Cartwright, R. v

LORD JUSTICE IRWIN: On 30 January 2017 at the Southwark Crown Court, following a trial before His Honour Judge Beddoe and a jury, the applicants, Cartwright and Bancroft, and the appellant, Mills, were convicted of the offences we shall recite in a moment. On 2 February 2017 they were sentenced as follows. Cartwright: for count 4, fraudulent trading, contrary to section 458 of the Companies Act 1985, three-and-a-half years' imprisonment and on count 6, conspiracy to conceal criminal property, contrary to section 1 of the Criminal Law Act 1977, three-and-a-half years' imprisonment concurrent. Bancroft: count 1, conspiracy to corrupt, 6 years' imprisonment; counts 3, 4 and 5, counts of fraudulent trading contrary to section 458, in each case 4 years' imprisonment consecutive to the sentence on count 1 but concurrent with each other. Finally, on count 6, the concealing of criminal property, 6 years' imprisonment again concurrent, and therefore a total of 10 years' imprisonment. Finally Mills: on count 1, conspiracy to corrupt, 7 years' imprisonment; on counts 2 and 3, fraudulent trading, in each case contrary to section 458, 4 years' imprisonment on each consecutive; on count 4, a fraudulent trading count, 4 years' imprisonment concurrent; on count 5, 4 years' imprisonment concurrent and on count 6, 7 years' imprisonment concurrent, and therefore a total of 15 years' imprisonment. Ancillary orders were made.

There were sentences on co-accused. Lynden Scourfield pleaded guilty to all the counts on the indictment, was sentenced to a total of 11 years and 3 months. He is the important co-defendant.

Cartwright renews his application for leave to appeal against conviction and for a representation order, after refusals of the applications by the single judge. Bancroft renews his application for leave to appeal against sentence likewise, and Mills appeals his sentence by leave of the single judge.

In summary, all three of these men were convicted of offences of fraud, centering on activities causing loss to HBOS, Halifax Bank of Scotland. The co-defendant, Scourfield, was a senior director of HBOS. He was a high risk relationship manager in the impaired assets division of the bank. An "impaired asset" was a debtor company, owing the bank money and in poor financial or commercial state. It was obviously in the bank's interests to promote the health of such companies, both for the sake of the company and to minimise exposure of losses to the bank. Scourfield was corrupted by Mills. Essentially for reward from Mills (and later Bancroft) he had connived at the activities of Mills and his associates including Bancroft and Cartwright.

Mills organised a campaign whereby he and his associates would act as consultants and often directors of the impaired assets. In a number of ways they then milked the companies. Excessive consultancy fees, organised illicit intercompany loans, prolonging trading beyond the point when trading should have ceased, and all that in order to maintain the flow of cash to them but not to the bank. They also acquired some of the better assets at very cheap cost when finally the companies were dissolved or the assets

Mills was the most prominent and dominant figure. Bancroft was a senior figure. Cartwright was described by the Crown as Bancroft’s lapdog.

Cartwright renews his application for leave to appeal his conviction following permission; Bancroft, his application for leave to appeal his sentence, not conviction, and Mills, as we have said, has leave to appeal his sentence, for reasons we will summarise below.

Some idea of the scale of what happened can be gleaned from the sentencing remarks of Judge Beddoe in remarking on the activities of Mills:

We begin by considering the renewed application of Cartwright. It is necessary to focus more closely on the facts as they affect him. Cartwright and Bancroft were old associates. Bad character evidence was given in the trial about that. In the course of a previous business dealing Bancroft had used some £600,000 of the company money of a company called Lux Lux, for personal expenditure. Bancroft was Chief Executive Officer and principal shareholder. Cartwright had become financial director and from 1988 to 1991 had concealed these depredations in the accounts of the company by a number of means, including false invoices. Cartwright had obtained personal expenditure in about £12,000. These matters were discovered in 1991. Bancroft and Cartwright repaid these moneys with interest after admitting what they had done and, luckily for them, they were not prosecuted.

Mills and Bancroft were also old friends who had known each other since Mills was 19.

As we have said, Cartwright was charged on three counts. Count 3 was fraudulent

We will take these matters in turn. Section 458 of the Companies Act 1985, in its material part, reads:

Then provisions for sentence are given.

