Middleton, R. v

MR JUSTICE WILKIE: This is the appeal by John Middleton and Veronica Patricia Rourke, now aged 56 and 51 respectively, against certain convictions in the Crown Court at Truro on 13th February 2007. They bring these appeals by leave of the single judge.

They were each convicted on an amended indictment number T20060084 which contained three counts. Count 1 charged them with converting the proceeds of drug trafficking, contrary to section 49(1)(b) of the Drug Trafficking Act 1994. The particulars of the offence were that between 31st December 1999 and 24th February 2003 they converted property, namely money to the value of approximately £103,000, for the purpose of avoiding prosecution for a drug trafficking offence or the making of a confiscation order.

Count 2 charged them with converting criminal property, contrary to section 327(1)(c) of the Proceeds of Crime Act 2002. The particulars of the offence were that between the 23rd day of February 2003 and the 29th day of June 2005 they converted criminal property to the value of approximately £70,000.

Count 3 charged them with possession of criminal property, contrary to section 329(1)(c) of the Proceeds of Crime Act 2002. The particulars of that count were that on 28th June 2005 they had in their possession criminal property, namely £21,485 in cash.

On 13th February 2007 the jury convicted them of each of counts 1, 2 and 3. They appeal against the convictions only in respect of counts 1 and 2.

Prior to that trial the appellant Middleton had pleaded guilty on separate occasions to counts of possession of a class C drug (cannabis) with intent to supply.

Subsequent to their conviction, they were each in due course sentenced on counts 1, 2 and 3 on the present indictment, to sentences of 12 months on each concurrent. The appellant Middleton was also sentenced in relation to the earlier two indictments and on each of the two counts of possession with intent to supply of cannabis, he received sentences of 30 months to run concurrently one with the other and concurrently with the sentences imposed in respect of counts 1 to 3.

The facts leading to their convictions are as follows. The appellants lived together with their children at an address, 10 Hawkins Road, Newquay. They also owned a garage at Whitewalls in the town of Perrancoombe. In June 2005 the police executed search warrants at their home address, resulting in seizure of 8.8 kilograms of cannabis resin, a set of digital scales, a list of names and figures and three quantities of cash: £975 found in clothing, £2,000 in an airing cupboard and £18,500 under the floorboards. These were the matters in respect of which Mr Middleton pleaded guilty on 8th July 2005 to a charge of possession of a class C drug with intent to supply. The money which was found on that occasion formed the subject matter of count 3 on the indictment with which we are concerned.

On 5th September 2005 police officers executed a search warrant at the Whitewalls garage, there seizing 11.5 kilograms of cannabis resin being stored in tins concealed beneath some boarding in a cupboard. The following words were written on one of the boards "Keep your fucking thieving hands off are [sic] I will batter you. You know I fucking know how." Middleton was charged with possession of that class C drug with intent to supply, and that is the matter to which he pleaded guilty to which we have already referred.

The police conducted an investigation into the appellants' finances, resulting in a financial report referred to as "the Tracker". The purpose of this document was to compare their known income with expenditure over the period 1999 to 2005. That document was analysed by forensic accountants on behalf of each of the appellants and also on behalf of the Crown by Mr Frampton, who both reviewed the Tracker and commented upon the findings of the defence experts.

At the trial the three accountants produced a joint statement setting out the areas upon which they had reached agreement. They agreed that the Tracker's calculations were incorrect and that their differing figures, although using different accounting approaches, would probably be capable of reconciliation. They were able to agree an "unexplained income" figure of £44,698 once all the appellants' known sources of income had been deducted from their total expenditure for the period 2000 to 2005. The defence experts and their reports were not adduced in evidence before the jury, but Mr Frampton was called and his report relied on by the Crown.

The prosecution case was that Middleton was involved in the commercial supply of cannabis and that he Rourke together laundered the profits. They were alleged to have converted somewhere between £44,698 and £173,000 over a five-year period. Count 1 concerned the period from December 1999 to February 2003, which was the period covered by the Drug Trafficking Act 1994. It was said that up to £103,000 had been converted in that period. Count 2 related to February 2003 to June 2005, a period covered by the Proceeds of Crime Act 2002. It was alleged that up to £70,000 was converted during that period. As we have indicated, count 3 concerned the cash found at the family home in June 2005 which exceeded £21,000, which it was said represented the proceeds of crime.

