Kallakis, R v

On 16^th January 2013, in the Crown Court at Southwark, the applicant, Achilleas Kallakis (now aged 49), was convicted of two offences of conspiracy to defraud. The jury were discharged from reaching verdicts on a number of other counts which were ordered to remain on the file on the usual terms.

On 17^th January he was sentenced by the trial judge, His Honour Judge Goymer, to concurrent terms of seven years' imprisonment on each of the two counts (counts 1 and 21). The total sentence was a term of seven years' imprisonment. He was also disqualified from acting as a company director for six years.

A co-defendant, Alexander Williams, who was also convicted on counts 1 and 21, was sentenced to concurrent terms of five years' imprisonment.

The facts can be briefly summarised, but it is necessarily a summary. The applicant and Williams were charged with conspiracy to defraud the Allied Irish Bank Plc ("AIB") between 1^st August 2003 and 13^th November 2008 (count 1). They had used various dishonest means to cause AIB to advance very large sums of money for the purpose of funding the purchase of property by companies owned or controlled by the applicant. Count 1 identified nine particulars of the dishonest conduct by which the fraud was completed.

Counts 2 to 20 charged 19 alternative substantive offences committed in the performance of the conspiracy.

Count 21 charged the second conspiracy between the applicant, Williams and Michael Becker. Between 1^st January 2007 and 2^nd May 2008 they defrauded the Bank of Scotland Plc by dishonestly causing the bank to advance money for the purpose of converting a passenger ferry by producing false documents and making false representations.

No issue arises in relation to the convictions for these offences. We can therefore turn to the sentencing hearing. In his sentencing remarks the trial judge observed that both AIB and Bank of Scotland had acted carelessly in their own interests. The Bank of Scotland in particular had made a loan on the mere assertion of a Swiss lawyer that the recipient of the funds, Oregon Finance (involved also in the count 1 conspiracy), was good for the money. It had been advised by its own inhouse lawyers as to the unsatisfactory nature of that assurance. Nonetheless, the judge observed that the offenders must themselves bear personal responsibility for their offending and that the carelessness of the banks was no mitigation. The central features of the fraud were the provision of forged and false information relating to the purported involvement of Sun Hung Kai Properties (a Hong Kong company) and the financial worth of Oregon. There were, the judge found, forged and false documents at every turn. He also found that both defendants took an active part in the production and use of those documents. Elaborate subterfuge was used to ensure that the bankers got nowhere near the truth. He accepted that the offenders were taking advantage of a rising property market in the hope that the market would rise so as to cover the fraud. The judge declined to place firm figures on any loss to AIB or personal gain to the offenders.

Turning to the sentencing guidelines issued by the Sentencing Guidelines Council for the substantive offence of fraud, the judge observed:

The judge identified two questions: first, whether he should impose sentences outside the guideline range; and secondly, whether he should impose consecutive sentences.

As to the first question, the judge concluded that the count 1 fraud was not the worst type offence of its type. In reaching this conclusion he took account of the fact that repayments to AIB were kept up until the summer of 2008, by which time alarm bells were ringing extensively in the property market. The judge was influenced by the sentence of ten years' imprisonment recently imposed by Holroyde J (as he then was) on Asil Nadir for fraud involving much larger sums and a very substantial breach of trust.

As to the second question, the judge concluded that count 21 represented only the extension of the same conduct upon which the prosecution had relied to prove count 1. He did not consider that it was open to him to pass consecutive sentences merely because he might think that the statutory maximum was too low.

In the result, the judge took in the applicant's case a starting point of eight years' imprisonment. He regarded him as the prime mover. He took account of the fact that he had not served a sentence of imprisonment before. There had been some honest business transactions. Neither of the offenders was in robust health, and Williams had lost his family. The judge then imposed the sentences to which we have referred.

