Bajwa & Ors, R v

This is the judgment of the court to which all of us have contributed.

The appellants Bajwa, Sahnan and Sohi appeal confiscation orders made against them. The applicant Midgley renews his application to appeal the confiscation order made against him. We grant leave. Mallinson’s renewed application for an extension of time in which to seek leave to appeal the confiscation order made against him was referred to the full court by the Registrar. We grant the necessary extension of time and we grant leave to appeal in his case also.

At the heart of these appeals are two issues of interpretation of sections 75(2)(c), 76(4) and (5) of the Proceeds of Crime Act 2002 (“POCA”) concerning the conditions that have to be fulfilled in order for a defendant to be deemed as having a “criminal lifestyle” within section 75(2)(c) of POCA. If a defendant is deemed to have a “criminal lifestyle” then it has consequences for how his “benefit” from his criminal conduct is to be determined under section 6(4) of POCA. However, this statement that the appeal raises two issues of construction of three provisions of POCA is deceptive. To decide the answers to those issues on the facts of this case it has been necessary to look at other statutes, at statutory instruments and many cases, as well as the facts. Our consideration of the issues has resulted in having to engage in a long and complicated paper trail in order to answer what ought to be simple questions. The questions raised are not easy to answer and the convoluted process we have felt constrained to go through to reach the answers is bad enough on appeal. But these complications are a nightmare for judges at first instance who regularly have to apply the Proceeds of Crime Act in confiscation proceedings which result from offences of smuggling tobacco products into this country by sea in containers. It is not in the interests of justice or of the public that the law should be so complicated; it is high time that it was simplified.

The key sections of POCA for the purpose of this appeal are sections 75(1) – (4) and section 76. In order to put them in their context it is sensible to set out also section 6(4)-(7), which stipulate what a Court must do if proceeding to consider whether to make a Confiscation Order against a defendant under the provisions of POCA.

Section 6(4), (5) and (7) and section 75(1)-(4) and section 76 of POCA provide as follows:

“6 Making of orderE+W

……

(4)

The court must proceed as follows—

(a)

it must decide whether the defendant has a criminal lifestyle;

(b)

if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct;

(c)

if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct.

(5 ) If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to it must—

(a)

decide the recoverable amount, and

(b)

make an order (a confiscation order) requiring him to pay that amount.

……

(7)

The court must decide any question arising under subsection (4) or (5) on a balance of probabilities.

……

75 Criminal lifestyleE+W

(1)

A defendant has a criminal lifestyle if (and only if) the following condition is satisfied.

(2)

The condition is that the offence (or any of the offences) concerned satisfies any of these tests—

(a)

it is specified in Schedule 2;

(b)

it constitutes conduct forming part of a course of criminal activity;

(c)

it is an offence committed over a period of at least six months and the defendant has benefited from the conduct which constitutes the offence.

(3)

Conduct forms part of a course of criminal activity if the defendant has benefited from the conduct and—

(a)

in the proceedings in which he was convicted he was convicted of three or more other offences, each of three or more of them constituting conduct from which he has benefited, or

(b)

in the period of six years ending with the day when those proceedings were started (or, if there is more than one such day, the earliest day) he was convicted on at least two separate occasions of an offence constituting conduct from which he has benefited.

(4)

But an offence does not satisfy the test in subsection (2)(b) or (c) unless the defendant obtains relevant benefit of not less than £5000.

76 Conduct and benefit

E+W

(1)

Criminal conduct is conduct which—

(a)

constitutes an offence in England and Wales, or

(b)

would constitute such an offence if it occurred in England and Wales.

(2)

General criminal conduct of the defendant is all his criminal conduct, and it is immaterial—

(a)

whether conduct occurred before or after the passing of this Act;

(b)

whether property constituting a benefit from conduct was obtained before or after the passing of this Act.

(3)

Particular criminal conduct of the defendant is all his criminal conduct which falls within the following paragraphs—

(a)

conduct which constitutes the offence or offences concerned;

(b)

conduct which constitutes offences of which he was convicted in the same proceedings as those in which he was convicted of the offence or offences concerned;

(c)

conduct which constitutes offences which the court will be taking into consideration in deciding his sentence for the offence or offences concerned.

(4)

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.

(6)

References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other.

(7)

If a person benefits from conduct his benefit is the value of the property obtained.”

The single count on the Indictment concerning all the appellants alleged that “…between 1 March and 22 September 2004 they conspired….fraudulently to evade the duty chargeable on goods namely a quantity of cigarettes”. It is of note that the appellants were charged with being party to a conspiracy fraudulently to avoid duty, not with the offence of having done so. The object of the conspiracy was to smuggle into the UK a container load of 7 million Chinese counterfeit Benson & Hedges Gold cigarettes, with the intention of evading the duty chargeable on them which would have totalled £1,069,740.00. The container had been loaded on board a container carrier at Chiwan, in the Peoples’ Republic of China, for carriage to Felixstowe. Before the vessel arrived, HMRC arrested all the appellants on 13 and 14 September 2004, although they were then released on bail and not charged until February 2005. The vessel arrived at Felixstowe on 21 September 2004. HMRC intercepted the container upon its discharge on 22 September 2004. Its contents were seized at 18.40 hours that day in a secure examination shed in Felixstowe docks when the seals on the container were broken by HMRC officials and the counterfeit cigarettes were found inside. As we shall explain, the precise period during which the conspiracy lasted, the precise times of involvement of the appellants in it and the precise circumstances by which HMRC came to intercept the container may have great importance to the outcome of these appeals.

On 22 February 2006, in the Crown Court at Manchester, Mark Midgley pleaded guilty on re-arraignment to conspiracy to contravene section 170(2)(b) of the Customs and Excise Management Act 1979 (“CEMA”). That section provides that:

“(2)

Without prejudice to any other provision of the Customs and Excise Acts 1979, if any person is, in relation to any goods, in any way knowingly concerned in the fraudulent evasion or attempt at evasion –

…..

(b)

of any prohibition or restriction for the time being in force with respect to the goods under or by virtue of any enactment

…..

shall be guilty of an offence under this section and may be arrested”.

On 7 March 2006 Stephen Mallinson pleaded guilty on re-arraignment to the same count. On 13 April 2006 Naripdeep Bajwa and Baljinder Sohi were convicted on the same count after a trial lasting 6 weeks before HHJ Atherton and a jury in the same Crown Court. On 19 April 2006 Harish Sahnan was convicted on the same count, before the same court. On 29 June 2006 the appellants were sentenced by Judge Atherton to various terms of imprisonment ranging from 4 years in the cases of Bajwa and Sohi to 2 ½ years in the case of Midgley.

Meanwhile proceedings under POCA were started against all the appellants. The case of the Crown against each of them was that the conspiracy had lasted longer than six months and that each had benefited from his conduct which constituted the offence of conspiring to contravene section 170(2)(b) of the CEMA. Each of the appellants was said to have benefited from his criminal conduct because each had obtained a pecuniary advantage as “a result of or in connection with” his conduct which constituted the offence of the conspiracy, viz. fraudulently to evade the prohibition or restriction on the importation of cigarettes without payment of the excise duty payable on them. The Crown argued that each of the appellants satisfied the conditions set out in section 75(2)(c) and section 76(4) and (5) of POCA and therefore each had a “criminal lifestyle” within section 75(1) of POCA and that each had benefited from his “general criminal conduct”, within section 6(4) (b) of POCA, as well as benefiting from his “particular criminal conduct” within section 6(4)(c) of POCA.

All the appellants challenged the Crown’s assertion that the conditions of section 75(2)(c) were fulfilled in their case, but did so on different bases. The appellants Bajwa, Sohi and Sahnan argued that they had not been involved in the conspiracy for a period of at least six months and so, in relation to them, the conspiracy was not “ an offence committed over a period of at least six months” for the purposes of section 75(2)(c) of POCA. This is the first issue that arises on this appeal. We will call this question “the six month issue”. The appellant Mallinson accepted that he had been involved in the conspiracy for more than six months. Before HHJ Atherton, counsel for Midgley also accepted that was so in his case.

All the appellants denied that they had benefited from the conspiracy because they all denied that they had obtained any “pecuniary advantage” within section 76(5) of POCA. They all argued that, on the facts, they had never become liable to pay any duty on the cigarettes and so could not be said to have evaded any duty on the cigarettes. This is the second issue that arises on this appeal. We will call this question “the pecuniary advantage issue”.

HHJ Atherton heard argument on these two issues and delivered a reserved judgment on 8 June 2008. On the question of the construction of section 75(2)(c), ie. “the six month issue”, he held that when the relevant offence was a conspiracy then the crucial question was whether that offence itself had been committed over a period of at least six months. He held that it was irrelevant that the particular defendant concerned had only participated (or alleged he had) for a period shorter than six months: see pages 6-7 of the judgment.

