SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LIVERPOOL COUNTY COURT
H.H. JUDGE BERNSTEIN & MR A.J. ELLERAY Q.C.
Strand, London, WC2A 2LL
Friday, 26th November 1999
B e f o r e :
- and -
- and -
TURNER Q.C. and MR CHARLES DAVEY (instructed by Linskills & Middleweeks
for Webb and the Porters)
MR ANDREW EDIS Q.C. Mr N.F. Riddle and Mr R. Warnock (instructed by the Force Solicitor for The Chief Constable)
In each of these two appeals, claimants brought proceedings against the Chief Constable of Merseyside for the return of money lawfully seized by the police on suspicion that it was the proceeds of drug trafficking. Two of the three claimants have not been convicted of drug trafficking offences. The third claimant was convicted of possessing a Class A drug but no drug trafficking inquiry was undertaken. The essential question which the appeals raise is whether, if the police establish in civil proceedings that the money is the proceeds of drug trafficking, they are entitled to refuse to return it when the purpose for which they seized it no longer applies.
Roy Webb appeals against the decision of Mr A.J. Elleray Q.C. sitting as an Assistant Recorder on the 9th September 1998 in the Liverpool County Court. The Assistant Recorder held that Roy Webb was not entitled to the return of £36,000. This was a decision after a trial in which the parties gave evidence.
The Chief Constable of Merseyside appeals against the decision of Her Honour Judge Bernstein on 25th September 1998 in the Liverpool County Court. She decided that Mrs Mary Porter and her son Christian Porter were entitled to the return of sums totalling £32,740. This was a decision upon an ill-defined preliminary issue and there are procedural complications.
The £36,000 which Roy Webb claimed was seized by the police on 10th December 1992. Roy Webb claimed its return or damages for conversion. By his defence, the Chief Constable accepted that he was liable to return the money to its owner. He put Roy Webb to proof of his ownership. He said that on the balance of probabilities the money was the proceeds of drug dealing. On 29th March 1993, Roy Webb had issued a complaint in the Magistrates' Court under section 1(1) of the Police Property Act 1897 seeking the return of the money. He did not appear at the hearing of his complaint and the magistrates dismissed it. It is accepted that this did not prevent him from bringing civil proceedings in the County Court.
The Assistant Recorder heard and considered much detailed evidence. Roy Webb gave and called evidence in support of his case that he was in the business of property dealing. In short summary, his case was that he and a Mr Walsh were interested during 1992 in a development site on Greenbank Street and Bold Street in St Helens. The selling price was about £23,000, and Roy Webb and Mr Walsh hoped to sell it on for a substantially higher price. They were also interested in about October 1992 in acquiring from St Helens Borough Council for £8,000 a property called Link House, Elizabeth Street, St Helens, intending to develop it as a nursery. Roy Webb's evidence was that in November 1992 he was lent £35,000 or thereabouts in cash by a Mr Harrison. Mr Harrison gave evidence. He lived in the Isle of Man for tax reasons and said that on occasions he had very large sums of cash on him. His evidence was that he was with his wife at Gateacre Park Hotel when he lent £35,000 in cash to Roy Webb. Roy Webb said that he borrowed the money on an oral promise to use it to acquire the Greenbank Street and Link House properties and promised to pay Mr Harrison 50% of the profits made on those developments. It was an oral transaction unsubstantiated by any documents.
Evidence was called on behalf of the Chief Constable that from 30th June 1992 Roy Webb, his brother Colin Webb, and others had been under observation by the police as part of a drug trafficking detection operation. Roy Webb had been observed making regular short visits to the continent, in particular to Belgium but also on at least one occasion to Holland. Roy Webb accepted that he had made these journeys and he gave innocent explanations for them. He accepted that on an occasion in August 1990 he had left £25,000 in cash in a left luggage locker at Maastricht railway station. He gave an improbable explanation of the reason for this as being that he had the cash in the expectation of buying an Aston Martin DB6 with it. The Chief Constable also called detailed evidence of observations in the St Helens area between June and December 1992, when Roy Webb and his brother Colin were seen acting suspiciously. They or others who appeared to be associating with them were on occasions seen to have or to hand over plastic bags which the observing officers suspected were concerned with drug dealing.
On 10th December 1992, Roy Webb was seen to leave his house at 135 St Helens Road at about 10 a.m. A little later, Colin Webb went to the house and after about 10 minutes left carrying a red and white plastic carrier bag. Colin Webb got into a blue Escort van and drove off. He was spotted and followed by two police officers in plain clothes driving an unmarked police vehicle. He went to a telephone box and when he came out of it the police went to speak to him. Put shortly, Colin Webb drove off and a chase ensued which ended with the police officers catching Colin Webb and arresting him on suspicion of supplying controlled drugs. He denied any knowledge of the bag which was near him on the ground when he was arrested. But it was obviously the bag which he had been seen to take from Roy Webb's premises. It was found to contain cash amounting to £23,020. Scientific investigation established that there were traces of amphetamines on both the bag and the notes in the bag. Later that afternoon, the police searched Roy Webb's house at 135 St Helens Road. They found £200 in bank notes in a book case. Meanwhile, other police officers visited Colin Webb's flat and also Colin's mother's house at 58 Astley Road, where Colin Webb still kept a bedroom. In that house, the police found a supermarket plastic bag containing about £13,000. This and the money in the plastic bag found when Colin Webb was arrested were the £36,000 which Roy Webb claimed in the proceedings.
On 12th December 1992, Roy Webb was arrested on suspicion of drug dealing. Neither he nor his brother Colin have been prosecuted to conviction for drug trafficking offences.
