England and Wales Court of Appeal (Criminal Division) Decisions

COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM READING CROWN COURT
HHJ McIntyre
T20080568

		Royal Courts of Justice Strand, London, WC2A 2LL
		02/03/2010

Lord Justice Toulson:

1. This appeal raises a question about the meaning of the words "omits a material particular" in s17 of the Theft Act 1968, which penalises various forms of conduct collectively described as false accounting.
2. The question arises in the context of benefit fraud, but false accounting may arise in widely different contexts. The section provides:

"(1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another,

(a) …falsifies any…document made or required for any accounting purpose; or

(b) in furnishing information for any purpose produces or makes use of any…document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular;

he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding 7 years.

(2) For the purposes of this section a person who makes…in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits…a material particular from an account or other document, is to be treated as falsifying the account or document."

3. The appellant stood trial at Reading Crown Court before Judge McIntyre on an indictment containing 5 counts. Counts 1 and 2 charged him with false accounting. They related to two claim forms for housing benefit and council tax benefit, the first dated 20 July 2004 and the second dated 7 February 2008.
4. Counts 3 to 5 were counts of dishonestly failing to notify a change of circumstances for the purpose of obtaining benefits contrary to s 111A(1A) of the Social Security Administration Act 1992. The three counts related to different forms of benefit. The benefits concerned were housing benefit and council tax benefit in count 3, income support in count 4 and job seeker's allowance in count 5.
5. On 20 August 2009 the appellant was convicted on counts 1-4 and acquitted on count 5. His wife had been jointly charged with him on counts 1 and 3, but she was acquitted on the judge's direction after she had given evidence.
6. The appellant sought leave to appeal against conviction on three grounds. The single judge refused leave on the first and second grounds but granted leave on the third ground. The appellant renews his application for leave to appeal on the first and second grounds. We can deal with those points summarily.
7. The first ground concerns count 5, on which he was acquitted. This was the first charge in time. It related to the period between July 2002 and February 2003, during which he was claiming job seeker's allowance. The prosecution alleged that he was in paid employment during that period but failed to disclose it. The basis for the allegation that he was in paid employment was that he later made a job application supported by a CV in which he claimed to have been working during the relevant period for a bank in Luxemburg. The appellant's evidence was that the CV was untrue in this respect, and that he was pretending to prospective employers that he had been in continuous employment in order to improve his job chances. His acquittal on count 5 means that the jury accepted this explanation as true or possibly true. The judge had given the jury an unqualified general good character direction. The judge discussed with counsel whether to give a Lucas direction. He was not asked to do so and there is no complaint about his decision not to do so. However, complaint is made that he failed to give the jury a specific direction that they should ignore the appellant's evidence about lying to a prospective employer when considering the allegations in counts 1 to 4.
8. The second ground relates to the consequences of the acquittal of the appellant's wife on the judge's direction after she had given evidence. The complaint is that the judge should have discharged the jury (which he was not asked to do) or should have given them a specific direction about the probative value of her evidence and other material which came into the case because she was originally a defendant. It was not a case in which there was a conflict of evidence between the appellant and his wife, but it is suggested that he may not have done himself justice in his wish to help her.
9. The single judge did not consider that either of those complaints provided an arguable ground for finding that his convictions were unsafe and we agree. We do not accept the argument that fairness required the judge to give special directions of the kinds now suggested and we cannot see how they would have made any difference to the jury's verdict on the facts of the case.
10. The third ground concerned the meaning of the expression "omits a material particular". In granting leave to appeal on that ground the single judge said that "I consider that you are entitled to have the judge's direction on counts 1 and 2 reviewed".
11. Before reviewing his direction it is necessary to explain in a little more detail what the case was about.
12. The statutory benefit system is complicated. In summary, housing benefit is intended to help those who are unemployed or on low incomes with their rent payments. Council tax benefit is intended to help them with their council tax payments. The scheme is administered by local authorities and to receive such benefits a claimant has to submit a claim form. The same form covers both forms of benefit and provides the basis of the authority's assessment of the claim. There is no dispute that a claim form for housing benefit and council tax benefit is a document made or required for an accounting purpose. (Compare Osinuga v DPP 162 JP 120, 30 HLR 853, [1998] Crim LR 216.)
13. The 2004 and 2008 claim forms were practically identical. They contained a large number of questions about the claimant's financial circumstances, including the following:

"Are you or your partner self-employed?

