Smith & Anor, R. v [2008] EWCA Crim 2373

Case No 200801164/1167/D4[2008] EWCA Crim 2373
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Venue Royal Courts of JusticeDate Wednesday, 15 October 2008
Strand
London, WC2A 2LL
B e f o r e:
LORD JUSTICE TOULSON
MR JUSTICE GRIFFITH WILLIAMS
THE RECORDER OF WINCHESTER
(Sitting as a Judge of the Court of Appeal Criminal Division)
Between
R E G I N ACrownv
Between
JASON EDWARD SMITH AND DARREN ROY CHRISTIAN
Computer Aided Transcript of the Stenograph Notes ofWordWave International LimitedA Merrill Communications Company190 Fleet Street London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
Mr J Sidhu appeared for Appellant SmithMr P R Hynes appeared for Appellant ChristianMr D Barnard appeared for Crown
J U D G M E N T

LORD JUSTICE TOULSON:

[1]On 3 November 2006 at Isleworth Crown Court the appellant Christian pleaded guilty on rearraignment to possession of a class A drug, heroin, with intent to supply. On 30 November 2006 at the same court the appellant Smith was convicted of the same offence. On 5 December 2006 Smith was sentenced to 13 years' imprisonment and Christian to ten and a half years' imprisonment. On 18 January 2008 confiscation orders were made against Smith and Christian in the sums respectively of £800,106.38 and £91,392.56. In the case of Christian the judge set a default period of imprisonment of five years. They were each also made subject to a financial reporting order which was to last for 15 years.[2]They appeal against the confiscation orders by leave of the single judge. They also renew their applications for leave to appeal against the financial reporting orders.[3]On the evening of 28 April 2006 Smith drove Christian to Shepherds Bush where they left their car and met a third man. That man was under police surveillance. He handed them a bag before walking away empty handed. Smith and Christian drove away, but were stopped by the police later that evening. Shortly before they were stopped Christian was seen to pull the bag from the back into the front of the car. The bag contained just over 2 kilogrammes of heroin at a purity of 100 per cent.[4]The judge dealing with the confiscation hearing found that each appellant had a criminal lifestyle. He was therefore required to apply the statutory assumptions set out in section 10 of the Proceeds of Crime Act 2002 in determining their benefit from their criminal conduct. The issue which caused the single judge to grant leave arises from the way in which the judge applied the third statutory assumption.[5]The relevant words of the section are as follows:
"10(1) If the court decides under section 6 that the defendant has a criminal lifestyle it must make the following four assumptions for the purpose of -- (a) deciding whether he has benefited from his general criminal conduct, and (b) deciding his benefit from the conduct. (2) The first assumption is that any property transferred to the defendant at any time after the relevant day was obtained by him -- (a) as a result of his general criminal conduct, and (b) at the earliest time he appears to have held it. ... (4) The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct. ... (6) But the court must not make a required assumption in relation to particular property or expenditure if -- (a) the assumption is shown to be incorrect, or (b) there would be a serious risk of injustice if the assumption were made."
[6]We have included section 10(2) in the passage cited, because, but for previous decisions of this court, the prosecution would have wished to submit that the heroin obtained by the appellants was property acquired as a result of their criminal activity. However in a line of authorities, leading to and including Hussain [2006] EWCA Crim 621, it has been held that illegally held drugs are to be treated as having a nil value for the purposes of determining under the Act not only the amount of an offender's available assets, but also the amount of any benefit obtained from his criminal conduct.[7]However, the courts have been willing to allow prosecutors to adduce market evidence relating to such goods, which are deemed to be valueless for the purposes of directly assessing the offender's benefit from crime, in order to show what the offender probably paid to acquire the drugs, and that amount can be regarded as an expenditure which, by applying the third assumption, may be inferred to have come from the proceeds of prior criminal dealing.[8]There is no doubt that this is an artificial route, but it is the route which the prosecution was constrained to follow in this case. So the prosecution relied on the third assumption and argued that the expenditure incurred by each defendant in the acquisition of the drugs was to be treated as expenditure from property obtained as a result of their prior criminal conduct. So far so straight forward, or relatively so. However the prosecution sought to argue that the amount of the expenditure incurred by each appellant was the full probable purchase price of the drugs.[9]The judge in her ruling on the point recognised at stages that the first assumption was not open to the court and that the matter had to be looked at within the focus of the third assumption, but in her reasoning she rather wavered between the two. She said as follows:
"Following a hearing on 10 December 2007 both prosecution and defence now agree that the third assumption applies and not the first assumption. In a case such as this, where a substantial quantity of class A drugs are involved, it is inconceivable that the drugs would not have been paid for before they were seized by the police. It would have been sold on probably at a substantial profit. The drugs were in the joint possession of Christian and Smith at the time they were seized. The value of the drugs is a benefit which has been obtained."
[10]She went on at a later stage to say:
"I take the view that both men were joint and equal partners and therefore each defendant is to be regarded as having received the whole of the benefit of £82,500 and that apportionment is not appropriate."
