Middlecote, R. v

MR JUSTICE SWEENEY:

On 21 February 2005, in the Bristol Crown Court, the appellant pleaded guilty to an offence of conspiracy to fraudulently evade excise duty chargeable on the importation of tobacco products, and was sentenced to 2 years' imprisonment.

On 24 November 2005, during confiscation proceedings in the same court, Her Honour Judge Hagen ruled that the appellant had benefited from the offence in the sum of £568,477.59, and that he had realisable assets to the value of £78,184.90. She therefore made a confiscation order in the sum of £78,184.90p.

On 14 January 2011 we granted an extension of time and leave to appeal against that confiscation order, and subsequently gave our reasons for doing so - see [2011] EWCA Crim 6.

The confiscation order was made under the provisions of the Criminal Justice Act 1988 ("the Act") in respect of apportioned amounts of what was alleged to be evaded excise duty on the relevant tobacco products. The evasion of such duty is, in law, a pecuniary advantage.

Section 71(5) of the Act provides that if a person derives a pecuniary advantage as a result of, or in connection with, the commission of an offence he is to be treated, for confiscation purposes, as having received a sum of money equal to the pecuniary advantage. The subsequent legislation contains similar provisions.

The transcript of the confiscation proceedings demonstrates that, unfortunately, no one applied their mind to the question of whether the appellant had himself obtained a pecuniary advantage either directly, because he was liable for the duty himself, or indirectly, because he had the necessary causal link with the non payment of the duty by another which the Court of Appeal (Civil Division) in Jennings [2005] EWCA Civ 746, [2006] 1 WLR 182, had held (wrongly as it turned out) was sufficient.

In addition, the transcript shows that it is likely that the wrong regulations governing liability for duty on tobacco goods were applied, namely the Excise Goods (Holding, Movements Warehousing and REDS) Regulations 1992 instead of the significantly narrower Tobacco Products Regulations 2001 ('the 2001 Regulations'). In any event, it is plain from the transcript that it was wrongly assumed by all that the appellant, having conspired to fraudulently evade duty, must have been liable for it - thereby conflating the breath of the offence with the much narrower issue of proof of benefit.

This is thus one of a number of similar cases that have come before this court since the discovery of the potentially widespread reliance on the wrong regulations in Chambers [2008] EWCA Crim 2467, and Khan [2009] EWCA Crim 588, and since the exposition in White, Dennard & Ors [2010] EWCA Crim 978 of the correct test to apply in the light of the decisions of the House of Lords in May [2008] 1 AC 1028 and Jennings [2008] 1 AC 1046 (including the rejection of apportionment), and the proper construction of the 2001 Regulations.

It was against that background that, when granting leave, we quashed the confiscation order and indicated that we would ourselves re-determine the issue, based on the material before the learned judge, and giving the appellant the opportunity to give evidence if he wished to do so, though in the event he did not.

The smuggling in this case was done in four containers from the Far East, each of which was brought into the country by sea. Liability to duty thus arose as each ship entered the port of destination here.

On behalf of the Respondent, Mr Bird has not, save in one respect which is of no significance, sought to argue that the original apportionment of the excise duty was wrong, as to do so would involve a massive increase in the benefit figure above that found by the learned judge. Mr Bird submits that, correctly assessed, the benefit obtained by the appellant amounted, in all, to at least £599,548.34 - made up of £568,477.59 in evaded excise duty, (i.e. the original benefit figure found by the learned judge), and an additional £31,070.75 representing the value of the flat pack beds (the cover loads in which the smuggled cigarettes were hidden in three of the containers), and of rewards obtained by the appellant as a result of his participation in the conspiracy which were in evidence at the original hearing. He also argues that the appellant must have obtained further benefit by way of reimbursement of rent and van hire costs, but is unable to put a figure on it.

On the appellant's behalf Mr Roche concedes that the appellant obtained the flat pack beds and the rewards, and that he is thus liable to the imposition of a confiscation order, in the sum of £31.070.75. Mr Roche asserts, however, that the appellant is not liable for any of the evaded excise duty, or (given the lack of evidence about it) for any benefit for any reimbursement of costs.

It seems to us that the Respondent's claim in relation to the reimbursement of rent and van hire costs is purely speculative, and thus requires no further consideration.

In the result, the principal issue that we have to determine is whether the Respondent has proved, on the balance of probabilities and in relation to the tobacco content of all or any of the four containers, that the appellant was himself liable for the excise duty that should undoubtedly have been paid - whether as a person who was holding the tobacco products at the excise duty point, or who had caused tobacco products to reach the excise duty point and (at that point) retained a connection with them (see Regulations 13(1) and 13(3)(e) of the 2001 Regulations, and White, Dennard & Ors (above) at paragraph 61.)

The conspiracy was concerned, overall, with 21 containers shipped from the Far East to this country. Each contained a cover load of flat pack beds of one sort or another, or other furniture, and a large quantity of cigarettes in re-inforced boxes. Ten of the containers were delivered to addresses in this country, the other eleven were intercepted on arrival in port - some in Belfast, others in Southampton. The loss of excise duty was in the order of £9 million.

The concept of the conspiracy was simple. Owens, in his guise as Quinn, was employed by a legitimate company called Seconique, which was based in the West Midlands, and which specialised in the importation of container loads of flat pack furniture from the Far East. It had a sister company in Northern Ireland. Seconique used P&O Nedlloyd as its shippers, and King International as its Customs Clearing Agents. It imported about 25 containers of furniture per week. The great majority were delivered direct to Seconique's premises, where they were unloaded and the furniture then sold on. However a small percentage of the containers were delivered direct to Seconique's customers. It was that part of their business which was exploited without their knowledge.