On the question of the construction of section 76(5), ie. the “pecuniary advantage issue” the judge concluded that it was a question of fact whether a particular defendant who was a party to a conspiracy had benefited from that “conduct” for the purposes of section 76(4) and (5) of POCA. He held that he was entitled to and would adopt the findings of fact that he had made for the purposes of passing sentence on the appellants, in particular the fact that each had played a substantial role in planning and/or carrying out the conspiracy. The judge also relied on his earlier conclusion that he should start from the premise that “each defendant’s participation was the same from the point of view of culpability”. In his judgment of 8 June 2008, Judge Atherton pointed out that none of the appellants had given evidence to undermine the conclusion which he drew which was that each had a “joint interest” in the cargo of counterfeit cigarettes. The judge continued:

“ … I find that each of you has in fact received a pecuniary benefit in that working together you have caused that importation. The actual negotiations in China were probably made by Mr Mallinson. I think that he and Mr Midgley were probably to have the responsibility for the carriage and storage of them if they had successfully cleared Customs. The other defendants played their parts with Mr Sohi and Mr Bajwa having dealings with the Bills of Lading”.

The consequence of the judge’s ruling on 8 June 2008 was that all the appellants were to be treated as having a “criminal lifestyle” for the purposes of section 6 of POCA. This meant that, in each of their cases, the court had to decide whether the particular defendant had benefited from his “general criminal conduct”, pursuant to section 6(4)(b). The court would do so making the “assumptions” set out in section 10 of POCA unless a particular assumption was shown to be incorrect or there was a serious risk of injustice if a particular assumption were made.

The judge reserved determination of the questions of the total “benefit” that each defendant had obtained from his criminal conduct and what sum was recoverable from each under section 6(5) and 7(1) of POCA. There were then a number of hearings before Judge Atherton in the first part of 2009 on the issue of what “benefit” each appellant had obtained from his general and particular criminal conduct and what realisable assets each had. In a hearing before him on 23 January 2009, Judge Atherton dealt with the issue of apportionment of the purchase price of the cigarettes. The judge held: (1) although there were five defendants, other conspirators had been substantially involved, including one in China, so that for the purposes of apportioning the purchase price of the cigarettes, he would take it that there were 8 conspirators substantially involved. (2) No one had argued that one conspirator should be treated more or less favourably than any other. Therefore each of the eight conspirators, and so each defendant, should be treated on an equal basis.

On 21 January 2009 this court delivered its judgment in R v Mitchell [2009] EWCA Crim 214. The issue in that case was whether a loader of a lorry which was used to smuggle tobacco into the UK from France had evaded the duty payable on the tobacco and so had obtained a “pecuniary advantage” within section 76(5) of POCA. That in turn depended on whether the loader was a person liable to pay duty on the tobacco upon its importation into the UK. This court reviewed the relevant statutory provisions, the regulations and the relevant EC Directive. It decided, in agreement with the judgment of Mr Recorder Stephen Males QC given below, that the loader had no personal liability to pay the duty, therefore he had not evaded payment and had not obtained any “pecuniary advantage” thereby. We will have to examine that decision further. We mention it here because once the Crown became aware of it, each of the solicitors acting for the appellants was sent a letter drawing attention to it. Those acting for Bajwa thereafter made further legal submissions to the judge before he made his final order on 31 July 2009. However, we understand that neither Bajwa nor the other appellants sought to submit to the judge that he had been wrong to conclude that the appellants were liable to pay the duty on the counterfeit cigarettes in this case. Nor did any appellant seek to give further evidence to clarify his involvement (or lack of it) in relation to the conspiracy to smuggle in the cigarettes into the UK.

Subsequently, on 31 July 2009, Judge Atherton made his final rulings on the “benefit” that each defendant had obtained from his criminal conduct, the “realisable assets” of each defendant and thus the confiscation orders that should be made against each of them. The judge noted that: (1) as a result of his ruling on 8 June 2008, in relation to each defendant it was a “criminal lifestyle” case; (2) the total duty evaded was about £1.411 million; (3) three defendants, Sohi, Midgley and Mallinson, did not have assets greater than that sum of “general criminal conduct benefit”; (4) but the defendants Bajwa and Sahnan did have. The judge reiterated his conclusion that he was not able to distinguish between one defendant and another so far as culpability was concerned. He continued:

“….. Whilst I have great sympathy with the view that it is harsh to make any particular defendant responsible for the whole benefit, I think that the conclusion from Regina v May is that although there is a residual discretion in certain circumstances, those circumstances do not here apply, and that I am forced by reason of the law, to make a joint and several liability order in the way in which the Crown have submitted.”

The judge then ruled on the total benefit obtained by each defendant and the realisable assets of each and therefore the confiscation orders that were to be made in respect of each defendant. His conclusions were as follows:

We heard argument on the appeals on Friday 18 February 2011. We reserved judgment.

On the question of the correct construction of section 75(2)(c) of POCA, the appellants Midgley continues to accept that he was involved in the conspiracy for more than six months. As already noted, counsel for Midgley had conceded in the confiscation proceedings that Midgley’s involvement was for longer than six months. The judge therefore made no findings of fact on this issue. In his perfected Grounds of Appeal, fresh counsel for Midgley sought to withdraw that concession of fact and sought leave to re-open the “six month issue” on behalf of his client. We will have to consider that issue below. However, whether or not Midgley can pursue the “six month issue” , both he and Mallinson do not accept that they have a “criminal lifestyle” for the purposes of POCA because they say that they have not “benefited” from the conspiracy, relying on their arguments under the “pecuniary advantage” issue.

In respect of the appellants Bajwa and Sohi, the Crown accepted before Judge Atherton and before us that their first involvement in the conspiracy was on 17 March 2004 when they met their co-conspirator at the Oxford Service Station on the M40 motorway. In the case of Sahnan, the Crown accepted before Judge Atherton and before us that it could not show that he was involved in the conspiracy at least six months. There are no further facts to be set out in relation to the “six month issue”.

The Crown argues the conditions in section 75(2)(c) are fulfilled if (a) the offence of the conspiracy overall was committed over a period of at least six months, and (b) the defendant concerned has benefited from the conduct which constitutes the offence of the conspiracy to evade duty on the counterfeit cigarettes to which that defendant was a party, whether or not he was himself involved in the conspiracy for more or less than six months. Accordingly, the Crown asserts that it does not matter whether it cannot prove that individual defendants were involved in the conspiracy for at least six months. On the Crown’s primary case each of the appellants fulfils the first condition of section 75(2)(c), so that the only remaining question is whether the appellant obtained a “benefit” from their conduct which constituted the conspiracy by obtaining a “pecuniary advantage” by evading the duty. The Crown’s second argument before us was that the involvement of Bajwa and Sohi in the conspiracy was at least six months because they did not withdraw from the conspiracy and it did not come to an end upon their arrest on 13 and 14 September 2004 or when HMRC seized the bill of lading on 13 September 2004. Their involvement in the offence continued until the seizure of the cigarettes by HMRC on 22 September 2004.

In relation to “pecuniary advantage issue”, Judge Atherton made his principal fact findings concerning the importation in his ruling of 8 June 2008. His findings have not been challenged on this appeal. We were shown a photocopy of the front page of an original bill of lading for the 40 foot container which was loaded on board the vessel. We understand that this photocopy was before the jury at the original trial. There was no photocopy of the reverse.

In summary the facts (which we have taken from the judge’s sentencing remarks on 29 June 2006, the judgment of 8 June 2008 and the photocopy of the bill of lading) are: (1) a 40 foot container, No CCLU 5033098 (“the container”) was loaded on board mv “Xin Xia Men” (“the vessel”) at Chiwan, China on 22 August 2004. (2) The bill of lading, on a standard form of China Shipping Container Lines (Hong Kong) Co Ltd acknowledged the receipt for shipment and shipment on board of the container. The bill of lading states that the container contained 520 cartons which were said to contain (“STC”) patio heater parts. The shipper is identified as Guangdong Chant Group and the named consignee is Associated Finishers Ltd at an address in Birmingham. The Notify Party is stated to be Paulan Export Services. We were informed by Mr Dudley, appearing for the Crown, that the consignee and Notify Party were legitimate companies. Freight was pre-paid. The bill of lading states that there were three originals. The photocopy of one of the original bills of lading that we saw bears a signature on behalf of the carrier, named as China Shipping Container Line Shenzen Co Ltd. There is no indication of the bill of lading having been endorsed. (3) The container actually contained the 7 million counterfeit “Benson & Hedges” Gold cigarettes. (4) On 13 September 2004 all the appellants apart from Mr Bajwa were arrested. He was arrested on the afternoon of 14 September 2004. (5) When Mr Mallinson was arrested on 13 September 2004 at a meeting with Mr Sohi in a car park near the M40, HMRC took from him one original bill of lading. They also took £15,000 in cash. (6) The appellants were questioned but made “no comment” and were released on bail. (7) At that time the vessel was sailing between Valencia, Spain, and Rotterdam. The position of the container on board the vessel was such that it could not, in normal circumstances, have been unloaded before the vessel’s arrival at Felixstowe. (8) On 21 September 2004 the vessel entered the port of Felixstowe. (9) On 22 September 2004 the container was discharged and the cigarettes were seized after HMRC officials had broken the seals on the container and seen that it contained the counterfeit cigarettes. The counterfeit cigarettes have been forfeited to the Crown. (10) No one attempted to claim the container or its contents.

