Court acquits bankrupt accused for failing to prove credit obtained under a business management agreement.

[*265] 1981 Febr. 27

(G. NICOLAOU, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Police,

v.

Costas Charalambous,

Accused.

(Case No. 15029/80)

Bankrupt - Undischarged bankrupt - Obtaining credit - Section 117(a) of the Bankruptcy Law, Cap. 5 - Undischarged bankrupt -undertaking, by means of an agreement, the control and management of a business in the course of which money would come into his hands, part of which he would have to pay to the other contracting party - Does not constitute “obtaining” or “credit” within the meaning of the above section 117(a).

Criminal Procedure - Count - Addition - Undesirable in the circumstances of this case - Section 85(4) of the Criminal Procedure Law, Cap. 155.

P.S. T. Panayiotou, for the Prosecution.

G. Pelagias, for the Accused.

JUDGMENT

The following judgment was delivered by:-

G. NICOLAOU. D.J.: The accused in [*266] this case is charged with obtaining credit while being an undischarged bankrupt contrary to section

117(a) of the Bankruptcy Law, Cap. 5.

It is of some :importance to have regard, at the outset, to the case sought to be established by the prosecution. The particulars of offence are in the following terms:-

“The accused on the 5th day of November, 1979 at Nicosia in the District of Nicosia being an undischarged bankrupt, did obtain credit to the extent of £627.411 mils from Costas Kokkalos of Nicosia without informing him that he was an undischarged bankrupt.”

At the trial the prosecution led evidence of the existence of an agreement made between the accused and the said Costas Kokkalos of Nicosia., ,P.W.1 in the case, on 5th November, 1979 which has been produced as exhibit 9. The Court then allowed the prosecution to adduce evidence of other events consequent upon that transaction occurring on subsequent dates but on the basis that such events would be relevant only, in so far as they consisted of acts done under and in pursuance of the said agreement in order to show what the results of the said agreement were in connection with the rights and liabilities of the parties. It was implicit in this course followed by the Court, after objection had been taken by the defence on the admissibility of such evidence, that this [*267] would not go to the proof of any other subsequent offence that may have been disclosed. It is of some importance to note here that the prosecution had at this stage the opportunity to direct its mind to this matter and consider whether to apply for either an amendment of the charge or the addition of another count and chose not to adopt such a course, but conducted its case on the basis I have indicated, namely, that subsequent events went only to the proof of the agreement evidenced by exhibit 9 as constituting the results arising thereunder. The defence was, therefore, conducted in that context and against that background. The relevance of this will appear later on in my judgment.

I do not propose in this case to rehearse the evidence given for this would be unnecessary in view of the issues involved. It has not been disputed and the prosecution has proved to my satisfaction that the accused was adjudged bankrupt on May 25, 1978 and had never obtained a discharge. The said written agreement between the accused and Mr. Costas Kokkalos dated November 5, 1979 embodied in exhibit 9 which again has not been disputed has also been proved. The prosecution has further adduced in evidence a memorandum dated December 5, 1979 to the effect that in settlement of accounts arising under the agreement dated November 5, 1979 a cheque drawn on the bank of Cyprus was given by the accused to Mr. Costas Kokkalos as representing half of the profits to which the latter was entitled. This memorandum is exhibit 10 in the [*268] case. The prosecution has also produced the said cheque which was for the sum of £100.- (exhibit 12). The existence of the said memorandum and cheque have not been disputed by the defence but the accused has tried to explain these by alleging that he had not himself taken accounts with Mr. Costas Kokkalos but that one Savvas Kyriacou called as prosecution witness had himself settled this matter with Mr. Costas Kokkalos writing out this cheque in order to pave the way for the signing of a new agreement between all three of them and that the accused was merely a conduit for making this arrangement. I do not accept this and find that the said cheque for £100.- was given to Mr. Costas Kokkalos by the accused in settlement of accounts. It is in evidence that this cheque which was drawn by Mr. Savvas Kyriacou and indorsed by the accused was dishonoured and it is also in evidence that in an action subsequently brought to recover on this cheque, judgment was obtained against the drawer only but what occurred in this action is of no signigicance to the issues posing for consideration in the present case.

