Green, R. v [2007] EWCA Crim 1248

[2007] EWCA Crim 1248Case No 200601415 B4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
Venue ON APPEAL FROM THE CROWN COURT AT MANCHESTER
His Honour Judge Steiger QC
T2003 7668
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 25/05/2007
Before
LORD JUSTICE MOORE-BICKMR JUSTICE DAVID CLARKEMRS JUSTICE SWIFT DBE
Between
THE QUEENRespondentMARK GREENAppellant
(Transcript of the Handed Down Judgment ofWordWave International LtdA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7421 4040 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Andrew Bodnar for appellantMr D J Farrer QC and Miss J Carter-Manning for respondentHearing Hearing dates : 23 rd April 2007
Judgment

Mr. Justice David Clarke:

[1]The Appellant, Mark Green, who is aged 34, appeals with leave of the single judge against a confiscation order in the sum of £2.5 million made against him on 17th February 2006 pursuant to section 2(5) of the Drug Trafficking Act 1994 (“the Act”). The order was made by His Honour Judge Steiger Q.C. sitting in the Crown Court at Manchester, who delivered a written judgment following a three-day hearing in January 2006.[2]The appellant had, on 13th May 2004, pleaded Guilty to offences of conspiracy to supply drugs of classes A and B (count 1); conspiracy to launder the proceeds of drug trafficking (count 2); and conspiracy to import controlled drugs of class B from Spain, Belgium and Holland (count 3). A number of co-defendants pleaded Guilty to offences on the same indictment; others were convicted after trial.[3]The conspiracies were alleged in the indictment to have been in operation between 17th July 2000 and 24th September 2003, which was soon after the appellant’s arrest on 18th September 2003. He pleaded Guilty, however, on a written basis of plea in which a number of admissions were made, including an admission that he had been involved in the supply of controlled drugs (including a small amount of class A drugs) between March 2001 and September 2003. The vast majority of the drugs supplied were cannabis resin and herbal cannabis imported into the UK via the mailbox system or cultivated in the UK. The class A drugs he had supplied had been obtained in the Wigan area. The appellant admitted that a total of about 1½ metric tons of cannabis had been imported and sold during the period of his involvement. No class A drugs were imported.[4]On 2nd August 2004 the judge proceeded to sentence according to that basis of plea, the confiscation proceedings being postponed. By the time these proceedings were heard in January 2006 the judge had concluded confiscation proceedings in respect of all the co-defendants, making the orders listed in paragraph 3 of his ruling. The confiscation proceedings[5]By the time of the confiscation proceedings it was common ground that the appellant was the principal conspirator at the heart of a sophisticated scheme for the importation and distribution of cannabis. The drug, principally high-value “skunk”, was packed in large padded envelopes, each containing 2 kilos or thereabouts, and despatched by post from mainland Europe to numerous mailboxes rented by or on behalf of the appellant, who used a number of false identities. The packages were collected from those mailboxes by fellow-conspirators or others working on the appellant’s behalf and then distributed down the chain of supply. Much of the cash proceeds of sale were exchanged into foreign currencies and used for the purchase of further consignments. The scale of the operation, which included also the distribution of some class A drugs, is clearly illustrated by the fact that between July 2000 and September 2003 cash sums totalling £4,277,768.76 were exchanged for foreign currencies at various bureaux de change.[6]The Court was required to proceed under sections 4 and 5 of the Act. Its task under section 4 was to assess the value of the appellant’s proceeds of drug trafficking; there was no issue but that he had benefited from drug trafficking. The assessment process included making, as appropriate, the assumptions prescribed by section 4(3), unless those assumptions were shown to be incorrect in his case or there would be a serious risk of injustice if they were made: section 4(4). Its duty was then to make a confiscation order in that sum, unless it was satisfied that the amount which might be realised from the appellant’s assets was less than the value of his proceeds of drug trafficking: section 5(3). In many cases, including the present case, this is in practice the crucial question because the value of the defendant’s realisable assets is less than the value of his proceeds of drug trafficking, but it is still important not to overvalue the proceeds, since the Crown may apply to the Court at any time to seek further recovery up to their full amount.[7]The present appeal relates to both stages of the exercise performed by the judge. Mr Bodnar, who appeared for the appellant, has substantial expertise in this difficult area of criminal law, but the grounds of appeal were lengthy, complex and in our judgment not always clearly focused. In the result, it was not clear to us at the outset precisely where his attack was directed. Nor was it clear to us in all cases how the figures reached by the judge had been arrived at. In the course of the hearing, however, it became clearer not only that Mr. Bodnar was critical of the judge’s approach to the assessment of proceeds, which involved aggregating the cost of purchasing the drugs and the proceeds of sale, but also that he criticised the judge for failing to adopt as the basis for his calculations (subject to a number of subsidiary points which remained in issue) figures that had been agreed between the appellant and the Crown.[8]The first of the stages to which we referred is commonly called the “benefit” calculation, but the term “benefit” is misleading in this context because it is clear from section 4 that what the court must assess is the value of the defendant’s proceeds of drug trafficking which are to be calculated by reference to gross receipts (i.e. turnover) rather than profit. In our judgment it is better, therefore, to use the statutory word “proceeds”. The value of a Defendant’s proceeds of drug trafficking is the aggregate of the payments or other rewards received by him at any time in connection with drug trafficking carried on by him or another person: section 4(1). A useful simple example of the distinction between proceeds and profits is to be found in the judgment of Lord Bingham C.J. in Banks [1997] 2 Cr.App.R.(S.) 110, as follows (page 112):
“Suppose that a defendant D inherits £1,000 from his law-abiding grandmother. Suppose further that D spends that whole sum on drugs which he then sells for £1,000, making no profit. Suppose in addition that he repeats that operation on four occasions, on each of them buying drugs for £1,000 and selling them for the same sum. It is on those facts plain that his turnover on the five transactions is £5,000, that being the gross sum received by him by way of payment on the five transactions. It is, however, equally plain that his profit is nil. At the end of his dealing he only has the £1,000 with which he started. It can therefore be said to be unfair if a confiscation order can be made with reference to the figure of £5,000, his gross receipts rather than his profits.”
