Hussain R. v

This is the judgment of the Court to which all members have contributed.

On the 18^th and 19^th June 2003 in the Crown Court at Leeds, before HHJ Wolstenholme the appellants Liaquat Ali and Akhtar Hussain were convicted of two counts of conspiracy, counts 1 and 4. The jury were discharged from reaching verdicts on counts 2, 3, 5 and 6. On 19^th June the appellant Mohsan Khan was convicted of conspiracy, count 1. The jury were discharged from reaching verdicts on counts 2 and 3. Counts 1 and 4 charged conspiracies to contravene section 49(2) of the Drug Trafficking Act 1994, contrary to section 1(1) of the Criminal Law Act 1977. There was a fourth accused, Arshad Mahmood, who was acquitted.

In count 1 it was alleged that between September 1997 and February 2001 they had conspired together and with Ghulam Mustafa Khan, Raja Munawar Khan and other persons unknown. On count 4 it was alleged that between the same dates Ali and Hussain (but not Mohsan Khan) had conspired together and with Faisal Malik, Imran Syed, Abdul Mitha, James Carr and Asif Memon and with other persons unknown.

It was alleged in substance that the conspirators had concealed, disguised or removed from the jurisdiction bank notes knowing or having reasonable grounds to suspect that in whole or in part they represented another person’s proceeds of drug trafficking (in short, money laundering). The difference between the two counts was that in count 1 the bank notes were alleged to have come from Ghulam Mustafa Khan and in count 4 from Asif Memon.

The money was in each case alleged to have been laundered through a firm called Watan Travel. This firm had a travel agency and money transfer business which was not alleged to be unlawful. The money transfer business was of the kind known as Hawala banking, used for the remittance of money, usually deposited in the form of bank notes, by people of Asian origin to their country of origin. Watan Travel was an agent of Pakistan International Airlines. It had a shop in Bradford operated by Hussain and Mamood and one in Birmingham run by Ali.

On 19^th June 2003 Liaquat Ali and Akhtar Hussain were each sentenced to 12 years’ imprisonment concurrent on each count and Mohsan Khan was sentenced to 8 years’ imprisonment. Each now appeals against conviction by leave of the single judge.

On 12^th October 2004 at the same court and before the same judge Shahid Nazir Bhatti was convicted of two counts of conspiracy. On count 3 he was sentenced to six years’ imprisonment and on count 4 to four years’ imprisonment concurrent. He was acquitted of counts 1 and 2, which charged alternative conspiracies to count 3.

Count 3 charged Shahid Bhatti with conspiracy to contravene section 49(2) of the Drug Trafficking Act 1994 or alternatively section 93C(2) of the Criminal Justice Act 1988, contrary to section 1(1) of the Criminal Law Act 1977. It was alleged that Shahid Bhatti conspired with his father Nazir Bhatti, and with Faisal Malik, Imran Syed, James Carr and Asif Memon and other persons unknown to conceal etc bank notes knowing or having reasonable grounds to suspect that, in whole or in part, they represented another person’s proceeds of drug trafficking or other criminal conduct. In count 4 Shahid Bhatti was charged with conspiring together with his father and a George Cockerill to conceal etc bank notes knowing or having reasonable grounds to suspect that, in whole or in part, they represented another person’s proceeds of criminal conduct, other than the proceeds of drug trafficking. The period alleged in each count for the conspiracy is 1^st July 1999 to 12^th February 2001. The money was alleged to have been laundered through Bradford Travel and the associated Bradford Currency Exchange which were run by Shahid Bhatti and his father.

Count 1, of which Shahid Bhatti was acquitted, was in similar terms to count 3 but alleged that the proceeds were the proceeds of drug trafficking.

Count 2, of which Shahid Bhatti was acquitted, was in similar terms to count 3 but alleged that the proceeds were the proceeds of criminal conduct other than drug trafficking.

Shahid Bhatti applies for leave to appeal against conviction.

These two trials were the second and third trials arising out of an investigation by HM Customs and Excise culminating in arrests made in February 2001. In the first of the three trials four defendants were convicted, namely Amer Ramzan, together with Faisal Malik, Imran Syed (he on his plea of guilty) and James Carr. It was because the latter three had been convicted at the first trial that the case against them was not pursued in the second and third trials, in which they were named in some of the counts as co-conspirators. In the first trial it was alleged that the bank notes had been laundered through the Halifax office of Ramzan Travel which was run by Amer Ramzan.

There have been a number of issues raised or sought to be raised at this hearing. Those which were advanced until the day before this hearing are.

Whether the judge was right to have permitted the prosecution to adduce evidence in the second and third trials of the convictions in the first trial of Malik and Carr. On this point Ali, Hussain and Khan have the leave of the single judge. Shahid Bhatti applied for leave to appeal on this point and we granted that leave on 20 April 2005.

Whether the judge was right to have permitted the prosecution to adduce at the second trial evidence of an expert. His evidence was to the effect that samples of bank notes recovered from Watan Travel were found upon testing to be contaminated with drugs. On this point Ali and Hussain have the leave of the single judge. Mohsan Khan does not advance this point.

Moshan Khan renewed his application, refused by the single judge, to appeal on the ground that the trial judge ought not to have allowed the prosecution to adduce certain observation evidence linking Mohsan Khan to Ramzan. It was accepted that the fate of this point followed the fate of the first point.

Mohsan Khan also renews his application refused by the single judge to appeal against sentence.

Shahid Bhatti applies for leave to appeal on a second ground namely that the trial judge should have stopped the trial at the end of the prosecution case.

Shahid Bhatti applies for leave to appeal on a third ground namely that the verdicts of the jury were inconsistent.

