England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT ISLEWORTH
HHJ MATTHEWS
T20111443

		Royal Courts of Justice Strand, London, WC2A 2LL
		4th March 2014

Lord Justice Davis :

Introduction

1. This appeal raises a point about the valuation of benefit for the purpose of confiscation proceedings under the Proceeds of Crime Act 2002 ("the 2002 Act"). The context is drugs. The judge decided, in the circumstances of the case, that the value of the drugs obtained by the appellant was to be assessed on a retail basis. The appellant contends that the judge was wrong to do so. It is argued on his behalf that the judge was obliged to value the drugs on a wholesale basis. There perhaps is a little more to this case than first meets the eye; and it also may have implications for other cases of this particular kind.

Facts

2. The background facts can, for present purposes, be very briefly summarised.
3. In August 2011 the police executed a search warrant at an address in Fulham, London. Some £39,500 in cash was found there, as well as quantities of cocaine, diazepam and cannabis. On examination of the cash the fingerprints of the appellant were found on some of the bank notes. In consequence, the appellant was arrested at his place of work, the Cromwell Hospital, where he was employed as a porter. His work locker was searched. It was found to contain 169 grams of cocaine and a small wrap containing just under 3 grams of cocaine, as well as a large number of bank notes totalling £56,510. His home premises were also searched. No cutting agents or wraps or bags were found at either location, but a set of scales and a scalpel were recovered. The 169 grams of cocaine were of 80% purity. The small wrap was of 5% purity.
4. In due course, the appellant pleaded guilty to counts of possession of class A drugs with intent to supply and possessing criminal property. He was sentenced to three years' imprisonment by HHJ Matthews, sitting in the Isleworth Crown Court, on 15 February 2012. The appellant had sought to put in a Basis of Plea for the purposes of sentence. This was to the effect that the appellant had been in circumstances of financial and personal stress and had started to take cocaine. After a while his supplier asked him to look after drugs for him and he agreed to store them at his place of work. In return, he received small amounts of cocaine for his personal use and £500 per week. The drugs were not in wraps but in larger quantities: he would, as and when asked, weigh out what his dealer wanted and take them to him. His stated position thus was that he was a custodian of the drugs. He was (he said) also asked, and agreed, to store money for his dealer.
5. The prosecution did not accept this Basis of Plea. Its position throughout was that the appellant was dealing drugs at street level, and would have cut the 169 grams of cocaine down to individual wraps of 5% purity. The appellant did not seek a Newton hearing before being sentenced.

The confiscation proceedings

6. The prosecution duly asked the Crown Court to proceed under s.6 of the 2002 Act. In its s.16 statement it ascribed a street value to the 169 grams of cocaine of £121,680: which was subsequently revised down to £108,160. The prosecution made clear that it was putting forward the street value as the relevant benefit amount, doing so on the basis of the estimated street value of a one gram deal being £40.
7. In addition, it was common ground that the criminal lifestyle provisions potentially applied to this case.
8. In his s.17 statement, the appellant, as he was entitled to do, sought to advance the version of events which he had previously put forward in his earlier Basis of Plea. He also disputed the valuation of the drugs advanced, saying that it was "based upon speculation" that the drugs would be cut to a purity of 5%. In that statement it was among other things said:

"Benefit figure for the purposes of confiscation is derived from historic transactions and the value of actual property held in the defendant's possession connected with the relevant offence, not what it 'might' be worth 'if' it was to be altered in some way."

It was further said that in any event there was no evidence that the drugs would be cut for onward sale in this case. The (wholesale) value of the 169 grams of cocaine was asserted to be £7,737 – subsequently revised down to £6,857.

9. At the confiscation hearing the judge received an amount of evidence, both written and oral, including the evidence of the appellant himself. The appellant was wholly disbelieved. The judge found his account "very incredible". The judge further found that "the drugs were cut by him for onward sale at a figure of 5%" (that is how the transcript reads: but clearly the judge must have meant that the drugs would be cut for onward sale by the appellant). The judge accepted the prosecution case in relation to the benefit from the drugs, in the figure of £108,160.
10. The lifestyle provisions fell to be applied. Total benefit was valued in the amount of £335,459. There were significant available assets, including the equity in a property, sums in various bank accounts and other assets. These were agreed, overall, at £245,984. Since that figure was lower than the benefit figure, that was the amount in which the confiscation order, dated 17 December 2012, was made. Six months were given as the time for payment, with a default term of three years' imprisonment.
11. The appellant's present argument challenges the ascription of the value of £108,160 to the drugs. He continues to maintain that the true value of the drugs for confiscation purposes was the wholesale value of £6,857; and the total benefit should thus have been £234,156 necessitating in consequence a reduction in the recoverable amount to that figure.

