England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT IN PETERBOROUGH
MR RECORDER FORSYTH
T2011/7077-3

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/11/2012

Mr Justice Roderick Evans:

1. Between 21^st November and 8^th December 2001, a period of 13 working days, this appellant stood trial with her husband, John Gilbert, and her stepson, Robert Gilbert at the Crown Court at Peterborough before Mr Recorder Forsyth. The defendants faced an indictment which contained 4 Counts. On Count 1, John Gilbert was charged with acting between the 22^nd day of December 2005 and the 21^st day of June 2009 in contravention of a disqualification order made under s.1 of the Company Director's Disqualification Act 1986 and the appellant and her stepson, Robert, were charged with aiding and abetting that offence.
2. Of the three defendants, only John Gilbert faced Count 2. That count alleged that he had conspired with others unknown to acquire, use or have possession of criminal property, namely, computer and office equipment and associated items. The prosecution did not allege that the appellant or Robert Gilbert were party to this conspiracy.
3. On Count 3, which is the count upon which this appeal focuses, all three defendants were charged with fraud, the particulars of which were that between 1^st December 2008 and 30^th January 2009 they had dishonestly and with the intent, set out in s.2 of the Fraud Act 2006, to which we shall return in due course, made false representations to Lloyds Bank in that they had supplied false details in support of an application to open a bank account.
4. On Count 4, John Gilbert alone faced a further allegation of fraud, the particulars of which were that between March and July 2009, he had falsely represented to a building supply company that he was authorised to act on behalf of I & J Developments and that payment would be made for goods supplied.
5. John Gilbert was convicted of all offences and sentenced to a total of 2 years imprisonment. Robert Gilbert was convicted on Count 1 and fined £500. He was acquitted on Count 3. The appellant was convicted on both Counts 1 and 3. On Count 1 she was made the subject of a disqualification under the Director's Disqualification Act 1986 and sentenced to a Community Order on Count 3. It is against her conviction for fraud on Count 3 that she appeals with leave of the single judge.
6. The charges arose out of the appellant's involvement with a company called I & J Developments Ltd (I & J) which was incorporated on 7^th September 2004. The appellant and her husband were shareholders in the company. Its principal business was to be the development and selling of real estate. The appellant was appointed company secretary and her husband, John, was appointed a director of the company. However, he resigned his directorship in December 2005 only a few weeks before he was made subject to an order disqualifying him from acting as a company director as a result of his trading activities in relation to another company called J & RG Ltd which had gone into liquidation owing over £123,000.
7. By 2008, the appellant and her stepson were directors of I & J but the company remained dormant. However, in 2008 steps were taken to activate the company and, thereafter, some transactions were carried out in the company's name. The prosecution case against the appellant and her stepson on Count 1 was that they had allowed John Gilbert to effectively control I & J whilst offering him assistance where necessary. In support of this allegation, the prosecution relied upon a meeting which took place on 8^th December 2008 at the Peterborough Branch of Lloyds TSB bank at which all three defendants were present. The purpose of the meeting was to open a bank account for I & J.
8. The bank employee present at this meeting was Alma Mee, a Business Manager at the bank, and she, on the basis of information given her at the meeting, filled in a bank form called "Check List to Open Account (s) for a New Business or Switcher". She recorded that the business of the company was "new build and renovation" and that the estimated turnover of I & J would be £700,000 to £800,000. Paragraph 10.5 of the form recorded that set up/purchase costs would be:

"funded by personal arrangements

from previous builds (savings)

future funding – savings/bank finance"

