R v Raymond George May

JurisdictionEngland & Wales
CourtHouse of Lords
Judgment Date14 May 2008
Neutral Citation[2008] UKHL 28

[2008] UKHL 28

HOUSE OF LORDS

R
and
May
(Appellant)(On Appeal from the Court of Appeal (Criminal Division))

Appellants:

Andrew Campbel-Tiech QC

Gavin Irwin

(Instructed by Pattichi Hill & Croques)

Respondent:

Oliver Sells QC

Ivan Pearce

(Instructed by Revenue and Customs Prosecutions Office)

Ordered to Report

The Committee (Lord Bingham of Cornhill, Lord Phillips of Worth Matravers, Baroness Hale of Richmond, Lord Carswell, and Lord Brown of Eaton-under-Heywood) have met and considered the cause R v May. We have heard counsel on behalf of the appellant and respondent.

1

This is the considered opinion of the Committee.

2

This is the first of a trilogy of appeals relating to the confiscation of criminal assets. They raise important questions on the interpretation and application of the statutes which, at the relevant times, governed this matter. To avoid unnecessary repetition the committee will, in this opinion, give a broad overview of the legislative schemes in force from time to time, and review a number of the leading authorities. Much of this material is relevant, and will be the subject of cross-reference, in the succeeding appeals, Crown Prosecution Service v Jennings [2008] UKHL 29 and R v Green [2008] UKHL 30. This opinion addresses only the case of this appellant, Mr May.

The Facts

3

On 24 September 2001 in the Central Criminal Court before Judge Samuels QC, the appellant pleaded guilty to a count of conspiracy to cheat contrary to section 1(1) of the Criminal Law Act 1977. On 3 October 2001 he was sentenced to five years' imprisonment. On 2 August 2002 a confiscation order was made against him in the sum of £3,264,277 with six years' imprisonment in default of payment under the Criminal Justice Act 1988 as amended. On 28 January 2005 the Court of Appeal [2005] 1 WLR 2902 (Keene LJ, Hodge J and Judge Jones QC) allowed his appeal against sentence to the extent of substituting for the original sentence of five years' a sentence of four years' imprisonment; his appeal against the confiscation order was dismissed, and is the subject of this appeal.

4

The conspiracy involved the wrongful withholding and reclaiming of VAT from HM Customs & Excise, resulting in a loss to public funds of around £11m. There were a number of other conspirators, some before the court, some not. Limited companies had been incorporated solely for the purpose of dishonestly retaining and reclaiming the VAT on sales of high value computer processing units ("CPUs"). Between February 1999 and September 2000 four such companies in turn imported CPUs from the European Union, no VAT being payable on importation. The goods were then sold on to a trader in the UK, thereby attracting a liability to VAT at the standard rate of 17.5%. The UK trader (also party to the fraud and commonly known as the "buffer company") ostensibly paid the purchase price plus VAT for the goods. The dishonest import company (commonly known as the "missing trader"), however, instead of accounting for the VAT received, retained it and then disappeared as a trading entity before enforcement action could be taken. The UK trader would then export the same goods (another zero-rated supply) back to the dishonest foreign supplier and itself reclaim the VAT which it had ostensibly paid to the importing company. This practice, with each importing company disappearing after a short trading life, is known as a "missing trader" or "carousel" fraud. It is a prevalent form of fraud, causing (the committee was told) very large losses to public funds. There were four phases of this conspiracy, referable to each of the four successive missing trader companies.

5

The appellant himself joined the conspiracy about halfway through and was involved only with the last two phases. With regard to these phases, however, he was found to be a joint principal, indeed the driving force, behind the fraud.

6

The VAT unaccounted for during phases 3 and 4 totalled £4,439,533. In determining the extent of the appellant's benefit, however, the judge subtracted from that figure sums amounting to £1,175,256 in respect of monies recovered from the missing traders' bank accounts and the proceeds of sale of a number of CPUs by the court-appointed receiver, leaving a net figure of £3,264,277. (It is now common ground that the judge erred in reducing the benefit figure in this way: he was confusing benefit with realisable assets.) The judge valued the appellant's realisable assets at £3,887,198, an amount exceeding the benefit figure. He accordingly made the confiscation order in the full sum of £3,264,277.

