Stannard, R. v

For confiscation under the Criminal Justice Act 1988, a defendant who controls companies used to carry out a fraud may be treated as having obtained the resulting pecuniary advantage. A purported discretionary trust does not prevent that conclusion where the evidence permits the court to find that the defendant alone controlled the property and that no trust existed in substance.

A gift is caught by section 74(10)(a) if it follows conduct constituting the substance of the offence. The indictment’s reference to a later tax return does not postpone completion of cheating the public revenue where the earlier fraudulent conduct had already prejudiced the Revenue’s right to tax. The offence is one of conduct and does not require a false representation or proof of actual loss.

The appellant had been convicted at the Crown Court at Southwark of two counts of cheating the public revenue through a scheme involving the acquisition of companies with unpaid corporation tax liabilities, false debenture documents and the extraction of company funds. In 2003, Judge Fingret made a confiscation order for £1,678,954 under section 71 of the Criminal Justice Act 1988.

The judge assessed the appellant’s benefit at £3,099,030, representing tax evaded, and found that £1,678,954 was realisable property. The appellant challenged both benefit and realisability. He relied on corporate and discretionary-trust structures, disputed that certain transfers were caught gifts, and contended that the cheating offences were incomplete until later tax returns were submitted.

The central issue was whether the earlier false-document and extraction transactions already constituted cheating the public revenue, so that the statutory gift provisions applied.

1. Appeal dismissed. The confiscation order was valid. The judge was entitled to find that the appellant had obtained a pecuniary advantage of £3,099,030 and had realisable property of £1,678,954.
2. The acquisitions of the target companies were genuine arm’s-length transactions, but that did not prevent the later transactions from forming a fraudulent scheme wholly controlled by the appellant. Applying Dimsey & Allen [2000] 1 CAR(S) 497, the court held that the corporate veil could be lifted because the relevant companies were vehicles for fraud and the appellant’s alter ego. He was therefore better off by the amount of the tax evaded.
3. For section 71(6), the appellant bore the burden of proving, on the balance of probabilities, that the amount realisable was less than the benefit. Clear and cogent evidence was required. The judge was also entitled to find that the purported Rupert Trust did not exist in substance: the appellant’s exclusive control of its assets was inconsistent with the claimed trust arrangement.
4. The judge was entitled to treat the Cotswold and Godalming transactions as gifts caught by section 74(10). Although he did not expressly refer to the discretion in section 74(10)(b), the submissions and circumstances showed that he had considered it. There was no basis for exercising it in the appellant’s favour.
5. Following The Queen v Mavji [1987] 84 Cr. App R 34 and the later authorities, cheating the public revenue is a conduct offence. It may be committed by an omission or by deliberate conduct prejudicing the Revenue’s right to tax, without proof of loss or a false representation. Here the false debentures and extraction of funds already constituted the substance of the cheat before the later tax returns. The gifts therefore followed commission of the offences for section 74(10)(a).
6. The court construed the Criminal Justice Act 1988 consistently with its purpose of preventing dissipation of criminal proceeds. The wording of the indictment, drafted to include the later returns, did not confine the court’s assessment of when the offences had been committed.

• Court of Appeal (Criminal Division): The appellant’s appeal against the confiscation order was dismissed: [2005] EWCA Crim 2717.
• Crown Court at Southwark: Judge Fingret convicted the appellant in 2001 of two counts of cheating the public revenue and, on 17 October 2003, made a confiscation order of £1,678,954 under section 71 of the Criminal Justice Act 1988. An earlier appeal against conviction had been dismissed, and leave to appeal against the custodial and disqualification sentences had been refused.