No: 2003/6248/C3 & 2004/1376/C3
Royal Courts of Justice
Strand
London, WC2
B E F O R E:
LORD JUSTICE CLARKE
MR JUSTICE GIBBS
MR JUSTICE STANLEY BURNTON
R E G I N A
-v-
LESLIE JAMES MOULDON
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MR A BODNAR appeared on behalf of the APPLICANT
J U D G M E N T
MR JUSTICE STANLEY BURNTON: On 6th December 2002 at Newcastle Crown Court, before His Honour Judge Whitburn and a jury, the applicant was convicted by a majority of a single count of conspiracy to supply a class A controlled drug (MDMA) to another in contravention of section 4(1) of the Misuse of Drugs Act 1971. On 24th January 2003 before the same judge he was sentenced to 16 years' imprisonment.
On 30th January 2004, before the same judge, a confiscation order was made against him under section 2 of the Drug Trafficking Act 1994 in the sum of £667,000 to be paid within six months, with three years' imprisonment consecutive in default. On 23rd February the confiscation order was revised up to the sum of £750,000.
He applies for leave to renew his application for leave to appeal against conviction and sentence. He was not represented for that purpose before us. He further seeks leave to appeal the confiscation order, the Registrar having referred this application to the full court. On that application he was represented by counsel, Mr Bodnar.
The brief facts of the case were that in March 2001 the Northumbria Police mounted an undercover operation to target the suppliers of illegal drugs. A shop known as Ace Hardware Store was used as a front. The store was fitted with covert audio and video recording equipment and staffed by undercover police officers who let it be known that they were open to offers to purchase drugs. The police also had access to a flat in nearby Middle Street for some of the transactions.
Undercover officers made contact with Edward Wilson from whom they purchased quantities of drugs on various occasions beginning in October 2001. An undercover officer referred to as "Omar" was taken to Wilson's flat by Knowles on 17th October 2001 where he purchased amphetamines and discussed with Wilson the purchase of 5,000 ecstasy tablets. Wilson said he needed to "speak to (his) man".
On the following day, two calls were made from a mobile telephone later recovered from Wilson's flat to a mobile telephone subsequently seized by the police from the applicant's home at the time of his arrest.
On 19th October, Wilson delivered 1,000 ecstasy tablets to an undercover officer called "Sohail". Sohail later contacted Wilson to say he could take another 4,000 tablets. Wilson said he would "Ring (his) man and see what he says". Less than 30 minutes later a call was placed from the mobile telephone later found in Wilson's home to the mobile telephone later found at the applicant's home address. Two minutes after that call Wilson called Sohail to confirm the deal. Wilson supplied 5,000 tablets to Sohail later that day. He was driven to the meeting point by Wood.
Over the following week there were discussions with Sohail and Wilson as to the supply of a further 5,000 tablets. Wilson supplied these on 7th November at a cost of £6,000.
Thereafter undercover officers entered discussions with Wilson for the supply of 15,000 ecstasy tablets. There were a number of telephone calls during this period between the mobile phone later found at Wilson's address and that later found at the applicant's address. During a discussion with Sohail on 6th December, in which Sohail expressed concern as to whether the quantity he wanted was available, Wilson made a call to this applicant's telephone. That telephone call was not in dispute. In the short call he said: "Kid is Edward still there? He is, that's all I wanted to know, I'll be in touch", following which he confirmed that 15,000 tablets would be available for purchase.
On 18th December, Wilson suggested that the meeting place for the transaction might be at his mate's pub, which was more like a hotel, although in the event this was not the arrangement. That was of some relevance as the applicant owned a pub known as the Ship Inn and it was suggested by the prosecution that that was the venue Wilson was referring to.
On 19th December Wilson arrived at the hardware store carrying a large black holdall which contained three heat sealed packs each containing around 10,000 ecstasy tablets, with a street value of around £100,000. The officers paid £27,000 for the drugs. As he left the store, a call was made from a mobile later found at his home to the mobile later found at the applicant's home. An Audi motorcar seen parked nearby was registered to the applicant. CCTV footage revealed an Audi motorcar leaving the parking area as Wilson walked away.
Later the same day Wilson, driven by Wood, met undercover officers and supplied them with amphetamine and ecstasy.
