JUDGMENT
R v Mackle (Appellant) (Northern Ireland)
R v Mackle No 2 (Appellant) (Northern Ireland)
R v Mackle No 3 (Appellant) (Northern Ireland)
R v McLaughlin (Appellant) (Northern Ireland)
before
Lord Neuberger, President
Lord Mance
Lord Kerr
Lord Hughes
Lord Toulson
JUDGMENT GIVEN ON
29 January 2014
Heard on 11 December 2013
Appellant (Plunkett Jude Mackle) Respondent
Ronan Lavery QC Liam McCollum QC
Michael Duffy BL
David McDowell BL
(Instructed by Rafferty &
Donaghy
Solicitors
)
(Instructed by Public
Prosecution Service of
Northern Ireland
)
Appellant (Benedict Mackle) Respondent
David A. Scoffield QC Liam McCollum QC
Donal Sayers BL David McDowell BL
(Instructed by Rafferty &
Donaghy
Solicitors
)
(Instructed by Public
Prosecution Service of
Northern Ireland)
Appellant (Patrick Mackle) Respondent
Julian Knowles QC Liam McCollum QC
Frances Lynch David McDowell BL
(Instructed by McNamee
McDonnell Duffy Solicitors LLP)
(Instructed by Public
Prosecution Service of
Northern Ireland)
Appellant (Henry McLaughlin) Respondent
Julian Knowles QC Liam McCollum QC
Frances Lynch BL David McDowell BL
(Instructed by McNamee
McDonnell Duffy Solicitors LLP)
(Instructed by Public
Prosecution Service of
Northern Ireland)
Page 3
LORD KERR (with whom Lord Neuberger, Lord Mance, Lord Hughes and
Lord Toulson agree)
1. On 22 November 2007, three brothers, Patrick Mackle, Plunkett Jude
Mackle (commonly known as ‘Jude’) and Benedict Mackle, all pleaded guilty to
the offence of being knowingly concerned in the fraudulent evasion of duty on
goods contrary to Section 170(2)(a) of the Customs & Excise Management Act
1979. In a separate trial, on 18 November 2008, Henry McLaughlin pleaded guilty
to a similar offence. He was also convicted of a second offence, on his plea of
guilty, but that is not relevant to this appeal.
2. On 13 December 2007 Deeny J sentenced Patrick Mackle to three years’
imprisonment, suspended for a period of five years. Jude Mackle and Benedict
Mackle were sentenced to two and a half years’ imprisonment. Again that
sentence was suspended for five years. At a later hearing, on 29 October 2008,
confiscation orders were made in respect of each of the defendants as follows:
Patrick Mackle – £518,387.00; Jude Mackle and Benedict Mackle – £259,193.00
each. The aggregate sum produced by these three amounts was equal to the
amount of duty and Value Added Tax which had been evaded. The confiscation
orders were made with the consent of each of the Mackle brothers.
3. Henry McLaughlin was sentenced by Weatherup J on 19 November 2008 to
one year’s imprisonment suspended for two years. The judge also imposed a
serious crime prevention order for a period of five years. A confiscation order for
£100,000 was made against Mr McLaughlin on the same date. This sum, taken
together with other confiscation orders made against co-defendants, represented
the total amount of duty and VAT said to have been evaded. The confiscation
order against Mr McLaughlin was also made with his consent.
The facts (the Mackles)
4. On 16 January 2003 a cargo ship, MV Hyundai Fortune, arrived in
Southampton from Malaysia. Customs officers carried out routine screening of a
container on board the ship. It was found to contain cigarettes. (Subsequently, it
transpired that the cigarettes had been manufactured in the United Kingdom. They
had been exported without duty having being paid on them.) The container was
not intercepted at this stage. It was allowed to proceed to its destination. It was
taken first from Southampton to Belfast docks on the MV Celtic King on 25
January 2003. It was then collected at Belfast by a haulier on 27 January 2003 and
taken to premises at Ballynakilly Road, Coalisland, County Tyrone.
Page 4
5. On the same date, police and customs officers went to the premises to
which the container had been delivered. There they found Jude Mackle and his
brother Benedict unloading boxes from the container. They were being assisted by
two other men. It was discovered that the boxes which were being unloaded
contained cigarettes. These had been concealed under wooden flooring in the
container. All four men were interviewed by police officers. They were
subsequently charged with revenue offences.
6. Patrick Mackle was the owner of the premises where the cigarettes were
being unloaded. He was not present when the police were at the premises on 27
January 2003 but he later presented himself to police and on 25 April 2003 he
voluntarily attended Musgrave Street Police Station in Belfast for interview. On
that date he was released on bail. He returned on 3 July 2003 for further interview.
Following this interview he was also charged with revenue offences.
The facts (Mr McLaughlin)
7. On 16 November 2005 police officers went to premises at 194 Battleford
Road, Armagh. There they discovered 10,434,620 cigarettes stored in two sheds.
They also found 4,999,920 cigarettes loaded on a lorry, hidden amongst a
consignment of peat moss. They arrested three persons who were at the premises.
These persons were subsequently charged with revenue offences in relation to the
cigarettes. Henry McLaughlin was not present when the police were at Battleford
Road. He had no known connection to the premises there.
8. On 20 July 2006, however, Mr McLaughlin’s home was searched by police
officers. Large amounts of cash in different currencies were found. The total
value of the cash amounted to something in the order of £65,000. Various
documents including documentation relating to the sale and distribution of
cigarettes were found. Mr McLaughlin was subsequently interviewed and charged
in relation to the items that had been found in his house and in relation to the
cigarette seizure on 16 November 2005. It is accepted that the lorry which had
been found at Battleford Road loaded with the cigarettes had stopped at the Mr
McLaughlin’s premises earlier on 16 November 2005. It is also accepted,
however, that he was not present at that time.
The proceedings against the Mackles
(i) The Rooney hearing
Page 5
9. Each of the Mackle brothers was prosecuted on a single count to which he
pleaded guilty, as described in para 1 above. That plea was entered after evidence
had been given over the course of a number of days. It also followed what is
known as a Rooney hearing (Attorney General’s Reference No 1 of 2005; In re
Rooney (Bernard Philip Mary) and others [2005] NICA 44; [2006] NI 218). The
purpose of a Rooney hearing is to obtain from the trial judge an indication of the
possible sentence in the event that a plea of guilty is entered.
