R v Islam

The House of Lords considered the meaning of the expression "market value" in section 79 of the Proceeds of Crime Act 2002 and its application, via section 80, to the assessment of a defendant's "benefit" from criminal conduct and, via section 9, to the assessment of the "available amount" for confiscation. The court held that the market to which attention is to be directed depends on context: for the purpose of assessing benefit under section 80(2)(a) the competent market may be the illicit market in which the defendant would have expected to dispose of illegally obtained goods; by contrast, for the purpose of assessing available property under section 9 an illicit market must be excluded because the court cannot require the defendant to realise assets by unlawful means. The Court overruled R v Hussain and reinstated the trial judge's confiscation order based on a wholesale valuation of the heroin at the time it was obtained.

This appeal concerned the correct approach to valuing illegally obtained goods (heroin) for the purpose of confiscation under the Proceeds of Crime Act 2002. The respondent pleaded guilty to two counts of fraudulent evasion of the prohibition on importation of heroin (importations in February and March 2005). At first instance HHJ Collender QC valued the heroin at wholesale market prices when obtained, assessed the respondent's benefit at £404,604.69 and made a confiscation order for that amount, ordering forfeiture and destruction of the drugs under section 27 of the Misuse of Drugs Act 1971.

The Court of Appeal ([2008] EWCA Crim 1740) considered itself bound by R v Hussain and reduced the confiscation order by the wholesale value of the seized heroin (£71,424), holding that goods which cannot lawfully be sold have no market value for the purposes of assessing the defendant's benefit.

The House of Lords was asked whether goods of an illegal nature obtained by a defendant must be treated as having no value for the purpose of calculating benefit under POCA 2002. The issues framed were (i) whether "market value" in section 79(2) necessarily excludes illicit or black market transactions; (ii) whether the same meaning must apply at the benefit stage (section 80 read with section 79) and at the available-amount stage (section 9 read with section 79); and (iii) the implications of earlier authorities (including R v Dore, R v Thacker and R v Hussain).

The majority held that the statutory term "market value" is context dependent. For assessing benefit under section 80(2)(a) the proper market is that in which the defendant would have been expected to sell the goods (which may be an illicit market) and therefore an illicit market value may be attributed to goods such as heroin at the time they were obtained. For assessing available amount under section 9(1)(a) the relevant market must be one in which the defendant can lawfully realise assets, so illicit market values are excluded and goods liable to forfeiture are often valued at nil. The House therefore allowed the Crown's appeal, overruled R v Hussain, and restored the trial judge's confiscation order. Two members of the House dissented, considering that the same meaning should be given to "market value" in both contexts and that it should exclude black market transactions.

Appeal allowed. The House held that "market value" in section 79(2) is to be determined by reference to the market appropriate to the statutory context: for the purpose of assessing a defendant's benefit under section 80(2)(a) the market may be an illicit market in which the defendant would have sold the goods, so illegal goods can have a black market value; but for the purpose of assessing the available amount under section 9(1)(a) the market must be one in which the defendant can lawfully realise assets, so illicit market values are excluded. R v Hussain was overruled and the trial judge's confiscation order restored.

Respondent pleaded guilty and HHJ Collender QC made a confiscation order on 5 January 2007 for £404,604.69 (including a wholesale valuation for heroin). The Court of Appeal, applying R v Hussain, reduced the order by £71,424 and gave its judgment at [2008] EWCA Crim 1740. The Crown obtained and the House granted leave to appeal to the House of Lords, which delivered judgment at [2009] UKHL 30.