judgement:
Is a person who has been extradited to this country for trial on a criminal charge, and who prior to his extradition was guilty of contempt of court by disobeying a court order, open to punishment for his contempt although it was not the basis of his extradition? The answer depends in part on the proper interpretation of the so called specialty or speciality provisions of the Extradition Act 2003 and partly on the law relating to contempt.
The speciality principle (widely recognised in extradition law and extradition treaties) prohibits a person who has been extradited for a particular offence or offences from being dealt with by the requesting state for another offence or offences committed (or alleged to have been committed) before his extradition, subject to such exceptions as may be contained in the relevant statute or treaty.
Mr OBrien appeals against a decision of the Criminal Division of the Court of Appeal (Gross LJ, Openshaw J and Judge Milford QC) [2012] 1 WLR 3170, upholding an order of the Common Serjeant (Judge Barker QC) committing him to prison for 15 months for contempt of court in disobeying a restraint order made against him under section 41 of the Proceeds of Crime Act 2002 (POCA).
The appellant does not dispute that he was guilty of contempt, but he submits that his committal was unlawful by reason of the specialty provisions of Part 3 of the Extradition Act 2003.
After committing the contempt the appellant fled to the USA, from where he was extradited to the UK for other reasons.
It is submitted that it was not thereafter open to the English court to punish him for his earlier contempt, for which he had not been extradited.
The Court of Appeal certified the following points of law of general public importance: i.
Whether a contempt of court constituted by breach of a restraint order made under section 41 of the Proceeds of Crime Act 2002 constitutes a civil or criminal contempt. ii.
If the answer to i) is a civil contempt, whether Section 151A of the Extradition Act 2003 and/or article 18 of the United Kingdom United States Extradition Treaty 2003 preclude/s a court from dealing with a person for such a contempt when that person has been extradited to the United Kingdom in respect of criminal offences but not the contempt in question.
In 2009 the Appellant came under investigation on suspicion of involvement in a large scale scheme to defraud investors, commonly known as a boiler room fraud.
On 24 September 2009 the Common Serjeant made a restraint order against him under section 41 of POCA.
It required the appellant, among other things, to make disclosure of his assets, not to remove assets from England and Wales, and to repatriate within 21 days any moveable asset in which he had an interest outside England and Wales.
The order was prefaced in the usual way with a penal notice, that is, a warning that if he disobeyed the order he may be held to be in contempt of court and imprisoned, fined or have his assets seized.
In this respect the order followed the standard form of freezing order in civil proceedings (originally known as a Mareva order), on which the statutory criminal restraint order provisions were modelled.
The appellant failed to comply with the restraint order and he fled the jurisdiction.
On 18 December 2009 the Common Serjeant found that he was in contempt of court, issued a warrant for his arrest and adjourned the imposition of a penalty.
Six months later the Appellant was traced to Chicago.
The Serious Fraud Office (SFO) by now wanted his extradition in order to prosecute him on charges relating to the alleged fraud.
They sought the assistance of the US authorities and a federal arrest warrant was issued against him.
On 8 October 2010 he was arrested in Chicago and appeared before the local US District Court.
He consented to his extradition in accordance with the UKs request but did not waive entitlement to the benefit of the specialty principle.
The SFO was initially under the impression that as a matter of law the appellants contempt was criminal in nature.
However, the United Kingdom United States Extradition Treaty 2003 limited extradition to offences punishable by imprisonment for 12 months or more, and in the USA the maximum sentence for the appellants contempt, if punishable as a misdemeanour, would have been six months imprisonment.
In those circumstances the SFO was concerned that there might be complications if the appellant were returned to the UK under an extradition order for prosecution for the boiler room fraud but at the same time was subject to a bench warrant for the earlier contempt.
This concern led the SFO to apply to the Common Serjeant to set aside the bench warrant, and on 30 November 2010 he did so.
On 2 December 2010 the appellant was returned to the UK.
He was arrested, charged with various offences of fraud and remanded in custody.
On further consideration, the SFO came to the view that the appellants contempt was not a criminal offence and so was not affected by the specialty principle.
It therefore applied to the Common Serjeant for the appellants committal.
The appellant objected that the court had no jurisdiction to hear the application.
In a judgment delivered on 1 April 2011 the Common Serjeant rejected the appellants objection.
After reviewing the authorities he concluded that the contempt was not a criminal offence, but was a civil contempt, and that the specialty principle therefore did not afford the appellant any protection.
The Court of Appeal upheld the Common Serjeants decision.
For the avoidance of doubt, the question whether the appellants contempt constituted a civil or criminal contempt made no difference to the jurisdiction of the Criminal Division to hear his appeal, by virtue of section 13 of the Administration of Justice Act 1960 and section 53 of the Senior Courts Act 1981.
Section 13 of the 1960 Act provides that an appeal shall lie from any order or decision of a court in the exercise of jurisdiction to punish for contempt of court (including criminal contempt), and that such an appeal from the Crown Court shall lie to the Court of Appeal.
Section 53 of the 1981 Act provides that the Criminal Division of the Court of Appeal shall exercise the jurisdiction of the Court of Appeal under the former section in relation to appeals from orders and decisions of the Crown Court.
Grounds of appeal
Mr Alun Jones QC advanced two arguments on behalf of the appellant.
His primary submission was that on the appellants extradition to the UK the Crown Court had no power to deal with him for his earlier contempt, no matter whether it constituted a civil or a criminal contempt.
If he failed on that point, his second submission was that the appellants contempt should be classified as criminal.
The first point depends on the proper construction of the Extradition Act.
The second depends on the law of contempt.
Extradition Act 2003
Part 1 of the Extradition Act deals with extradition from the UK to category 1 territories.
Part 2 deals with extradition from the UK to category 2 territories.
Part 3 deals with extradition to the UK from category 1 and 2 territories.
The USA is a category 2 territory.
The appellants argument is clear and simple.
Part 3 should be regarded as a self contained code governing extradition to the UK.
It comprises sections 142 155A (section 155A, as inserted by section 42 of, and paragraph 24 of Schedule 13 to, the Police and Justice Act 2006) but the important provisions for the purposes of the appellants argument are sections 148 and 151A (as inserted by section 76(3) of the Policing and Crime Act 2009).
Section 148(1) provides: Conduct constitutes an extradition offence in relation to the United Kingdom if these conditions are satisfied (a) the conduct occurs in the United Kingdom; (b) the conduct is punishable under the law of the relevant part of the United Kingdom with imprisonment or another form of detention for a term of 12 months or a greater punishment.
The appellants contempt occurred in the United Kingdom and was punishable under section 14(1) of the Contempt of Court Act 1981 with imprisonment for longer than 12 months.
He submits that it was therefore an extradition offence within the definition of section 148.
Section 151A provides: (1) This section applies if a person is extradited to the United Kingdom from a territory which is not (a) a category 1 territory, or (b) a territory falling within section 150(1)(b) [which does not include the USA]. (2) The person may be dealt with in the United Kingdom for an offence committed before the persons extradition only if (a) the offence is one falling within subsection (3), or (b) the condition in subsection (4) is satisfied. (3) The offences are (a) (b) (c) (a) (b) the offence in respect of which the person is extradited; an offence disclosed by the information provided to the territory in respect of that offence; an offence in respect of which consent to the person being dealt with is given on behalf of the territory. (4) The condition is that the person has returned to the territory from which the person was extradited, the person has been given an opportunity to leave the United Kingdom. (5) A person is dealt with in the United Kingdom for an offence if (a) (b) the person is tried there for it; the person is detained with a view to trial there for it.