In a skeleton argument dated 17^th April 2005, that is the day before the start of this hearing, Ali applied for leave to argue a further ground of appeal, namely that the counts on the indictment on which he was convicted were bad in law in that the particulars of the offence did not allege an agreement that was capable of amounting to a conspiracy contrary to section 1 of the Criminal Law Act 1977. We granted leave to all three appellants in respect of this ground on 20 April 2005. This was linked to an argument advanced for Shahid Bhatti on the form of the indictment. We granted leave to Bhatti on this ground.

The three trials could in principle have all been combined into one. The reason for not doing this (we were told) was that the cases would then have become too long and difficult to manage efficiently.

All three trials arise out of the deposit of millions of pounds in cash with the three separate businesses referred to above, for the purpose of making corresponding payments abroad, mainly in Dubai and Pakistan, in US dollars or rupees. The three trials correspond to the three businesses: Ramzan, Watan and Bradford.

Each of the businesses operated a service for transmitting money from the UK mainly to Pakistan for the benefit of the Asian community here. The Crown accepted that the making of these cash remittances to a very substantial extent did not involve the proceeds of drug trafficking or any other crime. There were remittances totalling some £120m which the Crown did not allege to the proceeds of any crime. But the Crown alleged that sums amounting to £170 million did represent the proceeds of crime. They identified a number of individuals as sources from whom the defendants received the cash. The most significant of these was Asif Memon from whom some £80.6 million was received in cash by Watan in the period of less than two years identified in the indictment. The next most significant was GM Khan from whom £46.5m was received in cash by Watan in the period. These two were therefore identified in the counts of the indictments referred to above. For reasons of case management there were no separate counts identifying the other sources. But the jury bundles did include documents identifying the other sources, and the sums involved. These included Altaf K £30m, Bashir £5.2m, Moti £4m, Gazi £3.2m, Luton £805k, Multinet £221k and Ramzan £210k.

Until 1999 Watan Travel had had banking facilities with the Midland Bank. Through these facilities the money was converted into US dollars and transferred abroad, principally to the New York bank accounts of a Dubai based currency exchange business called World Link Exchange. Midland Bank became concerned about compliance with money laundering legislation and the business was transferred to Giro Bank. They offered a less advantageous facility. Asif Memon was alleged to be an official of World Link Exchange. Faisal Malik and Imran Syed delivered the £80.6 million on his behalf to Watan Travel in cash. Some of that was collected from James Carr in boxes at a meeting point near the M62 which had been observed by officers.

GM Khan carried on business in Islamabad, Pakistan and in that period, on the prosecution’s case, the £46.5 million in cash was delivered on his behalf to the business of Watan Travel at their offices either in Bradford or Birmingham. One of those carrying the cash was Mohsan Khan.

In the case of Shahid Bhatti, the Crown’s case was that between 1^st July 1999 and 12^th February 2001 over £71 million pounds went through the Bradford Travel business. Of this £29 million represented what the prosecution accepted to be traditional Hawala banking which they did not allege to be the proceeds of drug trafficking or other crime. The balance of £42 million was alleged to be the proceeds of drug trafficking or other criminal conduct. Of this £3.7 million was involved in count 4 and £38 million in counts 1 to 3.

Hawala banking is an arrangement by which individuals (or intermediaries who have collected money from individuals) deposit money, usually in the form of modest amounts of cash, with a Hawalader in, for example, the UK to be remitted to beneficiaries abroad, commonly in the country from which the remitters’ families originate, for example Pakistan. The UK Hawalader will have a Hawala contact in Pakistan who will pay a sum in rupees, at a rate of exchange which may have been agreed with the remitter in advance. The payment will commonly be made more quickly, more cheaply and with less formality than any corresponding service that might be available through the medium of the commercial banks. There is commonly a family relationship between the UK Hawalader and his contact in Pakistan which enables the transaction to be completed with a greater reliance on trust than is necessary in other commercial financial dealings. The accounts between the Hawalader and the contact in Pakistan could be settled by remittances in US dollars which might be paid into accounts held outside Pakistan, for example in New York or Dubai.

For ordinary Hawala there must be records to show the identities of the individuals from whom the money had originally been collected in the UK and of those to whom it was ultimately to be paid in Pakistan. In relation to the bank notes alleged to be the proceeds of drug trafficking this essential information was conspicuously lacking, whether in the records of Watan Travel, or the records of Malik or for that matter Carr. What was recorded was the name of the source, such as GM Khan or Asif, and the name of an intermediate transferee such as World Link Exchange. The defence case was that this was what they called corporate Hawala. They said that is ordinary Hawala money which had been collected from individuals by intermediaries, and that the intermediaries did not communicate to the defendants the source or ultimate destination of the funds for reasons of commercial confidentiality

Amongst the evidence relied on by the prosecution that this was not ordinary Hawala money was

the difference in the records available in respect of the remittances which they did not allege to be of the proceeds of crime, and of the remittances that they did allege to be;

the very large sums involved;

observation evidence of the transport in boxes and bags of what the Crown alleged to be the bank notes, the deliveries corresponding with entries (limited as they were) in the books kept by the defendants. The defence case on the contents of the bags observed to be carried by Mohsan Khan included explanations such as that they contained clothes and other things he had been buying and which the surveillance officers had not seen him buy, and that his visits to Watan Travel were to pay cash for airline tickets.

At almost the start of the second trial, on 1^st May 2003, the judge ruled that the prosecution could adduce evidence that Faisal Malik and James Carr but not Amer Ramzan had been convicted the previous June of conspiracy with Asif Memon to launder the proceeds of drug trafficking through the business of Ramzan Travel.

The judge reached the same conclusion in the Shahid Bhatti trial and that is also appealed. At the conclusion of the argument we indicated that the appeals against the rulings failed. We said that we would give reasons later, and the reasons are as follows.

No distinct submissions were made on behalf of Shahid Bhatti and it is therefore sufficient to address the arguments made on behalf of Ali, Hussain and Khan.