The Crown accepted that the appellants had some legitimate income arising from caravan rentals and from Mr Middleton's self-employment, but it was the prosecution case that they had grossly inflated their legitimate income figures in order to account for the significant shortfall in relation to their expenditure. The prosecution invited the jury to draw the inference that the source of the unexplained income was payments relating to drug trafficking, and that the seizures of cannabis from the appellants' properties demonstrated the nature and scale of the enterprise.

The case of Middleton was that he was minding the cannabis for a friend and did not profit from the arrangement. He denied being a drug dealer and denied being involved in the conversion of criminal proceeds. He was self-employed and had had a number of different legitimate sources of income over the years, including building work, gardening and selling. Any apparently unexplained income was due to the chaotic nature of his finances.

The case of Rourke, with which Mr Middleton agreed, was that she had no knowledge of the cannabis found at their property and did not know or suspect that Middleton was involved with drugs. She denied being involved in the conversion of the proceeds of crime and believed that all her income was from legitimate sources. She accepted she may have failed to declare income to the Inland Revenue, but she had failed to keep proper financial records as an explanation for that.

The evidence placed before the jury was as follows. Detective Constable Mamaton gave evidence about the value of the drugs seized and gave evidence of her opinion that the drawings seized during the June 2005 searches were of a proposed hydroponics unit and that the list of names and figures seized was a dealer list, the figures on that list varying from between £20 to £6,000.

Mr Frampton, the forensic accountant, gave evidence of his detailed analysis of the couple's finances. He took the view that because of lack of information in relation to 1999, figures for that year should be ignored. He gave evidence supporting his figure of an unexplained income between 2000 and 2005 of the sum of £44,000-odd, to which we have already referred.

Paul Hoyte, from Trenance Holiday Park, gave evidence as to how that business worked and the profits that could be made. He confirmed that the appellants owned several caravans at this holiday park which were let out. They paid him ground rent and could expect to make around £450 per caravan per week in high season.

Phillip Francis, a Customs officer, gave evidence that on 11th February 2005 Mr Middleton was stopped at Bristol airport as he was about to board a flight to Spain. He was carrying just under £10,000 in cash. When questioned, he told the officer that the money was intended to be used as a deposit on a property in Spain.

John Lobb gave evidence of Mr Middleton's claim to have earned money in the late 1990s by clearing out a restaurant called the Clock Tower which had suffered a fire, and that he had sold Mr Lobb the restaurant chairs. He confirmed that he had bought 30 to 40 chairs from the burnt-out restaurant, but this was in mid-1990s and he paid £5 to £6 for each.

Janice Cobley of the Ambassador Hotel gave evidence concerning Mr Middleton's claim to have earned cash from carrying out roofing repairs at the Hotel. She stated that she had no record of Mr Middleton having carried out any such work, and in any event she never paid workmen in cash.

Malcolm Pelmear gave evidence in relation to Mr Middleton's claim to have carried out roofing work at Newquay railway station. Mr Pelmear was employed by Network Rail, was involved in the management of the station and said he could find no record of Mr Middleton having carried out any such work.

Evidence was given of the interviews conducted with the appellants. Each had denied being involved in drug dealing or money laundering. They made no comment to some of the questions asked. Mr Middleton handed a prepared statement which said that he would be able to answer all allegations in due course by explaining all the legitimate sources of his earnings. He was asked about the list of names that had been seized from his house and said that he knew nothing about it. He was asked about the writing on the boards at the Whitewalls garage and said he was not responsible for that. When asked about the drawings, he said he had not seen them before.

Mr Middleton gave evidence about what he said were his legitimate business interests. He said that because of the chaotic nature of their finances, he and Rourke may have significantly underestimated their earnings for the indictment period. He said that he always worked: he had been a salesman, worked in the building trade and in factories, and he had done landscape gardening and rubbish clearance. He admitted that he withheld information about his income from the Inland Revenue and that he kept no proper record of his earnings. He said in the late 1990s, following a fire at the Clock Tower restaurant, he earned £10,000 from clearing the premises and selling the chairs to Mr Lobb. He had inherited money from a relative, which accounted for the £20,000 in the safe found by the police in June 2005. He said that he and Rourke earned a good income from the caravan rentals and from property in Spain.

