[View without highlighting]
[Printable RTF version]
[Buy ICLR report:  3 WLR 229]
[Buy ICLR report:  QB 1418]
||Neutral Citation Number:  EWCA Crim 631
||Case No: 1998/02023/D5
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
||Royal Courts of Justice
London, WC2A 2LL
||17 March 2004
B e f o r e :
THE LORD CHIEF JUSTICE OF ENGLAND AND WALES
MR JUSTICE RICHARDS
MR JUSTICE HENRIQUES
||- and -
||Wallace Duncan Smith
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
HTML VERSION OF JUDGMENT
Crown Copyright ©
The Lord Chief Justice:
- 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  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  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.
- 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  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 representations were made that WSTC was in a position to repo the Bonds (both for the February and April 1991 offences) but it was disputed that such representations were false.
(3) That the appellant knew that the representations were false.
(4) That as a result of the representation Discount Bank paid the money into WSTC's New York account with Northern Trust International; and
(5) That the appellant was dishonest.
- The three issues which have to be determined by the Court on this appeal are:
(1) Whether the jurisdiction of this Court is already exhausted by the previous appeal in Smith No. 1. (Functus Issue)
(2) Whether the courts of England and Wales have jurisdiction over the offences which give rise to counts 3 and 4 both in their original form or their substituted form. (Jurisdiction Issue)
(3) Whether offences, under section 1 of the Theft Act 1978, can be substituted for the offences alleged in counts 3 and 4 of which the appellant was found guilty by the jury. (Substitution Issue)
- This issue arises because the Court of Appeal in its judgment in Smith No. 1 dealt with an argument that in relation to counts 3 and 4 the trial court lacked jurisdiction because although the deception had taken place in London, the obtaining, which was the essence of the offence, had taken place in New York and the offences were thus committed in New York. This argument was rejected in Smith No. 1 in a judgment given by Rose, VP because the only feature of the circumstances which had occurred outside England was the transfer of funds to the bank's New York account. With obvious justification it was decided in Smith No. 1, that it would be astonishing if the English courts did not also have jurisdiction in such a case as this as there would be nothing inimicable to international comity in their assuming such jurisdiction. Questions of jurisdiction, although involving substantive law contain a strong procedural element, and the court must recognise the need to adapt its approach to such questions in the light of developing and advancing communications technology. If the issue of jurisdiction in cases of obtaining by deception were to depend solely on the where the obtaining took place the criminal law would be distorted by complex and at times obscure issues which had no bearing on the criminality of those responsible for the dishonesty.
- If the decision in Smith No. 1 is binding on this court then it would not be possible for this court to do other than apply Smith No.1 and come to the same conclusion as to the jurisdiction issue. However, in the later case of Manning  QB 980 (appeal against sentence),  EWCA 2074 (main judgment), this court, presided over by Buxton LJ, carefully examined the authorities on the question of jurisdiction and came to the conclusion that it should not follow the decision in Smith No. 1 as to the basis of jurisdiction. According to Manning the correct rule was that before an English court could try an offence it was necessary, not only for the defendant to be physically within the jurisdiction, but also that the act needed to complete the offence, here the crediting of the money, had to take place within the jurisdiction. This rule had not been replaced by a theory that an offence would be triable in England even if the last act did not take place here provided that there was nothing contrary to international comity in the English court assuming jurisdiction.
- The court in Manning was not dealing with an offence of obtaining property by deception contrary to section 15 of the Theft Act 1968 but an offence of procuring the execution of a valuable security by deception contrary to section 20(2) of that Act. However, it is not possible to distinguish the two cases because they deal with different offences. It is clear from Lord Justice Buxton's judgment in Manning that he regarded Smith No. 1 as being wrongly decided on the issue of jurisdiction and that he was not prepared to follow Smith No. 1.
- When this case was referred back to this court by the Commission, the lawyers who assist this court commendably recognised the approach to jurisdiction adopted in Manning on the jurisdiction issue conflicted with the approach in Smith No. 1. The Manning case was drawn to the attention of the parties. As a result, the appellant now relies on Manning and contends that in any event he was wrongly convicted because the court had no jurisdiction despite the decision of this court in Smith No. 1.
- Before us Mr Barnes contends that as a matter of principle, at least in relation to an issue of this nature, an appellant has only one right of appeal. The reference procedure involving the Commission may provide a second appeal but this does not enable the appellant to revisit legal issues decided against him. In support of his contention he cites R v Berry No. 2  2 AER 789 at p795 and R v Roberts  Crim Law Review 122.
