CPS Nottinghamshire v Rose [2008] EWCA Crim 239 (21 February 2008)

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England and Wales Court of Appeal (Criminal Division) Decisions

You are here: BAILII >> Databases >> England and Wales Court of Appeal (Criminal Division) Decisions >> CPS Nottinghamshire v Rose [2008] EWCA Crim 239 (21 February 2008)
URL: http://www.bailii.org/ew/cases/EWCA/Crim/2008/239.html
Cite as: [2008] 1 WLR 2113, [2008] Crim LR 650, [2008] 2 Cr App Rep 15, [2008] 3 All ER 315, [2008] 2 Cr App R 15, [2008] WLR 2113, [2008] EWCA Crim 239, [2008] 2 Cr App R (S) 80, [2008] 2 Cr App Rep (S) 80, [2008] Lloyd's Rep FC 206

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		Neutral Citation Number: [2008] EWCA Crim 239
		(1) Case No: 200606278-B5, (2) Case No: 200702192-C3

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM
(1) THE CROWN COURT AT NOTTINGHAM
(2) THE CROWN COURT AT BRADFORD

Royal Courts of Justice
Strand, London, WC2A 2LL

21/02/2008

B e f o r e :

LORD JUSTICE RICHARDS
MR JUSTICE OPENSHAW
and
HIS HONOUR JUDGE STEPHENS QC
____________________

Between:

	(1) Case No: 200606278-B5 CPS Nottinghamshire	Appellant
	- and -
	Kevin Rose	Respondent
	(2) Case No: 200702192-C3 Between The Queen	Respondent
	- and -
	Gareth Lee Whitwam	Applicant

____________________

David Perry QC and William Hays (instructed by the Crown Prosecution Service) for the Crown
Paul Mann QC and Martin Hurst (instructed by Tracey Barlow Furniss & Co.) for
Kevin Rose
Paul Mann QC and Martin Robertshaw (instructed by Carr & Co. Solicitors) for
Gareth Whitwam
Hearing date : 6 December 2007
____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Richards :

These two cases were listed for hearing together because they raise related issues under the Proceeds of Crime Act 2002 ("the 2002 Act"). In the case of Gareth Whitwam, there is an application for leave to appeal against conviction which raises the question whether stolen goods acquired by a thief or handler are "criminal property" for the purposes of the offence of acquiring criminal property contrary to s.329(1)(a) of the 2002 Act. In the case of Kevin Rose there is a prosecution appeal against a confiscation order which raises the question how such criminal property is to be valued for the purpose of deciding the amount of the defendant's benefit. The facts of the cases prompt a further question about the appropriateness of charging a money laundering offence under Part 7 of the 2002 Act in respect of conduct which has the hallmarks of ordinary burglary/theft or handling stolen goods.

Gareth Whitwam

On 30 March 2007 in the Crown Court at Bradford, after a trial before Mr Recorder Mansell and a jury, Gareth Whitwam was convicted by a majority of 11 to 1 on a single count of acquiring criminal property, contrary to s.329(1) of the 2002 Act. He was later made the subject of a community sentence. His application for leave to appeal against conviction was referred to the full court by the Registrar.

The facts of the offence can be briefly stated. A 50cc child's motorcycle owned by a Mr Kelly was stolen in the course of a burglary at Mr Kelly's home. On the day of the theft, the applicant was seen in possession of the motorcycle. He was confronted by Mr Kelly, who gave evidence that the applicant said to him: "It's only a broken window, you can claim on the insurance". The applicant disputed this in his evidence, saying that Mr Kelly raised the subject of his broken window and that the applicant replied that he could claim on his insurance. In any event, when the police were called to the scene, the applicant told them that he had come across some youths trying to start the motorcycle and he had bought it from them for £20. He was arrested and charged.

At the conclusion of the prosecution evidence the recorder rejected a submission of no case to answer, advanced on the basis that no evidence had been adduced by the prosecution that the motorcycle was "criminal property" for the purposes of the 2002 Act. The applicant then gave evidence in support of his defence that he had bought the motorcycle for £20 and that at no stage did he suspect that it was criminal property. In his summing up, the recorder directed the jury that there was no dispute that the motorcycle was criminal property but the prosecution had to make them sure that the applicant knew or suspected that it was criminal property.

The basis of the application to this court was that the recorder was wrong to reject the submission of no case.

Section 329 of the 2002 Act reads:

"329.(1) A person commits an offence if he –

(a) acquires criminal property;

(b) uses criminal property;

(c) has possession of criminal property."

Relevant definitions are to be found in s.340:

"340. … (3) Property is criminal property if –

(a) it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly); and

(b) the alleged offender knows or suspects that it constitutes or represents such a benefit.

…

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

…

(8) If a person benefits from conduct his benefit is the property obtained as a result of or in connection with the conduct.

…

(10) The following rules apply in relation to property -

(a) property is obtained by a person if he obtains an interest in it;

…

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

The essential submissions made in the skeleton argument for the applicant were that the person who stole the motorcycle in the course of the burglary did not obtain an "interest" in it within the meaning of s.340(10)(a), since "interest" must mean a lawful interest, and did not therefore obtain property within the meaning of that provision; by working through the earlier provisions of s.340, it followed that the motorcycle in this case was not "criminal property"; and the applicant could not therefore have been guilty of acquiring criminal property even if he was the thief or a handler of the motorcycle.

Those arguments were met by written submissions from Mr Perry QC, for the Crown, contending that a thief does obtain an "interest", within the meaning of s.340(10), in the property he steals, because he obtains a right to possession of that property. Mr Perry relied on Costello v Chief Constable of Derbyshire Constabulary [2001] EWCA Civ 381, [2001] 1 WLR 1437. In that case the claimant was found to be in possession of a motor car which was to his knowledge stolen. The police seized the car from him pursuant to s.19 of the Police and Criminal Evidence Act 1984 and retained it pursuant to s.22 of the Act since the owner was unknown. The claimant brought an action against the Chief Constable for delivery up and damages. The Court of Appeal held that the statutory provisions vested in the police no title to the property seized but only a temporary right to retain it for specified purposes; and that when that right expired, the police were obliged to return the car to the claimant since he had a possessory title in it even though it was stolen. Lightman J, with whom the other members of the court agreed, expressed his conclusion on that issue as follows (at para 31):

"In my view, on a review of the authorities (save so far as legislation otherwise provides), as a matter of principle and authority possession means the same thing and is entitled to the same legal protection, whether or not it has been obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is good against the world save as against anyone setting up or claiming under a better title. In the case of a theft the title is frail, and of likely limited value (see, e g, Rowland v Divall [1923] 2 KB 500), but none the less remains a title to which the law affords protection. … This conclusion is in accord with that long ago reached by the courts that even a thief is entitled to the protection of the criminal law against the theft from him of that which he has himself stolen: see, e g, Smith & Hogan, Criminal Law , 9th ed (1999), p 522."

Mr Perry submitted that, applying that principle to the facts of the present case, the applicant clearly acquired criminal property and was properly convicted of an offence contrary to s.329 of the 2002 Act. The motorcycle was stolen in the course of a burglary. The thief obtained an interest in it, namely a right to possession. It followed that the motorcycle was property obtained by him as a result of criminal conduct and constituted his benefit from such conduct. It was therefore criminal property.

At the hearing before us, Mr Paul Mann QC, who appeared with Mr Martin Robertshaw for the applicant, told the court that counsel had considered with care the arguments advanced in writing on behalf of the Crown and accepted the correctness of those arguments. The application for leave to appeal was therefore not pursued. We were told that the grounds of appeal had their origin in an article in Issue 07 (19 February 2007) of Criminal Law Week, but that there had been an effective recantation in Issue 15 (23 April 2007), on the basis of a response from the CPS which set out arguments very much along the lines of those subsequently developed in Mr Perry's submissions. That being so, it is perhaps unfortunate that the concession made on behalf of the applicant came so late in the day.