With regard to the money he made from his own work, he would often be paid in cash and would put it away in various places around the house without the knowledge of Rourke, which explained the cash that was found by police during their searches. He denied that any of his money came from drug dealing, but he said that because of the lack of written records it was difficult to remember details of jobs he had done five or six years previously.

As far as the cannabis was concerned, he said he was doing some work with a friend one day at the garage at Whitewalls when another friend appeared and asked whether he could hide his drugs there. Middleton agreed and gave this friend a key to the premises. Later that day the friend turned up at his home address and asked him to look after some more cannabis which was stored in tins. He thought this was some time during the week prior to 28th June 2005. That was how he came to be in possession of some 20 kilograms of cannabis. He was minding it for this friend.

One day he noticed that some of the cannabis at the garage had gone missing, and he suspected the other friend who had been helping him to have taken it. That was why he wrote the warning words on the walls. He admitted lying about that writing in interview because he thought it would incriminate him. In relation to the list of names and figures, he admitted that it was writing but stated that it was simply jobs that he had priced. When asked why he had lied in interview, he said he had not told the police the whole truth because he had felt that his income was none of their business.

Ms Rourke gave evidence that she had no knowledge of the drugs found by police and that Mr Middleton would not have told her that he was hiding them for a friend because he would have known that she would have disapproved. She was not involved in or aware of drug dealing and believed all the family income was legitimately earned. Their caravan rental business was a cash business. She used the cash for day-to-day expenses rather than banking it. With five caravans she could earn about £35,000 to £44,000 a year. She conceded she had made inaccurate returns to the Inland Revenue and that she in fact earned more from the business than she has suggested in interview. She and Mr Middleton did not keep proper business records. She was aware that Mr Middleton used to keep cash around the house, but did not ask him about it. They were largely financially independent of one another. The property they had bought in Spain was funded partly from the caravan rental profits and partly by a loan.

At the outset of the trial on 29th January 2007 the appellants sought to have counts 1 and 2 quashed on the basis that they were bad for duplicity. The argument was that there were identifiable transactions throughout the period covered by these counts which could and should have been individually isolated to allege specific acts of money laundering or conversion of criminal property. The judge, in ruling against the appellants, acknowledged that, by way of analogy with charges under the Theft Act, it is only in very limited circumstances that it is possible for the prosecution to charge rolled-up or general deficiency counts. Otherwise the Crown must specify, if need be by way of specimen counts rather than citing every single transaction, individual instances of theft, so as to reflect the criminality charged. However, the judge concluded that the legislation under which these offences were being charged, in his judgment, permitted the prosecution to conduct the case in the way that it had and that there was nothing in the legislation itself which precluded such an approach, though he indicated that he would keep a weather eye on the way the case developed.

At the conclusion of the evidence, counsel for Middleton invited the judge to indicate how he intended to direct the jury of the minimum sum of which they had to be satisfied before they could convict his client on count 1 and/or count 2. The judge indicated that he was not prepared to contemplate leaving the case for the jury on the basis that "approximately" in the indictment might mean anything upwards of the £44,698 which comprised the so-called unexplained income. This would mean that, even if the jury were to accept that the defence case in respect of their respective legitimate incomes may be to any extent right, they would nonetheless still face conviction on these counts.

Immediately before the defence closing speeches, the judge indicated that he would direct the jury to the effect that "approximately" meant "within 20% of the figure indicated". The judge directed the jury in the following terms:

The case at trial for both the prosecution and the defence focused on three major elements, within each of which there were subsidiary issues of fact. The first element was "unexplained other income". That comprised a series of figures, from 2000 through to 2005, which the forensic accountants agreed could not be explained as income from any source at all. That sum totalled £44,698. Had the Crown not been able to prove anything beyond that figure then, in accordance with the judge's direction to the jury, there could not have been a conviction on either count 1 or count 2.

The second element was the income which Mr Middleton asserted he derived from legitimate self-employment of various types. That figure was identified for each of the years 2000 to 2005. It totalled £83,500. In accordance with the judge's direction, if the jury had been satisfied so that they were sure that none of Mr Middleton's claimed legitimate income was legitimate income and they were also satisfied that the "unexplained other income" came from drug money, then, nonetheless, the prosecution would not have succeeded in reaching the more than 80% mark. Thus there could not be a conviction on either counts 1 or 2.

