Rowbotham, R v

J U D G M E N T

1. THE VICE PRESIDENT: On 24th October 2004, before Cannock Magistrates, this appellant pleaded guilty to being knowingly concerned in carrying tobacco with attempt to defraud contrary to section 170(1)(b) of the Customs and Excise Management Act 1979. He was committed to the Crown Court for sentence under section 3 of the Powers of Criminal Courts (Sentencing) Act 2000. At Wolverhampton Crown Court, on 27th October 2004, before His Honour Judge Orme, the appellant pleaded guilty on rearraignment to another offence, of being knowingly concerned in the keeping of dutiable goods with the intention of evading duty contrary to section 170(1)(b) of the 1979 Act. On 17th November he was sentenced by His Honour Judge Onions to 15 months' imprisonment in relation to the offence to which he had pleaded guilty on the indictment and to nine months' consecutively in relation to the offence for which he had been committed by the magistrates for sentence. The total sentence was, accordingly, two years' imprisonment.

2. Thereafter, confiscation proceedings took place on 17th January and 9th May 2005 under section 6(2) of the Proceeds of Crime Act 2002. His Honour Judge Onions made a confiscation order in the sum of £249,252 with three years' imprisonment in default of payment.

3. He appeals against the confiscation aspect of the sentence by leave of the single judge, who granted the necessary extension of time.

4. The facts were these. On 15th September 2003 Customs and Excise officers went to an address in Bilston, West Midlands, which was owned by the appellant and was on the market to be sold. At the side of the house, in a yard, they found two white transit vans containing a number of unopened cardboard boxes. They contained, on examination, what seemed to be Superkings and Benson and Hedges cigarettes. More cigarettes were discovered in a conservatory nearby. Something in excess of 2 million cigarettes were discovered and the revenue which had been evaded in relation to them was £305,171.

5. The appellant was arrested. In interview, he said the cigarettes belonged to some gypsies who had paid him £200 a week to park their vans on his property.

6. Thereafter, in pleading guilty to the charge on the indictment to which these matters gave rise, he entered a written basis of plea, which said that:

"... the cigarettes in question were being stored at the defendant's premises for the benefit of another. They had been delivered to his premises by the other party and were to be collected in due course by the same person or someone on his behalf. The defendant expected to receive £200 but he never received payment. It follows from his plea that he knew the nature of the goods."

7. The prosecution indicated that they had no knowledge of the amount which the appellant was paid, and neither accepted, nor sought trial, in relation to that aspect of the matter. The prosecution had, however, always accepted, as they do before us, that the appellant's role was that of storeman.

8. Having been released on bail in relation to these matters, on 1st October 2004 the appellant was arrested on the M6 motorway. In the van which he was driving there were 420,000 Superkings cigarettes, on which duty had not been paid, and £6,085 in cash. The cigarettes were believed to be counterfeit. The duty evaded was in excess of £63,000. In interview, the appellant said he had been approached by a man at a greyhound race track and he had been offered £80 to drive a van to the Liverpool junction of the M6. He knew the van contained a load, but denied knowledge of the nature of the load.

9. As we have said, the prosecution sought, under section 6(4)(c) of the Proceeds of Crime Act, confiscation but not on the basis that there was any evidence of a criminal lifestyle. The matter proceeded under section 76 of the Act and, in particular, subsection (4) which provides:

"A person benefits from conduct if he obtains property as a result of or in connection with the conduct.

(5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage."

10. The earlier subsections of section 76 identify the particular conduct of the defendant, which includes conduct constituting the offence to which the appellant had pleaded guilty.

11. In relation to the charge on the indictment, the defence contended before the learned judge that the Crown and the court were bound by the basis of the plea, which was set out in writing and the relevant terms of which we have rehearsed. It was submitted, and, as will appear, the submission was in due course repeated before us, that it would be an injustice to make the defendant subject to a confiscation order as though he had himself brought the cigarettes into the country, bearing in mind that his sole role was that of warehouse man. The learned judge was referred to Olubitan [2004] 2 Cr App R(S) 70, to which this court also has been referred, and to which, in a moment, we shall come. It was further argued on behalf of the defendant that, if the prosecution were seeking to say that the defendant was more involved than he claimed to be, then a Newton hearing ought to have been heard before his plea of guilty was accepted on the basis which had been tendered.

