Drug valuations in confiscation proceedings

Legal wig copyright David Winch 2014The way in which illegal drugs are valued in confiscation proceedings has changed over the years.  A Court of Appeal decision in March 2014 is only the most recent development.

It is useful to consider separately valuation of drugs in relation to the defendant’s ‘available amount’ and in relation to his ‘benefit’.

 

Available amount

It has long been the case that illegal drugs (sometimes referred to as controlled drugs) have been regarded as having zero value when calculating a defendant’s ‘available amount’ for confiscation purposes, because the drugs cannot legally be sold and any drugs seized will have been forfeit and destroyed by the authorities.

 

Benefit

The valuation of illegal drugs in relation to the defendant’s ‘benefit’ is not so straightforward.  There have been a number of twists and turns in the interpretation of the law.

In 2008 the Court of Appeal concluded that illegal drugs had no value for the purposes of calculating a defendant’s ‘benefit’ but, where the ‘criminal lifestyle’ assumptions operated (as they would under PoCA 2002 in a drug trafficking case by virtue of s75 and Schedule 2), then the expenditure on acquiring those drugs would in many cases form a component of the defendant’s ‘benefit’ figure.

The following year the House of Lords (by a 3-2 majority) overturned that Court of Appeal decision, in the leading case of R v Islam [2009] UKHL 30.

The statute law provides that s79 applies “for the purpose of deciding the value at any time of property then held by a person” and that “its value is the market value of the property at that time”.

The issue in Islam revolved around the meaning of “market value”.  Was that expression limited to a ‘legal market value’?  Could illegal drugs be simultaneously regarded as having a zero value in relation to the defendant’s ‘available amount’ and a significant value in relation to the defendant’s ‘benefit’?

The majority view was that when determining the “market value” for the purposes of ‘benefit’ “we look at the market in which [the defendant] expected to dispose of the property in question. That is what it was worth to him”.  So, for the purposes of evaluation of the defendant’s ‘benefit’ the value of seized drugs could be based on their value on the illegal drugs market.

The House of Lords noted that it was a commonplace of everyday life that the same goods might have a different value depending upon the market on which they were sold.  So there was no illogicality in valuing drugs differently for the purposes of ‘available amount’ (based on the impossibility of sale in a legal market) and ‘benefit’ (based their value on the illegal drugs market).

 

The latest development

On 4 March 2014 the Court of Appeal issued its judgment in the case of Elsayed v The Crown [2014] EWCA Crim 333.

The issue was relatively straightforward.  The defendant worked as a hospital porter.  He was arrested and his locker at the hospital was searched.  In it were found £56,510 in cash, 169 grams of cocaine of 80% purity and a small wrap of 3 grams of cocaine at 5% purity.  No cutting agents or other wraps or bags were found.

The defendant in due course pleaded guilty to possession of Class A drugs with intent to supply and possession of criminal property.  Confiscation proceedings followed.

The defendant’s explanation was that he had started to use cocaine and had agreed to store the 169 grams of cocaine and cash for his supplier.  The small wrap was for his own use.

The prosecution asserted, on the contrary, that this defendant intended to cut the 169 grams of cocaine to a 5% purity for ‘retail’ sale at street level.

In the confiscation proceedings the Crown Court judge found, as a fact, that the defendant himself would cut the cocaine and sell it ‘retail’ at street level.

The importance of this was that, if cut and sold ‘retail’, that cocaine would have a market value of £108,160.  In its uncut state and if sold ‘wholesale’ that cocaine had a market value of only £6,857.  The judge made a confiscation order based upon the ‘retail’ value of that cocaine.  The defendant appealed.

 

The legal arguments

The defence argued that “benefit figure for the purposes of confiscation is derived from historic transactions and the value of actual property held in the defendant’s possession connected with the relevant offence, not what it ‘might’ be worth ‘if’ it was to be altered in some way.”

In support of that one might refer to the wording of s79 which applies “for the purpose of deciding the value at any time of property then held by a person” and that “its value is the market value of the property at that time”.  Similarly the focus of s80(2)(a) was on “the value of the property (at the time the person obtained it)”.

The prosecution argued that the cocaine should be valued by reference to the market on which the defendant intended to sell it – which the judge had found to be the ‘retail’ street market.  In consequence, argued the prosecution, the Crown Court judge had been correct to adopt the ‘retail’ street value because that was the market in which the defendant intended to sell the drugs.

