The second, third and fourth claimants were three Blackpool-based companies of which the first claimant was a director and which acted as brokers between energy companies and small businesses requiring an energy supply. The Lancashire trading standards authority (“Lancashire Trading Standards”) received complaints about the second and third interested parties, two energy supply companies based in Lancashire with which the claimant companies had dealings. As the complaints were followed up, it became apparent that the predominant issue was alleged mis-selling initiated by the claimant companies. Following a preliminary investigation by an investigating officer, it was decided that the investigation should be taken further. By that time, Lancashire Trading Standards was liaising with the north west regional investigation team, of which the first interested party, a neighbouring local authority, was the lead partner under a protocol for region-wide trading standards investigations agreed by the local authorities in the region. The regional investigation team had been undertaking investigations into the trading activities and practices of the claimants and the second to seventh interested parties. Lancashire Trading Standards decided that the case was no longer suitable for it to retain and referred it in its entirety to National Trading Standards (“NTS”), a centrally-funded body responsible for delivering consumer protection-related work with a national or regional scope, in order for an investigation by the regional investigation team to be fully funded. NTS agreed to fund the investigation and required the north west regional investigation team to conduct the investigation. As part of the investigative process, the first interested party obtained warrants to search and seize material from the premises of the second, third, fifth and sixth interested parties. Execution of those warrants led to the retrieval of a very large amount of digital material from devices held by those parties. In due course the first interested party applied for production orders in respect of financial material relating to the claimant companies, and personal and business accounts of the first claimant and another individual, pursuant to the Proceeds of Crime Act 2002 on the basis that there were reasonable grounds to suspect the claimants of committing money laundering offences. The claimants opposed the application on the ground, inter alia, that the first interested party lacked the power to conduct the investigation. After being referred to section 222(1) of the Local Government Act 1972, dealing with the power of local authorities to prosecute or defend legal proceedings, and to the statutory power to delegate any of their functions to another local authority, the Crown Court judge held that Lancashire Trading Standards had the power to investigate and prosecute, the offences having taken place in Lancashire where the relevant companies were based, and that it had been entitled to delegate that power to the first interested party pursuant to the protocol. He granted the production orders accordingly. The claimants sought judicial review of that decision, contending that a local authority based in the north west lacked the power to undertake what was effectively a national fraud and money laundering investigation and that, even if it did, no consideration had been given at any point by any local authority to whether such an investigation was “expedient” within the meaning of section 222(1) of the 1972 Act. The first interested party relied on section 1 of the Localism Act 2011, conferring power on a local authority to do anything that individuals generally could do, as providing it with the relevant power.
On the claim—
Held, claim dismissed. (1) Section 222(1) of the Local Government Act 1972, and thus the statutory test of expediency which it imposed, applied to the prosecution of or appearing in legal proceedings and did not encompass an investigation by a local authority into alleged criminal activity, nor applications made for an investigatory purpose. Since the present case was concerned with an investigation, and the first interested party had yet to make any decision to prosecute, there could be no requirement on it, or any local authority which might have delegated its power to take proceedings to the first interested party, to show that a prosecution would be expedient to promote or protect the interests of the inhabitants of the area of the relevant local authority (paras 56, 57, 72, 80).
(2) Section 1 of the Localism Act 2011 gave a general power of competence to local authorities. The power was not unfettered and, in particular, could not be used to circumvent restrictions on a pre-existing power or to avoid an express statutory restriction, and thus it did not give rise to a right to prosecute because section 222(1) of the 1972 Act still applied. However, section 1 amply entitled a local authority to engage in an investigation in relation to fraudulent trading practices prima facie falling within its function as a trading standards authority, such an investigation being one which could be undertaken by an individual, albeit that, in relation to an application for a production order pursuant to the Proceeds of Crime Act 2002, that individual would have to be an “appropriate officer”. While the local authority's action in investigating could be subject to challenge on well-established public law principles, the hurdle to a local authority’s decision to investigate criminal activity was high given the general power of competence provided by section 1 of the 2011 Act as compared with the criteria-based power set out in section 222 of the 1972 Act. Any court had to be very slow to interfere with a local authority’s exercise of its general power. The power of Lancashire Trading Standards to conduct the investigation could not realistically be challenged. The first interested party was conducting the investigation by reason of a lawful delegation of its investigative function by Lancashire Trading Standards, pursuant to the power of delegation conferred on a local authority by section 101 of the 1972 Act. For that purpose, it was unnecessary for Lancashire Trading Standards to have referred specifically to section 101, so long as it was delegating a lawful function. While the protocol agreement did not itself provide the first interested party with lawful authority, that agreement was simply a mechanism by which section 101 of the 1972 Act operated in the context of trading standards investigations in the region (paras 58–63, 65, 66, 67, 69, 70, 72).
(3) Additionally, Lancashire Trading Standards, and thus the first interested party under delegated powers, was empowered to conduct the investigation under section 111 of the 1972 Act, that investigation being something that was “calculated to facilitate, or is conducive or incidental to” the discharge of any of its functions. The relevant function was the commencement of criminal proceedings, necessarily and implicitly, a prosecution coming within section 222 of the 1972 Act. While, at the investigation stage, it was unlikely to be known whether a prosecution would (as opposed to might) be “expedient” within the meaning of section 222, the conduct of an investigation with a view to deciding whether or not to prosecute was capable of satisfying the requirements of section 111 provided that the local authority entertained a reasonable belief or there was a realistic possibility that the investigation might result in a prosecution coming within section 222. That test was met in the present case. The judge’s decisions both as to the vires of the investigation underpinning the production orders and as to the merits of the applications for those orders were correct (paras 71, 72, 80).
Per curiam. The fact that a Government department funds NTS to fulfil objectives including national consumer enforcement work cannot provide any local authority with a power which it does not otherwise have. NTS is not a legal entity capable of commencing a prosecution, and the regional investigation teams to which NTS refers cases similarly have no legal entity for such purposes. It follows that any so-called national prosecution must be conducted by a local authority, whether in the interests of its own inhabitants or the inhabitants of another local authority which has delegated its prosecutorial function, since the creation of regional or national investigative teams cannot override the clear provisions of section 222(1) of the 1972 Act. In considering of whether a prosecution would promote or protect the interests of the inhabitants of the relevant area, a local authority properly can consider the impact on the area in terms of reputational damage. Moreover, there will be adverse resource implications if a trader repeatedly engages in fraudulent practices from a local authority's area without any effort by the local authority to take enforcement action to prevent such trading. On the facts of the present case, the structures put in place to take effective regional action against alleged criminal activity do not result in the local authorities in question exceeding their statutory powers (paras 73, 74).
Chris Daw QC (instructed by Farleys Solicitors, Preston) for the claimants.
Andrew Thomas QC and Anna Pope (instructed by Adkirk Law, Preston) for the first interested party.
Philip Marshall QC and Matthew Morrison (instructed by Weightmans Solicitors, Manchester) for the second to seventh interested parties.
The defendant court was not represented.