Cadman v R.

On 25^th February 2005, in the Birmingham Crown Court, before His Honour Judge Taylor and a Jury, this appellant was convicted of conspiracy to defraud (count 1) by a majority verdict of 11:1. On 15^th April, he was sentenced to 5 years’ imprisonment and disqualified under section 2 of the Company Directors Disqualification Act 1986 for a period of 10 years. On 16^th September 2005 a Confiscation Order in the sum of £230,000 was made against him pursuant to section 71 of the Criminal Justice Act 1988, with 12 months to pay and a consecutive term of 2 years’ imprisonment in default of payment.

There were 14 co-accused, ten of whom pleaded guilty to count 1. Of the remaining four co-accused, Brendan Pearson, Albert Chapman and Timothy Woodfield were each convicted of count 1. Pearson was sentenced to 6 years’ imprisonment, disqualified as a company director for 12 years and made the subject of a confiscation order for £283,000 (later varied to £207,546 on appeal). Chapman and Woodfield were sentenced respectively to 4 months’ and 3 months’ imprisonment. The appellant’s brother, Michael Cadman, was acquitted of count 1 by the verdict of the jury.

The appellant appealed against conviction by leave of the Full Court, leave having been granted on a single new ground to the effect that the appellant had been prejudiced as the result of the jury being provided, after they had retired to consider their verdict, with extraneous material in the form of a number of sample cheques that had not been produced in evidence during the course of the trial.

On 2^nd May 2008, we allowed the appeal, quashed the conviction and ordered a new trial. In this judgment we give our reasons for having done so.

The relevant facts can be briefly stated. In 2000 the Department for Education and Science (“the DfES”) was operating the Government’s Individual Learning Account Programme which provided an incentive in the form of financial assistance (hereafter “the financial incentive”) to members of the public in order to retrain or further their education. The idea was to encourage lifelong learning and to enable members of the public to retrain at any stage of their lives. The financial incentive consisted of a contribution by the DfES towards the cost of the prospective student’s chosen course of learning or training. For most courses the contribution was 20% of the cost (up to a maximum of £100), but for computer training courses the contribution was up to 80% (up to a maximum of £200). The practical effect of the financial incentive was that the student was able to embark on his/her chosen training course at a significantly discounted cost.

The Government’s financial incentive was provided through the means of an Individual Learning Account (an “ILA”). To obtain an ILA the prospective student had to complete an application form, which could be obtained from the ILA centre in Darlington (where the scheme was run on behalf of the DfES by Capita Business Services), from the internet or from the relevant learning provider and send the completed form to Darlington for processing. The applicant would then be registered on the ILA database and be sent an ILA card with a unique ILA account number.

Learning providers also had to register under the scheme. However, anyone could apply to be registered as a learning provider for the purposes of the scheme. Remarkably, no previous experience was required nor was it necessary for any course programme or material to be approved. The prospective learning provider merely had to complete the appropriate application form, sign a declaration and return it to the ILA centre, together with a Health and Safety Statement and a Public Liability Insurance Certificate. The learning provider would then receive a package including its unique registration number and a letter containing its unique password.

Once registered with the scheme, the learning provider was able to charge every enrolled student/ILA holder the discounted fee for the training course and also claim the appropriate financial incentive/contribution (i.e. the DfES contribution) from that student’s ILA account via the ILA centre. The financial incentive was then deducted from the student’s ILA and paid directly to the learning provider. The total amount thus due in respect of all relevant students was paid weekly or fortnightly by transfer to the learning provider’s nominated bank.

It was the Prosecution’s case that this particular fraud involved the making of bogus claims in fictitious names supported by forged application forms filled in by friends and associates of the appellant (“the co-conspirators”). The appellant and Pearson were said to be at the heart of the conspiracy because they managed or controlled a series of companies that were involved in the fraud, in particular as far as the appellant was concerned two companies named Sentinel Securities Ltd (“Sentinel”) and Intercept Training Ltd (“Intercept”) both of which had registered as learning providers and on whose behalf at least 5537 bogus ILA claims were made, representing 83.6% of the claims made by Sentinel and 92.9% of the claims made by Intercept respectively.

