- This is an application
for an order of Habeas Corpus in respect of the claimant's committal by District
Judge Pratt at Bow Street Magistrates' Court on 7th March 2001
in proceedings brought pursuant to a request for extradition made by the Kingdom
of Thailand (the government). This judgment is the judgment of the court,
to which both members of the court have made contributions.
Introduction.
- The claimant is a citizen
of the United States of America and of Thailand. He is 51 years of age, and
at the material time he was President and Chief Executive Officer of Finance
One Public Company Limited (Fin One). In 1996/97 it was the largest finance
house in Thailand, and the seven charges on which the claimant was committed
arise out of his management of that company in February 1997. The claimant
was arrested in London on 11th December 1999. There were difficulties
with the first order to proceed, and the Secretary of State issued another
order on 13th June 2000, as a result of which the hearing before
the District Judge took place on various days in December 2000, and in January
and February 2001. There were originally 45 charges all relating to the way
in which between November 1996 and February 1997 Fin One gave financial support
to two of its associated companies, Ekapak Ltd (Ekapak) and Consolidated Business
Administration Limited (CBA), and recorded or failed to record what it was
doing. Thirty-nine of the charges were in groups of three, each group relating
to a Bill of Exchange transaction. For each transaction there was –
(1) A
charge of false accounting in respect of the "offering sheet".
(2) A
similar charge in respect of the cheque release form and
(3) A
charge of theft.
- There were also four
charges in respect of promissory notes – three of theft and one of false accounting
– and two charges of publishing accounts with intent to deceive. Although
dishonesty was an essential ingredient in each charge, it was not and is not
alleged that the claimant acted with a view to any personal gain for himself,
or any one connected with him, and the allegations all relate to a period
of financial crisis in the Thai economy. The District Judge distinguished
between the earlier charges which he dismissed and the seven later charges
on which he committed on the basis that pre-February 1997 transactions reflected
a system which had become "a semi-acceptable norm known to everyone", including
the Bank of Thailand, so that it was impossible to impute dishonesty to the
claimant when what was done was not so regarded at the time. From 6th
February 1997 the District Judge found evidence from which it was possible
to impute dishonesty by focussing on the worsening financial position of the
companies and the actions of the claimant in relation thereto. The main contention
advanced by Mr Alun Jones QC for the claimant before us is that there was
no justification for the distinction drawn by the District Judge, and that
there was and is no sound basis for committing the claimant in respect of
any charge.
Relationship between companies.
- Government Regulations
in Thailand restricted cross ownership in the finance and securities industries,
and when Fin One wanted to take direct control of Securities One, a securities
firm with brokerage, trading and investment advisory licences, the Bank of
Thailand refused to sanction that course. Fin One then, with the tacit agreement
of the Bank, followed the course adopted by other banks and finance companies,
and constructed a scheme of indirect ownership of other companies which did
not offend the cross ownership provisions. Thus in 1982 CBA was incorporated
with shareholders reflecting precisely the share ownership in Fin One, and
CBA acquired 31 % of Securities One. In November 1989 Ekapak was incorporated
and, after restructuring, CBA held 54.66% of the shares of Ekapak, 9.9% were
held by Fin One, and the balance were held by the original shareholders of
Fin One. Fin One's shares were ordinary shares, the rest being preferred shares,
and thus Fin One had a controlling interest in Ekapak and was able to benefit
from most of the dividends paid by companies of which Ekapak was a shareholder
although it was not the legal owner of Ekapak. In a memorandum dated 11th
June 1993 Fin One said of Ekapak –
"Ekapak
is a holding company whose sole business is to hold shares in members of the
Finance One Group. At March 31, 1993, 90.10% of the share capital of Ekapak
was owned by certain of the principal shareholders of the Company and the
remainder of its share capital was owned by the Company. Through its direct
shareholding and its principal shareholders, the Company has effective voting
control over Ekapak."