For reasons which I will explain, section 148 has no direct application to the extradition of a person to the United Kingdom from the United States.
However, two matters are not in dispute.
First, it is common ground that if the appellants contempt amounted to an offence within the meaning of section 151A, it was not open to a court in the United Kingdom to deal with him for that contempt.
Secondly, although an offence (in section 151A) is wider than an extradition offence (in section 148) in that it is not limited to an extraditable offence, it is not suggested that the meaning of the word offence itself varies in different sections of the Act.
If it means a criminal offence in one section it must mean a criminal offence in the other.
For completeness it is right to record that the United Kingdom United States Extradition Treaty 2003 (Cm 7146) contains the following specialty clause in article 18(1): A person extradited under this Treaty may not be detained, tried, or punished in the Requesting State except for: (a) any offense for which extradition was granted, or a different denominated offense based on the same facts as the offense on which the extradition was granted, provided such offense is extraditable, or is a lesser included offense Article 2.1 provides: An offense shall be an extraditable offense if the conduct on which the offense is based is punishable under the laws in both States by deprivation of liberty for a period of one year or more or by a more severe penalty.
Those provisions of the Treaty run in tandem with the Act but do not give rise to a separate argument.
The argument clearly and forcefully presented by Mr Jones depends for its persuasiveness on reading section 148 in isolation.
However, for a proper understanding of its purpose and construction it is necessary to see how the section fits into the structure of the Act.
Parts 1, 2 and 3 of the Act each contains a definition of extradition offence, which have in common that they refer to conduct punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment.
In Part 1 the relevant sections are 64 and 65; in Part 2 the relevant sections are sections 137 and 138.
The full definitions vary according to whether the extradition is outwards or inwards, the territories concerned, and whether the person subject to the proceedings has already been sentenced, but there is a common structure.
The Extradition Act 2003 replaced the Extradition Act 1989.
The need for new legislation arose from the Council Framework Decision of 13 June 2002 on the European arrest warrant and surrender procedures between member states (2002/584/JHA).
Those states are designated as category 1 territories under the 2003 Act, and Part 1 of the Act implements the Framework Decision in relation to arrest warrants issued by them.
The rationale of the Framework Decision is summarised in para (5) of the preamble: The objective set for the Union to become an area of freedom, security and justice leads to abolishing extradition between Member States and replacing it by a system of surrender between judicial authorities.
Further, the introduction of a new simplified system of surrender of sentenced or suspected persons for the purposes of execution or prosecution of criminal sentences makes it possible to remove the complexity and potential for delay inherent in the present extradition procedures.
Traditional co operation relations which have prevailed up till now between Member States should be replaced by a system of free movement of judicial decisions in criminal matters, covering both pre sentence and final decisions within an area of freedom, security and justice. [Emphasis added.]
Article 1.1 provides: The European Arrest Warrant is a judicial decision issued by a Member State with a view to the arrest and surrender by another Member State of a requested person, for the purposes of conducting a criminal prosecution or executing a custodial sentence or detention order. [Emphasis added.]
It follows that under the Framework Decision it is a prerequisite of a valid arrest warrant that the conduct of which the person is accused or has been convicted constitutes a criminal offence under the law of the requesting state.
The process by which Part 1 of the 2003 Act gives effect to the Framework Decision is linear, by which I mean that it sets out a series of stages and what is required at each stage.
Section 2 sets out the formal requirements of a European Arrest Warrant; it must specify the offence of which the person is accused or has been convicted.
Section 3 authorises the arrest of the person who is the subject of a European Arrest Warrant.
The arrested person must be brought before a judge within 48 hours (section 6).
If the judge is satisfied that the person brought before him is the subject of the arrest warrant, he must fix a date for the extradition hearing and deal with various procedural matters (section 8).
At the initial stage of the extradition hearing, section 10(2) requires the judge to decide whether the offence specified in the Part 1 warrant is an extradition offence.
In order to decide that question the judge must apply either section 64 or section 65.
Section 64 applies to a person who has not been sentenced, ie someone who has been accused but not tried or who has been convicted but not sentenced.
Section 65 applies to a person who is alleged to be unlawfully at large after conviction and has been sentenced for the offence.
The question whether the offence specified in the warrant is an extradition offence for the purposes of Part 1 depends on (a) the nature of the offence, in particular whether it is included in the European Framework list of extraditable offences or, if not, whether it would constitute an offence under the law of the United Kingdom if committed in the United Kingdom and (b) the length of the term of imprisonment to which the person either might be sentenced or has been sentenced.
Thus section 64 provides (in relation to a person not sentenced for the specified offence): (2) The conduct constitutes an extradition offence in relation to the category 1 territory if these conditions are satisfied (a) the conduct occurs in the category 1 territory and no part of it occurs in the United Kingdom; (b) a certificate issued by the appropriate authority of the category 1 territory shows that the conduct falls within the European framework list; (c) the certificate shows the conduct is punishable under the law of the category 1 territory with imprisonment or another form of detention for a term of 3 years or a greater punishment. (3) The conduct also constitutes an extradition offence in relation to the category 1 territory if these conditions are satisfied (a) the conduct occurs in the category 1 territory; (b) the conduct would constitute an offence under the law of the relevant part of the United Kingdom if it occurred in that part of the United Kingdom; (c) the conduct is punishable under the law of the category 1 territory with imprisonment or another form of detention for a term of 12 months or a greater punishment (however it is described in that law).
Section 65 contains analogous provisions in relation to sentenced offenders.
Extradition to non EU Member States with which the UK has extradition arrangements (category 2 territories) is governed by Part 2 of the 2003 Act.
The process begins with a request through diplomatic channels but the judicial process in the UK follows a similar pattern to that set out in Part 1.
At an initial stage the judge has to decide under section 78(4) whether the offence specified in the request for extradition is an extradition offence.
For that purpose the judge has to apply section 137 (in relation to a person who is accused of the offence or has been convicted but not sentenced) or section 138 (in relation to a person who has been sentenced for the offence).
Those sections closely resemble sections 64 and 65 in Part 1.
Thus section 137(2), which is the counterpart to section 64(2), provides: The conduct constitutes an extradition offence in relation to the category 2 territory if these conditions are satisfied (a) the conduct occurs in the category 2 territory; (b) the conduct would constitute an offence under the law of the relevant part of the United Kingdom punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment if it occurred in that part of the United Kingdom; (c) the conduct is so punishable under the law of the category 2 territory (however it is described in that law).
The function of the definition of extradition offence in sections 64 and 65 of Part 1 and sections 137 and 138 of Part 2 is to differentiate between an offence for which a person may be extradited and one for which he may not.
To be an extradition offence, it must not only be a criminal offence but it must satisfy the prescribed criteria.
That accords not only with the scope of extradition under the Framework Decision but also with the essential nature of extradition as historically it has always been understood in the United Kingdom.
