The government has been given the power under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 to remove or amend the caps on fines that magistrates' courts can impose for criminal offences.
The following changes brought about by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) will affect any primary and secondary legislation in England and Wales that gives magistrates' courts the power to impose a fine for a criminal offence:
A fine payable on summary conviction that is currently capped at the statutory maximum (£5,000), or capped at a higher amount (for example, £20,000 or £50,000), will become a fine of an unlimited amount in England and Wales. This change will apply to summary offences and either way offences set out in any primary or secondary legislation. However, LASPO also gives the Secretary of State the power to disapply these changes and set new caps by way of secondary legislation.
Fines below £5,000 (whether expressed by reference to the standard scale or fixed fines) will continue to be capped but the amounts may increase.
Although the Act received Royal Assent on 1 May 2012, these particular changes have not yet been commenced. If and when the changes are brought into force, they will apply across all business sectors and will affect a very wide range of legislation, including commercial, company, financial services, competition, property, health and safety, and environmental laws. Companies and their directors may have to reconsider their approach to any offences which up until now may have been treated as relatively minor because of the low fines involved.Close speedread
A vast amount of primary and secondary legislation that applies to a business includes criminal offences that are punishable on summary conviction in a magistrates' court. Such offences may apply to an individual (such as a company director, senior officer or an employee) or to a legal person (such as a company or partnership), or both.
For example (this is not an exhaustive list), offences that may be punishable on summary conviction can be found in:
Commercial and trade law: Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008 (SI 2008/1816), Business Protection from Misleading Marketing Regulations 2008 (SI 2008/1276), Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277), Consumer Protection Act 1987, Food Safety Act 1990, Food Labelling Regulations 1996 (SI 1996/1499), Gambling Act 2005, General Product Safety Regulations 2005 (SI 2005/1803), Licensing Act 2003, Price Marking Order 2004 (SI 2004/102) and Weights and Measures (Packaged Goods) Regulations 2006 (SI 2006/659).
IP and IT law: Copyright, Designs and Patents Act 1988; Trade Marks Act 1994; Computer Misuse Act 1990; Data Protection Act 1998.
Company law: Companies Act 2006.
Corruption and financial crime: Bribery Act 2010, Money Laundering Regulations 2007 (SI 2007/2157) and Proceeds of Crime Act 2002.
Financial services law: Consumer Credit Act 1974 and Financial Markets and Services Act 2000.
Competition law: Competition Act 1998 and Enterprise Act 2002.
Property law: Town and Country Planning Act 1990, Planning (Listed Buildings and Conservation Areas) Act 1990, Highways Act 1980, Regulatory Reform (Fire Safety) Order 2005 (SI 2005/1541) and Control of Asbestos Regulations 2012 (SI 2012/632).
Health and safety law: Health and Safety at Work etc Act 1974.
Environmental law: Environmental Permitting (England and Wales) Regulations 2010 (SI 2010/675) and Producer Responsibility Obligations (Packaging Waste) Regulations 2007 (SI 2007/871).
There are three types of criminal offence
Summary offences: These are tried and sentenced in a magistrates' court by lay magistrates, or occasionally by a specialist magistrate referred to as "District Judges (Magistrates' Court)" (formerly known as a stipendiary magistrate).
Indictable offences: These are tried and sentenced in the Crown Court, by both a judge and a jury.
Either way offences: These are offences that can be tried either in a magistrates' court or the Crown Court.
Magistrates' courts therefore have jurisdiction in respect of both summary offences and either way offences. References in this legal update to "summary conviction" refer to a conviction in a magistrates' court in respect of a summary offence or an either way offence. The legislation in question will specify whether a criminal offence is punishable by a fine, imprisonment or both. For the purposes of this legal update, we only need to look at fines for summary convictions.
The way in which fines are currently expressed in legislation, and its amount, varies:
An offence can refer to a fine not exceeding one of the following levels on the standard scale:
The standard scale is used for summary offences only.
This currently means the following caps:
These standard scale amounts are the same in England, Wales, Northern Ireland and Scotland (Schedule 1, Interpretation Act 1978).
An offence can refer to a fine not exceeding the statutory maximum or the prescribed sum.
The expressions "statutory maximum" and "prescribed sum" apply to summary offences and either way offences.
This currently means the following caps:
(Schedule 1, Interpretation Act 1978.)
An offence can refer to a fine not exceeding [an amount higher than £5,000].