The third element constituted the income of the appellant Rourke. She claimed that the entirety of her income derived from renting a number of caravans at the Trenance Holiday Park which she owned. The Crown's case was that it accepted that to some extent she did derive legitimate income from that business. Their case was that it was limited to those payments which were paid into her bank account direct from her tenants. There was, in respect of each of the years 2000 to 2005, a balance which represented unbanked income. The Crown said that none of that balance derived from that legitimate business but it derived from drug dealing money. The Crown was able, through the analysis of bank accounts, to identify how much that "unbanked" income of Rourke was in each of the years 2000 to 2005. Again, had the jury been satisfied so that they were sure that the Crown had satisfied them that none of that money was legitimate, then, even if they were sure that one or other of the other elements was proved, they would not convict of either of counts 1 or 2 because the more than 80% test had not been satisfied.

Thus, the effect of the judge's direction to the jury was that they could only convict either appellant of either counts 1 or 2 if they were satisfied so that they were sure that income from each of the three elements was not legitimate but derived from drug dealing money and were sure of sufficient in each of the three categories such that at least 80% of their unexplained or dubiously explained income derived from drug dealing.

The appellants accept that this direction went a long way towards safeguarding them from the risk that they might be convicted of significant money laundering offences, where the jury were only satisfied of a relatively small portion of the sums alleged by the Crown. They say, however, that the decision of the judge to permit the Crown to proceed on counts 1 and 2, drafted in that general way, was wrong as a matter of principle and not saved by his specific direction to the jury.

The Indictment Rules 1971 have been revoked by the Criminal Procedure (Amendment) Rules 2007 which (by Rule 9) inserted a new Part 14 in the 2005 Criminal Procedure Rules to make fresh provision as to the form, content, signature and service of indictments. Rule 14.2 of the 2005 Rules (as amended) concern the form and content of indictment. They read, insofar as is relevant, as follows:

Practice direction (Criminal Proceedings: Consolidation) paragraphs IV.34.8 to IV.34.12, as inserted by the Practice Direction (Criminal Proceedings: Further Directions) [2007] 1 WLR 1790, states, insofar as is relevant, as follows:

The explanatory memorandum to the Practice Direction states that the Criminal Procedure Rule Committee was "satisfied that the new rule reflects what judgments of the House of Lords in the past have found consistent with fundamental principles of fairness."

The trial in this case was not governed by the 2007 amendment to the Criminal Procedure Rules 2005. We note, however, that the Criminal Procedure Rules Committee considered that they were doing no more than codifying the existing law in formulating Rule 14.2(2) and giving guidance in Practice Direction IV.34.8 and IV.34.11. The learned editors of Archbold surmise, in our judgment correctly, that the Committee had in mind in that regard the speech of Lord Diplock in Director of Public Prosecutions v Merriman [1973] AC 584 HL at 607 at which he said at letter C:

The most recent description of this practice and its justification is to be found in the judgment of the Divisional Court in Barton v Director of Public Prosecutions [2001] EWHC Admin 223, in which at paragraph 6 Kennedy LJ said:

And at paragraphs 22 to 23:

Mr Middleton accepts that the number of discrete offences, based on each individual transaction which was identifiable, would have involved preparing and incorporating a schedule running to many of hundreds, indeed thousands, of entries because it was the Crown's case that every financial transaction which Mr Middleton had effected over the period of the indictment was a conversion of the proceeds of drug trafficking. It is contended that what the Crown could and should have done was to charge a small number of these credits, year by year, as specimen or sample counts. The appellant has identified in a schedule, setting out two counts per year, 12 individual banking transactions the value of which totals under £10,000. In addition, in relation to the numerous secondary transactions, where the Crown have asserted that goods paid for by cash, cheque or credit card transactions constituted fresh acts of conversion, he has identified, by way of specimen counts, a further 11 totalling about £45,000. Furthermore, the appellant has identified four large purchases, of value just over £100,000, of various properties said to involve conversion.

