Hibberd & Anor, R v [2009] EWCA Crim 652

[2009] EWCA Crim 652Case No 2008/05772 A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM Southwark Crown Court
HHJ Gledhill QC
T2007/0790
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 02/04/2009
Before
LORD JUSTICE HOOPERMR JUSTICE JACKMRS JUSTICE SHARP DBE
Between
Gary Hibberd and Timothy AllenAppellantsThe QueenRespondent
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr G Cox QC for Appellant Gary HibberdMr N Corre for appellant Timothy AllenMs J Osborne for RespondentHearing Hearing date: 26 February 2009
Judgment
[1]At the Crown Court at Southwark (H.H. Judge Gledhill QC) the appellants pleaded guilty to counts 1 and 2 on 23 June 2008. On that day what was anticipated to be a lengthy trial was due to start. As a result of the pleas and as a result of the prosecution offering no evidence against two co-defendants, there was no trial. On 11 September 2008 Gary Hibberd (“Hibberd”) (aged 46) was sentenced as follows: Count 1 – Conspiracy to defraud, 4 years imprisonment Count 2 – Conspiracy to defraud, 2 years imprisonment consecutive Count 1 – Conspiracy to defraud, 4 years imprisonment

Count 2 – Conspiracy to defraud, 2 years imprisonment consecutive

[2]Timothy Allen(aged 36)wassentenced as follows: Count 1 – Conspiracy to defraud, 2½ years imprisonment Count 2 – Conspiracy to defraud, 1 years imprisonment consecutive Count 1 – Conspiracy to defraud, 2½ years imprisonment

Count 2 – Conspiracy to defraud, 1 years imprisonment consecutive

[3]No order was made disqualifying them as directors because such an order had already been made, by the Department of Trade and Industry following a voluntary arrangement.[4]They appeal against sentence by leave of Blair J.[5]Both appellants had no previous relevant convictions, and excellent character references for both of them were before the sentencing court and before us. There was one further letter from a family member which we have read.[6]Count 1 charged the appellants with conspiring together between 1 March 2002 and 28 February 2004 to defraud the Royal Bank of Scotland (“RBS”) by dishonestly: i) Causing or permitting RBS to provide loans and overdraft facilities to Vodka Bar Management Ltd (“VBM”) and/or associated companies ii) Misleading RBS as to their financial position and that of others.[7]Count 2 charged the appellants with between 1 July 2002 and 28 February 2004 conspiring together to defraud Lombard North Central plc (“Lombard”) by dishonestly:
“i. Causing or permitting Lombard North Central plc to grant lease purchase agreements to Vodka Bar Management Limited and/or associated companies ii. Representing to Lombard North Central plc that invoices submitted pursuant to said lease purchase agreements were valid invoices for which payment was properly due under the terms of the agreement iii. Representing to Lombard North Central plc that an extract of the minutes of a meeting between Vodka Bar Management Limited and Laurel Pub Company Limited was a valid document. iv. Representing to Lombard North Central plc that Gary Hibberd was a member of the Laurel Pub Company Limited Board of Directors v. Representing to Lombard North Central plc that a Direct Agreement dated 4 April 2003 between Lombard North Central plc, Laurel Pub Company Limited and Innovative Trading Limited was a valid document.”
[8]There was a significant delay between the date on which RBS reported the alleged dishonesty to the City of London Police in August 2004, and the date that the appellants and the co-defendants were charged in March 2007. During all or most of that time the appellants were aware of the ongoing police investigation, and we accept that the long delay had a significant deleterious effect on them. It appears that one reason for the long delay was the fact that only one officer was assigned to the case.[9]The appellants and the co-defendants were the directors and executive officers of VBM and a number of associated companies. Hibberd was managing director, entitled to a salary of some £250,000 and Allen was the finance director, entitled to a salary of some £60,000. Hibberd drove a Bentley Azure, valued at £136000, for which the lease purchase finance was provided by Lombard. Allen was not provided with a car.[10]VBM and the associated companies ran a chain of nine bars trading under the name Babushka, bars which were “upmarket” and designed to attract, amongst others, “celebrities”. The bars were operated by VBM through a management company, Service Co Ltd, and trading companies. As to Service Co

the judge in passing sentence said:

