APPEAL COURT, HIGH COURT OF JUSTICIARY
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Lord Johnston
Lord Kingarth
Lord Penrose
|
[2006]
HCJAC 69
Appeal
No: XC215/03
OPINION OF THE COURT
delivered by LORD JOHNSTON
in
NOTE OF APPEAL AGAINST
CONVICTION and SENTENCE
by
IAN GEORGE McKENZIE COWPER
Appellant;
against
HER MAJESTY'S ADVOCATE
Respondent:
_______
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Act: McBride, Q.C., Jones, Q.C.; BCKM, Edinburgh
Alt: Murphy, Q.C., A.D.; Crown Agent
14 September 2006
[1] On 8
August 2002
at the High Court in Glasgow the appellant was found guilty by a
majority verdict of charge (1) on the indictment as amended, which is in the
following terms:
"(1) between
1 November 1990 and 31 December 1995, both dates inclusive, at branches of the
Trustee Savings Bank at 200 Morningside Road, Edinburgh and at 128-130 High
Street, Musselburgh, at 76 Ravelston Dykes, Edinburgh, at Casa Moraira, Jesus
and at Anda Santa Evlalia 17-1, both Ibiza, Spain and elsewhere in the United
Kingdom and Spain you IAN GEORGE McKENZIE COWPER whilst in the employment of
Viajes Cresta SA, a subsidiary company of Thomson's Tour Operations Limited,
Greater London House, Hampstead Road, London, having in the course of your
employment received 38 cheques amounting in value to £2,357,801 drawn by or on
behalf of Thomson's Tour Operations Limited in favour of hoteliers or their
purported agents in payment for holiday accommodation provided to customers of
said Thomson's Tour Operations Limited, for the purpose of remitting said
cheques to their payees did fail to remit said cheques to their payees or
otherwise account to Thomson's Tour Operations Limited, and did pay or cause
said cheques to be paid into accounts held on your behalf or for your benefit
at the Trustee Savings Bank, 200 Morningside Road, Edinburgh and 128-130 High
Street, Musselburgh, appropriate the proceeds thereof to your own use and
thereby embezzle £2,357,801 of money."
[2] After sundry
procedure (related in particular to associated confiscation proceedings) he was
sentenced on 10 February 2003 to 5 years imprisonment and a
confiscation order in terms of section 1 of the Proceeds of Crime (Scotland) Act 1995 was eventually made in the
sum of £1,080,622.
[3] On 25
June 2003
the appellant lodged a Note of Appeal against conviction and sentence. The subsequent delay between that date and
the present hearing, which could be described as inordinate, was largely
attributable to a deliberate postponing or delaying of the matter pending the
outcome of a case in the Privy Council with regard to the propriety of
temporary judges being used in the High Court.
Once that case was resolved this appeal took the normal course. The trial judge summarised the matter in his
Report as follows:
"The terms of the conviction
returned against the appellant were that between 1 November 1990 and
31 December 1995, both dates inclusive, at branches of the Trustee Savings
Bank at 200 Morningside Road, Edinburgh and at 128-130 High Street,
Musselburgh, at 76 Ravelston Dykes, Edinburgh at Casa Moraira, Jesus and
at Anda Santa Evlalia 17-1, both Ibiza, Spain and elsewhere in the United
Kingdom and Spain he, whilst in the employment of Viajes Cresta SA, a
subsidiary company of Thomson's Tour Operations Limited, Greater London House,
Hampstead Road, London, having in the course of his employment received
38 cheques amounting in value to £2,357,801 drawn by or on behalf of
Thomson's Tour Operations Limited in favour of hoteliers or their purported
agents in payment for holiday accommodation purportedly provided to customers
of said Thomson's Tour Operations Limited for the purpose of remitting said
cheques to their payees did fail to remit said cheques to their payees or
otherwise account to Thomson's Tour Operations Limited, and did pay or cause
said cheques to be paid into accounts held on his behalf or for his benefit at
the Trustee Savings Bank, 200 Morningside Road, Edinburgh and
128-130 High Street, Musselburgh, appropriate the proceeds thereof to his
own use and thereby embezzle £2,357,801.
