited
liability partnerships, friendly societies and unincorporated associations, provided
that they have sufficient presence in the United Kingdom, notwithstanding that
none of them can vote. The second is that donations by bequest are permissible
from anyone who was on an electoral register at any time during the period of five
years before his death. Such a person cannot, of course, cast a vote posthumously,
but it is significant that it is permissible for his bequest to have been made at a
time when he was not on the register, provided that he was registered to vote at
some point during the five years before his death. Had Mr Bown bequeathed,
rather than bestowed, his donations during the period that he was off the electoral
register, and then died, there would have been no objection to UKIP receiving the
bequests.
28. The White Paper’s comments that I have quoted at para 24 above underline
the fact that entry on an electoral register is not per se an essential attribute of a
donor. The comment that “little is lost” by the proposed departure from the Neill
recommendations appears to recognise that depriving parties of donations from
those entitled to be on an electoral register, but not actually registered, involves a
degree of sacrifice, albeit one that is justified on grounds of practicality.
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29. The secondary object of Chapter II of Part IV of the Act is to provide a
scheme for achieving the primary object that is easy to apply, easy to police and
that contains adequate sanctions for non-compliance.
The purposes of the power to forfeit
30. Mr Beloff submitted in his written case that there were three purposes of the
power to forfeit. The first was to deprive a political party of the “wrongful gain”
acquired by accepting a donation from an impermissible source. The second was to
deter breaches of the Act. The third was to provide simple and effective sanctions
in the form of a rigorous civil enforcement scheme to enforce the prohibition on
acceptance of impermissible donations. The third object is, in fact, no more than a
more detailed way of describing the second object.
31. I agree that there are two distinct objects of the power to forfeit. As to the
first, I do not find the description “wrongful gain” helpful. The primary object of
forfeiture is the direct prevention of the mischief that the legislation is designed to
prevent – the receipt by a political party of foreign funding. This would normally
dictate the forfeiture of the acceptance of any donation received by a party from a
foreign source, regardless of whether or not that acceptance had come about as a
result of a culpable fault on the part of the party. As I have said, that is probably
why the Neill Committee recommended that where a donation was received from a
person who was not entitled to be placed on an electoral register, forfeiture from
the party funds should be of not less than the amount of the donation. The fact that
the donor was not entitled to be placed on the register demonstrated that he had
insufficient connection to the United Kingdom to be an acceptable source of
funding.
32. The Act has radically changed the Neill Committee’s scheme. A donor
whose connection with the United Kingdom would entitle him to be placed on the
electoral register and thus to vote is rendered an impermissible donor by reason of
the simple fact that he is not on the register. Under this scheme an unregistered
donor may or may not be “foreign”. If he is “foreign”, or if he is unable to prove
that he is not “foreign”, then his donation is intrinsically undesirable. It is the type
of funding that the Act was designed to prevent. His donation should, barring
exceptional circumstances, be automatically subject to forfeiture in its entirety. If it
is not forfeited, the very mischief that the Act was designed to prevent will have
occurred. Whether or not the party accepting the donation exercised due care
should not normally be relevant. This may well be why the Act expressly provides
that a forfeiture order may be made, whether or not proceedings have been brought
against any person for an offence in connection with the donation.
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33. I agree with Mr Beloff that the second object of the power to forfeit is to
provide a deterrent or sanction against failure to comply with the requirements of
the Act that are designed to make sure that donations are not received from an
impermissible donor. Thus the power to forfeit is intended to further both the
primary and the secondary object of the legislation.
The nature and purpose of the discretion
34. I now come to the interrelated questions of whether the power to forfeit is
“all or nothing” and how the discretion whether or not to exercise that power
should be exercised.
35. If Parliament had enacted the Neill Committee scheme there would have
been a strong presumption in favour of forfeiting the whole of a donation from an
impermissible source. It would, or would be likely to, be a foreign donation and
objectionable as such. Indeed there would have been a case for making forfeiture
of such donations automatic. But Parliament adopted a scheme under which
impermissible donations may or may not be foreign. Under this scheme the
significance of an individual impermissible donation may vary widely. At one
extreme it may be a donation from a foreign source, accepted by a political party
with full knowledge of its provenance. At the other extreme it may be a donation
from an individual who is entitled to be on an electoral register and has in the past
been on an electoral register, been believed to be on an electoral register, but who,
because of some administrative error for which he is not responsible, has been
removed from the register at the time when he made his donation.
36. Parliament plainly made the power to forfeit discretionary with the intention
that the magistrates’ court should discriminate between cases where forfeiture was
warranted and cases where it was not. It seems to me natural to assume that
Parliament intended the court to consider whether forfeiture was a proportionate
response to the facts of the particular case. This involves considering whether
forfeiture is necessary to achieve either the primary or the secondary object of the
Act. The most relevant consideration is whether forfeiture is necessary to prevent
the retention of a foreign donation in the individual case. Proof of acceptance of a
donation from an impermissible source should raise a presumption that the
donation is foreign. If the party cannot rebut that presumption, forfeiture should
follow. If the party succeeds in demonstrating that the donor was entitled to be
placed on an electoral register, forfeiture should then depend on whether it is an
appropriate sanction for such shortcomings as led to the acceptance of the
donation. This will require consideration of culpability, the size of the donation
and the effect that forfeiture will be likely to have on the political party. Partial
forfeiture, if permitted (as to which see below), will enable the court to impose an
appropriate sanction where total forfeiture would be disproportionate.
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37. The Court of Appeal held that the power to forfeit was all or nothing and
that there was a presumption that it should be exercised in the absence of
exceptional circumstances. The Court’s reasons for holding that there was a strong
presumption that the power to forfeit should be exercised were as follows:
i) Unless forfeiture was the normal consequence of the acceptance of
an impermissible donation, parties would be free to disregard with
impunity the obligations not to accept or to return impermissible
donations.
ii) Forfeiture would never be disproportionate if it was limited to a
donation which should never have been accepted.
iii) It was irrelevant whether or not the impermissible donor was a
foreign donor, because Parliament had not made that the test.
Parliament had made being on an electoral register the test. The
Court should not re-introduce the Neill Committee test by the back
door.
iv) The fact that a party might not know that the donation was
impermissible was irrelevant. Parliament had not made that a bar to
forfeiture.
v) The fact that the state of the party’s finances might make forfeiture
particularly onerous was irrelevant. The receipt of the donation was
illegal and the full extent of the donation was an advantage that the
party should not have had.
vi) Furthermore, if it was necessary to investigate a party’s finances
before making a forfeiture order, the sanction would be unwieldy. Mr
Beloff expanded this to a more general point. If there was a wide
discretion, this would give rise to complex factual inquiries that the
simple scheme of the Act was designed to avoid.