Background

7

In R v Cuthbertson [1981] AC 470 the House held, with an expression of "considerable regret" (p 479), that the power of forfeiture and destruction conferred on the court by section 27 of the Misuse of Drugs Act 1971 did not provide a means of stripping professional drug-traffickers of the whole of their ill-gotten gains or the total profits of their unlawful enterprises. This decision prompted the establishment of a committee under the chairmanship of the Hon Mr Justice Hodgson to assess how far the powers of criminal courts met the need to strip offenders of their ill-gotten gains. In its report on "The Profits of Crime and their Recovery" published in 1984 the committee considered (pp 8, 11) means of depriving offenders of the fruits of crime and of seeking to ensure that crime did not pay. The committee's objective was to restore the status quo before an offence had been committed and recommended that the courts should have power to make confiscation orders, but recommended that only the net profits of offending should be confiscated (pp 74-75, and p 151, recommendation 12).

8

Full legislative effect was not given to the committee's recommendations on confiscation, but the report led to the enactment of a series of statutes directed to confiscation of the proceeds of criminal offending. The series began with the Drug Trafficking Offences Act 1986, and there followed (among the more important statutes) the Criminal Justice Act 1988, the Criminal Justice (International Co-operation) Act 1990, the Criminal Justice Act 1993, the Drug Trafficking Act 1994, the Proceeds of Crime Act 1995 and the Proceeds of Crime Act 2002. In these statutes the original confiscation regime established by the 1986 Act was modified, extended, elaborated and tightened, and effect was given to the obligations of the United Kingdom under the Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) and the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime (1991). But despite much refinement and differences between the 1986 and 1994 Acts on the one hand and the 1988, 1993 and 1995 Acts on the other, the essential structure of the 1986 regime has been retained. It requires the court, before making a confiscation order, to address and answer three questions: see R v Johnson [1991] 2 QB 249, 252-255; R v Dickens [1990] 2 QB 102, 105-106. The first question is: has the defendant (D) benefited from the relevant criminal conduct? If the answer to that question is negative, the inquiry ends. If the answer is positive, the second question is: what is the value of the benefit D has so obtained? The third question is: what sum is recoverable from D? In some cases (such as R v Chrastny (No 2) [1991] 1 WLR 1385, R v Walls [2003] 1 WLR 731 and R v Ahmed [2005] 1 WLR 122) there may be no dispute how one or more of these questions should be answered, but the questions are distinct and the answer given to one does not determine the answer to be given to another. The questions and answers should not be elided.

9

Although "confiscation" is the name ordinarily given to this process, it is not confiscation in the sense in which schoolchildren and others understand it. A criminal caught in possession of criminally-acquired assets will, it is true, suffer their seizure by the state. Where, however, a criminal has benefited financially from crime but no longer possesses the specific fruits of his crime, he will be deprived of assets of equivalent value, if he has them. The object is to deprive him, directly or indirectly, of what he has gained. "Confiscation" is, as Lord Hobhouse of Woodborough observed in In re Norris [2001] UKHL 34, [2001] 1 WLR 1388, para 12, a misnomer.

The first question: benefit

10

Section 1(2) of the 1986 Act required the court first to determine whether D had benefited from drug trafficking, to which alone the Act was directed, and it was provided (section 1(3)) that for the purposes of the Act a person who had at any time "received any payment or other reward in connection with drug trafficking carried on by him or another" had benefited from drug trafficking. Any payments or other rewards received at any time in connection with drug trafficking were his proceeds of drug trafficking (section 2(1)(a)), and for the purpose of determining whether he had benefited the court was entitled, but not bound, to make certain assumptions about (among other things) the source of his property and expenditure (section 2(2),(3)) save to the extent that such assumptions were shown to be incorrect in the defendant's case.

11

Part VI of the Criminal Justice Act 1988, applicable to crimes other than drug trafficking, empowered the courts to make confiscation orders requiring the defendant to pay such sum as the court thought fit if satisfied that a defendant had benefited from an offence or offences in at least a minimum amount (section 71(1),(2),(3)). He had benefited (section 71(4)) if he had obtained property as a result of or in connection with the commission of the offence or offences, and if (section 71(5)) he had derived a pecuniary advantage as a result of the offending he was...

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