CONFISCATION NO 2
Volume 1
22.46
Companies
Evidence
Piercing/lifting the corporate veil
R v Powell and Westwood 2016 EWCA Crim 1043 P was convicted of environmental permit offences and
a waste disposal offence. W pleaded to counts that mirrored P’s counts. The Judge refused to lift the
corporate veil and the prosecution appealed. Held. para 27 P and W were both well aware of the failure to
comply with regulations at the material time and that the reason for non-compliance was out of a desire to
increase the company’s profitability. But it is important, in looking at the nature of the criminality to note
here that there was no facade or concealment for hiding behind the company’s structure in a way which
abused the corporate shield. Unlike the situation, in Jennings v CPS 2008 UKHL 29, this was not a company
being run for an unlawful purpose but rather was a legitimate business which had broken the criminal law
through its failure to observe the necessary regulations. P and W’s liability depended on consent,
connivance or neglect in relation to the company’s failures. P and W were not the sole shareholders. Appeal
dismissed.
22.51
Step 4 Is the offence specified in Schedule 2?
Footnote 317 Replace ‘Commencement is awaited’ with ‘In force 26 May 2016, Psychoactive Substances
Act 2016 (Commencement) Regulations 2016 2016/553 para 2’.
22.82
Step 7 Determining the benefit
Assets seized
R v Brooks 2016 EWCA Crim 44 D was convicted of conspiracy to import drugs. He was the organiser of
boats that would transport drugs from South America to the UK. The Irish navy seized a yacht with 1,504
kilos of cannabis near the Irish coast. In confiscation proceedings, the Judge included the value of the drugs
(worth about £3m) in the benefit figure. Held. para 19 The fact the drugs were seized does not and cannot
take the value of the drugs outside the benefit figure. Finding upheld.
22.86a Determining the benefit
Directors of companies
R v Powell and Westwood 2016 EWCA Crim 1043 P was convicted of environmental permit offences and
a waste disposal offence. W pleaded to counts that mirrored P’s counts. Both were directors and
shareholders of the offending company. Both were involved in the management and finances of the
offending site. The clean-up costs paid by MoD and the public purse were about £1.125m. The prosecution
said that by abandoning the site P and W had avoided the costs of a clean-up and therefore had a pecuniary
advantage. The Judge made a limited confiscation order. The Judge had refused to lift the corporate veil
and the prosecution appealed. Held. para 27 P and W were both well aware of the failure to comply with
regulations at the material time and that the reason for non-compliance was out of a desire to increase the
company’s profitability. But it is important, in looking at the nature of the criminality to note here that there
was no facade or concealment for hiding behind the company’s structure in a way which abused the
corporate shield. Unlike the situation, in Jennings v CPS 2008 UKHL 29, this was not a company being run
for an unlawful purpose but rather was a legitimate business which had broken the criminal law through its
failure to observe the necessary regulations. P and W’s liability depended on consent, connivance or neglect
in relation to the company’s failures. P and W were not the sole shareholders. para 29 There needs to be a
legal right against the person controlling the company which exists independently of the company’s
involvement. We find it hard to identify [any] legal right, liability, obligation or restriction for P or W which
existed independently of the company. It was the company which had incurred obligations to comply with
the relevant environmental laws by obtaining the permit. The prosecution’s approach would risk making
every company director liable in the confiscation proceedings whenever a company broke the criminal law.
para 31 As Prest v Petrodel Resources and Others 2013 UKSC 34, para 35 makes plain, the court is
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concerned with abuse of the corporate veil to evade or frustrate the law. The facts point away from showing
that this is the sort of case in which a benefit obtained by a company should be treated as a benefit obtained
by the individual criminal. para 34 Neither P or W had a personal liability for the costs of cleaning up the
company’s polluted site.
