England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		22/06/2012

Lord Justice Toulson:

1. This case concerns an undated cheque given by a borrower to a bank as a condition of a 20 year loan.
2. The critical issue is what representations were to be implied from the giving of the cheque in the commercial context in which it was given. The matter comes before the court on an appeal by the UAE against a decision of District Judge Purdy refusing an application for the respondent's extradition, following her conviction and sentence in her absence on a charge of cheque fraud.

Facts

3. The bank was the Abu Dhabi Commercial Bank. The amount of the loan was Dhs (Dirhams) 2,380,000, equivalent to approximately £415,000. The loan application form showed that its purpose was the purchase of a property. The total cost of the property was Dhs 2,800,000, of which the respondent was providing Dhs 420,000 from her own resources. In the application form she stated that she was employed by a hospitality and leisure company and had a monthly income of Dhs 35,000 (equivalent to approximately £70,000 per annum).
4. The loan was to be repayable by monthly instalments through a credit card account with the bank. As security she provided the bank with an undated cheque for Dhs 2,337,500, a sum approximately equal to the amount of the loan. The cheque was provided on terms that:

"In the event of a default or failure by me to effect payments of the outstanding amount under my Credit Card Account…I hereby authorise [the bank] to insert the date on the said cheque if undated and present it for payment."

5. The loan was described in the application form as a mortgage loan. The form also contained a declaration that the particulars given in the application were true, correct and up to date in all respects, and a statement in the following terms:

"I/we will advise the Bank in writing in the event of any change in my/our circumstances in the period between the loan application and the date of opening of the loan account."

6. Although the date on which the respondent gave the cheque to the bank is unclear, it is common ground that it must have been before the loan was advanced.
7. The loan was taken out in May 2008. In late 2009 there was a default by the respondent. The default led the bank to call in the loan, insert the date of 30 December 2009 on the previously undated cheque and present it for payment. The presentation was in a sense notional because the cheque was drawn on the bank itself and there was no credit to meet it. The respondent made a repayment of approximately Dhs 800,000, but that left an unpaid balance of approximately Dhs 1,500,000. Shortly after making that repayment the respondent returned to the UK.
8. In her absence she was prosecuted and convicted of an offence described in the extradition request as issuing an uncovered cheque.
9. It appears that under Abu Dhabi law she was treated as having issued the cheque on the day on which the date was inserted by the bank, i.e. 30 December 2009, and as having acted in bad faith because she had no credit with the bank to meet the amount of the cheque. She was sentenced to 3 years' imprisonment. On 22 March 2011 the Home Secretary received through diplomatic channels a request for the respondent's extradition. The UAE has been designated as a category 2 territory under s69 of the Extradition Act 2003. Accordingly, part 2 of the Act applies.
10. The request was certified by the Home Secretary as valid and sent to the court, which issued an arrest warrant. In due course the respondent was arrested and brought before Westminster Magistrates Court.

The issues and the legislative framework

11. Because a number of extradition requests from the UAE raised similar issues, on 2 December 2011 DJ Purdy heard arguments in this and three other cases on two questions - whether there was dual criminality and whether there was a prima facie case. The respondent's case was a conviction case. Others were accusation cases. This had the consequence that some of the relevant sections were different but their wording was materially identical.
12. The first question arose under s78, which deals with initial stages of an extradition hearing. It provides:

(1) This section applies if a person alleged to be the person whose extradition is requested appears or is brought before the appropriate judge for the extradition hearing.

(2) The judge must decide whether the documents sent to him by the Secretary of State consist of (or include) –

…

(c) particulars of the offence specified in the request…

…

(4) If the judge decides that question in the affirmative he must decide whether –

…

(b) the offence specified in the request is an extradition offence…

...

(6) If the judge decides any of the questions in subsection (4) in the negative he must order the person's discharge.

13. Section 78(2)(c) does not define the particulars of the offence which are required, by contrast with the requirements of an European Arrest Warrant which are as set out in s2. Section 2(4)(c) requires an accusation warrant to contain:

"Particulars of the circumstances in which the person is alleged to have committed the offence, including the conduct alleged to constitute the offence, the time and place at which he is alleged to have committed the offence and any provision of the law of the category 1 territory under which the conduct is alleged to constitute an offence."

