Kai Xu & Anor, R. v

Where benefit from criminal conduct is assessed under the Proceeds of Crime Act 2002, the court must identify the benefit actually attributable to that conduct. Entire business receipts are not a realistic or just measure merely because unlawful workers were employed, where the business would have continued lawfully at reduced capacity. The court may make a robust factual assessment where offenders have not provided evidence of the workers’ true contribution. It may infer a proportion of receipts from their contribution to the workforce.

David Kai Xu and Lu Xu were convicted at Grimsby Crown Court of offences under section 25(1) of the Immigration Act 1971 for facilitating breaches of immigration law. Their restaurant had employed three illegal immigrants.

In confiscation proceedings under the Proceeds of Crime Act 2002, the Recorder held that the criminal-lifestyle assumptions applied, but excluded periods before unlawful employment began and after the appellants’ arrest. He assessed benefit as all restaurant receipts during the remaining period.

The appellants challenged that assessment. The central issue was whether the whole turnover, rather than the benefit properly attributable to employing the illegal workers, could be treated as criminal benefit.

1. The appeal against the amount of the confiscation orders was allowed. The court quashed the amounts and directed substitution of sums calculated by reference to one quarter of the restaurant’s receipts during the relevant period. The renewed applications for leave on the other grounds were refused.
2. The Recorder was entitled to proceed on the basis that the criminal-lifestyle assumptions under section 10 of the Proceeds of Crime Act 2002 applied, subject to the exclusion of periods where their application would be unjust. The issue was the benefit attributable to the unlawful employment during the remaining period.
3. The Recorder misdirected himself by treating Neuberg ([2007] EWCA Crim 1994) as factually indistinguishable. In that case, the business probably would not have survived without the criminality, so benefit equal to all takings could be upheld. Here, it was accepted that the restaurant would have continued lawfully, albeit at reduced capacity, without the three illegal workers.
4. The appellants obtained benefit through receipts generated by the workers’ employment or expenses thereby avoided. However, it was neither realistic nor just to attribute every customer receipt to that employment. That would wrongly assume that the business could not otherwise have continued.
5. The appellants had not provided evidence of the employees’ actual contribution. The court could therefore make a robust factual inference. Since the three workers comprised a quarter of the workforce, it inferred that one quarter of the receipts was attributable to their employment. The three-year default term remained unchanged.

• Court of Appeal (Criminal Division): Allowed the appeal against the amount of the confiscation orders and substituted an assessment based on one quarter of relevant receipts: [2008] EWCA Crim 2372.
• Grimsby Crown Court: On 7 July 2006, convicted David Kai Xu and Lu Xu of facilitating breaches of immigration law. On 15 November 2007, made confiscation orders of £244,613.17 against each appellant, with three years’ imprisonment in default.