The said agreement embodied in exhibit 9, was after settling accounts on December 5, 1979, superseded on December 7, 1979 by a new agreement made between the accused, Mr. Costas Kokkalos and Mr. Savvas Kyriacou, produced by the prosecution as exhibit 11 in the case. Under this, the accused and Mr. Savvas Kyriacou gave to Mr. Costas Kokkalos who was the other contracting party a cheque for £350.- for which as stated in the said exhibit 11 they were personally and jointly” liable [*269] meaning apparently .by the use of the word ”personally” severally. According to the prosecution, other debts were also incurred by the accused under this agreement these being telephone and electricity charges but in my view the prosecution has failed to prove these or connect them with the accused. It is of the utmost importance to observe here that this subsequent agreement embodied in exhibit 11 is by its terms a completely separate agreement and cannot be regarded as being related in any way for the purpose of the present case to the former agreement embodied in exhibit 9. This means that exhibit 11 does not in the event fulfil the intrinsic requirement relating to the purpose of its admissibility in respect of the offence charged. What has given rise to strong dispute in the present case is whether the accused had, prior to entering into the said agreement embodied in exhibit 9, informed Mr. Costas Kokkalos of the fact that he was an undischarged bankrupt. Mr. Costas Kokkalos in-his testimony was emphatic that the accused had not. The accused in his testimony remembered quite clearly that he had and on this he was backed up by his defence witness Mr. Doros Poulis of Nicosia in whose pharmacy the parties had met quite by accident and there talked about embarking on the venture to which the said exhibit 9 relates. This raises in an acute form a matter of credibility in respect of which I would quote from the speech of Lord Pearce in Onassis and Calogeropoullos v. Vergotis, (1968) 2 Lloyd’s Rep. p. 403 at 431 :- [*270]

“Credibility” involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is, he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with “others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist, It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however, honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance [*271] more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process”

Having seen the prosecution witness Mr. Costas. Kokkalos, the accused himself and the defence witness Mr. Poullis testify before me I accept the testimony of Mr. Kokkalos as both true and accurate and reject that of the accused and his defence witness. I find that the accused never actually informed Mr. Kokkalos of the fact that he, the accused was an undischarged bankrupt.

What must now be resolved is whether the accused by virtue of the agreement embodied in exhibit. 9 ever obtained credit from Mr. Kokkalos to. the extend, alleged by the prosecution or at any rate at least to the extent of £10.- or upwards. In my judgment he has not. The fact merely that by the said agreement the accused undertook the control and management of a business in the course of which money would come into his hands, part of which, this being the one half of the net profits, he .would have to pay to Mr. Kokkalos who was the other contracting party would constitute neither “obtaining” or “credit” within the meaning of section 117(a)

of the Bankruptcy Law, Cap. 5. In the words of Winn J. as he then was in Fisher v. Raven, [*272] (1963) 47 Cr. App. R. 174 “the word ‘obtaining’ is not

synonymous with accepting or receiving” (at p. 179). So far as the meaning of “credit” is. concerned there seems

to be some confusion there being conflicting decisions on the English section

155 of the Bankruptcy Act 1914 from which our own provision is taken. As Parker L.C.J, said in R. v. Goodall (1958) 43 Cr. App. R. 24:-

“The ordinary case of obtaining credit, no doubt, is the case where goods are supplied .to or services rendered for a man and he is given time to pay.”

