Judgments - R v Islam (Respondent) (on appeal from the Court of Appeal Criminal Division)

(back to preceding text)

23.  It is as true today as it was in 1869 that “it is a sound rule of construction to give the same meaning to the same words occurring in different parts of an Act of Parliament": Cleasby B in Courtauld v Leigh (1869) LR 4 Exch 126, 130. Here it is a question of construing the very same words as applied to consecutive sections of the PCA 2002. I would dismiss this appeal.

BARONESS HALE OF RICHMOND

My Lords,

24.  I agree that, for the reasons given by my noble and learned friends Lord Hope of Craighead and Lord Mance, that R v Hussain [2006] EWCA Crim 621 should be overruled, that this appeal should be allowed and the order of HHJ Collender QC restored.

25.  This is not a case where we are putting a different construction upon the same words when used in different sections of the same statute. It is a case where we are applying the words of the same section to different factual situations. We are concerned only with section 79 of the Proceeds of Crime Act 2002. Section 79(1) provides that “This section applies for the purpose of deciding the value at any time of property then held by a person". Section 79(2) provides that “Its value is the market value of the property at that time". We are, I think, all agreed that references to a market can on occasions include a black market. 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. When we are looking at what is available for confiscation by the state, we look at the market in which he can properly be expected to realise the value of the property he holds. The state cannot expect him to sell it on the black market. It may be the same property but it may well have a different value depending upon the circumstances in which that value comes to be realised. This is a commonplace of everyday life. Property may change dramatically in value depending upon whether it is sold new, or in the second hand market, or in the antique market. I see no reason why Parliament should not have contemplated such a commonplace in enacting section 79(2).

26.  Lord Mance has, in my view, correctly identified the question thus: “to which market is attention to be directed?” This may or may not include a black market as the circumstances require. Once that has been decided, the issue is whether the property has any value in that market and, if so, what.

LORD MANCE

My Lords,

27.  The respondent pleaded guilty on 1 February 2006 to two counts of being knowingly concerned in the fraudulent evasion of the prohibition on the importation of goods contrary to section 170(2) of the Customs and Excise Management Act 1979. The counts concerned the importation of 3.53 kg of heroin through Southampton on or about 14 February 2005 and of 0.438 kg of heroin through Felixstowe on or about 1 March 2005. Both consignments were following their importation seized by HM Revenue and Customs (“HMRC”), the latter after a controlled delivery to a location selected by the respondent. The courts below have held that the respondent obtained the heroin at the moment of its importation as a result of or in connection with his illegal conduct within the meaning of section 76(4) and (7) and section 80(1) of the Proceeds of Crime Act 2002. That conclusion is no longer challenged. The issue now before the House is whether the heroin had, when the respondent so obtained it, any market value within the meaning of section 80(2) read with section 79(2) of the same Act.

28.  HHJ Collender QC held on 5 January 2007 that it had a wholesale value of £71,424, and, by reference to that and other items, assessed the respondent’s total benefit at £404,604.69. He held that the respondent had failed to show that the amount available for confiscation was less than the benefit, and made a confiscation order accordingly in the full £404,604.69. He further ordered the forfeiture and destruction of the heroin under section 27 of the Misuse of Drugs Act 1971.

29.   On 31 July 2008 the Court of Appeal rightly held that it was bound by (despite doubts it clearly held about the correctness of) its previous decision in R v. Hussain [2006] EWCA Crim 621; and on that basis concluded that the heroin did not, for the purposes of sections 76(4) and (7), 79(2) and 80(2) of the Act, have any market value when obtained, since there was no lawful market for its purchase or sale. The Court noted (at para 32) that the judge had not been invited to take “the indirect route of inferring …. that the [defendant] must have spent £x in purchasing the drugs and that the £x spent on drugs came from criminal conduct", and that, although that route would have been open under sections 6(4) and 10 (since his guilty pleas established the necessary criminal lifestyle), there was no evidence sufficient to justify any finding as to the purchase cost. The amount of the confiscation order was thus reduced by £71,424. The Court certified a point of law of general importance, namely: “For the purpose of calculating a defendants’ benefit, as distinct from the available amount, in confiscation proceedings under the Proceeds of Crime Act 2002, must goods of an illegal nature obtained by him be treated as having no value?” Leave to appeal was granted by the House.