[9]Later Lord Bingham said (page 113):
“The court’s duty therefore under section 5(1) is to make a confiscation order in the amount which the Crown Court assesses to be the value of the defendant's proceeds of drug trafficking. In order to assess the value of the defendant’s proceeds of drug trafficking in pursuance of that subsection the court must refer back to section 4(1) which defines the meaning of the proceeds of drug trafficking. The definition is that those proceeds are the aggregate value of the payments or other rewards received by a person in connection with drug trafficking, and those expressions take one back to the first of the clutch of subsections we mentioned in section 2 where, in subsection (3), there is an express reference to “any payment or other reward”
. It accordingly seems to us that the reference to “benefit” in section 2(2) and (3) is the subject of clear and express further definition to which the court must pay attention in applying this Part of this Act. We accordingly conclude that, on the language which Parliament has used in this Act, reproducing similar language used in the 1986 Act, it is clear beyond argument that the benefit is to be treated in particular in accordance with section 4 as the aggregate value of the payments or other rewards made to the defendant in connection with drug trafficking. That does not, as we read it, direct attention to profit but to gross payments.”[10]In a note prepared for the confiscation proceedings the Crown submitted that the value of the defendant’s proceeds of drug trafficking could be ascertained from the evidence of the conspiracy itself and the application of the assumptions in section 4(3). It adopted the appellant’s admission, made for the first time in the confiscation proceedings, that he had imported 2 metric tons of cannabis and argued that his proceeds comprised(a) the value of the drugs imported (on the basis that they represented property received in the course of drug trafficking);(b) the purchase price of the drugs supplied (applying the assumption in section 4(3)(b) that any expenditure during the relevant period had been met out of payments received in connection with drug trafficking);(c) payments received on the sale of the drugs in this country (on the basis that they represented the proceeds of drug trafficking);(d) the money laundered through the bureaux de change; and(e) the value of various assets passing through his hands in accordance with the assumption set out in section 4(3). However, the Crown was alive to the obvious risk of double counting and accepted that the drugs imported were largely the same as those supplied, although some were obtained in this country. It also accepted that much (though not all) of the money received by the defendant from the sale of drugs was exchanged at the bureaux de change.[11]At the commencement of the confiscation hearing the Crown’s position was that the value of the defendant’s proceeds of drug trafficking was £10,522,433, the main elements of that sum being the purchase price of the drugs (£3.8 million) and the proceeds of sale (£5.6 million). These sums reflected the defendant’s admission that he had imported 2 metric tons of cannabis at a cost of £1,900 per kilo and had sold it at a price of £2,800 per kilo and involved the aggregation of the whole of the cost of purchase and the proceeds of sale. Not surprisingly, the appellant contended that the Crown’s calculation involved a significant degree of double counting. The preliminary ruling[12]On 30th January 2006 the judge was asked to rule by way of preliminary issue on a number of matters in dispute. The only one that is directly relevant to this appeal concerned the correct application of the statutory provisions relating to the assessment of proceeds. The appellant accepted that £4.8 million had passed through his hands, but he submitted that in seeking to put a higher figure on his proceeds the Crown was seeking to count the same money twice over and to attribute to him money received by other parties to the conspiracy.[13]The judge pointed out that by virtue of the statutory assumption relating to expenditure in section 4(3)(b) a defendant’s proceeds of drug trafficking may consist of both the purchase price of the drugs and their proceeds of sale. The question was whether that remained appropriate in a case of multiple importations of the kind with which the court was concerned in this case. He noted that apart from the importation of cannabis the appellant had also been dealing in hard drugs which he had bought and resold in this country and he also referred to the evidence that the appellant had been handling large amounts of cash. He decided that in all the circumstances it was not appropriate to proceed in any way other than by aggregating the cost of purchase and the proceeds of sale of the cannabis. He indicated that he proposed to start from the basis that the appellant had spent £3.8 million to buy the drugs and had received £5.6 million by way of proceeds of sale, but he appears at that stage to have left it open to him to prove that any particular payments or receipts should be excluded on the grounds that to include them would involve double counting.[14]When the matter came back before the judge on 15th February the position seems to have changed in certain respects. The basis on which the appellant had pleaded guilty, and on which he had originally invited the court to sentence him, was that he had imported 1½ metric tons of cannabis and the judge was understandably wary of accepting that the true quantity involved was so much greater than the defendant had originally admitted. Moreover, he had before him evidence in the form of a statement from an expert witness, a Mr. Saggers, that the cost of skunk in Holland was only £1,000 per kilo and the price at which it could be sold in this country was £2,500 per kilo. Each of these figures was significantly lower than that put forward by the appellant.[15]Although he had given a detailed statement in answer to the prosecution case, the appellant chose not to give evidence. The judge was not impressed by his assertion that he had imported 2 rather than 1½ metric tons of cannabis which he thought was nothing more than a device to explain the source of all the money that had been laundered through the bureaux de change. He concluded that those funds had not all come from the purchase and sale of cannabis and that the amount laundered implied that the appellant had traded a far larger quantity of drugs from an undisclosed source. In the circumstances he decided for the purpose of assessing the appellant’s proceeds of drug trafficking to aggregate the buying and selling prices of 1½ metric tons of cannabis at the prices put forward by Mr. Saggers. That produced a figure of £5.25 million. To that he added an amount representing a further 10 months’ trading between July 2000 and March 2001 based on the average monthly sum laundered through the bureaux de change during the whole period of the conspiracy. That provided an additional £1 million. Finally he added a further sum of £1,094,550 representing the value of certain individual assets passing through the appellant’s hands during the period of 6 years immediately prior to the proceedings. He therefore assessed the total value of the appellant’s proceeds of drug trafficking at £7,345,450.