“A clear indication of financial impropriety or criminality arose in November 2002 when one of Vodka Bar Management's subsidiary companies Service Co Limited went into liquidation. Once an agreed civil judgment had been entered against Service Co, Vodka Bar Management announced that they were no longer prepared to support it. Consequently it went into liquidation owing over £75,000 to the Inland Revenue and £125,000 to Vodka Bar Management. The directors of Service Co were you Gary Hibberd and Timothy Allen, together with your two former co-defendants. The four of you of course were also directors of Vodka Bar Management.”
[11]The background to the fraud was set out by the judge in passing sentence: “ ... For some time before these offences were committed you were involved in the running of a number of licensed premises, principally in the London area. By 1998 you Gary Hibberd with others were running vodka bars trading under the name of Babushka. In July of that year Babushka was bankrupt. This was not the end of the vodka bar enterprise. The business continued as if nothing had happened under the new company name of Babushka Limited until 2002, with your brother Anthony Hibberd as the sole director. You Timothy Allen had been working for Gary Hibberd and the other directors of Babushka from about 1993, progressing from a disk jockey to a bar manager and eventually by 2001 a director of the company. It is clear that during 2001 you were preparing to replace Babushka Limited. You set up Vodka Bar Management Limited as a parent or holding company overseeing a structure of subsidiary companies representing the different licensed venues and handling payroll and administration duties. In February 2002 Babushka Limited had changed its name to Install 500 UK Limited, that company was wound up in May 2002 with debts amounting to over half a million pounds, £50,000 of which was said to be owed to Vodka Bar Management. Vodka Bar Management and the associated companies then took over where Babushka had left off”.[12]Mr Cox QC objected to this passage, submitting that it undermined the concession made by the prosecution that the appellants had not deceived RBS about the previous trading (a particular in count 1 making such an allegation had been deleted). We disagree. Particularly in so far as Hibberd was concerned, the fact that he had run companies which had collapsed and risen “phoenix like” from the ashes on more than one occasion, put him in a different position from a person who had no such history. We return to this point later.[13]In early 2002 VBM approached RBS with a view to moving their banking from Barclays. In addition to ordinary banking facilities, including an overdraft, they were seeking finance for the redevelopment of three of their Babushka sites in London. The customer development manager at RBS was Richard Clark (“Clark”), and he remained the principal point of contact throughout. He was responsible for arranging the RBS finance that was the subject matter of count 1. Prior to the granting of the finance, part of RBS’s due diligence procedure involved the appointment of an independent surveyor to value the VBM business and estates and assess their forecasts. It is important to note that the report of the surveyor was favourable and was not tainted by any dishonesty on the part of the appellants or their co-defendants.[14]Clark required independent evidence of the net worth of the directors, including of the appellants and the co-defendants. Clark received a letter purporting to come from a firm of accountants confirming that the net worth of the four defendants was in the region of £3.9 million, and that they owned various freehold properties. The letter was a forgery and very substantially overstated their assets.The freehold properties did not exist.[15]Having received the letter from the accountants and the surveyor’s report, the RBS credit committee authorised loans totalling £1.305 million. It was a condition of the grant that the directors entered into personal guarantees and undertook to maintain sufficient unencumbered assets available to meet their obligations. The guarantees and undertakings were dishonest and worthless.[16]During the negotiations with RBS, VBM was approached by the Laurel Pub Company plc (“LPC”) and invited to enter into a joint venture. LPC was a large company operating a number of well known chains. The agreement involved VBM creating a new company, Innovative Trading (“IT”), taking over the running of a number of LPC’s underperforming sites and re-branding them as Babushka bars. The agreement provided for LPC to fund the refurbishments, for IT to pay rent on the premises and for the profits to be shared equally. The contractual obligations arising out of the IT and LPC joint venture were contained in a contractual agreement known as the “Management and Outsourcing Agreement”, although this document was not drafted and signed by the parties until June 2003. It was a term of the agreement that title in fixtures and other assets bought during the refurbishment and fit-out of the joint venture premises should pass to LPC.