THE CROWN PROSECUTION SERVICE v (1) RONALD WILLIAM COMPTON (2) COMPTONS OF BRIGHTON LIMITED (3) DAVID COYNE (as Trustee in Bankruptcy of the bankrupt estate of Ronald Compton & Margaret Compton (4) MARGARET OLIVE COMPTON [2002] EWCA Civ 1720

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION (ADMINISTRATIVE COURT)
(Mr Justice Stanley Burnton)
[2002] EWCA Civ 1720Case No Case No: C/2002/0764/QBACFVenue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
THE CROWN PROSECUTION SERVICEAppellant(1) RONALD WILLIAM COMPTON (2) COMPTONS OF BRIGHTON LIMITED (3) DAVID COYNE (as Trustee in Bankruptcy of the bankrupt estate of Ronald Compton & Margaret Compton (4) MARGARET OLIVE COMPTONRespondents
Before
Lord Justice Simon BrownLord Justice MayLord Justice ClarkeA Mitchell Esq, QC & Miss S Brown(instructed by The Crown Prosecution Service) for the AppellantA Moran Esq, QC & J Dawson Esq(instructed by Messrs Bermans) for the Second & Third RespondentsThe First Respondent did not appear and was not representedThe Fourth Respondent did not appear and was not representedHearing dates: 12th November 2002Date 27 November 2002

Lord Justice Simon Brown:

This

[1]is an appeal by the Crown Prosecution Service ("CPS") with the permission of Buxton LJ against orders made by Stanley Burnton J in the Administrative Court on 26 th March 2002 by which inter alia he refused(i) to make a restraint order against the second respondents, Comptons of Brighton Limited ("the company") pursuant to section 26(1) of the Drug Trafficking Act 1994 ("the Act"), and(ii) to appoint a receiver to take over the assets of the company pursuant to section 26(7) of the Act.[2]To explain the nature of the appeal and how it has now come to be moot it is necessary first to set out certain basic facts. This I shall do as briefly as possible.[3]On 2 January 2001 Ronald William Compton, the first respondent ("Mr Compton"), pleaded guilty in the Hove Crown Court to offences of possession of heroin and cannabis resin with intent to supply for which on 17 January 2001 he was sentenced to seven years' imprisonment. He had been arrested on 4 November 1999 together with his wife, the fourth respondent ("Mrs Compton"), albeit she in the event was not prosecuted.[4]On 19 September 2000 Mrs Compton was adjudicated bankrupt; so too, on 24 October 2000 was Mr Compton. The trustee in bankruptcy for each was the third respondent, David Coyne ("the trustee in bankruptcy"). He and the company alone among the respondents have appeared to resist the CPS's appeal.[5]The company, set up by Mr Compton, was incorporated on 6 October 1993. Mr Compton was appointed sole director, Mrs Compton the company secretary. Two £1 shares were issued, one to each.[6]Following notice from the Companies' Registrar that the company was at risk of being dissolved, the first annual return for the year ending 6 October 1994 was filed on 19 September 1995. The company's business on the next annual return for the year ending 6 October 1995, and dated 12 January 1996, was stated to be "domestic furniture shops, antique dealers/used furniture and florists, nurserymen". On 12 September 1996 the company's annual accounts for 1994 and 1995 were filed; they showed the company to be insolvent.[7]From October 1996, however, there was a dramatic improvement in the company's fortunes. On 26 October 1996 a property was purchased in the company's name at 26 Chatsworth Road, Brighton ("Chatsworth Road") for £126,000. Mr Compton had paid the 10% deposit on 2 October 1996 by a cheque for £12,600 drawn on his private account and during the following three weeks large cash deposits were made into the company's accounts which enabled the company on 25 October 1996 to pay the balance of £113,400. On 31 October 1996 the company's balance sheet showed a director's loan of £106, 521.[8]On 9 May 1997 Mr Compton was granted letters of administration in respect of his mother's intestate estate, the net value of which was £67,113.[9]On 26 September 1997 adjacent properties at 9 and 11 Lansdowne Place, Hove, were purchased in the company's name respectively for £175,000 and £205,000. Nationwide Building Society advanced £393,400 for the purpose, a charge over Chatsworth Road being registered in their favour on 27 November 1997 and the building society taking a debenture over the company's assets.[10]On 9 January 1998 Mrs Compton transferred her £1 share to Sean Compton ("Sean"), one of her four sons. Sean and two of his brothers (Robert and Stephen) were convicted at Hove Crown Court on 16 January 2001. Sean and Robert were convicted of a number of drug trafficking offences for which they were sentenced respectively to 4½ years' and 6 years' imprisonment. Stephen was convicted of money laundering offences and sentenced to 4 years' imprisonment. The fourth brother ("Ronald Jnr") had earlier been convicted at Lewes Crown Court on 27 April 1999 of possessing Class A and Class B drugs with intent to supply for which he was sentenced to 8 years' imprisonment and made subject to a confiscation order of £435,703.96.