CONFISCATION
31.16
Volume 1
Defendant absconds
R v Bestel and Others 2013 EWCA Crim 1305 D pleaded to fraud offences. In confiscation proceedings,
he did not file an assets statement. He was sent a draft section 18 statement to sign in prison. He didn’t
sign it. He did not attend the confiscation hearing. His advocate asked for an adjournment. This was
refused and his advocate withdrew. The Judge held the withdrawal was highly likely to frustrate the
proceedings. (By this stage D might have been released from prison. Ed.) The prosecution said if this was
treated as absconding then everyone who wanted to frustrate confiscation proceedings could just stay at
home. Held. para 44 The withdrawal seems unfortunate as the advocate could have helped with the law.
In ordinary usage a person who absconds flees, runs away or escapes. In the context of the administration
of criminal justice, the phrase ‘a defendant absconds’ implies that, at least, the defendant has sought to
place himself beyond the reach of the court for the purpose of escaping judgment. D did not abscond in
this sense. D had deliberately failed to attend hoping that the confiscation hearing would be postponed but
knowing of the risk that the court would proceed in his absence. He remained at his known address, had
been communicating with his solicitors and with the prosecution; and he had not attempted to escape the
reach of the court. He did not abscond within the meaning of section 27.
31.29a
Companies
Piercing the corporate veil
Prest v Petrodel Resources and Others 2013 UKSC 34 Supreme Court In divorce proceedings the
husband failed to comply with the Court’s orders. The Judge found H, the husband and an oil trader,
simply treated the PRL companies’ cash balances and property as his own and drew on them as he saw fit
without board control. The management control of PRL was always in H’s hands. At the end of the
hearing the Judge ordered H to procure the transfer of seven UK properties owned by PRL to the wife in
part satisfaction of the lump sum order. The companies appealed. Neither the Judge nor the Court of
Appeal believed they could pierce the corporate veil. Held. para 8 Subject to very limited exceptions,
most of which are statutory, a company is a legal entity distinct from those of its shareholders. Its
property is its own, and not that of its shareholders. That principle applied to a company that was wholly
owned and controlled by one man, Saloman v A Salomon and Co 1897 AC 22. ‘Piercing the corporate
veil’ means disregarding the separate personality of the company. It is really the exception to the rule in
Saloman v A Salomon and Co. para 27 The court may be justified in piercing the corporate veil if a
company’s separate legal personality is being abused for the purposes of some relevant wrongdoing. The
difficulty is to identify what is relevant wrongdoing. Two principles lie behind the terms. First, the
concealment principle which enables the court to identify the real actors where they are being concealed.
This does not involve piercing the corporate veil. The evasion principle is different and does involve
piecing the corporate veil. There is a legal right against a person in control of ‘it1’ which exists
independently of the company’s involvement, and a company is interposed so the separate legal
personality of the company will defeat the right or frustrate its enforcement. (The court then listed case
examples.) para 34 The corporate veil may be pierced only to prevent the abuse of corporate legal
personality. When a person is under an existing legal obligation or liability or subject to an existing legal
restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a
company under his control, the court may piece the corporate veil. That is only for the purpose of
depriving the company or its controller of the advantage that they would otherwise have obtained by the
company’s separate legal personality. This principle is a limited one. If it is not necessary to piece the
corporate veil it is not appropriate to do so. The Judge was right not to piece the corporate veil because H
1 Presumably the company. Ed.
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html
was not concealing or evading any legal obligation owed to his wife. The properties were held on a
resulting trust by the companies for H. We restore the order for the transfer of the seven properties.
Note: ‘No court in this land will allow a person to keep an advantage by fraud’ Lazarus Estates v Beasley
1956 1 QB 702 at para 712 which was affirmed by Prest v Petrodel Resources and Others 2013 UKSC 34
para 18. Ed.