Do you or your partner work for an employer?

Do you or your partner do any other work at all? This could be voluntary work or any other work, even if it is not paid work.

Do you or your partner…have any money coming in (or expect to have some money coming in) that you have not already told us about?"

14. The appellant answered all those questions by putting a cross in the "no" box, except that in answer to the question "Do you or your partner do any other work at all?" in the form dated 7 February 2008 (count 2), he marked the "yes" box. In answer to supplementary questions on the (2008) form, he stated that his partner worked on internet sales for Lancaster and Coull Publishing; that she had started doing so in March 2004; that she usually worked 40 hours a week; and that she did not get paid.
15. The forms also asked the question "Do you use your home for business?" The appellant marked the "no" box on the form dated 20 July 2004 and the "yes" box on the form dated 7 February 2008, the latter being consistent with his statement about his wife doing work for Lancaster and Coull Publishing.
16. The forms were signed by the appellant beneath a declaration which included:

"I declare that the information I have given on this form is correct and complete [as far as I know and believe].

…

I agree that you will use the information I have provided to process my claim for Housing Benefit or Council Tax Benefit, or both…"

(The words "as far as I know and believe" appeared in the 2008 form but not the 2004 form.)

17. The prosecution's case against the appellant was summarised in its written opening note as follows:

"Count 1 [20 July 2004]

In fact [the appellant and his wife] were actively involved as directors in a company that they ran called Coull Web Design. This was run from their home address but was no half-baked affair. Record keeping was meticulous; the company had its own designated back accounts; it used the services of an accountant. Thus, say the prosecution, they were clearly involved in work.

Through the company, Paul Lancaster had applied for and successfully obtained a consultancy contract with a company called Imagine-ie based in Edinburgh. This involved him working from 26 July to 24 October 2004 at a rate of £210 per day.

On the very same day that the claim form was signed, 20 July 2004, in his capacity as a director of Coull Web Design, Paul Lancaster was on the verge of signing a consultancy agreement with them…

7 February 2008

At the time of submitting this form, [the appellant and his wife] were directors of and were still running Coull Web Design and had set up another company called Lancaster and Coull Publishing. This company, on 19 March 2007, began to trade in the publishing and supply of books, particularly in relation to entry exams to obtain UK immigration.

Both were being run from their home address but were nevertheless professional and relatively successful operations, each with two bank accounts. One of the Lancaster and Coull accounts became particularly active in November 2007 and as of 7 February 2008 (the date of the form) had a balance of £71,412.90.

The company's books were available via well-known suppliers such as Amazon, WH Smith…

Neither the Coull Web Design or Lancaster and Coull business accounts were declared on the form. …

Furthermore, there were often transfers between the two business's accounts and both Paul Lancaster and his wife received payments from both companies."

18. At the trial formal admissions were made by the appellant that at 7 February 2008 his wife had access to Abbey bank accounts of Lancaster and Coull Publishing and Coull Web Design with balances totalling over £75,000 and that during the period from 1 June 2007 to 7 February 2008 Lancaster and Coull had raised invoices amounting to just under £100,000 to a company called Gardeners Books.
19. Under s 17(2) a document may be falsified by a material misrepresentation or by a material omission. Although it was the prosecution's case that both forms contained material misrepresentations, the particulars of the alleged offences were expressed in terms of omissions.
20. The particulars of count 1 were as follows:

"Paul Lancaster [and his wife] on or about the 20^th day of July 2004, dishonestly and with a view to gain for themselves, falsified a document required for an accounting purpose, namely a claim form for housing benefit and council tax benefit, by omitting from the said form the following material particulars:

(a) their interests in and/or control of Coull Web Design UK Limited;

(b) that Paul Lancaster…was due to sign a consultancy agreement with Imagine-ie limited; and

(c) that they were using their home address for business purposes."