I will deal with each of these points in turn.
38. I do not accept that almost automatic forfeiture of the totality of an
impermissible donation is necessary to provide a realistic sanction against noncompliance with the requirements of the Act. In the first place there are criminal
sanctions for non-compliance. In the second place, the mere risk of forfeiture of
the entirety of a donation might be thought a sufficient incentive to carry out the
relatively simple check that a donor is on an electoral register. A party should not
need much incentive to check that the position of anyone who wishes to make a
donation is regularised.
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39. The suggestion that forfeiture of a sum limited to the impermissible
donation can never be disproportionate is founded on the premise that the party
should never have received the donation in the first place. But where a person
within the United Kingdom wishes to make a donation to a party, there is nothing
intrinsically wrong about the party receiving that donation. Of course the party and
the donor should make sure that the donor complies with the statutory requirement
of being placed on an electoral register. But if, by inadvertence, or even
negligence, they fail to do so, it does not follow that it cannot be disproportionate
for the donation to be forfeited. Proportionality will depend on the degree of
culpability, the size of the donation and its importance to the party.
40. I disagree that it is irrelevant whether or not the donor is a foreign donor. If
he is, then forfeiture is clearly appropriate. Parliament has made electoral
registration the test, but Parliament has also made forfeiture discretionary. To
allow the party to show that the donor could have been registered to vote is not to
introduce the Neill test by the back door. Parliament’s scheme usefully transfers
the burden of showing that the donation is not a foreign donation onto the donor
and the party. If this burden can be discharged, the primary object of the legislation
has not been defeated, and this fact is highly relevant to the issue of whether the
power to forfeit should be exercised.
41. The fact that Parliament has not made ignorance of the impermissibility of
the donation a defence is no reason why it should not be a relevant extenuating
circumstance when considering whether or not to forfeit the donation. Once again
the Court of Appeal has ignored the fact that Parliament has chosen to make
forfeiture of the donation discretionary.
42. The argument that the effect of forfeiture on a party is irrelevant turns on
the proposition that the party should never have had the donation in the first place.
This ignores the fact that where the impermissibility of the donation results simply
from an inadvertent, or even negligent, failure to register there is nothing
intrinsically undesirable about the source of the funding.
43. Finally I must deal with the point that, if there is a general discretion
whether or not to forfeit, forfeiture proceedings will involve a lengthy
investigation of all the material circumstances. In the first place, this will not
normally be true where the donor is, in fact a foreign donor. The party will not be
in a position to show that the donor was entitled to be placed on an electoral
register. If, where this is the case, forfeiture is virtually automatic, forfeiture
proceedings are unlikely to be protracted in those cases where forfeiture is most
readily justified. Where, however, the donor is not a foreign donor, the fact that
forfeiture is discretionary is likely to involve a significant investigation of the
facts, whether the discretion is broad or narrow. However narrow the discretion it
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will surely be necessary for the party or the donor to show that the donor was not a
foreign donor and to demonstrate, insofar as steps were taken to comply with the
statutory requirements, what was in fact done.
44. None of these arguments persuades me that where the donor is not foreign,
but has for some reason failed to exercise his right to be placed on an electoral
register, Parliament intended that forfeiture of the entire donation should be
virtually automatic. On the contrary, where the donor is shown not to be foreign, I
consider that Parliament would have intended, by conferring a discretion whether
or not to forfeit, that there would be a careful evaluation of all the circumstances in
order to decide whether the draconian step of forfeiture was justified.
The Commission’s approach to its discretion
45. My conclusions receive some, if modest, support from the Commission’s
own approach to the exercise of its discretion. If Parliament had intended that a
donation from an impermissible source should be forfeited unless there were
exceptional circumstances, the Commission might have been expected
automatically to make an application for forfeiture once satisfied that a donation
was from an impermissible source. There would seem to be no basis upon which
the Commission could properly decide not to make an application in circumstances
where Parliament intended that forfeiture should occur.
46. In the course of the hearing the Commission provided the Court with
internal guidelines drawn up by the Commission in February 2007 in relation to
the forfeiture of impermissible donations. These included the following:
“3.1 . . . In all cases where the Commission is clear that section 58
applies the Commission will apply for a forfeiture order, unless there
are reasons to conclude that on balance, the public interest is such
that would lead us to exercise our discretion in favour of not seeking
forfeiture.
3.2 The Commission will have regard to all relevant considerations,
which may include:
Steps taken by the regulated organisation or individual for
the verification of permissibility
Steps taken by the regulated organisation or individual in
relation to acceptance or return of donations
Page 16
Any other extenuating circumstances that may be
relevant.”
These guidelines do not suggest that the Commission itself applies a strong
presumption in favour of forfeiture where a party has accepted a donation from an
impermissible source.
Conclusions
47. Where it is shown that a political party has accepted a donation from an
impermissible source, there should be an initial presumption in favour of forfeiting
the donation. In order to prevent parties receiving funding from individuals who
have insufficient connection with the United Kingdom, Parliament has chosen to
lay down a simple test. Donations must only be accepted from those who are on an
electoral register. The onus should be on the party concerned to show why a
donation that has been received from an impermissible source should not be
forfeited.
48. A first step in discharging this onus will normally be to show that the
mischief against which the relevant part of the Act is directed did not occur – that
the donation in question was not, in fact, a foreign donation. Where an individual
is concerned this should require demonstration that the individual was entitled to
be entered on an electoral register. If this cannot be demonstrated, forfeiture should
normally follow. In such circumstances it can properly be assumed that retention
of the funding would defeat the policy underlying the legislation.
49. If it is shown that the donor was in a position to qualify as a permissible
donor by registering on an electoral register, the initial presumption in favour of
forfeiture will have been rebutted. The question will then be whether there have
been failures to comply with those requirements of the Act that are designed to
ensure that such donations are not accepted, and the nature of those failures. Once
again the onus will be on the party to explain how it was that the donation came to
be accepted. If the donation is large, and if the power to forfeit is an all or nothing
power, significant shortcomings are likely to be required to make forfeiture of the
donation a proportionate response. It is in the light of that conclusion that I turn to
consider whether the power to forfeit is all or nothing.
Is the power to forfeit “all or nothing”?
50. Both Walker J and the Court of Appeal concluded that the power to forfeit
was an all or nothing power. Walker J concluded that this was the only meaning
Page 17
that could properly be given to a power to forfeit “an amount equal to the value of
the donation” (para 117). This finding was not challenged in the Court of Appeal
and was accepted by Sir Paul Kennedy as correct (para 49). My initial inclination
was to agree. The language of section 58(2) suggests that there is only one amount
that can be forfeited. Furthermore, forfeiture normally relates to a specific fund, or
right, not part of one. But in this case, “forfeit” is used in an unusual way. It was
the Neill Committee that first used the word, in recommending that a sum “not less
than the donation should be liable to forfeiture from the party’s funds”. It has been
common ground that a forfeiture order will create a debt to be met from UKIP’s
funds, as and when monies are paid into them. So the forfeiture in this case is more
akin to a fine. Furthermore, the Neill Committee contemplated that the amount to
be forfeited would be variable when commenting that where the receipt was
innocent or inadvertent “the courts would clearly take into account the degree of
culpability in setting the level of forfeiture”.
