Rigby & Anor v R

For confiscation purposes, a temporary and unrealised increase in the market value of an offender’s shares is not a pecuniary advantage unless the offender has actually obtained an advantage from it. A merely notional increase which soon disappears does not suffice.

Salary or other employment benefits are not obtained as a result of or in connection with an offence merely because there is a narrative or slight association between them. There must be a sufficient causal connection. Under Criminal Justice Act 1988, employment retained because the offender’s expertise is needed to address independent company problems is not a benefit of the offence.

The appellants, the chairman and chief executive officer and the chief financial officer of a listed software company, were convicted of recklessly making a materially misleading trading statement contrary to section 397(1)(c) of the Financial Services and Markets Act 2000. The statement included revenue and profit from purported contracts which did not bind the counterparties.

At Southwark Crown Court, confiscation orders included the appellants’ subsequent salaries and emoluments. Rigby’s order also included a temporary increase in the value of his shareholding following the statement. Bailey’s compensation order incorporated the confiscation amount. The central issues were whether those items were benefits obtained from, or pecuniary advantages derived in connection with, the offence.

1. The appeals were allowed. The confiscation orders were quashed insofar as they included the appellants’ salaries and other emoluments, and insofar as Rigby’s order included the temporary increase in his shares’ value. Bailey’s compensation order was reduced to £35,114.

2. Section 71 distinguishes property obtained from a pecuniary advantage derived as a result of, or in connection with, the offence. The court accepted that the legislation is stringent, but held that it does not extend to a temporary and unrealised rise in market value. Rigby neither sold the shares nor otherwise obtained a direct or indirect advantage. A sale at the relevant time would have breached the Model Code and risked a penalty under section 91 of the Financial Services and Markets Act 2000. The rise was therefore purely notional and soon disappeared.

3. R v Smith (David) [2001] UKHL 68 was distinguishable. In that case, evasion of excise duty was the very advantage obtained through the offence when the cigarettes were imported. Subsequent forfeiture or inability to realise the contraband did not alter that fact. Here there was no obtaining or pecuniary advantage absent a sale of the shares.

4. A claimed benefit in the form of post-offence pay requires a sufficient causal link to the offence. Section 102(7) concerns concurrent connections; it does not reduce the required causative connection to the slightest association. The appellants continued to be employed despite the misleading statement, not because of it. Their expertise was needed to address cash-flow problems and restructuring which were not caused by the statement. The assertion that their employment would have ended had all facts been known was not a fact found by the judge and could not be made good on appeal.

• Court of Appeal (Criminal Division) — Allowed the appeals against confiscation orders in [2006] EWCA Crim 1653; quashed the challenged components and reduced Bailey’s compensation order to £35,114.
• Southwark Crown Court — Following convictions for a misleading trading statement, made confiscation orders against both appellants and compensation orders, including a compensation order against Bailey of £141,686.