The fraud was essentially very simple. The forged applications purported to have been filled in by genuine students who intended to be trained by Sentinel and/or Intercept. In reality, however, little or no training was actually provided by or available from either company. The forged nature of the application forms was proved (inter alia) by forensic handwriting analysis carried out on the handwriting of the majority of the co-conspirators. However, there was no such analysis of the appellant’s handwriting, because it was not alleged that he had personally filled in any of the bogus forms.

Once the bogus applicants had been registered with the scheme, Sentinel or Intercept claimed the full DfES financial incentive/contribution in respect of each such bogus student (“the fraudulently obtained funds”). The fraudulently obtained funds that were thus received into the bank accounts of the two companies were swiftly removed, mainly by cheques made payable to cash and by other cheque payments made to co-conspirators (“the relevant cheques”). The appellant admitted that he had signed the vast majority of the relevant cheques, although he denied having filled in the body of the cheques (i.e. the payee and the amount), apart from one occasion where he had filled in part of the body of the cheque (as to which, see below).

Amongst the documentation produced in evidence and provided to the Jury by the prosecution was Schedule K. Schedule K provided details of all transactions on the Sentinel/Intercept bank accounts with NatWest during the period of the fraud, including all the withdrawals of the fraudulently obtained funds. Schedule K was formally admitted to be correct by the appellant (Formal Admission 26). It appears that the Intercept account, in particular, had really no other function apart from the receipt of the fraudulently obtained funds and their subsequent removal. In the event, the DfES paid a total of £568,685 to Sentinel and Intercept during the period covered by the fraud. Claims for a further £184,000 were withheld when the DfES came to suspect the existence of the fraud in question.

Although it was common ground that the vast majority of the relevant cheques had been signed by the appellant (his “signature” taking the form of an illegible squiggle), there was no expert handwriting evidence that compared his handwriting with the handwritten details in the body of each cheque. As will become apparent in due course, this is a matter of considerable significance in this appeal.

The prosecution claimed that the levels of withdrawals from the NatWest accounts during the period of the fraud were completely inconsistent with the levels of cash withdrawn from the accounts before the fraud started. Furthermore, it was said that the payments to co-conspirators by means of cheques signed by the appellant coincided with the periods when the co-conspirators were provably forging the ILA application forms. Although it was not suggested to the appellant in cross-examination that (contrary to what he claimed to be the case) he had filled in the body of any of the relevant cheques that he had admittedly signed, it was the prosecution’s case that the pattern of the withdrawals and the amounts of the cheques were such that the payments could not have been made without his knowledge and agreement.

The appellant admitted the existence of the conspiracy to defraud. Stated broadly, it was the appellant’s case that he had known nothing of the fraud at the time and that he had played no part in it. He gave evidence that he was a full-time fire officer and that Sentinel was a busy company promoting security staff that had up to 200 employees or sub-contractors on its books. The appellant stated that he was the operations director and that he was not much involved in the office on the financial side of the business. Although he admitted having signed the vast majority of the relevant cheques, the appellant claimed to have done so in blank for use for legitimate (i.e. non-fraudulent) purposes and that he had left the details of the payee and the amount to be completed by the office staff (apart from one immaterial occasion where he had filled in part of the details: see below).

Accordingly, the appellant’s evidence that he had not filled in the body of any of the relevant cheques that he had admittedly signed (and by which, of course, the withdrawal and distribution of the fraudulently obtained funds had been effected) was crucial because it went to the very heart of his defence that, at the time, he knew nothing about the fraud and had not been a party to the conspiracy in question.

As we have already stated, the appellant’s crucial evidence, to the effect that he had not filled in the body of any of the relevant cheques that he had admittedly signed, was not challenged in cross-examination by Mr Wheeler on behalf of the Prosecution. However, it appears that, in the course his final speech to the Jury, when dealing with the case against Michael Cadman (the appellant’s brother), Mr Wheeler did inadvertently suggest that the appellant both wrote and signed most of the relevant cheques. According to the transcript, what Mr Wheeler said was this:

“That brings me to cash … between May 2000 and December 2001 … there are some cash withdrawals. … There is about £14,000 worth. … But they are in much smaller amounts, but suddenly after the ILA scheme started this huge amount of money comes in and all, virtually all, goes out in cash. Again you may think all the hallmarks of a fraud, because here the pattern is set in the previous eighteen months; payment by cheque in small amounts and you have to ask yourselves whether it is more than coincidence that all this cash suddenly goes out during the ILA scheme. It may be Paul Cadman writing and signing most of those cheques, but you may think that cannot have been able to happen without the knowledge of the finance director, Michael …” (our emphasis)

Although Schedule K listed every cheque drawn on the account during the relevant period, the investigating police had obtained copy cheques from the bank only where the amount involved was £500 or more. Accordingly, it was only in the case of some of those cheques that Schedule K also recorded the details of signatory and payee.

