REGINA v Peter HUNTER

The second limb of section 993(1) of the Companies Act 2006 criminalises carrying on a company’s business for any fraudulent purpose. It is not confined by limitations developed for the distinct common-law offence of conspiracy to defraud.

A fraudulent purpose requires dishonesty. Deception will often evidence dishonesty, but an intention to deceive and an actual victim or completed harm are not indispensable elements. The offence is directed to the fraudulent purpose, so it may be committed before that purpose is successfully implemented.

In ticket-resale cases, a ticket is a contractual licence, not a transferable good freed from its restrictions. Restrictions designed to prevent commercial harvesting and resale may be fair and enforceable, subject to the facts of the individual consumer contract.

Peter Hunter and David Smith appealed convictions at Leeds Crown Court for fraudulent trading contrary to section 993(1) of the Companies Act 2006 and for possessing or controlling articles for use in fraud contrary to section 6(1) of the Fraud Act 2006.

The Crown alleged that their ticket-resale company used false identities, payment cards, bots and related software to obtain tickets in breach of vendors’ restrictions, and then resold tickets at substantial premiums without disclosing the risk of cancellation or refusal of entry. It also alleged speculative sales of tickets not yet owned.

The appeals challenged the refusal to admit fresh evidence and exclude allegedly emotive evidence, the meaning of fraudulent trading, the fairness and effect of ticket restrictions, the legal nature of a ticket, and the adequacy of the jury directions.

Disposition

1. The court dismissed both appeals and the application to adduce fresh evidence. The proposed evidence about links between ticketing businesses was not fresh. Material concerning the challenged concerts was relevant to the manner in which the business operated and to dishonesty; its prejudicial effect did not make its admission unfair.

2. Section 993(1) of the Companies Act 2006 contains a distinct second-limb offence. Its three cumulative components are that a company business is carried on, that it is carried on for a fraudulent purpose, and that the defendant knowingly participates in its carrying on in that manner. The statutory language is not restricted by common-law limits applicable to conspiracy to defraud.

3. Dishonesty is essential to a fraudulent purpose. Deception and concealment may be powerful evidence of it, but fraud and deception are not synonymous. The prosecution need not prove an intention to deceive, an actual victim, completed fraud, or actual loss. The focus is on the fraudulent purpose; a business system may be carried on for that purpose before it causes actual harm.

4. On the facts, the jury had been directed favourably to the appellants. It was asked to decide whether the use of false identities and software deceived ticket vendors, and whether consumers were exposed to an undisclosed risk that tickets would be cancelled or refused. The evidence established real prejudice to consumers and vendors in any event.

5. The Consumer Rights Act 2015 did not apply to the appellants’ purchases from ticket vendors because those were trader-to-trader contracts. Fairness under that Act was for the judge, not the jury. The restrictions were intelligible, pursued the legitimate aim of protecting consumers against ticket harvesting and inflated resale, and were fair on the evidence before the court.

6. A ticket is evidence of a contractual licence to enter land and receive the relevant service. It transfers with its contractual benefits and burdens. The doctrine of a bona fide purchaser for value did not apply to remove restrictions from tickets or excuse the appellants’ conduct. The judge’s directions correctly concentrated the jury on these real issues without unnecessary exposition of complex civil-law concepts.

• Court of Appeal (Criminal Division) — dismissed the appeals against conviction and the application to adduce fresh evidence: [2021] EWCA Crim 1785.
• Crown Court at Leeds — on 13 February 2020, Hunter and Smith were convicted of fraudulent trading and possession or control of articles for use in fraud. On 24 February 2020, Hunter was sentenced to four years’ imprisonment and Smith to two years and six months’ imprisonment.