The conjoined appeals of R v McDowell; R v Singh  EWCA Crim provide valuable guidance on the calculation of confiscation orders in cases involving regulatory offences.
Background to the litigation
McDowell was an experienced arms dealer. On 28 January 2013 he was convicted on two counts of being knowingly concerned in the supply of controlled goods with intent to evade the prohibition on those goods, contrary to Article 9(2) of the Trade in Goods (Control) Order 2003. He received a suspended sentence.
He was the sole director and shareholder of a company called Wellfind Limited (“Wellfind”) which had been involved in negotiating arms sales despite not having a licence to do so. In the subsequent confiscation proceedings, MacDowell was found to have benefited personally in the sum of £2,557,826.30. The available amount was £292,499.60 and a confiscation order was made in that sum.
Singh was a scrap dealer who had traded while unregistered. He pleaded guilty to an offence contrary to section 1(1) and (7) of the Scrap Metal Dealers Act 1964. He was committed to the Crown Court for sentence and fined £350. In the confiscation proceedings, his benefit figure was assessed as being £965,838. A confiscation order was made in the available amount of £176,218.11.
The arguments on appeal
In summary, each appellant argued that they had been convicted of “regulatory” offences only, and that the underlying trading had been lawful but for the absence of, respectively, a licence or registration. In those circumstances, no benefit had accrued for the purpose of the Proceeds of Crime Act 2002 s.76(4), either to the company or to the individual.
The Court held as follows:
- It was not sufficient to treat regulatory offences as creating a single category of offence to which POCA is uniformly applied.
- The essential question was “what is the conduct made criminal by the statute; is it the activity itself or failure to register or to obtain licence for the activity?
- There is a narrow yet critical distinction between an offence that prohibits and makes criminal the very activity admitted by the offender or proved against him (eg. R v del Basso  1 Cr App R (S) 41), and an offence comprised in the failure to obtain a licence to carry out an otherwise lawful activity (R v Sumal and Sons (Properties) Limited v The Crown (London Borough of Newham)  1 WLR 2078).
In McDowell’s case, the Court decided that the statute criminalised the very act of taking part in the sort of arms sales negotiations that Wellfind was involved in. The Act further created exceptions to that prohibition for a person who had specific permission (a licence) to be involved in such sales. The confiscation order would therefore stand.
In Singh’s case, on the other hand, it held that the criminal conduct was the failure to register before carrying on business (such offence being committed on each day that the company traded thereafter without being registered). As, however, the appellant’s trading receipts derived from activity that was lawful in itself, and not from the failure to register the business, the confiscation order would be quashed.
Differentiating between these two circumstances will therefore be crucial for practitioners in advising clients of their position viz confiscation. In each case, close analysis of the relevant legislation will be the key to identifying the true position.