[11]Although having first correctly directed herself that she must look at the matter in terms of the third assumption, the reasoning which followed was based on a conclusion that both men obtained the property jointly and that it had a value of £82,500. This would have been an entirely acceptable approach if she had been able to proceed under the first assumption, but she was not. She did not focus on the question which had to be focused on under the third assumption, which was what expenditure each defendant had incurred.[12]The rationale behind the third assumption is not difficult to see. It is to be assumed in the case of somebody with a criminal lifestyle that money expended by him has come from the fruits of prior criminality and the burden is placed on the offender to show otherwise. But the rationale and fairness of it depend on it being established what expenditure that offender has in fact incurred. As a matter of plain common sense they cannot both have expended £82,500 for drugs the price of which was found to have been £82,500.[13]On behalf of the prosecution it was submitted that if two people enter into a single joint venture to buy and sell a quantity of drugs, and if it is known to the court on the evidence that, for the sake of argument, one expended 90 per cent of the purchase price and the other expended 10 per cent, each is deemed in law to have expended 100 per cent. No direct authority was cited to support that proposition.[14]Mr Barnard referred us to the observations of the House of Lords in May [2005] UKHL 28, that where property is obtained, by offenders jointly each has a joint interest in the full amount of the property so obtained and a confiscation order can therefore properly be made against each for the full amount. That is a different matter. What we are concerned with in this case is not questions of title to property which was obtained, but questions of fact about the source of funds used to obtain property.[15]It was also argued by Mr Barnard that his submission was supported by ordinary principles of partnership law. The argument went as follows:
"The defendants were partners in a joint criminal venture. Therefore, before the purchase money was expended, it must have been notional partnership money in which each partner had a full joint interest and, therefore, the amount was expended in full by each of them."
[16]We find that argument contrived and it produces a consequence which is contrary to common sense. We add, as a rider, that Mr Barnard accepted that there was no evidence in this case of any prior partnership in crime giving rise to some joint receipt of assets subsequently applied for the present purchase.[17]The judge was in the difficulty that she had no direct evidence as to how much was in fact expended by either appellant. However, she found that they were both equally involved in the joint venture. It was open to her in those circumstances to have inferred, not by reason of any presumption of law, but as a simple inference of fact in the absence of contrary evidence, that each had expended half the purchase price. The appellants in the skeleton arguments prepared on their behalf accept that proposition. They do not seek a reduction in the finding of benefit below a figure based on each having expended half the full purchase price as found by the judge.[18]In our judgment the judge was wrong to apply the third assumption as she did, because the evidence did not enable her to conclude that each defendant had expended the full purchase price of the drugs. If, contrary to our view, that were the proper construction of section 10(4), then to apply it in the way for which the prosecution has contended would, in our judgment, give rise to a serious risk of injustice, because it would produce a result which is illogical and flies in the face of common sense. We therefore allow the appeal to the extent that the benefit figure assessed by the judge must in each case be reduced by half of £82,500. This will not affect the amount of the confiscation order in either case.[19]In imposing a default sentence of five years' imprisonment the judge exceeded her statutory powers. The Proceeds of Crime Act 2002 section 36 applies the relevant provisions of section 139 of the Powers of Criminal Courts (Sentencing) Act 2000 for the purpose of determining the maximum default period. Under those provisions the maximum default period in the case of Christian was two years. That is the maximum where the amount of the confiscation order does not exceed £100,000. In this case the amount of the confiscation order was only a little short of £100,000. We will therefore quash the five year default term and substitute a two year default term. It is unfortunate that the judge's attention was not brought to this error on her part by counsel on either side at the time when she dealt with the matter.[20]Finally, there are the renewed applications for leave to appeal against the financial reporting orders made under section 76 of the Serious Organised Crime and Police Act 2005. Neither of these appellants is a man of good character. Smith had previous convictions for a number of offences of possessing a prohibited weapon, including an automatic weapon and shortened shotgun. He received what, on the face of it, seems the remarkably light sentence of 12 months' imprisonment. Counsel explained this on the basis that there was a Newton hearing in which the court accepted that he was on his way to dispose of the weaponry at the time when he had the misfortune of being arrested. Christian has a number of previous convictions for offences of dishonesty and also for unlawful possession of ammunition or offensive weapons.[21]The single judge was unimpressed by this complaint. Otherwise he would have granted leave to appeal. We share the single judge's view. In our judgment, there is no arguable cause for complaint about the registration orders made in this case and the renewed applications for permission to appeal are refused.[22]THE COURT ASSOCIATE: One little matter. The confiscation order was ordered to be paid within three months of the date of sentence.

LORD JUSTICE TOULSON: That is not affected. There is no reason to make any alteration to that, is there?

[24]MR HYNES: No. Essentially, as your Lordship rightly said, the benefit figure was reduced in Mr Christian's case from £145,718.36 to £100,468.36. The reduced figure is still in excess of the realisable assets of £91,000, so the confiscation order remains as it was.

LORD JUSTICE TOULSON: Quite so. Thank you very much.