Appeal judges rejected Craig Whyte’s challenge to fraud charge over Rangers takeover

It was argued that a previous ruling which defined the common law offence of fraud was “wrongly decided”, but the appeal judges rejected the submission that a full bench should reconsider the issue.

Common law fraud

Lord Justice Clerk, Lady Dorrian, sitting with Lord Turnbull and Lord Clarke, heard that the appellant faced an indictment containing one charge at common law and a further charge under sections 678 and 680 of the Companies Act 2006.

At a preliminary hearing in December 2016 the court repelled pleas to the relevancy of both charges, but leave to appeal against that decision was granted in relation only to the common law charge.

The basis of the appeal was that it was arguable that the case of Adcock v Archibald 1925 JC 58, which was binding on the preliminary hearing judge and which he applied as the basis for his decision, was wrongly decided and should be reviewed by a larger court.

In Adcock, the Lord Justice General (Clyde) observed that:- “It is … a mistake to suppose that to the commission of fraud it is necessary to prove an actual gain by the accused, or an actual loss on the part of the person alleged to be defrauded. Any definite practical result achieved by the fraud is enough.”

The submission before the preliminary hearing judge was that the indictment did not aver a “definite practical result” of the kind which was an “essential element” in a charge of fraud, thus rendering the charge “irrelevant”.

Actual loss

Before this court it was submitted on behalf of the appellant that in a case such as this the “dupe” must be shown to be in a worse position than he or she otherwise would have been but for the fraud.

It was argued that, legally, there must be some “significant prejudice” suffered – i.e. the “dupe” must have suffered some “actual loss”.

Counsel sought to distinguish the case of Adcock on the basis that it “did not reflect current commercial practice”, which had changed substantially since 1925; and the opinion in the case was short and “not easily understood”.

In support of the appeal it was argued that the result in Adcock did not accord with the treatment of fraud by Hume, who described it as an offence against property.

Although the matter had developed somewhat by the time of the decision in Adcock there were even at that stage differing views which the case of Adcock did not resolve.

For example, in the case of HMA v Witherington (1881) 4 Coup. 475 the Lord Justice General (Inglis) stated that: “The crime charged in the major proposition is falsehood, fraud, and wilful imposition. To the constitution of this offence it is necessary that the accused shall have (1) made false representations; (2) for the fraudulent purpose of cheating the person to whom they are made; and (3) to the effect of obtaining from that person by this means goods, money, or some other value or advantage, without any return or consideration, to the profit of the accused, and the corresponding injury of the other party.”

This definition, it was argued, was at odds with what was said in Adcock.

A practical result

Refusing the appeal however, the judges observed that principle in Adcock had been “accepted and applied without apparent difficulty in our courts for over 90 years”.

Delivering the opinion of the court, the Lord Justice Clerk said: “Whatever may have been the case in the past, by the time of Adcock fraud was clearly being treated as a crime of dishonesty. There had been a series of cases, several of which had been cited to the court, both to the effect that no economic loss need be proved, and that a definite practical result was sufficient. In these cases it is relatively clear that the Court concentrated on the making of a false statement, with the intent of inducing an action which would not otherwise have followed, and where the action did follow.

“As regards authority, the high water mark of the submission of senior counsel for the appellant might be thought to be the case of Witherington and the comment by the Lord Justice General quoted above. However, that was a case in which it was averred that there had been both a loss to the “dupe” and a gain to the panel, and the Lord Justice General’s comments were merely in the context of stating that the averments in the charge so made were relevant.”

The court noted that senior counsel for the appellant accepted that he was unable to point to any judicial authority since Adcock where the principle contained in it was doubted.

His argument was, to a great extent, based on passages of Gordon, Criminal Law, 4th edition, which criticised the decision, but the judges said the criticisms largely turn on the facts of the case, and the application of the law to the particular facts.

The court added that the principle in Adcock had the virtue of being “clear, objective, sufficiently flexible” to address changing commercial situations, and which apparently had worked “successfully” for over 90 years.

Lady Dorrian said: “It must be borne in mind that the initiating point of the offence of fraud is a dishonest misrepresentation of fact which is designed to bring about the practical result which eventuates. There must be a definite practical result which is causally connected to the pretence. These components of the definition of fraud are important safeguards against the criminalisation of innocent behaviour, or mere lies. In our view there is no need to convene a larger court to reconsider Adcock and this appeal must be refused.”