VAT – Benefit from criminal fraud – Carousel fraud

R v (1) Bhovinder Singh Sangha (2) Brian Meehan (3) Gerard Martin McAllister: CA (Crim Div) (Lords Justice Richards, Mr Justice Stadlen, Judge Gordon): 18 November 2008.

The appellants (S) appealed against confiscation orders made against them in the Crown Court. The orders followed their conviction, after a jury trial, on counts of cheating the public revenue.

The offences related to their participation in a VAT carousel fraud involving sales of mobile phones. The prosecution case was that they had participated in that part of the fraud relating specifically to the evasion of VAT by ‘missing traders’ and that they had participated only as secondary parties, in that they had acted dishonestly and in the knowledge that they were playing a part in the carrying out of a fraud on the public revenue when they paid VAT on their purchases from the missing traders into the bank accounts of the foreign suppliers of the phones. The judge found that each appellant had benefited from his relevant criminal conduct, on the basis that the sums obtained from selling on the phones in the UK, to the extent that they had been used to pay the VAT element to the foreign suppliers, were property obtained by S in connection with the commission of the relevant offence within section 71(4) of the Criminal Justice Act 1988. S submitted that the judge had been wrong to make a confiscation order against any of them because, given the narrow factual basis on which the case was left to the jury, they could not properly be said to have benefited from the criminal conduct of which they were convicted.

Held: (1) Provided that he acted consistently with the verdict and its factual basis, the judge was entitled to take into account all of the evidence he had heard and to make his own relevant findings of fact when determining the question whether S had benefited from their relevant criminal conduct. The questions that had to be determined in the confiscation proceedings were distinct from those falling for determination during the trial process itself.

The standard of proof was different, namely that applicable in civil proceedings. There would normally be evidence additional to that led at the trial. The judge could and should determine the statutory questions on the evidence before him, rather than being limited to the factual basis of the jury’s verdict, R v Threapleton (Michael) (costs: confiscation order) [2001] EWCA Crim 2892, [2003] 3 All ER 458, R v Olubitan (Ayodele Olusegun) [2003] EWCA Crim 2940, [2004] 2 Cr App R (S) 14 and R v Green (Mark) [2008] UKHL 30, [2008] 2 WLR 1154 applied. The principle that an offender should only be sentenced in respect of matters that had been alleged and proved against him did not have the effect of limiting the judge to the jury’s verdict and its factual basis, R v Canavan (Darren Anthony) [1998] 1 WLR 604 CA (Crim Div) considered. Even on the assumption that the principle in R v Canavan applied to confiscation proceedings, the scope of the principle had important limits, R v Considine (Lawrence Philip) [2007] EWCA Crim 1166, (2008) 1 WLR 414 considered. The court was not limited to the facts on the basis of which the jury reached their verdict. If other misconduct was relevant to the statutory questions that the court had to determine, the principle did not preclude the court from considering evidence of that other misconduct even where it amounted to a criminal offence.

(2) In determining whether S had benefited from the offence of cheating the public revenue, the judge had been right to focus on section 71(4) and the obtaining of property, rather than on section 71(5) and the obtaining of a pecuniary advantage. He was entitled to hold that, where S made payment for goods sold by the missing traders not to the missing traders but to the foreign suppliers, and funded those payments by the sums obtained from the onward sale of the goods to purchasers within the UK, insofar as the sums obtained from the onward sale of the goods were used to pay the VAT element of S’s purchases, those sums were property obtained ‘in connection with’ the commission of the offence of which S had been convicted.

Appeals dismissed.

Rex Tedd QC, Simon Taylor (instructed by Richard Nelson Business Defence Solicitors) for the appellants; Peter Finnigan, Tom Baker (instructed by in-house solicitor) for the respondent.