- CBA was also an investment
holding company, and the situation was well known to the Bank of Thailand
as the regulator, as well as, of course, to the Board of Fin One and others
involved in the Thai financial market. Mr Tallon, who served on the board
of Fin One as a representative of BNP Paribas said that at one meeting between
representatives of Fin One and the Bank of Thailand the deputy governor of
the Bank indicated that –
"He would
like to see Fin One eventually wind down its shareholding in Ekapak and CBA
with the objective over time to close down Ekapak and CBA altogether. " Funding
Ekapak.
- Ekapak obtained funding
to buy assets and discharge liabilities by issuing bills of exchange to one
of four intermediate banks. The bills of exchange were payable by the issuer
after three months, and the bank involved advanced the amount on the face
of the bill less a commission. That bank then sold on without recourse to
Fin One, which in turn sold on with recourse at a further discount in the
secondary market, where the bills were handled by many well known financial
institutions. The bank would have added some value to the bill by validating
it – it could not thereafter be challenged as a forgery – but its real value
was that when it was endorsed by Fin One with recourse those in the market
knew that they had what was in effect a guarantee. If the issuer did not honour
the bill when it became due Fin One would honour it, and the standing of Fin
One was such that bills endorsed in the way that we have described were known
as Fin One paper, and were freely traded.
- In fact what usually
happened was that after three months, when a bill was presented to Ekapak
for payment, Ekapak simply issued a new bill in the same amount, and thus
was able to roll over the debt. Thus in reality the market was financing Ekapak
(and CBA) to purchase assets which Fin One controlled. All of the transactions
were properly recorded in the books of Ekapak, CBA and Fin One, which were
available for and were inspected by the Bank of Thailand, and before the District
Judge there were formal agreements to that effect.
- In December 1994 Fin
One, in response to an approach from the Bank of Thailand, laid down procedures
for, amongst other things, "Lending, Purchasing, Discounting and Re-discounting
of Bills and Creating Contingent Liabilities". Those procedures involved the
setting of credit limits, and the authorisation by the Board of the company
of persons to approve credits and credit limits. Four years earlier, in 1990,
Ekapak had been given a credit limit of 290 million Baht.
Bank of Thailand 1995 investigation.
- In August and September
1995 the Bank of Thailand made what appears to have been a routine investigation
of Fin One, which was then a very substantial company with assets of 120 billion
Baht (about US $4.8 billion) and annual profits of 2.5 billion Baht. The companies
in the Fin One group had 6000 employees.
- In February 1996 representatives
of Fin One met representatives of the Bank of Thailand to discuss what had
emerged from the investigation, and the minutes of that meeting show that
the Bank of Thailand knew precisely what was happening, however little it
cared for it. Paragraph 3.1 of the minutes reads –
"The company
re-discounted bills of exchange, endorsed by …. (intermediate banks) …. drawn
by Ekapak Company Limited and Consolidated Business Administration Co Ltd
(CBA) as drawers and drawees of the bills. The two companies have management
connection with Finance One, it directors, its managing level or its shareholders.
As of the examination date, the outstanding value of the bills was 1,602.0
million Baht and 506.0 million Baht respectively."
Paragraph
3.3 reads –
"We would
like an explanation for the lending activities via the banks as mentioned
in 3.1 in the manner of avoiding direct lendings to the subsidiaries of the
company."
The explanation
given was –
"Ekapak
Company Limited was a holding company, which invested in businesses where
investment was restricted by law. It was not the nominee of the company but
the company would monitor the investment. It (Ekapak) has high profit and
it increased its assets substantially including the market value of its shares
which was many times above its par value and much higher than the capital
value. As for the case of its discounting the purchase of the bills of exchange,
if the company had given direct loan (as to the debtor), the Bank might have
made a remark that a substantially high sum of money had been lent to an affiliated
business. However, the company will not increase its discounting purchase
of bills of exchange in this manner again and will, at the same time, gradually
reduce the scope of its discounting purchase of bills of exchange."
