Dimsey & Anor, R. v [1999] EWCA Crim 2261

EWCA-Crim
Dimsey & Anor, R. v
[1999] EWCA Crim 2261 · 1999-10-11
Computer Aided Transcript of the Stenograph Notes of Smith Bernal Reporting Limited 180 Fleet Street, London EC4A 2HG Tel No: 0171 421 4040 Fax No: 0171 831 8838 (Official Shorthand Writers to the Court)MRS A HARDY and MISS T DAVEY appeared on behalf of the Appellant Dimsey MR A NEWMAN QC and MR J KESSLER appeared on behalf of the Appellant Allen MR P F ROOK QC and MR J FISHER appeared on behalf of the Crown

HTML VERSION OF JUDGMENT

Crown Copyright ©

11th October 1999

LORD JUSTICE LAWS: On 7th July 1999 this court dismissed appeals brought by Brian Roger Allen and Dermot Jeremy Dimsey against their convictions, in Dimsey's case of an offence of conspiracy to cheat the public revenue, and in Allen's case of 13 substantive counts of cheating the public revenue. On that occasion the court also granted permission to appeal in Allen's case against a confiscation order, made in the Knightsbridge Crown Court on 20th February 1998, in the sum of £3,137,165 with seven years' imprisonment in default. The court ordered that should the default sentence fall to be served it should be consecutive to the term of seven years' imprisonment imposed for the 13 offences of which Allen had been found guilty.