[11]Between May and July 1998 large sums in cash were deposited in the company's bank accounts. On 16 July 1998 £185,000 was transferred from the company's business reserve account to Mr Compton's account. On 11 September 1998 Mr Compton paid £56,000 as a 10% deposit on the purchase of 1a Tongdean Road, Hove, a property later registered in Sean's sole name and sold early in 2000 for some £650,000.[12]On 17 November 1999 Sean was appointed as a second director of the company.[13]On 17 July 2001 the trustee in bankruptcy obtained an order from the Brighton County Court setting aside the share transfer from Mrs Compton to Sean as a transaction at an undervalue.[14]On 30 August 2001 the Lansdowne Road properties were sold respectively for £375,000 and £350,000.[15]By the time of the interlocutory application before Stanley Burnton J on 26 March 2002, the property held in the company's name consisted essentially of: i) £355,686 together with accrued interest, representing the net proceeds of sale of the Lansdowne Place properties; ii) Chatsworth Road, then worth some £400,000; iii) the rental income from Chatsworth Road, some £3,163 per month. iv) the balance of the Lloyds TSB bank account.[16]Stanley Burnton J, as already indicated, refused the CPS's applications for restraint and receivership orders against the company. He did so for two independent reasons: first, because he was not satisfied on the evidence before him that it was appropriate to treat the company's assets as belonging to Mr Compton; secondly, because in any event he could not make the orders sought by virtue of section 32(2) of the Act:
"Where a person has been adjudged bankrupt, the powers conferred on the High Court or a county court by sections 26 to 30 of this Act or on a receiver so appointed shall not be exercised in relation to- (a) … (b) property for the time being comprised in the bankrupt's estate for the purposes of Part IX of the 1986 Act; …"
[17]Having regard to sections 283 and 436 of the Insolvency Act 1986 (defining respectively "a bankrupt's estate" and "property") it is clear that if the company's property belongs beneficially to Mr Compton it is part of his estate.[18]I shall have to return to both those matters later, but first I must indicate just what orders the judge did make to safeguard the CPS's interests and then I must bring the story up to date.[19]The judge made a restraint order against Mr Compton in what may be called the usual terms save that it was subject to the proviso that "this prohibition does not include any property which for the time being forms part of the bankrupt's estate for the purposes of Part IX of the Insolvency Act 1986". He adjourned the CPS's applications for declaratory relief (applications, for example, that the property held in the company's name be declared to be owned by Mr Compton) to a date after 29 April 2002 (the date then fixed for the Crown Court hearing of the Crown's application for a confiscation order). By paragraph 4 of the order the judge ordered that the trustee in bankruptcy: "Must not(a) in any way dispose of or deal with or diminish the surplus remaining in the bankrupt estate of Ronald Compton after payment in full and with interest of all the creditors of Ronald Compton and the payment of the expenses of Ronald Compton's bankruptcy and(b) in the event of annulment of Ronald Compton's bankruptcy dated 24 October 2002, pay [or] transfer any part of the bankrupt's estate vested in the … trustee in bankruptcy of Ronald Compton to Ronald Compton".[20]That order prevented the trustee in bankruptcy at the conclusion of Mr Compton's bankruptcy returning to him any surplus from the estate. It was, so to speak, an anticipatory restraint order.[21]So far as the company's assets and Mrs Compton's estate in bankruptcy were concerned, these were dealt with in parallel proceedings before the judge with regard to Sean, proceedings in which the trustee in bankruptcy was the applicant, the CPS the respondent. On 28 February 2002 the trustee in bankruptcy had secured agreement from the agents receiving the Chatsworth Road rents thereafter to retain these sums rather than pay them over to the company. On 26 March 2002, by way of variation to an undertaking previously given, the trustee in bankruptcy undertook:
"Not to take any steps to sell, dispose of or deal with any assets of [the company] otherwise than by way of taking steps to preserve those assets for the benefit of the persons who are entitled to those assets save that after 20 May 2002, in the event that [the company] is wound up, the [trustee in bankruptcy] be permitted to distribute up to half of the value of the assets of [the company] to the trustee in bankruptcy of Ronald Compton for the payment of Ronald Compton's creditors in full and with interest and the expenses of the bankruptcy."
