Case No: 201701564 C2, 201701566 C2, 201701567 C2, 201701569 C2, 201701571 C2 and 201701572 C2
ON APPEAL FROM SOUTHWARK CROWN COURT
(HER HONOUR JUDGE KORNER CMG, QC)
T.21067360-66
Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
LORD JUSTICE DAVIS
MR JUSTICE PHILLIPS
and
HIS HONOUR JUDGE DICKINSON QC (SITTING AS A JUDGE OF THE COURT OF APPEAL CRIMINAL DIVISION)
Between:
D LIMITED | Applicant |
- and - | |
A AND OTHERS | Respondents |
David Perry QC and Andrew Bird and Rebecca Chalkley (instructed by Edmonds Marshall McMahon) for the Applicants
Duncan Penny QC and Simon Ray (instructed by Bindmans LLP) for A
Philip Hackett QC (instructed by Huttons Solicitors) for B
William Boyce QC and Rachna Gokani (instructed by Kingsley Napley LLP) for C
Dean Armstrong QC and Sean Hammond (instructed by Kelcey and Hall) for D
Christine Agnew QC and Valerie Charbit (instructed by Russell Cooke Solicitors) for E
Timothy Evans (instructed by Martyn Prowel Solicitors) for F
Hearing dates: 12 & 13 July 2017
Judgment Approved
Lord Justice Davis:
Introduction
This is the judgment of the court. Reporting restrictions pursuant to s. 71 of the Criminal Justice Act 2003 apply, subject to any further order of the court.*
In June 2016 the applicant, a limited company, commenced a private prosecution – essentially founded on allegations of fraud – against a number of individuals. The matter was in due course sent to the Southwark Crown Court. Thereafter, the individual defendants respectively issued applications seeking to have the proceedings stayed against them on the ground of abuse.
The matter became particularly acrimonious, complex and protracted. It was ultimately heard by HHJ Korner QC over five days in March 2017 (no oral evidence being presented). Her ruling, which acceded to the defendants’ application for a stay, was given on 31st March 2017.
The applicant now seeks to appeal from that terminatory ruling. The relevant undertakings have been given and it is accepted that this court has jurisdiction to entertain the prospective appeal. The matter was referred by the Registrar to this court on the basis of there being a rolled up hearing; and the hearing before us itself lasted 2 days (leaving aside pre-reading). Having considered the matter, we have decided to grant leave to appeal.
The court at the outset would acknowledge the hard work and care which has evidently been deployed by all counsel, and their respective legal teams, in the preparation and presentation of the respective cases, and the skilful and able arguments advanced before us. No disrespect is intended if individual aspects of some of the arguments are not specifically mentioned in this judgment. Likewise we will by no means specifically be referring to all the particular documents (out of the vast quantity of folders provided to this court) which were alluded to in the arguments. We have, however, sought to bear all of the points raised in mind.
Background Facts
For present purposes, only a relatively short summary of the background facts is needed.
The applicant company, and its trading subsidiary, has at all relevant times specialised in the legal expenses insurance business. Its relevant trading operations were conducted from Bristol. Its ultimate holding company is based in Germany. For present purposes no distinction need be drawn between the English companies.
The first defendant and second defendant were senior employees with the applicant: the first defendant becoming chief executive of the relevant trading subsidiary company. The second defendant is a qualified solicitor and was claims manager and assistant general manager until he left at the end of 2004.
9. Put shortly, the applicant asserts that the first two defendants engaged in a sustained fraud on the applicant, starting in 2000 and successfully concealed until 2014. They did so by causing to be established a company called Medreport Limited for the purpose of providing forensic medical reports. Matters were so structured that the beneficial interests which those defendants had in Medreport were carefully and deliberately concealed, through the use of nominees and trusts. Over the years the applicant then was procured to place an immense amount of business in the way of Medreport, to the very considerable profit of Medreport and to its management and owners. Further, loans or funding arrangements were sometimes provided by the applicant to Medreport, to the ultimate benefit of it and its (covert) owners.
10. The first two defendants further caused to be established in 2003 a law firm called CW Law: which was then retained, as one of the applicant's panel firms, to act in many litigation cases. Here too very large sums were paid by the applicant to CW Law. Here too the first and second defendants are alleged to have had covert beneficial interests in CW Law and to have profited from the receipts.
11. The third defendant was the wife of the first defendant (they divorced in 2005). She was involved in the management of Medreport and for a time was remunerated at the rate of £240,000 per annum.
12. The fourth defendant was a close friend of the first defendant. He specialised in security related matters. He was, on the prosecution case, used as a front in being nominal owner of the shares in Medreport until he was bought out in 2003 by another company: a sum of £1.5 million being paid to the fourth defendant for his shares. His wife had in the meantime received remuneration of around £240,000 per annum, ostensibly for work as an administrator at Medreport.
13. The fifth defendant became the wife of the first defendant in 2005. She is a qualified solicitor and had until 2004 worked for the applicant. She at various times received large sums from Mr Culpan, the ostensible principal of CW Law.
14. The sixth defendant is the second defendant's wife. She was used, as it is alleged, in effect as a nominee for her husband's beneficial interest in Medreport. Large sums were paid to her by Medreport, ostensibly as an employee but in reality, as it is alleged, to reflect the second defendant's beneficial interest.
15. So far as the 2003 purchase of the shares of the fourth defendant in Medreport was concerned the purchasing company was fronted by a man called Walker. It seems that the purchase price of £1.5 million was funded by a loan from Medreport itself (which, if so, may have implications under the Companies Act 2006). The trust arrangements relating to the first two defendants continued, however, until Mr Walker became increasingly uneasy in 2008. The shares of the first two defendants were then variously sold (to Mr Walker or to the third defendant and an individual called Munro). In the following year Mr Walker sold his shares in Medreport to the third defendant and Mr Munro.
16. The business connection between the applicant and Medreport nevertheless was maintained until the Board of the applicant directed that it be terminated in 2012. A dispute ensued. Medreport and its directors (the third defendant and Munro) were represented by Peters and Peters, the solicitors. The matter was ultimately the subject of a confidential settlement agreement dated 26 July 2013.
