England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		20 March 2013

1. THE VICE PRESIDENT: This is a Crown appeal under section 31(2) of the Proceeds of Crime Act 2002 against the decision of the Recorder to stay confiscation proceedings on the grounds that they represented an abuse of the process of the court.
2. The defendants are husband and wife. For about 16 months between the beginning of November 2007 and 30th April 2009 they operated a business selling car wheel trims. They traded under the style of 'Wheeltrims UK', initially as a partnership and as from March 2009 via a limited company of that name of which, so far as we understand it, they were the sole directors and shareholders. They offered for sale wheel trims designed specifically for about a dozen different well-known makes of motorcar. They ranged, speaking purely alphabetically, from BMW to Volkswagen. These wheel trims were imported from Italy where they were made by a company called "Team SRL". They were specifically advertised as suitable to be fitted to the motorcars made by the car manufacturers. However, none of the wheel trims was either made by the relevant car manufacturer, nor had that manufacturer granted any licence to Team SRL to do so. Notwithstanding that, the trims bore the logos of the relevant manufacturer and they were marketed both by Team SRL and in this country by the defendants as "non-genuine replacement parts" and under an advertisement which typically said something such as this: "Vauxhall Astra Part [and a number]. These wheel trims are not produced from the car manufacturer but made to the same if not better product offering a high quality lasting product for your vehicle."
3. The defendants were in due course charged with a series of counts of unauthorised use of a trade mark contrary to section 92(1)(b) and (c) of the Trade Marks Act 1994. The offence under paragraph (b) is of using material bearing a trade mark with a view to gain for oneself or with intent to cause loss to another without consent of the proprietor of the mark. Similarly, under paragraph (c), the offence is of having in one's possession any such material with a view to doing anything which would be an offence under paragraph (b), once again providing it was done with a view to gain for oneself or with intent to cause loss to another and without the consent of the proprietor.
4. It is true to say that either offence can prima facie be committed without the defendant knowing that he is misusing somebody else's trade mark. However, whilst that is true of the offence as created by the offence creating provisions, it is substantially mitigated by the provision of a statutory defence under section 92(5) which says this:

"It is a defence for a person charged with an offence under this section to show that he believed on reasonable grounds that the use of the sign in the manner in which it was used, or was to be used, was not an infringement of the registered trade mark."

In accordance with general principle a defendant who sets out to establish that defence is required to do so only on the balance of probabilities and not to the criminal standard of proof. These defendants did rely on that statutory defence and their trial took something like two weeks. They were, however, convicted by the jury. The statutory defence was rejected.

5. Offences under this section of the Trade Marks Act are made lifestyle offences for the purposes of the Proceeds of Crime Act 2002. That is to be gathered from a combination of section 75 and Schedule 2 paragraph 7(2).
6. It follows from that, that the court is bound to make the assumptions as to benefit which are set out in section 10 of the Proceeds of Crime Act, unless of course either the relevant assumption is shown to be incorrect or there would be a serious risk of injustice if it were made. The assumptions are nowadays, we think, well understood. In effect any property which was transferred to or held by the defendant in a six year period prior to the commencement of proceedings is assumed to be the proceeds of some antecedent crime, unspecified, unless the defendant demonstrates, again on a balance of probabilities, that it did not derive from such.
7. In the present case, as we understand it, the Crown began the confiscation stage of proceedings by asserting against the defendants that the benefit figures ought to be in the region of £190,000 for the husband and in the region of £180,000 for the wife. However, it needs to be recorded that by the end of the proceedings which concluded with the Recorder's ruling to stay them, the Crown had significantly modified its position. First, it had conceded that the same assumptions ought not to be made in respect of the same property which had been transferred to or held by the two defendants jointly - in other words that there should not be double counting of the same property held by the defendants jointly. That is a substantial concession: see R v May and R v Waya. Secondly, the Crown did not seek to go back six years as the statute entitles it to do, but instead asserted a calculation beginning with the commencement of this business in September 2007. Thirdly, as we understand it, the defendants' explanation offered for various previously unexplained cash receipts was, except to a very small extent, accepted. We understand it to be the case that in the end the Crown contended for orders totalling about £120,000 or £130,000 in all. Much would depend no doubt on the extent to which the defendants were able to rebut the statutory assumptions. But if it be the truth of the matter that these are the only offences that they have committed, if that be the truth, then it is likely that the statutory assumptions will be displaced in relation to property which does not derive from these offences. That, however, remains of course in the future.
8. On the other hand, the defendants' case was either that they had made no profit from the business, which both of them had asserted at some stage, or alternatively, at the trial it seems, that their profit was limited to about £25,000 or thereabouts.
