Scottish High Court of Justiciary Decisons

HIGH COURT OF JUSTICIARY 2012 HCJ 97 XM1/12
	OPINION OF LORD TURNBULL in the application by HER MAJESTY'S ADVOCATE against SHETLAND CATCH LIMITED For a Confiscation Order in terms of Section 1 of the Proceeds of Crime (Scotland) Act 1995

Crown: Divers, AD, Heaney

Defence: Burns QC; HBJ Gateley, Solicitors

11 July 2012

Introduction

[1] On 26 August 2010 Shetland Catch Limited ("the company") appeared on indictment before me in the High Court. The company pled guilty to a charge of contravening Article 3(2) of the Sea Fishing (Enforcement of Community Control Measures)(Scotland) Order 2000 and the Fisheries Act 1981 as amended. The criminal activity engaged in by the company arose out of arrangements which it entered into with various Masters of pelagic fishing vessels who landed their catches between January 2002 and March 2005 at the fish processing plant operated by the company at Lerwick.

[2] The company pled guilty on the basis that they acted in concert with the various accused Masters in furnishing false declarations regarding the quantities of fish landed over the period covered by the indictment. A total of seventeen Masters also pled guilty to this conduct and over the period covered by the indictment the difference between the value of the fish declared and that actually landed was in excess of forty seven million pounds.

[3] Confiscation proceedings in terms of the Proceeds of Crime (Scotland) Act 1995 were instituted against each accused and in due course the proceedings against each of the vessel Masters were resolved by way of agreement and confiscation orders were made against each, following which I passed sentence against each accused Master. No agreement was reached with this accused and the Crown went to proof on their application for a confiscation order before me in April 2012. An explanation of the relevant legislative provisions which governed the accused's conduct, as well as an account of the practices which permitted the criminal conduct to take place can be found in the opinion which I issued in these proceedings dated 7 July 2011

The Relevant Legislation

[4] Parties were agreed that the application for a confiscation order made in this case fell to be determined in terms of the Proceeds of Crime (Scotland) Act 1995, despite the fact that this Act of Parliament was subsequently repealed by the Proceeds of Crime Act 2002. An analysis of the transitional arrangements which brought this result about is set out in my earlier opinion. The fact that the Proceeds of Crime (Scotland) Act 1995 is the governing statute has certain important consequences. The first is that section 1 of that Act gives the court a discretion as to whether to make any order at all and a discretion as to the sum to be paid, if the court decides to make such an order. Secondly, the court can only make a confiscation order if it is satisfied that the accused has benefited from the commission of the offence concerned (section 1(4)) and thirdly, any sum which the court orders the accused to pay by way of a confiscation order cannot exceed the lesser of the amount of the benefit to the accused from the commission of the offence and the amount that might be realised at the time the order is made (section 1(6)).

A Summary of The Company and its Trading History

[5] Shetland Catch Limited was set up in Lerwick in 1989 in an attempt to re‑establish a locally based fish processing industry providing year round employment for members of the local community. A locally based fish processing facility was thought to be viable in light of a period in which East European factory ships descended on Lerwick Harbour periodically to service the Scottish fleet. At its height the influx of factory ships brought with it large numbers of foreign employees, to the extent that at times the population of the Islands would double during the relevant seasons, however no islanders were employed in the visiting processing industry. The company now employs more than one hundred members of staff on a full time and seasonal basis. It is one of Shetland's main private sector employers with an annual wages bill in the region of £3 million. It contributes to the local economy in other significant ways, by, for example, paying rent at a level of around half a million pounds per year to the Lerwick Harbour Trust and providing the Harbour Trust with the opportunity to charge a levy per tonne of fish landed as well as an export levy payable in respect of supplies of fish exported by the company to foreign customers. Other local businesses are supported by, for example, the transport costs incurred by the company which run to sums of between £2 million and £3 million per year. The company went through a major expansion of its facilities in around 2001 and has become one of the largest fish processing plants in Europe. Its competitor plants are located in other parts of North East Scotland, Ireland, Denmark and Norway.

