Kai Xu & Anor, R. v

LORD JUSTICE TOULSON: On 7 July 2006 at Grimsby Crown Court before Mr Recorder Bury the appellant, David Kai Xu, was convicted of doing an act which facilitated a breach of immigration law contrary to section 25(1) of The Immigration Act 1971. In the same proceedings Lu Xu was convicted of three counts of doing an act which facilitated a breach of immigration law contrary to the same section. David Xu was sentenced to 12 months' imprisonment suspended for two years and Lu Xu was sentenced to 18 months' imprisonment suspended for two years. On 15 November 2007 in confiscation proceedings under the Proceeds of Crime Act 2002 confiscation orders were made against both appellants in the sum of £244,613.17 with sentences of imprisonment of three years to be served in default of payment.

The appellants appeal against the confiscation order on a single ground for which the single judge gave leave. They also seek to renew their applications for leave in respect of other grounds on which leave was refused.

In 2000 a number of illegal Chinese immigrants were found dead in a container on arrival at Dover. This caused extensive police enquiries to be made. A telephone number found on one of the deceased was linked to a restaurant called the Great Fortune Chinese restaurant in Scunthorpe. That restaurant is conducted by the appellants through a limited company in which each has a 50 per cent shareholding. Investigations revealled that they had provided accommodation, food and employment for three employees. Four illegal immigrants were found. Three were working in the restaurant: one as a cook and the other two as kitchen assistants.

In confiscation proceedings it was properly accepted that under the provisions of the Act the criminal lifestyle provisions applied to each appellant and the Recorder was therefore obliged to apply the assumptions set out in section 10 subject to the proviso as incorrectness or injustice in subsection (6).

The Recorder found that it would be unjust to apply the assumptions to the period prior to mid-2002, when, on the evidence, the employment of illegal labour in the restaurant began, and that it would be unjust to apply the assumptions to the period after the appellants' arrest, when they continued to run the restaurant but without employment of illegal immigrants.

The question which the Recorder had to determine was what benefit was to be attributed to the appellants' conduct during the period when illegal immigrants were being employed. He was referred by the prosecution to the decision in the case of Neuberg[2007] EWCA Crim 1994. In that case the defendant was convicted of trading under a prohibited style contrary to provisions of the Insolvency Act 1986. It was found that but for her criminality the business would, as a matter of probability, not have survived, and this court upheld an assessment of the defendant's benefit equal to the entire takings of the business. The Recorder adopted the same approach in the present case and assessed the benefit in the amount of the entire receipts from the business over the relevant period.

It is submitted on behalf of the appellants that he was wrong to do so. He applied and followed Neuberg, although there was a material distinction on the facts of this case, since in this case the business would have continued in any event, and, indeed, it is properly conceded by Mr Bindloss for the prosecution that without the three illegal immigrants the appellant would no doubt have operated the restaurant lawfully at a reduced capacity as they did following their arrest in December 2004.

Mr Bisarya on behalf of David Xu made his central criticism cogently, when he said, by way of illustration, that if a large multiple store were to employ a single unlawful immigrant in one of its outlets it would be unreasonable, and indeed fly in the face of common sense, to treat the entire proceeds of the business as a benefit resulting from that criminality.

Mr Bindloss on behalf of the Crown did not dispute that suggestion on those hypothetical facts. He submitted that the question is one of fact and that it was open to the Recorder to have reached the conclusion which he did in this case, absent any evidence from the appellants as to the limited effect which the employment of the illegal immigrants may have had in increasing the receipts of the business or reducing its overheads.

Mr Bindloss was right in his submission that the question is essentially one of fact. This court would be slow to interfere with a finding of fact by a court which has properly directed itself. We do, however, think there is force in the argument that the Recorder in truth misdirected himself in this case by applying the approach in Neuberg as if it were indistinguishable on the facts when the facts were significantly different. We have no doubt that the appellants did obtain a benefit from the employment of illegal immigrants, which might be looked at either in terms of receipts generated by their employment or expenses avoided, but in our judgment it is not realistic or just to conclude that the entirety of the receipts from each and every customer flowed from the employment of these illegal immigrants. That would be tantamount to a finding that the business would otherwise not have been sustainable, contrary to the agreed position that it would indeed have continued.

That places this court in the difficulty of deciding what order should be made. The position adopted by the appellants below was that if the court concluded that there was benefit to them from the employment of the illegal immigrants the court should simply assess it as a proportion of turnover. This was not a helpful approach. If the appellants had been more forthcoming and shown the real part played in the business by these three employees they might have been able to show that the true benefit was relatively modest, but they did not do so. In those circumstances, they cannot reasonably complain if the court takes a robust approach in inferring as a matter of fact that they did make a significant difference to the amount of the receipts.

It is impossible for us to carry out a scientific exercise, but, absent any better basis for assessing the benefit, we have come to the conclusion that since the three employees, none of them employed in particularly high positions, were nevertheless a quarter of the work force, it should be inferred that a quarter of the receipts of the business over the relevant period came from their employment. We will therefore quash the amount of the confiscation order and substitute a figure based on a benefit equal to a quarter of the receipts over the relevant period. Counsel will no doubt in a moment give us the right figure.

MR BINDLOSS: My Lord, I have to work out the figure. It may take a little time.

LORD JUSTICE TOULSON: Come back in a moment and mention it. In fact, if you are agreed, just tell the associate and that will go in the order.

MR BIDDLE: Of course we can agree it.

LORD JUSTICE TOULSON: We have considered the points on which the single judge refused leave. We see no greater merit in them than he did, and the application for leave to appeal on those points is refused.

MR BIDDLE: In relation to the default period, if the figure that we will agree will between about £100,000 and £120,000, that is in the bracket of between -- the bottom end of the three year to five years bracket. In fact the Recorder said three years, didn't he. It won't go below £100,000, so it might be in the circumstances that the three years will remain.

LORD JUSTICE TOULSON: Right. (Pause). That appears to be right. In those circumstances the only order we need make will be to alter the amount of the confiscation figure. The default period can remain.

MR BINDLOSS: The hearing was over a year ago and the 12 months for payment has elapsed. Given that your Lordships have quashed the order and substituted a new one, it may flow that a new default period --

LORD JUSTICE TOULSON: A new time for payment.

MR BINDLOSS: Yes, that the appellants may be entitled to that and they may wish to raise that.

LORD JUSTICE TOULSON: We don't want to take up time on this now. Do you need to take instructions on the point?

MR BIDDLE: I don't think so. We extended the period. In fact time runs out on 15 November next month. I happen to know that the appellants have been raising money. I expect that they will in fact be able to pay it within the relevant time scale, so I don't think I need to deal with the matter.

LORD JUSTICE TOULSON: If you need to raise the point, you have leave to do so, but please do it on paper.

MR BIDDLE: Thank you very much.