We are, however, satisfied that that concession was properly made. In our judgment there is no answer to Mr Perry's submissions. The stolen motorcycle was property obtained by the thief, within the meaning of s.340(10)(a), since the thief obtained a right to possession of it and, by s.340(10)(d), an interest includes a right to possession; and it was self-evidently obtained as a result of or in connection with criminal conduct. It therefore constituted the thief's benefit from criminal conduct. It follows that the first part of the definition of criminal property, in s.340(3)(a), was satisfied. The second part, in s.340(3)(b), depended on whether the appellant knew or suspected that it constituted or represented such a benefit. That was an issue that the recorder properly left to the jury and that the jury decided against the appellant. The recorder, who did not have the benefit of Mr Perry's argument, based his rejection of the submission of no case on a construction of s.340(10) that Mr Perry has not sought to uphold; but his instincts were sound and his conclusion was correct. His directions to the jury captured the substance of the matter accurately and no complaint has been made about them.

A question was raised as to whether s.340(10) is an exhaustive definition of when a person "obtains property" as a result of or in connection with criminal conduct. It may be arguable that, as a matter of simple language, a thief or handler "obtains" stolen property even if he does not obtain an interest in it or come within any of the other specific provisions of s.340(10). However, in the light of the clear conclusion we have reached on the application of s.340(10) in this case, that is not a question that we need decide.

For the reasons given, Whitwam's application for leave to appeal against conviction is formally refused.

The appropriateness of charging Whitwam under s.329 of the 2002 Act

Whilst conceding that there was no sustainable ground of appeal against Whitwam's conviction, Mr Mann raised with the court a wider concern about the appropriateness of charging under s.329 of the 2002 Act in a case such as this. His submission was that the circumstances provide a classic example of where a charge of burglary or at least handling could be expected: the applicant was confronted in possession of the stolen scooter, and the exchange about the broken window supported a case of burglary against him. If burglary or handling had been charged, it would of course have been necessary to prove dishonesty, whereas dishonesty is not an ingredient of the offence under s.329. It would appear in the circumstances that s.329 was used as an easier means of securing a conviction. But s.329 is in a part of the 2002 Act dealing specifically with money laundering offences. Mr Mann drew our attention to a document from the CPS website (which appears to be the Legal Guidance Manual referred to at para 16 below) which states that money laundering offences are invariably serious; in summary, money laundering incentivises crime by rendering it profitable, provides domestic and transnational organised crime with cash flow to perpetrate further crimes, and threatens the financial system and its institutions, both domestic and international; and careful consideration should be given to the following public interest factors in favour of prosecution for money laundering, namely the importance of making it more difficult for criminals to legitimise their ill-gotten gains, the importance of deterring professional launderers, and the importance of protecting the integrity of financial institutions. Mr Mann pointed out how far removed from all of that is stealing or receiving a child's motorcycle: it is not the kind of conduct that one would expect to be dealt with as a money laundering offence. He told us that there was a genuine concern at the Bar about the routine use of s.329 in preference to a prosecution for burglary/theft or handling.

At the court's invitation, Mr Perry addressed this issue after the hearing in additional written submissions to which he attached a note by Mr Jeremy Rawlins, Head of Proceeds of Crime Delivery Unit at the CPS. Mr Rawlins's note observes that in conducting a review of a potential money laundering case a Crown prosecutor will apply the two-stage test of evidential sufficiency and public interest set out in the Code for Crown Prosecutors. The Code also provides general guidance, stressing that the CPS will not necessarily proceed with the most serious charge and that the charges should reflect the seriousness of the offending, give the court adequate sentencing powers, and enable the case to be presented in a clear and simple way. A Legal Guidance Manual contains a chapter on money laundering and includes general charging advice which stresses that this is an area where careful exercise of prosecutorial discretion is required, particularly with regard to the possession offence under s.329. The legal guidance confirms that money laundering and the underlying criminality are separate offences and that the underlying offence ought normally to be proceeded with, as it represents the conduct which gives rise to the criminal proceedings. An additional money laundering charge should normally be considered where a defendant has actively tried to conceal or transfer criminal proceeds. Specific guidance is given in respect of handling, reminding prosecutors that money laundering offences are not confined to cases involving money and that there will need to be a careful judgment in those cases where the prosecution could charge money laundering based on possession or an offence of handling stolen goods. The guidance states that prosecutors may consider charging a money laundering offence where a defendant has possessed criminal proceeds in large amounts, or in lesser amounts but repeatedly and where assets are laundered for profit.

Among additional points made by Mr Rawlins are that the offence of handling stolen goods contrary to s.22(1) of the Theft Act 1968 carries the same maximum penalty (14 years' imprisonment and/or a fine, on conviction on indictment) as an offence contrary to s.329; a conviction under s.329 does not trigger the "criminal lifestyle" provisions of the 2002 Act, so that a defendant will be in the same position in respect of a confiscation application whether a handling offence or a s.329 offence is pursued; and, although it is not necessary to prove dishonesty under s.329, it is difficult to envisage circumstances in which the offence could be committed honestly.

Mr Perry's own submissions add that the statistics do not bear out the contention that prosecutions under s.329 are routinely brought in preference to a prosecution for handling: in the year ending September 2007, there were 1,856 charges under s.329 put before the court at first appearance, compared with 19,931 charges for handling. So far as the decision to prosecute Whitwam is concerned, Mr Perry adds that, since the evidence was unclear whether he was a thief or a handler, a charge of handling would have had to be combined with a charge of burglary, so that the decision to prosecute under s.329 had the effect of simplifying the issues at the trial. It is submitted that in all the circumstances the court should conclude that the decision to prosecute was properly made.

A concern about the use of s.329 in circumstances such as these was in fact ventilated in R (Wilkinson) v Director of Public Prosecutions) [2006] EWHC 3012 (Admin), in which it was sought to challenge the decision to prosecute in a case arising out of very similar facts. A mini motorcycle had been stolen in a burglary and the claimant had been found in possession of it, but he was charged with an offence contrary to s.329 rather than with an offence of burglary or handling stolen goods. An application for leave to apply for judicial review to challenge the decision to prosecute was dismissed on grounds of delay, but in giving judgment Maurice Kay LJ went on (at para 8) to make observations on the substance of the application:

"… [H]aving considered the Code for Crown Prosecutors and the CPS's own document on money laundering, I feel unable to say that the decision to proceed under s.329 was arguably vitiated by some public law consideration. The passages to which we have been referred seem to me to be encouragement to crown prosecutors to resort to offences under the 2002 Act in serious cases. They are less obviously expressed as discouragement to resort to offences in less serious cases, of which this is one. The question of who should be charged and with what offence is essentially one for the Crown Prosecution Service. I am bound to say that when I used to preside over criminal trials and indeed during the far more numerous years when I used to appear as counsel in them, it was a regular occurrence for the judge to criticise the prosecution if he thought that a particular defendant had been over-charged and that a different outcome would be preferable by way of charge. I make it clear that if this case had come before me sitting in the Crown Court, I would have taken precisely that course, encouraging the Crown Prosecution Service to substitute a charge of handling stolen goods. But encouragement is where it would stop. It is ultimately a matter for them. Notwithstanding the obvious wider intention of the 2002 legislation, it cannot be said that the conduct sought to be attributed to the claimant does not fall within s.329."

Whilst acknowledging that charging decisions are for the CPS rather than the courts (subject to exceptional cases of unlawfulness where the court will be prepared to intervene on judicial review), we share the concern evidently felt by Maurice Kay LJ about the use of s.329 in Wilkinson's case. The concern applies equally to Whitwam's case. It applies to a much lesser extent to Rose's case, the circumstances of which are described later in this judgment. It is difficult to see why cases such as those of Wilkinson and Whitwam were thought to merit the charging of a money laundering offence rather than a charge of handling (with or without an alternative charge of burglary or theft). That it may have simplified the issues at the trial is certainly an advantage of the course adopted but is not a complete answer. On the other hand, we do not know the full details of the decision-making process in the individual cases and it would be wrong for us to express any final view in relation to them. More importantly, we see nothing wrong with the tenor of the guidance given to prosecutors; nor does it appear to us, on the statistics supplied by Mr Perry, that there can in practice be a widespread problem of inappropriate use of s.329, notwithstanding the perception reported to us by Mr Mann. In the circumstances, whilst the CPS will no doubt wish to remind prosecutors of the guidance in order to ensure that it is borne fully in mind by those making charging decisions in such cases, we think it unnecessary to say anything further here on the subject.