The admissibility of evidence of the convictions of persons other than a defendant is provided for by the Police and Criminal Evidence Act 1984. That provides:

All the defendants objected to the admission of those convictions on the grounds of relevance, under section 74, and on the further ground that the admission of the evidence would be unfair and should be excluded under section 78, which provides:

The basis on which the prosecution submitted that the conviction was relevant was as follows. The principal courier of cash to Watan Travel on account of Asif Memon was Faisal Malik, assisted by Imran Syed and Abdul Mitha. Malik kept a book which had been seized by Customs and was an exhibit. In that book he recorded collections and deliveries of cash. Entries in the book for deliveries corresponded to entries in the Watan Travel books for receipts. The books showed that the money recorded as collected by Malik and his associates went mainly to Watan Travel up to August 1999 and thereafter went mainly to Ramzan Travel. All of it then went to World Link Exchange. On one occasion cash delivered by Carr to Malik was divided by Malik into separate onward deliveries to Watan Travel and Ramzan Travel. On another occasion the money from Carr was split between Watan Travel and Bradford Travel. It was the cash delivered by Malik and his associates to Ramzan Travel which was the subject of the first trial which resulted in the convictions the prosecution proposed to adduce. The evidence of Malik’s activities was in any event before the jury in the second trial in which this application was made. The question was whether the convictions should also be before the jury.

It is significant, in view of the fact that the conviction in the first trial is one for conspiracy, that the jury had been directed at the first trial to find a defendant guilty of that offence only if they were satisfied that at least some of the cash represented the proceeds of drug trafficking. The prosecution submitted that it followed from the form of the direction, and from the fact of the conviction, that the jury were sure that some or all of the money which Malik and his associates delivered to Ramzan was the proceeds of drug trafficking. The prosecution submitted that the convictions were relevant because they went to the issue of whether the bank notes that went to Watan Travel were the proceeds of drug trafficking. The prosecution submitted that the convictions supported the inference that some or all of the money delivered by Malik and his associates to Watan Travel was also the proceeds of drug trafficking. The prosecution did not contend that the convictions proved anything in relation to the state of mind of the defendants at the second trial. They were put in only on the issue of whether the Asif Memon money was the proceeds in whole or in part of drug trafficking.

The defendants submitted to the judge, as they have to us, that the bank notes were different in each delivery, and that the convictions were in any event consistent with some of the bank notes delivered to Ramzan Travel not being the proceeds of drug trafficking. So, it was said, it did not follow from the earlier convictions that the bank notes delivered to Watan Travel were the proceeds of drug trafficking. This is obviously correct, so far as it goes, as the judge accepted.

It was also submitted that strictly it is not a necessary ingredient of the offence of conspiracy that the cash in question in fact represented the proceeds of drug trafficking, only that the defendant must at least have reasonable grounds to believe such to be the case. This is also correct. But what was not disputed at the second trial was that, as a matter of fact, the jury in the first trial had been given the direction mentioned above, namely to find a defendant guilty of that offence only if they were satisfied that at least some of the cash represented the proceeds of drug trafficking.

The judge permitted the evidence to be adduced in relation to the couriers, Malik and Carr, but not in relation to Ramzan. In his summing up he explained the relevance of the evidence to the jury as follows:

This was an “issue” within the section as explained in R v Robertson (1987) 85 Cr App R 304. The judge gave other directions on the subject, some to a similar effect, and some additional, including a direction that it was not evidence relevant to Mohsan Khan (who was the courier from GM Khan, not Asif Memon). In his ruling the judge noted that even without the convictions of Malik and Carr, a prima facie case on the issue of whether the money was at least in part the proceeds of drug trafficking had been made out and called for an answer from the defence.

Before us it was submitted that the conviction proved only the propensity of Malik and Carr to handle the proceeds of drug trafficking, and that evidence of propensity was not admissible. But the rule excluding evidence of propensity relates to the defendant at a trial, not to others who are not defendants.

Further it is submitted that the convictions, even when considered in conjunction with the terms of the indictment, do not show that Malik and Carr were found to have dealt with what was in fact the proceeds of crime. This could be proved, if at all, only by also proving the terms of the direction to the jury. This is a step too far, it is submitted, there being no reported case in which a jury has had the basis for a plea or conviction adduced in evidence before it.

The possible significance of a basis of plea or conviction to evidence sought to be adduced under section74 was touched on in R v Mahmood and Manzur [1997] 1 Cr App R 414 CA, but the question we have to decide did not have to be decided in that case.

Where there is a conviction for robbery or burglary the indictment commonly will not identify the stolen property unambiguously. In a subsequent trial of a handler (or of some other person whose criminal responsibility depends on particular property having been stolen), it may be relevant to establish precisely what property was the subject of the earlier conviction. In practice this may well be entirely non-contentious.

Section 75 of the 1984 Act expressly makes some provision for solving the problem of identifying the facts on which a conviction is based. It provides specifically for the admissibility of certain documents such as the indictment. It also provides that that is “without prejudice to the reception of any other admissible evidence for the purpose of identifying the facts on which the conviction was based”. So the question is whether, in principle, the terms of the direction to the jury would be such evidence. We see no reason why it should not be. In practice, the point is likely to be dealt with by admissions.

That does not conclude the point before us, because the terms of the direction to the jury were not put before the jury in this case. If the point had been foreseen, they could have been. This could have been done all the more readily because the judge had put the essential part of his directions in writing. But as noted above, this point was not taken at the time, and Mr Clegg who advances the point to us on behalf of Ali was not counsel at the trial. Everybody on 1^st May 2003 knew about the earlier trial, it was the same judge and counsel for the prosecution. The matter proceeded on the footing that it was common ground that the jury in the first trial had been directed as the judge described. It was thus not necessary for the prosecution to take the matter any further.