The circumstances
of the commission of the embezzlement were as follows. Over the relevant period mentioned in
charge 1, the appellant was the resort manager for Thomson's Tour
Operations Limited ("Thomson's") in Ibiza, being
employed by the subsidiary company Viajes Cresta SA. It was part of his responsibilities to
complete contracts on behalf of Thomson's with local hoteliers for hotel
accommodation on the island. There were
two different types of contract. There
was first of all what was known as a committed contract, whereby a fixed number
of beds were purchased and paid for, irrespective of whether they were used by
Thomson's. Under such a contract a
series of payments were made, mainly before the summer season began. Secondly, there was what was known as a variable
contract, whereby Thomson's paid only for beds which had been used, after being
invoiced for them. The resort manager
was not expected by Thomson's to take any commission for negotiating
accommodation on their behalf. Payments
by Thomson's for accommodation were made by means of cheques drawn on Citibank
which carried the signature of the finance director. The cheques were made payable to the hotels
or their nominees and were forwarded from London to the
appellant in order that he could remit them to the payees in payment of the
accommodation provided to Thomson's.
In the case
of the appellant, there was undisputed evidence that, over the period mentioned
in charge 1, thirty eight cheques with a total value
of £2,357,801 had been sent by Thomson's in London to him in Ibiza in
order that he could remit the cheques to the hoteliers or their nominees, to
whom the cheques were payable. There was
also undisputed evidence that he failed to remit the cheques to the hoteliers
or their nominees and that what he did was to pay them into his personal
account with the Trustee Savings Bank, initially at 200 Morningside
Road, Edinburgh and
thereafter at 128-130 High Street,
Musselburgh. He was able to engage in
this irregular practice because he had the assistance of a tame bank manager,
Mr Stuart Bruce, who worked at these two branches of the Trustee Savings
Bank during the relevant period.
Mr Bruce had been a friend of the appellant, who had been the best
man at his wedding, since childhood. In
about October 1990 the appellant, along with his brother, called to see
Mr Bruce at the Morningside branch.
He opened an account with an initial payment of £25,000 from his
personal account with the Clydesdale Bank.
Thereafter the cheques referred to in charge 1, payable to the
hoteliers or their nominees, were sent to the Trustee Savings Bank and
subsequently sent by Mr Bruce by way of special presentation carrying his
personal endorsement to Citibank for payment.
Citibank then honoured the cheques and the amounts in question were
credited to the appellant's account with the Trustee Savings Bank. As a result of his participation in this
irregular practice, Mr Bruce was dismissed from his employment with the
Trustee Savings Bank. The money which
came into the appellant's Trustee Savings Bank account was thereafter
transferred to other accounts in his name in Guernsey, Jersey and the
Isle of Man. In November and
December 1996 those sums, with accrued interest, were pooled in the client
account of the appellant's solicitor, the other accused Malcolm, who was a
partner of Connor Malcolm, Solicitors at 1 Inverleith Terrace,
Edinburgh. On 10 January 1997
£2.4 million was debited from their client account in the name of the
appellant and remitted to an account which had been opened by Mr Malcolm
in the appellant's name with Credit Suisse in Geneva, Switzerland. When an inspection of the books of
Connor Malcolm was carried out by the Law Society of Scotland between 24
and 26 June 1997 the
transfer of £2.4 million to Credit Suisse was noted. As there was no underlying transaction to
account for the payment into and out of the client account on the behalf of the
appellant, the chief accountant of the Law Society became suspicious that
Mr Malcolm had been involved in money laundering and, following an
interview by him of Mr Malcolm, the Law Society reported their suspicions
to the police. A police investigation
thereafter ensued, and in the course of it the embezzlement by the appellant
was uncovered.