Before we outline the arguments of the parties on the “pecuniary advantage” issue, it is necessary to set out the relevant legislation concerning duty on imported tobacco and who is liable for its payment. We must also refer to some of the case law insofar as it relates to confiscation under POCA when tobacco has been smuggled into the UK by sea.

Section 5(1), (2)(a), (3) and (8) and section 43(1) of CEMA provide as follows:

"(1)

The provisions of this section shall have effect for the purposes of the Customs and Excise Acts.

(2)

Subject to subsections (3) and (6) below, the time of importation of any goods shall be deemed to be –

(a)

where the goods are brought by sea, the time when the ship carrying them comes within the limits of a port;

(b)

…

(c)

…

(3)

In the case of goods brought by sea of which entry is not required under [regulation 5 of the Customs Controls on Importation of Goods Regulations 1991], the time of importation shall be deemed to be the time when the ship carrying them came within the limits of the port at which the goods are discharged.

(4)

…

(5)

…

(6)

…

(7)

…

(8)

A ship shall be deemed to have arrived at or departed from a port at the time when the ship comes within or, as the case may be, leaves the limits of that port".

Section 43(1) of CEMA states the general rule that no imported goods shall be delivered or removed on importation until “the importer” has paid to the proper officer any duty chargeable on the goods imported. However, section 43(2D) of CEMA states that this general rule has no effect for the purposes of any duty of excise chargeable on any goods for which the “excise duty point” is fixed by regulations made under section 1 of the Finance (No 2) Act 1992 and the applicable rate of duty is fixed by section 1(2) of that Act.

Section 1(1) of the Tobacco Products Duty Act 1979 (“TPDA”) defines what is included within the phrase “tobacco products” to which the TPDA applies; it includes cigarettes. Section 2(1) provides that “there shall be charged on tobacco products imported into or manufactured in the United Kingdom a duty of excise at the rates shown….in the Table in Schedule 1 to this Act”. Section 6 stipulates that the rate of duty can be increased or decreased by statutory instrument. Section 7 gives HM Commissioners of Revenue and Customs the power to make regulations “…with a view to managing the duty charged by section 2…”.

Section 1(1) of the Finance (No 2) Act 1992 (“the 1992 Act”) grants HM Commissioners of Revenue and Customs the power to make regulations for fixing the time when the requirement to pay any duty with which goods become chargeable is to take effect. In section 1(1) that point in time is called “the excise duty point”. Section 1(3) of the same Act provides:

“Regulations under this section may provide for the excise duty point for any goods to be such of the following times as may be prescribed in relation to the circumstances of the case, that is to say –

(a)

the time when the goods become chargeable with the duty in question…”.

Section 1(4) of the same Act provides:

“Where regulations under this section prescribe an excise duty point for any goods, such regulations may also make provision-

(a)

specifying the person or persons on whom the liability to pay duty on the goods is to fall at the excise duty point (being the person or persons having the prescribed connection with the goods at that point or at such other time, falling no earlier than when the goods become chargeable with the duty, as may be prescribed); and

(b)

where more than one person is liable to pay the duty, specifying whether the liability is to be both joint and several”.

In 1992 Regulations concerning the payment of duty on imported tobacco were made pursuant to section 7 of the TPDA and section 1(1) of the 1992 Act. In White, Dennard, Perry and Rowbotham v The Crown [2010] EWCA Crim 978 at [55], Hooper LJ, giving the judgment of the court, considered the issue of who was liable to pay duty on imported tobacco under the 1992 Regulations. He said that, with regard to the 1992 Regulations:

“…a person who causes or has caused the goods to reach the excise duty point is not liable to pay the duty unless he retains a connection with the goods at the excise duty point, which in tobacco smuggling cases involving sea ferries, is at the time the ship enters the limits of the port”.

The 1992 Regulations were replaced by The Tobacco Products Regulations 2001 (SI 1712 of 2001) (“the 2001 Regulations”). Those are the relevant regulations for the purposes of this case. They were made in order to implement the Council Directive 92/12/EEC and another, immaterial regulation. (Footnote: ¹) Regulations 12(1) and 13(1), (2), (3)(e) and 14(1) provide as follows:

“Excise duty points

12.

—(1) Subject to the provisions of this regulation, the excise duty point for tobacco products is the time when the tobacco products are charged with duty.

….

Person liable to pay the duty

13.

—(1) The person liable to pay the duty is the person holding the tobacco products at the excise duty point.

(2)

Any person (not being the person specified in paragraph (1) above) who is described in paragraph (3) below is jointly and severally liable to pay the duty with the person specified in paragraph (1) above.

(3)

Paragraph (2) above applies to—

…

(e)

any person who caused the tobacco products to reach an excise duty point.

…

Payment and calculation of the duty

14.

—(1) Except where regulations 17 to 19 below (deferred payment) apply, the duty must be paid at or before the excise duty point.”

Regulation 12(1) does not define the moment when tobacco products are charged with duty; it simply says that they are charged at the “excise duty point”. Section 2(1) of the TPDA does not take the matter that much further because it only says that excise duty will be charged when tobacco is imported into the United Kingdom. But, the effect of that section, plus the 2001 Regulations and sections 5(2),(3) and (8) of CEMA is that when tobacco is imported by sea into the UK in a ship, then duty is payable the moment when the ship comes within the limits of the port at which the goods are to be discharged. We think that is confirmed by the decision of this court in White, Dennard, Perry and Rowbotham v The Crown [2010] EWCA Crim 978 at [57]. That means, in this case, that duty became payable the moment the container carrier came within the limits of the port of Felixstowe. However, there is a complication to which we refer at [75] and footnote 7 below.

Regulation 13 of the 2001 Regulations determines who is liable to pay the duty. By virtue of Regulation 13(1) the principal liability is that of the person “holding” the tobacco products at the excise duty point. “Holding” is an imprecise term which could embrace actual possession of the tobacco products and, perhaps, both constructive possession (which we shall explain below) and also control of the tobacco products.

The ambit of Regulation 13(3)(e) has been considered by this court in three important recent decisions: R v Chambers [2008] EWCA Crim 2467; R v Mitchell [2009] EWCA Crim 214 and White, Dennard, Perry and Rowbotham v The Crown [2010] EWCA Crim 978. In Chambers it was conceded for the Crown that it had to show that the particular defendant concerned was liable to pay the duty before it could be said that he had evaded it and obtained a “pecuniary advantage”.

In Mitchell the 2001 Regulations were analysed in more detail. Toulson LJ gave the judgment of the court. The principal points decided were: (1) the 2001 Regulations are primarily concerned with civil liability for duty. It is wrong to approach the construction of who has civil liability for the duty under Regulation 13 as if the Regulation were aimed primarily at crooks, because it is aimed at importation in general: [24]. (2) Because Regulation 13 was intended to give effect to the 1992 Directive, it is necessary to look at the scope of that Directive, in particular Article 7(3): (Footnote: ²) [31]. (3) The intent of Article 7(3) is that the person liable for the duty is primarily the consignor or consignee of the goods to be imported, or where one and the same person is the “holder” of the goods both before and after importation, that person: [31] (4) That is the rational way to interpret Regulation 13(3)(e) of the 2001 Regulations: [31]. The different language in Regulation 13(3)(e), viz. “any person who caused the tobacco products to reach an excise duty point” may have been used to make clear that attention is being directed to the person who may not be physically making the delivery but “is the person who is truly responsible for it being made”, so that, eg. it would be the corporate employer, not the driver, who is liable: [31]. (5)The court said that it would not make final decisions on those points because it had not heard full argument on them. However, the court did say that “…it appears to us that [Regulation 13(3)(3)] is directed at that person or body who had real and immediate responsibility for causing the product to reach [the excise duty] point, which will typically and ordinarily be the consignor”: [32].

In White, Dennard, Perry and Rowbotham v The Crown, this court had full argument on all aspects, including European law issues on which specialist counsel were instructed to argue the matter. (Footnote: ³) Hooper LJ gave the judgment of the court. He stated at [61]:

“Although Regulation 13 [of the 2001 Regulations] does not refer to persons “having the specified connection with the excise goods at the excise duty point” as Regulation 5 of the 1992 Regulations did, [the Crown] accepts that it must be interpreted in conformity with section 1(4) of the Finance (No 2) Act 1992 so that a person who has caused the tobacco products to reach an excise duty point is not liable for the duty unless he retained a connection with the goods at the excise duty point. Interpreted in this way, Regulation 13(e) is not ultra vires”.