Roy Webb's case at trial was that the money was his and that most of it had been lent to him by Mr Harrison in the circumstances which I have briefly described. It had been divided into £23,000 and £13,000 because these were the approximate sums of money needed for the property transactions at Greenbank Street and Link House respectively. By the time of the trial, there was a formal disclaimer on behalf of Colin Webb to the effect that he claimed no entitlement to the money.
The Assistant Recorder very carefully considered all the details of the evidence, which I have only briefly summarised. He made two crucial findings of fact. Firstly, he rejected on the balance of probabilities the factual case that the money which the police seized had been lent by Mr Harrison to Roy Webb for the purpose of property dealing. Secondly, he found on the balance of probabilities that the money was the proceeds of dealing in drugs. In reaching these conclusions, he properly directed himself that it was for the police to establish that the money was the proceeds of drug dealing. He also properly directed himself that, this being a civil case, the standard of proof was the balance of probabilities and not the higher criminal test. He emphasised, however, that, "since the allegation of illegality is serious, and particularly absent any criminal trial of the relevant Plaintiff, a civil judge would need strong and cogent evidence of the relevant tainting of the money which the Plaintiff seeks to recover."
It was the Chief Constable's case that the money that Roy Webb wanted to recover was the proceeds of drug dealing in which he was involved. It was contended that in consequence as a matter of public policy he could not recover the money. The Assistant Recorder said that the courts had long refused to enforce illegal contracts and transactions. He referred to and discussed authorities including Thackwell v. Barclays Bank plc  1 A.E.R. 676 and Tinsley v. Milligan  A.C. 340. He said that illegality as considered in Tinsley v. Milligan simply prevents reliance by a plaintiff on his own illegality in order to substantiate a claim. He said that nothing in Tinsley v. Milligan appeared to him to challenge what he referred to as the consequence of the first finding of fact in Thackwell and he held it to be the law that "one cannot seek to recover property ... when the property in question was obtained by the illegality of the plaintiff." He held therefore that, if the police established that the money which Roy Webb claimed was the proceeds of illegal drug dealing, Roy Webb would not be entitled to recover the money. Having held, as I have said, that the money was the proceeds of unlawful dealings in drugs, the Assistant Recorder dismissed Roy Webb's claim. This finding, taken with the principle which the Assistant Recorder applied and his findings as a whole, carried with it a clear inferential finding that Roy Webb was himself concerned with the illegal drug dealing.
I turn to the second appeal, that of the Chief Constable in the case of Mary Porter and Christian Porter.
On 4th November 1994, police officers lawfully executed a search warrant under the Misuse of Drugs Act 1971 at 8 Danebank Road, Liverpool, Mary Porter's house. She was present with one of her sons, John Porter, who, when he was told he was to be searched, was seen to try to swallow a wrap of heroin. John Porter was not a party to the subsequent civil proceedings. In addition to the heroin recovered from John Porter, the police found a small quantity of Ecstasy tablets apparently belonging to Christian Porter. They also found and seized £32,740 in cash. It was said that scientific examination established that some of the money was contaminated with drugs. Mary Porter was charged with being concerned with a supply of a Class A drug. Christian Porter was charged with possession of drugs, as was his brother John. The charge against Christian Porter related to the possession of the Ecstasy tablets. The charge against John related to the heroin which he had tried to swallow. John Porter pleaded guilty to possession of a Class A drug. Christian Porter pleaded guilty to possession of a Class A drug. The charge against Mary Porter was withdrawn. No drug trafficking inquiry was undertaken. The police have not returned the £32,740.
Mary Porter and Christian Porter started proceedings in the Liverpool County Court claiming that approximately £5,000 of the £32,740 belonged to Christian Porter and that the balance belonged to Mary Porter. They claimed return of the money and damages for conversion. The Chief Constable denied that they were the owners of the money and pleaded that on the balance of probabilities the money was the proceeds of dealing in drugs. The Chief Constable admitted liability to return the money to its true owner or owners, but said that the plaintiffs were not the true owners. He was unable to say who the true owners were and the judge said that she would not expect the police to have any idea who the true owners were either now or in the future.
The matter came before the judge upon a preliminary issue. It is, I think, clear that the terms of the preliminary issue were not as well defined as they might have been. In her judgment, the judge expressed the issue as being "whether or not in law the Defendants' contention that they are entitled to retain the money pending their finding the true owner is a good defence as against the Plaintiffs' claim for return of the money." The judge heard no evidence and was therefore not in a position to make any findings of disputed fact.
The judge referred to Tinsley v. Milligan as deciding that:
Where property interests were acquired a result of an illegal transaction the party to the illegality could recover by virtue of a legal or equitable property interest if, but only if, he could establish his title without relying on his own illegality even if it emerged that the title on which he relied was acquired in the course of carrying through an illegal transaction.
The judge then said:
It may be that the money is the proceeds of drug dealing. If the Plaintiffs had to rely on an illegal contract then of course the situation would be entirely different. But it seems to me in this case, where the Plaintiffs were in possession of the money, there is not any one who has said: "It is not their money, it is my money", they, in my judgment, do not rely on any illegal contract.
The judge held that, even if it were established that the money was the proceeds of drug dealing, she was bound by Tinsley v. Milligan and other authorities to come to the conclusion that the plaintiffs had title to the money. She considered that, if it had been intended to give the police the right to seize and hold on to money recovered from premises other than in circumstances set out in the Police and Criminal Evidence Act 1984 and the Misuse of Drugs Act 1971, parliament would have made specific provision for it. She held that the contention of the Chief Constable that the police were holding the money until they discovered the true owner was a red herring. It was fanciful to suppose that in the circumstances a purchaser of drugs would come forward and claim the money. She held that there was no principle that the court might exercise a discretion to say whether it was against public conscience to allow a plaintiff to recover money which was probably the proceeds of drug dealing. She held, therefore, that the plaintiffs were entitled to recover the money from the police.
