Attorney General's Reference (No. 2 of 1982)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR |
| Judgment Date | 24 November 1983 |
| Judgment citation (vLex) | [1983] EWCA Crim J1124-21 |
| Court | Court of Appeal (Criminal Division) |
| Docket Number | No. 6026/R/82 |
| Date | 24 November 1983 |
[1983] EWCA Crim J1124-21
Lord Justice Watkins
and
Lord Justice Kerr
No. 6026/R/82
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Royal Courts of Justice
MR. A. RAWLEY, Q.C. and MR. P. MOTT appeared on behalf of the Attorney-General.
MR. J. GORMAN, Q.C. and MR. A. BAILLIE appeared on behalf of the Respondents.
Lord Justice Watkins is not able to be here this morning. I am going to deliver the judgment of the court.
On this reference by the Attorney-General under section 36 of the Criminal Justice Act, 1972, the court is asked to give its opinion on the following point of law:
"Whether a man in total control of a limited liability company (by reason of his shareholding and directorship) is capable of stealing the property of the company; and whether two men in total control of a limited liability company (by reason of their shareholdings and directorships) are (while acting in concert) capable of jointly stealing the property of the company."
In June 1982 two defendants pleaded not guilty before H.H. Judge Blaker and a jury at the Crown Court in Winchester to an indictment which included a number of counts of theft from companies wholly owned and controlled by them. At the end of the case for the prosecution, followed by several days of legal argument in the absence of the jury, the judge directed the jury to acquit both defendants after delivering a short judgment to which we refer later. In view of Rules 3 and 6 of the Criminal Appeal (Reference of points of Law) Rules 1973 we will refer to the defendants as X and Y, as they are in the reference, although their identity has already been mentioned in a number of legal publications.
The counts of theft were specimen counts alleging the appropriation by the defendants for their own private purposes of funds of various companies of which they were the sole shareholders and directors. The total amounts involved ran into millions. Some of the counts related to X alone, some to Y alone, and in some of them they were charged jointly. However, it is common ground that, in relation to all of thorn, each acted with the consent of the other: indeed, all the alleged thefts appear to have been carried out by means of cheques drawn on various accounts of the companies concerned and signed in each case by X and Y jointly. There is no question of X or Y having been the victim of the dishonesty of the other, as, for instance, in the case of theft of partnership property by one of the partners: see R. v. Bonner (1970) 1 WLR 838. It was therefore common ground that on the facts of this case the two parts of the point of law must stand or fall together. We will so treat them although – in relation to the first part – it should be borne in mind that a private company with limited liability must in any event have at least two shareholders: section 1 of the Companies Act, 1948.
For present purposes it is unnecessary to go through all the relevant counts on which this point of law arises. It is sufficient to quote some extracts from the reference summarising the evidence for the prosecution and to deal with one of the specimen counts as an illustration. By way of background it should be explained that all the funds in question appear to have been supplied on overdraft facilities by one finance company, and that the indictment also included two counts of corruption contrary to section 1 of the Prevention of Corruption Act, 1906 against both X and Y in relation to an employee of that company. This part of the indictment proceeded to trial, but the defendants were acquitted on both these counts.
The following are extracts from the reference of the evidence for the prosecution, first by way of background:
"Between 1970 and 1974 X and Y traded as property developers and speculators borrowing vast sums of money from various financial "institutions. The principal lender was a merchant bank called H. & P. The borrowing was on X and Y's own accounts and on the accounts of a large number of companies controlled by one or both of them. They operated 55 bank accounts with H. & P. By the end of 1974 their indebtedness exceeded £7 million of which £5.8 million was owed to H. & P. By that time the property market had collapsed and inevitably the security held by H. & P. was well below the level of borrowing. In respect of 7 companies whose affairs were specifically analysed, the deficiency as regards creditors was over £2.5 million. X and Y themselves went bankrupt with gross liabilities of £4.8 million and £3.5 million respectively.
