England and Wales Court of Appeal (Criminal Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
SITTING AT SOUTHWARK CROWN COURT
ON APPEAL FROM MR JUSTICE OWEN

		Royal Courts of Justice Strand, London, WC2A 2LL
		28 May 2010

Lord Justice Maurice Kay :

1. The four appellants stand charged with an offence under section 188 of the Enterprise Act 2002. An issue arose towards the end of the preparatory hearing as to the law relating to the ingredients of the offence. On 20 April the trial judge, Owen J, ruled in favour of the prosecution. On 22 April we heard an appeal for which he had given leave. At the conclusion of the hearing we dismissed the appeal. As a result, the trial commenced on 26 April. We now give our reasons for dismissing the appeal.
2. The material parts of section 188 are as follows:

"(1) An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the following kind relating to at least two undertakings (A and B).

(2) The arrangements must be ones which, if operating as the parties to the agreement intend, would –

(a) directly or indirectly fix a price for the supply by A in the United Kingdom (otherwise than to B) of a product or service."

3. Subsection (2)(b)-(f) refers to other forms of horizontal anti-competitive practices such as agreements to limit supply or production, to share markets and to rig bids. Subsection (3) provides that arrangements must also be ones which, if operating as the parties intend, would

"(a) directly or indirectly fix a price for the supply by B in the United Kingdom (otherwise than to A) of a product or service … "

4. The Particulars of Offence in the present case allege that

"Martin George, Andrew Crawley, Alan Burnett and Iain Burns, between 1^st July 2004 and 20^th April 2006 dishonestly agreed with each other and with Paul Moore, William Boulter and Steven Ridgway to make or implement arrangements relating to at least two undertakings, namely British Airways and Virgin Atlantic Airways, which directly or indirectly fixed the price for the supply by British Airways and Virgin Atlantic Airways in the United Kingdom of passenger air transport services."

5. At the material time, George, Crawley, Burnett and Burns were employees of British Airways (BA). Moore, Boulter and Ridgway were employees of Virgin Atlantic Airways (VAA). The latter are not defendants. Indeed, they are prosecution witnesses.
6. The present issue relates to the requirement of dishonesty in section 188(1). The submission of the prosecution, which was accepted by the trial judge, is that they need only prove dishonesty on the part of the defendants. The defence case is that that is not enough and that there must be mutual dishonesty on the part of both the defendants and the named VAA employees. Although for convenience we refer to each in the plural, strictly the reference should be to any one defendant and any one of the named VAA employees. The primary case for the prosecution is that there was in fact mutual dishonesty and we are told that the VAA employees have admitted their dishonesty in the context of receiving immunity from prosecution. However, Mr Latham QC submits that if they were to resile from that as a result of cross-examination or otherwise, or if the jury were not satisfied as to it, it would still be open to the jury to convict one or more of the defendants on the basis of unilateral dishonesty. We should add that at an earlier stage of the preparatory hearing the trial judge ruled that the test of dishonesty in section 188(1) is the two-tier test propounded in Ghosh (1982) 78 Cr App R 154. That is now common ground for present purposes.
7. Mr Latham submits that the language of section 188(1) is clear and unambiguous. It is only the defendant whose case is being considered who must be proved to have "dishonestly agreed". Miss Montgomery QC for George, supported by counsel for the other three defendants, submits that the language is at best ambiguous and that, if one considers it in context and purposively, the requirement is of proof of mutual dishonesty.
8. The trial judge had no doubt but that the ordinary and natural meaning of the language is clear. He said:

"In my judgment the language of the section is simple and straightforward. It provides that the offence is committed by an individual who, acting dishonestly, agrees with one or more others to make or implement one of the prescribed arrangements. The adverb 'dishonestly' may qualify the verb 'agrees' but the subject of the verb is 'an individual'."

We agree with this analysis. Indeed, we regard it as self-evident.

9. In support of her submission to the contrary, Miss Montgomery persistently refers to the purpose of the provision as being to criminalise "dishonest agreements". However, that puts an unwarranted gloss on the words of the section – "an individual is guilty … if he dishonestly agrees with one or more other persons". We consider that there is force in Mr Latham's submission that if the intention had been to limit criminality to cases of mutual dishonesty, one would expect to see drafting such as "a person is guilty … if he and one or more other persons dishonestly agree …". Nor do we agree with Miss Montgomery's further submission that the language of section 188(2) and (3) supports her mutual dishonesty construction. As Owen J said:

"The subsections simply serve to identify the types of arrangement that will fall foul of section 188(1) if the individual dishonestly agrees to enter into such an arrangement. The fact that they refer to arrangements between undertakings A and B does not … imply a requirement for mutuality of dishonesty for commission of the offence under subsection (1)."

