England and Wales Court of Appeal (Criminal Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT CHICHESTER
His Honour Judge Wood QC

		Royal Courts of Justice Strand, London, WC2A 2LL
		25/03/2011

Lord Justice Stanley Burnton:

Introduction

1. On 14 September 2010 in the Crown Court at Chichester before His Honour Judge Wood QC the appellant pleaded guilty on the first two counts of the Indictment, charging acting as a director of a company whilst an undischarged bankrupt, contrary to section 11(1) of the Company Directors Disqualification Act 1986, and acting as a director of a company known by a prohibited name, contrary to section 216(3) and (4) of the Insolvency Act 1986. On 22nd September, in the same court, he was convicted unanimously of the offence of falsifying books or papers relating to a company's affairs, contrary to section 206(1)(c) and (2) of the Insolvency Act 1986 and of three offences of making a material omission in a statement relating to a company's affairs, contrary to section 210(1) of that Act.
2. On 1 October 2010 His Honour Judge Wood imposed the following sentences on the appellant:

i) For the offences of acting as a director of a company whilst an undischarged bankrupt and acting as a director of a company known by a prohibited name, 6 months' imprisonment on each count, concurrent.

ii) For the offence of falsifying books or papers relating to a company's affairs, to 12 months' imprisonment concurrent.

iii) For the offences of making a material omission in a statement relating to a company's affairs, to 4 months' imprisonment on each count, concurrent between themselves but consecutive to the other sentences.

Thus the total custodial sentence was 16 months' imprisonment. In addition, the appellant was disqualified under the Company Directors Disqualification Act 1986 from acting as a director for 5 years.

3. The appellant renewed his application for leave to appeal against his conviction for the offence of falsifying books or papers relating to a company's affairs and appealed with leave of the single judge against his convictions of making a material omission in a statement relating to a company's affairs, and against his sentence.
4. We granted the appellant leave to appeal against his conviction for the offence of falsifying books or papers relating to a company's affairs on one ground only, which we summarise below.

The facts in outline

5. On 18 April 2003 the appellant formed Amalgamated Demolition Services Limited ("Amalgamated Ltd"). A compulsory winding up order was made by the Court on 24 April 2006. Shortly before, on 6 April 2006, the appellant formed a second company, Amalgamated Demolition and Asbestos Services Limited ("Asbestos Ltd"). On 16 January 2007 the appellant was personally made bankrupt. He was discharged from his bankruptcy on 16 January 2008. Asbestos Ltd ceased to trade and was dissolved in September 2009.
6. In 2005-6 Amalgamated Ltd was involved in a demolition contract with an NHS Trust. Amalgamated Ltd was a one-man company: effectively it was the appellant wearing a corporate hat. In connection with that contract, the appellant had given to the NHS Trust the particulars of Amalgamated Ltd's bank account with HSBC. The first stage payment was made by the Trust by electronic transfer into that account in January 2006.
7. The second stage valuation took place in March 2006. The appellant submitted an invoice for some £23,000 under the Amalgamated letter-head. However, in March a judgment creditor presented a petition for the compulsory winding up of Amalgamated Ltd. On 5 April 2006, before the NHS Trust had paid the invoice, the appellant was informed by the bank that the company's bank account had been frozen following the presentation of the winding up petition.
8. On 6 April 2006, the appellant formed Asbestos Ltd. On the same day the appellant opened a bank account in that company's name with Lloyds TSB.
9. At some stage after the formation of Asbestos Ltd, the computer records of the NHS Trust were changed. In place of the original HSBC banking particulars of Amalgamated Ltd there were entered the Lloyds TSB banking particulars of Asbestos Ltd, although the name of the company in the Trust's records was not altered. The NHS Trust's records showed that the HSBC account was effective from 30 January 2006 to April 2006, whereas the Lloyds TSB account was effective from 20 April 2006 to 28 September 2006.
10. The prosecution case, which was accepted by the jury, was that the appellant deliberately prevented a payment of £23,000 being paid into the account of Amalgamated Ltd and caused it to be paid instead to the account of Asbestos Ltd. He had contacted the NHS Trust and told them a deliberate lie, namely that the bank account details of Amalgamated had changed. In addition, he failed to inform the Official Receiver about three, high-value vehicles which his company had acquired subject to hire purchase agreements. The vehicles were a Range Rover motor vehicle, a Mitsubishi L200 and a Komatsu PC300 Excavator. It was, the prosecution contended, part of a dishonest attempt to hold on to these rather than disclose the truth promptly to the Official Receiver.
11. The defence case was that there had been no intention to conceal the state of affairs of the company or to defeat the law. So far as the hire purchase agreements were concerned the appellant, having spoken to staff at the Official Receiver's office, believed that there was no obligation to declare the vehicles and they were not to be treated as assets of the company.
12. The issue for the jury was whether the appellant was privy to diverting funds away from Amalgamated Ltd to Asbestos Ltd and whether he was being dishonest by concealing the hire purchase vehicles from the Official Receiver.

