England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice The Strand London WC2
		28th July 2000

1. MR JUSTICE RICHARDS: On 21st November 1995 in the Crown Court at Nottingham this appellant pleaded guilty to being concerned in offering to supply a class B controlled drug. On 20th March 1996 he was sentenced to two years' imprisonment. On 14th January 1997 a confiscation order in the sum of £59,965.16 was made against him by His Honour Judge Davidson QC under the Drug Trafficking Act 1994. He appeals against that order by leave of the single judge.
2. There has been a most regrettable delay since leave to appeal was granted but the parties are not to blame for that delay. One consequence of the delay is that the appellant's counsel at one point thought of a further ground of appeal for which the court's leave was sought but has had time on further consideration to decide not to pursue that ground before us today. The issue raised was whether the judge in granting adjournments of the confiscation order proceedings on three occasions in 1996 failed to specify a period of postponement in accordance with section 3 of the 1994 Act. The reason why the matter has not been pursued is that counsel accepts that in the light of the judgment of this court in R v Lingham Times Law Reports, 2nd June 2000, there is an insuperable obstacle in his path. On the facts here it is clear that in adjourning the case on the three occasions in 1996 the judge was exercising inherent powers of the court and was not constrained by the specific limitations laid down for the exercise of power under section 3. We are therefore satisfied that counsel was right not to pursue the point.
3. We turn to consider the substantive issues which relate to the assessment of the proceeds of drug trafficking under section 4 of the Act. Since the provisions of section 4 are essential to an understanding of the case, we quote them at the outset:

"(1) For the purposes of this Act-

(a) any payments or other rewards received by a person at any time (whether before or after the commencement of this Act) in connection with drug trafficking carried on by him or another person are his proceeds of drug trafficking;

and

(b) the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards.

(2) Subject to subsections (4) and (5) below, the Crown Court shall, for the purpose-

(a) of determining whether the defendant has benefited from drug trafficking; and

(b) if he has, of assessing the value of his proceeds of drug trafficking, make the required assumptions.

(3) The required assumptions are-

(a) that any property appearing to the court-

(i) to have been held by the defendant at any time since his conviction, or

(ii) to have been transferred to him at any time since the beginning of the period of six years ending when the proceedings were instituted against him, was received by him, at the earliest time at which he appears to the court to have held it, as payment or reward in connection with drug trafficking carried on by him;

(b) that any expenditure of his since the beginning of that period was met out of payments received by him in connection with drug trafficking carried on by him; and

(c) that, for the purpose of valuing any property received or assumed to have been received by him at any time as such a reward, he received the property free of any other interests in it.

(4) The court shall not make any required assumption in relation to any particular property or expenditure if-

(a) that assumption is shown to be incorrect in the defendant's case; or

(b) the court is satisfied that there would be a serious risk of injustice in the defendant's case if the assumption were to be made; and where, by virtue of this subsection, the court does not make one or more of the required assumptions, it shall state its reasons."

