Developments in the Law: 2012
Useful Cases and Materials
NOTE: “The Human Medicines Regulations 2012 (SI 2012 No.1916)” [link]. See also the Explanatory Memorandum [link]. This is a substantial measure, which consolidates with “minor and drafting amendments” large parts of the Medicines Act 1968 and a number of regulations made thereunder. The 2012 Regulations come into force on the 14th August 2012. Note that s.130 of the Medicines Act 1968 is amended to bring it into line with the EC definition of a “medicinal product” (see Directive 2001/83/EC, as amended by Directive 2004/27/EC): see reg.2 (and para.31 of schedule 34) of the 2012 Regs.
For a copy of (March 2012) “Proposal for a Directive of the European Parliament and of the Council on the freezing and confiscation of proceeds of crime in the European Union” [link]
For a copy of the Report of the European Union Committee of the House of Lords (32nd Report of Session 2010–12; April 2012), “The United Kingdom opt-in to the draft directive on proceeds of crime” [link]
For a copy of the Proceeds of crime – Commons Library Standard Note regarding the Proposal for a Directive on proceeds of crime” [link]
The Misuse of Drugs Act 1971 (Amendment) Order 2012 came into force on 13th June 2012: see SI 2012 No.1390. [link] The Order “adds, in article 2, Desoxypipradrol and other Pipradrol-related compounds to Part 2 of Schedule 2 to the Misuse of Drugs Act 1971….which specifies drugs
which are subject to control as Class B drugs under that Act. Article 3(a) omits Pipradrol from, and adds 7-bromo-5-(2-chlorophenyl)-1,3-dihydro-2H-1,4-benzodiazepin-2-one
(commonly known as Phenazepam) to, paragraph 1(a) of Part 3 of Schedule 2 to the 1971 Act which specifies drugs which are subject to control as Class C drugs under that Act.
Article 3(b) adds Pipradrol to paragraph 1(b) of Part 3 of Schedule 2 to the 1971 Act”.
The Misuse of Drugs (Amendment No.3) (England, Wales and Scotland) Regulations 2012 came into force on 13th June 2012: see SI 2012 No.1311. [link]
The Misuse of Drugs (Designation) (Amendment No.2) (England, Wales and Scotland) Order 2012 came into force on 13th June 2012 (desoxypipradrol and other pipradrol-related compounds): see SI 2012 No.1310. [link]
NOTE: The Misuse of Drugs (Amendment No.2) (England, Wales and Scotland) Regulations 2012 came into force on the 23rd April, 2012: see SI 2012 No. 973. [link] These are important amendments and note the omission of the expression “medicinal product” from the regulations. Please monitor developments relating to the MDA 1971 on the Misuse of Drugs pages of this website.
NOTE: The 6th edition of “Misuse of Drugs and Drug Trafficking Offences” [R. Fortson, 2012, Sweet & Maxwell Ltd., London] has now been published [link]
SENTENCING COUNCIL DEFINITIVE GUIDELINE FOR DRUG OFFENCES
On the 24th January 2012, the Sentencing Council published definitive sentencing guidelines for drug offences, which came into force on the 27th February 2012. The Crown Court Guidelines for Drug Offences are available by clicking on the “link” button [link]. The Magistrates’ Court Guidelines for Drug Offices are also available from the Sentencing Council website [link]. A copy of “Drug Offences Response to Consultation” is available from the Sentencing Council website: [link]. A series of very informative “Research and analysis publications” is also available on the Sentencing Council website. [link]
NOTE: Credit is due to Mr Laurence Eastham, the editorial coordinator for Blackstone’s Criminal Practice (OUP), for drawing my attention to the fact that the table of factors in the Sentencing Council’s Definitive Guideline for Drug Offences (Crown Court), that pertain to the importation/exportation of controlled drugs, has been modified (albeit slightly). It is therefore essential that practitioners download the current version of the guidelines from the Council’s webiste.
NOTE: For a “Summary and Discussion of the Sentencing Council’s Definitive Guidelines for Drug Offences” [R. Fortson], see: [link]. The views expressed are those of this commentator alone. The document will be modified from time to time as the jurisprudence develops.
NOTE: For important guidance given by the Court of Appeal on the Definitive Guideline for Drug Offences (a judgment that aims to dispel some “myths”), see A-G Ref No.15-17 of 2012 (Lewis, Wijtvliet, and Vriezen)  EWCA Crim 1414: [link]. The Court made the following observations (among others):
- the Guideline is not a statute requiring strict statutory construction [4; 17];
- “Harm, or rather the potential for harm, is measured by the weight or quantity of the drug concerned” [per Hallett LJ, para.5];
- “….the weight or quantity of the drug remains at the heart of the sentencing process. However, a direct comparison between the new guidance and the old may be misleading. Under the previous regime, sentencing ranges for drugs offences were based on the weight of the drug at 100% purity. Under the new Guideline, the purity of the drug does not become relevant until step two, when low purity or high purity of the drug may be a mitigating or aggravating factor.” [per Hallett LJ; para.7];
- “The essential nature of a drugs hierarchy remains the same even if the terminology has changed” ;
- “….it is not necessary for an offender to possess every characteristic before he or she can be described as fulfilling any particular role…..The words chosen have a broad meaning and judges should be astute not to place offenders in a lower category than is appropriate” ;
- “….the list of aggravating and mitigating factors is non-exhaustive” ;
- “….the Council’s clear intention was certainly to maintain if not increase the level of sentences for drugs offences (save in the case of the so-called “drugs mules” – a very special category of offender)” ;
- “….departure from the sentencing ranges is permitted where there is….a serious and commercial operation involving the importation of a quantity of drugs significantly larger than category 1” .