The statutory provisions

12. The statutory context is all too familiar.
13. Under s.6(5) the court must, where the defendant has benefited from criminal conduct, decide the recoverable amount and make an order requiring him to pay that amount. Section 7 relates to determination of the recoverable amount; s.8 relates to determination of the benefit; and s.9 relates to determination of the available amount. It is established by the decision of the House of Lords in May [2008] 2 CAR 28, [2008] UKHL 28 that a three stage process is called for. They are these. First, has a defendant benefited from criminal conduct? Second, if he has, what is the value of the benefit so obtained? Third, what sum is recoverable? These stages, as is established, require separate consideration.
14. By s.76(4) it is provided that a person benefits from conduct if he obtains property as a result of or in connection with the conduct. By s.76(7) it is provided that if a person benefits from conduct his benefit is the value of the property obtained.
15. Central to the argument of the appellant are the provisions of s.79 and s.80. In the relevant respects, s.79 provides as follows:

"79 Value: the basic ruleE+W

This sectionnoteType=Explanatory Notes has no associated

(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."

Section 80 provides:

"80 Value of property obtained from conduct

E+W

(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).

(3) The property found under this subsection is as follows—

(a) if the person holds the property obtained, the property found under this subsection is that property;

(b) if he holds no part of the property obtained, the property found under this subsection is any property which directly or indirectly represents it in his hands;

(c) if he holds part of the property obtained, the property found under this subsection is that part and any property which directly or indirectly represents the other part in his hands.

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

"Property" is given a very wide definition in s.84.

The parties' submissions

16. The argument of Miss Ruth Jones on behalf of the appellant essentially came down to this. She conceded, in the light of the judge's findings of fact, that the appellant was to be taken as having obtained the value of the drugs: an argument that he had not obtained even that (by reference to the decision in Allpress [2009] 2 CAR(S) 58, [2009] EWCA Crim 8) necessarily failed once his case that he was a mere temporary custodian was rejected. But she emphasised that the 169 grams of cocaine as seized were at 80% purity. By virtue of s.80(2)(a) the value of the property was to be assessed at the time the appellant obtained it. Accordingly, it was the value of those drugs that was to be decided. She submitted that was the wholesale value. It was incorrect, she said, for the judge to substitute the prospective retail street value. That would need, if to be achieved, the addition of cutting agents, division and packaging into wraps at 5% purity. That lay in the future and was to that extent speculative, she said. None of these things had been done when the appellant obtained the drugs; none of these things had been done at the time the police seized the drugs. The statutory emphasis, she submitted, was on what the appellant had obtained; not what he might thereafter obtain (since s.80(3) was not argued to apply in this case).
17. Mr Tanney, on behalf of the Crown, in the course of his submissions accepted that in confiscation proceedings drugs may frequently be valued on a wholesale basis. But all, he submitted, depends on the circumstances of the particular case. On the facts here, he submitted, the judge was perfectly entitled to adopt the retail valuation advanced by the prosecution.

Disposition

18. In our judgment, the argument on behalf of the appellant is incorrect. It fails, we consider, to give proper effect to the provisions of s.79 and s.80 of the 2002 Act and it fails properly to reflect the findings of fact made by the judge.
19. In Waya [2013] 2 CAR (S) 20, [2012] UKSC 51 the legislative purpose behind the 2002 Act was stated by the Supreme Court to be one of ensuring that criminals do not profit from their crimes and to send a strong deterrent message to that effect (paragraph 2). It was further stated in paragraph 8:

"….the task of the Crown Court judge is to give effect to Parliament's intention as expressed in the language of the statute. The statutory language must be given a fair and purposive construction in order to give effect to its legislative policy."