The Extradition Act 1870 (33 and 34 Vict, c 52) set out in the language of its preamble: the law relating to the surrender to foreign states of persons accused or convicted of the commission of certain crimes within the jurisdiction of such states, and to the trial of criminals surrendered by foreign states to this country.
Such persons were referred to in the Act as fugitive criminals.
The Extradition Act 1989 defined the term extradition crime as: Conduct in the territory of a foreign state.which, if it occurred in the United Kingdom, would constitute an offence punishable with imprisonment for a term of 12 months, or any greater punishment, and which, however described in the law of the foreign state, is so punishable under that law.
The word offence in that definition clearly referred to a criminal offence because that was the word being defined.
The effect of the definition was to narrow the class of crimes constituting extradition crimes to those of sufficient seriousness to warrant extradition.
Similarly, section 2(1)(a) of the 1989 Act contained a definition of extradition crime in language which closely resembles section 137(2) of the 2003 Act.
There is a difference in the introductory words in that section 2(1) of the 1989 Act began with the words Extradition crime means, whereas section 137(2) of the 2003 Act begins with the words the conduct constitutes an extradition offenceif, but I would reject the idea that the change of wording reflects a subtle intention to widen the concept of an extradition offence so as to include non criminal conduct.
To change the law in that respect would have been a significant step which one would expect to have been highlighted at that time.
Part 3, under which the present appeal arises, is the reciprocal of Parts 1 and 2 in that it is concerned with extradition from category 1 and category 2 territories to the UK.
Extradition from a category 1 territory is a judicial process under the Framework Decision.
Sections 142 to 149 implement that process.
Under section 142 a judge may issue a part 3 warrant if satisfied among other things that there are reasonable grounds for believing that the person has committed an extradition offence or that the person is unlawfully at large having been convicted of an extradition offence.
Section 148 applies in this context.
Section 148 has no direct application in relation to the extradition of a person from a category 2 territory, as in the present case, because the UK judiciary is not involved in the process of obtaining the extradition of a person from a category 2 territory.
The process of extradition from a category 2 territory is triggered not by a warrant issued by a UK judge but by a request from the Government to the foreign state.
For that reason sections 142 149 have no counterpart in relation to extradition from category 2 territories.
In any event, however, it is in my judgment clear for the reasons set out above that nothing can constitute an extradition offence (whether for the purposes of Part 1, Part 2 or Part 3) unless it is a criminal offence under the law of the relevant state.
Not every alleged criminal offence will amount to an extradition offence, but it is a necessary pre condition of an extradition offence that the conduct or alleged conduct is proscribed by the criminal law of the relevant state.
For those reasons I would reject Mr Joness principal argument.
Civil or criminal contempt
A restraint order under section 41 of POCA is an interim remedy.
Its aim is to prevent the disposal of realisable assets during a criminal investigation or criminal proceedings.
Under section 41(7) the court may make such order as it believes is appropriate for the purpose of insuring that the restraint order is effective.
This may include, for example, an order requiring disclosure of assets by the person against whom the restraint order is made.
A restraint order may also be reinforced by the appointment of a receiver under section 48 and the court may order any person who has possession of realisable property to which the restraint order applies to give possession of it to the receiver.
POCA does not provide that it is an offence to disobey or obstruct a restraint order or a receivership order, but the Crown Court has an inherent power to treat such behaviour as contempt of court, for which it may impose punishment under section 45 of the Senior Courts Act 1981.
Rule 59.6 of the Criminal Procedure Rules 2013 (SI 2013/1554) provides that an applicant who wants the Crown Court to exercise that power must comply with the rules set out in part 62 (Contempt of Court).
There is a distinction long recognised in English law between civil contempt, ie conduct which is not in itself a crime but which is punishable by the court in order to ensure that its orders are observed, and criminal contempt.
Among modern authorities, the distinction was explained in general terms in Home Office v Harman [1983] 1 AC 280 (in particular by Lord Scarman at p 310) and Attorney General v Times Newspapers Ltd [1992] 1 AC 191 (in particular by Lord Oliver at pp 217 218).
Breach of an order made (or undertaking obtained) in the course of legal proceedings may result in punishment of the person against whom the order was made (or from whom the undertaking was obtained) as a form of contempt.
As Lord Oliver observed in Attorney General v Times Newspapers Ltd, although the intention with which the person acted will be relevant to the question of penalty, the liability is strict in the sense that all that is required to be proved is the service of the order and the subsequent doing by the party bound of that which was prohibited (or failure to do that which was ordered).
However, a contempt of that kind does not constitute a criminal offence.
Although the penalty contains a punitive element, its primary purpose is to make the order of the court effective.
A person who commits this type of contempt does not acquire a criminal record.
A criminal contempt is conduct which goes beyond mere non compliance with a court order or undertaking and involves a serious interference with the administration of justice.
Examples include physically interfering with the course of a trial, threatening witnesses or publishing material likely to prejudice a fair trial.
The distinction is not unique to English law.
A similar distinction is recognised in the U.S.A.
In Turner v Rogers 564 US 1 (2011) the US Supreme Court had to decide whether the Due Process Clause of the US Constitution granted an indigent defendant a right to state appointed counsel in civil contempt proceedings which might lead to his imprisonment.
Justice Breyer, at page 8, said that civil contempt differs from criminal contempt in that it seeks only to coerce the defendant to do what the court had ordered him previously to do.
If a victim of the appellants fraud had obtained a freezing order against him similar to the restraint order made under section 41 of POCA, there is no doubt that the claimant would have been entitled to bring contempt proceedings against the appellant after his extradition to the United Kingdom.
The case would be analogous to Pooley v Whetham (1880) LR 15 Ch D435.
An order was made in litigation between Mr Pooley and a bank that Mr Pooley was to give up possession of certain property to a receiver and manager appointed by the court.
Mr Pooley disobeyed the order and went to Paris, where he was arrested under a warrant issued under the Extradition Act 1870 for an alleged offence of fraud.
After his return Mr Pooley was acquitted for the fraud for which he had been extradited to stand trial, but the bank sought to proceed against him for his earlier contempt.
It was argued unsuccessfully on his behalf that the proceedings contravened section 19 of the 1870 Act, which provided that a person who was arrested under the Act should not be triable or tried for any offence committed prior to his arrest other than a crime for which the surrender was granted.
The Court of Appeal held that the process instituted by the bank was not a proceeding for punishing a crime.
It was a process for the purpose of enforcing civil rights.
Mr Jones submitted that the position is different with a restraint order under section 41, because it is not an order obtained in order to protect an applicants civil rights but is an order obtained by the state in the course of a criminal investigation.
The Common Serjeant and the Court of Appeal rejected this argument and I agree with them.
It is necessary to look at the nature and purpose of the order.
It is fallacious to argue that because the order was made by a criminal court, rather than a civil court, disobedience to the order amounts to a crime, whereas it would not have been a crime to disobey a similar order imposed by a civil court.
The question whether a contempt is a criminal contempt does not depend on the nature of the court to which the contempt was displayed; it depends on nature of the conduct.
To burst into a court room and disrupt a civil trial would be a criminal contempt just as much as if the court had been conducting a criminal trial.
Conversely, disobedience to a procedural order of a court is not in itself a crime, just because the order was made in the course of criminal proceedings.