30.  The scheme of the 2002 Act requires the sentencing court, in the event of a relevant conviction, to determine the amount of any confiscation order before making any order for, inter alia, forfeiture under section 27 of the Misuse of Drugs Act 1971 (see section 13 and R v. Dore [1997] 2 Crim App R(S) 152, 160, decided under the predecessor provision in the Drug Trafficking Act 1994). The court must start by determining whether the defendant does or does not have a criminal lifestyle (section 6(4)). In the present case, the respondent did have, since his convictions were of a class specified in Schedule 2. Under section 6(5), the court had then to decide the recoverable amount, and make a confiscation order requiring him to pay that amount. Under section 7(1): “The recoverable amount for the purposes of section 6 is an amount equal to the defendant’s benefit from the conduct concerned"; but section 7(2) qualifies this by providing that

“if the defendant shows that the available amount is less than that benefit the recoverable amount is (a) the available amount, or (b) a nominal amount, if the available amount is nil".

Section 9(1) explains that:

“For the purposes of deciding the recoverable amount, the available amount is the aggregate of (a) the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and (b) the total of the values (at that time) of all tainted gifts".

Under section 82 “Property is free unless an order is in force in respect of it under” one of a number of statutory provisions, including section 27 of the Misuse of Drugs Act 1971. “Tainted gifts” are those made after dates defined by section 77, going back as long as six years prior to the commencement of proceedings in the case of a defendant with a criminal lifestyle.

31.  The concept of benefit is first addressed in section 8:

“(1) If the court is proceeding under section 6 this section applies for the purpose of—

(a) deciding whether the defendant has benefited from conduct, and

(b) deciding his benefit from the conduct.

(2) The court must—

(a) take account of conduct occurring up to the time it makes its decision;

(b) take account of property obtained up to that time.”

Section 76 (Conduct and benefit) provides:

“(4) A person benefits from conduct if he obtains property as a result of or in connection with the conduct.

……….

(7) If a person benefits from conduct his benefit is the value of the property obtained.”

Sections 79 and 80 then provide:

“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).

(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.”

Section 84 addresses the concepts of “property” and “held":

“84 Property: general provisions

(1) Property is all property wherever situated and includes—

(a) money;

(b) all forms of real or personal property;

(c) things in action and other intangible or incorporeal property.

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

(a) property is held by a person if he holds an interest in it;

(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).”

32.  In other contexts, a drug-importer such as the respondent would find strange a suggestion that heroin which he obtained by its illegal importation into the United Kingdom had no market value. There are two inter-connected strands to the submission that this is the correct analysis under the 2002 Act. The first is that the word “lawful” must be understood as read into section 79(2) before the phrase “market value". The second is that the basic rule of market valuation contained in section 79 is also applicable to the valuation of property held by a defendant when deciding the amount available for confiscation (see sections 7(2) and 9(1)) and that the impossibility or inappropriateness of attributing to heroin a black market value at that time demonstrates that no such value can have been contemplated at the earlier stage of valuation of benefit.

33.  If the first argument postulates an absolute rule that the law, or Parliament, never concerns itself with black market values, I would reject it. No doubt there are circumstances when they will decline to do so. But that does not mean that it may not be appropriate in other circumstances to accept the reality that benefit may be obtained in the form of black market value. Lord Dunedin’s observation in Charrington & Co. Ltd. v Wooder [1914] AC 71, 82 and 84 to the effect that the term “market” did not have a “fixed legal significance” seems to me relevant here as in the contractual context in which it was uttered.

34.  As to the second argument, heroin may have a black market value when it is imported and obtained, which it will no longer possess when the confiscation order is made. At the latter point, the heroin will commonly have been forfeited by HMRC or be in the hands of other authorities, about to be forfeited and incapable of being realised on any market. The statutory scheme distinguishes between valuations in different contexts and for different purposes. When assessing benefit, the heroin is to be valued by reference to the market value “at the time the person obtained it” (section 80(2)(a) read with section 79(2)), although in an alternative (not relevant on the facts of this case) by reference to the market value (if greater) of any such heroin obtained and still held or traceable into other property at the date of the court’s decision. When assessing the available amount, the market value is taken “at the time the confiscation order is made” of any “free property then held by the defendant” (section 9(1) read with section 79(1) and (2)). Where HMRC have seized goods, forfeiture is automatic, and in that case the goods will no longer be property held by the defendant at the time of the confiscation order within section 84(2): see R v Dore [1997] 2 Cr App R(S) 152, 158, under section 62(5)(a) of the 1994 Act. But, in other cases, the confiscation order will precede any order for forfeiture under section 27 of the Misuse of Drugs Act 1971 (see above). The heroin may then continue in law to be “free property then held by the defendant” at the time of the confiscation order within the meaning of section 84(2), although physically in the possession of the authorities and destined in due course to be the subject of a forfeiture order. In such circumstances, it would however be impossible to regard it as having any market value for the purposes of assessing the available amount; it would not (because it could not) ever be bought or sold on any market.

