Islam, R v [2008] EWCA Crim 1740

[2008] EWCA Crim 1740Case No 200701190 C2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM SNARESBROOK CROWN COURT
HHJ Collender QC
T20050639
IN THE MATTER OF THE PROCEEDS OF CRIME ACT 2002
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 31/07/2008
Before
LORD JUSTICE TOULSONMR JUSTICE JACKRECORDER OF HULL (SITTING AS A JUDGE OF THE COURT OF APPEAL CRIMINAL DIVISION)
Between
RRespondentSAMSUL ISLAMAppellant
Cheryl Drew and Abdul Gofur instructed for AppellantMark Sutherland Williams and Charlotte Hadfield instructed for RespondentHearing Hearing dates: 22 July 2008
JudgmentLord Justice Toulson :
[1]On 1 February 2006 at Snaresbrook Crown Court the appellant pleaded guilty to two counts of being knowingly concerned in the fraudulent evasion of the prohibition of the importation of goods contrary to section 170(2) of the Customs and Excise Management Act 1979. The appellant had been responsible for the importation of 3.53 kg of heroin in a consignment of vegetables and fish which arrived at Southampton from Bangladesh on 14 February 2005 and for the importation of 0.438 kg of heroin in a consignment of beauty products which arrived at Felixstowe from Bangladesh on 1 March 2005. Neither consignment came into the physical possession of the appellant because both consignments were seized by Customs at the port.[2]On 5 January 2007 a confiscation order was made against the appellant by His Honour Judge Collender QC in the sum of £404,604. A further order was made under section 27 of the Misuse of Drugs Act 1971 for the forfeiture and destruction of the drugs.[3]The appellant appeals against one part of the judge’s lucid judgment in the confiscation proceedings. In determining the value of the benefit to the appellant from the offences he included the sum of £71,424 representing the wholesale value of the heroin. Mrs Drew submitted on the appellant’s behalf that the judge was wrong to do so.[4]Under section 6 of the Proceeds of Crime Act 2002 a court considering whether to make a confiscation order must decide whether the defendant has benefited from the relevant criminal conduct (whether it be general criminal conduct or particular criminal conduct) and, if so, what is the recoverable amount. Under section 7 the recoverable amount is an amount equal to the defendant’s benefit from the conduct concerned unless the defendant shows that the available amount is less than that benefit, in which case the recoverable amount is the available amount (or a nominal amount if the available amount is nil).[5]The appellant failed to show that the amount available to him from his resources was less than the amount of the benefit found by the judge. The issue is whether the judge was right to include the wholesale value of the drugs in the value of the benefit to the appellant from his criminal conduct.[6]Section 76 (4) provides:
“A person benefits from conduct if he obtains property as a result of or in connection with the conduct.”
[7]The first ground on which the appellant was given leave to appeal was that the judge erred in law by holding that the appellant obtained the heroin at the moment of importation and consequently derived a benefit.[8]In the light of the judgments of the House of Lords in R v May [2008] UKHL 28, [2008] 2 WLR 1131 and Jennings v CPS [2008] UKHL 29, [2008] 2 WLR 1148, that is a hopeless point. As the importer and consignee of the goods, the appellant obtained property in the goods in connection with their importation. It is irrelevant that the heroin was seized before it came into his possession because it was already his property.[9]The appellant was given leave to appeal on a second ground, which raises a more serious issue. The ground is that the judge erred in measuring the appellant’s benefit by the wholesale value of the drugs.[10]Section 79 provides that the value at any time of property then held by a person is the market value of the property at that time.[11]Under section 80 the value of property obtained by a person as a result of or in connection with his criminal conduct is to be taken as the greater of(a) the value of the property at the time the person obtained it (adjusted to take account of later changes in the value of money) and(b) the value at the time of the confiscation order of the property, if still held by the person, or any other property which directly or indirectly represents the other part in his hands.[12]In this case the drugs were no longer held by the appellant at the time of the confiscation order and the relevant question was what value was to be put on the drugs at the time when the appellant obtained them.[13]The judge’s finding that the drugs prior to their seizure had a wholesale value of £71,424 was based on evidence provided by an officer of HM Revenue and Customs, Mr Stacey.

