England and Wales High Court (Administrative Court) Decisions

Queen on the application of A and SNARESBROOK CROWN COURT [2001] EWHC Admin 456 (14th June, 2001)

Case No: CO/1019/2001

Neutral Citation Number: [2001] EWHC Admin 456

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Thursday, 14 June 2001

Lord Woolf C.J.: This is the judgment of the court.

1. On 21 February 2001, at Snaresbrook Crown Court, His Honour Judge Radford rejected application, under section 6(1) of the Criminal Justice Act 1987, for a charge of theft to be dismissed. Mr A (the Claimant) sought permission to claim judicial review of the judge's decision. On 17 May 2001, this court gave the Claimant permission to claim judicial review, but dismissed his application. These are the reasons for that decision.

2. The court gave permission because the claim raises an important issue as to the circumstances in which a director can be guilty of theft from a company if his conduct, which is alleged to constitute theft, is in law regarded as being the conduct of the company.

The Facts

3. At all material times the Claimant was Chief Executive of H Ltd. He was also a shareholder. He and Mr H were the sole directors of F Ltd which was a wholly owned subsidiary of H Ltd.

4. Prior to 1994 F Ltd had been an arm of C Ltd, which supplied C Ltd with a considerable amount of food. H Ltd acquired F Ltd from C Ltd on 27 May 1994. It was important to F Ltd and to H Ltd that F Ltd continued to be C Ltd's food supplier. On the same date H Ltd entered into a three year supply agreement with C Ltd which made F Ltd an exclusive supplier of foodstuffs to C Ltd.

5. In due course the Claimant set about trying to secure an early renewal of the supply agreement. He negotiated for this with his co-defendants, Mr G, General Manager of the Food Buying and Manufacturer's Group of C Ltd, and Mr C, General Manager of Food Buying at C Ltd. An extension to the supply agreement was completed on 25 January, 1995, for which C Ltd was paid £2.85 million.

6. The Crown's case, prepared and presented by the Serious Fraud Office ("SFO"), was that the extension was achieved by corrupt payments of £1 million each to Mr G and Mr C. On 26 January 1995, upon a payment instruction, signed by the Claimant, the sum of £2.4 million was debited from F Ltd's bank and transferred to the Zurich bank account of T Ltd a company owned by Mr Z. From there, £2 million was transferred to bank accounts of British Virgin Islands' companies which were beneficially owned by Mr G and Mr C. £400,000 was retained by T Ltd. The £2.4 million was dressed up, for the Board of H Ltd, as being a brokerage fee payable to Mr Z for promoting the extension. In fact neither Mr Z nor T Ltd had played any part in the negotiations for the extension and T Ltd's "fee" had been a device to convey corrupt payments to Mr G and Mr C. A solicitor, Mr T who advised H Ltd during the negotiations for the extension, helped set up the British Virgin Islands companies and bank accounts with funds supplied by the Claimant from H Ltd.

7. On the basis of that case, in September 1999, Mr G and Mr C were each charged with an offence of Corruption contrary to Section 1 of the Prevention of Corruption Act 1906. Mr T was charged with two aiding and abetting offences in respect of the corrupt payments to Mr G and Mr C. But the Claimant was in Monaco. He could not be extradited from Monaco for corruption. He could be extradited for theft, but with the benefit of "speciality", that is protection from prosecution for an offence other than that for which he was extradited. The Claimant returned to England voluntarily in May 2000. He did so under an agreement with the SFO that he would be charged with theft not corruption. On his return he was arrested and charged as follows:

"Theft contrary to section 1 of the Theft Act 1968.

Mr A on or about the 26th January 1995 within the jurisdiction of the Central Criminal Court stole a credit balance of £2.4 million held to the order of F Ltd A/c No. 00803826 at the Lloyds Bank Plc."

8. On 11 July 2000, by a notice of transfer given under the provisions of the Criminal Justice Act 1987, the charges against the four men were transferred for trial at the Snaresbrook Crown Court, and a draft bill of indictment reflecting the charges was served.

9. On 5 October 2000 the Claimant's representatives gave notice of his intention to apply for dismissal of the charges against him, pursuant to section 6(1) of the 1987 Act, which provides:

"Where notice of transfer has been given, any person to whom the notice relates, at any time before he is arraigned (and whether or not an indictment has been preferred against him), may apply orally or in writing to the Crown Court sitting at the place specified by the notice of transfer as the proposed place of trial for the charge, or any of the charges, in the case to be dismissed; and the judge shall dismiss a charge (and accordingly quash a count relating to it in any indictment preferred against the applicant) if it appears to him that the evidence against the applicant would not be sufficient for a jury properly to convict him."

