Lazarus, R. v

MR JUSTICE HUGHES: This applicant pleaded guilty at Swindon Crown Court to offences associated with dealing in and possession of drugs. He renews his application for leave to appeal against, first, sentences totalling four-and-a-quarter years' imprisonment, and secondly, a confiscation order in the sum of £20,802.04.

The defendant was twice arrested. First, on 7th May 2003 a search warrant was executed at his house. In the house were found five or six packages containing either heroin or cocaine in batches which were worth between £100 to £200 apiece. He also had a safe in his house and in it was £13,880 in cash.

When he was interviewed the defendant said that the drugs were for his own use and that the money was money which had been paid to him by way of advance instalments on the sale by him of a BMW motorcar. He did not at that stage say who the suggested purchaser was. He was granted bail.

On 27th June of the same year, about seven weeks later, he was seen driving a motorcar, although disqualified. Seeing the police he ran off, but in the car which he abandoned the police found a further small quantity of cocaine. That generated a second search of his house and there just under six grammes of cocaine and crack cocaine was found, worth about £700, together with a small quantity of cannabis. There was another £600 in the safe and some electronic scales.

In interview he repeated the story about the intended sale of the motorcar and this time named the anticipated purchaser. The story about the sale of the car, however, proved to be a false one which fell apart and by the time of the plea and directions hearing in the Crown Court the defendant was accepting that the £13,880 found in the safe on the first occasion was the proceeds of drug trafficking, although he said it was drug trafficking which had not personally been carried out by him.

At that plea and directions hearing, and therefore at an early opportunity, the indictment was modified to take account of the admissions the defendant was now making and he pleaded guilty to seven counts. The first was one of being concerned in the supply of cocaine between 1st December 2002 and 7th May 2003, that is the date of the first arrest. The others were counts of simple possession of the drugs found on the occasion of each of the arrests. The defendant entered those pleas and they were accepted by the Crown prosecutor then appearing for the Crown on a written basis. That was that for a period of about six months prior to the first arrest he had offered his home as a place of safe storage for money generated by drug dealing by somebody else and that the £13,880 found on the first occasion was such money being kept there by him for the man who was the dealer. The drugs found, he asserted, were for his own use and had been provided to him by the dealer, together with some money, as consideration for the storage of the dealer's funds.

The first question for us accordingly is whether sentences totalling four-and-a-quarter years were arguably either wrong in principle or manifestly excessive for those offences. The judge passed sentences of three-and-a-half years for the principal offence of being concerned in the supply of cocaine in the manner which the defendant admitted, and he passed shorter sentences amounting to nine months consecutive for the various offences of possession of the drugs.

We accept that it will often, although not necessarily always, be appropriate to distinguish in sentencing between a man who is a dealer on his own account and one who gives assistance in one of a number of ways, whether by storing the drugs or moving them about or otherwise. That said, the banker (such as this defendant was) is providing a significant service to a drug dealer. He is protecting him against the attentions both of the police and of others who might steal his ill-gotten gains. He is making it easier and safer for the drug dealer to deal. This drug dealer, whoever he was, was operating on a more than minimal scale if he had approximately £14,000 capital to keep at one time. His sentence, if he had been caught, would have been, we suspect, something in the general region of seven to eight years if he had been tried, perhaps four-and-a-half years or five years on a plea of guilty. In that context it is plain that there is nothing arguably wrong with three-and-a-half years for the banker.

Mr Tregilgas-Davey submits that consecutive sentences were wrong in principle for the possession of the drugs because, he says, those drugs were payment for the storage of the money and thus the possession was part and parcel of the supplying offence. We do not necessarily agree. The defendant was himself in possession of drugs, itself a criminal offence. But whether or not there is force in that submission in relation to the drugs which were found on the occasion of the first arrest, it cannot begin to apply to those found seven weeks later. The first count, being concerned in supply, covered only the period up to 7th May, the first arrest. The events of 27th June showed that independently of any arrangement with the supplier, the drug dealer, this defendant was in possession of class A drugs in by no means minimal quantities seven weeks later. Moreover that was an offence which he committed when on bail. A consecutive sentence was fully justified for it, if not inevitable. Overall, standing back, we see nothing wrong with four-and-a-quarter years. It was a sentence within the bracket available to the sentencing judge and in relation to that sentence the application for leave to appeal is refused.

The confiscation order was ostensibly made under the Proceeds of Crime Act 2002. Everybody in the court below proceeded on the basis that that was the right statute. We should say that we are very grateful to Mr Quinlan, who did not appear for the Crown below, for drawing attention to the fact that because the drug trafficking count (count 1) spanned a period which began on 1st December 2002, the Proceeds of Crime Act did not apply. It applies only to offences committed on or after 24th March 2003. Plainly nobody appreciated this in the court below, including the Crown which prepared detailed financial submissions couched in terms of the Proceeds of Crime Act. It follows that the order under that Act cannot stand and for that reason we grant leave to appeal that order.

