R v Lambie [1981] UKHL 4

House of Lords

Between

RAppellant

LambieRespondent

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal (Criminal Division) of the 31st day of July 1980 complained of in the said Appeal be, and the same is hereby, Reversed so far as regards the words " allowed the appeal against conviction on count 2 " and that the conviction of the Respondent by Bedford Crown Court on the 2nd day of August 1979 on the said count 2 of the indictment be, and the same is hereby, Restored: And it is further Ordered, That the Costs of the Appellant in this House and in the Court of Appeal (Criminal Division) be paid out of Central Funds pursuant to section 10 of the Costs in Criminal Cases Act 1973, the amount thereof to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Court of Appeal (Criminal Division) to do therein as shall be just and consistent with this Judgment.

HOUSE OF LORDS

REGINA (APPELLANT)

v, LAMBIE (RESPONDENT)

(ON APPEAL FROM THE COURT OF APPEAL (CRIMINAL DIVISION))

Lord Diplock Lord Fraser of Tullybelton Lord Russell of Killowen Lord Keith of Kinkel Lord Roskill

Lord Diplock

My Lords,

I have had the advantage of reading in draft the speech prepared by my noble and learned friend. Lord Roskill. I agree with it and would allow the appeal.

Lord Fraser of Tullybelton MY LORDS,

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Roskill. I agree with it and for the reasons stated therein I would answer the certified question in the negative and allow this appeal.

Lord Russell of Killowen

My Lords,

I have had the advantage of reading in draft the speech prepared by my noble and learned friend. Lord Roskill. I agree with it and that this appeal should be allowed.

Lord Keith of Kinkel my lords.

For the reasons given in the speech of my noble and learned friend. Lord Roskill, which I have had the opportunity of reading in draft and with which I entirely agree, I too would allow the appeal.

Lord Roskill

My Lords,

On the 20th April 1977 the respondent was issued by Barclays Bank Limited (" the bank ") with a Barclaycard (" the card "). That card was what today is commonly known as a credit card. It was issued subject to the Barclaycard current conditions of use, and it was an express condition of its issue that it should be used only within the respondent's credit limit. That credit limit was £200 as the respondent well knew, since that figure had been notified to her in writing when the card was issued. The then current conditions of use included an undertaking by the respondent, as its holder, to return the card to the bank on request. No complaint was, or indeed could be, made of the respondent's use of the card until the 18th November 1977. Between that date and the 5th December 1977 she used the card for at least twenty-four separate transactions, thereby incurring a debt of some £533. The bank became aware of this debt and thereupon sought to recover the card. On the 6th December 1977 the respondent agreed to return the card on the 7th December 1977. She did not, however, do so. By the 15th December 1977 she had used the card for at least forty-three further transactions, incurring a total debt to the bank of £1005.26.

My Lords,

on the 15th December 1977 the respondent entered into the transaction out of which this appeal arises. She visited a Mothercare shop in Luton. She produced the card to a departmental manager at Mothercare named Miss Rounding. She selected goods worth £10.35. Miss Rounding completed the voucher, checked that the card was current in date, that it was not on the current stop list and that the respondent's signature on the voucher corresponded with her signature on the card. Thereupon, the respondent took away the goods which she had selected. In due course, Mothercare sent the voucher to the bank and were paid £10.35 less the appropriate commission charged by the bank. On the 19th December 1977 the respondent returned the card to the bank.

My Lords,

at her trial at Bedford Crown Court, on the 1st and 2nd August 1979, before His Honour Judge Counsell and a jury, the respondent faced two charges of obtaining a pecuniary advantage by deception contrary to section 16(1) of the Theft Act 1968. These were specimen charges. The first related to an alleged offence on the 5th December 1977, and the second to the events which took place at the Mothercare shop at Luton which I have just related. The particulars of each charge were that she dishonestly obtained for herself a pecuniary advantage " namely, the " evasion of a debt for which she then made herself liable by deception, " namely, by false representations that she was authorised to use a " Barclaycard ... to obtain goods to the value of £10.35 ".

The jury acquitted the respondent on the first charge. She was, however, convicted upon the second. The evidence of dishonesty in relation to the Mothercare transaction which was the subject of the second charge was overwhelming, and before your Lordships' House learned counsel for the respondent did not seek to suggest otherwise. Presumably the acquittal on the first count was because the jury were not certain that at the earlier date, 5th December 1977, the respondent was acting dishonestly.