- The last sentence in
particular was originally mistranslated, and the correction was made before
this case was considered by the District Judge. On the basis of the mistranslation
it was originally suggested that Fin One had not honoured its undertaking,
but there is no evidence to show, one way of the other, whether it complied
with the undertaking when properly understood.
- In July 1996 the Bank
of Thailand wrote to the chairman of the board of Fin One to advise the company
formally of matters arising out of the 1995 examination which could be improved.
Part of the letter reads –
"It appears
that your company acquired bills of exchange discounted from commercial banks.
Consolidated Business Administration Co Ltd and Ekapak Ltd of which businesses
are related to your company, its directors, executives or shareholders are
the drawees of these bills of exchange in an amount of Baht 506.0 million
and Baht 1,757.3 million respectively. This could be deemed loans granted
to the said two debtors."
Reference
was then made to the undertaking given in February, and Fin One was asked
to comply with the Bank's letter of 28th April 1981 in relation
to "the lending and giving aval of bills to the businesses which relate to
the directors, management, employees and shareholders of the company." Again
we have seen no clear evidence of any breach of that requirement. Approval
of Credit.
- Internally Fin One had
procedures which it operated before agreeing to extend credit to any company
or individual, and those procedures were operated in relation to bills of
exchange. The procedures are set out in an Approval Memorandum dated 14th
October 1996 which was still current in February 1997. It is clear from the
Memorandum that in certain cases the approval of the President (i.e. the present
claimant) was required whereas in other circumstances approval could be given
at a lower level. In particular his approval was required if the amount was
very large, or the approved credit line had expired by more than six months,
or was past its review date by more than six months. It is common ground that
in the relevant period there was no formal assessment made of the credit-worthiness
of Ekapak, and it was not given a fresh credit line, but, as we shall see,
each transaction which was the subject matter of a charge was approved by
the claimant and thus met Fin One's own approval requirements. On behalf of
the claimant it is said with force that it was unreal to expect there to have
been a formal credit assessment and consideration of a credit line each time
it became expedient for Fin One to help Ekapak, having regard to the close
association which existed between the two companies.
1996-97 the Falling Market.
- During 1996 the Thai
economy was in recession, and the Market value of the shares held by Ekapak
and CBA declined, to a point where it was clear that Ekapak and CBA could
not, without the support of Fin One, honour their debts as they fell due,
but nevertheless Ekapak and CBA did continue to function commercially because
they were part of the Fin One group. In reality, Mr Jones submits, Fin One
had no choice. It had to support Ekapak and CBA because, as Mr Tallon puts
it in his statement –
"Those
institutions holding Ekapak and CBA Bills of Exchange would regard any liquidity
problems and defaults by Ekapak and CBA as liquidity problems and defaults
by Fin One."
- The accounts of Ekapak
for the year ended 31st October 1996 show a net loss of 304,292,134
Baht but, as Mr Jones points out, if Ekapak, CBA and Fin One had been treated
as a group the consolidated accounts would have shown a profit of about 12.3
billion Baht. Mr Edmund Lawson QC, for the government, is rightly cautious
of that approach because, as he points out, this was not in fact a trading
group, and if a group were to be established it might logically have to include
the other companies which would have produced figures in the consolidated
accounts very different from those on which Mr Jones relies.
- Nevertheless the fact
is that at the end of 1996 Fin One was itself still quite a healthy looking
company with, according to the accounts for the year ended 31st
December 1996, which were published on 14th February 1997, a net
income of 1,460,048,065 Baht. One of the issues which arises at a later stage
is whether those accounts made proper provision for liabilities which would
arise if Ekapak and/or CBA were unable to honour outstanding bills of exchange,
and if not whether they should have done so, but even if those contingent
liabilities were not and should have been taken into account there would still
have been a significant trading profit, albeit only about 35% of the figure
recorded.
Prospects for 1997.
- In retrospect 1997 was
a disastrous year for the Thai economy. The SET index started at over 800
points, and by the end of the year it had fallen below 400 points, but at
the start of the year not everyone was pessimistic. A Morgan Stanley investment
research report, said –
"Many
of the problems besetting the Thai market today will dissipate over the coming
months, leading to a potentially stronger performance next year."
