England and Wales Court of Appeal (Criminal Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM CROWN COURT AT GRIMSBY
HIS HONOUR JUDGE REDDIHOUGH

		Royal Courts of Justice Strand, London, WC2A 2LL
		26/05/2004

Lord Justice Auld : Reasons For Judgment
1. On 18^th October 2002, before His Honour Judge Reddihough and a jury in the Crown Court at Grimsby, the appellant was convicted on one count of fraudulent trading, contrary to section 458 of the Companies Act 1985 and seven counts of theft. And, on 5^th December 2002, the Judge sentenced him to six months imprisonment and disqualified him under section 2 of the Company Directors Disqualification Act 1986 from acting as a director or being concerned in the management of a company for five years.
2. The appellant appealed against conviction by leave of the Single Judge. On 1^st April 2004 we dismissed his appeal. These are reasons for doing so.

The facts and the evidence at trial

3. In 1995 the appellant became the managing director of a company known as Freetime Sport Limited ("Freetime"), which traded as a mail order company selling sports and designer wear direct to the public from premises in Grimsby. The prosecution case was that, towards the end of 1997, Freetime was in dire financial straits and that, to alleviate its difficulties, the appellant devised and oversaw the operation of a scheme for quick disposal of old stock of Ralph Lauren shirts. Under this scheme, with the assistance of a computer software programme provided by the company called "HCCM", the Company selected and sent to previous customers who had bought goods from it on their credit card accounts, shirts that the customers had not ordered and at the same time debited their credit card accounts. This was an extreme, and the prosecution maintained an illegal, form of a trading device known as a "negative option scheme" in which traders foist unsolicited goods on persons requiring payment if they do not return the goods within a short time. In its less extreme, but hardly more respectable form, such a scheme often provides for a delay of, say, seven days, from despatch of the unsolicited goods before the customer's credit card account is debited with the charge for them.
4. The prosecution case was that this scheme, with its immediate debiting of customers' accounts, without their consent or knowledge, was clearly dishonest and that the appellant knowingly and dishonestly instructed it and was party to its use. It was alleged that within a short period of a few days in early December the Company, by this means, augmented its trading receipts by over £250,000. The appellant's defence was that he instructed and was a party to the use of a negative options scheme, but not knowingly as to charge customers at the point of order. On his case, he had instructed - and had mistakenly believed at the time that his instructions had been followed - a negative option trading scheme that only debited customers' accounts seven days after despatch if they had not, by then, indicated their intention to refuse to accept the shirts. (We should perhaps note that it is moot whether the scheme would have been lawful even on that basis.) Count 1 charged a single offence of fraudulent trading to cover this conduct between 30^th November 1997 and 15^th January 1998, but in fact over three days from 2^nd to 4^th December 1997, and counts 2 to 8 charged individual thefts as instances of that fraudulent trading, consisting in each case of stealing the amount debited to a customer in respect of a "created" order under fraudulent scheme.
5. The prosecution evidence was that at the material time the appellant was the managing director and, though only a 25% owner of its equity, effectively controlled the business of Freetime. He was responsible for all important decisions. Others involved in the company at a senior level were: John Smith who had founded and run the company as a family business, but who had gradually handed over the control of it to the appellant; Graham Simpson, the operations manager responsible for the mail order side of the company's business and a number or area retail outlets, to whom the appellant delegated much of the day to day running of the mail order side; and Andrew Smith, the company's information technology manager, who was the company's main liaison with HCCM, the computer company that had provided the software programme in question.
6. Freetime had a sort of invoice factoring scheme with a finance company known as Barclays Merchant Services ("BMS") to expedite receipt of monies for goods despatched to customers who charged their purchases to their credit card accounts. Freetime notified the Bank as and when it debited the accounts and the Bank, for a commission, would pay Freetime the money debited before the Bank received it from the credit card companies. If and when customers sought a refund it operated a system of "charge backs", that is of making the refunds and charging them to Freetime.
7. In October 1997 Mr Malcolm Harper, a fraud investigator of BMS became concerned about the level of charge backs, resulting in an accumulation of credit extended by it to Freetime of about £60,000. BMS dealt with this at the time by arranging with the appellant to hold back some of the funds that it would otherwise have paid immediately to Freetime on notification by it of debits to customers' accounts for goods despatched.
8. Simpson and other employees of the company, including Mark Allen, its accounts manager, and Sarah Davies is telesales manager, who gave evidence for the prosecution, indicated in their different areas of responsibility, the increasing financial difficulty for the company as the end of the year approached to maintain its liquidity and honour its customers' orders. Customers who had ordered and paid for goods called in increasing numbers to complain and to ask for their money back. The position became so bad that company had to arrange a separate telephone line to deal with complaints, and the appellant set a daily limit on the amount that the company would refund.
9. According to Simpson in his evidence at the trial, the appellant, in late November/early December 1997 devised a scheme to dispose of a large number of Ralph Lauren shirts left over from a previous sales campaign by sending one each to selected previous customers of the company on an unsolicited sale or return basis. In his evidence in chief, he said that when the appellant first discussed this scheme with him, he made no mention of when the customers would be charged. His, Simpson's, expectation was that the company would allow three days for the shirts to be delivered to the selected customers and a further four days to give them an opportunity to decide whether to keep, or to notify Freetime that they did not wish to keep them. As will appear when we come to consider the second ground of appeal, this was the first mention in the case of such a seven day delay being part of the scheme. Simpson had not mentioned it in his witness statement; indeed, he had given a wholly contrary impression in that statement, namely that the appellant had indicated to him that he was going to send Freetime's existing customers unsolicited goods and at the same time debit their credit card accounts without their authority. Not even the appellant before he gave evidence at trial had made any mention of such delayed charging being part of the scheme; he had said nothing about it in interview or in his defence statement.
10. On about 1^st December the appellant requested HCCM, a firm of computer software specialists, to produce a programme as a base for operation of such a negative options scheme, though without requiring incorporation in it of any programme for delay in charging. However, Simpson, in his evidence at trial said that he thought that HCCM had been asked to write a computer programme to give effect to such a delay and that there was to be a standard letter from the company enclosed with each unsolicited parcel informing the customer of that seven day scheme, matters, as we have just indicated, he had not mentioned in his witness statement.
11. Because Simpson's evidence in chief on the critical issue of the appellant's intention and instructions for the timing of debiting of customers' accounts was not so damning to the appellant's case as his witness statement suggested it would be, Mr Harwood-Stevenson, who appeared for the appellant at trial, and again on this appeal, did not cross-examine him on the point.
12. Andrew Smith, who also gave evidence for the prosecution, but, relevantly to the appellant's case on this appeal, after Simpson, said that the appellant, as managing director of Freetime "ran everything". He remembered that in early December 1997 either the appellant or Simpson asking him to sign a memorandum requesting HCCM to produce a software programme for Freetime that would produce deemed orders from previous customers, debiting their credit card accounts on despatch of the goods. He said that he had refused to sign the memorandum as he considered that the proposal was improper, and voiced his concern to Simpson. In the event, he had nothing to do with the arrangements with HCCM for ordering or acceptance of the software programme that it provided.
13. Mr Steven Hunwick and Paul Chadwick of HMMC gave evidence of receipt of instructions from the appellant for provision to Freetime of the computer software for the proposed scheme, namely a system for selecting past credit card account customers in respect of whom orders were to be "created". Hunwick said that the appellant did not instruct HCCM to provide for a seven day interval between order and debiting the selected customers' accounts; it was for Freetime to decide what type of negative option scheme the programme was to serve and that the programme provided by HCCM was capable of being adapted by Freetime to incorporate a delay in charging for the goods supplied to such customers. He said that he had spoken to the appellant and asked him to explain what he had in mind. And, because he had never previously been asked to provide such a scheme to a clothing company, he had sought a written undertaking from the appellant that Freetime would not charge any customer's credit card account without his or her express permission. The appellant, by letter to Hunwick of 2^nd December 1997 gave such an undertaking in the following terms:

"Further to our earlier conversation, I confirm my request for a program to create a series of 'negative option' orders for immediate despatch from the list we have generated.

For convenience for future charging we requested that you attach customers credit card details to these orders but assure you that we do not intend to charge cards for these unsolicited goods until the customer has been given an opportunity to decline them.

I appreciate your co-operation in this request and understand that you will be able to deliver the Software within 48 hours. …"

Hunwick added that the appellant had not instructed HCCM to include in the software programme provided any standard explanatory note or letter to the selected recipients of unsolicited goods explaining the negative option scheme under which the goods were sent to them. However, he said, that that was a simple task that Freetime could have undertaken for itself.

14. Hunwick explained that the programme enabled the production of regular reports that would advise the reader of the simultaneous debiting of customers' credit card accounts with its "creation" of their orders. He said that he knew that Freetime staff had used these reports because they had raised queries on them with HCCM at the material time. However, he said that no-one at Freetime had ever complained to HCCM about the way in which the programme had operated or had reported any problems with it.
15. Andrew Smith, in his evidence, explained that HCCM had installed its software into Freetime's computer system simply by dialling into it, uploading the programme and providing instructions for its operation. Importantly, he said that the programme had enabled Freetime to debit the selected customers' credit card accounts at the same time as it "created" their orders. He added that there were two ways in which Freetime could have prevented that: first to instruct the computer to substitute a later date for debiting the accounts, not a simple task; or to have created a "charging file" in the mail order software so that charges were not transmitted to Barclays Merchant Services until after the 7^th day following despatch of the goods. He said that the appellant or Simpson had instructed him to operate the programme but that neither of them had directed him to take either of those courses. He also said that neither of them had asked him to create a message for insertion on the invoices informing customers that they would not be charged if shirts were returned within 7 days, and he did not do so. He added that the immediate charging could not have occurred by accident or without those involved at Freetime - including by implication, the appellant - knowing of it.
16. Mr Harwood-Stevenson, in his submissions to this Court, informed it that, until Mr Smith gave this evidence, the defence had been conducted on the basis of the appellant's claimed belief that the software, as provided by HCCM, already had an inbuilt delay.
17. When the scheme was put into effect on 2^nd December and operated over the next two or three days, it did not operate in the way that Simpson described in his evidence, but as Andrew Smith described it. Thousands of previous customers received parcels, each containing a shirt in respect of which they had been debited a sum for a deemed purchase of which they knew nothing, raising, on the prosecution's case, more than £250,000, on the defence case, more than £150,000. None of the recipients of the shirts received any documentation with it explaining the basis upon which it had been sent, whether or when the recipient would be charged for it or how he should go about rejecting or returning it. In some cases that parcel contained no indication of who had sent it. In short, no seven day deciding time was given to them, their credit card accounts were debited at the time of the computer's "creation" of the their order, that is, even before delivery.
18. Andrew Smith said that "the management" knew perfectly well of the charging of credit customers' accounts immediately on the computer's "creation" of their orders. He said that he had done nothing to stop it as the appellant and Simpson knew about it, and he had presumed that that was what they had intended. He mentioned that the appellant had walked through the offices on 2^nd or 3^rd December and looked at the screens whilst the programme was running, from which he would have seen that instant charging was taking place. He denied that it had resulted from any negligence on his part or that he was trying to cover up for any fault of his or that of HCCM.
19. Not surprisingly, there were many complaints from recipients of the unsolicited shirts complaining that they did not want them, so many – between 200 to 300 a day - that the company's phone lines were blocked. The staff were instructed by the appellant to tell such callers that the shirts had been sent to them as a result of a computer error and that they should return them if they wanted a refund. There were so many claims for a refund, and their effect on Freetime's financing arrangements with BMS and on its already endangered liquidity were such that, on 15^th December 1997, the BMS terminated its financing of the Company's sales to credit card account customers. On 14^th January 1998 the Company went into receivership, and on 14^th May 1998 it was wound up with a net deficiency of well over £1 million.
20. According to Andrew Smith, the appellant had never suggested to him that there had been a terrible mistake in the operation of the computer charging system; nor had he reproached him for what had occurred.
21. It was not until March 1999 that the police arrested the appellant on suspicion of being a party to the fraudulent trading of Freetime, and interviewed him. By then the software programme that Freetime had used in the scheme was no longer available for examination by them, and the appellant did not mention it in the interview. The interviewing officers were Detective Constables Adele Walden and William Orr. The appellant, in response to their questions, spoke of the trading operations of Freetime and acknowledged his pivotal position in its direction and management. He said that he had been aware on almost a daily basis of the current financial position of the Company and had been in regular contact with its bankers. He explained the refund and charge-back system and the difficulties caused for its cash-flow by BMS's introduction in October 1997 of a delay in funding a proportion of its financing of Freetime's mail order trading because of the high volume of claims for refunds. He denied having instigated a programme by which past customers' credit card accounts had been debited without their authority. He also denied any knowledge of how they had come to be so debited or why it was that so many charge-backs were recorded in respect of orders "created" between 2nd and 4^th December 1997 He maintained that the Company had done exactly what he had undertaken to do in his letter to Hunwick of 2^nd December 1997. Later when he came to give evidence at his trial, he admitted that that was a lie and that he had been stalling with the officers in an attempt to discover what allegations he was facing and what Hunwick or Chadwick of HCCM had told them.