20. We do not accept Miss Jones' submission that what the appellant was going to do with the 169 grams of cocaine (at 80% purity) was "speculative". The judge made findings of fact, entirely open to the judge, as to what the appellant would do with those drugs. The appellant was found to be neither a custodian nor a wholesaler. On the contrary, he was going to sell them, cut and divided into wraps at 5% purity, as a dealer at street level. Those findings of fact, as we see it, necessarily bear on the value of the property obtained by the appellant: the market value, as specified in s.79(2). The fact that the drugs had a purity of as high as 80% indicated, we can accept, that they had come to the appellant from a wholesale source. But that does not mean that such wholesale source prescribes the value of the drugs as obtained by the appellant as a retailer. It is perfectly consistent with the entire notion of "market value" that for particular property it may vary, depending for example on the time at which it is obtained or the capacity or role of the person obtaining it.
21. If it were not so, indeed, one would have thought that much of the basis of this confiscation hearing, and of the basis in which the appellant's case was advanced in the s.17 statement, would have been academic. Had the appellant been found to be a wholesaler only, intending to pass on (let it be assumed) to another wholesaler "at cost", the benefit which he obtained would, on Miss Jones' argument, have been precisely the same as it would have been to him in his capacity (as actually found) of retail street dealer. That seems both surprising and artificial. Take another example. Suppose the police had made their seizure two days later when the appellant had cut and divided the 169 grams of cocaine into wraps of 5% purity for street sale. Miss Jones conceded that the value of the benefit would in such circumstances be £108,160. But it seems arbitrary to sanction such an outcome by virtue of the happenstance of the timing as to seizure, when the appellant's role and intention at the time he obtained the drugs had been, and remained, precisely the same. And it also seems artificial and incorrect to resort prospectively to the provisions of s.80(3) of the 2002 Act (nor did counsel so submit). We thus conclude, given the judge's findings of fact, that the value of the 169 grams, at the time the appellant obtained those drugs, was properly assessed by reference to the retail street value. That those drugs may have had a lesser market value to the wholesaler who previously supplied them to the appellant is in no way determinative of the value to be ascribed to them as obtained by the appellant himself. Accordingly, the judge's conclusion reflected not simply the potential market value of the drugs (as Miss Jones' arguments connote): they reflected the actual market value at the time when the appellant obtained them.
22. We consider that this conclusion, on the facts as found by the judge, flows from a "fair and purposive" construction of the relevant provisions of s.79 and s.80 of the 2002 Act. It also reflects the legislative purpose of the 2002 Act: to deprive a defendant of the benefit from his criminal conduct.
23. We further consider that such a conclusion accords with authority: albeit no case precisely corresponding on its facts to the present situation was cited to us.
24. We note that in Ascroft [2004] 1 CAR (S) 56, [2003] EWCA Crim 2360 (a decision discussed in Waya at paragraph 68) what was in issue was the value of stolen goods to the accused, as thief: a context, of course, very different from the present. The legislation concerned in Ascroft, it should be emphasised, was not the 2002 Act: in fact, under the statutory provisions there applicable (the Criminal Justice Act 1988, as amended) the statutory provisions referred to the value of the property "to him": words which do not appear in the 2002 Act. Thus the appellant had ingeniously sought in that case to argue that since he, as the thief, could only sell on the goods at a very reduced price compared to the open market value then that reduced prospective price was to be taken as the value of his benefit. It is true that it was said by the court (at paragraph 59):

"The words 'value of the property to him at the time he obtained it' are, in our judgment, looking at the incoming value at the time rather than what the appellant might have got through a dishonest sale."

But that scenario simply does not reflect the facts of the present case. Besides, the Court of Appeal in Ascroft went on in terms immediately to say this:

"In our judgment comparison with valuations in drug cases is neither relevant nor helpful."

We agree. At all events, we did not find particularly helpful purported analogous examples by reference to, for instance, real property and money as put forward by both Miss Jones and Mr Tanney in support of their respective arguments. It may, all the same, be observed that the Court of Appeal in Ascroft made clear that it would have ascribed different values to the goods, as obtained by the thief, depending on whether they were stolen from a wholesale outlet or from a retail outlet (see paragraph 60 of the judgment). This connotes an acceptance of the proposition that the value of particular goods may vary depending on the circumstances in which they are obtained. We agree with that in general terms.

25. We were referred by both counsel to the decision of the House of Lords in Islam [2010] 1 CAR(S) 245, [2009] UKHL 30. That case was primarily concerned with the question of whether drugs could under the 2002 Act have a market value for the purposes of deciding benefit but not for the purpose of deciding the available amount. The majority decided that was the position: and that was not an issue in the present case before us. However, there are, as it seems to us, dicta pronounced in the course of the majority judgments in Islam which we think tell strongly against the appellant's argument before us. Thus, Lord Hope said this at paragraphs 17 and 18 of this judgment:

"17. …..On the one hand the court is looking for the value that the goods had in the hands of the defendant at the time when he obtained the benefit. It does not seem out of place in that context to look at the market to which he would have been expected to go to sell the drugs, even although this was an illicit one, especially as this was the only market in which he could have derived any significant benefit from them….