[17]Clark shared an office with Nathan Patterson (“Patterson”) an account executive with Lombard which is a subsidiary company within the RBS group. He was introduced to VBM with a view to Lombard providing lease purchase finance to fund investment in VBM’s existing sites for such expenditure as decoration, furniture, billing systems, stack operating systems, computers and bar equipment. Patterson had access to the core information gathered by RBS, including the forged and untruthful information in relation to the directors’ assets. He was impressed by them. Subsequently, VBM/IT sought further finance from Lombard to assist in the financing of the IT/LPC joint venture. The lease purchase facilities made available by Lombard to VBM/IT, once authorised, were drawn down on the production of the invoice for the particular item of equipment and Lombard retained a lien under the terms of the finance over the goods purchased. In fact many items which Lombard was led to believe belonged to VBM/IT in fact belonged to LPC. Thus Lombard’s lien was worthless.[18]We turn to another example of the dishonest behaviour of Hibberd. In the words of the judge: “Background checks [prior to the RBS and Lombard agreements] uncovered a county court judgment against you Gary Hibberd in the sum of £68,000. Nathan Patterson, the employee of Lombard dealing with the transaction was obviously concerned at this discovery, as indeed was Richard Clark at the Royal Bank of Scotland who happened to share an office with him. You denied any knowledge of that judgment, both Messrs Patterson and Clark accepted your lying explanation and put it down to error, they were both impressed by you Gary Hibberd. In Mr Patterson's own words he was: ‘Convinced of his integrity.’[19]In early 2003 one of the directors at LPC who was most intimately involved in the joint venture, Karen Forrester, was invited to join the VBM board as non-executive director. She cemented her involvement with VBM when in June 2003 she personally invested £200,000 in the company. Notwithstanding that she lost her investment, she wrote a statement to assist Hibberd at the time of sentencing.[20]From March 2003 VBM started to suffer from acute cash flow problems and by September 2003 RBS regarded the account as critical. As the overdraft rose the bank sought further increased guarantees from the existing guarantors and if possible, new guarantors. Karen Forrester was proposed by VBM as potential guarantor and an email purporting to be from her detailing her personal assets was sent to RBS. That was a forgery.[21]VBM’s finances grew worse and RBS sought to increase the amount guaranteed by the directors. On 6 November Ms Forrester, and the existing guarantors signed a new guarantee.[22]As Lombard’s exposure to VBM and the associated companies increased, Patterson enquired as to whether LPC, given the joint venture with IT, would be prepared to guarantee any of the Lombard agreements. A copy of the ‘Management and Outsourcing” agreement was made available to the Lombard credit committee and Lombard sought a copy of the LPC board’s minutes evidencing the fact that LPC were aware of the IT Lombard Finance agreements. What was said to be acopy of the minutes was provided by Allen. In fact it was a forgery.[23]Further finance of £250,000 was sought by VBM/IT and the Lombard credit committee made it a pre-condition, before further lending was sanctioned, that LPC should become party to a “step-in agreement”. The agreement entailed LPC agreeing to take on responsibility for all payments due on the IT/ Lombard finance agreements in the event of IT defaulting. The agreement required the signatures of two directors from both VBM/IT and LPC. Allen agreed that Hibberd would take the agreement, in his capacity as a member of the LPC board, to the next board meeting. The document was returned to Lombard purporting to have been signed by the directors of LPC. The signatures had been forged.[24]In the latter part of 2003 the financial position of VBM and its associated companies worsened. On 2 January 2004 LPC repossessed the joint venture sites and shortly thereafter the RBS banking facilities were withdrawn and VBM/IT collapsed. RBS attempted unsuccessfully to enforce the personal guarantees given by the appellants and the co-defendants. RBS was told that the assets were held in offshore trusts and were not available. That assertion was supported by forged documentation purporting to come from the company administering the trust, Platinum Offshore. Furthermore RBS discovered that the assets that they had been led to believe were held by the directors did not in fact exist.[25]RBS lost over £1.586 million and Lombard lost £450,000: so the total lost by these two was about £2 million. Other creditors also lost money, but their losses were not reflected in any count no doubt because they were only the indirect victims of the frauds.[26]In the words of