Following this applicant's arrest, police found 30 ecstasy tablets bearing the same logo as that on the tablets supplied by Wilson to officers on 19th December in a kitchen drawer at the applicant's home address. A mobile phone was also seized. A large black holdall was found in the cellar at the Ship Inn of which the applicant was the owner.
The prosecution case was that the applicant had supplied to Wilson the quantities of ecstasy which Wilson supplied to the undercover officers. The prosecution alleged that he could be directly related to the transactions on 19th October and 7th November by the itemised calls from the mobile telephone found at Wilson's home address to the mobile telephone found at the applicant's home address.
It was the Crown's case that the applicant transported Wilson and the drugs to the hardware store in his Audi motorcar on 19th December and that the distinctive markings on the black holdall found in the cellar of the Ship Inn showed it to be identical to that used by Wilson to carry the drugs on that occasion. The Crown relied on evidence from the Dutch manufacturers of the holdall that such holdalls were not actively sold by them in this country.
In interview the applicant denied any involvement in a conspiracy to supply class A drugs. He knew Wilson because he drank in his pub. He gave him a lift to the hardware store on 19th December but knew nothing of the drugs. Wilson tended to telephone him when he was drunk to discuss arrangements concerning the pub pool team. The ecstasy tablets found in the kitchen drawer had been handed in at his pub a few days before. He had no knowledge of the holdall found in the cellar at the Ship Inn and it was not his.
The defence case was that the applicant was not involved in any conspiracy to supply ecstasy. Wilson had supplied large quantities of cocaine and amphetamine to the undercover officers. Wood drove Wilson to the meeting point for two such transactions. There was no suggestion that the applicant was the ultimate supplier of these drugs and the defence maintained that if Wilson was being supplied with these drugs by other individuals the jury could not be sure that it was the applicant who had supplied the ecstasy to him. Itemised telephone records showed that Wilson had made telephone calls to Wood and to a man named Lawson during the relevant period, both of whom had convictions for drug matters. It was clear that Wilson was using at least one other mobile telephone at the relevant time for which the itemised calls were not available.
The applicant gave evidence and denied any involvement in supplying the ecstasy. His evidence as to the telephone calls was summed up by the judge. His evidence as to the circumstances in which he gave Wilson a lift to the hardware store on 19th December was similarly fairly set out by the judge in the summing-up. His evidence as to the holdall was also summed up. He gave evidence as to the holdall and there was also evidence from Michelle Wilson as to the ecstasy tablets found in the Ship Inn.
A man called Edward Leyton also gave evidence. He said that he was a customer at the Ship Inn and knew Wilson. Wilson may have telephoned him at the pub, but he would not have been there during the daytime.
The proposed ground of appeal against conviction is that the judge's summing-up was biased against the applicant, in particular that the judge referred to coincidences explained by the applicant in derogatory terms. So far as that is concerned we have carefully considered the summing-up. In our judgment none of the comments made by the judge went beyond those he was entitled to make on the evidence before him. There is no sensible argument that this conviction is unsafe by reason of any derogatory remarks or other prejudice that might arguably be engendered by the terms of the summing-up. It follows that the renewed application for leave to appeal against conviction is refused.
So far as sentence is concerned, the applicant had two previous serious convictions for drug offences, albeit they related to class B drugs. The judge said he was quite satisfied that the applicant was the main supplier of ecstasy to Wilson. As the telephone calls demonstrated, he had supplied at least 11,000 other tablets in addition to the 30,000 supplied to Wilson on 19th December. Heat sealed packages in which the drugs had been supplied clearly came almost directly from the manufacture into his possession. Given that the judge found and was entitled to find that the applicant was a large scale dealer in class A drugs, namely ecstasy, and was close to the source of supply, a substantial sentence of imprisonment was inevitable and indeed that is accepted in the grounds settled by counsel. A sentence of 14 years' imprisonment could not be the subject of any complaint. Here the sentence was one of 16 years' imprisonment. However, that addition was in our judgment well justified by the previous convictions of this applicant. In those circumstances, there is no arguable appeal against the sentence of imprisonment and the application for leave to appeal against that sentence is similarly refused.
