Vehicle Operator Services Agency v FM Conway Ltd

MR JUSTICE IRWIN: This is a prosecutor's appeal lodged by the Vehicle and Operator Services Agency (VOSA) against a decision made by the Bexley Magistrates' Court, on 5 October 2010, to dismiss a case taken by the agency against FM Conway Ltd. The respondent company, FM Conway, was charged with an offence under section 38 of the Goods Vehicles (Licensing of Operators) Act 1995. It was alleged that the respondent company had lent and allowed Kevin Harris (the subcontractor) to use an operator's licence belonging to the respondent company with intent to deceive on 14 December 2009.

The respondent company argued successfully at the close of the prosecution case that those holding positions of authority within companies would not be responsible for the actions and omissions of their staff for the purposes of prosecutions such as this, unless they were directors or company secretaries, office holders, or - in the shorthand deployed in the authorities - "the brains of the company". The prosecutor's case was then dismissed. It is the appellant's submission that that ruling should be overturned.

The appeal proceeds, of course, by way of case stated. The facts as found by the magistrates were summarised by them as follows:

So those were the facts as found by the Magistrates' Court. The relevant parts of section 38 of the Goods Vehicles (Licensing of Operators) Act 1995 ("the Act") read as follows:

It was argued before the Justices that the offence concerned was an offence of strict liability. It was also argued that there was an obligation on the prosecutor (this was an argument from the respondent) to lay evidence to show that the company had formed the necessary intent to deceive. Those two contrary propositions were advanced before the magistrates.

In the course of the helpful and elegantly drafted statement of the case coming from the magistrates, they reached the following conclusions:

Both party's counsel before me have put the matter with admirable clarity. Miss Mostafa for the appellant contends that the facts here were sufficient to show that Mr Hedderman was in charge of this aspect of the company's business, that this aspect of the company's business had been delegated to him. She does not suggest that he was a shadow director of the company, but rather her case rests on the proposition that he was a senior employee in charge of this area, or sufficiently in charge of this area of the company's operations to constitute, for present purposes, "the brains" of the company.

Mr Mott for the respondent contends that is not enough. Clearly, he says that if a director of the company properly constituted, or another officer of the company, knew of the misuse of the badge, then that would be evidence sufficient to found a conviction. Clearly, he also concedes if an individual is acting as a shadow director, meaning that they have such a degree of control over the affairs of the company that they are to be regarded by operation of law as a director even though not properly appointed, then if such a person has the requisite knowledge so as to form the intent, that intent could be fixed upon the company.

I do not take Mr Mott to do more than make the concession that those situations could arise depending on the facts of a given case. He was not making the concession in relation to this case, but a concession for the purposes of illustration only.

Mr Mott goes on to say that the requirement is that the mind of the company should go with this offence, particularly where there is a specific intent. He also commented in the course of argument that the evidence disclosed by the magistrates might indeed not have been enough to reach a proper conclusion that there was the necessary intent on the part even of Mr Hedderman himself, since the nature of the admission by Mr Hedderman in his letter was of a mistake. Of course since the prosecution was stopped at the close of the prosecution case, it follows that Mr Hedderman would not have given any evidence before the magistrates. Hence this point does not arise on this appeal.

Against the backcloth of those facts I turn to the relevant authorities. It is remarkable that there is a cluster of three cases, all now more than 40 years old and all close in time. The first is the case of Hill & Sons (Botley & Denmead) Ltd v the Chief Constable of Hampshire [1972] RTR 29. That was a case concerning regulation 79(1) of the Motor Vehicles (Construction and Use) Regulations 1969. The relevant part of the regulation provided:

The appellant in that case was a company of haulage contractors. One of their lorries was involved in an accident because of an un-lubricated handbrake mechanism. There was a conviction. They appealed the conviction to Quarter Sessions. The conviction was sustained and the matter came before the Divisional Court by way of further appeal. The facts were that the managing director of the appellant company had established a regular four weekly maintenance system. The foreman fitter in charge of the team was of experienced maintenance assistance and 35 years experience in the industry. The records showed that the vehicle service by an assistant about a month before the accident included lubrication of the handbrake, but it had not in fact been lubricated and the record was faulty.