The statutory provisions

13. So far as material, section 206 of the Insolvency Act 1986 is as follows:

206 Fraud, etc. in anticipation of winding up.

(1)When a company is ordered to be wound up by the court, or passes a resolution for voluntary winding up, any person, being a past or present officer of the company, is deemed to have committed an offence if, within the 12 months immediately preceding the commencement of the winding up, he has—

(a) …

(c) concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the company's property or affairs, or

…

(2) Such a person is deemed to have committed an offence if within the period above mentioned he has been privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of subsection (1); and he commits an offence if, at any time after the commencement of the winding up, he does any of the things mentioned in paragraphs (a) to (f) of that subsection, or is privy to the doing by others of any of the things mentioned in paragraphs (c) to (e) of it.

(3) For purposes of this section, "officer" includes a shadow director.

(4) It is a defence—

(a) for a person charged under paragraph (a) or (f) of subsection (1) (or under subsection (2) in respect of the things mentioned in either of those two paragraphs) to prove that he had no intent to defraud, and

(b) for a person charged under paragraph (c) or (d) of subsection (1) (or under subsection (2) in respect of the things mentioned in either of those two paragraphs) to prove that he had no intent to conceal the state of affairs of the company or to defeat the law.

14. Section 210 of the Act, so far as is material, is as follows;

210 Material omissions from statement relating to company's affairs.E+W+S

(1)When a company is being wound up, whether by the court or voluntarily, any person, being a past or present officer of the company, commits an offence if he makes any material omission in any statement relating to the company's affairs.

(2) When a company has been ordered to be wound up by the court, or has passed a resolution for voluntary winding up, any such person is deemed to have committed that offence if, prior to the winding up, he has made any material omission in any such statement.

(3) For purposes of this section, "officer" includes a shadow director.

(4) It is a defence for a person charged under this section to prove that he had no intent to defraud.

The issues on this appeal

15. The sole ground raised in this appeal in relation to the appellant's conviction of an offence under section 206 of the Insolvency Act 1986 is whether the data stored on the computer of the NHS Trust were within the scope of the words "book or paper" in section 206(1)(c).
16. In relation to the appellant's convictions under section 210 of the Act, the issue is whether there was evidence fit to go to the jury that he had made any material omission in statements relating to the affairs of Amalgamated Ltd.

The section 206 offence

(a) The contentions of the parties

17. On behalf of the appellant, Mr Krolick submitted that "any book or paper", an undefined expression, was limited to physical books and papers, as made clear by the word "paper", which could not include a computer record.
18. On behalf of the respondent, Mr Ashley-Norman submitted that these words should be given a common-sense meaning. It would be absurd to think that Parliament intended to restrict that paragraph to paper. For example, on the appellant's case, a company director could falsify records of a company's property kept on microfiche without committing any offence under section 206(1)(c). He submitted that any book or paper contains writing, and that "writing" is the subject of definition in Schedule 1 to the Interpretation Act 1978:

"Writing" includes typing, printing, lithography, photography and other modes of representing or reproducing words in a visible form, and expressions referring to writing are construed accordingly.

(b) Discussion

19. As Mr Ashley-Norman's helpful skeleton argument demonstrated, it is a legislative curiosity that the ground raised by the appellant could not have been raised under the immediately preceding legislation. The Companies Act 1985 included a relevant definition:

'books and papers' and 'books or papers' include accounts, deeds, writings and documents;

Computer records are clearly both "writings" and "documents", even without recourse to the Interpretation Act 1978. The ground raised by the appellant could not be argued if the alleged offence had occurred after 12 October 2009. With effect from that date, the 1985 Act definition has been inserted into the 1986 Act and a new subsection added:

436B – References to things in writing

(1) A reference to a thing in writing includes that thing in electronic form.