Kevin Rose: introduction

We move to Kevin Rose's case, which raises a knotty question as to how the provisions of the 2002 Act are intended to operate in relation to the calculation of benefit in respect of stolen property obtained by a thief or handler. The respondent's submissions would appear again to owe something to an article in Criminal Law Week, in Issue 15 (23 April 2007), which this time, so far as we are aware, has not been the subject of a recantation.

Rose was convicted on 2 October 2006 in the Crown Court at Nottingham, after a trial before His Honour Judge Mitchell and a jury, on three counts of possession of criminal property contrary to s.329(1)(c) of the 2002 Act. He was given concurrent sentences of 30 months' imprisonment on each count, subsequently reduced on appeal to 12 months' imprisonment. A confiscation order under the 2002 Act was made against him in the sum of £8,272.50, to be paid within 6 months, with a period of 6 months' imprisonment consecutive in default.

The Crown appeals under s.31 of the 2002 Act against the confiscation order, contending that Rose's benefit from his criminal conduct was in fact £27,272.50 rather than £8,272.50. The respondent's legal representatives initially indicated that the appeal would not be resisted. However, when the matter came on for hearing before a different constitution of this court, presided over by Toulson LJ, a point was raised which had not been considered by the judge below and was one of potential importance, but the case was adjourned because counsel were not ready to argue the point at that time. At the adjourned hearing before us, we had the benefit of full written and oral submissions from Mr Perry on behalf of the Crown and Mr Mann on behalf of the respondent.

The material facts are that on 16 June 2005 police officers executed a search warrant of the respondent's premises at Crossroads Farm, Sutton cum Lound in Nottinghamshire and discovered four items of stolen property:

i) a Volvo trailer with an agreed value of £9,000 which had been stolen on 16 June 2005: it was restored to its true owner following its recovery;

ii) the stolen contents of the Volvo trailer, namely a quantity of alcohol and soft drinks with an agreed value of £6,522.50: this property was available to be returned to the brewery which owned it but the property was no longer usable because the brewery was not permitted by law to sell the drink once it had left its control;

iii) an Ifor Williams horse trailer with an agreed value of £1,750 which had been stolen on 10 May 2005: the true owner had been paid the value under an insurance claim, and following its recovery the trailer was restored to the insurance company, but it had later gone missing and its whereabouts were unknown at the time of the Crown Court proceedings;

iv) an agricultural vehicle known as a JCB Teleporter with an agreed value of £10,000 which had been stolen on 13 June 2005: this property was restored to its true owner.

The confiscation proceedings were conducted on the basis that this was not a "criminal lifestyle" case and that the court was therefore required under s.6(4)(c) to decide the extent to which the respondent had benefited from his particular criminal conduct. The relevant statutory provisions are set out below.

The prosecution's case was that he had benefited to the total of the agreed values of the property found in his possession, namely £27,272.50. The respondent contended that the value of the property restored to its true owners should not be included in the calculation of benefit and that the benefit figure was therefore limited to the value of the alcohol and soft drinks and the value of the horse trailer, which together came to £8,272.50. His Honour Judge Mitchell accepted the respondent's submissions, making the robust observation:

"Whatever the rights and wrongs of this as a matter of law my interpretation of the legislation is that there would be gross unfairness if items recovered and which are usable were not taken into consideration …."

There was no dispute that the realisable amount exceeded the benefit, whichever of the rival contentions as to benefit was accepted. The judge therefore made a confiscation order in the sum of £8,272.50.

The relevant provisions of the 2002 Act

The Crown Court must proceed under s.6 of the 2002 Act if the conditions in subss.(2) and (3) are satisfied. We need not set them out since there is no issue about them here. By subs.(4) the court must decide whether the defendant has a criminal lifestyle: if it decides that he does, it must decide whether he has benefited from his general criminal conduct; if it decides that he does not, it must decide whether he has benefited from his particular criminal conduct. As we have indicated, this is a case concerning benefit from particular criminal conduct: the position is that by virtue of s.75 and schedule 2, the criminal lifestyle provisions do not apply to an offence under s.329.

If the court decides that the defendant has benefited from his particular criminal conduct, by subs.(5) it must decide the recoverable amount and make an order (a confiscation order) requiring him to pay that amount. By subs.(6) the court must treat the duty in subs.(5) as a power "if it believes that any victim of the conduct has at any time started or intends to start proceedings against the defendant in respect of loss, injury or damage sustained in connection with the conduct". In the present case the relevant property was restored to the true owner without any civil proceedings being instituted. It seems to us that subs.(6) does not cast any real light on the issue of calculation of benefit considered below. The discretion that it confers may be important where, for example, the defendant has insufficient funds to pay damages to the victim in addition to meeting a confiscation order: the interests of the victim should take precedence (cf. the precedence given by s.13(5) and (6) to compensation orders). But the provision does not evidence a legislative intention that confiscation orders cannot or should not be made in respect of property that has been restored to its true owner or where the true owner could bring a civil claim for recovery of the property or for damages. We therefore give it no further consideration in the discussion that follows.

Section 7 contains provisions about the "recoverable amount". By subs.(1) the recoverable amount is an amount equal to the defendant's benefit from the conduct concerned; but by subs.(2), if the defendant shows that the available amount is less than that benefit, the recoverable amount is the available amount, or a nominal amount if the available amount is nil. By subs.(4), in calculating the defendant's benefit from the conduct concerned for the purposes of subs.(1), any property in respect of which (a) a recovery order is in force under s.266 (i.e. a civil recovery order), or (b) a forfeiture order is in force under s.298(2) (i.e. an order in the magistrates' court for forfeiture of cash), must be ignored. Again, we do not consider that that provision casts any real light on the issue we have to resolve.

Section 8 contains various provisions about the determination of benefit, but nothing turns on them for present purposes.

Section 9 concerns the available amount and provides in subs.(1) 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.

Section 10 concerns the assumptions to be made in a case of a criminal lifestyle. The assumptions are to be made for the purpose of deciding whether the defendant has benefited from his general conduct and deciding his benefit from the conduct. They include, for example, assumptions that any property transferred to the defendant or held by him at relevant times was obtained by him as a result of his general criminal conduct and at the earliest time he appears to have held it. Although the assumptions are not of direct application to the present case, we mention the section here because it was referred to in argument.

Section 13 concerns the relationship between confiscation orders and other orders. The general rule in subs.(5) is that the court must leave the confiscation order out of account in deciding the appropriate sentence for the defendant. That is subject to subs.(2), which provides that the court must take account of the confiscation order before it imposes a fine or makes an order falling within subs.(3). The orders within subs.(3) include "an order involving payment by the defendant, other than an order under s.130 of the Sentencing Act (compensation orders)": in other words, the court is not required to take account of the confiscation order before imposing a compensation order. By subss.(5) and (6), where the court makes both a confiscation order and a compensation order against the same person in the same proceedings and believes he will not have sufficient means to satisfy both orders in full, it must direct that "so much of the compensation as it specifies is to be paid out of any sums recovered under the confiscation order; and the amount it specifies must be the amount it believes will not be recoverable because of the insufficiency of the person's means". Thus specific provision is made for the victim to take precedence in this situation.

Sections 75 and following contain general interpretative provisions. Section 76, headed "Conduct and benefit", reads:

"76.(1) Criminal conduct is conduct which –

(a) constitutes an offence in England and Wales …

…

(3) Particular criminal conduct of the defendant is all his criminal conduct which falls within the following paragraphs –

(a) conduct which constitutes the offence or offences concerned;

…

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

(5) If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.

…

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

The most important of those provisions is s.76(7), that a person's benefit is the value of the property obtained. That takes one to s.79 (headed "Value: the basic rule") and s.80 (headed "Value of property obtained from conduct"), the meaning and effect of which are at the heart of the argument in this case. They read:

"79.(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.

(3) But if at that time another person holds an interest in the property its value, in relation to the person mentioned in subsection (1), is the market value of his interest at that time, ignoring any charging order under a provision listed in subs.(4).