[22]That undertaking prevented the disbursement of the company's assets for the benefit of Mrs Compton's creditors but reflected the CPS's acceptance that Mr Compton's creditors could properly be paid. (We were told at the hearing that Mr Compton's indebtedness to his creditors amounts to £29,000-odd, Mrs Compton's to £92,000-odd).[23]As for the company's management, three new directors (one to act as company secretary) were appointed by the trustee in bankruptcy (as the holder of the two issued shares) on 13 May 2002 in place of Sasha Compton (Sean's wife) and Jacqueline Meads (another intimate of the Compton family) who had been appointed respectively director and company secretary on 2 March 2001.[24]On 19 July 2002, following three final days of oral evidence, Judge Scott-Gall in the Hove Crown Court finally determined the prosecution's long-outstanding applications for confiscation orders to be made in respect of Mr Compton and Sean, confiscation orders in respect of Ronald Jnr and Stephen having been made the previous August. A confiscation order against Sean was made for £329,000-odd. More relevantly for present purposes, the judge determined that Mr Compton had benefited from drug trafficking to the extent of £1,954,403, and that his realisable assets amounted to £977,937.27. He accordingly made a confiscation order in that latter sum, such order to be satisfied within twelve months, with 4 years' imprisonment in default consecutive to the 7 year term Mr Compton is already serving. In the course of a very detailed judgment extending over some 70 pages of transcript, Judge Scott-Gall described himself as "quite satisfied that Ronald Compton was the head of a family of determined and prolific drug-traffickers" and, having explored in great detail the company's role in money laundering, concluded that the court should "pierce the corporate veil to establish the full extent of Ronald Compton's benefit from drug trafficking". He noted that on 30 May 2002, when granting the CPS permission to appeal against Stanley Burnton J's decision, Buxton LJ had commented:
"The questions raised are of significant public importance. I am far from certain that the judge was right either in the general principles that he adopted or in relation to his approach to the evidence."
[25]As, moreover, Judge Scott-Gall also noted, in addition to the doubt which that comment cast on Stanley Burnton J's approach:
"I, unlike Burnton J, have had the benefit of detailed evidence given by Ronald Compton which has been tested fully in cross-examination. I have seen and heard evidence on numerous documents, accounts, correspondence and so forth, and I have had the benefit of the evidence of and the reports provided by [Mr Compton's forensic accountant]. … I have no doubt that … the unexplained bankings of about £600,000 going into the company accounts were the proceeds of drug-trafficking therefore confirming, in my judgment, what Burnton J surmised on limited evidence was the case. His prophecy in paragraph 43 is, in my judgment, fully justified."