But it
was also cautious, saying that there was no pressure to rush into the Thai
market because the picture is not encouraging, and pointing out that the asset
quality of banks had clearly deteriorated.
- The managing director
of ING Barings predicted a 100 point increase over the first six months of
1997, but suggested avoiding sectors such as Finance and Banking.
- Perhaps the most optimistic
note was sounded by the Bank of Thailand itself which, in its quarterly report,
said –
"In 1997
the Thai economy is expected to achieve stronger growth of an estimated 7.1
%." Outline case against the claimant, and his response.
- Having set the scene
we are now about to turn to February 1997 and the transactions giving rise
to the charges on which the claimant was committed, so it is worth looking
at the way that the case is put against him. The essential case, as formulated
in paragraphs 7 and 9 of Mr Lawson's skeleton argument, is that by authorising
the making of advances to or for the benefit of CBA and Ekapak by way of what
are described as "disguised loans" where there was no reasonable prospect
of repayment, he misappropriated Fin One's money. CBA and Ekapak were plainly
insolvent and, rather than acknowledging the reality, he poured good money
after bad. On behalf of the claimant it is said that even if, with the benefit
of hindsight, it is possible to say that the claimant made a commercial error,
that is a long way short of saying that he was dishonest and there had to
be at least prima facie evidence of dishonesty if he was to be properly
committed by the District Judge.
Charge 14.
- In chronological order
the first transaction to be considered is that giving rise to charge 14, a
charge of theft.
- Ekapak had obtained money
from Thai Investment and Securities Ltd, a public finance company, secured
by a Bill of Exchange for 30 million Baht issued in November 1996, which was
due to mature on 3rd February 1997. On that date Fin One advanced
the sum necessary to meet the liability. It was not a Bill of Exchange which
Fin One had endorsed with recourse, so there was no immediate contingent liability
so far as Fin One was concerned, but, for the reason already given, Fin One
had an obvious interest in protecting the financial credibility of Ekapak.
The offering sheet shows that the claimant had to give his approval because
Ekapak's 1990 limited credit line had expired, and was long past its review
date.
- On 6th February
1997, three days after the transaction giving rise to charge 14, the claimant
wrote to the Bank of Thailand seeking financial help. As Mr Jones makes clear,
the help was sought not just for Fin One but also for the Fin One group, and
the forecast of forthcoming liabilities specifically included two Ekapak liabilities
later in February, which now form the subject matter of charges 13.3 and 16.
- Mr Lawson submits that
the District Judge was right to say that from early February 1997 onwards
Fin One was in a dire financial situation with huge liquidity problems, and
Mr Lawson also invited our attention to the claimant's own affidavit in these
proceedings. We consider that factually the District Judge was correct, but
that does not of itself demonstrate dishonesty, and no doubt the claimant
could if required have justified his actions to the board of Fin One or to
its shareholders as a serious attempt to keep alive associated companies which,
if they collapsed, would be likely to undermine Fin One itself.
Charges 15.1 and 15.2.
- Charge 15.1 is another
alleged theft. It involves no Bill of Exchange. Ekapak had a line of credit
with Peregrine Securities, and had issued promissory notes to Peregrine Securities.
On 6th February 1997 Peregrine Securities relied on those promissory
notes to demand 20 million Baht. Fin One then accepted a promissory note from
Ekapak and advanced the money necessary to enable Ekapak to meet its liability
to Peregrine Securities. The claimant authorised the transaction, and the
rationale can only have been the same as it was in relation to charge 14.
- On the cheque release
form dated 6th February 1997 there is a tick against the printed
words "loan documents are completed and verified." Mr Lawson submits that
was a lie, because there were no loan documents. For what it was worth the
new promissory note is dated 7th February, the following day, which
is also the date on the cheque, so the cheque release form is said in the
charge to be "misleading, false or deceptive in a material particular in that
it purported to show that the loan documents were completed and verified."
