On 16 July 2001 this appellant was convicted at Snaresbrook Crown Court of 2 counts of conspiracy fraudulently to evade the prohibition on the importation of a controlled drug of Class B, namely cannabis or cannabis resin. On 27 July 2001 he was sentenced to 11 years imprisonment on count 1 and 9 years concurrently on count 2. On 12 April 2002 a confiscation order was made in the sum of £1,525,615 with a sentence of 5 years 3 months imprisonment in default of payment. He appeals against the confiscation order with the leave of the Full Court.

At trial the appellant was jointly indicted with two co-accused men. Eric Charles Mason was jointly charged with counts 1 and 2 but the jury were discharged from giving a verdict on count 1 and returned a verdict of not guilty on count 2 on the direction of the trial judge. The appellant’s son, Jonathan Ronald Barnham, was convicted of count 2 and sentenced to 3½ years imprisonment. A confiscation order was subsequently made against him in the sum of £975 with 28 days imprisonment in default of payment.

In early 1995 West Yorkshire Police started investigations into a group believed to be cultivating cannabis in the United Kingdom. An undercover police officer, Kyle Murray, infiltrated the group, his cover being that of an international money launderer. In due course he was introduced to the appellant. It was not alleged that the appellant had any involvement with the suspected cannabis cultivation.

On 15 September 1995 Murray travelled to Spain and met the appellant at his home. The appellant indicated that he was involved in the large-scale importation of cannabis into the United Kingdom from Morocco. He said that his organisation expected to receive a payment of £12 million in the near future of which his personal share would be £2 million. He sought assistance from Murray in laundering the money. He asked Murray to make a financial investment in the business in order to show his good faith.

On 25 September 1995 Murray returned to Spain with another undercover officer known as Sara. At a meeting with the appellant, Murray handed over £27,000 in cash as his financial investment. There was a discussion about money laundering in which the appellant said that he wanted to obtain £500,000 to £1,000,000 in laundered cash by the end of the year as he intended to leave the business. On 20 February 1996 Murray and Sara again met the appellant in Spain. The appellant described the involvement of his associate, Ronald Glover. Glover arranged the transportation of the drugs in containers used in his legitimate maritime tank cleaning business. The appellant spoke of the difficulties affecting the drug trafficking operation resulting from a number of arrests and drug seizures in Morocco.

Following that meeting telephone contact was maintained between Murray and the appellant. However by 28 June 1996 the appellant had indicated that Glover was unreliable and he had been forced to change his plans. The prosecution alleged that this marked the end of the first conspiracy (count 1).

In the same telephone conversation on 28 June 1996 the appellant told Murray that he had another option open to him which he had used previously but the drugs had arrived at the destination in a damaged state. Murray suggested that he might be able to assist with transport difficulties. The details of Murray’s proposal were discussed in further telephone conversations. The Crown alleged that this marked the start of the conspiracy alleged in count 2.

On 19 July 1996 Murray travelled to Spain with another undercover police officer known as Michael. They met the appellant and two associates, Ronald Everett and Daniel Redmond. Michael was introduced as the person who could assist in the transportation of drugs. Murray and Michael were asked by the group to investigate what legitimate cargos could be used to conceal the drugs.

On 20 July 1996 in a telephone conversation the appellant indicated to Murray that the amount of cannabis to be moved would be 10 tonnes. There were further telephone conversations concerning the cost of the transport arrangements.

Further meetings followed during the course of which the plan to ship cannabis was discussed. A shipment of 6 tonnes of cannabis was envisaged.

On 29 October 1996 the appellant told Murray by telephone that the plan was proceeding; however a shipment of drugs did not arrive. Further meetings followed between Murray and Michael and the appellant and Redmond. By the end of March 1997 the appellant indicated to Murray that the plan was still going ahead.

In May 1997, the appellant was arrested in Portugal in connection with unrelated matters and detained in custody. On 5 June 1998, the appellant was released from custody but on 17 July 1998 Redmond and Radford were arrested in Spain in relation to unrelated matters. Their arrests terminated the second conspiracy.

In sentencing the appellant, the judge described him as the lead organiser in a sophisticated, established and internationally based drug trafficking business. Further, he stated that the fact that no cannabis was actually imported was not due to lack of any effort or determination on the part of the appellant but he did not profit from the conspiracies

The prosecution served a section 11 statement which claimed that the total benefit to the defendant of his operations was £15,037,615. This sum was calculated by reference to direct benefit and assumed benefit (proceeds). Assumed benefit was divided into transfers (income) from unidentified sources and expenditure from unidentified sources. In support of the calculation of benefit the prosecution relied to a considerable extent on the conversations between the appellant and the undercover police officers.