The judge recorded the rival arguments and his conclusion as follows:

“The defendant argues that the Crown valuation of the heroin is to be abated to reflect the purchase price of the drugs… In the present case I simply must determine that the value of the property for the purposes of determining the recoverable amount, the benefit, not the available amount or realisable amount…The heroin does not form part of the defendant’s free property. I reject the defendant’s case on this issue and accept the prosecution contention that the benefit is the value of the property in the defendant’s hands when he obtained it. The cost of purchasing the drugs, of which there is in any event no evidence before me, is irrelevant to my determination of the appropriate figure which I judge to be that advanced by Mr Stacey.”
[14]The appellant now advances a more fundamental argument which was not put before the judge. It is submitted that the authorities establish that no value was to be placed on the drugs in calculating the value of the benefit to the appellant from his criminal conduct. This is because market value in section 79 has been taken to mean the value in a lawful market and there was no lawful market in heroin. Counsel on both sides referred us to a number of authorities, none of which were cited to the judge.[15]In Thacker (1995) 16 Cr App Rep (S) 461 the defendant was convicted of being knowingly concerned in the importation of cannabis resin of which the estimated purchase price was £40,000. The goods were seized by Customs at the port of entry. The issue was whether the amount realisable for the purposes of a confiscation order under the Drug Trafficking Offences Act 1986 should include £40,000 representing the value of the drugs. The Court of Appeal answered the question in the negative, holding that:
“… once the drugs had been seized, as they were in April 1992 by the Customs and Excise, they ceased to be property held by the appellant. There was no basis on which it could be held that he was in any position to realise that property as an asset.”
[16]In Dore [1997] 2 Cr App R(S) 152 the defendant pleaded guilty to being knowingly concerned in the importation of cocaine and possessing cocaine with intent to supply. It was inferred that he must have paid £10,800 for the cocaine found in his possession. An order for the forfeiture of the drugs was made under section 27 of the Misuse of Drugs Act 1971. There was a statutory assumption that the defendant’s expenditure of £10,800 on the purchase of the drugs had been met out of payments received by him in connection with drug trafficking. The judge therefore assessed the defendant’s benefit from drug trafficking as including the figure of £10,800 spent on purchasing the cocaine, and that sum was included in the amount of the confiscation order made against him. The defendant argued unsuccessfully that the judge had been wrong to do so in circumstances where the cocaine itself had been the subject of a forfeiture order.[17]The argument for the defendant was put in two ways. First, it was argued that in calculating the proceeds of his drug trafficking the value of the drugs forfeited should be disregarded, because otherwise there would be a double recovery. The flaw in that argument, pointed out by Lord Bingham CJ, was that while the sum of £10,800 was treated as part of the defendant’s proceeds or benefit from his (earlier) drug trafficking, the drugs themselves were not so treated; so there was no double counting in arriving at the defendant’s proceeds from drug trafficking.[18]The defendant’s second argument was that inclusion of the sum of £10,800 in the confiscation order would lead to serious injustice, in that he would have to sell his legitimately acquired home to satisfy the confiscation order, and that in those circumstances the sentencer had a discretion whether to include that amount. Rejecting that argument, Lord Bingham said (at p 160):
“The appellant’s real complaint is that houses which he owns, and which were not the product of drug trafficking, should be realised to pay the confiscation order. But that is the result for which the Act provides and the court has, in our judgment, no discretion to mitigate the intentionally harsh consequences of a confiscation order.”