[16]The next step was for judge to determine the value of the appellant’s realisable assets. Section 5(1) of the Act provides that the amount to be recovered under the confiscation order shall be the amount assessed as the value of the defendant’s proceeds of drug trafficking, subject, however, to subsection (3) which provides that if the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the value of defendant’s proceeds, the amount to be recovered shall be the amount that it considers might be realised. The starting point for the confiscation order, therefore, was £7,345,450,[17]At the time of the confiscation hearing the prosecution had managed to identify various assets held by the appellant, the value of which the judge assessed at £577,533. The judge was not satisfied that they represented all the appellant’s assets, but he considered that it would be unfair to treat him as having assets to a value of the whole of the proceeds when he had already determined that others involved in the conspiracy had received proceeds totalling £4,873,719 and £157,290 had already been recovered from them. He therefore deducted that amount from the total proceeds and made a confiscation order against the appellant in the sum of £2.5 million.[18]Mr Bodnar submitted that in approaching the matter in that way the judge went wrong in a number of respects. He submitted that he was wrong to proceed on the basis of the admission made by the appellant in his basis of plea about the quantity of cannabis involved when it had subsequently been agreed between the appellant and the prosecution that the quantity had been greater and wrong to accept the evidence of Mr. Saggers about buying and selling prices when they too had been the subject of agreement. Next, he submitted that the judge was wrong to aggregate the buying and selling prices of the drugs, since it was clear that a large proportion of the proceeds of sale had been used to purchase further stocks. He also submitted that the judge was wrong to find that the appellant had received £1 million from drug trafficking during the period between July 2000 (when the judge found that the conspiracy began) and March 2001 (the date accepted in the appellant’s basis of plea), and wrong not to take account of the money withheld by other defendants when assessing the value of the appellant’s proceeds. Quantities and prices - the judge’s findings[19]Mr. Bodnar submitted that since the only source of funds suggested to have been available to the appellant other than trading in cannabis was his dealing in class A drugs, the effect of the judge’s rejection of the agreement between the Crown and the appellant as to the amount of cannabis imported and its purchase and selling prices was to cast on the appellant the burden of proving that he had not been engaged in dealing in large quantities of class A drugs. He submitted that it was wrong for the judge to do that because there had never been any suggestion that the appellant had been engaged in activities of that kind on a substantial scale; indeed, it had always been accepted that the scale of his dealing in class A drugs had been limited, as was borne out by the judge’s comments when he sentenced the appellant for that offence. He also submitted that although section 4 of the Act requires the court to make certain assumptions, it does not require, or indeed permit, it to assume that assets have passed through the defendant’s hands. That is a matter in respect of which the burden lies squarely on the prosecution.[20]In our view the judge was in a difficult position. It was reasonably clear from the material before him that some, probably a large proportion, of the money received from the sale of cannabis had been changed into foreign currency and used for the purchase of fresh stocks of cannabis, but not all of it, since some would undoubtedly have been taken by the conspirators as profit. Moreover, he had little hard evidence to indicate whether all the money that passed through the bureaux de change had originated from the same source. If he was entitled to reject, as he did, the appellant’s evidence of quantities and prices on the grounds that it was simply designed to provide an explanation for the amount exchanged into foreign currency, he was thrown back on the evidence contained in the basis of plea and Mr. Saggers’ statement. On that basis the sale of 1½ metric tons of cannabis would have produced sale proceeds of only £3.25 million, so it followed that there must have been another significant source of income to account for the total amount exchanged into foreign currency. The practical effect of his decision, therefore, was to make a finding that the appellant had another substantial source of income, but there was no evidence pointing to the existence of another source of income, other than the dealing in class A drugs which it had always been accepted had been on a very limited scale.[21]That being the case, we think that there is force in Mr. Bodnar’s submission that the judge was not justified in rejecting the figures for quantities and prices agreed between the appellant and the Crown. The choice facing him was to accept those figures, which provided a reasonably full account of the amounts laundered, or to reject them in favour of different figures which did not explain the amounts laundered and which could only be explained by reference to other activities of which there was no credible evidence.