We return to look in more detail at charge 15.2 later in this judgment.
Charges 17 and 18.
- On 14th February
1997 the Fin One accounts for the year ended 31st December 1996
were published, it is contended that those accounts "failed to record Ekapak
and CBA as debtors". The criticism, as we understand it, relates to bills
of exchange issued by those companies prior to 31st December 1996,
but which at that date had not yet matured. It is difficult to describe any
one as a debtor of Fin One whose only current obligation is to pay a third
party at some future date, even if it is thought unlikely that he will pay.
In that event the holder of a Bill of Exchange will be able to look to Fin
One for payment, but that, as it seems to us, can only be regarded as a contingent
liability of Fin One. In cross examination by Mr Jones, the accountant for
the government, Mr Hobbs, conceded that two figures in the accounts, those
in respect of Loans and Receivables, and in respect of Liabilities under Commercial
Papers Sold, could in fact contain appropriate amounts in respect of contingent
liabilities, and if they did so that would have accorded with United Kingdom
accounting practice up to 1994. We return to consider charges 17 and 18 later
in this judgment.
Charge 13.3.
- On 18th February
1997 one of the Ekapak Bills of Exchange matured, and that liability was rolled
over by issuing a fresh Bill of Exchange in the way described earlier in this
judgment. As Mr Lawson points out, the intermediate bank was never at risk
because it never advanced money to Ekapak until it was paid by Fin One, but,
as Mr Jones submits, Fin One lost nothing by this transaction. If there had
been no rollover it would have had to honour its obligations under the existing
Bill of Exchange which Ekapak was unable to meet. It is difficult therefore
to understand how this can be regarded as a theft, and even more difficult
to understand how the District Judge was able to find sufficient evidence
of dishonesty in relation to the charge of theft, but not in relation to two
associated charges of false accounting, which referred to the offering sheet
and cheque release form which triggered this transaction (charges 13.1 and
13.2).
- On 20th February
1997, two days after the transaction which forms the subject matter of charge
13.3 the claimant was again seeking assistance from the Financial Institutions
Development Fund of the Bank of Thailand. As the District Judge pointed out,
the series of requests by Fin One were of ever increasing amounts.
Charge 16.
- On 25th February
1997 another Ekapak Bill of Exchange was due to mature. By this stage, Mr
Jones submits, it was clear that the secondary market for bills of exchange
had fallen away because of the general financial situation, so no attempt
was made to roll over the liability. Fin One simply repurchased the Bill of
Exchange and raised a claim against Ekapak in respect of which Fin One accepted
what Mr Lawson described as a worthless promissory note. Here again, as Mr
Jones points out, it would seem that Fin One had little option. The existing
Bill of Exchange established the liability. If Ekapak did not meet its liability
as issuer of the Bill of Exchange then Fin One would have to meet the liability,
having endorsed the Bill with recourse. In those circumstances it is difficult
to understand what basis there was for a charge of theft.
- Thereafter Fin One sought
and obtained further support from the Bank of Thailand. By the end of March
the Fund had advanced 20,500 million Baht, all but 8 million being advanced
in 1997, and, as Mr Jones points out, the sums in the charges in respect of
which the claimant was committed are but a tiny fraction of that total sum.
Theft charges – alleged errors.
- Mr Jones submits that
when dealing with the charges of theft the District Judge made four significant
errors. First he detected in February 1997 a significant change of procedure
– the omission, save in one case (charge 13.3) – of an intermediate bank.
But, as Mr Jones points out, three out of the four February transactions were
not roll over transactions at all. They were responses to the prevailing situation,
Fin One supporting Ekapak as and when the need arose.
- The second error was
to conclude that the provision of funds by whatever means to allow Ekapak
to meet liabilities in respect of Bills of Exchange which Fin One had endorsed
"with recourse" could be dishonest. Fin One simply had to meet those liabilities
(charges 13.3 and 16) if Ekapak did not do so.
