Factual and Procedural Background
There are two cases before the court concerning confiscation orders related to offenders who managed companies as directors in contravention of director disqualification orders or undertakings. In both cases, Crown Court judges had assessed the "benefit" obtained by the offenders as equal to the total turnover of the companies during the period of contravention, following earlier Court of Appeal decisions. Subsequent House of Lords judgments questioned the legal soundness of this approach. The first appellant ("Mr Blatch") was disqualified from acting as a director but continued to be involved in managing six associated companies, pleading guilty to six counts of contravening the disqualification order. A confiscation order was made based on the aggregate turnover of two trading companies. The second appellant ("Mr Seager") gave an undertaking not to act as a director but remained involved in running a company, Tabline Ltd, which later entered liquidation. A confiscation order was made based on the company's turnover during the relevant period. Both appellants sought leave to appeal the confiscation orders, focusing on the legal question of how to assess the "benefit" obtained under the relevant confiscation legislation.
Legal Issues Presented
- Whether company director disqualification offences require a different approach to assessing "benefit" under confiscation legislation than that adopted in the trio of House of Lords cases.
- If the general approach of the House of Lords cases applies, how it should be applied in director disqualification cases, including whether the earlier case R v Neuberg remains good law.
- Whether the corporate veil should be pierced in either case to attribute company turnover as the "benefit" of the offender, and on what basis.
- If the corporate veil is not pierced, how should the "benefit" be calculated for each appellant.
- Whether the confiscation orders can stand as made or should be quashed or varied, and if varied, on what basis.
Arguments of the Parties
Appellants' Arguments
- The trio of House of Lords cases effectively overruled R v Neuberg, rendering the judges' approach to equate benefit with company turnover legally incorrect.
- The offences being director disqualification offences do not justify a different approach to assessing benefit than other crimes.
- There was no basis to pierce the corporate veil because the companies conducted legitimate business and the appellants did not hide behind the companies.
- The correct question is what property or monies the appellants personally obtained as a result of or in connection with their offences.
- For Mr Blatch, the benefit should be his gross personal income received from the companies during the relevant period, totaling £221,109.81, which he accepts as the correct figure.
- For Mr Seager, no alternative benefit figure to turnover was presented and no evidence of personal benefit was available; thus, the confiscation order based on turnover should be quashed without substitution.
- They requested that the court quash the existing confiscation orders and substitute the correct amounts where possible.
Crown's Arguments
- A person acting as a disqualified director uses the company as a vehicle for their criminal activity and is personally liable for all company debts under the Company Directors Disqualification Act 1986 (CDDA 1986) section 15.
- The court is entitled to pierce the corporate veil and treat the company's turnover as the offender's benefit, consistent with Re H and others and R v Neuberg.
- Without this approach, prosecuting companies under CDDA 1986 section 14 would be complicated and costly.
- In Mr Blatch's case, the turnover of the companies should be attributed to his benefit as he had de facto control.
- In Mr Seager's case, he contributed materially to the company's turnover, which would not have been achieved without his involvement; thus, the turnover should be attributed to him.
- Even if the corporate veil cannot be pierced, acts done on behalf of a company by a convicted disqualified director are to be regarded as acts of the offender for confiscation purposes (citing Jennings v CPS).
