Pennock & Anor, R. v

This is an appeal against conviction by Richard and Angela Pennock. We will refer to them as the first and second appellant respectively. The single judge granted leave to appeal in respect of four out of six proposed grounds. The first appellant had intended to make renewed applications in respect of two further grounds, but we have not dealt with those applications in circumstances which we shall set out. There is also before the court a renewed application for an extension of time and for leave to appeal against sentence by the two appellants. Again, we have not needed to deal with those and we shall explain why shortly.

The appeals arise out of the conviction (by a majority of 10:2) on 11 December 2012 of both appellants of two offences under the Fraud Act 2006 following a trial before His Honour Judge Moorhouse and a jury in the Crown Court at Teesside. On 11 January 2013 Judge Moorhouse sentenced Angela Pennock (who is now aged 46) to 18 months' imprisonment concurrent in respect of each offence, and he sentenced Richard Pennock (who is now aged 66) to three years' imprisonment in respect of each offence, to run concurrently.

The charges were made under section 4 of the Fraud Act 2006, which provides:

There is no statutory explanation of what constitutes the circumstances set out in section 4(1)(a), so it must depend upon the facts of each case. Neither is the word "abuses" in section 4(1)(b) defined in the statute. A good working meaning might be: "uses incorrectly" or "puts to improper use" the position held in a manner that is contrary to the expectation that arises because of that position. That appears to be the proposition which is accepted in the current edition of Archbold at 21-386.

Section 5 of the Fraud Act is also relevant. It provides:

Thus, in general terms, in respect of an offence charged under section 4 of the Fraud Act 2006, the prosecution has to prove four matters:

Against that background we can now briefly describe the facts which gave rise to the charges. The first appellant, Richard Pennock, is a successful and wealthy businessman who lives in the North East of England. At no time did he have any financial difficulties and could, on the evidence, raise up to £1 million quickly and easily. The second appellant is his wife. The complainant, Mr George Spann, is now an elderly gentleman of over 90 years of age. He is the great uncle by marriage of the second appellant. Her grandfather, Alec Bayliss, was married to the complainant's sister, but she had died before the relevant events took place in 2009. At that time the complainant was aged about 86. His wife had also died. At the trial there was conflicting evidence about the state of Mr Spann's memory in 2009. However, it was accepted that by the time of the trial his memory had deteriorated significantly and that he was by then suffering from the early stages of Alzheimer's disease.

The complainant had lived for many years in New Zealand. he had met the Pennocks on a visit to the United Kingdom in the early 2000s when his sister was ill. In fact, she died at the time of that visit. In 2009 he decided to sell his house in New Zealand and move to the United Kingdom. The second appellant went out to New Zealand to help him do so. The house in New Zealand was successfully sold for something just over the New Zealand equivalent of £105,000. The complainant had some other money and he also had a pension.

When he came to the United Kingdom, Mr Spann first of all lived with the two appellants in their house in Newcastle. The bank manager of the Pennocks, Mr Gilsennen of Barclays Bank, had a meeting with the complainant and Mr Pennock, as a result of which four joint bank accounts with Barclays were set up. These were an income account, a spending account (on which there was a spending limit of £500), a savings account and a household bills account. At the trial Mr Gilsennen gave evidence for the prosecution. He said that Mr Pennock had said that he would control the accounts of Mr Spann (the complainant) and that Mr Spann agreed with this at that meeting. Mr Gilsennen said in evidence that he had said at the meeting that the only way that Mr Pennock could have control over the accounts was if the accounts were in joint names. In cross-examination he said that he was satisfied that Mr Spann gave his consent to the accounts being opened and that mandates were sent to Mr Spann when "the accounts were transferred". Unfortunately, the relevant bank records were apparently not made available at the trial so that none of this could be verified on the documents.

The complainant gave his evidence in chief by way of a recorded video interview. He was cross-examined via a video-link. His evidence was that he had not realised that he had opened joint accounts with the Pennocks and he denied knowing that he had signed anything to set up the joint accounts.