[19]The relevance of Dore to the present case is that in the course of his judgment Lord Bingham referred to the decision in Thacker, which had been relied upon by the defendant. Lord Bingham said that the decision in Thacker was correct but that it threw no light on the solution to the issue in Dore. After citing what had been said in the judgment in Thacker, and approving it, Lord Bingham added this observation:
“But even if the drugs had still been held by the defendant within the meaning of section 62 (5)(a) of the 1994 Act- and this could well be the position where it was the police and not the customs and excise who seized the drugs- so that the property would on its face be realisable property within the meaning of section 6 (2)(a) of the 1994 Act, the drugs would still be without value as realisable property. That is because, by virtue of section 7 (1) of the 1994 Act to which we have already made reference, the value of the property is to be taken as its market value and the market value must be the market value if the property is sold lawfully. In the case of drugs, it is obvious that the drugs cannot be sold lawfully and therefore they have no market value.”
[20]Two points might, with respect, be noted about this passage. First, Lord Bingham was addressing a hypothetical situation and his observation was not necessary to the reasoning in Dore. Secondly, the issue which he was considering on those hypothetical facts was whether the drugs should be treated as having realisable value equivalent to market value.[21]It is not difficult to see that when Parliament provided that the amount of a confiscation order made against a defendant should be limited to the realisable value of his assets (as it did by section 5 of the 1994 Act, reproducing section 4 of the 1986 Act), it must have meant lawfully realisable (which would therefore exclude value which could only be realised by going into an unlawful market).[22]Perhaps because of the high authority of Lord Bingham, the passage quoted above from his judgment in Dore appears to have been treated in later cases as if the words were statutory and applied in a very different context from that which Lord Bingham was considering.[23]When looking at the benefit historically gained by a criminal from drug dealing, as distinct from looking at what is his realisable property, it is not self-evident that the court should exclude the actual market value of goods in which it was unlawful for the defendant to deal.[24]Tuckey LJ flagged the point in Berry [2000] 1 Cr App R (S) 352, 356, when he said:
“It is clear from Dore that for the purpose of assessing realisable assets, drugs in the defendant’s possession must be valued at nil because they have no market value. However, we observe without deciding that it does not necessarily follow that the same would apply when considering the antecedent question of valuing the defendant’s benefit.”
[25]In Ajibade [2006] EWCA Crim 368, [2006] 2 Cr App R (S) 70, the defendant flew to London from Nigeria. She was searched on arrival and found to be wearing a corset containing a little under 2 kg of cocaine with an estimated street value of around £100,000. In making a confiscation order the judge held that her benefit included the value of the drugs in her possession, which he put at approximately £45,000 representing their wholesale value. On appeal the defendant relied on Lord Bingham’s judgment in Dore for the proposition that the drugs should have been taken to have a nil value. The appeal proceeded on a concession by the prosecution that the principle stated by Lord Bingham applied equally to the calculation of benefit. (Counsel for the prosecution said that the concession was limited to a case where the defendant was a courier, although it is hard to see how that could make any difference). The appeal was therefore allowed and the confiscation order was quashed.[26]In Hussain [2006] EWCA Crim 621 the defendant was convicted of being knowingly concerned in the importation of diamorphine. He was found to be carrying the drugs when he was stopped and searched at Manchester airport. The judge refused to make a confiscation order and the prosecution appealed against his refusal. The judgment of the court, given by Stanley Burnton J, identified the crucial issue as whether the judge’s decision was correct, having regard to the fact that the defendant had in his possession a quantity of drugs of considerable value, if sold illicitly. The judge set out the relevant provisions of the 2002 Act including sections 76(4), 79 and 80. Stanley Burnton J then turned to the question whether the drug had a market value at the time when the defendant acquired it, or at any subsequent time, within the meaning of the Act. He said that the natural meaning of “market value” was value in a lawful market and that there was nothing in the Act or in authority to lead to a contrary conclusion.[27]He cited Lord Bingham’s judgment in Dore and added that, since the words “market value” had been re-enacted in the 2002 Act, Parliament must intend them to have had the meaning given to them in Dore. He also cited Ajibade. In conclusion Stanley Burnton J described the result as not offensive to common sense. He said:
“16. The result is not a result which is in any way offensive to common sense. In a case such as the present, the drugs having been seized, the defendant has received and enjoys no benefit by reason of the drugs themselves. Had he sold the drugs, the proceeds of sale, assuming them to be cash or other property which it is lawful to buy and to sell in this country, would have been “a benefit”, which would have been the subject of confiscation proceedings. Equally, if it could have been shown that the drugs in this case had been purchased with property which was itself the proceeds of drug trafficking, that property, which would normally be a sum in cash, would have been his benefit for the purposes of the Act. However, none of those circumstances applied in the present case.”