As the judge directed the jury, it was not in issue that if the jury were sure of what it is alleged had been done, that would constitute carrying on a business dishonestly for personal gain and would be caught by the section. There is no submission here that there was insufficient evidence of fraudulent trading. There is therefore no need for us, in considering Cartwright's application, to rehearse the detail of that.

The point taken is a narrower one, derived from the language of the statute. Put shortly it is this: can a defendant, as a matter of law, be convicted of an offence under section 458 not on the basis that he or she was in a position to "carry on...the business" of the company fraudulently, but rather as an aider and abettor of another who was and who did? The defence said "no", the Crown said "yes". That is the issue in respect of which Cartwright seeks leave to appeal.

In this case the judge followed the modern practice. He split his summing-up in two, giving written and oral directions on the law before the closing speeches of counsel, and concluding with his summing-up on the facts after counsel had finished. On counts 2 to 5 as affecting those indicated he said as follows:

He then gave a direction concerning aiding and abetting as the issue affected firstly, a co-defendant, Cohen, charged under count 2. Cohen was, it was argued, had no management or controlling role. The direction was in unimpeachable terms. This direction was a precursor to the specific direction he gave as affecting Cartwright.

The judge proceeded to count 3. In respect of Mills and Bancroft he had directed the jury to the same two questions as he had outlined in count 2: had the Crown made the jury sure in each case that the defendant held the controlling or managing function in the business at the time, and were they sure the company was being managed or controlled fraudulently?

Then he came to Cartwright. Referring to the written questions he had formulated for the jury he said this on count 3:

The judge next addressed count 4 in exactly the same way. For Mills and Bancroft the same two questions as in count 3, for Cartwright the same questions and in the same sequence or cascade as we have quoted above.

It follows that the judge left two routes to verdict against Cartwright on count 4. If they answered "yes" to questions 1 and 2, they would convict him as a principal; if they answered "yes" to questions 3 and 4 they would convict him in the alternative as an aider and abettor. It is the latter route that the applicant says is in error in law.

Before we address that, we must consider briefly the conviction on count 6, the conspiracy to conceal or otherwise deal with criminal property. The applicant submits that the conviction on count 6 is parasitic on the conviction on count 4, there having been the acquittal of Cartwright on count 3. The Crown rejects that proposition. In truth it might possibly depend on the basis of the conviction under count 4.

Returning to count 4 the submissions can be summarised as follows. Mr Kane says the language of the section requires the defendant to have been "party to the carrying on of the business" in a fraudulent manner.

In the case of R v Miles (The Times, 15 April 1992) and also reported and digested at [1992] Crim LR 657, this court considered a case of selling worthless shares. By the time the evidence was completed, there were two issues remaining in relation to that appellant: (1) was he a party to the carrying on of the business or was he merely a salesman taking orders? Issue (2): was he aware that the shares were worthless? Against that factual background the court looked at the history of section 458 and its forebears.

Section 75 of the Companies Act 1928 was in similar language, save that it created personal liability on the part of "directors" of the company, as defined. Section 75(5) defined a director as including "any person who occupies the position of a director, or in accordance with whose directions or instructions directors of a company have been accustomed to act." The section was amended subsequently, and in section 101 of the Companies Act 1947 for the words "any of the directors past or present", was substituted the words "any persons". That wording was consolidated into section 332 of the Companies Act 1948 and thereafter the wording of the 1985 Act was as the court recited.

In Miles the Crown argued that the substitution of the phrase "any persons" for "director" meant that the test caught anyone within the company, and indeed beyond. The Crown conceded that there would be many people within a company who could not be said "party to the carrying on of the business of the company". There would therefore need to be a direction as to the ambit of that test on the facts of a given case.

Having noted the dearth of authority on the section and its predecessors, and noted the decision of Re: Maidstone Building Provisions [1971] 1 WLR 1085, which turned on the provisions of section 332 of the 1948 Act, the court reached the following conclusions:

The editors of Archbold (2020 edition, paragraph 30-7) attribute the reference to the phrase of Lord Lane CJ to the decision in Grantham [1984] QB 675; 79 Cr App R 86. The court was there dealing with the precursor provision (section 332 of the 1948 Act). That provision did create a criminal offence but also dealt with civil liability. It had very similar wording. The material parts read:

Then in subsection (3):

The difficulty with the attribution of Lord Lane’s phrase is that the phrase "running the business" is hard to locate in the decision of Grantham. Doing the best that he could to assist the court, Mr Kane suggested to us that it derives from a passage on page 5 of the report, as it appears in the Criminal Appeal Reports, in the penultimate paragraph, where the Lord Chief Justice said:

He then continued with the facts of the case.