The Attorney General applied to refer these sentences to the Court of Appeal under section 36 of the Criminal Justice Act 1988 on the basis that they were unduly lenient. The application was heard on 12^th April 2013 before Pitchford LJ, Roderick Evans and Turner JJ. It took place in what was a conjoined hearing of an appeal by Nicholas Levene. The Levene appeal related to overall sentences of thirteen years' imprisonment passed in the Crown Court at Southwark on 5^th November 2012, following his pleas of guilty to statutory fraud and related offences arising out of what his counsel described as a "Ponzi-type fraud". That hearing related to the argument on behalf of Levene that the sentences were manifestly excessive.

The applicant was represented by trial leading and junior counsel. Levene was also represented by his trial counsel. The Attorney General was represented by leading counsel and Ms Darlow as junior counsel. The Attorney General submitted that the judge had erred in his approach to sentencing. First, he was wrong to apply the Sentencing Guidelines Council's guideline because it was clear that this did not apply to offences of conspiracy to defraud. Secondly, he submitted that consecutive sentences should have been imposed on established principles. Thirdly, he submitted that the right approach to seriousness was that laid down in R v Bright [2008] EWCA Crim 462; that it was not for the court to imagine a more (or most) serious type of offence within the relevant category.

It was submitted on behalf of the applicant that the judge, who had presided over both trials, was in the best position to evaluate the seriousness of the offending by reference to the culpability of the offenders and the harm which they either caused or foresaw. It was conceded that the guideline was not strictly applicable, and submitted that the judge was right to conclude that the additional offending revealed by count 21 did not require a consecutive sentence.

The Court of Appeal reserved its judgment and on 16^th May 2013 handed down its decision in both cases: Attorney General's Ref Nos 7 and 8 of 2013 (R v Kallakis and Williams) and R v Levene [2013] EWCA Crim 709. The judgment dealt with the three issues raised by the Attorney General, the third of which was the appropriate use of the power to impose consecutive sentences for the substantive offences of fraud and conspiracy to defraud: see [1]. At [2] to [19] the court dealt in detail with the facts of the conspiracy directed against the AIB (count 1), the substantive offences within the conspiracy (counts 2 to 20) and the further conspiracy (count 21). At [20] and [21] the judgment addressed the judge's sentencing remarks, and at [22] and [23] the Attorney General's submissions. Importantly, for present purposes, the court also recited the submissions made on behalf of the applicant at [24] to [26]. The court noted the points made by counsel for the applicant in relation to the sentence, which we have already summarised, namely:

Having summarised the submissions on behalf of the applicant, the Court of Appeal went on to consider the facts, the plea and sentence, and the submissions on behalf of Levene, before coming at [49] to [71] to its observations on the Sentencing Council's Guidelines on Fraud and Totality and on the previous reported decisions of this court. From [72] onwards the court set out its conclusions on the two cases with which it was concerned. In the case of the applicant, the court considered that the correct sentence was a term of eleven years' imprisonment. It therefore quashed the concurrent term of seven years' imprisonment on count 21 and substituted a sentence of four years' imprisonment, to be served consecutively to the sentence on count 11, which remained unaffected. We will return to this point when we consider Mr Mansfield's submissions. In the result, the overall sentence was therefore increased from seven to eleven years' imprisonment: see [72] to [78].

In summary, the court concluded that although the Sentencing Guidelines Council guidelines on statutory offence of fraud did not apply to offences of conspiracy to defraud, the underlying principles of sentencing for fraud applied both to the substantive offence and conspiracy to defraud: see [73]. (We would add that the current definitive guidelines for fraud, with effect from 1^st October 2014, explicitly cover conspiracy to defraud.)