R v Sale 2013 EWCA Crim 1306 D pleaded to corruption and fraud by false representation. D was the
managing director and sole shareholder of SS, a company that supplied Network Rail. He provided gifts
and hospitality to a Network Rail employee worth just under £7,000. D was given secret tender advice
and SS received about £1.9m worth of contracts. A £60,000 invoice was paid twice. D was sentenced on
the basis that the work done by SS was ‘without criticism as to price or quality’. SS had a turnover of
about £9.9m and only in its work with Network Rail was SS dealing illegally. D’s benefit in apportioned
salary and dividends for Network Rail’s contracts was £125,000. SS’s gross profit before tax was nearly
£200,000. The Judge agreed to lift the corporate veil and found the benefit was £1.9m. The order was
made in that sum because of D’s assets. Held. The principles in Prest v Petrodel Resources and Others
2013 UKSC 34, although strictly obiter, apply across the board. This is not a case coming within the
evasion principle referred to Prest at para 28. Here there was no legal obligation or liability which was
evaded or frustrated by the interposition of the company in this case whereby the interposition of the
company would mean that the separate legal personality of the company would defeat the right or
frustrate its enforcement. This was a company which existed long before this corrupt conduct and which
existed for bona fide trading purposes: there was no interposition of the sort described. However, it falls
within the concealment principle. D was the sole controller of the company and where there was a very
close inter-relationship between the corrupt actions of D and steps taken by the company in advancing
those corrupt acts and intentions, the reality is that the activities of both D and the company are so
interlinked as to be indivisible. Both entities are acting together in the corruption. The court is entitled to
look to see what were the realities of D’s criminal conduct. The objectives of POCA are to seek to
discover the facts which the existence of the corporate structure would otherwise conceal so as properly to
identify the Appellant’s true benefit. Prior to R v Waya 2012 there would have been no fault in finding the
benefit figure to be £1.9m. Since then any confiscation order to bear a proportionate relationship to the
purpose of the Proceeds of Crime Act, which is to recover the financial benefit which an offender has
obtained from his criminal conduct.
31.38
Step 4c
Was the offence committed over a period of at least 6 months?
R v Odamo 2013 EWCA Crim 1275 D was convicted of conspiracy to defraud and pleaded to two
obtaining mortgages by deception counts. Because one of the mortgage offences was committed entirely
after the 2002 Act came into force, the prosecution chose to proceed for the confiscation procedure only
for that count. The offence was not listed in POCA 2002 Sch 2. D had made an application for the
mortgage in June 2006. £535,000 was paid into the conveyancer’s client account in July 2006. The Judge
found D had no gainful employment or legitimate source of income so D must have funded the
dishonestly obtained mortgage out of the proceeds of the conspiracy to fraud offence. Accordingly he
found the six-month requirement was made out. Held. The transfer occurred when the money was
received, applying Theft Act 1968 s 15(2). How the mortgage was serviced was not relevant. The lifestyle
provisions did not apply.
31.52b Step 7 Determining the benefit
Benefit figure must be proportionate
R v Jawad 2013 EWCA 644 D argued that his confiscation order was disproportionate in the light of R v
Waya 2012 UKSC 51 Held. para 21 R v Waya 2012 requires the court to consider whether a POCA
confiscation order is disproportionate. We are satisfied that it generally will be disproportionate if it will
require the defendant to pay for a second time money which he has fully restored to the loser. If there is
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html
no additional benefit beyond that sum, any POCA confiscation order is likely to be disproportionate. If
there is additional benefit, an order which double counts the sum which has been repaid is likely, to that
extent, to be disproportionate, and an order for the lesser sum which excludes the double counting ought
generally to be the right order. But, for the reasons explained, we do not agree that the mere fact that a
compensation order is made for an outstanding sum due to the loser, and thus that that money may be
restored, is enough to render disproportionate a POCA confiscation order which includes that sum. What
will bring disproportion is the certainty of double payment. If it remains uncertain whether the loser will
be repaid, a POCA confiscation order which includes the sum in question will not ordinarily be
disproportionate.
31.55d Step 7 Determining the benefit
Goods restored to the loser
R v Harvey 2013 EWCA Crim 1104 D pleaded to various handling and arson offences. D owned and
controlled a plant hire company, JHL. The police searched his property and found 39 stolen ‘items of
plant’. The total value of stolen goods was £314,700. The value of the plant recovered by police and
restored to the losers was £159,800. The defence argued this should be deducted from the benefit. Held.