We find it hard to see how the use of the phrase in that way, which was clearly a comment on the specific facts, was intended by Lord Lane to constitute a restriction on the ambit of section 332 or on its successor, section 458.

The Court of Appeal in Grantham did approve the summing-up of the trial judge which began, "as against the individual ... the prosecution have to prove first that he took an active part in carrying on the business". That formulation merely reflected the language in section 332 and the way the matter was put by the Crown in that case.

Following the decision in Miles, the case was the subject of a digest and commentary in the Criminal Law Review. We have cited the reference above. The commentary was penned by that most authoritative figure, the late Professor JC Smith. He wrote:

The essential submission from the appellant here is that Professor Smith was wrong. Mr Kane argues that the limitation placed on primary liability under the statute necessarily precludes the existence of secondary liability by an aider and abettor. Unless such secondary liability is precluded, it is said, the limitation on primary liability is a nullity.

Mr Kane QC, for Cartwright, in his careful and helpful submissions, has referred us to commentary on the section and on the decision in Miles, to be found in Arlidge and Parry on Fraud (fifth edition 2018). The editors suggest:

Then a further passage from 8-051:

In our judgment, the submission so carefully advanced by Mr Kane must fail. Accepting that primary liability is confined in the way indicated by Miles, and that therefore there can be no secondary liability without a primary offender (whether indicted or not), we see no reason why secondary liability is removed by necessary implication. Common law liability as a secondary party can only be excluded by express provision or necessary implication: that is a long-standing principle, but stated authoritatively in R v Jefferson [1994] 99 Cr App R(S) 13.

There is no question of the former here. For the latter to operate there would need to be direct authority making that conclusion clear. In our view, that is not to be found in Miles or elsewhere.

In his oral submissions Mr Kane took us to the provisions in section 9 of the Fraud Act 2006. He submitted to us that the adoption by the draftsman of the same phrase "party to carrying on the business of the company" indicated a similar policy objective in the drafting of that Act. We have considered that argument carefully, but we do not see how that carries with it a policy objective which should govern the interpretation of the earlier statute. It must remain to be argued whether that provision in the Fraud Act carries the necessary implication sought to be derived in this case from the Companies Act provisions.

It is difficult to see what legitimate policy objective would be achieved by the outcome advanced by Mr Kane.

What of other inchoate offences? It could hardly be said that aiding and abetting is

For those reasons, we reject the submissions of Mr Kane in relation to the interpretation of section 458.

It follows from that fact that the conviction on count 4 will stand and it therefore follows as a consequence that there is no live argument that the conviction on count 6 should be impugned in any way.

Given the difficulty of the matter and the complexity of the argument, we grant Cartwright leave to appeal, and representation in respect of his appeal, but for those reasons we dismiss the appeal.

We turn to the questions of sentence.

As we have indicated, leave has been given to Mills to appeal. It is worth recalling what the single judge said when granting that leave:

The basis of the sentence here was clear. Mills was dominant, he corrupted Scourfield and Dobson, was dominant over the other defendants and profited hugely from the offending. He lied continually to police in the course of the investigation. The scale and duration of the corruption over at least 4 years was emphasised by the judge, and he described Mills’s character as follows:

The judge bore in mind Mills' age (60 at the time of sentence), he bore in mind totality and passed the sentences in a total of 15 years.

The grounds before permission were granted were threefold: that there was good character before these offences; that the defendant Mills was 60, and delay. Unsurprisingly no great emphasis was or is put on the first two points. This was a hugely corrupt man, demonstrating his corruption and his corruption of others over years. He was not and is not of an age where any real impact could be sought to be derived on sentence from his age. The emphasis in submissions has been placed on delay.

A procedural timetable has been agreed with the Crown. The indictment period ran from 2003 to 2010. There was an arrest in 2010 and charge in January 2013. In October 2014 the Crown applied to delay the trial and it was refixed for January 2016. Then again in October 2015, a further application from the Crown to delay the trial to September 2016. The complaint here is that by undue delay in disclosure and progress towards trial, about 2 years was introduced into the timetable, and that there were two periods of build up to trial which were disruptive.