9. In evidence, Alma Mee stated that she had no specific recollection of this meeting and no notes of it other than the checklist form. She could not recall the detail of what was said at the meeting save that it was John Gilbert who had done all the talking and made all the representations. However, she said that she had not written the word "savings" on the form and could not identify who had. It was the appellant, in her capacity as director and company secretary of I & J, who signed the form formally applying for the opening of a bank account and thereby confirming the accuracy of the information contained in the form. No request was made at the time of the application to open a bank account for overdraft facilities and no such application was ever made thereafter. Three days after attending at the bank the appellant resigned as a director of the company but continued as Company Secretary.
10. In addition to forming part of the prosecution's case on Count 1, the application to open the bank account and the representations made as part of that application, were also the basis of the prosecution's case on Count 3. The prosecution alleged that the appellant was party to the application to open the bank account and party to the furnishing of false and misleading information to the bank. She must, the prosecution said, have known the truth about the family's poor financial situation. The prosecution put Count 3 before the jury on the basis that the obtaining of the bank account was the first step, and a dishonest step, towards using I & J to make financial gains.
11. The application to open the bank account was successful and an account in the name of I & J was opened and cheque books issued. Initially, the appellant and her stepson, Robert Gilbert, were the sole signatories on the account but some months later they applied for the signatory on the account to be changed to that of a Mr Lima. That application was, eventually, approved in July 2009.
12. In the event, there was little activity on this account. In May 2009, a deposit of £1040 was made. The following month, a cheque was cashed for £1000 leaving a balance of £40. However, in May and June 2009, I & J obtained a quantity of computers and computer equipment and, in purported payment of those items, issued post dated cheques to its supplier. Thereafter, I & J put stops on those cheques and, when they were presented for payment by the suppliers, payment was refused. I & J incurred a penalty of £35 for stopping the cheques which left a balance of £5 in its account but the suppliers suffered losses in the region of £130,000. These transactions formed the basis of the conspiracy allegation in Count 2 of the indictment. For the purposes of this judgment, there is no need to mention further Count 4 on the indictment.
13. When interviewed by the police the appellant said that her husband wanted to open a bank account and he hoped to get an overdraft because he wanted to do some more building.
14. The appellant's case on Count 3 was that she had not acted dishonestly but had simply done what her husband had told her to do. Furthermore, she relied upon the lack of evidence about when and by whom the word "savings" had been entered on the application form and denied any intention to make a financial gain.
15. Before turning to consider the issues that arose at trial in relation to Count 3, it is necessary to have in mind the relevant provisions of the Fraud Act 2006:

"Section 2 Fraud by False Representation

(1) A person is in breach of this section if he –

(a) dishonestly makes a false representation, and

(b) intends, by making the representation –

(1) to make a gain for himself or another or

(2) to cause loss to another or to expose another to a risk of loss.

(2) A representation is false if –

(a) it is untrue or misleading, and

(b) the person making it knows that it is, or might be, untrue or misleading.

(3) …

(4) …

(5) …

Section 5 "Gain" and "Loss"

(1) The reference to gain and loss in Sections 2 to 4 are to be read in accordance with this Section.

(2) "Gain" and "Loss" –

(a) extend only to gain or loss in money or other property

(b) include any such gain or loss whether temporary or permanent

and "property" means any property whether real or personal (including things in action and other intangible property).

(3) "Gain" includes a gain by keeping what one has, as well as a gain by getting what one does not have.

(4) "Loss" includes a loss by not getting what one might get as well as a loss by parting with what one has.

16. At the end of the prosecution case, Mrs Devas submitted in respect of Count 3 that in view of the lack of evidence about when and by whom the word "savings" had been written on the form, there was inadequate evidence of a misrepresentation. Furthermore, the prosecution had never identified any specific gain or loss which it was alleged the defendant had intended to make or cause. The Recorder rejected the submission. In doing so he said:

"I am first of all satisfied that there is evidence of a false representation to Lloyds Bank in the application for the bank account. This is not, in my view, to be found in the estimated turnover but to be found in the assertions of the availability of savings and other assets to fund the property development. The question of whether this was dishonestly done must of course go to the jury, not for decision for me; but I have been troubled by whether there is evidence of an intent to make a gain for themselves or another or to cause loss to another.

If Robert Gilbert and Stephanie Gilbert knew of the planned fraud then this is plainly satisfied. But I am not satisfied that there is sufficient evidence of that. But, on reflection, even if they had bona fide thought that the bank account was to facilitate John Gilbert's plans for property development they were surely doing so in order that he and also Stephanie Gilbert as a shareholder, could make a gain.

So I find that the terms of the statute are or maybe satisfied by the evidence on that count and I turn the applications down."

17. Mrs Devas submits that the Recorder was wrong to reject her submissions.
18. All defendants gave evidence. John Gilbert accepted that he had provided the information to Alma Mee that the developments to be undertaken by I & J would be funded, in part, by savings. The appellant (and her stepson) could not recall whether savings were discussed at the meeting.
19. As part of his summing up, the Recorder gave the jury written directions in which he set out, word for word, Section 2 of the Fraud Act 2006, correctly dealt with the issue of dishonesty and directed the jury in the following terms upon the question of gain and loss:

"If you are sure that the Defendants – any one of the three – dishonestly made a false representation, then you need to consider whether this was done with the intent of making a gain for himself or herself or another, or with the intent to cause loss to another, or to expose another to risk of loss. "Gain" or "loss" here mean gain or loss of money or other property and, of course, a bank account is not property."

20. He then summarised the key questions the jury had to answer in respect of Count 3 as follows:

"(i) Was any part of the form….or what was said on the occasion on which the form was signed, false?

(ii) Was the Defendant dishonest?

(iii) Did the Defendant, by making a representation, intend to cause a gain for himself or herself, or another?

If you are sure that the answers to all three of these questions are yes, the Defendant is guilty of this count."