- We do not accept Mr Barnes's approach. The Criminal Appeals Act 1995 enables the Commission to refer an appeal to this court. When it does so, the powers of this court are the same as they would be on any other appeal. However, the court, where there has been a previous appeal does not ignore that appeal but adopts the approach which was set out very clearly by Lord Justice Auld in the case of Poole and Mills  EWCA Crim 1753 paras 56-62 which was also a case involving a reference.
- As Auld LJ made clear, on a reference a ground may be advanced that has already been aired in a previous appeal, but the proper exercise of the court's discretion to depart from its previous reasoning should be confined to exceptional circumstances. Such exceptional circumstances may include "where there has been a development of the law requiring the adoption of a different approach by the Court to the issues before it" (para 57).
- It is an unusual situation for there to be between the original hearing by this Court and the hearing on the reference another decision by this Court on the same issue that conflicts with the very point decided previously by this Court. However, this court has to determine which of the previous decisions correctly reflects the law. The position is no different from that on an appeal (without a reference) where there are two earlier relevant decisions on a point of law by this Court which are in conflict. This Court in that situation must decide which decision is correct. Both on an appeal and a reference this Court must determine the safety of the conviction and this can involve resolving conflicts in decisions of this Court when they exist.
- However, in exercising its discretion whether to refer a case, the Commission when it comes to exercising its discretion should have well in mind the comments of Lord Bingham CJ in Hawkins  1 Cr App Rep 234, when he dealt with the analogous position of this court giving leave to appeal out of time in consequence of a change of the law since the time limit in which to appeal had expired.
- While referring to the Commission's discretion we draw attention to what the Commission said in their Statement of Reasons 00141/97 in this case about the possibility of the Court of Appeal substituting alternative verdicts (the next issue we are required to decide). The Commission said:
"43. The Commissioners considered the issues relating to the possibility of the Court of Appeal substituting alternative verdicts should they not uphold the existing conviction. The Commission take the view that it is not within their remit to make any determination concerning alternative verdicts and that this is a matter solely for the Court of Appeal."
- We are conscious that since those Reasons were delivered in this case a number of years have passed and the paragraph that we have cited probably does not reflect the Commission's current practice. However, if this is not the case, we would confirm that para 43 does not correctly set out the appropriate approach. The Commission's role is to refer those cases to this Court where the Commission considers that there may have been some real injustice or there are other exceptional circumstances which justify referring the case. If a conviction will not be upheld but the conviction of another offence will be substituted, usually there will be no purpose in making a reference in relation to the conviction. The position as to sentence may be different in some cases. In the case of the present appeal, it is, as we will see, far from clear whether there can be substitution so a reference could be justified as enabling the law to be clarified, but the position as to substitution still needed to be considered.
The Substitution Issue
- The question whether there can be substitution or not on this reference is by no means easy to resolve. The issue turns on the language of section 3 of the 1968 Act. Counts 3 and 4 cannot be sustained because of the decision in Preddy. That is common ground. It is Mr Barnes's submission that this is a case where for the offences under section 15(1) of the Theft Act 1968, there can be substitution of offences under section 1 of the Theft Act 1978 of obtaining services from another by deception.
- Section 15 of the 1968 Act defines the offence of obtaining property by deception in these terms:
"15(1) A person who by any deception dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall on conviction on indictment be liable to imprisonment for a term not exceeding 10 years.
(2) For the purposes of this section a person is to be treated as obtaining property if he obtains ownership, possession or control of it, and "obtain" includes obtaining for another or enabling another to obtain or to retain."
- Obtaining services by deception is an offence which, as is to be expected, is similar to obtaining property by deception. Section 1 of the Theft Act 1978 provides:
"1(1) A person who by any deception dishonestly obtains services from another shall be guilty of an offence.
(2) It is an obtaining of services where the other is induced to confer a benefit by doing some act, or causing or committing some act to be done, on the understanding that the benefit has been or will be paid for.
(3) Without prejudice to the generality of subsection (2) above, it is an obtaining of services where the other is induced to make a loan, or to cause or to permit a loan to be made, on the understanding that any payment (whether by way of interest or otherwise) will be or has been made in respect of the loan."
