R v Smith (David)

The House of Lords held that an importer who fraudulently evades payment of excise duty derives a "pecuniary advantage" for the purposes of sections 71(4) and 71(5) of the Criminal Justice Act 1988. The pecuniary advantage is to be treated as property equal to its value at the material time under section 74(5), so that subsequent seizure or destruction of the contraband does not negate the benefit for confiscation purposes. The court preferred an interpretation that includes the evasion or deferral of a debt within the ordinary meaning of "pecuniary advantage" and rejected the Court of Appeal's contrary approach.

This is an appeal by the Crown against a decision of the Court of Appeal (Criminal Division) which quashed a confiscation order made against the respondent, who pleaded guilty to fraudulent evasion of excise duty under section 170(2) of the Customs and Excise Management Act 1979. The respondent and his co-accused were found with a large quantity of cigarettes; the excise duty payable would have been £130,666.40. The Crown Court had made a confiscation order for £46,250, reflecting the respondent's available realisable assets.

The Court of Appeal accepted that the duty became payable on importation but concluded that, because the cigarettes were seized and forfeited before the respondent could sell them or realise their value, he had not derived any pecuniary advantage from evading the duty and accordingly had not "benefited" for the purposes of section 71(4) and (5) of the Criminal Justice Act 1988. The Crown sought leave to appeal to the House of Lords; after procedural steps at the Court of Appeal and the House, leave was granted.

The House framed the principal issue as whether an importer who intends not to enter goods for customs purposes and does not pay duty at importation derives a benefit under section 74 of the Criminal Justice Act 1988 where the goods are forfeited before their value can be realised. The Lords analysed sections 71(4) and (5) and the valuation rules in section 74(5) and (6). They concluded that subsection (5) treats a pecuniary advantage as property in the form of a sum of money and that section 74(5) requires valuation at the time the property (or its money-equivalent) is obtained. Consequently the benefit is measured at the material time of obtaining the advantage, so subsequent seizure or destruction of the goods is irrelevant to the existence or measure of the benefit.

The House therefore held that evasion or deferral of duty falls within the ordinary meaning of deriving a "pecuniary advantage" and that the respondent had derived a pecuniary advantage equal to the evaded duty of £130,666.40 at the point of importation. The Crown's appeal was allowed and the confiscation order of the Crown Court was restored.

Appeal allowed. The House held that evading or deferring payment of excise duty constitutes a "pecuniary advantage" under section 71(5) of the Criminal Justice Act 1988 and that the value of that advantage is to be assessed at the material time under section 74(5), so subsequent seizure or loss of the goods does not prevent a confiscation order based on the evaded duty. On that basis the Crown Court's confiscation order was restored.

The respondent pleaded guilty at Sheffield Crown Court (2 October 1998) and a confiscation order was made (22 July 1999). The respondent appealed and the Court of Appeal (Criminal Division: Mance LJ, Newman and Burton JJ) allowed the appeal and quashed the confiscation order on 16 June 2000. The Crown sought leave to appeal to the House of Lords; after procedural dealings and re-certification by the Court of Appeal (20 December 2000) the House granted leave and heard the appeal, restoring the Crown Court order.