10. In the course of the Rooney hearing, counsel on behalf of Patrick Mackle
asserted that he had not been the organiser of “this matter”. Counsel for the Crown
submitted that Patrick Mackle had played “… a role in the organisation of this
operation”. He suggested that conclusions about the extent of the organisational
role would depend on the inferences which the court might ultimately draw and
“on the extent to which primary facts are established.” Understandably, since he
did not, in the event, hear all the evidence, the judge did not express a conclusion
on the precise role that Patrick Mackle had played. He did say, however, that he
was satisfied that he had played some part in the organisation of the evasion of the
duty on the cigarettes. In giving an indication of the possible sentence to be
imposed the judge said that he would propose to sentence Patrick Mackle on the
basis that “he is not a ringleader but has some limited organising role in the
matter.”
11. In relation to Jude and Benedict Mackle, their counsel urged on the judge
during the Rooney hearing that they had been merely labourers in the unloading of
the cigarettes. In response to those submissions, counsel for the Crown said this:
“… the prosecution position is that there is no evidence which
suggests anything contrary to the submissions made by counsel on
their behalf in this application. So for the purpose of this application
I have no contrary submissions.”
12. On the hearing of the appeal before this court, Mr McCollum QC, for the
respondent, drew our attention to the fact that in his submissions to the trial judge
he had emphasised that the statement that the prosecution had no evidence to
counter the claims made by counsel for Jude and Benedict Mackle had been made
for the purpose of the Rooney application. This did not amount to a concession, he
said, concerning the value of any benefit which they had received for the purpose
of the subsequent confiscation proceedings. This aspect of the case will be
considered in greater detail below.
13. In giving his indication of sentence in relation to Jude and Benedict Mackle,
Deeny J said that he considered there were no aggravating features in their cases.
Page 6
Since playing a part in the organisation of this type of criminal activity is well
recognised as an aggravating feature, it is to be presumed that the judge had
accepted that neither of these appellants had performed such a role.
(ii) The sentencing hearing
14. In opening the case to the trial judge for the purpose of sentencing, Crown
counsel said that if all the prosecution evidence had been given, “certainly at its
height it would have suggested an organisational role by Mr Patrick Mackle”.
Counsel who then appeared for Patrick Mackle submitted that there was “no
suggestion on the evidence of the accused having had any hand, act or part in the
financing, funding, importation or other organisational contribution”. The judge
concluded that since Patrick Mackle had asked his brothers to carry out the
unloading of the cigarettes and since this had taken place at Patrick Mackle’s yard,
he had a limited organising role. He noted that the prosecution had accepted the
appellant’s plea of guilty on the basis that he was not the ringleader in the
enterprise. He (the judge) considered that it was appropriate to sentence Patrick
Mackle on that basis.
15. In relation to Jude and Benedict Mackle, counsel for the Crown told the
judge that the prosecution had no evidence to suggest that they were involved in
any capacity other than as assisting in the unloading of the container.
Unsurprisingly, this statement was highlighted by counsel for the two appellants in
their pleas in mitigation and appears to have been accepted by the judge in
choosing the sentence that should be imposed on them for he distinguished the role
that they had played from the more serious part that their brother, Patrick, had had
in the enterprise.
(iii) The confiscation proceedings
16. A prosecutor’s statement in respect of each of the Mackle brothers was
prepared by Roisin McMullan, an officer of HM Revenue and Customs. In each of
the statements Ms McMullan asserted that the benefit obtained by each of the
Mackle brothers was the full amount of the duty which had been evaded. At the
confiscation hearing on 29 October 2008 the only evidence as to benefit presented
to the court was a witness statement prepared by Ms McMullan dated 14
November 2006. This was appended to the prosecutor’s statements. The witness
statement also referred to the total excise duty as constituting the benefit which
had been obtained.
Page 7
17. At the outset of the confiscation hearing, prosecuting counsel announced
that the parties had reached agreement as to the amount of benefit that each
defendant had received and that each would consent to a confiscation order for that
amount. In these circumstances no examination was undertaken of the basis of the
apportionment of the total sum to be confiscated. It is quite clear, however, that
this was directly related to the duty which Revenue and Customs had calculated to
have been evaded.
The proceedings against Mr McLaughlin
18. There was no Rooney hearing in Mr McLaughlin’s case. The sentencing
and confiscation hearings took place at the same time. In his mitigation plea,
counsel for Mr McLaughlin suggested that there was no evidence that he had been
involved in the actual importation of the cigarettes. Mr McLaughlin had played,
counsel said, “what could be described as … a supporting role in what happened.”
19. In sentencing Mr McLaughlin, Weatherup J referred to the decision of the
Court of Appeal in England and Wales in the case of R v Czyzewski [2003] EWCA
Crim 2139; [2004] 1 Cr App R (S) 289 in which a number of possible aggravating
features in fraudulent evasion of duty cases were considered. The first of these
was “playing an organisational role”. Weatherup J plainly must have accepted
counsel for the appellant’s submission on this aspect because he said that neither
this nor, indeed, any other aggravating feature was present.
20. The amount of duty evaded in the case of Mr McLaughlin and his two codefendants was something just short of £730,000. The total recoverable amount
(i.e. the amount of benefit which the three accused were said to have obtained)
was, by agreement, fixed at the same sum. One co-defendant’s benefit (and
therefore the amount recoverable from him) was said to be £500,000; another’s
was fixed at £129,968.61 (although in his case since it was agreed that the
available amount was nil, the confiscation order was fixed at nil). The
confiscation amount ordered to be recovered from Mr McLaughlin was £100,000,
fixed so as to make up the balance of the duty evaded. All of this was done by
agreement and, again, there was no investigation before the judge of the basis on
which the total sum was apportioned or how the respective benefits to each of the
defendants was estimated. The only indication of the value of the benefit to the
defendants was the amount of the duty evaded.
The Court of Appeal’s judgment
Page 8
21. Appeals by the Mackle brothers and by Mr McLaughlin and one of his coaccused, Aidan Grew, against the confiscation orders made in their cases were
heard together by the Court of Appeal (Morgan LCJ, Girvan and Coghlin LJJ).