The Proceedings in the Crown Court

10. The contention of the Claimant to Judge Radford was that the transfer out of F Ltd's account, of £2.4 million, was effected by the Claimant and Mr "H" acting together as the sole directors and as the directing mind of F Ltd, both being aware of the corrupt nature of the payment, so that the transfer was the act of the company itself. The payment was for the benefit of the company. There was no assumption by the Claimant of the rights of the company, the owner of the credit balance, and therefore there was no appropriation for the purposes of sections 1(1) and 3(1) of the Theft Act 1968; hence there was no theft by the Claimant. Mr H had made witness statements, served as part of the Crown case, that he knew and agreed to the payment of £2.4 million to T Ltd, as a brokerage fee, but was unaware of its true corrupt purpose. It was conceded that if it was proved to the criminal standard of proof that Mr H was unaware of the corrupt purpose and destination of the £2.4 million, then the Claimant, acting alone, was not acting as the company, F Ltd, in respect of the corrupt transfer and the contention could not succeed. However, it was contended that no reasonable jury, properly directed, could be sure that in giving his authority as the other director of F Ltd to the transfer of the £2.4 million to T Ltd, Mr H was ignorant of the corrupt purpose involved.

11. The judge gave leave, under section 6(3) of the 1987 Act, for oral evidence to be given by Mr H who was cross-examined by counsel for the Claimant.

12. The judge found that, even if Mr H knew of the corrupt destination and purpose of the transfer of the £2.4 million yet combined with the Claimant in authorising it, the Claimant's part in what occurred was nevertheless capable of amounting in law to an appropriation of the credit balance. But he decided that in any event Mr H's denials of complicity in corruption were capable of belief by a jury. Therefore the challenges to the credibility of Mr H's evidence should be left to be weighed at the trial.

13. The attack on the judge's decision is mounted on two fronts: first, that the judge misdirected himself on the law of theft, so far as appropriation was concerned, and, second, that he reached a perverse decision in respect of the credibility of Mr "H's evidence. It was contended that the Claimant and Mr H were acting as F Ltd in respect of the vital transfer, and not merely as its agents, and that as a company can not steal from itself the Claimant cannot be guilty of theft. It was contended that Mr H was "indisputably in tandem with the Claimant", and that it was not safe to proceed on the basis that he was not. In opening the argument for the Claimant in that way, Mr Michael Beloff Q.C. accepted, rightly, that the Claimant must succeed on both bases of attack, if the judge's decision was to be quashed and the charge against the Claimant dismissed at this preliminary stage. Mr Beloff put the Claimant's argument on the law of theft. Mr Julian Bevan Q.C. put the argument in respect of Mr H's evidence. It is convenient to deal with Mr Bevan's argument first since this will set out the factual background against which it is necessary to consider Mr Beloff's argument.

Mr H's Evidence.

15. The essence of Mr Bevan's argument was that the Crown must prove beyond reasonable doubt that Mr H was not a knowing party to the corrupt payment to T Ltd, and that he was duped by the Claimant into believing that the payment of £2.4 million to T Ltd/Mr Z was a genuine broker's fee. No reasonable jury properly directed could so find, it was submitted, so a trial judge would have to stop the case under the second limb of the test in R v Galbraith (1981) Cr.App.R.124, at page 127, which the wording of section 6(1) of the 1987 Act reflects.

16. Mr Bevan pointed to a number of features in the evidence, which, he contended, made it inconceivable that Mr H did not know the true purpose of the payment of £2.4 million when he approved it. In particular:

i) Mr H knew that the "fee" of £2.4million was 85% of the fee of £2.85 million paid to C Ltd for the extension agreement. The suggestion that someone should be paid 85% of the cost of a deal, to broker the deal, was ridiculous.

ii) According to Mr Z's witness statement, he was first approached as a possible conduit for £2 million at a fee of £400,000 on 23 or 24 January 1995. On 23 January 1995, draft letters dated 1 December 1994 and 15 January 1995 were produced apparently offering and accepting a brokerage agreement between T Ltd and H Ltd, to give a false history of Mr Z's involvement in the extension of the supply agreement. On 20 March 1995, by which time non-executive directors of H Ltd were concerned about the possibility of bribery to achieve the extension, the Claimant, Mr H and another H Ltd director, Mr L, assisted by Mr T, prepared a background document setting out the supposed history of Mr Z's involvement, described by the Crown as a dishonest attempt to cover up the truth. Paragraph 10 of the document spoke of a meeting on 19 January 1995, between the Claimant and Mr G, making no progress towards an extension agreement, and Mr H then speaking to Mr Z, on the same day, about the possibility of him (through T Ltd) being mandated by H Ltd to procure the extension. Mr H accepted that this was a lie, but claimed that he agreed to lie at the Claimant's request, because the Claimant told him about Mr Z's broking services on 19 or 20 January, and he trusted the Claimant and felt sorry for him. The explanation for the lie was incredible. Mr Z had not even been approached by 19 or 20 January.