- The third error to which
Mr Jones invites our attention is what he contends to be the judge's belief
that in dealing with the relevant transactions the claimant departed from
Fin One's standard procedures. We are not satisfied that the judge did make
that error, nor are we satisfied as to the fourth alleged error, namely that
the District Judge misunderstood the financial circumstances of Fin One, because
in our judgment the position of Fin One in early 1997 was dire, but what we
cannot find in relation to any of the charges of theft is prima facie evidence
of dishonesty.
The identification point.
- Our conclusion in relation
to dishonesty makes it unnecessary for us to consider in any detail Mr Jones'
further submission that in the circumstances of this case the actions of the
claimant which are relied upon in relation to the charges of theft were actions
of Fin One, and therefore the charges cannot succeed because a company cannot
steal from itself (see Tesco v Nattrass [1972] AC 53 and subsequent cases
to which our attention was invited). Suffice to say that in our judgment the
principle on which Mr Jones and Mr Caplan QC place some reliance cannot be
applied where what is alleged in the charge is that someone who is himself
the directing mind and will of the company has committed a crime against the
company (see the speech of Lord Browne-Wilkinson in R v Gomez [1993] AC 442
at 496 F). The position of a defendant within a company from which he is alleged
to have stolen money may, of course, as in the present case, be highly relevant
in relation to the question of dishonesty and, as Mr Lawson accepted, although
in general dishonesty is in the end a question for a jury, a case cannot properly
be committed for trial unless there is evidence from which dishonesty could
reasonably be inferred.
Charge 15.2
- We return now to Charge
15.2, which is a false accounting charge. It reads as follows:-
"Pin Chakkaphak
on or about the 6th day of February 1997, dishonestly and with a view to gain
for himself or another or with intent to cause loss to another falsified a
document required for an accounting purpose namely a cheque release form,
by making or concurring in making an entry thereon which was or may have been
misleading, false or deceptive in a material particular in that it purported
to show that the loan documents were completed and verified"
- As indicated above this
charge is related to charge 15.1 insofar as it concerns the cheque release
form for the cheque for 20 million Baht paid by Fin One to Ekapak on 7 February
1997 which is the subject matter of charge 15.1.
- Both the offering sheet
and the cheque release form are internal Fin One documents which have to be
approved by an authorised officer of the company. In the case of this transaction,
the cheque release form was dated 6 February 1997. There is a tick in the
box against the words "The loan documents are completed and verified." There
is no tick in the box against the words "The loan documents are incompleted."
The offering sheet, the cheque and the promissory note relating to this transaction
are all dated 7 February 1997. The offering sheet was signed by the claimant.
There was no evidence that he signed the cheque release form but it is accepted
that he would have known of the transaction.
- The District Judge, in
concluding that there was a prima facie case on charge 15.2, attached
importance to the fact that the cheque release form was dated 6 February 1997
and that it confirmed that all loan documents were verified although the promissory
note was not dated until 7 February 1997.
- Mr Lawson told us that
the government relies on the wider point that the cheque release form was
false because it stated that the loan documents were completed and verified
when none had been approved by the claimant at that date because in reality
there were no such documents. He also made the point that the cheque release
form had been completed differently in this case from the other cases, particularly
the cheque release form for the 30 million Baht which is the subject of the
theft charge in charge 14 and which was also advanced in return for a promissory
note. In those other cases, the box against the words "The loan documents
are incompleted" had been ticked ,followed by words of explanation as to what
remained to be done.
- Mr Jones submitted, firstly,
that there was no evidence what the loan documents referred to in the cheque
release form consist of, secondly that if, which was denied, the document
was false or misleading, it was not false or misleading in a material particular
and, thirdly, that there was no evidence of dishonesty or of anyone being
deceived
- The two witnesses from
Fin One who dealt with this document were Mr Prasert Shinsuvapla, who at the
time worked in the Credit Department, and Ms Voraporn Turongsomboon who worked
in the Operations Section. They described the procedure that would have been
involved. Neither they, nor any other witness, explained why the cheque release
form was dated and completed in the way that it was, nor did they remark that
there was anything unusual about it. They simply did not comment on it at
all. It does not appear from the documents to be something to which anyone
attached any importance. No witness suggested that there was any dishonesty
or ulterior motive. This was an internal document which, together with other
documents, would, according to Ms Voraporn, be kept for future review by an
internal and external auditor. As Mr Jones submits, the evidence is silent
as to the loan documents to which anyone completing the form should have referred.