My Lords,

during the hearing in this House your Lordships enquired of counsel for the appellant prosecutor why no count of obtaining property by deception on the 15th December 1977 contrary to section 15 of the Theft Act 1968 had been included in the indictment. Your Lordships were told that such a charge had indeed been preferred at the magistrates' court during the committal proceedings, but had been rejected by the magistrates upon a submission made on behalf of the respondent during those proceedings. My Lords, if this be so, I find it difficult to see upon what basis such a submission could properly have succeeded, or what defence there could have been had such a charge been the subject of a further count in the indictment once the jury were convinced, as they were, of the respondent's dishonesty on the 15th December 1977. Had that course been taken, the complications which in due course led to the Court of Appeal (Criminal Division) quashing the conviction on the second count, and consequently, to the prosecutor's appeal to this House, with your Lordships' leave, following the grant of a certificate by the Court of Appeal (Criminal Division), would all have been avoided. But the course of adding a count charging an offence against section 15 of the Theft Act 1968 was not followed, and accordingly your Lordships have now to determine whether the Court of Appeal (Criminal Division) was correct in quashing the conviction on the second count. If it was, then as that court recognised in the concluding paragraph of its judgment, a gateway to successful fraud has been opened for the benefit of the dishonest who in circumstances such as the present cannot be proceeded against and punished at least for offences against section 16 of the Theft Act 1968.

My Lords,

the committal proceedings were what is sometimes called " old " fashioned ", that is to say, that advantage was not taken of section 1 of the Criminal Justice Act 1967. Witnesses were called in the magistrates' court and cross-examined. These witnesses included Miss Rounding, the departmental manager. Your Lordships were shown a copy of her deposition. Miss Rounding was not called at the trial at Bedford Crown Court. Her deposition was read to the jury. It emerged from her evidence,

and other evidence given or read, that, as one would expect, there was an agreement between Mothercare and the bank. That agreement does not appear to have been properly proved at the trial, but by consent, your Lordships were given a pro forma copy of what is known as a " merchant "member agreement" between the bank and its customer, setting out the conditions upon which the customer will accept and the bank will honour credit cards such as Barclaycards.

My Lords,

at the close of the case for the prosecution, learned counsel for the respondent invited the learned judge to withdraw both counts from the jury on, it seems, from reading the learned judge's clear ruling upon this submission, two grounds, first, that as a matter of law there was no evidence from which a jury might properly draw the inference that the presentation of the card in the circumstances I have described was a representation by the respondent that she was authorised by the bank to use the card to create a contract to which the bank would be a party, and secondly, that as a matter of law there was no evidence from which a jury might properly infer that Miss Rounding was induced by any representation which the respondent might have made to allow the transaction to be completed and the respondent to obtain the goods. The foundation for this latter submission was that it was the existence of the agreement between Mothercare and the bank that was the reason for Miss Rounding allowing the transaction to be completed and the goods to be taken by the respon- dent, since Miss Rounding knew of the arrangement with the bank, so that Mothercare was in any event certain of payment. It was not, it was suggested, any representation by the respondent which induced Miss Rounding to complete the transaction and to allow the respondent to take the goods.

My Lords,

the learned judge rejected these submissions. He was clearly right to do so, as indeed was conceded in argument before your Lordships' House, if the decision of this House in Commissioner of Police for the, Metropolis v. Charles [1977] A.C. 177 is of direct application. In that appeal this House was concerned with the dishonest use, not as in the present appeal of a credit card, but of a cheque card. The appellant defendant was charged and convicted on two counts of obtaining a pecuniary advantage by deception, contrary to section 16 of the Theft Act 1968. The Court of Appeal (Criminal Division) and your Lordships' House both upheld those convictions. Your Lordships unanimously held that where a drawer of a cheque which is accepted in return for goods, services or cash, uses a cheque card he represents to the payee that he has the actual authority of the bank to enter on its behalf into the contract expressed on the card that it would honour the cheque on presentation for payment.