51. Having regard to these considerations I have reached the conclusion that the
better interpretation is to treat the power to order forfeiture of an amount equal to
the value of an impermissible donation as implicitly including the power to order
forfeiture of a lesser sum. Such an interpretation is desirable to cope with the
situation where the magistrates’ court is persuaded that the donor is not foreign. In
those circumstances, total forfeiture of the donation may be disproportionate. If so,
it should not be ordered, both under the ordinary principles that apply to the
imposition of sanctions and having regard to the requirements of article 1 of the
First Protocol to the European Convention on Human Rights. The magistrates’
court should have the power to make a partial forfeiture order that reflects the facts
of the particular case. I would interpret section 58(2) as conferring that power.
Disposal
52. Walker J rightly held that the reasons given by the Senior District Judge
were too brief. He reached, however, decisions on the issues of principle which
this Court has endorsed. He concluded that, in circumstances where the donor was
entitled to be on the electoral register, no presumption of total forfeiture should be
applied, but forfeiture should reflect fault on the part of the party accepting the
donation or donations.
53. As to the application of that principle to the facts of this case, he applied a
very broad brush that effaced most of the detail of communications between the
Commission and UKIP. He allowed UKIP to retain all donations up to the point at
which they learned that Mr Bown was not on the electoral register, and ordered
forfeiture of all donations from that moment until Mr Bown was again on the
register. He erred however in stating that it was on 19 June 2005 that UKIP learned
that Mr Bown was not on the register. In fact they did not learn this until 13
Page 18
December 2005. On this erroneous basis he ordered forfeiture of donations
totalling £14,481.
54. The parties were anxious, if possible, to avoid a further hearing before the
Senior District Judge. I have reached the conclusion that the amount of the
forfeiture that was ordered adequately reflected the facts of this case and,
accordingly, I would restore the order of the Senior District Judge.
LORD RODGER
55. In the 1990s there was considerable public unease about the funding of
political parties. The Committee on Standards in Public Life under the
chairmanship of Lord Neill of Bladen QC looked into the matter and in 1998 they
produced a report (Cm 4057) which contained many recommendations. In
particular, they formulated a principle to the effect that those who live, work and
carry on business in the United Kingdom should be the persons exclusively
entitled to give financial support to the operation of the political process here (para
5.16). In order to create a workable system, they recommended that political
parties should be able to receive donations from (1) people who are registered
voters in the United Kingdom and (2) those who are eligible to be put on an
electoral register in the United Kingdom (para 5.20).
56. In due course the government issued a White Paper giving their considered
response to the Neill Committee’s recommendations (Cm 4413). The government
accepted the thrust of the committee’s recommendation on foreign donors, but they
introduced a significant modification: only individuals who were registered voters
should be permitted to make donations to political parties. As the White Paper
explained in para 4.6, in a very real sense this was in the parties’ interest: checking
whether a particular donor appeared on the electoral register would offer a test of
acceptability that was both conclusive and simple for the parties to operate. It
would be much less straightforward for parties to verify that a donor who did not
appear on the register was nevertheless entitled to be registered. Of course, the
downside was that the new test excluded more potential donors than the Neill
Committee test: those who were eligible to be registered, but who were not
registered. The White Paper pointed out, however, that, with the introduction of
rolling registration, people in that position could readily apply to be registered and
it would then be open to a political party to accept a donation from them. “In
practice, therefore, little is lost by the proposed departure from the Neill
Committee’s recommendation.”
Page 19
57. This was the scheme which was encapsulated in clause 50 of the draft Bill
and was given effect in section 54 of the Political Parties, Elections and
Referendums Act 2000 (“the Act”). So far as relevant, that section provides:
“(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 purposes of this Part the following are permissible
donors—
(a) an individual registered in an electoral register…”.
58. Nothing could be clearer than the language used by Parliament and nothing
could be clearer than the intention behind the language: political parties were not
to accept donations from any individual who was not registered in an electoral
register. In particular, parties were not to accept donations from individuals who
were entitled to be registered, but who were not on the register. That situation
would be adequately catered for by the simple expedient of the individual
concerned getting himself registered: the party could then accept a donation from
him.
59. Obviously, the Act envisages that, when they receive a donation, a political
party must check the electoral register to ensure that the individual is registered. If,
as a result of that check, it appears that he is not on the register, then he is not a
permissible donor and the party must return the donation, or a payment of an
equivalent amount, within thirty days: section 56(2)(a). The party must keep a
record of the receipt of the donation and of its return within the thirty-day period.
In addition, the party must include a report of the receipt and return of the
impermissible donation in their donation report to the Electoral Commission for
the relevant period: section 62(9). If they fail to do so, section 65(6) comes into
play:
“Where the court is satisfied, on an application made by the
Commission, that any failure to comply with any such requirements
in relation to any donation to a registered party was attributable to an
intention on the part of any person to conceal the existence or true
amount of the donation, the court may order the forfeiture by the
party of an amount equal to the value of the donation.”
Page 20
60. The present case concerns exactly the situation of a donor who was entitled
to be registered but was not actually on the register. Although he had previously
been registered, Mr Alan Bown was not registered in any electoral register
between 1 December 2004 and 2 February 2006. During that period he made a
number of donations to UKIP which amounted in total to almost £350,000. Since
Mr Bown was not registered to vote, by virtue of section 54(1)(a), UKIP were
bound not to accept the donations. In terms of section 56(2)(a), the party should
therefore have returned them to Mr Bown within thirty days – and pointed out to
him that they could not accept the donations until he was on the register again.
When the party duly reported the donations to the Electoral Commission, the
Commission drew their attention to the fact that Mr Bown did not appear to be on
the register. The party none the less retained the donations. So they have made a
gain of roughly £350,000 by accepting donations which they were prohibited from
accepting under section 54(1)(a).