To hold that a breach of a procedural order made in a criminal court is itself a crime would be to introduce an unjustified and anomalous extension of the criminal law.
Civil contempt is not confined to contempt of a civil court.
It simply denotes a contempt which is not itself a crime.
Conclusion
I would dismiss the appeal and would answer the questions certified by the (i) a contempt of court constituted by a breach of a restraint order made under section 41 of POCA is not itself a crime. (ii) section 151A of the Extradition Act 2003 and article 18 of the United Kingdom United States Extradition Treaty 2003 do not preclude a court from dealing with the person for such a contempt when that person has been extradited to the United Kingdom in respect of criminal offences.
Court of Appeal as follows:

dataset_name: UK-Abs

summary/full:
This appeal concerns the principle that an individual extradited to the UK to face trial may only be tried for crimes allegedly committed before the extradition if those crimes form the basis of the extradition request (the specialty principle), and its application to contempt of court proceedings.
In 2009 Mr OBrien came under investigation on suspicion of involvement in a large scale scheme to defraud investors, commonly known as a boiler room fraud.
On 24 September 2009 the Common Serjeant of London made a restraint order against him under section 41 of the Proceeds of Crime Act 2002 (POCA).
This order required Mr OBrien (amongst other things) to make disclosure of his assets, not to remove assets from England and Wales, and to return to England and Wales within 21 days any moveable asset in which he had an interest outside England and Wales.
The order contained a penal notice, warning Mr OBrien that if he disobeyed the order he could be found to be in contempt of court.
Mr OBrien disobeyed the order and fled to the United States.
On 18 December 2009 the Common Serjeant found that he was in contempt and issued a bench warrant for his arrest.
Mr OBrien was traced to Chicago.
The Serious Fraud Office (SFO) sought his extradition to face charges relating to the alleged boiler room fraud.
Mr OBrien consented to his extradition on 8 October 2010.
Since there was a concern that the outstanding bench warrant could complicate the extradition, the SFO applied to the Common Serjeant to set aside the bench warrant, which he did on 18 November 2010.
Mr OBrien was returned to the UK on 2 December 2010.
He was arrested, charged with various fraud offences, and remanded in custody.
Meanwhile the SFO had reviewed its concerns about the contempt allegation, and re applied to the Common Serjeant for Mr OBriens committal for contempt.
Mr OBrien challenged the courts jurisdiction to hear the application.
That challenge was rejected by the Common Serjeant and by the Court of Appeal.
Mr OBrien now appeals to the Supreme Court on two grounds, namely that: On the correct construction of the Extradition Act 2003, the specialty rule applies to any extradition offence, defined as conduct occurring in the UK and punishable under the law of the UK with imprisonment or detention for 12 months or more (by reference to sections 148 and 151A of the Extradition Act 2003 (the 2003 Act)).
Mr OBriens contempt satisfies these criteria and so falls within the specialty rule; or In the alternative, Mr OBriens contempt of court is a criminal contempt constituting a criminal offence, and so falls within the specialty rule.
The Supreme Court dismisses the appeal.
The judgment of the Court is given by Lord Toulson.
On the first issue, the Court holds that section 151A does not directly apply to this case [34 35].
In any event, the sections relied upon by Mr OBrien cannot be read in isolation, and reading the Act as a whole it is clear
that conduct constituting an extradition offence must be a criminal offence under the law of the requesting state (here the UK) [36].
On the second issue, the Court holds that there is a material distinction between civil and criminal contempt.
The latter involves a serious interference with the administration of justice [41].
The former is an inherent power used by a senior court in order to ensure that its orders are observed.
Its primary purpose is to ensure that the courts orders are observed, and the contemnor does not acquire a criminal record [39 40].
In this case Mr OBriens disobedience to the Common Serjeants order constitutes civil contempt, which does not constitute an extradition offence [45].
First Ground: Mr OBrien argued that if his contempt satisfied the definition of extradition offence in section 148 of the 2003 Act, section 151A precluded a United Kingdom court dealing with him for that contempt [14 16].
Mr OBriens argument required reading these two sections in isolation.
However, it is necessary to see how those sections fit into the structure of the 2003 Act [20].
Each of Parts 1 3 of the 2003 Act contain a similar definition of extradition offence, in each case referring to conduct punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment, with a common structure across the definitions [21].
The Extradition Act 1989 was replaced by the 2003 Act in order to implement, in Part 1 of the 2003 Act, an EU Framework Decision [22].
Under the Framework Decision, it is a prerequisite of a valid arrest warrant that the conduct of which the person is accused or has been convicted constitutes a criminal offence under the law of the requesting state [25].
In relation to Part 1 (dealing with extradition from the UK to other Member States), the definition of extradition offence accordingly requires that an offence either be a listed extraditable offence or an offence under the law of the United Kingdom [28].
A similar scheme is in place in relation to extradition from the UK to those non EU countries with which the UK has extradition arrangements, governed by Part 2 of the 2003 Act.
So, sections 137 and 138 of the 2003 Act require that an extradition offence concerns conduct which would constitute an offence under UK law [29 30].
That accords with the essential nature of extradition as it has been understood in the UK [31 33].
Part 3 of the 2003 Act deals with extradition to the UK. section 148 (within Part 3) has no direct application to this case, since the UK judiciary is not involved in the process of obtaining Mr OBriens extradition [35].
Nonetheless section 151A should be understood in the light of the wider scheme of the 2003 Act.
It is clear that nothing can constitute an extradition offence unless it is a criminal offence under the relevant state, here the UK [36].
Second Ground: A restraint order under POCA is an interim remedy, aiming to prevent the disposal of realisable assets during a criminal investigation.
The Crown Court has an inherent jurisdiction to treat breach of such orders as contempt of court [37 38].
There is a well recognised distinction between criminal contempt, covering conduct itself a crime, and civil contempt, covering conduct which is not itself a crime but is punishable by the court in order that the courts orders be observed.
A civil contemnor does not receive a criminal record [39 41].
If a victim of Mr OBriens fraud had obtained a freezing order against him similar to the POCA restraint order and Mr OBrien had disobeyed and absconded, the victim would clearly have been able to bring contempt proceedings following his extradition [43].
There is no relevant difference with a POCA order.
The key is the nature and purpose of the order, not the court in which the order was made [44].
Mr OBriens contempt was civil, and his committal is not barred by the specialty principle.

