R v Greenstein
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON |
| Judgment Date | 29 July 1975 |
| Judgment citation (vLex) | [1975] EWCA Crim J0729-3 |
| Docket Number | No. 2394/B/74 |
| Court | Court of Appeal (Criminal Division) |
| Date | 29 July 1975 |
[1975] EWCA Crim J0729-3
IN THE COURT OF APPEAL
CRIMINAL DIVISION
Royal Courts of Justice
Lord Justice Stephenson
Mr. Justice Nield
and
Mr. Justice Chapman
No. 2394/B/74
No. 2393/B/74
MR. B. NEILL, Q.C. and MR. A. HILL appeared as Counsel for the Appellants.
MR. D. A. JEFFREYS and MR. BLAIR-GOULD appeared as Counsel for the Crown.
On 22nd May, 1974 at the Central Criminal Court the Appellants were convicted after an eleven day trial as follows: Allan Greenstein on two counts of obtaining property by deception, contrary to Section 15(1) of the Theft Act 1968 and one count of attempting to obtain property by deception. Monty Green (his brother) on five counts of obtaining property by deception and two counts of attempting to obtain property by deception. The Appellant Green was acquitted on one count (the first) of obtaining property by deception. Allan Greenstein was sentenced to six months' imprisonment on each count concurrent, suspended for twelve months. Monty Green was sentenced to twelve months' imprisonment on each count suspended for eighteen months. Each Appellant was ordered to pay £750 towards the Legal Aid costs of his defence. Both now appeal against their convictions by leave of the single Judge.
The prosecution, the first of its kind, arose out of an operation known as "stagging", i.e. applying to merchant banks or issuing houses for allotment of companies' shares, or local authorities' stock, being issued to the public for the first time with the intention not of keeping them but of selling them immediately at a profit. It was not suggested that stagging was itself illegal, but it is the method of stagging carried out by each Appellant which is alleged to be illegal and an offence, or an attempt to commit an offence, against Section 15 of the Theft Act 1968. Hence it was said by the Judge to be an important case not only for the Appellants but, as will appear when their method of stagging is explained, for merchant banks and issuing houses and for many individuals who apply for small amounts of stocks and shares which they want to hold as an investment and which they can pay for at once out of their own existing bank balances.
In 1971 and 1972 many private companies were "going public" and seeking to raise capital by inviting applications for new shares. It was a time when the public, institutions and individuals, had money to spend on buying stocks and shares and such issues were frequently oversubscribed. The issuing houses had therefore far fewer shares to allot than were applied for. Those who applied for large quantities of shares received allocations of comparatively small quantities; those who applied for few shares got fewer still or had to ballot successfully to get any. In order to curb stagging Applicants had generally to send with their applications payment, usually in the form of cheques, to pay the price of the shares they applied for in full. The issuing houses decided in their discretion how many shares to allot to each applicant and sent the applicant, with their letter allotting part of the shares applied for, a cheque for the difference between the amount of the applicant's cheque and the price of the shares actually allotted.
In 1971 the Appellants had banking accounts which were in credit but not to an extent which would enable them to apply for new shares on any large scale. They recognised that there were profits to be made by stagging, but that to be allotted shares in sufficient quantities to make worthwhile profits on sale it was necessary to apply for far more than they could expect to obtain or could pay for out of their existing credit balances. They also recognized that the return application money cheques which would be sent to them by the issuing houses would put them in sufficient funds to pay for the reduced number of shares actually allotted to them and even to honour their own cheques for the full amount, and that those return cheques could and in many cases would be cleared in a short period which could be further shortened by special arrangements. With this knowledge they embarked on large-scale stagging operations initiated by applying for very large amounts of new issue stocks and shares, accompanying their applications by cheques for very large sums and receiving allocations of much smaller amounts accompanied by cheques for the change in smaller but still substantial sums.