My Lords,

I venture to quote in their entirety three paragraphs from the speech of my noble and learned friend, Lord Diplock, at pages 182 and 183 of the report, which as I venture to think, encapsulate the reasoning of all those members of your Lordships' House who delivered speeches:

" When a cheque card is brought into the transaction, it still remains " the fact that all the payee is concerned with is that the cheque " should be honoured by the bank. I do not think that the fact that " a cheque card is used necessarily displaces the representation to be " implied from the act of drawing the cheque which has just been " mentioned. It is, however, likely to displace that representation at " any rate as the main inducement to the payee to take the cheque, " since the use of the cheque card in connection with the transaction " gives to the payee a direct contractual right against the bank itself " to payment on presentment, provided that the use of the card by " the drawer to bind the bank to pay the cheque was within the " actual or ostensible authority conferred upon him by the bank.

" By exhibiting to the payee a cheque card containing the under- " taking by the bank to honour cheques drawn in compliance with " the conditions endorsed on the back, and drawing the cheque " accordingly, the drawer represents to the payee that he has actual

" authority from the bank to make a contract with the payee on the " bank's behalf that it will honour the cheque on presentment for " payment.

" It was submitted on behalf of the accused that there is no need " to imply a representation that the drawer's authority to bind the " bank was actual and not merely ostensible, since ostensible authority " alone would suffice to create a contract with the payee that was " binding on the bank; and the drawer's possession of the cheque card " and the cheque book with the bank's consent would be enough to "constitute his ostensible authority. So, the submission goes, the " only representation needed to give business efficacy to the transac- " tion would be true. This argument stands the doctrine of ostensible " authority on its head. What creates ostensible authority in a person " who purports to enter into a contract as agent for a principal is a " representation made to the other party that he has the actual " authority of the principal for whom he claims to be acting to enter " into the contract on that person's behalf. If (1) the other party has " believed the representation and on the faith of that belief has acted " upon it and (2) the person represented to be his principal has so " conducted himself towards that other party as to be estopped from " denying the truth of the representation, then, and only then, is he " bound by the contract purportedly made on his behalf. The whole " foundation of liability under the doctrine of ostensible authority is " a representation, believed by the person to whom it is made, that " the person claiming to contract as agent for a principal has the " actual authority of the principal to enter into the contract on his " behalf."

If one substitutes in the passage at page 182G the words " to honour the " voucher" for the words " to pay the cheque ", it is not easy to see why mutatis mutandis the entire passages are not equally applicable to the dishonest misuse of credit cards as to the dishonest misuse of cheque cards.

But the Court of Appeal in a long and careful judgment delivered by Cumming-Bruce L.J. felt reluctantly impelled to reach a different conclusion. The crucial passage in the judgment which the learned

Lord Justice delivered reads thus:

" We would pay tribute to the lucidity with which the learned judge " presented to the jury the law which the House of Lords had declared " in relation to deception in a cheque card transaction. If that analysis " can be applied to this credit card deception the summing-up is " faultless. But, in our view, there is a relevant distinction between " the situation described in Charles and the situation devised by " Barclays Bank for transactions involving use of their credit cards. " By their contract with the bank, Mothercare had bought from the " bank the right to sell goods to Barclaycard holders without regard " to the question whether the customer was complying with the terms " of the contract between the customer and the bank. By her evidence " Miss Rounding made it perfectly plain that she made no assumption " about the appellant's credit standing at the bank. As she said ' the " 'Company rules exist because of the Company's agreement with

"' Barclaycard'. The flaw in the logic is in our view demonstrated " by the way in which

the Judge put the question of the inducement " of Miss Rounding to the jury:

"'Is that a reliance by her, Miss Rounding of Mothercare, "' upon the presentation of the card as being due authority within "' the limits as at that time as with count one? '

" In our view, the evidence of Miss Rounding could not found a " verdict that necessarily involved a finding of fact that Miss Rounding " was induced by a false representation that the appellant's credit " standing at the bank gave her authority to use the card."

I should perhaps mention, for the sake of clarity, that the person referred to as the appellant in that passage is the present respondent.

It was for that reason that the Court of Appeal (Criminal Division) allowed the appeal, albeit with hesitation and reluctance, accordingly certified the following point of law as of general public importance, namely:

" In view of the proved differences between a cheque card transac- " tion and a credit card transaction, were we right in distinguishing " this case from that of Commissioner of Metropolitan Police v. Charles " [1977] A.C. 177 upon the issue of inducement? "