These are sometimes referred to as "exceptional statutory maximum fines" and are typically found in health and safety and environmental laws, but can also be found in other types of laws such as food safety legislation.
The legislation will expressly state the specific cap.
An offence can refer to a fixed sum below £5,000.
While this is less common, you may still find fixed sum fines in legislation. For example, various offences under the Consumer Credit Act 1974 are punishable by a fixed fine of £400 if tried summarily (Schedule 1, Consumer Credit Act 1974).
The legislation will expressly state the fixed sum.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) was introduced primarily to deal with the reform of civil litigation costs and funding.
However, it also made a number of other changes, including changes to magistrates' courts' powers to impose fines on summary conviction (sections 85-88, LASPO). These are discussed in detail below. Note that, although LASPO received Royal Assent on 1 May 2012, sections 85 to 88 have not yet been commenced.
For more information on other aspects of LASPO, see:
For any offence punishable on summary conviction, a fine currently capped at £5,000 or a higher amount will be a fine of an unlimited amount (section 85(1), LASPO).
Apply to all primary and secondary legislation that has an offence punishable on summary conviction by such a fine (section 85(3), LASPO). (It will also apply to any common law offence with such a fine.)
Apply however such a fine is expressed. So it will apply if the amount is expressly set out, or if it is expressed as "level 5 on the standard scale", "an amount not exceeding the prescribed sum", "the prescribed sum" or "the statutory maximum".
Apply to fines set at amounts higher than £5,000 (section 85(1), LASPO). It will remove such higher caps.
Apply to both summary offences and either way offences that are tried summarily (section 86(16), LASPO).
Not have retrospective effect (see No retrospective effect below).
Apply to England and Wales, but not Northern Ireland or Scotland (see Where will the changes apply? below).
Not apply where, in an either way offence, an offender tried summarily and convicted by a magistrates' court is to be sentenced as if convicted by indictment (section 85(4)(b), LASPO). Fines on indictment in the Crown Court will remain uncapped (LASPO has not changed this) unless specifically capped in particular legislation.
If the government commences section 85(1) to remove those caps, it will have to issue secondary legislation at the same time to deal with proportionate fines which are calculated on the basis of a proportion of £5,000 or a higher amount. This is because the removal of the cap means it will not be possible to make the calculation. Where a fine is currently set out as a proportion of £5,000 or a higher amount, the Secretary of State may set it as a proportion of a specific amount by way of statutory instrument (sections 85(7)-85(8), LASPO):
Any such statutory instrument would be subject to the affirmative resolution procedure (that is, it would require the approval of both houses of Parliament) (section 85(1), LASPO).
An example of a proportionate fine is the penalty for default in filing accounts and records under the Companies Act 2006, for which the penalty is a fine not exceeding level 5 on the standard scale (£5,000) and, for continued contravention, a daily fine not exceeding one-tenth of level 5 on the standard scale (so, £500) (section 451(4), Companies Act 2006).
The Secretary of State has been given the power to disapply the removal of the cap, and set a new cap for an offence by way of statutory instrument (sections 85(5) - 85(13), LASPO). Any such statutory instrument would be subject to the affirmative resolution procedure (section 85(1), LASPO).
In other words, the Secretary of State has the power to set a new cap again for specific legislation (through secondary legislation), despite the cap having been abolished across all legislation by section 85(1).
The Secretary of State has also been given the power to increase levels 1 to 4 on the standard scale by such other amounts as he considers "appropriate" by way of statutory instrument (section 87(1), LASPO):
However, the ratio of one level to another cannot be changed (section 87(2), LASPO).
Any such statutory instrument would be subject to the affirmative resolution procedure (section 87(6), LASPO).
No guidance or explanation is given as to what the Secretary of State might consider "appropriate". It would not be limited to increases only because of inflation (the "value of money"). The government has always had the power to increase the standard scale on an inflationary basis but this seems never to have been exercised (section 143, Magistrates' Court Act 1980).
The Secretary of State has also been given the power to increase fixed fines currently set below £5,000 by way of statutory instrument (section 86(2), LASPO). The new fixed fine cannot exceed the greater of:
whatever the level 4 amount on the standard scale is at that time.
Any such statutory instrument would be subject to the affirmative resolution procedure (section 86(10), LASPO).
None of the changes will affect any fines for offences committed before those sections in LASPO, or the applicable statutory instrument, come into force (sections 85(4), 86(6), 87(7), LASPO).