summary/background: This appeal concerns the principle that an individual extradited to the UK to face trial may only be tried for crimes allegedly committed before the extradition if those crimes form the basis of the extradition request (the specialty principle), and its application to contempt of court proceedings. In 2009 Mr OBrien came under investigation on suspicion of involvement in a large-scale scheme to defraud investors, commonly known as a boiler room fraud. On 24 September 2009 the Common Serjeant of London made a restraint order against him under section 41 of the Proceeds of Crime Act 2002 (POCA). This order required Mr OBrien (amongst other things) to make disclosure of his assets, not to remove assets from England and Wales, and to return to England and Wales within 21 days any moveable asset in which he had an interest outside England and Wales. The order contained a penal notice, warning Mr OBrien that if he disobeyed the order he could be found to be in contempt of court. Mr OBrien disobeyed the order and fled to the United States. On 18 December 2009 the Common Serjeant found that he was in contempt and issued a bench warrant for his arrest. Mr OBrien was traced to Chicago. The Serious Fraud Office (SFO) sought his extradition to face charges relating to the alleged boiler room fraud. Mr OBrien consented to his extradition on 8 October 2010. Since there was a concern that the outstanding bench warrant could complicate the extradition, the SFO applied to the Common Serjeant to set aside the bench warrant, which he did on 18 November 2010. Mr OBrien was returned to the UK on 2 December 2010. He was arrested, charged with various fraud offences, and remanded in custody. Meanwhile the SFO had reviewed its concerns about the contempt allegation, and re-applied to the Common Serjeant for Mr OBriens committal for contempt. Mr OBrien challenged the courts jurisdiction to hear the application. That challenge was rejected by the Common Serjeant and by the Court of Appeal. Mr OBrien now appeals to the Supreme Court on two grounds, namely that: On the correct construction of the Extradition Act 2003, the specialty rule applies to any extradition offence, defined as conduct occurring in the UK and punishable under the law of the UK with imprisonment or detention for 12 months or more (by reference to ss. 148 and 151A of the Extradition Act 2003 (the 2003 Act)). Mr OBriens contempt satisfies these criteria and so falls within the specialty rule; or In the alternative, Mr OBriens contempt of court is a criminal contempt constituting a criminal offence, and so falls within the specialty rule.

summary/judgement: The Supreme Court dismisses the appeal. The judgment of the Court is given by Lord Toulson. On the first issue, the Court holds that s. 151A does not directly apply to this case [34-35]. In any event, the sections relied upon by Mr OBrien cannot be read in isolation, and reading the Act as a whole it is clear that conduct constituting an extradition offence must be a criminal offence under the law of the requesting state (here the UK) [36]. On the second issue, the Court holds that there is a material distinction between civil and criminal contempt. The latter involves a serious interference with the administration of justice [41]. The former is an inherent power used by a senior court in order to ensure that its orders are observed. Its primary purpose is to ensure that the courts orders are observed, and the contemnor does not acquire a criminal record [39-40]. In this case Mr OBriens disobedience to the Common Serjeants order constitutes civil contempt, which does not constitute an extradition offence [45].

summary/reasons: First Ground: Mr OBrien argued that if his contempt satisfied the definition of extradition offence in s. 148 of the 2003 Act, s. 151A precluded a United Kingdom court dealing with him for that contempt [14-16]. Mr OBriens argument required reading these two sections in isolation. However, it is necessary to see how those sections fit into the structure of the 2003 Act [20]. Each of Parts 1-3 of the 2003 Act contain a similar definition of extradition offence, in each case referring to conduct punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment, with a common structure across the definitions [21]. The Extradition Act 1989 was replaced by the 2003 Act in order to implement, in Part 1 of the 2003 Act, an EU Framework Decision [22]. Under the Framework Decision, it is a prerequisite of a valid arrest warrant that the conduct of which the person is accused or has been convicted constitutes a criminal offence under the law of the requesting state [25]. In relation to Part 1 (dealing with extradition from the UK to other Member States), the definition of extradition offence accordingly requires that an offence either be a listed extraditable offence or an offence under the law of the United Kingdom [28]. A similar scheme is in place in relation to extradition from the UK to those non-EU countries with which the UK has extradition arrangements, governed by Part 2 of the 2003 Act. So, sections 137 and 138 of the 2003 Act require that an extradition offence concerns conduct which would constitute an offence under UK law [29-30]. That accords with the essential nature of extradition as it has been understood in the UK [31-33]. Part 3 of the 2003 Act deals with extradition to the UK. S. 148 (within Part 3) has no direct application to this case, since the UK judiciary is not involved in the process of obtaining Mr OBriens extradition [35]. Nonetheless s. 151A should be understood in the light of the wider scheme of the 2003 Act. It is clear that nothing can constitute an extradition offence unless it is a criminal offence under the relevant state, here the UK [36]. Second Ground: A restraint order under POCA is an interim remedy, aiming to prevent the disposal of realisable assets during a criminal investigation. The Crown Court has an inherent jurisdiction to treat breach of such orders as contempt of court [37-38]. There is a well-recognised distinction between criminal contempt, covering conduct itself a crime, and civil contempt, covering conduct which is not itself a crime but is punishable by the court in order that the courts orders be observed. A civil contemnor does not receive a criminal record [39-41]. If a victim of Mr OBriens fraud had obtained a freezing order against him similar to the POCA restraint order and Mr OBrien had disobeyed and absconded, the victim would clearly have been able to bring contempt proceedings following his extradition [43]. There is no relevant difference with a POCA order. The key is the nature and purpose of the order, not the court in which the order was made [44]. Mr OBriens contempt was civil, and his committal is not barred by the specialty principle.


judgement:
This appeal is the lead case in a number of appeals concerned with the interpretation of the phrase in section 6(1) of the Social Security Contributions and Benefits Act 1992, [w]here in any tax week earnings are paid to or for the benefit of an earner.
It focuses on the meaning of the word earnings in that phrase.
The context is the payment of an employers contribution to a Funded Unapproved Retirement Benefits Scheme.
Until 2006 such schemes were commonly used to top up sums available through tax approved pension schemes.
The facts
On 11 April 2002 the appellant company (FML) established by trust deed a retirement benefit scheme to provide relevant benefits (as defined in section 612 of the Income and Corporation Taxes Act 1988) to its employees and directors.
The trust provided that, upon a members retirement from service, the trustees were to apply the accumulated fund in providing the member with a pension for life or such other relevant benefits as they might agree with him.
On the members death the trustees were to realise the accumulated fund and apply the net proceeds to or for the benefit of a defined discretionary class of beneficiary.
On the same day Mr McHugh, a shareholder and director of FML, asked to become a member of the scheme.
He informed the trustees that he wished them to exercise their discretion in favour of his wife in the event of his death.
FML made an initial cash contribution to the scheme of 1,000 and transferred to it Treasury Stock with the nominal value of 162,000, both for Mr McHughs benefit.
He has been the only member of the scheme.
He has received no relevant benefits from the scheme.
When the transfers were made to the scheme Mr McHugh was 54 years old.
He had no vested interest in the assets of the scheme because the retirement age under the scheme was defined as meaning: the date between the 50th birthday and the 85th birthday notified to a Member by the Employer as the date on which the Members benefits will become payable.
Such date may be varied from time to time by agreement in writing between the Employer and the Member.
FML specified Mr McHughs retirement age to be his 60th birthday.
But, as HMRC pointed out, he controlled FML and was in a position to bring forward his retirement date for the purposes of the trust deed.
The Issue
The principal issue which we address is whether the transfer of the cash and Treasury Stock to the scheme was a payment of earnings to or for the benefit of Mr McHugh within the meaning of section 6 of the 1992 Act.
It was agreed that the payment was for his benefit.
But was it earnings for the purposes of that section?
The prior proceedings
FML appealed against HMRCs decision that it was liable to pay Class 1 National Insurance Contributions on the value of the transfer.
The Upper Tribunal (Tax and Chancery Chamber) (Floyd J and Judge Avery Jones) heard the appeal at first instance.
It delivered a judgment on 21 February 2011 allowing the appeal.
HMRC appealed to the Court of Appeal (Arden LJ, Rimer LJ and Ryder J).