4. Although the assumption under subsection (3)(a) refers to the period of six years before the proceedings, the prosecution in this case relied on the more limited period of November 1992 to March 1995. That was because of the nature of the offence and its background.
5. The case concerned the supply of a large quantity of cannabis resin brought in from Spain. The appellant was arrested on 7th March 1995 at the point of hand over of the drugs. There were a number of co-accused. The main co-accused was a man called Goring who was sentenced on conviction to three-and-a-half years' imprisonment and was also the subject of confiscation proceedings. The police had been keeping Goring under observation since soon after his release from prison in November 1992, although his first recorded contact with the appellant was in December 1993. It was those facts which led the prosecution to rely on the period November 1992 to March 1995 as the relevant period for the assessment of the proceeds of drug trafficking for both those defendants.
6. By the time of the confiscation hearing in the case of the appellant there were four main areas of dispute. All but one were resolved in the appellant's favour by the judge. The appeal relates to the one resolved against him. It concerned income of £58,858.98 which was referred to as "motor trading income" and which the appellant claimed to have received during the relevant period from a motor dismantling and scrap metal business which traded mainly for cash. Of that sum the prosecution conceded that £3,000 was the appellant's legitimate business income. That concession was based on the account given by the appellant when interviewed by the police when he had said that he had earned a total of £3,000 from trading in second-hand motor vehicles but that he was not involved in the scrap yard business which he had transferred to his son in 1988. In an affidavit dated 11th March 1996 he gave further details of that transfer saying that the sale to his son had been made in order to avoid a costly matrimonial settlement. Taking into account the prosecution concession, the dispute related to the balance of £55,585.98 out of the motor trading income.
7. The judge had before him a number of documents. They included two section 11 statements of matters considered relevant by the prosecution. Those statements included copies of the bank statements relating to the appellant's only current account - an account with National Westminster Bank at Retford in his sole name. The statements showed deposits of sums ranging from the very small up to a number of larger sums of £1,000, £2,000 or £2,500, and a number of cheque payments for tens or hundreds of pounds. The account had a modest credit or debit balance throughout the period. The appellant's case was that he traded mainly for cash and needed a large cash float but from time to time surplus cash would be paid into his bank account thus explaining the larger payments into that account. The payments out consisted of household bills plus business expenses and transfers to deposit and building society accounts.
8. The defence documents before the judge consisted primarily of two accountants' reports. The first was by a Mr Lister and the second by Mr Barraclough who replaced Mr Lister when Mr Lister fell ill. Both were from the firm of Haines Watts. Mr Lister stated in his report that from evidence contained in the scrap yard books of the business and from paying-in slips over the period he had calculated sales income generated in cash by the business over the period as amounting in total to the sum of £58,858.98. The books showed that sales were being recorded well before November 1992, a point relied on by counsel for the appellant in support of the proposition that the sales were not disguising proceeds of drug trafficking.
9. Mr Lister also examined scrap metal sales to a specific firm, an established dealer called McIntyres which, it is pointed out, were also recorded well before November 1992 and were themselves supported by printed invoices. During the relevant period those sales amounted to a sum in excess of £18,000. Mr Barraclough's report included a letter from McIntyres confirming that it had had business dealings with the appellant for many years.
10. Mr Lister described the operation of the bank account as being entirely in keeping with its being the appellant's main business account. He included an appendix demonstrating, as he put it, a close correlation between sales and cash deposits in the bank account - by which it would seem he meant that the amount of cash provided by sales and the timing of sales were capable of explaining the deposits. On that basis he suggested that there was sufficient evidence to support the premise that the appellant's business activities were traceable as the cash deposits in the bank account.
11. Mr Barraclough's report provided additional evidence of legitimate trading by the business. We have already mentioned the McIntyres letter. There were other letters from business associates. There were by way of further example copies of invoices from a firm called Buchans relating to the sale or collection of scrap and matching certain cheque payments appearing in the bank statements.
12. In addition to the accountants' reports there were a number of witness statements from employees of various firms or organisations that had dealings with the business and which vouched for the fact that the business had been engaged in genuine trading for many years and that the appellant had always been considered to be the proprietor or principal of the business.
13. Those were the main documents before the court. In addition the judge heard oral evidence from the appellant himself, from his son Paul and from the accountant, Mr Barraclough. He expressly accepted the evidence of Mr Barraclough as accurate and fair to the limits of his knowledge but went on to say that in the light of the statutory assumptions under section 4 the credit of the other witnesses and in particular of the appellant was a crucial matter. He described the appellant as "cutting a very poor figure" in terms of accuracy and truthfulness and as "a most unconvincing witness". He gave as examples the appellant's evidence about the sale of the scrap yard business to his son to avoid his ex-wife "getting her hands on it" and his evidence that what he had told the police in interview about deriving no income from the business after the sale was a lie made for Inland Revenue purposes. The judge was not prepared to accept what the appellant said in evidence unless it was supported from elsewhere. In relation to the son Paul the judge said that his testimony had to be approached with caution and he looked for other evidence to support him as well.
14. On coming to that part his ruling which dealt with the dispute over the motor trading income, the judge referred first to the prosecution's figure of £3,000 and the basis upon which that figure was accepted by the prosecution. He went on:

"The alternative figure of £58,858.98 comes from the first report of Haines Watts and can be found summarised at Appendix A1 as 'Sales Ledger Summary', the four figures for the years 1992 to 1995 are there set out and total that amount. The breakdown is at subsequent pages in the report and it seems to have been prepared from the usual sort of scrapdealers' books which appear in this case to be rough, as one would expect, but genuine. It is right that the total over the period concerned is not out of the way or outrageous. This is the sum that the defendant claims that he has received from the business between November 1992 and March 1995 which is accepted to be the relevant period. But at this point, his own untruthfulness combines, to my mind, with the statutory assumptions to make insuperable difficulties for him bearing in mind that the burden of proving what he received is on his shoulders. Specifically, (A), he was not able to say at all what amounts he had, in fact, taken out of over the period. At one stage in his evidence, with a hint perhaps of desperation, he suggested that he might have had all £58,858 but this is manifestly absurd and falls with the weight of its own absurdity. (B) He kept no documents whatever for what he drew out from the business or says he drew out. It might be said by naive people like myself that such documents were surely necessary for tax purposes but the defendant had to admit that over the period he prepared no tax returns and could, therefore, derive no help from any Inland Revenue figures. In these circumstances, his unsupported assertion that he had substantial sums from the business, in the light particularly of the other evidence as well, is wholly unconvincing. Any figure which I could derive from his evidence would be the merest guess work. At the end of it, the defendant has failed to prove, as he must, what if anything he got out of the business which, for a long time, he protested was no longer his. I am driven back on the figure he gave to the prosecution and which they are content to accept of £3,000 and I find that that and no more represented his profit."