So far as fairness is concerned, it was submitted to us that the evidence of the convictions might cause the jury to take the forbidden line of reasoning, namely that because Malik and Carr were guilty in the first trial in relation to money delivered to Ramzan, therefore they were also (as named co-conspirators) guilty in relation to the money delivered to Watan Travel (the subject of the second trial).

Given the careful and repeated directions which the judge proposed to give, and did give, to the jury in the second trial as to what the evidence was and was not to be used for, we can see no error in his decision under section78. The point on unfairness was a strong point in relation to Amer Ramzan. The fact that he was convicted on the basis that he was the person to whom the bank notes were delivered and who had laundered them might have led the jury to conclude that the defendants in this case were guilty. But the judge accepted this submission and excluded the evidence of Ramzan’s conviction.

We turn to the ground of appeal that concerns the contaminated bank notes.

Ali and Hussain have leave to argue that the judge wrongly admitted evidence of contamination of bank notes. The evidence as to contamination came from an expert scientist Mr Fletcher Burton. There was in the end no challenge to his expertise. This ground is based on the contention that the bank note contamination evidence is wholly irrelevant and therefore inadmissible.

Mr Burton, who is a chemist, works for a laboratory which specialises in the analysis of bank notes for the presence of drugs. Since 1995 his laboratory has regularly analysed cash in general circulation for traces of drugs. The cash is taken at random from banks in different parts of the country, the amount being analysed each time being £2000. From that his experience is that chemical evidence of cocaine and heroin is quite rarely found on bank notes in general circulation the average being three notes in every hundred. In the present case in January and February 2001 Customs and Excise officers seized cash that had passed through Watan Travel and Mr Burton analysed it to see if there was any difference in the degree of cocaine and heroin contamination found in the notes and the average for notes in general circulation. The first cash that was tested showed a contamination rate around 3%. But the second amount of cash collected from Watan produced on analysis a very different picture.

The cash collection was £25,000 and Mr Burton analysed £9400 worth made up of 622 individual notes. A graph was before the jury showing the result of the analysis of 170 notes 35% of which were contaminated to a significant degree. The percentage for the third batch of cash tested was that 25% of the notes were found to be contaminated to a significant degree. The fourth collection which was analysed resulted in a finding that 22% of the notes were contaminated to a significant degree. The percentage for the fifth examination of cash was 22%. For the sixth examination the percentage was 10%. Examination was made, of money seized from a safe at Watan Travel on the day of the arrests. Analysis of the 166 bank notes found showed contamination of 23%. He also tested some cash taken from Birmingham which was consistent with the percentage in cash in general circulation. The same result was achieved on examination of a substantial amount of cash taken from the home of Hussain.

Finally Mr Burton examined £2,175 consisting of 130 separate bank notes found in Moshan Khan’s briefcase. The graph for this examination showed 20% contamination.

In summing up, almost at the end, the judge took the jury in detail through the various charts of percentages.

In ruling on defence objections to the admissibility of this evidence the judge said:

The judge said he regarded arguments advanced by counsel as going to the weight to be attached to the evidence and not to admissibility.

Having taken the jury through the detail of the evidence the judge said (426)

Mr Clegg QC who made the principle submissions on this point said that the evidence lacked any probative value whatsoever. That the cash could have come from a legitimate source could not be excluded. It could for example be money from genuine Hawala customers who were nevertheless drug users.

Mr Clegg referred to the passages of the summing up we have already referred to. In particular the first sentence of paragraph 427 “the prosecution concede that if this is drug money, it could be money that went through the business as ordinary Hawala cash.” That concession having been made, the evidence was completely irrelevant and the jury had been asked to draw a wholly improper inference from this evidence. The judge was asking the jury that which logic, common sense and the law did not permit.

His understanding of the Crown’s attitude in closing was that this evidence was described as of little evidential value.

Mr Singh submitted that it was impermissible for the judge to invite the jury to look at the whole picture. He referred to the case of Boyson [1991] Crim. LR 274. This court (Watkins LJ Hirst and Popplewell JJ) indicated that it did not approve the growing practice of allowing evidence to go before a jury which is irrelevant, inadmissible, prejudicial or unfair simply because it is convenient for the jury to have “the whole picture”.

Mr Bethel first dealt with a point briefly raised by Mr Clegg as to the admissibility of the test results on the cash in Moshan Khans briefcase. Mr Bethel said it was plainly relevant. Moshan Khan was a carrier of cash for GM Khan and over £2000 had been found on his arrest. The jury could infer he had collected that for GM Khan and it was destined for him. Moshan Khan had given an explanation that it represented the proceeds of a take-away business. That was for the jury to consider and it was plainly admissible in the case.

He said the Crown’s case was that money from drugs was not confined to GM Khan and Asif Memon monies but included all the cash not supported by documents listed at divider 8 in the Respondents bundle.

While accepting that it was possible that some had come from Hawala money the evidence was rightly admitted on a limited basis. It was admissible to give the general picture particularly with repeated emphasis by the judge that the money tested could not have come from the GM Khan or Asif Memon deposits.

The judge had stressed that the evidence only went to the origin of the money and repeatedly stressed that the prosecution had to prove separately knowledge or suspicion. This was significantly the most important part of the case.

The jury had clearly paid attention because they acquitted Mahmood since they could not have been satisfied on the question of knowledge or suspicion.

The judge warned the jury carefully about the limitations of this evidence. Mr Bethel conceded it would have been better with hindsight if the judge had not summed up the evidence in such detail and reminded the jury of it graph by graph. However, he submitted that the safety of the conviction was not affected.

In our judgment this ground fails. The fallacy in Mr Clegg`s attractive argument lies in the fact that what the Crown contended was non Hawala cash, was not confined to the two Hawaladers identified in count 1 and count 4 i.e. GM Khan and Asif Memon. The others who received this money, as can be seen from the totals in Dubery P at 79, were given over £44 million with no documentary support or verification. This money, unlike the GM Khan and Asif Memon cash was received at times relevant to the cash sampling.