Delivering the judgment of the court, Girvan LJ identified the two principal issues
as (i) whether the appellants had consented to the making of the consent orders on
an incorrect legal basis (and that therefore the trial judges had likewise wrongly
made the orders); and (ii) whether the orders having been made on consent, the
appellants were in any event bound by them.
22. On the first of those issues, Girvan LJ considered the effect of the decision
of the Court of Appeal in R v Chambers [2008] EWCA Crim 2467. He held that,
in light of that decision, if the appellants were not participants in the actual
importation of the cigarettes, they would not be liable for the duty on them and
thus could not be said to have obtained a pecuniary advantage for the purposes of
the Tobacco Products Regulations 2001 (para 26). This was not an end of the
matter in Girvan LJ’s estimation, however, for at para 27 he said this:
“Where, a defendant is knowingly involved in the evasion of duty on
smuggled cigarettes after importation and comes into possession of
the smuggled cigarettes with knowledge of the evasion and as part of
a joint enterprise to take advantage of the economic advantages
flowing from the evasion of the duty at the point of importation he
may gain a financial advantage flowing from his participation in the
ongoing enterprise.”
23. Girvan LJ observed in para 29 of the judgment that it was not in dispute that
the appellants had engaged in criminal conduct. The critical issue was, therefore,
whether they had benefited from that conduct. He acknowledged that this
depended on whether they had obtained property as a result and in connection with
the offences. Drawing on an example that he had earlier given of the pecuniary
advantage that could be obtained by a person to whom goods had been passed by
the actual importer of the goods, he concluded that the profitability in the criminal
enterprise in both cases arose from the evasion of the duty. He then said (at para
35):
“This criminal enterprise involved a number of participants acting
together playing different roles in the furtherance of the joint
enterprise. The pleas of guilty by the appellants make clear their
acceptance of the fact that they played a role in the enterprise, thus
evidencing participation in that joint enterprise. A proper inference
that could have been drawn from the pleas is that in playing their
different roles the appellants and each of them were involved in the
handling and processing of the cigarettes to advance the purposes of
Page 9
the joint enterprise. To so handle and process them they had to obtain
them at different stages of the process. As R v Green shows receipt
of goods by one on behalf of several defendants can be regarded as
receipt for all. The joint actions of the appellants, at least arguably,
involved possession and control of the cigarettes by those involved
in the participation and the enterprise.”
24. On the basis of this analysis Girvan LJ held that it would have been open to
a court to conclude that each of the appellants had obtained property in connection
with their admitted criminal conduct or obtained a pecuniary advantage as a result
of that conduct. He considered, however, that it was not only unnecessary for the
trial judges in these cases to consider whether the appellants had obtained property
or a pecuniary advantage in this way (which was, of course, a different basis from
that which the prosecution had proffered), it would have been inappropriate for
them to do so. This was because the appellants had consented to the making of the
orders, having received legal advice. Having reviewed commentary on the effect
of consent orders in confiscation proceedings in Millington and Sutherland
Williams on the Proceeds of Crime, 3rd ed (2010), at para 11.21 and considered
decisions of the Court of Appeal in R v Bailey [2007] EWCA Crim 2873 and R v
Hirani [2008] EWCA Crim 1463, Girvan LJ stated that the court had concluded
that, even if the appellants were incorrectly advised to consent to the confiscation
orders, they were bound by the orders made on consent. He went on to say,
however, that it had not been shown that the sentencing judges made the consent
orders on an incorrect legal or factual basis because “the factual basis on which the
orders were made arose from the admissions made by the appellants that, on the
facts, they had received a benefit from their criminal conduct.” The appellants
having made those admissions, there was no reason for the judges to go behind
them.
25. The appellants applied for permission to appeal to this court against the
decision of the Court of Appeal. That application was refused but the Court of
Appeal certified that the following points of law of general public importance
arose from its judgment:
“1. Is a defendant who pleaded guilty to being knowingly concerned
in the fraudulent evasion of duty and who consents, with the benefit
of legal advice, to the making of a confiscation order in an agreed
amount in circumstances which make clear that he does not require
the Crown to prove that he obtained property or a pecuniary
advantage in connection with the charged criminal conduct bound by
the terms of the confiscation order?
Page 10
2. Does a defendant who knowingly comes into physical possession
of dutiable goods in respect of which he knows the duty has been
evaded and plays an active role in the handling of those goods so as
to assist in the commercial realisation of the goods benefit from his
criminal activity by obtaining those goods for the purposes of section
158 of the Proceeds of Crime Act 2002?”
26. On 30 October 2012 this court gave permission to the appellants to appeal.
The statutory framework
27. Section 170(2) of the Customs and Excise Management Act 1979 provides:
“Without prejudice to any other provision of the Customs and Excise
Acts 1979, if any person is, in relation to any goods, in any way
knowingly concerned in any fraudulent evasion or attempt at
evasion—
(a) of any duty chargeable on the goods;
…
he shall be guilty of an offence under this section and may be
detained.”
28. Excise duty on tobacco is payable by virtue of section 2(1) of the Tobacco
Products Duty Act 1979 (as amended by Finance Act 1981, Sch 19, Pt III) which
provides that tobacco products imported into or manufactured in the United
Kingdom are subject to a duty of excise at the rates shown in a table in Schedule 1
to the Act. Such duty becomes payable at an “excise duty point”. Section 1(1) of
the Finance (No 2) Act 1992 provides that:
“… the Commissioners may by regulations make provision, in
relation to any duties of excise on goods, for fixing the time when
the requirement to pay any duty with which goods become
chargeable is to take effect (‘the excise duty point’).”
Page 11
29. By section 1(3) of the 1992 Act, regulations made under the section may
provide for the excise duty point for any goods to be at such times as may be
prescribed. Under section 1(4) where regulations prescribe an excise duty point
for any goods, they may also make provision (a) specifying the person or persons
on whom the liability to pay duty on the goods is to fall at the excise duty point
and (b) where more than one person is to be liable to pay the duty, specifying
whether the liability is to be both joint and several.