[6] The business which the company is involved in is volatile. The price paid for fish purchased fluctuates from season to season according to a range of variable factors. The sale prices achievable on the world market in which the company is engaged also vary depending upon factors such as the level of supply available at any given time. The company tends to hold large quantities of stock in the periods following on from the mackerel season and can keep such stock in a saleable condition for many months. The quantities of fish which the company purchases in order to operate its business are very substantial, with annual purchase costs in the region of £50 million in some years. The audited accounts of the company from the period year end 2002 to year end 2011 show stock being held and recorded as an asset in the balance sheets to the value of anything between some £3 million and some £20 plus millions. The company has always relied upon substantial support from its bankers in order to operate. The sums borrowed have varied from month to month according to the state of the business and the relevant fishing seasons but in the year end balance sheets for the period 2002 to 2011 indebtedness to the company's bankers in excess of £20 million has regularly been recorded.

[7] The police investigation into the matter to which the company pled guilty commenced in 2005. At the stage of the initial enquiry the company was prevented from trading for a period of three days. In his report the defender's accountant identified a loss of gross profit of around £374,000 as a result.

[8] In the aftermath of the enquiry the company went through a period in which substantial losses were made. The company's then bankers were not prepared to provide further support and its position became precarious. The company was able to obtain further financing in 2007 through an investment made by a Norwegian company, Norwegian Pelagic ASA, who provided a financial injection in return for a shareholding in the company. It would seem that in connection with this arrangement valuations of the company's buildings, machinery and other business assets were carried out.

[9] As part of this re-financing arrangement the company also obtained banking support from the Norwegian company's bankers, DNB Bank based in Bergen. Costs to the company of around £700,000 were identified as associated with this whole restructuring exercise.

[10] Over the years between 2002 and 2011 the company's audited accounts generally showed a healthy profit before tax, with the exception of the years to March 2006 and 2007 in which losses were returned. There was an accounting period alteration so that the period to year end March 2004 was for a period of fifteen months. The previous accounting year had been to 31 December and the result was that there was no year end period for 2003. The relevant figures for profit (or loss) before tax were as follows:

Year end 2002 - £2,611,513

Year end 2004 - £1,085,727

Year end 2005 - £8,867,821

Year end 2006 - (£4,207,805)

Year end 2007 - (£3,934,986)

Year end 2008 - £498,246

Year end 2009 - £2,340,915

Year end 2010 - £2,179,275

Year end 2011 - £5,589,871

[11] Evidence concerning the company's current circumstances was given by Mr Leiper, who has been employed by the company since 1998 and has held the position of Managing Director since December of 2006. On his evidence the prospects for the year end to March 2012 and the immediate future are not good. Market conditions prevailing at the time meant that prices paid for mackerel purchases in the later part of 2011 were the highest for many years. Since then the market has altered significantly, due in part at least to the activities of the Icelandic and Faroese fishing fleets. Vessels from these fleets are not governed by the same restrictions which apply to vessels licensed by Member States of the European Union. Although they had been operating to a quota level, both of these fleets recently abandoned their restrictions and introduced large quantities of fish onto the world market, resulting in a downward movement of prices. The result for the company was that it now held stock, purchased at a cost of over £20 million, which it was having difficulty selling at a profitable level. It has already sold some stock at below cost price and it was anxiously awaiting market developments to determine what return would be available. The management accounts for the year to 31 March 2012 predicted a loss of around £4 million. The prospects for the immediate future are uncertain.

[12] The company has only ever paid relatively modest sums by way of directors' remuneration and only began making dividend payments in 2010, doing so as part of the arrangement entered into when funds were made available by Norwegian Pelagic ASA.

Quota Deduction

[13] The European Economic Community Common Fisheries Policy applies to all Member States of the European Union. A quota of catch is made available annually to each Member State by the Council of Ministers. The United Kingdom catch quota is distributed amongst vessels which are members of various producer organisations. The producer organisations, which are in the nature of fishermen's collectives, manage the use of these quotas and allocate particular quotas to individual vessels.