Although these two appeals were heard together, the parties' submissions concentrated on the Webb appeal. It was acknowledged that the Porter appeal had procedural complications, to which I shall refer, which meant that, whatever the outcome on points of principle, it would have to be remitted for the court to hear evidence and make factual determinations.
It was agreed that the issues in the Webb appeal were (a) whether Roy Webb had established title to the money as against the defendant; and, if he had, (b) whether his claim was defeated by illegality.
Mr Turner Q.C. submitted on behalf of Roy Webb that his claim was in conversion and that he had sufficiently established his entitlement to possession of the money. The Assistant Recorder did not specifically so find, but the claim failed on the ground of illegality, and not on any issue of entitlement to possession. Although the money was in fact taken from Colin Webb, he had disclaimed any title to it and the evidence that it came from Roy Webb and that he was entitled to its possession was unchallenged. The defendant by contrast had no title to the money at all. The £23,020 had been seized under section 23(2) of the Misuse of Drugs Act 1971 and the balance under section 19 of the Police and Criminal Evidence Act 1984. The defendant's powers of detention were identified under section 22 of the 1984 Act. These had come to an end. The defendant's suggestion that he was entitled to retain the money under section 22(2)(b) of the 1984 Act in order to establish its lawful owner was fanciful, as Judge Bernstein held in the Porter case. The Police (Property) Act 1897 could give the defendant no title. Accordingly, Roy Webb had sufficient title and the defendant had no title at all.
As to illegality, Mr Turner submitted that, although the Assistant Recorder found that the money was the proceeds of drug trafficking, he made no precise finding as to the way in which it came into Roy Webb's possession. Mr Turner accepted that there was a strong inference from the Assistant Recorder's findings that Roy Webb must have known that the money was the proceeds of drug trafficking. Even so, upon principles to be found in the majority opinions in Tinsley v. Milligan at page 370, the claim was not defeated by illegality. Entitlement to possession would pass to Roy Webb even if the transaction by which he obtained possession was illegal. He did not have to rely on any illegal transaction to establish his entitlement as against the defendant. It was irrelevant if the illegality of the antecedent transaction emerged in evidence. Judge Bernstein's decision in the Porter case was essentially correct and the Assistant Recorder's decision in the Webb case incorrect. The Assistant Recorder sought to distinguish Tinsley v. Milligan on grounds which were inconsistent with Bowmakers Ltd v. Barnett Instruments Ltd  K.B. 65 as applied by the Privy Council in Singh v. Ali  A.C. 167, both of which cases were approved and followed in Tinsley v. Milligan.
Mr Turner further submitted that the circumstances in which the proceeds of drug trafficking can be confiscated or forfeited are governed by statute. No statutory provision extends to the circumstances of Rob Webb's case. It may be thought unsatisfactory that a person who has probably been involved in drug trafficking should have returned to him the proceeds of drug trafficking. But it is not for the court to fill a gap in statutory machinery for confiscating the proceeds of crime. It is no part of the court's business to sanction expropriation which is not authorised by statute.
Mr Edis Q.C. submits on behalf of the Chief Constable that the question of entitlement to possession of the money was in issue in each of the two cases before the court and that in neither case have the plaintiffs established their entitlement. In the Porter case, there have been no findings of fact at all. In the Webb case, the money was taken from Colin Webb and Roy Webb's explanation of how he came into possession of the money (that is, as a loan from Mr Harrison) has been rejected as untrue. The Assistant Recorder's finding that the money was the proceeds of drug trafficking, taken with the finding that Roy Webb's account of the loan was untrue, carries an overwhelming inference that, if indeed Roy Webb was entitled to possession of the money, his possession of it was unlawful. His possession of the money was an offence. If he were to receive the money back from the police, he would thereupon commit or continue to commit an offence under section 51 of the Drug Trafficking Act 1994 or related sections of that act or their statutory predecessors.
The Chief Constable does not assert any title to the money. His defence is a public policy defence which, as I understand it, has three limbs. Firstly, Roy Webb cannot establish an entitlement to possession without relying on his own illegality. Secondly, his possession of the money would itself amount to an offence, so that the claim fails under the Bowmakers exception, to which I refer later in this judgment. Thirdly, it would be absurd for the court to lend its assistance to enable Roy Webb to complete his criminal enterprise. Mr Edis suggests in support of this third submission that the case of Thackwell v. Barclay's Bank  1 All E.R. 676 was correctly decided on its facts and to that extent has survived Tinsley v. Milligan. The Assistant Recorder in the Webb case was, it is submitted, correct to note the concession recorded by Hutchison J in Thackwell at page 684h because Thackwell would have completed his criminal activity if he had received money under the cheque which was the subject of his claim against Barclay's Bank.
Section 23 of the Misuse of Drugs Act 1971 contains powers to search and obtain evidence. Section 23(2) provides:
If a constable has reasonable grounds to suspect that any person is in possession of a controlled drug in contravention of this Act ..., the constable may -
(a) search that person, and detain him for the purpose of searching him;
(b) search any vehicle ... in which the constable suspects that the drug may be found ...;
(c) seize and detain, for the purposes of proceedings under this Act, anything found in the course of the search which appears to the constable to be evidence of an offence under this Act.
In each of these two cases, the money which the claimants claim was lawfully seized under one or other of these two provisions. It is evident from their terms that the main purpose of seizing things under these sections is to prevent them being destroyed and for their possible use as evidence.