By a judgment dated 30 May 2012 the Court of Appeal by a majority (Arden LJ and Ryder J) allowed the appeal and restored the decision of HMRC.
Before this court Mr Bramwell presented FMLs appeal on a much narrower front than the case which had been debated before the Court of Appeal.
Until his oral submissions to us, FMLs case had been that earnings in NIC legislation covered the same ground as emoluments in income tax legislation.
FML abandoned that position and focused principally on the contingent nature of Mr McHughs interest in the transferred assets.
In short, Mr Bramwell accepted that earnings had a wider meaning than emoluments in income tax legislation.
His submission was that the payment of earnings under section 6 of the 1992 Act did not extend to the employers transfer to a trust of funds or assets in which the earner had at the time of the transfer only a contingent interest.
We, and Mr Jones for HMRC, therefore had to address a different argument from that advanced before the Court of Appeal.
Counsel for both parties argued their cases very ably.
Discussion
The legislative history that lies behind our present system of national insurance shows that Mr Bramwells change of position was correct: National Insurance Contributions (NICs) have been levied on a basis which is different from the emoluments on which income tax has been raised.
Mr David Lloyd George, when Chancellor of the Exchequer in 1911, introduced the first compulsory system of insurance against illness and unemployment in the United Kingdom: the National Insurance Act 1911.
The Act fixed contributions rates by reference to the level of an employed persons remuneration (section 4 and Second Schedule).
Lord Beveridge carried out a substantial review of the by then expanded system of national insurance and reported in 1942.
The Beveridge Report (Cmnd 6404) was implemented by the National Insurance Act 1946, which established the National Insurance Fund, into which workers, employers and the state were to contribute.
Employers and employed persons were required to make weekly contributions into the National Insurance Fund to pay benefits to the earners and their dependants.
Contributions were paid in respect of earnings.
In section 78 of the 1946 Act earnings were interpreted to include any remuneration or profit derived from a gainful occupation.
The current provision for NICs is contained in the 1992 Act and subordinate legislation.
Sections 6 to 9 of that Act provide, in relation to an earner employed under a contract of service, that where in any tax week earnings are paid to or for his benefit, the employed earner shall pay a primary Class 1 contribution and his employer will pay a secondary Class 1 contribution (both subject to specified thresholds).
Section 3 of the 1992 Act provides that earnings includes any remuneration or profit derived from an employment.
In my view it is significant that Parliament in the1946 Act, chose to use the word earnings rather than emoluments, which had been a term used in income tax legislation with a definition which had remained substantially unchanged since the Income Tax Act 1842.
The latter word had been the subject of judicial interpretation.
In particular, in Tennant v Smith [1892] AC 150, the case of the Montrose bank manager whose employer gave him free accommodation in a bank house which he was required to occupy, the House of Lords held that the Inland Revenue could not charge income tax on the value of the accommodation because the employee could not convert the benefit into money.
The House of Lords held that emoluments were confined to actual money payments and to benefits in kind which were capable of being turned into money by the recipient.
See also Lord Reids explanation of the case in Heaton v Bell [1970] AC 728, 744 745.
By contrast, from the outset, the word earnings in NICs legislation has included benefits in kind which the recipient could not convert into money there and then.
Part I of the First Schedule to the 1946 Act, which set out the contribution rates of employed persons, had a rate for earners earning remuneration of under 30 shillings per week and a higher rate for those earning remuneration above that sum.
Like the 1911 Act (section 4 and Second Schedule) it treated remuneration, which, as I have said, formed part of the definition of earnings in section 78, as including the provision of board and lodging by providing: For the purpose of this and Part II of this Schedule [which set out employers rates] a person shall be deemed to be earning remuneration at a weekly rate of thirty shillings or less if, but only if, his remuneration does not include the provision of board and lodging by the employer and the rate of the remuneration does not exceed thirty shillings a week, and to be earning remuneration at a weekly rate exceeding thirty shillings in any other case.
Since then, primary and subordinate legislation pertaining to NICs has made express provision for benefits in kind to be disregarded when Parliament has not wanted such earnings to be taken into account in the calculation of NICs.
In the National Insurance Act 1959, which introduced a graduated pension scheme on top of flat rate benefits, benefits in kind which the recipient could not convert into moneys worth were excluded from the calculation of graduated contributions by the device (in section 2(1)) of deeming remuneration to include only emoluments assessable to income tax under Schedule E.
That arrangement was preserved in the National Insurance Act 1965 (section 4(2)).
But in 1975 the basic scheme and graduated scheme were replaced by a new scheme which provided for graduated contributions related to the level of earnings between a lower earnings limit and an upper earnings limit.
The link between graduated contributions and emoluments for income tax purposes was abolished.
Since then, subordinate legislation has provided for the disregard of, among others, any payment in kind or by way of provision of board or lodging (the Social Security (Contributions) Regulations: SI 1973/1264, regulation 17(1)(d); SI 1975/492, regulation 17(1)(d); SI 1979/591, regulation 19(1)(d); and now SI 2001/1004, para 1 of Part II of Schedule 3 see para 13 below).
In 1985 the upper earnings limit was removed in relation to employer contributions, and since 6 April 2003 employees have been subject to an additional surcharge on earnings above the upper earnings limit (currently 2%).
Under the 1992 Act and current subordinate legislation, the Social Security (Contributions) Regulations 2001 (SI 2001/1004) as amended, a similar arrangement of using earnings as the basis of calculating liability to NICs and disregarding payments in kind has been maintained.
Thus in Schedule 3 to the 2001 Regulations (Part II para 1) it is provided: A payment in kind, or by way of the provision of services, board and lodging or other facilities is to be disregarded in the calculation of earnings.
It is not appropriate to interpret an Act of Parliament by reference to subordinate legislation which was made years after the primary legislation (Deposit Protection Board v Barclays Bank plc [1994] 2 AC 367, 397 per Lord Browne Wilkinson; see also Hanlon v The Law Society [1981] AC 124, 193 194 per Lord Lowry).
But that is not my purpose.
I refer to the 2001 Regulations simply to demonstrate that the scheme of NICs legislation by which earnings includes non convertible benefits in kind unless they are disregarded, either expressly or by necessary implication, has existed at least since 1946.
As FML accepts the proposition that earnings in NICs legislation is not to be equated with emoluments in income tax legislation, most of the arguments which engaged the Upper Tribunal and the Court of Appeal fall away.
Instead, the debate has focused on whether FML had paid earnings to or for the benefit of Mr McHugh when it made the transfer to the trust at a time when Mr McHughs interest in the assets of the trust was only a contingent one which might have been defeated by his death before his specified retirement age.
As I have said, both parties agreed that the transfer to the trust had been for the benefit of Mr McHugh.
The question was: was the transfer the payment of earnings?
On this narrow issue, HMRCs stance before this court was remarkable.
Because of the assumptions on which the subordinate legislation had been framed, Mr Jones had to submit that earnings are paid to an earner both when assets are transferred to a pension scheme to be held on a trust and also when payments are made from the trust fund.
HMRC looked to the payment and not to what the earner received.
HMRC argued that the payment into the trust fund was earnings because it was a sum paid as the quid pro quo for past or future services.
It was part of Mr McHughs remuneration.
