Jersey Unreported Judgments

Inferior Number Sentencing - contravention of the Housing (Jersey) Law 1949.

[2012]JRC145B

Royal Court

(Samedi)

31 July 2012

Before     :

J. A. Clyde-Smith, Esq., Commissioner, and Jurats Morgan and Liston.

The Attorney General

-v-

Woodleigh House Limited

Derek Donald Egre

Sentencing by the Inferior Number of the Royal Court, following a guilty plea to the following charges:

Woodleigh House Limited

1 count of:

Acting in contravention of Article 20 of the Housing (Jersey) Law 1949 as amended (Count 1).

Plea: Guilty.

Details of Offence:

Mr Egré was sole shareholder and a director of Woodleigh.  Woodleigh owned a property above Bonne Nuit Bay which had been converted by the previous owner from a three bedroomed house into two units of accommodation.  Both were subject to Regulation 1(1)(a) to (h) occupancy restrictions.  Mr Egré advertised the units as being non-qualified and the let them both as one single unit to an unqualified UK resident and his family at a rent of £60,000 per annum.  Material period was 1^st May, 2008 to 29^th November, 2011 - 42 months - during which he received £210,000 in rent.  Mr Egré had lied to the Population Office about who was living at the property on at least five occasions - in writing, on the telephone, face-to-face and on the particulars of exempted transaction form.  When Population Office discovered the property was being occupied by non-qualified persons, Mr Egré was challenged and cautioned.  He then admitted the facts and apologised for lying.  At interview it was established that the property and adjoining lodging house had been bought by Mr Egré via his company in April 2006 when the property market was buoyant.  (The lodging house was not material to this prosecution).  The company had taken a large loan from Jersey Home Loans secured on both properties.  At the date of sentencing, the outstanding capital sum was £2,930,482 and the interest repayments on the loan were greater than the income from rental of both properties.  Mr Egré had divorced in 2008 and he had suffered health problems resulting in him now being in receipt of State's benefits.  He had no other source of personal income and the company's income was all paid to offset the interest on the loan.  Affidavits were produced by both defendants regarding their perilous financial situation and Jersey Home Loans were about to start dégrèvement proceedings. 

Details of Mitigation:

Cooperated at interview.  Admitted infraction on Indictment. 

Previous Convictions:

None.

Conclusions:

The Court asked the Crown to reconsider the conclusions in light of contents of affidavits and adjourned briefly.  The Crown then moved for:-

Count 1:

£20,000 fine.

Asking 12 months in which to pay.

Order for Judicial hypothèque to be registered in the Public Registry against all realty owned by W H Limited sought.

Sentence and Observations of Court:

The Court observed that had the defendants not been in such perilous financial circumstances, the fines sought by the Crown were too low and a total fine of £45,000 would have been appropriate. 

Count 1:

£30,000 fine and 2 years in which to pay.

Order for Judicial hypothèque to be registered in the Public Registry against all realty owned by W H Limited made.

Derek Donald Egre

1 count of:

Acting in contravention of Article 20 of the Housing (Jersey) Law 1949 as amended (Count 2).

Plea: Guilty.

Details of Offence:

See Woodleigh above.

Details of Mitigation:

See Woodleigh above.

Previous Convictions:

None.

Conclusions:

The Court asked the Crown to reconsider the conclusions in light of contents of affidavits and adjourned briefly.  The Crown then moved for:-

Count 2:

Nominal fine £100.

Sentence and Observations of Court:

The Court observed that had the defendants not been in such perilous financial circumstances, the fines sought by the Crown were too low and a total fine of the order of £45,000 would have been appropriate. 

Count 2:

Nominal fine of £1,000 or 2 months' imprisonment in default

Given 1 year in which to pay.

No Order for costs.

Mrs S. Sharpe, Crown Advocate.

Advocate J-M. G. Renouf for the Defendants.

