R v Smith (Wallace Duncan) (No 4)
| Jurisdiction | England & Wales |
| Judge | The Lord Chief Justice |
| Judgment Date | 17 March 2004 |
| Neutral Citation | [2004] EWCA Crim 631 |
| Docket Number | Case No: 1998/02023/D5 |
| Court | Court of Appeal (Criminal Division) |
| Date | 17 March 2004 |
[2004] EWCA Crim 631
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Lord Chief Justice Of England And Wales
Mr Justice Richards and
Mr Justice Henriques
Case No: 1998/02023/D5
2001/02451/D5
Mr Douglas Day QC & Mr Simon Stafford-Michael (instructed by Byrne & Ptnrs) for the Appellant
Mr Timothy Barnes QC(instructed by the Serious Fraud Office) for the Crown
Introduction
On 24 February 1994 at the Central Criminal Court, Wallace Duncan Smith was convicted of one count of fraudulent trading, contrary to section 458 of the Companies Act 1985 (count 1) and two counts (counts 3 and 4) of obtaining property by deception involving respectively US$26,000,250 and US$11,005,000 contrary to section 15(1) of the Theft Act 1968. He was sentenced to six years imprisonment concurrent on each count.
This appeal has been preceded by other appeals in this case to this Court and in one case an application for leave to appeal to the House of Lords. It comes before the Court on this occasion on a reference by the Criminal Cases Review Commission under its powers under section 9 of the Criminal Appeals Act 1995.
Section 9 of the 1995 Act provides so far as relevant:
(1) Where a person has been convicted on indictment in England and Wales, the Commission – (a) may at any time refer the conviction to the Court of Appeal and …
(2) A reference under subsection (1) of a person's conviction shall be treated for all the purposes as an appeal by the person under section 1 of the 1968 Act against the conviction.
Sections 13 and 14 add:
"13. –(1) A reference of a conviction, verdict, finding or sentence shall not be made under any of sections 9 to 12 unless–
(a) the Commission consider that there is a real possibility that the conviction, verdict, finding or sentence would not be upheld were the reference to be made,
(b) the Commission so consider
(i) in the case of a conviction, verdict or finding, because of an argument, or evidence, not raised in the proceedings which led to it or on any appeal or application for leave to appeal against it, or
(ii) in the case of a sentence, because of an argument on a point of law, or information, not so raised, and
(c) an appeal against the conviction, verdict, finding or sentence has been determined or leave to appeal against it has been refused.
(2) Nothing in subsection (1)(b)(i) or (c) shall prevent the making of a reference if it appears to the Commission that there are exceptional circumstances which justify making it.
14. –(2) In considering whether to make a reference of a conviction, verdict, finding or sentence under any of sections 9 to 12 the Commission shall have regard to–
(a) any application or representations made to the Commission by or on behalf of the person to whom it relates.
(b) any other representations made to the Commission in relation to it, and
(c) any other matters which appear to the Commission to be relevant."
It will be noted that the Commission has a discretion to refer, the operative word being "may" in section 9(1).
There have been developments in the law since the reference was made by the Commission. Counsel for the appellant, Mr Douglas Day QC and Mr Simon Stafford-Michael, and counsel for the Crown, Mr Timothy Barnes QC have helpfully, in their skeleton arguments, identified how this has affected the issues which now have to be determined by this Court.
The first development arises out of the decision of the House of Lords in Lambert [2002] 2 AC 545. The House of Lords made clear in that case that the Human Rights Act 1998 is not retrospective in operation. This means, as is conceded by Mr Day, that the appellant cannot rely on the operation of the Act for advancing his grounds of appeal on count 1. This is because the appellant was relying on Article 6 to establish that the answers he gave, pursuant to a statutory obligation (section 2 Criminal Justice Act 1987), were inadmissible in evidence because they infringed his right not to incriminate himself. As this is now the only ground relied on in relation to his conviction on count 1, the validity of that conviction is no longer challenged. As the sentences in relation to count 3 and count 4 were concurrent with that imposed under count 1, by the commencement of the hearing of this appeal it was clear that this appeal could not affect the appropriateness of the six year sentence of imprisonment which was imposed by the trial judge. The appellant has already served that sentence.