[14] The police investigation into the practice engaged in by those who appeared on the indictment with the company, and a substantial number of other vessels and Masters, revealed that the United Kingdom had exceeded its annual quota for herring and mackerel in the years 2002 to 2005. Subsequent discussions with the European Commission led to deductions being made from the quota which would otherwise have been made available to the United Kingdom in the years between 2007 and 2012, all as set out in Commission Regulation No. 147/2007. The effect for the individual vessels concerned has been that since around 2005 arrangements have been in place to provide an annual deduction from the individual quotas which would otherwise have been available to each vessel. These arrangements were initially put in place administratively through the producer organisations but were formalised by the relevant department of the Scottish Executive in around April of 2007, which then notified the vessel owners of changes to their licence conditions which were designed to ensure compliance with these arrangements. The system of identifying quotas for each Member State of the European Union is designed to ensure conservation and sustainability of stocks. The object of reducing the United Kingdom annual quota over the period to 2012 was to ensure that over the whole period from 2002 onwards the total quantity of fish removed was no more than would have been removed had the quota restriction over that whole period been complied with. The ability of the individual vessels concerned to fish was therefore plainly restricted. In the period from 2005 onwards they would have been landing fewer fish than in the previous periods when they were fishing not just to full quota level but substantially more. A natural consequence of this might be expected to be a fall in profitability for the vessels concerned and their owners. However the effect was not entirely straightforward as during the period since 2005 the price available for both mackerel and herring per tonne has increased significantly. Accordingly in the post indictment period it has been possible to achieve a given level of profit whilst landing a substantially reduced quantity of fish.

The Crown's Approach

Benefit

[15] In line with the applicable legislative provisions the Crown invited me to conclude that the present accused had benefited from the criminal conduct engaged in. In doing so they accepted that the onus of proving that the accused had benefited, and by what amount, lay on them and had to be discharged to the standard of proof beyond reasonable doubt. They also accepted that the burden of establishing the extent of the accused's realisable property lay on them.

[16] It was agreed that over the period of the libel undeclared fish to a value of some £47 million had been landed at the premises operated by the company. This figure reflected the sums paid by the company to the various limited companies which owned the fishing vessels. The undeclared fish was in due course sold on by the company to their own customers.

[17] In order to establish that the company had benefited from its criminal conduct and to identify a value for that benefit the Crown relied on a report prepared by their expert accountant Mr Sinclair. Given that, in common with all of the other accused, the company included the value of the undeclared fish in their annual accounts the exercise which he conducted was relatively straightforward. From an examination of the appendix attached to the indictment Mr Sinclair was able to identify the purchase sums paid by the company for undeclared fish during the period between January 2002 and March 2005. He was then able to break the total down into the actual sums paid by the company during each of their relevant financial years. The relevant periods came to be:

1. To year end 31/12/2002

2. To year end 28/3/2004

3. To year end 31/3/2005

[18] Drawing on the audited accounts prepared on behalf of the company Mr Sinclair was able to identify the total price paid for fish purchased during each of these periods. Having identified the sums paid in those same periods for undeclared fish he was then in a position to state the percentage of the total cost of fish which was accounted for by undeclared fish. In the relevant periods the percentages were respectively 37.09%, 25.29% and 37.59%. The audited accounts for each period also provided a figure for what was termed "operating profit". Applying the percentage figures arrived at to each year's operating profit Mr Sinclair was able to identify a sum which represented the operating profit made from the undeclared fish. In each of the relevant periods the sums brought out were as follows:

1. To year end 31/12/2002 - £1,619,751

2. To year end 28/3/2004 - £796,426

3. To year end 31/3/2005 - £3,740,876

[19] The total figure of £6,157,053 brought out in this calculation was said by the Crown to represent the benefit to the present accused of its criminal conduct.

Realisable Property

[20] In seeking to establish the extent of the company's realisable property the Crown again relied on the evidence of Mr Sinclair and the terms of the report prepared by him. Mr Sinclair's view was that the company's realisable property would be equivalent to the total net worth of the company. The total net worth of the company was, in his view, represented by the figure for the total Shareholders Funds, which was to be found in the company's Balance Sheets and in the monthly Management Accounts prepared in the period between each financial year end. Looking to the Management Accounts prepared to March 2012 the figure brought out for Shareholders Funds was approximately £151/2 million. On this basis and looking to what Mr Sinclair considered was a history of commercially successful activity his opinion was that the company would be in a position to pay the calculated benefit figure of some £6.15 million.

The Approach Taken on Behalf of the Company

Benefit

[21] On behalf of the company it was contended that there was no basis for selecting a percentage of the operating profit in the financial years covered by the charge to which it pled guilty as providing a figure which reflected any benefit obtained by the company. It was submitted that no accountancy principle supporting the selection of operating profit as the starting point had been identified and nor had any other explanation for this choice been advanced.