- As already indicated subsection (3) cannot apply to the present case. However, it is interesting to observe that its specific provision dealing with loans are "without prejudice to the generality of subsection (2)". Section 1(3) was added to section 1 to deal with the decision of this court in R v Halai  Crim Law Review 624. In Halai it was decided that the simple making of a loan could not amount to a service. Halai had been the subject of much criticism. In R v Graham  1 Cr App Rep 302 Lord Bingham CJ agreed with the remarks of Lord Lane CJ in R v Teong Sun Chuah  Crim Law Review 463 at p464 that the decision in Halai bore all the hallmarks of having been decided per incuriam and in R v Cook  Crim Law Review 436 Potter LJ approved those observations and while acknowledging that Lord Bingham's remarks were obiter agreed with them and applied them. In consequence Halai is no longer an authority which should be followed. As was indicated by Potter LJ, there is no reason to restrict the meaning of "services" in section 1, the essential condition being that the service must confer a benefit and be rendered on the basis that it had been, or would be, paid for. Potter LJ summed up the position in these words:
"In the light of Graham and upon our reading of section 1 of the 1978 Act we consider that the wording of subsection (2) was, prior to the 18 December 1996, in any event apt to cover the inducement of a financial institution to advance money by way of loan in any case in which the institution and the borrower both expect that payment will be made in the form of interest charges and arrangement fee or both."
- So, a position which hitherto could be appropriately described by Lord Bingham CJ in Graham as "a sunken wreck, impeding navigation" (at p317A) is now no longer a threat to navigation.
- Mr Stafford Michael vigorously submitted that the transaction here, the "repo", did not fall within the description of services as defined in subsection 1(2). He regarded the repo as a sale and a resale rather than the provision of a secured loan. However, we do not accept his submissions which we regard as being inconsistent with the clear message given by the documents which recorded the arrangements that are before us. Although the product which the Discount Bank was making available was not a traditional secured loan because the Discount Bank, if it had obtained control of the bonds, would have been able to deal with the bond to a third party, the fact that the Discount Bank were under an obligation to "resell the bonds" indicated that their role in the transaction was to be the security. Very good security from the Discount Bank's point of view because they would have total control over the bonds. In this case their role as security was particularly clear because the bonds were in fact not handed over to the Discount Bank but were supposed to be held "in safe keeping to your order for the account of yourselves" as WSTC represented. We note too that the description of a repo as a form of secured lending was apparently uncontentious at the time of the trial. This is not surprising. It was an accurate description of the substance of the transaction.
- The financial services provided by the Discount Bank could either be regarded as being the making of the arrangements for the loan (in other words agreeing to provide the financial product known as a "repo") or they can be regarded as that agreement and the payment of the money in accordance with the agreement or, if the transaction were to be completed, the making of the agreement, the payment of the money and on the termination of the loan the resale of the bonds. We draw attention to this feature of the provision of services in order to make the obvious point that in a financial arrangement of this nature the provider of the services can perform a series of services and as long as some services have been provided the offence is complete. To illustrate what we mean, the arrangement may be to provide the finance at some future date. The making of the arrangement, if it is properly evidenced, could confer a benefit on the borrower since the agreement of a loan from a reputable institution even though it is not to take place until a future date can be of considerable value in establishing the financial liquidity of the borrower.
- However, while the services in this case could be divided, when it comes to considering the question of substitution the terms of section 3 of the Criminal Appeal Act 1968 become critical. Before there can be substitution, it has to be shown that "the jury could on the indictment have found him guilty" of the other offence. In addition, on the finding of the jury it must appear "to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence".
- Because of the language of section 3 it is important to refer to the Particulars of the Offence actually contained in counts 3 and 4 of the indictment of which the appellant was found guilty. For this purpose it is not necessary to do more than refer to one count since apart from the dates and amount involved the wording of the counts were identical.
- Count 3 was in the following terms:
"Wallace Duncan Smith on or about 27th February 1991 dishonestly obtained for Wallace Smith Trust Co Limited US$26,000,250 from Discount Bank and Trust Company with the intention of permanently depriving the said Discount Bank and Trust Company thereof, by deception, namely by falsely representing by words and conduct that Wallace Smith Trust Co. Limited was lawfully entitled to repurchase certain 1986 Government of Canada 9% Bonds when in fact it was not so entitled."
- An illustration of the types of offence that on Mr Barnes's submissions could be substituted for count 3 is in the following terms:
"Wallace Duncan Smith on or about 27th February 1991 dishonestly obtained certain services from Discount Bank and Trust Company namely the completion of a repo arrangement between Wallace Smith Trust Company and the Discount Bank by deception namely by falsely representing that Wallace Smith Trust Company was entitled to repo 1986 Government of Canada 9% Bonds when in fact it was not so entitled."