It must be
mentioned that, before the police investigation took place, in 1996 a firm of
auditors had carried out an investigation on behalf of Thomson's, in the course
of which the activities of the appellant had been uncovered. An investigator, Mr Michael Stannard,
asked him about money going into his own bank account. According to Mr Stannard, the appellant
told him that he was moving money on behalf of hoteliers or suppliers he was
dealing with in order to facilitate the money going offshore from Ibiza and to
avoid the payment of tax in Ibiza. There was also evidence that the appellant
was involved in a company known as Xucla SA, which engaged in property
transactions. As a result of the
investigation by the auditors, and following upon negotiations which took place
between Mr R E Henderson QC and the other accused Malcolm in his capacity
as the appellant's solicitor, on behalf of the appellant, and the London firm
of solicitors Mishcon de Reya on behalf of Thomson's, a settlement was
eventually reached between the appellant and Thomson's. This settlement was embodied in a formal
agreement dated 9 April
1997 between the appellant and Thomson's. In terms of that agreement the appellant made
a payment of £850,000 to Thomson's in full and final settlement of any
claims which they might have against him.
At the trial the Crown argued that the appellant, in making this payment
to Thomson's, had accepted that he was paying them back money which they had
lost as a result of his having paid the cheques into his own bank account. On the other hand, the defence elicited
evidence in the course of the trial that no hotelier to whom any of the cheques
was payable had complained of non-payment to any extent or even of late
payment."
[4] Counsel for
the appellant did not substantially dispute the facts narrated by the trial
judge as aforesaid with one major exception.
He said that it was not correct to say that there was undisputed
evidence that the appellant had failed to remit the cheques to the hoteliers or
their nominees. While it was accepted
that he did pay them into his own personal account in Edinburgh, counsel submitted that there was no
evidence whatsoever as to how the cheques were dealt with as between the time
they were remitted to the appellant and subsequently appearing in his bank
account. In particular he maintained
that while there was no direct evidence before the jury that the cheques ever
reached the hoteliers or their nominees equally there was no evidence that they
had not, and before us the Crown did not dispute the defence position in that
respect.
[5] It is
appropriate at this stage to deal with a letter dated 30 January
2003 from
the Crown Office to the appellant's solicitors which was placed before us. It was written after certain further evidence
had apparently come to light in the course of the confiscation proceedings - in
particular in the course of precognition by the Crown of a witness who was a
director of the holding company in a Spanish hotel group whose subsidiaries
included hoteliers who provided holiday accommodation to customers of
Thomson's. That letter inter alia contained the following
passage:
"The evidence is that the sums paid
directly into Iain Cowper's accounts represented commission owed to him by
Spanish hoteliers. The economic
advantage gained was the evasion of Spanish tax by Iain Cowper on commission
owed to him plus interest on that sum.
This is consistent with the evidence at trial that there were no
complaints of under, late or missing payments from the Spanish hoteliers and is
consistent with the Crown accountant's analysis of the destination of the
embezzled sums.
The judge had received a claim for
compensation from Thomson's and Ian Cowper did reach a civil settlement with
Thomson's. The position of the Crown
will be that there is no evidence of any loss suffered by Thomson's and that
the Prosecutor's Statement has been prepared on this basis."
[6] This matter
was elaborated before us by the advocate depute. In effect he informed us that what the Crown
now understood from the witness named in that letter, namely Senor Hose Bonet (who,
it appears, was involved in most, if not all, of the transactions) was that
upon receipt of the cheques by the appellant he physically handed them to Mr.
Bonet as a representative of the various hoteliers but immediately received
them physically back again and thereafter transmitted them to his own bank
account (although in some few cases Mr. Bonet was content to be shown
photocopies of the cheques). They were
never encashed by the recipient who apparently settled the hoteliers' accounts
with pesetas in the holding company's account. This was the explanation for why there were no
complaints from any hotelier that he had not been paid. We were told that the purpose behind this
exercise was basically tax evasion. The
money that was converted into the appellant's own bank account represented
commission that he was due in respect of other work that he carried out on his
own behalf in Spain for the benefit of the various hoteliers (albeit apparently
contrary to the terms of his contract with Thomson's which requires him to
devote his whole time and attention to them).
This scheme was accordingly an elaborate way of the appellant being paid
commission in that respect, and avoiding Spanish tax.
[7] These facts
were presented to us, not as founding any ground of appeal based on fresh
evidence, but as background - albeit important background to the appeal, which was
presented upon sufficiency of the evidence before the jury and how such was
handled by counsel and the trial judge.