17. So far as CW Law was concerned, that, as we have said, was set up in 2003. Ostensibly the sole proprietor was a Mr Culpan, a solicitor. (He died in 2008.) As alleged, the true beneficial ownership was to be one third Mr Culpan; one third the second defendant; and one third the first and third defendants (who were then still married) jointly. At the time, Regulations precluded non-solicitors from being proprietors of legal firms.
18. Thereafter CW Law was to receive at least 3,000 cases a year referred by the applicant, with an estimated annual turnover of £1 million therefrom. In addition, there was advanced to CW Law some £500,000 by the applicant as a start-up loan. Thereafter on one occasion Mr Culpan paid £150,000 to the fifth defendant (by now in a relationship with, and subsequently married to, the first defendant). Subsequently, in 2007, CW Law was taken over by William Graham Law: that purchase being in fact financed to the tune of £3 million by the applicant. These proceeds were received by Mr Culpan. Banking documents since obtained show that at least £950,000 (and perhaps more) of that sum was transferred into an account of the second defendant and fifth defendant, and some of those receipts in turn remitted to the first defendant.
19. Count 1 on the indictment charged conspiracy to defraud with regard to Medreport. Count 2 on the indictment charged conspiracy to defraud with regard to CW Law. Counts 3 and 4 related to the sixth defendant’s receipts (purportedly as salary) from Medreport, this being charged as money-laundering. Count 5 related to the second and fifth defendants in relation to receipt of part of the profits and proceeds of sale of CW Law, being also charged as money-laundering. Count 6 was directed at the first defendant. It was a count of furnishing false information, by reference to his failure to disclose for the purposes of the companies' annual accounts the connection with Medreport and CW Law. Count 7 was a count of fraud also directed at the first defendant, relating to his involvement in procuring the various payments in concealment of his (and other parties') beneficial interests.
20. In her summary of the case in her ruling, the judge stated that her summary "does not begin to encompass the ramifications or the detail of the events which took place during the 14 years encompassed by Count 1 of the indictment (Medreport) and 5 years encompassed by Count 2 (CW Law)". We would say the same of the above summary.
Investigations
21. It appears that at the time there were constant rumours about the first two defendants' involvement in Medreport. There also seems to have been an element of whistle-blowing. At all events, the Board of the applicant in 2004 instructed a Bristol firm of accountants called Solomon Hare (now part of Smith & Williamson) to investigate and review the applicant’s contractual arrangements, including those with Medreport. Solomon Hare reported on 19 July 2004. Solomon Hare found, among other things, that the rumours about the recent acquisition by Mr Walker of Medreport were "unfounded". It found "no evidence of any specific wrongdoing by any of the senior management". It recorded that managers of the applicant's business partners were saying that no payments had been made to the applicant or its personnel other than as recorded in the contracts. Solomon Hare also found nothing untoward in the relationship with CW Law.
22. So far as the second defendant was concerned, however, Solomon Hare recorded that it had found on the files an unsigned letter purportedly from him to Mr Culpan referring to an agreement for CW Law to pay part of its profits to a legal firm called DK Law (of which the second defendant was owner). Mr Culpan and Mr Williams denied making any such payment. When asked, the second defendant said that the letter was unknown to him and was a planted forgery. Solomon Hare, whilst expressing concerns, said "In the absence of any evidence to the contrary, there does not appear to have been any wrong-doing."
23. It is the position of the applicant that Solomon Hare failed to unearth the frauds and that they were duped by the first two defendants. In addition, however, the parent company in Germany made its own investigations in view of the whistle-blowing allegations. In its internal audit report of 22 June 2005, it found no evidence of the first two defendants and fifth defendant setting up a rival business. Among other things, it recorded the first defendant having stated that he "had gone out of his way to ensure that he had never been connected with any business that has dealings with DAS." In his typed statement to the auditors dated 26 April 2005 the first defendant had indeed so stated and further had said, among other things: “I have never had any interest in any business that conflicts with my position". Moreover, in a diary note of Mr Allen the then company secretary, of a conversation he says that he had with the first defendant on 26 March 2004 about the rumours, Mr Allen records the first defendant emphatically denying any dealings with any trust that might own Medreport.
24. At all events, the concerns about the activities of the first two defendants having arisen the ultimate litigation with Medreport caused there to be further investigations. The first defendant was suspended as Chief Executive Officer on 15 October 2014. The accountants Ernst and Young were asked to investigate. They assembled a vast data-base of documentation. Their initial conclusions, contained in a very lengthy draft report dated 20 February 2015, indicated that the applicant may have lost up to £6.9 million in its transactions with Medreport. It noted evidence now obtained to the effect that the first two defendants had an interest, via a trust, in Medreport and an interest, via a trust, in CW Law.
25. The applicant then took further steps. It endeavoured to obtain any relevant trust documentation relating, in particular, to the ownership of Medreport. After an approach was made by its solicitors Edmonds, Marshall and McMahon (EMM) to Peters & Peters and then to the third defendant direct, without result, it applied for a Norwich Pharmacal Order against Medreport and the third defendant.
26. Such an Order was made against Medreport and the third defendant by HHJ Moloney QC (sitting as a Judge of the High Court) on 13 July 2015, following an inter partes hearing. The focus of the witness statement and skeleton argument in support of the application was on the asserted wrong doing of the first and second defendants and on prospective proceedings (whether by civil proceedings or prosecution) against them. The judge described the evidence against them as "fairly formidable." The documents subsequently disclosed in consequence of the Order then showed the nature of the trust arrangements, which had existed. It appears that some of the legal documentation may have had been drafted by the fourth defendant's sister - in- law, a non - practising solicitor.
27. The applicant was very aggrieved at what was being revealed. It considered, to the point of total conviction, that it had been the subject of a sustained fraud.
28. The applicant had in fact previously referred the whole matter to the Avon and Somerset Police, who considered it. They declined to investigate further for a number of stated reasons, including an insufficiency of evidence at that time. That decision was given on 12 March 2015. The applicant then referred the case to the Serious Fraud Office. On 27 April 2015 the Serious Fraud Office declined, following a review, to investigate further, on the basis of "insufficient evidence of criminality which would fall within the remit of the Serious Fraud Office."