We turn to the confiscation order. The application for leave to appeal against the confiscation order seeks to raise a question of principle as to the application of the relevant provisions of the Drug Trafficking Act 1994. The applicant had, on the findings which the judge made and which it is accepted he was entitled to make, acquired a number of properties with cash which the judge was entitled to find, certainly to assume, had been derived from his drug dealing. In the case of all or most of those properties the purchase price had been financed not only from cash derived from the drug dealing, or assumed to be from the drug dealing, but also from loans made by banks and other financial institutions. The submission made on behalf of the applicant in essence is that where that occurs the benefit derived from the drug dealing of the applicant is not the property itself but a proportion of the property represented by the deposit which may be explained or may be assumed to be derived from the proceeds of drug dealing. For example, if £5,000 in cash is supplied to a property purchased for £100,000 and a mortgage of £95,000 is taken and the property doubles in value, the benefit value as at the date of the confiscation order to be taken by the applicant, in his submission, is not £105,000, being the value of the equity in the property, but £5,000 doubled to £10,000.
In our judgment that submission is based on a fundamental fallacy, namely that what is acquired in the circumstances to which we have just referred is an interest of £5,000, rather than the equity in the property subject to the mortgage. In our judgment the Act requires that relevant property be valued as at the date of the confiscation order, subject to any charges, but it is the property which is valued rather than the deposit placed on the property by a defendant.
We arrive at that result through two possible loops, both of which have exactly the same result. For present purposes we turn first to section 4 of the 1994 Act. Subsection (1) provides:
"For the purpose of this Act -
any payments or other rewards received by a person at any time (whether before or after the commencement of this Act) in connection with drug trafficking carried on by him or another person are his proceeds of drug trafficking; and
the value of his proceeds of drug trafficking is the aggregate of the values of the payments or other rewards."
Subsection (2) provides:
"Subject to subsections (4) and (5) below, the Court shall, for the purpose -
of determining whether the defendant has benefited from drug trafficking, and
if he has, of assessing the value of his proceeds of drug trafficking,
make the required assumptions.
The required assumptions are-
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, at the earliest time at which he appears to the court to have held it, as a payment or reward in connection with drug trafficking carried on by him;
that any expenditure of his since the beginning of that period was met out of the payments received by him 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."
It is undisputed that the various properties which constituted the realisable property of the applicant at the date on the confiscation order were properties which had been transferred to him at a time subsequent to the beginning of the period of six years ending with the proceedings instituted against him referred to in section 4(3(a(ii). It follows that the court was required to make the assumption stipulating section 4, namely those properties had been received by him as a payment or reward in connection with drug trafficking carried on by him. The words "in connection with" are of wide input. They do not necessarily require there to be an immediate and direct connection with drug trafficking. In our judgment, where it is shown that a defendant has with cash which are the proceeds of drug trafficking put that money into property that is acquired property with it, section 3(a) requires that the property so required to be regarded as a payment or reward in connection with the drug trafficking carried on by the defendant.
The assumption is a rebuttable assumption. It is rebuttable in the circumstances referred to in section 4(4). That provides:
"The court shall not make any required assumption in relation to any particular property or expenditure if-
that assumption is shown to be incorrect in the defendant's case; or
the court is satisfied that there would be a serious risk of injustice in the defendant's case if the assumption were to be made;
and where, by virtue of this subsection, the court does not make one or more of the required assumptions, it shall state its reasons."
In the present case the applicant was unable to establish that the assumption was incorrect. It might have been shown to be incorrect because a property had been purchased by him from monies made quite legitimately. It might have been shown to have been incorrect if the property were a genuine gift or the result of a request made by relative. He was unable to do anything of that kind. The assumption therefore remained good unless section 4(4)(b) applied. Section 4(4)(b) applies if the court is satisfied that there would be a serious risk of injustice if the assumption were to be made. In circumstances where the value of the property in the hands of the defendant exceeds the cash investment he made in it, because the value of that property has risen, we see nothing unjust or even arguably unjust in the value of the property being taken to be the payment or reward of the defendant made in connection with drug trafficking. It has frequently been said that the legislation is draconian. Its object is to deprive those involved in drug trafficking of the benefit of drug trafficking and in a case such as that which we are considering, where a deposit has been made of cash monies in order to buy a property, we see nothing unjust or arguably unjust and no risk of injustice if the property which is acquired, which we remember is not the deposit but the equity in the property if there is a mortgage, is taken to be the reward of drug trafficking. It is accepted that if the assumptions do apply and the property is assumed and therefore taken to be a payment or reward in connection with drug trafficking, the property is to be valued as at the date of the proceedings resulting in the confiscation order. That is what the judge did. In our judgment it is neither unjust nor surprising that where a property is bought with a relatively low down payment and a high mortgage and it increases in value, the benefit to the defendant is a sum which may be a multiple of the original deposit. That is because, subject to any interest payments, any mortgage remains unchanged by increases in market values, whereas the defendant has acquired the equity in the property, that is to say he has the property subject only to the mortgage. That appears to us to be plain on the wording of section 4 and having regard to the draconian purposes of the Act.