iii) The background document claimed that Mr Z helped to arrange a meeting with C Ltd on 11 January 1995, attended by the Claimant, Mr G, Mr C, Mr T and Mr Z. Mr H claimed that he was told this by the Claimant on 19 or 20 January. Mr H had already himself become involved in the extension negotiations by 19 January 1995. He did not attend the 11 January 1995 meeting but he was present at a meeting on 16 January which involved the Claimant, Mr G, Mr C and Mr T, where the atmosphere was frosty. But he was not concerned to be told for the first time on 19 or 20 January of the prior involvement of Mr Z to whom it was proposed to pay a very large fee, of which he had been told nothing on 16 January.

iv) The supposed brokerage agreement between H Ltd and T Ltd/Mr Z was documented in a letter dated 24 January 1995 from T Ltd, and a letter dated 25 January from H Ltd signed by the Claimant and Mr H. The letters were clearly based on the drafts dated 1 December 1994 and 15 January 1995. In interview under caution Mr H claimed that he had not seen the drafts before they were disclosed to him prior to interview. But the drafts were themselves clearly based on first drafts also dated 1 December 1994 and 15 January 1995 and faxed to Mr T on 23 January 1995 under cover of a faxed sheet written by Mr H, as he admitted at the time of the hearing before the judge. Mr H accepted that he perused the draft letters in regard to the financial details, but claimed that he did not notice the 1 December 1994 date on one draft letter and the reference to this date in the first paragraph of the other. He accepted that had he done so he would have realised that they were bogus, to create a false history.

v) It was clear that the possibility of corruption crossed Mr H's mind before 19 January 1995. The written statement of Mr O, partner in a large and well-known firm of chartered accountants, spoke of Mr H asking him if he had experience of inducements being paid, on 10 January 1995. Mr H thought that H Ltd's purchasing contacts at C Ltd might be asking for a payment. Mr O telephoned Mr H the following week and expressed the view that any inducement payment was almost certainly illegal. Mr H made no mention of those conversations during H Ltd's internal enquiry in March 1995, or in an interview under caution, or in his first witness statement. In his second witness statement, he said that he did not specifically recall a meeting with Mr O on 10 January; he did recall a telephone call from Mr O advising that H Ltd take legal advice over any payments to intermediaries, which he communicated to the H Ltd board. That remained his position. Yet the vast "brokerage fee" was paid shortly after the conversation recalled by Mr O.

vi) At 11.30am on 25 January 1995 a board meeting of H Ltd was held, attended by the Claimant and Mr H and two other directors. It also comprised a board meeting of F Ltd, attended by the Claimant and Mr H. The minutes of both meetings recorded a resolution that the Directors should seek to procure an extension of the C Ltd supply agreement "for a consideration payable to C Ltd which, together with associated costs, would not exceed £5.5 million". The actual price of £2.85 million and the fee of £2.4 million do not appear in the minutes which were written up by H Ltd's Group Company Secretary, Mr M. Mr M's witness statement says that Mr H asked him to prepare minutes after the meeting (which Mr M did not attend), and emphasised the inclusion of words along the lines which we have quoted, thereby concealing the large "brokerage fee".

17. Those are the points which Mr Bevan particularly stressed in his detailed and closely reasoned written and oral submissions. He contended that the judge was wrong to rely as strongly as he did on his own assessment of Mr H as a witness, when the undisputed evidence and documentation spoke so loudly. Mr Bevan's arguments were met by extensive written submissions for the SFO which stressed evidence of the Claimant's ability to deceive those around him, his need to keep the bribes secret, Mr H's trust of the Claimant, and his limited involvement in events leading to the extension agreement. The judge had seen Mr H give evidence, subjected to extensive cross-examination. The members of this court had not.

