England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL
CRIMINAL DIVISION

		Royal Courts of Justice Strand London, WC2A 2LL
		13 October 2009

1. LORD JUSTICE RIX: On 7th March 2008 in the Crown Court at Southwark before His Honour Judge Testar and a jury, the applicant Lindani Mangena was convicted of three counts: one comprising fraudulent trading, another comprising money laundering and the third carrying on an unauthorised investment business. On 10th March 2008 he was sentenced in respect of the fraudulent trading to a term of imprisonment of five years. On the money laundering count he received a sentence of two years consecutive and on the count of carrying on an unauthorised investment business he received a term of 18 months concurrent. Thus he was sentenced to a total of seven years' imprisonment. He was also disqualified from being a company director for six years. His co-accused were convicted of other counts and received lesser sentences. He now renews his application for leave to appeal against conviction after refusal by the single judge, but appeals against sentence with the single judge's leave.
2. The case involved a Ponzi fraud, said the prosecution, in which Mr Mangena invited his victims to invest money on the stock market for the purposes of spread trading. The investors were misled into believing that the money they handed over would be invested on their behalf and that they would reap considerable rewards in short periods of time. All of the victims, who numbered about 1,000, like Mr Mangena himself, were members of or associated with the Seventh Day Adventist Church. A recurrent theme of the evidence of the investors was that they trusted Mr Mangena because of this link through the church.
3. Mr Mangena's principal vehicle for this fraud was a company called JNL Ltd which was incorporated on 12th August 2003. Mr Mangena was a director, as were his co-accused. In August 2003, JNL rented serviced office space in the heart of the city of London in Throgmorton Street. Investors were offered participation in a number of schemes with different names but the effect of all of them was that comparatively small sums of money would produce very large returns in a short period of time. For instance, something called a "gift exchange scheme" involved an investment of £200 and the promised return of £1,600 in less than two months. Other schemes such as "gift it plus" involved an investment of £2,000 and the return of £10,000 in less than 10 weeks. As is usual in Ponzi schemes of such a kind, it was a feature of this scheme, said the prosecution, that some investors were paid out what they had been promised at an early stage of the scheme in order to entice both them into further and larger investments and also to make good the case for investment by a larger and larger public. In total some £3.25 million was invested by more than 1,000 people. Hardly any of it was invested on the stock exchange, as had been promised. Whereas quite large sums, it is said, some £1.7 million, were rolled over in returns to investors, the overall loss was put at some £2.2 million. That reflected the recovery of some £900,000, most of it from the recovery, as we understand it, of two deposits which Mr Mangena put down, as deposits of 10 per cent, on two very expensive flats - in effect those deposits amounting to some £750,000 were buying two homes valued at some £7.5 million or thereabouts. Other large sums of money were spent by Mr Mangena on expensive cars and foreign travel to luxury hotels such as the Burj Al Arab in Dubai, said to be the world's only seven star hotel. Matters came to a head in February 2004 so that the fraudulent trading with which Mr Mangena was charged lasted for something like six months.
4. The defence case was that Mr Mangena was not involved in any wrongdoing at all and that it was his co-accused who were entirely responsible for deceiving the investors. In effect the defence was that a Ponzi scheme such as was alleged by the prosecution had taken place but that it was the co-accused who were responsible for it. Mr Mangena said that his part in JNL was to operate a legitimate business in the form of a pyramid scheme under which he was delivering training courses in the art of spread trading and other self-improvement techniques, so as to enable his clients to pyramid the virtues or otherwise of his spread trading abilities. He said that it was his relaxation of his control over the business that had given his co-directors the opportunity to operate the JNL business for their own abusive ends. So the issue for the jury was to determine the role and involvement of the appellant in the scheme.
5. So far as the grounds put forward for the purpose of obtaining leave to appeal, there was originally an additional ground (since abandoned) which was that the judge had interrupted so much in the process of trial as to render the trial unfair. That ground having been abandoned, three other grounds remain, but in his clear and helpful submissions today Mr Clarke has advanced oral submissions only on the first of those grounds, accepting that if he were to fail to obtain leave to appeal on behalf of Mr Mangena by reference to that first ground, then his second and third grounds could not by themselves bear the weight of obtaining leave to appeal.
6. That first ground related to a ruling or practice of the judge adopted at the trial, which was a second trial, pursuant to section 139 of the Criminal Justice Act 2003, whereby the investor witnesses were permitted to refresh their minds from the witness statements which they had given to the police. Apparently the judge had made a general order, or at any rate a blanket order, permitting those witnesses to refresh their minds in that way - in other words to permit the Crown to assist the witnesses in giving their evidence by reference to their witness statements, but it is accepted by Mr Clarke that before any such assistance by reference to a witness statement was given to a witness they were individually taken through the conditions laid down by section 139. Section 139(1) provides for these purposes:

"(1) A person giving oral evidence in criminal proceedings about any matter may, at any stage in the course of doing so, refresh his memory of it from a document made or verified by him at an earlier time if—

(a) he states in his oral evidence that the document records his recollection of the matter at that earlier time, and

(b) his recollection of the matter is likely to have been significantly better at that time than it is at the time of his oral evidence."

7. As we have said, Mr Clarke accepts that those conditions were met in the case of each witness, but he submits nevertheless that the judge's indication by means of his blanket ruling -- however it should be described it is not a ruling which we have in documentary form before us -- was wrong, because he submits the judge should not give permission for the use of a witness statement pursuant to section 139(1), even if those two conditions set out in the statute are met, unless the witness should first be shown to stumble in his evidence by reference to a faulty memory. Mr Clarke seeks to support that submission by reference to a comment of the learned editors of Archbold 2009 at paragraph 11-09, where they are discussing section 120 of the 2003 Act and say that there may be a danger whereby through the means of those provisions there might be a routine substitution of a witness's statement for oral evidence-in-chief.
8. There came a point during the trial when the judge did give a ruling dated 29th January 2008, that is to say well into this ten week trial whose concluding stages began with a summing-up that started on 26th February 2008, in which the judge ruled on a continuing objection to witnesses referring to their witness statements. The judge stated in that ruling that Mr Clarke did not ask him to review his ruling, or a ruling which he was reminded that he had made at the first trial as well, that the parties could refresh their memories from statements. The judge went on to say this:

"What he says is that he accepts that rulings in this trial are likely to be the same as rulings in the last trial on the basis that the submissions are likely to be the same and they are likely to concern the same material, but what he says in relation to the way that the present trial is being conducted is that he objects to the way in which the memory refreshing exercise is taking place with the witnesses and he says that the objection is one of appearance rather than substance and so he seems to accept that there is no injustice in his professional view about what is happening but he is concerned about the appearance of unfairness in the eyes of his client and he says potentially in the eyes of the jury."

