R v Islam (Respondent) (on appeal from the Court of Appeal Criminal Division)

For confiscation proceedings under the Proceeds of Crime Act 2002, “market value” is not invariably confined to value in a lawful market. The relevant market depends on the context and purpose of the valuation.

When assessing a defendant’s benefit from illegally obtained goods, the court may use the market in which goods of that nature are ordinarily traded, even if it is an illicit market. When assessing the amount available to satisfy a confiscation order, the court must consider property that the defendant can lawfully realise. Seized drugs may therefore have a black-market value when obtained but no realisable value at the confiscation stage.

The respondent pleaded guilty to two offences concerning the fraudulent evasion of prohibitions on importing heroin. The sentencing judge valued the heroin at its wholesale value of £71,424 and made a confiscation order of £404,604.69.

The Court of Appeal, in [2008] EWCA Crim 1740, considered itself bound by R v Hussain [2006] EWCA Crim 621. It held that the heroin had no market value because it could not lawfully be bought or sold, and reduced the order by £71,424.

The certified question was whether, when calculating benefit rather than the available amount under the Proceeds of Crime Act 2002, illegally obtained goods must be treated as having no value.

1. By a majority of three to two, the appeal was allowed. Lord Hope and Baroness Hale agreed with Lord Mance that R v Hussain [2006] EWCA Crim 621 was wrongly decided and should be overruled. The sentencing judge’s confiscation order was restored. Lord Walker and Lord Neuberger dissented.

2. Per Lord Mance, Lord Hope and Baroness Hale, “market value” in section 79 of the Proceeds of Crime Act 2002 is capable of embracing both lawful and illicit markets. The expression has no universal statutory meaning which excludes unlawful transactions. The court must identify the market relevant to the nature of the property and the purpose and context of the valuation.

3. At the benefit stage, sections 76, 79 and 80 require an objective valuation of the property when the defendant obtained it. Heroin imported for sale has value in the market in which such goods are ordinarily traded. Its intended black-market value may therefore be included even if surveillance, seizure or forfeiture prevents the defendant from realising a profit. The fact that the goods cannot lawfully be traded does not make the benefit nil.

4. The available-amount inquiry under sections 7 and 9 serves a different purpose. It limits the confiscation order to assets which the defendant can actually be required or expected to realise. The court cannot value drugs on the assumption that the defendant will sell them illegally to satisfy the order. Drugs already seized, forfeited, destined for forfeiture or otherwise incapable of lawful realisation therefore have no available market value.

5. Per Baroness Hale, the majority did not assign different meanings to the same statutory words. It applied one concept of market value to different factual situations. The operative question was which market was relevant in the circumstances.

6. Lord Walker and Lord Neuberger dissented. They considered that section 79’s single definition should have the same effect throughout the statutory scheme. Because black-market value could not be used for the available-amount calculation, they concluded that it should also be excluded when valuing benefit.

1. House of Lords: By a majority of three to two, allowed the Crown’s appeal, overruled R v Hussain [2006] EWCA Crim 621 and restored the confiscation order made by the sentencing judge.
2. Court of Appeal (Criminal Division): In [2008] EWCA Crim 1740, held itself bound by R v Hussain and reduced the confiscation order by £71,424 because the heroin had no value in a lawful market.
3. Crown Court: HHJ Collender QC valued the heroin at £71,424, assessed total benefit at £404,604.69 and made a confiscation order for that amount. He also ordered forfeiture and destruction of the heroin.