Introduction

The case of R v Cartwright, R v Bancroft, and R v Mills [2020] EWCA Crim 369 presents a significant examination of fraudulent trading under section 458 of the Companies Act 1985. This case involves the conviction of three individuals—Cartwright, Bancroft, and Mills—for orchestrating fraudulent activities that inflicted substantial losses on HBOS, Halifax Bank of Scotland. The primary focus is on the legal interpretations surrounding the roles of the defendants, particularly whether individuals can be held liable as principals or as secondary parties (aiders and abettors) under the aforementioned statute.

Summary of the Judgment

On February 28, 2020, the England and Wales Court of Appeal (Criminal Division) reviewed the convictions and sentences of Cartwright, Bancroft, and Mills. The Court upheld the convictions of all three individuals for various offences related to fraud, including fraudulent trading and conspiracy to conceal criminal property. The Court particularly scrutinized the application of section 458 of the Companies Act 1985, debating whether Cartwright could be convicted not as a principal offender but as an aider and abettor to Mills and Bancroft.

Ultimately, the Court dismissed the appeals by Cartwright and Bancroft, affirming the original convictions and sentences. The Court concluded that the prosecution had sufficiently demonstrated the defendants’ roles in the fraudulent activities and that the legal reasoning applied by the trial judge was sound.

Analysis

Precedents Cited

The judgment references several key cases to elucidate the interpretation of section 458:

• R v Miles [1992] Crim LR 657: This case dealt with the interpretation of section 458, focusing on whether an individual could be deemed a party to fraudulent trading without holding a managerial or controlling role.
• Grantham [1984] QB 675: Addressed the definition of "running the business" under section 332 of the Companies Act 1948, a precursor to section 458.
• Re Bank of Credit and Commerce International SA [1987]: Explored the liability of entities not holding a managerial role but knowingly participating in fraudulent activities.
• R v Jefferson [1994] 99 Cr App R(S) 13: Affirmed that secondary liability cannot be excluded unless explicitly stated.
• R v Beattie-Milligan [2019] EWCA Crim 2367: Examined the impact of prosecutorial delay on sentencing.

Additionally, authoritative commentaries by Professor JC Smith and editions of Archbold were cited to support the Court’s interpretation of the statute.

Legal Reasoning

The crux of the Court’s reasoning centered on whether defendants like Cartwright could be convicted under section 458 as party to fraudulent trading without directly managing the company’s business. The Court affirmed that section 458 is intended to target those who exercise a controlling or managerial function, effectively "running the business," thereby excluding individuals who do not hold such roles from primary liability.

However, the Court also clarified that secondary liability for aiding and abetting exists independently of primary liability. This means that even if a defendant does not hold a managerial position, they can still be held liable if they knowingly assisted in the fraudulent activities of those who are primary offenders.

The Court rejected the appellant’s argument that the limitation on primary liability precludes any form of secondary liability, reinforcing the principle established in R v Jefferson. The Court emphasized that secondary liability is a consistent element of English criminal law and only excluded when explicitly stated.

Regarding the sentencing appeals, the Court acknowledged the delay in proceedings but found that its impact was mitigated by the nature of the offenders' lifestyles and the lack of genuine hardship suffered by them during the delay.

Impact

This judgment reinforces the dual pathways of liability under section 458 of the Companies Act 1985. It clarifies that while primary liability is reserved for those in managerial or controlling roles, secondary liability remains a viable route for holding auxiliaries accountable for their involvement in fraudulent activities.

The affirmation of secondary liability as an independent mechanism ensures that individuals who facilitate or support fraudulent activities, even without directly managing the business, remain prosecutable. This serves as a deterrent against peripheral but contributory roles in corporate fraud.

Additionally, the Court’s approach to sentencing and the consideration of prosecutorial delays set a precedent for handling similar appeals, balancing procedural fairness with the severity of the offences.

Complex Concepts Simplified

Section 458 of the Companies Act 1985

Definition: Section 458 addresses fraudulent trading, making it an offence for individuals to carry on a business of a company with intent to defraud creditors or for any fraudulent purpose.

Primary vs. Secondary Liability:

• Primary Liability: Applies to individuals who are actively managing or controlling the business and are directly involved in fraudulent activities.
• Secondary Liability (Aiding and Abetting): Applies to individuals who assist, encourage, or facilitate those who are primarily responsible for the fraudulent activities, even if they do not hold a managerial position.

Secondary Liability Principles

Secondary liability refers to holding individuals accountable for assisting or facilitating the commission of a crime, even if they are not the principal offenders. This is crucial for addressing comprehensive fraudulent schemes where multiple parties are involved in different capacities.

Criminal Law Terms

Aiding and Abetting: Providing assistance or encouragement to someone committing a crime.

Conspiracy: An agreement between two or more parties to commit a criminal act.

Conclusion

The Court of Appeal's judgment in R v Cartwright, R v Bancroft, and R v Mills [2020] EWCA Crim 369 provides a clear delineation between primary and secondary liability under section 458 of the Companies Act 1985. By affirming the validity of holding individuals accountable as aides and abettors, even without a managerial role, the Court ensures robust legal mechanisms against corporate fraud. This decision not only upholds the integrity of the legal process in addressing complex fraudulent schemes but also serves as a deterrent against multifaceted involvement in fraudulent activities.

In reinforcing the applicability of secondary liability, the judgment strengthens the legal framework necessary to address and mitigate corporate misconduct effectively. This aligns with broader legal principles that seek to comprehensively address and penalize fraudulent behaviors within corporate structures, ensuring that all facilitators of fraud can be held accountable.