Source: http://www.accountingevidence.com/blog/tag/mortgage-fraud/
Timestamp: 2019-04-26 02:39:04+00:00

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The Court of Appeal have now tackled issues relating to appeals against old confiscation orders which appear to be incorrect following the Supreme Court’s decision last year in R v Waya.
In a previous blog article I described the general background. Briefly, an appeal against a decision in the Crown Court normally has to be initiated within 28 days of the decision being made (that involves some form filling). An appeal can still be considered even where that deadline has been missed – but only if permission can be obtained from the Court of Appeal (either from a single judge or the full court).
In deciding whether to give permission the Court of Appeal has to consider two conflicting principles. Firstly the outcome of proceedings should be just. Secondly the outcome of proceedings should be final. It would be chaotic if every time there was a new interpretation of the law all previous relevant decisions had to be reconsidered by the appeal courts.
The general rule is that the Court of Appeal will not allow an appeal to be made out of time if the only reason for the appeal is that subsequent cases have shown the previous perception of the legal position was mistaken. But this has sometimes been subject to exceptions where the defendant has suffered a substantial injustice.
Wrong – but a substantial injustice?
But if the Crown Court has made a confiscation order which, whilst it appeared to be correct when it was made, in the light of more recent authority now is obviously wrong – is that enough to show a substantial injustice which the appeal courts should correct?
Most of the previous case law on appeals out of time in what are sometimes referred to as ‘change of law’ cases did not relate to confiscation orders. It could be argued that confiscation cases are rather different from most other cases because a confiscation order involves payment of money and – if that money has been paid in error – then it would be a simple matter to pay it back.
Also in confiscation cases there is often a long delay between the order being made and it having a full effect. This is because the defendant is ordinarily allowed time to pay and even more time will elapse before a default sentence will be activated.
So it could be argued that there is a greater opportunity for courts to, if you like, correct previous mistakes in relation to confiscation orders.
The Court of Appeal took the opportunity in May 2013 to comment on the situation in the case of R v Jawad  EWCA Crim 644 where, perhaps fearing a deluge of late appeals, the court commented at paragraph : “We should make clear the general approach of this court, over many years, to change of law cases. An extension of time will not be granted routinely in such a case simply because the law has changed. It will be granted only if substantial injustice would otherwise be done to the defendant, and the mere fact of change of law does not ordinarily create such injustice”.
But in the case of Jawad leave to appeal out of time (by just a few days) had already been granted by the single judge before the matter came before the full court – so that judgment did not explore that issue more fully.
More recently these issues have been fully explored in the judgment of the Court of Appeal in the case of Bestel & Others v R  EWCA Crim 1305 (19 July 2013).
In essence this judgment confirms that, even in a confiscation case, the mere fact that the Crown Court confiscation order now seems incorrect is not, of itself, sufficient to persuade the court to allow an appeal to be heard out of time to correct the position.
This is most clearly demonstrated in relation to Mr Naim Raza who had pleaded guilty to two counts of mortgage fraud involving total loans of £237,505. In subsequent confiscation proceedings the Crown Court had ruled in July 2011 (before the Supreme Court judgment in Waya had been made) that Mr Raza’s benefit was the total amount borrowed – £237,505. Mr Raza had an available amount, based on the equity in the properties and the value of his business, of £203,069. A confiscation order was therefore made for £203,069.
After the Supreme Court judgment in Waya in 2012, Mr Raza sought permission to make a late appeal against his confiscation order. It was agreed by all parties that, on the basis of the law as explained by the Supreme Court in Waya, Mr Raza’s benefit should only have been £10,710 (rather than £237,505).
But the Court of Appeal refused to allow Mr Raza to appeal against the incorrect benefit figure. The fact that the benefit figure now appears incorrect, simply as a result of subsequent developments in the understanding of the law, was not enough to warrant permission to appeal out of time to re-open the determination of Mr Raza’s benefit.