The Crown also makes a concession. Mr Barnes accepts that in view of the decision of the House of Lords in Preddy [1996] AC 815 the convictions on counts 3 and 4 cannot be sustained. The case of Preddy makes clear that while the appellant may have been guilty of deception there had not been the necessary obtaining of the property which was the subject of those counts. These concessions are not the end of this appeal. The Crown contends that if the convictions on counts 3 and 4 of offences under section 15 of the Theft Act 1968 are to be set aside, this Court should exercise its power under section 3 of the Criminal Appeal Act 1968 to substitute convictions of offences under section 1 of the Theft Act 1978 of obtaining services from another by deception.
Section 3 of the 1968 Act provides:
(1) This section applies on an appeal against conviction where the appellant has been convicted of an offence and the jury could on the indictment have found him guilty of some other offence and on the finding of the jury it appears to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence.
(2) The court may instead of dismissing the appeal substitute for the verdict found by the jury a verdict of guilty of the other offence and pass such sentence in substitution for the sentence passed at the trial as may be authorised by law for the other offence not being a sentence of greater severity.
Section 1, Theft Act 1978 was amended by the Theft (Amendment) Act 1996, section 4(1) by adding an additional subsection 1(3) to section 1 of the 1978 Act. The amendment only applies to things done on or after 18 December 1996 and as the events relied on here occurred before that date, subsection (3) cannot assist the Crown.
Background Facts
In order to understand the remaining issues, it is necessary to give an outline of the facts which led up to the prosecution. Our outline is based upon the judgment of Rose LJ on the previous appeal to this Court, in which judgment was given on 3 November 1995 [1996] 2 CAR 1, Smith No. 1. The full Court dismissed the appeal against conviction but certified that the decision involved two points of law of general public importance. The House of Lords later refused leave to appeal.
The appellant is a Canadian national. He established a merchant bank, Wallace Smith Trust Company ("WSTC"). He was the Chairman and Managing Director of the Bank. On 30 April 1991 WSTC ceased trading and a provisional liquidator was appointed on the petition of the Bank of England. It was subsequently wound up owing its unsecured creditors approximately £92,000,000. The appellant controlled other companies based in Canada including one known initially as Wallace Smith Holdings ("WSH").
Working from this country and using a group of companies which he controlled, the appellant set up various bogus deals between WSTC and WSH which boosted the size of WSTC's profits.
Counts 3 and 4 relate to two similar transactions, in each of which a back-to-back repo was arranged. A repo has been described as a form of secured lending. We will use the "loan" terminology although its appropriateness is one of the issues in dispute. There are two 'limbs' of the transaction. The first part involves the security represented by the stock being sold to the lender for the agreed duration of the transaction. In other words the lender, as security for the loan, purchases and pays the amount of the loan for the stock on the first limb of the transaction. The lender owns the stock but the lender is subject to an obligation to sell it back at an agreed future date —this being the second limb. While he owns the stock, the lender can and probably will trade the stock. The return for the lender is provided by the agreed increase in price payable by the borrower to the lender on the repurchase limb. Repos are back-to-back when there are two successive repos.
In the case of both counts 3 and 4 the lender was the Discount Bank of Switzerland, which operated from London. In these cases the stock never entered into the possession of the Discount Bank of Switzerland. It was supposedly held in Canada to that bank's order. In fact, in neither case was any such stock available to the appellant in Canada or elsewhere.
The important feature of the transactions for present purposes is that while the dishonest arrangements were put into operation by the appellant in this jurisdiction the obtaining of the money took place outside the jurisdiction when the money was paid into a bank account in New York.
It is submitted on behalf of the Crown that the jury in order to have found the appellant guilty of counts 3 and 4 had to be satisfied:
(1) That the appellant obtained the money from Discount Bank with the intention of permanently depriving them of it. This was not disputed by the appellant.
(2) That WSTC represented that it was lawfully entitled to repo the Bonds. It was not in issue at trial that the...
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