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 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. “Such a scheme has the merit of simplicity. If in some circumstances it can operate in a penal or even a draconian manner, then that may not be out of place in a scheme for stripping criminals of the benefits of their crimes": see R v Cadman Smith [2001] UKHL 68; [2002] 2 Cr App R(S) 37, para. 23 per Lord Rodger of Earlsferry. (That case was decided under section 74(3)(a) of the Criminal Justice Act 1988, which was, as Lord Rodger said, to like effect to section 6(1)(a) of the Drug Trafficking Act 1994, these two sections being superseded by and for present purposes to like effect to the first twelve words of section 80(2)(a) of the 2002 Act.). 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).

36.  I cannot however agree with my noble and learned friend Lord Neuberger’s suggestion (paragraph 61) that it must logically follow that, if drugs obtained had by the date of the confiscation order been converted into and were thus under section 80(3)(b) or (c) represented by other lawful property, then such property would fall to be valued at that date by reference to any black market value. A lawfully owned gun would, by definition (and in contrast with unlawfully owned drugs), be property which the defendant did not contemplate selling (indeed, in view of the legislation regulating gun-ownership would be most unlikely to be able without detection to sell) on any black market. To look at a black market for guns being unlawfully disposed of (and normally also unlawfully possessed) would be to look at a market for disposal of essentially different items in a quite different context compared with any relevant to the defendant, once he had converted his drugs into lawfully owned property.

37.  The assessment of market value for the purpose of determining “the available amount” at the time when the confiscation order is made raises different considerations. Leaving aside the special position arising from tainted gifts, the purpose of restricting the recoverable amount to the lesser of “the defendant’s benefit from the conduct concerned” and “the available amount” under sections 7(1) and (2) and 9(1) is to ensure that confiscation orders are not made against defendants in an amount beyond that which they can, from one source or another, meet at the time the confiscation order is made. The court is in this context therefore concerned with the value of property which the defendant can actually be required or expected to realise on the market. It would defeat this purpose if a black market value were put on drugs which would never conceivably be sold on that market to meet the confiscation order.

38.  If one supposes circumstances in which drugs obtained by a defendant were, at the time of the confiscation order still held by the defendant and potentially realisable on a black market here or abroad (e.g. where he had hidden or (re-)exported them), a further consideration militating against treating their value as ‘available’ for the purposes of a confiscation order would be likely to come into play. As a matter of general policy, the court will not enforce or condone the doing of an illegal act here or abroad. The “integrity of the justice process” must be preserved, as McLachlin J said in Hall v. Hebert (1993) 101 DLR (4th) 129, 160-8. On the same principle contracts for the performance of illegal acts abroad are unenforceable. A confiscation order requires the defendant to realise his available assets, on pain of serving the additional period of imprisonment specified by the court when making the order. If the court took account of black market value in fixing the value of the defendant’s available property, it could itself be regarded as requiring or encouraging, or imprisoning for failure to effect, an unlawful realisation of the drugs by the defendant. The court is not however implicated in any similar way if, when assessing the defendant’s benefit from illegally obtained drugs, it recognises the fact that such drugs had a real and intended black market value.

39.  In principle, there was, therefore, no inconsistency in this case between treating the heroin as having a black market value when imported and obtained by the respondent in early 2005, but no such value at the time of the confiscation order nearly two years later. This is not to give two different meanings to the statutory concept of market value, which is capable of embracing every type of market. It is to recognise that the relevant question (“to which market attention is to be directed and/or whether property has any and if so what value upon it?”) always depends upon the context in and purpose for which the question is being answered.