[COMMENT: Interestingly, the Court considered the appropriate sentence in respect of “methylethylcathinone” (sometimes called “4-methylethcathinone”: both names are imprecise) a Class B cathinone derivative that is sold (said the Court) under the names “4-MEC” or “NRG-2” . Note that a different substance, namely, 4–Methylmethcathinone, is a Class B drug (commonly referred to as “mephedrone”) and it is also controlled by part 2, para.1(aa) of sch.2 to the MDA 1971. None of the Class B cathinone derivatives are expressly referred to in the Definitive Guideline. Accordingly, the Court said that, in relation to 4-MEC, it had no option “….but to approach this particular case on the basis most favourable to the offender namely on the basis of the ‘indicative’ quantities for cannabis. Should evidence become available that our approach is wrong, it can be corrected in a future case” .
The Court was right to say that, under the new Guideline, “the purity of the drug does not become relevant until step two, when low purity or high purity of the drug may be a mitigating or aggravating factor. This is a significant change” . The change is indeed significant. Although the Court stressed that the “twin pillars of harm and culpability remain” , the academic discussion is whether the potential for harm is usually more accurately determined by reference to drug purity rather than the quantity or weight of the product in question. This is not to overlook the potential for harm in respect of impure drugs, or the use of toxic or otherwise harmful ‘cutting agents’.
In the case concerning V, investigators seized 971 grams of moist amphetamine sulphate (591 grams dry). The difference in the moist and dry weights is considerable (380 grams). The Court did not discuss (and, on the facts of that case, did not need to discuss) whether, for the purposes of the Definitive Guidelines, the relevant weight is dry-weight. It is not evident to what extent the difference in weight was attributable to the presence of water (presumably harmless) rather than, say, the remnants of precursor chemicals that had been used to produce it. Only time will tell whether, in the event that the evidence/scientific experience shows that moist-weight is largely attributable to the presence of water, the courts decide that the relevant weight remains (as a starting point) the gross weight of the product.
Definitive Guideline for Drug Offences and Inchoate Offences
Although not expressly stated in the Definitive Guideline for Drug Offences, it is submitted that (save in exceptional cases) the Guideline does apply to the commission of inchoate offences. The Guideline clearly applies where a substantive offence (e.g. production) has been committed jointly by two or more persons. Accordingly, one starts from the premise that the Guideline applies to such conduct, albeit charged as a statutory ‘conspiracy’ (noting s.3, CLA 1977). It is important to note that for the purposes of the three offences created under Part 2 of the Serious Crime Act 2007, s.49(1) provides that “[a] person may commit an offence under this Part whether or not any offence capable of being encouraged or assisted by his act is committed” [emphasis added]. By s.58 of the 2007 Act, in cases other than murder, the offender “is liable to any penalty for which he would be liable on conviction of the anticipated or reference offence”. It is therefore submitted that there will usually be sufficient flexibility in the structure of the Definitive Guideline to adjust the sentence having regard to the particular features of the case in question (e.g. that the contemplated offence was not carried out). As for flexibility within the Guideline, see R v Healey  EWCA Crim 1005 (para.5).
- R v Waya  UKSC 51. [transcript].
In late 2003, W contracted to buy a flat for £775,000. £310,000 came from his own resources. The balance of £465,000 was provided by way of a mortgage, which W obtained having made false statements about his employment and earnings. In April 2005, the mortgage was redeemed by way of a second loan (honestly obtained) in the sum of £838,943. By the date of confiscation proceedings, the open market value of the property was £1,850,000.
The trial judge assessed the benefit in the sum of £1,540,000 (£1.85M – £310K).
The CACD determined W’s benefit in the sum of £1.11M (£1.85M x 60% (i.e. (£465K/£775K) x 100 = 60%).
The majority of the UKSC held that the correct determination was £392,400 (see para.80). The minority held that the “real benefit” was no more that the money value of obtaining financing on better terms than might otherwise have been available (para.124).
In a nine-judge decision of the Supreme Court, the Justices were unanimous in respect of the following propositions (lead judgment, Lord Walker and Sir Anthony Hughes):
1. “Although the statute has often been described as “draconian” that cannot be a warrant for abandoning the traditional rule that a penal statute should be construed with some strictness. But subject to this and to HRA, the task of the Crown Court judge is to give effect to Parliament’s intention as expressed in the language of the statute.” 
2. Article 1 of the First Protocol to the ECHR (“A1P1”) “imports, via the rule of fair balance, the requirement that there must be a reasonable relationship of proportionality between the means employed by the State in, inter alia¸ the deprivation of property as a form of penalty, and the legitimate aim which is sought to be realised by the deprivation.” [12, citing Jahn v Germany (2006) 42 EHRR 1084, para.93]
3. Any violation of A1P1 can be avoided by applying to POCA, and in particular to section 6, the rule of construction required by section 3 of HRA. 
4. It is possible to read s.6(5)(b) of POCA (“…make an order (a confiscation order) requiring him to pay that amount…”) as subject to the qualification “except insofar as such an order would be disproportionate and thus a breach of Article 1, Protocol 1” and, it is necessary to do so in order to ensure that POCA remains Convention compliant. 
5. Confiscation orders of the kind considered in cases such as Morgan and Bygrave  EWCA Crim 1323, and Shabir  EWCA Crim 1809, “ought to be refused by the judge on the grounds that they would be wholly disproportionate and a breach of A1P1. There is no need to invoke the concept of abuse of process”. 
6. The “safeguard of the defendant’s Convention right under A1P1 not to be the object of a disproportionate order does not, and must not, depend on prosecutorial discretion, nor on the very limited jurisdiction of the High Court to review the exercise of such discretion by way of judicial review” 
7.However, “the judge’s responsibility to refuse to make a confiscation order which, because disproportionate, would result in an infringement of the Convention right under A1P1 is not the same as the re-creation by another route of the general discretion once available to judges but deliberately removed”. 
8. The severity of the regime “will have a deterrent effect on at least some would-be criminals. It does not, however, follow that its deterrent qualities represent the essence (or the “grain”) of the legislation. They are, no doubt, an incident of it, but they are not its essence. Its essence, and its frequently declared purpose, is to remove from criminals the pecuniary proceeds of their crime”. 
9. In “lifestyle cases” (see s.75, read with Schd.2, of POCA), although the starting point is that the assumptions “must” be made (section 10(1)), “this duty is subject to two qualifications contained in section 10(6). The assumptions should not be made if they are shown to be incorrect: section 10(6)(a). Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b).” 
