Kausar, R v

J U D G M E N T

Thursday 30 July 2009

LORD JUSTICE STANLEY BURNTON:

1. This is an appeal by leave of the full court by Rahila Kausar against her conviction at the Crown Court at Stoke-on-Trent, before His Honour Judge Eades and a jury, by a majority of 11:1 of acquiring criminal property contrary to section 329(1)(a) of the Proceeds of Crime Act 2002. On 18 July 2008 she was sentenced to 26 weeks' imprisonment suspended for 18 months with a supervision requirement. She was acquitted of converting criminal property contrary to section 327(1)(c).

2. The facts were as follows. The appellant owned a property at 104 Buccleuch Road, Stoke-on-Trent, which she let out. The property was unencumbered. She also had rental income from another property at 66 Chaplin Road which had a mortgage of £35,000 with the Halifax Bank. On 12 April 2005 she applied for a "Buy to Let" mortgage from the Royal Bank of Scotland in the sum of £40,000. The mortgage application form was completed by her co-accused, Urfan Akhtar, a mortgage broker. The signatures on the application form were forgeries. Information regarding the appellant's employment and income, namely that she was a sole trader of a grocery store, was also false. Akhtar had pleaded guilty to being concerned in arrangements for money laundering in respect of the appellant's mortgage application.

3. The prosecution case was that the whole purpose behind the mortgage application was a deception from the outset. Its object was to fund a bail application for the appellant's brother, not that which was stated in the mortgage application. The inference was that the appellant was a party to the deception in that she knew or suspected that the false information contained in the mortgage application form would be put before the bank and that it would deceive them and lead to the grant of a mortgage loan.

4. The defence case was that the appellant had not dealt with Urfan Akhtar and had not supplied him with false information. She had therefore no knowledge or suspicion that there would be any deception or any falsehood in the application form. It was also her case that the false information was not material or operational and that therefore there had been no relevant deception.

5. It can be seen that the case as alleged was a fairly straightforward mortgage fraud. If the appellant had been a knowing party to obtaining a mortgage loan by deceiving the lender in the mortgage application, when she received the proceeds of the mortgage she would have committed what is now the offence of fraud by false representation under section 2 of the Fraud Act 2006 and was at the relevant time the offence of obtaining a money transfer by deception contrary to section 15A of the Theft Act 1968.

6. However, instead of being charged with one of these offences, the appellant was charged under section 329(1)(a) of the 2002 Act. Section 329, which is headed "Acquisition, Use and Possession", provides:

"(1) A person commits an offence if he --

(a)acquires criminal property;

....

(2) But a person does not commit such an offence if --

(a)he makes an authorised disclosure ....

(b)he intended to make such a disclosure but had a reasonable excuse for not doing so;

(c)he acquired or used or had possession of the property for adequate consideration;

(d) ....

(3) For the purposes of this section --

(a) a person acquires property for inadequate consideration if the value of the consideration is significantly less than the value of the property;

...."

Various expressions in section 329 are defined in section 340. Section 340 defines those expressions for the purposes of that Part of the Act alone. It defines "criminal conduct" as conduct which:

"(a) constitutes an offence in any part of the United Kingdom, or

(b) would constitute an offence in any part of the United Kingdom if it occurred there."

"Criminal property" is defined as being such if:

"(a) it constitutes a person's benefit from criminal conduct or it represents such a benefit (in whole or in part and whether directly or indirectly), and

(b) the alleged offender knows or suspects that it constitutes or represents such a benefit."

Subsection (9) provides:

"Property is all property wherever situation and includes --

(a)money;

(b) all forms of property, real or personal, heritable or moveable;

(c) things in action and other intangible or incorporeal property.

(10) The following rules apply in relation to property --

(a) property is obtained by a person if he obtains an interest in it;

...."

7. The appeal raises a number of issues, not least the question whether the property in this case was criminal property within the meaning of the Act when it was acquired by the appellant. It is submitted on her behalf that since the property in question, namely the mortgage monies, could not have been criminal property until she received it, she could not have been guilty of an offence under the section. That is an issue which will arise for decision on another occasion. It is unnecessary to determine it on this appeal since there is another issue raised on this appeal on which in our judgment the appellant is entitled to succeed.

8. One of the issues that may arise under section 329 is whether the property in question was acquired for inadequate consideration. If it was not so acquired, no offence under it is committed (subsection (2)(c)), and that is so even if the person who acquires it knows or suspects the property to be criminal property. If the person knows that it is criminal property, he will be guilty of the offence of handling or in the present case, if he is a party to a fraud, obtaining a money transfer by fraud. It is accepted by the Crown on the authority of the decision of the Divisional Court in Hogan [2007] EWHC 978 (Admin), the correctness of which was accepted by this court in Davis [2008] EWCA Crim 2756, that the burden of proving inadequate consideration is on the prosecution. At the trial of the appellant, no attention was given to this ingredient of the offence, and the issue has been raised for the first time on this appeal. There is no objection by the Crown to the issue being so raised before us. Fortunately, in the present case the question does not depend on any oral evidence that was before the jury.