After the complainant had lived with the Pennocks for some time, the idea was mooted of him moving to a bungalow which he would share with Mr Bayliss, who was approximately the same age as Mr Spann. There were disputes in the evidence about how this came about. But there is, apparently, no dispute that the sum of £100,000 of the complainant's funds was removed from one of the joint accounts by Mr Pennock (that is, one of the joint account holders and signatories), and that this money was used as part of the purchase price of £265,000 for a bungalow at No 3 Bute Close ("the property"). There was also no dispute that Mr Pennock had provided the remainder of the purchase price and had also paid the Stamp Duty and the conveyancing fees. The bungalow was conveyed into the joint names of Mr and Mrs Pennock as holders of the legal title.

There was no direct evidence from any prosecution witness of the precise details of how the purchase came about. However, Ms Jeanette Bowes, who was employed by the Citizens Advice Bureau, gave hearsay evidence that Mr Spann had told her that he did not know that he had paid £100,000 towards the purchase of the property. She said that he also told her that he had not given permission for the purchase of the house using his £100,000.

The solicitor who carried out the conveyancing for the purchase of the property, Ms Caroline Rathmell, gave evidence for the defence. She said that she was instructed by the Pennocks only and not by them and Mr Spann jointly. The contract for the purchase of the property was signed on 13 November 2009 and the conveyance was completed three days later. The total purchase price was transferred from one account, which was one of Mr Pennock's sole accounts, to the solicitor's client account. We were informed by Mr Mullarkey, who appeared for the prosecution at the trial and who appears for the Crown on the appeal that (although this does not appear from the summing-up), the £100,000 had been taken from one of the joint accounts of Mr Spann and Mr Pennock, transferred into Mr Pennock's sole account, and then transferred to the solicitors' client account. Ms Rathmell's evidence was that, at the time of the transaction, Mr Pennock had told her that Mr Spann had provided £100,000 towards the purchase price of the property and that the purchase was so that Mr Spann and Mr Bayliss could live in that property. Ms Rathmell was questioned in cross-examination by Mr Mullarkey about her statement that Mr Pennock had told her at the time of the transaction that Mr Spann had provided £100,000 towards the purchase price. It was suggested to her that Mr Pennock had only told her at a later time. Ms Rathmell was firm that Mr Pennock had told her at the time of the transaction about the provision of the £100,000 towards the purchase price by Mr Spann.

It was common ground at the trial that there was no document setting out an express declaration of trust in respect of Mr Spann's interest in the property. Nor was his financial contribution registered in any way on the title to the property, or otherwise formally recognised. Ms Rathmell's evidence was that Mr Spann should have taken his own, independent advice. It would appear that that she did not tell her own clients at the time that this is what could or should have been done.

After Mr Spann and Mr Bayliss moved into the property all was well for a short while. Then problems started. Ultimately, in April 2010 there was an argument between Mrs Pennock and Mr Spann. She alleged that on one occasion he had approached her in a menacing fashion with raised fists. This led, shortly afterwards, to Mr Pennock giving Mr Spann a written "notice" to leave the property and to pay what were said to be arrears of "rent". An employee of Stockton Borough Council, Ms Jennifer Wardle, who gave evidence for the prosecution, said that she advised Mr Spann to pay the so-called rent. In the second half of April Mr Pennock gave Ms Rathmell instructions to transfer the legal title in the property from Mr and Mrs Pennock's names to that of their adult daughter Amanda. That was done on 21 April 2010. The Pennocks' evidence was that this was done for "tax-planning purposes". The summing-up does not suggest that any nominal transfer price was paid upon the transfer of the property to Amanda Pennock. Ms Rathmell's evidence was that once all the parties had fallen out, she had advised the Pennocks to repay the £100,000 to Mr Spann. But by this time Mr Pennock was on bail. It appears that at some point the sum was deposited in a client account at the solicitors' firm, but it was thereafter taken out of the solicitors' account because the solicitors did not like to have such large sums sitting for any long period in their client account.

During the time that Mr Spann lived in the property there was some form of tenancy agreement between Mr Spann as "tenant" and the Pennocks as "landlords". Under this agreement Mr Spann was to pay a "rent" of £450 per month. There was a dispute at the trial as to whether he had signed such an agreement or whether he had paid one or more such sums by way of "rent". At the same time, arrangements had been made, with Mrs Pennock's assistance, for Mr Spann to claim Housing Benefit and council tax relief. He was probably not entitled to such benefits. It appears from the summing-up that the evidence was that these sums were used to pay his household expenses.