The judgment next considered in detail the relationship between the 1992 Directive and the 2001 Regulations. The court did not reach any final view on whether there was any incompatibility between those made liable to pay duty under the 1992 Directive and under Regulation 13 of the 2001 Regulations, although it thought this unlikely: [103]. However, the court also saw “force” in the submission of the appellants that Article 7(3) of the 1992 Directive was prescriptive, so that Member States could not add further categories of persons liable to pay duty beyond those identified in Article 7(3). The court’s view was that if the 2001 Regulations had done so, then it was to be “disapplied” to the extent it had.

The judgment then examined the decision in Mitchell, in particular the passage at [32] that we have quoted above. At [115] the court concluded:

“In the light of the acceptance in these appeals that a person who caused the tobacco products to reach the excise duty point (ie. the point of importation) is only liable if he retained a connection with the goods at the point of importation, it is likely in many cases that such a person would also have real and immediate responsibility for causing the product to reach that point. If a case arises where such a person did not have real and immediate responsibility for causing the product to reach the excise duty point, then the correctness or otherwise of the underlined obiter passage [in Mitchell at [32]] will have to be considered”. (Footnote: ⁴)

The upshot of the decisions in Mitchell and White, Dennard, Perry and Rowbotham v The Crown appears to be that, under Regulation 13, a person cannot be liable to pay duty on tobacco imported by sea in a ship unless one of two conditions is satisfied. Either he must be “holding” the tobacco at the excise duty point, or he must both have “caused” the tobacco products to reach the excise duty point and he must also have retained a connection with the goods at that point. We respectfully suggest that the phrase used by Toulson LJ at [32] in Mitchell that the person or body must be the “real and immediate responsibility for causing the product to reach that point” is an elaboration that only underlines the fact that the person or body “causing” the product to reach the excise duty point must not have too remote a causal connection. It will be a question of fact in each case whether a person has “caused” the product to reach the excise duty point and whether that person retains a connection with the goods at the point of importation.

The argument for the Crown is that each of the appellants “caused” the importation of the counterfeit cigarettes and each retained a sufficient connection with them at the moment that the container vessel reached the limits of the port of Felixstowe. Therefore each became liable to pay duty on the cigarettes and each evaded that liability, thereby obtaining a “pecuniary advantage”.

The argument advanced on behalf of the appellants on the correct construction of the first part of section 75(2)(c) (ie. “the six months issue”) can be summarised as follows: (1) the aim of the “criminal lifestyle” provisions in section 6(4) and 75 of POCA is to ensure that serious and long-standing criminals are stripped of the benefits of all their “general criminal conduct”. (2) Therefore section 75(2) is intended to identify classes of serious and long-standing criminals to which the “criminal lifestyle” provisions will apply. The offences listed in Schedule 2 (to which section 75(2)(a) refers) are serious offences. The list includes such offences as people, arms and drug trafficking, and also money laundering. Section 75(2)(b), as explained by section 75(3), is also aimed at serious and long-standing criminals. (3) It cannot have been the intention of Parliament to catch those who only played a small or short – time part in a larger conspiracy (itself of over six months) because that is inconsistent with the aim of section 75(2). (4) Therefore section 75(2)(c) must be construed so as to be “defendant focused”. Accordingly, it should be interpreted as if it read as follows: “it is an offence committed by this defendant over a period of at least six months and the defendant has benefited from the conduct which constitutes the offence over a period of over six months”. (Additional words have been added in bold). (5) The appellants’ involvement in the conspiracy must have ended upon their arrest on 13 and 14 September 2004 or when HMRC seized the bill of lading on13 September 2004. Therefore, in respect of the appellants Bajwa, Sohi and Sahnan the prosecution cannot establish that they committed the offence of conspiracy of which they have been charged for a period of at least six months.

Counsel for the appellants and for the Crown said that they had been unable to find any authority on the construction of this part of section 75(2)(c). We are unaware of any that is specifically in point. After the hearing our attention was drawn to the decision of this court (to which Aikens LJ and Irwin J were a party) in R v Evwierhowa [2011] EWCA Crim 572. That case concerned the question of whether confiscation proceedings should be brought under the provisions of the Criminal Justice Act 1988 (as amended) or POCA. It concerned a conspiracy to make false instruments, namely false passport applications. The particulars of offence in the indictment stated that the conspiracy ran from 1 January 2003 to 16 May 2007. The appellant pleaded guilty to the conspiracy, but in his basis of plea he stated that he had countersigned the first false application on 29 October 2003. The relevant provisions of POCA came into force on 24 March 2003. This court held that the appellant had been convicted of an offence which had begun before the commencement date of POCA, so that, on the correct construction of the Proceeds of Crime (Commencement No 5, Transitional Provisions, Savings and Amendment) Order 2005 (SI 2003/333), the 1988 Act applied: see [28]-[31]. The present argument about the correct construction of section 75(2)(c) was not raised at the hearing nor considered in the judgment, because the issue was which statutory regime applied, which depended on the dates of the conspiracy to which the appellant had pleaded guilty. The case did not turn on whether the particular appellant fulfilled the “six month” test in section 75(2)(c) of POCA.

This question of whether the appellants have obtained a “pecuniary advantage” is relevant to two aspects of these confiscation proceedings. First, it is relevant to the question of whether the conditions in section 75(2)(c) are fulfilled so that the relevant defendant is to be regarded as having a “criminal lifestyle”. Whatever the answer to the “six month issue”, the Crown has to prove that the particular defendant concerned had also “benefited from the conduct which constitutes the offence”. In this case that “benefit” is said by the Crown to take the form of evading the duty payable on the counterfeit cigarettes, thereby obtaining a “pecuniary advantage” within section 76(5). By the same provision, the person who has obtained the “pecuniary advantage” 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” that he has obtained. Because “money” falls within the definition of “property” by virtue of the terms of section 84(1)(a) of POCA, if someone has obtained a “pecuniary advantage” as a result of or in connection with conduct, he is therefore deemed to have “obtained property” as a result of or in connection with that conduct and so he will have “benefited from the conduct which constitutes the offence” within section 75(2)(c). If so, the second part of the condition in section 75(2)(c) will be fulfilled in respect of that particular defendant.

Secondly, the question of whether the appellants have obtained a “pecuniary advantage” is relevant to the court’s decision on what, if any, “benefit” each of the appellants have obtained, either from his “general criminal conduct” or his “particular criminal conduct”, for the purposes of section 6(4) of POCA. The points raised are the same.

The argument for all the appellants on this issue is that none of them was ever liable to pay the duty on the counterfeit cigarettes, so that none could have evaded the duty and thus none could have obtained any ‘pecuniary advantage”. There are a number of strands to the argument. The first point taken is that none of the appellants is a person who is liable to pay the duty within the terms of the 2001 Regulations. In support of this the appellants rely on the fact that HMRC seized the bill of lading on 13 September 2004. Therefore, it is said, none of the conspirators could be “holding” the cigarettes at the excise duty point, because none possessed the bill of lading, which was “the key to the goods” and none had any other right to obtain possession of the cigarettes anymore. The appellants also rely on the fact that all the appellants were arrested on 13 and 14 September 2004, which meant that they must have impliedly ceased to have any further interest in the goods. Furthermore, in the circumstances none of the appellants could have “caused” the tobacco to reach the excise duty point, nor did they retain a sufficient connection with the goods as at the duty excise point.

The second point taken is that, even if one or more of the appellants was liable to pay the duty, none evaded it. In this regard the appellants submitted that their part in the conspiracy ended when they were arrested so they could not be said to be conspiring to evade the duty on the cigarettes any longer. Therefore they were not “evading” the duty. Moreover, it is submitted that the judge did not investigate or make a finding as to whether particular defendants were liable to pay the duty on the cigarettes within Regulation 13 of the 2001 Regulations and this court cannot do so in the absence of relevant findings of the judge.

The resolution of this issue depends entirely on the correct construction of section 75(2)(c). We make two observations at the outset. First, section 75(2)(c) must be construed in the context in which that provision appears, which context embraces both POCA in general and the provisions in POCA concerning “criminal lifestyle” in particular. In the “Endnote” in R v May [2008] 1 AC 1028 at [48], Lord Bingham of Cornhill enjoined all courts and judges who have to construe the legislation dealing with confiscation orders to focus very closely on the language of the statutory provision in question, in the context of the statute and in the light of any statutory definitions. He said that the language used was not arcane or obscure and “any judicial gloss or exegesis should be viewed with caution”. He also emphasised that guidance should be sought in the statutory language rather than the “proliferating case law”. We bear those passages very much in mind.

