Powell & Another

Piercing the corporate veil in order to include a pecuniary advantage obtained by a defendant’s company when calculating his POCA Benefit

Here two directors, Powell and Westwood, of Wormtech Limited (a company specialising in the composting of food and green waste on an MOD owned site) had been convicted of environmental offences.

Westwood was represented by Mr Peter Rouch QC of 3 Temple Gardens.

POCA proceedings found Powell to have benefited in the sum of £60,000 with Westwood benefiting in the sum of £30,000. They were ordered to pay those sums in confiscation in addition to compensation.

The company had been wound up and the site abandoned leaving hundreds of tons of food waste rotting down and producing leachate. The MOD cleanup cost £1.125m. This was an appeal by the prosecution under section 31 of the Proceeds of Crime Act 2002.

The prosecution sought to obtain upward variations to the confiscation orders by adding the £1.125m to them. In doing so it was argued that the corporate veil should be pierced and the two directors made personally liable for the cleanup cost as this was a pecuniary advantage in favour of the company, since it would have been liable for that cost had it still been trading.

The prosecutor relied on R v Seager & Blatch [2010] 1 Cr App R (S) 60 which included:
"…. Second, where an offender does acts in the name of a company which (with the necessary mens rea) constitute a criminal offence which leads to the offender's conviction, then "the veil of incorporation is not so much pierced as rudely torn away": per Lord Bingham in Jennings v CPS paragraph 16."

The defence resisted the application submitting that the above limb of Seager did not apply. In doing so they relied on the Supreme Court decision in Prest v Petrodel Resources Ltd [2013] 3 WLR 1 stating that, as neither of the defendants had been the sole controller or sole shareholder of the company, neither of the principles of concealment or evasion established by Prest applied.

Held

The court found that "…..there was no facade or concealment for hiding behind the company's structure in a way which abused the corporate shield …… this was not a company being run for an unlawful purpose but rather was a legitimate business which had broken the criminal law ….. it is a material fact that these respondents were not the sole shareholders ……. we find it hard to identify in the case of either respondent some legal right, liability, obligation or restriction on either respondent which existed independently of the company …. there was no separate obligation imposed on either of the respondents ….. an examination of the proper context to be attributed to the second test of Seager & Blatch together with the analysis of the evasion principle enunciated by Lord Sumption in Prest, demonstrates that the applicant falls well short of establishing the necessary conditions for fixing these respondents with liability ……. the necessary conditions for rendering these respondents liable to a confiscation order were not established".
Appeal refused.