England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice The Strand London WC2A 2LL
		30th July 2002

1. MR JUSTICE MCCOMBE: On 1st July 2002 at the Crown Court at Manchester before His Honour Judge Hammond the appellant entered pleas of guilty to two counts of failing to disclose knowledge or suspicion of money laundering contrary to section 52(1) of the Drug Trafficking Act 1994. On the same day he was sentenced by the learned judge to six months' imprisonment on the charge comprised in count 2 of the indictment and to three months concurrent on count 3. He pleaded not guilty to one further similar charge on count 4 of the same indictment and to a further count, count 1, alleging an offence of assistance to another to retain the benefit of drug trafficking. Those counts were ordered to remain on the file.
2. He now appeals against the sentence by leave of the single judge.
3. The salient facts are these. The appellant is now 43 years of age and was qualified as a solicitor, obtaining such qualification in 1984. He established his own practice called Drummonds in 1991. It was based in Chester and he was sole principal, assisted by certain people as qualified solicitors who were called salaried partners. About 90 per cent of the practice's work was conveyancing, the balance being made up with personal injury litigation work.
4. In about 1993 or 1994 he met a man called Gibson through their mutual interest in motoring racing. Gibson was an apparently successful businessman with a variety of commercial interests. One of Gibson's business associates was a man called Halford. The appellant began to act as a solicitor for Gibson in relation to litigation in which the latter was involved. They also became friendly through those professional dealings and through their common hobby.
5. In March 1998, however, Gibson and Halford were arrested at Birmingham Airport in possession of cocaine valued at about £5 million. They denied all knowledge of the drugs. The appellant was initially instructed to act for both Gibson and Halford in the criminal proceedings, although, later on, Halford became represented by other solicitors.
6. Some six months after the initial arrest of the two men the Crown introduced into the case a charge of conspiracy to import drugs between October 1996 and March 1998. In other words, they were alleging at this stage a wider conspiracy than simply the one-off circumstances leading to the arrest at Birmingham Airport in March. In this period it was alleged that Gibson and Halford had undertaken in excess of 30 illicit trips between Dusseldorf and the United Kingdom for drug trafficking purposes. Evidence was served by the Crown in the ensuing weeks and months dealing with the finances and lifestyle of Gibson and Halford. This disclosed a high and extravagant standard of living.
7. At this stage the appellant, who had hitherto been, as he put it, convinced of Gibson's innocence began to have doubts about the matter. He turned his attention to various matters in which he had been involved, including the two transactions which were the subjects of counts 2 and 3 on the indictment.
8. Count 2 concerned a sum of £60,000 in cash given by Gibson to the appellant in April 1997. £10,000 of that sum was paid on account of costs of on-going litigation. The remaining cash sum, £50,000, was paid by Gibson as an investment by him in a proposed branch office in Preston to be run by the appellant in return for which Gibson was to have a share in the profits of that office. We make no comment as to whether that fell properly within the proper rules of professional practice of solicitors, although we must admit to having doubts in that regard. However, Gibson apparently changed his mind and asked for the return of the money, the £50,000, for investment purposes. That sum was duly returned, as we are told, by cheque.
9. Count 3 concerned another sum of £10,000 paid by Gibson in May 1997 into a company called Talking Compensation Limited. This was a company set up to solicit personal injury compensation business for the solicitor's practice. Gibson, again, offered to invest this sum in the business. The venture was unsuccessful and the money was consumed in advertising and other costs. The business became dormant in November 1997.
10. Section 52(1) of the 1994 Act provides that a person is guilty of an offence under this section if:

"(a) he knows or suspects that another person is engaged in drug money laundering,

(b) the information, or other matter, on which that information or suspicion is based came to his attention in the course of his trade, profession, business or employment, and

(c) he does not disclose the information or other matter to a constable as soon as is reasonably practicable after it comes to his attention."

11. Subsection (2) provides:

"Subsection (1) above does not make it an offence for a professional legal adviser to fail to disclose any information or other matter which has come to him in privileged circumstances."