The two counts on the indictment are in the following terms. Count 1 charges fraud, contrary to section 1 of the Fraud Act 2006. The particular of offence state:

The statement of offence in count 2 charges fraud, contrary to section 1 of the Fraud Act 2006. The particulars of offence state:

The fact that the particulars of offence in count 1 refer to "his bank account" and "his permission" does not recognise that the relevant accounts that were set up were all joint accounts to which the first appellant was one of the joint account holders and signatories together with the complainant. There is no reference in count 1 to the use of the £100,000 deposited by Mr Spann in one of the joint accounts for the purchase of the property.

The particulars of offence of count 2, on the other hand, focus on the transfer of "ownership" of the property to Amanda Pennock "without recognising or protecting" the interest of Mr Spann. It is that transfer (which must mean the transfer of the legal estate) which is said to be the abuse of the position of trust and was dishonest because it did not recognise or protect the interest of Mr Spann.

The prosecution case in relation to count 1 was that both appellants had been dishonest when, without Mr Spann's consent, they took £100,000 from one of the joint accounts of Mr Spann and Mr Pennock. This is reflected in the judge's summing-up at page 4, lines 12-13, where he speaks of the prosecution alleging that the appellants abused their position by "transferring £100,000 from his [sic] bank account without his [sic] permission".

The defence case was that Mr and Mrs Pennock had never acted dishonestly in respect of the use of Mr Spann's £100,000 as part of the purchase price of the property. Their case was that Mr Spann had consented to using this sum towards the purchase price of the property.

The prosecution case in respect of count 2 was that both Mr and Mrs Pennock had acted dishonestly in transferring the legal title of the property to their daughter without recognising or protecting the equitable interest of Mr Spann in the property, thereby abusing their position in which they were expected to safeguard or not act against Mr Spann's financial interests. It was the prosecution case that this was done intending that the defendants would thereby make a gain for themselves or for their daughter, presumably on the assumption that the property would be free of any interest of Mr Spann.

The defence case in relation to count 2 was that the Pennocks had never acted dishonestly in relation to the transfer of the legal title in the property to their daughter; that they had done so as a tax-planning activity; and that they had fully intended to reimburse the £100,000 to Mr Spann.

At the end of the prosecution case, Mr Kemp, who acted at the trial on behalf of both Mr and Mrs Pennock, submitted that there was no case to answer on count 1. His argument was that the prosecution evidence in relation to Mr Spann's permission to use £100,000 of his money towards the purchase price of the property was so inherently weak and inconsistent that it would be unsafe to leave count 1 to the jury. The judge rejected that submission. The judge "conceded" that some of the evidence was far from strong, "but there is no documentation supporting the use of Mr Spann's money" because there was a complete lack of a written record. The judge accepted that there were inconsistencies in the prosecution evidence but said that, as Mr Spann was now 89 and suffering from early Alzheimer's disease, some of the evidence was bound to be inconsistent.

Both the appellants gave evidence at the trial. In cross-examination Mr Pennock agreed that at the time that legal title in the property was transferred from him and his wife to their daughter, he had not told the solicitor carrying out the conveyancing, Ms Rathmell, about the £100,000 of Mr Spann's money that had been part of the purchase price. However, as already noted, Ms Rathmell's evidence was that she had been told by Mr Pennock, at the time of the purchase of the property, that Mr Spann was contributing £100,000 towards the purchase.

The appellants called other witnesses in support of their case. The judge gave directions to the jury on 10 December 2012 and the jury returned their verdicts the following day.

The first ground of appeal for which the appellants have leave is that the judge erred in failing to accept the submission of no case to answer in respect of count 1. It is clear from the transcript of Mr Kemp's argument that he focused his submissions on the weak and inconsistent evidence concerning the issue of whether there had been consent from Mr Spann to the joint accounts and the use of £100,000 of his funds, which was obviously from one of the joint accounts in Barclays, for use as part of the purchase price of the property.

In respect of count 1 there seems to us to have been a failure carefully to analyse the legal position. First, it is necessary to focus on the bank accounts. The fact is that joint accounts were opened at Barclays. Unless Mr Gilsennen acted entirely improperly, those accounts could only have been opened at the bank with the express consent of both Mr Spann and Mr Pennock. A joint account is one that gives both account holders the authority to withdraw money from that account. So far as the bank is concerned, unless there has been some express limitation on the authority of one of the joint account holders with respect to withdrawals (eg only up to a certain sum, so sums above that need authorisation from both account holders), no further "permission" from one account holder to the other is needed. The bank does not act in breach of its mandate (unless there has been some specific restriction, eg on the amount that may be withdrawn) if one of the joint holders of the account withdraws money from that account but the other does not agree to that being done.