- It will be noted that the only significant difference between the original count and the count to be substituted is that the original count refers to the obtaining of the sum of money and the substituted count refers to the completion of the repo arrangement which offence involved the payment of the same sum of money. We have no difficulty in deciding (and the answer to the issue under section 3 depends on what to this court appears to be the position) that the jury would inevitably have been satisfied of all the matters alleged in the particulars of the proposed substituted count. The question that remains is, are those facts included expressly or by implication in the original offence? (See R v Graham (above))
- The argument, on behalf of the appellant as to why it will not be possible to substitute, again depended upon the contention that a repo is not a loan. We are, however, also concerned as to whether it can be said that the ingredients of an offence of obtaining services was implicitly included in the particulars of the offence of which the appellant was found guilty.
- Ironically, the particulars of the count had prior to the trial been amended and before amendment the count referred to "a sale and repurchase transaction between the aforesaid companies relating to 1986 Government of Canada 9% bonds". If those words had remained in the count the position would have been clear. However, despite the amendment we have come to the conclusion that this is a case where we are entitled to substitute for the original offences under counts 3 and 4, offences of obtaining services in the form suggested in paragraph 40.
- In coming to our conclusion, we found it helpful as a guide as to whether substitution is appropriate to take the Particulars of the Offence in the form that they were before the jury, but to substitute for the then Statement of Offence, a Statement of Offence alleging obtaining services by deception contrary to section 11 of the Theft Act 1978. We would then ask if the Statement of Offence is substituted whether the original Particulars on which the appellant was found guilty would support the substantiated offence. If that is done, it does seem to us that the Particulars would satisfactorily show that the services referred to in the Statement of Offence were the obtaining of the US dollars from the Discount Bank by deception by false representations relating to what was clearly the completion of a financial arrangement involving the payment of money by the Discount Bank and the giving of security, namely the Government of Canada bonds. If the Defence had sought further particulars then they would be entitled to them, but absent such a request, the offence here was one on which a jury would undoubtedly have been satisfied had been committed.
The Jurisdiction Issue
- In considering this issue, we focus on the offence to be substituted. We do so because it seems to us that even if there was no jurisdiction for the original offence, section 3 would allow an offence to be substituted which complied with the requirements of section 3 if it was an offence in respect of which there was jurisdiction.
- Of course, the Court has a discretion as to whether to substitute and it does not follow that because there can be substitution it will be just to make substitution. However, in the situation which we have here where during the trial there was no dispute as to jurisdiction, we see no difficulty in substituting, if the substituted offence is one in respect of which the Crown Court would have had jurisdiction. However, as it happens, on the facts of this case there is unlikely to be any distinction on the question of jurisdiction between the counts on which the appellant was found guilty and the counts which it is proposed to substitute.
- The first requirement for substitution is that the appellant at the material times was in London and based here. He was therefore subject to the general criminal jurisdiction of our courts. The issue is whether the substituted offence would have been an offence which our courts would have had jurisdiction to try. It is here that the conflict between a decision of this Court in Smith No. 1 and Manning has to be resolved.
- The issue is an important one. The importance goes beyond the issue of jurisdiction that is directly involved on this appeal. It involves determining the extent to which it is appropriate for this Court to develop the common law as to jurisdiction in order to meet the changing requirements of society.
- The precise issue upon which the approach in the two appeals differed is of diminishing importance because the legislature has intervened and the intervention of the legislature means that in due course the undoubted adverse consequences of the Manning decision, which Buxton LJ fully recognised, have been alleviated by the legislation.
- However, Mr Barnes submits on behalf of the Crown that as yet this is still far from being the present position in the case of large-scale frauds because the complex nature of such cases means that often many years elapse before they come to trial. The problem is aggravated because although the legislation in question is contained in the Criminal Justice Act of 1993, that Act only came into force in June 1999. Furthermore, the provisions are not exhaustive and only apply to two groups of offences. One group, Group A, includes offences of obtaining property and services by deception. Subject to this qualification, from 1999, the courts here will have jurisdiction in respect of Group A offences "if any of the events which are relevant events in relation to the offence occurred in England and Wales". A relevant event "means any act or omission or other event (including any result of one or more acts of omissions)" proof of which is required for conviction of the offence. (See section 2) The Act also clarifies the position in relation to cases where property is dispatched or received or information is sent from one place to another (see section 4).
