Ali, R v

For fraudulent trading, the absence of a definitive sentencing guideline does not prevent a court from having substantial regard to the structured approach in the fraud guideline where its harm and culpability factors are comparable. The court must nevertheless recognise that fraudulent trading spans a wide range of seriousness and is not identical to substantive fraud.

A custodial sentence may be justified where deliberate and sustained dishonest trading involves abuse of trust, vulnerable victims, substantial losses and damage to public confidence. Equal sentences may be proper despite differing monetary losses where the offenders played equivalent leading roles and the judge identifies no material difference in culpability or harm.

The three appellants were convicted after trial at the Crown Court at Blackfriars of fraudulent trading contrary to section 993 of the Companies Act 2006. Each received 28 months’ imprisonment.

The offending concerned letting businesses trading as Crestons. The businesses failed to protect or return tenancy deposits, retained rent which should have been paid to landlords, and used paperwork which obscured the identity of the contracting company. The appellants challenged their sentences as excessive, principally contending that the judge placed undue weight on the fraud sentencing guideline and insufficient weight on earlier authority concerning fraudulent trading. Two appellants also relied, to differing degrees, on alleged disparity with a co-appellant.

1. The appeals against sentence were dismissed. The sentences of 28 months’ imprisonment were neither wrong in principle nor manifestly excessive.

2. There was no definitive guideline for fraudulent trading. However, the sentencing judge was entitled to have more than some regard to the Sentencing Council’s guideline for fraud, bribery and money laundering. Its structured assessment of harm and culpability was helpful, although fraudulent trading was not the same offence as fraud under section 1 of the Fraud Act 2006. The court endorsed the usefulness of the factors identified in R v Mackey [2012] EWCA Crim 2205, which substantially corresponded with those in the current guideline.

3. Fraudulent trading covers a wide spectrum. The broad observation in R v Smith and Palk [1997] 2 Cr App R(S) 167, that it may be less serious than equivalent theft or fraud, was particularly apt to lower-level offending and did not assist these appellants. Nor was Mackey a true analogy: it concerned a formerly genuine business in financial difficulty and unusually powerful personal mitigation.

4. The judge was entitled to find deliberate and reckless trading over a sustained period, in the knowledge that liabilities could not be discharged. The appellants had acted dishonestly, abused the trust of landlords and tenants, and caused loss to numerous victims, some of whom were vulnerable. The loss fell within the range which, by analogy, would be category 3 fraud, and the offending undermined confidence in the letting sector. Those matters supported a finding of high culpability.

5. The judge was also entitled to impose the same sentence on all three appellants. Each had played a leading role in operating the business, and the judge identified no material distinction in culpability or harm. The higher loss attributable to Syed did not establish an unacceptable disparity.

• Court of Appeal (Criminal Division): Three appeals against sentence, brought with the single judge’s leave, were dismissed.
• Crown Court at Blackfriars: On 26 November 2018 the appellants were convicted of fraudulent trading. On 17 January 2019 each was sentenced to 28 months’ imprisonment.