Allen's appeal relating to the confiscation order is now before this court together with his renewed application for permission to appeal against the substantive sentence of seven years. In addition, both appellants ask the court to certify a point of law of general importance, in Allen's case a series of points, said to arise out of the court's judgment of 7th July 1999 and to grant permission to appeal to the House of Lords.The facts of these cases are described in detail in our judgment of 7th July 1999, [1999] EWCA Crim 1917 and we do not repeat them now.We turn, first, to the appeal relating to the confiscation order. In the Crown Court it was agreed between counsel that the amount of the appellant's benefit arising from his offences was £4 million and that his realisable assets amounted to £3,137,195. In addition, the Crown gave an undertaking that upon a confiscation order being made it would not pursue the appellant for pre-existing tax liabilities, in effect the shortfall of £900,000, out of any income which he might acquire in the future. The judge accepted these figures and the Crown's undertaking and made the confiscation order in the sum we have stated of just over £3 million.Mr Newman QC, for the appellant Allen, submits that the confiscation order is unlawful essentially because a statutory precondition required to be met before a confiscation order can be made has not been fulfilled. He says that the appellant has not obtained a pecuniary advantage by his fraudulent failure to pay or declare tax due. At least he has certainly not obtained a pecuniary advantage to the tune of £4 million; and a pecuniary advantage has to be shown if the confiscation order is to be a lawful one.The power to make confiscation orders was first introduced into the law by the Drug Trafficking Offences Act 1986 and extended so as to cover offences other than drug trafficking by the Criminal Justice Act 1988. The relevant provisions of that statute were amended by the Proceeds of Crime Act 1995 which, so far as material, came into effect on 1st November 1995. The appellant's offending straddled periods before and after that date. The essential change in the legislation was that, whereas under the original statute of 1988 the court was empowered to make a confiscation order if certain conditions were met, under the Act of 1995 it was, subject to exceptions, required to do so.The central provisions for present purposes are section 71(4) and subsection (5) of the Criminal Justice Act which were not amended in 1995. Section 71(4) states:
"For the purposes of this Part of this Act 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."
Subsection (5):
"Where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence, he is to be treated for the purposes of this Part of this Act as if he had obtained as a result of or in connection with the commission of the offence a sum of money equal to the value of the pecuniary advantage."
In the light of counsel's argument we should also note section 72(3) of the unamended statute and section 71(1C) of the amended Act which is the substitute of section 72(3). 72(3) provided:
"When considering whether to make a confiscation order the court may take into account any information that has been placed before it showing that a victim of an offence to which the proceedings relate has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with the offence."
Section 71(1C) of the amended Act:
"If, in a case falling within subsection (1B) above, the court is satisfied that a victim of any relevant criminal conduct has instituted, or intends to institute, civil proceedings against the defendant in respect of loss, injury or damage sustained in connection with that conduct -- (a) the court shall have a power, instead of a duty, to make an order under this section; (b) subsection (6) below shall not apply for determining the amount to be recovered in that case by virtue of this section; and (c) where the court makes an order in exercise of that power, the sum required to be paid under that order shall be of such amount, not exceeding the amount which (but for paragraph (b) above) would apply by virtue of subsection (6) below, as the court thinks fit."
We should add that section 71(1B) and subsection (6) require the court to make an order in a sum equal to the benefit derived by the offender from his offence or his realisable assets whichever is the less. Those provisions are thus modified in a case to which section 71(1C) applies.Section 72(7), which was not amended in 1995, is also to be borne in mind:
"Where -- (a) a court makes both a confiscation order and an order for the payment of compensation under section 35 of the Powers of Criminal Courts Act 1973 against the same person in the same proceedings; and (b) it appears to the court that he will not have sufficient means to satisfy both the orders in full,
it shall direct that so much of the compensation as will not in its opinion be recoverable because of the insufficiency of his means shall be paid out of any sums recovered under the compensation order."Mr Newman in essence advances two arguments:(1) The appellant's failure to pay or declare tax due did not, on the facts of the case, offer him any pecuniary advantage because the tax remains due and payable. Had he, perhaps between the commission of the offence or some one of the offences and its coming to light, gained interest on the money withheld that might have been a pecuniary advantage, but the principal sum of tax due, says Mr Newman, cannot amount to a pecuniary advantage. It remains due and payable to the Revenue.(2) As regards the corporation tax liability evaded by the appellant, counts 1 to 7 in the indictment, the tax liability was that of the off-shore companies in the case. The only pecuniary advantage which the appellant might have gained would have been an increase in the value of the shares by virtue of the non-payment of corporation tax, but, Mr Newman submits by his skeleton argument, the evasion scheme reduced the value of the shares.We turn to the first of these arguments. Pecuniary advantage it not defined in the Criminal Justice Act and should, in our judgment, be accorded its ordinary meaning. In The United States Government v Montgomery [1999] 1 All ER 84 at 96D to E Stuart-Smith LJ indicated that there was no reason to accord a restricted meaning to the expression in section 71(5) of the Criminal Justice Act. So much, I think, would not be disputed by Mr Newman. The ordinary and natural meaning of pecuniary advantage must surely include the case where a debt is evaded or deferred. The sense of the expression matches, in our judgment, with that accorded to the same phrase in another statutory setting, namely, section 16(2)(a), now repealed, of the Theft Act 1968 under which a pecuniary advantage arose where:
"Any debt or charge for which he makes himself liable or is or maybe liable (including one not legally enforceable) is reduced or in whole or in part evaded or deferred."
Discussing this subsection Lord Reid said in R v Turner [1974] AC 357, 365G:
"An obligation is evaded if by some contrivance the debtor avoids or gets out of fulfilling or performing his obligation."
In short, the fact that the tax remains due does not mean that its evasion did not confer a pecuniary advantage, nor indeed that that pecuniary advantage consisted of the whole of the tax withheld, the value of the liability that was evaded. By his crime the appellant evaded payment of £4 million tax. That sum constituted the proceeds of the offence. On the agreed figures, as we have indicated, he had realisable assets of £3.1 million. The fact that he remained in law liable to pay the tax, the fact even, were it so, that the Revenue might later recover it, does not, in our judgment, yield the proposition that the proceeds of his crime were one penny less than the whole of the tax evaded.It is of interest to note what was also said in Turner's case, to which we have briefly referred. At 365H and following Lord Reid said this:
"An obligation is reduced if the creditor agrees with the debtor that the amount owed shall be reduced. An obligation is deferred if creditor and debtor agree that the date of performance shall be postponed. An obligation is evaded if by some contrivance the debtor avoids or gets out of fulfilling or performing his obligation. In the days when such things happened, a welshing bookmaker not only evaded his pursuers, he also evaded his obligations. Evasion does not necessarily mean permanent escape. If the bookmaker evaded his pursuers on Monday, the fact that he is caught and made to pay up on Tuesday does not alter the fact that he evaded his obligations on Monday. Unlike reducing and deferring an obligation, evading an obligation is a unilateral operation. It leaves the obligation untouched and does not connote any activity on the part of the creditor. When the evasion ceases he can seek to recover the debt in any way open to him."
We bear in mind, as was emphasised by Mr Newman, that section 16(2)(a) of the Theft Act was regarded by the House of Lords as a deeming provision, and it bears no analogue in the Act of 1988. But Lord Reid's remarks about the nature of the evasion of a debt, with great respect, seem to us to be wholly apposite to a case of the present kind. Had these very grave frauds succeeded then, in crude terms, Mr Allen would have been better off to the tune of £4 million. That represents, in our judgment, the measure of his pecuniary advantage.We also consider that there is force in the Crown's submission that a confiscation order falls to be clearly distinguished from a compensation order which may be made under section 35 of the Powers of Criminal Cases Act 1973. The amount of a confiscation order is referrable to the applicant's benefit arising from the commission of his crime, not the loss suffered by the victim. As the Revenue's skeleton, paragraph 28, puts it:
"The confiscation order is made to deprive the offender of the proceeds of his crime. A compensation order is made to compensate the victim of the crime."
Section 72(3) of the Criminal Justice Act in its original form, Section 71(1C) which was its substitute in 1995, and also section 72(7) -- all of which we have set out -- demonstrate to our mind that the legislator intended that confiscation orders should or, at any rate, might be made in cases where the sum confiscated in reality represented a debt or part of a debt which was not forgiven and remained outstanding.Mr Newman has urged upon us the proposition that if the Crown's arguments are accepted the way is open, in theory at least, to double recovery on the part of the Revenue against a person in Mr Allen's position in relation to the sum of money due. He has referred us to some authorities of the European Court of Human Rights which -- we hope without injustice -- we may fairly summarise as indicating the emphasis placed by that Court on the need for certainty in the law.In our judgment, whether or not the Revenue may hereafter seek to recover tax against the appellant, which forms all or part of the tax due represented by the confiscation order, simply does not go to the scope of section 71(5) of the Act of 1988. Questions that may arise if the Revenue were to seek to take such action hereafter would fall to be decided in different proceedings in a different court. We bear in mind the fact of the Revenue's undertaking, to which we have already referred, given on 20th February 1998.Accordingly, as it seems to us, Mr Newman's complaint as to the possibility of double recovery, his reference to the well-known passage in Walton J's judgment in Vestey :