Following conviction the judge formally postponed the hearing of the confiscation proceedings. In due course the proceedings were conducted in two parts. In January 2002 the first hearing took place to determine the benefit to the appellant from his drug trafficking operations. The judge heard evidence from a police officer and was assisted by statements served pursuant to sections 11 and 12 of the Drug Trafficking Act 1994. He received skeleton arguments and submissions from counsel. The appellant did not give evidence. The judge gave his ruling on 8 February 2002.

At the hearing the appellant admitted items of benefit to a total value of £185,615. The judge after setting out his calculations and reasons found that the total benefit to the appellant was £1,525,615. There is no appeal against that finding.

In April 2002 the judge conducted a hearing in respect of the realisable assets. At this hearing the appellant and his wife gave evidence. They were cross-examined by counsel for the prosecution, and the judge heard submissions from counsel. The judge in his ruling of 12 April 2002 found that the appellant and his wife had not told the truth. He said:

Having so concluded the judge ruled that the amount which the appellant should be ordered to pay under the confiscation order was the amount which he had assessed as the benefit namely £1,525,615.

The issue in this appeal is whether the confiscation order made by the judge gave rise to a serious risk of injustice to the appellant. Encompassed in this issue is an issue as to what is the correct approach for a judge to take when making a determination at the second stage of confiscation proceedings and the impact of Article 6(1) of the ECHR on this stage. In order to understand the appellant’s submissions it is necessary to refer to the statutory framework of the Drug Trafficking Act 1994 (the Act) and some of the more recent decisions dealing with confiscation proceedings.

The 1994 Act provides a framework for making confiscation orders. It includes a two-stage procedure. Section 2 requires the court first to determine whether the defendant has benefited from drug trafficking. This exercise is not confined to benefits received in connection with the offences of which the defendant has been convicted. The court has to consider benefits received by the defendant “at any time” in connection with drug trafficking carried on by him (section 2(3)). Once the court has determined the benefit to the defendant it must go on to determine the amount to be recovered from him. The amount to be recovered must be determined in accordance with section 5.

Section 4 of the Act requires the court, when determining whether a defendant has benefited from trafficking and if so assessing the value of his proceeds of drug trafficking, to make “required assumptions”. The required assumptions are set out in sub-section 4(3) and are as follows:

Section 4(4) provides:

Having determined the amount of benefit, the second stage is to determine the amount to be recovered under the confiscation order. That amount is determined in accordance with section 5, which in the material parts reads:

if the court is satisfied that the amount that might be realised at the time the confiscation order is made is less than the amount the court assesses to be the value of his proceeds of drug trafficking, the amount to be recovered in the defendant’s case under the confiscation order shall be-

Section 6(1) defines the expression “the amount that might be realised” as follows:

Mr Owen QC made two broad submissions in support of this appeal. We shall deal with each separately.

Mr Owen QC submitted that Article 6 (1) of the ECHR was engaged at the second stage of confiscation proceedings as well as at the first stage. He submitted that the effect of this, in a case involving an allegation by the prosecution that a defendant had hidden assets, was to require the prosecution to make out a prima facie case before a defendant could be expected to deal with such an allegation. Mr Owen QC submitted that there was a difference between cases where the prosecution had proved benefit at the first stage, by evidence, from cases where the prosecution had proved benefit by operation of the assumptions. In the latter class of case it was submitted that the assumptions flowed through into the second stage. Thus the prosecution should be required to establish a prima facie case of hidden assets before the burden of proof shifted to the defendant. To do otherwise was to invite a court to take a leap into the dark at the second stage when it disbelieved a defendant. Further, Mr Owen QC submitted a defendant facing an allegation of hidden assets was put at a real disadvantage unless the prosecution first set out the nature of the case which he had to meet.

Mr Stubbs, on behalf of the Crown, submitted that once the second stage of the proceedings had been reached it was for a defendant to prove to the civil standard his realisable assets, or as in this case, that he had no realisable assets other than his house. It was not, he submitted, for the prosecution to raise a prima facie case before the burden shifted to a defendant.

In this case, Mr Stubbs submitted that the appellant knew exactly the case which he had to meet following the judge’s ruling at the end of the first stage. Further, in this case, the prosecution had served on the appellant a questionnaire as an appendix to its section 11 statement. The questions indicated the areas with which the appellant should deal when, if he chose to do so, he gave evidence.

It was common ground that the judge should, before making the order, stand back and decide whether there was or might be a risk of serious or real injustice to the appellant.

Both counsel relied on passages in the main authorities on confiscation proceedings. We shall refer to some of those passages, although by the end of submissions it became clear that there was little between the prosecution and the appellant on the legal principles applicable.

