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On 8 June 2010, a seven-judge Supreme Court heard an appeal by the  UK Independence Party concerning  the circumstances in which a political party should forfeit donations from individuals not registered on an electoral register under the provisions of the Political Parties, Elections and Referendums Act 2000 (PPERA). PPERA established the existence of the Electoral Commission and provided, amongst other things, that political parties should only accept donations in excess of £200 from individuals currently on the electoral register.  PPERA, s 58(2) provides that where a political party has accepted a donation which the party is prohibited from accepting, then a magistrates’ court may, on application made by the Electoral Commission, order the forfeiture by the party of an amount equal to the value of the donation.

In this case, a member of UKIP, B, made 69  donations totalling over £360,000 to the party over a period between 1st December 2004 and 2nd February 2006.  Some of these donations were of under £200, but of those which were not, the total was £349,216.  Although B  was entitled to be registered as an elector during that period, his name did not appear on any electoral register.  The statute requires a political party which receives a donation to take all reasonable steps forthwith to verify the identity of the donor and whether he is a permissible donor (s 56 (1)).  If the party is not satisfied that a donor is a permissible donor, it can return the donation within 30 days, and only if it fails to do so will it be regarded as having accepted the donation.  UKIP did not return any of the donations totalling £349,216 within thirty days or at all.

On 16th March 2007, the Commission applied to the City of Westminster Magistrates’ Court for an order for the forfeiture of an amount equal to the value of the donations.  The magistrates’ court took the view that s 58(2) was ‘designed to ban foreign donations to political parties’, and since B’s donations were not foreign donations, but were made by a man who believed they were permissible, and was entitled to registration on the electoral role, ordered only  the forfeiture of a sum equal to the value of donations received from B after a meeting between Commission officials and the then treasurer of UKIP at which ‘the party was aware that B was not on the electoral roll’.

The Commission challenged this decision by way of judicial review, arguing that the magistrates’ court had erred in law by construing s58 PPERA without a presumption in favour of forfeiture; (2) made an invalid exercise of his discretion; (3) erred when giving the date of the meeting between the Commission and UKIP as 19th June 2005 and (4) failed to give adequate reasons for rejecting the Commission’s case.  Part of the Commission’s case against UKIP was that it had already made detailed enquiries about the validity of these donations and of major donations from another donor, and so the party was on notice as to the rigor of these provisions.  UKIP made the point that it was a small political party which at the material time had only the equivalent of four full-time staff.

At first instance, Mr Justice Walker ([2009] EWHC 78 (Admin))  held that although there was no presumption in favour of forfeiture in s 58(2) PPERA,  and although the magistrates’ court decision was defective and inadequately reasoned, it was not irrational.   He ordered the decision to be quashed, and that the application for an order of forfeiture be remitted to the magistrates’ court for reconsideration. The Commission appealed the issue of disposal.

The Court of Appeal ([2009] EWCA Civ 1078, [2010] 2WLR 873) accepted that there was a presumption in favour of forfeiture. PPERA put the onus upon political parties to make a simple check as to the eligibility of donors by reference to whether they appeared on the electoral roll at the address they had given.  This party had not performed that check, and its relatively small resources were immaterial.  Once it had been shown that a donation had been accepted from an impermissible donor and had not been returned as envisaged by s56, then the court’s discretion was narrow.  In almost every case, a magistrates’ court should exercise its power under s58(2) by ordering forfeiture of an amount equal to the value of the donation.

The Court of Appeal therefore held that the magistrates’ court had erred in its construction of PPERA, and not made a valid exercise of discretion under s58(2).  Its decision was irrational, and inadequately reasoned.  The Court of Appeal substituted an order that the matter be remitted to the magistrates’ court to reconsider in accordance with its own judgment.

UKIP’s further appeal to the Supreme Court will have important ramifications for the rigour with which political parties can be expected to check the provenance of political donations.