England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM INNER LONDON CROWN COURT
(His Honour Judge Burn)

		Royal Courts of Justice Strand, London, WC2A 2LL
		08/10/2009

Lord Justice Richards :

1. Johnny Mejia and Paul Sneath appeal against confiscation orders made against them on 31 October 2007 by His Honour Judge Burn sitting at Inner London Crown Court. Mejia and Sneath had faced an indictment charging them and a number of co-accused with conspiracy to supply cocaine. Mejia pleaded guilty and was sentenced to 12 years' imprisonment. Sneath was convicted after trial and was sentenced to 18 years' imprisonment. Confiscation proceedings were brought against them under the Proceeds of Crime Act 2002 ("the 2002 Act"). The judge made a finding that they had each benefited in the sum of £268,770 (based on an equal split of a total figure of £537,540). Mejia's realisable assets were found to be £58,480 and the judge made an order against him in that amount. Sneath's realisable assets were agreed to exceed the benefit figure and the judge therefore made an order against him in the amount of the benefit. Their appeals are directed to the valuation of the benefit.
2. The appellants were involved in a highly sophisticated operation for the importation of cocaine from Panama. The method used was to impregnate fibre board with cocaine and then to build the impregnated fibre board into ornate doors which were imported into the United Kingdom. Once in this country, it was intended that the doors would undergo a chemical process for the extraction of the cocaine. In fact they were seized while the work was in progress but before any cocaine had been extracted. On the basis of analysis, however, it was calculated that they contained 17.34 kg of cocaine at 100% purity, with a minimum value of £537,540.
3. The evidence was that Sneath had travelled to Panama where he purchased the doors and arranged their importation. On their arrival in the United Kingdom he took part in their delivery to his home address and then drove them to the premises where the cocaine was to be extracted. Mejia pleaded guilty on a written basis of plea (not accepted by the Crown) to the effect that his role was inter alia to "caretake" the rented storage premises, construct a sterile section there and obtain supplies (i.e. for the extraction process); but he was not involved in arranging the importation of the doors or in their physical importation or delivery to the premises or in the actual extraction of cocaine. He was seen coming away from the premises just before they were raided by the police, and the prosecution case was that he had been present at the time of delivery of the doors and the commencement of the extraction process.
4. By section 76(4) of the 2002 Act, a person benefits from conduct if he obtains property as a result of or in connection with the conduct; and, by section 76(7), if a person benefits from conduct his benefit is the value of the property obtained. The central provisions relating to the value of property obtained are sections 79 and 80, together with the definitions in section 84:

"79. Value: the basic rule

(1) This section applies for the purpose of deciding the value at any time of property then held by a person.

(2) Its value is the market value of the property at that time.

…

(5) This section has effect subject to sections 80 and 81.

80. Value of property obtained from conduct

(1) This section applies for the purpose of deciding the value of property obtained by a person as a result of or in connection with his criminal conduct; and the material time is the time the court makes its decision.

(2) The value of the property at the material time is the greater of the following –

(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;

(b) the value (at the material time) of the property found under subsection (3).

…

(4) The references in subsection (2)(a) and (b) to the value are to the value found in accordance with section 79.

…

84. Property: general provisions

(1) Property is all property wherever situated ….

(2) The following rules apply in relation to property –

...

(b) property is obtained by a person if he obtains an interest in it ….

…

(h) references to an interest, in relation to property other than land, include references to a right (including a right to possession)."

5. At the confiscation hearing, the Crown and the appellants were represented by the same counsel as appeared before us on the appeals (Mr Gadsden for the Crown, Mr Williams for Mejia, and Mr Mitchell for Sneath). The primary area of dispute was whether the market value of the drugs could be taken into account under section 79(2) when assessing benefit. The defence submission, deriving support at the time from a number of Court of Appeal authorities, was that illegal drugs could have no market value because they could not lawfully be sold. The Crown sought to distinguish the authorities as dealing with situations where the particular defendant did not have the capacity to realise the profit on the drugs. It conceded that, for example, drugs would have no market value in the hands of a courier who did not have the capacity to realise their value, but submitted that they would have a market value in the hands of a trafficker who had the potential to realise profit from them. The judge accepted the Crown's case:

" The crucial question therefore it seems to me is this. Does the market value equal the value of the property at the time it is held by the person, if that person has the potential to realise the profit from the drugs, in other words if that person is a drug trafficker?

