Attorney General's Reference (No. 1 of 1995); R v B; R v F
| Jurisdiction | England & Wales |
| Judge | THE LORD CHIEF JUSTICE |
| Judgment Date | 23 January 1996 |
| Judgment citation (vLex) | [1996] EWCA Crim J0123-4 |
| Date | 23 January 1996 |
| Court | Court of Appeal (Criminal Division) |
| Docket Number | No. 95/5926/R1 |
[1996] EWCA Crim J0123-4
IN THE COURT OF APPEAL CRIMINAL DIVISION
Before: The Lord Chief Justice of England (Lord Taylor of Gosforth) Mr Justice Brooke and Mr Justice Forbes
No. 95/5926/R1
MR MICHAEL WORSLEY QC and MR NEVILLE SPENCER-LEWIS appeared on behalf of the ATTORNEY GENERAL
MR PETER COLLIER QC and MR JEREMY BARNETT appeared on behalf of THE RESPONDENTS
Tuesday 23 January 1996
THE LORD CHIEF JUSTICEThis is a reference by the Attorney General, No. 1 of 1995, under section 36 of the Criminal Justice Act 1972.
On 22 November 1994 the respondents were convicted in the Crown Court at Teesside of a number of offences under section 35 of the Banking Act 1987. They were sentenced to a term of imprisonment. The offences involved fraudulent inducements to make deposits.
They were, however, acquitted on the learned trial judge's directions of two counts charged under section 3(1) of the Banking Act 1987. The judge withdrew those counts from the jury's consideration following submissions at the conclusion of the case for the Crown. Her Majesty's Attorney General now seeks the opinion of this court on points of law, namely:
(1) Whether on a charge against a company director of consenting to the acceptance of a deposit contrary to sections 3 and 96 of the Banking Act 1987, ignorance of the law as to the requirement of the authorisation of the Bank of England is a defence; and
(2) What mens rea is required to be proved to show "consent".
The terms of the two relevant sections of the Act are as follows so far as is relevant. Under section 3(1) of the Act:
"…. no person shall …. accept a deposit in the course of carrying on a business which for the purposes of this Act is a deposit-taking business unless that person is an institution for the time being authorised by the Bank [of England] under …. this Act."
Under section 96(1) of the Act:
"Where an offence under this Act committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of any director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, he, as well as the body corporate, shall be guilty of that offence …."
It is convenient for completeness to refer also to section 96(4) of
the Act, which provides:
"In any proceedings for an offence under this Act it shall be a defence to the person charged to prove that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control."
The facts of the present case can be shortly stated. The respondents were directors of a company trading in the north of England. It was a small company dealing in insurance and investment brokerage. The first respondent 'F' was the Chairman. He ran the business. He and his wife were the only directors. The second respondent 'B' was his right-hand man and acted as a de facto director.
There was evidence that from 1987 onwards the company was accepting deposits in the course of carrying on a deposit-taking business and that both were men were directly concerned in that activity. Large sums of money were deposited, amounting to some £750,000 in total. In order to induce such deposits the respondents told a number of the depositors that the money would be lent on as bridging loans for which the company would hold charges as security. In fact the money thus raised was being diverted into a night club venture. When that venture failed in 1989, most of the money was lost. It was in respect of the representations made by respondents to the depositors that the charges which were proved against the respondents were based.
The company was not authorised by the Bank to accept deposits. In February 1992 the respondents were arrested and in October 1992 they were charged. Following their arrest interviews were sought with the two respondents. They declined to answer questions. However, in September 1992 the second respondent 'B' volunteered an interview. Towards the end of it the Detective Sergeant asked 'B' what explanation he could give for the unlicensed deposit taking of the company. In the course of questioning it emerged from the respondent 'B' that he had no idea that in order to take people's money on deposit or to take people's money on investment you have to be licensed by the Bank of England.
The two counts in question were specimen offences. Count 1 related to Mrs 'B'. She had originally invested a total of about £20,000 through the company. She said that at some point after her initial investment the second respondent offered her 17% on her money and the respondents had carte blanche from her to invest the money where it would get 17%. The money was then deposited in the company's "bridging fund". The deposit was evidenced by a document called a "property bridging bond" which was signed by the second respondent. It referred to an "invest", which the prosecution said was truly a deposit, of £19,210 on 25 November 1988 at a flat rate interest of 17%. The first respondent later acknowledged in a letter dated 27 December 1989 that Mrs 'B' had been offered participation in the bridging fund scheme with fixed interest.
Count 2 concerned Mr and Mrs 'G' who placed £54,511 in the company's bridging fund via an intermediary. That transaction was evidenced by an agreement with the company signed by the second respondent, which was found at the first respondent's house.
At the end of the prosecution case the defence submitted that there was no case to answer on these two counts. It was argued on their behalf that in order to be guilty of consenting to the offence by the company a defendant director must be aware of the relevant facts. If the director was not aware that the business is as a matter of fact deemed to be a deposit-taking business for the purposes of the Act, he cannot give informed consent and therefore cannot consent to the acceptance of the deposit in contravention of section 3. The issue as to whether the two directors were aware that this was a deposit-taking business was a point raised before the trial judge, but in view of the basis of his decision it was not adjudicated upon.
The matter which was determined in the court below was a submission that the directors had to be positively aware of the lack of authorisation by the Bank of England and to have applied their minds to that fact. Reference was made to Secretary of State for Trade and Industry v Hart [1982] 1 WLR 481. The trial judge gave an initial ruling in the course of which he said:
"In my judgement, on the authorities which have been argued before me, but principally that of Secretary of State for Trade and Industry v Hart, and relying upon dicta from both the judgments of Ormrod LJ and Woolf J, as he then was, I rule that the Crown would have to prove not only a deposit-making, not only that it was in the course of a deposit-taking business, not only that there was no licence, but that these defendants knew and had applied their mind to the fact that there was no licence for them to do this.
I think, as against the company, there is what is in shorthand referred to as strict liability in the criminal jurisdiction. As against directors it is necessary to prove that they applied their minds to the lack of a licence. That not being so in this case, and there being no evidence of it, counts 1 and 2 on this indictment fail and I shall withdraw them from the jury."
The trial judge gave a more extended ruling the next day during the trial in which he said:
"I think I can deal shortly with counts...
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