Section 22 of the 1984 Act provides:
(1) ... anything which has been seized by a constable or taken away by a constable following a requirement made by virtue of section 19 or 20 above may be retained so long as is necessary in all the circumstances.
(2) without prejudice to the generality of subsection (1) above -
(a) anything seized for the purposes of a criminal investigation may be retained, ...
(i) for use as evidence at a trial for an offence; or
(ii) for forensic examination or for investigation in connection with an offence; and
(b) anything may be retained in order to establish its lawful owner, where there are reasonable grounds for believing that it has been obtained in consequence of the commission of an offence.
Where, as in the Webb case, there is to be no prosecution, or where, as in the Porter case, prosecutions have been finally concluded without confiscation orders being made, the money is no longer required as evidence or for forensic examination. I agree with Judge Bernstein that in these cases the police are not in truth retaining the money in order to establish another lawful owner. They are retaining the money because they say that it would be against public policy to return it where, in the Webb case, it has been established to be the proceeds of drug trafficking or where, in the Porter case, they wish to set about establishing that.
Section 1 of the Police (Property) Act 1897 applies to any property which has come into the possession of the police in connection with their investigation of a suspected offence. A police officer or a claimant of the property may apply to a court of summary jurisdiction. The magistrate or court may make an order for the delivery of the property to the person appearing to be its owner or, if the owner cannot be ascertained, may make such order with respect to the property as may seem meet. It is agreed that these provisions do not prevent civil court proceedings of the kind taken in these cases. The section does not give the police any permanent entitlement to retain the property.
The position therefore is that in each of these cases the police lawfully seized the money which is claimed, but their statutory power to retain it is exhausted. These are not therefore cases, such as was Tinsley v. Milligan and many of the cases which the House of Lords there considered, where there is a contest of entitlement between claimant and defendant. The police here have no title, but advance illegality as a defence on public policy grounds. The defences have to be put in this way, since it is accepted that there is no statutory provision entitling the police to confiscate the claimants' money, if indeed they are entitled to possession of it. It is necessary to refer briefly to those statutory provisions which do exist.
Section 43 of the Powers of Criminal Courts, Act 1973 applies where a person is convicted of an offence. The court by or before which he is convicted can deprive the offender of his rights to property to which the section relates. The property is taken into the possession of the police, and the 1897 Act applies to it with certain modifications. The property is property lawfully seized or in the offender's possession when he was apprehended which was used for the purpose of committing, or facilitating the commission of, any offence or was intended to be used for that purpose; or the offence, or an offence which the court has taken into consideration in determining his sentence, consists of unlawful possession of property which has been lawfully seized from him or was in his possession when he was apprehended. It has been held that, where money found in the possession of a person convicted of supplying drugs is shown to be his working capital for the purchase of future supplies of drugs, it may be liable to an order under section 43 of the 1973 Act - see R. v. O'Farrell (1988) 10 Cr.App.R(S) 74. The section however applies upon conviction and is part of a discretionary sentencing process.
Sections 2 to 10 of the Drug Trafficking Act 1994 apply where a defendants appears before the Crown Court to be sentenced for one or more drug trafficking offences, and where either the prosecutor asks the court to proceed under the provisions or the court considers that it is appropriate to do so. [The scheme of the 1994 Act derived from earlier legislation in force at the times relevant to these appeals.] The court first determines whether the defendant has benefited from drug trafficking. If it so determines, there is then a determination of the amount to be recovered, which the court then orders the defendant to pay, taking this into account before imposing what are essentially financial penalties or forfeiture orders. By section 2(8), the standard of proof required to determine whether a person has benefited from drug trafficking or the amount to be recovered is the civil standard. The details of these provisions are complicated, but the essential point is that the sections provide for confiscation orders in conjunction with the sentencing process of those who have been convicted of drug trafficking offences. Section 71 of the Criminal Justice Act 1988 contains similar confiscation provisions for offenders convicted of relevant offences other than specifically drug trafficking offences. Section 42 of the Drug Trafficking Act 1994 empowers a customs officer or constable to seize and detain any cash which is being imported into or exported from the United Kingdom if, among other things, he has reasonable grounds for suspecting that it directly or indirectly represents any person's proceeds of drug trafficking, or is intended by any person for use in drug trafficking. Section 43 of the 1994 Act provides for a Magistrate's Court to order the forfeiture of cash seized under section 42 if the court is satisfied that the cash directly or indirectly represents any person's proceeds of drug trafficking or is intended by any person for use in drug trafficking.. The standard of proof in proceedings on an application under section 43 is the civil standard and "an order may be made under this section whether or not proceedings are brought against any person for an offence with which the cash in question is connected."
There are various statutory provisions for the forfeiture and disposal of objects used in the perpetration of offences, such as firearms, offensive weapons, knives, drugs and so forth - section 52 of the Firearms Act 1968; section 1(2) of the Prevention of Crime Act 1953; section 6 of the Knives Act 1997; and section 27 of the Misuse of Drugs Act 1971. Section 6 of the Criminal Justice Act 1972 provides for the making of restitution orders for the purpose of section 28 of the Theft Act 1968 out of money taken from the offender on his apprehension. All of these powers are exerciseable upon conviction.
In summary, therefore, there are various statutory provisions providing for the forfeiture of the proceeds of crime or of objects used in the commission of crime. Most of the powers are exerciseable only if the offender is convicted. None of them applies to Roy Webb or Mary Porter, who have not been convicted. Christian Porter was convicted but statutory confiscation proceedings were not taken against him. Sections 42 and 43 of the 1994 Act do provide for forfeiture of the proceeds of drug trafficking in proceedings to which the civil standard of proof applies whether or not there has been a prosecution; but the sections only apply to cash which is being imported into or exported from the United Kingdom.