22. The trial began on 1^st October 2002, and, on the close of the prosecution case some ten days later, Mr Harwood-Stevenson submitted on the appellant's behalf that there was no case to answer. He maintained that there was no direct or primary evidence to establish that the appellant had knowingly participated in the alleged dishonest scheme or that he had even known at the time that it was taking place. He added that, in the absence of any such primary evidence, the secondary evidence of the poor financial state of Freetime at the material time took the prosecution case no further. He also made a particular submission of no case to answer in relation to count 2, one of the seven counts, each relating to an individual transaction forming part of the overall charge of fraudulent trading the subject of count 1. There, the customer claimed never to have received the shirt the subject of the debit to her, and Mr Harwood-Stevenson suggested, therefore, that it might simply have been an instance of mistaken double-debiting as had undoubtedly occurred in relation to other transactions.
23. Mr David Tremberg, for the prosecution resisted the submissions, arguing that there was sufficient evidence before which a properly directed jury could reasonably find that this was a dishonest scheme, of which transaction the subject of count 2 was also part, to ameliorate the poor financial state of the company and that the appellant had instigated and had been a party to it.
24. The Judge rejected Mr Harwood-Stevenson's submission, holding that there was sufficient evidence on which the jury could convict, and that it was a matter for them to assess the evidence and to draw from it the inferences they thought proper. As to the transaction the subject of count 2, he held that the jury could take into account that it was raised at the same time and bore the same characteristics as the many transactions the subject of count 1, including the fact that, as a previous credit card customer, the complainant could be said to be within the group of previous customers for the creation of such deemed orders.
25. As we have said, the appellant gave evidence. He said that by 1997 the turnover of the company was about £1million a month, derived in large part from its mail order business. However, he acknowledged that the company had been overtrading, had stock problems and, for a year or so, had been relying on the goodwill of its creditors to keep going. His main responsibility lay in producing catalogues, photographs and descriptions of goods, and he had spent much time travelling on behalf of the Company. He had, therefore, delegated much responsibility to Simpson; and Andrew Smith had reported to both of them. Because of the impact on the Company of BMS's decision in October 1997 to withhold money on account of the increasing number of charge backs, he had decided in late November to dispose of surplus stock, in particular Ralph Lauren shirts by sending them, unsolicited, to previous customers accompanied by a letter informing them that they had seven days in which to reject them, that is, by the use of a "negative option scheme". He had discussed it with Simpson and with Chadwick and Hunwick of HCCM, and had asked HCCM to prepare a software programme. He had not specifically instructed Chadwick or Hunwick to include a seven day charging delay in the software, but had assumed that they would build in a delay. He had signed the undertaking that Hunwick had requested. After that, he had left it all to Simpson to implement, notwithstanding Simpson's reaction that he thought the scheme was shabby. He, the appellant had had nothing to do with the running of the scheme, as he had been very busy at the time. He suggested that it had been Simpson's responsibility to give Andrew Smith the necessary instructions to ensure that the software programme as provided contained a seven day delay or was adapted to do so.
26. The appellant agreed that the scheme had operated over three days on the 2^nd, 3^rd and 4^th December and that if and when he had been in the company offices during those days he had seen the daily computer reports showing the balances of the deemed sales generated by the new software programme. However, it was only over the following week-end or on Monday, 8^th December that he had became aware that customers' credit card amounts had been debited on the computer programme's "creation" of their orders. He said that he had not expected that and assumed that HCCM had made a mistake in devising the software. However, he had not mentioned the matter to HCCM either by way of complaint or as a request for a correction of the software so as to re-credit the accounts of those customers who were telephoning, or who might do so, to reject the shirts. He had not instructed the sending of a letter to each of the customers concerned to inform them of and apologise for the error. He had thought, given the shortness of time and his expectation that there would about a 60% acceptance of the shirts, that the better way to deal with the problem was to make refunds as and when they were requested. He had felt that the Company would be able to meet all demands for refunds that there might be and that it could stave off its other creditors through attempts he was making to re-finance the Company's business.
27. In his evidence, the appellant blamed Andrew Smith and HCCM for having provided Freetime with a defective programme, that is, for having failed to ensure that a seven day delay was built into the system before the customers were charged. The immediate charging was an error of which he had had no knowledge at the time, and he had acted throughout in good faith. He had not told the police that when they had interviewed him in March 1999 because he did not know what the police were alleging against him and he had wanted to know what Hunwick and Chadwick had told them.
28. The appellant called a number of persons to give evidence in support of his defence. The first was Keith Hatfield, who gave essentially character evidence to the effect that the appellant had begun to turn Freetime back towards profit and that, in a crisis he was the sort of man to have around. The second was Andrew Knight, who challenged the evidence of Hunwick that the Company could have readily operated HMCC's programme by setting it to provide for a seven day delay before charging. The third was William Lyndley, a computer expert, who expressed a similar view, though without having been provided by Freetime or HMMC with a copy of the programme.
29. There are two grounds of appeal: 1) that the Judge wrongly rejected the submission of no case to answer; and 2) that the appellant should be given permission to call, as fresh evidence, testimony from Graham Simpson to give evidence that he did not, but could have given, at trial if asked to do so.