61. Lord Phillips deprecates the use of the phrase “wrongful gain” to describe
this type of gain. He would apparently confine any such description to gains made
from donations by foreign donors who are not entitled to be on the electoral
register in this country – because the true object of section 54(1)(a) is to prevent
parties receiving donations from such persons. But that is to substitute the ultimate
aim of the legislation for the means by which the legislation seeks to achieve that
aim. The ultimate aim is indeed to catch foreign donors. But the legislature has
chosen to pursue that aim by prohibiting parties from accepting donations from all
except a narrowly defined class of permissible donors. That class excludes foreign
donors who are not entitled to be registered, but – quite deliberately – it also
excludes donors, like Mr Bown, who are entitled to be, but are not, registered. As
the White Paper explained, there were good practical reasons for adopting that
legislative approach. In these circumstances it is not open to the courts to secondguess Parliament and to proceed on the footing that some impermissible donors are
less impermissible than others.
62. Since UKIP kept the donations from Mr Bown which they were prohibited
from accepting, the Electoral Commission eventually applied to the City of
Westminster Magistrates’ Court in terms of section 58(1) and (2):
“(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.
Page 21
(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.”
In the case of England and Wales the court in question is a magistrates’ court.
63. Where a party have accepted a donation which they are prohibited from
accepting and they show no sign of being willing to return it, the starting point
must surely be that the court will take steps to ensure that the party are deprived of
the gain which they are determined to keep in defiance of the law. In other words,
an order will be made for the forfeiture of the whole value of the unlawful
donation. And that is exactly what section 58(2) says: the court may order the
forfeiture of “an amount equal to the value of the donation”. Had parliamentary
counsel intended to give the court power to order the forfeiture of a lesser sum, as
Lord Brown points out, there is a variety of other phrases which could have been
used to embody that intention.
64. The same words are to be found in section 65(6) (quoted at para 59 above)
and in para 12(4) of Schedule 7 to the Act. Both of these provisions deal with a
situation where there has been a deliberate failure to comply with the relevant
reporting requirements in order to conceal the existence, or true amount, of a
donation. In such a situation, also, it is hard to see why forfeiture of a sum which is
less than the donation would be appropriate. So these provisions tend to confirm
the straightforward interpretation of the equivalent words in section 58(2). Like
Lord Brown, I have no hesitation in agreeing with Walker J’s conclusion on this
issue.
65. Lord Phillips takes a different view. He goes back to the report of the Neill
Committee who first suggested the idea of forfeiture, but described the sum to be
forfeited in various ways (“a sum not exceeding the unreported donation” and “a
sum not less than the donation”). The committee may well have envisaged the
court selecting what it regarded as the appropriate sum to be forfeited in the
particular circumstances. On this basis, Lord Phillips considers that “the better
interpretation” is to treat the words in section 58(2) as implicitly including the
power to order forfeiture of a lesser sum. The Neill Committee report stands,
however, at two removes from the text of section 58(2) which embodies the law
enacted by Parliament. Moreover, as Lord Phillips himself points out, the Act
radically changed the scheme envisaged by the committee. In these circumstances
their report cannot displace the plain meaning of Parliament’s words. The system
is all or nothing: either the court orders the forfeiture of the value of the donation
or it makes no order.
Page 22
66. Having armed the court with a discretion to award a lesser sum, Lord
Phillips proceeds to construct an elaborate scheme for the exercise of this
discretion. If the donation is not from a permissible donor, the onus will be on the
party to show why it should not be forfeited. If the donation is from a foreign
donor, then the party will not normally be able to show this, since it can properly
be assumed that retention of the funding would defeat the policy underlying the
legislation. But if the party can show that the donor was in a position to qualify as
a permissible donor by registering on an electoral register, the initial presumption
in favour of forfeiture will have been rebutted. In that situation the court will have
to see whether there have been failures to comply with the requirements of the Act
that are designed to ensure that impermissible donations are not accepted and, if
so, the nature of those failures. If the donation is large, significant shortcomings
are likely to be required to make forfeiture of the donation a proportionate
response. In other words – apparently – the larger the impermissible donation, the
less likely it is that the party will have to give it up.
67. It seems to me unlikely – to say the least – that Parliament would have
intended that a provision, which is designed to ensure compliance with the
statutory scheme, should operate so as to make large impermissible donations
harder to forfeit than small impermissible donations. That apart, many may admire
the scheme outlined by Lord Phillips – which might have commended itself to the
Neill Committee. Indeed, had it been proposed to Parliament, it might well have
been enacted. But there is not the slightest hint of such a scheme in the wording of
the provision which Parliament did enact – and, in fact, as I have already
explained, the wording of section 58(2) is inconsistent with a scheme of that kind.
Moreover, it would have been surprising if such a nuanced decision had been left
to the magistrates’ court. For these reasons I would respectfully reject Lord
Phillips’ construction of the subsection.
68. If a party return an impermissible donation after the end of the thirty-day
period, under section 56(5) they are treated as having accepted it for the purposes
of section 58(2). It might well be, however, that the Electoral Commission would
often not make an application to the court in such a case. And if it did, the context
for the exercise of the court’s discretion would be significantly different from the
situation where the party had kept a donation. Similarly, the rationale of any
forfeiture order would be to mark some blameworthy failure to comply with the
regulations – and pour encourager les autres. I would therefore reserve my opinion
on whether there is room for the court to exercise its discretion differently in such
cases.
69. In a case, like the present, however, where the party have held on to the
donations, the real difficulty, as Lord Brown points out, is to see how the court
could properly do other than make an order for forfeiture, since forfeiture so
clearly promotes the statutory object of preventing parties from accepting
Page 23
donations from individuals who are not permissible donors. Moreover, since the
party had no right to the donations in the first place, there is no room for an
argument that taking them away infringes article 1 of the First Protocol to the
European Convention on Human Rights.
70. Consideration of the exact scope of the court’s discretion is not made any
easier by the lack of any real indication in the Act of how the forfeiture order takes
effect. As Lord Phillips points out, the discussion at the hearing proceeded on the
(unexamined) premise that it would create a debt to be met out of the party’s
funds, as and when monies are paid into them. Although it is tempting to think of
the Act as concerned with the major parties, it actually applies to a large number of
political parties, many of them very small. Some may well have shaky finances. It
is therefore quite conceivable that a forfeiture order would tip a party into
insolvency and so cause at least as much prejudice to the party’s unsecured
creditors as to the party. So the creditors might argue that, for this reason, the court
should exercise its discretion not to make an order. In that connexion it may be
worth noting that section 60(1)(b) and (c) envisage that rules of court may allow
persons affected by any possible forfeiture order to be joined as parties to the
proceedings in the magistrates’ court. Since, however, the point does not arise for
decision and was not argued in this case, I merely raise the possibility that such
circumstances might have a bearing on the way that the court exercised its
discretion under section 58(2).
71. For these reasons, and for those given by Lord Brown, with which I agree, I
would dismiss the appeal.
LORD WALKER
72. I agree with the judgments of Lord Rodger and Lord Brown, and for the
reasons which they give I would dismiss this appeal.