Tinsley v. Milligan  1 A.C. 340 is the leading authority on the effect of illegality upon civil relationships. The essential principles are to be found in the majority opinion of Lord Browne-Wilkinson, with whom Lord Jauncey of Tullichettle and Lord Lowry agreed. At page 370C, Lord Browne-Wilkinson said:
From these authorities the following propositions emerge (1) property in chattels and land can pass under a contract which is illegal and therefore would have been unenforceable as a contract; (2) a plaintiff can at law enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right; (3) it is irrelevant that the illegality of the underlying agreement was either pleaded or emerged in evidence: if the plaintiff has acquired legal title under the illegal contract that is enough.
These principles apply equally to legal and equitable rights. The law has in this respect moved on since the enunciation of what is referred to as Lord Eldon's wider principle as expressed, for instance, in Curtis v. Perry, 6 Ves. 739 at 746a, to the effect that equity will assist neither party to an illegal transaction. It was on this point that the minority in Tinsley v. Milligan (Lord Keith of Kinkel and Lord Goff of Chieveley) disagreed with the majority. Lord Browne-Wilkinson explained the shift in the law in these terms at page 375B:
In my judgment, the explanation for this departure from Lord Eldon's absolute rule is that the fusion of law and equity has led the courts to adopt a single rule (applicable both at law and in equity) as to the circumstances in which the court will enforce property interests acquired in pursuance of an illegal transaction, viz., the Bowmakers rule  K.B. 65. A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if he can establish his title without relying on his own illegality.
Lord Browne-Wilkinson said that the position was well illustrated by two decisions of the Privy Council, one of which was Singh v. Ali  A.C. 167. He concluded that, although there was no case overruling the wide principle stated by Lord Eldon, as the law has developed the equitable principle has become elided into the common law rule. He concluded his opinion by saying at page 376G:
Finally, I should mention a further point which was relied on by Miss Tinsley. It is said that once the illegality of the transaction emerges, the court must refuse to enforce the transaction and all claims under it whether pleaded or not: see Scott v. Brown, Dearing, McNab & Co.  2 Q.B. 724. Therefore, it is said, it does not matter whether a plaintiff relies on or gives evidence of the illegality: the court will not enforce the plaintiff's rights. In my judgment, this submission is plainly ill founded. There are many cases where a plaintiff has succeeded, notwithstanding that the illegality of the transaction under which she acquired the property has emerged: see, for example, Bowmakers Ltd. v. Barnett Instruments Ltd.  K.B. 65 and Singh v. Ali  A.C. 167. In my judgment the court is only entitled and bound to dismiss a claim on the basis that it is founded on an illegality in those cases where the illegality is of a kind which would have provided a good defence if raised by the defendant. In a case where the plaintiff is not seeking to enforce an unlawful contract but founds his case on collateral rights acquired under the contract (such as a right of property) the court is neither bound nor entitled to reject the claim unless the illegality of necessity forms part of the plaintiff's case.
Lord Lowry in Tinsley v. Milligan expressed the principle succinctly at page 368G as follows:
The foregoing considerations render me all the more convinced that the right view is that a party cannot rely on his own illegality in order to prove his equitable right, and not that a party cannot recover if his illegality is proved as a defence to his claim.
All members of the court agreed that, in the words of Lord Browne-Wilkinson at page 369B:
... the consequences of being a party to an illegal transaction cannot depend, as the majority of the Court of Appeal held, on such an imponderable factor as the extent to which the public conscience would be affronted by recognising rights created by illegal transactions.
In Singh v. Ali, there was an unlawful sale to the plaintiff of a lorry, which was registered in the defendant's name as part of the illegal purpose. The defendant removed the lorry from the plaintiff's possession without his consent and refused to return it. The plaintiff claimed its return or its value. It was held that, notwithstanding that the contract for the sale of the lorry was unlawful, when the lorry was sold and delivered to the plaintiff under the contract, the property in it passed to him. He derived the right to its immediate possession, which entitled him to sue the defendant for its detention. The plaintiff also had actual possession of the lorry at the time when the defendants seized it and was entitled to sue in trespass. Accordingly his claim succeeded. Lord Denning, who delivered the opinion of the Board, said at page 176:
Although the transaction between the plaintiff and the defendant was illegal, nevertheless it was fully executed and carried out; and on that account it was effective to pass the property and the lorry to the plaintiff. There are many cases which show that when two persons agree together in a conspiracy to effect a fraudulent or illegal purpose - and one of them transfers property to the other in pursuance of the conspiracy - then, so soon as the contract is executed and the fraudulent or illegal purposes achieved, the property (be it absolute or special) which has been transferred by the one to the other remains vested in the transferee, not withstanding its illegal origin: see Scarfe v. Morgan (1838) 4 M.&W. 270, 281, per Parke B. The reason is because the transferor, having fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by which he did it - he cannot throw over the transfer. And the transferee, having obtained the property, can assert his title to it against all the world, not because he has any merit of his own, but because there is no one who can assert a better title to it. The court does not confiscate property because of the illegality - it has no power to do so - so it says, in the words of Lord Eldon: "Let the estate lie where it falls"; see Muckleston v. Brown (1801) 6 Ves. 52, 69. This principle was applied by the Court of Appeal recently in Bowmakers Ltd. v. Barnett Instruments Ltd. The parties to the fraud are, of course, liable to be punished for the part they played in the illegal transaction, but nevertheless the property passes to the transferee.
