England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT SITTING AT INNER LONDON
His Honour Judge Mervyn Roberts
T20067506

		Royal Courts of Justice Strand, London, WC2A 2LL
		30 July 2009

Lord Justice Moses:

1. On 1 August 2008 at the Inner London Crown Court a confiscation order under the Proceeds of Crime Act 2002 was made against the appellant in the sum of £9,672,176.69 and he was ordered to serve ten years in prison in default. The issue in this appeal is whether the judge, in reaching the conclusion that that sum was the recoverable amount, applied the correct burden and standard of proof. This appeal, like so many before it, teaches the importance of a rigorous, step-by-step approach to the process of determining the recoverable amount for the purpose of s.6(5) of the Proceeds of Crime Act 2002 (the 2002 Act).
2. The appellant had pleaded guilty to entering into or becoming concerned in a money laundering arrangement contrary to s.328(1) of the Proceeds of Crime Act 2002, conspiracy to supply amphetamine contrary to s.1(1) of the Criminal Law Act 1977 and offences of possessing a prohibited weapon and permitting premises to be used for producing amphetamine. His total sentence was eight years' imprisonment. The sentence of ten years in default was ordered to be served consecutive to that sentence of eight years' imprisonment.
3. The benefit in issue between the appellant and the prosecution by the time of the hearing of the confiscation proceedings was the sum of £8,814,840. The judge concluded that the appellant had obtained cocaine to the value of £8,814,840, and that the appellant had failed to show that the available amount was less than the full amount of the benefit. The appellant submits that, in his ruling, the judge misdirected himself as to the burden and standard of proof and that there was no basis upon which he could properly conclude that he had benefited in that sum of £8,814,840.
4. The factual issues in the confiscation hearing concerned the results of the police search at the appellant's premises on arrest. On the day of his arrest he was found in possession of cash totalling £797,563. He had sought to launder the sum of £274,680 through three co-defendants. That sum was found in bags carried by two of them, when they were arrested. After the appellant had been arrested, the police found £174,475 and €409,125 in two bedrooms, elastic bands over the floor and a cash counting machine.
5. At the rear of his premises, police discovered an amphetamine production factory. By a process of calculation involving an assessment of the amount of mixing agent present at the premises and previously ordered by the appellant, the benefit of the appellant's production and supply of amphetamine was calculated to be £105,000. That left an existing amount of just under £700,000 unexplained. But that was merely the context in which a further important discovery was made on that day by the police.
6. At the premises the police found a notebook, in the appellant's handwriting, marked "Master Logg" and called exhibit RL/6. The prosecution, in its s.16 statement, relied upon Warren Gordon, a forensic accountant, who identified, on 5 pages of the notebook, the figure of 29,800. His opinion was that that represented the rate in pounds for the current wholesale price per kilo of cocaine. Other figures, alongside and underneath, he said, represented kilos. On one side of the page is the total value of kilos: on the first page, for example is the figure of 75. Beneath the figure of 75 is the figure of 54 next to the letters US and 21 next to the letters YOU. Multiplying the total figure for kilogrammes by the rate (i.e., 295.8 kilogrammes x 29,800) the total figure on five pages of the notebook is 8,814,840. The prosecution, on the basis of Mr Gordon's opinion, contended that the figures represented sterling. It contended that £8,814,840 was the monetary value of cocaine which the appellant had obtained and distributed. We should note that in the s.16 statement the prosecution alleged benefit in a higher sum to include the current London selling price of cocaine. That is irrelevant for the purposes of this appeal.
7. In response, the defendant contested the analysis of RL/6. He said that he was asked by another person to prepare "the master logg" and was provided with the information with which to do so. He continued:-

"This document does not represent materials or money passing through his hands."

In response the prosecution repeated its contention that RL/6 was an accounting record for the purchase of 295.8 kilos of cocaine at the rate of £29,800. Accordingly, the issue for the judge was whether a benefit from a criminal lifestyle, to the value of £8,814840, could be inferred from the contents of RL/6.