The first ground of appeal – the Judge's rejection of the submission of no case to answer

30. The Judge, in his ruling, agreed with the prosecution's response to the submission. He said:

"The prosecution ….say that a jury is entitled to draw inferences from that evidence which they accept and they are entitled, say the prosecution, to draw reasonable inferences not only from what the defendant did and said but also what he did not say or did not do, and they point to various factors which can give rise to inferences drawn by the prosecution. For example, that in the first place this negative option scheme, as it can neutrally be described, was his idea. He gave an undertaking to a computer company that customers would not be charged. There's no evidence that he sought specific requirements to effect that or ever made any enquiries to ensure that his undertaking was being fulfilled. The prosecution say that all those matters that are in evidence are matters which are for the jury to consider and which they're entitled to consider and from which they could reasonably draw the inference that the defendant intended this scheme to operate dishonestly and took no steps whatever to stop it so operating. In addition they are entitled to take account of that evidence which indicates the degree of participation by this defendant in the financial affairs of the company and its day to day direction.

Having considered carefully all that's been urged upon me by Mr Harwood-Stevenson I've come to the very firm conclusion that the prosecution is right, that there is a body of evidence from which, if they accept it, the jury are entitled to draw inferences in relation to this defendant and his participation in this scheme, his intention with regard to it being put in operation and operating and, in my judgment, it is a classic case for the jury to make up their mind as to how they assess that evidence and the inferences they can properly draw from it. In my judgment, they could properly draw the inferences suggested by the prosecution and it's entirely a matter for them as to whether they do or they do not."