29. The applicant resolved on issuing civil proceedings. These were commenced on 18 September 2015 against the first two defendants, Medreport and an associated company (these currently stand stayed).
30. The applicant also, however, determined on a private prosecution. Its motives for doing so have been fiercely challenged by the defendants. We will come on to that issue. At all events it retained EMM, a firm specialising in private prosecutions, as its solicitors for this purpose. The partner having the overall responsibility was Kate McMahon (KM).
31. Following the outcome of the Norwich Pharmacal application, and various other steps taken and further investigations made, summonses were issued, on informations laid by the applicant, by the Westminster Magistrates Court on 8 June 2016.
32. In due course, after the matter was sent to the Crown Court, the applications to stay on the ground of abuse were made. The basis for these applications thereafter seems significantly to have matured, as it were, in the light of further and ongoing disclosure being given by the applicant. The total amount of documentary disclosure thus far made - both in terms of the counts on the indictment and in terms of the abuse application itself - has been enormous in quantity. Nevertheless, the defendants were and are fiercely critical of the disclosure made.
33. No defence statements have as yet been served. (In fact there are extant, as we were told, dismissal applications brought by three of the defendants.) Thus the stay application has taken place in advance of the true issues being identified. It is to be gathered, however, that at least part of the defence case will be that the applicant sufficiently knew all along of the actual position. But how (for example) the first defendant would respond to the express statements he apparently made to the internal auditors of the German parent company in 2005 and to the company secretary in 2004 is not known. How (for example) the first two defendants would explain what was apparently stated to Solomon Hare is not known. How (for example) the defendants would explain the seemingly covert nature of the trust arrangements and payments made with regard to Medreport and CW Law is not known.
Legal principles applicable
34. The judge was presented, as were we, with an extensive number of authorities on the principles applicable to staying an indictment on the grounds of abuse. As is well - established, there are two bases, or limbs, for such an application. The first, put shortly, is that in view of what has happened the defendant cannot have a fair trial. We will call that "limb one". The second, again put shortly, is that it would not be fair for the defendant to be tried (or, putting it in other words, that it would offend the court's sense of justice to permit the prosecution to proceed). We will call that "limb two". On either approach, it is established that it will be an exceptional course for a stay to be granted. As it has been put, a stay of criminal proceedings is a remedy of last resort.
35. It is important to bear in mind that the two limbs to the exercise of this jurisdiction to stay are legally distinct and have to be considered separately: considerations that may be relevant to the first limb may not be relevant to the second limb and vice versa. Moreover, the second limb requires a balance of the competing interests, whereas the first limb does not. The point is of particular importance in the present case: because Mr Perry QC (who did not appear below) for the applicant on this appeal submits that the judge in effect conflated the two differing approaches.
36. Thus in R v R [2015] EWCA Crim 1941, a stay was sought, in the context of a massively complex fraud case, on the footing of inadequate disclosure where the proceedings had been extant for five years. A constitution of this court held that no stay should be ordered, on either limb. It made trenchant observations about resolution of such problems lying in the Crown Court’s case management powers and its ability to make specific disclosure and other orders. It pointed out that, in the context of initial disclosure, a “search for perfection in this area is likely to be illusory.” However, of particular note for present purposes is what was said by Sir Brian Leveson P., in giving the judgment of the court, in paragraph 64 of the judgment:
“This conclusion was on the basis that the defendants would not get a fair trial due to the delay which had resulted from the prosecution failure to provide CPIA compliant primary disclosure. On the face of it, therefore, the decision fell squarely within first limb abuse of process (impossible now to have a fair trial). However, [the judge] also referred to public interest considerations and at times appeared to state his concern about the integrity of criminal justice system. As outlined above, he referred to the stay as a "sanction" and repeatedly referred to the prosecutorial failings. Such considerations are not relevant to a consideration of first limb abuse which should only be concerned with whether it is possible for the defendant to have a fair trial. They only come to the fore during the balancing exercise required in a consideration of where there is second limb abuse; namely whether it is fair to try the defendant.”
Mr Perry submits that the judge here wrongly brought into account, in granting a stay on limb one, asserted prosecutorial motives and failings: when the focus should have been, under limb one, solely on whether it was possible for the defendants to have a fair trial in the light of what had happened.
37. As to limb two, the reluctance of the court to intervene on this ground is illustrated by the decisions in R v Maxwell [2011] 2 Cr. App. R.31 and Warren v Attorney General of Jersey [2011] 2 Cr. App. R. 29. In each case there had been serious and deliberate concealed prosecutorial misconduct, involving dishonesty or illegality; yet in each case respective decisions to grant a retrial and refuse a stay were upheld. Every case of this kind, of course, ultimately is fact specific. But the approach there indicated is informative.
Private prosecutions
38. It is also necessary to say something here about private prosecutions.
39. One should not usually attach over much weight to remarks of a judge made in the course of oral argument. It is, however, perhaps possible to infer from some of the judge’s initial remarks in argument that she was concerned that the public interest was not being furthered by the pursuit of what were essentially highly complex commercial proceedings, in relation to matters dating back a number of years, and when civil proceedings were available. It is easy to understand such a concern: many Crown Court judges, we suspect, might have had them.
40. Nevertheless, a general right to bring a private prosecution is conferred by statute. It is not readily to be undermined. In fact in recent years there seems to have been something of a growth in private prosecutions (reflected in the fact that there are now counsel and solicitors’ firms who specialise in such cases). One particular area of growth, indeed, may lie in complex fraud cases: where, in reality, the public authorities sometimes may lack the resources and/or inclination to commence a public prosecution: the present being, as the applicant would say, precisely such a case.
41. Nevertheless, it is rightly conceded on behalf of the defendants that the legal principles relating to stay on the ground of abuse apply in precisely the same way to private prosecutions as they do to public prosecutions. That must be correct. However, what the defendants emphasise in this case is the context: in particular that, there being no public prosecutor, the prosecutor is the applicant itself. The effective investigation officer has been KM; the disclosure officer is a senior solicitor employed by EMM; the individual having responsibility within the applicant for supervisory disclosure has been its Control Risks Manager, Mr Eccleson (he had joined the applicant in 2013 and is an “approved person” regulated under the Financial Services and Markets Act 2000). The defendants are fiercely critical of the conduct of EMM in general and of KM in particular. They are also fiercely critical of Mr Eccleson, who they say is vindictively pursuing this entire litigation. It is said that, overall, the principal individuals involved on behalf of the applicant have a mind-set entirely fixed against the defendants: that they have lost all sense of impartiality; and that they cannot be relied upon to behave with the fairness and objectivity required of a prosecutor.
