CASE STUDY

Confiscation proceedings against a company
Confiscation Order

In August 2010 a Scottish fish processing company pled guilty to assisting fishermen in under-declaring fish landings, and therefore assisting the fishermen in exceeding their quotas, between 2002 and 2005 and was served with a Statement of Information under the old Proceeds of Crime (Scotland) Act 1995. This Statement initially calculated that the company’s benefit was equal to its gross profit from so-called “black fishing”, and was in excess of £13 million. Some seven months later a revised Statement calculated the company’s benefit as being over £66 million, but restricted the sum sought to around £6 million. Finally, in September 2011 the Crown issued another revised Statement in which it calculated benefit in terms of operating profit, the figure again being around £6 million. The company argued that the any benefit that it had enjoyed from processing over-quota landings had been negated, firstly, by the quota payback mechanism imposed on the vessels after the discovery of the under-declarations. The company depended heavily on a small number of suppliers, and suffered considerable losses when these vessels were unable to supply the company with fish. Secondly, the company’s losses led to difficulties with its bankers. Eventually the company’s directors managed to find a new lender, but only after incurring substantial fees on professional assistance that had proved to be unsuccessful. In contrast to the skippers of the vessels, the company did not settle on an agreed figure with the Crown, and the matter was decided by Lord Turnbull after a lengthy proof. Lord Turnbull’s opinion contains some interesting comments, albeit they apply to the 1995 Act and not to the 2002 Act. He stated that the onus was on the Crown to prove beyond reasonable doubt whether, and by what amount, the respondent had benefited. In contrast to later legislation, the 1995 Act did not direct the court in its choice of method for assessing the amount of benefit. Lord Turnbull was not persuaded that operating profit, rather than profit before tax or profit after tax was the appropriate measure of benefit. He found that the benefit obtained by the company was more correctly measured by profit after tax, and calculated this figure as some £2.7 million. However Lord Turnbull rejected the company’s arguments that quota payback and the costs incurred in financial restructuring should be deducted in arriving at a figure for benefit. Many factors other than quota payback affected the price of fish and it was impossible to quantify what effect quota payback had on the company’s level of profitability. Lord Turnbull was satisfied that the Crown had established beyond reasonable doubt that the company had benefited from the offence to which it pled guilty and that this benefit was at least £2.7 million. Over quota fishing had been endemic in the fishing industry. The vessels had dominated in their relationship with the company and would have been able to take their catch to other processors had the company restricted landings to those within quota. The company did not pay large salaries to its directors, or large dividends to its shareholders, instead re-investing any profits in improving the company. The company had conducted its affairs in a proper manner since the practice of black fishing had ended. It was a very important to the local economy. It had incurred considerable costs in preparing to defend itself against Crown calculations of benefit that the Crown had then radically changed. Lord Turnbull had discretion in determining the level of confiscation order to impose and, taking account of all these factors, decided to make a confiscation order for £1.5 million, payable within 3 years. The company was also fined £150,000.

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