…

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

80.(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 contains general provisions about "property" which include provisions to the same effect as those in s.340(10) which we have already considered in the context of Whitwam's case. In particular, s.84 provides:

"84. … (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 holds 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)."

The rival submissions in outline

Mr Mann's contention for the respondent is that the value of the property obtained by the respondent is to be determined in accordance with s.80, which by subs.(4) feeds back into s.79; by s.79(3), since the true owner had an interest in the property, the value of the property in relation to the respondent was the market value of his interest in it; the respondent's only interest in the property was a right to possession of it (see the analysis above in connection with Whitwam); and since that right had a nil market value, the value of the property in relation to the respondent was nil. It is therefore submitted that the judge was right not to make a confiscation order in a larger sum than he did. (If Mr Mann is correct, it is difficult to see why the argument does not apply to the totality of the property obtained by the respondent, on which basis the judge was wrong to make a confiscation order at all. There is, however, no cross-appeal to that effect. We are concerned only with the Crown's submission that the order should have been in the sum of £27,272.50 rather than the sum of £8,272.50.)

Mr Perry's contention for the Crown is that, if and to the extent that s.79 applies to the calculation of benefit in respect of property obtained, the reference in subs.(2) to the market value "at that time" is to the market value at the time when the property was obtained, which is to be understood as the market value in the hands of the person from whom it was obtained; and that subs.(3) has no application in that context but relates only to the determination of the realisable amount. A subsidiary argument is that ss.79 and 80 are both concerned exclusively with specific situations relating to the realisable amount and that, although s.80(4) feeds back into s.79, it is only for the purpose of determining the amount to be realised. On that subsidiary argument there is no statutory expansion of, or qualification to, the simple provision in s.76(7) that a person's benefit is "the value of the property obtained": one simply gives the words their ordinary meaning.

On a natural reading of the statutory provisions, there are considerable attractions in the respondent's contention and difficulties in both the primary and the subsidiary contentions advanced by Mr Perry. Mr Perry submits, however, that the provisions have to be construed purposively and in the light of the legislative history and policy. For that reason it is necessary to look in some detail at the earlier statutes and the case-law under them before giving further consideration to the rival arguments.

A regime for the confiscation of the proceeds of crime was first introduced by the Drug Trafficking Offences Act 1986 ("the 1986 Act"). This was followed by the Criminal Justice Act 1988 ("the 1988 Act"), which itself was subject to amendment on a number of occasions. The Drug Trafficking Act 1994 ("the 1994 Act") then replaced the 1986 Act. The 2002 Act, in turn, replaced both the 1988 Act and the 1994 Act. In each case the court has been required to calculate the defendant's benefit, to calculate his realisable assets and to make a confiscation order in the amount of the benefit or, if less, the realisable assets. There are, however, certain differences in the detailed approach adopted.

The Drug Trafficking Offences Act 1986

By s.1(2) of the 1986 Act, the court was required to determine whether the defendant had benefited from drug trafficking. By s.2(1), any payments or rewards received by him at any time in connection with drug trafficking carried on by him or another were his proceeds of drug trafficking, and the value of his proceeds of drug trafficking was the aggregate of the values of the payments or other rewards. By s.2(2), for the purpose of assessing the value of the defendant's proceeds of drug trafficking, the court was entitled to make the assumptions contained in s.2(3) except to the extent that the assumptions were shown to be incorrect in the defendant's case. The assumptions included that any property appearing to the court to have been held by the defendant at any time since his conviction, or to have been transferred to him at any time since the beginning of the period of six years ending when the proceedings were instituted against him, was received by him as a payment or reward in connection with drug trafficking carried on by him; and that, for the purpose of valuing any property received or assumed to have been received by him at any time as such a reward, he received the property free of any other interests in it.

If the court determined that the defendant had so benefited, it was required to determine in accordance with s.4 the amount to be recovered. By s.4(1) and (3), that was the amount the court assessed to be the value of the defendant's proceeds of drug trafficking or, if less, the amount that might be realised at the time the confiscation order was made. The amount that might be realised at the time the confiscation order was made was defined by s.5(3) as the total of the values of all the realisable property held by the defendant, less, where there were obligations having priority at that time, the total amounts payable in pursuance of such obligations.

By s.5(4), the value of property was to be determined as follows:

"5. ... (4) Subject to the following provisions of this section, for the purposes of this Act the value of property (other than cash) in relation to any person holding the property –

(a) where any other person holds an interest in the property, is –

(i) the market value of the first mentioned person's beneficial interest in the property, less

(ii) the amount required to discharge any incumbrance (other than a charging order) on that interest, and

(b) in any other case, is its market value."

It is also helpful to set out the provisions of s.5(5) and (6), since they too have a bearing on the argument about ss.79-80 of the 2002 Act:

"5. … (5) Subject to subs.(10) below, references in this Act to the value at any time (referred to in subs.(6) below as 'the material time') … of any payment or reward are references to –

(a) the value of the … payment or reward to the recipient when he received it adjusted to take account of subsequent changes in the value of money, or

(b) where subsection (6) below applies, the value there mentioned,

whichever is the greater.

(6) Subject to subs.(10) below, if at the material time the recipient holds -

(a) the property which he received (not being cash), or

(b) property which, in whole or in part, directly or indirectly represents in his hands the property which he received,

the value referred to in subs.(5)(b) above is the value to him at the material time of the property mentioned in paragraph (a) above or, as the case may be, of the property mentioned in paragraph (b) above so far as it so represents the property which he received, but disregarding in either case any charging order."

A relevant feature of the regime under the 1986 Act and subsequent confiscation regimes relating to drug trafficking is that illegal drugs are taken to have no market value since they cannot be sold lawfully: see, for example, R v Dore [1997] 2 Cr App S 152, 158 (although in fact a case under the 1994 Act), and R v Hussain [2006] EWCA Crim 621, para 15 (in fact a case under the 2002 Act).

A case under the 1986 Act which featured in argument before us is R v Johnson (1990) 91 Cr App R 332. One of the issues in the case concerned a car which the defendant had bought for £6,000 with the assistance of a loan from a finance company. The finance company had no title or interest in the car. The defendant had paid the initial deposit of £400 and at the date of the hearing had repaid a further £900 of the loan, making a total payment by her of £1,300. The court said that the judge had been entitled prima facie to make the assumption that the car was received by the defendant as a payment or reward in connection with drug trafficking carried on by her; but, in effect, the assumption was displaced because the judge had evidence as to how the purchase price of the car was in fact provided, namely by the loan from the finance company. In the result, the judge had been entitled to assume only that the £1,300 actually paid by the defendant represented moneys received by her as a reward. In rejecting further arguments that the value of the car should be taken into account, Neill LJ, giving the judgment of the court, stated (at p.340):

"It seems to us that, where it is possible for a defendant to demonstrate the actual source of the funds used to purchase an asset held by him at a material time, the statutory assumptions cannot be made if the court is satisfied that the source of the sums is not from drug trafficking and does not represent a payment or reward. In the present case there is no suggestion whatever that the loan provided by Forward Trust represented tainted money. It follows therefore in our view that the car cannot be assumed to have been received as a payment or reward in connection with drug trafficking."

The Criminal Justice Act 1988

The 1988 Act provided for the making of confiscation orders where a person was convicted of an indictable offence or certain summary offences. Originally an order could be made only where the benefit was at least £10,000, but that limitation was removed by the Proceeds of Crime Act 1995 (which also provided for certain assumptions to be made in particular cases, similar to those contained in the drug trafficking legislation). Under the 1988 Act the court was required first to determine whether the defendant had benefited from any relevant criminal conduct; and, if he had, it was required to determine the amount to be recovered in his case (being the amount of the benefit or, if less, the amount that might be realised) and to make an order that he pay that amount.

Section 71 contained provisions relating to the determination of benefit, as follows:

"71. … (4) For the purposes of this Part of this Act 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.

(5) Where a person derives a pecuniary advantage as a result of or in connection with the commission of an offence, he is to be treated for the purposes of this Part of this Act as if he had obtained as a result of or in connection with the commission of the offence a sum of money equal to the value of the pecuniary advantage."