We offer no view as to whether the scheme in question amounted to a
criminal offence under Scots law, but it certainly did not, on the face of it,
as the advocate depute appears to accept, sit easily with the most obvious
reading of the fairly simple but narrow averments of embezzlement in the charge,
the main allegation of which was of a failure to "remit said cheques to their
payees".
[8] There is no
doubt that while employed by Thomsons the appellant had been working on his own
behalf in Spain, a fact which was subsequently discovered by Thomson's and led
to a dispute between them and the appellant and also a claim for unfair
dismissal by the appellant against Thomsons.
This claim inter alia was
eventually settled by a compromise agreement dated 9 April
1997 ("the
agreement").
[9] In terms of
that settlement the appellant agreed to pay Thomsons a total of £850,000. This was said to be in full and final
settlement of all claims, rights and actions including interest and costs which
Thomsons had or may have had against Mr. Cowper and others.
[10] Despite
lodging a number of detailed grounds of appeal, before us counsel for the
appellant concentrated on two quite separate issues. First of all he maintained that, there having
been no evidence that loss was suffered by Thomson's, in as much that as there
was no evidence that any hotelier made any claim for non-payment, there was no
evidence indicative of any dishonesty on the part of the appellant. In the absence of any evidence as to what
happened to the cheques in Spain before the jury it was illegitimate to
infer dishonesty on the part of the appellant simply because the cheques
finally were paid into his account in Edinburgh.
Counsel submitted that in so far as the trial judge had left that matter
to the jury, namely the issue of dishonesty, there was insufficient evidence to
support the position.
[11] The Crown's
response to this was simply to point to what actually happened. The fact that the cheques were, on any view,
at some stage of the process under the control of the appellant and had finally
finished up in his own bank account, allowed the jury to make a legitimate
inference of dishonesty despite the absence of any actual evidence as to what
happened in Spain.
The advocate depute submitted that there was a plain breach of fiduciary
duty in as much as that at no time could the appellant's title to the cheques
be any more than fiduciary and as a trustee, and from the fact that he diverted
them into his own bank account the jury were more than entitled to infer
dishonesty.
[12] We can deal
with this point shortly.
[13] Although we
recognise that the absence of any evidence as to what happened to the cheques
in Spain at least called into question what inference could be drawn at all in
respect of their subsequent arrival in the appellant's bank account, we are
satisfied that the trial judge correctly left the issue of dishonesty in this
respect to the jury, on the basis that at all times, as the advocate depute
submitted, the appellant's duty was fiduciary and by converting the cheques to
his own use he had acted in a way which left it open to the jury legitimately
to conclude - in the absence of any explanation by the appellant - that he had
both acted dishonestly and embezzled the money as averred.
[14] We are
therefore not persuaded by this ground of appeal.
[15] The other and,
however, more important point concentrated upon by counsel for the appellant
related to the existence of the agreement and the use made of it by the Crown,
and in turn to the way the trial judge had dealt with that aspect of the matter
in his charge.
[16] In his
submissions to the jury, starting at page 19 of the transcript, the advocate
depute relied upon the agreement essentially to show that it was habile to
cover the issue of the cheques as well as the issue of other business
activities and amounted effectively to an admission that Thomson's was due
money by the appellant, and that moreover apparently by reason of a direct loss
of the sums represented by the cheques.
He summarised the matter on page 20 as follows:
"He is paying Thomson's back money
that they are entitled to as a result principally of his putting the cheques
into his own account."
[17] This was
emphasised as an important part of the Crown case against the appellant in
particular as showing the necessary dishonesty.
[18] The trial
judge dealt with this matter in his charge, initially at page 43, where he
says:
"Firstly, he (the advocate depute
(our addition)) referred to the terms of settlement which was negotiated
involving the payment by the second accused (Cowper) to Thomsons of
£850,000. He submitted to you that in
paying this sum the second accused was accepting that Thomsons had lost out as
a result of his putting the cheques into his own accounts and this was him paying
them back. In support of that submission
he referred to the particular cheques and the clauses of agreement on which he
relied."