[22] Operating profit was a figure arrived at by deducting the yearly cost of fish purchases from the figure for turnover, resulting in a gross profit figure. From the gross profit figure there was then deducted distribution and administration costs. The resultant figure was referred to as the operating profit. However the company had other substantial costs in each year. In particular, since it required ongoing finance from its bankers to trade, it incurred substantial annual interest payments. These were also reflected in the annual profit and loss accounts and after deduction of such sums (along with accounting for other relatively small sources of income) a figure was brought out in the accounts for "profit on ordinary activities". It was on this figure that the company's liability for taxation was calculated. Although it was not conceded that the Crown's underlying approach was appropriate at all, it was submitted that if it was, then the annual figures to which the percentages for undeclared fish should be applied ought to be those brought out under the heading of profit on ordinary activities.

[23] It was also contended on behalf of the company that further adjustments would require to be made to the total brought out in this method in order to take account of the effect of quota deduction, tax paid on sales of undeclared fish, loss of income during the initial period of the police investigation, costs associated with the financial restructuring in 2007 and unnecessary legal costs incurred as a consequence of having to address the various different prosecutor's statements which had been served on the company during the confiscation proceedings.

[24] Senior counsel for the company contended that the losses made in the financial years to March 2006 and 2007 were attributable to reduced quantities of fish being available for purchase and as a result there had been in effect a form of what was referred to as "payback" and that this should be taken account of in assessing the overall economic advantage obtained by the company through its illegal activity.

[25] A feature applying to all of those involved in over quota fishing was that full declarations of profit were made to the Inland Revenue. The same was true for Shetland Catch Limited. It was acknowledged by the Crown that the tax paid by the company on profits from the sale of fish landed but not declared for monitoring purposes came to £1,800,000. Counsel for the company contended that this should be taken account of and deducted from any figure identified as representing the benefit to the company.

[26] Counsel also drew attention to the fact that the present proceedings had something of a history. The original prosecutor's statement served in August of 2010 identified the benefit to the company as being £13.5 million. By April 2011 a further statement had been served which purported to calculate the benefit to the company in a different manner and brought out a benefit figure of £66 million but sought a restricted confiscation order of just over £6 million. By September of 2011 a further statement had been served which calculated the benefit to the company in yet a different manner and identified the sum of £6,157,053 as reflecting the benefit to the company of its criminal activity. It was contended that the company had been put to unnecessary legal expense in seeking to prepare for and defend proceedings which had then been radically altered as the procedure had unfolded.

Realisable Property

[27] Senior counsel for the company also sought to attack the Crown's approach to the calculation of the company's realisable assets. His submission was that it was unrealistic to simply look to the book value of these assets and assume that the company could be sold as a going concern for that amount. He pointed out that a quarter share of the company had been sold in 2007 to Norwegian Pelagic ASA for the sum of £1.5 million. That indicated a market value for the company of around £6 million at that time.

[28] If the company could not be sold as a going concern then the realisable value of its assets would be limited to whatever could be raised by way of sale of the individual items in a break up of the company.

[29] The company's assets consisted essentially of stock listed in the balance sheet at cost price, plant and machinery listed at cost price less an annual figure for depreciation and its interest in land and buildings, being the property which it operated from and the lease which it held over that property. The most up to date balance sheet figure for assets which did not include stock was some £13 million. Counsel submitted that it was unrealistic to assume that these items would fetch their book value if sold as part of the break up of the company. In contrast to the approach taken by the Crown's accountant he relied on the evidence of his own accountant Mr Adamson. His report identified a figure for the break up value of the company's assets, as adjusted to take account of the 2007 valuations, of around £4 million.

Discussion

[30] Section 1(1) of The Proceeds of Crime Act 1995 provides that:

"the court, on the application of the prosecutor, may make an order (a "confiscation order") requiring the accused to pay such sum as the court thinks fit"

Section 1(4) provides that:

"Except where the offence is a drug trafficking offence, the court may make a confiscation order against an accused only if is satisfied that he has benefited from the commission of the offence concerned."

Section 2(1) provides that:

"For the purposes of this Part of this Act, an accused shall be held to have benefited from the commission of an offence if in connection with its commission he has obtained, directly or indirectly, any property or other economic advantage."