20. It is unfortunate that the issue now raised by the appellant was not raised before the judge. Moreover, on the prosecution case, there were more obvious offences that could have been charged, such as obtaining a money transfer or a pecuniary advantage by deception.
21. Mr Krolick relied on the subsequent amendment of the 1986 Act as demonstrating that Parliament had considered that the unamended Act did not include things in electronic form in a "book or paper". The difficulty in this connection is that we do not know whether the amendment was passed to make clear what was previously unclear, or to effect a substantive change in the law. We can say that no reason has been suggested why Parliament should have restricted the ambit of section 206(1)(c) when the 1986 Act was enacted. In our judgment, we have to interpret that paragraph as it was when enacted, without reference to subsequent legislation. This does not mean that what is denoted by the expression in question is restricted to forms of "book or paper" that existed in 1986. The expression must be applied to current facts and circumstances.
22. The task of interpreting section 206(1)(c) is not made easier by the variety of expressions used in the 1986 Act to refer to the means of storing data, and it is not always obvious why. Any book or paper must be a document, yet section 206(1)(e) creates an offence in relation to documents that must generally duplicate that created by paragraph (c). Section 209 (interestingly headed "Falsification of company's books") refers to "any books, papers or securities" and to "any register, book of account or document". Section 355, relating to individual insolvency, refers to "papers and other records" and to "any books, papers or other records". The difference may be explained by the fact that a company must keep books (particularly books of account), whereas an individual may not.
23. We do not consider that computer records are a "paper". However, we agree with Mr Ashley-Norman that the expression "book or paper" should be given a practical meaning, reflecting current usage.
24. We see no incongruity in a statement such as "My company's books are kept on computer". We consider that it is for this reason that neither counsel nor the members of the Court in R v McCredie [2000] BCLC 617 saw any reason to question the scope of section 208(1)c) (which refers to "any books and papers"), in a case in which the particulars of the offence were that the defendants "did not deliver up to the liquidator all books and papers in their custody or under their control belonging to the company and which they were required to deliver up, namely, [the contents of] filing cabinets and computer floppy disks containing customer details". The case proceeded on the basis that "books and papers" included floppy disks. Similarly, in R (Griffin) v Richmond Magistrates' Court [2008] 1 Cr App R 37, the Divisional Court assumed that the claimant could properly be convicted of the offence under section 206 where the allegation appears to have included a failure to deliver up computer records.
25. It follows that in our judgment, records kept on computer that affect or relate to a company's property or affairs are within the composite expression "book or paper affecting or relating to the company's property or affairs". It is therefore unnecessary to consider whether "book or paper" is within "expressions referring to writing" in the definition of writing in the Interpretation Act. Accordingly the jury were entitled to convict the appellant of the offence under section 206(1)(c).

The section 210 offences

(a) The contentions of the parties

26. The issue raised under this heading is whether there was evidence that the appellant had failed to disclose to the liquidator of Amalgamated Ltd the company's possession of 3 vehicles which it had as hirer under hire purchase agreements that had been terminated. The appellant's case is that there was nothing relevant that he was required to disclose; at the date of his statement, the company had ceased to be in possession of the vehicles with the consent of their owners, the hire purchase companies in question; the vehicles (or at least two of them, a Mitsubishi and a Range Rover) were in his possession, not that of the company. It followed that he could not properly have been convicted of failing to disclose the company's possession of the vehicles in question.
27. The prosecution case was that the vehicles in question remained in the possession of the company unless and until they were repossessed by their owners or taken by an unconnected third party. They remained in the possession of the company while in the physical possession or custody of the appellant, whose possession of them was as officer of the company.

Discussion

28. Mr Krolick pointed out that by their express provisions the hire purchase agreements in question automatically determined when the winding up petition against Amalgamated Ltd was presented. However, it does not follow that the company then ceased to be in possession of those vehicles.
29. The failure to disclose alleged against the appellant was in a Preliminary Information Questionnaire. Question 2.7 asked:

Have you or have any of the officers or any third party … guaranteed any of the company's obligations?

The appellant had guaranteed the company's obligations under each of the 3 hire purchase agreements in question. Nonetheless, he answered this question "Refinanced on all to new company". That was untrue. If this question had been answered correctly, it would have revealed to the official receiver that the company had been a party to hire purchase agreements, and might be in possession of the goods that were the subject of those agreements.