Secondly, we observe that if the Crown establishes (on a balance of probabilities) that a defendant falls within one or other of the tests for having a “criminal lifestyle” as set out in section 75(2), the consequences for him are serious. In the first place, if he does so then the court has to enquire into whether he has benefited from his “general criminal conduct”. That inquiry can be far wider and have far more serious consequences than an inquiry simply into his benefits from “particular criminal conduct”. Secondly, the court investigating whether a defendant who is held to have a “criminal lifestyle” has benefited from his “general criminal conduct” will, prima facie, use the four statutory “assumptions” set out in section 10 of POCA. Therefore, following basic canons of construction of penal statutes, if there is any ambiguity in the language of section 75(2)(c) then that must be resolved in favour of those who would otherwise be subject to the draconian regime that would be imposed on them if they were to be held to have a “criminal lifestyle”.

The starting point for the construction of section 75 must be the statement of Lord Bingham of Cornhill in Jennings v Crown Prosecution Service [2008] 1 AC 1046 at [13] and [14] that the object of the confiscation legislation is to deprive individual defendants of the product of his crime or its equivalent, so that the focus of any enquiry under the legislation is the benefit “obtained by him”. It seems to us that, consistent with this legislative objective, the focus of section 6(4) and section 75 is upon identifying the circumstances in which individual defendants will be regarded as having a “criminal lifestyle”. If the individual defendant has one, then the court must investigate his benefit from his “general criminal conduct”. That is why section 75(1) states that “a defendant has a criminal lifestyle if (and only if)…” one of the conditions set out in section 75(2) is fulfilled.

If one then examines section 75(2)(a) in particular and asks: how is the condition set out in section 75(2)(a) fulfilled in relation to a particular defendant, the answer must be that the particular defendant must have committed one or more of the offences set out in Schedule 2 of POCA. The schedule sets out a list of offences under the general heading of “Lifestyle Offences: England and Wales”. Paragraph 10 of Schedule 2 states, under the heading “Inchoate offences”:

“(1)

An offence of attempting, conspiring or inciting the commission of an offence specified in this Schedule.

(2)

An offence of aiding, abetting, counselling or procuring the commission of such an offence.”

Therefore, for example, if an individual defendant has committed the offence of conspiring to possess prohibited drugs with intent to supply, over whatever period he has been involved in such a conspiracy, he will fulfil the condition set out in section 75(2)(a). Under that paragraph there is no additional requirement that the particular defendant has also benefited from the conduct that constitutes the offence. The “minimum benefit” provision (of £5000) in section 75(4) does not apply to section 75(2)(a).

In the case of section 75(2)(b), the condition, or “test” to use the statutory word, is that the offence (or offences) concerned “constitute conduct forming part of a course of criminal activity”. The phrase “conduct forming part of a course of criminal activity” is defined in section 75(3). Conduct will only form part of a course of criminal activity if (1) “the defendant has benefited from the conduct”, and (2) either “(a) in the proceedings in which he was convicted he was convicted of three or more other offences, each of three or more of them constituting conduct from which he has benefited”, or “(b) in the period of six years ending with the day when those proceedings were started…he was convicted on at least two separate occasions of an offence constituting conduct from which he has benefited”. (We have added the (1) and (2) for convenience).

Thus in all cases coming within section 75(2)(b) the “test” focuses on what a particular defendant has done. In all cases he has to have benefited from his criminal conduct, subject to the minimum of £5000 set out in section 75(4). He also has to have been convicted of a certain number of offences. He does not have to have been involved in one any particular offence for any particular length of time. However, the requirements of section 75(3)(a) and (b) that the defendant has to have been convicted of three or more offences in total over the last six years make it clear that section 75(2)(b) is aimed at long-standing criminals who have benefited by at least £5000 from their extensive criminal conduct.

Thus, we think it clear that both section 75(2)(a) and (b) are aimed (“the offence (or any of the offences) concerned”) at the offence or offences committed by the defendant whose case is being considered to see whether or not he has a criminal lifestyle. Both are focusing on what offences the particular defendant has committed.

Against that background we can now analyse section 75(2)(c). In our view the wording “it is an offence committed over a period of at least six months” must relate to the particular defendant’s part in an offence, so that the defendant being considered must have committed the offence for at least six months. We say this for four reasons. First, that approach is consistent with the object of section 75, which is to identify particular defendants who have a “criminal lifestyle”. Secondly, section 75(2)(c) is the third set of “tests” for establishing whether a defendant has a criminal lifestyle. It only needs be considered if a defendant does not fulfil the other two. It should be construed consistently with paragraphs (a) and (b) in which the first question is whether the particular defendant has committed the offences identified in those paragraphs. Thirdly, if it were enough for paragraph (c) that “the offence” at large was committed over a period of at least six months, it produces a startling anomaly. It would mean that in a case where there is only one defendant involved in the offence, it would have to be demonstrated that he had committed the offence concerned for at least six months. But if there is more than one defendant involved in the same offence, then (on that construction) the defendant (A) committing the offence only on the last day of a period of at least six months would be caught by the paragraph, but only if it could be demonstrated, for at least one other co-defendant (B), that the offence had been committed over at least six months. For example, if there was a long-standing conspiracy to smuggle counterfeit cigarettes into the UK with the intention of fraudulently evading the duty payable and one defendant (of previous good character) was engaged, for a fee of £5001, to be the driver on the day prior to the last run before all the defendants were arrested, he would be caught by this paragraph. Yet it would seem almost perverse to describe that driver as having a “criminal lifestyle”. Fourthly, the practical consequences of accepting the Crown’s submissions would produce a difficulty. No matter how short a period a particular defendant (A) was involved in a conspiracy, so long as one other co-defendant was involved for at least six months then defendant (A) could never enter a basis of plea that would avoid him being treated as having a “criminal lifestyle”.

Our conclusion, contrary to the decision of HHJ Atherton, that a particular defendant will only come within section 75(2)(c) if it is demonstrated that he had committed the relevant offence for a period of at least six months has consequences for the position of the appellants Sahnan, Bajwa, Sohi and Midgley. In relation to Sahnan, the Crown has conceded that it cannot show that he had been involved in the conspiracy for at least six months. It must follow therefore that he cannot come within section 75(2)(c) and so cannot be subject to the “criminal lifestyle” provisions of POCA.

In relation to Bajwa, Sohi and Midgley, the judge made no finding of fact on how long they were involved in the conspiracy, because it was not necessary for him to do so on his interpretation of section 75(2)(c). The submission to us on behalf of the appellants was that the earliest date of their involvement in the conspiracy was 17 March 2004. They also submit that their involvement must have terminated by 14 September 2004 at the latest because (a) by then they had been arrested; and (b) HMRC had seized the bill of lading on 13 September 2004. Therefore, either those appellants must have withdrawn from the conspiracy or the conspiracy must have terminated because its object was no longer capable of being fulfilled because the conspirators could not obtain possession of the container as they could not present the bill of lading upon discharge of the container to do so. The Crown submits that if Midgley is permitted to re-open the issue of the extent of his participation in the conspiracy, the evidence demonstrates that he was involved before 17 March 2004, so that even if his participation ended on 13/14 September, overall it was for longer than six months.

The burden of proving fulfilment of the statutory criteria under any of the three paragraphs of section 75(2) must lie on the Crown. In accordance with section 6(7) of POCA, any question concerning whether a defendant has a “criminal lifestyle” must be decided on a balance of probabilities. On our construction of section 75(2)(c), the Crown must therefore prove, on a balance of probabilities, that Bajwa and/or Sohi and/or Midgley were involved in the conspiracy alleged for at least six months.

Before considering the parties submissions, we remind ourselves of some elementary points on the law of criminal conspiracies. First, a conspiracy is an agreement, or a common understanding, between the conspirators that a particular course of conduct should be pursued which will involve the commission of the crime that is specified in the Indictment. Secondly, the existence of such a common understanding may, in some cases, be proved by specific evidence of words or writings in which the conspirators evinced such an understanding. But more commonly the existence of the conspiracy has to be inferred from all the circumstances, including the “overt acts” of the conspirators. Thirdly, the duration of the conspiracy or of a particular conspirator’s part in it may also have to be proved by drawing inferences from all the circumstances, including “overt acts” of those involved. Fourthly, in the absence of any specific evidence of words or writing which demonstrate the point at which the common understanding was formed, the start date of the conspiracy will usually have to be proved by reference to the earliest “overt acts” on the part of any of the conspirators. Similarly, the start date of the involvement of one particular conspirator’s participation will have to be proved by proof of his earliest “overt act”.

Fifthly, once the conspiracy has begun, it will normally (in the absence of evidence to the contrary) be a reasonable inference that it continues until its object had been achieved. Evidence to the contrary might include specific evidence of words or writings by which the conspirators agreed to call the whole thing off, or of actions on their part from which it can reasonably be inferred that they must have done. Likewise, once a particular defendant has joined a conspiracy, it will normally (in the absence of evidence to the contrary) be a reasonable inference that he remained a party to it until the conspiracy as a whole came to an end, typically because its object had been achieved. Evidence to the contrary might include specific evidence of words or writings by which that defendant indicated an intention to withdraw, or of actions on his part from which it can reasonably be inferred that he must have done. Often that will be in the form of a communication by conspirator (A) to another conspirator (B), or to a non- conspirator, that (A) was ceasing to be involved.