9. As we understand it, the evidence demonstrated that the gross takings from these sales was of the order of £103,000 or £105,000. Moreover, the evidence demonstrated that that represented 95 per cent or more of the business that the defendants conducted. There was no other legitimate business or minimal legitimate business.
10. The defendants' case before the Recorder was indicated to be, as we understand it, that any confiscation order beyond about £25,000 worth of profit would be oppressive. The Recorder stayed the confiscation application sharing, it seems, that view. He was expressly referred to and dealt in the course of his ruling with the decision of this court in R v Shabir [2009] 1 CrAppR (S) 84. He could not be referred because it had not by then been decided) to the subsequent decision of the Supreme Court in R v Waya [2012] UKSC 412 but that has been covered properly in the submissions before us.
11. The Recorder gave several different reasons for his decision to stay. First, he expressed the view that although the Proceeds of Crime Act is often described as draconian in effect, it was unlikely that Parliament had had in mind a situation such as this case. Secondly, he relied upon the fact that the offences were ones of strict liability and did not involve proof of either bad faith or dishonesty. Thirdly, he took into account, and plainly regarded as very significant, the fact that other people doing the same thing had not been prosecuted. Most of all he drew attention to the fact that the Italian manufacturers of these infringing articles had not been prosecuted. Fourthly, the Recorder relied upon the fact that the defendants were carrying on what he described as a "proper business". By that he made it clear that he meant that they were keeping records and paying tax and they were not fly-by-night traders. Said the Recorder: "Their only mistake was not doing sufficient research." From that proposition the Recorder drew the conclusion that to describe the defendants as having a criminal lifestyle was to do violence to the statutory language. Fifthly, the Recorder drew attention to the fact that the order, at least as originally sought, would strip the defendants of all their available assets. Lastly, he said that the fact that it might have been unoppressive to seek a confiscation order limited to the profit did not affect his conclusion.
12. Not all of those reasons have been explicitly supported before us today by Mr Balysz who, if we may say so, has put a difficult case for the defendants as persuasively as it possibly can be put. His principal submission is that given the good character of the defendants, the fact that they had marketed the goods as non-genuine replacement parts rather than pretending that they had been made by the car manufacturers and especially in the light of the fact that the Italian manufactures had escaped punishment, it is simply unfair that the confiscation regime provided for by English statute should apply to these defendants. Or at least his submission is that the decision that it was oppressive was one which the Recorder was entitled to arrive at.
13. We are afraid that by no stretch of the imagination can any of these reasons justify a stay of these confiscation proceedings. To take the Recorder's reasons seriatim we draw attention to the following. First, trade mark offences are specifically contemplated as lifestyle offences by the provisions of Schedule 2 of the Proceeds of Crime Act to which we have referred. That is not surprising. They are typically repeat offences, as they were here. Trade mark infringement is not a venial offence. It does real damage to the people who are entitled to the protection of a trade mark which they have invented. Even if the goods are marketed in the way that these were here, they look as if they are real Volkswagen or Vauxhall or whatever trims and they are not. They are depriving the manufacturers of the legitimate fruits of all the research and development through which they developed their product. That is why trade marks exist. A criminal lifestyle for the purposes of confiscation under the Proceeds of Crime Act is not, as the Recorder seems to have thought, limited to the kinds of gross criminal offences which attract long prison sentences such as drug trafficking or armed robbery. It is a concept applied by the statute also, and entirely understandably, to those whose business is founded on the commission of offences, as we are afraid there is no escape from saying that this business was. This business was entirely constituted by the selling of infringing wheel trims.
14. Secondly, the essence of confiscation is the removal of the proceeds of offending. The proceeds may well be similar whether the defendant is greatly to blame or much less to blame. It is the proceeds which matter and not the blame. In fact, it has to be said that it is not easy to describe these defendants as entirely blameless. The evidence showed that trading standards officers had visited and attempted to make a test purchase on 27th January 2009. That same day the male defendant telephoned an organisation known as Consumer Direct South East and asked for advice. In doing so he gave a partial name, calling himself John, rather than Scott, Beazley, and a false or at any rate misleading address. He said that he was thinking of starting up a business importing wheel trims and he requested advice on labelling and other issues. That was to say the least disingenuous. After the test purchase had alerted them to the investigation, the husband specifically asked the Italian manufacturers whether they would be able to supply the replica manufacturers' badges separately from the wheel trims so that they could be married together by the defendants. Moreover, at about the same time the lady defendant, Mrs Beazley, sent a similar message indicating that she would like to use the car manufacturers' badges on their business logo or stationary, observing in terms: "We are not sure what we can get away with." It is also the fact that the defendants knew that one car manufacturer, namely Ford, had alone successfully obtained an injunction against the Italian manufacturers preventing wheel trims using their mark from being marketed. It is true that the defendants in consequence abstained from marketing Ford wheel trims and that is to their credit, but they can hardly have failed to be aware of the risk that was being run, nor of the real possibility that trade marks were being infringed, if they knew that one manufacturer had successfully taken that step.