12. The judge referred to section 76. He said that, whatever the defendant's reason for possessing the cigarettes, once they were in his possession he had benefited to the amount passing through his hands. He concluded that the words of the legislation were clear. Admittedly it was penal legislation, but he had no option but to make a confiscation order in the sum sought. He concluded that there was a liability to pay duty in the sum of £305,171, plus the additional sum of £63,000-odd in relation to the offence for which the appellant had been committed for sentence, making a total of £368,393. Subsequently, having considered material in relation to the appellant's available assets, he certified that those were £249,252, and a confiscation order was made in that sum as we indicated at the outset of this judgment.

13. The appellant is 60 years of age. He has no relevant previous convictions.

14. The grounds of appeal assert that the confiscation order was excessive and wrong in principle, in that the judge failed to decide that the issue of benefit from the appellant's particular criminal conduct had previously been determined by agreement consequent upon acceptance of the written basis of plea and was, therefore, not susceptible to what, it is submitted, was the different conclusion reached by the learned judge. Further, it is said that the judge failed to have proper regard to the basis of plea and failed to decide that he could not imply an interests of justice proviso when determining the amount of the benefit which the appellant had received.

15. Counsel's attention was drawn for the purposes of this appeal to the decision of a differently constituted division of this court in Bakewell [2006] EWCA Crim 2.

16. The submission made by Mr Aspinall, now, as previously, representing the appellant, is directed to that part of the confiscation order made as a result of the plea to the count in the indictment. First, Mr Aspinall took us to certain observations by Lord Bingham of Cornhill in McIntosh v The Lord Advocate , which Mr Aspinall referred us to in [2001] 3 WLR 107, and, in particular, to paragraph 28 of Lord Bingham's opinion, where appears the following:

"In concluding, as I do, that article 6(2) has no application to the prosecutor's application for a confiscation order, I would stress that the result is not to leave the respondent unprotected. He is entitled to all the protection afforded to him by article 6(1), which applies at all stages, the common law of Scotland and the language of the statute. If the court accedes to the application of a prosecutor under section 1(1) of the 1995 Act, it will order an accused to pay 'such sum as the court thinks fit'. In making a confiscation order the court must act with scrupulous fairness in making its assessment to ensure that neither the accused nor any third person suffers any injustice."

Those observations we bear in mind.

17. Mr Aspinall next invited the court's attention to Olubitan and, in particular, to headnote H4, where appears the following:

"The section [the section there under consideration was section 71 of the Criminal Justice Act 1988] was not to be construed so that a person might be held to have obtained property or derived a pecuniary advantage when a proper view of the evidence demonstrated that he had not in fact done so."

18. Mr Aspinall took us to a passage in paragraph 14 of the judgment there given by May LJ, where it is said:

"There was no proper evidential basis for supposing that he had benefited from earlier consignments received when he was not part of the conspiracy. ... Even if, taken literally, that were correct, it was not an inference which a proper evaluation of the evidence enabled the judge to make."

19. At paragraph 25 May LJ rejected counsel for the prosecution's extreme submission with regard to section 71, that:

"... where there is a conspiracy, anyone who joins the conspiracy as a matter of law becomes liable for his proportion of the total amount by which the conspirators as a whole may have benefited."

May LJ went on:

"... in our judgment, the section is not to be construed so that a person may be held to have obtained property or derived a pecuniary advantage when a proper view of the evidence demonstrates that he has not in fact done so."

20. Mr Aspinall submits that those observations are equally apt in the present case. He submitted that liability to duty is a question of fact, in relation to which the judge has to make an evaluation as to whether the defendant has obtained a pecuniary advantage.

21. Mr Aspinall then took us to the decision of the House of Lords in David Cadman Smith [2002] 2 Cr App R(S) 144. He took us to headnote H4, where appears:

"The sentencing judge in the Crown Court proceeded on the basis that by evading duty payable on the cigarettes, the respondent had derived a 'pecuniary advantage' in the same amount."

22. At H5 appears the following:

"It could be said that the respondent derived a pecuniary advantage when he evaded the payment of excise duty on the cigarettes at the customs post even though the cigarettes were subsequently seized by the customs officers when they boarded the boat."

