R v Neuberg (Karen Jayne)
| Jurisdiction | England & Wales |
| Judge | LADY JUSTICE HALLETT,LORD JUSTICE LEVESON,Mr Justice Elias,MR JUSTICE ELIAS |
| Judgment Date | 13 July 2007 |
| Neutral Citation | [2007] EWCA Crim 1994,[2007] EWCA Crim 761 |
| Docket Number | No: 2006/3354/D1,No. 2006/03354/D1 |
| Court | Court of Appeal (Criminal Division) |
| Date | 13 July 2007 |
[2007] EWCA Crim 1994
IN THE COURT OF APPEAL CRIMINAL DIVISION
Royal Courts of Justice
The Strand
London
WC2A 2LL
Lord Justice Leveson
Mr Justice Elias and
Mr Justice Griffith Williams
No. 2006/03354/D1
MR CHRISTOPHER HOTTEN QC appeared on behalf of THE APPELLANT
MR SIMON DAVIS appeared on behalf of THE CROWN
Friday 13 July 2007
I will ask Mr Justice Elias to give the judgment of the court.
Introduction
On 12 November 2004, at the Crown Court at Birmingham, before His Honour Judge Ross, the appellant appeared together with her husband Clive Neuberg. He was charged with taking part in the management of Watergate Services Limited when an undischarged bankrupt. The appellant was jointly indicted with aiding and abetting that offence. He pleaded guilty; she pleaded not guilty. On a second count the appellant was charged with trading under a prohibited style, namely Neuberg Metal Spinners, without the leave of the court, between 19 November 2001 and 14 June 2002, contrary to the Insolvency Act 1986. Her husband was jointly indicted with aiding and abetting that offence. She pleaded guilty; he pleaded not guilty. The pleas were accepted by the prosecution.
The Background
The background can be briefly stated. The offences stem from the running of a long-established business which had been in Mr Neuberg's family for some generations. The business produced light metal products. It had traded as Neuberg Metal Spinners for many years. In recent years Clive Neuberg had used various limited companies as vehicles to continue his trading. However, Neuberg Metal Spinners Limited went into liquidation in 1998. Another limited company, Watergate Services Limited, was incorporated on 16 September 1997. The applicant was the sole director and, from 20 May 1998, the company secretary. Her husband was said to be the driving force behind the company. It continued to trade under the style of Neuberg Metal Spinners.
On 21 July 2000, Clive Neuberg was adjudged bankrupt. Watergate Services Limited continued to manufacture until about December 2000 and to dispose of stock up until February 2001. He remained actively involved in directing its operations after his bankruptcy, hence his conviction. It had ceased trading by March 2001. It was wound up on 19 November 2001. It was only after that date that it became unlawful to trade under the name Neuberg Metal Spinners.
In about January 2001, the applicant began to trade as Karen Neuberg trading as Neuberg Metal Spinners. She was registered for VAT from 1 January of that year. She traded lawfully, using that name, until Watergate went into liquidation on 19 November. Thereafter, she continued to use the prohibited style until 14 June 2002, even after having been warned not to do so. It was common ground that the turnover in respect of the unlawful period of trading was £288,948.
On 28 January 2005, the appellant was sentenced to a Community Punishment Order of 80 hours and disqualified from holding a directorship for five years. She does not appeal against that part of the sentence.
A determination of the confiscation proceedings under the Criminal Justice Act 1988 was postponed. Two issues fell to be decided in those proceedings:
(1) Did the applicant obtain a benefit from the commission of the offence?
(2) If so, was the benefit to be calculated on the basis of the gross turnover of the business or the net profit?
The judge found that there was a benefit which should be calculated by reference to the turnover for the relevant period. However, he appreciated that since the appellant did not have the assets to pay that sum, the relevant realisable asset, which was the subject of the order, was £100,000. That order is now the subject of this appeal.
The Hearing before the Judge
Counsel for the Crown, Mr Davis, submitted before the judge that there was a benefit directly linked to the commission of the offence. Since the business traded unlawfully, using the prohibited name to generate business, the benefit must be the gross income or turnover of the business for the period specified in the count on the indictment. This was the period during which the name was unlawfully used.