The magistrates and then Quarter Sessions found that the company was nonetheless reckless in making no check, and had constructive knowledge of the defective lubrication of the brake by their responsible officers "in the sense of being reckless and closing their eyes to knowledge of defects in the vehicle". On that basis the appeal to Quarter Sessions was dismissed.

The Divisional Court allowed the appeal from the decision by Quarter Sessions. The principal ground was that the conclusion that the company had been reckless was not justified merely because the vehicle's examination was not scheduled to take place more frequently than at four-weekly intervals. However, in the course of the case Lord Widgery LCJ made remarks about the necessary proof for the mind of a company to be affected by an offence other than an offence of strict liability. The relevant remarks are to be found at page 34.

After dealing with, and quoting from, some of an earlier authority, Magna Plant Ltd v Mitchell [1966] 110 SJ 349, Lord Widgery made a further reference to a passage from the judgment of Lord Parker CJ in that case, whom he quoted as saying as follows:

The next case is Ross Hillman Ltd v Bond [1974] RTR 279. This again was a decision of the Divisional Court. In this instance Lord Widgery CJ was sitting with MacKenna and May JJ. The case was concerned with a similar provision: section 40(5) of the Road Traffic Act 1972, which provides that:

He then went on to analyse the relevant statutory provision in Smee and to rely on the conclusion in Smee that using-type offences could be committed without proof of knowledge. His judgment goes on quoting from Hill and Sons (Botley and Dunmead) Ltd: the passage which I have already quoted. At page 288 D to F the judge quotes the authority of Smee concluding that the two words "causes" and "permits" were placed in such close juxtaposition in section 40(5)(b) that:

Having decided the issue arising in that case, that both causing and permitting requires mens rea, although obviously of somewhat different kind, May J then concluded that in reliance upon Hill v Hampshire it was impossible to fix a company with liability in the absence of proof that a director or company officer held the requisite intent.

The third case from the 1970s is P Lowery & Sons Ltd v Wark [1975] RTR 45. This too was a decision of the Divisional Court headed by Lord Widgery CJ, on this occasion sitting with Ashworth and Bristow JJ. The court there too was concerned with the same section of the Road Traffic Act 1972, section 40(5)(b). The court there too held, by the same logic and relying upon the same line of authority, that causing and permitting both required mens rea, and that proof of mens rea in relation to a company required knowledge of the facts rendering the user unlawful to be attached to those who could be fairly described as the "brains" of the company. This case is, in effect, a straight application of Ross Hillman Ltd v Bond.

Curiously, there appear to be no further reported cases in reliance on that strain of authority, or bearing on the point at issue, until Cambridgeshire County Council v Associated Lead Mills Ltd [2005] EWHC 1627 (Admin), [2006] RTR 8. The Divisional Court consisting of Kennedy LJ and Walker J considered the parallel provisions of section 5(1) of the Road Traffic Regulation Act 1984. That section concerns an offence that is recited in the section as follows:

It is of interest that their Lordships disagreed as to the outcome of the case, but they did agree that where a mental element was required of an offence, then a company could not be fixed by that mens rea in the absence of evidence that established that those with real authority within the company held the relevant mens rea. The Justices in that case made findings which included the following:

In his judgment Kennedy LJ, who in the event was in the minority, dissented with Walker J and in the circumstances of that case therefore disagreed with the outcome. He said this:

In the course of his judgment Walker J cited Ross Hillman Ltd v Bond and quoted the relevant passages from it, although the principal purpose of his quotation was to establish his view of the necessary mental element in the case before him. It is clear that, by implication, he agreed with the requirement that a company could only acquire the necessary mens rea consistently with the observations of the court in Ross Hillman Ltd.

Indebted as I am to the argument by both counsel, I have also, since rising to consider this judgment, turned to the 13th Edition of Smith and Hogan's Criminal Law. Usefully at chapter 15.4 the authors of Smith and Hogan consider the area of corporate manslaughter, to use the shorthand. It will be recalled that the necessary mens rea for manslaughter may be as limited or low a threshold as gross negligence, on first principles a lower threshold in terms of mens rea than a specific statutory intent to deceive.