- Before proceeding further, we should identify how the jurisdiction issue arises on the facts of the Manning case. Manning was charged with offences of false accounting contrary to section 17(1) of the Theft Act 1968 and of offences under section 20(2) of the Theft Act 1968. Those (latter) offences were offences of procuring the execution of a valuable security by deception contrary to section 20(2) of the Theft Act 1968. The procuring was by the defendant in England and the execution of the cheques took place in Athens. The Court of Appeal decided that the offences under section 20(2) were not completed until the cheques had been executed. As the cheques had been executed in Athens the Court decided that the courts of this country had no jurisdiction. The arguments in favour of this approach are eruditely explained in the judgment of Lord Justice Buxton. The approach means as Buxton LJ makes clear that the decision in Smith No. 1 was wrong. Before examining Buxton LJ's reasoning it is important to note precisely what was the basis for the decision in Smith No.1.
- In Smith No. 1, as in Manning, the courts were concerned with the effect of the decision of this Court in Harden  1 QB 8. Harden was a case involving the obtaining of cheques by false pretences where the cheques had been posted from Jersey. The judgment on the issue of jurisdiction of Widgery J was characteristically succinct. He confined his remarks to stating; "It appears from R v Ellis  1 QB 230 that the gist of the offence of obtaining by false pretences lies in the act of obtaining and that if this act is done within the jurisdiction it matters not that the false pretence was made abroad". On this approach obtaining offences can be described as "result crimes"; that is crimes that are not complete until the specified result is achieved, and crimes where the location of the result determines the jurisdiction over the crime. This is also called the "terminatory theory" in some of the authorities. The judgment then devotes itself to what appears to have been the main issue examining whether on the facts the posting of the cheques was to be treated as their being received by the appellant. On this issue involving questions of agency the Court came to the conclusion that as the parties to the transaction contemplated that the cheques should be sent by post the offences were complete at the time of posting the cheques. So there was no jurisdiction. From a jurisdictional point of view it is unsatisfactory for a question of jurisdiction to be determined by an artificial concept designed for resolving contractual disputes.
The Rose Approach
- In his judgment in Smith No. 1, Rose LJ examined the correctness of the decision and referred to a number of different authorities. Having done so, he came to the conclusion that the court's reasoning in Harden "that the gist of obtaining by false pretences lies in the act of obtaining" was "unimpeachable and clearly applies to the offence of obtaining by deception created by section 15(1)" (p19). In view of the remainder of his judgment this passage was criticised in argument but it can be explained in the context of the judgment as a whole as the acceptance by Rose LJ that while Harden establishes one basis of jurisdiction, as Lord Diplock had previously pointed out in Treacy v DPP  55 Cr.App.R. 113, "there is no reason in principle why the terminatory theory should have the effect of excluding the initiatory theory as an alternative ground of jurisdiction".
- Rose LJ went on to examine a number of statements in the authorities to which it will be necessary for us to make reference later which gave support to a different approach which he described as the "comity approach" but he has also referred to as the "initiatory theory". The initiatory theory was a description applied by Professor Glanville Williams in an article "Venue and Ambit of Criminal Law" (1965) 81 LQR 518 which was referred to by Lord Diplock in Treacy v DPP  AC 537 and involves the proposition "that the crime is committed where the offender is when he does the acts which constitute the essential physical element of the crime".
- The essence of the reasoning of Rose LJ's judgment however comes later and is to be found in the passage of his judgment to which we have already referred where he deals with the astonishing consequences that can flow from the Harden approach. It also appears from the following paragraphs at the end of the judgment which deal with the issue of jurisdiction in these terms:
"The reliance of international banking on ever developing and advancing communications technology has added new weapons to the armoury of fraudsters, especially those whose purpose it is to perpetrate fraud across national boundaries. If the issue of jurisdiction in cases of obtaining is to depend solely upon where the obtaining took place it is likely that the courts, and especially juries, will be confronted with complex and, at times, obscure factual issues which have no bearing on the merits of the case. This Court must recognise the need to adapt its approach to the question of jurisdiction in the light of such changes. In Liangsiriprasert v. Government of the United States of America (1991) 92 Cr.App.R. 77, 89  1 A.C. 225, 250A. Lord Griffiths, giving the opinion of the Privy Council in a conspiracy case, having referred to the judgment of the Chief Justice of Hong Kong, Roberts C.J. said:
"The passage in Treacy v. D.P.P. (1971) 55 Cr.App.R. 113  A.C. 537 to which Roberts C.J. refers is the celebrated discussion by Lord Diplock of the bounds of comity and the judgment of La Forest J. in Libman v. R. (1985) 21 C.C.C. (3rd) 206 contains a most valuable analysis of the English authorities on the justiciability of crime in the English courts which ends with the following conclusion at p221:
'The English courts have decisively begun to move away from definitional obsessions and technical formulations aimed at finding a single situs of a crime by locating where the gist of the crime occurred or where it was completed. Rather, they now appear to seek by an examination of relevant policies to apply the English criminal law where a substantial measure of the activities constituting a crime take place in England, and restrict its application in such circumstances solely in cases where it can seriously be argued on a reasonable view that these activities should, on the basis of international comity, be dealt with by another country.'"