[19] The position
of Mr. McBride in this respect was simple but forceful. He maintained that although the agreement was
habile, in terms of its reference to future claims, possibly to cover the issue
of the cheques, in reality (and in accordance with certain evidence given) the
settlement was entirely related to what might be described as the external
activities of the appellant on his employer's time resulting in a claim being
available to them against him in that respect.
Howsoever it was to be quantified was another question. We were told that the ultimate agreement in
the sum of £850,000 was effectively "as a result of horse trading". However, as counsel maintained he had
submitted at the trial, the introduction of the agreement into the notion of
embezzlement in this case and its use by the advocate depute at the trial was
totally unfounded and its endorsement by the trial judge in his charge amounted
to a misdirection in law. He said it was
going far too far to maintain that the settlement and the money to be paid by
the appellant thereunder amounted to an admission on his part that he had an
obligation to pay money back to Thomson's and amounted to an admission that he
had embezzled his employer's money.
[20] The essential
response of the advocate depute was to accept, in general terms, that the
agreement primarily related to so-called external activities but given the
breadth of the actual wording of the settlement, with a reference to future
claims, it was legitimate to place the evidence before the jury as evidence of
possible dishonesty. There had been
evidence in the trial that at the material time Thomson's did not know what, if any, loss had been sustained
arising out of the appellant's handling of the cheques. He therefore did not accept that it was a
wholly irrelevant and separate issue and accordingly that the trial judge was
entitled to treat the matter in the way that he did. In any event it could not be said there had
been a miscarriage of justice.
[21] We are
satisfied that the agreement (from its terms, and absence of any convincing
evidence to the contrary) was intended to discharge all claims and possible
claims that Thomson's had or might have had against the appellant, including
any related to his handling of cheques drawn for the provision of services in
Spain. However, the discharge - which in
the event was made without any express admission of liability - related,
without differentiation, to all heads of claim and possible claim, and we have
come to the view that it was not consistent with a proper construction of the
document to treat it as an admission of the legitimacy of any single element of
Thomson's omnibus discharge of the appellant.
It clearly did not specify any such element. The aggregate sum paid did not relate to any
such element. It was a sum considerably
smaller than the amount alleged to have been embezzled,
whatever the sums of damages that Thomson's might have claimed in relation to
the appellant's other activities.
Without evidence supporting the contention that the payment related to
the discharge of a particular element of the aggregate, it was a matter of pure
speculation whether any of it actually amounted to an admission of
embezzlement. Further, it certainly
could not be read as an admission that the appellant had caused Thomson's
direct loss in respect of the sums represented by the cheques. In relying on the agreement in the terms set
out in paragraph [16] above, the advocate depute sought to draw an inference
from the terms of the agreement that simply cannot be sustained on a proper
interpretation of its terms.
[22] That in itself might not have been material to the outcome since the
negative of the point was argued by Mr. McBride before the jury and in any
event could, perhaps, have been rectified by a direction from the trial
judge. The difficulty before us is that
in his charge, in the passage we have quoted, the trial judge repeated the
Crown submissions for loss and so directed by the jury. He made no attempt, so far as we can see, in
any part of the charge, to correct or rectify that position as far as the
Crown's submissions were concerned. He
therefore left the jury with a clear direction that they were entitled to
consider whether or not the agreement amounted to an admission of dishonesty in
the way in which we have referred.
[23] We have
therefore come to the conclusion that the way the trial judge dealt with this
matter in his charge amounted to a material misdirection. He should have emphasised to the jury that it
was not open to them to rely upon the agreement as evidence of an admission of
monies due from the appellant to Thomson's in respect of the cheques. In the circumstances, we have come to the
conclusion that this misdirection amounts to a miscarriage of justice in as
much as , in respect of a matter which formed an important part of the Crown
case, it was left open to the jury wrongly to draw an inference adverse to the
appellant's position. This position, in
our view, was not justifiable. We cannot
but come to the conclusion that this must have featured in the jury's
consideration of guilt and therefore that the verdict could have been
influenced accordingly, particularly in the context of a majority verdict.
[24] On this narrow
but important ground we therefore consider that this appeal succeeds and the
conviction must be set aside.