15. The judge's rejection of the appellant's case on that issue but his acceptance of the appellant's case on the other disputed issues led to adjustments to the overall income and expenditure figures before the court and to a final figure for the confiscation order of £59,965.16.
16. The detailed grounds of appeal are extensive but can without unfairness be reduced to a number of main points. First, it is submitted that there was a fallacy or error in the judge's approach to the application of section 4 of the Act. The statutory assumption in section 4(3)(a) is that property transferred to the appellant in the relevant period was received by him as a payment or reward in connection with drug trafficking. The only relevant transfers here were the sums deposited in the bank account. The correct question was therefore whether the appellant had shown the bank deposits had come from legitimate business dealings. It is submitted that the judge asked a different and erroneous question, for example as to what the appellant's drawings were and what his income was.
17. We can see no such error in the judge's approach. What he focused on and correctly focused on was whether the appellant had shown that any sums transferred to him during the relevant period, in particular into the bank account, had come from legitimate business dealings so as to displace the statutory assumption. For that purpose he had to ask himself how much of the sales income of the business had been transferred to the appellant. How much, to use his words, had been taken out of or drawn out of the business? It was in that connection that he pointed to the absurdity of the appellant's suggestion at one point in evidence that the entire amount of the motor trading income, £58,858.98, had been taken out by the appellant. It was absurd because that figure was the gross sales income of the business, making no allowance for the expenses of the business. The gross sales income was plainly not an amount available in its entirety for transfer out of the business.
18. This leads to a difficulty underlying the appellant's case more generally. In reality it was only the profit of the business that could have been available for transfer whether to the appellant or to his son or to anyone else, but there was no attempt to calculate that sum. The defence experts calculated the sales income but did not calculate the expenditure. No nett figure was put forward. The nearest one had to a profit figure was the £3,000 that the appellant had given in his police interview. Yet the appellant's case before the judge, as before us, was that he should be given the benefit of the whole of the £58,858.98 for the purpose of the assessment. That simply ignored the unquantified element of expenditure. It is plain that the case for the full sum could not succeed. Yet once that case was rejected there was no other figure for the court to fall back on, apart from the appellant's own figure of £3,000. Without a specific figure and evidence to support it, and in circumstances where the burden of proof was on the appellant, the case was doomed to failure.
19. Leaving that aside, crucial though it is, we turn to consider the second main complaint about the judge's ruling. It is said that in rejecting the case put forward the judge ignored or wrongly rejected the accountants' evidence concerning the legitimate trading activities and sales income of the business and that in the light of that evidence the judge should have held that the assumption had been shown to be incorrect under section 4(4)(a) or should have been satisfied under section 4(4)(b) that there would be a serious risk of injustice in the appellant's case if the assumption were to be made. We reject that submission too. It is plain that the judge far from ignoring the accountants' evidence took it into account and accepted its accuracy. He also accepted that the total sales income over the relevant period was not out of the way or outrageous. He went on, as he was required to do, to examine how far that took the appellant. The existence of a legitimate business producing genuine trading income did not avail the appellant unless the appellant could show that transfers to him derived from that trading income. But at that point the appellant's case broke down and broke down because the judge did not find the appellant to be a credible witness and did not consider there to be sufficient independent support for the appellant's claim. The appellant was unable to give particulars of sums transferred to him from the business. There were no documents showing it. Counsel says that one cannot expect that in a cash business, but the judge's observation that documents were necessary for tax purposes was a legitimate one. In any event, the important point was that the judge was left with the appellant's unsupported assertion that he had received substantial sums from the business. There is no sufficient support for that assertion in the accountants' evidence to which we have referred, that the cash sales income was capable of explaining the deposits in the bank account. The position is therefore that the judge simply did not find the appellant's evidence on the point to be credible; assessment of credibility was a matter for the judge and in the light of his assessment the judge was entitled to reach the conclusion he did. Thus it was fully open to the judge on the evidence before him to hold that the statutory assumption had not been shown to be incorrect and for him not to be satisfied that there would be a serious risk of injustice if the assumption were made.
20. We should mention that for the purposes of this appeal counsel for the appellant has produced additional evidence in the form of a statement from an employee of McIntyres to support the contention that the scrap yard business was a cash business and a statement from a police officer who has known the appellant for many years and confirms that the business appeared genuine. There has been no formal application for that evidence to be admitted by this court on appeal. We do not need however to decide the formal issues raised because we have considered the material and we take the view that it does not in any event undermine the judge's reasoning or the judge's conclusion.
21. Finally, a separate point made is that it was unfair to apply the statutory assumption and to make a confiscation order in relation to the whole of the period November 1992 to March 1995. It is said that it was accepted by the prosecution that Goring was the principal offender and there was no known contact between Goring and the appellant until December 1993. There was no evidence that the appellant was involved in any successful drugs importation or supply prior to the one for which he was arrested and he had no previous convictions in relation to drugs. The evidence to which we have already referred was that the appellant was involved in running a genuine business throughout and indeed before the relevant period. It is said that the pattern of payments into the bank account does not look like the proceeds of drug trafficking and in all those circumstances it is suggested that, at the very least, the judge should not have found against the appellant in relation to the period prior to December 1993 or January 1994.
22. In our view that point cannot succeed in the light of the fact that the statutory assumption refers to the period of six years. By going back only to November 1992 the prosecution limited the extent to which, pursuant to the statutory assumption, the appellant was required to show that his income was legitimate. There was no unfairness in that course. As to the appellant's failure to discharge the burden upon him in relation to the period in question, we have already said everything we need to say. We do not consider that the judge was in error in applying the statutory assumption in respect of the entirety of the relevant period.
23. For the reasons we have given the challenge to the confiscation order fails and the appeal is dismissed.