The court considered that the count 1 conspiracy was clearly more serious than the count 21 conspiracy. Seriousness comprised both culpability and harm. The culpability of the applicant and Williams was at the highest level because they set out and persisted over a significant period with planning, determination and audacious dishonesty to commit commercial fraud of international proportions. Harm was, by reason of section 143(1) of the Criminal Justice Act 2003, to be treated as harm which was intended or may have foreseeably been caused by the offence: see [74]. Notwithstanding the judge's mistaken belief that he was bound by the statutory offence guideline, his approach to identification of the starting point accorded with the principles stated in the guideline and the decisions of the Court of Appeal: see [75].

The judge had acknowledged that the maximum sentence was available for offences of the most serious kind. This was not, he concluded, such a case. He reached this view because the offenders had managed to make mortgage repayments. In the view of the Court of Appeal, the judge had been too generous to the applicant and Williams in this regard. They had had to make payments to prevent the scam from being uncovered: see [75].

The Court of Appeal concluded that the starting point of eight years' imprisonment for count 1 was not unduly lenient: see [75]. We note that the court was, in fact, doubtful that there was any significant mitigation which justified reducing that starting point: see [76]; not least because both offenders had committed fraudulent offences together on a previous occasion.

Looking at the concurrent sentence on count 21, the court rejected the argument that a consecutive sentence indicated a view that the maximum sentence for conspiracy to defraud was inadequate. On the contrary, the concurrent sentence gave the impression that the applicant had entirely escaped the consequences of a serious fraud in which substantial loss resulted. While the nature of the fraud was similar and overlapped in time with count 1, the Bank of Scotland was a separate victim and suffered substantial loss, unlike AIB. A consecutive sentence was required, subject to the principle of totality.

The court then quashed the concurrent term of seven years' imprisonment on count 21 and substituted the sentence of four years' imprisonment and ordered that that term be served consecutively, increasing the total sentence from seven to eleven years. In Levene, the court allowed the appeal, considering that the overall sentence should be a term of twelve years' imprisonment and not thirteen: see [79] to [85].

The applicant was not of good character at the time of the sentence. He had four convictions over the period 1993 to 2011. In 1995, he had been sentenced to a community order for an offence of conspiracy to defraud.

The present application is for an extension of time in which to apply for leave to appeal out of time, and for leave to appeal against the sentence imposed by the Court of Appeal on the ground that it was manifestly excessive.

Both applications raise difficulties for the applicant. The application for leave requires an extension of time of just over three years. The substance of the application is a challenge to a sentence imposed by the Court of Appeal on the basis that it was manifestly excessive or wrong in principle following a Reference under section 36 of the Criminal Justice Act 1988 of a sentence considered to be unduly lenient. The delay must be explained and justified.

Mr Mansfield QC, who did not represent the applicant at trial or before the Court of Appeal in 2013, addressed the issue of delay. The applicant's current representatives were first instructed in January 2014. The papers in the case were voluminous and had to be considered by the solicitors in order to narrow the issues for counsel. Thereafter, funding ran out until July 2015. In December 2015 a full brief, including instructions, was sent to current counsel. Much of 2016 was spent complying with the obligations described in McCook [2014] EWCA Crim 734 and obtaining further papers and instructions.

At the heart of Mr Mansfield's submission is the contention that the applicant had no real opportunity to challenge what was an unforeseen result in the Court of Appeal, on the basis that it led to a manifestly excessive sentence. The applicant's counsel were there to support the judge's conclusion and to reject the Attorney General's argument that the sentences were unduly lenient.

Such a challenge is open to an applicant in the light of the decision in R v Hughes [2009] EWCA Crim 841 at [20]. The judgment of the court was given by Hughes LJ (as he then was). [20] in the following terms:

It is clear that while the power of the Court of Appeal Criminal Division to entertain an application for leave to appeal against sentence is not removed by the fact that there has been a Reference, leave is likely to be refused in any case in which an applicant seeks to put forward an argument which could have been raised at the time of the hearing of the Reference. Any extension of time in such a case, which will plainly be inevitable, will be granted only where there is good reason to grant it and ordinarily where the defendant will otherwise suffer significant injustice.