There can be no doubt that at the second stage of confiscation proceedings there is a persuasive burden on a defendant to prove to the civil standard what realisable assets he has. Mr Stubbs in support of this proposition referred the court to R v Barwick [2001] 1 CAR (S) 445. That case concerned an order made under the Criminal Justice Act 1988. The statutory provisions in that Act are very similar to those in the 1994 Act. At paragraph 6 of the judgment in Barwick the court said:

Importantly, in R v Benjafield [2001] 3 WLR 75 Lord Woolf, Lord Chief Justice, giving the judgment of the court stated:

Lord Steyn, in his speech in the House of Lords, agreeing that the appeal in Benjafield should be dismissed, approved the whole of paragraph 86 of the Court of Appeal’s judgment. It is this passage which is relied on by both counsel in support of the proposition that a judge conducting the second stage of confiscation proceedings must be astute to avoid any risk of serious injustice to a defendant.

Before the appeal of Benjafield to the House of Lordswas heard the case of Phillips vUnited Kingdom was heard by the European Court of Human Rights: Application No 41087/98 5 July 2001. In that case the European Court decided that Article 6(2) (the presumption of innocence) did not apply to confiscation proceedings. It did however consider that Article 6(1) was engaged. At paragraph 46, in a passage relied upon by Mr Owen QC, the majority decision reads:

Mr Owen QC submitted that the European Court envisaged that a different approach might have been adopted in a case involving an allegation of hidden assets.

However, Benjafield and the accompanying appeal of Rezvi were cases where the statutory assumptions were in play. The decision in Phillips was considered by the House of Lords in those appeals. In his speech Lord Steyn referred to various passages of the majority decision in Phillips before stating (see [2003] 1 AC 1099 @ p1151 G):

Lord Steyn went on to refer to the dissenting opinion of the court to the effect that the majority had taken too narrow a view of Article 6 (2). He said:

Mr Owen QC sought to persuade us that the concession referred to by Lord Steyn was one made by counsel for the appellant in Benjafield in relation to the burden of proof. Whatever concession counsel may have made, it is clear from the passage in the judgement of the Court of Appeal approved by Lord Steyn that the burden of proof on a defendant was a persuasive one and not an evidential one.

We reject the submission that the prosecution was required to do anything further at the second stage of the proceeding by way of providing a prima facie case for the appellant to meet.

In our judgment the correct approach for the court to take when dealing with confiscation proceedings at the second stage is the same whether the benefit has been proved by evidence in addition to the statutory assumptions. Once the prosecution has established the benefit there is no requirement on it to provide a prima facie case. At the second stage the burden of proof shifts to a defendant to establish, if he can, his realisable assets to the satisfaction of the court. By the second stage a defendant will know exactly how the court has determined benefit attributable to him and must prove by evidence what his realisable assets are. It is for him to show why the confiscation order should not be “the value of (his) proceeds of drug trafficking”. If he proves that he has no, or appreciably less, realisable assets than the amount of the benefit determined by the court the order will be made in the lesser sum. Provided the judge keeps well in mind the principle that the risk of serious injustice to the defendant must be avoided and does not just pay lip service to that principle the order will be in the amount assessed as either the amount of benefit or such other sum as the defendant shows represents his realisable assets.

To hold that the prosecution must, in some way, show a prima facie case that the defendant has hidden assets in our judgment would defeat the object of the legislation. It is designed to enable the court to confiscate a criminal’s ill-gotten gains. The expression “hidden assets” is indicative of the fact that the prosecution can have no means of knowing how and where a defendant may have dealt with or disposed of the proceeds of his criminal activities.

Mr Owen submitted that the judge’s decision in this case was unfair. He pointed to the fact that the largest elements of the judge’s assessment of benefit were the costs of obtaining 2.5 tonnes of cannabis, the subject of count 1; the cost of purchasing 3 tonnes of drugs referred to in conversations between the appellant and the undercover officer, Murray; and the costs of 1,200 kilograms of cannabis also referred to in conversations between the appellant and Murray. These three items were assessed by the judge at the first stage at cost price which amounted to £1,340,000. Mr Owen submitted that since it was the prosecution case that each of the two conspiracies, count 1 and count 2, failed, in the sense that no drugs reached the United Kingdom, it was not fair to make a determination of realisable assets based on those conspiracies. He added that the judge had made no allowance for the fact that the appellant must have been one of a number of conspirators. He submitted that the judge should have made a deduction for costs attributable to other persons involved in the conspiracies.

Further, Mr Owen submitted that the prosecution case at the second stage changed in respect of the 2.5 tonnes of cannabis. In support of his submission he relied on an exchange between Mr Stubbs and the judge during the course of submissions at the second stage hearing. Mr Owen submitted that at one stage the prosecution were submitting to the judge that the 2.5 tonnes of drugs could not be counted as a realisable asset since the conspiracy failed. At a later stage Mr Stubbs submitted that it could be counted. Mr Owen argued that this demonstrated that the judge unfairly included a sum of £500,000 in respect of this proposed shipment of cannabis as a realisable asset when the shipment did not reach a market in the United Kingdom.

