R v Mackle (Northern Ireland) [2014] UKSC 5

Three Mackle brothers and Henry McLaughlin pleaded guilty to fraudulent evasion of tobacco duty and consented to confiscation orders calculated on the evaded duty. The Supreme Court held the consent was based on a mistake of law, quashed the orders, and remitted the cases.

Facts

The three Mackle brothers (Patrick, Plunkett ‘Jude’ and Benedict) pleaded guilty to being knowingly concerned in the fraudulent evasion of duty contrary to section 170(2)(a) of the Customs and Excise Management Act 1979. A container of cigarettes manufactured in the United Kingdom had been exported without duty paid, then shipped from Malaysia via Southampton to Belfast and on to Patrick Mackle’s yard in County Tyrone, where Jude and Benedict were caught unloading them on 27 January 2003.

Henry McLaughlin pleaded guilty to a similar offence in connection with cigarettes discovered at premises in Armagh in November 2005. Although he was not present at those premises, large sums of cash and documents linked to cigarette distribution were found at his home.

Confiscation orders were made by consent against each defendant: £518,387 against Patrick Mackle, £259,193 each against Jude and Benedict, and £100,000 against Mr McLaughlin. The aggregate of each set of orders equalled the total duty and VAT evaded. The prosecution case for benefit, set out in statements by HMRC officer Roisin McMullan, rested solely on the pecuniary advantage said to arise from evasion of duty and VAT.

Issues

The Court of Appeal certified two questions:

Question 1

Whether a defendant who pleaded guilty to fraudulent evasion of duty and consented, with legal advice, to a confiscation order in an agreed amount, in circumstances making clear he did not require the Crown to prove he obtained property or a pecuniary advantage, is bound by the order.

Question 2

Whether a defendant who knowingly comes into physical possession of dutiable goods on which duty has been evaded, and plays an active role in handling them so as to assist commercial realisation, benefits from his criminal activity by obtaining those goods for the purposes of section 158 of the Proceeds of Crime Act 2002.

Arguments

The appellants contended that they had been incorrectly advised that they were liable to pay the evaded duty and VAT, and had consented on that erroneous basis. Under the Tobacco Products Regulations 2001 (as construed in R v Chambers, R v White and R v Bajwa), they were not liable for duty because they had neither held the products at the excise duty point nor caused them to reach it while retaining a connection with them.

The respondent argued that no evidence had been produced to show that the appellants were wrongly advised, that the appellants should have sought to adduce fresh evidence, and that having consented to the orders they were bound. Mr McCollum QC further submitted that the benefit could be characterised as the enhanced saleable value of the cigarettes attributable to the evaded duty.

Judgment

Liability for duty under the 2001 Regulations

Lord Kerr (with whom Lord Neuberger, Lord Mance, Lord Hughes and Lord Toulson agreed) explained that under regulation 13 of the Tobacco Products Regulations 2001, liability for excise duty falls only on the person holding the products at the excise duty point or, by virtue of regulation 13(3), on certain specified persons including one who caused the goods to reach the excise duty point and retained a connection with them. None of the appellants fell within those categories. Following the House of Lords trilogy of R v May, R v Green and Jennings v CPS, and the Court of Appeal in Chambers, evasion of duty constitutes obtaining a pecuniary advantage only if the defendant personally owes that duty.

The basis of the prosecution’s case

The sole basis on which the prosecution alleged benefit was that each appellant had obtained a pecuniary advantage equal to the evaded duty and VAT. That basis was, as a matter of law, unsustainable. The argument that the saleable value of the cigarettes was enhanced by the evaded duty had not been advanced before the sentencing judges and would in any event only assist if the appellants had obtained the property itself.

Effect of consent

The Court of Appeal had not been referred to R v Emmett [1998] AC 773 or R v Bell [2011] EWCA Crim 6. Under POCA the court itself must be satisfied that the defendant has benefited from his criminal conduct; a defendant’s consent cannot confer jurisdiction where the facts cannot in law support that conclusion. Where, however, a defendant unequivocally accepts facts which themselves justify a confiscation order, the judge is entitled to rely on that acceptance as evidence. The proper approach is illustrated by RCPO v Mitchell, where Recorder Males QC refused to accept a concession he doubted to be legally correct.

Here, the only inference was that the appellants consented because they had been wrongly advised that they were liable for the duty. The Court of Appeal’s suggestion that there might have been tactical reasons for consenting was unsupported by evidence.

Alternative bases of benefit

The Court of Appeal had upheld the orders on an alternative basis: that the appellants, as participants in a joint enterprise, had come into possession or control of the cigarettes. Lord Kerr held that where the original basis is no longer viable, an order may only be sustained on a different basis where the defendant has had a proper opportunity to address it. Furthermore, drawing on May, Jennings, R v Sivaraman and R v Allpress, mere participation in a joint criminal enterprise does not establish that an individual defendant obtained property; minders, custodians or minor contributors rewarded by a fee do not thereby obtain the property handled. Possession in the sense required must ordinarily connote a power of disposition or control. The Court of Appeal had not examined the evidence to determine whether each appellant had in fact obtained a benefit in that sense.

Disposal

The Supreme Court reformulated the first certified question and answered it ‘No’: a defendant is not precluded from appealing against a consent confiscation order where the consent was based on a mistake of law arising from wrong legal advice. The second question was answered: ‘Not necessarily.’ Playing an active part in handling goods does not alone establish benefit; it must be established by evidence or reasonable inference that the defendant actually obtained a benefit. The confiscation orders were quashed and the cases remitted to the trial courts to proceed afresh.

Implications

The decision confirms that, in confiscation proceedings under both the Proceeds of Crime (Northern Ireland) Order 1996 and the Proceeds of Crime Act 2002, the sentencing court bears an independent statutory duty to be satisfied that the defendant has benefited from his criminal conduct. Consent, even after legal advice, cannot cure the absence of a proper legal foundation for an order.

The judgment reinforces the narrow scope of liability for tobacco excise duty under the 2001 Regulations: liability attaches only to those holding the products at the excise duty point or who caused them to reach it while retaining a connection with them. Participation in handling smuggled tobacco does not, without more, make a defendant liable for the duty or fix him with a pecuniary advantage equal to the duty evaded.

More broadly, the case underlines that participation in a joint criminal enterprise is not equivalent to obtaining benefit from it. Each defendant’s actual benefit must be assessed individually on the evidence, and courts must guard against conflating criminal culpability with benefit obtained. The decision is particularly significant for practitioners advising on confiscation in revenue and smuggling cases, and for prosecutors, who must identify the correct legal basis for benefit and not rely on consent to bypass that requirement. It leaves open, on remittal, whether on the particular facts any of the appellants can be shown to have obtained a benefit on a properly supported alternative basis.

Verdict: The appeals were allowed. The confiscation orders made against each of the Mackle brothers and Henry McLaughlin were quashed and the cases remitted to the trial courts to proceed afresh in light of the Supreme Court’s judgment.

Source: R v Mackle (Northern Ireland) [2014] UKSC 5