Appeal - Fraud - Defendant solicitor acting for both purchasers of properties and mortgagor building society
R v Cornelius: Court of Appeal, Criminal Division (Sir Anthony May P, Lords Justice Hughes and Lewison, Mr Justice Dobbs and Underhill): 14 March 2012
Section 3 of the Criminal Appeal Act 1968 provides: '(1) This section applies on an appeal against conviction, where the appellant has been convicted of an offence [to which he did not plead guilty] and the jury could on the indictment have found him guilty of some other offence, and on the finding of the jury it appears to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence; (2) The Court may, instead of allowing or dismissing the appeal, substitute for the verdict found by the jury a verdict of guilty of the other offence, and pass such sentence in substitution for the sentence passed at the trial as may be authorised by law for the other offence, not being a sentence of greater severity.'
The defendant was a solicitor with an expertise in property and conveyancing transactions who worked for a solicitors' firm, X. He also made his own investments in property. In 2007, the defendant discovered that it was possible to apply for a buy-to-let mortgage (the mortgage) from a building society (the building society) before a property had been purchased. He subsequently acted in eight transactions for both the purchasers of properties and the building society (the transactions). In each case, the defendant provided a bridging loan to the purchaser (the loan). The purchaser used the loan to pay for the property.
As security for the loan, the defendant required a declaration of trust from the purchaser (the trust deed). The purchased property was subsequently valued and the mortgage was provided by the building society at 80% of the value. In the course of acting for both the purchaser and the building society on each transaction, save for one where an earlier form was used, the defendant provided the building society with a certificate of title (the certificate) in the form required in the Solicitors' Code of Conduct 2007. When monies were subsequently advanced to the purchaser under the mortgage, the loan was repaid.
The defendant received a cash sum from the purchasers for acting for them and took steps to ensure that the accounts of X were falsified so that the provision of finance by him was not apparent. There was evidence that the building society would not have advanced funds to the purchasers if it had known of the defendant's personal interest in the transactions. In June 2009, as part of an investigation into the affairs of one of the purchasers, the police attended X's offices and obtained files relating to the transactions with that purchaser.
It was concluded, inter alia, that: (i) the personal interest of the defendant in the transactions breached the conditions of the Council of Mortgage Lenders' Handbook (the handbook) in addition to the Solicitors' Code of Conduct (the code); and (ii) there had been no disclosure to the building society of any details of the defendant's interest. In June 2010, the defendant was charged with offences of fraud and transferring criminal property contrary to section 327(1)(d) of the Proceeds of Crime Act 2002 (the fraud and money laundering charges).
Having been arrested and served with a restraint order prohibiting him from dealing with his assets in October 2009, in October 2010, the defendant told the police that he wished to sell his car. However, it was subsequently discovered that the car had been sold one month earlier. The defendant was accordingly charged with perverting the course of justice, to which he pleaded guilty. As to the fraud and money laundering charges, the prosecution case was that the building society would not have advanced the funds if the false representation as to the certificates had not been made. By signing the certificates, the defendant had been representing that the title of the purchasers was unencumbered.
Further, that the defendant had known that what he was doing was dishonest. The defence case was, inter alia, that the defendant had unknowingly been in breach of the code and the handbook and that he had not acted dishonestly. At the conclusion of the evidence, the judge provided both prosecution and defence counsel with a copy of his proposed directions in law. No Ghosh direction was included and no comment was made by counsel on the proposed directions. The judge directed the jury, inter alia, that they had to be sure that in the case of each property, the defendant had made a false representation to the effect that the title of the purchasers to the properties was unencumbered. The defendant was subsequently convicted on all counts of fraud and transferring criminal property and was sentenced to four years' imprisonment on each count with a consecutive sentence of eight months' imprisonment for perverting the course of justice.
The defendant appealed against conviction.
He submitted, inter alia, that the judge should have given a Ghosh direction in relation to dishonesty. Accordingly, the conviction was unsafe. The prosecution relied on the existence of the trust deeds and their non-disclosure as amounting to a breach of the certificates. The issues that fell to be determined were: (i) whether, on a proper construction of the certificates, false representations had been made; and (ii) if so, whether a conviction for an offence of attempted fraud and attempted money laundering ought to be substituted in respect of each count of fraud and money laundering pursuant to section 3 of the Criminal Appeal Act 1968 and section 1(1) of the Criminal Attempts Act 1981. It was common ground that, if there had been no false representations, there was no case to answer and the convictions on all the counts, including those relating to money laundering, had to be quashed. The appeal would be allowed.
(1) In interpreting standard forms of certificate, the court had to apply consistent interpretations and not draw fine distinctions. Liability would not be imposed on conveyancers unless it was done in clear terms (see [25] of the judgment). On the facts, the representations made in the certificates had been true. Accordingly, the convictions on the fraud counts could not be sustained, as the defendant had not only been indicted on the basis that the representations as to the certificates had been false, but the judge had left the case to the jury on the basis that they had to be sure that the representations had been false (see [30], [33], [34] of the judgment). Barclays Bank plc v Weeks Legg & Dean (a firm); Barclays Bank plc v Layton Lougher & Co (a firm); Mohamed v Fahiya; N E Hopkin John & Co (a firm), third party [1998] 3 All ER 213 considered; Midland Bank v Cox McQueen (a firm) [1999] All ER (D) 62 considered.
(2) Applying established principles, on the facts, it was not possible to conclude that the jury had to have been sure that the defendant had intended to be dishonest in respect of the very technical representations he had been required to make; it was quite possible from the lax way in which he had conducted his business that he had paid little attention to the details of representations in the certificates. The jury might well have found that the defendant had been dishonest in failing to disclose his interests, but the prosecution had rightly not sought to contend that the court should substitute a conviction on a basis other than the offence of attempt to make the representations set out in the certificates (see [38], [39] of the judgment).
The convictions on all the counts on which the defendant had been found guilty would be quashed. The count of conspiracy to pervert the course of justice to which the defendant had pleaded guilty would be una
ffected. As he had served the sentence for that count, he was entitled to be released (see [34], [40] of the judgment).
Peter Christopher Rouch QC and John Ryan (instructed by TNT Solicitors) for the defendant; David Perry QC (instructed by the Crown Prosecution Service) for the Crown.
