R v Smith

Factual and Procedural Background

On 24 February 1994 at the Central Criminal Court, the Appellant was convicted of one count of fraudulent trading contrary to section 458 of the Companies Act 1985 and two counts of obtaining property by deception involving substantial sums of money, contrary to section 15(1) of the Theft Act 1968. The Appellant was sentenced to six years imprisonment, concurrent on each count. The appeal currently before the Court arises from a reference by the Criminal Cases Review Commission under section 9 of the Criminal Appeals Act 1995. This reference followed previous appeals and an application for leave to appeal to the House of Lords, which was refused.

The Appellant, a Canadian national, established a merchant bank ("Company A") which ceased trading and was wound up owing significant debts. The Appellant controlled other companies including "Company B". He orchestrated various fictitious transactions between these companies to inflate profits. Counts 3 and 4 relate to two back-to-back repo transactions involving a financial institution ("Company C") operating from London. In these transactions, stock was never actually delivered, and the money was paid into a bank account outside the jurisdiction. The Crown contended that the Appellant dishonestly obtained money by deception through false representations about entitlement to repurchase bonds.

Legal Issues Presented

1. Whether the Court's jurisdiction is exhausted by the previous appeal (Functus Issue).
2. Whether the courts of England and Wales have jurisdiction over the offences in their original or substituted form (Jurisdiction Issue).
3. Whether offences under section 1 of the Theft Act 1978 can be substituted for the offences alleged in counts 3 and 4 (Substitution Issue).

Arguments of the Parties

Appellant's Arguments

• The Appellant contended that the Court lacked jurisdiction because, although the deception occurred in London, the obtaining (the essence of the offence) took place in New York.
• The Appellant relied on the decision in Manning, arguing that the last act of the offence must occur within the jurisdiction for jurisdiction to be established.
• Regarding substitution, the Appellant argued that the "repo" transactions did not constitute services under the Theft Act 1978 and thus substitution was inappropriate.

Crown's Arguments

• The Crown conceded that convictions on counts 3 and 4 under section 15(1) Theft Act 1968 could not be sustained following the decision in Preddy, which clarified that the necessary obtaining of property was lacking.
• The Crown argued that the Court should substitute convictions under section 1 of the Theft Act 1978 for obtaining services by deception, relying on the Court's power under section 3 of the Criminal Appeal Act 1968.
• The Crown contended that the Court of Appeal in Smith No. 1 correctly held jurisdiction despite the obtaining occurring outside England, and that Manning should not supplant that approach.
• The Crown submitted that the financial arrangements constituted the provision of services, specifically secured lending, and thus substitution was appropriate.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Lambert [2002] 2 AC 545	The Human Rights Act 1998 is not retrospective.	Precluded reliance on Article 6 for inadmissibility of answers given under statutory obligation, affecting count 1 appeal grounds.
Preddy [1996] AC 815	Clarified that deception alone does not satisfy the "obtaining property" element for offences under section 15 Theft Act 1968.	Led to concession that counts 3 and 4 convictions under section 15 could not stand.
R v Halai [1983] Crim Law Review 624	Held that making a loan did not constitute obtaining services under Theft Act 1978.	Overruled by later cases; not followed in this opinion.
R v Graham [1997] 1 Cr App Rep 302	Criticised Halai as decided per incuriam and supported a broader interpretation of "services".	Supported the view that repos could amount to obtaining services.
R v Teong Sun Chuah [1991] Crim Law Review 463	Supported criticism of Halai decision.	Referenced in support of broader interpretation of "services".
R v Cook [1997] Crim Law Review 436	Approved criticisms of Halai and applied broader interpretation of "services".	Reinforced the approach to interpreting "services" under Theft Act 1978.
R v Berry No. 2 [1991] 2 AER 789	One right of appeal principle.	Rejected by this Court as limiting appellate discretion in reference cases.
R v Roberts [1990] Crim Law Review 122	One right of appeal principle.	Rejected by this Court as limiting appellate discretion in reference cases.
Poole and Mills [2003] EWCA Crim 1753	Discretion to depart from previous reasoning on references to the Court of Appeal.	Applied to justify reconsideration of jurisdiction despite previous decision.
R v Harden [1963] 1 QB 8	Last act or terminatory theory for jurisdiction in obtaining offences.	Recognised as correct but not exhaustive basis of jurisdiction.
R v Ellis [1899] 1 QB 230	Gist of offence lies in the act of obtaining.	Supported Harden's reasoning on jurisdiction.
Treacy v DPP [1971] AC 537	Introduced the initiatory theory of jurisdiction and discussed comity.	Supported alternative basis for jurisdiction beyond last act rule.
Liangsiriprasert v Government of the United States of America [1991] 1 AC 225	Endorsed broader jurisdictional approach for crimes with substantial connection to England.	Supported Rose LJ's reasoning favoring a flexible jurisdictional approach.
Reg v Sansom [1991] 2 QB 130	Applied Liangsiriprasert in conspiracy context.	Used to illustrate jurisdictional principles, though distinguished by Buxton LJ.
R v Tirado 59 Cr App R 80	Reaffirmed last act rule jurisdiction.	Referenced by Buxton LJ to support terminatory theory.
Reg v Thompson [1984] 1 WLR 962	Applied last act rule jurisdiction.	Supported Buxton LJ's view on binding nature of last act rule.
Reg v Nanayakkara [1987] 1 WLR 265	Applied last act rule jurisdiction.	Supported Buxton LJ's view on binding nature of last act rule.
Libman v The Queen (1985) 21 C.C.C. (3d) 206	Analysis of justiciability of crime in English courts.	Endorsed by Lord Griffiths and cited in support of broader jurisdictional approach.
DPP v Stonehouse [1978] AL 55	Supported last act rule jurisdiction.	Referenced as authority for terminatory theory.
R v Doot (HL(E))	Discussed complexity of locating elements of crimes for jurisdiction.	Supported view that jurisdictional principles must adapt to complex crimes.