Lord Griffiths also said at p90 and p251C:
"Unfortunately in this century crime has ceased to be largely local in origin and effect. Crime is now established on an international scale and the common law must face this new reality. Their Lordships can find nothing in precedent, comity or good sense that should inhibit the common law from regarding as justiciable in England inchoate crimes committed abroad which are intended to result in the commission of criminal offences in England."
In Sansom & Others (1991) 92 Cr. App. R. 115,  2 Q.B. 130, in a judgment delivered by Taylor, L.J., Liangsiriprasert was applied by this court in a conspiracy case. We see no distinction, in relation to the principles of jurisdiction between conspiracy and obtaining by deception. Accordingly the English court had jurisdiction and ground 5a fails."
- From these passages of the judgment of Rose LJ we understand his reasoning to be:
i) The decision in Harden was correct but it no longer should be regarded as setting out an exclusive basis of jurisdiction.
ii) For the policy reasons which he identifies particularly in relation to complex fraud, where there are no reasons of comity which require a different approach, when substantial activities constituting a crime take place in England the court here should have jurisdiction in accordance with the approach indicated by the Chief Justice of Hong Kong, Roberts CJ.
iii) Thus as to jurisdiction, there does not have to be a distinction in relation to the principles of jurisdiction between different crimes. Conspiracy in inchoate crimes and obtaining by deception can be governed by the same general, less rigid approach.
iv) Questions of jurisdiction although they involve substantive law have a strong procedural element and are less immutable than issues of pure substantive law. This is particularly so where they have been the subject of criticism from sources of high authority as here.
The Buxton LJ Approach
- Having as we hope is the case made the basis of Rose LJ's position clear, we can return to the detailed reasoning of Buxton LJ. A substantial part of the judgment is directed to explaining why he concludes that the last act or terminatory theory remains the binding common law of England and Wales based on the decision in Harden. In saying this, Buxton LJ is clearly seeking to demonstrate that that is the only basis of jurisdiction. Nonetheless, it is not clear from his judgment that he appreciated that Rose LJ was advancing an alternative and additional approach to the terminatory or last act rule, a complementary approach. That is to say an approach which would result in jurisdiction if either the last act took place in England or a substantial part of the crime was committed here and there was no reason of comity why it should not be tried here.
- The possibility that Buxton LJ may have misunderstood what Rose LJ meant by his approach is confirmed by the fact that Buxton LJ described the "comity theory" as providing "broadly that any offence may be tried in this country even if the last act did not take place here provided the courts sees nothing contrary to international comity in its assumption of jurisdiction. In Smith No. 1 therefore, this Court assumed jurisdiction in a case where the deception had taken place in this country but the last act, the obtaining, had taken place in New York" (p 989). Rose LJ, as we have made clear was not postulating as broad an approach as this. His approach requires the crime to have substantial connection with this jurisdiction.
- Buxton LJ states that the court is bound by the cases that demonstrate that the last act or terminatory theory remains binding common law of England and Wales and then continues "we have carefully considered whether that position can be regarded as set aside by the decision of this court in Smith No. 1 but we have to conclude that the decision cannot stand against authorities to which we have just referred. We are driven to that conclusion partly by analysis of the speech of Lord Diplock in Treacy which we do not think propounded a rule of jurisdiction that replaced the last act rule as the governing rule".
- What was not examined in Manning, in any detail is the question of whether it is appropriate for a court to develop the law in the way that was done by Rose LJ. Instead Buxton LJ summarises his reasoning for not following the approach adopted in Smith No. 1 in these terms:
"First, as to Reg v. Sansom  2 Q.B. 130, that case was, like Liangsiriprasert v. Government of the United States of America  1 A.C. 225, solely about conspiracy, and did not address at all the last act rule as applied in cases of substantive offences. Further, we cannot agree that there is no difference in respect of jurisdiction between conspiracy and offences such as obtaining by deception. As we have sought to demonstrate, the line of authority in respect of each category has developed quite differently, and in no previous case has it been suggested that the law as to jurisdiction in cases of conspiracy can override or offset the existing authorities on obtaining by deception or procuring the execution of a valuable security.