Also produced in evidence and included in the documentation provided to the Jury was a small bundle, referred to as Appendix G, which consisted of copies of 7 of the relevant cheques, each of them signed by the appellant. Although the appellant admitted having signed each of the cheques in Appendix G, he denied having filled in the body of any of them, apart from some of the details of a cheque that had been made payable to T. Woodfield (G25), where the appellant admitted that he had written in the amount of the cheque in both words and figures, but denied having written in the name of the payee.

Apart from the copy cheques in Appendix G, the Prosecution did not produce in evidence any of the relevant cheques, but relied on the various details provided in Schedule K. Furthermore, although reference was made during the course of the appellant’s evidence in chief that he had obtained copies of about another 850 of the cheques drawn on the NatWest bank account during the relevant period (and which were apparently contained in 4 lever arch files) these were never actually produced in evidence by the defence.

The trial began on 4^th January 2005. The jury were sent out to consider their verdicts shortly before 1pm on Wednesday 23^rd February 2005. On 24^th February, the jury acquitted Michael Cadman (the appellant’s brother) and returned a verdict of guilty in respect of Brendan Pearson. The jury then continued their deliberations in respect of Paul Cadman (the appellant) and the remaining two co-accused, Albert Chapman and Timothy Woodfield. However, shortly before resuming their deliberations on the morning of 25^th February, the jury arranged for a handwritten note to be taken to the judge requesting that they be provided with certain exhibits and also with samples of cheques written by the appellant. The precise wording of the note was as follows:

“Bundles of Mutiple (sic) names/addresses at front of court

Brown envelope of letters that came to Kenilworth Court

Sample of cheques that Paul Cadman wrote

Albert Chapman’s paying in book for Flat A/c”

In due course, the jury were brought into court. Having regard to the issues in this appeal, it is necessary to quote at some length from the transcript of what then took place, both in the presence of the jury and out of their presence, as follows:

It appears that about 24 copy cheques were selected from the 4 lever arch files that had been prepared by the Defence. It is common ground that this bundle of cheques was extraneous material that did not form any part of the evidence that had been produced to the jury. Unfortunately, the copy cheques that were chosen and given to the jury have subsequently gone missing and are no longer available. It is therefore not possible to give a precise description of the sample copy cheques that were actually provided to the jury in response to their request. However, in his unchallenged evidence contained in a witness statement dated 27^th September 2007, Police Sergeant Stuart Knight of the West Midlands Police described the way in which the copy cheques were selected and their general nature in the following terms:

“During the course of the trial Cadman’s defence team prepared a 36-page schedule of all the cheques drawn from his company account. I understand that they also obtained a large number of the cheques that the police had excluded from our search parameters. I was a party to a number of conversations between defence and prosecution counsel concerning the feasibility of the jury’s request and then the makeup of the folder of cheques that would be handed to them. I recall that defence counsel were particularly keen on the idea of allowing the jury to see further cheques and it was generally accepted that it suited the defence to allow this process to take place. I recall that Paul Cadman was also a party to some of those conversations and the subsequent selection process of the cheques to be used. Mr Barnes, Mr Cadman and his legal rep Paul Lennon selected about 10 or so cheques, which I think came from the defence bundle of cheques and Mr Wheeler and myself selected a further 10 or so cheques, which I think came from the same source. There then followed some debate over the cheques with Mr Cadman not being happy about some of the prosecution’s selections. I don’t recall if any of the cheques were substituted after that debate, but I recall that all parties were eventually comfortable with the selection. I recall that the cheques were in a variety of handwriting styles, for a variety of amounts and were made out to a variety of people. The cheques selected were all put in a ring binder folder and were taken to the jury. At the conclusion of the case I recovered the prosecution exhibits and papers from the court. Neither I, nor any other police officer took possession of the extra file of cheques. I assumed that they had been retained by the court with the jury bundles or had been returned to the defence.”