The appeal court noted that the confiscation order had been limited to Mr Raza’s available amount and that, if his assets in the event proved to realise less than the figure assessed by the Crown Court, he could seek an adjustment to the confiscation order under s23 PoCA 2002. So the Court of Appeal did not consider that Mr Raza risked imprisonment unjustly as a result of the benefit figure being too high.
In the same judgment the Court of Appeal also refused permission to appeal the confiscation order which had been made against Mr Sahid Bashir in December 2011. The Court of Appeal noted that, at the time of the Crown Court proceedings, Mr Bashir had agreed the benefit figure in his case. The appeal court did not consider that a substantial injustice was done by holding him to that agreement. So Mr Bashir was not permitted to make a late appeal against his confiscation order.
But in the case of Jean Pierre Bestel the Court of Appeal did give permission to appeal out of time and it referred his confiscation order back to the Crown Court for reconsideration. This was because the appeal court found a number of issues in Mr Bestel’s case had not been dealt with properly by the Crown Court when his confiscation order was made in July 2012. In particular the Crown Court judge had not given proper consideration to all the evidence which was before him at that time regarding Mr Bestel’s available amount.
Because Mr Bestel’s case has now to be reconsidered in the Crown Court both his benefit figure and his available amount may be amended. The Crown Court will reconsider the position in the light of the law as it is now understood to be, having regard to the Supreme Court judgment in Waya.
These cases clarify the picture in relation to confiscation appeals out of time. But no doubt further appeals will come before the courts – and these cases do not deal with the question which may arise on an application by the prosecution under s22 PoCA 2002 to pursue further amounts where a confiscation order has been limited to the available amount of the defendant at the time the order was made. In considering whether it would be just to make an order under s22 will a court have to reconsider the circumstances in which the benefit figure was previously determined – and the changed legal position as a result of subsequent case law? That remains to be resolved.
I frequently see, in the course of confiscation proceedings under PoCA 2002 and earlier legislation, figures put on the value of residential properties by prosecution and defence. Those figures are most often used in connection with determining the ‘available amount‘ of the defendant. But they can also be relevant to determining the defendant’s ‘benefit’, for example where there are allegations of mortgage fraud or where the property in question is said to have risen in value after being purchased with funds tainted by criminality.
Although I am not a property valuer (and claim no expertise in the valuation of tangible assets) I am aware of the context in which issues of valuation arise.
The key valuation legislation under PoCA 2002 in England & Wales is the segment on interpretation and in particular s79 which provides that in relation to property held by a person “its value is the market value of the property at that time”. If another person has an interest in the property, then the relevant value “is the market value of his interest at that time”. This means that a reduction will be made to reflect amounts due to lenders secured on the property, the legitimate interests of joint legal owners and the equitable interests (if any) of a spouse / domestic partner or others.
In relation to the value of property obtained from criminal conduct s80 indicates that “the material time is the time the court makes its decision” and for the purpose of determining the defendant’s ‘available amount’ s9(1) indicates that the values “at the time the confiscation order is made” are to be used.
But what do we mean by the “market value”?
In the case of R v Islam 2009 UKHL 30 Lord Hope of Craighead said at paragraph : “The statute has refrained from defining precisely what is meant by the expression “market value”. . . . The market value of goods . . . is the price which a willing seller will accept for them from a willing buyer”. This remark may well be obiter dicta and not strictly relevant to residential properties (the case was concerned with the value of illegal drugs) but it does not appear to be contentious.
The International Valuation Standards Committee defines “market value” as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”. The Royal Institution of Chartered Surveyors (the RICS) adopts that same definition of “market value” in the ‘Red Book’ – the RICS Valuation Standards. Valuations on this basis are sometimes referred to as being at ‘Red Book market value’.
But what is actually done about residential property valuations in confiscation cases?
The likelihood is that the prosecutor will have placed a value of some sort on the residential property in the course of his s16 statement. He might have done that based on information obtained, probably from the Land Registry, concerning the date of purchase of the property and the price paid then – uplifted by a published index of movements in UK property prices since that time. Alternatively he may have based his valuation on relatively recent data concerning the sales of local comparable properties. He will then have deducted from that value a figure obtained from the mortgage lender (or from a credit check) for the current amount outstanding on the mortgage.