[26]Let me at once set out the paragraph of Stanley Burnton J's judgment there referred to since it conveniently conveys the general tenor of his approach as to whether he should treat the company as a sham. "43. The information shown in the documents of the company, indicating that monies were paid to it and provided to it by [Mr Compton] as a loan and showing the properties as being vested beneficially in it and the income of those properties as income of the company, may be false. There are some indications of this. By way of example, no interest seems to have been paid or payable on the apparent loan made by the defendant. Certain monies of the company, albeit provided by the defendant, seem to have gone to assist his son [Sean] in the purchase of his home. Further investigation of the affairs of the company may reveal evidence that its documents, and in particular its accounts, do not represent the reality of its affairs. However, in my judgment, the evidence presently before me is insufficient to show, even on a prima facie basis, that the company's accounts do not reflect that reality. On that basis, the evidence before me does not establish to any requisite standard that the company was a sham."[27]On this appeal the CPS seek to challenge the approach adopted in that paragraph. They contend that the judge was wrong to hold that no prima facie case arose on the evidence before him that the company was a sham and wrong too, if such was his view, to regard a prima facie case as an insufficient basis upon which to make interim restraint and receivership orders.[28]What, however, Mr Mitchell QC for the CPS has found it difficult to accept is that this appeal is moot, indeed doubly so. First, even had the judge below thought it right to treat the company as a sham, he would nevertheless have been unable to make the restraint and receivership orders sought because of section 32(2) of the Act. As Stanley Burnton J observed, whilst a prior restraint order takes priority over a subsequent bankruptcy (see section 32(1) of the Act), where, as here, bankruptcy precedes the making of a restraint order, by virtue of section 32(2) it is the bankruptcy which has priority. Although the CPS had sought to dispute that view below, it is no longer challenged and, indeed, it is plainly right.[29]Secondly, even if the judge's view of the evidence or approach to the exercise of section 26 powers was mistaken, that is now history. Now, as already stated, a confiscation order has been made in the Crown Court, the Crown Court judge having heard full evidence on all issues. True, it remains open to Mrs Compton - or, indeed, the trustee in bankruptcy on behalf of her creditors - to contest in the High Court the conclusion arrived at in the Crown Court - see the decision of the House of Lords in In re Norris [2001] 1 WLR 1388 . But that contest, were it to take place, would be by way of a final determination of the issue and not, as before Stanley Burnton J below, an interlocutory ruling on interim restraint and receivership applications. It would take place, moreover, in the context of the realisation of property under section 29 of the Act following the making of a confiscation order.[30]I need perhaps to qualify that last sentence to this extent. Because of the impact of section 32(2) not only upon section 26 interim restraint and receivership orders but also upon post-confiscation order powers exercisable under section 29 (in particular to appoint a receiver under section 29(2) to gather in and realise realisable property), it would be necessary, in a case like the present whether the bankruptcy subsists, to resolve any remaining issue between the CPS and Mrs Compton (or the trustee in bankruptcy) as to the extent of Mr Compton's realisable property in proceedings before the Administrative Court for declaratory relief (such proceedings to be served on anyone claiming an interest in the property consistently with the approach ordinarily required by 29(8)). In fact, as noted in paragraph 19 above, such proceedings are already here in being, namely the CPS's applications for declaratory relief which Stanley Burnton J adjourned on 26 March. If, despite Judge Scott-Gall's holdings following the detailed evidence called in the Crown Court, the trustee in bankruptcy still thinks it right to compete with the CPS for the benefit of the company's assets on behalf of Mrs Compton's creditors, or if Mrs Compton herself wishes to do so with a view to receiving the surplus at the conclusion of her bankruptcy, those are the proceedings in which that issue would now fall to be resolved, plainly on substantially fuller evidence than was available at the interim hearing on 26 March 2002.[31]Even though the appeal is moot, however, it does not follow that we must necessarily decline to consider the approach adopted below. After all, as Buxton LJ noted when giving permission to appeal, "the questions raised are of significant public importance". For my part, therefore, I think it right to touch on certain aspects of the judgment below although not, of course, to embark on the sort of detailed review which would have been necessary if the issues before the judge were still live.[32]There are, as it seems to me, three aspects of the judgment below: first, its approach to the exercise of the court's power to make interim restraint and receivership orders under section 26 of the Act; secondly, its approach to the legal principles applicable when attempts are made to pierce the corporate veil; and thirdly, its application of those principles to the facts of this particular case. I propose to make certain observations on the first two matters but to say nothing about the third. The approach to the exercise of section 26 powers[33]The starting point must be section 31(2) of the Act:
"… the powers [including those under section 26] shall be exercised with a view to making available for satisfying … any confiscation order that may be made in the defendant's case the value for the time being of realisable property held by any person, by means of the realisation of such property."