While the prosecution made the sensible concession that cash from Hawala transactions could possibly have been excessively contaminated, it was open to the jury as a matter of commonsense to infer that it was far more likely that the genuine Hawala cash would be either not contaminated or lightly contaminated. The cash which was contaminated was likely to come from non Hawala money. It was in our view legitimate for the jury to have regard to the contamination evidence and conclude that the evidence gave them some, but limited assistance in the way the judge offered for their consideration at paragraphs 426 to 428 of the summing up.

On its own it might not have the greatest importance but the jury would consider it alongside the devastating evidence of collection and delivery of cash: by way of example the hundreds of thousands of pounds delivered in cardboard boxes from Liverpool by car at pre arranged venues.

We agree with Mr Clegg that the emphasis given to the evidence at the end of the summing up was, with hindsight, unfortunate. It would, as Mr Bethel conceded, have been better if the judge had not spent so long reminding the jury of the detail of the charts. However, looking at the summing up on this topic in the round, we do not think that it can in reality be argued that any imbalance in the summing up at this point was such as to render the convictions unsafe.

We turn to the ground newly raised on behalf of Ali, Hussain and Khan and raised in a different form in the Bhatti grounds, namely: the conspiracy counts were bad in law in that the particulars of the offences did not allege an agreement that was capable of amounting to a conspiracy contrary to section 1 of the Criminal Law Act 1977. The thrust of the argument is that although the substantive offences relevant to this appeal are committed if a person merely has reasonable grounds to suspect that the property is the proceeds of drug trafficking or of other criminal conduct, the offence of conspiracy can only be committed if the person knows that.

Count 4 in the Ali, Hussain and Khan indictment read (other counts charging similar conspiracies in the Ali trial and in the Bhatti trial were framed using the same general language):

We set out the various statutory provisions directly or indirectly relevant to this appeal, underlining references to the required mental element of knowing, suspecting or having reasonable ground to suspect.

Section 49 of the Drug Trafficking Act 1994 Act provides:

The predecessor to section 49 was section 14 (1) and (2) of the Criminal Justice (International co-operation) Act 1990 (see Montila [2004] UKHL 50; [2004] 1 WLR 3141 for the international and domestic history of the offences of the laundering of drugs money).

Section 50 (1) provides:

Section 50 (4) provides:

Section 51(1) provides:

The offences created by these sections are punishable by 14 years’ imprisonment.

By virtue of section 52 (1) a person is guilty in certain circumstances of an offence if he knows or suspects that another person is engaged in drug money laundering and does not disclose the information to a constable as soon as is reasonably practicable after it comes to his attention. Similar language is used in section 53, which prohibits “tipping off”.

All these provisions of the Drug Trafficking Act 1994 were repealed and replaced by the Proceeds of Crime Act 2002

Sections 93A, B, C and D of the Criminal Justice Act 1988 (as inserted by the Criminal Justice Act 1993 and now repealed and replaced by Part 7 of the Proceeds of Crime Act 2002) correspond respectively to sections 50, 51, 49 and 53 of the Drug Trafficking Act 1994. The relevant differences are that the section 93 offences relate to criminal conduct. That is defined in section 93A(7) as:

Section 71(9) (c) of the Criminal Justice Act 1988 provides that an offence to which this Part of this Act applies includes any indictable offence other than a drug trafficking offence (or certain terrorist offences).

Section 93C, with which this appeal is concerned, provides:

converts or transfers that property or removes it from the jurisdiction,

Section 93A, which we shall have to also consider provides in so far as relevant:

The other statutory provision which we shall have to consider in detail is section 1(1) of the Criminal Law Act 1977, which reads –

That subsection is subject to section 1(2) of the Act which provides –

Mr Clegg submits that by virtue of the decision in Montila and of section 1(1) and (2), a person cannot be guilty of a conspiracy to commit an offence against section 49(2) or a conspiracy to commit an offence against section 93C(2) unless he and another conspirator know at the time of the agreement that the property is the proceeds of drug trafficking (section 49(2)) or of other criminal conduct (section 93C(2)).

The first issue which we propose to consider relates to the meaning of the expression “reasonable grounds to suspect”. It or a similar expression is very familiar. Section 24 of the Police and Criminal Evidence Act 1984 provides:

For the purposes of these and similar provisions a person has reasonable grounds for suspecting X if he suspects X and there are reasonable grounds for suspecting X (see Archbold, 2005, paras 15-23-24).

If that definition were to be applied to the provisions in issue in this appeal, the offence would be committed if the defendant suspected that the property was the proceeds of drug trafficking or of other criminal conduct and that suspicion was a reasonable one. It seems unlikely that the draftsman intended that result- interpreted in that way it would be more difficult to obtain a conviction of the offences in sections 49(2) of the 1994 Act and 93C(2) of the 1988 Act. Whereas for the other offences knowledge or suspicion would be sufficient, for these two offences knowledge or a reasonable suspicion would be required.

Mr Collier submitted that, if suspicion were sufficient (which he does not accept) the judge should have directed the jury that if they were sure that the defendant and a co-conspirator suspected at the time of the agreement that the property was the proceeds of drug trafficking, then the prosecution must also prove that the suspicion was reasonable.

If the draftsman intended to include liability for negligence, as well as for knowledge and suspicion, then one would have expected the use of an expression such as: or “he knows or suspects or ought to know or suspect that the property is the proceeds of drug trafficking or of other criminal conduct”. Section 49(2) would then read:

That does not however solve a further problem. The section requires the defendant to conceal or disguise etc “for the purpose of assisting any person to avoid prosecution for a drug trafficking offence”. It is difficult to see how a person who only ought to have known or suspected can have as the purpose of the concealment etc “assisting any person to avoid prosecution for a drug trafficking offence ...”.