In my judgment, if that is the situation and the holder of the drugs does have the capacity, in the future, to realise their value, then those drugs, that commodity, does have a market value. If the contrary were correct, I repeat the effect of the statute would have been largely undermined."

6. In the course of the discussion that followed, Mr Gadsden told the judge: "I think we are in agreement that it follows from your Honour's ruling that the drugs which were there in the hands of these defendants have a value of £537,000 odd, whatever the exact figure is". There was no dissent from counsel for either of the appellants. Indeed, Mr Mitchell interposed with the precise figure of £537,540. There was then a question whether each of the appellants had benefited in that sum, on the basis that Sneath had given evidence at his trial that he had sold the drugs on to Mejia. The judge, however, took the view that the prosecution case had been put on the basis of a conspiracy in which the profit was shared between them. He therefore took the overall benefit figure and divided it equally between the two appellants. He then moved to the issue of realisable assets and the amounts of the confiscation orders themselves.
7. At the forefront of the grounds on which leave to appeal was granted was the contention that the judge's ruling was wrong because the cocaine could not lawfully be sold and therefore had to be treated as having no market value for the purpose of calculation of benefit. That contention, well arguable at the time, has since been demolished by the decision of the House of Lords in R v Islam [2009] UKHL 30, [2009] 3 WLR 1. R v Islam concerned the importation of two consignments of heroin which were seized by customs before they reached the destination. The effect of the decision of the majority of the committee is conveniently summarised in the headnote:

"Held … that, although the 2002 Act refrained from defining precisely what was meant by 'market value' of goods for the purposes of making a confiscation order, it did not provide that the market in which the price of the goods had to be determined had to be a legitimate one; that the nature of the goods and the context in which the assessment was to be made would determine the nature of the market to which the court should look to determine their market value; that when determining the benefit which the defendant had gained from his conduct it was right to look at the market in which he expected to dispose of the goods in question; that where there was a legitimate market in which the market value of such goods could be determined that was the market to which the court should look when calculating the value of the benefit to the defendant for the purposes of a confiscation order; but that, if the property obtained by the defendant, because of its nature, condition or quality, had no value at all in a legitimate market and the only market in which a transaction for its sale could take place was an illegitimate one, the court, in calculating that benefit, could have regard to the price which a willing buyer would pay to a willing seller in that illegitimate market; and that, accordingly, it was consistent with both the language and spirit of the statutory scheme relating to confiscation proceedings to take account of the black market value of the consignments of heroin when valuing the benefit obtained by the defendant at the time of their illegal importation, even though they would have a nil value in a legitimate market after their seizure when the court had to assess the amount available for confiscation …."