42. In this context, we were referred to the decision of a constitution of this court in the case of Zinga[2014] 1 Cr. App. R 27. In particular, the Lord Chief Justice, giving the judgment of the court, said this at paragraph 61:
“In such cases the court can in part rely on the professional duties of the advocates and solicitors under their professional codes and on the duties owed to the Court. These are examined in detail by Sir Richard Buxton in “The Private Prosecutor as a Minister for Justice" [2009] Crim LR 427. Advocates and solicitors who have conduct of private prosecutions must observe the highest standards of integrity, of regard for the public interest and duty to act as a Minister for Justice (as described by Farquharson J) in preference to the interests of the client who has instructed them to bring the prosecution. As Judge David QC, a most eminent criminal judge, rightly stated in R v George Maxwell (Developments) Ltd [1980] 2 All ER 99, (1980) 71 Cr. App. R. 83, in respect of a private prosecution:
"Traditionally Crown counsel owes a duty to the public and to the Court to ensure that the proceeding is fair and in the overall public interest. The duty transcends the duty owed to the person or body that has instituted the proceedings and which prosecutes the indictment."
There is no place in such a prosecution for what some have claimed as "end to end" case management on behalf of the client who has initiated a private prosecution.”
The decision below
43. The judge helpfully provided her ruling in writing as well as delivering it orally. She delivered her ruling some five days after the conclusion of the lengthy hearing.
She summarised, with clarity, the background facts and the essential nature of the allegations. She set out the history of the investigations and of the proceedings. She referred to the legal principles. She noted the many authorities cited to her, selecting for particular relevance as “specific to the facts of this case” the decision in Dacre v City of Westminster Magistrates Court [2008] EWHC 1667, quoting at some length a passage from it. She also referred to Zinga and to Maxwell (cited above). She set out at considerable length the essence of the defence submissions and criticisms, including the treatment of witnesses and witness statements: the disclosure exercise undertaken; the motives for bringing the private prosecution; the conduct of EMM; and various other individual complaints. She then set out at considerable length the essence of the submissions of the prosecution.
Having done all this over 23 pages, the judge’s decision was contained in section 12 of her ruling, at pages 23 to 24.
It is, we think, necessary to set out the judge’s entire reasoning for her decision in full:
“12.1 In his closing submissions, Mr Brompton stated (I paraphrase) that this type of hearing concentrated on the "worst" of the case rather than the evidence which pointed to the involvement of the defendants in the criminal offences alleged. That may or may not be the case. There was, as the defence pointed out in their reply, nothing to prevent the prosecution from relying on such material. However at this stage I am not considering whether there is evidence of fraud but whether, regardless of the strength or otherwise of the evidence, it would be "impossible to give the accused a fair trial" or whether "it offends the court’s sense of justice and propriety to be asked to try the accused in the circumstances of the case". The first limb does not require me to balance the competing interests, the second does.
12.2 In my judgment the history of this case so far discloses that the prosecutor, [the applicant], has carried over its motives for bringing the prosecution into its investigation and preparation for the trial. It set out to look for evidence which implicated the defendants and wilfully ignored or tried to suppress evidence which did not assist in that goal. It has not, as required in the case of R v Zinga acted as a "Minster of Justice".
12.3 In this endeavour it has been assisted by EMM, who throughout have acted as though they were retained to promote the interests of their client [the applicant]. Through its lawyers, in particular I regret to say KM but not her alone, EMM has pursued a blinkered and ultimately pernicious course of conduct which has in my judgment irredeemably tainted the whole process, particularly with respect to witnesses. In my judgment what has happened cannot be remedied through the trial process.
12.4 Notwithstanding the fact that considerable disclosure has been made of material which has assisted the defence in its submission, the fact remains, that any further disclosure of this nature lies in the hands of [the applicant] and will in any event be filtered through EMM. The defence submission that they, and indeed the court, can have no confidence that material fulfilling the test for disclosure is again, in my judgment, well-founded.
12.5 Mr Boyce QC said in his closing submissions that the "prosecutor has fundamentally misjudged how to prosecute this case" and that is a sentiment with which I agree.
12.6 In Zinga the observations of Sir Richard Buxton that "Advocates and solicitors who have conduct of private prosecutions must observe the highest standards of integrity, of regard for the public interest and duty to act as a Minister for Justice (as described by Farquharson J) in preference to the interests of the client who has instructed them to bring the prosecution" were quoted with approval. I regret, again, to have to say that in this case I do not feel that the "safeguard" that counsel will act as Ministers of Justice is present. Leading and junior counsel were instructed very early on. It is to be assumed that they were consulted over at least some of the decisions made in relation to disclosure and LPP. The fact that they either did not advise the removal of Eccleson from his position as disclosure officer, or if they did their advice was ignored, does not engender confidence that they will be effective in future. This lack of confidence is re-inforced by the positions adopted in their written submissions, which were only abandoned during the course of the legal submissions.
12.7 Finally although not the determining factors for my decision I cannot overlook the fact that this is a very old case and that as a result of the actions of the Prosecutor and its agents EMM, were the trial to go ahead, its length would be increased exponentially by legitimate cross-examination on those actions. A jury would have difficulty in concentrating on the task of evaluating the actual evidence relevant to the issues.
12.8 Accordingly, I find that this is one of the exceptional cases where the accused cannot receive a fair trial and accordingly I order this prosecution is to be stayed as an abuse of the process of the court.”
It thus will be seen, and as was common ground before us, that the judge’s approach is essentially “conclusionary” in style: in particular the central paragraphs 12.2, 12.3 and 12.4. Mr Perry’s submission is that the lack of any analysis and reasoning given by the judge in support of her announced conclusions masks the fact that there were in truth no sufficient reasons that could be given to justify conclusions of such a nature: which he says were unwarranted. The defendants, on the other hand, suggest that it is to be inferred that the judge had accepted all, or at least some, of their specific submissions which she had earlier recorded in her ruling. In any event, they submit, even if the judge had not given reasons or provided any analysis for her conclusions that does not of itself necessarily vitiate the ultimate decision: see for example RCPO v C [2010] EWCA Crim 97.