Relevant definitions were contained in s.74. They included, in s.74(4), a provision in identical terms to s.5(4) of the 1986 Act (see above) but which it is helpful to set out again:

"74. … (4) Subject to the following provisions of this section, for the purposes of this Part of this Act the value of property (other than cash) in relation to any person holding the property –

(a) where any other person holds an interest in the property is –

(i) the market value of the first-mentioned person's beneficial interest in the property, less

(ii) the amount required to discharge any incumbrance (other than a charging order) on that interest; and

(b) in any other case, is its market value"

They also included, in s.74(5) and (6), specific provisions relating to the value of property obtained by a person:

"74. … (5) References in this Part of this Act to the value at any time (referred to in subsection (6) as 'the material time') of any property obtained by a person as a result of or in connection with the commission of an offence are references to -

(a) the value of the property to him when he obtained it adjusted to take account of subsequent changes in the value of money; or

(b) where subsection (6) below applies, the value there mentioned,

whichever is the greater.

(6) If at the material time he holds –

(a) the property which he obtained (not being cash); or

(b) property which, in whole or in part, directly or indirectly represents in his hands the property which he obtained,

the value referred to in subsection (5)(b) above is the value to him at the material time of the property mentioned in paragraph (a) above or, as the case may be, of the property mentioned in paragraph (b) above, so far as it represents the property which he obtained, but disregarding any charging order."

It was held in In re K, The Times, 1 October 1990, that determining the value of the benefit under s.71(4) gave rise to the simple question "what property did he obtain?", and that where the defendant obtained a house his benefit was the value of the house and not the value of the equity of redemption. That decision was approved in R v Layode, an unreported decision of the Court of Appeal on 12 March 1993 concerning a confiscation order following conviction of offences of mortgage fraud. The first question was whether the benefit should include the purchase price of a house bought with moneys advanced by a building society under a mortgage. The court held that nothing in s.71(4) suggested that anything other than the actual value of the property obtained should be included as benefit, and, with reference to s.74(4) and (5), that "none of the somewhat intricate provisions of the relevant sections of the Act made it necessary or right to consider any figure other than … the purchase price". Only in relation to the second question, concerning the amount of the defendant's realisable assets, did the court say that, if the building societies had been able to recover the moneys dishonestly obtained, the proper exercise of the court's discretion should be to exclude those sums in determining the amount of the order.

In R v Smith (David Cadman) [2002] 1 WLR 54 the defendant had pleaded guilty to an offence of fraudulent evasion of excise duty in respect of an imported consignment of cigarettes. The cigarettes themselves had been seized and forfeited. A confiscation order was made against him on the basis that by evading the duty he had derived a pecuniary advantage. The Court of Appeal allowed his appeal but the House of Lords restored the original order. In the leading judgment, Lord Rodger of Earlsferry said in relation to s.71 of the 1988 Act, and in particular subss.(4) and (5), that "[b]y treating persons who derive a pecuniary advantage as persons who have obtained property, Parliament has indicated that, for the purposes of confiscation orders, the same approach is to be applied to both types of offender" (para 21). Having then set out s.74(5) and (6), he continued:

"23. These provisions show that, when considering the measure of the benefit obtained by an offender in terms of s.71(4), the court is concerned simply with the value of the property to him at the time when he obtained it or, if it is greater, at the material time. … Except … where the actual property obtained by the offender has subsequently increased in value, the court is simply concerned with its value to the offender 'when he obtained it'. It therefore makes no difference if, after he obtains it, the property is destroyed or damaged in a fire or is seized by customs officers: for confiscation order purposes the relevant value is still the value of the property to the offender when he obtained it. Subsequent events are to be ignored …. 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 ….

26. If, then, the value of the property obtained as a result of or in connection with the commission of an offence is simply the value of the property to the offender when he obtained it, even if it is subsequently destroyed, damaged or forfeited, one would expect the same general approach to apply in the case of a pecuniary advantage. And indeed subss. (4) and (5) of s.71 of the 1988 Act produce that result. As I have already noted, the combined effect of those subsections is that the offender who has derived a pecuniary advantage from his offence is treated as a person who has obtained 'property' as a result of or in connection with the commission of the offence, the 'property' in question being a sum of money equal to the value of the pecuniary advantage. Under s.74(5) for the purposes of making a confiscation order the value of the property is its value to the offender when he obtained it …."

Lord Rodger noted at para 29 that the interpretation adopted by the Court of Appeal (and disapproved by the House) "would go a long way to making the confiscation provisions ineffective against smugglers" (para 29).

Smith (David Cadman) was applied in R v Wilkes [2003] EWCA Crim 848, [2003] 2 Cr App R (S) 625, in circumstances where the defendant had committed offences of burglary and handling but all the stolen goods had been recovered. The Court of Appeal held that s.71(4) was to be interpreted as meaning what it said without any gloss: when the appellant had completed committing the trigger offences he obtained property, and it was irrelevant that he was unable to realise that property because of police intervention.

In R v Ascroft [2003] EWCA Crim 2365, [2004] 1 Cr App R (S) 56, at p.326, the appellant had been convicted of offences of conspiracy to steal, conspiracy to obtain by deception and forgery. The offences related to the theft of high value goods from sealed containers in a manner which concealed the thefts until the containers were finally opened. In making a confiscation order, the judge assessed the value of the property obtained by the appellant on the basis of the wholesale value of the goods that had disappeared from the containers. It was submitted for the appellant that the reference in s.74(5) to "the value of the property to him when he obtained it" meant that one looked at what the appellant could get for the property if he sold it. The Court of Appeal rejected that submission in these terms (per Scott Baker LJ, giving the judgment of the court):

"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. In our judgment comparison with valuations in drug cases is neither relevant nor helpful. Different considerations apply under different sections of different Acts.

60. The question is what would it have cost the appellant to obtain legitimately the goods he obtained dishonestly in the conspiracy? These were bulk goods obtained from distributors. The relevant value is the wholesale value. The situation would have been different if he had, for example, raided a retail shop. Then the retail value would have been appropriate. Such a construction, in our judgment, has the benefit of simplicity ...."

In R v Glatt [2006] EWCA Crim 605, the appellant Glatt was convicted of a conspiracy in which he used his position as a solicitor to assist a co-accused, Martin, to launder the proceeds of a very large fraud. The confiscation order made against him reflected the amount of money which had directly or indirectly passed through his hands being the proceeds of the fraud. His principal argument on appeal was that the property which he obtained had no value for him because he had no beneficial interest in the money passing through his hands. The basis of the argument was that s.74(4) applied when determining, under s.71(4), the value of the property obtained; and that the value of the property was nil because, given that it was Martin's money, the appellant had no interest in it or his interest had no market value.

In assessing that argument, the court looked at length at the legislative policy. The position was summarised at para 66 of the judgment of the court, given by Tugendhat J, where he said that a confiscation order (i) is a penalty, (ii) is designed to deter those who consider embarking upon criminal conduct, (iii) is designed to deprive a person of profits received from criminal conduct and to remove the value of the proceeds received from criminal conduct from possible future use in criminal conduct, and (iv) is designed essentially to impoverish defendants, not to enrich the Crown. He added in para 67 that the 1988 Act contemplated cases where there was a victim who might have a civil claim for restitution or damages, and in such cases, at least where the victim was not the Crown, it was clear that the 1988 Act and related statutes could not have a compensatory purpose.

The court went on to consider, inter alia, numerous cases in which confiscation orders had been made against persons who could be described as couriers or minders or launderers, with whom the appellant was considered to be in a comparable position. It concluded:

"99. It follows, if [counsel for the appellant] is right, that the effect of s.74(4) has been overlooked in a number of cases. We do not consider that it has been overlooked. The value referred to in s.74(4) is the value of property (other than cash), and is in effect either the value of that person's beneficial interest, or the value of the whole, if no other person holds an interest. This provision is an appropriate one for calculating the realisable property held by the defendant. But the effect of applying this to s.71(4) would be to exclude from the scope of the legislation all those who obtain property as minders, or couriers or agents, and to give rise to the problems of proof described in para 39 above. Given that the objective of the legislation includes a deterrent and penal element, and that there is in principle no objection to multiple recovery in the sense of recovery of the same sum from different individuals, it is difficult to attribute to the legislature the purpose of excluding such an important group of offenders from the scope of the legislation.