The sum went to a trust fund which was solely for the benefit of Mr McHugh and his wife.
Mr McHugh, it was submitted, was immediately better off because he had the hope of receiving the trust fund in the future, and his family would benefit if he did not survive until his retirement age.
Payments to him out of the trust fund would as a matter of principle also be earnings when made because they also were payments to him in respect of his employment.
On this approach, double counting was avoided only by Part VI of Schedule 3 to the 2001 Regulations which disregards, among others, payments by way of pension (para 1) and payments by way of relevant benefits pursuant to an unapproved retirement benefits scheme (para 4).
There are three reasons why I think that HMRCs argument is wrong.
The first and principal reason is that the ordinary man on the underground would consider it to be counter intuitive that a person would earn remuneration both when his employer paid money into a trust to create a fund for his benefit and again when at a later date that trust fund was paid out to him.
The argument would in principle apply also when a company gave an employee a bonus, which was put into a trust or in an escrow fund and was payable at a future date only if the company performed to a specified level by then: he would earn the bonus twice.
I am reluctant to attribute such a view to Parliament absent clear words or necessary implication, of which there are neither.
If one gives words their ordinary meaning, it is clear that a retired earner receives earnings in respect of his employment in the form of deferred remuneration when he receives his pension.
So too does an earner when he receives his deferred bonus.
In each case I would characterise the payment from the trust or escrow fund as deferred earnings.
It follows that the payment into the trust or escrow fund would not be earnings.
Secondly, it is only by looking exclusively to what was paid and ignoring what the earner received that HMRCs view can be sustained.
But such an interpretation of section 6(1) of the 1992 Act denudes the word earnings of any meaning, so that the phrase earnings are paid would amount to payments are made in respect of any one employment.
Earnings in this context are remuneration derived from the employment.
The use of the word earnings points the reader towards what the employee obtains from his employment.
Looking to what the earner receives avoids the counter intuitive result.
The third and subordinate reason relates to the method of computation.
HMRC, by treating the payment into the trust as earnings, fail to take into account the existence of the contingency.
If Mr McHugh had died before his retirement date, the trustees would have realised the accumulated fund and paid the proceeds to a member of the defined discretionary class of beneficiary probably his wife.
One must ask: what did Mr McHugh receive through the transfer? It was not the cash and Treasury Stock.
The trustees received the assets transferred to them on the trusts of the fund and not unconditionally for Mr McHugh.
The transfer gave him only the entitlement to a future pension or relevant benefits once a condition his reaching retirement age had been purified.
It does not matter that Mr McHugh could not immediately convert his entitlement into money because, as I have said, non convertible benefits in kind are in principle earnings in the NICs legislation.
But the hypothetical value to be attributed to Mr McHughs entitlement would not be the value, at the date of the transfer, of the assets paid into the fund.
Rather it would be the value of his contingent right to the trust fund such as it would be at his retirement date.
That calculation would not be a simple exercise.
The valuer would have to allow for both the contingency of the earners pre deceasing the specified retirement date and the uncertainty of the trustees performance in managing the fund until that date.
That would not be the same as the value of the cash and assets in the week in which the transfer was made.
HMRCs approach, by treating the payment into the trust fund as Mr McHughs earnings, fails to address what it was that he received when the transfer was made.
In my view therefore the transfer to the trust was not the payment of earnings to or for the benefit of Mr McHugh within the meaning of section 6(1) of the 1992 Act.
Having reached this view on the issue which the parties presented in this appeal, I comment briefly on some of the cases to which counsel referred.
This case was presented as a test case on the issue of principle.
No argument was advanced as to whether a payment into a pension or bonus fund might properly be analysed as a payment out of the earners salary as in Smyth v Stretton (1904) 5 TC 36.
Mr Jones stated that HMRC might take that point in an appropriate case.
Edwards v Roberts (1935) 19 TC 618 assists in this case not because it is correct to equate earnings in NICs legislation with emoluments in income tax legislation but because of its application of the general law in relation to a contingent interest and its focus on what an employee receives.
In that case an employee received a salary and also, if he remained in employment for more than five years, a right to receive at the end of a subsequent financial year part of the capital of a trust fund into which his employer paid a proportion of its annual profits.
Lord Hanworth MR stated (p 638): [U]nder these circumstances there could not be said to have accrued to this employee a vested interest in these successive sums placed to his credit, but only that he had a chance of being paid a sum at the end of six years if all went well.
I would therefore allow the appeal and reinstate the judgment of the Upper
HMRC submitted and the majority of the Court of Appeal accepted that Collins J had been in error in Tullett & Tokyo Forex International Ltd v Secretary of State for Social Security [2000] EWHC (Admin) 350; [2000] All ER (D) 739 because he held that NICs were payable on what the employee receives.
For the reasons set out above, I disagree with HMRCs submission.
Conclusion
Tribunal.

summary/full:
This appeal is the lead case in a number of appeals concerned with liability to pay National Insurance Contributions (NICs) and, in particular, with the interpretation of the phrase in section 6(1) of the Social Security Contributions and Benefits Act 1992, [w]here in any tax week earnings are paid to or for the benefit of an earner.
The case focuses on the meaning of the word earnings in that phrase, and whether it covers a payment by the appellant, FML, of an employers contribution to a Funded Unapproved Retirement Benefits Scheme [1].
The scheme was set up by FML by trust deed on 11 April 2002 to provide certain benefits to its employees and directors.
The trust provided that upon a members retirement from service the trustees were to apply the accumulated fund in providing the member with a pension for life or such other relevant benefits as might be agreed.
On the members death the trustees were to realise the accumulated fund and apply the net proceeds to or for the benefit of a defined discretionary class of beneficiary.
On the same day, Mr McHugh, a shareholder and director of FML, asked to become a member of the scheme.
He informed the trustees that he wished them to exercise their discretion in favour of his wife in the event of his death.
FML made an initial cash contribution to the scheme of 1,000 and transferred to it Treasury Stock with the nominal value of 162,000, both for Mr McHughs benefit.
He has been the only member of the scheme and has received no relevant benefits from it, as defined in section 612 of the Income and Corporation Taxes Act 1988 [2].
He was 54 years old when the transfers were made, and FML specified his retirement age to be his 60th birthday.
However as he controlled FML this date could be brought forward for the purposes of the scheme [3].
The question was whether the transfers were payments of earnings to or for the benefit of Mr McHugh within the meaning of section 6 of the 1992 Act.
It was agreed that the payment was for his benefit, but was it earnings? HMRC decided that it was, and that FML was therefore liable to pay Class 1 NICs on the value of the transfer.
FMLs appeal to the Upper Tribunal was successful, but the Court of Appeal reinstated HMRCs decision [4 5].
FML appealed to the Supreme Court.
Departing from its position before the Court of Appeal, FML accepted that earnings had a wider meaning than emoluments in income tax legislation.
It submitted that the payment of earnings under section 6 did not extend to the employers transfer to a trust of funds or assets in which the earner had at the time of the transfer only a contingent interest [6].
In a judgment delivered by Lord Hodge, the Supreme Court unanimously allows the appeal.
Lord Hodge examines the legislative history behind the UKs system of national insurance, which shows that NICs have indeed been levied on a basis that is different from the emoluments on which income tax has been raised [7 13].
