Grainger, R. v

In confiscation proceedings, criminal culpability must be kept distinct from the benefit which an offender has actually obtained. Confiscation is directed to deprivation of that real benefit, not to further punishment. A defendant does not obtain money paid to a company merely because he participated in the fraud which caused the payment, or shared responsibility for it. The court must examine the facts, identify any direct or indirect benefit truly obtained by the defendant, and value it fairly. A company may not be used to conceal criminal benefit, but the prosecution must prove the true benefit rather than rely on an arbitrary share of the company’s receipts.

The applicant was convicted at Newcastle-upon-Tyne Crown Court of six counts of fraudulent trading arising from false invoices submitted under invoice-discounting facilities. He was sentenced to 27 months’ imprisonment.

Following the convictions, the Crown Court made a confiscation order of £262,491.87 against him. The judge treated the applicant and other participants as jointly responsible for the fraud and assessed his benefit as one twelfth of the sums paid by banks to companies in the group, subject to the amount of his available assets.

The applicant renewed his application for permission to appeal against that order. The central issue was whether payments made to the companies could properly be treated as benefit obtained by him personally.

1. The court granted leave, allowed the appeal and quashed the confiscation order.

2. In the light of R v May [2008] UKHL 28, R v Jennings [2008] UKHL 29 and R v Green [2008] UKHL 30, the court held that legal culpability and confiscation benefit are distinct. Confiscation is not additional punishment. It is directed to depriving an offender of the benefit actually received, a factual question to be answered in a common-sense way.

3. The banks’ payments were made to Mr Prudhoe’s companies. The applicant’s instrumental role in procuring those payments, and the judge’s finding of joint control and responsibility, did not establish that the applicant received the payments or held a direct beneficial interest in them.

4. The applicant plainly received benefit through continued employment, salary and fringe benefits which would otherwise have ceased. Those benefits could have been valued, but there was no logical link between them and one twelfth of the companies’ receipts. The prosecution and the judge must instead identify and fairly value the real benefit shown by the evidence.

5. An offender cannot use a company to hide criminal benefit. A court may look behind the corporate veil to identify the true position. On the material before it, however, the Court of Appeal could not undertake the necessary primary fact-finding exercise or substitute a new valuation.

• Court of Appeal (Criminal Division): Leave was granted and the appeal against the confiscation order was allowed. The order was quashed: [2008] EWCA Crim 2506.

• Crown Court at Newcastle-upon-Tyne: After conviction for six counts of fraudulent trading, the court made a confiscation order of £262,491.87 against the applicant on 21 January 2008.