In that way it is said that it was practicable for the Crown to identify discrete offences sufficiently few in number to have been accommodated by the jury, but reflecting the overall scale of the criminality.

It is said that the unfairness of the Crown's approach meant that he could potentially have faced conviction, whether or not the jury concluded that he had been dealing in drugs throughout the period or whether they only concluded that he had so dealt for some lesser period, and it was pointed out that the evidence of drug dealing was much more convincing in relation to the latter period rather than in the earlier years. The jury was not in a position, by its verdicts, to reveal such a decision. It is accepted that the judge's intervention, by the direction to which we have referred, mitigated very substantially this intrinsic unfairness. The point of principle, however, remains that, wherever possible, individual charges ought to be formulated in respect of individual transactions or events, so that the defendants know precisely the charge they face and have a fair opportunity of adducing focused evidence to meet the charge concerned. General deficiency counts ought, it is submitted, to be strictly confined to circumstances where it is genuinely impossible for the Crown to formulate specific counts, including, if need be, sample counts which are adequate to allow a jury to decide about the overall wrongdoing alleged.

The appellant Rourke adopts these submissions.

The Crown's submissions are that the prosecution case was that Mr Middleton was a drug trafficker. They rejected his assertion that he was minding drugs for another on the occasions when they were found in his possession. They alleged he had been involved in the supply of drugs for a number of years, though there was no direct evidence of previous incidents of supply. They relied upon an analysis of the financial position of the appellants between 2000 and 2005 to support that assertion. Counts 1 and 2 involved the application of the principle of general deficiency which was both necessary and fair.

It is said that the description of the circumstances in which a general deficiency would be available in Merriman is satisfied. The analysis of the three known sources of income of Mr Middleton and Ms Rourke which underpinned counts 1 and 2 required the jury to focus on the three areas which we have identified. In respect of each, it was said the Crown was unable to identify individual transactions as involving the conversion of criminal property because the Crown accepted that the appellants had been in receipt of some legitimate income, albeit limited in amount. Thus the prosecution could not allege that individual cash credits, or identified specific purchases, constituted acts of conversion so as appropriately to be charged as discrete charges. This was not a case where, for example, the prosecution was able to point, in evidence, to any particular event which took place immediately prior to a particular transaction so as to give rise to an inference that such transaction was connected with the supply of drugs.

On the issue of fairness, the Crown relies on the direction given by the judge that before the jury could properly convict either appellant they had to be sure that they had converted at least 80% of the sum alleged in the individual count. That would, of necessity, mean that the jury, before convicting, would have to be sure that for at least five of the six years between 2000 and 2005 the appellants were converting the proceeds of drug trafficking to the scale suggested by the Crown and that the jury rejected the innocent explanations given by the appellants in respect of each of the three categories of income. It was unavoidable, say the Crown, that the figures set out in the indictment were imprecise because the prosecution was unable to apportion a specific figure for the legitimate work which the appellants had carried out.

In our judgment the prosecution is correct in its submissions. The prosecution case was that each of the appellants had been involved in a course of conduct, drug dealing (Mr Middleton) and (both appellants) converting the proceeds of such dealing over a number of years. They had done so in a huge number of individual transactions, mostly small in scale. Intermingled with that illegal activity, the prosecution accepted, was some legitimate activity on the part of each of the appellants. It was impossible to untangle that activity, save that, in the case of Ms Rourke, the prosecution asserted that there was a distinction to be drawn between the direct banking of income from customers of her legitimate activity and banking of cash by her arising out of Middleton's drug trafficking.

It would have been unduly oppressive and onerous to have identified each and every individual transaction as separate counts. Furthermore, to have adopted a relatively small number of discrete specimen counts would have given rise to two problems. First, even if convicted, the powers of the judge in sentencing would have been constrained by authority so as to be limited to those specimen counts which had been proved. Second, in any event, the prosecution was unable to say, of any individual transaction, that the jury could be sure that the money involved derived from drug trafficking. It was the scale of the informal transactions, and the paucity and untruthfulness of the evidence from the appellants to justify that level of economic activity as legitimate, which was the essence of the Crown's case.

