R v Grantham
| Jurisdiction | England & Wales |
| Judge | THE LORD CHIEF JUSTICE |
| Judgment Date | 23 March 1984 |
| Judgment citation (vLex) | [1984] EWCA Crim J0323-12 |
| Docket Number | No. 1420/A/83 |
| Court | Court of Appeal (Criminal Division) |
| Date | 23 March 1984 |
[1984] EWCA Crim J0323-12
The Lord Chief Justice of England (Lord Lane)
Mr. Justice Boreham
and
Mr. Justice Stuart-Smith
No. 1420/A/83
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Royal Courts of Justice
MR. M. BECKMAN, Q.C. and MR. R. BRIGHT appeared on behalf of the Appellant.
MR. J. ROBERTS, Q.C. and MR. R. GLANCY appeared on behalf of the Crown.
On 16th February 1983 at the Crown Court at Northampton before His Honour Judge Allen and a jury, this appellant was convicted of fraudulent trading under section 332 of the Companies Act 1948. He was sentenced to fifteen months' imprisonment and a criminal bankruptcy order was made against him.
He now appeals against conviction by leave of the single Judge.
There were three others indicted with him: David Williams, who was acquitted of fraudulent trading; Michael Williams, who was convicted of fraudulent trading and also two counts of being a bankrupt taking part in the management of a company; and James Peter Stokes (alias Charrington), who was acquitted of fraudulent trading but convicted of being a bankrupt taking part in the management of a company.
The allegation of fraudulent trading arose out of the activities of a company called Belexpress Ltd. (hereinafter called the Company). The period of trading was short, namely from 29th May to 25th June 1980. During that period the Company bought 39 loads of potatoes from a supplier in France called Joseph Jacob. The total amount due to Jacob in respect thereof was more than £88,000.
According to the prosecution case the roles played by the various individuals were as follows: The appellant carried on business as 6.H. Roth & Co. at Thrapston, Northamptonshire as a business consultant. He also ran a telex service called Rothco Telex Services. He bought the company "off the shelf" in 1978. It traded for a time in livestock and sutained a loss of some £2,000. Michael Williams was a bankrupt. He was involved in managing Rushden Hay and Straw Ltd., of which the appellant had been a secretary from 1977 to 1979. Stokes had dealt unsuccessfully in potatoes and had been adjudged bankrupt in 1980. He was in debt to the tune of £8,000 to £10,000 to Wagstaff (Sandy) & Co. Ltd., importers and exporters which was run by two men, Ellis and Watts.
It was clear from the correspondence that by October 1979 the appellant, Ellis and the Williams brothers were considering dealing in potatoes. The appellant would benefit by charging consultancy fees and also fees in respect of his telex company, Ellis by selling the potatoes and charging commission and handling charges, and Michael Williams for sundry services in connection with transporting the potatoes. Ellis introduced Stokes to the consortium, and Stokes thenceforward operated under the assumed name of Charrington. Stokes spoke French.
On 11th March 1980 the appellant registered the company as carrying on the business of importer of root crops under the name of East Midlands Potato Company. The appellant resigned his former position in the company, but he remained the sole authorised signatory of the cheques. He was to be the "consultant" in charge of administration and holder of the purse-strings. Stokes was to do the negotiation and purchasing. The Williams brothers were to do the transportation and Ellis and Watts the onward sales on commission.
There were two main issues to be decided: first, was this business carried on dishonestly by way of fraud upon a creditor, namely Joseph Jacob? secondly, if so, was the appellant party to the dishonesty and fraud?
As to the second issue, the appellant and Stokes were in conflict. Stokes's case was that the appellant had used him as a "front man", that he had signed documents without knowing their contents or significance, and that he had severed connection with the Company as soon as he realised that Jacob was not being paid.
The appellant's case on the other hand was that he had no knowledge of the details of the potato dealings of the Company; that at all material times he acted as no more than an administrator in accordance with instructions given to him by Stokes, the managing director; that he remained sole signatory to the company's cheques only because Stokes was difficult to reach and had requested him so to do. He asserted that he did not know that the potatoes were being sold at a loss.
At this point it may be of interest to see the destination of such funds as came into the hands of the Company. The prices realised for the potatoes sold by Jacob for £88,000 totalled £68,000. Ellis was consistently selling the potatoes for less than their purchase price and often for less than their true market price. He asserted that he had nothing to do with ordering the potatoes and did not know the purchase price. His charges alone amounted to over £15,000. He remitted some £53,000 to East Midlands Potato Company (i.e. the Company). Of this £5,500 went in fees to G.H. Roth & Co. (the appellant), £825 to Rothco Telex (the appellant), over £14,000 to Rushden Hay and Straw (Williams), and about £5,500 to the hauliers who carried the potatoes from Williams's farm to the market. Joseph Jacob was not so lucky, he only received £19,668 towards his legitimate entitlement of £88,000.
Much of the trouble was caused by the fact that within a day or two of the commencement of trading the potato market collapsed. This did not deter those who were running the company from continuing to pursue their course of purchases unabated.
There was, in short, ample evidence that this company was being operated dishonestly. Indeed had there been a charge of conspiracy laid against this appellant, it would, questions of jurisdiction apart, probably have succeeded. From the outset no, or no sufficient, capital was available. No overdraft facilities were sought. There was some suggestion in the later stages that the situation might be retrieved by trading in other commodities, or by raising a loan from a merchant bank or by introducing fresh backers, but nothing came of these suggestions.
Mr. Beckman's first complaint is that the Judge misdirected the jury as to what it was upon which they had to be satisfied before convicting the appellant under section 332 of the Companies Act 1948 (as amended).
Section 332(3) reads as follows: "Where any business of a company is carried on with such intent or for such purpose as is mentioned in subsection (1) of this section, every person who was knowingly a party to the carrying on of the business in manner aforesaid, shall be liable on conviction on indictment to imprisonment …."
Section 332(1) reads as follows: "If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the official receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct."
The passages in the summing up which are relevant to this ground of appeal are as follows:
Page 4B: "AS against the individual, the individual defendant, the prosecution have to prove first that he took an active part in carrying on the business. That is the first thing. They then have to prove that in doing so he had an intention -to defraud creditors and thirdly they have to prove that he was acting dishonestly."
Page 5D: "…. I go on to consider the position on the assumption that in respect of the man you are considering you answer that one in the affirmative, 'He was playing an acting part'. The prosecution have then got to prove that he had an intent to defraud creditors and was acting dishonestly.
"Members of the jury, my direction, as a matter of law, to you with regard to what is meant by intent to defraud is this. A man intends to defraud a creditor either if he intends that the creditor shall never be paid or alternatively if he intends to obtain credit or carry on obtaining credit when the rights and interests of the creditor are being prejudiced in a way which the defendant himself has generally regarded as dishonest."
Page 6B: "Some fraudulent traders intend from the outset never to pay or never to pay more than a fraction of the debt. If that is true in your view in this case then the intent to defraud would be made out but a trader can intend to defraud if he obtains credit when there is a substantial risk of the creditor not getting his money or not getting the whole of his money and the defendant knows that that is the position and knows he is stepping beyond the bounds of what ordinary decent people engaged in business would regard as honest.
"Members of the jury, if a man honestly believes when he obtains credit that although funds are not immediately available he will be able to pay them when the debt becomes due or within a short time thereafter, no doubt you would say that is not dishonest and there is no intent to defraud but if he obtains or helps to obtain credit or further credit when he knows there is no good reason for thinking funds will become available to pay the debt when it becomes due or shortly thereafter then, though it is entirely a matter for you this question of dishonesty, you might well think that is dishonest and there is an intent to...
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