…

103. For these reasons, s.74(4) does not, in our judgment, apply to the assessment of the value of benefit under s.71(4), at least in the way which [counsel] submits."

Counsel for the appellant had submitted that Ascroft was wrongly decided, but in reaching its conclusion on s.74(4) the court plainly rejected that submission. At para 31 of the judgment it referred to Ascroft as having "authoritatively decided" that the value of property obtained by a thief was not the amount of money he could obtain or did obtain on the sale of the property but the economic value to the loser.

The Drug Trafficking Act 1994

The 1994 Act replaced the 1986 Act but did not introduce any changes that are material to the present issue. Again, by s.2(3), a person was to be taken to have benefited from drug trafficking if he had at any time received any payment or other reward in connection with drug trafficking carried on by him or another person; and s.4 contained provisions corresponding to those in s.2 of the 1986 Act. Thus, by s.4(1) any payments or other rewards received by a person at any time in connection with drug trafficking carried on by him or another person were his proceeds of drug trafficking, and the value of his proceeds of drug trafficking was the aggregate of the values of the payments or other rewards. By s.4(2) to (5) the court was required to make certain assumptions for the purpose of determining whether the defendant had benefited from drug trafficking and, if he had, of assessing the value of his proceeds of drug trafficking. The required assumptions included, by s.4(3)(a), that any property appearing to the court to have been held by, or transferred to, the defendant at a relevant time was received by him as a payment or reward in connection with drug trafficking carried on by him; and, by s.4(3)(c), that, for the purpose of valuing any property received or assumed to have been received by him as such a reward, he received the property free of any other interests in it. By s.7, the value of property was to be determined in the same way as under s.5 of the 1986 Act: in particular, the wording of s.7(1) to (3) of the 1994 Act was materially the same as that of s.5(4) to (6) of the 1986 Act.

In R v Walls [2002] EWCA Crim 2456, [2003] 1 WLR 731, the appellant had bought a house. The 10% deposit had been paid from his own money and the balance had been provided by a 90% mortgage advance from a building society. The issue was whether the gross value of the property was to be included in the proceeds of drug trafficking. The Court of Appeal held that it was not. His Honour Judge David Clarke QC, giving the judgment of the court, stated at para 17 that the house fell clearly within the required assumption at s.4(3)(a), but that the court was required to consider the relationship between the assumptions and s.7. He referred to In re K and Layode (para 52 above), stating at para 25 that they were binding authority that s.74(4) of the 1988 Act fell to be applied only at the stage of valuing the realisable assets. It was the appellant's contention that the legislative scheme of the 1994 Act operated differently on this particular issue. The court, however, referred to Johnson (para 47 above), observing that the terms of s.7(1) of the 1994 Act were similar to those of s.5(4) of the 1986 Act. The judgment stated:

"32. We have concluded that R v Johnson … is indistinguishable from the present case and we are bound by it. The distinction between the car and the bank loan on the one hand, and the house and mortgage on the other, is one which works against rather than in favour of [Crown counsel's] argument. It appears to have been conceded by the Crown in R v Johnson that if the lender had held an interest in the car, for example, through a hire purchase agreement, the value of the appellant's interest in it would have been calculated in accordance with s.5(4)(a) of the 1986 Act, the equivalent of s.7(1)(a) of the 1994 Act. In R v Johnson the lenders had no legal interest in the car, but despite this the court held that it could not be regarded as directly or indirectly representing the sums of money which the appellant received for drug trafficking.

33. In the present case the mortgage lender undoubtedly had an interest in the house and s.7(1)(a) of the 1994 Act must therefore be applied to the court's valuation of the offender's interest, which is represented by the equity of redemption ….

34. We do not overlook the required assumption enshrined in s.4(3)(c) of the 1994 Act. But, as in R v Johnson …, we apply s.4(4)(a) and hold that to the extent that the house was purchased with money provided by the building society, the required assumption is shown to be incorrect in the appellant's case.

35. Though we have little sympathy for the appellant, this result does, in our judgment, do justice to his case. It is a matter of regret, however, to find that in this particular respect the Drug Trafficking Act 1994 operates differently from the Criminal Justice Act 1988, especially when that difference had not previously been recognised and when In re K … and R v Layode … had been applied without argument for many years."

The Proceeds of Crime Act 2002

We have already set out the relevant provisions of the 2002 Act. We have also mentioned Hussain [2006] EWCA Crim 621 as one in a line of cases in which it has been held that illegal drugs are to be taken to have no value. In reaching that conclusion, the court referred (at para 14) to the test of "market value" in s.79(2) and held that in re-enacting those words in the 2002 Act Parliament must have appreciated that the courts had already decided that "market value" meant value in a lawful market and that illegal drugs had no such value. Had the defendant sold the drugs, the proceeds of sale would have been a benefit; but the drugs had in fact been seized.

Another case under the 2002 Act to which we were referred was R v Scragg [2006] EWCA Crim 2916. In that case the appellant had been convicted of fraudulent trading, which involved buying and selling high value cars. The benefit was calculated at first instance as the aggregate of the sums he paid for the cars and the sums for which he sold them. The appellant contended that this involved double counting and that the benefit in respect of each car should be the greater of the sum he paid for the car or the sum for which he sold it. The judgment of the Court of Appeal stated that the parties had referred to Ascroft, Glatt and Smith, but that "[e]ach of those cases was … concerned with earlier legislation and not with the 2002 Act and we have gleaned little assistance from them" (para 5). The court referred (at para 11) to s.80 as "the section that provides for the valuation of property obtained through criminal conduct" and observed (at para 12) that the scheme of the section seemed simple: subs.(2) required the court to take the greater of the value of the property when the defendant obtained it (subject to adjustment for change in the value of money) and the value at the time the court made its decision, the property there including (a) property still held by the defendant and (b) any property in his hands that directly or indirectly represented the property that he had held. The court accepted the appellant's approach to the valuation of the benefit in the particular case, holding that the benefit figure was obtained by adding together the cost of each car to the appellant when he obtained it or the amount for which he sold it on, whichever was the greater figure. Such an approach was stated (at para 16) to be entirely consistent with that in Glatt under the 1988 Act.

The Crown's submissions in greater detail

Mr Perry submitted that the policy underlying the confiscation regime is Parliament's desire to strip criminals of their present assets to the extent they have benefited from past criminal conduct (see e.g. In re P (Restraint order: sale of assets) [2000] 1 WLR 473, 479G). The legislation is concerned with confiscating the value of the defendant's benefit and is not limited to the actual proceeds of his crime or his profit. The scheme is punitive and not compensatory. Where money passes through a defendant's hands, the benefit is the total amount passing through his hands, with no requirement for the money to have been retained. Where the proceeds of a crime have been spent, a confiscation order can be made against other assets.

In a case where property has been obtained, the focus is on the point when it is obtained. It is irrelevant that a defendant has been unable to realise the property (Wilkes) or has forfeited it (Smith (David Cadman)) or, therefore, that it has been restored to its true owner. In the case of a thief or a handler, the benefit is the incoming value of the property at the time the defendant obtained it, i.e. the amount it would have cost him to obtain the goods legitimately: Ascroft. Prohibited drugs, however obtained, are in a special position because there is no lawful market in them and they are therefore taken to have a nil value: see e.g. Dore and Hussain.

The 2002 Act brought together, within a single framework, the existing confiscation provisions relating respectively to drug trafficking and non-drug offences; but it can safely be assumed that Parliament, in enacting the legislation, did not intend to weaken the application of the existing confiscation regime or to exclude from it thieves and handlers of stolen goods. The Explanatory Notes to the Bill referred to the relevant part of the 2002 Act as "replacing separate drug trafficking and criminal justice legislation with a consolidated and updated set of provisions", and to clauses 79-81 as "broadly reproduc[ing] the property valuation principles set out in the existing legislation".