10. To make a confiscation order where D “has restored to the loser any proceeds of crime which he had ever had, is disproportionate. It would not achieve the statutory objective of removing his proceeds of crime but would simply be an additional financial penalty.” 
11. To the extent that Rose  1 WLR 2113 held (at para 88) that the recovery and restoration intact of the stolen property was always irrelevant to the making of a confiscation order, “that part of the decision should not be followed”. .
12. In R v Smith (David)  UKHL 68,  1 WLR 54, the House “was not…considering the case in which the criminal property obtained has been restored to its owner undamaged.” 
13. A legitimate, and proportionate, confiscation order may have one or more of three effects :
(a) It may require the defendant to pay the whole of a sum which he has obtained jointly with others;
(b) Similarly, it may require several defendants each to pay a sum which has been obtained, successively, by each of them, as where one defendant pays another for criminal property;
(c) It may require a defendant to pay the whole of a sum which he has obtained by crime without enabling him to set off expenses of the crime.
Property obtained and its value
By a majority (lead judgment, Lord Walker and Sir Anthony Hughes, with whom Lady Hale, Lord Judge, Lord Kerr, Lord Clarke and Lord Wilson agreed [Lord Phillips and Lord Reed dissenting]):
1. In the case of an ordinary loan induced by fraud, “there is no doubt that the defendant does obtain the loan sum advanced.” 
2. If a borrower repays a fraudulently induced loan, secured or unsecured, “…a confiscation order which requires him to pay the same sum again is (lifestyle considerations apart) likely to be disproportionate and wrong. But that, likewise, does not mean that he did not obtain the loan sum advanced in the first place.” 
3. In the case of a mortgage advance of the kind relevant in Waya, W never acquired anything but the equity of redemption …“what Mr Waya obtained was the right to have the mortgage advance applied in the acquisition of his flat, subject from the moment of completion to the mortgage lender’s security, which ensured the repayment of the advance. This thing in action had no market value at or immediately after completion, as the equity of redemption (or in everyday speech, the equity) represented Mr Waya’s down-payment.” [53, emphasis added]
4. “If the defendant and another person both hold interests in the same property, then it is the value of the defendant’s limited interest which is to be taken for the purposes of calculating his benefit.” [65; noting ss.84(2)(b) and 79(3), POCA]
5. Rose and, Ascroft  1 Cr App R (S) 326, are correct in holding that the measure of the value of the interest in property stolen to the thief, for the purposes of confiscation, is what it would cost him to acquire it in the open market. 
6.In economic terms, W’s benefit was so much of any appreciation in value as was attributable to the mortgage obtained by his dishonesty, which on the facts of his case, was 60 per cent (i.e. £465K (dishonestly obtained), over £775K (cost of acquisition) = 60%) of the appreciation in the net value of the flat, subject to the mortgage. [78; and see paras.71 and 80]
Of the judges who considered the law pertaining to this case, all of them would doubtless say that they reached a determination of the value of W’s “benefit” in a manner that was faithful to the language of POCA 2002 and yet, each tier (HHJ, CACD, and SC), assessed that value in a significantly different amount. Indeed, the two dissenting Supreme Court Justices held that “The real benefit was no more than the money value of obtaining his financing on better terms than might otherwise have been available. To base the confiscation order on the increase in value of the flat would be disproportionate. For this reason we consider that the judge should have applied A1P1 and reduced the confiscation order to reflect the modest benefit that Mr Waya may have enjoyed of obtaining the mortgage on better terms.” .
Beyond para.34 of the judgment of the Supreme Court, the two dissenting Justices fundamentally disagreed with the reasoning and approach of the majority.
The true explanation (it is submitted) for the different determinations lies not only in the “complexities and difficulties of confiscation cases, arising from the extremely involved statutory language” (Waya, SC, para.4) but also in the markedly different reactions and views of the judiciary concerning the severity of outcomes and, policy considerations, of confiscation regimes (following conviction) such as POCA 2002 and earlier confiscation regimes that became largely stripped of judicial discretion to make determinations in a “just” amount. To the extent that, in recent years, the Courts have taken steps to make determinations of an offender’s benefit under statutory confiscation regimes more proportionate than hitherto (and which more closely reflects that offender’s actual benefit), the decision is to be welcomed (and see R. Fortson, “Modern Notion of Benefit”, Proceeds of Crime Review, 2011, Issue 5, pp.4-9 (Wildy’s, London).
Lord Phillips and Lord Reed described the “identification of A1P1” as “novel and imaginative” (para.83), but A1P1 has often been cited in appellate decisions concerning confiscation following conviction. What is novel is the unanimous decision of the Supreme Court to use A1P1 as the means by which the reach of confiscation regimes can be kept within the limits of what is “proportionate” to the “legitimate aim which is sought to be realised by the deprivation [of property]”. 
However, the decision of the SC in Waya is bound to result in arguments being advanced in confiscation proceedings that had previously been thought to be unarguable. The SC has made it clear that A1P1 does not vest the sentencer with a general discretion (see para.24). But, one practical effect of the decision of the UKSC is that even if D has “obtained property” as a benefit from “criminal conduct”, there may be circumstances in which it would be disproportionate (A1P1) to make a confiscation order in a sum that would otherwise be recoverable (s.6(5), POCA, and see judgment paras.15 and 16). The Supreme Court gave a few examples of the circumstances in which A1P1 would be engaged, but it did not (and could not) provide a closed list of such circumstances.
Although the majority rejected the notion that A1P1 amounts to “creating a new governing concept of ‘real benefit’” (para.26), the majority appear to have regarded as a relevant factor, when determining the value of a defendant’s benefit, the level of his or her culpability. Thus, the Court noted that W had been sentenced to “80 hours’ community service” and that, “[d]epriving him of that prospective capital gain, or a proportionate part of it, would therefore be the appropriate way of making the confiscation order fit the crime” [42; italics added] This approach may say something about the nature of a confiscation order as a ‘penalty’, but it also begs the question, “what are the true objects of confiscation regimes following conviction?”