30. Regulation 12(1) of the Tobacco Products Regulations 2001 (SI 2001/1712)
provides that the excise duty point for tobacco products is the time when the
tobacco products are charged with duty. In relation to imported tobacco, therefore,
the excise duty point arises at the point of importation into the United Kingdom
because, by virtue of section 2(1) of the Tobacco Products Duty Act 1979, that is
the point when duty becomes chargeable. In the case of the Mackles the excise
duty point arose when the ship carrying the cigarettes entered the limits of the port
at Southampton Docks – see section 5(2)(a) of the Customs and Excise
Management Act 1979 which provides that, where the goods are brought by sea,
the time of their importation shall be deemed to be the time when the ship carrying
them comes within the limits of a port; R v White [2010] EWCA Crim 978, [2010]
STC 1965 at para 57 and R v Bajwa (Naripdeep) [2011] EWCA Crim 1093, [2012]
1 WLR 601, para 32. The excise duty point in respect of the cigarettes involved in
Mr McLaughlin’s case is unknown.
31. By virtue of regulation 13(1) of the 2001 Regulations the person liable to
pay the duty is the person holding the tobacco products at the excise duty point.
But regulation 13(2) provides that the persons described in regulation 13(3) are
jointly and severally liable to pay the duty with the person holding the tobacco
products at the excise duty point (ie, the person specified in regulation 13(1)).
Included in this group are the occupier of the registered premises in which the
tobacco products were last situated before the excise duty point (regulation 13(3)
(a)); any registered excise dealer (RED) to whom the tobacco products were
consigned (regulation 13(3) (b)); and any person who caused the tobacco products
to reach an excise duty point (regulation 13(3) (e)).
32. None of the categories of person described in regulation 13(3) fits the
circumstances of the Mackle brothers or Mr McLaughlin. There is no evidence
that they held the tobacco products at the excise duty point. Nor is there evidence
that they caused the tobacco products to reach the excise duty point. In this
connection it should be noted that the Court of Appeal in White held (correctly in
my view) that regulation 13(3) (e) must be interpreted in conformity with section
1(4) of the Finance (No. 2) Act 1992, so that a person who has caused the tobacco
products to reach an excise duty point is not liable for the duty unless he has
retained a connection with the goods at the excise duty point. As Aikens LJ said at
para 39 of Bajwa the “upshot” of the relevant decisions on regulation 13 is that a
Page 12
person cannot be liable to pay duty on tobacco imported by sea in a ship unless one
of two conditions is satisfied. Either he must be “holding” the tobacco at the
excise duty point, or he must both have “caused” the tobacco products to reach the
excise duty point and he must also have retained a connection with the goods at
that point.
33. The 2001 Regulations provide a sharp and (for the purposes of this case)
pertinent contrast with their predecessor, the Excise Goods (Holding, Movement,
Warehousing and REDS) Regulations 1992 (SI 1992/3135). The 1992 Regulations
provided that a significantly wider number of categories of person were liable for
import duty than are liable under the 2001 Regulations. Firstly, by virtue of
regulation 5(1) of the 1992 Regulations, the person liable to pay the duty in the
case of an importation of excise goods from another member state was the
importer of the excise goods. More relevantly for this case, however, was the
provision in regulation 5(3) of the 1992 Regulations that among the categories of
person who would be jointly and severally liable with the importer of the goods for
the duty was any consignee of the excise goods. For a discussion of the
constricting of the classes of individual liable for duty on tobacco products which
the 2001 Regulations introduced, see R v Khan [2009] EWCA Crim 588, para 2.
34. Despite the fact that the 1992 Regulations were disapplied in relation to
tobacco products by regulation 28 of the 2001 Regulations, the significant
narrowing of the categories of person liable for excise duty on imported tobacco
which was brought about by the 2001 Regulations was not immediately
appreciated by the revenue authorities. Indeed it was not until a sharp-eyed lawyer
in the Asset Forfeiture Division of the Revenue and Customs Prosecutions Office,
reviewing a draft judgment in the case of R v Chambers [2008] EWCA Crim 2467,
noticed that the Crown in that case had relied on the 1992 Regulations which, as
she knew, had been superseded by the 2001 Regulations (so far as tobacco
products were concerned) that the true picture began to emerge.
35. A trilogy of decisions of the House of Lords in R v May [2008] UKHL 28,
[2008] AC 1028, R v Green [2008] UKHL 30, [2008] AC 1053 and Jennings v
Crown Prosecution Service [2008] UKHL 29, [2008] AC 1046, had established
that the evasion by a smuggler of duty or VAT constitutes, for the purposes of
confiscation proceedings, the obtaining of a pecuniary advantage only if he
personally owes that duty or VAT. Giving effect to those decisions, the Court of
Appeal in Chambers held that a day labourer who had merely assisted in unloading
contraband tobacco did not obtain a benefit by way of a pecuniary advantage in the
form of the evasion of excise duty since he was not himself under a liability for the
payment of that duty. Toulson LJ, delivering the judgment of the court, said at
para 52:
Page 13
“On the hearing of the appeal Mr Cammerman accepted, in our
judgment correctly, that the appellant would only have obtained a
benefit by way of a pecuniary advantage in the form of the evasion
of excise duty if he was himself under a liability for the payment of
that duty which he dishonestly evaded. To help somebody else to
evade the payment of duty payable by that other person, within intent
to defraud, is no less criminal, but in confiscation proceedings the
focus is on the benefit obtained by the relevant offender. An
offender may derive other benefits from helping a person who is
under a liability for the payment of duty to avoid that liability, eg by
way of payment for the accessory’s services, but that is another
matter. In order to decide whether the offender has obtained a benefit
in the form of the evasion of a liability, it is necessary to determine
whether the offender had a liability which he avoided. In the present
case that turns on whether the appellant was liable for the payment of
excise duty on the relevant goods under the relevant Regulations.”
36. As observed in para 22 above, the Court of Appeal in the present cases
accepted that if the appellants were not participants in the actual importation of the
cigarettes, they would not be liable for the duty on them and could not therefore be
said to have obtained a pecuniary advantage. Although this was expressed
conditionally, it is clear that the Court of Appeal must have proceeded on the basis
that the appellants could not have been liable for payment of excise duty under
regulation 13 of the 2001 Regulations. No evidence had ever been presented of
the appellants’ having held the cigarettes at the excise duty point or of their having
caused them to reach that point, while retaining a connection with them.