LORD BROWN
73. The funding of political parties has long been the subject of public and
parliamentary concern. In October 1998 the Commission on Standards in Public
Life under the chairmanship of Lord Neill of Bladen QC reported on the matter to
the Prime Minister. The Government’s response by way of a White Paper was
presented to Parliament in July 1999 with a Draft Bill annexed. There followed the
Political Parties, Elections and Referendums Act 2000 (“the Act”), Part I of which
Page 24
provided for the establishment of the Electoral Commission (“the Commission”),
Part IV for the control of donations to political parties.
74. This appeal centres on Chapter II of Part IV under the heading,
“Restrictions on Donations to Registered Parties”, and more particularly on
donations from people not permitted to donate which a party nevertheless accepts
(impermissible donations as I shall henceforth refer to them). Section 58 of the Act
applies to such donations and by subsection (2) provides:
“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.”
75. At the heart of this appeal is the proper construction and application of that
provision. Everyone agrees that it invests the court with a discretion: no one
contends that “may” here means “must”. There are, however, two core questions
arising. First, whether the court has power to forfeit part only rather than the whole
of the value of any impermissible donation, i.e. can “equal to” be construed as “up
to”? Secondly, how wide is the discretion conferred? Is there a presumption that
impermissible donations will be forfeited and, if so, how strong is that
presumption?
76. I put the two questions in that order because to my mind they are closely
related: if the court has no option but to forfeit all or nothing, that seems to me to
strengthen the argument for a presumption in favour of forfeiture. That said, it may
be noted that Walker J at first instance, despite holding that the court’s power is to
forfeit all or nothing, nevertheless decided that the discretion whether to order
forfeiture is a wide one. Walker J’s holding that this is an all or nothing power was
not contested before the Court of Appeal. That Court, however, reversed his
decision on the width of the discretion to exercise the power, holding that, for the
legislative purpose to be served, the power should be exercised to order forfeiture
of impermissible donations in all save truly exceptional cases. It is against that
decision that UKIP now appeal.
77. With those few introductory paragraphs let me turn next to the other
provisions of the Act dealing most directly with impermissible donations received
from known individual donors (as opposed to impermissible donations from
corporate donors, unidentified donors or, indeed, by way of bequest).
78. Section 54, under the heading “Permissible donors”, provides that for the
purposes of Part IV of the Act “an individual registered in an electoral register” is
Page 25
a permissible donor (section 54(2)(a)) and that: “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” (section 54(1)(a)). In short, so far as identified individual donors are
concerned, the party is prohibited from accepting any donation unless that donor is
registered in an electoral register.
79. Section 56(1), under the heading “Acceptance or return of donations:
general”, provides that where a donation is received and not immediately refused
the party must forthwith take all reasonable steps to verify the donor’s identity and
whether he is a permissible donor (and certain other details as to his address for the
purpose of providing quarterly reports on donations under section 62). Section
56(2) provides that if the party receives a donation which it is prohibited from
accepting, it (“or a payment of an equivalent amount”) must be sent back to the
donor within 30 days of when it was received. (The mention of “an equivalent
amount” is explicable by reference to the wide definition of “donation” in section
50 to include a variety of benefits such as the provision of property, services or
facilities.) Section 56(3) provides that if a party fails to return an impermissible
donation within 30 days (as required by section 56(2)) the party and its treasurer
are each guilty of an offence. Indeed, until the Act was amended by the Political
Parties and Elections Act 2009, this was an absolute offence. Now, by a freshly
inserted subsection (3A), it is a defence to prove that “(a) all reasonable steps were
taken by or on behalf of the party to verify (or ascertain) whether the donor was a
permissible donor, and (b) as a result, the treasurer believed the donor to be a
permissible donor”.
80. Although I have already (at para 74 above) summarised the effect of section
58 of the Act, the provision at the core of this appeal, I should perhaps set out
subsection (1): “This section applies to any donation received by a registered party
– (a) which, by virtue of section 54(1)(a) . . . , the party are prohibited from
accepting, but (b) which has been accepted by the party.” And I should note that
by section 56(5) “For the purposes of this Part a donation received by a registered
party shall be taken to have been accepted by the party unless – (a) the steps
mentioned in paragraph (a) . . . of subsection (2) are taken in relation to the
donation within the period of 30 days mentioned in that subsection”. Section 58(4)
provides that a forfeiture order can be made whether or not criminal proceedings
are brought (most obviously under section 56(3)).
81. The one other provision of the Act which I would notice at this stage is
section 65(6) which states:
“Where the court is satisfied, on an application made by the
Commission, that any failure to comply with any such requirements
Page 26
in relation to any donation to a registered party was attributable to an
intention on the part of any person to conceal the existence or true
amount of the donation, the court may order the forfeiture by the
party of an amount equal to the value of the donation.”
The “requirements” here in question are those placed upon the party by section 62
to prepare quarterly donation reports (or under section 63 to prepare weekly such
reports during general election periods) in respect of all relevant donations and
benefits, and by section 65 to deliver such reports to the Commission within 30
days of the end of such reporting periods (7 days in the case of section 63 reports).
82. What, then, in the context of these legislative provisions is the nature of the
discretion conferred upon the Court by section 58(2)? It is recognised by both
parties that it is a discretion which the Court is bound to exercise having proper
regard to the policy and objects of the Act. This principle is, of course, established
by high authority, most notably the judgments of the House of Lords in Padfield v
Minister of Agriculture, Fisheries and Food [1968] AC 997. A later illustration of
the principle – to my mind of some assistance in the present context – is the
House’s decision in R v Tower Hamlets London Borough Council, Ex p Chetnik
Developments Ltd [1988] AC 858 (“Chetnik”) where (at 873G) Lord Bridge said:
“. . . 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.”
83. It is necessary, therefore, to consider what is the statutory purpose of Part
IV of the Act and more particularly whether there is a clear purpose to be served
by conferring on the court a power under section 58(2) to order the forfeiture of
impermissible donations. In large measure this purpose is to be discerned from the
statutory provisions themselves. To a limited extent, however, I would accept that
some light may be thrown upon these by their legislative history, namely the Neill
Report and the White Paper which followed it. But it is unnecessary to spend much
time on these.
84. So far as individual donations are concerned, the Neill Report
recommended and the White Paper agreed that the underlying principle should be
that only those with a stake in the United Kingdom should be permitted to donate;
Page 27
foreign donations were to be outlawed. How then should that be achieved? Again,
both agreed that this should be done by defining the permissible source of
donations. At that point, however, the two documents diverged. Whereas the Neill
Report recommended that the permissible source of individual donations should be
defined to include not merely registered UK voters but also “those who are eligible
to be put on an electoral register in the United Kingdom”, the White Paper
proposed instead what is now section 54(2)(a) of the Act. This provision, the
White Paper noted (para 4.5), “departs from [the Neill Report’s] 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.” The White Paper then continued (para 4.6):
“Checking that a particular donor appears on the electoral register
offers a test that is both conclusive and simple to administer. It
would be far less straightforward for political parties to verify that a
donor not appearing on the register was nevertheless entitled to do
so. It is in the interests of the parties to have available a test which
offers certainty as to the eligibility of a donor.”