There were, however, in force the very similar provisions of the Drug Trafficking Act 1994. In this case, had it been appreciated that it was the 1994 Act which applied, the procedure which followed and the steps of reasoning required of the judge would, it is accepted, have been substantially the same. We have power under section 11(3) of the Criminal Appeal Act 1968 to substitute for the order under the Proceeds of Crime Act such order which the court below had power to make under the 1994 Act, so long as the appellant is not as a result dealt with more severely than he was below. Sensibly and realistically it is accepted on behalf of the appellant that, subject to the submission which is made on his behalf as to the merits of the confiscation order, that is a course which we ought to take.

The argument on the merits is that the statutory assumptions arising under section 4 of the Drug Trafficking Act cannot be made given the accepted basis of plea without serious risk of injustice to the appellant. Under both the 1994 Act and the 2002 Act, sections 4(3) and section 10 respectively, when the court is assessing the defendant's benefit it is required to make a statutory assumption that any property in his hands at any time during the period of six years before the commencement of proceedings represented the proceeds of drug trafficking or crime, as the case may be. However under both Acts the court is required not to implement that assumption if either it is shown to be incorrect, the burden falling upon the defendant upon the balance of probabilities, or there would be a serious risk of injustice if the assumption were made.

In the court below the issue of fact in the confiscation hearing was whether quite substantial sums passing over the six year period through the defendant's bank account were or were not shown on the balance of probabilities to be other than drug related. The defendant gave evidence about it. The learned judge heard his evidence and he disbelieved the explanations for these sums which he advanced. Over the six year period those sums amounted to £51,345 and some pence. The judge's conclusion was supported by the fact that within a day or so of his first arrest the defendant had effectively emptied his bank account by transferring £11,000 to his father, who in turn moved it on to two different accounts. There can be and there is no suggestion that that determination by the judge could be successfully appealed. However, of that £51000-odd it is agreed that only the sum of £11,591 (and some pence) passed through the account during the six month period of the charge which formed count 1 in the indictment. What Mr Tregilgas-Davey here does is to renew the submission which he made to the judge, which is that because the basis of the defendant's plea was accepted it follows that there must be a serious risk of injustice if the statutory assumption is made in relation to any money passing through the defendant's hands other than during the six month period when he admitted that he was involved in the supply of cocaine by storing the money for the dealer.

In R v Lunnon [2004] EWCA Crim. 1125, a similar point was addressed. We are, we should say, very grateful to Mr Quinlan for the Crown for drawing that decision to our attention. In that case the defendant pleaded guilty to a conspiracy to supply cannabis, which count arose out of an importation of nearly two tonnes of that drug. There were a number of defendants. Lunnon was a minor member of the conspiracy and had played a limited part in the handling of the drug. The part which he had played was set out when his plea was tendered and accepted by the Crown. More, the Crown accepted the proposition that he had derived no financial benefit from the transaction, and critically, and further, the Crown made a further explicit concession: it explicitly accepted that prior to that single incident of importation charged on the indictment that appellant (Lunnon) had had no previous involvement in drug trafficking at all. That admission by the Crown was not qualified in any way, nor was it limited to saying that he fell to be dealt with as a man with no previous convictions and nor was it ever withdrawn, though this court recognised that it could have been. Accordingly, when it came to confiscation proceedings, this court held in that case that the Crown's admission stood and created a serious risk of injustice if the statutory assumptions to reverse effect were then made against that appellant.

That however is not this case. In this case the defendant's written basis of plea began with this paragraph:

That admission of an offence committed over a period of six months leaves wholly open the question whether there had been any benefit from drug trafficking before that period. Despite Mr Tregilgas-Davey's submissions, we are unable to agree that the Crown's acceptance of that basis of plea carried with it the further assertion "and we agree he had never done it before". That is not what the Crown was being invited to address. There was in this case no concession by the Crown that the defendant had never previously been involved in drugs.

It will, we observe, normally be the case that what is charged on the indictment is a specific offence. It may be charged as having been committed on a single day, or it may be charged as having been committed over a defined period, but it will nearly always, if the latter, be a period a great deal less than six years.

A confiscation order is not limited to the proceeds of the offence which is charged on the indictment. The effect of the Act is that any conviction for a relevant drug trafficking offence opens the confiscation enquiry into property which has passed through the defendant's hands, not simply during the period of the offence but for six years prior to the commencement of proceedings. It is then for the defendant to show on the balance of probabilities that such property was not the proceeds of crime or drug trafficking as the case may be. It is also for the court to keep a careful eye on whether there is a serious risk of injustice if the statutory assumption is made. This obligation on the court is a critical part of the scheme of the Act and is essential if injustice is to be avoided -- see R v Benjafield [2002] 2 Cr.App.R (S) 71. But what the scheme of the Drug Trafficking Act makes clear is that such risk of injustice does not and cannot arise simply because the assets in question were unrelated to the charge on the indictment. The confiscation scheme is subject to rules quite different to those which govern the laying of charges upon an indictment. When laying a charge on an indictment the Crown can charge only what it can prove to the criminal standard of proof. In the case, however, of confiscation proceedings the onus is not on the Crown but on the defendant (to the civil standard). Moreover the defendant can be ordered to provide information, which is something which he cannot be required to do when proof of the offence is in question.