8. In an attempt to avoid the effect of the decision in R v Islam, counsel for the appellants advanced very different submissions before us from those put forward at the confiscation hearing. First it was submitted that the particular property here was not cocaine but cocaine-impregnated doors. There was no cocaine in marketable form (the figure of 17.34 kg of cocaine being no more than a calculation of the amount of cocaine that could be extracted from the doors by processing). No market of any kind has been established for cocaine-impregnated doors; and, in the absence of evidence as to the cost of extraction of the cocaine, there is no basis on which to determine the price that might be paid even if a willing buyer could be found. Accordingly the property had no market value for the purpose of the calculation of benefit. There were alternative submissions that the only value ascertainable was the invoice price of the doors (£3,150) or the purchase cost of the cocaine in Panama (where it was said to be available for $800 per kilo).
9. On behalf of Mejia, Mr Williams advanced a separate line of argument that he did not "obtain" the property at all. This was based on a development in the case-law since the date of the confiscation hearing. In J v Crown Prosecution Service [2005] EWCA Civ 746 it had been held by the Court of Appeal that "obtain" contemplates that the defendant should have been instrumental in getting the property out of the crime. On that basis, said Mr Williams, it appeared that a finding of obtaining could be made against Mejia simply by reason of his having given assistance as a party to a conspiracy. In R v Jennings [2008] UKHL 29, however, the appellant criticised the approach of the Court of Appeal, contending that in order to obtain property the defendant must have come into possession of, or in some way controlled, the property in connection with the offence; he must have had his hands on it. Their Lordships accepted the broad thrust of that criticism, whilst not adopting the appellant's submission ipsissimis verbis (it was observed in particular that "the defendant need not have had his hands on the property"). Mr Williams also cited R v Sivaraman [2008] EWCA Crim 1736 and R v Grainger [2008] EWCA Crim 2506, both of which post-dated R v Jennings in the House of Lords. He submitted in the light of such authorities that Mejia's limited role in relation to the storage premises, involving neither the purchase nor the importation of the doors, was insufficient to result in his obtaining the property.
10. Mr Williams also sought leave to add a further ground of appeal, to the effect that the confiscation order was disproportionate, oppressive or operated as a fine, or that it was an abuse of process for the prosecution to invoke the confiscation process. The basis of the submission was that the importation was a total failure, the defendants were deprived of any product of the crime, and there were no lifestyle issues or suggestions that the appellant otherwise gained or benefited at all. There was said to be no justification for a confiscation order in such circumstances. The main authority relied on was R v Morgan [2008] EWCA Crim 1323.
11. The first, and in our view insuperable, problem about all those submissions is that they were not advanced in the confiscation proceedings in the Crown Court. The defence case before the judge was limited to the submission that illegal drugs could have no market value because they could not lawfully be sold. Once the judge had ruled against that submission there was no further material dispute, it was accepted to follow that the total benefit was £537,540, based on the value of 17.34 kg of cocaine at 100% purity. In our judgment, it is not open to the appellants to adopt an altogether different approach in the Court of Appeal, advancing an entirely fresh set of submissions of the kind we have outlined. Had it been argued before the judge that the relevant property was cocaine-impregnated doors rather than cocaine, or that the true value was the invoice value of the doors or the purchase cost of the cocaine, or that Mejia did not obtain the property at all, the Crown would almost certainly have led additional evidence on the points in issue and the judge would have made relevant findings of fact. Similarly, if arguments had been advanced as to disproportionality or abuse of process, that too would have affected the shape of the hearing before the judge and he would have made relevant findings. It is simply too late to raise such matters for the first time on an appeal.
12. In any event, we very much doubt whether any of the submissions now made would have had any real prospect of success even if they had been advanced at the proper time. First, there is no reason to consider that cocaine-impregnated doors would have no market and therefore no value. It is absurd to suggest that no value is to be attached to a product containing 17.34 kg of pure cocaine, brought into this country for the very purpose of extracting the cocaine and selling it on. We were told that at Sneath's trial one of the police officers observed that a continued attempt to extract the cocaine in the manner used by the appellants would have created a real likelihood of the death of one or more of them and that they would not have extracted a sizeable quantity of cocaine. But no weight can be placed on remarks of that kind from a police officer: the issue would have had to be the subject of expert evidence if it had been raised in the confiscation proceedings. In the absence of such evidence, all we have to go on is the accepted