Mr Hotten QC, who appeared both before the judge and before us on behalf of the appellant, submitted that there was no benefit. The appellant did not trade unlawfully. She was carrying on a wholly lawful business, and the identity of the business was merely an incidental part of that activity. The confiscation provisions were, therefore, not engaged. Moreover, he submitted that even if they were, the proper basis of assessment was for the judge to determine the net profit after taking into account the expenditure involved and not the gross turnover. Any other basis, it was submitted, would be unjust.
The judge reviewed a number of authorities, some of which we refer to later in this judgment. He concluded that the Crown were correct. The judge held that it was a lawful business which was carried on through an unlawful vehicle. He said this:
“The name Neuberg Metal Spinners was much more than a bolt-on addition, a convenient but non-harmful badge. The name Neuberg Metal Spinners was fundamental to the business in two respects. First, it sent out a message to the world at large, and in particular to suppliers and customers, that nothing had changed in relation to the company structure and trading nature. There was no need for anyone, in particular 'suppliers' to be concerned. it would raise no questions in anyone's mind. It was business as usual. Second, the name Neuberg Metal Spinners was fundamental to the company's business identity, and fundamental to the generation of business by virtue of the company's history. Mrs Neuberg, I find, knew this and for these reasons traded through this company's unlawful name.”
Accordingly, the judge concluded that there was a benefit which continued throughout the duration of the unlawful trading. He then turned to consider the basis upon which the benefit should be calculated. In the light of the authorities, to which we will return, he concluded that it should be the turnover and not simply the net profit. He observed:
“Without the carrying on of the lawful business through an unlawful business vehicle, I find it highly probable that business would have collapsed. It is my view therefore that no injustice is done in saying the turnover, rather than the net profit, is the appropriate approach to the calculation of the benefit in this case.”
It was in the light of that ruling that the parties agreed the turnover figure of £288,948. They also agreed that the realisable assets were smaller and amounted to £100,000. Accordingly, the judge made a Confiscation Order in that sum.
The case came before this court on 19 March 2007, following a refusal of leave to appeal by the single judge. The court granted leave. They allowed all three grounds of appeal to be argued, but indicated that the principal ground which they considered merited leave was the third.
The three grounds are these. First, Mr Hotten reiterates the two arguments that were run and lost before the judge. He submits that the judge erred in concluding that the appellant had gained any benefit at all from the use of the prohibited name; and second, that in any event the calculation of the benefit by reference to the gross turnover was unjust and failed to give credit for the expenditure involved in running the business. The third ground was not originally identified in the grounds of appeal. It is submitted that there is a broad-ranging discretion which obliges a sentencing judge, having applied the specific principles set out in the legislation, to stand back and consider whether it is in the interests of justice to impose an obligation to pay the sum which is the subject of the Confiscation Order. If there is a significant risk of injustice, then it is submitted that the Order should be modified accordingly.
The foundation of this argument is that section 3 of the Human Rights Act 1998 requires domestic statutes to be read compatibly with community law. It is said that Article 1 of the First Protocol requires that in appropriate circumstances any interference with the property rights identified in that Article must be proportionate.
The Statutory Provisions
We first set out the statutory provisions. The relevant offence was committed in 2001–2002 and therefore the confiscation provisions in play were those contained in the Criminal Justice Act 1988, as amended by the Proceeds of Crime Act 1995. There was a similar, albeit not identical, set of provisions found in the Drug Trafficking Act 1994 for drug trafficking offences. These different regimes have been brought together under Part 2 of the Proceeds of Crime Act 2002, but only for offences taking place after 24 March 2003. Accordingly we are dealing in this case with now repealed legislation, but many of the principles applicable under the repealed Acts remain equally applicable under the 2002 Act.
Section 71(1) of the Act states:
“Where an offender is convicted in any proceedings before the Crown Court of an offence of a relevant description, it shall be the duty of the court—
(a) if the prosecutor has given written notice to the court that he considers that it would be appropriate for the court to proceed under this section, or
(b) if the court considers, even though it has not been given such notice, that it would be appropriate for it so to proceed,
to act as follows before sentencing or otherwise dealing with the offender in respect of that offence or any other...
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