30. Question 3.1 was under the heading "Assets" and stated:

"List below details of the company's assets stating any which are, or may be, subject to claims by creditors (for example, finance companies under hire purchase agreements, banks under debentures or charges, suppliers claiming reservation or retention of title). If none, write 'NONE' in the details column."

Boxes (i) and (j) were for "Motor vehicles" and "Plant and machinery" respectively. The appellant wrote in the details column "NONE" against both.

31. Question 5.7 asked:

"Does the company have any property owned by others (for example, property on hire, hire purchase, lease, loan, for safe custody, for repair or supplied under a reservation or retention of title agreement?"

The appellant ticked the box answering "No".

32. Question 7.1 sought details of the company's liabilities. It included a list of possible creditors, with boxes, and invited the person completing the form to tick the relevant boxes. The appellant ticked some boxes (such as Inland Revenue), but left that for hire purchase agreements blank. The following page required the appellant to list the company's creditors. It stated:

"Note: You must identify creditors under hire purchase agreements, …"

The appellant did not include the hire purchase finance companies in the list.

33. The appellant signed and dated the questionnaire 16 June 2006.
34. The judge directed the jury that the questionnaire related back to the date of the winding up order. We accept Mr Krolick's submission that this was misdirection. The questions are asked in the present tense, and their natural reading is that they relate to the situation as at the date they are answered, except where express provision is made otherwise: for example, question 5.5 asks "Has any payment been made to a sheriff or bailiff within the last 6 months?" We understand why the liquidator would wish to have the questions answered with reference to the date of the winding up order, but if so the form must be amended to make that clear.
35. However, the judge's misdirection would be material only if there should have been a different answer as at the date the appellant signed the questionnaire. In evidence, the appellant accepted that he remained in possession of the Range Rover and the Mitsubishi. He did not suggest that he had not been in possession of the Komatsu when he signed the agreement. His defence was that they all belonged to the finance companies, that the company no longer had possession with the consent of the finance companies (because the hire purchase agreements had been terminated), and that there was no equity in the Range Rover or in the Mitsubishi. He did not suggest that the Komatsu had disappeared when he signed the questionnaire.
36. As against Amalgamated Ltd, the appellant had no right of possession of any of the vehicles in question. His possession of them was by reason of his being an officer of the company, and his possession of them was its possession. A company director with a company car in the garage of his house cannot truthfully say that the car is in his, and therefore not the company's, possession: he has custody or possession of it on behalf of the company. By not mentioning the vehicles in the questionnaire, the appellant did not disclose that the company had them and was in possession of them, albeit through him.
37. If question 3.1 had referred only to "Assets", it might have been arguable that did not require something that had no value to the company to be disclosed. However, the question refers expressly to assets that are subject to claims by finance companies under hire purchase agreements, which is what the three vehicles in question were. Moreover, the jury were entitled to consider all his misleading answers, to which we have referred, in order to decide whether he had failed to disclose the company's possession of the vehicles. In our judgment, there was ample material before them justifying the verdicts they unanimously returned. In our judgment, it is clear that he deliberately suppressed any reference to the vehicles, the hire purchase agreements, and his guarantees, because he wanted to keep the vehicles for himself. If that is right, the jury would also have been entitled to conclude that the vehicles were assets of the company. That conclusion was not, however, essential to their verdicts.
38. For these reasons, the appeal against the convictions for failing to disclose the company's possession of the vehicles in question will be dismissed.

Sentence

39. The principal point made by the appellant in his appeal against sentence is that the judge should have obtained a pre-sentence report before sentencing him. However, he did not put before us or suggest that there was any information that a pre-sentence report would or might have provided to the judge. In these circumstances, the absence of a pre-sentence report is irrelevant.
40. The offences to which the appellant pleaded guilty and of which he was convicted were serious offences. Effectively, he stole from the creditors of Amalgamated Ltd the sum of £23,000 owed to it by the NHS Trust. He deliberately concealed from the Official Receiver, as the liquidator of the company, the fact that he had three of the company's vehicles so that he could continue to use them himself. Despite his age and previous good character, both of which the judge took into account, we regard the sentences passed as fully justified.
41. The appeal against sentence will be dismissed.