[22]If the appellant had imported and sold 2 metric tons of cannabis with a resale price of £2,800 per kilo, his gross proceeds would have been £5.6 million and if, as he said, the purchase price was £1,900 a kilo, it would seem likely that the bulk of the funds changed into foreign currency (£3.8 million out of the total of £4.2 million) were recycled in order to purchase fresh stock. That would still have provided a nominal profit of £1.8 million, although the expenses of the operation and the cost of purchasing the class A drugs would have had to come out of it. If the judge had accepted the facts agreed between the prosecution and the defence, therefore, there would not have been such a significant discrepancy between the amount of money laundered and the proceeds of the sale of cannabis and there would not then have been grounds for finding that the appellant had another substantial source of income. In those circumstances the judge should in our view have accepted the agreed figures and made findings accordingly. It would still have been necessary, however, for him to consider the extent to which it was appropriate, if at all, to aggregate the cost of purchase and the proceeds of sale. Aggregation[23]The principle governing the assessment of the defendant’s proceeds of drug trafficking for the purposes of making a confiscation order is contained in section 4(1) of the Act. In itself it is quite simple: the value of the defendant’s proceeds of drug trafficking is the aggregate value of the payments or other rewards received by him in connection with drug trafficking. The section therefore requires the court to ascertain what the defendant has received by way of money and other property during the relevant period, to assess its value and to decide whether it was received in connection with drug trafficking. However, in reaching its conclusions the court is required to make certain assumptions about the source of property coming into the defendant’s hands and about the source of the money used to finance expenditure.[24]Section 4(3)(b), which requires the court to assume that any expenditure during the relevant period was financed by the proceeds of drug trafficking unless proved otherwise, was intended to ensure that funds whose origin could not otherwise be accounted for should be treated as having been obtained in that way. The policy behind that provision is clear: only by making such an assumption can the court ensure that the defendant’s proceeds are brought fully into account despite having been transferred into other assets or used to finance expenditure not directly related to drug trafficking. In such a case it is clearly appropriate to add the amount of any such expenditure to the defendant’s other proceeds of drug trafficking. Not surprisingly, therefore, the Crown submitted that the court may assume in accordance with section 4(3)(b) that a drug dealer who has bought drugs for the purposes of resale has met the cost of doing so out of the proceeds of drug trafficking and referred us to the case of Dellaway [2001] 1 Cr.App.R.(S.) 77 in support of that proposition. It argued that it was appropriate in the present case to add to the proceeds of sale the cost of buying fresh stocks with which to continue trading.[25]It will be seen from what we said earlier about the way in which the appellant and his co-conspirators worked that Dellaway was a rather different case from the present. The defendant and four others had brought into the country drugs valued at £143,000. The court inferred from the fact that the drugs were in their possession that the defendants had already paid for them, or were in a position to pay for them, and was therefore required by section 4(3)(b) to assume that the money used for that purpose had been derived from drug trafficking. On that basis it had to be taken into account when assessing the total value of the defendant’s proceeds of drug trafficking. We would respectfully agree with that conclusion, which in our view follows from the wording of the Act. However, it will be apparent that the case did not raise the question that arises for decision in the present case. In a case such as Dellaway, in which the defendants were found in possession of one parcel of drugs and there was no direct evidence of the source of the funds used to purchase them, to make the assumption required by section 4(3)(b) produces no injustice. However, if there is evidence which the court accepts, as there was in this case, that the proceeds of sale were regularly reinvested in new stock, the position is different.[26]If a defendant has purchased and sold drugs continuously over a long period of time, it will often be the case that the funds used to purchase each new parcel of drugs will have been derived in whole or in part from the proceeds of sale of the previous parcel. In such a case the money received from the sale of the drugs clearly does represent the proceeds of drug trafficking and an assumption (were it necessary to make one) that the expenditure required in order to purchase the next consignment was met out of payments received in connection with drug trafficking would clearly be correct. It is equally clear, however, that the proceeds of sale and the money used to buy the new stock is the same money and that it would be wrong to treat the defendant as having received two separate sums of money when in fact he has received only one. In our view the position in such a case is to be determined by reference to section 4(1), which requires the court to identify payments and rewards received by the defendant in connection with drug trafficking, not by reference to section 4(3), which merely provides a tool that can be used for that purpose. The first step, therefore, is to identify what sums or other rewards the defendant has received. In this context it should be noted that, although section 4(3)(b) requires the court to assume that money used to finance expenditure was derived from drug trafficking, it does not require the court to assume that such money was derived from sources other than those to which the evidence naturally points.[27]The example given in Banks to illustrate the distinction between turnover and profit also provides a good example of circumstances in which it can be seen that the proceeds of sale and the source of the money used to buy new stock are the same. On the facts postulated by Lord Bingham C.J., aggregation of the sale and purchase prices would result in the defendant’s proceeds being assessed at £9,000 rather than £5,000, but since the proceeds of sale also provided the funds used for the purchase of fresh stocks, the expenditure was not met out of unrelated payments or rewards of drug trafficking. It would be wrong as a matter of fact, therefore, to treat it as if it had been and to add to the proceeds of sale the cost of buying the new stock. It would also be unfair to the defendant because, apart from anything else, it would impose on him, when the court came to assess the value of his assets, the burden of explaining what had happened to money which he had never received.