12. The "privileged circumstances" are explained and defined more fully in subsection (8) of the section which we do not need to read. Suffice it to say, as we would mention hereafter, the appellant became concerned and to some extent confused by the proper interpretation of the legislation.
13. In October 1998 the appellant became aware that he might, by reason of the transactions we have mentioned, have been used for the purpose of money laundering. He had received some literature from the Law Society about the money laundering legislation. He consulted it. He came to the conclusion that as the transactions were in the past Gibson could not be described as a person who is engaged in drug money laundering within the meaning of section 52, which he considered to connote continuing present dealing. He further had doubts, by reason of the provisions we have mentioned, about how his duties under the section were to be reconciled to his duties to Gibson and Halford, his client and former client respectively. He reached the personal conclusion that he was under no duty of disclosure. However, he took no advice, whether of a professional nature from the Law Society or, at that stage, legal advice from a professional colleague as to the proper interpretation of the section.
14. In April and May 1999 Gibson and Halford were tried on the offences relating to drug trafficking and were convicted. Some of the evidence, apparently, focused upon the deals between Gibson and the appellant.
15. After the trial the appellant took legal advice from a respected firm of Manchester solicitors, where one of the partners advised the appellant that his construction of section 52 was the correct one and that, accordingly, there had been no duty to report.
16. In October 1999 the appellant was arrested and interviewed on various occasions between then and the charge being made against him in December 2000. It is right to say that in the early interviews he was not entirely frank with the officers concerning the underlying facts of the charges. Counsel has submitted to us that such lack of frankness was occasioned by the circumstances of his arrest and early confusion when questioned without the benefit of advice.
17. At a pre-trial review in January 2002 counsel for the appellant invited the learned judge to direct a preliminary hearing under the Criminal Procedure and Investigations Act 1996 with a view to securing a ruling on the proper interpretation of section 52, indicating that if adverse rulings were made guilty pleas to some of the counts would ensue. The learned judge declined to take this course, deciding that he would rule upon any such matters at trial. There continued to be legal disputes between the appellant's representative and the Crown which led, in the end, to the appellant pleading guilty to counts 2 and 3 of the indictment, with counts 1 and 4 being left on the file.
18. The basis of the plea was as follows. As it is relied on substantially by counsel this morning we read it in full:

"1. When the prosecution broadened the ambit of the case against Mr Gibson, in October 1998, by alleging a conspiracy between October 1996 and March 1998, as opposed to one substantive charge of importation in March 1998, so far as Mr Duff was concerned, this substantially affected his view of the case; in particular, in his mind, it called into question for the first time the possibility that the financial transactions that Mr Gibson had been involved in in 1997, which are the subject matters of counts 2 and 3, may him suspicious, i.e drug related.

2. Mr Duff was a solicitor who rarely dealt with criminal law; his practice involved more or less entirely conveyancing and personal injury work. He was unfamiliar with the details of the provisions of the Drug Trafficking Act 1994.

3. When Mr Duff had occasion to have suspicions (in the circumstances set out in paragraph 1 aforesaid), he looked for the first time at the 1994 Act. His understanding was that:

(a) a suspicion in October 1998 did not necessitate a report by him of past activity in March and April 1997 (see section 52(1)(a));

(b) as he was acting for Mr Gibson, and an essential part of the preparation of his case involved a detailed overall review of his financial position and the many transactions in which he had been involved, client confidentiality and/or privilege excused him from an obligation to report, under section 52.

(c) he now accepts that his then interpretation of section 52 was erroneous. He submits that it is not the easiest or clearest of provisions to understand. He accepts that his cursory look at the Act was insufficient and that (with the benefit of hindsight) he could and should have obtained clarification thereof.

4. Following Mr Gibson's conviction, and as a result of matters which had emerged during the course of the trial, Mr Duff immediately sought advice from his present solicitor ... as to whether -- in the light of Mr Gibson's conviction -- section 52 placed on obligation upon him to report financial transactions in which Gibson, to his knowledge, had been involved in 1997.

5. He was advised by [that solicitor] (who will, if necessary, confirm this on oath) that there was no such obligation if the suspicion on Mr Duff's part substantially postdated the relevant financial transactions; i.e Mr Cooper's interpretation of section 52(1)(a) was the same as Mr Duff's had been."

19. The appellant is obviously a man of hitherto previously good character. He is married with children aged eight, four and one. Following his arrest, he was subject to substantial adverse and sometimes inaccurate publicity. There were 15 months between his arrest and charge and a further 18 months until the matter came to court. His legal practice, we have been told, collapsed in October 2000 principally because of irregularities arising out of this case. One of which we would, however, mention was the practice of putting some of this money into assumed names for the purpose of carrying out the transactions envisaged.
20. In view of the legal dispute the learned judge was prepared to treat the appellant as a man who had given an early indication of an intention to plead guilty. The learned judge gave such credit and credit for the relatively small amounts, as he put it, of the money involved, but he said that a clear message had to go out to solicitors that offences of this type would not be overlooked. He, accordingly, passed the sentence he did.
21. On this appeal it has been submitted on the appellant's behalf, in an able argument by counsel that this case did not pass the custody threshold for an offence under this section. We disagree. It seems to us quite clear that in a case of this sort, where a solicitor has been drawn, albeit unwittingly, into this type of offence, it is important to look at the underlying facts of the case.
22. Here was a case where a solicitor received £70,000 in cash in the space of a month. He became concerned about the matter in October 1998. The money had been put in part into fictitious names. He did not seek advice immediately in October 1998 but only sought it in April 1999. Clearly for the six months from October 1998 to April 1999 he was courting a risk that his suspicions were reportable. Thereafter he can perhaps claim some benefit for acting under legal advice. He was not, as we have said, entirely co-operative with the authorities at his initial arrest. We have set out the circumstances advanced to excuse that. Money laundering is, of course, a very serious matter and breaches of the legislation by professional people cannot be overlooked. We agree with the learned judge about that.
23. This was clearly a case where a custodial sentence was warranted and, having regard to all the circumstances that we have endeavoured to outline, we do not think that the learned judge did anything other than give all credit that was called for. In our view, it cannot be said that this sentence was in any way excessive. This appeal is therefore dismissed.