It follows that it will often be the case that offending which could not be proved to the criminal standard in support of counts on the indictment does fall to be considered when it comes to confiscation. It therefore follows also that although confiscation proceedings are a part, if a discrete part, of the sentencing process, it will often happen that a defendant falls to be sentenced upon information and evidence which is quite different from that which is relevant to subsequent confiscation proceedings. The justification for that position, as contained in the scheme of the Act, is that it only arises when first the defendant has been convicted to the criminal standard of a relevant offence.

Lunnon and this case are perhaps salutary reminders that some care needs to be taken by the Crown when considering proffered bases of plea. In some cases the Crown may be in a position to make the kind of express acknowledgment that was made in Lunnon, that the indicted offence is the defendant's first involvement in relecant crime, and to do so knowing that that acknowledgment will be carried forward into confiscation proceedings. In other cases, and we suspect in the majority, the Crown may be able to say no more than that for the purposes of sentence it does not and cannot dispute a particular assertion made by a defendant, but that it cannot say what information may arise in any subsequent confiscation proceedings. That, as it seems to us, is likely especially to be true if, as not infrequently happens, at the time of consideration of the basis of plea the financial enquiry has not yet been undertaken. We have no doubt that the Crown ought, as a matter of good practice, when responding to a basis of plea which is advanced in a case where confiscation proceedings might follow, to bear in mind the question of whether it will be asking for a confiscation enquiry to be made and, if so, what if any admission is now being made which will apply to that enquiry. Lunnon shows that an admission made by the Crown at the sentencing stage might be withdrawn subsequently, but we would suggest that it is generally undesirable that a defendant should not know from the outset how far the Crown is prepared to go. In addition, of course, both Crown and defendants need to remember that under both the Drug Trafficking Act (section 2(1)) and the Proceeds of Crime Act (section 6(3)) there is always the possibility that the court of its own motion may decide that a confiscation enquiry should be made.

We should add this. In the present case the detailed financial reports put forward by the Crown shortly after the acceptance of plea make it abundantly clear that the Crown was seeking to rely on all the unexplained credits to the defendant's bank statements over the full six year period. The second of those financial statements followed a skeleton argument tendered on behalf of the defendant and responded to the submission which is made here. It follows that unlike the defendant in Lunnon this defendant knew perfectly well that the Crown was seeking to rely on the statutory assumptions and he had ample opportunity to rebut them on the balance of probabilities by evidence if the truth was that the money was other than the proceeds of drugs.

There is accordingly no unfairness to him and it was not unjust to make against him the statutory assumptions required by the Drug Trafficking Act. If, contrary to our view, the Crown had ever made any concessions as to drug trafficking before the period covered by the indictment, those financial statements effectively and fairly withdrew it. The judge accordingly was right to hold that there was no unfairness to the defendant in making the statutory assumptions.

It follows that this appeal succeeds to this extent only. We quash the order made under the Proceeds of Crime Act and we substitute for it this order: pursuant to the Drug Trafficking Act 1994 the defendant's benefit from drug trafficking is determined at £51,345.12 and the amount recoverable is determined at £20,802.04.

Mr Davey, the defendant was ordered to pay it within 6 months, was he not?

MR TREGILGAS-DAVEY: My Lord, yes, he was.

MR JUSTICE HUGHES: What do you ask us to do about time?

MR TREGILGAS-DAVEY: My Lord, I think there is a hearing coming up. At this moment I do not ask for anything.

LORD JUSTICE MAY: You are asking for no modification of the order in that respect?

MR TREGILGAS-DAVEY: My Lord, no.

MR JUSTICE HUGHES: So to be paid within 6 months of the original determination?

MR TREGILGAS-DAVEY: Yes.

MR JUSTICE HUGHES: There was a sentence of -- I am sorry there was 18 months in default, was there not?

MR TREGILGAS-DAVEY: Yes.

MR JUSTICE HUGHES: That order will be incorporated into our order. Was it 18 months if he failed to pay?

MR TREGILGAS-DAVEY: Yes, it was.

MR QUINLAN: My Lord, it was six months to pay with 18 months in default.

MR JUSTICE HUGHES: Then the order will be in the same term as the order below, but made under the correct statute.

MR TREGILGAS-DAVEY: My Lord can I raise one matter? Of course you, as it were, rejected by merits argument but strictly speaking you allowed the appeal. Will this court consider granting a representation order for this morning?

LORD JUSTICE MAY: Yes, we do grant you a representation order. Thank you very much.