[34]This provision was considered in Re Peters [1988] QB 871 although in very different circumstances from those arising here. Lord Donaldson MR said: "Counsel for the Commissioners points out that a court faced with the making or variation of a restraint order or a charging order is not concerned with the making of a confiscation order or a process of execution in satisfaction of such an order. It is concerned solely with the preservation of assets at a time when it cannot know whether the accused will or will not be convicted. Such a jurisdiction is closely analogous to that exercised by the courts in relation to Mareva injunctions and might, not inaccurately, be referred to as a 'Drugs Act Mareva'. Under the Mareva jurisdiction the interest of the potential judgment creditor has to be balanced against those of actual creditors, whether secured on unsecured, and of the defendant himself who may succeed in the action and should be fettered in his dealing with his own property to the least possible extent necessary to ensure that the processes of justice are not frustrated. Sub-section 2 [of what was then section 13, now section 31] is consistent with such a purpose, subject to what counsel for the Commissioners described as a 'legislative steer', namely that, so far as is reasonable taking account of the fact that the accused may be acquitted and that, unlike the position under the Mareva jurisdiction, there is no counter-undertaking in damages although there is a discretionary power to award compensation …, the value of the realisable property shall be maintained in order that it may be available to satisfy any confiscation order." (p879)[35]Nourse LJ similarly remarked upon the close analogy with the Mareva jurisdiction, stating: "In both cases the object is to strike a balance at an interlocutory stage between keeping assets available to satisfy a final order, if and when one is made, and meeting the reasonable requirements of their owner in the mean time." (p880)[36]Not only, I should note, was the context very different there - what was at issue was the variation of a restraint order to allow the defendant to make a lump sum payment of £25,000 by way of the capitalisation of his son's future school fees and expenses - but so too was the nature of the issue still to be decided: the defendant in that case had still not been convicted whereas here, of course, Mr Compton already had although no confiscation order had yet been made against him. The outstanding issue here was as to whether eventually the corporate veil would be pierced.[37]Another authority I think it appropriate to bear in mind when exercising the section 26 power is this court's recent decision in Hughes -v- Customs & Excise Commissioners [2002] 4 All ER 633 , again a decision in a very different context - the liability for receivership costs in the event of acquittal - where, at paragraph 60, I myself said:
"Given that restraint and receivership orders can, as perhaps these very cases show, bear heavily upon the individuals involved and may leave acquitted defendants with substantially depleted assets, the court should, in deciding whether initially to make, and whether thereafter to vary or discharge, such orders, weigh up the balance of competing interests with the greatest care. The Crown's concern to safeguard an accused's property against dissipation or removal abroad must always be weighed against the possibility that the price to be paid will fall upon an innocent man. It is important that this legislation continues to be operated to strip criminals of their ill-gotten gains. But it is important too that the court keeps a close control over those it appoints to act as receivers on its behalf and that costs are not too readily incurred, particularly before any confiscation order is made."
[38]All that I think it appropriate on this appeal to add by way of comment on the approach to adopt to the exercise of section 26 powers is that if, on the documents, a good arguable case arises for treating particular assets as the realisable property of the defendant - here on the basis that the company's corporate veil should properly be pierced - then the relevant restraint (and possibly receivership) order(s) should ordinarily be made. That essentially is the test for the grant of Mareva relief. So too should it be the test for the exercise of the section 26 powers. It is, of course, open to third parties (or the defendant himself where the order is made without notice) to apply to set it aside.[39]If in paragraph 43 of his judgment Stanley Burnton J was suggesting some different test, then it follows that I would regard it as wrong. It seems to me likely, however, that his conclusion (right or wrong) that the evidence before him failed to establish "even on a prima facie basis" a case for piercing the corporate veil (on the ground that the company was a sham) was tantamount to saying that in his view no good arguable case had been made out for such a conclusion.[40]There are, I should perhaps add, certain other passages in the judgment which could be read as suggesting that the judge set himself too high a threshold for the exercise of the section 26 powers. Take, for example, paragraph 58:
"In the present case, I have not, on the evidence before me, been satisfied that it is appropriate to treat the assets of the company as belonging to the defendant."