[28]In the present case, as in the example given in Banks, it was unnecessary for the court to resort to the assumption in section 4(3)(b) because the appellant did not seek to deny that the money used to purchase fresh stocks had come from drug trafficking, in particular from the sale of cannabis. To the extent that the evidence supported his account, therefore, it was wrong to treat the expenditure on new stock as having been met out of payments derived from extraneous sources. The Crown recognised the force of that argument, and indeed Mr. Farrer Q.C. did not strive to support the judge’s decision on this point. In our view, therefore, the judge was wrong in this case simply to aggregate the buying and selling prices of the drugs. We consider that in the absence of satisfactory evidence to the contrary, it is safe to proceed on the basis that the whole of the £4.2 million changed into foreign currency during the period of the conspiracy represented the proceeds of the sale of drugs of one kind or another, but since on the appellant’s own admission the proceeds of sale of the cannabis alone amounted to £5.6 million, that was more than enough to account for it. In our view, therefore, the evidence points to the conclusion that substantially all the money that was laundered through the bureaux de change was the proceeds of sale of drugs supplied pursuant to the conspiracy. On that basis the gross proceeds of drug trafficking arising from the conspiracy, leaving aside the value of identifiable assets, receipts and payments that are subject to the statutory assumptions and any proceeds of trafficking during the period from July 2000 (when the judge found that the conspiracy began) to March 2001 (the date accepted in the appellant’s basis of plea), which we shall call “the additional period”, can be fairly assessed at £5.6 million. Value of specific assets[29]To the amount assessed as the value of the proceeds of trading in drugs in pursuance of the conspiracy the judge added the sum of £1,095,450, being the value of various assets, receipts and payments for which the appellant could provide no innocent explanation. They were included in the assessment of the total value of his proceeds by virtue of the statutory assumptions in section 5(3). As recorded in paragraph 25 of his judgment, there was broad agreement about this element; in particular, the appellant did not contend that to include the value of these assets would involve any element of double counting. It should be recorded that the appellant had provided substantial details of his financial affairs, as well as a detailed account of the course of his drug trafficking activities, together with an accountant’s report in which many items falling within the statutory assumptions were identified.[30]No argument was advanced to us in relation to these items, and we adopt the figure taken by the judge. The additional period[31]The next question for consideration is whether the judge was right to add a further £1m in respect of the additional period. (It seems to have gone without argument that this was a period of 10, rather than 9 or even 8 months.) That figure broadly represents ten times two-thirds of the average amount of money exchanged into foreign currency over the admitted period of the conspiracy, namely £145,000. It is clear, therefore, that this element of the calculation proceeded on a different basis from the first; not on the sale and purchase prices of the drugs, but on the amount of money laundered.[32]The judge’s approach was criticised by Mr Bodnar on the grounds that he was not entitled to go behind the appellant’s basis of plea by finding that he had been engaged in drug trafficking before March 2001, the date from which he had admitted taking part in the conspiracy. In support of that submission he relied on Fowles (sub nom May) [2005] EWCA Crim 97; [2005] 2 Cr. App. R.(S.) 408 and Lunnon [2004] EWCA Crim 1125; [2005] 1 Crim. App. R.(S.) 111. These were both cases in which the factual basis of plea had been agreed by the Crown, in one in relation to the defendant’s role and in the other as to the period of his involvement in drug trafficking. In our view, however, although we accept the principle that a court conducting a confiscation hearing is bound to respect the defendant’s basis of plea and must not make findings of fact or assumptions that would contradict it, neither of those cases is of direct assistance.[33]Lunnon is the case most nearly in point. In that case the Crown had expressly accepted that the appellant had not been involved in drug trafficking before he had joined the conspiracy with which he was charged. On appeal the court held that it was not necessary in those circumstances for the appellant to adduce evidence at the confiscation hearing to establish that he had not been involved in drug trafficking at any earlier date and that there would inevitably be a serious risk of injustice if the court were to make the statutory assumptions in relation to property passing through his hands prior to the admitted period of the conspiracy.[34]However, it is important to note the limits of this principle. In the case of Lazarus [2004] EWCA Crim 2297, [2005] 1 Cr App R (S) 98 the appellant had pleaded guilty to a charge of being concerned in the supply of cocaine between December 2002 and May 2003. At the confiscation hearing an issue arose as to whether sums of money totalling £51,000 which had passed through his bank account during the six years prior to the commencement of the proceedings were the proceeds of drug trafficking. Of that sum of £51,000 it was agreed that only £11,591 had passed through the account during the six month period to which the charge related. Making the statutory assumptions the judge found that the defendant had failed to establish that the whole of the money was not the proceeds of drug trafficking and made an order accordingly. On appeal the appellant submitted that for the court to make the statutory assumptions in his case gave rise to a serious risk of injustice because the assumptions were inconsistent with his basis of plea. However, that argument was rejected. Hughes J., giving the judgment of the court, pointed out that, unlike the case of Lunnon, the appellant’s basis of plea was silent about his activities prior to the date of the matters charged and that in accepting it the Crown had not agreed that he had not been involved in drug trafficking at an earlier date. Accordingly, the court rejected the submission that to make the assumptions would be inconsistent with the basis of plea.[35]In our judgment the present case is indistinguishable from Lazarus. Here the basis of plea related only to the period between March 2001 and September 2003; it said nothing about any earlier period and the Crown did not agree that the appellant had not been involved in drug trafficking during the period between July 2000 and March 2001. In those circumstances to make the statutory assumptions in relation to property passing through the appellant’s hands prior to March 2001 was not in itself inconsistent with the basis of his plea and did not for that reason give rise to a serious risk of injustice. The judge found that the appellant had exchanged £75,725 into foreign currency on 18th July 2000 and that cash credits of £60,000 for which no innocent explanation could be given had been posted to his accounts during the latter part of that year. In our view the judge was entitled to make the statutory assumptions in relation to those sums and find that he had received them as payments or rewards in connection with drug trafficking.