LAW REPORT: No transfer of property in mortgage fraud

LAW REPORT: 17 July 1996: Regina v Preddy; R v Slade; R v Dhillon; House of Lords

Regina v Preddy; R v Slade; R v Dhillon; House of Lords (Lord Mackay of Clashfern, Lord Chancellor, Lord Goff of Chieveley, Lord Jauncey of Tullichettle, Lord Slynn of Hadley, Lord Hoffmann) 10 July 1996

The debiting of a mortgage lender's bank account and the corresponding crediting of the mortgagor's account as a result of the latter's dishonest misrepresentation did not amount to the "obtaining" by the mortgagor of "property belonging to" the lender within section 15 of the Theft Act 1968.

The House of Lords allowed appeals by John Crawford Preddy, Mark Slade and Raipaul Singh Dhillon against the dismissal by the Court of Appeal ([1995] Crim LR 564) of their appeals against convictions under section 15(1).

Section 15 provides:

(1) A person who by any deception dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall on conviction on indictment be liable for a term of imprisonment not exceeding ten years.

(2) For the purposes of this section a person is to be treated as obtaining property if he obtained ownership, possession or control of it, and "obtain" includes obtaining for another or enabling another to obtain or retain.

Ivan Krolik QC and Jane Terry (Stephen Fidler & Co, for Bishop & Light, Brighton) for Preddy and Slade; RG Marshall-Andrews QC and Geoffrey Cox (Janes) for Dhillon; Bruce Houlder QC and David Perry (CPS HQ) for the Crown.

Lord Goff said the cases concerned mortgage frauds. The appellants applied to building societies or other lending institutions for advances to be secured by mortgages on properties to be purchased by the applicant. The mortgage applications or accompanying documents contained statements which the appellants knew to be false. They related variously to the appellant's name, employment, income, the intended use of the property or the purchase price.

The appellants were charged with dishonestly obtaining, or attempting to obtain, from the relevant lending institution an advance by way of mortgage in a certain sum. When the sum was paid, it was sometimes by cheque, sometimes by telegraphic transfer and sometimes by the clearing house automated payments system (Chaps), which involved an electronic transfer as between banks. For present purposes no distinction need be drawn between telegraphic and electronic transfers, each involving a debit entry in the payer's account and a corresponding credit entry in the payee's.

The Court of Appeal referred to the definition of "property" in section 4(1) of the Act as including "money and all other property, real or personal, including things in action and other intangible property", and concluded that such an electronic transfer was "intangible property" for the purpose of section 15(1).

The Court of Appeal were identifying the sums which were the subject of the relevant charges as sums standing to the credit of the lender in its bank account. Those credit entries would, in his Lordship's opinion, represent debts owing by the bank to the lender which constituted choses in action belonging to the lender and as such fell within the definition of property in section 4(1).

However, identifying the sums in question as property did not advance the argument very far. The crucial question was whether the appellant obtained or attempted to obtain property belonging to another. The question was whether the debiting of the lender's bank account and the corresponding crediting of the applicant's bank account, constituted the obtaining of that property.

The difficulty was that when the bank account of the appellant or his solicitor was credited, he did not obtain the lender's chose in action. On the contrary, that chose in action was extinguished or reduced pro tanto, and a chose in action was brought into existence representing a debt in an equivalent sum owed by a different bank to the appellant or his solicitor. In those circumstances it was difficult to see how the appellant thereby obtained property belonging to another, ie to the lender.

True it corresponded to the debit entered in the lender's bank account, but it did not follow that the property which the appellant acquired could be identified with the property which the lender lost when its account was debited. In truth, section 15(1) was being invoked for a purpose for which it was never designed and for which it did not legislate.

Paul Magrath, Barrister