[41]That is unexceptionable if the judge was meaning no more than that he was not satisfied even that a good arguable case had been made out for piercing the veil but, of course, objectionable if the judge thought he could only exercise the section 26 powers once persuaded that the veil should be pierced.[42]Because, however, the appeal is moot, it is obviously unnecessary to explore these doubts further. The legal principles applicable to piercing the corporate veil[43]I touch on this not because a moot appeal provides an appropriate opportunity to expatiate upon this difficult area of the law but only lest anyone were in future to place undue reliance upon Stanley Burnton J's judgment. Take paragraph 44:
"A sham, it must be remembered, is a fiction. To establish a sham it must be shown that the apparent activities and ownership of the company were a fiction. To the contrary, most of the documentation before me indicates that there was a genuine company with a genuine business, albeit that it engaged in a seriously illegal activity, namely money laundering - the investment in property of the proceeds of drug trafficking - which it knew to be such because its director, the defendant, knew, as probably did also his wife."
[44]The ruling authority in the present context is this court's decision In re H and Others (Restraint Order) [1996] 2 All ER 391 where the headnote, (as I think accurately) summarises the holding as follows:
"Where a defendant has used the corporate structure as a device or façade to conceal his criminal activities, the court could lift the corporate veil and treat the assets as the realisable property of the defendant under the 1988 Act [the Criminal Justice Act 1988]. On the facts, there was a prima facie case that the defendants controlled the two companies, that the companies had been used for the fraudulent evasion of excise duty on a large scale, that the defendants regarded the companies as carrying on a family business and that they had benefited from company cash in substantial amount; and further no useful purpose would have been served by involving the companies in the criminal proceedings. In all the circumstances it was therefore appropriate to lift the corporate veil and treat the stock in the companies' warehouses and the companies' motor vehicles as realisable property held by the defendants."
[45]Stanley Burnton J considered that authority in some detail but concluded that in the present case the prosecution had been unable to provide equivalent evidence that would justify the company being regarded as a sham. He next considered the decision of Sir Andrew Morritt VC in Trustor AB -v- Smallbone & Others (No 2) 2001 1 WLR 1177 which he noted, in paragraph 52 of his judgment, was authority for the proposition that "the fact that the company has engaged in money laundering [does not] of itself justify piercing the corporate veil".[46]Whether or not the judge below was right in the light of those authorities to find no good arguable case for piercing the corporate veil here seems to me now not to matter (if, indeed, having regard to section 32(2) it ever did). In my judgment it is sufficient to note that after an exhaustive examination of the facts the Crown Court concluded, to my mind perfectly properly, that the company's veil should indeed be pierced. I have no intention of rehearsing here all the detailed facts upon which this conclusion was based. I note only the following two passages in Judge Scott-Gall's judgment:
"On the evidence I have heard, I accept that some dealing in antiques or furniture continued on a sporadic basis during 1996 - 1999, but it was of a very limited nature and was cash in hand. I am satisfied that the defendant would have kept such sums of money out of the bank to use as part of his float …. In 1996 [the company's] trading pattern changed dramatically to property purchase."
[47]The judge then summarised how the benefits of drug trafficking had been converted into property investments represented most notably by Chatsworth Road, Lansdowne Place, and Sean's house at 1a Tongdean Road, and continued:
"In Trustor the Vice-Chancellor concurred with the judgment of Rose LJ in Re H at paragraph 23 but the Vice-Chancellor qualified that in paragraph 22 thus: 'it was, however, insufficient that the [company] had on the facts of that case been involved in some impropriety not linked to the use of the company's structure to avoid or conceal that liability.' Large scale money laundering is not 'some or mere impropriety' in my judgment and money laundering cannot, in my judgment, have been in the contemplation of the Vice-Chancellor when he gave his judgment in Trustor . Further, on the facts that I have found in this case, the money laundering was part and parcel of the company's structure and therefore 'intimately linked' in contra-distinction to the facts found in the judgment of the Vice-Chancellor in Trustor ."