Court's Reasoning and Analysis

The Court examined three main issues: the functus issue, the jurisdiction issue, and the substitution issue.

Regarding the functus issue, the Court held that the Criminal Appeals Act 1995 allows the Commission to refer convictions for appeal, and the Court retains full appellate powers. While previous appeals are relevant, exceptional circumstances such as developments in the law may justify revisiting issues previously decided. The Court rejected the Crown's contention that the Appellant was limited to one appeal on the jurisdiction issue.

On the substitution issue, the Court considered the language of section 3 of the Criminal Appeal Act 1968, which permits substitution of offences if the jury could have found the Appellant guilty of the substituted offence and the facts satisfy that offence. The Court found that the particulars of the original counts, especially before amendment, supported substitution with offences of obtaining services by deception under section 1 of the Theft Act 1978. The Court rejected the Appellant's argument that repos were sales rather than services, emphasizing the financial substance and documentation describing the transactions as secured lending.

The jurisdiction issue involved a conflict between two Court of Appeal decisions: Smith No. 1, which adopted a broader "initiatory" or "comity" approach to jurisdiction allowing trial where substantial activities constituting the crime occur in England, and Manning, which reaffirmed the "last act" or "terminatory" theory requiring that the final act completing the offence occur within the jurisdiction. The Court analysed the reasoning of both, including extensive consideration of authorities and academic commentary.

The Court concluded that the Smith No. 1 approach better reflects contemporary realities of international fraud and evolving common law principles. It recognized that jurisdictional issues have a strong procedural element and that the common law must adapt to modern developments in communication and finance. The Court therefore resolved to follow Smith No. 1 rather than Manning, allowing jurisdiction to be established where substantial parts of the offence occur in England unless principles of international comity dictate otherwise.

Finally, the Court noted that the substituted offences would be triable within the jurisdiction under the Smith No. 1 approach, and that the sentences originally imposed remain appropriate for the substituted convictions.

Holding and Implications

The Court quashed the convictions on counts 3 and 4 under section 15(1) of the Theft Act 1968 and substituted convictions under section 1 of the Theft Act 1978 for obtaining services by deception.

The Court affirmed its jurisdiction to try the substituted offences, adopting the broader jurisdictional approach articulated in Smith No. 1. The sentences imposed remain appropriate and concurrent. This decision clarifies the Court's power to substitute offences under section 3 of the Criminal Appeal Act 1968 and endorses a flexible approach to jurisdiction in cases involving complex and international financial fraud. No new precedent was established beyond confirming the continued validity of the Smith No. 1 approach over the Manning approach.