The principle in the Bowmaker's case was approved and applied in Tinsley v. Milligan. In the Bowmaker's case itself, the judgment of the Court of Appeal given by du Parcq L.J. referred to an exception to the general rule in these terms at page 72:
It must not be supposed that the general rule which we have stated is subject to no exception. Indeed, there is one obvious exception, namely, that class of cases in which the goods claimed are of such a kind that it is unlawful to deal in them at all, as for example, obscene books. No doubt, there are others, but it is unnecessary, and would we think be unwise, to seek to name them all or to forecast the decisions which would be given in a variety of circumstances which may hereafter arise.
The main principle in Tinsley v. Milligan is expressed by reference to an underlying agreement to which both the claimant and the defendant are parties. In the present appeals, there is no such underlying agreement. The Chief Constable claims no title to the money. If it is supposed, for the sake of illustration only, that Roy Webb acquired the money in issue in his appeal in one or more unlawful transactions consisting of the sale by him of controlled drugs, possession of the money passed to him and there is no question of him seeking to enforce unlawful transactions. The hypothetical transactions are complete and he was in possession of the money notwithstanding the illegality. He does not have to rely on anything more than his right to possession as against the Chief Constable. It is irrelevant that illegality surrounding his acquisition of the money was pleaded in defence or emerged in evidence. He is not seeking to enforce an illegal agreement.
Mr Edis concentrated on the twin submissions (a) that, upon the Assistant Recorder's findings, Roy Webb's possession of the money before it was seized must have constituted or been part of one or more offences by him either as principal drug trafficker or as money launderer; and (b) that, if the money is handed back to him under an order of the court in these proceedings, the very receipt by him of it would constitute an offence. Mr Edis referred us to sections 49, 50 and 51 of the Drug Trafficking Act 1994 and their statutory predecessors. He submitted that it would be absurd if the law had this result and that it would be against public policy for the court to lend its assistance to a continuing criminal enterprise. Mr Turner submitted that, although there are various money laundering offences under which the possession of the proceeds of drug trafficking by other people is an offence, it is not an offence to be in possession of the money proceeds of your own drug trafficking. Mr Turner also submitted that the submissions relying on these sections of the 1994 Act were no part of the Chief Constable's case before the Assistant Recorder. This court should not entertain these submissions when the Assistant Recorder had made no specific findings of fact in relation to them. In my view, Mr Edis' submissions about offences that might have been committed before the money was seized do not sit well with the fact that, for whatever reason, Roy Webb was not prosecuted for any such offences. As to the possibility of offences subsequent to any order in Roy Webb's favour in these proceedings, I consider that it is unnecessary and undesirable for this court to speculate about the future in the light of the Assistant Recorder's limited findings of fact about the past. Such questions should be addressed if and when the occasion arises.
In my judgment, the facts of Roy Webb's case do not fall within the Bowmaker's exception. That exception refers to goods of such a kind that it is unlawful to deal in them at all. The example given was obscene books. If Roy Webb were claiming the return of controlled drugs seized by the police, that would come within the exception. But money is not something which it is unlawful to deal in at all.
The Assistant Recorder relied on the survival after Tinsley v. Milligan of part at least of the decision of Hutchison J. in Thackwell v. Barclay's Bank. In that case the plaintiff sued the bank for making payment on a cheque payable to him on which his signature had been forged by way of endorsement. Hutchison J. held that the bank had been negligent and were not therefore entitled to rely on section 4 of the Cheques Act 1957. But he dismissed the action because the cheque constituted the payment to the plaintiff of the proceeds of a fraudulent enterprise. It was conceded on behalf of the plaintiff that, if he knew that the scheme was fraudulent, he could not recover. Hutchison J. held that he did know from the outset that the scheme was fraudulent and willingly participated in it. Accordingly his claim failed. The defendant had advanced an alternative argument, which the judge accepted, that, even if the plaintiff was innocent, his claim should fail. The test upon which this argument was based, to be found on page 687 of Hutchison J.'s judgment, was seen by the House of Lords in Tinsley v. Milligan as the origin of the public conscience test, which, in its developed form at least, the House of Lords rejected. Lord Goff said at page 359D of Tinsley v. Milligan that it was unnecessary for the House of Lords to consider whether the test accepted by Hutchison J. was good law or not, although Lord Goff's subsequent discussion reads to me as being unenthusiastic. The test, suggested by counsel for the defendants in Thackwell, was recorded by Hutchison J at page 687d in these terms:
That test, he suggested, involved the court looking at the quality of the illegality relied on by the defendant and all the surrounding circumstances, without fine distinctions, and seeking to answer two questions: first, whether there had been illegality of which the court should take notice and, second, whether in all the circumstances it would be an affront to the public conscience if by affording him the relief sought the court was seen to be indirectly assisting or encouraging the plaintiff in his criminal act.
In my judgment, this formulation, taken as a whole, does not survive the rejection by the House of Lords of the public conscience test. I have already referred to Lord Browne-Wilkinson's summary rejection of it. I would not, however, rule out the possibility that circumstances might arise where the court would refuse relief where to grant it would be "indirectly assisting or encouraging the plaintiff in his criminal act".