31. Mr Harwood-Stevenson challenged the Judge's reasoning. First, he submitted that there was no primary evidence that the appellant knew before or during the running of the HCCM programme that it would create instant debits to the customers' accounts or that it would be operated by the Company in that way. He said that the only prosecution witness who claimed to have spoken with the appellant about this was Simpson, whose expectation had been that there was to be a seven day delay period before charging. He suggested that Andrew Smith's contrary evidence that immediate debiting had been intended had stemmed entirely from his assumption, not because of anything said to him by the appellant or Simpson. And he pointed to the absence of direct evidence from anyone else at Freetime as to when the direct debiting had first been noticed. However, he acknowledged, when pressed by the Court, that at the close of the prosecution case there was, from the appellant's written undertaking of 2^nd December 1997 to HCCM, an inference open to the jury that the appellant knew that the HCCM software had no in-built delay and that he should have told Andrew Smith to incorporate a delay into the system, and that there was no evidence that he had done that. However, Mr Harwood-Stevenson said that it did not follow that there was evidence on which the jury could infer that the appellant anticipated that Andrew Smith would be so incompetent as to run the software without modifying, or instructing HCCM to modify, it to insert such a delay.
32. Focusing particularly on the Judge's reasoning in his ruling, Mr Harwood- Stevenson said that the Judge had overlooked that fact that there was no direct evidence of what the appellant had said or done or on what he had not said or not done. The nearest to any such evidence was the impression he had left with Simpson that he had intended to do what he had subsequently undertaken to HCCM to do in his letter of 2^nd December 1997, namely operate a debiting delay of seven days. As to the evidence of Andrew Smith, it amounted to no more that a presumption that the appellant had been responsible for the immediate debiting because he, Andrew Smith, had presumed, without having checked with the appellant or Simpson, that that was what "management" wanted. Mr Harwood-Stevenson also suggested that the Judge, in commenting on the absence of evidence that the appellant had taken any specific steps to ensure the fulfilment of his undertaking, was effectively reversing the burden of proof.
33. As to the secondary evidence, going to Freetime's difficult financial position at the time, Mr Harwood-Stevenson, whilst acknowledging that the Company had had increasing cash-flow problems as 1997 advanced, sought to minimise the evidence of what was undoubtedly its dire financial position at the beginning of December of that year. He also questioned its probative value, in any event, on the issue of the appellant's honesty or dishonesty in instituting the offending scheme. He submitted – and this is common ground – that this evidence on its own would not be enough to establish guilt.
34. Mr Tremberg, for the Crown, drew together a large number of strands from the prosecution evidence to produce what he submitted was more than sufficient evidence to raise a case for the appellant to answer. These included: 1) the fact that the appellant was the managing director and that, on Andrew Smith's evidence, he "ran everything"; 2) the sheer scale of the operation over three days in respect of which thousands of previous customers were debited sums in respect of transactions of which they knew nothing, raising, on the prosecution's case, more than £250,000; 3) none of the recipients of the shirts received any documentation with it setting out the basis upon which they had been sent, whether or when they would be charged for them or how they should go about rejecting or returning them it; 4) the appellant, on his own account in interview, knew that Freetime's computer system was configured, unless reconfigured by it, to debit credit card accounts at the point of order; 5) the appellant instigated the scheme and must have been aware that the Company had the capacity to control the timing of debiting the accounts of its targeted customers, as evidenced by Hunwick and Andrew Smith; 6) at the very least, given the undertaking demanded of him by Hunwick, the appellant could not have overlooked the need to ensure, by clear instructions to HCCM and/or Andrew Smith, that a delay in debiting should be built into the operation of the scheme, yet, on the evidence of Hunwick and Andrew Smith, he took no steps to give such instructions, and Mr Harwood-Stevenson had not suggested in his cross-examination of them that he had; 7) it was open to the jury to conclude from the evidence of Andrew Smith that the appellant had seen the debiting of customers' accounts on the computer screens in the Company's office on the first or second day of the operation of the scheme, a matter that Chadwick, in his evidence, did not definitively contradict; 8) the appellant's behaviour after the four day period of immediate debiting was consistent with his having been party to a dishonest scheme, not with that of somebody who had just discovered an error by someone else which had had catastrophic for the Company's trading position and goodwill of its customers; and 9) his lies in interview by the police in March 1999 that he did not know how the sums had come to be debited from the credit card accounts of Freetime's previous customers.
35. In our view, the Judge was entitled, indeed bound, to conclude that on all the prosecution evidence before him there was material on which the jury could convict the appellant of instigating and/or being a willing party to a dishonest scheme of immediate charging for unsolicited goods. We find much force in all of Mr Tremberg's points, but highlight just four of them here. First, it was open to the jury to infer from Hunwick's and Chadwick's evidence that the software programme provided by HCCM was of such a nature that Freetime would have to do something to it to honour the appellant's undertaking that no charges would be made without the customers' permission, at the very least by building in a reasonable delay period before debiting their credit card accounts. Second, there was Andrew Smith's evidence that the appellant must have contemplated beforehand and known at the time of the immediate debiting of the selected customer's credit card accounts, and of the appellant's presence in the office, looking at the screens when that was being done. Whilst that evidence was challenged in cross-examination and the appellant was yet to give evidence as to what he saw on the screens, it was nevertheless evidence at the close of the prosecution case for the jury to consider. Third, if, as the appellant was to maintain at trial, the fault for the immediate charging lay with HCCM or Andrew Smith, not with him, given the great difficulties it had caused the company, it was at the very least surprising that he did not take Mr. Smith or HCCM to task or, at the very least, ask them for an explanation of what had happened. And, fourth, there were the appellant's lies to the police interview that the Company had operated the scheme in accordance with his undertaking to HCCM.
36. For all those reasons, we reject the first ground of appeal.

The second ground of appeal -fresh evidence

37. The appellant invites the Court under section 23(1) (c) and (2) of the Criminal Appeal Act 1968 to receive, as fresh evidence, the testimony of Simpson, by way of supplement to and considerable qualification of, the evidence he gave for the prosecution at the trial. In summary, Mr Harwood-Stevenson submitted that the police, when questioning him for the purpose of preparing his witness statement, did not explore with him sufficiently, or did not include in his witness statement what he had told them about the negative option scheme and as to the appellant's intention for and knowledge of it.
38. The starting point for this submission is Simpson's 9 page witness statement provided on 10^th August 1999 to the two police officers, DCs Walden and Orr. In a number of passages in the statement, but in particular in one short passage on pages 7 and 8 of the statement, his account was plainly adverse to the appellant's case that. It read:

"I believe in December 1997 the phone lines jammed and everything seemed to collapse. There were no orders or refunds made for a number of days.