8. The vade-mecum for judges in confiscation proceedings under the 2002 Act is contained at §48 in the speech of Lord Bingham in R v May [2008] 1 AC 1028 at 1044. The Committee advised that courts should focus very closely on the language of the statutory provision and, with a hint of despair, suggested that guidance should ordinarily be sought in the statutory language rather in the proliferating case law.
9. Clear analysis of the distinct questions which have to be resolved is also to be found in R v Seager and R v Blatch [2009] EWCA Crim 1303 (in particular [39] and [72]). Blackstone's Criminal Practice (2009) has a useful guide to the separate stages (E.19.13 et seq). It is vital that the questions are kept distinct and that the court conducting the hearing resolves them as part of a sequential process. Laborious though this is, it reduces the risk of losing the way in the labyrinthine provisions and ensures that at each stage the particular issue which the judge is addressing is clear. In that way confusion over who has to prove what and to which standard may be avoided or, perhaps more realistically, there is a better chance of avoiding confusion.
10. The first question the court had to decide was whether this appellant had a criminal lifestyle pursuant to s.6(4)(a) and s.75. On this question, there was no dispute since the offences of money laundering and conspiracy to supply amphetamine were specified in Schedule 2 (s.75(2)(a)). The second question the court had to determine was whether the appellant had benefited from his general criminal conduct (s.6(4)(b)). General criminal conduct is all the defendant's criminal conduct whether the conduct occurred before or after the passing of the 2002 Act (s.76(2)(a)). To answer that question, the court had to answer a third question, namely whether the appellant had obtained property as a result of or in connection with his general criminal conduct (s.76(4)).
11. Lord Bingham, in May explained what is meant by obtains:

"(6) D ordinarily obtains property if in law he owns it, whether alone or jointly, which will ordinarily connote a power of disposition or control…Mere couriers or custodians or other very minor contributors to an offence, rewarded by a specific fee and having no interest in the property or the proceeds of sale, are unlikely to be found to have obtained that property. It may be otherwise with money launderers." (§48 F-H)"

12. It is necessary at this stage to identify the statutory quest on which the court has embarked. The court is concerned to identify property which either remains in a defendant's possession or which he has obtained in the past but which he no longer retains. Existing property presents fewer problems; it may be ascertained, and valued. The question will then arise as to its source, at which stage the statutory assumptions in s.10 will be triggered. More problems arise in relation to property which the defendant has had but no longer exists, or, at least, which cannot be found. As Lord Bingham noted, the question whether a defendant has obtained property and its value

"…plainly calls for an historical enquiry into past transactions [48].

13. It is vital to bear in mind that it is for the prosecution to prove that the defendant has obtained the property in issue, which will either be known property he still possesses or which he has possessed. This issue as to proof of the existence of property must not be confused with proof of the source of that property. Subject to the particular, and confined exception, illustrated by R v Briggs-Price [2009] 2 WLR 1101, the prosecution must prove the existence of that property to the civil standard of proof (s.6(7)).
14. Thus, once a criminal lifestyle has been established, it falls to the prosecution, if it can, to prove, on the balance of probabilities, that the defendant has obtained property. The prosecution, as the first three assumptions in s.10 indicate, may do so by proving that property has been transferred to the defendant (s.10(2)), that he has obtained property (s.10(3) or that he has incurred expenditure after the relevant day (s.10(4)).
15. Only when the prosecution has established that the defendant has held property in one of those three ways does any question of the source of that property arise. The prosecution may establish the possession of property or expenditure by any manner of means according to the civil standard of proof. But in one particular circumstance it has to do so to the criminal standard. If the prosecution can only establish that the defendant had obtained property in the past by proof of criminal offences other than those charged on the indictment, it must prove those criminal offences to a criminal standard. This was the decision of the majority in R v Briggs-Price (Lord Rodger [76-79], Lord Brown, [96], and Lord Neuberger [152]).
16. In Briggs-Price the appellant was a wealthy man with substantial interests from a hotel and other income-yielding properties. It was agreed that the assumptions regime should not be applied to his known existing assets and expenditure. In those circumstances the prosecution sought to prove the existence of past assets by proving past trafficking in cannabis which was not the subject matter of any charge on the indictment. The vital feature in Briggs-Price was that the prosecution could only prove that the defendant had obtained property in the past by proof of criminal offences with which he had not been charged [41] and [66]. The defendant had sought to contend that, since the prosecution had not relied upon the statutory assumption he could not seek to rely upon evidence of criminal activities with which he had not been charged. The relevance of those previous criminal activities is demonstrated in Lord Philips's response:-

"Where an issue is raised as to the source of property held by a defendant, it would be strange if the prosecution were precluded from countering the defendant's assertion that it had a legitimate source by relying on evidence that at the time the defendant was involved in drug trafficking. Mr Owen did not submit that any such restriction applied. Yet it is hard to see why evidence of the defendant's criminal activities should be admissible for the purpose of proving the source of assets but not for the purpose of proving the existence of assets." [20] (our emphasis)