Lastly, we consider, in general, what the position is if the object of the conspiracy becomes impossible of achievement; ie. in this case, that it would no longer be possible to import the counterfeit cigarettes and evade the duty payable on them because HMRC knew about the plot and were going to seize the container and its contents. We think that the result will depend on whether or not the conspirators know that the object of their common understanding is no longer capable of being fulfilled. Broadly, if they do know, then the inevitable inference is likely to be that the agreement or common understanding to pursue a course of conduct which involves the commission of the offence which can now no longer be achieved will have come to a full stop. There might be specific evidence of words or writings to show that the unlawful plan is at an end, but that hardly seems necessary.

On the other hand, if the conspirators do not know that the object of their common understanding is no longer capable of being fulfilled, the offence will carry on. We think that this distinction is well illustrated by the case of R v Green (Harry) [1976] QB 985. That was an appeal against convictions of the appellant for (a) being knowingly concerned in the fraudulent evasion of the prohibition on the importation of cannabis, contrary to section 304 of the Customs and Excise Act 1952, (the forerunner of section 170(1)(a)(iii) of CEMA) and (b) conspiring to evade the prohibition on the importation of a controlled drug. Crates containing the cannabis had, unbeknown to the conspirators, been intercepted by HM Customs after discharge from a vessel at Southampton. The crates had been refilled with peat and paper by Customs officers and then sent on their way. The appellant had been involved in this enterprise but only after the cannabis had been seized and the peat and paper substituted. He knew nothing of the interception. It was argued that the appellant could not be guilty of the offence of being knowingly concerned in the fraudulent evasion on the prohibition of the importation of cannabis because the objective, ie. to evade the prohibition, was impossible of attainment by the time he became involved. It was also argued that his agreement to be involved after the cannabis had been seized could not amount to him being party to a conspiracy to commit the substantive offence.

The Court of Appeal rejected both arguments. In giving the reserved judgment of the Court, Ormrod LJ said in relation to the substantive offence (at page 993D):

“The actus reus of this offence is being concerned in the evasion or attempted evasion of a prohibition on the importation of the goods in question, not the successful evasion. All the necessary ingredients were proved or admitted: cannabis is a prohibited drug; it was imported in breach of the prohibition; so evasion was established. We accept [counsel for the Crown’s] argument that evasion is a continuing offence, that is, that it does not cease when the cannabis was seized by the authorities. Once imported the evasion of the prohibition continues until the goods ceased to be prohibited goods, or, possibly, are re-exported”.

Ormrod LJ then dealt with the offence of conspiracy. He said (at page 993F):

“There is ample authority for the proposition that the actus reus of conspiracy is the agreement to effect an unlawful purpose, and that the offence is committed whether or not any act is done in pursuance of the agreement. It must follow that the fact that, unknown to the conspirators, the unlawful purpose could not be achieved is no defence…in the present case only the lifting of the prohibition could prevent their purpose from being unlawful”.

In DPP v Nock [1978] AC 979, the House of Lords considered some remarks of Ormrod LJ in Green on the effect of statements of Lord Hailsham of St Marylebone in R v Smith [1975] AC 476, but the correctness of the principal analysis and the decision in Green was not doubted. In R v Sissen [2001] 1 WLR 902, this court followed the principles set out by Ormrod LJ quoted at [59] above in the context of a charge under section 170(2)(b) of CEMA of evading an EU restriction on the importation of rare macaws into the EU.

In this case, on our construction of section 75(2)(c), it must be for the Crown to prove, on a balance of probabilities, that a particular defendant was involved in the conspiracy for at least six months; it is not for a defendant to establish that either the conspiracy as a whole or his part in it has come to an end. We accept that the Crown might be able to discharge the burden by producing positive evidence that, even after the object of the conspiracy had, in fact, become unachievable, some or all of the conspirators were nonetheless trying to find ways of retrieving the situation and obtaining their objective after all.

Because this court is a court of review, not one for making primary findings of fact, we cannot make new findings of fact except on the basis of either the material that was before the judge or the facts that he has already found: see R v Mark Barrington Grainger [2008] EWCA Crim 2506 at [14] and [16]; R v Seager; R v Blatch [2009] EWCA Crim 1303 at [56] and [92]. There are no findings of fact by Judge Atherton on this particular point, so we can only draw inferences from those findings that he has made and any other relevant material that was before him.

In relation to the start-date of Midgley’s participation in the conspiracy, counsel had conceded, in the course of the hearing before HHJ Atherton on 3 June 2008, that Midgley’s first contact with Mallinson was 1 February 2004, although in fact the Crown accepts that it was only 1 March 2004. It is submitted that the concession was made without instructions, so that Midgley should now be permitted to re-open this issue of fact. We do not accept that he should be permitted to do so in the absence of any compelling argument or evidence to show that the concession of fact was wrong. The concession must stand. Therefore, even assuming Midgley’s participation in the conspiracy ended on 14 September 2004, he is in the same position as Mallinson on the “six month issue” on the facts.

In relation Bajwa and Sohi and the end date of the conspiracy, the fact that the bill of lading was seized by HMRC on 13 September 2004 cannot, by itself, terminate the conspiracy. Its seizure did not make the object of the unlawful agreement impossible to achieve. There are, unfortunately, many reported instances of a person gaining possession of containers without production of the bill of lading, even if presentation of the bill of lading by the lawful holder is the normal, legitimate, means of obtaining possession of goods upon discharge from a vessel. Nor would the seizure of the bill of lading by HMRC, by itself, persuade us that Bajwa and Sohi had withdrawn from the conspiracy.

However, we think that the combination of the arrest and interview of the appellants plus the fact of the seizure of the bill of lading by HMRC, which all of the appellants must have known about, leads to the inevitable inference that all the appellants must have appreciated that HMRC knew all about the plan to smuggle in the cigarettes in the container and that HMRC was in complete control of the situation. As soon as HMRC got the bill of lading, it knew which ship the container was loaded on and which port it would be discharged at and when. There was no means by which the container could have been diverted and unloaded at another port.

We accept that there is no direct evidence that the original intention of the conspirators to deceive HMRC had ended. However, we think that the reasonable inference, on the facts that we have, must be that Bajwa and Sohi did not continue with that intention after 14 September and that the original common understanding between the conspirators, particularly Bajwa and Sohi, could no longer have been in existence. We think the only common sense conclusion is that from 14 September 2004 they must have known that the attempt at deception of HMRC had failed or was doomed to failure.

The Crown emphasised the fact that neither Bajwa nor Sohi gave any evidence in the confiscation proceedings that explained what their position was after 13/14 September 2004. The Crown relied on cases such as R v Olubitan [2004] 2 Cr App R (S) 70 at [25] for the proposition that a court may be entitled (using the proper standard of proof) to make robust inferences if convicted defendants remain unhelpful as to which of them obtained what benefit as defined by POCA or similar Acts. In our view that does not assist the Crown in this case for three reasons. First, the burden was on the Crown to establish that a particular defendant’s part in the “offence” continued for at least six months and the Crown’s own evidence led to the opposite conclusion in the case of Bajwa and Sohi. Secondly, there are difficulties in expecting a defendant who has pleaded not guilty but been convicted (as had both Bajwa and Sohi) to give evidence in the subsequent confiscation proceedings to the effect that he had, after all, been guilty of the conspiracy but over a period of less than six months. Thirdly, given the Crown’s case on the “six month” point, it appears to us that these issues of fact were not given the focus that they now have to receive as a result of our conclusion on the correct construction of section 75(2)(c) of POCA. It would be unfair to invoke the principle of “robust inferences” against the appellants in those circumstances.

Our conclusion, therefore, is that the Crown has failed to show that either Bajwa or Sohi was involved in the conspiracy offence for at least six months. Accordingly, Bajwa, Sohi and Sahnan do not fall within the ambit of section 75(2)(c). As already noted, Mallinson accepts that they cannot take the “six month” point. Midgley is bound by the concession of fact made by counsel before HHJ Atherton so that fulfils the six month “test” on the facts.

Having reached those conclusions, we must go on to consider the arguments on the “pecuniary advantage” issue in order to decide whether Mallinson and Midgley fall within the terms of section 75(2)(c). The outcome of this question will also determine whether, in relation to the duty on the counterfeit cigarettes, any of the appellants “obtained a benefit” for the purposes of sections 76(5) and 6(4) of POCA.