37. Liability for payment of Value Added Tax is, for present purposes,
coterminous with liability to pay customs duty on imported goods from outside the
European Union. Section 1(1) of the Value Added Tax Act 1994 provides that
VAT shall be charged (inter alia) on the importation of goods from places outside
the member states. Section 1(4) provides that VAT on the importation of goods
from places outside the member states shall be charged and payable as if it were a
duty of customs. Thus, whoever has liability for the payment of customs duty on
goods imported from outside the EU also has a liability to pay the VAT arising on
their import.
Provisions relating to confiscation in Northern Ireland
38. The offence to which the Mackles pleaded guilty occurred before 24 March
2003. The relevant confiscation legislation in their case, therefore, was the
Proceeds of Crime (Northern Ireland) Order 1996 (SI 1996/1299). Article 2(6) of
this Order provided that a person who obtains property, or derives a pecuniary
Page 14
advantage, as a result of or in connection with the commission of an offence has
benefited from the offence. Article 2(7) provided that any property obtained and
any pecuniary advantage derived by a person as a result of or in connection with
the commission of an offence was his benefit from the offence. Article 2(7)(c)
stated that the value of the benefit was the value of the property or a sum of money
equal to the value of the pecuniary advantage or the aggregate of the values of the
property and money.
39. Mr McLaughlin’s offence took place after the coming into force of the
Proceeds of Crime Act 2002 (POCA). Section 156(4)(a) and (c) provides that if a
defendant has been convicted of an offence before the Crown Court, it must be
determined whether he has a criminal lifestyle. If it is not concluded that he has
such a lifestyle (and that was the position in relation to all the appellants in this
appeal) the court must decide whether the convicted person has benefited from his
particular criminal conduct. If it is determined that he has so benefited, the court
must decide on the recoverable amount, and make an order (a confiscation order)
requiring him to pay that amount.
40. The recoverable amount for the purposes of section 156 is an amount equal
to the defendant’s benefit from the conduct concerned: section 157(1). But by
section 157(2), if the defendant shows that the available amount (as defined in
section 159) is less than the recoverable benefit, the recoverable amount is the
available amount, or a nominal amount, if the available amount is nil. This is the
provision by which one of Mr McLaughlin’s co-accused had the recoverable
amount in his case fixed at nil.
41. Section 224(4) and (5) of POCA are in similar terms to article 2(6) and (7)
of the 1996 Order.
The basis on which the appellants were said to have benefited from their offences
42. The prosecution statements prepared by Ms McMullan in respect of the
Mackle brothers were identical in all material respects. And the basis on which the
appellants were said to have benefited from their criminal conduct was likewise
identical. It was also unequivocal. In respect of each appellant, she asserted that
the benefit was £1,036,775.77, a figure made up of evaded tobacco product duty of
£845,596.37 and evaded VAT of £191,179.40. It is clear from Ms McMullan’s
calculations that confiscation was sought against each appellant on the basis that
they had derived a pecuniary advantage in the total amount of duty/VAT evaded.
This renders academic Mr McCollum’s argument (referred to in para 12 above)
that he had not made any concession about the value of the benefit to the Mackles
so far as concerned the confiscation proceedings. The plain and inescapable fact is
Page 15
that the case made by the prosecution was that the appellants had obtained a
benefit in the form of evasion of the duty. No other form of benefit was advanced
or even mooted.
43. The same holds true for the case made against Mr McLaughlin. No
suggestion was made that he had derived a benefit from his criminal conduct other
than by the evasion of the excise duty and VAT. Indeed, on the evidence
presented, it is difficult to see how any other case could have been made. Nothing
in the prosecution case suggested a physical connection between Mr McLaughlin
and the cigarettes. And, as in the case of the Mackles, the total amount of the
benefit that Mr McLaughlin and his co-accused were said to have obtained was
calculated solely by reference to the amount of the evaded duty.
44. The respondent in its printed case has asserted that there was no evidence
before the Court of Appeal that the appellants had been wrongly advised as to the
effect of the 2001 Regulations. It has also been stated that the respondent has not
accepted that incorrect advice was given. It is claimed that it was incumbent on
the appellants to make an application to adduce fresh evidence before the Court of
Appeal, or for that court to inquire of trial counsel as to the nature of the advice
that was given before any conclusion could be reached about the basis on which
the appellants consented to the confiscation orders.
45. This argument misses the essential point in my view. This is that the only
basis on which the appellants were said to have obtained a benefit was that they
had evaded the duty and VAT payable. No other possible basis of benefit was
canvassed. An acceptance that they had obtained a benefit on that account
inevitably involved a mistake of law. No evidence is needed to establish that
proposition.
46. On the hearing of the appeal Mr McCollum suggested that the benefit which
the appellants had obtained was the equivalent of the evaded duty. The cigarettes
had a saleable value which was enhanced, he claimed, by the duty that had been
evaded. Even if it could be established that the saleable value of the cigarettes had
been increased by precisely the amount of the evaded duty (and that seems, at best,
highly questionable), the important point is that this is not the basis on which the
case against the appellants was presented on the confiscation proceedings.
Moreover, the saleable value of the contraband tobacco (as distinct from the
alleged pecuniary advantage from evasion of a legal liability, which was the basis
of the prosecution’s claim in the proceedings) would be a benefit to the appellants
only if they obtained the property as a result of or in connection with the
commission of the crime. I return to this point at para 59. If they did not obtain
the property, its value, whether enhanced or not, would not be a benefit to them.
Page 16
47. The prosecution had firmly espoused the case that the benefit obtained by
the appellants took the form of a pecuniary advantage derived from evasion of the
duty on the cigarettes. This basis of benefit was accepted uncritically by the
sentencing judges. It is not altogether surprising that they should have done so.
The confiscation orders were not only made on consent; they were the product of
discussions between the parties. Unlike the position in Revenue and Customs
Prosecutions Office v Mitchell [2009] EWCA Crim 214; [2009] 2 Cr App R (S)
463, (to which reference will be made at para 51 below) the appellants had not
indicated disagreement with the amount which the revenue authorities claimed was
the benefit that they had obtained. As the Mitchell case demonstrates, however,
sentencing judges should be astute to ensure that they are satisfied that agreements
on the amount to be recovered by way of confiscation orders are soundly based. In
any event, it is clear that the basis on which both judges accepted that the
appellants had benefited by their criminal conduct was that they had evaded duty
on the cigarettes. As is now apparent, because their liability to pay duty could not
be established, this was not a correct legal basis on which to find that the
appellants had obtained a benefit.