17. Lord Brown recognised that Briggs-Price concerned a case where the Crown could only prove the existence of the assets by proving other offences but he recognised that there might be other means of establishing possession of property or the incurring of expenditure in the past:-

"Certain of your Lordships suggested it was strange that the Crown could rely on statutory assumptions and the reverse burden of proof to establish benefit by reference to demonstrable property held or expenditure incurred and yet not be entitled to prove drug trafficking and its likely benefits. I agree, but I agree only on the basis that, unless the possession of property or expenditure can otherwise be established, the Crown must indeed prove the offending, even if not formally charged, to the criminal standard, as in this very case." [96] (our emphasis)

18. The question whether the defendant had obtained property in the past was a logically prior question to the question of its source. There is a risk of confusion between the two separate questions, the one as to the existence of property and the other as to the source of that property, because in a case such as Briggs-Pearce, the evidence which establishes the existence of the property also establishes its source. Proof of the offence of trafficking in cannabis established both the existence of the property, obtained by the defendant in the past, and also its source. Indeed, once the prosecution had proved the existence of property by means of proof of the criminal offence, it had at the same time and by the same means proved that the source was criminal. There was no need to rely upon any assumption as to its source, even had the prosecution wished to do so. The assumptions have nothing whatever to do with proof that the defendant obtained property. Apart from the fourth, they are concerned only with proof of the source of property which the prosecution has proved the defendant has obtained or remains in his possession.
19. The judge, in his ruling, noted that there was no dispute but that the defendant had a criminal lifestyle and that he had benefited from it. He then analysed the exhibit RL/6 and observed that although Mr Gordon's evidence was not in dispute the inferences which the officer sought to draw form the notebook were contested. Having recalled that counsel for the defendant had cross-examined to the best of his ability, the judge continued:-

"The onus of the proof (sic) on the balance of probabilities, being on the defendant in this case, the defendant was called."

He then dismissed the defendant's account that he was asked to copy the pages and paid £3,000 to do so as being incredible. He said that it beggared belief. He concluded that he had obtained cocaine in the value of £8,814,840.

20. It is unfortunate that the judge failed to pose and then answer the questions identified in May in the order which the House of Lords proposed. Had he done so, he might have avoided a serious error.
21. The second question was whether the defendant had benefited from general criminal conduct. This was not disputed. The third question was whether the prosecution could prove that the defendant had obtained property or incurred expenditure in the past (see our [10] and [11] and s.76(4)). The answer to that question turned on the inferences to be drawn from RL/6.
22. It was important that the judge identified on whom the burden lay. The defendant denied that that which was written down in RL/6 represented either property transferred to or obtained by him or expenditure he had incurred. In short, he denied that the figures represented any property, be it drugs or cash, over which he had the power of disposition or control.
23. In the light of that dispute, it was for the prosecution to prove that the figures in RL/6 did represent property over which the appellant had a power of disposition or control. It was not for the defendant to disprove that factual proposition. The judge appears to have been under the mistaken impression that it was for the defendant to prove that the document did not represent materials or money passing through his hands. It may be that the judge was confused by the opening words of s.10 of the 2002 Act once it had emerged that the defendant was not disputing that he had benefited from general criminal conduct:-

"(1) If the court decides under s.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 dates obtained by him –

(a) as a result of his general criminal conduct, and

(b) at the earliest time he appears to have held it.

(3) The second assumption is that any property held by the defendant at any time after the date of conviction 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 date was met from property obtained by him as a result of his general criminal conduct." (our emphasis)

24. The purpose of the first three assumptions within s.10 is to assist in the proof of the source of property obtained by the defendant. The assumptions have nothing to do with the logically prior question as to whether the defendant has or has had the property in issue. As Lord Mance put it at [104] in Briggs-Price in relation to a predecessor to s.10 (s.4(2) of the Drug Trafficking Act 1994):-

"The scheme operates by reference to the benefit made from drug trafficking and the value of the proceeds of drug trafficking. The assumptions, where they apply, do no more than assist to prove these matters. It is a fallacy to describe them as some form of separate assets-based recovery. They are means of proving the receipt of proceeds from drug trafficking by pointing to particular property or expenditure and requiring an explanation for its origin." [104].