The judge recognised this difficulty in paragraph 52 of the Ali, Hussain and Khan summing-up, to which we turn shortly.

Between those two competing possible interpretations is a middle way, which was adopted by Tuckey LJ in Rizvi and Chisti [2003] EWCA Crim 3575. The effect of the decision is that if “the facts or circumstances” proved by the prosecution ought to have given rise to the suspicion that the property is the proceeds of drug trafficking (section 49(2)), then the defendant has reasonable grounds to suspect that the property is the proceeds of drug trafficking.

The judge in the Ali, Hussain and Khan summing-up (the Bhatti summing-up is to a like effect) reminded the jury of the words of the indictment and of section 49(2). He continued:

Thus the judge, as the written directions show, told the jury to convict a defendant only if he knew or suspected that at least part of the money he was dealing with was another person’s proceeds of drug trafficking.

We note that the “other persons” whose proceeds were being laundered were named in the indictments as co-conspirators (in the Liaquat Ali case, Ghulam Mustapha Khan in count 1 and Asif Memon in count 4). No point is taken on that. It is worth noting, however, that a person who launders his own proceeds of drug trafficking commits an offence under section 49(1) and not section 49(2). (The indictment in this case is worded, in this respect, in the same way as in Sakavickas [2004] EWCA Crim 268; (2005) Crim LR 2005, to which we turn below.)

In the light of that direction it is not necessary for us in this case to resolve the issue raised by the words “reasonable cause to suspect”. Mr Bethel QC told us that any decision on the meaning of these words could have a substantial effect on a number of convictions. It is necessary however to deal with the submission of Mr Collier QC set out in paragraph 88 above. We have no doubt that even if Mr Collier were right, the failure to direct the jury in either case that the suspicion had to be reasonable would not affect the safety of the convictions on the facts of these cases. If the jury only found suspicion, it is inconceivable, on the facts of this case, that the jury would not also have found the suspicion reasonable.

Mr Clegg has two arguments in support of his submission that a person cannot be guilty of a conspiracy to commit an offence against section 49(2) or a conspiracy to commit an offences against section 93C(2) (or indeed the other offences) unless he and another conspirator know at the time of the agreement that the property is the proceeds of drug trafficking (section 49(2)) or of other criminal conduct (section 93C(2)). First, a count of conspiracy to commit an offence against section 49(2) or 93(C)(2) is bad in law if it includes the words “reasonable grounds to suspect” or even just “suspect”. He submits that such a count falls foul of section 1(1)(a) of the Criminal Law Act 1977 in the light of Montila. He submits that an agreement to conceal etc the property will not necessarily amount to or involve the commission of the substantive offence of money laundering if the state of mind of the conspirators is only suspicion (objective or subjective). Secondly, in the light of Montila, such a count falls foul of section 1(2) of the Criminal Law Act 1977. That sub-section requires the defendant and another co-conspirator to intend or know at the time of the agreement that the fact that the property is the proceeds of drug trafficking (section 49(2)) or of other criminal conduct (section 93C(2)) “shall or will exist at the time when the conduct constituting the offence is to take place”. Mr Collier merely expressed his agreement with the first argument but further developed the second argument.

In Montila the House of Lords decided that for the offences under subsection 49(2) of the 1994 Act subsection 93C(2) of the 1988 Act it must be proved that the property was in fact the proceeds of respectively drug trafficking or of other criminal conduct. It is not enough that the defendant has reasonable grounds to suspect that the property is the proceeds of drug trafficking or of other criminal conduct when in fact it is not (or cannot be proved to be so). Lord Hope of Craighead giving the considered opinion of the Committee said:

At one point in his argument Mr Clegg appeared to be submitting that the effect of Montila is that a person can only commit a conspiracy to commit an offence against section 49(2) or 93C(2) if the property actually exists. Thus, he submitted, if A and B agreed to deal with (a convenient expression to describe conceal, disguise etc) the supplier’s proceeds of a supply of drugs which they expect to take place tomorrow, they would not be guilty of conspiracy. He accepted after further time to consider the point, that this could be an effective conspiracy even if the supply did not take place. If the prosecution proves that the property which is the subject of the agreement would be, to the knowledge (belief would be a better word) of the co-conspirators, the proceeds of drug trafficking or of other criminal conduct at the time when the conduct constituting the substantive offence is to take place, then the offence of conspiracy would be made out (if the other ingredients are satisfied). This follows from section 1(2) which refers to knowledge (belief would be a better word) that the fact or circumstance shall or will exist at the time when the conduct constituting the offence is to take place.

Mr Clegg relies upon Harmer [2005] EWCA Crim 01, which he says supports both of his arguments. The ratio supports his first argument, so he submits, and the obiter dictum supports his second.

Harmer was convicted of conspiracy to convert or transfer property, namely currency, which he and his co-conspirator (Hadley) had reasonable grounds to suspect in whole or in part represented another person’s proceeds of criminal conduct and/or drug trafficking. The count as left to the jury reflected an earlier amendment:

The facts were:

May LJ giving the judgment of the Court allowing the appeal said:

Having summarised the decision in Montila and set out section 1 of the Criminal Law Act 1977, May LJ continued:

In the light of paragraph 24 it could be said that the Court’s decision is limited to the facts. This not being “a case where the prosecution could prove the agreement alone, apart from what they could show might be the substantive offence” and given that the prosecution “had to ask the jury to infer the agreement from the subsequent putting of it into operation”, the inability to prove that the various amounts of money were the proceeds of crime was fatal to the charge of conspiracy (as it would be to the substantive offence after Montila).