In the very early part of December an incident occurred which I clearly remember. Andrew Smith the IT Manager and myself were called into a meeting. O'Connor stated that he had an idea from the Britannia Music Company called negative marketing. He was going to send out to our existing customers unsolicited goods, namely a Ralph Lauren shirt and debit their credit cards without their authority. He said that 60% of the customers would keep the shirt as a gift or thought that as it was our fault they wouldn't be charged or it would take several weeks to refund customer who didn't want the shirt. He contacted a Paul Chadwick at the Company HCCM who produced the software for the Company. Chadwick stated he would write the program that O'Connor wanted, but he was going to have nothing more to do with it. This program picked out all the clients who had previously ordered Ralph Lauren Chaps shirts. The customers who had previously ordered a Chap shirt or shirts were sent one shirt each and the credit card debited. …. This was done clearly to generate money. O'Connor told us that this was a genuine method of selling but I didn't think it was right. My own feelings were exactly opposite to what O'Connor thought. …"

As we have said, his evidence at trial on this important issue in the case was quite different. His account to the jury was that that, from what the appellant had said to him beforehand, his, Simpson's, expectation was that Freetime would allow the recipients of the goods seven days from their despatch in which to decide whether to keep or reject them.

39. Mr Harwood-Stevenson, in his submissions to the Court, with his eye on the "capable of belief" factor in section 23(2)(a), suggested that there is no real conflict between what Simpson said in his witness statement and what he said in evidence, in that: 1) in the witness statement: he had not asserted that the appellant had suggested a dishonest act, but had said he had got the idea from a scheme of another, presumably, reputable company; 2) although he had characterised the scheme in the witness statement as "tacky", he had not described it as dishonest -if he had thought that, he would not have had anything to do with it.
40. Mr Harwood-Stevenson also argued that the material paragraph in Simpson's witness statement is unclear on the issue of what the appellant had said or intended about the timing of the debiting of customers' account, and that, for that reason, the interviewing officers should have asked him more about it. He made similar criticisms of prosecution counsel for not exploring this aspect with Simpson in his evidence in chief at trial, with a view, possibly, to treating his differing evidence as hostile. As for the defence, Mr Harwood-Stevenson, as we have already mentioned, was content not to cross-examine Simpson at all on this surprisingly favourable evidence to the appellant.
41. The fresh evidence upon which the appellant sought to rely is principally that of Simpson in an affidavit sworn on 6^th January 2003, two or three months after the trial, which he confirmed in oral testimony heard by the Court with a view to considering whether to receive it pursuant to section 23 of the 1968 Act. The appellant also invited the Court to receive fresh evidence from himself in the form of affidavit sworn on 7^th February 2003, which he also confirmed in oral testimony heard by the Court on the same basis.
42. Simpson's evidence was as follows. It was only after the appellant's trial he became fully aware of the way in which the prosecution put the case against the appellant. He was shocked when he heard of the appellant's conviction and offered to help him. The truth was not as had been set out in the passage from his witness statement set out in paragraph 38 above, and if only someone from the prosecution or defence had asked him in detail about the matter at trial, he would have told the jury that the appellant had instructed a seven day delay before debiting customers' accounts and for refunds to be made in respect of returned goods.
43. Simpson laid particular blame on DCs Walden and Orr for not exploring the details of the negative option scheme with him in the interviews giving rise to his witness statement. The first interview with both officers on 10^th August 1999 lasted between four and five hours. They asked him questions for about an hour without making any notes of his answers. They then went back over the same ground again, this time making notes of what he said. At the end of the interview they showed him the notes, and then or later he signed them at their request. The officers were very selective in those notes, their main interest being in information from him that might support inferences hostile to the appellant.
44. The officers returned at a later date and asked him to sign the typed version of what he had told them. The contents of the statement, though not untrue, were again selective. They did not include much of what he had told them and gave a misleading account of the conduct of the business of Freetime and of his, Simpson's, opinions of the appellant. However, the police had not told him the specific matters that they were investigating, he assumed that they knew what information they wanted to record and it was not for him to suggest that their account was selective. He highlighted certain passages in the witness statement as examples of this selectivity and/or "foreshortening" or distortion of some of his answers to their questions. In relation to the material passage from the witness statement set out in paragraph 38 above, he stated in his affidavit that he had made plain to the officers that the appellant had intended a seven day delay in debiting customers' credit card accounts and that Andrew Smith knew that. However, when cross-examined by Mr Tremberg in this Court on this aspect, and before being reminded of what he had sworn in his affidavit, he said that he had not mentioned to them that the appellant had instructed a seven day charging delay because he had not realised at the time that it was an issue. He said, generally, that the officers had credited him with a hostile attitude to the appellant and his conduct of the business that he had not expressed in their interview of him.