It should be added, with respect, that getting money by contracting a loan also constitutes the obtaining of credit. The emphasis should, of course, be not on the mere getting of money but on getting it as a loan: see R.v.Pryce, (1950) 34 Cr. App. R. 21. What is envisaged by the word “credit” in the said section 117 (a) in cases where what is alleged is that by reason of some transaction money came into the hands of the accused, is that the accused should be entitled to use the money for his own purposes and it is immaterial that he has in fact actually so used it if he has done so in breach of the agreement by which he got it: R.v. Laker, 34 Cr. App. R. 36. On the meaning of “obtaining credit” see also the House of Lords decision in Fisher v. Raven, Raven v. Fisher, (1963) 2 All E.R. 389 in which some of the older cases were reviewed. What’ is clearly borne out by the authorities is that [*273] merely incurring an indebtedness to another by incurring some pecuniary or proprietary advantage would not constitute “credit” within the meaning of section 117(a) of the Bankruptcy Law, Cap. 5. The next point I should make in respect of this section is that so far as the monetary limit is concerned it is not necessary to prove that any single sum which goes to make up the credit was to the extent of £10.- or more and it is possible to aggregate or tot-up small sums to arrive at a total in excess of the monetary limit of £10.-: see R.v. Hartley, 56 Cr. R. 189. I should add for the sake of completeness that the offence under section 117(a) of the Bankruptcy

Law is an absolute one for which no mens rea is required see R.v. Duke of Leinster, (1924) 1 K.B. 311 approved in R.v. Salter, (1968) 2

Q.B.793.

In the light of all the above I hold that by the said written agreement made on November 5, 1979 embodied in exhibit

9 on which the prosecution sought to establish its case, the accused never “obtained credit” within the meaning of section 117(a) of the Bankruptcy Law, Cap. 5 and that the accused’s indebtedness to Mr. Kokkalos evidenced by the memorandum which is exhibit 10 and the cheque which is exhibit 12 in the case both of which are referable to the obligations of the accused arising out of the said agreement contained in exhibit 9, does not constitute such “credit” as would fall within the meaning of the said section 117(a). It may be that the meaning I have given to the words [*274] “obtaining credit” leaves certain gaps in the law but this is a matter for the legislature to consider.

The evidence adduced by the prosecution concerning the written agreement dated December 7, 1979 embodied in exhibit 11, which I accept, suggests quite clearly that an offence was committed by reason of this latter transaction, for credit was, thereby, obtained by the accused jointly with the said Savvas Kyriacou to the tune of £350.- again without the accused disclosing that he was an undischarged bankrupt. This, however, would be quite another offence. In view of this result, I have directed my mind as to whether, in the exercise of my powers under section 85(4) of the Criminal Procedure Law, Cap. 155, I should add a second count charging the commission of an offence under section 117(a) on December 7, 1979 by reason of the agreement to which exhibit 11 relates and convict the accused on that count, but after careful reflection I have come to the

conclusion that it would be undesirable to do so in view of the position taken by the prosecution in these proceedings and whatever may have been the merits or otherwise of the defence on this latter the defence might justifiably complain of prejudice. The sense of justice of the Court in this context cannot be restricted merely to a consideration of factual situations offending against the law and calling for a remedy but must encompass wider considerations involving the protection of those procedures designed to secure the fair trial of an accused. The safeguarding of such procedures is at the [*275] end of the day of more importance than the actual result in any single case. I shall, therefore, refrain from adding a new count. I would only add that in view of

the result I have reached regarding the agreements embodied in exhibit 9 and 11, the suggestion made by the prosecution that the

Court might amend the date so as to include the whole period during which the various transactions took place is quite irrelevant. If the words “on or about the date” were used in the charge, then it would be possible to encompass within this, such items as were referable to the transaction to which the agreement in exhibit 9 related and culminating in the indebtedness, of the accused to the

extent of £100.-: see on this matter R.v.Hartley, (supra), But the period which the charge relates could not in any

circumstances be extended to cover the transaction evidenced by exhibit 11 for that was an altogether different transaction.

The prosecution has failed to prove its case against the accused and the accused is, therefore, acquitted and discharged.

Accused acquitted and discharged.