In ‘criminal lifestyle’ cases, the Supreme Court (in Waya) alluded to the two exceptions to the making of statutory assumptions under s.10 POCA. Interestingly, the majority said “The assumptions should not be made if they are shown to be incorrect: section 10(6)(a). Nor should they be made if making them would give rise to a risk of serious injustice: section 10(6)(b). The combination of these provisions, and especially the latter, ought to mean that to the extent that a confiscation order in a lifestyle case is based on assumptions it ought not, except in very unusual circumstances, to court the danger of being disproportionate because those assumptions will only be applied if they can be made without risk of serious injustice.”  Given what the Court has stated in relation to A1P1, it is arguable that the “serious risk of injustice” exception will have a wider application than seemed to have been permitted under pre-existing case law: consider Delaney and Hanrahan (May 14, 1999), Mouldon  EWCA Crim 2715 (cited in Panesar  EWCA Crim 1526), Ul-Haq  EWCA Crim 14, Rowsell  EWCA Crim 1894, Deprince  EWCA Crim 524, Elton v United Kingdom (ECHR), 11 September, 1997: and see R. Fortson ‘Misuse of Drugs and Drug Trafficking Offences’ (Sweet and Maxwell Ltd, 6th ed. 2012), chp.13-131. Would it now be “disproportionate” and a “serious risk of injustice” (in a criminal lifestyle case) to make a confiscation order where the only asset (albeit a ‘benefit’) is a modest ‘family home’ occupied by the defendant and his family?
Perhaps the time has come for the appellate courts to consider whether the principle in R v Barwick  1 Cr App R (S) 129 is too strict (notwithstanding Grayson and Barnham v UK
 ECHR 871; (2009) 48EHRR 30) given the powers now available to the courts to reconsider determinations under POCA (notably, ss.19-23) and the power to make a Financial Reporting Order, or a Serious Crime Prevention Order, against the defendant in appropriate cases (noting Wright  EWCA Crim 3207, Mullen  EWCA Crim 606, and Hancox and Duffy  2 Cr App R(S) 74).
- R v YDG  EWCA Crim 1378. [transcript]. There is nothing in the language of the DTA 1994 which suggests that a certificate has effect against anyone other than the person in respect of whom it is made. Accordingly, there is no reason why Parliament would have intended that a person who held any proceeds of drug trafficking should not be the subject of criminal prosecution in respect of proceeds that are greater than the amount certified. Ordinarily and unless the context otherwise requires, a certificate issued by a court only affects the parties to the proceedings in which the certificate was issued. “The legislation was designed to impose a punitive regime on all who participate in drug trafficking or assisted in the laundering of proceeds. If many years later it was discovered that an associate was knowingly dealing with what could be proved to be proceeds of the drug trafficking in excess of the amount certified, could Parliament have intended that such a person could rely on the certificate given in proceedings to which he was not a party? We can think of no reason why Parliament would have any such intention given the purpose of the 1994 Act” (per the President of the QBD, para.26)
- R v Gangar and White  EWCA Crim 1378. [transcript]. This decision, decided in relation to the CJA 1988, applies to all confiscation regimes following conviction. The point in issue was whether, in cases where two or more defendants are co-owners of an available asset, the “amount that might be realised” (CJA/DTA/DTOA) or the “available amount” (POCA 2002), is the full value of that asset in respect of each defendant. The Court held (correctly it is submitted) that the answer is in the negative: “Any one defendant can only be called upon to realise what is his to realise (and, but for the confiscation order, to keep). That is limited to his beneficial interest” [per Hughes LJ., 37]. COMMENT: It is submitted that the decision is plainly right. It has long been established that there is a clear distinction between the meaning of “realisable property” and, “the amount that might be realised” (CJA/DTA; or the ‘available amount’ [POCA]): see Dickens (1990) 12 Cr.App.R.(S.) 191. The distinction is often overlooked. Section 74(3) CJA defines the “amount that might be realised” in terms of the value of D’s “realisable property” (less ‘obligations having priority’, but including the value of gifts caught by the Act) which, in turn, takes us to s.74(4) for the purposes of the 1988 Act. Thus, it is the value of D’s beneficial interest in property that matters (and this holds true in respect of all the confiscation regimes). Neither Porter (1991) 92 Cr.App.R.126 nor Chrastny (1991) 93 Cr.App.R.406 is authority to the contrary. As the Court, in Gangar observed, “….the valuation provisions, such as s.74 of the 1988 Act, or s.79 of the 2002 Act….clearly require the partial interest of the defendant to be valued separately from the whole” [per Hughes LJ., para.31]. It is submitted that it is preferable that the value of a defendant’s beneficial interest in property should be determined in confiscation proceedings at first instance, but it is recognised that this may not always be practicable (see, further, R. Fortson, “Misuse of Drugs and Drug Trafficking Offences”, 6th ed., para.13-143; 13-177; 2012, Sweet & Maxwell).