A similar result may be reached by applying the provisions of section 7. If cash which is assumed to be the rewards of drug trafficking is used to purchase a property then that property represents directly or indirectly the reward. Section 7(3) provides:
"Subject to section 8(2) of this Act, if at the material time [the material time relating to confiscation proceedings] the recipient [that is to say the recipient of the properties -- in this case the applicant] holds-
the property which he received (not being cash), or
property which, in whole or in part, directly or indirectly represents in his hands the property which he received,
the value referred to in subsection (2)(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 received, but disregarding in either case any charging order."
No question of charging orders arise in the present case. The real properties acquired with cash which were assumed to be and properly assumed to be the proceeds of drug trafficking, directly or indirectly represent that cash -- that is to say the property which was originally received by the recipient referred to in subsection (3)(b) of section 7 is the cash, and the property applied with it directly or indirectly represents it for the purposes of the Act. If that is so, then the property falls to be valued as at its market value, subject of course to any charging order and it would also be necessary to take into account any outstanding charges or mortgages. That is what the judge did in the case of each relevant property.
Our attention has been focused on the Old School Lane project which was the last and most important of the acquisitions made by the applicant. That was a property which was developed. The applicant contributed a relatively small sum, some £40,000 on the judge's findings, to the acquisition of that property. It was acquired and developed by a partnership in which the applicant had a fifty per cent interest. After completion of the development the profit from the partnership was something approaching £1 million and the defendant's fifty per cent of that was some £400,000. The £1 million and the £400,000 were arrived at after deduction of all charges. In our judgment the judge's calculation is precisely that which we would have expected to be made under the provisions of the Act. The fact that the original contribution of the applicant was a relatively small sum and his profit a large sum in no way makes the application of the assumptions in the Act and the requirements of the Act unjust, creates no risk of injustice, nor shows that the assumptions are inaccurate. To the contrary, it is in the public interest that those who traffic in drugs should be deprived of their benefit from drug trafficking viewed in the largest possible way. As we have already observed, this legislation is draconian and intended to be such.
It was put to us in favour of Mr Bodnar's submissions that the Crown's interpretation of the Act and that adapted by the judge in this case would lead to bankruptcy of an applicant which is neither a matter stipulated nor intended by the Act. That again is a misapprehension. Whatever may be the calculation of a defendant's benefit from drug trafficking, a confiscation order is limited by the extent of his realisable property and since it is limited to his realisable property, no question arises of a confiscation order being made in a sum which is greater than the value of property available for its satisfaction. Indeed, there are provisions in the Act for reducing the amount of a confiscation order in circumstances where unexpectedly the value of property in practice is not that which a court assumed it to be or found it to be when the confiscation order was made.
In our judgment the working of the provisions of the Act are quite clear. The Act has always been applied in the manner we have described and although Mr Bodnar's submissions were worthy of consideration in terms of time, in our judgment they raised no arguable point of appeal. The confiscation order was rightly made and this application is therefore refused.
MR BODNAR: My Lord, a couple of things very briefly. My Lord said that the confiscation was revised upwards to £750,000. In fact what happened was the order of £667,000 represents the applicant's realisable assets. The learned judge made a benefit finding of at least £750,000.
LORD JUSTICE CLARKE: He revised that to £750,000.
MR BODNAR: The order itself remained the same.
LORD JUSTICE CLARKE: Thank you.
MR BODNAR: The second point, very briefly, is that the order has been somewhat in abeyance awaiting this hearing. Could I invite your Lordships to extend the time for payment by three months, to permit I think the technical----
LORD JUSTICE CLARKE: By three months? Yes, we will do that. Yes.
MR BODNAR: The final point is I have in mind a very broad definition in connection with -- I do not know if it is possible to ask for a certificate on a leave application. If it is I will do it in writing.
LORD JUSTICE CLARKE: It think it is very unlikely. If it is you had better do it in writing. Thank you very much.