Is a consent to a confiscation order made under a mistake of law binding?
48. As noted at para 24 above the Court of Appeal held that, even if the
appellants were incorrectly advised to consent to the confiscation orders, they were
bound by the orders made on consent. Unfortunately, it appears that the court was
not referred to the decisions of the House of Lords in R v Emmett [1998] AC 773
and the Court of Appeal in R v Bell [2011] EWCA Crim 6 on this question. In
Emmett a confiscation order had been made by consent under the Drug Trafficking
Offences Act 1986 following the appellant’s plea of guilty to being knowingly
concerned in the importation of a controlled drug contrary to section 170(2) of the
Customs and Excise Management Act 1979. The Court of Appeal certified the
question whether it was open to the defendant to appeal against the order on the
ground that his acceptance of the prosecution’s case as to his liability was based on
either a mistake of law or a mistake of fact. Section 3 of the 1986 Act provided:
“Where—(a) there is tendered to the Crown Court by the prosecutor
a statement as to any matters relevant to the determination whether
the defendant has benefited from drug trafficking or to the
assessment of the value of his proceeds of drug trafficking; and (b)
the defendant accepts to any extent any allegation in the statement,
the court may, for the purposes of that determination and assessment,
treat his acceptance as conclusive of the matters to which it relates.”
49. It had been argued by the prosecution in Emmett that the effect of this
section was that an appeal such as the appellant sought to advance was implicitly
Page 17
excluded. That argument was rejected by Lord Steyn (with whom the other
members of the Appellate Committee agreed). At pp 782-783 he said:
“Earlier in this century it may not have been possible to put forward
as a ground of appeal that the plea of guilty arose from a mistake of
law or fact of the defendant: R v Forde [1923] 2 KB 400, 403, per
Avory J. Nowadays it is clear that as a matter of jurisdiction the
Court of Appeal has power in such a case to consider an argument
that the plea of guilty was induced by a fundamental mistake of law
or fact: see R v Boal [1992] QB 591 (a mistake of law); R v Lee
(Bruce) [1984] 1 WLR 578, 583E (a mistake of fact) and
Blackstone’s Criminal Practice, 7th ed. (1997), pp. 1512-1514, para.
D22.12. Given that the powers of the Court of Appeal extend to
cases when a plea was entered on a mistaken view of the law or fact,
it is difficult to see what rational basis there could be to exclude such
a right of appeal under section 3(1). Even drug traffickers have rights
and they, too, are entitled to justice.”
50. It is to be remembered that under POCA the court must itself decide
whether the convicted person has benefited from his particular criminal conduct.
The power to make a confiscation order arises only where the court has made that
determination. A defendant’s consent cannot confer jurisdiction to make a
confiscation order. This is particularly so where the facts on which such a consent
is based cannot as a matter of law support the conclusion that the defendant has
benefited. On the other hand, if it is clear from the terms on which a defendant
consents to a confiscation order, that he has accepted facts which would justify the
making of an order, a judge, provided he is satisfied that there has been an
unambiguous acceptance of those facts from which the defendant should not be
permitted to resile, will be entitled to rely on the consent. This is so not because
the defendant has consented to the order. It is because his acceptance of facts itself
constitutes evidence on which the judge is entitled to rely. Provided the acceptance
of the facts is unequivocal, and particularly where it is given after legal advice
which proves to be sound, the judge need not mount a further investigation. It
should be emphasised, however, that this is because the judge can in those
circumstances himself be satisfied on the evidence that the basis for making a
confiscation order has been made out.
51. The proper discharge by a judge of his statutory duty to satisfy himself that
a defendant has benefited by his criminal conduct is well illustrated by the case of
Mitchell (referred to above at para 47). In that case the respondent had pleaded
guilty to an offence under section 170(2) of the 1979 Act. The goods involved
were tobacco products. In subsequent confiscation proceedings the prosecution
claimed that the respondent had benefited in respect of the tobacco and had
obtained a pecuniary advantage by evading the excise duty payable. The
Page 18
respondent contended that the only benefit he had received from the offence was
£100 paid to him in cash for helping to load the tobacco. The lawyers acting on
behalf of the respondent accepted that, whatever his real benefit might have been
as a matter of fact, under the terms of POCA, he obtained the benefit alleged by
the prosecution. Troubled about the correctness of this concession, the sentencing
judge, Recorder Males QC, declined to act on it. After considering the position
and hearing argument, he made a confiscation order against the respondent for
£100, the amount that he had claimed to have received for his services as a loader.
The Court of Appeal not only endorsed this approach, it paid tribute to the way in
which the Recorder had dealt with the case.
52. In Bell, confiscation orders were made in respect of evaded duty on tobacco
products smuggled into the United Kingdom for resale. The prosecution had
wrongly claimed benefit in the sum of the evaded duty as a pecuniary advantage
although (it transpired) the defendants could not in law be liable for it. The
defendants had consented to confiscation orders in those sums. On their appeal
against the confiscation orders the prosecution argued that because the defendants
had consented to the orders, they were bound by them. It was submitted that it was
for the defendants to spot the error and having not done so, leave to appeal should
be refused. This submission was forthrightly rejected by Hooper LJ, who delivered
the judgment of the court. Stating that the arguments were neither convincing nor
attractive, Hooper LJ said at para 14:
“In our view it would be a grave injustice not to grant leave in cases
such as the present cases … on the basis that there has been a
previous misconception as to the state of the law, there would be a
substantial injustice if we did not grant leave.”
53. On the same basis it would be manifestly unfair to require the appellants in
this case to be bound by their consent to the confiscation orders when, as pointed
out in para 45 above, the only possible explanation for the consent was that it was
given under a mistake of law. The Court of Appeal in para 40 of its judgment had
suggested that the appellants “were, on advice, prepared to consent to confiscation
orders by way of a compromise of the legal issues that arose as between them and
the Crown in respect of the confiscation applications” and that they “knew
perfectly well what their respective roles were in the joint enterprises and what
was likely to emerge if they contested the applications for the confiscation orders”.