We state first of all some principles which cannot be challenged in this court. (1) A person “obtains a pecuniary advantage” within section 76(5) of POCA if he evades or defers a debt that is then due and owing. (Footnote: ⁵) (2) Duty is payable on tobacco imported by sea in ships when the ship enters the limits of the port where the goods are to be imported. (Footnote: ⁶) (3) Duty will be “evaded” when the duty becomes payable but it is not paid. The precise point at which evasion occurs is, however, controversial. (Footnote: ⁷) (4) If goods are smuggled into the UK past the “excise duty point” and excise duty is thereby evaded, a “pecuniary advantage” to the extent of the duty evaded will be obtained even if the goods are thereafter seized by HMRC or are lost or destroyed. (Footnote: ⁸) (5) a person is only liable to pay excise duty on tobacco imported by sea in a ship if (a) he is “holding” the goods at the excise duty point, or (b) he caused the goods to reach the excise duty point and he retained a sufficient connection with the goods at that point. (Footnote: ⁹) (6) The Crown must prove, on a balance of probabilities, that a particular defendant has (a) evaded the duty payable, so that (b) a “pecuniary advantage” within section 76(5) has been “obtained by him” and that defendant has thus obtained a “benefit” to the extent of the monetary value of that pecuniary advantage. (Footnote: ¹⁰)

It seems to us that three questions therefore arise in this case under this issue. They are: (A) on the facts of this case, which of the appellants, if any, was liable to pay excise duty on the counterfeit tobacco; (B) if any were so liable, when did that liability arise in principle; (C) was there any “evasion” of that duty by any particular appellant so as to obtain a “pecuniary advantage” within section 76(5) of POCA, with the consequence that that appellant obtained a “benefit” for the purposes of section 76(4) and so section 75(2)(c) (relevant only to Mallinson and Midgley) and section 6(4) of POCA, which is relevant to all appellants.

Which appellant, if any, was liable to pay excise duty on the tobacco?

The first question is whether any appellant was “holding” the counterfeit cigarettes at the time that it entered the port of Felixstowe on 22 September 2004. As the law currently stands, that depends on whether any of them had possession or control of the cigarettes at that point. Obviously, none of them was physically in possession of the cigarettes at the time. However, it is elementary commercial law that if a person is the lawful holder of a bill of lading then he has “symbolic” or “constructive” possession of the goods that are identified in the bill of lading, such that he can demand their delivery up by the shipowner at the completion of the contractual voyage. We are prepared to assume, without deciding the point, that for the purposes of Regulation 13(3)(e) of the 2001 Regulations, a person who is the lawful holder of a bill of lading for the goods in respect of which he intends to import will be “holding” those goods, whether or not he is the consignor or consignee named in the bill of lading.

However, there are two difficulties about establishing “possession” by that means in this case. First, although the bill of lading identified the right container, it did not identify the cigarettes as being within the container. Second, and more importantly, at the time the ship entered the port of Felixstowe none of the appellants was the lawful holder of the one bill of lading we know about because it had been seized by HMRC on 13 September 2004.

There were two other bills of lading in the set of three that had originally been issued by the carriers upon shipment of the container in China. However, there was no evidence before the judge about who possessed those documents on 21/22 September 2004 and so there is no basis on which we can find that any of the appellants actually held one of the other bills of lading at the relevant time. It might be argued that another of the total of eight conspirators held one of the other two bills of lading at the time the vessel entered the port of Felixstowe. Therefore (it might be argued), as all eight conspirators had a joint interest in the cigarettes, therefore all eight must have had joint “symbolic” or “constructive” possession of the cigarettes at that time. We accept that this is a theoretical possibility, but there are no findings of fact which enable us to reach that conclusion. We therefore do not need to consider whether any of the conspirators was a “lawful holder” of one of the bills of lading.

For similar reasons we must reach the conclusion that none of the appellants had “control” over the cigarettes at the time that they entered the port of Felixstowe. Therefore we conclude that it is not established that any of the appellants was “holding” the cigarettes when they entered the port of Felixstowe.

Accordingly, we have to go on to consider whether any of the appellants “caused” the cigarettes to reach the excise duty point, viz. when the vessel carrying the container entered the port of Felixstowe, within regulation 13(e) of the Tobacco Products Regulations 2001. If so, then we must consider whether that person has also “retained a connection with the goods at that point”: see [39] above. In his ruling of 8 June 2008 the judge did consider the question of whether any of the appellants “caused” the cigarettes to reach the excise duty point. However, he did so by asking whether any defendant had “benefited” from smuggling in the cigarettes and he referred to the decision of this court in R v Houareau [2006] 1 Cr App R (S) 89.

In that case the appellant had been the organiser of the importation of two million cigarettes by lorry from France. The question was whether, for the purposes of making a confiscation order under the Criminal Justice Act 1988, he had obtained a “benefit” by evading the duty payable on the cigarettes, within section 71(5) of the 1988 Act. The case was decided before the leading House of Lords cases of R v May and Jennings v Crown Prosecution Service. Keene LJ gave the judgment of the court. It does not appear that the court in Houareau was referred to all the relevant legislation concerning importation and the imposition of duty that we have set out above. In particular, the court was not referred to the fact that the general rule in section 1(1) of CEMA, that an “importer” is liable to pay duty on imported goods, gives way to a specific regime with regard to imported tobacco products. Keene LJ concluded, at [18], that a judge could find that a person who has knowingly played his part in the importation of cigarettes has a “beneficial interest” in the goods, so that the appellant was to be regarded as an “importer” of the cigarettes (within section 1(1) of CEMA) and therefore liable for the unpaid duty. Keene LJ concluded that :“It then follows that, on the authority of Smith, he derived a “pecuniary advantage” within the meaning of section 71(5) of the 1988 Act”. However, because Houareau did not deal with the 2001 Regulations, it is cannot assist us on the question of whether any of these appellants “caused” the cigarettes to be imported within Regulation 13(3)(e).

In his ruling of 8 June 2008, HHJ Atherton said he would rely on facts found for the purposes of sentencing when making his ruling on issues concerning confiscation orders. In his sentencing remarks of 29 June 2006, the judge found: (1) all the appellants played a part in the arrangements for the importation of the cigarettes into the UK: (page 3B). (2) Mallinson was involved in setting things up in China: (page 3G-4B). (3) Bajwa, Midgley, Sohi and Sahnan were involved in arrangements in the UK: (page 4B-F). (4) Mallinson met Sohi on 13 September 2004 in the car park of the Lambeth Arms near to the M40 so that the bill of lading would be handed over: (page 4H). Overall, the judge concluded that each appellant “..has played a substantial role in the planning or carrying out or both of this conspiracy…the roles of all these defendants were, in my view, complimentary to the common purpose, namely to smuggle these counterfeit cigarettes in the United Kingdom and thereby defraud the Revenue and incidentally those who were going to buy these cigarettes”: (page 6G-H).

On the basis of those findings of fact we think that it would have been open to the judge to find that each of the appellants “caused” the counterfeit cigarettes to reach the relevant excise duty point: viz. the limit of the port of Felixstowe. In addition, we think that on those facts it would also have been open to the judge to conclude that each of the appellants was a person who had “real and immediate responsibility for causing” the cigarettes to reach the excise duty point, viz. the limit of the port of Felixstowe. As the Crown pointed out in argument, there was nothing more that any of the conspirators needed to do for the container and the cigarettes to sail past the limits of the port of Felixstowe and it was as a result of their actions that the container and the goods got onto the quayside at Felixstowe.

Therefore we must go on to the next question: did any of the appellants “retain a connection” with the cigarettes at the excise duty point? This is, we think, a more difficult question to answer, not least because the judge (unsurprisingly because the relevant case law had not been developed as at June 2008) did not make any specific findings of fact on this issue. As already noted, we cannot make any new findings of fact except on the basis of either the material before the judge or the actual findings he has made.

Effectively (although it was not put in the terms of the judgment of Hooper LJ in R v White, Dennard, Perry and Rowbotham), the argument of the appellants is that when the vessel entered the port of Felixstowe on 21 September 2004, they no longer retained any connection with the cigarettes because (a) HMRC had seized the bill of lading on 13 September; and (b) they had all been arrested on 13 and 14 September and so (c) the conspiracy had come to an end then because its object was no longer capable of being achieved, and (d) they had terminated any part in the conspiracy when the cigarettes were seized by HMRC on 22 September 2004.

We point out again that it must be for the Crown to prove, on a balance of probabilities, that the appellants retained a sufficient connection with the cigarettes as they passed the excise duty point on 21 September 2004. If we are correct in our analysis above that the result of the combined effect of the seizure of the bill of lading by HMRC on 13 September 2004 and the arrest and questioning of the appellants on 13/14 September 2004 is that (a) the appellants must, by inference, have ended their common understanding to carry out the conspiracy and (b) it was no longer possible to achieve the object of the conspiracy, then that must have an impact on whether any of the appellants retained a connection with the cigarettes by the time they passed the excise duty point. In our view, on the facts as found by the judge and on the material before him, it is impossible for us to conclude that the Crown could prove, on a balance of probabilities, that any of the appellants had retained a connection with the cigarettes by the time the vessel passed the excise duty point. The conspiracy was impossible of completion; the basis of the common understanding had come to an end. The obvious inference is that the appellants had abandoned any connection they had with the cigarettes by 21 September 2004.