[28]What may be more difficult to defend in terms of common sense are the anomalies which now exist in this part of the law. One oddity is that if a person smuggles cigarettes which are seized at the point of entry, he is taken to have obtained a benefit equal to the duty evaded (Cadman Smith [2002] 2 Cr App R (S) 37) so that a criminal might appear to be better off, in terms of protecting his assets, by dealing in drugs rather than tobacco. However, that apparent oddity may be off-set by another. If a defendant has a criminal lifestyle, as defined by section 75, the statutory assumptions set out in section 10 have to be applied unless any assumption is shown to be incorrect or there would be a serious risk of injustice if the assumption were made. Under section 75 (2) a defendant has a criminal lifestyle if, among other things, his offence is specified in schedule 2 which, in broad summary, includes drug trafficking offences. One of the statutory assumptions (as in Dore) is that expenditure incurred by the defendant within 6 years prior to the commencement of proceedings for the offence was met from property obtained by him as a result of his criminal conduct. By that circuitous route, if a defendant is caught in possession of drugs, market evidence can be used to infer what he must have paid for the drugs and thereby attribute to him a past benefit equal to (and based upon) the inferred purchase price of the seized drugs, although market evidence cannot be used to place a direct value on the drugs held by him (since the drugs themselves are deemed to be without market value). This presupposes, of course, that there would be no injustice in applying the assumption; but the court saw no such injustice in Dore. This, however, fits uneasily with the court’s expression at the end of Hussain of its view about the common sense of the result.[29]On the other hand, there would be stronger ground for objection if the prosecution were able to pursue both the direct and indirect routes so that the finding of drugs could generate the finding of a double benefit in the form of the value of the goods and also their inferred purchase price (statutorily assumed to be the proceeds of earlier crime). That would be in substance a kind of double counting of the kind which was alleged in Dore, but which was not found in Dore precisely because the seized drugs were not included in the calculation of benefit. Hussain prevents double counting of that kind. An alternative way of preventing such double counting, if Hussain had been decided differently, would be to refuse to apply the statutory assumptions in relation to the inferred purchase price of the drugs where its application would otherwise produce such double counting and be unjust.[30]In Rose [2008] EWCA Crim 239 the issues before the court were different, but we mention the case because in the course of giving the judgment of the court Richards LJ considered Hussain. The court regarded it as establishing that under the 2002 Act illegal drugs are to be treated as having no value when applying sections 79 and 80, whether for the purpose of assessing a defendant’s benefit from obtaining drugs or for the purpose of assessing the amount available to him at the time of the confiscation order.[31]In our judgment we are bound by the decision in Hussain, which is directly in point, to hold that the judge was wrong in law when he took the direct route of finding that the appellant had obtained a benefit worth £71,424 by obtaining the heroin which was the subject of his offences.[32]If the prosecution had proceeded differently, the judge might have taken the indirect route of inferring as a matter of fact that the appellant must have spent £x in purchasing the drugs and that the £x spent on drugs came from criminal conduct. This route would have been available to him, since the judge found that by reason of his pleas of guilty the appellant had a criminal lifestyle.[33]However, it is not possible for this court to uphold his confiscation order on that basis, because, as the judge said in his judgment, he had no evidence on which to find what the purchase price had been. There was evidence about the wholesale value of the goods, but it would not be right for this court, in the absence of evidence on the subject, to infer that this equated to what the appellant would have paid to his Bangladeshi supplier or suppliers.[34]We conclude that this appeal must be allowed and the amount of the confiscation order reduced by the sum of £71,424.

Cited in 2 later judgments