9. Whether the objection to what became the practice at the trial, indeed as it seems at both trials, was the gravamen which Mr Clarke has put to us, namely that the judge ought not to exercise his power or the power which arises under the statute, even if the statute's conditions are met, unless the witness has first stumbled; or whether the complaint is rather that which the judge records in his ruling, namely that there was no vice in what was happening pursuant to the statute but that rather there was a danger that the appearance of things might be unfortunate; it seems to us that the matter raised is not arguably a wrongful use of the power under section 139, nor does it potentially lead to the question of the safety of the conviction.
10. As we have already said, Mr Clarke accepts that in the case of each witness the conditions (a) and (b) of section 139(1) were met. In other words the witness had confirmed in his oral evidence that he had made an earlier document which recorded his recollection of the matter and that his recollection of the matter was likely to have been significantly better at that time than it was at the time of his oral evidence. Ultimately we think that the condition under section 139(1)(b) is a matter for the assessment of the judge, whatever be the witness's view of the matter, and that therefore section 139(1) is not, as Mr Clarke suggests, prescriptive if two conditions are met by the witness himself or herself, but that it is a matter for the discretion of the judge if the two conditions are met, one of which is the judge's view that the witness's recollection of the matter was likely to have been significantly better at the time of giving his witness statement than at the time of his oral evidence.
11. We consider that this judge, having had a full experience of the matters at issue at the earlier trial and having dealt with the investor witnesses in the same way at that earlier trial, was in an excellent position to exercise his discretion pursuant to section 139(1) in circumstances where the witness had referred in his oral evidence to his earlier witness statement and confirmed in the witness's opinion that his recollection at that time was likely to be better and the judge had himself concluded that that was likely to be the case. As the judge said, it was not a matter of memory but of what was in the interests of justice. After all, it is a standard matter for a witness to refresh his or her recollection by reading his statement before he goes into the witness box.
12. In as much as Mr Clarke seeks to draw comfort from the remarks of the learned editors of Archbold by reference to section 120, it will of course be a matter for the judge to consider where evidence can properly be given with the assistance of the witness's memory being refreshed by reference to an earlier statement and where on the substance of the evidence which that witness has come to give it would in any event be preferable for the evidence to be given without reference to such a witness statement. What in any event the learned editors appear to be considering at paragraph 11-39 of their work is the replacement of oral evidence by reading written evidence. For our purposes the previous paragraph, 11-38, is perhaps as pertinent or more pertinent where the learned editors recognise that it will be unusual for it not to be possible to use a statement as a memory-refreshing aid by reference to the section 139 rule.
13. As we have said, we consider that this judge was peculiarly well situated to exercise his discretion on this matter and we do not think that it is arguably possible to interfere with it. In this connection we would observe that for the most part the evidence of these witnesses, which had to be given over a distance of some four years or so between the events in question in August 2003 to February 2004 and the trial which was taking place in early 2008, in dealing with matters such as with whom they were having particular conversations and what monies they were investing and what money they were receiving back, were obviously matters on which an earlier witness statement would be a useful tool for the refreshing of memory. This was detailed factual evidence about their implication in an investment which the Crown's case said was a fraud, rather than the description of some particular event. In sum, for these reasons, we consider that this first ground of appeal is not arguably correct and in those circumstances Mr Clarke accepts that his second and third grounds are not reached and it follows that this renewed application for leave to appeal against conviction is refused.
14. We turn then to Mr Mangena's appeal against sentence. Mr Mangena was born on 5th December 1983. At the time in question he was of the young age, for such offending, of 19 and he was of previous good character. He had had a successful school career and had gone on to university. No pre-sentence report was requested and the judge went on to sentence Mr Mangena without one. The judge was satisfied that the appellant was the driving force behind JNL and in charge of everything. He described him as a consummate conman without a shred of remorse. As time went on he had used others to act as salesmen in his fraud. The evidence against him was overwhelming and what had become clear in the trial was that when he had no other line of escape his response was to put all the blame upon his co-accused, but also to accuse his clients of lying and attempting to cheat by exaggerating their losses. Numerous people, predominantly church members, who were hard-working, intelligent and articulate people had been defrauded of large sums of money. The appellant had been defiant to the last and was likely to represent a danger to the public. The total sentence would be one of seven years. In that respect the judge explained the make up of his sentence as follows. He reminded himself that the offence of fraudulent trading carried a maximum of seven years and that money laundering (the offence on count 2) a maximum of 14 years. He said that the seven years were made up in the following way. The sentence on count 1 (the count of fraudulent trading) was one of five years. He considered however that the money laundering went beyond the defrauding of others by completely ignoring and defeating the investors' economic interests by enriching himself through the laundering of the money, in particular on the deposits on the two homes. Therefore the sentences should be consecutive.