14. Section 2(6)(b) requires a conviction warrant to contain particulars of the conviction.
15. In Dudko v Government of The Russian Federation [2010] EWHC 1125 (Admin), an accusation case, it was common ground that s78(4)(c) should be read as encompassing the more comprehensive language of s2(4)(c). Thomas LJ said, at para 16, that he agreed with that view because it would be an odd result if Parliament had intended that the request of persons to be extradited to other countries in the European Union required particulars of the offence which were more onerous than the requirements of those to be extradited to category 2 territories.
16. In the respondent's case, the order of the prosecutor referring the charge against her to the court (which would seem to be equivalent to an indictment in this country) stated the alleged offence in these terms:

"It was on 30/12/2009, in Abu Dhabi jurisdiction, with a bad intention she has given to Abu Dhabi Commercial bank an uncovered cheque of amount of 2,337,500 Dhirams to be withdrawn in the same bank, but they did not have balance that was liable for withdrawal."

17. In its reasons for finding the respondent guilty the court stated that:

"…she has given the victim (beneficiary) a cheque of an amount of 2,377,500 Dhirams to be withdrawn at Abu Dhabi Commercial Bank and the bank stated that the accused has no credit which is liable for withdrawal thus the pillars of crime of issuing an uncovered cheque have been established…"

18. Whether the conduct specified in the extradition request was an extradition offence, as required by s78(4)(b), turns on the application to the facts of the definition of an extradition offence in s138. (That section applied in the respondent's case because she was a sentenced person; s137 contains a materially identical definition in the case of a request for the extradition of a person who has not been sentenced).
19. One of the requirements of an "extradition offence" as defined in s137(2)(b) or 138(2)(b) is that:

"the conduct would constitute an offence under the law of the relevant part of the United Kingdom punishable with imprisonment or another form of detention for a term of 12 months or a greater punishment if it occurred in that part of the United Kingdom."

20. The first question considered by the district judge was whether the conduct specified in the relevant extradition requests met this requirement.
21. The second question was whether the extradition request fulfilled the requirement of s84 (accusation cases) or s86 (conviction cases) that:

"there is evidence which would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him."

22. DJ Purdy answered both questions in the respondent's favour and ordered her discharge.
23. On the first question, he did not consider that default in a loan agreement supported by the security of an undated cheque could of itself amount to an offence in the UK under s2 of the Fraud Act 2006 (the corresponding offence relied on by the UAE) or at all. On the second question he identified what he saw as a number of deficiencies in the evidence.
24. The UAE appeals against his decision under s105 of the Extradition Act.
25. Section 1 of the Fraud Act provides that the statutory offence of fraud may be committed in any of three ways – fraud by false representation (s2), fraud by failing to disclose information (s3) and fraud by abuse of position (s4).
26. The appellant relies on s2. This provides:

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

(a) dishonestly makes a false representation, and

(b) intends, by making the representation –

(i) to make a gain for himself or another or,

(ii) 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) "Representation" means any representation as to fact or law, including a representation as to the state of mind of -

(a) the person making the representation, or

(b) any other persons.

(4) A representation may be expressed or implied.

False representation

27. As already noted, the respondent was convicted of an offence committed under Abu Dhabi law on 30 December 2009, when the bank filled in the date and notionally presented the cheque to itself, but there was no or insufficient credit in the account to meet it.
28. The appellant's case is that the respondent was guilty on the same date of an offence under s2 of the Fraud Act. Its argument for saying that she made a false representation at that time was founded on two propositions:

1. By providing the cheque the respondent represented that in the event of the cheque being presented it would in the ordinary course be met.

2. The representation became false when at or prior to 30 December 2009 the respondent depleted her account, or failed to maintain it in credit, so as to render the balance insufficient to meet the cheque on presentation.

29. In support of the first proposition the appellant relied on three cases: R v Hazleton (1874) LR 2 CCR 134, Metropolitan Police Commissioner v Charles [1977] AC 177 and R v Gilmartin [1983] QB 953.
30. Hazleton and Charles establish that where a person tenders a cheque intended for presentation as payment for goods or services, the drawer impliedly represents that "the existing state of facts is such that in the ordinary course the cheque will be met". The words quoted come from the judgment of Pollock B in Hazleton at p140, where he said:

"I think the real representation made is that the cheque will be paid. It may be said that that is a representation as to a future event. But that is not really so. It means that the existing state of facts is such that in the ordinary course the cheque will be met."

