Varley & Ors, R. v

A director who is named in, and accepts responsibility through, a market-facing directors’ responsibility statement may personally make a representation for the purposes of section 2 of the Fraud Act 2006. The company’s issue of the prospectus does not prevent the director from being a principal maker of that statement.

For fraud by false representation, the conduct element is an objectively untrue or misleading representation. Knowledge that it is or may be false, dishonesty and the requisite intent are mental elements. This construction permits liability through an innocent agent and applies to statutory conspiracy.

However, an agreement cannot found statutory conspiracy where an authorised non-conspirator might instead execute the relevant document, since the agreement would not necessarily involve an offence by a party to it.

The Serious Fraud Office appealed a terminating ruling of Jay J at Southwark Crown Court. The respondents, senior Barclays executives, were charged with statutory conspiracy to commit fraud by false representation in connection with capital raisings in June and October/November 2008.

The prosecution alleged that advisory service agreements with Qatari entities were sham devices for undisclosed additional commissions. It relied on prospectuses and subscription agreements said to contain false statements about commissions, costs and other arrangements.

The judge held that the respondents had no case to answer on three proposed routes to liability: personal making of the statements, innocent agency and participation. He also held that the evidence against John Varley was insufficient. The appeal raised whether directors could personally make representations in company prospectuses, whether innocent agency was available under the fraud legislation, and whether the ruling concerning Mr Varley met the statutory threshold for reversal.

1. The appeal was allowed in part. The judge erred in law by ruling out the direct route to liability based on the directors’ responsibility statements in the June 2008 equity prospectus and the November 2008 Warrant Prospectus. Those statements were market-facing and expressly stated that both the directors and Barclays accepted responsibility. A director who made such a statement could be convicted under section 2 of the Fraud Act 2006 if a jury found it false and the remaining elements proved.

2. The fact that Barclays issued the prospectus did not mean that only Barclays made its contents. The question was not one of Barclays’ directing mind and will. The directors and Barclays could make and accept responsibility for the statement as principals. The court permitted amendment of Count 2 to add allegations based on the Warrant Prospectus.

3. The subscription agreements could not sustain the prosecution’s direct-route case. Their execution was delegated to a class extending beyond the alleged conspirators. It was therefore a matter of chance who signed them, and the alleged agreement did not necessarily involve an offence by one or more parties to it, as section 1(1) of the Criminal Law Act 1977 requires.

4. Innocent agency was capable of applying to statutory conspiracy and to fraud by false representation. Section 2(2)(a) identifies the objectively false or misleading representation; section 2(2)(b), together with section 2(1), supplies mental elements. The contrary construction would absurdly exclude liability where a knowing fraudster caused an innocent person to make the representation.

5. The court did not determine the alternative participation route based on procuring Barclays’ offence, because its conclusion on innocent agency made that unnecessary.

6. The appeal concerning Mr Varley’s evidential sufficiency was dismissed. The prosecution had to establish knowledge that each advisory agreement was a sham, rather than merely an expensive or controversial agreement. Although aspects of the evidence caused concern, the judge’s conclusion remained within the range of reasonable conclusions. Proceedings could continue against Jenkins, Kalaris and Boath on Count 1, and against Jenkins on Count 2, before a different High Court judge.

• Court of Appeal (Criminal Division): The Serious Fraud Office’s appeal against the terminating ruling was allowed on the direct-route and innocent-agency issues, and dismissed on the evidential-sufficiency issue concerning John Varley.
• Southwark Crown Court: Jay J, by ruling dated 3 April 2019, upheld submissions of no case to answer in respect of all respondents on the charged counts.