Two further particular points should be flagged up at this stage.
First, the judge made no specific findings on a number of the points advanced before her by both defence and prosecution: not least, though not only, as to the issue of motive. We will have to come on to those points.
Second, the judge made plain that she granted a stay on limb one: that is, that the defendants could not have a fair trial. The judge did not base her ruling on limb two. That is clear from paragraph 12.8 of her ruling.
Disposal
Having carefully considered the materials and the arguments advanced to us we are compelled to the conclusion that this decision to order a stay simply cannot stand.
Before us the defendants understandably and powerfully emphasised that this is a very experienced judge (as indeed she is); that she had been pro-active and industrious in preparing for the hearing and familiarising herself with the voluminous papers (as indeed she had); and that the transcripts show a keen and thorough understanding on the part of the judge of the issues (as indeed they do). We also very much bear in mind that the appellate court should not adopt a sort of lofty intellectualism far removed from the realities of Crown Court proceedings. Nor, as is well settled, should it or will it interfere with a decision on such a matter simply because other judges might well have reached a different conclusion. But applications for a stay of this kind cannot be judicially resolved by a process of “feel” or “instinct”: concepts which also were introduced by the defendants at one stage of the argument before us (although in fairness to the judge she never sought to claim that as her approach). It remains the case that it is an exceptional step to stay a prosecution; and if a stay is to be granted it must be by a proper application of settled principles to the facts.
In our considered view, there was an error of law and principle in the judge’s approach in reaching the decision she reached: and in consequence her ruling was one which it was not reasonable for her to have made.
We will now explain, as concisely as we can, why we have reached that conclusion.
It is important to note that, whilst there were very fierce criticisms of the motives and conduct both of the applicant and of KM, there was no allegation of bad faith made. At one stage in his closing oral submissions before the judge Mr Boyce QC, on behalf of the third defendant, had referred to Mr Eccleson’s conduct as, or potentially as, “less than honest”. When this was queried by counsel on behalf of the applicant he very properly withdrew the suggestion: albeit making clear that he relied on “a lack of open mind, bias, prejudice and vindictiveness”.
(1) Supression of evidence
That being so, what was the basis for the judge’s finding at paragraph 12.2 that the applicant “wilfully ignored or tried to suppress evidence which did not assist in that goal”? The judge does not identify the evidence to support so strong a finding (which is tantamount to a finding of bad faith or an attempt to pervert the course of justice, presumably – albeit not expressly stated – directed principally at Mr Eccleson). Moreover, as was accepted before us, no such submission had been made on behalf of the defendants themselves prior to or at the hearing to that effect; and the prosecution thus had no reason to call (say) Mr Eccleson or KM to rebut so serious a charge.
In the course of the hearing before us Mr Boyce put in a most detailed written Schedule and Reference Guide extracting evidence from the documents which, it was said, could support such a finding and could illustrate the applicant’s determination to (among other things) control the scope of the prosecution and to protect the reputation of the applicant and to avoid pursuing lines of enquiry which might not assist the prosecution. We have considered all those materials. Our own clear conclusion is that they do not begin to justify the conclusion expressed by the judge in paragraph 12.2. Indeed Mr Boyce was himself constrained to concede that the material there identified “does not, on its own, demonstrate that material has been wilfully ignored or that [the applicant] has tried to suppress evidence which does not assist it”. Instead he then sought to rely on the conduct of EMM to support the judge’s findings. But that will not do either. Indeed, it is apparent from the judge’s ruling at paragraph 12.3 that she was dealing with the conduct of EMM to an extent - though not entirely - separately for this purpose. But in any case the most serious conclusion that the solicitors may have been involved in assisting in the deliberate suppression of evidence is, in our judgment, unjustified on the available material. Certainly, the judge identified no specific examples and made no specific finding in support of so strong a conclusion.
In our judgment, assessing the evidence overall, there simply was no sufficient evidential basis for the judge’s unequivocal finding at paragraph 12.2: which was indeed, on the available evidence, not fair to the applicant (whatever other criticisms can properly be made) or to Mr Eccleson. We further accept Mr Perry’s submission that this error has “infected”, in his word, the whole ruling and ultimate decision. That of itself would entitle this court to interfere with the judge’s exercise of discretion and overall evaluation.
(2) Motives
Moreover, whilst the judge refers in the first sentence of paragraph 12.2 to the applicant’s motives for bringing the prosecution, she in fact – and notwithstanding that she had been addressed at very great length on that issue by the defendants – made no findings at all as to what those motives were. (Questions of collateral motive, we might add, ordinarily would in any event relate to an argument under limb two rather than under limb one.)
We too were addressed at great length on this issue. It may well be that the defendants have a burning sense of grievance at being the subject of this private prosecution. But the applicant had the statutory right so to proceed. Moreover, the applicant only commenced this private prosecution after the Police and the Serious Fraud Office had both declined to investigate further: and it was not suggested to us, nor could it be, that the applicant’s requests to them to investigate and prosecute were a charade.
In any event, mixed motives may often be present in many prosecutions. In a public prosecution, the proceedings will be brought in the public interest: but the actual complainant may often be accused of (say) seeking revenge after a relationship has failed, and so on. This may sometimes indeed be the case but the true motive of the complainant may still be to seek justice. In a private prosecution, the complainant of course is frequently the prosecutor. But there too it is well established that mixed motives do not of themselves necessarily vitiate the prosecution: see, for example R v Bow Street Metropolitan Stipendiary Magistrate ex p. South Coast Shipping Co. Ltd [1993] QB 645.