In our judgment, therefore, it was legitimate for the Crown to proceed with counts alleging general deficiency. They chose to do so by two counts only, each covering a number of years and separated only by reference to the different statutory regimes which applied at different times. In our judgment this was a high risk strategy and, on its own, might have given rise to unfairness. The point is well made by the appellants that, by not dividing the period into individual years, by way of example, the Crown was inviting the jury to consider activity over two lengthy periods, rather than what may still have been significant, but lesser, periods within the overall time frame. Without any mediation, this might have led to convictions by the jury for criminality significantly less serious than alleged by the Crown but of which the judge in sentencing would have been unaware. However, the judge, in a sensible approach to managing the case for the benefit of the jury and the appellants, by his direction ensured that convictions on each of counts 1 and 2 would reflect that the jury was sure that the appellants were guilty of the criminal activity alleged and on the scale alleged.

In our judgment, therefore, neither count 1 nor count 2 was unlawfully duplicitous in itself. They involved a continuing activity, or general deficiency, falling within the authorities, nor, in the event, did they give rise to unfairness. In those circumstances, in respect of these arguments, the verdicts of the jury were not unsafe.

The appellant Ms Rourke raises an additional point. She says she could not, in law, be guilty of count 1. This count charges her, under section 49(1)(b) of the 1994 Drug Trafficking Act, with converting property "for the purpose of avoiding prosecution for a drug trafficking offence or the making of a confiscation order." It is said that, as she has never been charged in respect of a drug trafficking offence nor been convicted of one, she could not be the subject of such a charge as she could not act for the prohibited purpose as she was neither threatened with prosecution nor, after conviction, the making of a confiscation order.

It is said that the judge erred in law in directing the jury that the prosecution could establish her guilt if she was acting together with her husband for the purpose of avoiding his prosecution as a drug trafficker or the making of a confiscation order in the event of his conviction as such.

Section 49 of the Drug Trafficking Act 1994 reads, insofar as is relevant, as follows:

Ms Rourke says that the appropriate offence to have charged her with on the facts of this case was an offence under section 49(2). Indeed, it is the case that at the conclusion of the prosecution case submissions were made to the effect that that was the appropriate charge, rather than a charge under section 49(1)(b). But the prosecution declined so to amend the indictment.

The focus of our consideration has to be section 49(1)(a), which feeds into section 49(1)(b). In our judgment the words of significance are the words "his proceeds of drug trafficking". What the appellant says is that those words mean that in a case such as this, which was summed up to the jury on the basis that it was Mr Middleton who was trafficking the drugs, the sums derived from that trafficking could only be Mr Middleton's proceeds of drug trafficking and that therefore no charge could properly be laid against her in those circumstances: the only appropriate charge would be one under section 49(2).

The respondent to the appeal says that the important words are "his proceeds", rather than (as could have been used by Parliament) "the proceeds of his drugs trafficking". What the prosecution says is that, as in the facts of this case, where Mr Middleton sold drugs, the money derived from that became Ms Rourke's proceeds or their joint proceeds when they were either passed to her directly by the customer or by Mr Middleton, or were dealt with by them as part of a joint enterprise, where she, knowing what he was about, participated in and encouraged the general dealing with the proceeds of his drug trafficking. In those circumstances, what is to be focused on is the ownership or the possession of the money derived from the drug trafficking, rather than the person who actually does the selling or the drug trafficking.

The offence created by section 49(2) is concerned with some extraneous third party, such as an accountant or a solicitor, who is entirely unconnected with the drug trafficking, either as an individual or as part of a joint venture.

In our judgment this is a fine distinction, but it is nonetheless a real one and we agree with the respondent to the appeal that in the circumstances of this case, whilst it would no doubt have been open to them to have charged Ms Rourke under section 49(2), it was equally open to them to charge her as part of a joint enterprise under section 49(1)(b). The directions of the judge, focusing as they did initially on Mr Middleton's alleged drug trafficking, but thereafter on what the Crown said was a joint enterprise involving both of them in dealing with the proceeds of that drug trafficking, directed the jury properly. Therefore the conviction was not unsafe, being based on an appropriate charge for the facts which the jury found proved so that they were sure.

For the reasons which we have given, therefore, we dismiss the appeals of each appellant against their convictions on each of counts 1 and 2 of the indictment.

This appeal therefore fails.

LORD JUSTICE LEVESON: Thank you very much.