As for the section 58 forfeiture order itself, the White Paper said this (para 4.15):
“Clause 51 [enacted as section 58] provides a power for a
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. Under clause 51(2) [section 58(2)] it will be for the Electoral
Commission to make an application to the court for a civil forfeiture
order.”
85. It will readily be seen that the forfeiture power exists in respect of an
impermissible donation once the 30 days allowed for its return by section 56(2) are
up – even, indeed, if the donation was subsequently returned to the donor. This is
so, moreover, whether or not the donation was accepted knowingly – there is no
precondition of forfeiture (as under section 65(6)) that the party intended to
conceal something, nor any defence (as now under section 56(3A)) that all
reasonable steps were taken to verify that it came from a permissible donor. It will
also readily be seen that, unless by the time the court is called upon to exercise its
section 58(2) discretion the donation has in fact been returned to the donor, it
necessarily follows that the party will have received a donation which by virtue of
section 54 it was prohibited from accepting, that it failed to return it within 30 days
as section 56 required it to do, and that it continues to retain a benefit to which it is
manifestly not entitled. In these circumstances, the sole effect of a forfeiture order
Page 28
in respect of the whole of the donation is no more and no less than to require the
party to disgorge that which the law plainly forbids it to have retained. By the
same token, were the court to refuse such an order, it would be allowing the party
to retain that to which it is plainly not entitled and which the law long since
required it to have surrendered.
86. With these considerations in mind let me return to Chetnik for the assistance
it seems to me to provide. Chetnik concerned the proper construction and
application of section 9 of the General Rate Act 1967 which so far as material
provides:
“. . . where it is shown to the satisfaction of a rating authority that
any amount paid in respect of rates . . . could properly be refunded
on the ground that . . . (e) the person who made a payment in respect
of rates was not liable to make that payment, the rating authority
may refund that amount or a part thereof.”
The Court of Appeal had said of that power ([1987] 1 WLR 593, 602):
“We think it clear that, in broad terms, the purpose of section 9 and
its predecessor was to enable rating authorities to give redress and to
remedy the injustice that would (at least prima facie) otherwise
ordinarily arise, if they were to retain sums to which they had no
right, in cases where persons had paid rates which they were not
liable to pay.”
87. Holding in the light of that purpose that the discretion to withhold
repayment in such a case could only be exercised for some valid reason, the Court
of Appeal had quashed the rating authority’s refusal to repay the overpaid rates
and had directed them to reconsider the matter. Affirming the Court of Appeal’s
approach, Lord Bridge (with whom the other members of the Committee agreed)
said:
“Parliament must have intended 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.” (877D).
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88. Later in his speech (880G), having said that the most difficult aspect of the
problem was to give guidance as to the positive factors relevant to the exercise of
the section 9 discretion which might be considered in whole or in part to displace
the prima facie justice of refunding overpayments, and that such factors could only
arise from the circumstances in which the overpayment had come to be made in
any particular case, Lord Bridge suggested three possible (obviously exceptional)
situations in which it might be proper to refuse a refund. He then said (881E-F)
that he had not found it an easy case and in particular “cannot envisage
circumstances which, on the principle I have indicated, would point to a partial
refund of overpaid rates as just and appropriate.”
89. On the latter point, however, (the express power of partial refund under
section 9) Lord Goff drew on general principles of restitution law and wondered
“whether the fact that the rating authority will have, for example, employed a
substantial part of its rate income to meet precepts by other authorities, would
provide a good reason for denying, at least in part, a ratepayer’s claim for refund
under section 9.” (882G).
90. Let me come, then, to the first of the two questions I posed at the outset:
Has the court power under section 58(2) to order forfeiture of part only of an
impermissible donation? UKIP contends that it does, essentially on the basis that
the greater impliedly includes the lesser unless the context compels a different
conclusion. With the best will in the world, this seems to me an impossible
contention. Where, as here, the draftsman has explicitly chosen the words “an
amount equal to the value of the donation” (words he then repeats in section
65(6)), it can hardly be thought he intended them to mean an amount “up to” that
value, or an amount “not exceeding” that value, or (the words used by the
draftsman of section 9 of the General Rate Act 1967) “that amount or a part
thereof”. Why would he not have used one of these expressions had he intended to
provide a power of partial forfeiture? The words of section 58(2) seem to me clear
and unambiguous. I agree with Walker J’s conclusion on this issue at first instance
and am unsurprised that in the Court of Appeal counsel then appearing for UKIP
did not seek to challenge that conclusion.
91. With regard to Mr Lawrence QC’s subsidiary submission that such a
construction “amounts to an impermissible interference with article 1 of the First
Protocol to the European Convention on Human Rights” (para 69 of his case) I am
at a loss to see how the forfeiture of a donation which by definition the party
should never have accepted or kept could be said to violate that party’s human
rights. Even assuming, however, that in certain circumstances it could, the court
always has the option – and on that hypothesis would be bound – to make no
forfeiture order at all.
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92. These considerations apart, I find myself sharing Lord Bridge’s difficulty in
Chetnik (although there, of course, the power to make partial refund was expressly
provided for) in envisaging circumstances which would point to such an order as
being just and appropriate – at any rate where the party still retains the benefit of
the impermissible donation.
93. Recognising, therefore, that the forfeiture power is an all or nothing power,
I pass to the second core issue arising: Is there a presumption that impermissible
donations should be forfeited and, if so, how strong is that presumption?
94. The Court of Appeal concluded (at para 50) that there was only a narrow
discretion not to order forfeiture. As Sir Paul Kennedy put it in the Court’s only
reasoned judgment:
“. . . it might assist a party which, for reasons beyond its control,
such as illness of staff, was unable to complete its inquiries within 30
days, or a party which was misled by an inaccurate entry in an
electoral register [that perhaps refers to a fraudulent entry or an
erroneous statement from some apparently responsible authority that
the donor was on the register]. Maybe there would also be room for
the exercise of discretion if a donation or its value were to be
returned to the donor out of time but before any forfeiture was
sought, because Parliament clearly did not intend a party to surrender
the value of a donation more than once.”
95. That essentially is my view too. In most cases, certainly in any case where
neither the benefit nor its value has ever been returned, it is difficult to see how the
discretion could properly be exercised other than by an order for forfeiture. How,
in those circumstances, could a court properly allow a party to retain the value of a
donation which Parliament has plainly ordained that it should never have
accepted? How could this be thought consistent with the policy of the legislation?