My Lords,

as the appellant says in paragraph 9 of his printed case, the Court of Appeal (Criminal Division) laid too much emphasis upon the undoubted, but to my mind irrelevant fact that Miss Rounding said she made no assumption about the respondent's credit standing with the bank. They reasoned from the absence of assumption that there was no evidence from which the jury could conclude that she was "induced by a false "representation that the appellant's credit standing at the bank gave her "authority to use the card". But, my Lords, with profound respect to the learned Lord Justice, that is not the relevant question. Following the decision of this House in Charles, it is in my view clear that the representa- tion arising from the presentation of a credit card has nothing to do with the appellant's credit standing at the bank but is a representation of actual authority at the bank to make the contract with, in this case, Mothercare on the bank's behalf that the bank will honour the voucher upon presentation. Upon that view, the existence and terms of the agreement between the bank and Mothercare are irrelevant, as is the fact that Mothercare, because of that agreement, would look to the bank for payment. That being the representation to be implied from the respondent's actions and use of the credit card, the only remaining question is whether Miss Rounding was induced by that representation to complete the transaction and allow the respondent to take away the goods. My Lords, if she had been asked whether had she known the respondent was acting dishonestly and, in truth, had no authority whatever from the bank to use the credit card in this way, she (Miss Rounding) would have completed the transaction, only one answer is possible—no. Had an affirmative answer been given to this question, Miss Rounding would, of course, have become a participant in furtherance of the respondent's fraud and a conspirator with her to defraud both Mothercare and the bank. Leading counsel for the respondent was ultimately constrained, rightly as I think, to admit that had that question been asked of Miss Rounding and answered, as it must have been, in the negative, this appeal must succeed. But both he and his learned junior strenuously argued that, as my noble and learned friend, Lord Edmund-Davies, pointed out in his speech in Charles at pages 192 and 193 of the report, the question whether a person is or is not induced to act in a particular way by a dishonest representation is a question of fact, and since what they claimed to be the crucial question had not been asked of Miss Rounding, there was no adequate proof of the requisite inducement. In her deposition, Miss Rounding stated, no doubt with complete truth, that she only remembered this particular transaction with the respondent because some one subsequently came and asked her about it after it had taken place. My Lords, credit card frauds are all too frequently perpetrated, and if conviction of offenders for offences against sections 15 or 16 of the Theft Act 1968 can only be obtained if the prosecution are able in each case to call the person upon whom the fraud was immediately perpetrated to say that he or she positively remembered the particular transaction and, had the truth been known, would never have entered into that supposedly well-remembered transaction, the guilty would often escape conviction. In some cases, of course, it may be possible to adduce such evidence if the particular transaction is well remembered. But where as in the present case no one could reasonably be expected to remember a particular transaction in detail, and the inference of inducement may well be in all the circumstances quite irresistible, I see no reason in principle why it should not be left to the jury to decide, upon the evidence in the case as a whole, whether that inference is in

truth irresistible as to my mind it is in the present case. In this connection it is to be noted that the respondent did not go into the witness box to give evidence from which that inference might conceivably have been rebutted.

My Lords,

in this respect I find myself in agreement with what was said by Humphreys J. giving the judgment of the Court of Criminal Appeal in R. v. Sullivan

(1945) 30 Cr. App. R. 132

at 136:

" It is, we think, undoubtedly good law that the question of the " inducement acting upon the mind of the person who may be described " as the prosecutor is not a matter which can only be proved by the " direct evidence of the witness. It can be, and very often is, proved " by the witness being asked some question which brings the answer:

" ' I believed that statement and that is why I parted with my money'; " but it is not necessary that there should be that question and answer " if the facts are such that it is patent that there was only one reason " which anybody could suggest for the person alleged to have been " defrauded parting with his money, and that is the false pretence, if " it was a false pretence."

It is true that in Reg. v. Laverty

(1970) 54 Cr. App. R. 495

, Lord Parker C.J. said at p.498 that the Court of Appeal (Criminal Division) was anxious not to extend the principle in Sullivan further than was necessary. Of course, the Crown must always prove its case and one element which will always be required to be proved in these cases is the effect of the dishonest representation upon the mind of the person to whom it is made. But I see no reason why in cases such as the present, where what Humphreys J. called the direct evidence of the witness is not, and cannot reasonably be expected to be available, reliance upon a dishonest represen- tation cannot be sufficiently established by proof of facts from which an irresistible inference of such reliance can be drawn.

My Lords,

I would answer the certified question in the negative and would allow the appeal and restore the conviction of the respondent upon the second count in the indictment which she faced at Bedford Crown Court.

213389 Dd 8208150 C2 6/81