Be that as it may, and notwithstanding all the very elaborate arguments, written and oral, advanced to us we can see no proper basis for a finding of improper motives, whether for the purposes for limb one or limb two, such as to vitiate this entire prosecution – a finding, indeed, which the judge herself did not in terms make. In many ways, in fact, the defendants’ submissions seemed to conflate the issue of why the applicant initiated the private prosecution with the (distinct) issue of how they are conducting the private prosecution. In substance, notwithstanding the applicant’s evident numerous tactical considerations and, for example, seeming satisfaction at being in control of the prosecution once the Police and the Serious Fraud Office declined to interfere (matters which of themselves do not impede the defendants in advancing their own defences), the predominant motive seems clear: to seek just retribution from defendants who the applicant is convinced have engaged in a sustained criminal fraud on the applicant. There is nothing improper in that. On the contrary, it is a facet of the pursuit of justice in punishing alleged criminality: which is itself the rationale for the statutory right to bring a private prosecution.
(3) Conduct of EMM
So far as EMM were concerned, the judge in paragraph 12.3 of her ruling made the trenchant finding that it, as solicitors to the applicant, had pursued an “ultimately pernicious” course of conduct. The judge further found that that had “irredeemably tainted” the whole process “particularly with respect to witnesses” (although the judge did not spell out just what findings she was making in this regard): and that what had happened “cannot be remedied through the trial process”. Mr Perry submitted that, here also, the judge had no proper factual basis for making a finding of “ultimately pernicious” conduct: nor was there any basis, he submitted, for saying that the complaints raised could not be remedied through the trial process.
The defendants understandably emphasised the obligations on a private prosecutor as set out in paragraph 61 of Zinga. There can, as we see it, be no doubt that KM had got very close indeed to her client’s case and had enthusiastically been trying to promote it. A finding that her approach was “blinkered” can perhaps be justified. But to say that her, and her firm’s, approach was “ultimately pernicious” in our view goes altogether too far.
As Mr Perry emphasised, and as is borne out by the decision in R (cited above), conduct and prosecutorial failings are not of themselves ordinarily relevant on limb one. As he put it, it is the consequences of the alleged misconduct which need to be assessed in deciding whether it is not possible to have a fair trial.
The defendants had made a number of very strong criticisms of the conduct of EMM, and KM in particular, which the judge had set out in her detailed summary of the defence submissions but as to which she made no specific findings at all. There certainly, in our view, is room for criticism of KM. But it is not possible to see how those criticisms of her conduct will have caused a fair trial not to be possible or will have caused irredeemable prejudice to the defence.
For example, the defendants fiercely criticise KM for making a direct approach to Mr Oliver, a very experienced solicitor and partner at Peters and Peters who had, as we have said, acted for Medreport and the third defendant in the previous civil litigation. It is not proper conduct for one solicitor to approach another solicitor, as KM did, with a view to obtaining documents (the confidential property of that solicitor’s client) in effect as a “personal favour”. Further, when that approach was – absolutely correctly – rebuffed by Mr Oliver, it was not proper for KM then to approach the third defendant directly for these documents when KM had been told that she should assume that Peters and Peters were still acting for the third defendant: the more so when it was not even explained at the time by KM that the third defendant was herself a potential suspect.
Such conduct was, entirely properly, accepted in oral argument by Mr Brompton QC, appearing below on behalf of the applicant, as “bad”. But for the purposes of the limb one argument one has to assess the prejudicial effect of that conduct on the fairness of the trial. And it had no relevant effect: for neither Mr Oliver nor the third defendant acceded to those (improper) approaches.
By way of further example, complaint was also made as to the terms of the emailed letter sent by EMM to Smith & Williamson on the 11 June 2016 seeking to obtain the (now missing) draft letter relating to the second defendant (and said by him at the time to have been in effect a forgery), as referred to in the Solomon Hare report. The wording of the letter of 11 June 2016 was both insensitive and aggressive: but it is absurd exaggeration to say, as the defendants do, that it involved serious misrepresentation. The more fundamental point, however, is that the letter elicited no consequential result. So here too no prejudice to the defence arose.
Yet further, criticism was made of the applicant obtaining the issue of the summonses as from the Magistrates Court in June 2016 without, so it was asserted, making proper disclosure: in particular of the Settlement Agreement of 26 July 2013. It is difficult to see that that point has much validity (the judge herself made no actual finding); but, again, in causative terms it in any event has no bearing on whether, under limb one, a fair trial is no longer possible.
(4) Witnesses
It is in fact to be deduced from the judge’s remarks in paragraph 12.3 that what “irredeemably tainted” the whole process lay, in her estimation of events, “particularly with respect to witnesses”. The judge did not elaborate further.
We were addressed at great length as to what, it is to be inferred, the judge must have had in mind in this respect. Further, a detailed schedule was put in of relevant passages from various draft witness statements and notes of interviews of witnesses obtained by the applicant and disclosed to the defendant.
The applicant had, through EMM (and, before then, Ernst and Young) interviewed and taken detailed statements from numerous prospective witnesses. These, among many others, included, for example, statements from Mr Walker, who could properly be regarded as, in effect, a potential accomplice; statements from Mr Buss; an interview with Mr Allen; an interview with Mr Williams: a solicitor and erstwhile consultant to CW Law; and a statement of Ms Mortimer (formally head of legal services at the applicant). Overall, it was submitted by the defendants that on close study the whole evidence gathering process was tainted by witnesses being prompted as to matters; witnesses being told of what other witnesses would say; witnesses being encouraged to make statements which would withstand cross-examination; witnesses being primed as to potential inconsistencies in their evidence; and so on. Mr Boyce also referred to the subtle and insidious effect that such interventions may sometimes have on prospective witnesses.
In many ways, the approach of EMM seems to have been more consistent with how evidence gathering is sometimes undertaken in civil commercial proceedings. There certainly were, in our view, unsatisfactory features in the evidence gathering: which also extended, for example, to KM and an associate solicitor even having dinner with Mr Walker during the statement – taking process. However, the point remains that the notes and records of the interviews, and the drafts of the relevant witness statements, meeting the disclosure test were disclosed to the defendants. They were not withheld.
