Royal Courts of Justice
Strand
London, WC2A 2LL
B e f o r e :
LORD JUSTICE GAGE
MR JUSTICE SILBER
HIS HONOUR JUDGE RADFORD
(Sitting as a Judge of the CACD)
R E G I N A
v
STEVEN WALLER
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Mr C Bott QC appeared on behalf of the Appellant
Mr A Mitchell QC & Mr T Allen appeared on behalf of the Crown
J U D G M E N T
MR JUSTICE SILBER: This appeal raises an important issue on how to calculate in confiscation proceedings the benefit to be attributed to a smuggler. Steven Waller appeals with leave of the single judge against the quantum of a confiscation order that was imposed on him in the Crown Court at Maidstone on 12th September 2007, by which he was found to have benefited from his wrongful conduct in the sum of £41,505. The judge who made the order, under section 6 of the Proceeds of Crime Act 2003 ("the 2003 Act"), made a confiscation order in that amount which was payable within 6 months, with a period of 18 months' imprisonment to be served in default of payment.
Previously the appellant had pleaded guilty on 2nd March 2007 to being knowingly concerned in the fraudulent evasion of the duty payable on the importation of 250 kilograms of tobacco. On 4th April 2007 he was sentenced to 4 months' imprisonment suspended for 12 months together with a provision that he undertook 120 hours unpaid work.
The facts giving rise to this application are not unusual. On 2nd November 2006 the appellant was stopped at the Channel Tunnel by British customs officers. When the appellant was asked if he had purchased any dutiable goods, he said that he had purchased two boxes of wine. When his car was searched, 250 kilograms of hand rolling tobacco was found in the boot. The appellant admitted to buying the tobacco for himself, his family and his friends. He had spent £2,000 of his own money and £12,000 given to him by three other people.
He accepted that the duty evaded was £27,505. The appellant also accepts that he bought the tobacco with the intention of evading duty. It is also accepted that, for the purposes of the confiscation proceedings, the operative time for calculating the intention is when he purchased the tobacco.
The Crown in the confiscation proceedings served a statement of information contending that the appellant's benefit had amounted to £41,505 which was calculated as being £14,000 for the value of the tobacco, which is the contested issue on this appeal and the evaded duty of £27,505. The issue before the Crown Court and the issue on this appeal relates to whether the confiscation order should have included the value of the tobacco as well as the evaded duty.
In his ruling the Judge Michael Lawson QC said, in relation to the claim for the value of the tobacco:
"It is a matter which if not covered by authority has been covered in principle if not in specifics of this offence of R v David Cadman Smith in the House of Lords, where it is and has been the practice for some time to regard both, even with cigarettes, both the value of cigarettes and the duty evaded has been the benefit. That is the position, as I understand it, to take a higher court than this to either to overturn that approach that has been adopted in these courts since that decision in 2001 where I found that benefit is in fact both the value of the cigarettes and the revenue evade."
It seems clear to us that the actual decision in Cadman Smith is not of critical significance, because the issue in that case related to a claim for duty rather than a claim for the value of the goods. Nevertheless, as we will explain, much guidance in relation to the problem raised in the present case is to be found in the approach in the speech of Lord Rodger of Earlsferry with whose speech the remainder of the members of the Appellate Committee agreed.
To understand the dispute it is necessary to refer briefly to the 2003 Act. Section 76(4) states:
"A person benefits from conduct if he obtains property as a result or in connection in the conduct."
Section 76(3)(c) states that the court must decide whether the applicant has "benefitted from his criminal conduct." Section 76(6) of the 2008 Act provides that "references to property ... obtained in connection with conduct includes references to property ... obtained both in that connection and some other."
The case for the appellant is that the judge erred as he should have determined first that the correct amount of the benefit was solely the duty evaded and second that he should not have included the value of the tobacco as it had been purchased legitimately. Our attention has been drawn to cases such as R v Bakewell [2006] 2 Cr App R(S) 42 and R v Homer [2006] EWCA Crim 1559, where the duty evaded was identified as the benefit that had accrued in those cases. This court had in both cases upheld orders made in the amount of the duty evaded. In neither of those cases was there any discussion about claims based on the value of the goods supplied as well as the duty evaded.
Our attention was drawn to the comments of Collins J in Re O [2006] EWHC 3543 at paragraph 6 where he said that:
"The attempt to smuggle cigarettes into this country failed. Customs stopped it. The result was that there was in fact no benefit in the sense of no profit made from the criminality. However, the law provides that benefit is to be regarded as the duty which would have been evaded."
In that case, there was no argument that it should have been the property value as well as the duty which ought to be recovered. Mr Bott QC, for the appellant, also draws our attention to the comment of Rix LJ, giving the judgment of this court in Bakewell where he said, having reviewed the speech of Lord Rodger in Cadman Smith , at paragraph 31:
"Nor is it clear to us what might be the position if the defendant's smuggler in question was the owner of the contraband (not our present case, nor even perhaps the case in Cadman Smith ) and thus might be said to have obtained the property of the cigarettes for themselves..."
The case for the appellant is that the prosecution, the respondents on this appeal, are seeking to develop the law too far, by claiming not only the lost duty but also the value of the tobacco.