45. As to his evidence at trial, Simpson said that shortly before he went into the witness box was shown his witness statement, but he did not know what charges the appellant was facing. It was only after he had given evidence that he learned that the central issue was the negative option scheme, and he was surprised why he had been asked so little about it by either side in the course of his evidence. If he had been asked, he would have told the jury that on or about 1^st December 1997 the appellant discussed with him and Andrew Smith the possibilities for the scheme in general terms, including obtaining software from HCCM to identify customers who had previously bought Ralph Lauren shirts from Freetime and, as a feature of the scheme, a delay after "creation" of orders before debiting customers' accounts. There was then a further meeting the following day at which the appellant told them to go ahead with the scheme instructing Andrew Smith to liaise with and take instructions on the software aspect from HCCM and to debit customers' accounts only after a lapse of seven days after "creation" of the orders, so as to allow three days for delivery and four days in which they could decide whether to accept or refuse the goods. The Company was also take responsibility for collecting the goods from those customers who refused them and, further, would compensate them by offering them a discount in its next sales catalogue.
46. Continuing with Simpson's evidence to this Court, he organised the warehouse staff to despatch the goods over the next three days. He left Andrew Smith to liaise with HCCM over the software and to run it with a seven day delay period as the appellant had instructed, and also to provide the warehouse staff with despatch notes and a standard explanatory letter for enclosure with each parcel. Contrary to those instructions and his, Simpson's, understanding at the time of what was to happen, Andrew Smith must have run the HCCM software so as to debit the customers' accounts immediately on "creation" of their orders.
47. For most of the three day period of operation of the scheme he, Simpson, and the appellant were away from the Company's offices and the warehouse, busy on other aspects of the business. It was only some days later that he learned of the immediate charging of the customers' accounts and of all the trouble that it had caused. He told the appellant, who was angry but decided that it was too late to reverse the debits and that they would wait for claims for refunds and meet them when made. They did not try to find out how the error had occurred because they were very busy and simply assumed that HCCM was responsible for it in its preparation of the software. He did not ask Andrew Smith what had happened; he assumed that the appellant would do that. In short, the scheme was not dishonest, but was poorly planned and a rushed promotion that went wrong.
48. Mr Tremberg, with the permission of the Court, called DC Walden to give evidence of the manner in which she and DC Orr questioned Simpson and, from his answers, prepared the witness statement that he signed. Her account contradicted the testimony of Simpson in important respects. This is what she said. They interviewed him first on 30^th June 1999 (not 10^th August 1999 as suggested by him in his affidavit). The interview lasted an hour and a half, in the early part of which, in accordance with police practice, they allowed him to talk freely without them taking any notes. They then asked his to go over his account again while DC Walden took notes with a view to using them for the preparation of a draft witness statement. They did not ask Simpson to read or sign her notes. Because of the passage of time, those notes are no longer to be found.
49. DC Walden denied that Simpson told them at this meeting, or at all, that the debiting of customers' credit card accounts was to be done after a delay of seven days from the point of order or that he had spoken of arrangements for refunds in respect of returned unsolicited goods. She said that if he had mentioned such matters, she would have regarded them as significant and would have asked for further details, which would have been recorded in the draft witness statement.
50. On the return of the officers to the police station, DC Walden, working from her notes of the meeting, drafted a witness statement covering all the points mentioned by Simpson and sent it to him for his consideration.
51. On 16^th July 1999 DC Orr met Simpson to discuss the draft. Simpson had already made a number of changes to it, and, at his request, DC Orr made further alterations in the course of the meeting. One of the amendments made by the appellant and initialled by him (and to be seen in the extract from the final witness statement set out in paragraph 38 above) was in the following terms:

"The customers who had previously ordered a Chap shirt or shirts were sent one shirt each and their credit card debited."

That draft was made available, as unused material, to the defence at trial and is before this Court. There is nothing in it to support Simpson's present account that he mentioned that the scheme was to operate with a seven day delay before debiting the customers' accounts or of any arrangements for refunds for returned goods. There is, on the other hand, much indication in the draft, from the alterations to it made and suggested by Simpson, that he had read it carefully and had taken the trouble to correct or add matters that he had considered important.

52. DC Orr then passed the amended draft to DC Walden for her to redraft the witness statement so as to accord with Simpson's alterations. She did that. On 10^th August 1999 (the date suggested by Simpson in his affidavit as the date of their first interview of him) DC Orr, on his own, met the appellant again to discuss her redraft; the appellant was apparently content with it, and he signed it at that meeting. It is apparent from the witness statement in its final form that it made no mention of delayed debiting of accounts or refunds for returned goods. Indeed, as the extract from the signed witness statement that we have set out at paragraph 38 above makes plain, such mention, if made, would have been in direct conflict with that passage, and would, D C Walden said, have prompted them to investigate the matter further with him.
53. The appellant's evidence to the Court consisted of a long affidavit largely repeating and amplifying the evidence he gave at trial, with a considerable sprinkling of argument and much reference to difficulties that he had had at the time to recall relevant details so as to enable him properly to instruct his solicitor and counsel in the conduct of his defence. He said, as Mr Harwood-Stevenson had put to the Court, that before Andrew Smith had given evidence he had believed that it was all HCCM's fault, but that after that evidence he had believed it was Smith's fault. He added that he had lied to the police in interview to protect HCCM, though he had not given that explanation in his evidence at trial.
54. We say straightaway that there is nothing new or fresh about this evidence in a section 23 sense. And, though much of it would have been admissible at trial, it does not, in our view, begin to satisfy the remaining factors of potential credibility, materiality or reasonableness of explanation for not expanding at trial with any such detail as he has sought to rely on in is affidavit.
55. Mr Harwood-Stevenson's main reliance under this ground of appeal was on Simpson's evidence to the Court. He submitted that it satisfied all the requirements for receipt under section 23 of the 1968 Act. It was new or fresh evidence in that it had not formed part of his evidence to the jury. It was capable of belief, because there was no real conflict with what he had told the jury, simply a filling of gaps in that evidence caused by the failure of the police officers to investigate the matter thoroughly with him in interview and because of the way in which they had prepared his witness statement. There was also the want of questioning by both prosecution and defence counsel at the trial, which could well have brought out the full story then and eliminated any sense of conflict with his witness statement. He acknowledged that Simpson's account in the critical passage in his witness statement gives the impression that the appellant intended immediate charging, but he invited the Court to disbelieve the evidence of DC Walden or to characterise her and DC Orr's questioning of Simpson as "extraordinarily negligent" in failing to elicit clearly what he was saying on this point. He submitted that if Simpson's new evidence had been before the jury, it might reasonably have affected their decision, and thus might afford a ground for allowing the appeal. The evidence would have been admissible at trial. And there was a reasonable explanation for the failure to adduce or elicit it at trial, again because of the officers' conduct, and also because his favourable evidence to the appellant at trial, led Mr Harwood-Stevenson reasonably not to cross-examine him, reasonably because: 1) before trial the terms of his witness statement suggested that he was hostile to the appellant leading the defence team to consider and reject the idea of interviewing him; and 2) at trial he, Mr Harwood Stevenson, could not have been expected to embark blindly on a line of detailed questioning of a witness who might yet be hostile to the appellant. Moreover, the defence advantage from Simpson's evidence was short-lived, followed as it was by the unexpected evidence of Andrew Smith shifting the possibility of blame from HCCM to the appellant for the way in which the scheme was introduced and operated.
56. Mr Tremberg took as his main response to this ground of appeal, the issue of the potential credibility of Simpson's evidence. He submitted that there was clear and sharp conflict between Simpson's witness statement and his evidence to this Court. In the former he gave the impression that it had been the appellant's intention to debit past customers' accounts to whom unsolicited goods had been sent immediately on the computer's "creation" of their orders and without their knowledge or consent. He also submitted that, in the light of the evidence of DC Walden in particular, and of her and DC Orr's documented record of the sequence of events giving rise the production of the first draft as amended by him, and to the final version of it, there is no basis for the suggestions that the police behaved improperly or inadequately in the manner in which they interviewed him and prepared the statement. It was plain that he had had plenty of opportunity to add to or alter the statement in draft if he had wished, so as to mention what, on any showing, was critical to the defence case, whether the appellant had instructed immediacy or delay in debiting customers' accounts. It was also plain, submitted Mr Tremberg, that Simpson's assertions of the appellant's anger on learning of what had happened does not fit the other evidence of how he behaved when he saw the catastrophic damage it had caused to the Company.
57. Secondly, Mr Tremberg submitted that this new evidence of Simpson, if available at trial, would have had no material impact on the jury's decision since, in the light of his first witness statement, the prosecution would not have called him as a witness because it could not have put him forward as a witness of truth. If called for the prosecution, the sharp conflict between his witness statement and that indicated by his affidavit and oral evidence to this Court would have been a proper basis for the Judge to have permitted prosecution counsel to cross-examine him as a hostile witness. If the defence had sought to call him, prosecution counsel would have cross-examined him about his witness statement, the first draft of it as amended by him and the related matters of which DCs Walden and Orr could have spoken, both of whom he might also have sought to call in rebuttal. Either way, argued Mr Tremberg, the impact of the new evidence of Simpson, if volunteered at that stage, would have been negligible.
58. Finally, Mr Tremberg invited the Court to ask itself, when deciding whether to receive this evidence of Simpson, why, if the account of his instruction of a seven day delay were true, the appellant had not raised it a much earlier stage, say, at the time with HCCM or Andrew Smith or other employees of the Company, or in his police interview or defence statement.
59. In our view, there is overwhelming force in Mr Tremberg's submissions, under three of the factors to which, under section 23 (2), the Court should have regard, when considering whether to receive this evidence. First, as to potential credibility, such new material as is to be found in Simpson's affidavit and oral evidence to this Court is, of itself, so inconsistent with what he said in his witness statement and the evidence of other witnesses, in particular, Andrew Smith and of DC Walden that, in our view, his new account is incapable of belief. We are reinforced in that view by our assessment of him as a witness, in particular, in response to Mr Tremberg's questioning of him on internal inconsistencies in his present account and also as between his oral and affidavit evidence to the Court. Second, as to reasonable explanation for failure to adduce this evidence below, for the reasons advanced by Mr Tremberg, we do not consider that Simpson has given the beginnings of a reasonable explanation for not coming forward with it before or at trial. He had plenty of opportunity to say all this to the police officers in interview and in subsequent preparation for his comment and correction of the draft of his witness statement. Having heard both Simpson and DC Walden in the witness box and having considered the accompanying documentary support for her account, we have no hesitation is rejecting Mr Harwood-Stevenson's contentions of dishonesty or incompetence on their part in the conduct of the interview of Simpson and preparation of his witness statement. Third, as to materiality, it is plain that had Simpson given such evidence at trial, whether as a prosecution or defence witness, he would have left the witness box discredited by the contrast that would have been drawn for the jury with what he had said in his witness statement and with other prosecution evidence on this critical issue, on which the appellant had thus far remained silent, the building of a seven day charging delay into the operation of the scheme. The facts that his solicitors chose not to interview Mr. Simpson before trial because they believed him to be hostile to the appellant, and that when, in evidence, he proved not be quite so hostile as his witness statement had suggested, leading Mr Harwood-Stevenson, for tactical reasons not to cross-examine him, are not a reasonable explanation for failure to seek to adduce or elicit this evidence central to the defence case, if honestly made and relied upon before the jury.
60. For all those reasons, we declined to receive the evidence of Simpson or the appellant under section 23 of the 1968 Act, with the result that the second ground of appeal fell away.
61. Those are our reasons for dismissing the appeal against conviction.