- R v McGee  EWCA Crim 613. [transcript]. M’s conviction for permitting her premises to be used for the supply of Class A drugs, contrary to s 8(b) of the Misuse of Drugs Act 1971 was quashed. Police found, under M’s bed, 100 grams of powder containing cocaine. Other quantities of cut cocaine and heroin were found in a room occupied by P. Found in the utility room, were cutting agent powders and items that would have been used in mixing and packaging drugs. In a garden shed, police found a hydraulic press used for compacting mixed or cut cocaine into blocks, as well as large quantities of cutting agent. The Court of Appeal held that it was necessary for the prosecution to prove that there had been an actual supply of a controlled drug from the premises  (citing R v Auguste  EWCA Crim 3329,  1 WLR 917. There was no such evidence in this case. It is submitted that the decision is plainly right: and see Fortson, ‘Misuse of Drugs and Drug Trafficking Offences’ (6th ed., chp. 7-003 to 7-004; 2012, Sweet and Maxwell Ltd). Note that the prosecution case was not that M had permitted her premises to be used for the production of a controlled drug consider R v Williams  EWCA Crim. 232)
- R v Lambert and Walding  EWCA Crim 421. [transcript]. L and W were convicted of drug trafficking offences. It was a joint criminal venture between L and W, and they were to benefit jointly . There was evidence that L and W were to share net proceeds equally . The benefit from the venture was assessed at £107,860. The judge made a confiscation order in that sum against each defendant. In dismissing the appeals against the making of the confiscation orders, the Court of Appeal (Criminal Division) noted that in R v May  UKHL 28, the Committee stated [para.46] that apportionment between parties jointly liable would be “contrary to principle and unauthorised by statute” and that the statutory questions must be answered by “applying the statutory language, shorn of judicial glosses and paraphrases”. This approach applies to the calculation of a defendant’s “benefit” under section 4 of POCA 2002, the calculation of “recoverable amount” under s.7, and to the duty on the court under s.6(5) to make a confiscation order (per Pill LJ, para.42). The challenge, in Lambert, was based “on the potential for the amounts to be paid under the orders, if totalled, exceeding the total benefit obtained” . The Court added that “Confiscation orders are made to deprive drug dealers of the profits of their crime and also to deter them and others from drug dealing” [per Pill LJ, para.47]. COMMENT. The judgment is measured but a number of submissions were made to the Court that warrant further discussion and comment. First, there is the use of the word “apportion”. The effect of the decision of the House of Lords in R v May, was to cast the definition of “benefit” in terms of what the defendant had personally “obtained” (CJA/POCA), or “received” (DTA) from his or her criminal conduct. Subsequent decisions of the Court of Appeal, such as Allpress  EWCA Crim 8, Clark  EWCA Crim 15, Ahmad  EWCA Crim 391 (and many others), are founded on that definition of “benefit”. Subject to what is stated at para.45 in May, there is no room for apportioning benefit between defendants who had participated in a joint criminal venture. What came to be loosely described as ‘apportionment’ (in the wake of Porter  1 WLR 1260, and Chrastny No.2  1 WLR 1385) , was actually a concession – rather than a hard and fast principle – made by the prosecution or by the sentencer, in order to keep the value of a defendant’s “benefit” down to something approaching a just amount (see R. Fortson, Law of the Misuse of Drugs and Drug Trafficking Offences, 6th ed., chp.13-122, Sweet & Maxwell Ltd. 2012). Unfortunately, in Lambert, no reference is made to R v Rooney where the Court – having considered R v Olubitan  2 Cr App R (S) 70, and May (particularly paras. 27, 32 and 46) – said, “In short, the position is, as we understand it: (a) if a benefit is shown to be obtained jointly by conspirators, then all are liable for the whole of the benefit jointly obtained. (b) If, however, it is not established that the total benefit was jointly received, but it is established that there was a certain sum by way of benefit which was divided between conspirators, yet there is no evidence on how it was divided, then the court making the confiscation order is entitled to make an equal division as to benefit obtained between all conspirators. (c) However, if the court is satisfied on the evidence that a particular conspirator did not benefit at all or only to a specific amount, then it should find that is the benefit that he has obtained.” . It is submitted that identical principles apply to cases of joint enterprise. Accordingly, what may seem to be apportionment is no such thing. It is submitted that practitioners would be well-advised to avoid the use of the words “apportion” and “apportionment”. Secondly, Lord Bingham stated in May, para.45, that “There might be circumstances in which orders for the full amount against several defendants might be disproportionate and contrary to article 1 of the First Protocol, and in such cases an apportionment approach might be adopted“. In Lambert, the Court said that it was common ground that the Committee was “summarising the findings of the Court of Appeal and not expressing its own view” . However, at para.46, Lord Bingham went on to say “No error was shown in the reasoning of Keene LJ, with which the committee generally agrees, while stressing that in any given case the statutory questions must be answered by applying the statutory language, shorn of judicial glosses and paraphrases, to the facts of that case.” The Committee did not disavow the proposition with regards to Article 1 of the First Protocol: a fact, about which the Court, in Lambert, expressed a “little surprise” . However, it is perhaps arguable that the issue that troubled the Committee was whether the multiple recovery of the full value of the benefit, could be said to be “disproportionate” with regards to the enrichment of the state rather than the impoverishment of a given defendant. There are examples where the full value of the benefit from criminal conduct has been ordered to be recovered from more than one defendant: see R v Ahmad  EWCA Crim 391. It will be interesting to see whether the ECrtHR gives judgment on these issues. Thirdly, it had been submitted by the Crown and by the Intervenor that Porter had been “disapproved” by the Committee in May and not “distinguished” . It is respectfully submitted that Porter was distinguished. That case has often been misunderstood. The point in issue was whether it is open to a judge to make two or more defendants “jointly and severally” liable under a confiscation order. The answer, given by the Court in Porter, was in the negative. In other words, the fact that D1 fails to pay a confiscation order does not oblige D2 to pay the balance. That remains the position. Accordingly, Porter is not concerned with the issue of so-called ‘apportionment’ and can thus be distinguished on that basis. Fourthly, it was submitted in Lambert that there is a requirement to “impose a further sentence if the sum ordered is not paid” . Although a default term of imprisonment is a ‘sentence’ for the purposes of making an appeal to the Court of Appeal (Criminal Division), it is manifestly not a “sentence” as generally understood. Fifthly, there appears to have been much discussion concerning the objectives of confiscation following conviction – whether, for example, “a deterrent approach is legitimate” . It is questionable how useful such discussions are in the construction of the DTOA/DTA, CJA 1988, or POCA. None of those confiscatory regimes set out the stated aims of the legislation beyond recovering a defendant’s “benefit” from his or her relevant criminal conduct. Expressions such a “draconian”, “the legislative steer”, “the deterrent approach” (and others), are often heard, but whether they reflect the actual intention of the legislature is another matter. Parliamentarians, who have debated confiscation regimes, often misstate their own legislation as measures that are designed to recover “ill-gotten gains” or “profits” – rather than “proceeds”. A by-product of confiscation may be deterrence, but if deterrence is one of the aims of the legislation then this will invite a critical assessment of its effectiveness in that regard.