The Assistant Recorder held that nothing in Tinsley v. Milligan appeared to challenge the correctness of the concession on behalf of the plaintiff that, if he were found to have participated in the fraudulent scheme, he could not recover against the bank. The Assistant Recorder accordingly held it to be the law that "one cannot seek to recover property - in that case the value of the cheque - when the property in question was obtained by the illegality of the plaintiff". He held that it followed that, if the police established that the money which Roy Webb claimed was the proceeds of illegality such as drug dealing, he was not entitled to recover it from the Chief Constable. In my judgment, this holding is contrary to the actual decision in Tinsley v. Milligan and does not derive from any reservation by Lord Goff that Hutchison J.'s test might survive. I did not understand Mr Edis to support the Assistant Recorder's finding in the terms in which it was made. He did, however, suggest that the actual decision in Thackwell may have been right on its own facts on the basis that the claim for payment under the cheque was the last act of a criminal conspiracy, on the basis of a principle that the court should not make an order which facilitates a criminal to complete his crime. I would reserve (without enthusiasm) the question whether there may be such a qualification to the principles in Tinsley v. Milligan. It certainly is the law that the court will not enforce executory provisions of an unlawful contract - see Lord Jauncey in Tinsley v. Milligan at page 366C - but that is not Roy Webb's case. Nor, in my judgment, would the return to him of the money which he claims constitute the completion by him of a crime. If he committed a crime which resulted in his possession of the money, the crime was already complete before the police seized the money.
In my judgment, therefore, on the facts found by the Assistant Recorder and assuming for the moment that Roy Webb sufficiently established an entitlement to possession of the money which he claimed, the facts established by the Chief Constable did not constitute a defence to the claim under any hitherto recognised exception to the principles in Tinsley v. Milligan. The question nevertheless is whether as a matter of public policy the court should refuse Roy Webb relief on the ground that to do so would assist in a criminal enterprise. Mr Edis referred to the decision of this court in Reeves v. Commissioner of Police of the Metropolis  Q.B. 169 for the continued existence of a public conscience defence on the ground of illegality in certain circumstances, notwithstanding its rejection in Tinsley v. Milligan. In Reeves, the question was whether it would be against public conscience to award damages for negligence to the estate of a person who had committed suicide. That is, however, far removed from this case.
In my judgment, the court should not extend the law in the way suggested. Although from the Chief Constable's perspective the money is the proceeds of crime, from another perspective the court should not, in my view, countenance expropriation by a public authority of money or property belonging to an individual for which there is no statutory authority. There is statutory machinery for the prosecution of those who deal in drugs and for the confiscation upon conviction of the proceeds of their drug dealing. There is statutory machinery for the confiscation upon conviction of the proceeds of other serious crime. There is statutory machinery for the forfeiture of the cash proceeds of drug trafficking which are being imported into or exported from the United Kingdom. There is no statutory power to confiscate the proceeds of drug dealing within the United Kingdom where the person entitled to possession of the money is not convicted of a drug trafficking offence. I recognise that there may be circumstances where for a variety of reasons a prosecution may not take place. But that does not, in my view, justify expropriation by means of a defence to a civil claim for return of money which has been seized from persons who are not convicted. It is one thing to prosecute to conviction and to take positive steps authorised by statute to confiscate the proceeds of crime from the convicted defendant. It is quite another to resist the claim of an innocent person by asserting some or all of the ingredients of what might have been a prosecution; or to effect confiscation in this way from a convicted person against whom statutory confiscation machinery has not been used. Innocent claimants would, I am sure, be deterred from pursuing entirely proper claims for the return of money or property to which they were entitled. I can foresee quite unacceptable possible consequences of the development of the law for which the Chief Constable contends in these cases. If statutory provision for civil confiscation are inadequate, it is for Parliament to strengthen them after proper consideration of all the implications.
The conclusion which I have reached accords with observations of this court in Malone v. Metropolitan Police Commissioner  Q.B. 49. The police in that case, acting under a search warrant, entered the plaintiff's house and seized some cash. The plaintiff with others was charged with conspiracy and handling stolen property but no specific charge was made in relation to the money. The police refused to return most of the money before the criminal trial. The plaintiff took proceedings in which he claimed to the delivery up to him of the cash. Wien J. granted an injunction to this effect. On appeal, it was held that, although there was no general power in the police to retain property lawfully seized which was not the subject of any charge and the police must justify such retention upon some ascertainable ground, circumstances could arise in that case where the cash would form material evidence at the trial. This justified its retention by the police until the conclusion of the criminal trial. It was, however, further held that, if the money could not have been retained as material evidence in the criminal trial, the police would not have been entitled to retain it for the purpose of making it available in the event of a conviction to satisfy an order under section 28(1)(c) of the Theft Act 1968 or under section 35 or section 43 of the Powers of Criminal Court's Act 1973, because none of those sections conferred power on the police to retain money not the subject of any charge which had been found in the possession of an accused at the time of his arrest. Stephenson L.J. said at page 61H:
The common law can develop in many ways, but I would accept it as clear law that, generally speaking, the right or power to deprive a defendant of his property even for a time, whether in criminal or in civil proceedings, for the purpose of punishing him by forfeiture or compensating the victim of his wrongdoing by any form of restitution, can only be conferred by express and unambiguous statutory provisions.
And at page 63G, Stephenson L.J. said:
If such a power or powers as Mr Hazan wants the police to have, or the courts to assert that they have, are now required for the protection of the public against the increase of crime, it is for Parliament, not the courts to grant them.
It is right to point out that Roskill L.J. expressed the view at page 71 that it would not be right, in circumstances where the plaintiff's initial possession of foreign currency forming part of the cash seized was unlawful, to grant him equitable relief in the form of a mandatory injunction for the return of the foreign currency. Mr Edis relied on this passage in support of his submissions. However, Roskill L.J. stated explicitly at page 71G that he did not rest his decision on this ground. He also said at page 72A that he was in complete agreement with Stephenson L.J. on all points. I also doubt, without deciding, whether the view expressed by Roskill L.J. on page 71 could now stand in the face of Tinsley v. Milligan.
For these reasons, I consider that the Assistant Recorder's conclusion in the Webb case on the subject of illegality was erroneous. It was no defence to Roy Webb's claim to establish that the money which he claimed was the proceeds of unlawful drug trafficking. In the Porter case, Judge Bernstein's conclusion on the subject of illegality was correct in law. It would be no defence in that case to establish that the money seized was on the balance of probabilities the proceeds of dealing in drugs.