21. Count 2 was against the appellant alone but was in similar form apart from the identification of the omitted "material particulars". In count 2 these included the appellant's and his wife's interest in and/or control of and/or receipts and drawings from Lancaster and Coull Publishing.
22. The judge directed the jury as follows:

"There are two matters to be considered in relation to false accounting: (1) the criminal act, which the prosecution alleges; and, secondly, the criminal state of mind which the prosecution allege the defendant had. The criminal act alleged in count 1 is that Mr Lancaster, if you would look again under the particulars of the offence, the relevant words are "falsified a document required for an accounting purpose, namely a claim form for housing benefit and council tax benefit, by omitting from the said form the following material particulars, (a), (b), (c)." So what directions about that? First of all, the prosecution have to establish that…(a) and/or (b) and/or (c) were material; they do not have to prove that all three were. So, they say that all three were material particulars, but it is sufficient if the prosecution establish that any one of the particulars was material. When is a particular material? A particular is material if in your view it is a particular which the form requires the person completing it to provide."

23. Mr Hallowes submitted that this was a misdirection and that the omissions were material only if they in fact caused the local authority to pay benefits to which the appellant was not entitled. He cited two authorities: R v Mallett (1978) 67 Cr App Rep 239 and R v Passmore [2008] 1 Cr App R 165.
24. Mallett was a case of misrepresentation. A car dealer made out and used a hire-purchase agreement form which falsely stated that the hirer had been a company director for a named company for several years. Relying on the information, a finance company financed the transaction. The defendant argued that although the document was required for an accounting purpose, the false statement about the hirer was not directly connected with the accounting purpose of the document. The Court of Appeal held that this did not matter. The document itself had to be made or required for an accounting purpose, but once that requirement was satisfied any statement in the document which was false in a material particular was sufficient to justify a conviction, subject to the other requirements of the section being satisfied. On the issue of materiality, the judge directed the jury that "false in a material particular" meant false in an important respect; something which mattered. The Court of Appeal approved the direction.
25. In Passmore the defendant was in receipt of housing and council tax benefit. He was convicted of dishonestly failing to give prompt notification of "a change of circumstances affecting any entitlement of his to any benefit or other payment or advantage under the relevant social security legislation", contrary to s 111A of the Social Security Administration Act 1992. The question for the court concerned the meaning of the phrase "a change of circumstances affecting any entitlement of his to…benefit". The court held that the change of circumstances must have made a difference to the amount of benefit which the recipient was entitled to claim in order for it to be characterised properly as a change of circumstances affecting his entitlement to benefit.
26. We do not accept Mr Hallowes' submission that the omissions identified by the prosecution could properly be regarded as material only if they in fact caused the local authority to pay benefits to which the appellant was not entitled.
27. We do not consider that Passmore is relevant to the proper construction of s 17 of the Theft Act. The offence for which Passmore was prosecuted belongs to a different statutory scheme, and the two sections are aimed at different mischiefs. The mischief aimed at by s 111A of the Social Security Administration Act 1992 is not falsification of documents but dishonest failure by a recipient of public benefits to notify the relevant authority of a change of circumstances which would make a difference to the computation of his benefit. Section 17 of the Theft Act applies generally to the falsification of accounting documents for the purpose of obtaining financial gain or causing financial loss. It does not require that such gain or loss should in fact result. By contrast, dishonest obtaining of property or pecuniary advantage by deception was covered by other sections of the Act (ss 15 and 16), which have been repealed by the Fraud Act 2006.
28. There remains the question what is meant by "omits a material particular" in the second part of s 17(2), relating to non-disclosure.
29. Section 17(1)(b) refers to the production or use of a document which to the defendant's knowledge is or may be misleading, false or deceptive in a material particular. Section 17(2) identifies two ways in which a document may be regarded as falsified - either by an entry which is or may be misleading, false or deceptive in a material particular, or by omission of a material particular. Although the words "misleading, false or deceptive" are contained in the first part of the subsection (relating to misrepresentation), and not the second part (relating to non-disclosure), it is clear when read as a whole and in its context that the subsection is concerned with documents which are or may be materially misleading either by reason of what they contain or by reason of what they should contain but fail to contain. So in a non-disclosure case the omission will be material if it has the effect that the document is liable to mislead in a way which is significant (or, in the language of Mallett, in a way which matters).