Accordingly, we must conclude that none of the appellants were persons who were liable to pay the excise duty on the cigarettes at the moment that the vessel, loaded with the container, passed within the limits of the port of Felixstowe on 21 September 2004.

When did the liability to pay excise duty arise in principle?

We have answered this question in the course of answering question (A). The excise duty became payable upon the container and its contents passing within the limits of the port of Felixstowe on 21 September 2004. Once a ship comes within the limits of its discharge port it is then and there at the “excise duty point”: see Glyn Edwards v The Crown [2004] EWCA Crim 2923, per Newman J at [9]. However, for the reasons we have given above, that conclusion does not matter on the facts of this case.

Was there an evasion of the excise duty by any of the appellants?

As we have concluded that none the appellants were persons who were liable to pay duty on the cigarettes once the cigarettes had passed the “duty excise point”, we do not need to consider the three questions that remain. But we think that we should briefly express a view on them nonetheless. The questions are: first, does any further action or inaction have to be proved, on a balance of probabilities, to demonstrate that the appellants “evaded” the duty that was due once the cigarettes had passed the “duty excise point” such that a “pecuniary advantage” is obtained. We note that the Crown accepted before us that it had not proved that any of the appellants had done anything positive in relation to the conspiracy after their arrests on 13/14 September 2004. Secondly, when does the action or inaction have to take place? Thirdly, can the position of any of the appellants be differentiated?

What constitutes “evasion” of the duty? What (if any) actions or inactions are needed to “evade” the duty?

If we consider this point first without reference to the cases, it seems to us that “evasion” involves avoiding doing something which a person is under an obligation to do. A person can only avoid doing something if he knows that he is obliged to do it. The person will “evade” the obligation if he deliberately so organises affairs that he is able to avoid doing what he knows he has to do. For the purposes of this point, we assume (contrary to our conclusion above) that in this case each of the appellants was, by law, obliged, or liable, to pay duty on the cigarettes the moment they entered the port of Felixstowe. Logically, therefore, if each appellant has deliberately so organised things that this liability to pay duty is avoided, then he would be “evading” his liability. If this is translated into criminal law terms: a person fraudulently evades an obligation if, at the time the obligation arises, he dishonestly intends not to fulfil it.

We think that this is approach is consistent with the decision of this court in Attorney-General’s Reference (No 1 of 1981) [1982] 1 QB 848. The court considered whether, on a prosecution for fraudulent evasion or attempted evasion of a prohibition or restriction in respect of goods or duty chargeable on them, it was necessary for the prosecution to prove acts of deceit were practiced on a customs officer in his presence. The court held that it was not necessary to do so. Lord Lane CJ, giving the reserved judgment of the court, held that the prosecution had only to prove “…fraudulent conduct in the sense of dishonest conduct deliberately intended to evade the prohibition or restriction ...or the duty chargeable on the goods”: see page 856D-E. Therefore there does not need to be proof of any positive act of deceit face to face with HMRC. The question is whether the person concerned (the appellants in this case) has taken steps to avoid an obligation he knows he has to pay the duty.

We also think that our analysis is consistent with the House of Lords’ decision in R v Smith (David) [2002] 1 WLR 54, where the defendant did nothing more than sail the motor vessel up the Humber, past the customs houses at Immingham and Hull and then on to Goole where he berthed. He was held to have evaded the duty payable and thereby obtained a “pecuniary advantage” for the purposes of section 71(4) of the CJA 1988. It was enough that the defendant had the cigarettes on board his vessel and was intent on not presenting them so that duty could be assessed and paid. It is also, we think, consistent with the reasoning in R v Edwards (Glyn) [2004] EWCA Crim 2923. That was a confiscation case under the CJA 1988 where the appellant had successfully got his lorry containing over 3 tonnes of tobacco through the customs point at Hull docks but was then stopped by HM Customs before leaving the port gates. Newman J said at [16]: “A person fraudulently evades the duty chargeable on goods if, at the point of importation, he dishonestly intends not to pay the duty on the goods”. Conduct before and after that point will be relevant to the person’s intention at the time of importation.

When does the evasion of the duty occur?

Upon this analysis, we think that we must respectfully agree with the analysis of Hooper LJ in White, Dennard, Perry and Rowbotham v The Crown [2010] EWCA Crim 978 at [46], viz. that when goods are being smuggled into the UK with the intention of avoiding the payment of any duty due on them, the evasion will take place when the vessel enters the limits of the port. We accept that there may be factual situations where evasion will take place at a later stage, as we think the court may have contemplated in Mitchell at [26]. But on the facts of the present case, if any of the appellants had been liable to pay the duty the evasion would have taken place when the cigarettes passed the limit of the port of Felixstowe.

Can the position of any of the appellants be differentiated?

In our view if we are correct in concluding that all the appellants “caused” the importation of the cigarettes and if we had concluded that they retained a connection with the goods at the moment the excise duty point was passed, then all must be in the same position on the question of “evasion”. No contrary argument was addressed to us on behalf of individual appellants.

In the light of our analysis, we have concluded that the judge was not correct to conclude that all the appellants had obtained a “pecuniary advantage” within section 76(5) of POCA and, therefore, a “benefit” within section 76(4). We emphasise that, unlike the judge, we had the benefit of fuller argument and we have had the benefit of the analysis of more recent case law. But it must follow that none of the appellants satisfy the conditions needed to fall within section 75(2)(c). The judge was therefore not correct to conclude that the appellants had a “criminal lifestyle” for the purposes of section 6(4) of POCA.

It must also follow from our conclusions that none of the appellants has obtained any “benefit” from his particular criminal conduct in relation to the conspiracy fraudulently to evade the duty chargeable on the counterfeit cigarettes, for the purposes of section 6(4) (c) of POCA.

Because we have concluded that none of the appellants falls within section 75(2)(c) and therefore none has a “criminal lifestyle”, Judge Atherton was wrong to determine the appellants “benefit” on the basis of “general criminal conduct” pursuant to section 6(4)(b) of POCA. Furthermore, as we have concluded that none of the appellants was liable to pay the duty on the cigarettes, therefore none could have evaded that liability and so none have obtained a “pecuniary advantage” in relation to that duty. Therefore, the judge’s conclusions on the appellants’ “benefit” based upon that supposed “pecuniary advantage” concerning that “particular criminal conduct” cannot be maintained.

Accordingly, these appeals must all be allowed and the confiscation orders imposed by HHJ Atherton must be set aside.

Since handing down a draft of this judgment, the Crown has submitted, in writing, that it should be entitled to obtain a deprivation order, pursuant to section 143(1) of the Powers of the Criminal Courts (Sentencing) Act 2000, (“PCCSA”) in relation to the £15,000 cash that was seized when Mallinson and Sohi were arrested on 13 September 2004. In the confiscation hearing before HHJ Atherton, that sum plus the interest that had accrued on it was treated as an asset of Mallinson. The Crown now submits that if there is to be no confiscation order against Mallinson, then it is entitled to obtain a deprivation order in relation to the principal sum of £15,000 and accrued interest.

Section 143(1) and (5) of the PCCSA provide:

“Where a person is convicted of an offence and the court by or before which he is convicted is satisfied that any property which has been lawfully seized from him, or which was in his possession or under his control at the time when he was apprehended for the offence…

(a)

has been used for the purpose of committing, or facilitating the commission of any offence, or

(b)

was intended by him to be used for that purpose,

The court may (subject to subsection (5) below) make an order under this section in respect of that property.

……..

(5)

In considering whether to make an order under this section in respect of any property, a court shall have regard –

(a)

to the value of the property; and

(b)

the likely financial and other effects on the offender of the making of the order (taken together with any other order that the court contemplates making)”.

The Crown submits that its case in relation to the £15,000 cash has always been that it was intended to be handed over to Sohi by Mallinson in return for the bill of lading. Therefore, it is said, the cash was intended by Mallinson to be used for the purpose of facilitating the commission of the offence of the conspiracy and that the cash was both lawfully seized from him and was in his possession and under his control at the time when he was apprehended.

The cash was placed in an interest-bearing account. When the final confiscation order against Mallinson was made he signed a form consenting to the sum of £16,244,29 and any accrued interest being paid over “in respect of the confiscation order against me”. The Crown submits that, although it was inappropriate at the time of the confiscation order of HHJ Atherton for there to be a deprivation order in respect of this cash, if the confiscation order against Mallinson is to be quashed, this court should now make a deprivation order, because the Crown Court would have been invited to make one if it had not made the confiscation order.

We are not prepared to consider this application, which is raised at this stage for the first time and could involve some difficult technical issues concerning sections 13 – 15 of POCA and section 11(3A) of the Criminal Appeals Act 1968 as amended. There were no findings of fact by the judge below that Mallinson intended to use the £15,000 to “purchase” the bill of lading or that it was otherwise to be used for the purpose of committing or facilitating the commission of the conspiracy charged or any other offence. This court cannot find facts and we are not prepared to infer them.