LORD JUSTICE KAY: We have to consider whether to make a recovery of defence costs order. We know that he has some means. But we have a document dated 29th July which says the appellant has not completed a statement of means form sent to HMP Forestbank. The office was not informed of his recent move to Kirkham. You may wish to adjourn the matter of the recovery of defence costs order until a statement of means form has been completed.

MR BAKER: My Lord, I spoke to my instructing solicitor yesterday. He gave me an original form. His understanding was that your Lordships would have a copy of it. Perhaps I can hand it in?

LORD JUSTICE KAY: Hand in what you have got. It will be very helpful if you've got something and it will save an adjournment.

MR BAKER: My Lord, I anticipate your Lordships will be able to deal with it today.

(Handed)

LORD JUSTICE KAY: I see. This is a form for representation in the Crown Court.

MR BAKER: Yes, it includes a declaration that he has properly declared his financial state.

LORD JUSTICE KAY: Dated 4th July.

MR BAKER: Your Lordship will see that in essence his means are £300,000 equity in a house worth £600,000 and £3,000 a month payable by partners in his previous practice.

MR JUSTICE WRIGHT: We are only concerned with the recovery of defence costs in relation to this hearing.

MR BAKER: Yes, but there is to be a separate hearing at the Crown Court in relation to the trial. My Lord, can I refer you to --

LORD JUSTICE KAY: Sorry, what's his equity in the house?

MR BAKER: £300,000.

LORD JUSTICE KAY: That is more than enough. We have to disregard the first £100,000.

MR BAKER: Yes. Can I take your Lordships to the relevant statutes. It is Archbold page 874.

LORD JUSTICE KAY: Sorry?

MR BAKER: It is at Archbold page 874. The statute's position pursuant to the Access to Justice Act 2000 -- sorry, 1999. My Lord, rule 9, on the right hand side of two pages, sets out the matters to be considered. (Pause). My Lord, going to the matters perhaps I can hopefully summarise the provisions? The following assets of the defendant should be taken into account -- that is rule 9 subrule (2) -- (a) the first £3,000 capital available to him. Your Lordships will see from Form B he has £5,000 in a current bank account.

LORD JUSTICE KAY: And a car worth £6,000 and his wife has another one.

MR BAKER: Yes. His principal residence, so £200,000 in his residence. Then his income. It relates to his gross amount income, that does not exceed £24,000. Well, in fact it won't exceed £24,000, when one takes the mortgage payments of over £1,500 a month and the various insurances.

LORD JUSTICE KAY: He has sufficient assets to pay his own representation.

MR BAKER: My Lord, the test is at rule 11. At the conclusion of the relevant proceedings the judge should consider whether it is reasonable to make a recovery of defence costs order in all the circumstances of the case, including any other finances order or penalty.

LORD JUSTICE KAY: Yes.

MR BAKER: My Lord, it is my submission, albeit his appeal has been unsuccessful, that it would not be reasonable to order costs against him. First of all, he is now in prison. He is unlikely to have any meaningful income in the future.

MR JUSTICE WRIGHT: With respect, he has a fixed income for the next eight years.

MR BAKER: That is not guaranteed. It depends, first, on the goodwill of the partners and, secondly, on that actual firm continuing to trade and, thirdly --

LORD JUSTICE KAY: He has assets. He can sell the car for a start.

MR BAKER: My Lord, that may --

LORD JUSTICE KAY: They may have to make do with being a one car family. We are not talking huge sums of money here.

MR BAKER: No, but when you look at the financial penalty he has already suffered, it is an absolutely massive one of many hundreds of thousands of pounds.

LORD JUSTICE KAY: This is the whole approach. If people can afford to pay for it, then they should pay. A fair measure of allowance is given. The figures are not unreasonable.

MR BAKER: My Lord, no. Perhaps the only point I can make is this. There were no sentencing authorities in relation to this matter, because there can't be any, and even in relation to construction of section 52, which would have allowed him not to pursue the appeal. In effect he was in an area of law --

LORD JUSTICE KAY: He is allowed to pursue it, but at the end of the day the question is asked, does the public have to pay for it, or ought a recovery of defence costs order to be made?

MR BAKER: My Lord, yes. My Lord, in my submission it is a proper case for the public to pay.

LORD JUSTICE KAY: Yes, thank you. (Pause). We make a recovery of defence costs order to the full extent of the costs.

MR BAKER: So be it, my Lord.

LORD JUSTICE KAY: You had better have back that document.

MR BAKER: Yes, my Lord, it is the only signed copy.