While in D’s possession the stolen items had depreciated. R v Waya 2012 UKSC 51, 2013 2 Cr App R (S)
20 paras 28-29 did not deal with partial restoration. In fact the property appreciated in value. R v
Axworthy 2012 EWCA Crim 2889, R v Hursthouse 2013 EWCA Crim 517, and R v Jawad 2013 EWCA
Crim 644 (see 31.52b) dealt with full restoration. There is nothing in the wording of POCA 2002 which
requires the court to deduct the residual value of chattels after prolonged use. If a defendant steals or
otherwise unlawfully obtains someone else’s property and uses it for a number of years thereby materially
reducing its value, a confiscation order based upon the original value of that property without any
deduction is not disproportionate. The Judge was right not to deduct the residual value of the stolen plant
after its recovery by the police.
31.56a Step 7 Determining the benefit
VAT
R v Harvey 2013 EWCA Crim 1104 D pleaded to various handling and arson offences. D owned and
controlled a plant hire company, JHL. The police searched his property and found 39 stolen ‘items of
plant’. JHL received nearly £844,000 in VAT from their customers. Some of it was set off by the VAT
on purchases. £200,745 was paid to the Revenue. Held. We focus on money received not on how it was
spent. para 76 JHL was using the proceeds of criminal conduct to purchase goods and services. For the
amounts set off in the VAT, the result could be said to be disproportionate. para 53 R v James and
Blackburn 2011 EWCA Crim 2991, 2012 2 Cr App R (S) 44 (p 253) and R v Ahmad 2012 EWCA Crim
391 dealt with property not obtained as a result of the criminal conduct. We uphold the Judge’s decision.
31.57b
Step 7 Determining the benefit
Money launderers
R v Sander 2013 EWCA 690 D was convicted of assisting another to retain the benefit of criminal
conduct. He controlled the flow of money into an account, although the account was not in his name and
he did not pay the money in. The total was just over £6.95m. Defence counsel conceded that was the
benefit figure. On appeal another counsel asked to withdraw that concession, saying D would only have
received a small proportion of that figure. Held. The concession was properly made. He had obtained the
money because he controlled it.
31.55
Step 7 Tainted gifts
R v Smith 2013 EWCA Crim 502 D pleaded to dishonestly making false statements about housing benefit
and council tax benefit. She had savings meaning she was not entitled to benefit. The prosecution applied
for a benefit of the sum obtained less the amount paid back. In fact she had given money to her family.
The Judge found she had no assets. The Judge held that once items were considered to be tainted gifts
there was no need to investigate whether there was any prospect of them being recovered. Held. We agree
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html
with the Judge for two reasons. First, there is a specific statutory regime governing the valuation of
tainted gifts. There is nothing in section 81 which links the value of the gift to its recoverability, even
though it contemplates the situation where the recipient of the gift has parted with it. Second, the whole
point of including assets which a defendant has given away as one of the components in assessing the
amount which a defendant has available was to prevent a defendant dissipating his assets by giving them
away. If he is to be able to say that they are of no value because he cannot get them back, that would
defeat what the inclusion of tainted gifts in section 9(1) was seeking to achieve. Since you cannot sue the
recipient of a gift for its return, there may be many occasions when gifts cannot be recovered. It cannot
have been intended for those gifts which the recipient is prevailed upon to return to be included as part of
the offender's available assets, but not those which the recipient cannot be persuaded to give up.
31.56a Step 7 Determining the benefit
Conspiracies/Joint enterprises
Expenses
R v Mahmood 2013 EWCA Crim 325 D pleaded to a conspiracy to import heroin. D was placed in a
leading role. In confiscation proceedings, the Judge included the conspirator’s expenditure in the benefit
figure. Held. The joint liability of members of a conspiracy does not assist in identifying which member
of it may have incurred expenditure in the course of its operation. Nor does the statutory assumption in
section 10(4) help. It is an assumption about the source of expenditure, once it has been established that a
defendant incurred it. What is required is evidence about the identity of the particular member of the
conspiracy who actually incurred the expenditure. The section 10(4) assumption does not mean that,
unless he can prove otherwise, each conspirator is treated as having incurred all of the expenditure. It may
be that in the circumstances of a particular case the court can draw inferences that a particular member of
the conspiracy met an expense of its operation. In other, and perhaps many, cases, the natural inference
will be that the conspirators will have contributed equally to such expenses. But without a finding that the
defendant in question spent something, the section 10(4) assumption is not triggered. Here there was no
finding about the D’s expenditure, so the expenses cannot be attributed to him.