In our view, although criticisms can undoubtedly be made, the defendants’ stated concerns, for the purposes of assessing the fairness of a future trial and whether irredeemable prejudice had been created, were exaggerated. To a very great extent, the current prosecution case – and the witnesses’ prospective evidence – is demonstrably document based. It must be very doubtful at this stage whether the way in which the witnesses’ evidence had been obtained or interviews conducted ultimately will have any significant materiality or will have resulted in significant and irreversible prejudice. Moreover if it does, in any given instance or instances, have significance then the material is available, from the disclosure given, to enable cross-examination of the relevant witnesses on such a point. Such evidence even, in appropriate circumstances, could potentially be subject to an application to exclude under s. 78 of the Police and Criminal Evidence Act 1984. It is a common enough occurrence, after all, in criminal cases for criticism of the investigation process and of the obtaining of statements to feature at trial before a jury: and the jury then can appraise such evidence accordingly. It is also a common enough occurrence, for example, for a cross-examination to be based on the differences between a witness statement of a witness and what that witness is recorded as previously saying in, say, a prior significant witness interview.
An example in the present case – and it is only an example – can be taken from the draft statement of Ms Mortimer. The (disclosed) tracked changes show that the senior associate solicitor engaged in finalising the statement proposed to Ms Mortimer that certain passages in the initial draft be taken out and other alterations made. But the reasons given in the tracked change commentary were understandable (that the passages in question were, for example, opinion or speculation); and in any event it was all left for Ms Mortimer, a solicitor, to consider. None of the questioned passages would appear to be of any very obvious materiality. If it is thought that they were, then that could in any event be the subject of cross-examination at trial.
75. We also wholly reject, on the materials available, the further suggestion that there was improper pressure on or improper coaching of witnesses.
(6) Disclosure
76. We turn to the issue of disclosure, as dealt with in paragraphs 12.3 and 12.4 of the judge's ruling. Although it seems that the judge's "irredeemable taint" was primarily directed to witnesses, she evidently also had concerns in this regard about further disclosure: no doubt reflecting also her findings at paragraph 12.2.
77. As illustrated by the case of R (cited above), it will be a rare case where concerns about disclosure will justify a stay under limb one. The obvious remedy lies in the court's ability to direct disclosure and its powers of case management.
78. Here too the defendants can point to no specific instance of non-disclosure of relevant documentation. Ultimately, their stance depends on there being, as it were, "unknown unknowns".
79. We - as was the judge - were presented with vast quantities of written submissions and schedules on the issue of disclosure. But as the argument wore on we became less and less impressed by the points sought to be made on behalf of the defendants in the context of their arguments on abuse.
80. There were two aspects of disclosure: first, disclosure for the purposes of the prospective trial by reference to the Criminal Procedure and Investigations Act 1996 and Attorney General's Guidance; second, disclosure for the purposes of the abuse of process application (cf. R v Director of Public Prosecution, ex. p. Lee [1999] 2 Cr. App R 304). The judge perhaps seems to have accepted that the applicant had made proper disclosure on the abuse application. At all events, the abuse application ultimately was itself essentially founded on such disclosure.
81. We found the whole debate rather unedifying. The correspondence before the hearing would tend to suggest, in fact, that the defendants’ solicitors - sensing that they had now got an aggressive prosecutor on the defensive - were bombarding EMM with disclosure requests (at least some of which requests being, in truth, unsustainable). But there is, in our view, nothing in the result to show any substantive or material want of disclosure at this stage.
82. Mr Hackett QC, for the second defendant, made a series of criticisms of the disclosure process and the Disclosure Management Documents to which EMM and the applicant were working. There were errors in them: for example, a mistaken reference to the wrong Attorney-General’s Guidance. But they were not, in our judgment, shown to be material. We were also very unimpressed by speculative criticisms advanced as to the approach to documents potentially the subject of legal professional privilege: which, if hereafter identified, could in any event be the subject of specific disclosure applications, if appropriate. A particularly arid debate was raised before us as to EMM ostensibly directing itself by reference to the 1996 Act with regard to disclosure on the abuse application rather than by reference to ex. p Lee. But counsel were wholly unable to explain how that, ultimately, had really mattered; and in any event EMM were indeed latterly directing themselves explicitly by reference to ex. p. Lee for this purpose and throughout had been considering disclosure for the purposes of the abuse application.
83. In this regard, it is rather surprising that the judge made no reference at all to the instruction by EMM of Ms Rebecca Chalkley, experienced counsel, to advise specifically on and assist in the whole disclosure process. In fact Ms Chalkley had addressed the judge at length from the Bar during the hearing - and we have studied the transcripts - to explain precisely the methodology and operation of the disclosure process adopted (it was Ms Chalkley who had herself drafted the latter Disclosure Management Documents). Her explanation was detailed and measured. There was and is no reason to reject what she was saying.
84. The judge clearly, nevertheless, had concerns that ultimately documents were held by the applicant itself. In this respect the judge in fact erred in describing (in paragraph 12.6) Mr Eccleson as the Disclosure Officer. He was not: a senior associate solicitor at EMM was. To the extent that EMM would nevertheless need to look to the applicant for documentation - although very many were in fact on the Ernst and Young data-base - there was, as we have said in discussing paragraph 12.2 of the ruling, no sufficient evidence to show that the applicant had sought or would seek to suppress relevant documentation. We also note that the judge was informed that Group Legal Counsel would (in view of the criticisms made) be taking over from Mr Eccleson as the individual within the applicant company coordinating disclosure.
85. The judge more than once expressed herself as having "no confidence" that material fulfilling the test for disclosure would be disclosed or that counsel would be effective in safeguarding the position. But "lack of confidence" is not the test: for a stay under limb one on this basis, there would at least need to be a conclusion, on the balance of probabilities, that there would not be proper disclosure so as materially to prejudice defendants. The judge made no such finding nor was such a finding open to her on the material available.
86. As to counsel, we were rather concerned by some of the judge's remarks. Not only does the judge wholly fail to acknowledge the involvement of Ms Chalkley for disclosure purposes but also it was, with respect, simply not fair on Mr Brompton QC to say (as the judge did at paragraph 11.4) that, by his concessions in the course of his submissions, KM in essence "had been thrown to the wolves". Nor is it right to say that Mr Brompton QC "abandoned” his previous submissions. We have studied the transcripts. The concessions made by him were undoubtedly significant. But that highly charged language simply does not accurately reflect the stance which Mr Brompton actually adopted and the concessions which he actually made in this respect with regard to KM.
