England and Wales Court of Appeal (Criminal Division) Decisions

IN THE COURT OF APPEAL (CRIMINAL DIVISION)
ON APPEAL FROM THE CROWN COURT AT SOUTHWARK
HIS HONOUR JUDGE GOYMER
201100740D1 T20087708

		Royal Courts of Justice Strand, London, WC2A 2LL
		01/06/2012

Lord Justice Elias :

1. This is an appeal against conviction by leave of the full court. It involves two appellants, husband and wife, Julie and Stephen Clark. They were convicted before HH Judge Goymer at the Southwark Crown Court of two counts of conspiracy to defraud, that is counts 14 and 15 on the Indictment, both by a majority of 10 to 2; and they were convicted unanimously of attempting to convert criminal property under count 16.
2. They each received concurrent sentences on each count of 12 months' imprisonment, suspended for 12 months, with a prohibition in each case requiring them to refrain from applying for mortgages and to reside for 12 months at a particular address in Spain.
3. Julie Clark was acquitted of count 10, which was obtaining a money transfer by deception, and Stephen Clark was acquitted of counts 11 and 12, which were conspiracy to defraud and transferring criminal property counts respectively.
4. There were number of co-accused, alleged to be parties to the conspiracies in counts 14 and 15 but it is not necessary to deal with them for the purposes of understanding this appeal.
5. The basis of the appeal is that the judge ought to have acceded to an application made by Julie Clark at half time that the prosecution had not established a case to be left to the jury with respect to either of counts 14 or 15, properly applying the test in the well-known case of Galbraith. It is common ground that if the appeal succeeds with respect to those counts then the verdict in count 16 cannot be sustained because it is entirely dependent upon the earlier counts.
6. The background to these allegations is that there were a series of fraudulent mortgage applications, as a result of which mortgage companies were induced to grant loans from late 2000 until 2006. The leading lights behind the operation were Warren Mitchell and Martin Power, who were friends. Mitchell was a property investor who ran a lettings agency and other associated businesses, and Power was somebody with whom he had a business connection. They involved a large number of other people in their activities; in all some 19 people were arrested in connection with their fraudulent conduct. Their activities involved using various dishonest means to persuade the lenders, typically mortgage companies, to make loans which they would not have made had the true facts been known, Different individuals were involved in different fraud conspiracies. There were five separate trials to deal with the full array of offences, and these appeals arise out of the third trial.
7. With respect to count 14, this involved the sale of a property called Canister Hall. This had been the subject of earlier alleged fraudulent transactions involving Julie Clark. She was acquitted on count 10 of obtaining a money transfer by deception in relation to that property when she bought it from Kelly Mitchell in June 2003. In some ways the charge was similar to that which she faced in count 15. It was alleged that she had lied about her income and employment when applying for a mortgage.
8. In count 14 the Crown's case was that Julie Clark, her husband Stephen Clark, and Michael Saddler, another friend of Warren Mitchell, together with other co-accused including Mitchell and Danny Downs, had conspired to defraud Birmingham Midshires Limited (BML) of £611,951. Warren Mitchell and David Lewis had been convicted in an earlier trial of this conspiracy and the Crown relied upon that to establish that such a conspiracy existed. The only issue was whether Julie Clark was a party to the conspiracy.
9. The conspiracy involved the use of a bogus purchaser called Graham Rogers. The Crown said that in fact he was Michael Saddler and there was cogent evidence to support this, including the fact that Saddler's photograph appeared on a forged driving licence submitted with the mortgage application which was verified by another co-accused, David Lewis, to be Rogers' driving licence. Lewis had acted as the broker to the mortgage and had confirmed to BML that he had met Rogers "face to face". The application contained a fictitious home address and employment and finance details.
10. The Crown's case against Julie and Stephen Clark was that Julie Clark had been the vendor of Canister Hall and that Stephen Clark as her husband must have been fully aware of her involvement in the fraud. The valuation of the property was £715,000. At an earlier trial the valuer had been acquitted of deliberately misrepresenting the value of the property, although the Crown continued to assert that it was always a high valuation as shown by the fact that the property was sold the following year for £455,000.
11. The completion statement showed that the vendor, Julie Clark, had made an allowance of just in excess of £27,000 against the property, for which there was no apparent explanation and which was not disclosed to the lender (although since she was not the borrower, Julie Clark would have been under no obligation herself to disclose this information to the building society). It was not, for example, said to be an allowance to enable the purchaser to put right some defect in the property. So the actual price was some £688,000.
12. The completion statement demonstrated that the total amount paid, including stamp duty and solicitors' costs, was just under £720,000. This came from two sources; the mortgage advance was £611,951 and £108,000 had come from another alleged conspirator, namely Danny Downs. The purchase money of around £687,900 came into her client account on 21 October 2005, and a couple of days later a payment of £110,000 was made to Danny Downs out of that account. The Crown submitted that this was the repayment of the £108,000 he had lent, together with £2,000 interest. This re-payment had been made ostensibly at the request of Julie Clark and was made on the same day as completion was effected. However, the Crown had accepted - and had done so by the time the judge made his half time ruling - that the document was a forgery: there were some errors in the letter of authorisation and that the signature, although ostensibly that of Julie Clark, was not in fact her signature. Some weeks later a payment of £110,000 was paid directly into Julie Clark's personal account, which was in her maiden name of Caughlan, by Danny Downs.
13. Julie Clark's mortgage was redeemed out of the purchase monies, and a sum a little short of £190,000 was paid to Julie Clark as the balance due to her. That money was, in fact, sent to Warren Mitchell.
14. Count 15 related to the sale of a property called Mitchell Hall by Kelly Mitchell to Julie Clark in February 2006. This was therefore just a few months after the sale of Canister Hall. In effect they were back to back and related transactions. The Crown contended that Julie and Stephen Clark, Kelly Mitchell, Warren Mitchell, David Lewis and certain others had conspired to defraud BMS of the mortgage advance which, in this case, was just short of £550,000 provided in order enable Julie Clark to purchase Mitchell Hall. Mitchell and certain other alleged conspirators had not been tried for this, having been convicted on other matters at an earlier trial.
15. The circumstances of this sale were that Kelly Mitchell transferred Mitchell Hall to Julie Clark on 1 February 2006. Julie Clark bought the property in her maiden name of Caughlan, although she was married at the time. The price according to the Land Registry was £900,000 In fact, Kelly Mitchell gave Clark an allowance of £28,000 towards the property - in a manner very similar to the allowance made in respect of the Canister Hall property and again in circumstances where the reason was never spelt out - and so only some £872,000 was actually paid over for the property.
16. Lewis acted as the mortgage broker in this transaction as he had done with Canister Hall. Clark is alleged to have claimed in her mortgage application that she was unmarried and self-employed. It was admitted that false details of her employment and income were provided in the application, as well as contact details for her accountant who denied ever having prepared her accounts or even knowing her. In the application form she claimed to be able to fund the deposit from her savings. Her solicitors were Cross Lane Davis (CLD), a firm of solicitors who employed an assistant solicitor, Yusuf Loonat, who was allegedly part of the unlawful conspiracies in both counts 14 and 15. (We were told that he was subsequently acquitted of these counts.)
17. The mortgage application was approved on 19 January 2006 and money was released upon completion on 30 January. It is right to say that Julie Clark paid the mortgage repayments and the building society suffered no loss from this loan, in contrast to the position with respect to the loan for Canister Hall.
18. In addition to the mortgage loan, the purchase was funded by a sum of £362,475 which came from Julie Clark's bank account. In November 2005 she only had £50,000 in the account. On 2 November 2005 £189,500 was paid into it from the sale of Canister Hall. A further cheque of £16,000 was paid into it, drawn from an account belonging to Kelly Mitchell herself. (When giving evidence Kelly Mitchell claimed that this was payment for a car which her husband had sold to Mr Clark, but this was not apparent when the half time application was made.). Then on 21 November 2005 £110,000 was paid into her account from Danny Downs. The Crown submitted that this was the money he had received from the sale of Canister Hall a month earlier. As we have said, this was paid into her own account and not into the client account held by the solicitors. Danny Downs was not registered as having any interest in the property. It is not known whether he was repaid in any way, or even whether he expected repayment.
19. In this case of the £872,000 purchase monies, some £406,000 was paid towards redeeming an outstanding mortgage, £150,000 was paid to Stephen Clark and used by him with respect to another property transaction which was the subject of count 11, and £10,000 was paid to Mitchell and Co. This left the sum of just under £300,000 to be paid to Kelly Mitchell. She provided CLD with instructions relating to payments of this money and the ledgers show that over the following weeks a series of payments were made by her to Mitchell and Co totalling £200,000. On her final instruction 148,000€ was paid into a Spanish bank account.
20. Julie Clark's defence as given in interview, was that she knew nothing about the arrangements, and left matters entirely to Mitchell. She had viewed the sale of Canister Hall and the purchase of Mitchell Hall as being effectively one transaction, the receipts from the sale providing much of the purchase money for Mitchell Hall. She was an innocent party to all these transactions, being duped by Mitchell. She claimed that both the alleged authorisation to pay out funds to Danny Downs and the declaration to the Building Society were false documents and in each case although they purported to be signed by her, in fact the signatures were false. She chose not to give evidence at the trial.
21. Count 16 related to the Clarks' attempt to sell Mitchell Hall following its purchase through the alleged fraudulent mortgage application whilst they were living in Spain in June 2007. It is accepted that this was a perfectly proper sale of the property. They were proceeding towards completion when the transaction was stopped on 10 August 2007 by a Restraint Order which was served on their solicitors. The basis of the Restraint Order was that the proceeds of the sale were said to represent the proceeds of crime.
22. As we have said, it is not disputed that if the convictions under counts 14 and 15 stand then so does the conviction under count 16. Conversely, if they do not, the conviction under this count cannot be sustained.