JUDGMENT

THE commissioner:

1.        Woodleigh House Limited ("the company") stands to be sentenced for permitting persons not approved by the Minister to occupy the two separate but inter-connecting units of accommodation, which comprise Bonne Nuit House which overlooks Bonne Nuit Bay, contrary to the conditions imposed upon the company under the revised housing consent issued on 29^th September, 2000.  The company also owns 11 adjacent self-contained flats which are registered under the Lodging Houses (Registration) (Jersey) Law 1962. 

2.        Derek Donald Egré ("Mr Egré") is the beneficial owner of the company and the director who has or had conduct of its business and he stands to be sentenced for knowingly consenting to or conniving in the commission of the offence committed by the company.  The attention of the Court has been drawn to the case of AG-v-Architectural Planning and Building Services Limited and Hoban [2002] JRC 161 and the element of double jeopardy where as here the company is Mr Egré's alter ego and he will ultimately pay the fines moved for in respect of the company. 

3.        The case is unusual in that when Mr Egré acquired the company for £3.5 million on borrowings of £2.5 million, the top flat was occupied by a person not approved by the Minister.  This was drawn to the attention of Mr Egré but rather than pursue enforcement against the company the Population Office, accepting that this breach of the law was not deliberate on his part, gave him some seven or eight months to regularise the matter.  The requirement for both units to be occupied by persons approved by the Minister was however made expressly clear to him. 

4.        Notwithstanding this clear warning Mr Egré proceeded to advertise at least one of the units as available to non-qualified persons and then to let both units to a Mr and Mrs Barclay, who do not have housing qualifications and who in good faith accepted Mr Egré's assurance that both units were available to non-qualified persons.  Mr Egré then proceeded to lie to officers of the Population Office as to who was occupying these units on at least five occasions and to submit an exemption form indicating that his daughter was occupying one of the units when that was not the case. 

5.        Following a visit by the Population Office to the property on 29^th November, 2011, it was clear that both units were being occupied by Mr and Mrs Barclay and when confronted by this by the Population Office and after caution Mr Egré admitted he had not been telling the truth and apologised.  He was apparently very distressed. 

6.        The two units have been let to Mr and Mrs Barclay for £5,000 per month for some forty two months, that's three and a half years, bringing in a total rental of £210,000.  Although both units could have been let to qualified persons, the Court is of the view that some element of this rental constitutes an illicit profit, which following AG-v-Muren and Peters 2000/166 we take into account in deciding upon the penalties to be imposed,even though on the evidence before us we are unable to quantify it precisely.  Mr Renouf submitted that the evidence, such as it is, did not support the existence of illicit profit, but in our view the only purpose in advertising the units for unqualified applicants at that time is because a greater return can be achieved in that market as compared to the local market.  We think that conservatively that illicit profit would be at least 10% of the rental received over the period, namely some £21,000. 

7.        In mitigation Mr Egré has pleaded guilty although in our view he really had no alternative but to do so and of course the company has also pleaded guilty.  Neither have previous convictions.  We are told by Mr Renouf that he was beset by personal, health and financial problems at that time, and was desperate to let the units in order to service a re-mortgaged facility raised in part to pay off his former wife pursuant to the terms of their separation agreement.  Mr Egré has filed two affidavits from which it is clear that his financial position and indeed that of the company is parlous.  The company owes £2.9 million now against these real estate assets which were worth some £3.5 million at the height of the market but whose precise current value in a weaker market is unknown.  The income derived from the property and the lodging house, which is not achieving and has not achieved full occupancy, is insufficient to meet the costs of servicing the mortgage facility.  Notwithstanding it is clear from what Mr Renouf said to us that Mr Egré does not at this stage look to a realisation of those assets and is hopeful that the company will be able to survive. 

8.        Apart from his beneficial ownership of the company Mr Egré, who is aged 56, has very limited personal assets and limited earning ability.  He is in receipt of long-term incapacity benefit following diagnosis in 2009 of Polymygella Rheumatica.  He still owes £40,000 to his former wife and is in arrears of the maintenance due in respect of his children.  He currently occupies one of the lodging house units so that if those units were to be realised he would have to find other accommodation. 