As to entitlement to possession, there is an instructive analysis in the decision of the Supreme Court of Victoria in Field v. Sullivan  V.L.R. 70. The essence of an extended passage in the judgment of Macfarlan J on pages 84-87 is that if goods are in the possession of a person, on the face of it he has the right to that possession. His right to possession may be suspended or temporarily divested if the goods are seized by the police under lawful authority. If the police right to retain the goods comes to an end, the right to possession of the person from whom they were seized revives. In the absence of any evidence that anybody else is the true owner, once the police right of retention comes to an end, the person from whom they were compulsory taken is entitled to possession.
Roy Webb's entitlement to possession of the money which he claims was in issue in his proceedings. But the basis of the Chief Constable's case was that Roy Webb was not the true owner because the money was the proceeds of drug trafficking. The contention that the Chief Constable was entitled to retain the money until the true owner was found was, as I have said, fanciful. What was not in issue was that, apart from drug dealing, Roy Webb was entitled to possession of the money. The Assistant Recorder did not deal with this, because it was not in issue. No one else claimed to be entitled to the money. Specifically Colin Webb had disclaimed any entitlement. The fact that the Assistant Recorder rejected Roy Webb's evidence about the loan from Mr Harrison is not in point, since Roy Webb did not have to establish where the money came from. The evidence about the loan was in attempted opposition to the Chief Constable's case about drug dealing, which was not itself a defence to the claim. In my judgment, there is no proper basis for remitting the question of entitlement to possession in Roy Webb's case for further consideration. I would accordingly allow his appeal.
In the Porter case, entitlement to possession is in issue. The judge came to her decision upon a preliminary issue without hearing evidence. She was not, therefore, in a position to determine it. For this reason, I would allow the Chief Constable's appeal in the Porter case to the extent of remitting the case for that issue to be determined. It would be a matter for the Chief Constable whether he wishes to pursue the case on that issue alone.
I agree with the judgments of both May and Pill L.J.J.
I agree. May LJ has set out in his judgment the statutory provisions making possible the forfeiture and confiscation of the proceeds of crime or objects used in the commission of crime. These include a power, under section 42 of the Drugs Trafficking Act 1994, to detain cash which is being imported into the United Kingdom if there are reasonable grounds for suspecting that it directly or indirectly represents any person's proceeds of drug trafficking, or is intended by any person for use in drug trafficking. Under section 43 of the Act, a Magistrates Court may order forfeiture of cash seized under section 42. These provisions, first enacted in the Criminal Justice (International Co-operation) Act 1990, were intended to assist in the international suppression of money-laundering operations. As May LJ has stated, they do not extend within the United Kingdom, beyond cash "which is being imported into or exported from the United Kingdom".
I agree in particular with the conclusion of May LJ that if statutory provisions for the forfeiture of cash are inadequate, it is for Parliament to strengthen them after proper consideration of all the implications. The principle was stated clearly by Stephenson LJ in Malone v Metropolitan Police Commissioner  QB 49 at p 61 and p 63, cited by May LJ. The conditions in which forfeiture is justified must be clear and specific.
Mr Edis QC, for the Chief Constable, has relied upon what has been described as the Bowmakers exception, that is a statement of du Parcq LJ giving the judgment of this Court in Bowmakers Ltd v Barnet Instruments Ltd  KB 65 at p 72. du Parcq LJ stated:
It must not be supposed that the general rule which we have stated is subject to no exception. Indeed, there is one obvious exception, namely, that class of cases in which the goods claimed are of such a kind that it is unlawful to deal in them at all, as for example, obscene books. No doubt, there are others, but it is unnecessary, and would we think be unwise, to seek to name them all or to forecast the decisions which would be given in a variety of circumstances which may hereafter arise.
There are echoes of that approach in the judgment of Roskill LJ in Malone at p 71.
The scope of that exception remains uncertain. No comment was made upon it in Tinsley v. Milligan  1 AC 340, though the decision in Bowmakers Ltd was approved by the majority in the House of Lords. Some of the situations which the Court almost certainly had in mind in Bowmakers Ltd would now be covered by statutory provisions which did not exist in 1945. I agree with May LJ that the exception does not avail the Chief Constable in the present cases and for the reasons given by May LJ. I too would not rule out the possibility that there may be circumstances in which the exception could be relied upon by a party in the position of the Chief Constable.
The Chief Constable is not in my judgment entitled to succeed in these actions on the ground that if he were to return the money he would be assisting the commission of crime. He has no continuing right to retain the money in the face of a better claim by Roy Webb to possess it, notwithstanding the finding of the Assistant Recorder in the Webb action that, on the balance of probabilities, the money was the proceeds of dealing in drugs. The Court has not been told, nor has it enquired, as to why there were no prosecutions in these cases. In the absence of a conviction, the Chief Constable fails upon the legal point raised. I do not consider it appropriate for this Court to comment or speculate upon what further action may be taken by the prosecuting authorities or as to its effect in law.
I agree with the course proposed by May LJ. I pay tribute to the careful way in which the Assistant Recorder considered the issues before him in Webb but on his findings of fact, he did in my judgment reach the wrong conclusion as to Roy Webb's entitlement in the action.
Order: Appeal in the case of Webb allowed with costs here and below; the matter of interest to be remitted to Liverpool County Court in the event the parties cannot agree; in the case of Porter appeal allowed to the extent of remitting the matter back to the Liverpool County Count to be heard by a different judge; respondents to have their costs here and below. Order does not form part of approved judgment.