- R v Ahmad and Ahmed  EWCA Crim 391 . [transcript]. This is an important case that considered two issues. The first concerns the calculation of a defendant’s “benefit” from an offence, for the purposes of Part VI of the CJA 1988. The second issue relates to the “amount to be recovered” where a defendant is alleged to have hidden assets. As to the latter, suffice to say that the Court of Appeal (Criminal Division) endorsed the “comprehensive analysis” in the judgment of the Court given by Moses LJ in R v McIntosh  EWCA Crim 1501. The first issue relates to the meaning of of the words “in connection with [the commission of the offence]” in s.71(4) of the 1988 Act. The Court held that “[to] make a confiscation order which includes within the benefit the costs of committing a crime seems to be contrary to the object of the legislation and that part of the confiscation order would, it seems to us, to operate by way of a fine” [per Hooper LJ., para.35]. The Court stressed that the instant case was not a case where the statutory assumptions applied . It declined to follow R v Waller  EWCA Crim 2037, on the grounds that it was “clearly wrong” [per Hooper LJ., para.54]. The Court noted that in R v James  EWCA Crim 2991 (see [link]), J “had bought items to assist the process of converting raw tobacco into hand rolling tobacco. The judge had held that the items purchased were part of the benefit and that the rent and wages which he had paid were a pecuniary advantage and also part of the benefit. The Court quashed that part of the confiscation order which encompassed these items. The appellant did not obtain the items in connection with any criminal conduct. His criminal conduct in participating in the conspiracy formed no part of the transactions by which he acquired the various items. Their acquisition was by way of lawful purchase for value. We accept that these transactions were entered into for the purpose of criminal conduct, but that is not necessarily a state of affairs caught by section 76(4)” [para.52]. In Waller, the cost of purchasing tobacco had been included as part of W’s “benefit” together with the value of the duty evaded on its importation. Section 71(4), CJA 1988 states that “a person benefits from an offence if he obtains property as a result of or in connection with its commission and his benefit is the value of the property so obtained” [emphasis added]. NOTE that s.76(4) of POCA 2002 defines “benefit” in similar terms (“A person benefits from conduct if he obtains property as a result of or in connection with the conduct”). A1 and A2 were convicted of conspiracy to cheat the public revenue. A confiscation order was made against each appellant in the sum of £92.3 million. A1 and A2 were each a director of, and a major shareholder in, MST Ltd. The company had engaged in no lawful trade and it had been used by the appellants in furtherance of a massive ‘carousel fraud’. The trial judge pierced the ‘corporate veil’. Accordingly, the benefit of the company had been obtained jointly by the appellants (applying R v May  1 AC 1028 (para.43, subject to the possible exception stated by Lord Bingham at para.45). The amount of VAT which was fraudulently reclaimed by the ‘exporter’ was approximately £12.6 million. However, the trial judge held that the benefit was “the total amount of money which had passed through the MST bank accounts in furtherance of the fraud, concluding that that was property obtained in connection with the commission of the offence. To commit an MTIC fraud it is, as the judge found, a necessary part of the deception on HMRC that an amount representing the value of the goods and the VAT thereon should pass through the accounts of the buffer companies” [per Hooper LJ., para.27]. The Court of Appeal held that the benefit for each appellant should have been set at £12.6 million (subject to any increase in the value of money from the date that the trial judge made the confiscation orders [para.60], noting that “In this case the offence was cheating the revenue of the VAT” and added that “the selling or purported selling of the goods was a mechanism by which the fraud was committed and the necessary costs involved in the selling or purported selling were the costs of committing the offence” [para.59]. COMMENTARY: It is respectfully submitted that the judgment of the Court, on both issues, is correct. The correctness of the decision in R v Waller has been questioned in Archbold [5-1051], in Criminal Law Week [08/35/30; see para.50 of the judgment], and – with more reserve – by this commentator. However, the following points are made. First, what should not be lost sight of is the fact that every statutory confiscation regime, following D’s conviction for a relevant offence, is concerned with the proceeds of crime. Although the notion of what constitutes the ‘proceeds of crime’ can be explained in various ways, it does not usually encompass lawfully acquired property – even if that property has been used as an instrument of crime. Secondly, the Court was right to stress that the cases of Ahmad and Ahmed did not involve the making of statutory assumptions. But, even in cases where the expenditure assumption is engaged, the focus remains on determining whether the money expended had itself been lawfully “obtained” (CJA/POCA) or lawfully “received” (DTOA/DTA). Thirdly, it is questionable whether the expression “in connection with” adds much to the meaning of “benefit”, but experience has shown that it can have relevance: see Randle and Pottle [Independent March 26, 1991; and see R. Fortson, chp.13-081, ‘Law on the Misuse of Drugs and Drug Trafficking Offences‘ (6th ed., 2012, Sweet & Maxwell)]. See also R v Osei (1988)10 Cr.App.R.(S) 289. The problem is knowing where to draw the line between property that can fairly be said to flow from the commission of a crime, and cases such as Osei. Fourthly, in Ahmad and Ahmed, the Court held – in relation to R v James – that the acquisition of items that ought not to have been included as a “benefit” was “by way of lawful purchase for value” [para.52]. Note the phrases “lawful purchase” and “for value”. The former is presumably intended to exclude cases where (e.g.) controlled drugs had been purchased (albeit overseas; and thus the Court has been careful not to undermine the decision of the House of Lords in R v Islam  UKHL 30). In James, the Court said “We accept also that the expression ‘in connection with’ widens the meaning of the words ‘as a result of’: see R v Waller  1 Cr App R (S) No 76, at page 450. In our view, the expression was probably intended to cover the type of situation where a person obtains property in anticipation of the criminal venture. For example, suppose that A is provided with a car (which is registered in his name) by someone planning a criminal venture, ostensibly for A’s own use but really with a view to him using it also in order to act as a courier to transport illegal tobacco products for that criminal venture. In this situation, it is clear that A has obtained the car in connection with his subsequent criminal conduct of transporting the illegal goods, although it may be open to argument whether he also obtained the car as a result of any criminal conduct” [per Edwards-Stuart J., para.49]. On the reasoning of the Court in Ahmed, there would be no such benefit had D purchased the car lawfully and for value. One assumes that the example, in James, proceeds on the basis that the car was gifted to D.