9.        The Crown originally sought a fine of £15,000 for each of Mr Egré and the company with costs of £2,500.  That total of £30,000 is in our view in comparison for example with the case of AG-v-Bracken-Smith [2007] JRC 192 on the low side.  In that case fines of £25,000 were imposed for breaches of the Housing Law over a shorter period for lessor sums and the Court accepted that there had been no deliberate breach.  However the Crown recognises the parlous financial circumstances of both the company and Mr Egré and has indicated to us that the Court may decide to impose individual sentences.  The Crown has also reminded us that in imposing a fine the Court has a discretion as to whether Mr Egré should serve a default sentence.  Under Article 20 of the Housing (Jersey) Law 1949 the penalty for an offence is a fine, not imprisonment, and it would be wrong in principle to impose a fine with a default sentence knowing that Mr Egré would be unable to pay it.  That would be to impose a penalty not envisaged by the Housing Law. 

10.      Mrs Sharpe referred us to the following passage in Principles of Sentencing by D. A. Thomas at page 320 as follows:-

"The Court has stated that 'it is axiomatic that where it is decided not to impose a custodial sentence, the court should be careful in imposing a fine not to fix that fine at such a high level that it is inevitable that that which the court has decided not to impose, namely a custodial sentence, will almost certainly follow."

And that principle has been followed or recognised by the Court in AG-v-Muir 1989/4 and AG-v-Riviera Guest House [1991] JLR N 15. 

11.      Whilst recognising the parlous state of the finances of the defendants the Crown have clearly not taken that properly into account in seeking the fines it originally sought in that Mr Egré clearly has no means to pay £15,000.  It was asked to reconsider the matter and having done so, sought reduced conclusions of a fine of £20,000 for the company to be paid in 12 months secured by a judicial hypothèque and a nominal £100 fine for Mr Egré and no costs.

12.       In our view if the means of the company and Mr Egré were not in issue we would have sought a substantial increase in the overall fine originally sought by the Crown namely £45,000. 

13.      Mr Egré is a businessman who until recently ran a rental agency business.  He will be well aware of the housing regulations but in this case he was actually expressly warned by the Population Office as to the conditions that related to these two units.  He then proceeded to breach the law knowingly, lying to the Population Office and submitting a false form in relation to his daughter's occupancy.  In our view such conduct requires a substantial penalty to be imposed. 

14.      However, it is clear that we need to take into account the means of indeed both defendants.  Mrs Sharpe in relation to the company, referred us to the case of AG-v-Deerglen [2009] JLR N 6, a health and safety infraction, where the court held that when determining the level of fine to be imposed the court had to consider firstly the gravity of the offence and secondly the amount the defendant could reasonably be ordered to pay, and we think those principles apply to the company in this case. 

15.      In our view, having considered the information before us carefully, we think the company is in a position to pay a fine of £30,000 given reasonable time.  In our view that is the minimum fine that should be imposed in order to reflect the serious nature of this offence.  We agree that the fine for Mr Egré must, in view of his personal circumstances, be substantially reduced but not as low as the nominal sum the Crown now seek. 

16.      So our conclusions therefore are as follows: in relation to Count 1, that is against the company, we impose a fine of £30,000 to be paid within 2 years and to be secured by a judicial hypothèque.  In relation to Count 2, that is in respect of Mr Egré, we impose a fine of £1,000 to be paid within 12 months, or 2 months' imprisonment in default. 

Authorities

Housing (Jersey) Law 1949.

Lodging Houses (Registration) (Jersey) Law 1962.

AG-v-Architectural Planning and Building Services Limited and Hoban [2002] JRC 161.

AG-v-Muren and Peters 2000/166.

AG-v-Bracken-Smith [2007] JRC 192.

AG-v-Muir 1989/4.

Principles of Sentencing (Second Edition) by D. A. Thomas

AG-v-Riviera Guest House Ltd and White 1991/160.

AG-v-Deerglen [2009] JLR N 6.

R-v-F Howe and Son (Engineers) Ltd [1999] 2 Cr App R (S) 37.

AG-v-Bled Ltd and Sullivan [2010] JRC 134.

AG-v-Biggs 2001/50.