fact that the doors contained 17.34 kg of pure cocaine. It is true that the process of extraction would have had a cost and there is no evidence of what that cost would have been. On the other hand, Mr Gadsden drew our attention to the fact that the actual calculation of value based on the wholesale market for cocaine at 100% purity was favourable to the appellants since, as the judge observed in his sentencing remarks, "once that had been cut to street level it makes approximately 52 kilograms of cocaine and puts the drug at a street value of approximately [£1.5] million" (the judge referred to £3 million, but £1.5 million would appear to be more accurate). Looking at the matter overall, on the basis of the limited information available, we do not think that the judge can be said to have been wrong to take the figure of £537,540 as the value of the property even if the correct focus was on the value of the doors rather than of the cocaine itself. The value of the cocaine was a reasonable indicator of the value of the doors, and it is hardly surprising that nobody thought at the time of drawing a distinction between the two.
13. We also have no hesitation in rejecting the contention that one should take the invoice price of the doors (which was no doubt a fictitious figure in any event) or the cost price of the cocaine in Panama. The relevant question is the market value of the property in the United Kingdom, not its cost at source. Counsel for the appellants sought to rely on R v Rose [2008] 2 Cr App R 15, in which it was held that the market value of property obtained by a thief or handler was the amount it would have cost the defendant to obtain the property legitimately. That, however, was a case dealing with a particular problem arising out of theft of goods. It has no bearing on the subject matter of the present case and provides no assistance to the appellants.
14. As to the issue of obtaining, Sneath does not dispute that he obtained the doors. Mejia may not have been in precisely the same position as Sneath, but the contention that he did not obtain the doors would have been a difficult one to sustain. Even his basis of plea acknowledged that he had a significant role in relation to the premises where the doors were to be stored and processed. He was sentenced on the basis that he had an organisational role, gave orders to others in the conspiracy and helped in the construction of the sterile environment for the extraction of cocaine at the premises. On the evidence there was also a plain inference that he was present at the premises at the time of delivery and the start of the extraction process. Those matters would appear to provide a sufficient basis for a finding of obtaining, whether or not Mr Gadsden was also correct to submit that, since this was a conspiracy in which importation was made pursuant to a joint plan, Sneath and Mejia both obtained the doors at the point of importation. Mr Williams conceded in the course of his submissions that Mejia was in possession of the doors at the premises, yet maintained that this was not enough to amount in the circumstances to obtaining. We accept, of course, that the fact of possession does not necessarily give rise to a finding of obtaining, but it seems to us that the particular circumstances point strongly towards such a finding in this case. Mr Williams's argument to the contrary slipped into the different point that the doors were seized by the police before the cocaine was extracted. That, however, provides no support whatsoever for Mejia's case. It would have been open to the court to find that Mejia obtained the doors before they were seized, in which case his benefit was their value at the time they were obtained. It is well established that the later seizure of property does not affect the calculation of the benefit or prevent the making of a confiscation order based on it. R v Islam was itself a case in which the drugs had been forfeited and destroyed after importation and before the confiscation order was made.
15. The additional ground that Mr Williams sought leave to advance on behalf of Mejia is without substance. The Draconian nature of the confiscation regime has long been recognised, but its validity has been upheld. On the proper application of the legislative provisions, Mejia clearly obtained a benefit. The fact that the property triggering that benefit was subsequently seized and the conspiracy was unsuccessful does not mean that his crime had "no product" or that the confiscation order was disproportionate or oppressive or operated as a fine. The confiscation order was duly made in accordance with the legislative scheme and is not open to challenge on the basis advanced by Mr Williams. Equally, we can see no foundation to the contention that it was an abuse of process for the prosecution to invoke the confiscation provisions in the first place. R v Morgan concerned a limited class of cases defined in paragraph [1] of the judgment of the court and very different from the circumstances of the present case (see also paragraphs [29]-[30] of the judgment for the limited scope of the decision). Neither the decision nor the reasoning gives support to Mr Williams's submissions.
16. Accordingly, we are satisfied that there is no substance to these appeals. They were well arguable on the law as it stood before the decision of the House of Lords in R v Islam, but that decision should have put an end to them. In so far as leave is required to amend or add to the grounds of appeal so as to advance the new points to which we have referred, such leave is refused. Both appeals are dismissed.