R v Kellard
| Jurisdiction | England & Wales |
| Judgment Date | 29 July 1994 |
| Judgment citation (vLex) | [1994] EWCA Crim J0729-17 |
| Docket Number | No. 92/1210/S1-92/1441/S1-92/1563/S1 |
| Court | Court of Appeal (Criminal Division) |
| Date | 29 July 1994 |
[1994] EWCA Crim J0729-17
IN THE COURT OF APPEAL CRIMINAL DIVISION
Before: Lord Justice Farquharson Mr Justice Gatehouse and Mr Justice Scott Baker
No. 92/1210/S1-92/1441/S1-92/1563/S1
MR N MYLNE QC and MR S CLAYTON appeared on behalf of the Appellant WRIGHT
MR D DAY QC and MR R OFFENBACH appeared on behalf of the Appellant KELLARD
MR D McEVOY QC and MR B NICHOLLS appeared on behalf of the Appellant DWYER
MR T BARNES QC appeared on behalf of the Crown
Friday 29th July 1994
THE RT HON LORD JUSTICE FARQUHARSON: The essence of the case against these appellants is fraudulent trading, in that they carried on the business of certain companies with the intention of defrauding creditors. The companies concerned were:
(i) KLF (U.K.) Ltd, the holding company of the group. The appellants Kellard and Dwyer were directors of this company throughout the period to which the charges relate, that is to say from 1980-1985. Dwyer was also the Company Secretary from June 1983. Kellard was the Managing Director and regarded by the Crown at the trial as the driving force of KLF (U.K.) Ltd. and it was primarily on behalf of this company that the allegedly fraudulent conduct took place. (ii) KLF (Construction) Ltd. a subsidiary company which owned the group's offices in Bournemouth. It was from here that the business of the group was conducted. Kellard was the Managing Director and Dwyer, a director, and from June 1983, the Company Secretary.
(iii) KLF (ITT) Ltd, another subsidiary company. This was the overseas trading arm of the group. Both Kellard and Dwyer were directors. It was intended that the profits made by this company should contribute towards the administrative expenses of KLF (U.K.) Ltd.
(iv) Brittania Park Limited another subsidiary of KLF (U.K.) Ltd. In October 1984 the appellant Wright was appointed Chairman, while Kellard and Dwyer were directors.
The different roles of these several companies will emerge from the history of the various transactions upon which the indictment was based.
Derbyshire County Council ("DCC") owned a site at Shipley Park near Heanor. It was proposed that a theme park should be constructed on the site and negotiations took place in 1979 between DCC and KLF (U.K.) Ltd. The outcome was that a lease was granted to the latter for a term of 90 years for the construction and development of the theme park. It was agreed that DCC would make a contribution to the preconstruction costs of £217,000, and further, that when KLF (U.K.) Ltd. had carried out work on the site to a value of £500,000 and demonstrated that they had the sum of £1,000,000 available to complete the development, DCC would be responsible for providing car parks, access roads and services which were estimated to cost £1.4 million by 1983.
The development of the theme park was clearly going to be an expensive exercise, yet it does not appear that a proper budget for the work was ever prepared. It was clear from the nature of the enterprise that no revenue would be available until after the park had been constructed and visitors were admitted. All the capital costs would have to be met before anything in the nature of a profit would be recovered. It follows that the developer KLF (U.K.) Ltd. would need to have substantial funds of its own available or show that there were investors committed to provide finance for the scheme. It is apparent that from the outset KLF (U.K.) Ltd. had no resources of its own which would meet even the preconstruction costs. Accordingly, finance had to be raised from an outside source.
In the early stages Kellard and Dwyer looked for support from the KLF (U.K.) Ltd. bankers, the National Westminster Bank at Blandford Forum, by way of an extension of its overdraft facilities. Similar approaches were made on behalf of KLF (ITT) Ltd. to its own bankers, namely Barclays Bank Ltd. Although Kellard and Dwyer were successful to some degree, it was, according to the Crown, as a result of false representations being made to the bank managers concerned. Substantial costs were incurred by KLF (U.K.) Ltd. of both an administrative and professional nature. Accounts were being rendered by the company's accountants, architects and structural engineer, which were not met; the company's staff were not receiving the wages to which they were entitled, and judgment debts even for small amounts were not being paid. While the increased overdraft facilities alleviated the position to a limited extent, it was not long before the limits of the overdrafts were being breached. The usual signs of insolvency were present. Meanwhile difficulties were being encountered at the site. A protest group called The Friends of Shipley Park challenged the planning permission granted for the development and their claim was upheld by Webster J. in January 1981, when he declared that it was invalid.
