Foggon, R v

For confiscation proceedings, the applicable statutory regime depends on when the offending began. Where the pre-amendment Criminal Justice Act 1988 applies, the court retains discretion as to whether to make a confiscation order and its amount.

Company income diverted to a concealed account and appropriated for personal use as part of a fraud on the Revenue is property obtained in connection with the offence. The benefit is the misappropriated money, not merely the tax avoided. A later payment by the company towards its own VAT liability does not reduce that benefit.

The appellant pleaded guilty to cheating the public revenue by diverting company income into an undisclosed bank account, failing to disclose untaxed profits, and using the money largely for private purposes.

At Manchester Crown Court, Judge Humphries made a confiscation order for £1,068,441, with six years’ imprisonment in default. The appellant challenged the statutory regime applied, the assessment of benefit, and the refusal to credit a later £125,000 VAT payment made by the company.

The central issues were whether the unamended Criminal Justice Act 1988 applied, whether the benefit was the diverted money or unpaid tax, and whether the VAT payment reduced the confiscatable benefit.

Appeal dismissed. Jack J delivered the judgment of the court.

1. The judge had applied the wrong statutory version. As the offending began before the commencement of the amendments made by the Proceeds of Crime Act 1995, the unamended Criminal Justice Act 1988 governed the proceedings. That restored a discretion to make a confiscation order and to determine its amount. The error did not affect the result because the judge had correctly stated that he would exercise that discretion by making the same order.

2. The benefit fell within section 71(4), not section 71(5). Diversion of the company’s income to the concealed account was an essential part of the charged fraud. The appellant controlled the money and used it as his own. It was therefore property obtained as a result of, or in connection with, the offence. The proper benefit was the diverted money, subject only to the agreed deduction for money from unconnected sources.

3. The unpaid corporation tax was not the appellant’s pecuniary advantage merely because he was a shareholder. Tax avoided may constitute an offender’s pecuniary advantage where the offender is personally liable for it, as in Attorney General v Moran [2001] EWCA Crim 1770, or where companies are the offender’s fronts and the corporate veil may properly be lifted, as in R v Dimsey & Allen [2001] 1 Cr. App. R (S) 497. Neither situation applied here.

4. The company’s later payment of £125,000 towards VAT did not reduce the appellant’s benefit. He had already appropriated and benefited from the money in the concealed account, while the VAT liability remained the company’s. The proper exercise of the statutory discretion was to allow no credit for that payment.

• Court of Appeal (Criminal Division) — in [2003] EWCA Crim 270, dismissed the appeal against the confiscation order.
• Manchester Crown Court — Judge Humphries made a confiscation order of £1,068,441 following the appellant’s conviction for cheating the public revenue.