"Throughout the period under consideration both X and Y lived extravagantly. In one year the wife of X spent over £27,000 at an exclusive West End couturier. Not only was money spent on cars, yachts, hotels and restaurants, but also large sums of money were spent on improvements to the homes of X and Y and on silver and antiques to put in them, all of which eventually found its way into their wives' names. From the 7 companies whose bank accounts were analysed X drew out for personal expenditure about £577,167 net and Y £215,217 net. The word 'net' is used to indicate that X and Y also paid sums into those companies but the sources of the payments in were often traced to unauthorised drawings from other companies controlled by one or both of them or by circular payments…..
"Throughout the period X and Y were advised by an accountant. He on a number of occasions, both orally and in writing, informed X and Y that it was illegal to borrow or take money from the companies for their private purposes. One reason was that it would be treated by the Inland Revenue as a distribution and would be subject to tax, but the prohibition was expressed in much wider terms by the accountant."
We then turn to the prosecution evidence concerning four specimen counts against X which is summarised in the reference as follows:
"All charge X with stealing monies from F Limited, a company wholly under his control. F Limited was incorporated on July 27 1970; its directors were X and his wife; the company records revealed massive drawings by X for jewellery, antiques, household effects, holiday travel for X and his associates and family, alterations and renovations to his home and those of his family and his secretary at the time. At liquidation it had large liabilities mostly owed to H. & P. There were no assets.
"The company had only participated in one minor transaction during its existence but it borrowed very heavily and most of the borrowed money was spent by X in transactions which could not in any way be classed as company expenditure. By May 30 1973 the account with H. & P. was £487,065 in debit. On that day £400,000 was credited to the F Limited account at H. & P. reducing the overdraft to £87,065. X paid off this £400,000 by borrowing on his own personal account at H. & P. on the same day. This switching of borrowing was done because X had been frequently told by his accountant that he was not entitled to borrow from F Limited; and the object was to put the situation right. Thereafter X's personal overdraft soared to £519,556. Nevertheless X continued to draw on F Limited and on June 12 1974 when the last cheque was honoured its overdraft had increased from £87,065 to £220,817."
It is only necessary to refer to one of these specimen counts, count 4. This charged X with theft of a sura £5,600 belonging to F Limited contrary to section 1 (1) of the Theft Act, 1968. The reference summarises the evidence in relation to this count as follows, and counsel for the Attorney-General pointed out that the alleged facts concerning this count occurred after and notwithstanding the events summarised in the previous extract:
"Count 4 related to a cheque paid to travel agents. Between November 1 1970 and February 28 1974 X used £25,869 of F Limited's money to pay various travel bills at the travel agents. X spent a great deal on travel and hotels, some £60,000 in 5 years. This count relates to a holiday he and his family spent in Switzerland. This holiday was preceded immediately by a Christmas cruise; the total cost of both was about £15,000. The sum charged, £5,600, is only part of the story. The date of the cheque was February 7 1974."
For present purposes it is unnecessary to go into any of the other counts. They were all of a similar, often more complex, nature, charging X or Y, or both of them jointly, with theft from various companies which were wholly owned and controlled by them. The counts were originally charged as thefts of the sums of money obtained by means of the cheques signed by X and Y, as already mentioned, but by consent all these counts were amended by including a charge of theft of a thing in action pursuant to section 4(1) of the Theft Act, 1968. Having regard to this amendment and to the decision of this court in R. v. Kohn (1979) 69 Cr.App.R. 395, and since all the relevant company accounts were at all material times in debit within the overdraft facilities granted by H. & P., it was common ground that there was no issue as to the subject matter of the thefts which were charged.
We must next set out the relevant provisions of the Theft Act, 1968, on which the issues mainly turn, as follows:
Section "1. Basic definition of theft. (1) A person is guilty of theft if he dishonestly appropriates property belonging to "another with the intention of permanently depriving the other of it; and 'thief and 'steal' shall be construed accordingly. (2) It is immaterial whether the appropriation is made with a view to gain, or is made for the thief's own benefit. (3) The five following...
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