18. In R v Central Criminal Court, ex parte Director of the Serious Fraud Office [1993] 1 W.L.R.949, this court (Woolf L.J. and Pill J.) concluded that this court had jurisdiction to review a judge's decision on an application under section 6(1) of the 1987 Act. In that case the judge had dismissed 46 of 66 charges of theft against Mr Azil Nadir on the ground that, based on his view of the law, there had been no appropriation as defined by section 3(1) of the Theft Act. At page 958 E-F, it is stated;

"I would however emphasise that I do not anticipate the courts being prepared as a matter of discretion to give leave to make an application for judicial review of such a decision except in the exceptional case. Jurisdiction should clearly only be exercised in the extremely limited circumstances. In this connection I would draw particular attention to the comments of May L.J. in R v Oxford City Justices ex parte Perry [1988] QB 507, 512-513, with regard to the judicial review of a decision of the justices to commit a defendant for trial. Normally the assessment of the judge of the merits of the proceedings should be regarded as conclusive. In accord with the normal approach to judicial review it will not be part of the function of this court to second guess the judge who has heard the application." (Woolf L.J.)

19. In Brooks v D.P.P. [1994] 1 A.C.568, in the Privy Council, it is stated (at page 581C, Lord Woolf)

"Questions of credibility, except in the clearest of cases, do not normally result in a finding that there is no prima facie case. They are usually left to be determined at the trial."

20. In R v The Crown Court at Snaresbrook ex parte The Director of the Serious Fraud Office, unreported, 16 October 1998, no. CO/2266/98, Brooke L.J., giving the judgment of the court, referred to the judgment in the Nadir case and said (transcript page 18 E-F):

"What amounts to an exceptional case has to be judged in the light of the characteristics of an ordinary case. The ordinary case, as counsel suggest, is a case in which the Crown Court judge has concluded that the Crown's intended evidence, taken at its best, does not yield a case which he or she would allow to go to the jury. Such a decision, in substance an evaluation of a body of evidence against an uncontentious backdrop of law, is not in the ordinary way reviewable in the court."

21. The decision of a judge on an application under section 6(1) of the 1987 Act, should not normally be reviewed by this court, in so far as it depends upon issues of credibility, especially where the judge has heard oral evidence. To do so would be for this court, which has not seen the witness or witnesses, to second guess the judge who has. An unsuccessful challenge to the credibility of an important witness, on a section 6(1) application, does not leave the defendant without remedy. Circumstances may justify a Galbraith submission at the end of the Crown's case when other witnesses who may contradict the challenged witness's evidence will have been heard. In addition, the defendant has the protection of the jury's combined judgment on credibility, applying the high standard of proof required to the whole of the evidence.

22. In any event, in the present case, it is impossible to fault the judge's approach to Mr H's evidence. He reminded himself of the main points made by Mr Bevan, and he reminded himself of Mr H's answers and explanations to those points. He reminded himself of the guidance in Brooks. He did refer to the favourable impression which Mr H had made as a witness, in his view, but only after reminding himself that a judgment as to his credibility relied also on an external comparison with other witnesses. He was perfectly entitled to conclude that Mr H was not incapable of being believed by any reasonable jury.

Theft by a Director of Company Property

23. The fact that the judge was entitled to come to this conclusion is fatal to the present claim. However, the decision means that there will now be a trial. At the trial the legal argument advanced by Mr Beloff will have to be considered. It was therefore agreed by both parties that we should deal with the point of law on which Mr Beloff relies.

24. We are prepared to accept as being obvious that a company cannot steal from itself. We also accept that a company can only commit crimes by the agency of individuals who perform the necessary criminal acts on the company's behalf. Furthermore, in the case of crimes involving mens rea such as theft, a company can not be guilty of the offence, unless it can be shown that officers of the company of sufficient seniority to be regarded as the alter ego of the company, have the necessary guilty mind.

25. However, it is to be emphasised that here we are not concerned with a charge of theft against a company. We are concerned with a charge of theft by the Claimant, though it is the theft of property of a company of which the Claimant is a director that is alleged. In addition, it is accepted that the theft was carried out for a purpose which could financially benefit the company.

26. Mr Beloff's primary argument was that there was not the appropriation which is necessary for a theft under the Theft Act 1968 ("1968 Act").