Second, we cannot agree that the state of the authorities is such that this court is free to choose between the last act or "gist of the offence" rule, and a "comity" rule based on the general observations of Lord Diplock in Reg. v. Treacy  A.C. 537. The latter has never been accepted as a rule of jurisdiction and, like this court in Reg. v. Tirado, 59 Cr. App. R. 80, we do not think that we are free to depart from the rule recognised in Reg. v. Harden  1 Q.B. 8 or, in particular case before us, from the rule of jurisdiction applied in Reg. v. Thompson  1 W.L.R. 962 and Reg. v. Nanayakkara  1 W.L.R.265. In terms of reason and policy we fully agree with the court in Reg. v. Smith  2 Cr. App. R. 1 that such a step is highly desirable, but we respectfully cannot agree that it is open to this court."
- As to this reasoning we would make two comments; the first being that in relation to conspiracy, a broader approach has undoubtedly been adopted as to jurisdiction than would follow on the application of the terminatory theory. Secondly, it does not necessarily follow that because the broader approach had been developed in connection with conspiracy and inchoate offences the same process of development would not be appropriate in cases involving offences of obtaining by deception. The opinion of Lord Griffiths in Liangsiriprasert extending the jurisdiction in relation to conspiracy should not be summarily brushed aside as of no relevance. The message of his opinion as a whole is that the common law must evolve to meet current circumstances. As an illustration of Lord Griffiths approach the following additional paragraphs at p251 state:
"But why should an overt act be necessary to found jurisdiction? In the case of conspiracy in England the crime is complete once the agreement is made and no further overt act need be proved as an ingredient of the crime. The only purpose of looking for an overt act in England in the case of a conspiracy entered into abroad can be to establish the link between the conspiracy and England or possibly to show the conspiracy is continuing. But if this can be established by other evidence, for example the taping of conversations between the conspirators showing a firm agreement to commit the crime at some future date, it defeats the preventative purpose of the crime of conspiracy to have to wait until some overt act is performed in pursuance of the conspiracy.
Unfortunately in this century crime has ceased to be largely local in origin and effect. Crime is now established on an international scale and the common law must face this new reality. Their Lordships can find nothing in precedent, comity or good sense that should inhibit the common law from regarding as justiciable in England inchoate crimes committed abroad which are intended to result in the commission of criminal offences in England."
- It is right, as Buxton LJ states, that "the terminatory or last act rule has been regularly applied and it has the support of Viscount Dilhorne in DPP v Stonehouse  AL 55 at pp 74-5. But as he points out Lord Griffiths strongly endorsed the broader approach Rose LJ was to adopt in Smith No. 1. Support can also be found not only from Lord Diplock but also in the language of Lord Wilberforce in R v Doot (H.L.(E.)) again a conspiracy case (at p817):
"In the search for a principle, the requirement of territoriality does not, in itself, provide an answer. To many simple situations, where all relevant elements occur in this country, or conversely, occur abroad, it may do so. But there are many "crimes" (I use the word without prejudice at this stage) the elements of which cannot be so simply located. They may originate in one country, be continued in another, produce effects in a third. Some constituent fact, the posting or receipt of a letter, the firing of a shot, the falsification of a document, may take place in one country, the other necessary elements in another."
- The starting point is that although in Harden Widgery J did refer to the Ellis case which was decided at the end of the 19th century, it is clear that when Harden was decided there was no clearly defined approach to jurisdiction. The succinct judgment of Widgery J in Harden was therefore something of a watershed. Writing in 1972,  Crim Law Rev 276 Mr Lynden Hall was prepared to argue that "there is no hard and fast principle which requires that an English court must apply the "terminatory theory" and to argue that "merely because the courts appear on occasion to have held an offence triable in accordance with the "terminatory" theory does not entail that other cases cannot be determined in accordance with the "initiatory" theory. The two are not mutually exclusive. Harden appears to be the only case where an English court has disclaimed jurisdiction because the final element of the offence occurred outside England. " Other academic writers in addition to Glanville Williams were critical of the Harden approach. In 1994 Smith regarded our laws as to jurisdiction as being "parochial to an embarrassing degree" in relation to international fraud (Property Offences 1.34 Sweet & Maxwell 1994). Lawrence Collins considered the "distinction and their elaboration have led to some absurd and anomalous results" (Fraudulent Conduct CLP 1989 258). However, the fact is that if this Court in Manning was right, the Court in Smith No. 1 was not free to develop the law in the way they purported to do.