To my mind, indeed, given the ease with which electoral registers can be accessed
and inspected – the whole point of registration as the sole source of permissible
individual donations being, as the White Paper said, to create a scheme “both
conclusive and simple to administer” – I question whether even staff illness could
provide a proper basis for not forfeiting a donation. If on account of staff illness a
donation was returned late (after the 30 day limit), that no doubt could justify not
making a forfeiture order. But I am here considering cases – like that presently
before the Court – where the donation has never been returned.
96. For my part I would accept that the discretion not to award forfeiture would
arise altogether more readily in the final situation envisaged by Sir Paul, where a
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donation or its value is “returned to the donor out of time but before any forfeiture
was sought”. By the time forfeiture is sought, of course, it is almost inevitable that
the party will have had ample opportunity (on the facts of the present case more
than a year since the final impermissible donation was accepted) to discover its
mistake (here, indeed, it had been several times alerted to it) and return the benefit.
Return after that time, therefore, might suggest no more than a naked attempt to
escape the forfeiture provision. One should note in this regard an obvious further
purpose underlying the forfeiture power (besides its principal purpose of
confiscating unlawfully retained benefits), namely as part of the mechanism for
policing the control of political donations. To allow the return of the benefit after
forfeiture has been sought to save a party from an order, would, except perhaps in
very special circumstances, more likely thwart than promote that additional
purpose. That question is, however, academic in the present case: quite simply
UKIP still retains donations which it should never have accepted.
97. On the Commission’s forfeiture application the Senior District Judge
allowed UKIP to keep almost all of the £350,000 odd total of impermissible
donations it had accepted from Mr Bown. In common with the Court of Appeal –
although not, as now appears, with the majority of this Court – I find that a
surprising and unsatisfactory outcome to this regrettable affair.
LORD MANCE
98. In agreement with Lord Phillips and Lord Kerr, I consider that the appeal
should be allowed. Their reasoning and conclusions are broadly consistent,
although, like Lord Kerr, I would be inclined to regard the question, whether
forfeiture is possible of a sum less than the full amount of a donation, as central to
the enquiry whether the discretion to order forfeiture is broad or narrow.
99. The discretion introduced by s.58(2) is on its face an open discretion,
capable of responding to different circumstances, in particular the difference –
important in the light of the mischief to which this Part of the Act was directed –
between foreign donations and donations such as the present made irregularly by a
person who was entitled to be on a United Kingdom register of electors but by
mistake was not.
100. The words “may …. order the forfeiture …. of an amount equal to the value
of the donation” are in my view capable of implying discretion to order forfeiture
of part as well as all or nothing of the donation, rather than compelling a
conclusion that the only discretion involved a blunt choice between all or nothing.
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101. The use of the word “may” in s.58(2) is coupled with provisions in s.59(2)
and (3) which permit an appeal by a registered party unhappy with a magistrates’
court decision under s.58(2) and which provide that any such appeal “shall be by
way of a rehearing, and the court hearing such an appeal may make such order as it
considers appropriate”. These provisions to my mind also suggest a flexible power
of appreciation in relation to the order made, according to the circumstances.
102. The provisions in s.60(1)(b) and (c) for rules to be made for the giving of
notice to and joinder of persons affected also tend to suggest that it was understood
that the exercise under s.58 and 59 might be a nuanced one, taking account of
others’ interests. The words “any amount” in s.60(3) and (5)(c) can of course be
read consistently with either party’s case.
103. A conclusion that partial forfeiture is possible and that discretion is broad,
is in my view more consistent with the policy of the legislation than that adopted
by the Court of Appeal or by Lord Rodger and Lord Brown. Parliament preferred
the simpler test of registration to a test including entitlement to register for
pragmatic reasons: it would be simpler for parties to verify actual registration,
simple for persons entitled to register to do so and “little is lost by the proposed
departure from the Neill Committee’s recommendation”. The underlying aim of
the legislation remained to eliminate inappropriate “foreign” donations. Lord
Phillips’s and Lord Kerr’s analysis is in this light consistent with the principle that
legislation should be construed to serve its statutory purpose: R v Tower Hamlets
LBC ex parte Chetnik Developments Ltd. [1988] 1 AC 858. The different analyses
adopted in that case and the present flow from differences in context and in the
nature of the issues. The refunding by a rating authority of overpaid rates to the
person paying them and the forfeiture to the state of an irregular donation made by
a member of the public, who is eligible for registration but by mistake not
registered, do not raise identical considerations.
104. The Commission submitted that, even if the law was as the majority of the
Court now holds, any reasonable judge must inevitably order forfeiture of the
whole of these donations. I do not agree. In my view and as Lord Phillips explains,
it was appropriate for the level of forfeiture to reflect the circumstances. These
include the fact that Mr Bown was entitled to be on the electoral register, and
would have corrected the position and made the same donations had he been aware
of the mistake which led to him not being on the register (or had the donations,
after being made, been returned to him, as should have occurred). They also
include the circumstances that it appears questionable, from what the Court was
told, whether UKIP could find the monies to meet any order or survive, if the total
sums donated were forfeited.
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105. Walker J observed (in last two sentences of para 121) that the District Judge
did not expressly deal with some factual aspects, most significantly for present
purposes emails from the Commission dated 19 April and 13 May 2005 asking
about Mr Bown’s status, following which UKIP did not take steps eliciting and
confirming the actual picture. On the other hand, the picture presented by the
correspondence between the Commission and UKIP throughout 2005 and into
2006 is not one suggesting any real urgency, still less a risk of any forfeiture; and
it is also common ground that the District Judge erred to UKIP’s disadvantage in
taking 19 June 2005, instead of 13 December 2005, as the date when UKIP
became aware that Mr Bown was not on the electoral register and so in ordering
forfeiture of a larger sum than he would have done, but for such error. UKIP did
not appeal in respect of this error. Both parties agreed before the Supreme Court
that there should be no re-hearing of any save the most formal sort before the
District Judge, and that the Court should if necessary make up its own mind.
106. On that basis, I agree with Lord Phillips’s proposal that the order made by
the District Judge should simply be restored.
LORD KERR
107. There are three possible outcomes to the debate about the correct
interpretation of section 58(2) of the Political Parties, Elections and Referendums
Act 2000. The first is that the discretion given to the court as to whether to order
forfeiture is wide and that it is open to the court to make an order for forfeiture of
less than the full amount of the donation. The second is that the discretion is
narrow and that an order of forfeiture, if made, should be for the entire amount of
the donation. The third is that the discretion is wide but if an order of forfeiture is
made it must be for the total sum.
