Powell & Anor, R. v

For confiscation purposes, a company’s pecuniary advantage cannot ordinarily be treated as an individual defendant’s benefit merely because the defendant consented to, connived in, or neglected the company’s offending. Under the evasion principle, disregarding corporate personality requires an independently existing legal right, obligation, liability or restriction affecting the individual, and deliberate use of a company under that person’s control to defeat or frustrate its enforcement.

The inquiry is fact-sensitive. The lawful or unlawful character of the business, the nature of the criminality, and the extent of the defendant’s control and shareholding may be relevant. Sole ownership or control is neither a necessary nor a determinative condition. A defendant ordinarily obtains a pecuniary advantage only by avoiding a liability to which the defendant is personally subject.

The prosecutor sought leave to appeal against confiscation orders made in the Crown Court at Newport following environmental offences committed through Wormtech Ltd, a waste-composting company.

Mrs Powell was convicted on the basis of consent or connivance in the company’s offending. Mr Westwood pleaded guilty on the basis of neglect. The company left waste and pollution at its site, producing substantial clean-up costs which it avoided when it ceased trading.

The Crown contended that the avoided costs were a pecuniary advantage obtained by the company which could be attributed to the respondents under the Proceeds of Crime Act 2002. The Crown Court rejected that contention, holding that neither respondent was the sole controller or shareholder. The central issue was whether the company’s avoided clean-up liability could lawfully be treated as a benefit obtained by either individual respondent.

1. The application for leave was refused. The Crown Court’s confiscation orders remained in force. Although the judge below had been wrong to treat sole control or sole shareholding as a necessary precondition, the conclusion that the company’s avoided clean-up costs could not be attributed to either respondent was correct.

2. The second corporate-veil proposition in R v Seager & Blatch [2010] 1 Cr App R (S) 60 had to be read in its factual and legal context, and consistently with Prest v Petrodel Resources Ltd [2013] 3 WLR 1. It did not create a general confiscation rule under which senior managers could be made liable for every pecuniary advantage obtained by a company through criminal conduct.

3. The evasion principle permits the court to disregard corporate personality only where an individual is independently subject to an existing legal right, obligation, liability or restriction, and deliberately interposes a company under that individual’s control to evade the obligation or frustrate enforcement. Those conditions were absent. The environmental obligations arose from the company’s permit and operations. The respondents’ criminal liability was secondary to the company’s offending and depended on consent, connivance or neglect.

4. The court applied the fact-sensitive approach in R v Boyle Transport (Northern Ireland) Ltd [2016] 4 WLR 63. The business had been established for a legitimate purpose and had lawfully operated for years, although its regulatory breaches were serious. There was no sham, concealment or abuse of the corporate structure. The respondents’ lack of sole shareholding was relevant, but not decisive.

5. Applying R v May [2008] 2 Cr App R 28, a pecuniary advantage ordinarily arises where a person avoids a liability to which that person is personally subject. Neither respondent had a personal liability for the company’s clean-up costs. The necessary conditions for a confiscation order based on those avoided costs were therefore not established.

• Court of Appeal (Criminal Division): In [2016] EWCA Crim 1043, refused the prosecutor’s application for leave to challenge the confiscation orders. It held that the Crown Court’s reasoning on sole control or ownership was erroneous, but its conclusion was correct.

• Crown Court at Newport: Made confiscation and compensation orders after the respondents’ convictions. It rejected the Crown’s attempt to attribute the company’s avoided clean-up costs to the respondents.