9. It is submitted by the prosecution that "consideration" in section 329 does not bear its ordinary meaning in the context of contract law (i.e., that which is given in exchange for the performance or promise by the other contracting party), but requires a different understanding. It is submitted that a promise to pay, or to do something which would otherwise be consideration, can never be good or adequate consideration. A promise to repay a mortgage debt cannot be adequate consideration. Quite what the prosecution say is the meaning of "consideration" in this context is not clear. Given the availability of other offences that could be charged, we see no reason for any unusual meaning to be given to a provision which is clearly worded.

10. "Consideration" is a well-known legal term of art. Its use in criminal statutes is not unusual: see, for example, the Accommodation Agencies Act 1953, considered in Saunders v Soper [1975] AC 239, section 10 of the Prevention of Terrorism (Temporary Provisions) Act 1976, section 13 of the Rent Act 1968, and, closer to the present context, section 23A of the Drug Trafficking Offences Act 1986. See also section 14 of the Criminal Justice (International Co-operation) Act 1990.

11. It is difficult to see why Parliament should have used a legal term of art in the Proceeds of Crime Act if some other meaning was intended. Section 329 makes perfect sense if the word is given its normal legal meaning. In our judgment it has such a meaning in this provision. We are supported in that conclusion by the note to section 329 in the Current Law Statutes at paragraph 29-301, which reads:

"This offence consists in acquiring, using or having possession of criminal property. It is essential (and probably something of a relief) to recall that, by section 340, property is only criminal property if the alleged offender knows or suspects that it constitutes benefit from criminal conduct. Bona fide possession of property which turns out to be criminal property is not an offence in terms of section 329. It is, by subsection (2)(c) a defence to a charge of committing an offence under this section that the person charged acquired or used the property or had possession of it for adequate consideration. The heart of the offence is, accordingly, acquisition of the property either without consideration or for inadequate consideration. The word 'consideration' is a familiar one (though more so in English Law than in Scots Law) and there is no reason to suppose that the word here has anything other than its ordinary meaning of 'any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment, or inconvenience, sustained by the plaintiff, provided such act is performed, or such inconvenience suffered, by the plaintiff with consent, either express or implied, of the defendant' ( Laythoarp v Bryant 5 LJCP 220). Note, however, that the adequacy or otherwise of the consideration falls to be judged according to the criteria set out in subsection (3)."

12. Where a contract is in writing, particularly if it is contained in a deed, and that contract is not alleged to be a sham, the consideration given by the parties is identified in the written document. In the present case, that was the mortgage deed. That there was a mortgage deed is not in dispute. It is not before us, but we know that it imposed on the appellant, as borrower, in return for the mortgage advance, an undertaking to repay the advance with interest and conferred on the lender a charge on the mortgaged property. The charge and the undertaking to repay with interest were the consideration for the advance. There is no suggestion that the interest was other than a market rate, or that in any other respect the consideration (as we have defined it) passing from the appellant was inadequate.

13. It is submitted on behalf of the Crown that a promise can never be good consideration in circumstances where the person obtaining the property knows or suspects the property to be the proceeds of crime. In our judgment that submission gives no force to the wording of section 329, where "inadequacy of consideration" is clearly a separate ingredient of the offence.

14. It follows, in our judgment, that the appellant should never have been charged with this offence and should not have been convicted of it. Accordingly, the appeal will be allowed and the conviction quashed.

MR FARRELL: My Lord, there is just one further application for costs. Prior to the granting of a representation order, some costs were incurred. Could I please ask that a defendant's costs order is made and that the matter is taxed by the court authorities, pursuant to the regulation? The appeal has been successful and it was inevitable, there being no representation, that some legal costs would be incurred. In my submission, it was perfectly reasonable for the appellant to have instructed counsel and solicitors privately to prepare the original grounds of appeal which were put in, and indeed for counsel to attend the hearing when leave was granted. I can give you figures today if you wish.

LORD JUSTICE STANLEY BURNTON: What order precisely are you asking us to make?

MR FARRELL: An order pursuant to section 16 of the Prosecution of Offences Act. It is a defendant's costs order in favour of the accused.

LORD JUSTICE STANLEY BURNTON: You may have that order.

MR FARRELL: Thank you very much.

LORD JUSTICE STANLEY BURNTON: Thank you for your help.

MR MORSE: My Lord, on the question of "consideration" I have particular instructions to ask if your Lordships would certify a question. I have taken the liberty of drafting one, although I have not yet shown it to my learned friend, nor of course to your Lordships.

LORD JUSTICE STANLEY BURNTON: Do you have sufficient copies?

MR MORSE: Yes, I do. I am not instructed to ask for leave, only to ask you to certify the question.

( The court conferred )

LORD JUSTICE STANLEY BURNTON: We will not certify. Thank you very much.