- The trio of House of Lords cases does not undermine the judges' conclusions in these cases, so the appeals should be dismissed.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Jennings v CPS [2005] 4 All ER 391; [2008] 1 AC 1046 |
Definition of "benefit" under confiscation legislation; "obtained" means obtained by the defendant personally; piercing the corporate veil where company is a sham. |
Held that the judgment of Laws LJ in the Court of Appeal was disapproved in part by the House of Lords; confirmed that "benefit" must be property obtained by the offender; distinguished from cases where company is a sham. |
| R v Neuberg [2007] EWCA Crim 1994; [2008] 1 Cr App R (S) 84 |
Prior approach to assessing benefit as turnover of business; principles on causation and valuation of benefit in confiscation orders. |
Found to be inconsistent with the House of Lords decisions; the court held that the judge was wrong to equate turnover with benefit obtained by the offender in these cases. |
| R v May [2008] 1 AC 1028 |
Clarified that "benefit" is the total value of property obtained by the defendant personally, joint receipts count fully; no deduction for payments to co-conspirators. |
Guided the court's approach to require focus on property obtained by the defendant personally; rejected prior broader attributions of benefit. |
| R v Green [2008] 1 AC 1053 |
Confirmed no deduction for amounts retained by co-conspirators in calculating benefit; joint control means each obtains the whole property. |
Supported the principle that benefit is attributed fully to each conspirator with joint control; relevant for assessing benefit in confiscation. |
| R v Sivaraman [2008] EWCA Crim 1736 |
Benefit must be the amount personally obtained by the defendant, not the total proceeds of the crime. |
The court quashed a confiscation order based on total proceeds and substituted the actual amount received by the defendant. |
| R v Grainger [2008] EWCA Crim 2506 |
Confirmed the need to examine the real benefit obtained by the offender; court may pierce corporate veil where company is used as a shield. |
Held that the confiscation order based on total company receipts was wrong; benefit was the salary and other benefits personally obtained by the defendant. |
| R v Xu and Xu [2008] EWCA Crim 2372 |
Benefit assessment must be fact-specific; court may pierce corporate veil if company used as a facade to hide criminal benefit. |
Reduced benefit to proportion of turnover attributable to illegal activity; court implicitly pierced corporate veil due to sham nature of company use. |
| R v Sylvia Allpress and others [2009] EWCA Crim 8 |
Rejected special approach for money laundering cases; confirmed ordinary principles on obtaining property apply. |
Clarified that possession or control without ownership does not constitute "obtaining" property for confiscation; confirmed approach to be applied generally. |
| Salomon v Salomon & Co Ltd [1897] AC 22 |
Established principle that a company is a separate legal entity distinct from its shareholders and directors. |
Applied as fundamental principle limiting when corporate veil can be pierced; court emphasized that piercing requires impropriety or sham. |
| Re H and others [1996] 2 All ER 391 |
Permitted piercing of corporate veil where companies were used for fraud and defendants controlled them. |
Distinguished from present cases; cited by Crown but court found facts here did not justify piercing veil. |
Court's Reasoning and Analysis
The court examined the statutory framework under the Company Directors Disqualification Act 1986 and confiscation legislation (Criminal Justice Act 1988 and Proceeds of Crime Act 2002). It recognized that the object of the disqualification regime is to protect shareholders, creditors, and the public from unfit directors, and that contravention of disqualification orders constitutes criminal conduct.
Applying the trio of House of Lords decisions, the court emphasized that "benefit" for confiscation purposes means property obtained by the offender personally, whether alone or jointly, and not merely property to which the offender materially contributed. The benefit is the value of property obtained, not net profit, and the court must apply ordinary common law principles to determine ownership.
The court rejected the Crown's argument that the corporate veil should be pierced merely because the appellants acted as disqualified directors controlling the companies. Piercing the veil requires impropriety such as using the company as a facade to conceal crime or benefits or sham transactions, none of which were found here. The companies conducted legitimate business and there was no evidence the appellants hid behind the companies to conceal benefits.
Consequently, the judges' approach equating benefit with the companies' turnover was legally incorrect. The court must determine the actual property or monies personally obtained by the appellants as a result of or in connection with their offences.
Regarding Mr Blatch, no evidence showed he personally obtained the turnover or had sole control over company accounts. However, it was accepted that he received £221,109.81 as income from the companies, which the court held to be the correct measure of his benefit.
Regarding Mr Seager, no evidence or findings were available about any personal benefit beyond the company's turnover. Without such evidence, the court could not substitute any figure for benefit and thus could not uphold the confiscation order.
Holding and Implications
The court QUASHED the confiscation orders in both cases and allowed the appeals.
For Mr Blatch, the court substituted a confiscation order of £221,109.81, to be paid within two months, with a default sentence of three years imprisonment.
For Mr Seager, the court quashed the confiscation order without substitution due to lack of evidence to determine his personal benefit.
This decision clarifies that in director disqualification offences, the benefit for confiscation purposes must be the property personally obtained by the offender, not the total turnover of companies involved. The corporate veil will not be pierced absent evidence of impropriety or sham. The ruling emphasizes adherence to the principles established by the House of Lords and limits the scope of attributing company turnover as offender benefit.