The basis of the scheme was the return cheque or 'change' cheque for the excess application monies. It was admitted that the Appellants had made no arrangements to overdraw with their different banks. If they had applied for shares in an issue which was undersubscribed there would have been no return cheque and the Appellants could not have paid for the shares allotted to them. Their cheques would have "bounced".
But in the years in which the Appellants conducted their stagging operations new issues were normally oversubscribed and allotments had to be scaled down and return cheques for the unallotted balance of applications sent in repayment. To distribute the new shares fairly the issuing houses wanted to know the total amount applied for by any one applicant, though not necessarily his identity, and they discouraged multiple applications, that is to say a single application by one bank on behalf of several customers or more than one application by the same customer. To improve their chances of obtaining a large number of new shares the Appellants drew cheques on more than one bank account, the Appellant Greenstein used more than one address and the Appellant Green used different names and different addresses, applying sometimes in his own name, at other times in the names of Monty Gibbs and Stuart Phillips, and for one stock Greenstein submitted twenty-one applications in the same name and Green submitted twelve applications in the same pseudonym. Advised by a stockbroker named Turpin, Mr. Green first worked his stagging scheme through a branch of the Midland Bank at 42 Cranbrook Road, Ilford, managed by a Mr. Whittle.
For more than eighteen months the scheme worked well for both Appellants. The inflated cheques went in with the applications. The return cheques were specially cleared for a small charge before the inflated cheques were first presented. The scaled down numbers of shares were paid for and the letters of allotment accompanying the return cheques sold at a profit. But in some cases, 14 out of 136 we were told, the inflated cheque could not be met on first presentation because the return cheque had not yet been cleared; Mr. Whittle marked the inflated cheque 'R. D.' (refer to drawer) or where he had been informed by Green that they would be met on second presentation 'R.D.P.R.' (refer to drawer, please represent).
In July 1972 Mr. Whittle told Green that his head office did not approve of this method of stagging and it must stop. Greenstein had had similar warnings from Mr. Franklin, the manager of the Forest Gate branch of the National Westminster Bank, first in November 1971 and again in May 1972. Other bank managers of branches where the Appellants operated accounts for these operations gave similar warnings in November 1972. It was made plain to both that it was irregular banking practice and the Appellants then stopped their operations.
The prosecution selected eleven transactions to charge as offences against Section 15(1) of the Theft Act. What these specimen charges alleged was that the Appellants dishonestly obtained, or attempted to obtain, a letter of acceptance in respect of shares and a return cheque belonging to an issuing house with the intention of permanently depriving the issuing house of the same (that is the letter and cheque) by deception. In all cases the deception charged was that the original cheque delivered to the issuing house then was a good and valid order for the payment of the amount on its face and that the defendant then had authority to draw a cheque for that amount upon the paying bank. All except counts 4, 5 and 6 (which concerned an issue of stock for the Dunbarton County Council) added "and that the said cheque would be paid (or honoured) on first presentation". Some of the counts against Green added the deception that the defendant was Monty Gibbs or Stuart Phillips.
Now the facts were substantially not in dispute and one of the matters which was not in dispute was that the issuing houses were in fact deceived by the Appellants. The Appellants had signed questionnaires recording the answers they had given to police questions, but, after an unsuccessful submission that they had no case to answer, they did not give or call evidence beyond some documents which had been put in in cross-examination of witnesses for the prosecution. But those witnesses included representatives of several issuing houses who testified in effect that they believed that the Appellants were making genuine applications for shares to the full amount of their cheques and were or would be able to pay the full amount on first presentation and that they would not have allotted to them any shares if they had known the true position, namely that the Appellants could only pay the full amount with the help of their own return cheque being cleared first.
It was also accepted that the drawing of a cheque on a bank for a given amount implies at least that the drawer has an account with that bank, that he has authority to draw on it for that amount, and that the cheque, as drawn, is a valid order for the payment of that amount in that in the ordinary course of events the cheque willbe duly honoured on presentation. It does not imply any representation...
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