This suggests that the court had concluded that there were tactical reasons for
consenting to the orders which were not associated with the erroneous belief that
the appellants were legally liable to pay the duty and VAT. But there was no
evidence to support such a conclusion. On the contrary, the court had been told by
the legal representatives of the appellants that the lawyers who had appeared for
them on the confiscation proceedings had wrongly advised them that they were
liable for the duty and VAT. No challenge to that claim was made by the Crown
Page 19
nor was it contended that evidence was required to show that wrong advice had in
fact been given. Since the only basis on which it had been claimed against the
appellants that they had benefited was that they were liable for the duty and VAT,
the obvious, indeed the only, inference to be drawn was that they had agreed to the
consent orders because they believed that they were indeed liable on that basis.
The prosecution had firmly committed itself to that unique case. If the appellants
had contested the sole basis on which the prosecution claimed that they had
benefited viz that they had evaded duty for which they were liable, there is no
reason to suppose that this would have exposed them to the risk of
disadvantageous evidence which was entirely unconnected with the case that the
prosecution had advanced. A finding that there were reasons for the appellants
consenting to the confiscation orders other than that they had been advised that
they were liable to pay the duty which had been evaded inevitably involves a
measure of speculation.
54. I would therefore re-formulate the first certified question so as to properly
reflect the particular circumstances of this case; in its amended form the question
reads, “Is a defendant precluded from appealing against a confiscation order made
by consent on the ground that the consent was based on a mistake of law, as a
result of wrong legal advice” and I would answer that question, “No”.
The second certified question
55. By way of preamble to consideration of the second certified question, it
should be noted that the reason the Court of Appeal dismissed the appeals was
that, in its estimation, an alternative basis from that advanced by the Crown existed
whereby the appellants could be found to have benefited from their admitted
criminal conduct. This circumstance, taken together with the consent to the
confiscation orders, was deemed sufficient to refuse to allow the appeals. Where
the original basis on which a confiscation order was made is no longer viable, a
decision to confirm the order on different grounds must be made with great care
and only when it is clear that the person against whom it is to be made has had
ample opportunity to address the altered grounds on which it is proposed to make
the order.
56. Of course, it may be clear on the established or admitted facts that those
who were made subject to a confiscation order on the erroneous basis that they
were liable to pay the excise duty under regulation 13(1), are in fact liable under
regulation 13(2) because they caused the goods to reach the excise duty point or
because they had obtained the value of the goods themselves: see, in this context,
R v Khan [2009] EWCA Crim 588 at para 8. In such circumstances it would be
wrong to quash the confiscation order if it is plain that the order would have been
made if the proper basis of liability had been correctly identified.
Page 20
57. It is apparent that the Court of Appeal in the present case did not regard the
appellants as having obtained a benefit on either of the two bases considered in
Khan. There was no evidence that they had caused the tobacco to reach the excise
duty point and no basis on which it could be said that they had received the benefit
of the cigarettes themselves. The court followed a different route. It said, firstly,
(at para 27) that those who come into possession of goods knowing that duty on
them has been evaded and, as part of a joint enterprise, take advantage of the
economic advantages flowing from the evasion of the duty may gain a financial
advantage flowing from their participation in the ongoing enterprise. Secondly,
the Court of Appeal found that “the joint actions of the appellants, at least
arguably, involved possession and control of the cigarettes by those involved in
the participation and the enterprise.” (para 35 – emphasis added).
58. It is to be noted that the Court of Appeal concluded that these were possible
alternative bases on which it might be concluded that the appellants had obtained a
benefit. It decided that it was unnecessary and inappropriate for the sentencing
judges to examine these alternative bases of liability because of the appellants’
consent to the making of confiscation orders. For the reasons given above, I do
not consider that the trial judges could in these cases be relieved of their duty to be
satisfied that the appellants had in fact obtained a benefit. It follows that I consider
that, if these alternative bases of liability were viable, they would have had to be
considered by the judges making the confiscation orders and that it would have
been necessary that the appellants have a proper opportunity to address the
different foundation on which the confiscation orders might be made against them.
On that account, I do not consider that the Court of Appeal’s affirmation of the
orders made can be upheld.
59. The second certified question is based on the premise that a defendant has
had physical possession of the goods and played an active role in the handling of
them. What is meant by possession of goods for the purpose of confiscation
proceedings and the significance of a finding as to the degree of possession
involved has exercised the courts in England and Wales on a number of occasions.
It again appears that not all of those cases can have been cited to the Court of
Appeal since some of them have not been referred to in the judgment.
60. In May, dealing with the requirement under the 1986 Drug Trafficking
Offences Act that a defendant be shown to have benefited from his criminal
conduct, at para 15 Lord Bingham said:
“…under the 1986 Act the first question was always whether, on the
facts (and allowing permissible inferences) the defendant had
benefited by receipt of any payment or other reward, which a mere
intermediary might possibly not. It does not necessarily follow from
Page 21
the mere possession of drugs that a person is not a mere minder or
custodian: see R v J [2001] 1 Cr App R (S) 273; R v Johannes [2002]
2 Cr App R (S) 109.”
61. In other words, it is not to be assumed that because someone has handled
contraband, even if that is in the course of a joint criminal enterprise, he has, on
that account alone, benefited from that possession. This reasoning applies to the
concept of obtaining benefit in both the 1996 Order and POCA. At para 48 of May
Lord Bingham set out a number of principles to be followed by courts dealing with
applications for confiscation orders. The first of these was that the relevant
legislation “is intended to deprive defendants of the benefit they have gained from
relevant criminal conduct, whether or not they have retained such benefit, within
the limits of their available means. It does not provide for confiscation in the sense
understood by schoolchildren and others, but nor does it operate by way of fine”.
Later, in the same para, Lord Bingham observed that mere “couriers or custodians
or other very minor contributors to an offence, rewarded by a specific fee and
having no interest in the property or the proceeds of sale, are unlikely to be found
to have obtained that property”.
