R v Carl Rigby and Gareth Scott Bailey
| Jurisdiction | England & Wales |
| Judge | Lord Justice May,LORD JUSTICE MAY |
| Judgment Date | 12 July 2006 |
| Neutral Citation | [2006] EWCA Crim 1653 |
| Court | Court of Appeal (Criminal Division) |
| Date | 12 July 2006 |
| Docket Number | Case No: 2005/06328B3 and 2005/06605B3 |
[2006] EWCA Crim 1653
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL CRIMINAL(CRIMINAL DIVISION)
ON APPEAL FROM SOUTHWARK CROWN COURT
HIS HONOUR JUDGE ELWEN
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice May
The Hon. Mrs Justice Rafferty Dbe and
His Honour Judge Diehl Qc
Case No: 2005/06328B3 and 2005/06605B3
T20047093
P Hackett QC & Mr M Milliken-Smith appeared on behalf of RIGBY
A Cameron QC & Miss B Petherbridge appeared on behalf of BAILEY
A Mitchell QC and I Pearce and
Miss S George appeared on behalf of THE FINANCIAL SERVICES AUTHORITY
Introduction
This appeal concerns confiscation orders made in criminal proceedings under Part VI of the Criminal Justice Act 1988. It raises two difficult points on the construction and application of section 71 of that Act and, if Gareth Bailey's appeal fails on the one of these points which applies to him, another difficult point about the relationship between confiscation orders and compensation orders.
Facts
AIT Limited was in 2002 a company, listed on the London Stock Exchange, which developed, supplied and maintained software programmes for financial businesses. Carl Rigby was its Chairman and Chief Executive Officer; Gareth Bailey its Chief Financial Officer. In the spring of 2002, the company had cash flow problems because, we are told, it had bought an American company expected to produce cash, which had in fact proved to be a drain on the company's cash.
On 2 nd May 2002, AIT issued a trading statement which represented that its turnover and profit were going to be in line with what the market expected, in that the turnover would be in the order of �47m. and the profit �6.7m. The statement was false and misleading because it took account of revenue and profit from three putative contracts which between them contributed �4.8m. to the predicted profit. These contracts had not been entered into so as to bind the other contracting party, and their revenue and profit should not have been taken into account. The appellants accepted this. What is more, side letters were written to each of the three putative contracting parties relieving them from any obligation to proceed with the contracts. The existence of these letters was suppressed, and both appellants assured the AIT Board that these contracts had been entered into. So the market, the Board and the Company's auditors were misled. The auditors' advice that further written documentation should be obtained was not immediately disclosed to the Board.
Following the 2 nd May 2002 statement, AIT's share price rose so that the value of Rigby's own shareholding increased by �228,546. He did not realise or otherwise benefit from this temporary increase in value. It was during a period when by Stock Exchange rules he was unable to sell his shares.
It soon became clear that the putative contracts were illusory. On 31 st May 2002, a corrective announcement was made for one of them; and a similar announcement was made for the second on 13 th June 2002. Upon each of these announcements, the share price fell dramatically. Following these announcements, the company was forced by its bankers, Royal Bank of Scotland, to restructure and seek refinancing. A new Board formally took over on 12 th September 2002. Nicholas Randall became Chief Executive Officer. He and the new CFO had needed help from the appellants in restructuring the company. Gareth Bailey continued to be employed and paid by the company until 12 th September 2002 and Carl Rigby continued as a consultant into 2003. They worked hard for the company during this period.
The criminal proceedings
On 16 th August 2005, in the Crown Court at Southwark before HH Judge Elwen and a jury, the appellants were convicted on count 2 of an indictment of recklessly making a statement, promise or forecast which was misleading, false or deceptive in a material particular contrary to section 397(1)(c) of the Financial Services and Markets Act 2000. The subject matter of the charge was the trading statement of 2 nd May 2002. Bailey was acquitted of a count which alleged that he knew that the statement was misleading, false or deceptive, and a not guilty verdict was entered by direction on a conspiracy count. Another conspiracy count was left on the file. For Rigby, the charge alleging knowledge and the two conspiracy charges were left on the file.