If the promissory note would have sufficed then the evidence of falsity is
confined to the dates, but given their proximity was this a matter of any
significance? There is no evidence that anybody was misled or deceived by
the document. Whilst it would appear that the document was incorrectly completed,
there is no evidence that there was any dishonesty involved, nor, in our view,
could any dishonesty properly be inferred. In our judgment, there was not
a case to answer on charge 15.2 and the District Judge was in error in committing
the claimant on that charge.
Charges 17 and 18
- Charges 17 and 18 are
charges of publishing false financial statements. They allege as follows:-
"17. PC
on or about the 14th day of February 1997, being an officer or purporting
to act as an officer of a body corporate called Fin One did publish or concur
in publishing a written account namely consolidated financial statements dated
31.12.96 which to his knowledge was or might be misleading false or deceptive
in a material particular, in that it failed to record Ekapak and CBA as debtors
of Fin One thus reducing the bad debt provision and inflating the net income/profit
of Fin One by 69% with intent thereby to deceive members and/or creditors
of the said body corporate about its affairs.
18. PC
on or about the 14th day of February 1997, being an officer or purporting
to act as an officer of a body corporate called Fin One did publish or concur
in publishing a written account namely financial statements dated 31.12.96
which to his knowledge was or might be misleading false or deceptive in a
material particular, in that it failed to record Ekapak and CBA as debtors
thus reducing the bad debt provision and inflating the net income/profit of
Fin One by 67% with intent thereby to deceive members and/or creditors of
the said body corporate about its affairs"
- The relevant provision
of domestic law is section 19(1) of the Theft Act 1968, which provides that
where an officer of a body corporate, with intent to deceive members or creditors
of that body about its affairs, publishes or concurs in publishing a written
statement or account which to his knowledge is or may be misleading false
or deceptive in a material particular he commits an offence.
- Charge 17 refers to the
consolidated accounts and charge 18 refers to Fin One's own accounts, both
for the year ending 31 December 1996. The allegation is that there was a failure
to record Ekapak and CBA as debtors of Fin One in those accounts, thereby
inflating profitability by 69% in the case of the consolidated accounts and
by 67% in the case of Fin One's accounts. These charges stand or fall together.
- The government's case
is that Fin One's accounts made no provision for the bad debts of Ekapak and
CBA. Reliance was placed on the first statement of Ms Somboon Anurootnatesiri,
the Vice-President of Fin One's Accounting Department which is responsible
for making Fin One's financial statements. She said in her first statement
that "Fin One did not set aside the fund for doubtful debts for loans given
to Ekapak and CBA." Mr Lawson relied on the fact that the accounts expressly
included loans which, he said, are debts but do not include the debts of Ekapak
or CBA. He referred to Article 4 of the relevant regulations which states:-
"The company
must record the purchasing discounting or rediscounting of bills as lending
to bearer, except as prescribed otherwise by the Bank of Thailand."
- Mr Lawson submitted that
the fact that Thai regulations required the intermediary banks to be recorded
in Fin One's records as debtors did not relieve Fin One of the obligation
to include the bad debts of Ekapak and CBA in the statutory accounts.
- The District Judge heard
evidence from experts on both sides, Mr Lawler for the claimant and Mr Hobbs
for the government. Mr Hobbs, as we have said, accepted in cross-examination
that it is possible that the loans may be included within the figures for
contingent liabilities. The District Judge took the view that that was a matter
for the trial. He expressed himself satisfied that an apparent failure to
make any provision for Ekapak or CBA as debtors of Fin One was or might be
misleading, false or deceptive and that it disclosed a prima facie case on
both charges.
