R v May [2008] UKHL 28, [2008] All ER (D) 169 (May)
House of Lords
Lord Bingham, Lord Phillips, Baroness Hale, Lord Carswell and Lord Brown
14 May 2008
A defendant, who jointly with others is found to have obtained a benefit from his offending, should ordinaryily have a confiscation order made against him for the total amount found to have been fraudulently obtained, provided he has realisable assets equal to or in excess of that amount.
Andrew Campbel-Tiech QC and Gavin Irwin (instructed by Pattichi Hill & Croques) for the defendant.
Oliver Sells QC and Ivan Pearce (instructed by the Revenue Customs and Prosecutions Office) for the prosecution.
The defendant participated in a “carousel” fraud involving the wrongful withholding and reclaiming of value added tax from HM Revenue & Customs (HMRC). He pleaded guilty to a count of conspiracy to cheat. The judge found him to be a joint principal behind the fraud. He held that where several defendants were jointly responsible for a fraud, and the property was jointly held by them, each benefited in the amount jointly held and there was no requirement to apportion the amount between them.
The Court of Appeal upheld that ruling. It attached importance to the finding that the companies defrauding HMRC were jointly controlled by a group of people including the defendant. It was of the opinion that once the corporate veil had been pierced, the property in question was to be regarded as the joint property of those controlling the company. It determined that it was analogous to the situation where conspirators had put the proceeds of the fraud straight into their joint bank account.
The defendant appealed to the House of Lords. He submitted that the confiscation regime was intended to strip wrongdoers of their ill-gotten gains but not to deprive them of that which they had never had; to permit recovery of the same sum against different defendants or to permit recovery of a sum exceeding what the victim had lost, therefore, the overall loss should be apportioned among those held to be jointly liable. The Crown, relying on ss 1 and 2 of the Drug Trafficking Offences Act 1986, s 71 of the Criminal Justice Act 1988, ss 2 and 4 of the Drug Trafficking Act 1994, and ss 6 and 76 of the Proceeds of Crime Act 2002, contended that the legislation laid down a mandatory regime and there was no warrant in any of the statutes for apportioning liability to pay among those who had benefited jointly.
LORD BINGHAM (GIVING THE OPINION OF THE HOUSE OF LORDS):
The sum which the defendant, jointly with others, was found to have fraudulently obtained from HMRC was, in law, as much his as if he had acted alone. That conclusion led ineluctably to the further conclusions that he benefited from his offending. The order made was less than his realisable assets. It was entirely consistent with the legitimate objects of the legislation, and it required, that he be ordered to pay such sum, which involved no injustice or lack of proportionality. The legislation was a precise, fair and proportionate response to the important need to protect the public. The court did not have power to apportion liability between parties jointly liable, a procedure which would be contrary to principle and unauthorised by statute. The appeal would therefore be dismissed.
Broad principles
The committee concluded by listing the broad principles to be followed in confiscation cases.
(i) The legislation was intended to deprive defendants of the benefit they had gained from relevant criminal conduct, whether or not they had retained such benefit, within the limits of their available means. It did not provide for confiscation in the sense understood by schoolchildren and others, but nor did it operate by way of fine. The benefit gained was the total value of the property or advantage obtained, not the defendant’s net profit after deduction of expenses or any amounts payable to coconspirators.
(ii) The court should proceed by asking the three questions: (a) whether or not the defendant had benefited from relevant criminal conduct; (b) if so, what was the value of the benefit the defendant had so obtained; and (c) what sum was recoverable from the defendant? Where issues of criminal life style arose the questions had to be modified. Those were separate questions calling for separate answers.
(iii) In addressing those questions the court first had to establish the facts as best it could on the material available, relying as appropriate on the statutory assumptions. In very many cases the factual findings made would be decisive.
(iv) In addressing the questions the court should focus very closely on the language of the statutory provision in question in the context of the statute and in the light of any statutory definition. The language used was not arcane or obscure and any judicial gloss or exegesis should be viewed with caution. Guidance should ordinarily be sought in the statutory language rather than in the proliferating case law.
(v) In determining whether or not the defendant had obtained property or a pecuniary advantage and, if so, the value of any property or advantage so obtained, the court should (subject to any relevant statutory definition) apply ordinary common law principles to the facts as found. The exercise of the jurisdiction involved no departure from familiar rules governing entitlement and ownership. While the answering of the third question called for inquiry into the financial resources of the defendant at the date of the determination, the answering of the first two questions plainly called for a historical inquiry into past transactions.
(vi) A defendant ordinarily obtained property if in law he owned it, whether alone or jointly, which would ordinarily connote a power of disposition or control, as where a person directed a payment or conveyance of property to someone else. He ordinarily obtained a pecuniary advantage if (among other things) he evaded a liability to which he was personally subject. Mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, were unlikely to be found to have obtained that property. It might be otherwise with money launderers.