[36]However, the judge went much farther than that. His decision to include in his calculation of the appellant’s proceeds of drug trafficking an amount in respect of the additional period calculated by reference to the average monthly amount laundered through the bureaux de change involved an implicit finding that the appellant had been importing cannabis during that period in broadly the same quantities and at broadly the same prices as he had between March 2001 and September 2003. It is not clear, however, what basis the judge had for that finding. Mr. Bodnar submitted that, although the court is required to make certain assumptions about the source of property which can be shown to have been transferred to the defendant during the six years prior to the commencement of proceedings (subject to the risk of injustice), it is not required, and indeed is not entitled, to make an assumption that property has passed through his hands. That is a matter which must be proved by the Crown.[37]In our view there is force in that submission. Although the judge was entitled to find that the conspiracy had begun in July 2000, by taking a monthly average of the funds exchanged during the admitted period of the conspiracy he failed to have regard to the manner of its development, particularly after the parties began supplying drugs in Stoke as well as Wigan. (The judge did not explain why he took two-thirds of the average monthly amount; it may have been to reflect the fact that he was dealing with the early stages of the conspiracy, but his reasons are not set out in the judgment). The fact is, however, that he had little, if any evidence to support a finding that the appellant had received £100,000 a month from the sale of drugs between July 2000 and March 2001 and in the absence of such a finding there was nothing to which he could apply the assumption set out in section 4(3)(a) of the Act. In our view there was no evidence before the judge capable of supporting any figure greater than that of amounts to which we have referred. It follows that this element of the judge’s calculation must be reduced from £1 million to £135,725. Amounts retained by other defendants[38]The third question is whether the whole of the proceeds of the trafficking that was carried out pursuant to this conspiracy are to be attributed to the appellant. Mr. Bodnar submitted that large amounts of money arising from the sale of drugs were retained by Dewse and Sargeant and did not pass through the appellant’s hands. In effect, he said that they took their share of the profits before passing the money back to him. Accordingly, the amounts they retained could not be regarded as proceeds of drug trafficking as far as the appellant was concerned.[39]The judge had very much in mind the fact that confiscation proceedings relating to the other defendants had resulted in findings that they had received something over £4.8 million by way of proceeds of drug trafficking and that sums totalling £157,290 had been recovered from them. However, he made it clear in paragraph 24 of his judgment that when calculating the appellant’s proceeds of drug trafficking he made no reduction in respect of the proceeds attributable to the other defendants, although when making the confiscation order he did make an allowance for the amounts which they had received. His decision is explained by the following passage in paragraph 10 of his judgment, in which he set out the principles which he understood were to be derived from the authorities cited to him:
“e. Apportionment as between defendants is appropriate to avoid an over-recovery but joint and several liability may be justified in assessing benefit as between defendants;”
[40]As we understand it, the judge approached the assessment of the appellant’s proceeds on the basis that any money received by Dewse and Sargeant from the sale of drugs was held by them jointly with the appellant as proceeds in which they were all fully interested. Mr. Bodnar submitted that he was wrong to do so, having misunderstood the decision of this court in May [2005] EWCA Crim 97, [2005] 2 Cr. App. R.(S.) 67.[41]In May the five defendants whose appeals were before the court had been convicted of taking part, together with others, in a conspiracy to cheat HM Customs & Excise by means of what is known as a ‘carousel’ fraud involving the wrongful withholding and reclaiming of VAT. The conspirators used a number of limited companies to perpetrate the fraud by trading in imported goods which attracted VAT on resale to buyers in this country. The VAT was collected from the buyers but retained instead of being paid over to HM Customs & Excise. The goods were then exported by the buyer to the original trader, allowing the buyer to reclaim the VAT it had paid on purchase, and the process would begin again. After a short period of trading the first importer ceased trading and disappeared and its place was taken by another company which carried on the process before it too disappeared. Four such companies were used during the course of the fraud.[42]The defendants accepted that for the purpose of confiscation proceedings under the Criminal Justice Act 1988 (as amended) the court could pierce the corporate veil in order to determine whether any particular person had benefited from the fraud and if so, in what amount. The question then arose how the court should assess the benefit received by each individual conspirator. The judge held that each defendant had benefited to the full extent of the value of the VAT of which the Revenue had been cheated by any corporate entity of which he was in a controlling position at the material time. As Keene L.J. observed when giving the judgment of this court, that amounted to holding that, where several defendants are jointly responsible for a fraud and the property obtained is held by them jointly, each benefits to the full value of the property and there is no requirement to apportion the benefit between them for the purposes of confiscation proceedings. On appeal the appellants argued that the judge’s decision was wrong and that the statute required the court to ascertain the benefit received by each conspirator individually by determining his share of the benefit obtained by the company. The court rejected that submission and held that where two or more defendants obtain control of property jointly each has “obtained” the whole of it within the meaning of the Act.[43]In May the court was considering a different statutory provision, but in our view the same principles apply in relation to the Drug Trafficking Act 1994. Section 2(2) requires the court to determine whether the defendant has benefited from drug trafficking and section 2(3) provides that a person has so benefited if he has “received” any payment or other reward in connection with drug trafficking. Section 7 makes provision for the valuation of property (other than cash) received by the defendant by limiting its value to that of his beneficial interest less the amount required to discharge any encumbrance, but no specific provision is made for assets received jointly, for example, cash paid into a joint bank account.[44]In principle where one person receives money or property to hold jointly on behalf of himself and one or more other persons each of those persons is fully interested in it and can properly be said to have “received” it. In May the court explained the position as follows in relation to the concept of “obtaining”:
“37. It seems to this Court to be important that there was a finding here that the companies retaining the VAT fraudulently were jointly controlled by various of the appellants. Once the corporate veil is pierced, as the appellants accepted it can be (a step endorsed by this Court in Dimsey and Allen [2000] 1 Cr.App.R.(S) 497 at 502), the property held by the company in question is to be regarded as the joint property of those controlling that company. It is analogous to the situation where conspirators have put the proceeds of the fraud straight into their joint bank account. In such a situation each is entitled to the full amount in the account. If one concentrates on the words of the statute, as one must, it seems to us that each individual “obtains” the property jointly held. 38 The position is succinctly put in Mitchell, Taylor and Talbot: Confiscation and the Proceeds of Crime (3rd ed.), para.5.026(3), where a particular situation is described as follows: “The evidence demonstrates that the proceeds obtained by and passed into the joint control of the defendants. On a strict interpretation of the Act each defendant has received the whole amount. Where, for example, the proceeds are paid into a bank account held jointly by the defendants, they each benefit by the whole amount deposited. Each of the defendants would then be liable to have a confiscation order made against him in that amount. It follows that even in a joint pool case the whole of the benefit is attributable to each of the defendants. The liability to pay that amount will be determined by the defendant's ability to pay.” 39 In our judgment someone who has joint control of property has "obtained" that property within the meaning of s.71(4). None of the authorities cited in argument require such an approach to be rejected and it seems to us to be the natural meaning of the words in the statute. In the same way it matters not that an individual who holds a joint account has not drawn out a specific sum of money from that account: he has still obtained the whole of the money in the account.” “The evidence demonstrates that the proceeds obtained by and passed into the joint control of the defendants. On a strict interpretation of the Act each defendant has received the whole amount. Where, for example, the proceeds are paid into a bank account held jointly by the defendants, they each benefit by the whole amount deposited. Each of the defendants would then be liable to have a confiscation order made against him in that amount. It follows that even in a joint pool case the whole of the benefit is attributable to each of the defendants. The liability to pay that amount will be determined by the defendant's ability to pay.”
[45]Mr. Bodnar submitted that where part of the proceeds of sale of drugs has been retained by some of the defendant’s co-conspirators the court is required to identify the payments or rewards that have actually passed through the defendant’s hands and cannot treat him as having received the whole amount. For the reasons given earlier, however, we consider that where money or property is received by one defendant on behalf of several defendants jointly, each defendant is to be regarded as having received the whole of it for the purposes of section 2(2) of the Act. It does not matter that proceeds of sale may have been received by one conspirator who retains his share before passing on the remainder; what matters is the capacity in which he received them.[46]Whether the proceeds of sale received by Dewse and Sargeant in the present case were initially received on their own personal behalf or on behalf of the conspirators as a whole was a matter for the judge to decide on the evidence before him. In fact, there was evidence on which he could find that the appellant was the ringleader and controller of the conspiracy and in those circumstances he was entitled to infer that the others were acting in accordance with his instructions, receiving proceeds of sale on behalf of the conspirators as a whole before retaining for themselves such amounts as had been agreed with the appellant. In our view this part of the judge’s decision is not open to criticism. Value of the appellant’s proceeds[47]We consider that the judge should have assessed the appellant’s proceeds of drug trafficking at £6,831,175 being the total of(i) the sum of £5.6 million received during the period of the admitted conspiracy and(ii) the sum of £135,725 representing the proceeds of trafficking during the additional period and(iii) the sum of £1,095,450 representing the value of the assets in his possession. Realisable assets[48]Mr. Bodnar submitted that as a result of the judge’s having incorrectly assessed the appellant’s proceeds of drug trafficking he was misled into accepting that the value of his realisable assets was far greater than was in fact the case. Inasmuch as there had been an element of double counting resulting from the aggregation of buying and selling prices, there was obviously a danger that the amount of the confiscation order would be too great, but that had no bearing on the value of the appellant’s realisable assets. In paragraph 39 of his judgment the judge drew attention to the “enormous gap”, as he put it, between the value of the appellant’s acknowledged assets (£577,533) and his proceeds of drug trafficking (£7,345,450) and even when the value of his proceeds is reduced to £6,831,175 the gap remains enormous. However, we think it is clear that the judge rested his decision largely on the evidence to which he referred in paragraphs 31-38 that the appellant had substantial assets abroad, the true value of which could not be determined.[49]Having regard to the nature of Mr. Bodnar’s submission, it may be helpful to refer once again to the effect of the statutory provisions in this context. As the decision in Banks makes clear, the Act is concerned with proceeds of drug trafficking (in the sense of receipts) rather than with profits. It is quite possible, therefore, for a defendant’s proceeds to be far greater than the amount of money that he has actually derived from his drug trafficking. Again, the example given by Lord Bingham C.J. in Banks makes that clear. Section 5(1) of the Act requires the court to make a confiscation order in the amount of the defendant’s proceeds, unless it is satisfied that the amount that might be realised at the time it makes the order is less than the amount of his proceeds: section 5(3). In a loose sense, therefore, a defendant may often be required to explain what has happened to money he never had at his disposal. By virtue of section 6(1)(a) the amount that might be realised is the total value of all the realisable property held by the defendant, whether derived from drug trafficking or not, and the burden of satisfying the court that the total value of his realisable assets is less than his proceeds of drug trafficking rests on the defendant: see Barnham [2005] EWCA Crim 1049, [2006] 1 Cr.App.R.