108. Of these three possible interpretations, the third seems to me to be the least
likely. A wide discretion to permit the making of an order that there should be no
forfeiture of any sum whatever does not sit comfortably with what can be
discerned to be the purpose of the legislation viz to eliminate the receipt by
political parties of donations from sources considered to be unsuitable. The debate
must focus, therefore, I believe, on the first and second of the mooted
interpretations outlined above.
109. Lord Phillips considered that the primary issue was what he described as
‘the presumption issue’ i.e. whether section 58(2) conferred a broad discretion on
the court as to whether it should make a forfeiture order, or whether there was a
strong presumption in favour of forfeiture. Although I agree with the outcome that
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Lord Phillips proposes, I have some reservations as to whether this is the primary
issue in this case. It appears to me that the matter of critical importance is whether
forfeiture of a sum of less than the full amount of the donation is possible. If it is, it
seems to me to follow logically that the discretion should be wide; if it is not, for
the reasons that I have given above, it is difficult to see how a broadly based
discretion would be appropriate.
110. If one approaches the question whether it is possible under the legislation to
order forfeiture of a lesser sum than the actual donation by concentrating
exclusively on the language of section 58(2) (and section 65(6)), the answer given
by the Court of Appeal and powerfully endorsed by Lord Rodger and Lord Brown
is difficult to resist. But, as a matter of general principle, the purpose of an item of
legislation should inform one’s approach to the interpretation of its constituent
parts and I therefore believe that this is a case where it is clearly necessary to be
guided in the construction of the relevant provisions not only by the language used
but also by the underlying aim of the Act.
111. The central purpose of the legislation was to prohibit donations from those
who did not have a stake in this country. I do not accept Mr Beloff QC’s argument
that its purpose evolved from a desire to ban foreign donors to one of denying the
right to give donations to those who could not vote. The Act was the result of the
government’s commitment in its manifesto to ban foreign donors. An examination
of the materials that preceded its enactment reveal, I believe, that this was always
the driver for the legislation. Paras 4.5 and 4.6 of the White Paper (on which Mr
Beloff relied to advance his evolution thesis) are concerned with devising a
convenient and easy-to-apply means of enforcement. They do not represent a
change of direction in government thinking on the target for the restriction.
112. The means chosen to achieve the aim of banning foreign donors obviously
has the potential to catch more than that category of persons. Individual
permissible donors are confined under section 54 to those who are registered in an
electoral register and quite clearly this can include persons who have a stake in the
country and people such as Mr Bown who are not registered in an electoral register
possibly because of an administrative error. A critical issue, therefore, is whether
the fact that someone such as he is caught by the breadth of section 54 can affect
the way in which section 58 is to be construed.
113. At first sight it does not appear that this should influence the interpretation
of section 58(2). The court is given the power to order the forfeiture of an amount
equal to the value of the donation. It is not empowered – at least not on the face of
the subsection – to order that an amount up to the value of the donation be forfeit.
And Lord Brown has articulated a strong argument to the effect that if this was the
intention of Parliament, it could easily have been achieved. One might also
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recognise that the notion of forfeiture is traditionally the deprivation of a specific
amount or object. Forfeiture is defined in the Oxford English Dictionary as “the
fact of losing or becoming liable to deprivation of (an estate, goods, life, an office,
right, etc) in consequence of a crime, offence, or breach of engagement” or “that
which is forfeited; a pecuniary penalty, a fine”. One of the definitions of forfeit is
“something to which the right is lost by the commission of a crime or fault”. These
definitions indicate, I think, that the use of the word “forfeiture” is commonly
associated with the deprivation of a defined thing.
114. There are strong policy reasons for interpreting section 58(2) in the manner
that the appellant contends for, however. The culpability of the offender is more
easily reflected in the penalty if one has a calibrated reaction to the gradations of
impermissibility that will arise; the impact on the party of the proposed forfeiture
order can be assessed; whether it is a foreign donation can be taken into account;
and the inaction of the Electoral Commission after it has discovered the
impermissible donation can also weigh in the balance.
115. But the strongest – and, ultimately, for me, the most convincing – argument
in favour of the interpretation advanced by the appellant is that it was never
intended that there be forfeiture in the true sense of that term where the donor was
someone who was entitled to be on the electoral register but who was not
registered because of an administrative error. The sense that one gets from the
Neill Report is that what was intended was the devising of a range of penalties to
deal with the various types of impermissible donation and that the word
“forfeiture” was not used in the report in its conventional connotation. This much
is, I think, clear from para 5.42 of the report where it was proposed that a sum not
less than the donation should be liable to forfeiture from the party’s funds and that
in significant cases a penalty of up to ten times the donation might be levied.
Notably, this paragraph also contained the suggestion that, while a forfeiture
power should also apply even if the receipt were innocent or inadvertent, “the
courts would clearly take into account the degree of culpability in setting the level
of forfeiture” (emphasis added). The use of the phrase “level of forfeiture” clearly
contemplates, in my opinion, a sanction involving the payment of a sum less than
the full amount of the donation.
116. There is nothing in the White Paper that signals a movement by the
government away from the essential purpose identified by the Neill Report and the
reasoning that underlay its recommendations. The changes to the Neill proposals
came about as a matter of administrative expediency rather than for reasons of
principle. It is therefore possible to hold that, since the primary function of the Act
was to ban foreign donors, the legislature must have intended that where others
were caught because of the simplicity and breadth of the provision that was
actually adopted to achieve that aim, they would not be subject to the same
draconian penalty as those to whom the legislation was principally directed.
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117. Lord Diplock, in commenting on the decision of the House of Lords in
Inland Revenue Comrs v Ayrshire Employers Mutual Insurance Association Ltd
[1946] 1 All ER 637, said that if the courts can identify the target of legislation,
“their proper function is to see that it is hit; not merely to record that it has been
missed” – (Courts and Legislators, Holdsworth Club Presidential Address 1965,
referred to in the second footnote on p 955 of Bennion on Statutory Interpretation,
5th ed (2008)). One might adapt that statement slightly to meet the circumstances
of the present case by saying that courts should ensure that the target is not subject
to greater fire than was intended.
118. Concluding, as I therefore do, that the court has power to make an order of
‘forfeiture’ for less than the full amount of the donation, I am of the view that the
discretion of the court as to the level at which to fix the sanction at less than full
forfeiture must be wide. But I agree with Lord Phillips that where it is shown that a
donation has come from an impermissible source it should be presumed that this is
a foreign donation and that if the presumption is not rebutted, forfeiture should
follow. If, however, it can be shown that the donation was not from a foreign
donor but came from someone who was entitled to be in an electoral register, the
level of forfeiture should reflect the particular circumstances of the case.
119. I would therefore allow the appeal. As to disposal, I agree with the order
that Lord Phillips proposes should be made.