- The claimant, however,
had obtained a further statement from Ms Somboon dated 8 December 2000 in
which she stated:-
"The Credit
Administration Department prepared the working papers on the provisioning
amounts for Fin One for year end 1996. The name of Ekapak was on the list
for 1997, but in 1996 there was no information on Ekapak and no special provisioning
for Ekapak and CBA. The reason for this was because the bills of exchange
issued by Ekapak and CBA in December 1996 had not matured. So far as the booking
was concerned they were not in default. In addition, no updated financial
statements of Ekapak and CBA were available. My recollection is that the financial
statements of Ekapak and CBA did not become available until March 1997.
In our
opinion the accounts of Fin One for the year end 1996 were kept in a proper
way and conformed with generally accepted accounting principles and properly
reflected Fin One's financial position as at the date they were published."
- Mr Jones submitted that
a critical question was whether the possible losses were reflected in the
accounts. The answer to that question, he said, was that it is possible that
they were within the figures for contingent liabilities, which he claimed
accorded with the nature of the liability. It was pointed out that Mr Hobb's
statement was not available at the time of Ms Somboon's second statement and
that neither party had therefore asked her whether the potential losses were
included in the contingent liabilities. Reliance was also placed on the fact
that the accounts had been given a clean audit certificate. There had been
no suggestion by the auditor that anything had been concealed from him. Mr
Jones submitted that on the correct committal test, no reasonable tribunal
could properly have convicted the claimant on the evidence which showed that
it was not possible to say whether the contingent liabilities arising out
of transactions involving Ekapak and CBA had been included in the accounts.
- It is necessary to bear
in mind that charges 17 and 18 allege a failure to record Ekapak and CBA as
debtors in the accounts. Ms Somboon's Department is the Department responsible
for compiling the accounts. Her evidence is, in effect, that there were not
any debts from Ekapak or CBA as at December 1996 because the Bills of Exchange
had not matured by that time and they were not in default. Her evidence, apparently
supported by the auditor, is that the accounts were kept in a proper way,
conformed with generally accepted accounting principles and properly reflected
Fin One's financial position as at the date when they were published. In the
light of that evidence it is difficult to see how a reasonable tribunal could
properly convict on charges 17 and 18. That is particularly so in the light
of the evidence of Mr Hobbs, the government's expert, that it is possible
that the losses may be included in the contingent liabilities. It must also
be borne in mind that in order to prove these charges it is necessary to prove
–
"1) that
the claimant knew the accounts to be misleading false or deceptive in a material
particular, and –
2) that
he intended to deceive."
We can
find no evidence of that.
- Bearing all those matters
in mind we take the view that there was insufficient evidence upon which a
tribunal, properly directed, could convict the claimant on charges 17 and
18. There was not, therefore, a case to answer on those charges and, in our
judgment, the District Judge ought not to have committed the claimant on them..
Other matters
- We should add that Mr
Jones, relying on the case of R v Governor of Pentonville Prison, ex parte
Kirby [1979] 1 WLR 541, also argued that the accounts of Fin One, Ekapak and
CBA were inadmissible because their contents were hearsay. He submitted that
section 24 of the Criminal Justice Act 1988 could not be relied upon to render
admissible any statements of opinion or judgment contained in those accounts.
However, as we have decided that there is no case for the claimant to answer
on charges 17 and 18 assuming that the accounts are admissible, it is not
necessary to decide those issues relating to the admissibility of the accounts.
- There was a further issue
raised by Mr Jones to the effect that the Secretary of State's order to proceed
in this case wrongly identified the extradition crimes of false accounting
and publishing false statements as being crimes of which the claimant was
accused in Thailand. It was submitted that charges 15.2, 17 and 18 do not
reflect any accusations made in Thailand. However, in view of our conclusion
that there is no case for the claimant to answer on charges 15.2, 17 and 18,
it is not necessary for us to decide that issue either.
Conclusion
- For those reasons we
set aside the decision of the District Judge, and grant the relief sought.