21. Later when dealing with the evidence on Count 3, the Recorder reminded the jury about the evidence as to whether Alma Mee was told that developments would be funded, in part, by savings and told them that "dishonesty is perhaps the crucial issue which you need to decide on this count." He then went on to deal with the question of gain or loss in the following terms:

"You then have to consider whether there was the intent to make a gain, or to cause a loss - the final requirement. Acquiring a bank account is not acquiring property, and so it does not count as a gain or a loss.

Now if you are sure that any one of these Defendants was at the time of the opening of the bank account party to a fraudulent scheme, such as the fraudulent scheme that resulted, then clearly a loss to others is intended. But if you don't think that, the question is more difficult. Even if the bank account was simply to enable development or to sell the company, you may conclude that the Defendant intended by doing that … intended by opening the account, to confer a gain upon someone."

22. Exception was taken on behalf of the appellant and Robert Gilbert to the Recorder's suggestion that either of those defendants might be found by the jury to be party to a fraudulent scheme at the time of the opening of the bank account as the prosecution have never suggested that either had been involved with John Gilbert in the transactions which founded Count 2 or Count 4. The Recorder accepted the correction and subsequently told the jury that it had never been suggested that either Robert or Stephanie Gilbert had been party to a fraudulent scheme and that the jury should not assume that he was including either of those defendants in his remarks which applied only to John Gilbert.
23. The final matter we should mention in relation to gain and loss is a note sent by the jury to the Recorder when they were in retirement. The note read:

"Does the gain in the count dealing with fraud by a false representation need to be illegal, i.e. is he allowed to make a legal gain?"

24. Having discussed the matter with counsel, the Recorder correctly directed the jury:

"….. that the gain does not need to be illegal; a legal gain will suffice. I add only this: that if you conclude that it was an illegal gain, that might assist you in deciding the question of dishonesty."

25. Mrs Devas makes a number of complaints about the summing up, some of which we can deal with quite shortly. Her submission that the appellant made no representations and was "implicated by her silence alone", that the evidence of a representation being made as to the availability of savings was "weak in the extreme" and that there was no evidence that any representation made was untrue when made, are untenable as grounds of appeal. There was evidence that John Gilbert had told Alma Mee that the developments would be funded, in part, by savings, that the appellant was present at the meeting when that statement was made and that the appellant signed the application form for a bank account as an officer of the company. There was also evidence from which a jury could conclude that the representation was false within the meaning of the statute.
26. The next ground is that the Recorder's direction (quoted at paragraph 21 above) that a finding by the jury that any defendant was party to a fraudulent scheme at the time the bank account was opened would mean that a loss was intended was a misdirection. That it was a misdirection in the context of this case, in relation to the appellant and her stepson, is not in issue. However, the misdirection was promptly and properly corrected by the Recorder and cannot impact on the safety of this conviction.
27. The substantive ground of appeal arises out of the way the Recorder dealt with the issue of intended gain or loss and it is on this that the single judge, Hamblen J, focused when granting leave. Mrs Devas submits that at no point did the prosecution, or indeed the judge, identify a particular gain or loss. The Recorder allowed the case to go to the jury at the close of the prosecution case on the basis of the possibility of a gain arising from future legitimate property development, rather than a gain arising directly from any representation made at the meeting at the bank, or directly from the opening of the bank account. This, and the direction to the jury that it was open to them to find that a gain could be inferred if they concluded that the opening of the bank account was simply to enable development or the sale of the company, left the case on too vague a basis. The link, it is submitted, between any representation and such a possible future gain, is too tenuous.
28. Mr Myatt, on the other hand, submits that there was clear evidence that it was the intention of each defendant that I & J should start developing properties; that the company needed a bank account in order to start trading and that the purpose of trading was to make financial gains, which would inure to the benefit of shareholders. There was, therefore, evidence from which the jury could properly infer that the appellant intended to make a gain.
29. An intention to make a gain (or to cause loss to another or expose another to risk of loss) is not of itself enough to meet the requirements of the section. In order to commit fraud by representation, a defendant must (a) make a false representation as defined in s.2(2) – (5) of the Act, (b) do so dishonestly and (c) intend, by making the representation, to make a gain (or to cause loss to another or expose another to a risk of loss). The jury must, therefore, be sure that the defendant intended to make a gain or cause loss or exposure to loss by making the false representation and it is a matter for the jury on the facts of each case whether the causative link between the intention and the making of the false representation, required by the section, is established.
30. In the present case, the need to be sure of that causative link was not properly addressed either at the end of the prosecution case or in the summing up. The Recorder misdirected himself and the jury, and the conviction on Count 3 is unsafe.
31. Accordingly, the appellant's conviction on Count 3 is quashed and the appeal allowed.