[48]It is not entirely clear whether Stanley Burnton J and Judge Scott-Gall adopted different approaches to the substantive law. If, however, they did, then for my part I prefer the latter's approach. Where, as here, it is established upon a full investigation of the facts that, save for the most limited and sporadic continuation of its original business activities, a small family company from a given date has wholly changed character and become essentially a vehicle for money laundering and, through investment, profiting from the proceeds of crime, it appears to me appropriate to pierce the corporate veil and to impute to the director(s) involved the ownership of the relevant company assets. As Rose LJ made plain In re H , in cases like these "no useful purpose would have been served by introducing into criminal proceedings the additional complexities as to the corporate mind and will which charging the companies would have involved". The courts should not permit those profiting from crime to escape the confiscation of their gains simply by pursuing under corporate guise what are no more than nominal trading activities as a cover for money laundering operations.[49]I would at this stage just briefly notice certain alternative arguments advanced by the CPS before both courts below. They contended that, if the corporate veil could not be pierced, then alternatively:(i) the company should be regarded as Mr Compton's "bare nominee or trustee" in respect of the drug monies advanced so that the profits from their investment were to be regarded as being held on resulting trust in his favour; or(ii) the monies were to be regarded as gifts. Paradoxically perhaps, the CPS's case for relief would be at its strongest were the sums advanced to the company (and the proceeds of their investment) properly to be regarded as gifts: gifts are caught by section 8 of the Act and in the result any property held by the company would be realisable property within section 6(2)(b) of the Act, section 32(2) constituting in those circumstances no bar to the making of the orders sought. In my judgment, however, the last thing these advances were to be regarded as were gifts. Assuming the corporate veil could not be pierced and that the company could not be regarded as Mr Compton's "bare nominee or trustee" then, as the company's own documentation purported to suggest, the advances would seem to me necessarily to be treated as loans rather than gifts to the company. As to the "bare nominee or trustee" argument, although this invites a less radical approach to the company than the argument that the corporate veil should be pierced and thus the company's existence ignored, at least for present purposes, it seems to me that once, by treating the company as a bare nominee or trustee one recognises its continuing existence, it is difficult to ignore the fact that it is the company rather than Mr Compton who is making and profiting from the successful investments. In short, the single critical question arising in a case like this is whether or not it is appropriate to pierce the corporate veil.[50]I make just two further points before concluding this judgment. First that, given the bar constituted here by section 32(2) of the Act, the judge really went to the furthermost limits of his powers in making the order against the trustee in bankruptcy, the anticipatory restraint order set out in paragraph 19 above. Whatever view he had taken of the court's entitlement to pierce the corporate veil, the judge could have afforded the Crown no more protection than in fact he did.[51]Secondly, it is to be noted that the trustee in bankruptcy's solicitors, having been informed of the making of the confiscation order on 19 July 2002, endeavoured in a series of letters to the CPS to persuade them to resolve any outstanding issues by agreement rather than pursue an appeal which was rightly suggested to have become "somewhat obsolete". It is a matter of considerable regret that the CPS failed to respond to this correspondence save by way of a holding letter dated 3 October 2002.[52]Whether the continuance of the appeal has served any useful purpose may be doubted. Certainly is was bound to fail, not least once the confiscation order had been made. Clearly it must now be dismissed.

Lord Justice May :

[53]I agree.

Lord Justice Clarke :

[54]I also agree that this appeal should be dismissed for the reasons given by Simon Brown LJ. I also agree with his reasoning in those parts of his judgment which are necessarily obiter , given that the appeal is moot. I only wish to add one short comment.[55]In a previous case, when I had to consider the notion of piercing the corporate veil in an entirely different context, I expressed the view that the authorities have not worked out what is meant by piercing the corporate veil and that it may not always mean the same thing: see The Tjaskemolen [1997] 2 Lloyd's Rep 465 at 471. I remain of that view.[56]I entirely agree with Simon Brown LJ that in a case like this, on the findings of Judge Scott-Gall, it is appropriate to treat the relevant assets of the company as the assets of Mr Compton. However, I am not sure that it necessarily follows that the company should be ignored or treated as non-existent for all purposes or as being incapable of having entered into legal relations with third parties. Fortunately, it is not necessary to explore possible complications of that kind on the facts here.

Cited in 10 later judgments

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