27. It is trite that theft involves four elements: "(a) a dishonest, (b) appropriation, (c) of property belonging to another, (d) with the intention of permanently depriving the owner of it." (Megaw LJ in R v Lawrence 55 Cr. App.R.73 & 78). There is no further requirement that the appropriation must be without the consent of the owner. (Lawrence v Metropolitan Police Commissioner [1972] A.C.626; R v Gomez [1993] AC 442 and Archibold [2001] para 21-22.) Therefore, the fact that the Claimant either acting on his own or acting in concert with Mr H could ensure that the company, as a matter of law, is to be regarded as consenting to the actions of the Claimant does not provide the Claimant with a defence if he would otherwise be guilty of theft. (The Attorney General's reference (No. 2 of 1982) [1984] 1 Q.B. 624, 78 Cr. App. R. 131.)

28. Appropriation for the purposes of the 1968 Act is defined in section 3 of that Act. The section, so far as relevant, provides:

"3(1) Any assumption by a person of the rights of an owner amounts to an appropriation, and this includes, where he has come by the property (innocently or not) without stealing it, any later assumption of a right to it by keeping or dealing with it as owner."

29. When this definition of appropriation is examined, we see no difficulty in regarding the claimant as having appropriated the sum with which he is charged within the meaning of section 3(1) of the 1968 Act. Whatever was his objective, and whether he was authorised to do this by the company or not, he had undoubtedly assumed the rights of the owner, F Ltd, over the £2.4 million which was transferred from F Ltd's bank as a result of the payment instruction which he had signed. Section 3(1) does not require misappropriation, merely appropriation.

30. It was for these reasons, that during the course of argument, it was pointed out to Mr Beloff that his contentions were more constructively examined, by focusing not on the word "appropriation" alone, but on the description of the required appropriation contained in section 1(1) of the 1968 Act, "dishonest appropriation". The reason why directors, who dispose of a company's property, are not in the normal way guilty of theft is because their appropriation is not dishonest. The disadvantage of focussing on the word "appropriation" in isolation, is that this is no more than "an objective description of the act done irrespective of the mental state of either the owner or the accused". (R v Gomez per Lord Browne-Wilkinson at page 495H)

31. This having been pointed out to Mr Beloff, Mr Beloff expanded his argument and contended that there was not here any dishonest appropriation. When considering whether there has been dishonest appropriation, we would be prepared to accept that the dishonesty has to be directed at the victim, F Ltd. We refer to the views of Professor Sir John Smith in Smith & Hogan 9^th Edition at pages 532 and 533. Professor Smith accepts this is the only tenable view having regard to the decision of Gomez. He refers to what Lord Browne-Wilkinson also said (at page 496G):

"Where a company is accused of a crime the acts and intentions of those who are the directing minds and will of the company are to be attributed to the company. That is not the law where the charge is that those who are the directing minds and will have themselves committed a crime against the company."

32. Professor Smith, however, goes on to say:

"Even if it must now be conceded that there is, in these cases, an appropriation of property belong to another, there is still difficulty in seeing how it can be a dishonest appropriation. The act is not dishonest vis-à-vis the shareholders because they are the appropriators and therefore it is unreal to say that it is dishonest with respect to the company, which exists for the benefit of the shareholders. It may well be dishonest with respect to the company's creditors - but the property does not belong to them. If D and E were not the directors of a company but the sole members of a partnership, they could not be guilty of theft of the partnership's assets, even if they disposed of them in riotous living with intent to defeat their creditors. There does not seem to be any difference in substance. It has been argued that the interests of the creditors of an insolvent or doubtfully solvent company are the interests of the company, but it is not clear that this is an established principle or that it is the foundation of the cases holding the sole director may steal the company's property."

33. While we recognised the pragmatic good sense of what is stated in this passage, it would be difficult to apply it to the present claim. First, here the Claimant and Mr H are not the owners of all the shares of F Ltd. F Ltd is a subsidiary of H Ltd. Although he was the Chief Executive of H Ltd the whole scheme involved concealing what was happening from the Board of H Ltd. Furthermore, whether or not the Claimant was acting dishonestly is essentially a question for the jury.

34. The jury would be perfectly entitled to take the view, that in all the circumstances, what the Claimant is charged with doing, whether or not this was being done with the complicity of Mr H, was dishonest. The jury would be perfectly entitled to reject Mr Beloff's suggestion that to use the resources of the company to bribe the officers of a customer of F Ltd was, contrary to what was contended, not for F Ltd's benefit. The short-term advantage of a continuity of business could be far outweighed by the serious consequences for F Ltd and H Ltd if the conspiracy were revealed. If, at the trial, it were to be established that what was happening was being concealed by the Claimant from other members of the H Ltd's board, the jury might regard this as the clearest evidence that not only was there an appropriation here, it was a dishonest appropriation.

35. It is for these reasons we considered the judge came to the correct conclusion and we dismissed the claim.