Confiscation orders – Drug trafficking – Market value – Statutory interpretation – Proceeds of crime

R v Islam: HL (Lords Hope of Craighead, Walker of Gestingthorpe, Mance, Neuberger of Abbotsbury, Baroness Hale of Richmond): 10 June 2009

The Crown appealed against a decision ([2008] EWCA Crim 1740) that in calculating a confiscation order following the importation of heroin by the respondent (S), the judge had been wrong to attribute a wholesale value to the heroin.

S had been convicted of being knowingly concerned in the fraudulent evasion of the prohibition on the importation of goods. It was not in dispute that he had obtained the heroin at the moment of its importation. The judge had quantified the wholesale value of the heroin for the purposes of assessing S’s total benefit and making a confiscation order. The Court of Appeal, recognising that it was bound by R v Hussain (Manaf) [2006] EWCA Crim 621, held that the heroin did not have any market value when obtained because there was no lawful market for its purchase or sale. It therefore reduced the confiscation order. The question for determination, which was certified as a point of law of general importance, was whether, for the purpose of calculating a defendant’s benefit in confiscation proceedings under the Proceeds of Crime Act 2002, goods of an illegal nature obtained by him had to be treated as having no market value within the meaning of sections 79(2) and 80(2) of the act.

Held: (1) (Lords Walker and Neuberger dissenting) It was consistent with both the language and the spirit of the statutory scheme to take account of the black market value of drugs when valuing the benefit obtained by a defendant from their illegal importation, although such drugs had a nil market value after seizure for the purposes of assessing the amount available for confiscation, R v Dore (Anthony) [1997] 2 Cr App R (S) 152 CA (Crim Div) considered and Hussain overruled. The act contained no precise definition of ‘market value’; it was merely the price that goods would fetch in the market where they were to be bought and sold. That market had to be identified by the court and the price determined as a question of fact. If there was a legitimate market, the calculation was to be based on that market. However, the act did not require the market to be a legitimate one and to ignore an unlawful market would be to restrict the amount of benefit in a way that ignored known facts, R (on the application of Revenue and Customs Commissioners) v Machell [2005] EWHC 2593 (Admin), [2006] 1 WLR 609 and Byrne v Low [1972] 1 WLR 1282 DC applied, and Crown Prosecution Service (Nottinghamshire) v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113 doubted. The essence of market value was simply the price that would be paid for the goods as between a willing buyer and a willing seller. If the only market in which such a transaction could take place was an illegitimate one, it should, unless the context showed otherwise, be used to determine the price that the goods would fetch, Building and Civil Engineering Holidays Scheme Management Ltd v Post Office [1966] 1 QB 247 CA considered.

(2) (Per Lord Walker) The same meaning should be given to the expression ‘market value’ at all stages of the calculation and the same meaning should be given to section 79 of the act as was given for the purposes of section 9 of the act, R v Thacker (Robert Steven) [1995] 16 Cr App R (S) 461 CA (Crim Div) considered.

(3) (Per Lord Neuberger) The black market should not be taken into account when determining the value of property for the purpose of assessing the ‘recoverable amount’ under sections 7(1) and 80(2)(a) of the act. Nor should a different meaning to ‘market value’ be given in sections 80(2)(a) and s.9(1)(a).

Appeal allowed.

David Perry QC, Mark Sutherland Williams, Charlotte Hadfield (instructed by in-house solicitors) for the appellants; Cheryl Drew, Abdul Gofur (instructed by Crescent & Co) for the respondent.