This is more than borne out by the prosecution evidence that was before the judge and the jury. Thus, Mr Gilsennen, the Barclays' bank manager, gave clear evidence that Mr Spann had agreed to the joint accounts and that he (Mr Gilsennen) had a duty not to act against the interests of either party and had to be sure that both parties knew exactly what they were doing and were happy with it before he could have opened those accounts in joint names. Next, there was an internal bank e-mail from Mr Gilsennen dated 6 October 2011 (some two years after the relevant events) that stated that Mr Spann wanted Mr Pennock as a joint account holder so that monies could be moved around on Mr Spann's account, and there was an e-mail from Mr Gilsennen to Mr Pennock stating that Mr Spann had agreed to and wanted Mr Pennock to act as a joint account holder. There was the evidence of Ms Bowes that "it was believed" that Mr Spann consented to the opening of the joint bank accounts and that he remembered signing the documents. Lastly, there was apparently a statement of Mr Spann, dated 25 August 2011 (which became part of the depositions), in which he said that he had remembered the accounts were to be joint as he trusted Mr Pennock, although under cross-examination Mr Spann denied signing anything. Any contrary evidence of Mr Spann at the trial, when he was suffering from memory loss and the early stage of Alzheimer's disease must, by its very nature be described as weak and entirely inconsistent with the unimpeachable evidence of Mr Gilsennen.

Given that the £100,000 must have been removed from a joint account of which Mr Pennock was a joint account holder, and given that there was no evidence that there was any restriction on his authority to act as a joint account holder, at all times Mr Pennock must have had authority to do that as a joint account holder. There was simply no case to answer given the way that the particulars of count 1 were framed. In his ruling on "no case to answer" the judge did not seem to have been alive to the fact that count 1 did not make any allegation as to the use of the money once it had been withdrawn from the joint account. Insofar as he referred to that matter, he was, with respect, not focusing on the issue given the way count 1 had been framed.

We therefore are driven to the conclusion, albeit reluctantly, that we must allow the appeal in relation to count 1 on this first ground of appeal. If the particulars of offence had been more carefully drafted and had concentrated on the use of the money to purchase the property, things may have been otherwise. But it did not.

Ground 2 relates to the summing-up. It is suggested that the judge made insufficient reference to the defence witnesses. We need only consider it in relation to count 2. Here Mr and Mrs Pennock were the legal title-holders to the property and so, as the holders of the legal title to the property, they were entitled to transfer that legal title to a third party. There can, however, be no doubt that Mr Spann had an equitable interest in the property to the extent that money which originated from him had contributed to the purchase price, in the absence of any suggestion that he had intended to make a gift of the £100,000 to the appellants: see, for example, Westdeutche Landesbank Girozentrale v Islington LBC [1996] AC 669 at 708-9 per Lord Browne-Wilkinson. There would be either a "resulting trust" or perhaps, as Mr Kempt suggested in argument, a "constructive trust" in Mr Spann's favour to the extent of that contribution. However, if Mr and Mrs Pennock made the transfer in a manner in which Mr Spann's equitable interest in it was not protected, then there would in our view be no doubt that they would be in breach of their fiduciary duty towards him. If they did that dishonestly and with an intent to make a gain for themselves or their daughter, that would amount to an offence under section 4 of the Fraud Act 2006.

Mr Spann's equitable interest in the property would, in law, however, have been protected, so long as the transfer of the legal title was not to a bona fide purchaser of the legal estate for value who did not have notice of Mr Spann's interest. So far as we understand it, Ms Amanda Pennock did not give any value for the transfer of the legal title in the property to her. Therefore, as a matter of law, Mr Spann's equitable interest in the property remained intact upon that transfer, despite the fact that it was not formally recognised or protected by a declaration of trust or other notification on the registered titled.

The evidence of prosecution witnesses and most of the defence witnesses, other than Mr and Ms Pennock and Ms Rathmell who carried out the conveyancing of the transfer to Amanda Pennock, were not significant in relation to count 2. The key issues were: (1) whether Mr and Mrs Pennock were in a fiduciary position towards Mr Spann, which they plainly were; (2) whether they abused that position, which depended upon the jury's view of why Mr and Mrs Pennock made the transfer and whether they intended to deprive Mr Spann of his equitable interest in the property; (3) whether they acted dishonestly; and (4) whether they intended to make a gain for themselves or their daughter, although it would not matter if no gain had in fact been made.