87. It no doubt was unfortunate that, in the prior written arguments lodged before the hearing, no real concessions at all had been made on behalf of the applicant as to KM's conduct: particularly, perhaps, with regard to the unjustifiable approach to Mr Oliver and the unjustifiable approach directly to the third defendant (just as it was unfortunate that, as we were told, several solicitors had been required by the applicant to give evidence at the hearing only for them to be told on the day that they were not, after all, required). It may be that the significant concessions made by Mr Brompton QC were prompted by his sensing in which direction the judicial wind was by then blowing. But be that as it may, the rather personalised criticisms of counsel at paragraph 12.6 of the ruling - and Mr Brompton also had a very experienced senior junior and additional junior, apart from Ms Chalkley - would, if anything, have had rather more force if no acknowledgment of inappropriate conduct on the part of KM was ever made. Any implied suggestion, at all events, that counsel could not be trusted to fulfil their professional obligations is not sustainable, on the evidence.
88. As to the matters set out in paragraph 12.7 of the ruling, the judge rightly said that they were not determining matters. We only add that, to the extent that the manner of investigation by the prosecution would engender cross-examination at trial, "exponentially" or otherwise, it remains to be seen just which witnesses really do need to be so examined or how long such examination will be (or will be permitted by the trial judge to be).
Conclusion on limb one
89. We make clear that we have considered all of the defendants’ complaints cumulatively as well as individually. Drawing the threads together, however, we have concluded that the judge's finding that the applicant has wilfully suppressed evidence was not open to her, on the material available. The judge's finding that the conduct of EMM was “ultimately pernicious" such that what happened could not be remedied through the trial process was not open to her, on the material available. Further, the judge's approach to limb one (in part seemingly based on the case of Dacre, which was in fact a limb two case) brought in and gave undue emphasis to certain matters, such as motives and aspects of conduct, which (as confirmed in paragraph 64 of the judgment in R) would more relate to limb two. The judge overall erred in law and in principle and in the result reached a conclusion which, in the judgment of this court, was not a reasonable one for her to reach.
Limb Two
90. This court had taken it from the joint Respondents' Notice that the defendants were seeking to uphold the judge’s conclusion that the defendants could not receive a fair trial: that is, by reference to limb one. However, at the appeal hearing Mr Duncan Penny QC, on behalf of the first defendant, said that he was in fact seeking to focus principally on limb two of the abuse of process principles: albeit that the judge had not reached her conclusion by reference to that limb. It is a point of comment that that had also been the stance of Mr Penny below: where he had relied solely on limb two. He had not sought to rely on limb one.
91. The other defendants took a different line. Below, they had relied on both limbs. Before us, Mr Hackett very fairly made clear that he was on this appeal seeking to support the judge's conclusion on limb one. He was not further relying on limb two. Mr Boyce, on the other hand, said that he was continuing to rely on both limbs, albeit primarily focusing on limb one. His position was adopted by counsel for the other defendants. Mr Perry, for his part, very fairly indicated that no technical objection was taken to limb two being pursued before us.
92. We propose to deal with this issue shortly.
93. Mr Penny, on behalf of the first defendant, was certainly entitled to focus, for the purposes of his argument on limb two, on the motives of the applicant and on its (and EMM's) prosecutorial conduct. As a matter of principle, they are undoubtedly relevant issues on a limb two argument.
94. However, adopting the requisite balancing process, this court is wholly unpersuaded that a stay should be granted on such a basis. Such a course is exceptional; and the circumstances of this case simply do not call for such a conclusion. This is, we repeat, a case where bad faith or dishonesty on the part of the prosecutor is not alleged. What we have said about the motives and conduct of the applicant and of EMM does not begin to justify a stay, when set against the public interest in upholding a person's statutory right to initiate and pursue a private prosecution and the public interest in alleged serious criminality in the form of a sustained and major fraud (in a case, at all events as against the first two defendants, previously judicially assessed on the then available evidence as "formidable") being the subject of prosecution.
95. Accordingly we unhesitatingly reject the defendants' arguments based on limb two. The integrity of the justice system is not impugned by permitting this case to go to trial.
Other matters
96. Before us there was produced an amount of further documentation, the result of recent further disclosure, which was not before the judge. Some of it may perhaps make for some rather uncomfortable reading by the applicant and EMM. But nothing in it has caused us to modify our conclusion on this appeal, even assuming that it is appropriate for us to take it into account for present purposes.
97. This court has already referred to the Norwich Pharmacal Order of 13 July 2015 obtained against Medreport and the third defendant. At the appeal hearing, the court raised concerns that documents obtained as a result of that Order had then been used to include the third defendant herself in the private prosecution: in circumstances where the third defendant seems not to have been clearly identified to HHJ Moloney QC as a potential suspect and in circumstances where there appears to have been no discussion about issues of privilege against self incrimination. Further, an undertaking to the court in quite broad terms as to the limitations on use of documents so obtained was contained in the Order; and no express permission to use the documents against the third defendant, pursuant to CPR 31.22, was made.
98. However this point was not, as Mr Boyce candidly acknowledged, taken below (Mr Boyce's attention understandably enough being directed towards the other issues) and was not, when raised by this court, over much debated before us. In those circumstances, apart from drawing attention to the point, we say no more about it for present purposes. Whether the point will, at all events so far as the third defendant is concerned, feature hereafter is not a matter for us.
Conclusion
99. Having granted leave, we allow the appeal. We reverse the judge's ruling on the basis that it involved an error of law or principle and that it was a ruling that it was not reasonable for the judge to have made. The proceedings will be resumed (before a different judge, to be nominated by the Resident Judge) in the Crown Court.
100. As we have said, we were told that there are three extant dismissal applications. Subject to that, we hope - it would be over-confident, given what we have seen thus far, to say that we trust - that this whole complex case can now proceed in a practical and sensible way, with the minimum of fuss, distraction and interlocutory wrangling. So far as any further disclosure is concerned, it will be critical to focus on the true issues in the case. Those true issues will be hard to identify until defence statements are served. Thereafter, robust and sustained case management will be essential; and this court encourages the firm squashing by the judge of any unwarranted tactical manoeuvrings (of whatever party).
* Note: Reporting restrictions were lifted on 25 July 2018.