At 1235 on 25^th February, a little under an hour and a half after they had been provided with the sample of copy cheques, the jury returned verdicts of guilty in the case of each of the remaining defendants, i.e. the appellant, Chapman and Woodfield.

The principles that apply to circumstances such as those that arise in this appeal, in which extraneous material has been introduced into the jury room after their retirement, have recently been considered and restated by this Court in R ~v~ Karakaya [2005] EWCA Crim 346. In the course of a comprehensive review of the relevant authorities, Judge LJ, Deputy Chief Justice (as he then was), said this (inter alia):

“14.

… In Owen (1952) 36 CAR 16 … the … conviction was quashed on the basis that:

“…Once the summing up is concluded, no further evidence ought to be given. The jury can be instructed in reply to any question they may put on any matter on which evidence has been given, but no further evidence should be allowed.” (Per Lord Goddard CJ)

15.

Lord Goddard returned to the same point in Wilson (1957) 41 CAR 226. He reasserted:

“The principle that, once the summing up is concluded, no further evidence ought to be given, must be maintained in every case, and, if further evidence is allowed at that stage, … the conviction will be quashed.”

16.

In Sanderson (1953) 37 CAR 32, the Court of Criminal Appeal presided over by Lord Goddard CJ held that it was permissible for the evidence of a witness for the defence to be taken after the summing up had been completed, but before the jury had retired. The judgment emphasised that the witness in question was a defence witness. Well-established principles governed the very limited circumstances in which the prosecution may call further evidence after closing its case. Nevertheless, Sanderson represents something of a relaxation of the absolute principle laid down in Owen.

17.

After Sanderson, in Gearing (1966) 50 CAR 18, Lord Parker CJ expressed the principle in terms which reiterated the analysis in Owen and Wilson, but made allowance for the decision in Sanderson. He said:

“It has always been a very strict rule of this court that no evidence whatever must be introduced after the jury have retired.”

18.

In Davis (1976) 62 CAR 194, the absolute nature of the observation that the conviction would inevitably be quashed in such circumstances, was questioned, not on the basis that the principle was in doubt, but whether every breach of it would result in the quashing of the conviction. The breach would be an irregularity, which depending on the circumstances might or might not result in the application of the proviso to s2(1) of the Criminal Appeal Act 1968. The question now is whether the conviction could be regarded as safe. We can, for example, envisage circumstances in which the material would be put before the jury at the request of the defendant on the basis that it advanced or purported to advance his case. If so, a later complaint would be unlikely to receive much sympathy.”

On behalf of the Crown, Mr Wheeler understandably stressed that he had twice tried to raise with the judge and those representing the appellant his concerns with regard to whether the sample cheques should be provided to the jury at all and the limited extent to which the jury could properly make use of such cheques if they were provided (see the transcript quoted above). We accept that this was so. It is clear that Mr Wheeler was rightly concerned about whether the cheques should be provided at all, since they had not been produced in evidence, and he was also concerned about how far it would be permissible for the jury to start comparing the handwriting of the sample cheques with the cheques in their jury bundles (i.e. Appendix G).

However, as Mr Wheeler pointed out, his concerns were effectively brushed aside because both the judge and the appellant’s legal team clearly appeared to believe that the process could only benefit the appellant and neither identified any possible detriment to the appellant if the sample cheques were provided in accordance with the jury’s request. Mr Wheeler therefore submitted that, applying the approach indicated in paragraph 18 of the judgment in Karakaya (supra), although the introduction of this extraneous material after the jury’s retirement amounted to an irregularity, it was not one that rendered the conviction unsafe since it had only occurred because the defence team believed it would advance the appellant’s case and had therefore encouraged and supported the proposed provision of sample cheques to the jury, thus effectively causing the irregularity to take place.

On behalf of the appellant, Mr Hubbard QC submitted that the wording of the jury’s request was very significant. He stressed that the jury had asked for a “Sample of cheques that Paul Cadman wrote” – they did not ask for a sample of cheques that he had merely signed (our emphasis). It was Mr Hubbard’s submission that, although at the time the judge and leading counsel for the appellant had both appeared to consider that it could only be to the appellant’s advantage to comply with the jury’s request, this was because they had both failed to understand the purpose for which the cheques had been requested. It was therefore Mr Hubbard’s submission that the appellant should not be prejudiced as the result of any such an error on their part. We accept that submission.