It is provided in s.76(4) of the 2002 Act that a person benefits from conduct if he obtains property as a result of or in connection with the conduct. The most obvious example of such obtaining is where a thief steals property belonging to another. It cannot have been intended that the valuation rules should operate to prevent a confiscation order being made in such a situation (yet to allow an order to be made if the thief sells on the property and receives money or other property in return).

It is provided in s.76(5) that if a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain a sum of money equal to the value of the pecuniary advantage. This is a simple provision, to which the valuation provisions in ss.79-80 have no application. It would be surprising if, by virtue of the application of those valuation provisions to s.76(4), there were a fundamental difference in the operation of the regime between the obtaining of property and the obtaining of a pecuniary advantage. It was held in Smith (David Cadman) that the same approach was to be applied to both types of offence. The judgment also emphasised the merit of simplicity and the importance of a purposive interpretation so as ensure the effectiveness of the confiscation provisions.

The provisions in ss.79-80 are concerned with particular factual situations which may confront a court: s.79 is concerned with valuing property "then held by any person"; s.80 is concerned principally with a "criminal lifestyle" case where the court is required to make an assumption under s.10, though is also relevant to the determination of a defendant's benefit from particular criminal conduct. There are two methods of calculating the benefit figure and the court is required to adopt the method that will produce the larger amount: the first is to determine the value of the property at the time the person obtained it and to adjust that figure to take into account later changes in the value of money; the second applies where the defendant still holds the property obtained or part of it or property which directly or indirectly represents the property obtained.

To illustrate the operation of the relevant provisions of the 2002 Act, Mr Perry analysed a number of the cases decided under the earlier legislation, including Ascroft, In re K, Layode, Johnson and Walls, and submitted that the result in them would be the same under the 2002 Act.

Applying the above to the present case, Mr Perry submitted that the benefit to the respondent of the property found in his possession was the economic value of that property to the losers or the amount it would have cost the respondent to obtain the property lawfully, namely the agreed total value of £27,272.50. This follows from application of the basic rule as to market value in s.79(2) (or, on the subsidiary argument that ss.79-80 as a whole are concerned only with the realisable amount, from the application of the simple wording of s.76(7)). The provision in s.79(3) relating to the value of a defendant's interest in property applies only to the calculation of the realisable amount and not to the calculation of benefit. In any event the fact that the property has been restored to its true owner is irrelevant.

The respondent's submissions in greater detail

Mr Mann pointed out that in a case where a defendant's criminal lifestyle is relied on, various assumptions fall to be made under s.10 but there is then a safeguard in that, by s.10(6), the court must not make a required assumption if it is shown to be incorrect or there would be a serious risk of injustice if the assumption were made. The assumptions do not apply to the respondent and there is no corresponding safeguard in the present context. That makes it all the more important to interpret the relevant provisions of this penal legislation strictly and to give effect to its clear language where it is in favour of a defendant.

The language of ss.79-80 is clear. By s.80(4), the value of the property obtained by a defendant is to be found in accordance with s.79; it follows that s.79(3) applies; and the effect of s.79(3) is that the value is the market value of the defendant's interest in the property. In the case of stolen property in the hands of a thief or handler, his interest is no more than a right to possession (a bare possessory title) which has no market value. If Parliament had intended s.79(3) to apply only to the calculation of the realisable amount, it would have said so.

A contrast is drawn between the position under the 2002 Act and that under the 1988 Act. The equivalent of s.79 of the 2002 Act (the basic rule as to value) was s.74(4) of the 1988 Act; and the equivalent of s.80 of the 2002 Act (the value of property obtained from conduct) was s.74(5) of the 1988 Act. But s.74(5) of the 1988 Act contained no link across to s.74(4), whereas s.80 of the 2002 Act contains an express link across to s.79. Moreover s.74(5)(a) of the 1988 Act provided that the value of the property obtained by a person was the value of the property "to him" when he obtained it, whereas the words "to him" are not to be found in s.80(1)(a) of the 2002 Act. Those features are said to explain why it was held in Glatt that s.74(4) applied only to the calculation of the value of a defendant's realisable property and not to the calculation of his benefit. But given the differences in wording, Glatt does not help with the interpretation of the 2002 Act.

The wording of ss.79-80 of the 2002 Act is said to follow not the 1988 Act but the confiscation regime in the 1986 Act and the 1994 Act in respect of drug trafficking. Parliament had to choose one or the other route when creating a single statute to deal consistently with all forms of criminal property, and it chose the drug trafficking route. That there was a deliberate choice of the approach under the drug trafficking regime is said to be supported by the court's reasoning in Hussain. Under the drug trafficking legislation, the interests of third parties in property fell to be taken into account at the stage of calculating benefit and not just at the later stage of calculating the value of realisable property: see Johnson and Walls (in which the difference in this respect between the drug trafficking regime and the regime under the 1988 Act was expressly acknowledged). The same approach should now be followed under the 2002 Act.

The respondent's interpretation of ss.79-80 does not prevent the 2002 Act from biting on professional burglars and handlers. They will engage the "criminal lifestyle" provisions and the assumptions will apply to any other assets they may have. The situation will not be very different from the result in Wilkes, where all the stolen property was recovered. Only low-level offenders will slip through the net. Thus there is no sufficient policy reason to justify the Crown's strained interpretation.

Conclusions on the calculation of benefit

We approach the issue on the basis that, although the provisions of the 2002 Act must be interpreted on their own terms, the earlier statutes and the cases decided under them may cast light on the legislative intention, particularly since it is clear that the relevant part of the 2002 Act was intended largely to consolidate the earlier legislation rather than to effect major changes in it. On the other hand, it has to be recognised that the 2002 Act brought together two separate confiscation regimes, relating respectively to drug trafficking and other criminal conduct, which differed to some extent in their provisions. The expression of regret in Walls at the court's finding that the 1994 Act operated differently from the 1988 Act in the respect there considered (para 62 above) provides a good illustration of the point. We note, too, the caution expressed in Scragg about the limited assistance to be gleaned from cases decided under legislation that preceded the 2002 Act (see para 64 above). Considerable care is plainly needed in the use of historical material as an aid to construction of the 2002 Act.

There can be no doubt, however, that the policy underlying the earlier confiscation regimes is carried through to the 2002 Act. We accept Mr Perry's submissions as to that policy (para 65 above) and also bear in mind the helpful summary of legislative policy in Glatt (para 58) above. We also accept Mr Perry's submission that it can safely be assumed that Parliament did not intend to weaken the application of the confiscation regime (or regimes) when bringing the existing provisions within a single framework. These points are important, because the context is one that calls for a purposive approach to interpretation. Just as the House of Lords in Smith (David Cadman) was evidently keen to reject an interpretation which "would go a long way to making the confiscation provisions ineffective against smugglers" (para 54 above), and the Court of Appeal in Glatt was equally keen to reject an interpretation which "would exclude from the scope of the legislation all those who obtain property as minders, or couriers or agents" (para 59 above), so we would be very concerned about accepting an interpretation which would seriously reduce the effectiveness of the legislation in its application to thieves and handlers of stolen goods.

We reject Mr Mann's submission that Parliament has made a deliberate choice to follow, in ss.79-80 of the 2002 Act, the approach taken under the earlier drug trafficking regime rather than that taken in the 1988 Act in respect of other criminal conduct. The starting point must be the basic provisions of the 2002 Act relating to the obtaining of benefit, which are modelled closely on the corresponding provisions of the 1988 Act. Thus, the wording of s.76(4), (5) and (7) of the 2002 Act (relating to benefit from the obtaining of property and the obtaining of a pecuniary advantage) is in substance the same as that of s.71(4) and (5) of the 1988 Act, though re-cast into three rather than two subparagraphs. The wording differs from the provisions of the 1986 Act and the 1994 Act concerning benefit from drug trafficking, which are cast in terms of the proceeds of drug trafficking and the value of such proceeds, and where the receipt of property and the value of property received come in via the assumptions that property held by the defendant or transferred to him at the relevant times was received by him as a payment or reward in connection with drug trafficking.