A danger is that these types of ‘desktop’ valuations may not reflect the value of the actual property in question, especially if it was purchased some years ago, may have been modified since it was purchased and may not be truly comparable to other local properties. There may also be a long delay between the prosecutor undertaking this exercise and the hearing in court which results in the confiscation order.
The defence on the other hand will be informed by the defendant’s own view as to the value of the property. They may also have obtained an independent valuation. This may be a figure from a local estate agent based on the asking price he would recommend if he were to be asked to sell the property. Such a valuation is sometimes referred to as a ‘market appraisal’ to distinguish it from a ‘Red Book market value’ valuation.
a figure from a ‘market appraisal’ may be in excess of the ‘Red Book market value’ because it is based on an estimated asking price rather than an estimated sale price.
The defence may rely upon the prosecution’s s16 statement for the amount of the secured liabilities.
It is immediately apparent that a figure from a ‘market appraisal’ may be in excess of the ‘Red Book market value’ because it is based on an estimated asking price rather than an estimated sale price.
In giving an opinion of value the valuer is acting as an expert witness in criminal proceedings. The valuer ought to be a person who, either by qualifications or experience, or both, is in a position to give an authoritative expert opinion. His written valuation ought to comply with Part 33 Criminal Procedure Rules.
The valuation should take into account the estimated costs of realisation of the property such as estate agent’s and legal fees, see R v Davies  EWCA Crim 3380 at paragraph , and even, where appropriate, the costs of legal proceedings to force the sale by way of an application under s14 Trusts of Land and Appointment of Trustees Act 1996, see R v Modjiri  EWCA Crim 829 at paragraph .
Of course the valuation needs to take account of the interests of persons other than the defendant in the property. So, for example, if the defendant is one of four legitimate joint owners each having an equal interest in the property then the value of the defendant’s interest will be one-quarter of the value of a 100% interest in the property. There should however be no additional adjustment to reflect the defendant’s minority interest (except by recognition of potential additional costs of realisation).
But subject to these adjustments, the value adopted should be the ‘Red Book market value’, that is to say the ‘market value’ as required by s79.
In practice a defendant subject to a confiscation order has a limited time to realise the monies required to satisfy that order.
In practice, of course, a defendant subject to a confiscation order has a limited time to realise the monies required to satisfy that order. If he fails to satisfy the order on time the amount outstanding will attract interest and he is at risk of the default sentence being triggered. So he may not be in a position to ensure “proper marketing” of the property and he is, to a certain extent, “under compulsion”. He is not a “willing seller”.
Should these factors be taken into account in the valuation of the property?
The law suggests that they should not, since to do so would be to adopt a basis which is not “market value”. However it may be the case that the defence will request the valuer to produce two valuation figures, one on a ‘Red Book market value’ basis and another on the basis of a need to obtain the proceeds of sale within 6 or 12 months of the confiscation order – a ‘quick sale’ basis. In that way the court may be better informed of the likely sales proceeds.
But why is this not done in practice?
I suggest that there are two reasons for this. The cost of obtaining a ‘Red Book market value’ will act as a disincentive to both prosecution and defence (who would need to obtain a prior authority from the LSC to cover the valuer’s fees). The other alternatives are cheaper or even free.
Also prosecutors and lawyers may not be fully acquainted with issues surrounding different bases of property valuations.
If the value of the property is relevant to the defendant’s ‘benefit’ in confiscation then there is a danger of his ‘benefit’ being overstated in the confiscation order. In that event it is not normally open to the defence to seek a downward revision to the ‘benefit’ figure if the property is subsequently sold for less than the valuation figure.
If there is no arm’s-length sale, for example if the ownership of the property passes to the defendant’s spouse or domestic partner, then there may be no basis on which to amend the valuation.
If the value of the property is relevant to the defendant’s ‘available amount‘ then this, and the consequent default sentence, may be excessive. If the property is subsequently sold at arm’s-length and realises less than the valuation figure it may be possible for the defence to have the ‘available amount‘ adjusted downwards under s23. However this involves the reconsideration of all the assets within the defendant’s ‘available amount‘. Furthermore the actual sale may take place a long time after the making of the confiscation order – by which time the default sentence may have been triggered.