However that would overlook what was said in paragraph 23 where the Court adopted the interpretation by Mr Ross of the sub-section as clearly the correct construction: the prosecution had not established that the appellant was guilty of conspiracy under section 1(1)(a), since the prosecution did not establish that the object of the agreement was an offence. If a person agrees with another to deal with property which he only has reasonable grounds to suspect is the proceeds of drug trafficking or other criminal conduct, the prosecution will not have established that, if the agreement is carried out in accordance with their intentions, it will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement. It will only necessarily amount to or involve the commission of any offence or offences if the defendant and another co-conspirator know this, because a person can only know that property is the proceeds of drug trafficking or other criminal conduct when it is (or will be) the proceeds of drug trafficking or other criminal conduct.

In this case the judge, who skillfully anticipated Montila, directed the jury (for example) in relation to count 1 in the Liaquat Ali case, that they could not convict unless sure that at least part of the bank notes delivered to Watan Travel on behalf of Ghulam Mustapha Khan were the proceeds of drug trafficking. He gave a similar direction in relation to other counts. Thus, on the jury’s verdict, the defendants agreed to deal with the banknotes which were (in part at least) the proceeds of drug trafficking and which they (at least) suspected were at least in part the proceeds of drug trafficking. At the time that they reached the agreement to deal with the banknotes which they suspected were the proceeds of drug trafficking, the offence against section 49(2) would necessarily be committed if they did deal with them.

Let us take two examples.

The second example reflects this case (assuming that the jury were sure of “suspicion” but not sure of “knowledge” on the part of the defendants)- subject to one caveat. The two examples envisage an agreement being formed about the particular cash brought into the Hawala bank. In reality the agreement is likely to have been formed earlier- D1 and D2 have agreed that D1 will send to Pakistan C’s money if D2 brings it in to the Hawala bank. That should not however make any difference in the light of the concession rightly made by Mr Clegg to which we refer in paragraph 98 above.

Likewise if D1 and D2 agree to receive goods which are (or will be) stolen believing (only) that they are (or will be stolen), then, if the course of conduct (handling) is carried out in accordance with their intentions, that will necessarily amount to the commission of an offence by both parties (that still leaves the section 1(2) problem to which we turn next).

Not without some hesitation in what is a difficult area, we think that the passage in paragraph 23 of Harmer to which we referred in paragraph 105 above is open to doubt.

In our view this first argument fails because the jury were directed to convict only if sure that (at least) part of the money was in fact the proceeds of drug trafficking. In the light of that direction section 1(1)(a) is, in our view, satisfied.

We turn to the second argument. It follows from Montila, so it is submitted on behalf of the appellants, that for the purposes of section 1(2), the fact that the property is or will be the proceeds of drug trafficking or of other criminal conduct is a fact upon which the sub-section bites. To the extent to which the substantive offence imposes liability without knowledge on the part of the person committing it of any particular fact or circumstance necessary for the commission of an offence, a person shall nevertheless not be guilty of conspiracy to commit that offence unless he and at least one other party to the agreement intend or know that that fact or circumstance shall or will exist at the time when the conduct constituting the offence is to take place. Knowledge of the fact that the proceeds are or will be the proceeds of drug trafficking or of other criminal conduct is required- suspicion is insufficient.

It is necessary to consider another passage in Harmer , a passage which it is agreed is obiter:

The Court then went on to consider a possible solution, charging an attempt to commit a conspiracy. The Court said that it “found the concept of attempting to make an agreement an odd one”. It rejected that solution given that:

Mr Clegg relies on this passage in Harmer. If it is a correct analysis of section 1(2), then he submits that these appeals must succeed. He points out that, although the Court in paragraph 26 referred to “reasonable grounds to suspect” (not relied upon by the judge in the instant cases), the underlined passage, he submits, shows that “suspicion” is also insufficient if the charge is one of conspiracy. Mr Bethel does not dispute this anlysis. He submits, however, that Harmer is wrong, that the law was laid down in Rizvi and Chisti, approved in Sakavickas (not cited to the Court in Harmer) and that this Court is bound to follow those decisions and not Harmer.

In Rizvi and Chisti the appellants had been convicted on a count which stated:

The two substantive offences were 49(2)(b) of the Drug Trafficking Act 1994 and its mirror provision, section 93C(2)(b) of the Criminal Justice Act 1988. So it was alleging a statutory conspiracy. The particulars of the offence were:

It was submitted by counsel for the appellant that:

The Court set out section 1(2) and continued:

In Sakavickas he and Reichwald had been convicted of conspiracy to commit an offence contrary to section 93A of the Criminal Justice Act 1988. We have already set out the terms of that section (paragraph 80 above). It should be noted that the required mental element is “knowing or suspecting”. In other words the same mental element as the judge directed the jury to find before conviction in the instant cases.

Summarising the facts, the Court said:

The judge had, like the trial judge in the instant cases, directed the jury:

The judge continued:

It was submitted on behalf of the appellant Reichwald by Mr Rees QC that:

It is important to set out the reasons given by Kennedy LJ for dismissing the appeal:

We turn to Browning and Dixon, which was cited by Kennedy LJ in Sakavickas and in which Mir and Beg, also cited by Kennedy LJ, was followed.

The substantial point in Browning and Dixon related to the mens rea necessary to support a charge of conspiracy to commit criminal damage being reckless as to whether life would be endangered. Dixon and Browning were jointly indicted in alternative counts of conspiracy to commit criminal damage:

Mantell LJ giving the judgment of the Court said:

We now take a closer look at these cases, starting with the criminal damage cases referred to in Sakavickas. Professor David Ormerod in his commentary on Sakavickas in the Criminal Law Review (April 2005, 293) writes this:

We agree.

As to Rizvi and Chisti, Professor Ormerod wrote in the same commentary:

We take the view that Professor Ormerod’s is right and that Rizvi and Chisti is no longer good law in the light of Montila.