22.94
Step 7 Determining the benefit
Drugs, Unlawful
R v Brooks 2016 EWCA Crim 44 D was convicted of conspiracy to import drugs. He was the organiser of
the boats that would transport drugs from South America to the UK. The Irish navy seized a yacht with
1,504 kilos of cannabis near the Irish coast. In confiscation proceedings, the Judge included the value of
the drugs (worth about £3m) in the benefit figure. The Judge found that D had contributed to the purchase
of the drugs. On appeal, the prosecution accepted that they had never contended that D had purchased the
drugs. Held. para 17 It is clear that the word ‘obtain’ [in Proceeds of Crime Act 2002 s 76(4)] is to be given
a broad, normal meaning, in which the role of a particular conspirator may be relevant. On the basis of the
extensive role of D in the drugs conspiracy and, in particular, his central involvement in the transportation
and proposed delivery of the drugs with significant managerial and operational control over the exercise,
[means] D ‘obtained criminal property’ and thus has benefited from his criminal conduct in respect of the
drugs. para 16 There was ample evidence of that, even if he had not contributed to their purchase. para 19
Once property has been obtained as a result of or in connection with crime, it remains the defendant’s
benefit whether or not he retains it. This is inherent in the value based scheme for post-conviction
confiscation, see R v Waya 2012 UKSC 51, 2013 2 Cr App R (S) 20 (p 87) para 55 a). para 19 The fact the
drugs were seized does not and cannot operate so as to take the value of the drugs outside the benefit figure.
22.108 The available amount Step 8 Tainted gifts when considering the recoverable amount
R v Johnson 2016 EWCA Crim 10 para 2 D pleaded guilty to 16 counts of fraud. She was given a Suspended
Sentence Order. The Judge found the benefit to be £45,000 and accepted D’s affidavit which said she had
sold her property to her daughter for £140,000 but gifted her £20,000 in the conveyance. That was taken to
mean the property was worth £140,000 and there was a gift of £20,000 to the daughter. At the date of the
hearing the gift was valued at £0. There were no other assets. The Judge made a finding that it was a tainted
gift and she made a confiscation order for £20,000. The Judge ordered any money collected to be paid to
the victim. The money was not paid and D applied for a variation order. The application was refused. D
then appealed the order out of time. D was sent to prison in default. The defence argued the order was
unjust. Held. Although there can be no appeal against the variation we consider the Judge was right to
refuse the application. We are not asked to determine the issue about the compensation order so we don’t.
para 31 A judge should consider the following when considering a tainted gift which is worthless.
i) The robustness of the evidence of the value of the tainted gift.
ii) The proportionality of making an order in the sum sought. This requires the court to appreciate the
distinction between this exercise and the exercise of a general discretion to avoid hardship, applying R v
Waya 2012 UKSC 51, 2013 2 Cr App R (S) 20 (p 87) para 20-21, summarised in part at 22.102.
iii) The appropriate term of imprisonment to be imposed in default. The stipulated scale provides for
maximum sentences relating to various amounts payable under the order. Although there is an obligation
to impose a term of imprisonment in default when making a confiscation order ( Powers of Criminal Courts
(Sentencing) Act 2000 s 139(2)), the court is required to consider all of the circumstances of the case when
doing so in accordance with R v Castillo 2011 EWCA Crim 3173. There is no minimum term which must be
imposed. The purpose of the term is enforcement not further punishment, and where the court is
affirmatively satisfied that enforcement is impossible that may be a reason to make a substantial reduction
in the term imposed in default. This will inevitably be a wholly exceptional course because the court will
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usually have limited confidence that an asset which has been apparently given away cannot be recovered
by the offender or that the offender cannot satisfy the order by other means.
The Judge’s decision was not wrong. Had she conducted a proportionality exercise considering R v Waya
2012 UKSC 51, 2013 2 Cr App R (S) 20 (p 87) (see 22.102), R v Jawad 2013 EWCA Crim 644, 2014 1 Cr App R
(S) 16 (p 85) (see 22.77) and R v Harvey 2015 UKSC 73, 2016 1 Cr App R (S) 60 (p 406) (see 22.87) she would
have come to the same decision. Appeal dismissed.