Next, Mr Owen submitted that the judge ought to have taken into account the fact that the appellant had been in custody for substantial periods of time after the conspiracy in count 2 ceased. This fact, submitted Mr Owen, ought to have caused the judge to make an allowance for living and other expenses diminishing any proceeds of crime which the appellant had obtained during the course of his criminal activities. Generally, the judge failed to take into account the probability that any proceeds of crime must have diminished in the period since the last conspiracy came to an end.

Further, Mr Owen submitted that the judge included in his assessment of benefit a sum of £65,000 as proceeds of drug trafficking but which sum had been used to re-furbish the appellant’s house in Spain. The house itself had been assessed as a realisable asset but no allowance had been made by the judge for the fact that £65,000 must inevitably have been included in the value of the house. As to this point, Mr Stubbs accepted that there was force in this submission in that in his ruling at the first stage the judge appeared to have double-counted the sum of £65,000. He conceded that this sum was subsumed in the value of the house and should be deducted from the final order.

In our judgment, the difficulty which the appellant faces in this appeal is that the judge rejected his evidence and that of his wife. As Mr Stubbs pointed out, the questionnaire annexed to the prosecution section 11 statement raised a number of questions for the appellant to answer. By way of example only we refer to four of these questions:

At no stage in his evidence did the appellant seek to answer these questions. He produced no evidence, documentary or otherwise, of any sort to show that he no longer retained any proceeds of his criminal activities or what had happened to them. His evidence amounted to a bare denial that he had any realisable assets other than his house. He did not explain in evidence what had happened to the 2.5 tonnes of drugs, the subject of count 1, which had not been seized. In respect of that item, we accept Mr Stubbs’ submission that, in his submissions to the judge, he was endeavouring to explain that the shipment of cannabis remained available for the appellant to deal with again.

In sentencing the appellant the judge had described him in respect of count 1 as the lead organiser in a sophisticated, established and internationally based drug trafficking business. It is to be noted that the very purpose of the appellant involving the under cover police officer was to assist the appellant in money laundering activities. In our judgment, the fact that the drugs did not arrive in England does not mean that they are to be ignored as potential realisable assets. The judge was entitled to conclude that they were a valuable asset under the appellant’s control. Drugs have a market value and the judge was entitled to look to the appellant to explain what had become of them and how much of his investment in them he had realised. But he received no credible evidence on this issue from the appellant and the fact that the appellant had been in custody for substantial periods of time since the end of the second conspiracy does not deal with the point. Associates could have sold the drugs on the appellant’s behalf. In the circumstances, in our judgment, the judge was quite entitled to find, as he did, that the appellant had not discharged the burden on him of proving that he had no realisable assets other than his house.

As to the submission that the judge should have made an allowance for contributions or expenses incurred by other conspirators, the judge dealt with this in his ruling at the end of first stage of the proceedings on 8 February 2002. Having pointed out that the appellant had given no evidence in support of this submission (which had been made at that stage) the judge concluded that he was satisfied from the evidence that the appellant had sufficient control over the criminal enterprise to pay for and realise the proceeds of the cannabis importations. He said:

In his ruling, the judge recorded that the appellant accepted making the statements to Murray as recorded in the conversations between him and Murray. But the judge rejected the appellant’s assertion that he earned his living in Spain from Karaoke singing. He pointed out that the appellant’s evidence failed to explain truthfully trips to Morocco, Portugal and Benidorm or to explain what had happened to the 2.5 tonnes of cannabis under his control in Morocco.

The judge’s conclusions are those to which we have already referred (see paragraph 17). In our judgement it is clear from the reasons which he gave that he did not just pay lip service to the requirement to stand back and avoid the risk of a serious injustice to the appellant. In his careful ruling he referred to the evidence of the appellant and his wife and to the submissions made on his behalf. In several passages in the ruling he directed himself that he must be careful to avoid the risk of causing a serious risk of injustice to the appellant. In particular, towards the end of his ruling, the judge said:

Having heard all the evidence and rejected the evidence of the appellant and his wife, in our opinion, the judge was quite entitled to find that the appellant had not discharged the burden of proving that he had no realisable assets other than the house. We conclude that, subject to a reduction of £65,000, the judge was entitled to make a confiscation order in the same sum as his determination under the first stage of the proceedings.

As we have stated the prosecution was prepared to accept that the sum of £65,000 ought not to have been included in the final order. In the circumstances the appeal will be allowed but only to the extent that the order will be reduced from £1,525,615 to £1,460,615.