 

The Court of Appeal’s decision

The Court of Appeal upheld the confiscation order based on the ‘retail’ street value of the cocaine.  They considered it would be arbitrary to value the cocaine on the basis of it not having been cut at the time it was seized if (as found by the judge) the defendant’s intention was to cut the cocaine and sell it at street level.

The court held that the value of those drugs to the defendant was the value he expected to obtain from their (‘retail’) sale by him.  It was not determinative, the court held, that the drugs had not been prepared for ‘retail’ sale when they were seized.

Of course that conclusion may yet be subject to further appeal.

David

(Note: This article applies to confiscation orders under the provisions of Part 2 of the Proceeds of Crime Act 2002 in England and Wales. There are a number of additional issues which could be relevant to a defendant’s confiscation order in particular cases which it is not possible to deal with in a relatively short article such as this. Appropriate professional advice should be sought in each individual case.)

5 thoughts on “Drug valuations in confiscation proceedings”

  1. Hi David,

    If POCA is concerned with recovering proceeds earned through crime, what if there actually were no proceeds (benefit)?

    Lets Assume for example, two separate people both obtained £100K worth of coke (two completely unrelated crimes). Both persons earned their respective £100k legally.

    Person A is caught BEFORE earning any proceeds of crime and his drugs are confiscated.

    Person B is caught AFTER selling the drugs and therefore gaining the full benefit of the crime.

    Person A is sentenced to jail term and POCA orders Person A to pay £1m. This is the street value Person A would likely have earned had he not been caught. Since Person A did not actually benefit from the crime, he has no way of paying this amount and therefore, he is now in debt of £1m.

    Person B is sentenced to the same jail term and POCA orders Person B to also pay £1m. Now this is the actual amount of benefit that he has already received having sold his coke before being caught. Therefore, Person B is immediately able to pay this amount back since he still has the proceeds of his crime.

    Now, as you should be able to see, the resulting punishment for both parties is completely skewered! Person A, having NOT flooded the market with £1m worth of drugs is in a much worse position leaving prison owing £1M, yet Person B, who clearly was responsible for much more harm leaves prison owing nothing.

    Could this really be the case?

    1. Limmy

      The court has to consider a number of questions separately before making a confiscation order.

      One is the question of what is the value of the property (which could be money or other assets) obtained by the defendant? Note it says OBTAINED not RETAINED. In the examples you give Person A obtained drugs said to have a value of £1m and Person B obtained money to the value of £1m. So each of them has obtained a benefit of £1m. (But in practice they may also have obtained other benefit, or assumed benefit, which the court would take into account in arriving at their total benefit figure.)

      A different question is what is the value of the defendant’s available amount? If Person B still has the £1m in money then that will form part of his available amount – but the drugs seized from Person A do not form part of his available amount.

      The confiscation order will, in each case, be based on the LOWER of the benefit and the available amount of the defendant.

      So if Person A has no other assets (and has made no tainted gifts) he will only be ordered to pay a nominal £1 confiscation order – not £1m. So he is not in the same position as Person B.

      Does that help clarify the position?

      David

      1. If person A pays this nominal £1, it will mean he accepts the £1m confiscation order and at some stage in the future should he come across large amounts of money, he will pay the remaining £999,999, where as person B will have to pay the remaining or do under 10 years (do 5 now) because it’ll be classed as hidden.
        I was hit with a £250k confiscation which was a figure SOCA came up with from adding up figures on all my bank statement’s cash deposits and credit card spendings going back 6 years from date of arrest. I wanted to argue most of the transactions as they were transactions made by family members because I had a debit card and on some occasions an elderly neighbour was about to spend for instance £600 on a washing machine but I found for £400, used my card and took the money.
        I was advised not to argue with the order as the judge would either accept or deny as a whole and not a transaction here and a transaction there. I took the advice and accepted. The judge mentioned something about £5, I said thank you very much and went back to jail. Coming up to the end of my sentence about to get open D-cat conditions I was refused becasuse that £5 order came back to bite me! I had to pay that £5 from my prison spends account in order to get transferred to a D-cat jail. I then found the reason why I needed to pay is because paying the £5 is my official admission to the £250k confiscation and I will pay the remaining £249,995 should I come by large amounts of money in the future, the rules state one cannot get open D-cat conditions if confiscation orders are outstanding.
        At the time I didn’t care about owing SOCA £249,995 as I just wanted to an open jail.
        Not entirely sure person A will absolutely have to pay the remaining as in my case the figures came from statements. However one of my co-defendants was in that position with a £100k figure who didn’t have any money and ended up staying in prison for another 2 years on top of his 15 year (do 7 and a half) without any D-cat because his was classed as hidden.

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