Sections 83 to 88 of LASPO are not yet in force. A commencement order will be needed to bring these into force.
However, on the date it comes into force, the removal of the caps described in Removal of caps on fines of £5,000 and higher amounts above will take immediate effect. At the same time, the government will need to issue secondary legislation to deal with proportionate fines, as the removal of the cap would render such proportionate fines unworkable.
The other changes will need additional secondary legislation.
These changes will apply only to England and Wales (section 152(1), LASPO).
This means that where a law also applies to Scotland and/or Northern Ireland, a fine payable for an offence punishable on summary conviction under that law will be different according to where the conviction was secured (assuming the Scottish and Northern Irish governments do not adopt the same change). Although the statutory maximum/prescribed sum is already different in Scotland (£10,000), this part of LASPO will bring about more discrepancies across the UK for legislation which has UK wide application.
If an offence refers to a fine not exceeding the statutory maximum or the prescribed sum
Assuming section 85 is commenced, this will mean:
If an offence refers to a fine not exceeding [an amount higher than £5,000]
Assuming section 85 is commenced, this will mean:
If an offence refers to a fine not exceeding level 5 on the standard scale
Assuming section 85 is commenced, this will mean:
If an offence refers to a proportion of the statutory maximum or prescribed sum
Assuming section 85 is commenced, the government will need to issue secondary legislation to set an amount, otherwise it will not be possible to calculate the proportion.
If an offence refers to a fine not exceeding one of the following levels on the standard scale:
Assuming section 87 is commenced, this will mean:
If the offence refers to a fixed sum below £5,000
Assuming section 86 is commenced, this will mean:
The removal of the cap was not part of the Bill when it was first laid before Parliament. These provisions were added to the Bill in October 2011 (see Legal update, Amendments made to Legal Aid, Sentencing and Punishment of Offenders Bill 2010-11: magistrates' court fines and criminalising squatting (www.practicallaw.com/5-510-2152)). There was very limited debate on these changes when the Bill was discussed in Parliament, as the Labour party made clear it agreed with the changes (see Hansard, House of Commons debates, 1 November 2001, at column 859-857).
However, there is some useful insight into the reason for these changes in the Equality Impact Assessment that was submitted by the Ministry of Justice when the changes were added to the Bill in October 2011. In particular, the government stated that:
It wishes to encourage greater use of fines in the magistrates' courts.
Removal of the cap on fines would enable the magistrates' courts to impose more proportionate fines on "wealthy or corporate offenders and organisations".
By allowing the magistrates' courts to impose higher fines, they will be less likely to refer the offender to the Crown Court for sentencing in either way offences, which according to the government can be bureaucratic, time consuming and costly. It would also enable the sentence to be handed down by the court that had heard all the evidence in the case.
The Ministry of Justice will be discussing with the Sentencing Council the impact of the changes on current sentencing guidelines.
The changes only apply to fines for criminal offences in the magistrates' courts. They do not apply to:
Crown Court fines (which will remain unlimited, unless expressly capped in legislation).
Civil fines (fixed or variable) imposed by regulators.
However, the effect of the changes is still considerable since they will apply to a very wide range of legislation, including commercial, company, financial services, competition, property, health and safety, and environmental laws. This is not an exhaustive list. In fact it might be simpler to state which laws would not be affected.
From a corporate liability point of view, companies and their directors may have to reconsider their approach to any offences which up until now may have been treated as relatively minor because of the low fines involved.
The changes will also affect decisions about the "choice of venue" for either way offences. If a defendant (including a corporate body) pleads "not guilty" to an either way offence, a choice has to be made as to whether the case should be heard in the magistrates' court or the Crown Court. At present, one of the factors affecting that decision is whether the magistrates' court has sufficient sentencing powers. It is also possible for a magistrates' court to commit an either way offence to the Crown Court for sentencing once the case has been heard in the magistrates' court. This would usually happen if the magistrates decide after they have heard the case that the case is more serious than they first thought and that their sentencing powers are insufficient. As mentioned in Why did the government make these changes? above, one of the effects of the changes is that magistrates' courts will no longer have to commit a case to the Crown Court for sentencing just because they have insufficient sentencing powers.
It remains to be seen if the Sentencing Council will amend the existing sentencing guidelines to provide the magistrates' courts with guidance on what fines would be appropriate if there are no caps. It might be tempting for some courts to impose disproportionate fines on corporate bodies because they have "deeper pockets" than an individual.