62. The House of Lords returned rather more explicitly to this theme in
Jennings. In that case (as in May) the relevant provision was section 71(4) of the
Criminal Justice Act 1988 which, among other things provided that “a person
benefits from an offence if he obtains property as a result of or in connection with
its commission”. At para 13 Lord Bingham said:
“In its opinion in R v May the committee endeavoured to explore the
meaning of section 71(4). … The focus must be and remain on the
language of the subsection. The committee regards the meaning of
the subsection as in substance the same as the equivalent provisions
of the drug trafficking legislation. There is a real danger in judicial
exegesis of an expression with a plain English meaning, since the
exegesis may be substituted for the language of the legislation. It is,
however, relevant to remember that the object of the legislation is to
deprive the defendant of the product of his crime or its equivalent,
not to operate by way of fine. The rationale of the confiscation
regime is that the defendant is deprived of what he has gained or its
equivalent. He cannot, and should not, be deprived of what he has
never obtained or its equivalent, because that is a fine. This must
ordinarily mean that he has obtained property so as to own it,
whether alone or jointly, which will ordinarily connote a power of
disposition or control, as where a person directs a payment or
conveyance of property to someone else.” (emphasis added)
Page 22
63. At para 14 Lord Bingham dealt with the question of whether a person who
contributes to property being obtained by another might be said to have obtained
benefit from it. He said that a person’s acts “may contribute significantly to
property … being obtained without his obtaining it. … a person benefits from an
offence if he obtains property as a result of or in connection with its commission,
and his benefit is the value of the property so obtained, which must be read as
meaning ‘obtained by him’”.
64. The focus must be, as Lord Bingham has said, on what benefit the
defendant has actually gained. Simply because someone has embarked on a joint
criminal enterprise, it does not follow that they have obtained an actual benefit.
Being engaged in a conspiracy does not, of itself, establish that each conspirator
has obtained the property which is the product of the conspiracy. Thus in R v
Sivaraman [2008] EWCA Crim 1736, [2009] 1 Cr App R (S) 469, at para 12 (6)
the Court of Appeal said:
“Where two or more defendants obtain property jointly, each is to be
regarded as obtaining the whole of it. Where property is received by
one conspirator, what matters is the capacity in which he receives it,
that is, whether for his own personal benefit, or on behalf of others,
or jointly on behalf of himself and others. This has to be decided on
the evidence: Green, para 15. By parity of reasoning, two or more
defendants may or may not obtain a joint pecuniary advantage; it
depends on the facts.”
65. In the subsequent case of R v Allpress [2009] EWCA Crim 8, [2009] 2 Cr
App R (S) 58, an argument that the judgment in Sivaraman on this point was
wrong was firmly rejected: see para 30. In delivering the judgment of the Court of
Appeal (the Vice President, Hughes LJ, Toulson LJ, Rafferty J and Maddison J)
Toulson LJ dealt with two misconceptions that had also featured in Sivaraman. At
para 31 he said this:
“In Sivaraman the court also addressed two misconceptions which
subsequent cases suggest may still be common. One was that in
assessing benefit in a conspiracy case each conspirator is to be taken
as having jointly obtained the whole benefit obtained by ‘the
conspiracy’. A conspiracy is not a legal entity but an agreement or
arrangement which people may join or leave at different times. In
confiscation proceedings the court is concerned not with the
aggregate benefit obtained by all parties to the conspiracy but with
the benefit obtained, whether singly or jointly, by the individual
conspirator before the court. The second misconception is a variant
of the first. It is that anybody who has taken part in a conspiracy in
Page 23
more than a minor way is to be taken as having a joint share in all
benefits obtained from the conspiracy. This is to confuse criminal
liability and resulting benefit. The more heavily involved a defendant
is in a conspiracy, the more severe the penalty which may be
merited, but in confiscation proceedings the focus of the inquiry is
on the benefit gained by the relevant defendant. In the nature of
things there may well be a lack of reliable evidence about the exact
benefit obtained by any particular conspirator, and in drawing
common sense inferences the role of a particular conspirator may be
relevant as a matter of fact, but that is a purely evidential matter.”
66. Two assumptions must be guarded against, therefore. Firstly, it is not to be
assumed that because one has handled contraband one has had possession of it in
the manner necessary to meet the requirements of the relevant legislation.
Secondly, participation in a criminal conspiracy does not establish that one has
obtained a benefit – as Toulson LJ said, this is to confuse criminal liability with
resulting benefit.
67. The Court of Appeal in the present case did not examine the evidence with
a view to ascertaining whether the appellants could be shown to have had
possession of the cigarettes in such a way as is contemplated by the legislation.
Before a confiscation order could be made in any of the appellants’ cases, such an
examination must take place. In its absence the Court of Appeal’s decision cannot
be upheld. Furthermore, the court’s conclusion that the appellants could be
considered to have obtained a benefit simply because they admitted participation
in a joint criminal enterprise cannot, in the light particularly of the decisions in
Sivaraman and Allpress, be accepted.
68. I would therefore answer the second certified question, “Not necessarily.
Playing an active part in the handling of goods so as to assist in their commercial
realisation does not alone establish that a person has benefited from his criminal
activity. In order to obtain the goods for the purposes of section 156 of POCA
2002 or article 8 of the Proceeds of Crime (Northern Ireland) Order 1996, it must
be established by the evidence or reasonable inferences drawn therefrom that such
a person has actually obtained a benefit.”
69. On an appeal against sentence the Court of Appeal has power under section
10(3) of the Criminal Appeal (Northern Ireland) Act 1980 to quash the sentence
passed by the Crown Court and pass such other sentence as is authorised by law.
Section 10(3A) of the 1980 Act (as inserted by the Coroners and Justice Act 2009,
section 141(2)) provides that where the Court of Appeal exercises its power under
subsection (3) to quash a confiscation order, the court may, instead of passing a
sentence in substitution for that order, direct the Crown Court to proceed afresh
Page 24
under the relevant enactment. Section 33(3) (as substituted by the Constitutional
Reform Act 2005, section 40, Schedule 9, para 33(4)(b)) provides that, for the
purpose of disposing of an appeal under this Part of the Act, the Supreme Court
may exercise any powers of the Court of Appeal. I would therefore quash the
confiscation orders and remit the cases to the trial courts to proceed afresh in light
of this judgment.