the judge passing sentence:

“So throughout 2002 and 2003 you funded your Vodka Bar business by obtaining large sums of money quite dishonestly from the Royal Bank of Scotland and Lombard. You persuaded both those institutions to lend through a combination of deceit, lies, forgery and eloquent persuasion. Both institutions were completely taken in by the pair of you, and to use a colloquialism, they were well and truly conned. Yes of course some of the money was used to run the bars, but a great deal of it was used to fund your extravagant lifestyles. You were unscrupulous in the way you persuaded the bank and Lombard to part with their money. … I appreciate that this is not a fraud of an individual causing enormous personal loss and distress. These are not victimless crimes. The banks and their shareholders are most certainly losers, the losses are paid for in the long run by the public in general. In your pre-sentence report, Timothy Allen, you identified many of the victims of these offences: ‘Many suppliers did not get paid and people lost their jobs.’ I ought to add including your own employees. You also said: ‘The money that was loaned could have been loaned to other companies and benefited other businesses.’”

The judge identified a number of aggravating features:

“There are a number of serious aggravating features in this case. Firstly, the prolonged time over which the fraud took place. Secondly, the determination with which the frauds were committed, innumerable false representations and even resort to forgery. Thirdly, the large sums of money involved. Fourthly, that the money was not used wholly to keep the businesses going, but went to fund your lifestyles. Fifthly, in your case, Gary Hibberd, I am satisfied that but for you Timothy Allen would not have become involved. I have concluded that you have corrupted him, though of course he is his own man and not a vulnerable sheep of a man. You are also responsible in part for Karen Forester becoming involved. Though no doubt the lure of quick and enormous profits as she saw you were taking was a main reason for her becoming involved. She has learnt the lesson by the large loss that she has sustained.”
[28]Both Mr Cox QC and Mr Corre disputed the fourth aggravating feature: life style. The judge had earlier described the appellants in his sentencing remarks as “living in high style and giving yourselves prestige cars when at least some of the vodka bars were not bringing in the income to pay the enormous salaries you were drawing to live so extravagantly”. He was later to say “you both continued to draw your enormous salaries regardless” and:
“... you Gary Hibberd realised that there were large profits to be made and you paid yourself well and provided yourselves with the accoutrements of wealth such as top of the range cars, no doubt impressing everybody including Karen Forester as to your success. It was a charade.”
[29]Mr Cox objected to the word “extravagantly”, but accepted that his client’s style of life could be described as “high”. He submitted that the desired celebrity status of the bars required a certain “high” style. He also submitted that the salary of £250,000 was not taken in full. As to this Miss Osborne, for the respondent, said that there were substantial cash drawings but that it was not now possible to work out how much Hibberd had taken from the company. In our view the judge was not wrong to give some adverse weight to the life style of Hibberd.[30]Mr Corre objected to the judge’s description of Allen’s life as extravagant and Ms Osborne did not seek to uphold the judge’s conclusion in so far as Allen was concerned. The judge should not have treated this as an aggravating feature. However, his sentence was considerably less than that of Hibberd.[31]Mr Cox objected to the first part of the fifth aggravating feature, namely that Hibberd had corrupted Allen. No such suggestion had been made by Mr Corre or by Ms Osborne. In reply to a question from Jack J, Ms Osborne said it was not possible to say whether one, other or both had instigated the indicted fraud. The judge was wrong, in our view, to say on the material available to him that Hibberd had corrupted Allen.[32]Mr Cox also objected to the second part of the fifth aggravating feature, namely that Hibberd was responsible for Karen Forester getting involved. There was no evidence Karen Forester had become involved because of the lure of quick and enormous profits as the judge suggested. It is submitted, with some force, that the statement made by Karen Forester for the purposes of sentence, did not support the assertion that she had become involved for this reason.[33]In our view the judge was wrong to rely on the fifth aggravating feature.[34]As to delay

the judge said:

“There has been, as is now clear, a good four year delay between the collapse of Vodka Bar Management early in 2004 and sentence today. There are a number of reasons for that delay. Firstly the length of time taken by the investigation of this serious and complex fraud, largely if not wholly investigated by one officer. Secondly, the delays between arrest and charging have been caused by the officer being ill, your solicitors asking for time because you were on holiday or unavailable, or they have not had chance to look at the documents, or the documents had not arrived and so on. So taking a generous view, neither of those two reasons I have just set out can be laid at your door. The third reason for the delay, that is the delay between your charge and today was caused by the fact that until the very day of the trial both of you were saying that you intended to plead not guilty and contest these allegations. It follows that in these circumstances I do reduce the sentences I am about to impose, because of the delay and the pressures that you have lived under over that time. But of course the credit that I give you for that is certainly not as great as it could have been if other circumstances had prevailed.”
[35]Mr Cox objected to the significant disparity in sentence between Hibberd and Allen, submitting that Hibberd’s sentence should be reduced accordingly. We have already referred to the much lower salary to which Allen was entitled and the difference in the life styles. Allen was significantly younger than Hibberd. We have also shown how Hibberd had been unsuccessfully involved in business of this kind from 1998 whereas Allen, who had started out as a DJ and then bar manager, only became a director in 2001. Additionally

the judge said in his sentencing remarks:

“Mr Patterson came to regard Gary Hibberd as being more high level than Timothy Allen who dealt with the finer detail of documentation surrounding the deals.”
In our view, the judge was entitled to draw the distinction that he did. Certainly, the disparity was not such that, by itself, it would justify this court intervening to lower the sentence.[36]Mr Cox relied upon the judge’s finding that:
“I accept that when you, Gary Hibberd, went into the vodka bar business and later when you, Timothy Allen, became involved, you did not intend to commit fraud. These businesses certainly the Babushka business began as a genuine business. Some of the bars did well, very well, others did not bring in the profits that you were hoping for. ... I accept that part of the reason for committing these offences was to keep the businesses going in the hope that they would become very profitable indeed. I also accept that when the businesses were expanding, costs such as building costs and other unforeseen costs were far higher than anticipated, and that there was as a result a cash flow problem. Indeed that seems to have been compounded by Laurel who did not put in as much money as they had agreed to put in or you anticipated they would put in.”
[37]Mr Cox submitted that this was a case where the appellants were intending to pay back the money- this, so he submitted, distinguishes the case from the kind of case in which the defendants have no such intention, taking money from their victims for their own personal enjoyment. We accept that there can be such a distinction. On the other hand, in so far as Hibberd is concerned, in the light of his previous financial history (see paragraphs 11and 12 above), he must have known the substantial risks that he was incurring in obtaining loans by deceit and forgery.[38]Objection was taken to another passage in the judge’s sentencing remarks:
“A clear message of deterrence must be sent from this court, that those who dishonestly obtain money from financial institutions by fraud will be firmly punished.”
[39]Counsel submitted that this passage showed that the judge was increasing the sentence which would otherwise have been passed because of the prevalence of this kind of fraud and the need to deter it. Reference was made to Oosthuizen [2006] 1 Cr App R 73 which is concerned with sentences being increased in one area because of prevalence, actual or assumed. In our view the judge was not saying that he would increase the sentence which he would otherwise have passed. He was merely re-affirming that a purpose of sentencing is “the reduction of crime (including its reduction by deterrence)”, as to which see section 142(1)(c) of the Criminal Justice Act 2003.[40]However, it would have been easier for this Court to have understood how the judge reached the sentences which he passed, if he had given his chosen starting point, prior to any increase because of aggravating features and prior to any reduction for good character, delay and any other mitigating features. Having reached the decision as to what would then be the appropriate sentence, it would have been better if the judge had said what deduction he was making for the late plea (the deduction for plea is applied to the appropriate sentence after all aggravating and mitigating features have been taken into account, see paragraph 2.4 of the Revised SGC Guidelines “Reduction in sentence for guilty plea”).[41]Mr Cox and Mr Corre complain that the sentences, relating as they did essentially to the same fraud should not have been consecutive. This court is usually concerned not with whether sentences are concurrent or consecutive but whether the total sentence is wrong in principle or manifestly excessive. On the other hand, the victims of the two counts, RBS and Lombard, were part of the same conglomerate and Clark and Patterson shared the same office. For that reason we think that in this case the maximum sentence which could have been passed for the two counts is 10 years’ imprisonment, being the maximum sentence for conspiracy to defraud, see Criminal Justice Act 1987, section 12(3). But it is an aggravating feature of the case against the appellants that they were involved in fraud which had two distinct manifestations: see Bright [2008] EWCA Crim 462 at paragraph 13 (to which we turn below).[42]Complaint is made about what is said to be a failure on the part of the judge to give sufficient credit for plea. Reference is made to Oprey [2002] 1 Cr App R (S) 75 at page 317. The Court said in that case that in cases of complex fraud, particular credit should be given to defendants who plead guilty, albeit late in the day, thus saving the burden and expense of a trial. That decision precedes the Guidelines referred to in paragraph 36 above, in which no such principle can be found. In our view the discount for the very late pleas in this case was in the region of 10 per cent.[43]We turn to the sentence of 6 years passed on Hibberd. Given that the judge gave no starting point and that he wrongly took into account the fifth aggravating feature for Hibberd (corruption of Allen and responsibility for Karen Forester becoming involved), we have decided to look at the sentence afresh.[44]There is no guideline case. There are draft SGC Guidelines on sentencing for statutory offences of fraud but they are not in force and do not apply, as now drafted, to conspiracy to defraud.[45]Much reliance is placed by Mr Cox on Attorney Generals Reference 48, 49, 50 and 51 of 2002 (Paulssen and others) [2002] EWCA Crim 3163; [2003] 2 CR. App. R. (S.) 36. The four offenders were convicted of one count of conspiracy to defraud, namely an investment fraud which operated from late 1995 to mid-1996. During that relatively short period $9.8 million was gathered in and only some $2.1 million was recovered. The fraud was a simple one and dishonest from the outset. Investors, many of whom were small investors who lost all or most of their savings, put their money into a company in reliance on promises of high rates of return and what turned out to be a worthless undertaking that the investments were protected by insurance. The money paid over by the investors was in very large measure not invested and used to benefit the offenders and others.[46]Giving the judgment of the Court Kennedy LJ said:
“27. We turn to what should be the sentencing starting point for a conspiracy such as this. The maximum sentence for a conspiracy to defraud is 10 years' imprisonment, or a fine or both (see s.12 (3) of the Criminal Justice Act 1987). Here Mr Aylett [for the A-G] submits that the sums involved were such that, taken together with the other aggravating features, they should have caused the trial judge to think initially in terms of a sentence approaching the statutory maximum. In support of that submission he invited our attention to R v Trevor Clark (1998) 2 CAR (S) 95 where this court offered guidance in relation to thefts by employees. Having reviewed the number of decisions in other cases, Lord Justice Rose said (at page 100) that contested cases involving between £250,000 and £1 million will merit between five and nine years; cases involving £1 million or more will merit ten years or more. We derive considerable assistance from that authority because, in our judgment, there is a clear parallel between the breach of trust committed by an employee who steals money from her employers and that committed by those who seek and deliberately misuse investors' monies entrusted to them.”
[47]Mr Cox submitted employee theft cases are more serious in that they involve a particular breach of trust. Notwithstanding this difference, we see parallels between cases of employee theft and cases of fraud of the kind being considered in Paulssen.[48]Kennedy LJ went on to say: “28. We recognise that in this case there were three factors common to all offenders which were bound to cause the sentencing judge to move down from the statutory maximum when seeking an initial common starting point, namely - 1) The amount of money involved, although high, could have been even higher, as it was in one or two decided cases, and the conspiracy, although lengthy, did not last over long; 2) There was no deliberate targeting of small investors; 3) Although in part attributable to the activities of one or more of the offenders themselves there was a substantial delay between 1996 when all except Paulssen were arrested for this offence and October 2001 when the trial began. 29. Bearing those factors in mind, it seems to us that the sentencing starting part should have been, as Mr Aylett contended, 7 years' imprisonment.” 1) The amount of money involved, although high, could have been even higher, as it was in one or two decided cases, and the conspiracy, although lengthy, did not last over long; 2) There was no deliberate targeting of small investors; 3) Although in part attributable to the activities of one or more of the offenders themselves there was a substantial delay between 1996 when all except Paulssen were arrested for this offence and October 2001 when the trial began.[49]In the case of Paullsen who was the principal beneficiary of the fraud (some £1.45 million) and who had pleaded not guilty, the Court said that it was appropriate to deduct one year from the seven years to reflect his hitherto good character and “other personal circumstances”. We shall look at the relevance of good character when we examine Bright.[50]Mr Cox points out that Paulssen’s fraud was significantly more serious than the index fraud. Paulssen’s fraud involved huge losses to investors, many of them small, and the scheme was fraudulent from the start. He also points out that in both cases there had been substantial delay. The mitigating value of delay, considered by the judge in passing sentence on the appellants (paragraph 34 above) is also considered in Bright to which we now turn.[51]In Bright, the judgement was given by the then President of the Queen’s Bench Division, Judge LJ. Bright was convicted following a trial on two counts of conspiracy to defraud. He was sentenced to 7 years’ imprisonment concurrent on each count. His appeal against sentence was dismissed. The convictions arose from the collapse of the Independent Insurance Group with a projected deficiency in the region of £1 billion. Bright had started the business in 1988. Not far short of £400 million has already been paid to policy holders by the Financial Services Compensation Scheme funded by the insurance industry, but not all claims will qualify for compensation. There was no suggestion that the company had been set up as a vehicle for fraud. The dishonesty began as a response to trading difficulties. What was unknown at first, but gradually became apparent to Bright and his co-defendants, was that the company had been unprofitable over a period of years. It was then that the dishonesty began.Very many millions of pounds worth of claims were put on lists which were kept separate from the accounting systems. In this way they were concealed from the company's independent actuaries, who were deliberately and dishonestly tricked into certifying that the reserves were sufficient when they were not. Once the company's considerable financial difficulties were appreciated, the appellant and Lomas negotiated three very substantial reinsurance contracts which had a corresponding beneficial effect on the accounts. These contracts were underpinned by several further, but unfavourable contracts. Assurances were given that the only contracts were the favourable ones. This was deliberately false. The effect was to alleviate concerns which would otherwise have troubled the company's actuaries and accountants. In the result, whereas the board of directors, and the public at large, were given detailed information about the beneficial contracts, the unfavourable contracts were entirely concealed. The dishonest actions of the appellant led to the accounts being overstated by over £200 million.