We would add a further comment about Rizvi and Chisti. If, as decided in Rizvi and Chisti, it is sufficient to establish the conspirator’s knowledge only as regards the facts which ought to have given rise to the suspicion that the money was the proceeds of drug trafficking (or of other criminal conduct), then it is difficult to see how the jury could be sure that the purpose of the alleged conspirators in dealing with the money was to avoid any person’s prosecution for a drug trafficking offence (the point made by the judge in the instant case, see paragraphs 89 and 90 above). In addition to a standard conspiracy direction, the judge would presumably have to identify for the jury those material facts (and circumstances) which a jury would be entitled to conclude ought to have given rise to the suspicion that the money being dealt with was the proceeds of drug trafficking. The judge would then say: “If you are sure about those facts and if you are sure that the defendant had knowledge of them, are you sure that the facts ought to have given rise to that suspicion?”. If the answer to that question is “Yes”, the jury would then have to be told that they must also be sure that the purpose of the defendant whose case they are considering was to avoid any person’s prosecution etc. But if a defendant neither knew or suspected, it is difficult to see how the jury could conclude that he had that purpose.

We turn to Sakavickas. To the extent to which the Court relied on Rizvi and Chisti, we take the view, as we have said, that Rizvi and Chisti is no longer good law.

The offence alleged against the defendants in Sakavickas was, as we have said, a conspiracy to commit an offence against section 93A of the Criminal Justice Act 1988. Quite why it was necessary to charge conspiracy, given the wide terms of the substantive offence, we are not sure.

Section 93A, on the facts in the Sakavickas appeal, made it an offence if Reichwald agreed to enter into an arrangement whereby the retention by Sakavickas of his proceeds of criminal conduct was facilitated, knowing or suspecting, at the time, that Sakavickas is a person who is or has been engaged in criminal conduct.

It was submitted on behalf of Reichwald, in reliance upon section 1(2) of the Criminal Law Act 1997, that he was guilty of conspiracy only if he, at the time, knows that Sakavickas is a person who is or has been engaged in criminal conduct. That the Court held was wrong. The Court decided that the prosecution “must prove the suspicion of the defendant and in so doing they inevitably prove knowledge of that suspicion.” Section 93A “is not therefore an offence to which section 1(2) of the 1977 Act applies”. Professor Ormerod argues in the Commentary to which we have referred that: “This is clearly not how section 1(2) was intended to be interpreted”.

Although, as Mr Bethel rightly submits, in Sakavickas the judge had directed the jury, in accordance with section 93A, that the prosecution must prove that the money was the proceeds of criminal conduct, counsel does not appear to have argued that, nor the Court considered whether, section1(2) of the 1977 Act “bit” on this fact. Counsel did not argue that that Reichwald had to know that the money, the retention of which he was facilitating, was the proceeds of drug trafficking.

That distinguishes this case. Following Montila, the substantive offences under section 49(2) and 93C(2), requires proof that the defendant is in fact dealing with the proceeds of drug trafficking or of other criminal conduct. Following Harmer section 1(2) of the 1977 Act bites on that and the jury may only convict of conspiracy if the defendant knew that he was dealing with the proceeds of drug trafficking or of other criminal conduct.

Mr Bethel has not submitted that, if Harmer is right and to be followed, the convictions for conspiracy are nevertheless safe.

We must now consider one further case, Singh [2003] EWCA Crim 3712, referred to by Mr Bethel. It was not cited in Harmer. The appellant was convicted on three counts of conspiracy to convert, transfer and remove from the jurisdiction the proceeds of drug trafficking and/or of other criminal conduct. The particulars of the counts read:

Mr. Krolick, on behalf of the appellant, submitted, in the light of section 1 of the 1977 Act:

Auld LJ giving the judgement of the Court rejected the argument saying:

The particulars of the indictment “could have been drafted so as to give effect to section 1(2) of the 1977 Act and as a mercy to the jury, namely that the appellant and his co-accused”:

Auld LJ concluded:

In Sakavickas Kennedy LJ said of Singh:

It seems to us that Singh does not survive Montila. An intention to launder illicitly obtained money is not enough. The money must be proved to have been the proceeds of drug trafficking or other criminal conduct. On to that requirement, section1(2) of the 1977 Act bites.

In the light of our analysis of the cases and of our decision that Harmer reflects the law as it stands after Montila, the jury should not have been directed to convict if a defendant only suspected that at least part of the money he was dealing with was another person’s proceeds of drug trafficking.

For these reasons the appeals are allowed.

Finally we wish to say something about the use of conspiracy counts. In the case of Ali, Hussain and Khan the prosecution’s overall case was that they dealt with nearly £171 million in bank notes, which were the proceeds of eight other persons’ drug trafficking. The dollar equivalent of those banknotes, on the prosecution’s case, was remitted by the defendants abroad. As we have seen the defendants claimed that the money was being sent to Pakistan as part of a genuine Hawala business and not to pay the suppliers of drugs. Why then could the prosecution not charge the substantive offences? The answer Mr Bethel gave was that each delivery of money would be a separate offence and would have to be charged separately, given the rules against duplicity (see Rule 4(2) of the Indictment Rules 1971). Thus to charge substantive offences would have lead to an overloaded or unrepresentative indictment.

The consequence of the present decision is (if we are right), that the prosecution has a heavier burden to discharge than it would have in order to prove the substantive offence. Although there are issues of duplicity with a conspiracy count (see e.g. Singh, paragraphs 23-24), a conspiracy count can be presented to overcome those difficulties.

Sections 17 and following of the Domestic Violence, Crime and Victims Act 2004 (not yet in force) provides one solution to the problem caused by the duplicity rule. Another solution would be to amend Rule 4(2), which can now be done by the Criminal Procedure Rules Committee together with the Lord Chancellor and the Home Secretary (see section 2 of the Indictment Act 1915 as amended by the Courts Act, section 109(1), Schedule 8 paragraph 67). We invite the Committee to consider the matter.