He considers it significant that Parliament, in the National Insurance Act 1946, chose to use the word earnings rather than emoluments.
The latter word has been interpreted by the courts as referring to actual money payments and benefits in kind capable of being turned into money by the recipient [10].
Lord Hodge refers to primary legislation in 1911 and 1946 and also subordinate legislation for the purpose of demonstrating that the scheme of NICs legislation by which earnings includes non convertible benefits in kind (unless they are disregarded) has existed since 1946 [11 13].
As a result of the assumptions on which the subordinate legislation had been framed, HMRC had to argue that earnings are paid to an earner both when assets are transferred to a pension scheme to be held on a trust and also when payments are made from the trust fund.
HMRC looked to the payment and not to what the earner received.
The sum paid into the trust was part of Mr McHughs remuneration, going into a trust fund for the sole benefit of Mr McHugh and his wife.
Payments out to him from the trust would also, it was submitted, be earnings as they were also payments to him in respect of his employment.
Double counting would be avoided only as a result of specific disregards in the subordinate legislation [15].
Lord Hodge considers that remarkable position to be wrong for three reasons: First, the ordinary man on the underground would consider it counter intuitive that a person would earn remuneration both when his employer paid money into a trust to create a fund for his benefit and again when at a later date the trust fund was paid out to him.
If one gives words their ordinary meaning, it is clear that a retired earner receives earnings in respect of his employment in the form of deferred remuneration when he receives his pension.
The payment from the trust is deferred earnings; the payment into it is not earnings [16].
Secondly, HMRCs view could only be sustained by looking exclusively at what was paid and ignoring what the earner received.
Such an interpretation denudes the word earnings of any meaning, so the phrase earnings are paid would amount to payments are made [17].
The third reason relates to the method of computation.
By treating the payment into the trust as earnings, HMRC fail to take into account the existence of the contingency.
The transfer gave Mr McHugh not cash and treasury stock, but only the entitlement to a future pension or relevant benefits once the condition of reaching retirement age had been purified.
The hypothetical value to his entitlement would not be the value at the date of the transfer of the assets paid into the fund, but the value of Mr McHughs contingent right to the trust fund such as it would be at his retirement age.
That would not be a simple exercise, and HMRCs approach fails to address what it was that Mr McHugh received when the transfer was made [18].
Lord Hodge concludes that the transfer to the trust was not the payment of earnings for section 6(1) purposes [19].
The court allows FMLs appeal and reinstates the judgment of the Upper Tribunal [22].

summary/background: This appeal is the lead case in a number of appeals concerned with liability to pay National Insurance Contributions (NICs) and, in particular, with the interpretation of the phrase in section 6(1) of the Social Security Contributions and Benefits Act 1992, [w]here in any tax week earnings are paid to or for the benefit of an earner. The case focuses on the meaning of the word earnings in that phrase, and whether it covers a payment by the appellant, FML, of an employers contribution to a Funded Unapproved Retirement Benefits Scheme [1]. The scheme was set up by FML by trust deed on 11 April 2002 to provide certain benefits to its employees and directors. The trust provided that upon a members retirement from service the trustees were to apply the accumulated fund in providing the member with a pension for life or such other relevant benefits as might be agreed. On the members death the trustees were to realise the accumulated fund and apply the net proceeds to or for the benefit of a defined discretionary class of beneficiary. On the same day, Mr McHugh, a shareholder and director of FML, asked to become a member of the scheme. He informed the trustees that he wished them to exercise their discretion in favour of his wife in the event of his death. FML made an initial cash contribution to the scheme of 1,000 and transferred to it Treasury Stock with the nominal value of 162,000, both for Mr McHughs benefit. He has been the only member of the scheme and has received no relevant benefits from it, as defined in section 612 of the Income and Corporation Taxes Act 1988 [2]. He was 54 years old when the transfers were made, and FML specified his retirement age to be his 60th birthday. However as he controlled FML this date could be brought forward for the purposes of the scheme [3]. The question was whether the transfers were payments of earnings to or for the benefit of Mr McHugh within the meaning of section 6 of the 1992 Act. It was agreed that the payment was for his benefit, but was it earnings? HMRC decided that it was, and that FML was therefore liable to pay Class 1 NICs on the value of the transfer. FMLs appeal to the Upper Tribunal was successful, but the Court of Appeal reinstated HMRCs decision [4-5]. FML appealed to the Supreme Court. Departing from its position before the Court of Appeal, FML accepted that earnings had a wider meaning than emoluments in income tax legislation. It submitted that the payment of earnings under section 6 did not extend to the employers transfer to a trust of funds or assets in which the earner had at the time of the transfer only a contingent interest [6].

summary/reasons: Lord Hodge examines the legislative history behind the UKs system of national insurance, which shows that NICs have indeed been levied on a basis that is different from the emoluments on which income tax has been raised [7-13]. He considers it significant that Parliament, in the National Insurance Act 1946, chose to use the word earnings rather than emoluments. The latter word has been interpreted by the courts as referring to actual money payments and benefits in kind capable of being turned into money by the recipient [10]. Lord Hodge refers to primary legislation in 1911 and 1946 and also subordinate legislation for the purpose of demonstrating that the scheme of NICs legislation by which earnings includes non-convertible benefits in kind (unless they are disregarded) has existed since 1946 [11-13]. As a result of the assumptions on which the subordinate legislation had been framed, HMRC had to argue that earnings are paid to an earner both when assets are transferred to a pension scheme to be held on a trust and also when payments are made from the trust fund. HMRC looked to the payment and not to what the earner received. The sum paid into the trust was part of Mr McHughs remuneration, going into a trust fund for the sole benefit of Mr McHugh and his wife. Payments out to him from the trust would also, it was submitted, be earnings as they were also payments to him in respect of his employment. Double counting would be avoided only as a result of specific disregards in the subordinate legislation [15]. Lord Hodge considers that remarkable position to be wrong for three reasons: - First, the ordinary man on the underground would consider it counter-intuitive that a person would earn remuneration both when his employer paid money into a trust to create a fund for his benefit and again when at a later date the trust fund was paid out to him. If one gives words their ordinary meaning, it is clear that a retired earner receives earnings in respect of his employment in the form of deferred remuneration when he receives his pension. The payment from the trust is deferred earnings; the payment into it is not earnings [16]. - Secondly, HMRCs view could only be sustained by looking exclusively at what was paid and ignoring what the earner received. Such an interpretation denudes the word earnings of any meaning, so the phrase earnings are paid would amount to payments are made [17]. - The third reason relates to the method of computation. By treating the payment into the trust as earnings, HMRC fail to take into account the existence of the contingency. The transfer gave Mr McHugh not cash and treasury stock, but only the entitlement to a future pension or relevant benefits once the condition of reaching retirement age had been purified. The hypothetical value to his entitlement would not be the value at the date of the transfer of the assets paid into the fund, but the value of Mr McHughs contingent right to the trust fund such as it would be at his retirement age. That would not be a simple exercise, and HMRCs approach fails to address what it was that Mr McHugh received when the transfer was made [18]. Lord Hodge concludes that the transfer to the trust was not the payment of earnings for section 6(1) purposes [19]. The court allows FMLs appeal and reinstates the judgment of the Upper Tribunal [22].