Mr Andrew Mitchell QC, counsel for the respondent, relies on the fact that the conduct which is relevant is that the appellant gathered funds from his friends and his family and himself in order to purchase tobacco on the mainland of Europe with the purpose of bringing it back into the United Kingdom without paying the excise duty. This would have rendered a substantial saving to the contributors to the fund. Thus Mr Mitchell contends that the whole enterprise was one tainted with criminal intent from its outset. He then says that without dutiable goods to smuggle, there can be no pecuniary advantage. Thus, his case is that the goods in question in this case, which is the tobacco were, in the words of the statute "obtained in connection with" the smuggling enterprise.
In our view, there are six reasons which individually and cumulatively lead us to the conclusion that the judge was right to make a confiscation order not merely for the value of the duty but also for the value of the tobacco.
The first reason is that in the recent House of Lords in R v May [2008] UKHL 28, the Appellate Committee at the end of its judgment, dealing with confiscation proceedings inserted an end note at paragraph 48. The relevant parts of it state (with own emphasis added that):
"(4) In addressing the questions the court should focus very closely on the language of the statutory provision in question in the context of a statute and in the light of any statutory definition. The language used is not arcane but obscure and any judicial gloss or exegeses should be viewed with caution. Guidance should ordinarily be sought in the statutory language rather than in the proliferating case law.
(5) In determining, under the 2002 Act, whether [the defendant] has obtained property or a pecuniary advantage and, if so, the value of an 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 this jurisdiction involves no departure from the familiar rules governing entitlement and ownership. While the answering of the third question calls for inquiry into the financial resources of [the defendant] at the date of the determination, the answering of the first two questions plainly calls for a historical inquiry into past transactions.
(6) [The defendant] ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control, as where a person directs a payment or conveyance of property to somebody else."
In our view, it is significant that the Appellate Committee did say there that somebody ordinarily obtains property if they own it. In this case there can be no doubt that the appellant owned the tobacco when he purchased it.
The judge was correct for a second reason which is based on comments which were made by Lord Rodger Earlsferry in Cadman Smith case. He said, first, at paragraph 21:
"The measure of his benefit is the value of the property so obtained."
Lord Rodger then went on to say at paragraph 23:
"...the courts have consistently held that 'payments' received in connection with drug trafficking mean gross payments rather than net profit and that 'proceeds' of drug trafficking mean a gross payments rather than net profit after deducting the cost of the drug trafficking operation."
We accept that these comments relate to the proceeds of drug trafficking but, in our view, they are equally applicable to case of evading duty and by analogy to circumstances such as those in the present appeal where the court is required to assess the benefit of criminal conduct involving importation of goods purchased abroad. In those circumstances, the court is not concerned solely with the duty evaded but with the total value of the property involved. This value must include the purchase price of the goods.
Our third reason for accepting the contentions of the respondent flows from the wording of the statutory provisions because the court has to ask itself two questions. The first is whether the defendant has benefited from his criminal conduct. In this case, the answer must be in the affirmative, as the appellant obtained tobacco which he purchased. The second question, based on section 76(4) is whether the appellant obtained property "as a result of or in connection with" the conduct of evading excise duty. In this case the answer must be that the appellant obtained property, namely the tobacco. This was the only property that he obtained and in reaching that conclusion, we have noted the width of the words used in the statutory provision because they talk about a person obtains property "as a result of or in connection with his conduct". The words "as a result of" apply to any consequence, while the words "in connection with" widen that meaning. In our view, the acquisition of property and this tobacco falls clearly within both those categories.
The fourth reason why we regard the respondent's submissions as being correct is the use of the word "property" in section 76(4). It is significant because the focus is not on the benefit which the appellant obtained as a result of his smuggling (namely the evasion of duty but what "property" he received and again that must be tobacco.
The fifth reason why we agree with the judge is that the submission of the appellant would mean that the statutory provision has to be re-written so that the word "profit" is introduced to define the word "property". That is not permissible and we have already stated that the Appellate Committee in May was saying that the words should be given their common sense meaning.
Our final reason for dismissing the appeal is that we agree with the reasoning of Hart J in the Belfast Crown Court in the case of R v McCrarren & McCrarren [2007] NICC 9. That was a case in which a father and son were involved in the unlawful importation of a large quantity of cigarettes. The issue that arose there was precisely the same as the one which arises in the present case, which is the value of the cigarettes. It noteworthy that Hart J said at paragraph 11:
"...I consider that the cost of purchase of cigarettes abroad must be taken into account when calculating the value of the property obtained. To ignore this would be to leave out of account a key element in assessing the value of the property purchased, and hence of the benefit to the defendant."
We appreciate that the conclusion at which we have arrived might well be regarded as being harsh, but it must not be forgotten that it has been frequently said that those who framed the Act intended these consequences (see Ian Smith (1989) 2 ALL ER 948). Furthermore when the Appellate Committee gave its reasons in May , they said of the confiscation legislation that, as Lord Steyn described in Rezvi [2003] 1 AC 1099, paragraph 17 it is:
"A precise fair proportionate response to the important need to protect the public."
For all those reasons, this appeal has to be dismissed.