10. Leaving aside the circumstances of the present case with its context of prosecution witnesses from VAA who have been granted immunity from prosecution upon their acknowledgement of their own dishonesty, we would find it surprising if the legislative intention had been to relieve a dishonest defendant of criminal liability simply because dishonesty is not also established against any individual in the corresponding undertaking. In the course of argument, we considered numerous hypothetical examples of which mention of two will suffice. The first is where the prosecution are unable to identify the active individual in the corresponding undertaking. In such circumstances it may be impossible to prove dishonesty, particularly so as to satisfy the second limb of the Ghosh test, on the part of the unidentified party. We see no sensible reason why a defendant against whom dishonesty has been proved should benefit from his own failure to identify his opposite number or the latter's elusiveness. Similarly, we see no sensible reason why a dishonest defendant in undertaking A should be able to take the benefit of an absence of the subjective element of Ghosh dishonesty on the part of his identified opposite number in undertaking B. This factual situation could arise, for example, where the identified opposite number is in a country where price-fixing is not unlawful or where he has received erroneous legal advice that a proposed agreement would be lawful.
11. Thus far, we have concentrated on the language of the statute and its implications. Miss Montgomery also submits that we should gain a different insight into the intention and purpose behind section 188 if we look into some of the documentation which preceded it. She refers first to the White Paper which preceded the Enterprise Act 2002 – Productivity and Enterprise: A World Class Competition Regime (July 2001, Cm 5233). The White Paper described the result of a consultation exercise which disclosed that a large majority of consultees "believed that the introduction of criminal penalties against individuals who engage in cartels would improve our regime" (paragraph 7.18). Under the side-heading "Catching the right arrangements", the White Paper stated (at paragraph 7.19):

"The new criminal offence will cover hard-core cartels only."

12. However, it did not attempt a legal definition of "hard-core cartels". It referred to examples and identified two possible statutory approaches, the second of which was based on a definition of the offence by reference to "the dishonest participation in an agreement which has, as a purpose, one or more of the specified hard-core cartel activities", adding (at paragraph 7.31):

"A jury would need to determine whether a defendant had acted dishonestly. A defendant could use as his defence the claim that he honestly believed that he was acting in accordance with Article 81 [of the EC Treaty] or Chapter 1 [of the Competition Act 1998]."

In our judgment, these passages do not represent a concluded view, let alone one founded on a requirement of proven mutual dishonesty.

13. Following the publication of the White Paper, the Director General of Fair Trading established a review by Sir Anthony Hammond and Roy Penrose who produced a report – Proposed Criminalisation of Cartels in the UK – in November 2001. They were asked to review "the legislative and procedural changes that would be necessary to enable the Office of Fair Trading to operate a regime in which criminal sanctions would be applied against individuals who had been found to have knowingly engaged in cartel activity". The report recommended, in summary (at paragraph 1.10), that

"the definition should incorporate the concept of individuals dishonestly entering into agreements with each other in order to implement 'hard-core' cartel arrangements". (Emphasis in original)

14. However, the authors stated in terms (at paragraph 2.2):

"We do not regard it as our function to put forward a precise definition of the cartel offence."

15. Moreover, they did not address the question whether a dishonest individual in undertaking A should be able to avoid conviction simply because no dishonesty is established against his opposite number in undertaking B. In these circumstances, we do not consider that the report takes the present task of interpretation any further.
16. Thirdly, Miss Montgomery refers to ministerial statements in Hansard. In the course of debates, Ministers in both Houses referred to "dishonest agreements", sometimes in contradistinction to "bona fide business agreements". We agree with Owen J that in these passages those terms were being used as convenient shorthand. They give no steer to the suggestion that proven dishonesty on one side of the agreement should be of no consequence because of its absence on the other side.
17. In our judgment, none of the extra-statutory material prayed in aid by Miss Montgomery has the effect for which she contends. As we have said, the language of the statute is clear. So, we believe, is its purpose. Where a statute imposes criminal liability on "an individual … [who] dishonestly agrees with one or more other persons …" to do a prohibited act, the intention and purpose is to criminalise that individual, regardless of whether "one or more other persons" was or were also dishonest. In reaching this conclusion, we have derived no assistance from the law of conspiracy. A statutory conspiracy pursuant to section 1 of the Criminal Law Act 1977 does not necessarily require proof of dishonesty at all. It only does so where dishonesty is an essential ingredient of the intended offence. There is no commonality of language or syntax as between that provision and section 188. Conspiracy to defraud, on the other hand, is a preserved common law offence with its own rules which cannot assist in the interpretation of section 188 to which it is not related.
18. It is for all these reasons, which closely reflect those of Owen J, that we dismissed the appeal against his ruling.
19. At the conclusion of the hearing, Miss Montgomery told us that in the event of conviction and unsuccessful appeals to the CACD on any other grounds, she would wish to reserve the right (if permitted) to take this point to the Supreme Court. However, all counsel were agreed that nothing should be done to put at risk the commencement of the trial (which has now started). As we understand it, if her client is convicted, regardless of whether other grounds of appeal exist, she would seek to appeal to the CACD on the basis that a direction to the jury that mutual dishonesty is not required is a misdirection. She anticipates that the CACD on that occasion, if it arises, would dismiss the appeal on that ground in the light of our decision. However, she would ask the Court to certify and grant permission at that stage. Mr Latham confirmed that the prosecution would raise no technical point against such a course, although it would be open to him to argue that the point is not substantively suitable for certification or permission. For our part, we are understanding of the position of both parties. We also assume that what goes for Miss Montgomery's client would also apply to the other appellants, counsel for whom supported but did not supplement Miss Montgomery's submissions.

Postscript

20. Just after this judgment had been written, it came to our notice that the anticipated trial had come to an early end, resulting in the acquittal of the appellants for reasons unrelated to this appeal. Nevertheless, we have decided to leave in the final paragraph because it illustrates a pragmatic way of avoiding interlocutory appeals to the Supreme Court and enabling trials to proceed, without prejudicing the contingent right of an appellant to take the matter further if that should become necessary and appropriate. Subsequent appellants (and respondents) may find it a sensible approach.