30. Whether the omission is significant will depend on the nature of the document and the context. The test is objective, although it would not be helpful to the jury to use that term. A less lawyerish way of expressing it is to say that it is for the jury to judge for themselves, on the particular facts of the case, whether they regard the omission as significant.
31. As the court observed in Mallett, evidence may be admissible to explain the significance, but in some cases the significance will be obvious. This is likely to be so where the document is an application form containing questions, although it does not necessarily follow that an incomplete or incorrect answer will be material. An error or omission may be trivial. Further, it is possible to envisage cases where an application form may include questions which have no discernable bearing on the processing of the application. (Government application forms may include questions, for example, about ethnic or cultural background which are for statistical purposes rather than because they are needed for the processing of the application. Application forms issued by companies in the financial services sector may include questions designed to enable the company to build up a data bank for marketing purposes rather than for any reason connected with the application itself.) We would therefore not accept that there is a hard and fast rule that any omission to supply information required by an application form must necessarily amount to the omission of a material particular.
32. In the present case, however, it seems to us plain beyond doubt that the information provided by the appellant in each application form was materially misleading on the facts known to him.
33. The first form was completed on the same day as the appellant, as a director of Coull Web Design, signed a consultancy agreement with Imagine-ie under which his services were to be provided full time to the customer from 26 July to 24 October at the rate of £210 per day (excluding overtime) plus expenses. In his evidence the appellant said that he did not know whether the contract would come off. It is correct that it was not signed by the customer until the next day, but it had been prepared by Imagine-ie and sent to the appellant on its headed paper for his signature. It would be fanciful to pretend that he did not have any expectation of money coming in from that source at the time when he completed the benefit application form. His answer "no" to the question whether he expected to have some money coming in that he had not disclosed was therefore misleading.
34. The appellant's defence statement asserted that he never personally received any form of income or financial reward from Coull Web Design, but as the controlling director of the company he was able to direct the way in which its money was used and he must have been expecting to get some financial benefit from it.
35. Furthermore, the fact that the appellant was negotiating this contract on behalf of Coull Web Design from his home was the clearest evidence that he was carrying on a business from his home, contrary to the information which he provided on the form.
36. As to the second form, the prosecution was able to rely on the appellant's formal admission that his wife had access to Abbey bank accounts for Lancaster and Coull Publishing and Coull Web Design which were in credit by over £75,000 at the date of the application. The defence statement stated that:

"… the Defendant admits failing to declare the relevant Abbey accounts, but will assert that, as far as he was concerned, he was under no obligation to declare these accounts because these were business assets not personal assets (pertaining as they did to limited companies)."

37. The appellant's belief as to whether he ought to have declared information about the accounts was relevant to the issue whether he acted dishonestly (about which the judge's direction is unchallenged) but it did not go to the question whether the information provided by him was misleading. It plainly was. At the date of the application the shares in Lancaster and Coull Publishing were held by the appellant's wife and her daughter. He stated that neither he nor his wife expected to have any money coming in, but did not disclose that she (if not he) was in effective control of the company and had access to such assets. It is not credible that neither of them expected to derive any financial benefit from this company, which had moreover raised invoices totalling nearly £100,000 in the previous 8 months.
38. It was obviously a matter of significance for the local authority to know what money the appellant and his wife had access to, what money they were expecting to receive, and whether they were in work, for the purpose of investigating whether he was entitled to benefit and likely to continue to be so. For those reasons we do not consider his convictions to be unsafe and this appeal is dismissed.