Owens placed furniture orders, ostensibly on behalf of Seconique, or on occasion on behalf of Seconique's sister company, with bogus companies claiming to be based in the Far East - mainly in Taiwan, Malasyia and Hong Kong. Either the order itself would on its face specify the delivery of the relevant container to a business other than Seconique in this country, or after the container had arrived King International would be given instructions by Seconique to arrange such a delivery. The relevant container would first be delivered to a port in the Far East and then transported in one of Nedlloyd is ships to Belfast or Southampton, where King international would deal with the necessary formalities including overseeing or arranging onward transport. The businesses to which the ten containers were actually delivered were, or were used as, fronts to enable the deliveries to take place. After a delivery the cigarettes would be removed and sold on, as would the furniture. Seconique's invoices to the front companies for the furniture were paid, in order to ensure the continuance of supply.

The Prosecution's Final Opening Note makes clear, unsurprisingly, that Owens's was pivotal to the success of the conspiracy. The note also asserted, in terms, that the co-defendants Smith and Grassick were both active importers of the containers under cover of imports to their respective businesses, Furniture Express and Birmingham Furniture Imports. Indeed, the note asserted that Smith had been suspected to be a major cigarette importer for a considerable period before the commencement of the conspiracy. In contrast, it was not asserted that the appellant was an importer.

As we have touched on already, the conspiracy began in January 2002. By the time that the appellant became involved in the summer of 2003, seven containers had already been imported. The appellant was involved in relation to containers 8 to 11.

The appellant was an old friend of his co-defendant, Smith. In the mid 1990s he had been employed by Smith as a salesman in Smith's furniture business. At some point thereafter the appellant had run his own furniture business called Discount Furniture, for a short time, from premises in Cinderford. By 2003 the appellant was the landlord of the Swan public house in Cinderford.

The appellant's explanation as to how he became involved in the conspiracy, and the extent of his role within it, was set out in his detailed Basis of Plea. Mr Bird accepts that the prosecution positively accepted the Basis of Plea without reserving its position in relation to confiscation. The only qualification was as to paragraph 6(f) which did not require a Newton hearing, and is of no significance in relation to the issues with which we are concerned.

It is equally clear that, at the confiscation hearing on 24 November 2005, the learned judge was invited to decide the issues in accordance with the Basis of Plea and that, without objection by the Prosecution, she did so. Indeed, for its part, the Prosecution placed emphasis on the appellant's admitted role in taking part in receiving and disposing of the loads in containers 8 to 10, and being ready to take part similarly in relation to container 11 (which was, in fact, intercepted in port at Southampton).

Paragraphs 1 and 2 of the Basis of Plea were in the following terms:

The wider evidence shows that each of the four containers was imported by Seconique which was the consignee in each instance.

The goods in container 8 were, on the face of documents upon which Mr Bird relies, ordered by Seconique from what turned out to be a bogus company called Fortune International Limited of Hong Kong on 29 May 2003. Mr Bird relies on an order form, apparently emanating from Seconique on that date, which on its face indicates that the contents of the container were to be sold to Forest Furniture Direct (the appellant's front company). However, in our judgment this is plainly a bogus document. It is directed to no vendor. There are also other aspects about it which are of concern. The container arrived in Southampton on 7th June 2003. On 19th June Seconique instructed King International to arrange to deliver it to the premises of Forest Furniture Direct, and it was duly delivered on 24th June 2003. Mr Bird submits that it is thereby demonstrated that the appellant knew, in advance of the subsequent deliveries, that they were going to be delivered to that address.

The goods in container 10 were ordered by Seconique from what turned it to be another bogus company called MBC Industry Co Ltd of Hong Kong on 9 June 2003. The bogus Seconique document in relation to this purported order indicates that the content of the container had been sold to a firm called Furniture Imports of Birmingham. The container arrived in Southampton on 1 July 2003. Thereafter Seconique instructed King International to arrange its delivery not to Furniture Imports in Birmingham but to Forest Furniture Direct, where it was duly delivered on 4 July 2003.

The goods in container 11 were similarly ordered by Seconique from MBC Industry Co purportedly on 19 June 2003. Yet a further bogus Seconique document shows that it was intended for sale to Furniture Imports of Birmingham. The container arrived at Southampton on 8 July 2003. That same day Seconique instructed King International to deliver it to Forest Furniture Direct on 11 July 2003. However, the container was intercepted whilst still in port and the contents were recovered.

As to the appellant's role in relation to these containers, paragraphs 3 - 5 of the Basis of Plea were in following terms:

It is also of significance to note that in the Prosecutor's Statement served for the purpose of the confiscation proceedings, the appellant's role is described in the following terms:

The Respondent does not now suggest that the appellant "owned" the cigarettes at any time, or that he "obtained" them (given that he had no power of disposition).

Mr Bird submits that the containers were destined for the appellant's premises (with his knowledge and consent) before they were imported at Southampton. He relies, in particular, on the two bogus documents to which we have made reference in relation to containers 8 an 9. He further submits that:

Iv. In relation to each container delivery instructions were given by Seconique only after the tobacco goods had passed the Excise Duty Point.

MR BIRD: The money has been paid. You need to say a 7 days in default of payment. You do not need allow time to pay because it has been paid.

LORD JUSTICE HOOPER: Seven days in default, except that it has already been paid. Is there anything further? Thank you Mr Bird. Thank you Mr Roche.