- We hope that what we have said so far helps to prepare the ground for our conclusions on this issue. What we have to decide is whether we should follow the decision in Smith No. 1 or the decision in Manning; or approaching the issue from a different direction, was this Court in Manning justified in not following Smith No. 1? Because of the conflict between Smith No. 1 and Manning, this Court is placed in a position where it has to make a choice between the two decisions. Although we acknowledge and pay tribute to the power and persuasiveness of the reasoning of Buxton LJ's judgment, the conclusion that we have come to is that we should follow the judgment in Smith No. 1. The reasons for our conclusion are as follows:
i) The Court in Manning was required to follow the decision in Smith No. 1 unless it came to the conclusion that the court in Smith No. 1 was not entitled to develop the law in the way in which they did. Here an analogy can be drawn with what has happened in relation to the decision in Halai. First Lord Bingham disproved of the decision in Halai in Graham and then subsequently it was overruled so that it was no longer a risk to navigation. While the analogy is far from close we see the parallels in what happened to Halai and what Smith No. 1 had to say about Harden. Though Harden was not sunk by Smith No. 1 it was moved to a mooring where it would not be a threat to navigation but for the decision in Manning.
ii) Smith No. 1 was not suggesting that Harden was wrongly decided. Smith No. 1 was suggesting it did not provide an exhaustive statement of the law as to jurisdiction in obtaining cases. We have already quoted the relevant passage of the judgment and we would suggest that Widgery J might be very surprised if he had been told that his judgment in Harden was to be treated as an impediment to any development of the law in relation to jurisdiction in this area. Buxton LJ, himself accepts that Harden has to be qualified where "the 'last constituent element' is a continuing or complex act," then the courts of this country have jurisdiction if any part of that act is committed in England and Wales. (p988 and R v Markus  AC 35) The approach in Harden cannot be applied to attempts and it has not been applied in relation to conspiracy.
iii) The Harden approach leads to a wholly unsatisfactory situation in contemporary circumstances. The broader approach provided by the Criminal Justice Act 1993 was already known when Smith No. 1 was decided. This judgment is in accord with that legislation which regrettably was not brought into force until 1999. There is no risk of conflict with Parliament in our decision.
iv) A more flexible approach as to the binding effect of previous decisions of this Court as to jurisdiction to try crimes is appropriate because there is not the same need for certainty as is the case in other areas of substantive law. In addition, Rose LJ was correct to identify a relationship with procedure where there is not a strict adherence to precedent.
v) While the answer to this issue is not achieved by counting the members of the House of Lords who have either supported or criticised the Harden decision, the fact that the decision in Manning is not in accord with the general approach to jurisdiction collectively adopted by Lords Diplock, Wilberforce and Griffiths undoubtedly provides some justification for developing the law as occurred in Smith No. 1.
vi) While Buxton LJ criticises the judgment of La Forest J in Libman v The Queen 21 CCL 206 it has the endorsement of Lord Griffiths in Liangsiriprasert as "a most valuable analysis" (p250).
vii) The approach advanced by Rose LJ has not prior to the judgment of Buxton LJ been considered and rejected. He was not seeking to overrule Harden directly.
viii) The development as to jurisdiction by Rose LJ in Smith No. 1 is consistent with the developments that have taken place in the law as to jurisdiction in the case of conspiracy and attempts.
ix) This is an area where it is necessary to recognise that some judges will be more proactive than others. The Court in Manning could not be criticised if absent the decision in Smith No. 1 they had not been in favour of a more proactive approach to the jurisdiction of our courts to obtaining offences. However, once the Smith No. 1 decision was given the position was different. We would not accept the conclusion in Manning that the Court in Smith No. 1 was not entitled to develop the law in the way that it did. It would undermine the inherent nature of the common law if courts were prevented as a matter of principle from developing the law to meet the needs of contemporary society in the present situation.
- In view of our conclusions set out above it is unnecessary for us to deal with Mr Barnes' alternative argument based on a theft of the alleged equitable interest of the Discount Bank in the credit in the WSTC's bank account as a result of the repo transactions.
- The sentence imposed on counts 3 and 4 are equally appropriate for the substituted counts. Accordingly, we quash the convictions in counts 3 and 4 and substitute convictions under section 1 of the Theft Act 1978.
Copyright Policy |
Donate to BAILII