15. In his elegant submissions on this point, Mr Clarke submitted that there was artificiality in dividing up the gravamen of the wrongdoing between the fraudulent trading and the money laundering. In effect, there was one overall course of conduct, however many individual offences had gone to make it up, and the spending of the money was part and parcel of the fraudulent obtaining of it. It was true that the offence of fraudulent trading could be committed on a very great scale. The jurisprudence included a case concerning an offence of fraudulent trading through the fraudulent issue of a rights issue, obtaining some £20 million, in circumstances where that was not done in order for the offender to spend the money obtained on himself, as distinct from in that case attempting to support a failing business. In the present case, however, Mr Clarke submitted that obtaining and spending was all part of a single course of conduct which should be met by one overall sentence and otherwise by concurrent sentences.
16. This case was not a case of the utmost gravity, Mr Clarke continued, one deserving of the maximum sentence of seven years for fraudulent trading, because much larger frauds could be visualised - those extending into hundreds of millions, if not billions, of pounds. As for an analogy with the case of Clark [1998] 2 Cr App R 137, dealing with stealing in breach of trust from employers, which had recommended sentences of 10 years and more for the theft of £1 million and upwards, Clark was now quite old and money had been sufficiently devalued to put that upon one side. Moreover, Mr Clarke relied upon matters of mitigation. It was, he said, a relatively short-term fraud. In particular this was a young man, at that time still very young, who had had a good background but who had gone wrong and of whom good might be hoped for in the future.
17. In general we are unsympathetic with these submissions. The fraud was undoubtedly a very bad one. One thousand victims are a very great number and it can well be imagined how those victims -- some of them had put in lifetime savings, be those greater or smaller -- had been bitterly deceived in the trust that they had put into this man, young as he was. It is clear from recent authorities on fraud such as Attorney General's Reference 48, 49, 50 and 51 of 2002 (Paulssen) [2002] EWCA Crim. 3165, [2003] 2 Cr.App.R (S) 36, and Dekson [2004] EWCA Crim. 3205, [2005] 1 Cr.App.R (S) 114, that in relatively modern times the authority of Clark has been referred to as being relevant to the situation in fraud, in particular in a case such as this where investors have been invited to place their investments and thus their trust in an offender who has then gone on deliberately to misuse the investors' money entrusted to him. We therefore consider that Clark is directly relevant.
18. At the end of the day, however, we agree with the submission that the gravamen of this offending has to be found under the fraud count and not under the money laundering count. In truth the money laundering was the spending by the fraudster of his company's ill-gotten gains and although no doubt that aggravates the fraud, it is in truth part and parcel of the fraud.
19. The judge chose to divide up the sentence between the two offences. We consider that the fraud count should bear a sentence which reflects the gravamen of the offending. If we considered that this offence, utterly serious as it is, represented a case of the utmost gravity which merited the maximum sentence available on count 1 then we would have upheld the judge's overall sentence of seven years. However, we cannot quite persuade ourselves that that is the situation. In this connection we have in mind recent sentences, albeit in respect of conspiracy to defraud which has a higher maximum of 10 years, in which sentences for very similar kinds of offending of seven years and six years and so forth have been upheld in recent years. Cases such as the two we have mentioned, Paulssen and Dekson and also the case of Bright and Hibbert [2009] EWCA Crim 652.
20. We also bear in mind the appellant's youth. His youth has not spared him an overweening arrogance and confidence in his wrongdoing, nor has it led him upon detection to any remorse. Nevertheless, the arrogance and lack of remorse which he has shown may just possibly be part of his youth. While agreeing with the judge's remarks about this consummate conman who may well prove to be a danger rather than a reformed character as he progresses through life, we nevertheless feel that some discount should be allowed him on a maximum sentence of seven years. For that reason and that reason only we would allow this appeal to the extent of quashing the sentence of seven years in total and substituting for it a sentence of six years which we would make up in the following way. We would impose a sentence of six years in respect of count 1 and otherwise maintain a two year sentence on count 2, but making it concurrent rather than consecutive, and finally maintaining the sentence of 18 months concurrent on count 3. To that extent this appeal against sentence is allowed.