[31] In the present case, along with the Masters of the fishing vessels concerned, the company facilitated the landing of fish in excess of the declared landing weights. The purpose in doing so was to avoid the quota restrictions imposed on each vessel in terms of the relevant European Union regulations. The conduct reflected in the indictment was engaged in on a massive scale over a period of around three years. Under declarations were made by landing Masters, with the connivance of the company, on more than seven hundred occasions. The value of the fish landed but not declared in single landings frequently exceeded £100,000 and sometimes exceeded double this amount. As stated above, the total price paid by the company for fish landed but not declared was in excess of £47 million.

[32] The purpose of the deception engaged in by the Masters was to enable them to catch and sell more fish than permitted in terms of their allocated annual quotas. By doing so the profits made by the private limited companies which owned the vessels were substantially higher than they would otherwise have been. Almost all of the Masters concerned were directors and shareholders of the relevant companies. The Masters benefited directly in various ways, including by their individual entitlement to the crew share of the sums received for the fish landed and from dividend payments made to them by the limited companies owning the vessels. Having dealt with the whole proceedings to date arising out of the investigation into overfishing by the Scottish Pelagic Fleet, and having heard the evidence in the present case, it is fair to acknowledge that the practice of landing fish in excess of the declared tonnage, and the subsequent over quota fishing, was driven by the vessel Masters. However the consequence for the company (which was not the only fish processing company to be prosecuted as a consequence of this investigation) was that they were able in turn to sell more fish over the relevant years than they would have had the Masters landed smaller, within quota, quantities of fish. Given the history of the practice engaged in and the extent to which it occurred it would be surprising to conclude that the company had not obtained, directly or indirectly, any property or other economic advantage. Nevertheless that was the conclusion which senior counsel for the company invited me to reach on taking account of all matters which he submitted were relevant. Or to put it differently, and bearing in mind the onus of proof, he invited me to conclude that the Crown had not established that the company had obtained any economic advantage as a consequence of its criminal activity.

[33] It was accepted that none of the assumptions which the Proceeds of Crime (Scotland) Act 1995 provides for in certain circumstances applied in the present case. Equally it was accepted that, unlike provided for in subsequent legislation, there was no method within this Act by which the court was directed to assess the benefit obtained as a result of criminal conduct. Thus, for example, it was accepted that the benefit obtained by criminal conduct for the purposes of this Act did not necessarily equate to the value of the property obtained.

[34] Both the advocate depute and senior counsel for the company referred me to Part IV of the Scottish Law Commission Report No. 147 on Confiscation and Forfeiture, which gave rise to the introduction of the 1995 Act. In paragraphs 4.5 and 4.6, under the heading of "Valuation of benefit", the Commission describes the English position under the Criminal Justice Act 1988. It is noted that in terms of that statutory regime no provision was made for any deduction in the calculation of proceeds or benefit obtained and that accordingly the measure of the proceeds or benefit was taken to be the gross receipts from the offence. The view is expressed by the Commission that this approach could lead to unrealistic results and some examples of situations in which unfairness would result if the calculation of an offender's benefit from criminal conduct did not take account of expenses incurred are canvassed. The Commission then goes on to note that a different approach from that set out in the Criminal Justice Act 1988 seemed to have been taken by Lord Justice‑Clerk Cooper in the older Scottish case of Gunn, Collie & Topping v Adair 1944 JC 21. In setting out their recommendations the Law Commission favoured the approach taken by The Lord Justice‑Clerk and said:

"We propose, however, that the Scottish courts, when assessing "benefit" for the purposes of confiscation, should likewise take a broad approach and arrive at a realistic result. The words "economic advantage" in our definition of "benefit" should enable them to do so."

[35] It was in light of this analysis, accepted as correct for the purpose of the application of the statutory provisions with which I was dealing, that the Crown submitted that operating profit rather than gross profit ought to reflect the appropriate starting point figure in any assessment of the benefit obtained by the company.

[36] I was satisfied on the evidence of Mr Sinclair that it was possible to identify what percentage of the total stock bought and sold in each relevant year by the company was made up of undeclared fish. His evidence also satisfied me that an examination of the company's accounts would enable a calculation to be performed which demonstrated the income received from undeclared fish. That of itself would not necessarily demonstrate benefit though.