31. In Gilmartin the Court of Appeal considered the position in relation to post-dated cheques. It is important to understand the commercial context. The appellant carried on business, through a one man company, buying and selling stationery and greetings cards. He had running accounts with various suppliers. The company had a bank account but it was over drawn. The appellant nevertheless gave cheques drawn on the account to a number of suppliers in payment for supplies knowing, as the prosecution alleged, that there was no prospect of them being met. One of the cheques was post-dated by one day. Others were given undated but with implied authority for the payee to put in a date at any time, which was likely to be in the near future. One was completed and presented within a week and the other within a month. The cheques were dishonoured.
32. Robert Goff LJ said that Pollock B's "terse but neat epitome of the representation implied in the giving of a cheque" should be regarded as an authoritative statement of law. He continued by asking the question: is the position any different in the case of a post-dated cheque? His answer at 961 was:

"We can see no reason why in the case of a post-dated cheque the drawer does not impliedly represent that the existing facts at the date when he gives the cheque to the payee or his agent are such that in the ordinary course the cheque will, on presentation on or after the date specified in the cheque, be met.

Take the case where, as in this instance, a post-dated cheque is issued when the account is heavily overdrawn and there is, as the drawer well knows, no prospect of any future funds being paid into the account before the date when the cheque matures or of the bank providing other overdraft facilities before that date. In such a case it appears to us the drawer is as much guilty of deception as he would be in the case of a cheque which is not post-dated."

33. It is important to remember that we are here talking about deception. In the case of a cheque given in payment for goods the implied representation recognised by the court accords with what would be understood and expected by any reasonable person, and the phrase "in the ordinary course" was readily understandable in the context in which it was used.
34. When one considers the commercial circumstances in which the respondent gave an undated cheque to the bank in the present case, and what a reasonable person would have understood from her conduct in doing so, there are a number of striking features.
35. The amount of the cheque was practically equal to the amount of the loan, but it was not the intended method of repayment. Repayment was to be by monthly instalments through the respondent's credit card account. The cheque was to be completed and presented upon a certain contingency, i.e. in the event of a default. It was required by the bank in order to provide a form of security in that event, which might occur at any time within a period of 20 years. Any banker would know that over 20 years there might be any number of reasons why a borrower might default, other than a deliberate intention to do so. Accident, illness, unemployment and economic downturn are all part of the hazards of human life. A commercial lender takes account of them when deciding the terms on which it will lend, including the rate of interest.
36. The provision of the loan was for the purpose of buying a property. No banker could have supposed the respondent to be suggesting that her financial circumstances at the time of taking out the loan were such that in the ordinary way she would be able to keep the amount of the loan in her bank account. If that had been her position, it is unlikely that she would have needed to take out the loan to buy the property, which was the purpose of the loan. The bank knew her financial circumstances, because she was required to disclose them as part of her application. There is no evidence that she did not make a full and frank disclosure of her financial circumstances.
37. The bank was entitled to insist as a term of the loan on her providing it with security in the form of an undated cheque for the amount of the loan, but it would have known that the value of that security was bound to depend on her circumstances at such future time as a default might occur, which might arise for any number of reasons. No reasonable banker could have inferred that she was thereby making a statement that her current economic circumstances were such that the cheque would be met "in the ordinary course" if presented at any time during the term of the loan on the contingency of a default. Indeed, the expression "in the ordinary course" does not lend itself to ready understanding in the present context. As I have said, illness, accident and unemployment are not outside the ordinary course of human events over a 20 year period. Was the respondent to be taken as saying that in such an event, resulting in a default, her circumstances at the time of the loan were nevertheless such that the cheque would be met, albeit that she was unable to fulfil her primary repayment obligations? It makes no sense.
38. The district judge put his finger on the point when he said that "the post-dated cheque in my judgment tendered in theory at any stage over many years…is very different from the "in the ordinary course the cheque would be met" per Pollock B"
39. To summarise, it is easy to see that a person who obtains goods or services by giving a cheque in payment which he knows that he is not going to be in a position to meet, but who does not disclose that fact to the supplier, carries out a form of deception. This was the point made by Robert Goff LJ in Gilmartin. However, I do not accept that a reasonable bank would have understood the respondent, by agreeing to its requirement that she provide an undated cheque as security against the contingency of a default, thereby to be representing impliedly that her current financial circumstances were such as to be able to say with confidence that in the event of that contingency occurring, at any time during the term of the loan, the cheque would "in the ordinary course" be met.
40. The appellant's argument, however, has to go further. This brings me to the appellant's second proposition. It is not part of the appellant's case that the respondent's alleged representation was false at the time of the loan. It is the appellant's case that the representation became false at or prior to 30 December 2009, some 19 months after the loan was made. Mr Summers advanced his argument in two ways, one based on the construction of s2 of the Fraud Act and the other based on common law principles.
41. As to the Act, Mr Summers submitted that "representation" in s2 includes any assurance as to the future. It thus includes any contractual promise, and a breach of such promise will be a misrepresentation. That is a radical submission and no authority was advanced to support it.
42. As a matter of common law, a representation must be capable of being expressed as a statement of the past or present. A statement which amounts only to a statement as to the future may have effect as a contractual promise, but it will not come within the legal classification of a representation. A promise may carry with it an implied statement as to the promissor's present intention and circumstances, but that is a representation of present fact.
43. Mr Summers submitted that, whatever may be the position at common law in civil cases, in criminal law generally a representation need not be capable of being expressed as a statement of the past or present but may include a simple promise of future action. The authorities show otherwise: Beckett v Cohen [1972] 1WLR 1593, R v Sunair Holidays [1973] 1 WLR 1105 and British Airways Board v Taylor [1976] 1 WLR 13. In British Airways Board v Taylor Lord Wilberforce said at 17:

"My Lords, the distinction in law between a promise as to future action, which may be broken or kept, and a statement as to existing fact, which may be true or false, is clear enough. There may be inherent in a promise an implied statement as to a fact, and where this is really the case, the court can attach appropriate consequences to any falsity in, or recklessness in the making of, that statement. Everyone is familiar with the proposition that a statement of intention may itself be a statement of fact and so capable of being true or false. But this proposition should not be used as a general solvent to transform the one type of assurance with another: the distinction is a real one and requires to be respected, particularly where the effect of treating an assurance as a statement is to attract criminal consequences, as in the present case."

44. When therefore the courts have confined the representation by the presentation of a cheque to a representation "that the existing state of facts is such…", etc., that limitation has not been mere verbal surplusage
45. In Gilmartin the Court of Appeal held that the same limitation applied to the definition of deception in s15 of the Theft Act 1968, which created the offence of dishonestly obtaining property by deception. Section 15(4) read:

"For the purposes of this section "deception" means any deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including a deception as to the present intentions of the person using the deception or any other person."

46. Robert Goff LJ said at 960, referring to the decision of the House of Lords in Charles:

"It might perhaps be thought from the manner in which Viscount Dilhorne expressed himself that he considered that in the case of offences under sections 15 and 16 of the Theft Act 1968 the relevant representation need not be a representation of existing facts, but can extend to include a representation as to the future. However, both Lord Diplock and Lord Edmund-Davies made it plain that the relevant representation must be a representation as to existing facts. This was certainly so under the old law relating to obtaining by false pretences before the coming into effect of the Theft Act 1968, and that this is still so is (putting on one side the immaterial reference to a representation of law) plain from the definition of deception in section 15(4) of the Act of 1968, referring as it does to deception by words or conduct as to fact, and also confining a representation as to intentions to the present intentions of the accused."

47. The wording of s2(3) of the Fraud Act is identical to s15(4) of the Theft Act, except that "state of mind" has been substituted for "present intentions".
48. "State of mind" was the phrase used by Bowen LJ in his famous judgment in Edgington v Fitzmaurice (1885) 29 Ch D 459, 483 in which it was held that a company prospectus contained an implied misstatement as to the directors' intentions. Bowen LJ said:

"There must be a misstatement of an existing fact: but the state of a man's mind is as much a fact as the state of his digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else. A misrepresentation as to the state of a man's mind is, therefore, a misstatement of fact."

49. Logically any statement by a representor about his or her state of mind can only be about their present (or past) state of mind; their state of mind as to the future can only be a current perception.
50. In British Airways Board v Taylor Lord Wilberforce warned against over-readiness to transform a promise as to the future into an assurance about the present, particularly where the effect may be to attract criminal consequences.
51. The suggestion that the drafter of clause 2 of the Fraud Act intended by substituting "state of mind" for "present intentions" to obliterate the distinction between representations and future promises recognised in Gilmartin, and more generally in the law, does not stand up to serious analysis. This conclusion is further strengthened by reference to the report of the Law Commission on Fraud, 2002, Law Com 276, which led to the Act being passed. In its report the Commission said at para 7.17:

"The concept of fraudulent misrepresentation is well established in both the civil and criminal law. It may be defined as an assertion of a proposition which is untrue or misleading, either in the knowledge that it is untrue or misleading or being aware of the possibility that it might be. The assertion may be expressed, implicit in written or spoken words, or implicit in non-verbal conduct. The proposition asserted may be one of fact or of law. It may be as to the current intentions, or other state of mind, of the defendant or any other person: for example, a person who orders a meal in a restaurant thereby impliedly claims to have not only the means of payment but also the intention to pay. An assertion as to future events will not suffice; but this is academic, since such an assertion would be dishonest only if the maker of the assertion knew that it was likely to prove untrue – in which case the maker would be making a false assertion about a present fact, namely the maker's own state of mind". (Original emphasis)

52. In a footnote the Commission added:

"The pre-1968 concept of "false pretence" did not include a misrepresentation as to the defendant's state of mind: Dent [1955] 2 QB 590. Such a misrepresentation is sufficient for the tort of deceit, however (Edgington v Fitzmaurice (1885) 29 Ch D 459), and section 15(4) of the Theft Act 1968 expressly provides that "deception" includes a deception as to the present intentions of the person using the deception or any other person. Clause 2(3) of our draft Bill similarly provides, for the avoidance of doubt, that, for the purpose of the new fraud offence, "representation" includes a representation as to the intentions of (a) the person making the representation or (b) any other person."