23. There is reference, also, in that part of the headnote to subsection (5) which:

"... dealt with the situation where an offender derived a 'pecuniary advantage' as a result of or in connection with the commission of an offence. A person who had derived a pecuniary advantage was treated as a person who had obtained property."

Then at H6:

"In this case, the respondent derived a pecuniary advantage by evading the duty at the moment when he imported cigarettes."

24. Mr Aspinall stressed that the defendant in that case had himself, in contrast to the appellant, imported the cigarettes.

25. Mr Aspinall also took us to paragraph 18 in the speech of Lord Rodger of Earlsferry, where he referred to, and adopted:

"... the view of Laws LJ in Dimsey and Allen [2000] 1 Cr App R(S) 497 at 500, that 'the ordinary natural meaning of pecuniary advantage must surely include the case where a debt is evaded or deferred'. In the example which I have given, therefore, the captain would have derived a pecuniary advantage from evading payment of the excise duty, even though the cigarettes were subsequently soiled."

The example being given by Lord Rodger was of a captain whose ship, laden with cigarettes, sank before it reached harbour for unloading.

26. At paragraph 19 appears the passage, which, for the reason which we have identified, Mr Aspinall sought to distinguish:

"In the same way, it can be said that the respondent derived a pecuniary advantage when he evaded payment of the excise duty on the cigarettes at the customs posts."

27. Mr Aspinall submits that, as this appellant had no pecuniary advantage, he had no benefit. He was not the importer; and warehousing, as such, does not give rise to any obligation to pay duty.

28. Mr Aspinall accepted that, like the present case, both Cadman Smith and Bakewell were, unlike Olubitan , cases involving the evasion of Customs and Excise duty. But, he submits, injustice would result for this appellant from an over-legalistic interpretation of this legislation. He accepted that there was no authority which supported his central submission.

29. On behalf of the Crown Mr Potter distinguished Olubitan on the basis that it was not a Customs and Excise case. He submitted that Cadman Smith , as further analysed by Rix LJ in Bakewell , is determinative, adversely to the appellant, of this appeal. Where excise duty is evaded, it is by reason of the legislation to be recovered, albeit in a draconian manner, from a variety of persons who are potentially liable to pay it. He referred the court to Statutory Instrument 1992 No 3135 Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992, regulation 5 of which identifies persons liable to pay duty in the following relevant terms:

"(1) The person liable to pay the duty in the case of an importation of excise goods from another member State shall be the importer of the excise goods.

(2) Each of the persons specified in paragraph (3) below having the specified connection with the excise goods at the excise duty point, shall be jointly and severally liable to pay the duty with the person specified in paragraph (1) above of this regulation.

(3) The persons specified in this paragraph are --

...

(b) any other person acting on behalf of the importer of the excise goods in respect of the importation of those goods;

...

(e) any consignee of the excise goods which have been imported into the United Kingdom."

30. Mr Potter submitted that the appellant is within (3)(b), and possibly, though less enthusiastically, within (3)(e). In consequence, he submits, the judge was correct in the way in which he applied the law to this case. There is, by virtue of the legislation and the statutory instrument, a continuing obligation to pay duty on imported cigarettes. Notwithstanding that the appellant was not an organiser, or the importer, in relation to this enterprise, he, nonetheless, played an important part and derived a pecuniary advantage and therefore a benefit because duty had not been paid.

31. In our judgment, the outcome of this appeal is conclusively determined by the authorities of Cadman Smith and Bakewell . Olubitan is clearly distinguishable because it was not a Customs and Excise case. The appellant's plea of guilty, albeit on the written basis we have rehearsed, necessarily included an admission that he had evaded duty. This appellant, by providing the warehousing facility, was, as Mr Aspinall rightly conceded in the course of his submissions, playing a part in the continuing process of keeping the cigarettes away from discovery. In our judgment, it follows unavoidably that that continuing process involved the evasion of duty. An evasion of duty, as Lord Rodger of Earlsferry made clear in Cadman Smith , is the obtaining of a pecuniary advantage and a pecuniary advantage is a benefit. In our judgment, it follows that the learned judge was correct in reaching the conclusion which he did, and this appeal must be dismissed.