On those issues in relation to count 2 the evidence of Mr Spann himself, Ms Bowes, Ms Wardle, Mr Gilsennen and the other defence witnesses were of little significance. So, even if the summary in the summing-up of the cross-examination of those prosecution witnesses and the evidence in chief of other defence witnesses was not as comprehensive as it should have been, that does not, in our view, affect the safety of the conviction on count 2.

Ground 3 is that the judge failed to give a proper direction on the effect of delay on the defence's ability to deal with the allegations. The judge did not give any direction on delay. That ground does not have much, if any, force in relation to count 2, however, because that count does not depend on issues such as consent or permission and people's recollection of such matters. The facts largely speak for themselves. The jury's decision depended upon their interpretation of facts that were not really in dispute. The transfer to Amanda Pennock was made. Mr Spann was not told of it. His equitable interest was not noted on the transfer of the legal title. Therefore the failure of the judge not to give any direction in respect of delay cannot, in our judgment, affect the conviction on count 2.

Ground 4 is that the judge wrongly and prejudicially questioned two defence witnesses, Ms Rathmell (the solicitor who did the conveyancing) and Mr Parker (her partner in the firm of solicitors). We see no force whatsoever in this ground. The judge was entitled to ask those questions so that the position on a very technical area of conveyancing would be clearer both for him and the jury.

Despite these conclusions on those grounds of appeal for which leave has been granted, we remain very concerned that the case in relation to count 2 was not properly presented to the jury by the judge in his summing-up. Although Ms Rathmell had made some statements about the legal position of Mr Spann's interest in the property, ie that he had an equitable interest in it to the extent of his contribution, the consequences of that fact were never properly explained to the jury in the summing-up. The question that they should have been invited to focus upon was whether the defendants, being in a fiduciary position towards Mr spann, were attempting dishonestly to deprive him of his equitable interest in the property by making the transfer of the legal title to their daughter and without there being any notification, by a declaration of trust or otherwise, of his equitable interest, so that they thereby were not properly recognising or protecting it. The jury, in our view, should have been directed on the law to the effect that, even once the transfer of the legal title to Amanda Pennock had taken place, Mr Spann's equitable interest in the property remained intact, because Amanda Pennock was not a bona fide purchaser of the legal estate for value without notice of his interest, as she had not given any value for the transfer. Therefore, the jury should have been told, as a matter of law, even assuming, contrary to their case, that the Pennocks were attempting to deprive him of his interest in the property, they had failed to do so. Whether a statement of the law to that effect would have made any difference to the jury's conclusion that Mr and Mrs Pennock were acting dishonestly and in abuse of their position is impossible to say. But the fact is that the technical legal position was not explained to the jury. It is our view that on the summing-up as given, the jury might have assumed, wrongly, that upon the transfer of the legal title to Amanda Pennock, Mr Spann lost all his equitable interest in the property. That was not the case.

In these most unusual circumstances, we have, again with considerable reluctance, been driven to the conclusion that the convictions on count 2 are not safe and must be quashed.

In the light of these conclusions we do not need to go on to consider the application for leave to appeal against sentence.

Mr Mullarkey has made an application that there be retrials of both the appellants. We do not accept that proposition. First, there could not be a retrial in respect of count 1, given our views on the inadequacies of the way that that count has been framed. In respect of count 2, the position is that both the appellants have served a considerable portion of their sentence. Mrs Pennock has served the entirety of her custodial term. Mr Pennock is about two-thirds of the way through his custodial term. Furthermore, there would, in our view, be considerable difficulties if it were contemplated that Mr Spann were himself to give evidence in a trial which might take place later in 2014, in circumstances when in 2012 he already had considerable difficulties with memory and was in the early stages of Alzheimer's disease. In these circumstances we have come to the conclusion that it is not in the public interest that there be any retrials.

We note, although it has nothing particularly to do with this court, that Mr Kemp informed the court that arrangements have been made for £100,000, and if necessary further sums, to be held in respect of Mr Spann's interest in the property, and that in due course matters will be dealt with in respect of that interest in the property.