[52]With the agreement of the prosecution, the judge accepted in that case that it would be inappropriate for him to pass consecutive sentences in relation to the two counts of conspiracy to defraud. As the Court of Appeal said (paragraph 13), the problem which arose in the appeal was that the judge also accepted a submission on behalf of the defendants that there was no effective difference between these particular conspiracies to defraud and what would have been conspiracies to trade fraudulently. For such offences the maximum available sentence was not 10 years' imprisonment for conspiracy to defraud, but 7 years, for what would have been conspiracies to trade fraudulently. The Court of Appeal held that he was wrong to have accepted the submission and that, the maximum available sentence was 10 years’ imprisonment (see paragraph 26) and that the Court had to examine the “sentence in the light of the statutory maximum as it is, not as it was thought to be” (paragraph 27).[53]The Court said this about statutory maxima: “29. The maximum sentence permitted by statute is, of course, very rarely imposed, and nowadays when there has been a guilty plea, effectively never. Such sentences should be reserved for those cases which, at the end of the trial and within the statutory context, can fairly be regarded as crimes of the utmost gravity. It is sometimes loosely said that the maximum sentence should be reserved for the worst case of its kind, and from this, imaginative counsel for the defendant will urge examples of cases of greater criminality than the offence established against his client. The argument however is founded on the misapprehension that if a realistically more serious case can be imagined, the imposition of the maximum sentence is precluded. That is why we repeat, the maximum sentence permitted by statute is reserved not for the worst possible case which can realistically be conceived, but for cases which in the statutory context are truly identified as cases of the utmost gravity. 30. The principle is long established. In R v Amber and Hargreaves, unreported, November 24, 1975, but referred to in Current Sentencing Practice at A1-4CO1 a case involving offences of corruption in the context of bribery of prison officers, Lawton LJ observed: ‘It is of course a principle of sentencing that maximum sentences should only be passed for the worst kind of offence. But it is to be borne in mind that when judges are asking themselves whether they should pass the maximum sentence, they should not use their imagination to conjure up unlikely worst possible kinds of case. What they should consider is the worst type of offence which comes before the court and ask themselves whether the particular case they are dealing with comes within the broad band of that type. Where the maximum sentence is low, the band may be wide.’ It is rare for sentencing decisions from the mid 1970s to continue to provide assistance over 30 years later. However the principle was recently endorsed in R v Butt [2006] 2 CAR (S) 364, where it was said that the "enunciation of principle bears repetition". We repeat and endorse the principle.” (Underlining added) ‘It is of course a principle of sentencing that maximum sentences should only be passed for the worst kind of offence. But it is to be borne in mind that when judges are asking themselves whether they should pass the maximum sentence, they should not use their imagination to conjure up unlikely worst possible kinds of case. What they should consider is the worst type of offence which comes before the court and ask themselves whether the particular case they are dealing with comes within the broad band of that type. Where the maximum sentence is low, the band may be wide.’[54]The court described what Bright had done “as a crime of the utmost gravity” (paragraph 33).[55]As to the good character of the appellant Bright, the Court said:
“34. Mr Winter [counsel for Bright] submitted that the sentence ignored the appellant's personal mitigation. He drew attention to the appellant's age (63 years) his good character, his poor health, the medical condition of his wife, for whom he was caring before he started his sentence. He also submitted that the appellant lost literally everything for which he had worked, not least the destruction of the business which had soared to the heights from nowhere, not least because of his commitment and contribution to it. In summary, his life is in ruins. A maximum sentence, by definition, must have ignored all these elements of personal mitigation, and some allowance should have been made for them. 35. Our conclusion is that in this particular case not much, if any, allowance would be appropriate. It is not unknown for major white collar fraudsters - and that is what the appellant is – to be individuals of apparent impeccable rectitude and good character. Indeed this very reputation helps them to establish this standing in business which, for a variety of different reasons, later becomes the vehicle for fraud. At the time when he was committing these offences, he was a President of the Institute of Insurers, apparently a pillar of respectability. Suspicion would not fall on him, and if it did, could be brushed aside as unworthy. It is always sad to see a successful individual fall from heights which he has achieved through his own hard work. But the appellant's criminal behaviour means that all his wounds were and are self inflicted.”