"One should be taxed by a law and not be untaxed by concession."

are not here in point.In short, there is, in our judgment, nothing in Mr Newman's first argument.Moreover it is to be noted that there are a number of cases where the Court of Appeal has upheld confiscation orders in relation to Revenue offences where payment of tax has been dishonestly withheld. They are referred towards the close of the Crown's skeleton argument where there are cited, Tighe [1996] 1 Cr App R(S) 314, Travers (unreported) 9th July 1999, Martin & White [1998] 2 Cr App R 385.The second point taken by Mr Newman in his skeleton argument was, as we have indicated, that the corporation tax liability, which in fact formed the greater part of the sum of more than £4 million, was a liability of the off-shore companies in the case, so that any pecuniary advantage arising from its withholding would be their advantage and not the appellant's. However, it is plain from authorities cited by the Crown that the corporate veil may fall to be lifted where companies are used as a vehicle for fraud. Here the companies in question were the appellant's alter ego: we refer to our judgment of 7th July 1999 for the full facts.On this part of the case it seems to us that the Crown's position is simply incontestable. In those circumstances the appeal against the making of the confiscation order will be dismissed.Mr Newman has also advanced short argument in support of his application for permission to appeal against the concurrent substantive sentences of seven years' imprisonment passed for the 13 offences of which the jury found his client guilty.The appellant is a man of 51, married, with a previous good character. All of those matters, of course, go in mitigation. Obviously he has not the mitigation of a plea of guilty. These offences were conducted in a determined and sophisticated manner over a long period of time and involved colossal sums of money. In those circumstances, it seems to us wholly beyond argument to suggest that the sentence of seven years was one with which there would be any justification for this court's interference. In the circumstances, that application will also be refused.We indicated at the outset of this judgment that applications were before us to certify points of general importance. We do not propose to give a narrative judgment relating to any of the points. They were all canvassed at some length and, we hope, with sufficient clarity in the judgment of 7th July. Suffice it to say, we have concluded that it would be right to certify for their Lordships' House two points of general public importance. The first is this, and I will cite the words of the question which were drafted by the Crown in each case but counsel will ensure that the exact wording is agreed between the parties and lodged with the court. The words I have from earlier correspondence with counsel are as follows:
"(1) Whether section 145 and/or section 154 of the Income and Corporation Taxes Act 1988 impose a charge to tax under Schedule E in respect of relevant benefits received from a company by an individual who, while having no actual office or employment with that company, nonetheless falls within the extended meaning of director under Section 1688 of the Act.
(2) Whether section 739(2) of the Income and Corporation Taxes Act 1988 has either of the additional effects in relation to income which it requires to be deemed to be income of an individual ordinarily resident in the United Kingdom:(a) of requiring for corporation tax purposes that same income to be deemed not to be the income of a company incorporated outside the United Kingdom whose income it actually is;(b) of requiring for income tax purposes that same income to be deemed not to be the income of the person whether an individual or a company resident or domiciled outside the United Kingdom whose income it actually is."Counsel will kindly check the wording.Those two questions will be certified by this court. We refuse leave to appeal to the House of Lords.MR NEWMAN: May I invite your Lordships' to two matters? First of all, when your Lordship comes to the look at the transcript of the judgment, in error I think at one stage, your Lordship in reading out the provisions of section 71 of the 1988 Act, as amended, talked about "reasonable" rather than "realisable" amount.