- R v Matthews  EWCA Crim 321. It was held that there is no authority which precludes the making of a confiscation order (in accordance with s.6(6) and s.7(3) of POCA 2002) where the defendant is obliged to pay an amount to a victim that exceeds the benefit amount which the sentencer had determined under the Proceeds of Crime Act 2002. The court observed that in Morgan and Bygrave  EWCA Crim 1323,  1 Cr.App.R (S) 60, “Hughes LJ accepted that at least if there appeared to be a benefit obtained from the criminal conduct beyond the loss to the suing loser, the court ought ordinarily to exercise its discretion under section 6(6) to make an order. Moreover, his Lordship added that there may be other reasons why an order should be made in a particular case (paragraph 15)” (per Cranston J, para.11). In Matthews, the Court said that there was no double recovery given the nominal value of the recoverable amount (£1) ordered to be paid in his case . Furthermore, there was no oppression in making a nominal order and, in doing so, this put paid to the abuse argument “at least for the present” . The background to the case is that the Law Socieity had obtained a High Court Order against, inter alia, M’s companies and M personally. In Law Society of England and Wales Isaac and Isaac International Holdings Limited  EWHC 1670 (Ch), Norris J held (a) that M dishonestly assisted in the breach of trust by a firm of solicitors and was personally liable to account on the footing of constructive trusteeship for £5.21 million odd paid out to his companies; (b) that he knowingly received the sum of £40,000 which he held as a constructive trustee and for which he must account; and (c) that he was liable for damages for conspiracy in the sum of £1,072,883 (paragraphs 36 and 81(d) of the judgment). Thus in all, Norris J held that M was liable to pay over £6.3 million.
- In the Matter of Peacock  UKSC 5. [transcript]. By a majority of 3-2 (Lord Hope and Lady Hale dissenting on the construction of s.16(2) of the Drug Trafficking Act 1994), the Supreme Court held that s.16(2) extends to assets acquired by D after a confiscation order was made against him (including ‘substituted assets’, i.e. assets obtained in place of other assets held by D): R v Tivnan  1 Cr.App.R.(S) 92, considered (and, in effect, approved): see also In re Maye  NI CA 41. COMMENT: a more detailed commentary will be posted on this website as soon as practicable. Suffice to say that this commentator is at one with the dissenters. That said, the point is now settled. There are references, in the judgments, to “producing symmetry between section 16 [DTA 1994] (increase in realisable property) and section 17 (inadequacy of realisable property)” (per Lord Walker, para.41). This is a laudable objective, but UK statutory confiscation regimes (particularly pre-POCA) developed piecemeal. Neither the DTA, nor Part VI of the CJA 1988, is noted for its symmetry. There is no s.16 DTA equivalent in Part VI of the CJA 1988. Interestingly, Lord Walker stated that “The justification for section 17 [DTA] is that not even the worst offender should be sent to prison for an additional term if he is simply incapable of complying with his obligation under an existing order.” [para.41]. Many defendants are heard to complain that they are incapable of satisfying a confiscation order, but if the sentencer has found that they have “hidden assets” they will struggle to succeed on a s.17 DTA application (or s.23, POCA 2002). This is because an application for a downward variation cannot be used to go behind a finding made at the confiscation hearing: see Gokal v Serious Fraud Office  EWCA Civ 368, per Keene LJ at paras 17 and 24); but note the observations of the Court of Appeal (Criminal Division) in Glaves v CPS  EWCA Civ 69.
- R v Dowds  EWCA Crim 281. [transcript]. The Court of Appeal (Crim Div) has held that the re-formulation of the statutory conditions for diminished responsibility (see s.2 Homicide Act 1957, as amended by s.52, Coroners and Justice Act 2009) “was not intended to reverse the well established rule that voluntary acute intoxication is not capable of being relied upon to found diminished responsibility. That remains the law.” [per Hughes LJ, para.40; citing, among other decisions, R v Fenton (1975) 61 Cr.App.R.261, R v Dietschmann  UKHL 10; R v Wood  EWCA Crim 1305, and R v Stewart  EWCA Crim 593.]. D inflicted approximately 60 knife wounds to V, killing her. D was a heavy but “elective drinker”. The trial judge ruled that simple voluntary and temporary drunkenness was not capable of founding the partial defence of diminished responsibility. D’s submission was that voluntary acute intoxication is a ‘recognised medical condition’ for the purposes of revised s.2 HA 1957. In an important, but somewhat enigmatic passage, the Court said that “The presence of a ‘recognised medical condition’ is a necessary, but not always a sufficient, condition to raise the issue of diminished responsibility.” [para.40; emphasis added]. COMMENT: The Court’s conclusion that voluntary acute intoxication is not capable of being relied upon to found diminished responsibility, for the purposes of revised s.2 HA, is unremarkable. The difficulty that the Court had to overcome is that “acute intoxication” can be a condition that is recognised by the medical profession inasmuch as it can be brought within one of two international classificatory systems of mental conditions (WHO ICD-10 and AMA DSM). It is true that neither classification of mental conditions has been explicitly included in s.2 HA 1957. But, it was the Royal College of Psychiatrists (as well as the Law Commission) that was concerned to ensure that diminished responsibility should be grounded in valid medical diagnosis (see Law Com. 304; para. 5.114; and see the collection of essays, ‘Loss of Control and Diminished Responsibility’ (A. Reed and M. Bohlander, Ashgate Publishing, 2012, chp.2, R. Fortson). The College did not press for either classifactory system to be explicitly included in the legislation, but it nonetheless sought to encourage diagnosis “in terms of one or two of those [systems]” (Law Com.304, para.5.114). It is respectfully submitted that this approach was far too loose and open ended. The classifications include a considerable number of mental conditions, and more are being added. That said, if – as the Court states – the “presence of a ‘recognised medical condition’ is a necessary, but not always a sufficient, condition to raise the issue of diminished responsibility”, then what is the extra condition (or latent element of s.2 HA) that D may need to fulfil in order to raise the issue? Rather than putting the courts in the position of having to specify medical conditions that are not (or that are) capable of founding the partial defence of diminished responsibility, would it be preferable for the legislation to tabulate “recognised medical conditions” for the purposes of (e.g.) s. 2 HA 1957? Would such an exercise be feasible? [See also, N. Wake, ‘Recognising acute intoxication as diminished responsibility? A comparative analysis?‘ (J. Crim. L. 2012, 76(1), 71-98).