(S.) 83. It follows that if the defendant fails to discharge that burden the court should make a confiscation order in the amount of his proceeds of drug trafficking. Moreover, the fact that the court is concerned for these purposes with the total value of all the defendant’s realisable assets means that there is no reason to assume that the value of any “hidden assets” does not exceed the profits that he derived from the drug trafficking covered by the indictment. If the defendant wishes to ensure that the amount of the confiscation order does not exceed the value of the assets available to meet it, he must make full disclosure to the court in order to enable it to be satisfied that it has the complete picture.[50]The approach adopted by the judge in the present case was consistent with these principles. The evidence to which he referred in paragraphs 31-38 suggested that the appellant had substantial assets which he had failed to disclose and that could only add to the burden which already lay on him to provide the court with a full explanation of his financial position. In the event the appellant chose not to give evidence and it is hardly surprising, therefore, that he failed to persuade the judge that the total value of his assets was less than the amount of his proceeds of drug trafficking. In those circumstances the judge recognised that it was open to him to make a confiscation order against the appellant in the full amount of the proceeds, but he decided to give him credit for the amounts realised from other defendants in order to avoid double recovery; and in order to avoid any potential injustice he also deducted the value of the proceeds which the other defendants had received. That led him to make a confiscation order in the amount of £2.5 million. The value of the defendant’s disclosed assets was something over £500,000, and that may explain why both counsel and the judge treated his decision as tantamount to a finding that the appellant had hidden assets to the value of £2 million. In our view, however, that is a misleading way of looking at it. The appellant simply failed to satisfy the judge that the total value of his assets was less than £2.5 million. Conclusion[51]We feel obliged to follow the judge in giving credit to the appellant for the amounts recovered from the other conspirators and for the value of the proceeds they received. Accordingly, since we have concluded that the value of the appellant’s proceeds of drug trafficking should be reduced to £6,831,175, the confiscation order must be reduced from £2.5 million to £1,985,725. To that extent the appeal is allowed. We do not consider it appropriate to reduce the term of imprisonment to be served in default, which will therefore remain at 6 years. ______________________ LORD JUSTICE MOORE-BICK: For the reasons set out in the judgment this appeal will be allowed to the limited extent that the confiscation order in the sum of £2.5 million will be reduced to one in the sum of £1,985,725. The term of imprisonment in default will remain the same at six years. MR BODNAR: My Lords, I hope you received from me yesterday an application for a certificate. LORD JUSTICE MOORE-BICK: We did and may I say I am sorry you had so much difficulty communicating with the court yesterday. It was not your fault, it is our system. You invited us to certify a point of law of public importance. In principle we are minded to do so, but we were not entirely sure that your formulation was as appropriate as it might be. Can I hand down to you for your consideration a draft that we have prepared. It does not have to be treated as the last word, but it seemed to us that the language of the point of law should reflect the language of the statute. We appreciate you had adapted the point in May, but of course that was arising under a different statute. Just take a moment to have a look at this. MR BODNAR: With respect, if I may say so, it is the same question but rephrased in the light of the wording of the statute. LORD JUSTICE MOORE-BICK: It is the same point but phrased in the terms of the statutory provisions we have to deal with. Are you content -- do not feel shy about drawing any infelicities to our attention. MR BODNAR: My Lord, with respect, I cannot see any infelicities and as I say I simply drew the question from that certified in May and replaced the references to the Criminal Justice Act. This then gives rise to two consequential applications. The first is for legal aid in general. LORD JUSTICE MOORE-BICK: Shall we first -- we will certify the question in the form of this draft and I will hand a copy to the Registrar. Yes. MR BODNAR: There are two consequential applications. The first is for legal aid in general and I understand from my Lords' Associate that the standard order is for junior counsel and solicitors to assist at the preparation of the -- LORD JUSTICE MOORE-BICK: You have to ask us for permission to appeal, do you not? MR BODNAR: I do. LORD JUSTICE MOORE-BICK: You ask and I am afraid we refuse. Let us get that formality over. MR BODNAR: It was never an application I was going to pursue with any vigour. LORD JUSTICE MOORE-BICK: I understand that. We certify but we refuse leave. Yes, now you want -- MR BODNAR: Legal aid, please. LORD JUSTICE MOORE-BICK: It is a representation order in modern language. MR BODNAR: A representation order which I understand in the standard form provides for the services of junior counsel and solicitors. I would also ask this court to extend that to cover the services of leading counsel. LORD JUSTICE MOORE-BICK: Why do you need leading counsel at this stage? You are the expert on this, Mr Bodnar, do not be too modest. MR BODNAR: I am grateful for the comments in the judgment about that but at the same time I recognise there is considerable room for improvement in my skills as an advocate. LORD JUSTICE MOORE-BICK: Mr Bodnar, what we are minded to do is to limit the order at this stage to solicitor and junior counsel. If their Lordships give you leave then we will make the order now that at that point we will extend it to leading counsel. MR BODNAR: My Lord, I am grateful. I think that is everything, my Lord. LORD JUSTICE MOORE-BICK: Thank you for your assistance. It is an interesting case. Maybe their Lordships will also be interested, who knows, we shall wait and see.

Cited in 3 later judgments