The judge was well aware of the issue of delay and he addressed it directly in sentence. The judge said:

Mr Vaughan, for the appellant, makes the following critical points. Firstly, count 1, the sentence of 7 years was the maximum. There was therefore no deduction for delay there. Secondly, a defendant who pleads not guilty is still entitled to mitigation derived from undue delay on the part of the Crown. Thirdly, that during his client's period on bail, his liberty was restricted and there was a considerable impact on him of the delay and of the build up to trial which was then frustrated. We accept that those are valid points to advance.

Mr Vaughan has taken us to the relevant passage, which we need not cite from Spiers and Ruddy [2008] 1 AC, and also referred to us the recent decision of this court in R v Beattie-Milligan [2019] EWCA Crim 2367. That was a case of a very different nature. This court addressed the question of delay in that case in the following useful terms:

We have considered this aspect of the case carefully. However, in contrast with the position in Beattie-Milligan, this judge did consider delay and the impact of delay. In making the remarks he did highlighted by Mr Kane, that to the effect that Mr Mills lived the period of delay in luxurious circumstances based on the proceeds of crime, he was not stating that he did not allow for any effect of delay on the overall sentence.

Properly read, in our view, his intention was to make clear that the degree of impact of that delay on this appellant was mitigated by the conditions under which he lived. It was mitigated by the luxury enjoyed by this appellant as a consequence of his offending.

We have considered the sentence overall. We have considered whether it was manifestly excessive in any sense. Although it was deliberately a severe sentence, in our view, it was not manifestly excessive. For those reasons the appeal in the case of Mills is dismissed.

We turn to the application of Bancroft. As we have indicated, Bancroft had no previous convictions, although there was significant bad character evidence in his case, as we have already indicated. The judge in addressing Bancroft for sentence again made the basis of sentence clear:

Bancroft was part of the corruption of Scourfield, although the relationship between Scourfield and Mills was already in place before Bancroft was introduced to Scourfield in 2003.

Bancroft played an active role in the corrupt inducements of Scourfield, granting the use of his villa in Portugal, procuring prostitutes and lap dancers and passing over envelopes

In addressing Bancroft the judge made clear that he regarded him as next in line to Mills and there can be no criticism of that ranking of the defendants.

A number of points are made on behalf of Bancroft. First of all, it is said that there can be no impact on his offence by delay. The court should have regard to the analogy of bribery. Bribery carries a 10 year maximum sentence, whereas the 7 years maximum for corruption means that such sentences should overall be scaled down. There is a complaint about totality. There is a complaint that there is a degree of overlap between count 1 and of the other counts. There is a clear complaint that there is insufficient distinction between Bancroft and Mills on count 1. There is a complaint advanced in relation to Mr Bancroft's health and age. He was 73 at sentence and is 76 now. He has diabetes, hypertension and has undergone considerable psychological stress. We have read the medical reports produced concerning Mr Bancroft, from Dr Bell at HMP Onley and we have seen some of the character evidence there. The personal material advanced has also been thought of by the court.

We have considered all of those points and in particular, the complaints articulated by Mr Reevell today. Bearing on the individual sentences given by the judge to the different counts there is no need for us to recapitulate the way it was put, but the essence is one can determine that on some counts there was very little, if any, adjustment for the overall role of this applicant.

However, we have considered the remarks of the judge in full. It is clear to us that the appropriate approach he took was to aim at an end point of sentence so that the total sentences reflected the proper differential between Mills and Bancroft.

One might say that intellectually the adjustment of sentences to gain that relationship between 15 years and 10 years, could have been done in a different way. But, in our view, that is neither here nor there.

This judge saw the trial, knew the offenders, gave close attention to their individual activities and clearly was taking an overall view on totality as to what the proper relationship between sentence for Mills and sentence for Bancroft should be. We have considered the position carefully. We have considered that there was sufficient in the arguments advanced by Mr Reevell to grant leave to appeal to him, and so here too we grant leave to appeal and representation. But for the reasons we have given, the appeal is dismissed.

We would like to thank you all for the clarity of what you have said.