- CPS v Piper  EWHC 3570 (Admin) . It is important that criminal law practitioners have an understanding of the elements of property law insofar as they bear upon third party interests: see Stack v Dowden  UKHL 17,  2 AC, as explained by the Supreme Court in Jones v Kernott  UKSC 53. Different principles apply where the defendant (a) holds property in his or her sole name (see CPS v Piper  EWHC 3570 (Admin)) and (b) where a third party holds property jointly with the defendant. In CPS v Piper (property in the offender’s sole name), the Court applied the following principles (in the context of husband and wife): (1) The starting point is that equity follows the law, and that the beneficial interest is held by H who is the sole registered owner of the property. The burden of proof is upon W to displace that presumption or starting point on the balance of probability. (2) The court should first ask: was it intended by H and W, as a common intention, that W should have any beneficial interest in teh property? (Jones v Kernott , paragraph 52, third sentence). (3) Their common intention is to be deduced objectively from their conduct (Jones v Kernott, paragraphs 51(3) and 52, sixth sentence). The short passage from Gissing v Gissing quoted with approval in Jones and Kernott at para.51(3) applies, and see para.69 of Stack v Dowden  UKHL 17,  2 AC 432. (4) In answering question at (2) above, if W has made some financial contribution referable to the transfer of the property to H, it can readily be inferred that it was intended that W should have a beneficial interest in that property (Stack v Dowden, para.61, 4th sentence). (5) If W does have a beneficial interest in the property, and the court deduces a common intention as to the size of that interest by direct evidence or by inference, then that is W’s interest. (6) If it is not possible to ascertain by direct evidence or by inference what the common intention as to the size of that interest is, then the size of that interest is that which the court considers fair having regard to the whole course of dealing between H and W in relation to the property. The ‘whole course of dealing’ is to be given a broad meaning (Jones v Kernott, para.52, 7th sentence, and para.51(4)). The law has moved on from what Lord Bridge of Harwich said in Lloyds Bank v Rosset  1 AC 107 at 132 133 (see Abbott v Abbott [2007 UKPC 53, paras.5,6 and 19); per Holman J.
- R v Clancy  EWCA Crim 8 . [transcript]. The Court of Appeal (Criminal Division) has held (with regard, in particular, to Manning  Crim. L.R. 198 and Jolie  EWCA Crim 1543) that the expression “good reason” is not one that calls for judicial explanation, being an ordinary phrase in common use. It would be wrong for judges to hedge that expression “with rules of law designed to limit its scope or meaning” (per Moore-Bick LJ, para.20). The Court added that in some cases, the court may be justified in ruling that certain facts are incapable of constituting a good reason, but it should be slow to do so. If the jury considers that defendant’s view of the facts was wholly unreasonable, for example, because he was drunk, or he had taken drugs, or he was suffering from mental illness that, ultimately, is a matter for them. A fear of attack can constitute a “good reason” within the meaning of s 139(4) of the 1988 Act (but note N v DPP  EWHC 1807 (Admin) . Accordingly, the defendant’s state of mind is not wholly irrelevant. See Blackstone’s Criminal Practice 2012: B12.136 (Oxford University Press).
- OB v SFO  EWCA Crim 67 . [transcript]. In an important decision, the Court of Appeal (Criminal Division) held that a contempt that is constituted by breach of a restraint order made under POCA, is a civil not a criminal contempt. The Court so held for the following reasons (per Gross LJ): (1) “the fact of a custodial punishment is neutral; what matters is the nature of the contempt (breach of an existing order of the Court) and the purpose of the punishment (coercive as well as punitive)”; (2) “the restraint order in the context of confiscation proceedings is closely analogous to the freezing injunction in civil proceedings”, (3) “nothing in the predecessor regimes to POCA supports the contention that contempt constituted by a breach of a restraint order is a criminal rather than a civil contempt”, (4) the conclusion “flows from a consideration of the predecessor regimes”, (5) that “it was not the case that the Courts in which the proceedings have taken place determine whether the contempt was civil or criminal”, (6) Sections 2-4 of the Civil Evidence Act 1995 apply to restraint proceedings umder POCA (“whereas they do not apply to confiscation proceedings which are to be regarded as criminal in nature: see R v Vincent Clipston  EWCA Crim 446;  2 Cr App R(S) 101, esp. at ”, and (7), the Court’s conclusion is consistent with and supported by R v M  EWCA Crim 1901;  1 WLR 1179, where the CACD “plainly proceeded on the basis that a contempt constituted by breach of a restraint order made under POCA, s.41, was a civil not criminal contempt” [paras.43 to 47]. See also  EWCA Crim 901 [transcript]
- R v Barnett  EWCA Crim 2936 . [transcript]. The case was decided in December 2011, but it is sufficiently important to be included here. Where a court is determining the value of a defendant’s benefit from his “general criminal conduct” (in respect of which the statutory assumptions apply), but a confiscation order had been made against him at an earlier time in respect of other such conduct (either under POCA, or under a statutory confiscation regime where the assumptions applied or could have been applied (e.g. CJA 1988/DTA 1994)), the court must have regard to s.10(9) and s.8(3)-(8) of POCA. This is so even if the earlier confiscation order had been made by agreement between the parties that includes the value of the defendant’s benefit from his or her general criminal conduct.