15. After the test purchase attempt in January the business continued unabated until the defendants were arrested three months later at the end of April. On the defendants' own admissions they were trading at the rate of about 200 to 400 sets each week.
16. As to the Recorder's third point, much relied upon by Mr Balysz, we accept that the Italian manufacturers have not been prosecuted. There may well have been some difficulty about it. We know first of all that the Italian manufacturers' representative gave evidence in the trial that a prosecution against it had failed in Italy. The exact basis of the failure we do not know, but it was clearly taken into account in the trial. Quite apart from that, we are not entirely surprised to learn that a trading standards department in an English county should baulk at the prospect of attempting to serve or arrest an Italian company, even if they are making sales via eBay in England and even in their own county. But fundamentally it is simply irrelevant whether anybody else has been prosecuted or anybody else has been subjected to confiscation or not. Every offender in every field can only very rarely be prosecuted. There was nothing remotely oppressive in prosecuting these defendants for a business which was founded entirely on illegality. The fact that other people may have been doing the same has never been either a defence or a ground for resisting proper consequential orders.
17. Much the same applies, as we have previously said, to the Recorder's reasons four and five. We do not doubt that these defendants were keeping proper records and they were not additionally committing the kind of offences which yet more dishonest traders might commit, such as avoiding tax. But as we have had to say, a business which is founded entirely on the infringement of other people's property rights, and is a criminal offence, will inevitably attract the consequence of confiscation of the proceeds. For the same reason it cannot be a ground for staying those proceedings that, if such be the case, it will remove the available assets of the defendants. As it turns out, we are not sure that it will. It will certainly remove their gross takings in this business. Whether it also removes anything else will depend upon whether they are able to displace the assumptions. If these are, as is asserted, the only offences that they have committed then on the face of it they will be able to displace the assumptions.
18. Everything that we have set out thus far was, we are quite satisfied, the law at the time that the Recorder addressed the question. Shabir, to which the Recorder was referred, was a very unusual case of the most enormous disproportion between an offence limited to something under £500 and a deployment of confiscation procedure in a manner which bid fair to generate a confiscation order of over £200,000. This court went out of its way in dealing with Shabir to explain how restricted the jurisdiction to stay for abuse is. In particular, it cannot be invoked where the judge feels unhappy about the consequences of a statutory regime which has been put in place by Parliament. It is for Parliament to put it in place and the courts simply have to operate it. In this case we do not think there is anything unfair about it, but even if there had been it would not have been a good enough reason to stay the proceedings. If that was in any doubt after Shabir, it was made abundantly clear by Lord Chief Justice in this court in Crown Prosecution Service v Paulet and others [2009] EWCA Crim 1573. The same is true since the recent decision of the Supreme Court in Waya [2012] UKSC 51. That has addressed the proper approach to submissions that applications for confiscation are oppressive. Resort to a stay for abuse of process is no longer either appropriate or required. Orders must be proportionate in order to avoid an infringement of Article 1 Protocol 1 to the European Convention on Human Rights. That is all explained in paragraphs 10 to 35 of Waya.
19. This case has come to this court later than it otherwise would because we delayed hearing it in the knowledge that submissions being made before the Supreme Court in Waya might lead to a reconsideration of the correct approach. To the extent that we have mentioned, they have done. But we want to make it abundantly clear that nothing in this case could begin to justify a reduction of the order which is otherwise appropriate in reliance on Article 1 Protocol 1. There is nothing remotely disproportionate about removing from this unlawful business the proceeds which it has generated. It is not in any way analogous to the kind of double recovery situation contemplated explicitly in Waya. The judgment in Waya specifically endorses the longstanding approval to the difference for confiscation purposes between gross proceeds on the one hand, which are the measure of benefit, and profit on the other, which is not. That is explicit in paragraph 26. There may be some other special cases in which a confiscation order can properly be described as disproportionate, but the fact that it is based on gross proceeds of crime is not one of them. Nor is there anything in this case which could possibly justify the description 'disproportionate', whether under Waya or otherwise.
20. For all those reasons this appeal must be allowed. The defendants have yet to be sentenced, correctly because the Recorder appreciated that the question of possible confiscation would have to be addressed before any financial penalty could be assessed, and in any event the calculation of benefit has not been fully investigated. Some of the things which may need investigation we have mentioned but there may, for all we know, be others.
21. Accordingly, the right order is that the case be remitted to the Crown Court where it ought to be dealt with, if at all possible, by the Recorder who has dealt with it thus far, although he will now have to deal with it with the benefit of the judgment of this Court.