The appellants were each sentenced to terms of imprisonment reduced on appeal to this court to 18 months' imprisonment for Rigby and 9 months' imprisonment for Bailey.
There were confiscation proceedings and compensation orders. On 11 th November 2005, the judge made a confiscation order for Rigby of �381,272.97, and a compensation order of �208,796, with an order to pay �250,000 towards the prosecution costs. For Bailey, the judge ordered confiscation of �106,572.53 and compensation of �141,686. This amount of compensation comprised the �106,572 from the confiscation order and an additional �35,114 of Bailey's realisable assets excluding any value of his matrimonial home.
The appeals
Each of the appellants appeals against the confiscation orders, and Bailey appeals contingently against the compensation order by leave of the single judge. Each appellant contends that the judge was wrong to take account of their salary and other emoluments which they earned from AIT after 2 nd May 2002 as a benefit from the offence of which they were convicted. Rigby contends that the judge was wrong to take account of the �228,546 temporary and unrealised increase in the value of his shareholding as a benefit.
Part VI of the 1988 Act provides for confiscation of the proceeds of an offence. By section 71(1A), where an offender is convicted of an offence of a relevant description and section 71(1) applies, the court has first to determine whether the offender has benefited from an offence of which he is convicted in the same proceedings or from offences taken into consideration. By section 71(4), "a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained." By section 71(5), "where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence", he is treated as if he had obtained thereby "a sum of money equal to the pecuniary advantage". By section 102(5) of the Act, "references � to property obtained, or to a pecuniary advantage derived, in connection with the commission of an offence include a reference to the property obtained, or to a pecuniary advantage derived, both in that connection and in some other connection".
Having determined the amount of the offender's benefit, the court then has to determine the amount that might be realised at the time the order is made, and must make a confiscation order for the lesser of these two amounts. The standard of proof is that applicable in civil proceedings. Section 72(7) is particularly relevant to compensation orders.
It is obvious that Rigby did not, according to normal understanding, benefit from the offence of which he was convicted in the amount of the temporary unrealised increase in the value of his shareholding. The first issue in this appeal is whether this was nevertheless under section 71(5) a pecuniary advantage which he derived. The second issue is whether the amounts of each appellants' salary and other emoluments from their continued employment after 2 nd May 2002 were obtained by them "as a result of or in connection with" the commission of the offence of which they were convicted.
The judge's decision
It was absolutely plain to the judge, "taking the wide definition of property in section 102 of the Act and the decision of the House of Lords in R v Smith [2002] 1 WLR 54, that the unrealisable increase in the value of the shares in AIT held by Mr Rigby on 2 nd May was obtained and a benefit for the purpose of the statute."
As to the salaries and other emoluments, the judge accepted that the appellants provided very valuable assistance to Mr Randall and his co-investors. But that did not break the connection which was equally plain between the offence and the wages. It was only necessary for the Financial Services Authority to have proved on the balance of probabilities the slightest connection between the offence and the wages, and this they had clearly done. Explaining himself subsequently, the judge said that, as a result of the offence, the company needed restructuring and/or refinancing. In order to do that successfully, the new management needed the knowledge and expertise of the appellants. Thus however slightly, the wages were a benefit obtained in connection with the offence.
In R v Smith (David) [2002] 1 C.A.R. 466; [2001] UKHL 68, to which the judge referred, an offender fraudulently imported cigarettes by sea, sailing past customs houses at Immingham and Hull without paying excise duty. Customs officers found the cigarettes at Goole, and they and the boat were forfeited before the cigarettes were sold. The House of Lords, reversing this court, upheld the making of a confiscation order in the amount of the duty evaded. The respondent had derived a pecuniary advantage as a result of or in connection with the commission of the offence. Lord Rodger of Earlsferry, giving the judgment of the House, adopted the view of Laws LJ in R v Dimsey and Allen [2000] 1 Cr. App. R. (S) 497 that the ordinary and natural meaning of pecuniary advantage must surely include the case where a...
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