Sale R. v

In confiscation proceedings, a company’s separate personality does not prevent the court from identifying an offender’s true benefit where the offender solely controls the company and their corrupt activities are so interlinked as to be indivisible. This is an application of the concealment principle, rather than piercing the corporate veil under the limited evasion principle.

Under the Proceeds of Crime Act 2002, invoices generated by corruptly obtained contracts may initially be benefit. However, the confiscation order must be proportionate and recover financial benefit rather than impose an additional punishment. Where genuine value was provided under the contracts, an order based on gross turnover may be disproportionate. The order should reflect profit and any proven additional pecuniary advantage, without double counting.

The appellant, the sole shareholder and managing director of a legitimate trading company, pleaded guilty at Woolwich Crown Court to corruption and fraud. Through gifts and hospitality given to a Network Rail employee, he secured contracts for the company. The company performed the work without criticism as to price or quality.

In confiscation proceedings, the Crown Court treated about £1.9 million, being payments made by Network Rail to the company, as the appellant’s benefit from his particular criminal conduct. The appellant challenged both the treatment of the company’s receipts as his benefit and the proportionality of the resulting order.

The appeal concerned the relationship between corporate personality, benefit under the Proceeds of Crime Act 2002, and the proportionality requirement established by R v Waya [2012] 3 WLR 1188.

1. Appeal allowed in part. The court quashed the confiscation amount of about £1.9 million and substituted £197,683.12. It also reduced the default term of imprisonment to 33 months.

2. Applying Prest v Petrodel Resources Limited & Others [2013] UKSC 34, this was not an evasion-principle case. The company pre-dated the offending, traded bona fide, and had not been interposed to evade an existing obligation or frustrate its enforcement. However, the concealment principle applied. The appellant solely controlled the company, and its actions in securing, administering, invoicing and performing the corruptly obtained contracts were inseparable from his corruption. The court could therefore examine the underlying reality to identify his benefit.

3. The analysis in R v Seager & Blatch [2010] 1 Cr App R (S) 60 remained applicable in confiscation proceedings when understood in that way. Its references to piercing the corporate veil should not be read as confined to the narrower evasion principle.

4. Sections 76(4) and (5) of the Proceeds of Crime Act 2002 were capable of treating the full invoices as benefit obtained in connection with the corruption. The contracts themselves, and the market advantages secured by them, were financial benefits. But R v Waya required a proportionate order directed to recovery, not punishment. Ordinary costs of supplying genuine work, labour and materials differed from the costs of committing crime. Although Network Rail received value, the corruption also secured market share, excluded competitors and avoided tendering costs.

5. A proportionate order would therefore comprise the profit from the corruptly obtained contracts and any quantified pecuniary advantage. There was no evidential basis on appeal to value the latter. The agreed profit figure was consequently substituted, despite being favourable to the appellant. A rehearing was not required in the interests of justice.

• Court of Appeal (Criminal Division): Allowed the appeal in part in [2013] EWCA Crim 1306, quashed the confiscation amount, substituted £197,683.12, and reduced the default term.
• Woolwich Crown Court: Following the appellant’s guilty pleas, held on 28 February 2012 that he had benefited by £1,918,562.44 and made a confiscation order in that amount.