25. The assumptions are not triggered unless and until the prosecution has proved that the defendant obtained the property which the prosecution contends goes towards the valuation of the defendant's benefit. The judge misdirected himself and imposed a burden on the defendant which it was not his responsibility to discharge. The prosecution had to prove that the figures in the notebook represented either cash or cocaine which he had obtained in the sense explained by Lord Bingham in May [48].
26. That was not the only serious misdirection, contends Mr Mitchell QC on behalf of the appellant. He submits that the judge applied the civil standard of proof. In reliance upon the decision of the majority of the House of Lords in Briggs-Price, he contends that the prosecution was required to establish that the defendant had obtained cocaine to the value of £8.8 million to the criminal standard of proof.
27. There will be many cases in which the assets on which the prosecution relies to establish the value of the benefit will have long since disappeared (see Lord Mance [127]). There will be cases where benefit will be based on payments or rewards which the defendant has received even if he made no profit (see Lord Roger, [59]). As we have indicated, Briggs-Price is no authority for the proposition that the only means of establishing that a defendant has obtained property in the past is by proof of criminal offences. It merely teaches that when the Crown cannot establish that a defendant has obtained property in the past or incurred expenditure by means other than by proof of criminal offences, it must establish those offences according to the criminal standard of proof.
28. In the instant appeal, the prosecution sought to prove that the defendant had obtained either drugs or cash to the value of £8.8 million by reference to the figures in the notebook. It sought to establish that the figures did represent pounds sterling by reference to the wholesale value per kilo of cocaine. It was for that purpose it attached significance to the figures of 29,800 and figures which, it suggested, represented kilos. But in relying upon the expert, Mr Gordon, to show that 29,800 was the wholesale value in sterling for a kilo of cocaine, the prosecution was not seeking to prove criminal offences in order to prove that he had obtained property in the past. It was attempting to prove the existence of property, cash or drugs to the value of £8.8 million, which the defendant had obtained in the sense that he had the power of disposition or control over that property. That was a process which went to the decision whether he had benefited from his general criminal conduct by obtaining property (s.76(4)) and if so, the extent to which he had benefited (s.76(7)). Those questions had to be decided on a balance of probabilities (see s.6(7) of the 2002 Act).
29. Mr Mitchell contended that the evidence of Mr Gordon, combined with the inferences the prosecution sought to draw from the notebook, was "tantamount to an attempt to prove the offence of trafficking in cocaine". That was an assertion which had to be proved to the criminal standard. We do not agree. The prosecution was not attempting to prove a criminal offence for the purpose of establishing that he had obtained property in the past. It could prove that he had obtained property by analysis of the notebook.
30. In any case in which the prosecution assert that a defendant has obtained property in the past other than as a result of the offences with which he is charged, it might be said that that assertion is "tantamount" to an assertion that he has committed offences in the past. If the property was not obtained by means of the offences charged in the indictment, it follows that it must have been obtained by other criminal offences, not charged (unless, of course the defendant can rebut the assumption of a criminal source (s.10(6)(a) or the assumptions are disapplied (s.10(6)(b)).
31. But Mr Mitchell's contention proves too much. If his submission was correct, then a civil standard of proof would, in general, only apply to proof of source. It would have no application to proof that the defendant had held property in the past. If Mr Mitchell were right, inferences to be drawn from old bank statements or title deeds would all have to be established to a criminal standard, since reliance on such documents would be "tantamount" to attempting to prove other criminal offences. The implications of Briggs-Price cannot be carried so far. If the prosecution can prove that the defendant has obtained assets in the past other than by proof of previous criminal offences then the prosecution may do so on a balance of probabilities.
32. In cases where the prosecution can prove the defendant has obtained property in the past, previous criminal offences are only relevant to establish the source of that property. Once the prosecution has proved that the defendant has obtained property, the assumptions in s.10 are triggered and the source of that property is assumed to be general criminal conduct unless the assumption is shown to be incorrect or there would be a serious risk of injustice if the assumption were made (s.10(6)). In the instant appeal, once the prosecution proved that the defendant had obtained property in the past by reference to the figures in RL/6 and other shredded documents, it was entitled, as its s.16 statement asserted, to rely upon the assumption that that property was derived from criminal activity. It did not need to rely upon the expert Mr Gordon to prove the source of the property; it needed only to rely upon s.10. As we have previously emphasised, Mr Gordon's evidence went to the issue of whether the figures in the notebook demonstrated that the defendant had obtained property in the past.