LORD JUSTICE LAWS: I misquoted; I will try to remember to pick that up.

MR NEWMAN: And the second point is that may I in fact ask your Lordships to add to the points certified a point relating to the confiscation order? In particular it was that passage in your Lordship's judgment where you said the fact that Mr Allen remained more liable to pay his tax and the Revenue might later recover it had no --

LORD JUSTICE LAWS: Mr Newman, subject to my brethren, we would certainly not wish to have a further hearing or draw the matter out any longer. What I suggest is that we rise for ten minutes or quarter of an hour and you can rough out a question and show it to Mr Rook and Mrs Hardy. I indicate no view one way or the other. I do not think it would be right to put you out of court or into court without a draft question. We will return to court at 12.30 in the hope that that will have been done.

MR ROOK: My Lord, may I mention the smallest of points? My Lord referred to cases where the Court of Appeal upheld confiscation orders in Revenue cases and cited Travers . My Lord, that is absolutely correct. The only problem is that there is no reference to the confiscation order in the Times Law Report. In fact Mr Fisher picked up the reference in the Lawtel report which we also included.

LORD JUSTICE LAWS: I see. It just shows that I should have referred back to your tab 20 more carefully.

MR JUSTICE MOSES: The citation should be the -- should refer back to the transcript.

LORD JUSTICE LAWS: Mr Fisher, got hold of this nugget of information from the transcript, did he?

MR ROOK: From Lawtel but the citation should be the transcript.

MR JUSTICE MOSES: So it should just say transcript of July 9th.

(Short Adjournment)

LORD JUSTICE LAWS: We will just read your draft.

MR NEWMAN: My Lord, the wording has been agreed with the Revenue, that is not to say that they necessarily would go along with the submission that there should be certification.

LORD JUSTICE LAWS: No, of course not.

(Pause)

I do not think it is very clear. Just a moment. Surely the expression at the end "within the meaning of section 71(5) of the CJA as amended" should go somewhere else, like after "pecuniary advantage" in the second line?MR NEWMAN: My Lord, with respect, I agree. May it be read with that amendment? Can I invite your Lordships to read it with that amendment.

LORD JUSTICE LAWS: Yes, well, your submission is that this is a point of general importance because it raises the potential question of double recovery. Do you want to say anything more than that about it?

MR NEWMAN: No, my Lord.

LORD JUSTICE LAWS: Mr Rook, do you wish to say anything?

MR ROOK: My Lord, our submission clearly is that the words of section 71(5) are clear and the question only arises when and if the Revenue seeks to recover. So we have no further observations.

LORD JUSTICE LAWS: We decline to certify this question. Thank you very much for your submissions.

It has been pointed out to me by the associate that the question may arise as to the possible grant of legal aid if the appellant desires to apply to the House for leave.MR NEWMAN: If your Lordships have the power to extend it for that purpose I would invite the court to do so.

LORD JUSTICE LAWS: What has happened to the £3.1 million that was his realisable assets?

MR NEWMAN: They have been seized. They are not available to him to spend, my Lord.

LORD JUSTICE LAWS: I have a note which -- it is a note dating back to 1991 -- from the Registrar of Criminal Appeals, attaching a letter from the Principal Clerk to the Judicial Office relating to the grant of legal aid when a point of law of general importance is certified. What is said is this:

"Where leave is refused by this court the grant of legal aid should usually be in the following terms: grant legal aid for junior counsel and solicitors for the purposes of an application to the House of Lords for leave to appeal to that House. QC and junior counsel and solicitors if leave to appeal is granted by that House."
Do you seek an order in those terms?MR NEWMAN: My Lord, I would invite your Lordships to say that this is a case where it is appropriate to have legal aid at this stage for leading and junior counsel, because we have a leading counsel who is familiar with the criminal law provisions and junior counsel who is familiar with the tax aspect, so, in the circumstances, we make a team.

LORD JUSTICE LAWS: I see. Mr Newman, thank you. With respect to you we will make the order in what appears to be in the usual form: for junior counsel and solicitors to apply for leave. If leave is granted, then leading and junior counsel and solicitors for the appeal.

MR NEWMAN: The Registrar is the solicitor in this case, so you will not need to specify a firm of solicitors.

LORD JUSTICE LAWS: But the Registrar will not have any role to play in relation to a petition to their Lordships' House.

MR NEWMAN: In which case then Messrs Gordons who represented the appellant at the trial will no doubt --

LORD JUSTICE LAWS: He has legal aid for solicitors to apply for leave. No doubt it is a matter for him who he instructs. Thank you very much.

There were no other matters arising of an ancillary nature? No, thank you.

Cited in 1 later judgment