The Court of Appeal has held that a company director’s notebook entries are admissible as evidence of the company’s guilt in a bribery case. Although the director is not a co-defendant in the proceedings, the notebook entries have been held to be relevant to the company’s guilt on the basis that the director was a directing mind and will of the company.
In R v A Ltd, X and Y 1 the Court reversed a trial court’s rulings on the admissibility of evidence produced by the Serious Fraud Office (‘SFO’) in a case against “A Ltd,” the UK subsidiary of a multinational conglomerate operating in the power generation and transport sectors. The two other defendants in the case are the Chairman and CEO of A Ltd and a manager of another subsidiary company within the Group. Applying the identification principle, the SFO alleged that A Ltd, via the directing minds of certain senior individuals at the company, paid bribes to secure transport contracts for companies or divisions within the Group.
The defence applied under section 78 of the Police and Criminal Evidence Act 1984 to exclude all evidence from a director of A Ltd, identified as “BK.” BK, who is not a defendant in the proceedings, resides in Switzerland and refuses extradition under Swiss law. BK has not made any statements in respect of the UK proceedings and has declined to assist either the prosecution or the defence.
Among the documents the SFO sought to rely on were BK’s notebook entries and emails and other correspondence involving employees of the Group or one of its subsidiaries. The trial judge held that BK’s notebook entries were not admissible as they were not business records and thus could not be admitted as an exception to the rule against hearsay. Moreover, the trial judge considered that the only relevance of the notebook entries was in relation to BK’s state of mind, and a document that merely concerned the state of mind of an absent co-conspirator was inadmissible and could not be used to prove the guilt of A Ltd. The trial judge held that the emails were admissible within the business records exception to the rule against hearsay but “final scrutiny” was required to determine their reliability and the purpose for which they were relied upon.
The Court of Appeal disagreed with the trial judge’s approach. As the SFO alleged that BK was a directing mind and will of A Ltd at the relevant time, BK’s notebook entries were admissible as evidence of his acts and knowledge, which could in turn be attributed to A Ltd. The Court described this approach as “entirely orthodox and unobjectionable.” The trial judge therefore did not need to consider whether the notebook entries were being introduced to establish the involvement of another co-conspirator because, applying the identification principle, the evidence was admissible as direct evidence of the company’s guilt.
The defence contended that it was unfair that the company had to address these allegations of criminality when BK, whose behaviour was relied upon to prove the company’s guilt, was not charged and was unwilling to assist in the company’s defence. The Court rejected this submission. It held that the presence or absence of a company’s directing mind at trial is irrelevant and it would otherwise not be possible to prosecute a company even in the most egregious cases if the directing mind was absent for whatever reason.
The Court upheld the admissibility of the A Ltd emails but disagreed with the trial judge’s reasoning. The trial judge had held that the emails were business records and therefore admissible as an exception to the rule against hearsay. The Court considered that the trial judge had implicitly rejected the submission that the emails were not hearsay because they were being relied upon to prove BK’s state of mind (and therefore the guilt of A Ltd). The Court held that it was not apparent from the trial judge’s ruling that the emails would be relied upon for the purpose of proving BK’s state of mind and were therefore admissible for that purpose. The case will now proceed to trial.
The result of this judgment is that the SFO can rely on BK’s notebook entries to prove A Ltd’s guilt even though A Ltd cannot cross-examine BK to test the veracity of the evidence. Although the SFO has frequently criticised the identification principle as an ineffective method for prosecuting corporate entities, this decision demonstrates that the principle has broad application when it comes to the admissibility of evidence against corporate defendants. Once it is established that an individual is a directing mind and will of the company, evidence from that person may be admissible as evidence of the company’s culpability regardless of whether the individual is a party in the proceedings. However, it is worth noting that the Court conceded that, had the application been to adduce the diary entries against the individual directors only (as opposed to against A Ltd), a stricter test would have been applied. The ruling clarifies the law on the admissibility in criminal trials of documents created by individuals who are not directly involved in the proceedings.