Tuesday Law Report: Money was `property belonging to another'

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17 November 1998

Regina v Klineberg and another

Court of Appeal, Criminal Division (Lord Justice Rose, Vice-President, Mr Justice Scott Baker and Mr Justice Maurice Kay) 6 November 1998

WHERE THE recipient of money for the purpose of transmission to a stakeholder misapplies that money for his own purposes he may be guilty of theft, notwithstanding that the money has, when paid into his bank account, been replaced by a chose in action in the form of a credit balance belonging to him, since the money is deemed by section 5(3) of the Theft Act 1968 to be "property belonging to another".

The Court of Appeal allowed in part the appeal of Jonathan Simon Klineberg and David Marsden against their convictions of theft.

Marsden was a director of a company, Powerhouse Canaries Ltd (PCL), which had taken over the marketing of a timeshare complex in Lanzarote, the Tinajo Country Club (TCC). A solicitor, Saffman, was also a director of PCL. Klineberg was in charge of PCL's office in England, and stood to gain in the company's profits.

A trust company, Timeshare Trustees International (TTI), had been appointed to act as trustee/stakeholder.

In addition to taking over the marketing of TCC, PCL had undertaken to bring into trust with TTI purchase monies received in respect of the apartments. By November 1991 237 people had paid over half a million pounds to PCL in connection with intended purchases of timeshares at TCC, but only pounds 223 had found its way to TTI.

Some of the purchasers had been informed that the independent trusteeship would be via TTI, but others were informed that it would be via Saffman's firm. Marsden and Klineberg were each convicted of ten counts of theft, contrary to section 1 of the Theft Act 1968. In each case the purchaser had paid a sum, either by cheque, bank transfer or cash, into PCL's bank account.

The trial judge certified under section 1(2) of the Criminal Appeal Act 1968 that the case was fit for appeal against conviction and, on the appeal, the appellants contended that, following the decision of the House of Lords in R v Preddy [1996] 2 Cr App R 524, once the timeshare purchasers had, by whatever means, paid monies to PCL which had then been paid into PCL's bank account, such monies had ceased to be property belonging to the purchasers, and had been replaced by a chose in action in the form of a credit balance belonging to PCL, and could not, therefore, have been stolen.

Simon Bourne-Arton QC (Registrar of Criminal Appeals) for the appellants; Christopher Storey QC (Crown Prosecution Service) for the Crown.

Mr Justice Maurice Kay said that the Crown had relied on section 5(3) of the Theft Act 1968, which was essentially a deeming provision by which property or its proceeds should be regarded as belonging to another even though, on a strict civil law analysis, it did not. That argument had rightly found favour with the trial judge.

Where a person had been induced to contract or had contracted, by virtue of implied terms or otherwise, on the basis that his money would be safeguarded by trusteeship, there was clearly a legal obligation within the meaning of section 5(3) of the Act to retain and deal with the money or its proceeds in a particular way, and it should therefore be deemed to be "property belonging to another" for the purposes of section 1 of the Act.

It was necessary, however, for the prosecution to prove in each case that there had been a breach of the obligation, and whilst the judge had correctly ruled that where the intending purchasers had contracted on the basis that their money would be transferred to TTI there was no difficulty in proving such a breach, that was not the case where they had contracted on the basis that their money would be transferred to Saffman's firm. Accordingly, those convictions which related to the "Saffman contracts" would be quashed.