40.  I turn to the authorities leading to the opposite conclusion by which the Court of Appeal was bound. They start with R v. Thacker (1995) 16 Cr App R(S) 461 and R v Dore [1997] 2 Cr App R(S) 152. In the former, the Court held no more than that drugs forfeited by HM Customs ceased to be property held by the defendant, so that there was “no basis upon which it could be held that he was in any position to realise that property as an asset", and the realisable amount fell to be reduced accordingly under sections 4(3) and 5(1) of the Drug Trafficking Offences Act 1986 (pre-cursors to sections 7(2) and 9(1) of the 2002 Act). The latter case was not in fact concerned with any attempt to treat the drugs seized as realisable property under the 1994 Act, but Lord Bingham CJ said obiter at p.158 that, “even if the drugs [in R v. Thacker] had still been held by the defendant …. - and this could well be the position where it was the police and not the Customs and Excise who seized the drugs", they “would still be without value as realisable property": That, he went on, was

“because, by virtue of section 7(1) of the 1994 Act …., the value of the property is to be taken as its market value and the market value must be the market value if the property is sold lawfully. In the case of drugs, it is obvious that the drugs cannot be sold lawfully and therefore they have no market value.”

41.  Perhaps because of the high authority of Lord Bingham - as Toulson LJ observed in the present case: [2008] EWCA 1740, para. 22 - the passage quoted appears to have been treated in some later cases as if his words were statutory and to have been applied in a very different context from that which he was considering. However, in R v. Berry [2000] 1 Cr App R(S) 352, Tuckey LJ rightly observed that the fact that drugs must for the purpose of assessing realisable value be valued at nil because they have no market value does not necessarily mean “that the same would apply when considering the antecedent question of valuing the defendant’s benefit” under the 1994 Act. Nevertheless, in R v Ajibade [2006] EWCA Crim 368; [2006] 2 Cr App R(S) 70, the Crown conceded and the Court of Appeal accepted that the principle indicated by Lord Bingham applied to a calculation of benefit under the 2002 Act.

42.  Finally, in R v. Hussain [2006] EWCA Crim 621, the Court of Appeal re-examined this question in detail, and reached a like conclusion. The judgment given by Stanley Burnton J has five strands. The first is that “The natural meaning of ‘market value’ is value in a lawful market. The ordinary meaning of ‘market value', in relation to something which it is illegal to buy and to sell is that it has no market value” (para.12). In support of this, Stanley Burnton J also cited Building and Civil Engineering Holidays Scheme Management Ltd. v Post Office [1966] 1 QB 247 and R(HN Revenue and Customs) v. Machell [2005] EWHC (Admin) 2593. The second strand (para.13) consists of Lord Bingham’s dicta in R v. Dore. The third (para.14) is that, in the light of Lord Bingham’s dicta, Parliament, when re-enacting the words “market value” in the 2002 Act “must be taken to have appreciated that this Court had already decided that ‘market value’ meant value in a lawful market, in a market in which goods could be bought and sold lawfully. …. In our judgment, Parliament must be taken to have advisedly and deliberately used an expression which had already received an interpretation by this Court in this context". The fourth (para. 15) is the decision in R v. Ajibade applying the dicta in R v Dore to the calculation of benefit while the fifth (para.16) was that the result was not “in any way offensive to common sense", since, “the drugs having been seized, the defendant has received and enjoys no benefit by reason of the drugs themselves"; and, had he sold the drugs, their proceeds, assuming them to be cash or other lawful property, would have been “a benefit” which would have been the subject of confiscation proceedings; and, if it could have been shown that the drugs had been purchased with the proceeds of drug trafficking, that would have been a benefit for the purposes of the Act.

43.  The considerations identified in R v. Hussain do not persuade me that the result reached in that case is either required by the statutory language or right. As to the first strand, it may be natural or usual to relate market value to value in a lawful market, for the very reason that ordinarily there is such a market. It does not mean that the concept is either necessarily or always related, and still less confined, to such a market. That is particularly so, in the context of an Act referring to the market value of property obtained as a result of or in connection with a defendant’s criminal lifestyle or criminal conduct. Secondly, Lord Bingham’s dicta in R v. Dore were both obiter and concerned with valuation for the purpose of assessing what was realisable or, in the language of the 2002 Act, available at the time and for the purposes of a confiscation order. Third, it is by the same token unjustified to attribute to Parliament, by reference to Lord Bingham’s words, either an appreciation “that this Court had already decided that ‘market value’ means value in a lawful market” or any decision “advisedly and deliberately” to use that expression in that knowledge. Further, on this line of reasoning, Parliament should also be taken to aware of Tuckey LJ’s clear warning in R v. Berry in 1999 that a black market value might be relevant to the assessment of benefit. Fourth, R v. Ajibade was a decision reached only in 2006 on a concession and without full examination of the issue.

 
Continue  Previous