53. The wording of clause 2(3) of the draft Bill attached to the report was identical to the wording of s2(3) of the Act. The Commission plainly did not intend to introduce the radical change which Mr Summers submitted is the effect of its choice of words.
54. Mr Summers had another string to his bow. He submitted that under common law principles the alleged representation took effect as a continuing representation such that it became a misrepresentation 19 months after it was made. He relied by analogy on Director of Public Prosecutions v Ray [1974] AC 370, the case (referred to by the Law Commission) of customers at a restaurant who stayed after they had finished their meal until a moment when the waiter had gone to the kitchen, whereupon they made their departure. Their conduct amounted to a continuing representation that they intended to pay until the moment when they left. In response to the question what was the continuing conduct of the respondent on which the appellant relies, Mr Summers said that it was her silence.
55. There are some circumstances recognised in the case law in which a person who has made a true representation will be under a duty to inform the representee if there is a significant change in the circumstances, as previously represented, before the representation has been acted upon. In particular, where a representation is made in the course of negotiations, it will be readily understood as intended to subsist up to the conclusion of the negotiations, so that if it becomes incorrect before it has been acted upon by the representee the representor will be guilty of misrepresentation by remaining silent: Briess v Woolley [1954] AC 333, 353-354, per Lord Tucker. The case of Rai [2000] 1 Cr App 242, which Mr Summers cited, provides an illustration. The appellant put in for a local authority grant to provide a downstairs bathroom at his home for his elderly and infirm mother. The council approved the application and the appellant was notified. Two days later his mother died. Unaware of her death, the council proceeded to enter into a contract with a builder to carry out the work.
56. The present case bears no resemblance to any of the cases which Mr Summers cited. As previously noted, in the loan application form the respondent not only confirmed the accuracy of the financial statements made by her, but also undertook to advise the bank in writing of any change in her circumstances in the period between the loan application and the date of opening the loan account. The representations made by her in the application form were acted upon when the bank advanced the money. She gave the bank no undertaking to provide it with information about any later change in her circumstances, and there is no principled basis for constructing some form of fictional implied continuing representation. Implied representations are legal constructs intended to give effect to that which honest parties involved in a transaction would reasonably read into the conduct of the other.
57. Mr Summers submitted that the bank's requirement for an undated cheque would be commercially pointless unless its provision operated as a continuing representation. That is an overstatement. As a source of financial obligation it may have added nothing of substance to her repayment obligation, but as a form of security it provided the bank with a simple cause of action on the cheque, with the reinforcement (as it would appear) of criminal sanctions under Abu Dhabi law. Its value as a security may have been limited, but that does not mean that it was entirely worthless or, more significantly, that it should be interpreted as intended to be a continuing representation of the kind argued for by the appellant.
58. Section 3 of the Fraud Act deals with fraud by non-disclosure, but the appellant has not sought to rely on that section. Mr Summers accepted that it could not do so because the appellant was under no continuing legal duty of disclosure after the loan had been made, which would be a prerequisite of liability under s3.
59. For those reasons, both the propositions on which the appellant bases its argument that there was a false representation by the respondent on 30 December 2009 are in my judgment unsound. I would not doubt that she impliedly represented at the time of the loan agreement that she then intended to honour its terms, so that if she had taken out the loan intending to breach the terms of the contract her conduct would have been deceptive, but that is not the case advanced against her.
60. It is therefore not strictly necessary to consider whether there was prima facie evidence of dishonesty on the part of the respondent, if there was a false representation. However, because the issue has been the subject of argument I would say only that I see no evidence in the papers that the respondent acted dishonestly. The district judge referred in his judgment to the fact that the loans in the cases which he was considering dated from a time in 2008 prior to the start of the banking crisis, but whether the financial turmoil precipitated by the collapse of Lehman Brothers had anything to do with the defaults was not explored. There is simply no information about what caused the default by the respondent, nor is there any evidence from which to infer dishonesty.

Conclusion

61. I would dismiss the appeal.

Mr Justice Griffith Williams:

62. I agree.