Introduction

In cases of bounced company cheques, the mens rea (intent) test for a company director centres on knowledge – that is, whether the director was aware, when signing the cheques, that they would fail to be honoured because of insufficient funds. If so, he or she acted as an accomplice in the company's criminal action. The same test applies to other company representatives.

The Supreme Court recently decided on the mens rea of a director of a public company and a company representative (who was also the wife of the director), who had issued cheques on the company's behalf while there were insufficient funds in its bank account.(1)

Facts

At the first-instance court the two defendants argued that they did not know that the cheques would not be honoured at the time of signing, since other people handled the company's finances. The court held that there was reasonable doubt as to the knowledge of the director and the representative at the time of signing the cheques, for the following main reasons:

  • The defendants did not play an active role in the company's finances; and
  • The name of the defendant public company had been included in the Central Information Database of Issuers of Bounced Cheques (CIDIBC) because some of the cheques it issued had not been honoured, due to insufficient funds. As a result, the bank had frozen the company's account. However, some cheques which were issued after the company's name was included on the CIDIBC and the account was frozen had been honoured; therefore, the defendants could not know that the relevant cheques would not be honoured.

The first-instance court therefore found the defendants innocent of all charges.

Following an appeal by the prosecution, the Supreme Court re-examined – among other things – whether the mens rea of the defendant director and representative existed in the above cases.

Decision

The Supreme Court examined the reasons for which the first-instance court had found the defendants innocent.

First, the Supreme Court stated that the defendants' lack of involvement in the company's finances was irrelevant to the question of whether they had the knowledge required to prove mens rea. It explained that the prosecutor could prove the mens rea of the offences from the evidence and circumstances surrounding the case (which proved beyond reasonable doubt the defendants' knowledge that the cheques could not be honoured).

Second, the Supreme Court stated that the first-instance court had failed to take into account that, on the evidence, the reason why certain cheques had been honoured after the account was frozen was due to a special arrangement with the bank, not because the account held sufficient funds. However, the special arrangement did not apply to the cheques involved in the case. It was not, therefore, a legitimate reason for the defendants to believe that the cheques would be honoured.

Ultimately, the Supreme Court found that by virtue of their position and relationship with the defendant company, both defendants knew or should have known that:

  • the company's account was frozen at the time of signing the cheques; and
  • for the cheques to be honoured, there should have been sufficient funds in the company account – which was not the case.

According to the Supreme Court, this knowledge was enough to satisfy the mens rea element of the offence. It therefore overturned the first-instance decision and found the defendants guilty as accomplices of the defendant company.

For further information on this topic please contact Matheos Antoniou at Democritos Aristidou & Co by telephone (+357 2558 5811) or email (m.antoniou@aristidou.com). The Democritos Aristidou & Co website can be accessed at www.aristidou.com.

Endnotes

(1) Consolidated Criminal Appeals 102/2014 and 115/2014 (23/10/2015): Savvas Theocharous & Son Ltd v Christou Orphanidi, Case 102/2014; and Savvas Theocharous & Son Ltd v Chariclias Orphanidi, Case 115/2014.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.