[37] I was not persuaded that the Crown were correct in submitting that operating profit should be taken as the appropriate starting point figure. No persuasive explanation was given by Mr Sinclair for choosing this particular figure in his evidence and nor was any submission made by the advocate depute as to why it should be selected over the figure for profit on ordinary activities. Mr Adamson's un‑contradicted evidence was that there was no accountancy principle which would dictate the selection of operating profit, as opposed to profit on ordinary activities, as the starting point for considering any benefit to the company. He was not asked any questions in cross examination by the Crown.

[38] Given that the Crown's approach was to acknowledge that it was appropriate to deduct expenses of distribution and the like there seemed to me to be no good reason for their refusal to also include other significant running costs, such as bank interest, in any deduction from the gross profit figure which was designed to identify a figure for benefit. The evidence was that the company depended on extensive financial facilities made available to it by its bankers, without which it would not have been in a position to operate. Mr Sinclair himself accepted in cross examination that it might well be appropriate to take account of interest paid on banking facilities in assessing a figure for benefit. When interest costs in each relevant year were taken account of the figures for profit on ordinary activities (or profit before taxation) were:

1. To year end 31/12/2002 - £2,611,513

2. To year end 28/3/2004 - £1,085,727

3. To year end 31/3/2005 - £8,867,821

[39] Applying the percentage figures for undeclared fish identified by Mr Sinclair to these sums brings out a figure in each financial year which equates to the profit before taxation on the sale of undeclared fish as follows:

1. To year end 31/12/2002 - £968,610

2. To year end 28/3/2004 - £274,580

3. To year end 31/3/2005 - £3,333,413

Giving a total of £4,576,603

[40] I was not however persuaded that this figure properly represented the economic advantage obtained by the company. Since the Crown acknowledged that they bore the onus of establishing what the benefit obtained by the company was, it fell to them to persuade me that I should decline to take account of the fact that the company had already paid a sum of £1.8 million in respect of tax on the sale of undeclared fish. As was submitted on behalf of the company, if I did not take account of this payment the effect would be that the company was paying it twice, since the state had already received a proportion of the money obtained by the illegal conduct. A deduction of this sum from the total identified in paragraph [39] brings out a figure of £2,776,603.

[41] I rejected the contention that I should take account of any effect on the company of the imposition of quota deductions. I was satisfied by the advocate depute's submission that the quota deduction arrangements had nothing to do with any calculation of benefit achieved by the company. As he rightly submitted, the deduction was not imposed on the company but on the various fishing vessels involved. These vessels had no contractual arrangements to land their catch at the company's processing plant. They were free to land their catches wherever they chose. It seemed to me that the inability of certain of the company's customer vessels to catch the same quantities of fish as they had in the past was simply one of the vagaries of the business which the company was in. There was no guarantee that in any given year the relevant fishing vessels would do as well as they had in previous years. The company had no control over the extent to which individual vessels would continue to fish. Some might decide to spend less time at sea or to leave the industry all together. Equally, the company was free to accept fish from whatever vessels it wished. It would be free to try and attract other British or foreign vessels by implementing an attractive purchasing policy. Although it was correct to note that the company had made losses in the two financial years after quota deductions had been introduced, it was also the case that they had thereafter returned to profit, despite a reduced tonnage of catch still being caught by the vessels within the Scottish Pelagic Fleet. In the financial year to March 2011 the company had in fact made a profit which was substantially greater than had been made during some of the years in which over quota fishing was taking place, despite the fact that its customer vessels were still working within reduced quotas.

[42] Given the view which I arrived at I did not strictly require to assess the exercise conducted by Mr Adamson which was designed to compare the average operating profit for within quota fishing during the financial years covered by the indictment with the average operating profit over the following years. This exercise was said to demonstrate that if the average within quota operating profit figure for the indictment years had been sustained during the succeeding years, a sum of around £16 million more than was made ought to have been expected. It was contended that this apparent shortfall must be connected in some manner to the reduced quantities of fish available to be purchased. However it was plain from the generality of the evidence that the fishing industry was so volatile and unpredictable that such an exercise was of very limited application. In any event Mr Adamson who, like Mr Sinclair, gave his evidence with restraint and with professional consideration was at pains to state that since many factors other than quota deduction affected the price of fish it was impossible to quantify what effect quota deduction had on the company's levels of profitability over the years between 2005 and 2012.