31.56c
Step 7 Determining the benefit
Corruption
R v Sale 2013 EWCA Crim 1306 D pleaded to corruption and fraud by false representation. D was the
managing director and sole shareholder of SS, a company that supplied Network Rail. He provided gifts
and hospitality to a Network Rail employee worth just under £7,000. D was given secret tender advice
and SS received about £1.9m worth of orders. A £60,000 invoice was paid twice. D was sentenced on the
basis that the work done by SS was ‘without criticism as to price or quality’. SS had a turnover of about
£9.9m and only in its work with Network Rail was SS dealing illegally. D’s benefit in apportioned salary
and dividends for Network Rail’s contracts was £125,000. SS’s gross profit before tax was nearly
£200,000. The Judge agreed to lift the corporate veil and found the benefit was £1.9m. Because of D’s
assets the order was made in that sum. Held. para 46 Prior to R v Waya 2012 there would have been no
fault in finding the benefit figure to be £1.9m. Since then any confiscation order to bear a proportionate
relationship to the purpose of the Proceeds of Crime Act, which is to recover the financial benefit which
an offender has obtained from his criminal conduct. Corruption of this nature clearly impacts on others.
The company obtained contracts with a client with whom it had had no previous business relationship.
Existing contractors with Network Rail were cheated out of the tendering process. The substantial market
in Network Rail contracts of this type was distorted, with the company gaining a market share to the
detriment of others. Tendering costs were avoided. para 56 Had this been an offence whose only criminal
effect was upon Network Rail which had been provided with value for money achieved by the
performance of a contract which required the company to expend monies in the ordinary course of
business, it would have seemed to us proportionate to limit the confiscation order to the profit made, and
to treat the full value given under the contract as analogous to full restoration to the loser. However, the
pecuniary advantage gained by obtaining market share, excluding competitors, and saving on the costs of
preparing proper tenders means a proportionate confiscation order would need to reflect those additional
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html
pecuniary advantages. An order for profit gained under these contracts, together with the value of
pecuniary advantage obtained, would represent a proportionate order which would avoid double counting.
There is no difficulty in attributing these items to D as proportionately representing his benefit since he
was the sole shareholder in the company. But we do not have the [information] to make a confiscation
order on this basis. There has been no analysis done in relation to pecuniary advantage. We are therefore
obliged to substitute the nearly £200,000 figure.
31.85a Appeals after a change in the case law
R v Jawad 2013 EWCA 644 D argued that his confiscation order was disproportionate in the light of R v
Waya 2012 UKSC 51 The Court considered the principles in granting leave out of time. Held. Obiter para
29 We should make clear the general approach of this court, over many years, to change of law cases. An
extension of time will not be granted routinely in such a case simply because the law has changed. It will
be granted only if substantial injustice would otherwise be done to the defendant, and the mere fact of
change of law does not ordinarily create such injustice. Nor is the case where an extension will be refused
limited to one where, if the law had been correctly understood at the time of the proceedings in the Crown
Court, a different charge or different procedure might well have left the defendant in a similar position to
that in which he now finds himself. The line of authority setting out this court’s approach culminates in R
v Cottrell and Fletcher 2007 EWCA Crim 2016; 2008 1 Cr App R 7 (p 107). The line of authority
includes similar pronouncements in R v Mitchell 1977 65 Cr App R 185, R v Ramsden 1972 Crim LR
547, R v Gosney 1971 55 Cr App R 502. (All conviction cases.) The Court [in R v Cottrell and Fletcher]
observed that alarming consequences would flow from permitting the general re-opening of old cases on
the ground that a decision of a court of authority had removed a widely held misconception as to the prior
state of the law on which the conviction which it was sought to appeal had been based. para 28 and 30
Here only an extension of a few days was required. In the event, D did not require an extension of time.