33. For those reasons we reject Mr Mitchell's submission that the prosecution was required to prove that the defendant had been guilty of trafficking in cocaine to a criminal standard of proof in order to establish that he had, in the past, obtained assets to the value of £8.8 million.
34. Nonetheless, we have identified a serious misdirection in the approach adopted by the prosecution. In those circumstances, Mr Mitchell contends there is no evidential basis on which this court could or should make an order under s.6(5). There is no basis upon which the amount of benefit can be calculated other than on the basis of existing and identified assets, most of which, if not all, are already held by the police. In order to resolve that issue it is necessary to return to the facts.
35. The starting point must be the undisputed facts as to the existing assets in the possession of the appellant. He had an unexplained amount of £700,000 in his possession. Further, it was not disputed but that he had procured others to launder cash he had obtained. It is in that context that we must consider his assertion that he had only written the figures in the notebook RL/6 at the request of others for the sum of £3,000. We must consider that assertion in the context of a further fact. Amongst the defendant's property, in the dining room, was a shredder which had shredded documents which were recovered and pieced back together. Shredded paper had been found in what was described as the defendant's "man bag".
36. Those documents showed, in the defendant's writing, figures as high as 359,090, with names written next to them and a calculation of "40 x 298,000: 1,192,000". The judge did not allow the prosecution to cross-examine. This was unfortunate. Whatever the view the judge had taken of the defendant's evidence-in-chief, he ought to have been given the opportunity to answer obvious questions in cross-examination. The judge himself did, however, ask the defendant about the shredded paper and the defendant's response was "Oh, that was a few weeks before".
37. In our judgment, the evidence taken as a whole of the existence of £700,000, which could not be explained by virtue of the amphetamine production, coupled with the notebook and shredded pieces of paper, demonstrate that the appellant had obtained assets to the value of £8.8 million at some stage before he was arrested. His very possession of those pieces of paper and the notebook contradict his assertion that he was merely making notes for someone else. The contents of the notebook demonstrate, to our satisfaction, that the appellant had a power of disposition or control, for the purposes of the 2002 Act, over cocaine or cash to the value of £8.8million. The words in the notebook plainly refer to distribution in the distinction drawn between "us" and "you" on the pages of the notebook on which the defendant has written.
38. We are satisfied, on the balance of probabilities, that the prosecution has proved that the defendant had obtained property to the value of £8.8 million of benefit to be added to the undisputed balance, making a total of £9,672,176.92. Once the appellant's evidence is rejected, then the assumptions contained in s.10 are triggered and, in the absence of any further evidence, we conclude that the defendant has benefited from his general criminal conduct to the amount of £9,672,176.92. The assumption has not been shown to be incorrect nor have we identified any serious risk of injustice if the assumption is made.
39. The next question is whether the defendant has shown that the available amount was less than the amount of the benefit for the purposes of s.6 and ss.7(1) and (2) of the 2002 Act. The defendant asserted that his available amount of free property was £266,066.55. He contended that he would not be capable of concealing assets valued at millions of pounds particularly after a thorough investigation by an experienced Financial Investigations Unit officer. He suggested that he was living a relatively modest lifestyle and the conclusion that he had hidden assets available to meet the amount of benefit was based on an erroneous interpretation of exhibit RL/6 (see his response to the statement of information, §19). No further argument as to the available amount was advanced before us on the appeal.
40. Once we have concluded that the appellant benefited to the amounts revealed in the documents to which we have referred, then in the absence of any evidence as to what has happened to those benefits, or how much profit they represented to him, we are compelled to conclude that the available amount is no less than the amount of the benefit. That, after all, is the purpose of shifting the burden of establishing that the available amount is less onto a defendant. If a defendant chooses to give no explanation or no acceptable explanation of benefits identified by the court he has only himself to blame for the failure to discharge the burden of establishing that a lesser amount is available. This is the risk a defendant runs in disputing the amount of benefit, once the prosecution succeeds in establishing a figure which he disputes.
41. We wish to stress the importance of following the statutory process for establishing the recoverable amount for the purposes of s.6 of the 2002 Act. This process, set out in May in its end note, which we have tried to repeat, not only ensures that the court avoids misdirection but also that it sets out its reasons for its conclusion. Unless it does so, this court is faced with the difficulty of identifying the reasons for the court's conclusion and whether it is justified.
42. In this case, the judge did misdirect himself as to the burden of proving whether the defendant had obtained property to the value of £8.8 million. But there was ample evidence to prove that the defendant had done so and the defendant has chosen to give no explanation as to what has happened to the assets he obtained. In those circumstances, we uphold the order made by the judge and dismiss this appeal.