Mr Hubbard submitted (correctly in our view) that any doubt as to the jury’s purpose in requesting the sample of cheques was resolved by the foreman’s answer in response to the judge, when he said (see the transcript quoted above): “We wanted to compare the handwriting on the cheques that the defendant produced with the samples in our bundles.” We also accept Mr Hubbard submission that it is clear that the jury wanted to “compare” the handwriting on the cheques just supplied to them with the handwriting on the sample of cheques in their jury bundles (i.e. the 7 cheques in Appendix G) and that it is very likely that they did so. The appellant had admitted having signed all the cheques in question and his signature was, in every case, an illegible squiggle. We agree with Mr Hubbard that the “handwriting” to which the foreman referred was clearly a reference to the handwriting in the body of each of the cheques (i.e. the handwritten details of the payee and the amount).

We also agree with Mr Hubbard’s submission that when the jury were then provided with the sample of about 24 cheques, as described by PS. Knight, they were entitled to assume that these were cheques that had been written by Paul Cadman (i.e. that he had both written out the body of each cheque, as well as having signed it). Again, we agree with that submission.

Mr Hubbard then went on to submit that once the jury had made the comparison between the handwriting on the cheques, they could have concluded (and probably did conclude):

Mr Hubbard submitted that once the jury concluded that the appellant had written the body of the cheques in Appendix G, it was inevitable that they would have regarded such a conclusion as very cogent evidence of the appellant’s participation in the conspiracy in question. It was evidence that went to the very heart of the appellant’s defence. Mr Hubbard therefore submitted that this explained why the jury convicted the appellant so quickly after having been supplied with the sample of cheques.

Mr Hubbard suggested that the jury may have been prompted to carry out the foregoing comparison by the inadvertent suggestion, made by Mr Wheeler in the course of his final speech, that the appellant had both written and signed most of the relevant cheques (see paragraph 17 above). Whether that was indeed the case is a matter of speculation, but it is plainly a possibility. For his part, Mr Wheeler stressed that any such suggestion would have been wholly unintentional, because it had never been any part of the prosecution’s case that the appellant did write out the body of the cheques in question and there was no evidence that he had done so (e.g. in the form of expert handwriting evidence). It was for those reasons that Mr Wheeler did not challenge the appellant’s evidence that he had not filled in the body of the relevant cheques that he admitted having signed (see paragraphs 14 and 17 above).

Mr Wheeler therefore accepted that any comparison of the handwriting in order to decide whether the appellant had written out the body of the cheques in Appendix G, contrary to what he had claimed in evidence, would clearly not have been a permissible exercise by the jury. He also very properly accepted that if the jury could have used the further sample of cheques to reach the conclusion that the appellant had lied in asserting that he did not fill out the body any of the cheques in Appendix G (except to the extent he admitted having done so in the case of the cheque made out to Mr Woodfield), then the appeal would have to be allowed because the verdict could not properly be regarded as safe.

In our view, Mr Wheeler was plainly correct to make those concessions. For the jury to use the extraneous material provided after their retirement (i.e. the sample of further cheques) in order to compare handwriting so as to decide whether the appellant had written out the body of the cheques in Appendix G, necessarily meant using that extraneous material as evidence in an exercise that would enable the jury to reach their own conclusion in relation to the appellant’s unchallenged and crucial evidence to the contrary effect. In our judgment, it was wholly impermissible for the jury to make use of the extraneous material for such an evidential exercise. However, as we have already stated, it is very likely that this is precisely what the jury did.

We also agree with Mr Hubbard’s submission (see paragraph 31 above) that, as a result of their impermissible evidential exercise, the jury could have come to the conclusion that the appellant had not merely signed the cheques in Appendix G, but that he had written out the entire body of the cheques and had lied about having done so. As we have already explained, the appellant’s evidence that (apart from one minor exception) he had not written out the body of any of the relevant cheques, was evidence that went to the very heart of his defence. In our judgment, there can be no doubt that any conclusion by the jury that the appellant had lied about this important matter is one that might reasonably have affected their decision to convict the appellant. Since we are satisfied that the jury could have come to such a conclusion as the result of the irregularity that occurred in this case, the conviction must therefore be considered unsafe: see R ~v~ Pendleton [2002] 1 WLR 72. Accordingly, for those reasons, this appeal is allowed and the conviction is quashed.