We doubt very much that, if an extension of time had been required in the present case, we should have
granted it.
para 31 The principle of finality that decisions made under the law as it was then understood should not
be disturbed unless substantial injustice would follow is well recognised and we must apply it. The
relevant date is the date of the confiscation order and not of the enforcement proceedings. Within the
criminal jurisdiction, the enforcement proceedings and their consequences are a relevant factor in a
consideration whether a substantial injustice might follow should an extension of time be refused. So also,
is the availability of an application to the Crown Court under section 23. In particular, where the
‘available amount’ is represented by the value of the very property which the tainted loans enabled the
applicant to acquire, it must follow that when at the enforcement stage it is known that the property is
subject to a charge in favour of the lender, that charge must be brought into account so as to reduce the
available amount if it has not already been considered. Equally, if the market value of the property has
decreased since the making of a confiscation order based on the market value of the property, section 23
would enable the Crown Court to reflect that fact. Where, however, as a result of an erroneous assessment
of benefit, a defendant has been required to meet a confiscation order from assets which can be clearly
demonstrated to be untainted, the availability of the section 23 application may not, in our view, act to
ameliorate the stringency of the principle.
See also: R v Bestel and Others 2013 EWCA Crim 1305 at 3.9.
31.85a
Appeal after a change in the case law
R v Chapman 2013 EWCA Crim 1370 The defence submitted their grounds of appeal. The Supreme
Court then gave its judgment in R v Waya 2012 UKSC 51. The defence then sought to amend their
grounds. It was agreed that applying the principles of R v Waya 2012 the benefit should have been just
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html
over £1,557,800 and not nearly £2,535,400 as the Judge found. The prosecution opposed the appeal
because of the need for finality and the fact even if the benefit figure was reduced it would have no effect
on the actual confiscation amount which was just over £152,100. Held. None of the original grounds had
merit but the appeal notice was within the prescribed time. para 24 A distinction has to be drawn between
that and where a notice was not filed in time. There is a public interest in not allowing final decisions to
be re-opened, except where necessary to avoid substantial injustice. Once an appeal has been constituted,
however, either by filing a notice of appeal in time or by obtaining an extension of time from the court,
the order of the court below, although not formally provisional, is subject to review. In practical terms it
is not final and there is no comparable public interest refusing to re-open it, since that is the very purpose
of the appeal procedure. For the court to refuse to allow an appellant to take advantage of a change in the
law occurring between the date of the order below and the filing of the notice of appeal would be
inconsistent with the appeal process; but if that is so, it is difficult to see how it could justify refusing to
allow him to take advantage of a change in the law occurring between the filing of the notice of appeal
and the hearing itself. This approach is borne out by the observations of the court in R v Jawad 2013.
Here the principle of finality did not apply. We therefore substitute the correct benefit figure.
31.87
Appeals
Defendant claims agreed asset figure(s) are wrong
R v Yew 2013 EWCA Crim 809 D contested his confiscation order. The defence provided a copy of the
Land Registry’s copy of title which showed the registered owners of a property were D and his wife. Both
counsel agreed the value of a property without considering D’s wife’s interest. D appealed and D’s
solicitor said that was a mistake on their part. The prosecution conceded the interest should have been
taken into account. Held. We reduce the value of the property.
31.87a
Appeals
Conflict between Crown Court and High Court
R v Hackett 2013 EWCA Crim 1273 D pleaded guilty to two counts of duty evasion. In confiscation
proceedings, the Judge found that there were further trips to France to avoid duty. She made a
confiscation order for just over £645,000. D appealed and his appeal was dismissed. The prosecutor
applied for a receiver to be appointed. The Judge heard new evidence and the prosecution conceded that
records were kept of journeys across the Channel and there was no evidence to support the Judge’s
assertion. The application was dismissed with costs. With consent the High Court issued a certificate of
inadequacy and the realisable property was assessed at £425,0002. Meanwhile D had paid over £½m. He
could not recover the overpayment from the Crown Court. The CCRC referred the case to the Court of
Appeal. Held. The conflict between the two courts cannot be allowed to persist. We allow the appeal. We
give 28 days for the parties to agree the true figure.
2 The figure in the judgment is £425,50.57 which is clearly a typo. Further to make any sense the benefit not the
realisable property would have needed to be re-assessed. Ed.
Copyright November2013 No 1
Banks on Sentence www.banksr.com
For more detail see http://www.banksr.co.uk/copyright-terms-cms-113.html