A further complication arose later in the same year. Until then KLF (U.K.) Ltd. had been negotiating with a Conservative controlled Council, but following elections in May 1981 control of the DCC passed to the Labour party. The new Leader of the Council, Mr. David Bookbinder, was hostile to the development, and he withdrew the pending appeal against Webster J.'s judgment. Furthermore, Mr. Bookbinder resisted the grant of new planning permission, which was not given until April 1983. Following the DCC's withdrawal from participation in the development, proceedings were taken by KLF (U.K.) Ltd. against it. Judgment was given in favour of the company on liability only in June 1984, the assessment of damages being adjourned for a further hearing.
Counts 1 and 3 of the indictment alleged offences of fraudulent trading by Kellard and Dwyer from 1980 to 1982 inclusive (count 1) and from January 1983 until 31st March 1985 (count 3). They were both convicted of these counts. It was their case that the company was not insolvent during the periods covered by the counts. They pointed to:
(i) the value of the lease
(ii) the claim against DCC
(iii) support from KLF (ITT) Ltd
(iv) agreements by various public bodies to exhibit material when the park was to be opened to the public. The park was to be called Brittania Park and the theme was to be
"British Genius". Kellard, when seeking investment from other parties, claimed that such national bodies as the Ministry of Defence, the Meteorological Office, the Ordinance Survey and the Royal Shakespeare Company had committed their support; and
(v) the award of a substantial contract to ITT by the government of Saudi Arabia.
None of these assets represented cash in hand and it was the prosecution case that the claims were either non-existent or exaggerated.
In the later part of 1983 Wright came on the scene. He first met Kellard on a social basis but became an unpaid advisor, at any rate in the early stages. Wright had a background of banking experience. As already indicated, he became Chairman of Brittania Park Ltd., the company which was to operate the theme park, in October 1984. It was the case for the prosecution that he was also active in the conduct of the business of KLF (Construction) Ltd. which was the company carrying out the development, as well as KLF (U.K.) Ltd.
By the spring of 1984 the KLF group's finances were in a parlous state. If the project was to be kept afloat, it was necessary to obtain a bridging loan to tide the group over the summer, and to give Kellard the opportunity to raise money from other sources. On this occasion they, Kellard and Dwyer, addressed the Midland Bank in Derby, seeking a loan of £500,000. The way they attempted to achieve it, goes say the Crown, to the very heart of the fraud. They approached John Moody and entered into a bogus agreement.
John Moody, and his company of the same name, was a supplier of amusement rides, and had been negotiating for the amusement machines franchise at the park. This company was also trading on its overdraft and apparently had no financial resources. Notwithstanding this state of affairs, on 23rd March 1984 the Moody company and KLF (U.K.) Ltd. entered into an agreement whereby the former was to advance a loan of £300,000 on 30th September 1984. This was to be used to fortify an application for a bridging loan from Midland Bank Ltd. A letter of the same date (23rd March 1984), signed by Kellard and known at the trial as the "Sarawez letter" was sent on ITT writing paper to Moody. By the terms of that letter ITT was committed to pay the Moody company £298,000 on 28th September 1984 for technical services and feasibility studies in Saudi Arabia. Payment was to be made through the "Sarawez" organisation. It was the case for the Crown that this letter was completely bogus as was the £300,000 loan. No such services or studies had been carried out. The apparent object of the letter was to impress Moody's own bank, Lloyds in South Shields, should they, as seemed likely, be approached by the Midland Bank for a reference. In the event Midland Bank refused the bridging loan.
Kellard and Dwyer next approached Samuel Montagu & Co Ltd. (Montagu) for a bridging loan, using the Moody agreement to support the application. Montagu had become interested in the project at the beginning of 1984, and were prepared to advance £500,000. This was of course subject to conditions. Relying on the loan from Moody, they required their own bridging loan to be repaid on 30th September 1984. The £500,000 was to be applied in part in the repayment of the overdraft with the National Westminster Bank, and the balance to be...
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