A dishonest employee – but is it theft?

Police lamp copyright David Winch 2014

Pamela Darroux was from 2 November 2002 until 1 April 2014 employed as a manager by a charity known as the Sunridge Court Housing Association.  She was a trusted and senior employee, managing the residential care home for elderly people operated by the Housing Association in Golders Green.  She had responsibility for the general running of the home.  Her responsibilities extended to the pay-roll of all employed staff, including herself.

She was contracted to work from Monday to Friday, between 9 am and 5 pm.  It was an agreed term that when she did overtime, or covered for other members of staff, she was entitled to claim additional payment.  She was also entitled to claim payment in lieu of holiday not taken.

It seems that her the practice throughout the period of her employment was to fill in the relevant claim forms by hand.

The mechanics of payment

Once the relevant claims were approved the forms would be sent on a monthly basis to a company called PCS Limited, who, in effect, provided pay-roll services.  It appears that on receipt of the relevant forms PCS would make the necessary computations for each employee; arrange for the appropriate deductions, with a view to accounting to the Revenue, in respect of PAYE and National Insurance contributions; prepare and send to each employee, the relevant monthly Pay Advice (which would include recording payment for hours worked in excess of the basic contracted amount); and arrange for the payment by bank transfer to each such employee accordingly.

The sums in question would then be paid out of the Housing Association’s account via BACS and the corresponding amount would then appear as a credit in each individual employee’s designated bank account.

Discovery of the overpayments

In 2013 the Housing Association was subject to an inspection by the Care Quality Commission, which reported shortcomings in its administration.

The Executive Director of the Housing Association ordered an audit of the financial position, including payroll payments.  The upshot of this was a claim by the Housing Association that Ms Darroux had defrauded the charity by submitting falsely inflated overtime / on call claims and claims in lieu of holiday entitlement for herself.  The total amount said to be involved was quantified at £49,465 for the period between January 2011 and February 2014.

Criminal prosecution

Ms Darroux was arrested, interviewed and ultimately charged with nine counts of theft contrary to s1 Theft Act 1968 in that she “stole monies belonging to Sunridge Court Housing Association”.

At the conclusion of her trial in the Crown Court on 15 June 2016 the jury found Ms Darroux guilty on six of the counts on the indictment.  On those counts on which the jury convicted they had, on the invitation of the judge, returned special verdicts setting out the amounts they had found to be dishonestly taken (these were rather less than had been alleged by the prosecution).

Ms Darroux was sentenced to 16 months imprisonment.  She appealed.

Grounds of appeal

In the Court of Appeal her counsel argued that, on the facts and circumstances of this case, counts of theft were unsustainable.

Counsel necessarily accepted that, by their verdicts, the jury had found Ms Darroux to be dishonest in respect of the counts on which she was convicted, but submitted that there were no acts constituting the appropriation of property belonging to another.

Counsel accepted that the facts alleged would bring this case within the ambit of s2 of the Fraud Act 2006; but not within the ambit of s1 Theft Act 1968.

Court of Appeal decision

The Court of Appeal concluded “with no enthusiasm” that these convictions must be quashed, Darroux v The Crown [2018] EWCA Crim 1009.

The dishonest actions of Ms Darroux were not “theft” as defined in law.  What had happened was that the Housing Association’s bank balance (a debt due from the bank to the Housing Association) had fallen and Ms Darroux’s bank balance (a debt due to her from her bank) had increased.

But these were two different assets.  Ms Darroux had not therefore appropriated property from the Housing Association.  This was a point dealt with by the courts long ago in R v Preddy [1996] UKHL 13.

What is more, the bank transfer had been made by PCS, not by Ms Darroux.  Ms Darroux had not assumed the rights of the Housing Association to its bank balance – those rights had been exercised by PCS.

The Court of Appeal held that it would be wrong to distort the meaning of the statutory language in order to overcome the difficulties thrown up by a wrong charging decision.  The remedy in such a case is to formulate the appropriate charges in the first place.

The Appeal Court was not prepared to substitute a conviction under s2 Fraud Act 2016.

Conclusion

Perhaps surprisingly no one appears to have drawn the attention of the Court of Appeal to the offence of false accounting contrary to s17 Theft Act 1968 – which seems to perfectly cover the facts of this case.  That section applies “Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another . . .  falsifies any account or any record or document made or required for any accounting purpose”.

The lesson to be learned is that it is important – for both prosecution and defence – to have careful regard to the legal ingredients of the offence on the indictment.  A ‘technical’ error in selecting the correct offence to charge may result in a dishonest defendant going free.

Contacting us

Our contact details are here.

David

(Note: This article applies to matters arising under the provisions of the criminal law in England and Wales.  Appropriate professional advice should be sought in each individual case.)

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