18. ….The market that has to be contemplated for the assessment of the available amount under section 9 of POCA 2002 must be taken to be one to which the defendant can resort to realise his assets without acting illegally. But no such restriction applies at the stage of calculating the amount of his benefit under section 8. At that stage the nature of the goods and the market in which they are ordinarily bought and sold will determine the market to which it is proper to go to discover the amount that a willing buyer would pay to a willing seller for them."

Lady Hale said this at paragraph 25:

"25. In applying section 79(2), it seems to me entirely appropriate to ask "upon what market do we expect the value of this property to be raised?" When we are looking at the benefit which the malefactor has gained from his conduct, we look at the market in which he expected to dispose of the property in question. That is what it was worth to him."

Lord Mance said this at paragraph 35:

"35. The assessment under section 80(2)(a) of the benefit consisting of the market value of property obtained looks simply to the objective value of the property if put up for sale on the market. Here, that means (under section 80(2)(a)) at the time when the defendant obtained it, i.e. at the moment of importation. In another case, it might (under section 17 80(2)(b) and (3)) mean at the date of the confiscation order. In either case, whether the importation is ever going to reach its intended market or the importation going to yield any profit at all would be irrelevant… There is nothing incongruous or inappropriate in this context about looking to the black market for each consignment of drugs; this was not just the only market but the market in which the respondent had intended to dispose of each consignment (even if only after splitting each consignment into smaller units)."

26. We accept that, as it happened, the value of benefit in Islam had been assessed by the trial judge by reference to the wholesale value. But that simply was not a point in issue in the House of Lords: indeed the case had, on its facts, involved an early interception by Customs officers of imported drugs. So in that regard the decision lends no authoritative support to Miss Jones' arguments. On the other hand the above dicta, as we see it, support the prosecution's argument in the present case.
27. Also against Miss Jones' arguments are observations of the Court of Appeal (also dicta but clearly fully considered) in the case of Mejia [2009] EWCA Crim 1940. There, the importation had been of cocaine impregnated doors from Panama. The doors were seized by Customs officers. The main argument of the appellants failed because of the intervening decision of the House of Lords in Islam and also because the further points sought to be argued on appeal had not been advanced in the Crown Court.
28. Nevertheless, the Court of Appeal went on to indicate that it in any event would have rejected those further arguments sought to be advanced on behalf of the appellants in that case: arguments which in many ways reflect those deployed before us by Miss Jones. It had there been submitted for the appellants that no attempts had been made, at the time of seizure, to extract the cocaine from the doors and that there was no market value for cocaine impregnated doors. As the court pointed out in paragraph 12, however:

"It is absurd to suggest that no value is to be attached to a product containing 17.34 kgs of pure cocaine, brought into this country for the very purpose of extracting the cocaine and selling it on."

Having noted the argument that the cocaine had yet to be extracted, at a cost to be ascertained, from the doors at the time the appellants had obtained them, the court then said this:

"On the other hand, [counsel for the prosecution] 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."

The Court of Appeal went on roundly to reject an argument that the valuation should be made by reference to the cost price of the cocaine in Panama. It said (in paragraph 13):

"The relevant question is the market value of the property in the United Kingdom, not its cost at source."

These various observations are thus also against the appellant's arguments in the present case. They represent, in our view, a proper focus on an estimation of the benefit obtained by a defendant in a drugs case, applying the statutory provisions.

Conclusion

29. We should add that the decision in Waya was referred to the judge, who took it into account. In agreement with the judge, we do not consider that the assessment of the benefit and the making of a confiscation order in this amount represents a disproportionate outcome or gives rise to any "fine", given the circumstances of this particular case.
30. We would pay tribute to Miss Jones' doughty arguments. But we are against them. Valuation of benefit is essentially a fact-driven exercise: and her arguments do not accord with the judge's findings of fact. They do not accord with a fair and purposive reading of the provisions of s.79 and s.80 of the 2002 Act. They also do not accord with the indications given in the authorities. Since all the arrows point in one direction, that is the direction we propose to take. Accordingly we dismiss the appeal.