[43] In this context I should also mention the Devolution Minute lodged on behalf of the company. Counsel contended that the effect of the quota deduction arrangements which I have described, when taken along with the imposition of a confiscation order, would lead to an unjustified infringement of the company's rights in terms of Article 1 of the First Protocol of the European Convention on Human Rights. This submission was predicated upon accepting that the quota deduction arrangements had the effect of removing from the company some at least of the proceeds of its criminal conduct. Since for the reasons which I gave above I did not accept this submission there has been no violation of the Protocol.

[44] Lastly I should note that I did not accept the submissions made by counsel for the company that in the assessment of any benefit obtained by the company I should take account of restructuring costs or legal costs associated with considering the various prosecutor's statements served. The restructuring costs may have been incurred in some manner which arose as a consequence of the company's criminal conduct coming to light but they did not impact on the benefit which the company obtained from its conduct in the way that for instance running costs did. In any event there was no evidence as to the break down of these apparent costs. The same applies to the costs associated with the present proceedings.

[45] Having given consideration to the whole evidence and submissions and in light of the views which I came to, as explained above, I was satisfied that the Crown had discharged the onus of establishing beyond a reasonable doubt that the company had benefited from the commission of the offence to which it plead guilty and that the economic advantage which it obtained was at least £2,776,603.

Realisable Property

[46] Section 4 (4) of the Act provides as follows:

"In assessing the value of realisable property (other than money) of a person in respect of whom it proposes to make a confiscation order, the court shall have regard to the likely market value of the property at the date on which the order would be made; but it may also have regard to any security or real burden which would require to be discharged in realising the property or to any other factors which might reduce the amount recoverable by such realisation."

[47] I was not satisfied on the evidence and submissions that the company's realisable property ought to be assessed at the balance sheet figure for total shareholders funds. There was no evidence to suggest that there was any likelihood of the company being able to secure a buyer prepared to take it over as a going concern. The value of the company's realisable property would, in my view, be restricted to what could be obtained for the individual assets if sold on the break up of the company. In line with the evidence of Mr Adamson I accepted that in such circumstances various of the company's assets would require to be reduced in value from the balance sheet figures and that some would have nothing more than a negligible value. Accordingly any assessment of a figure for the value of the company's realisable property can be no more than a broad estimate. The actual value achieved in such circumstances would depend on a range of entirely unpredictable factors, of which one of the most important would be the sale value of the stock currently held. As at the date of the last available figures the purchase price of the stock held was around £23 million. However a sum of nearly £17 million was due to the company's bankers in the form of loans and overdraft. It seemed to me that in terms of section 4(4) of the Act it would be appropriate to take account of the company's debts as well as its assets in assessing the value of its realisable property.

[48] It was clear though from the evidence of the company's Managing Director, Mr Leiper, that the stock referred to in the financial accounts had been held for a number of months and was proving difficult to sell due to severe market conditions, contributed to by the activities of the Icelandic and Faroese fishing fleets and the high purchase prices paid. It was in light of these circumstances that the prediction of a trading loss for the year to 31 March 2012 was being made.

[49] Using the value of the stock as given in the company's financial accounts and taking account of its other listed assets and liabilities Mr Adamson assessed the realisable value of the company at around £4 million. Although I accepted that the company was facing a difficult trading period it had a good recent history and even Mr Leiper did not go so far as to suggest that the stock currently held would not be sold at all. His concern was the extent to which it might need to be sold at less than cost price. Taking a broad approach, which perhaps erred on the pessimistic side, it seemed to me that I ought to assess the value of the company's realisable property at the sum of £4 million.