In their helpful summary of the history of the development of the law of corporate manslaughter, the editors of Smith and Hogan tell us the following:

In discussion of the laws, which predated the Act, the editors of Smith and Hogan go on to say this:

It seems to me that those passages from Smith and Hogan are instructive, because the ingredients they spell out, as necessary for an offence of manslaughter to be brought home against a company, are entirely consistent with the run of authorities cited in this very different area of criminal law. It seems to me that that reinforces the message to be drawn from those authorities. Had it been otherwise, it seems to me that the impetus towards the development of the law so as to make companies responsible for offences of much greater harm, but lower requirement in mens rea, would have carried the law farther, so as to render the Act unnecessary.

I return to the question in this case: is there a requirement before a specific intent of this kind can be proved against a company, to demonstrate that a director or office holder, whether fully appointed or by operation of law because of assumed control, had the necessary mens rea? None of the historic cases have dealt with the situation where responsibility for a whole operational area has been delegated to a senior employee who is not an officer of the company, or a formal legally appointed director.

With that caveat in mind, I remind myself that we are here dealing with criminal liability, that therefore the policy of the law where there is any ambiguity is to sustain a narrow reading of the law. I would therefore say that, even where there has been delegation of a significant area of operations to a senior employee, there is still a requirement that those with general direction of the company should be fixed with the necessary criminal intention, before the offence can be brought home against the company. That must be particularly so where the necessary intent is an intent to deceive.

I return therefore to the three questions set out for the opinion of this court by the magistrates.

MR MOTT: My Lord, the question of costs rears its ugly head as ever. I do not know whether your Lordship wishes, in accordance with CPR 52, to carry out a summary assessment of the respondent's costs, or whether your Lordship is content, as it were, to make a more general order that the appellant should pay the respondent's costs to be the subject of a detailed assessment in the form of an agreement.

MR JUSTICE IRWIN: I will not say at this stage that I will not make an assessment, but do you have a statement of costs for me to look at?

MR MOTT: I do, my Lord.

MR JUSTICE IRWIN: Have you had a chance to look at it?

MISS MOSTAFA: My Lord, I have just been given it.

MR JUSTICE IRWIN: You have not seen it before.

MISS MOSTAFA: No. (Same-handed).

MR MOTT: Just by way of background, my Lord, your Lordship may not be aware that in the present case what took place was that following the dismissal of the prosecution below, as a result of a submission, the learned clerk to the Justices then drew up a draft case stated and sent it out to the parties for any comments, observations or refining points to be made and invited submissions. Submissions were then made before the final case stated was produced. So when one looks over the page in relation to disbursements, and in relation to those fees which relate to my input, my Lord, that is what those figures there set out relate to.

I do not know whether your Lordship, in what seems to be the time honoured way of dealing with it, wishes to hear from my learned friend, Miss Mostafa, first.

MR JUSTICE IRWIN: I think that is sensible. As long as she feels she has had enough time to think about it. I see you do not have anyone with you.

MISS MOSTAFA: That is the difficulty I have. I do not have an instructing solicitor, who I am afraid is abroad at the moment, nor do I have anyone from the Vehicle and Operator Services Agency who will be landed with the bill. I make the following observations: in view of your Lordship's ruling I accept that we would have to pay costs, however I have not really had an opportunity to discuss these costs with those who instruct me and any representations they would wish to make in relation to these costs. May I ask for time? I would have to ask that the costs position is reserved until there can be an agreement in terms of costs.

MR JUSTICE IRWIN: It is open to you to agree. What I will say is this: I think if I am not to make a summary assessment, which on a case like this I would normally if you had had time to take instructions, but I do not want to put you in a difficult position, the alternative is to order the respondent's costs to be assessed, if not agreed, but with an interim payment. I do not see why the respondents should be kept out of any of their money for what will be quite a long period while the assessment takes place. Miss Mostafa, given what you have said, if I made that order, but order that there should be an interim payment of £4,000 within 28 days, it gives plenty of margin for some discussion, and let us hope there can be an agreement. Is that acceptable?

MISS MOSTAFA: My Lord, thank you very much. That gives me time to speak to my instructing solicitors. Hopefully there will just be agreement.

MR JUSTICE IRWIN: The respondent's costs to be assessed, if not agreed and £4,000 by way of interim payment of costs to be paid within 28 days of today. Thank you both very much.

MR MOTT: I am grateful, my Lord.