Reynolds & Ors, R, v

Where legitimate goods or services are supplied through contracts procured by corruption, the benefit for confiscation is not confined to the victim’s overpayment. The corruption may taint every transaction. A proportionate order may therefore reflect the profits generated, after quantified trading expenses, rather than gross turnover or the victim’s loss.

Under the Proceeds of Crime Act 2002, benefit concerns property obtained, not property retained. Corporation tax does not reduce it. Accurately accounted VAT must, however, be excluded where its inclusion would create disproportionate double recovery. Where defendants jointly obtain the benefit, each order is for the whole amount, subject to available assets and a provision preventing recovery more than once.

The respondents were convicted of conspiracies arising from a corrupt arrangement under which Grounds Products Ltd supplied industrial blades to Leicestershire County Council. Malcolm Farnish, a council stores controller, placed orders with the company while having an undisclosed financial interest in it. The company supplied goods of acceptable quality, but its only substantial customer was the council.

At confiscation, the Crown Court treated the respondents’ benefit as the council’s loss through overcharging. It made orders totalling £87,500 for three respondents and £50,000 for Valerie Farnish, with enforcement against each limited to a quarter share.

The Crown appealed. The central issues were the correct valuation of benefit where legitimate goods had been supplied through corruptly procured contracts, and the proper form of enforcement where benefit had been jointly obtained.

1. The Crown’s appeal was allowed. The Crown Court’s ruling involved errors of law and could not stand.

2. The court held that the essential wrongdoing was not confined to overcharging in particular transactions. Farnish’s abuse of his position of trust enabled the corrupt placement of every order with Grounds Products Ltd. That conflict of interest infected the entire course of dealing. The fact that the council received goods it needed, of satisfactory quality, was relevant to whether benefit should be measured by profits rather than turnover, but it did not confine benefit to the overcharge or the council’s loss.

3. Applying R v Waya [2012] UKSC 51, R v Sale [2013] EWCA Crim 1306 and R v King (Scott) [2014] EWCA Crim 621, the court treated the appropriate measure as profit: gross turnover less the quantified cost of supplying the goods. The loss sustained by the victim was generally irrelevant unless it happened to equal the benefit or the benefit had been fully restored. The joint benefit was therefore £291,745.39 before tax adjustments, not £87,500 or £50,000.

4. Under R v Harvey [2015] UKSC 73, corporation tax did not reduce benefit because confiscation concerns what was obtained, rather than what was retained. However, accurately accounted VAT had to be deducted under Article 1 of the First Protocol to the European Convention on Human Rights, since otherwise the same sum would be recovered twice. The correct joint benefit was £253,421.79.

5. Applying R v Ahmad and Fields [2014] UKSC 36, a joint obtaining required an order for the full benefit against each respondent. Enforcement had to prevent multiple recovery and could not exceed the individual’s available amount. The parties were given 14 days to agree available amounts; failing agreement, that issue was remitted to the Crown Court.

• Court of Appeal (Criminal Division) — The Crown’s appeal was allowed: [2017] EWCA Crim 1455. The benefit figure was increased and the enforcement provisions were varied.
• Crown Court at Leicester — On 21 December 2015, confiscation orders were made by HHJ Brown, valuing benefit principally by reference to the council’s loss and limiting enforcement against each respondent to a quarter share.