[50] Since I was satisfied that the company had obtained an economic advantage as a consequence of its criminal conduct and that it has realisable property of a value which would permit an order to be made, the next question for me was whether in the exercise of my discretion I ought to make a confiscation order. I was satisfied that I should do so. The company had, along with others, been engaged in criminal conduct over a lengthy period. The motivating factor from the point of view of the vessel Masters was financial gain. I accepted though that the company was in something of a different position, for reasons which I shall explain. It was obvious from the evidence before me that over quota fishing had been a feature of the Scottish Pelagic Fishing Industry for many years predating the period covered by the indictment. Establishing a fish processing plant in Shetland has been good for the local economy in many different ways. However it is also clear that the market in which the company operates is a volatile and competitive one, given the regular fluctuations in cost and sale prices and the choices available to large fishing vessels in deciding upon their landing locations. As such I recognised that it has been commercially challenging to keep the company in business and to enable it to develop in the way that it has. In this context I accepted the evidence of the current chairman of the company Mr Goodlad, who has been a director since its inception in 1989. Mr Goodlad is not and never has been a fisherman, although he has worked in the fishing industry for around thirty years since graduating from university. His evidence was that the issue of accepting undeclared fish was a regular feature of discussion at the company's board meetings. He explained that he and others had been keen to move away from the practice but given the extent to which it was established in the industry the board members were convinced that if they were to refuse to accept undeclared fish then the fishing vessels would simply take their catches elsewhere and the company would have no business at all. The board of directors was well placed to make this assessment since throughout the period covered by the indictment three of the non-executive directors were vessel Masters who eventually appeared on the indictment as co-accused with the company. A further director held his position as a representative of the Shetland Fish Producers Organisation, which was a shareholder in the company. The Shetland Fish Producer's Organisation was responsible for the allocation and monitoring of allocated quotas but was perfectly aware of the practices adopted by its members. In this context there was a relationship between the company and the vessel Masters in which a dominance was exercised by the Masters. This is why I said earlier that the practice of landing fish in excess of the declared tonnage was driven by the vessel Masters. Nevertheless the company did participate and did benefit from the practice. In these circumstances I would only consider refusing to make any order at all if I thought that the effect of a confiscation order would be to create a substantial risk of causing the company to go out of business, with the resultant impact on the local community. The evidence led did not lead me to this conclusion. Despite the difficulties of the current year's trading the company has a history of profit making. Even in his own cautious assessment of the state of the company Mr Leiper did not go so far as to assert that the company would not be able to survive the imposition of any confiscation order. His concern was the company's ability to cope with a further obligation running into the millions.

[51] In implementing this statutory procedure I am entitled to exercise discretion as to the level of order to impose. In considering this matter it is relevant to take account of the effect upon the company of any particular sum selected by way of confiscation order. It is presently at the limit of the facilities provided to it by its bankers. The history of the company and the contribution which it makes to the local economy are also relevant matters to take account of. It is relevant to note that the company did not take advantage of the practice in which it was engaged to make large payments to its directors or shareholders, or to accumulate substantial assets. The advantage gained was put to the general running of the company and the profits made, both before the investigation and since, have gone to reduce from time to time the company's level of indebtedness to its bankers. This is in marked contrast to the position of some at least of the vessel Masters. At this stage I also felt able to give some consideration to the evidence regarding the expense to which the company was put in considering and responding to the number of different prosecutor's statements which were intimated by the Crown. Although the evidence about any resultant expense was very general I did accept that it would be fair to take account of the fact that different sums had been sought at different stages on the basis of different approaches. I felt it would be fair to recognise that a certain amount of expense arose unnecessarily in these circumstances.

[52] I accepted the evidence in general as given by Mr Leiper. Accordingly I recognised that a confiscation order of any significance will impose a challenging financial burden on the company. The circumstances in which the company will find itself in the short term will be determined by what is done with the large quantity of stock which it currently holds. The only reservation which I was left with in relation to Mr Leiper's evidence arose out of his apparent reluctance to canvass the range of options which might be open to the company in relation to the stock held. I accepted that there were currently difficulties in disposing of this stock at the sort of price which had been anticipated. I also accepted that it was reasonable to hold onto the stock meantime in order to see how the market developed and I accepted that suddenly selling at a reduced price would cause problems with those of the company's customers who had already agreed to make purchases. Nevertheless I did not accept that the stock would simply remain unsold or that it would all be sold at a loss. Nor did Mr Leiper seek to suggest that these would be the likely outcomes. Furthermore the company now has a demonstrated history of successful trading in the post indictment period. For these reasons I was satisfied that it would be appropriate to make a substantial confiscation order. I decided however that I would not make an order reflecting the whole figure for benefit which I identified above. In taking account of the history of the company's involvement in the landing of over quota fish catches, the dominance in their relationship exercised by the vessel Masters, the history of the manner it which the company had conducted its financial affairs, its current financial position, the issue of expense mentioned above and giving full weight to the importance of its position in the local economy, I decided that it would be appropriate to impose an order for a reduced sum. I accordingly decided to make a confiscation order in the sum of £1,500,000, payable to the Sheriff Clerk at Lerwick within a period of three years.