Mortgage – Bridging loan – Buy-to-let – Appellant convicted of fraud in connection with buy-to-let mortgage transactions – Whether appellant making false representations in certificates of title as alleged – Appeal allowed
The appellant was a solicitor specialising in property and conveyancing. Apart from his work as a solicitor, he invested in property through local contacts. In 2007, the appellant became aware that the building society had changed the way it provided buy-to-let mortgages. The rule was relaxed which had prevented an owner from obtaining a mortgage on a buy-to-let basis until the owner had owned the property for more than six months. Under the new arrangements, a mortgage application could be made before the property had in fact been purchased; a bridging loan could be obtained for a short period in order to purchase a property and then a remortgage with the building society could be used to repay the loan.
In 2008, the appellant acted in eight transactions in which he provided a bridging loan to the purchaser of a property who was thereby able to buy the property for less than its market value as a cash buyer. The property was then independently valued and a buy-to-let mortgage loan obtained on the basis of that valuation. The appellant’s loan was repaid out of the mortgage advance. The appellant acted for both the purchaser and the building society. His firm received a fee from the building society and he received a cash sum from the purchaser. There was evidence that the building society would not have advanced funds to the purchasers if it had known of the appellant’s personal interest. As security for his bridging loan, the appellant obtained a declaration of trust from the purchaser under which the purchaser was to hold the property on trust for the appellant or for both of them equally. The declarations of trust were not registered and not disclosed to the building society.
The respondent prosecutor charged the appellant with fraud in connection with the transactions in that “dishonestly and intending thereby to make a gain … he had a false representation to [the building society] which was and which he knew was untrue or misleading, namely gave a false certificate of title in relation to the purchase of [the property], in breach of section 2 of the Fraud Act 2006”. The appellant appealed against conviction.
An issue arose whether, on a proper construction of the certificates of title, false representations had in fact been made. If there were no false representations, there was no case to answer and the convictions had to be quashed.
Held: The appeal was allowed.
(1) The appellant’s representations that the properties were free from incumbrances, were part of a standard certificate contained in the Council of Mortgage Lenders’ Handbook. They were clearly professionally drafted for use in conveyancing transactions up and down the country. In interpreting such standard forms, the court had to apply consistent interpretations and not draw fine distinctions. The certificate was drafted by the Council of Mortgage Lenders; and if they wished to impose liability on conveyancers, they had to do so in clear terms. In addition, many of the phrases used in the forms had well recognised technical meanings derived from centuries of conveyancing practice: Barclays Bank plc v Weeks Legg & Dean [1998] 3 EGLR 103; [1998] 40 EG 182 and Midland Bank plc v Cox McQueen [1999] PLSCS 19; [1999] EGCS 12 considered.
(2) In each case, the trust deed had been executed by the registered proprietor and declared a trust in favour of the appellant. It was not expressed to be a trust by way of security and the existence of the trust deed did not appear on the register of title at the Land Registry. The appellant was not in actual occupation of the properties in question and the interests created by the trust deed were not overriding interests under section 29 of or Schedule 3 to the Land Registration Act 2002. Thus, the mortgages to the building society took priority over the interests created by the trust deeds and the building society had acquired a good and marketable title free from the interest created by the trust. Moreover, the word “mortgagor” was a technical term. The appellant had not granted the mortgage; it had been granted by the registered owner. Accordingly, the appellant’s representations made in the certificates of title had been true and, since those representations, as set out in the indictments against the appellant, were not false, the convictions had to be quashed.
(3) Furthermore, the court could not substitute convictions for attempted fraud as the respondent had requested. On the directions given to the jury as to the basis on which they could find that the representations were false, it was hardly surprising that the jury found that the appellant was dishonest. The appellant had, on a proper construction of the certificate of title, in fact been truthful when providing the very technical representations required in the certificate of title. Thus the court could not conclude that the jury must have been sure that he had intended to be dishonest in respect of the very technical representations he was required to make; it was quite possible from the lax way in which he conducted his business that he paid little attention to the details of representations in the certificate of title: R v Deller (1952) 36 Cr App R 184 considered.
(4) The respondent’s request for a retrial would be refused. The respondent had erred in failing to identify the correct basis on which to charge the appellant. The appellant had spent almost a year in custody. Given his conviction for perverting the course of justice, quite apart from his conduct in the present transactions, it was unlikely that he would ever be permitted to practise as a solicitor again.
Peter Rouch QC and John Ryan (instructed by Sternberg Reed, of Romford) appeared for the appellant; David Perry QC (instructed by the Crown Prosecution Service) appeared for the respondent.
Eileen O’Grady, barrister