There is a recorded case, R v Lemmon  EWCA Crim 1, in which a confiscation order was quashed on appeal when a professional residential property valuation obtained after the date of the confiscation hearing showed that the defendant’s ‘available amount‘ had been overstated. However that decision may be specific to its facts. In particular it appears that in that case “the figures put as the value of his realisable assets were unknown to the appellant until the day of the hearing”. Ordinarily a defendant will be made aware of the prosecution’s assertions regarding his ‘available amount‘ in advance of the hearing, as they will be set out in the prosecutor’s s16 statement.
In the case of R v Davies  EWCA Crim 3380 a prosecution valuation (which proved to be an over-valuation) was not challenged at the confiscation hearing. Subsequently a professional valuation was obtained in a substantially lower figure and an appeal was lodged against the order. In the Court of Appeal defence counsel indicated that the valuation had not been challenged due to an oversight on his part. The Court of Appeal considered, at paragraphs  to , that the Crown Court judge had been misled as to the value of the property and it amended the defendant’s ‘available amount‘ and hence the amount of the confiscation order.
As a result of amendments made to the Criminal Appeal Act 1968 by s140 Coroners and Justice Act 2009 it is now open to the Court of Appeal to remit confiscation cases to the Crown Court for re-hearing. However it would be unwise, I suggest, to assume that a failure to carefully consider the value of residential property could always be remedied on appeal.
So there is something to be said for getting the most appropriate value recognised by the court at the time the confiscation order is made by appointing a properly qualified and experienced valuer to provide a ‘Red Book market value’ taking into account costs of sale, and supported perhaps by an alternative ‘quick sale’ valuation. I would suggest that the amounts due to secured lenders (the current redemption figure, including any early repayment or arrears penalties) should also be checked shortly before the confiscation hearing.
A recent Court of Appeal judgment demonstrated the limits of the money laundering legislation.
It was alleged that mortgages had been obtained fraudulently by false statements on the mortgage applications. A number of these allegedly fraudulent applications had been handled by the same mortgage broker.
The individual applicants could have been charged with obtaining a money transfer by deception, contrary to s15A Theft Act 1968, or fraud by false representation, contrary to Fraud Act 2006 (which replaced the earlier offence). The broker could have been charged with the same offences (which apply equally to obtaining money or property for someone else) or perhaps with conspiracy to defraud.
All of these offences necessarily involve dishonesty.
But instead the applicants were charged with acquiring criminal property, contrary to s329 Proceeds of Crime Act 2002, and the broker was charged with entering into an arrangement to facilitate the acquisition of criminal property by another, contrary to s328 PoCA 2002.
The PoCA 2002 offences (which are both ‘money laundering’ offences) do not need to involve dishonesty. The prosecution may therefore have thought it would be more straightforward to obtain convictions for these offences.
All the defendants were duly convicted and they appealed. All the convictions were quashed on appeal. But why?
Well it was undoubtedly the case that, if the mortgage applications were fraudulent, the mortgage advance monies were proceeds of crime in the hands of the applicants. But they were not proceeds of crime until the applicants had received them.
So the broker was not involved in an arrangement for the applicants to obtain proceeds of crime – the arrangement was to obtain legitimate monies belonging to the lenders. It was only after the arrangement had been successful that there were proceeds of crime.
It was irrelevant that, had the defendants been charged under different legislation, they would very likely have been convicted.
The defendants’ conduct, said the judges in the Court of Appeal, did not fall within the s328 and s329 offences (which envisaged that crime of some sort had occurred before the arrangement was made or the money was obtained).
Furthermore, by giving security for the mortgage advances, the applicants had provided adequate consideration for the monies which they had received – and therefore the exemption of s329(2)(c) applied to their acquisition of the monies (notwithstanding that false information regarding income and employment may have been entered on the mortgage application forms).
The judgment in the case is R v Amir & Akhtar  EWCA Crim 146.

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