Moving specifically to ss.79-80, the corresponding provisions of the earlier regimes were all very similar to one another: see s.74(4) to (6) of the 1988 Act and s.7(1) to (3) of the 1994 Act (effectively repeating s.5(4) to (6) of the 1986 Act). The express linkage between s.79 and s.80, the significance of which is considered below, does represent a difference from the earlier provisions, but it is not a difference that leans towards one set of the earlier provisions rather than another. The wording of ss.79-80 cannot be said to evidence a legislative choice to follow the approach of one of the earlier regimes in preference to the other (if indeed there was any difference of substance between them).

Nor does Hussain support Mr Mann's contention that the drug trafficking approach was deliberately chosen. The basis of the decision in Hussain (para 63 above) was that illegal drugs have a nil "market value" within the meaning of s.79(2) of the 2002 Act, since in re-enacting those words Parliament must have appreciated that the courts had already decided that they meant value in a lawful market. The reasoning in the earlier cases was such that illegal drugs (as opposed to the proceeds of their sale) would have been treated has having no value for the purposes of the benefit calculation whether the exercise was carried out under the drug trafficking legislation or under the 1988 Act. The point is simply of no assistance in resolving the issue before us.

In our view Mr Perry's subsidiary argument, that ss.79 and 80 are both concerned exclusively with the realisable amount and have no application to the calculation of the benefit, is untenable. Given that, by s.76(7), a person's benefit is "the value of the property obtained" and s.80 is expressed without qualification to apply "for the purpose of deciding the value of property obtained ...", it is plain that it applies to the calculation of benefit; s.79, in turn, is brought into play by the express words of s.80(4); and the interrelationship between s.79 and 80 is further confirmed by the provision in s.79(5) that s.79 has effect subject to s.80.

Moreover it seems to us that the provisions of s.80 are potentially important in various contexts for ensuring that the benefit figure is set at an appropriate level (e.g. by adjusting for changes in the value of money, or by taking into account the value, at the time the court makes its decision, the value of property which represents indirectly in the defendant's hands the property obtained by him). Notwithstanding the merits of simplicity vouchsafed in Smith (David Cadman) (see para 53 above) and elsewhere, it cannot have been intended that the entire weight of the detailed calculation of benefit should rest on the bare words of s.76(7).

Existing authorities under the 2002 Act are also against Mr Perry's subsidiary argument. In relation to the calculation of benefit, the court in Hussain relied on s.79(2) (see para 63 above) and the court in Scragg relied on s.80 (see para 64 above). It is true that the present point was not raised in those cases and it might therefore be argued that we are not bound by them; but they involved a considered application of ss.79 and 80 to the calculation of benefit and we would be very slow to depart from them on the point. In any event, we see no reason to disagree with the approach adopted in them.

Turning to Mr Perry's primary argument, it is extremely difficult to see how s.79(3) (together with the related s.79(4)) can be read as applying only to the calculation of the realisable amount and not to the calculation of benefit, in circumstances where s.79(2) does apply to the calculation of benefit and s.79(1) draws no distinction between s.79(2) and s.79(3) as regards the purpose for which the section applies. Moreover, there are various situations in which s.79(3) would seem apt on the face of it to play a useful part in the benefit calculation under s.80, e.g. in a case where the defendant has sold the property obtained by him and has used the proceeds to acquire a limited interest in some other property, being "property which directly or indirectly represents … in his hands" the property obtained by him (see s.80(3)(b)), or where an assumption under s.10 (being an assumption made for the purpose of a benefit calculation) bites on property in which the defendant holds a limited interest. We therefore have strong doubts about this aspect of Mr Perry's primary argument; but we do not need to reach a final decision on it, having regard to the conclusion we have reached on the other (and, as we see it, distinct) aspect of the argument, considered below.

The other aspect of Mr Perry's primary argument is that the "market value", within s.79(2), of property obtained by a thief or a handler is the amount it would have cost the defendant to obtain the property legitimately, or the economic value to the loser, rather than what the defendant could get for the property if he sold it (or, therefore, what he could get for his interest in the property if he sold that interest). That was the approach of the courts when applying s.74(5) of the 1988 Act: see, most obviously, Ascroft (paras 56 and 60 above). On that basis there is no need to consider the nature of the defendant's interest in the property obtained or the market value of that interest: the focus is on the incoming value of the property, not the value of the property in his hands. Had s.80 of the 2002 Act been enacted without a cross-reference to s.79, the similarity of wording between it and s.74(5) of the 1988 Act would have left no room for doubt that Parliament intended the approach adopted under s.74(5) to continue to apply. We think it highly unlikely that Parliament intended the actual difference in wording to alter the outcome of Ascroft and thereby to weaken the effectiveness of the confiscation regime against thieves and handlers. Nor, in our judgment, does the reference across to s.79 necessitate a different outcome. It takes one naturally to the "market value" provision of s.79(2); and if one understands that as referring in this context, in line with Ascroft, to what it would have cost the defendant to obtain the property legitimately, the qualification in s.79(3) in respect of circumstances where another person holds an interest in the property is irrelevant to the issue: it concerns an altogether different situation.

The fact that the stolen property has been restored to its true owner is also irrelevant. That follows from cases such as Smith (David Cadman) and Wilkes under the earlier legislation (see paras 53-55 above), and we see nothing in the 2002 Act to warrant a departure from that line of authority. The judge's actual decision in the present case seems to have been based on what he perceived to be the unfairness of taking into account items that had been recovered and were usable. In our view, to take such items into account is fully in line with the legislative policy and the decided cases.

We do not need to decide whether the reasoning in Glatt (paras 57-59 above) can be reconciled with the wording of ss.79 and 80 of the 2002 Act, but it seems to us that the court in that case was not necessarily holding that s.74(4) of the 1988 Act had no application at all to the calculation of benefit (reasoning which, for the reasons we have given, could not be applied easily to s.79 of the 2002 Act), but was rejecting the particular way in which s.74(4) was relied on by the appellant as applying to the assessment of benefit. In any event we think it likely, without deciding, that the same outcome would be reached under the 2002 Act.

In our view the cases of Johnson and Walls, on which Mr Mann placed substantial reliance, do not tell against the conclusion we have reached. They were both concerned with the operation of the statutory assumptions in respect of property held by the defendant. In each case the relevant assumption was found to be displaced where it was shown that the purchase price of the property came from lawful, third party sources rather than the proceeds of drug trafficking. In Johnson (para 47 above), the car could not be assumed to have been received as a payment or reward in connection with drug trafficking in circumstances where it had been bought with the assistance of a loan from a finance company (though the payments that the defendant had made towards its purchase could be assumed to represent moneys received as such a payment or reward). In Walls (para 62 above), where the defendant had purchased a house with the assistance of a building society mortgage, the assumption was displaced to the extent that the purchase money had been provided by the building society. It is true that the court analysed the matter primarily under s.7(1)(a) of the 1994 Act, which is the equivalent of s.79(3) of the 2002 Act, holding that the relevant provision required the assumption to be applied only to the value of the defendant's interest in the property, i.e. the equity of redemption. But that is entirely consistent with the view expressed above that s.79(3) may have a role to play in the calculation of benefit under the 2002 Act; and, more importantly, it is also consistent with the route by which we have reached our conclusion on the application of the 2002 Act to the calculation of benefit in respect of property obtained by a thief or handler.

In conclusion, we take the view that the judge below erred in his approach to the calculation of benefit in Rose's case. In our judgment the benefit, properly calculated, was the agreed value of all the stolen property, namely £27,272.50. We therefore allow the Crown's appeal and order that the confiscation order be varied so as to substitute the sum of £27,272.50 for the sum of £8,272.50 in the original order.

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	England and Wales Court of Appeal (Criminal Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Criminal Division) Decisions >> CPS Nottinghamshire v Rose [2008] EWCA Crim 239 (21 February 2008) URL: http://www.bailii.org/ew/cases/EWCA/Crim/2008/239.html Cite as: [2008] 1 WLR 2113, [2008] Crim LR 650, [2008] 2 Cr App Rep 15, [2008] 3 All ER 315, [2008] 2 Cr App R 15, [2008] WLR 2113, [2008] EWCA Crim 239, [2008] 2 Cr App R (S) 80, [2008] 2 Cr App Rep (S) 80, [2008] Lloyd's Rep FC 206