[56]This passage must be borne in mind when considering Paulssen. Likewise what was said about delay must be borne in mind when considering that case:
“It was suggested that some allowance should have been made for the delay between the first investigations with the appellant and the date of sentence. He was first interviewed in January 2002 by the liquidators of the company, and by the Financial Services Authority in November 2004. The prosecution, applying that term broadly, was not responsible for any delay. The investigation involved study of literally a million documents. During his interviews the appellant was concerned to conceal the truth rather than reveal it. The case therefore had to be prepared and it eventually proceeded as a trial. The practice of allowing a discount against sentence to a defendant who pleads guilty is pragmatic. In this case an honest response to the interview process, and an indication of a guilty plea, would have avoided a huge investigation and a mammoth trial. It would be absurd for the defendant whose criminal activity requires massive investigation and whose lies contribute to the delay in bringing him to justice, then to seek to take advantage of the delay as a feature in mitigation”
[57]Given the eventual plea of guilty in the index appeal, it seems likely that the appellants’ lies contributed to the delay in bringing them to justice, but absent a clear finding by the sentencing judge, we shall approach the issue of delay as he did (paragraph 34 above).[58]The Court in Bright also said, in dismissing the appeal, that if the maximum sentence had been 7 years:
“38. ... we very much doubt whether it would have been appropriate to order any reduction. In the light of his age, and ill health, and his wife's ill health, some small reduction from the notional maximum might have been allowed as an act of mercy, but the judge was entitled to conclude that in view of the appellant's conduct, he had forfeited any mercy which the court might otherwise have extended to him.”
. The Court went on to say:
“... the actual sentence has effectively made every possible allowance for these matters, and represents a relatively significant discount from the available maximum sentence. ”
[59]Mr Cox also referred us to Dekson [2004] EWCA Crim 3205; [2005] 1 Cr. App. R. 114. A sentence of six years’ imprisonment following a trial was upheld for an advance fee fraud in which the appellant was the principal (there were other consecutive sentences). The total amount obtained by the fraud was some £1.7 million. The Court considered a number of authorities including Paulssen and Mance LJ said that “Making allowances for the differences between the offending in this case and the offending in Paulssen, and taking account of the prevalence of the present type of offence and its character, we do not think that Paulssen suggests that the judge's sentence of six years was in any way out of line with an appropriate sentence. ”[60]What then is the appropriate sentence for Allen? As we have said, the maximum sentence for the two counts, in this case, is to be treated as being 10 years’ imprisonment. It is not, in our view, a case of the utmost gravity attracting the maximum sentence after a trial. In the light of Bright we think that the starting point of 7 years’ imprisonment on Paulssen may be on the light side. However, not without some reluctance, we take the view that until such time as there are guidelines either from the Court of Appeal or from the SGC on the appropriate sentences for conspiracy to defraud, we should assume that the starting point in Paulssen for a fraud of that kind is about right. The fraud in the index cases is less serious than that in Paulssen and in our view a starting point after a trial in the region of six years is appropriate taking into account the following aggravating features identified by the judge:
“[First] the prolonged time over which the fraud took place. Secondly, the determination with which the frauds were committed, innumerable false representations and even resort to forgery. Thirdly, the large sums of money involved.”
[61]Bearing in mind what was said in Bright, we attach only limited value to the good character and other personal mitigation of Hibberd. We do however consider that the delay in this case should be reflected by a reduction in the sentence. But we also take into account as an aggravating factor, the fact that he has in the past run companies which had collapsed and risen “phoenix like” from the ashes on more than one occasion. This put him in a different position from a person who had no such history. As we have said, although Hibberd intended that the victims of the fraud should not lose, he must have known the substantial risks that he was incurring in obtaining loans by deceit and forgery. Taking these factors into account into account, we think that the proper sentence before taking into account the late plea was in the region of five and a half years’ imprisonment. Taking into account the late plea and reducing that period by about 10 per cent, we conclude that the right sentence is one of 5 years’ imprisonment. To achieve that result we reduce the sentence on count 2 to one 1 years’ imprisonment, consecutive. To that limited extent Hibberd’s appeal against sentence succeeds.[62]We turn to the sentence of 3½ years on Allen. Notwithstanding the reduction in Hibberd’s sentence and notwithstanding the fact that the judge should not have taken into account the fourth aggravating feature (life style) for Allen, we take the view that this sentence for a fraud involving losses in the region of £2million, being a fraud in which Allen was very substantially involved, cannot be described as manifestly excessive or wrong in principle. His appeal against sentence is dismissed.

Cited in 3 later judgments