Mr Mansfield submits that the applicant did suffer significant injustice. He relies on six broad arguments. First, he submits that the sentencing judge was highly experienced in this type of case, had presided over two trials and therefore had a unique view of the detail of the fraud and is impact. It was never suggested that he failed to take into account material matters relevant to sentence, or that he failed to take into account the basic sentencing principles. It follows that the starting point – and perhaps the ending point – was his view as to the culpability and harm of this offending.

We accept that submission, at least to this extent. The matters in issue in the Court of Appeal were the three issues it identified, which included the judge's view that he was constrained to pass a sentence lower than the maximum for a single offence of fraud. The Court of Appeal held that this was not so and that this resulted in a sentence that was not merely lenient, but unduly so.

Secondly, it is said that the Court of Appeal did not materially criticise the sentence on count 1, and in fact reduced the sentence on count 21. In those circumstances, Mr Mansfield seeks to argue that it was unfair, unjust and disproportionate to increase the sentence effectively by four years on count 21. He refers to the sentencing remarks in which the judge specifically posed the relevant question:

Mr Mansfield's argument has the appearance of an attractive submission, but is in our view unarguable. The court considered very carefully the overall criminality covered by the two counts and concluded that it justified an overall sentence of eleven years' imprisonment. We will come shortly as to the way in which it did so, which is the subject of a separate criticism.

Thirdly, it is argued that no mention was made of the principle of double jeopardy when the Court of Appeal imposed the increased sentence. The reason that no mention was made of double jeopardy was, in our view, the change in the practice of the court in relation to jeopardy: see Archbold 2018 at 7-449 and R v Afzal and Malik [2014] EWCA Crim 1566.

Fourthly, it is argued that the total sentence of eleven years' imprisonment did not reflect the overall criminality and "did not accord with potential comparators". Examples are given: in Nadir the sentence imposed by Holroyde J, referred to by the sentencing judge; Levene itself; and R v Adoboli (a sentence imposed by Keith J).

This court discourages reference to sentences in other decisions of the Court of Appeal unless they are guideline cases, because other sentencing decisions are so often dependent on their facts. The same is plainly true of sentencing decisions in the Crown Court. It is of little assistance to this court to point to other cases where the fraud may have resulted in greater loss because in every case the court will be concerned with both harm and culpability. In fact, as we have noted, the Court of Appeal considered at length some of the sentencing principles that emerged from earlier decisions of the court: see [59] to [71].

The submission that there was a discordance between the court's approach in the applicant's case and in the case of Levene (decided at the same time) is, we would add, unrealistic.

Fifthly, Mr Mansfield argues that the differential sentencing bracket between the principle fraudulent conduct on count 1 and that represented by count 21 was disproportionate. Reliance is placed on the view of the judge that count 1 involved multiple transactions, and count 21 "though different in character is simply an extension of it". In his oral argument, Mr Mansfield relied on the fact that there was effectively the same modus operandi in relation to both frauds.

These were points specifically addressed on the applicant's behalf in the Reference. They were rejected by the court for the reasons it gave. In such circumstances, on the basis of Hughes, the ground is not arguable.

Finally, it is argued that it is unclear how the Court of Appeal came to the overall sentence of eleven years' imprisonment. While the sentencing judge expressed very clearly the basis on which he concluded that the correct overall sentence was a term of seven years' imprisonment, Mr Mansfield submits that the sentence of four years on count 1 appears "less to do with the count itself and more to do with accommodating the totality of eleven years". We do not accept that submission. At [77] the court said this:

We have considered whether, either individually or together, these points give rise to arguable grounds. In our view they do not. Not only could the arguments have been raised during the Reference, many of them were. Nor are we satisfied that significant injustice has occurred in the sentencing and resentencing process.

Accordingly, the applications for an extension of time and for leave to appeal will be refused.

In view of the circumstances outlined to us by Mr Mansfield, we will not make any loss of time order.