22.126 Step 8 The available amount Hidden assets
R v Brooks 2016 EWCA Crim 44 D was convicted of conspiracy to import drugs. He was the organiser of
the boats that would transport drugs from South America to the UK. The Irish navy seized a yacht with
1,504 kilos of cannabis near the Irish coast. In confiscation proceedings, the Judge included in the benefit
the value of the drugs (worth about £3m), the value of a villa and other property which came to just over
£3.6m. The Judge repeatedly noticed the absence of documentary evidence to support D’s claims and
considered D avoided leaving a financial trail for his dealings. He also found D led a cash lifestyle with
purchases of cars, property in Thailand, boats, expensive watches and stays at expensive hotels. From that
he inferred that D had significant amounts of cash available to him. The only identifiable assets were a
share in a Spanish villa worth just less than £300,000, and premium bonds and other small items totalling
£1,400. The Judge found D had not disclosed his assets and had failed to discharge the burden of showing
his assets were less than the benefit. He then held the recoverable amount was the same as the benefit at
just over £3.6m. Held. para 24 R v McIntosh and Marsden 2011 [provides] the correct approach. It was
wrong for the Judge to make a leap from rejecting D’s account as to his assets to concluding necessarily
that the available amount should equate to the amount of benefit. Where the drugs had been seized the judge
should have looked for evidence to show that D had available assets. However, the Judge could conclude
that there were hidden assets. After rejecting the D’s evidence, the judge was entitled to take a broad brush
approach. There was evidence of an affluent lifestyle which could have justified a finding of hidden assets,
but the Judge had failed to assess the matter on the whole of the evidence which had led to an overstatement
of an appropriate benefit1 figure. para 27 In R v Thacker 1995 16 Cr App R (S) 461 the Court held that
where drugs had been seized from a defendant by Customs and Excise they were not property held by a
defendant for the purposes of calculating the recoverable amount. In R v Islam 2009 UKHL 30, 2010 1 Cr
App R (S) 42 (p 245) the House of Lords made plain at paras 34, 37 and 44, that a clear distinction was to
be drawn between the assessment of value for the purpose of calculating benefit and the assessment of value
for the purpose of calculating the available or recoverable amount. para 28 More recently this court in R v
Kakkad 2015 EWCA Crim 385 said at para 32 “Self-evidently, property seized and forfeited would no
longer be part of the available amount. Its value would not be part of all the free property held by the
appellant, as was pointed out in R v Islam 2009.”
para 29 We note that at para 34 of R v Islam 2009, it was said that where HMRC have seized goods,
forfeiture is automatic, and in that case the goods will no longer be property held by the defendant at the
time of a confiscation order. [Further] that in other cases the confiscation order would precede any order
for forfeiture under the Misuse of Drugs Act so that the drugs would continue in law to be ‘free property
then held by the defendant’ at the time of the confiscation order, even though physically in the possession
of the authorities and destined to be the subject of a forfeiture order. Here the drugs were seized by the Irish
Navy and thus do not fall within the first part of these comments. However, the situation does not cause
difficulty since, as was pointed out, in such circumstances it would be impossible to regard the drugs as
having any market value for the purpose of assessing the available amount. They would not ever be bought
or sold on any market, legal or otherwise.
1 I think the Court meant recoverable amount not benefit. Ed.
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para 30 The Judge moved too precipitately from a rejection of D’s evidence to including the value of the
drugs in the available amount. para 41 We accept the Judge’s finding about D’s cash lifestyle. We take the
tainted gifts for the mortgage payments on the Spanish property (£135,000), the cash and consider the fair
and proportionate recoverable amount is £0.5m.
22.146 Appeals
Fresh evidence
R v Kelly 2016 EWCA Crim 1505 D appealed his confiscation order and sought to admit in evidence some
bank statements and some information about loans. The defence contended the material was not fresh
evidence. Held. An application to admit the evidence was necessary. The Court may admit evidence if it
thinks it is necessary or expedient in the interests of justice to admit it. It wasn’t either here. The documents
were not sent to the Court or the prosecution until last week. The prosecution has had no opportunity to
consider them properly. It would not be proper to adjourn the matter. Application refused. Appeal
dismissed.
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