The judge's ruling.

23. Counsel for Mrs Clark, but not Mr Clark, made a submission of no case to answer at half time with respect to counts 14 and 15. The judge rejected the submission. He properly directed himself in accordance with the principles in Galbraith. As to count 14, the judge correctly observed that in the usual case the seller is not interested in how the buyer finances the purchase of property. It is up to the purchaser how the purchase is financed. But he concluded that there were enough unusual features in this case to permit the issue to go to the jury.
24. First, there was the unexplained allowance of some £28,000, although the judge considered that this of itself would not have been enough for the count to be left to the jury. In addition, and perhaps crucially, the money was financed by a loan from Danny Downs of £108,000 but that sum was in turn repaid to Danny Downs from the purchase monies, together with £2,000 interest. The judge noted that although ostensibly authorised by Julie Clark that authorising document was accepted by the prosecution to be a forgery in a number of respects. (For example, it mis-spelt both her maiden name and the name of the property and it was not her signature). Further, the judge referred to the fact that it was paid out of the client account of the solicitors rather than her own personal account. No doubt he was recognising, as he told the jury, that she would not necessarily have the same knowledge of the in-goings and out-goings in that account as she would with her personal account. Subsequently, however, the £110,000 was paid into her personal account by Danny Downs, in her maiden name. That was the contribution toward the purchase of Mitchell Hall.
25. The judge concluded in the light of these facts that there was a case for the jury to consider. The jury could legitimately conclude that she had knowledge of what was involved. This was a possible construction of the evidence.
26. The judge also considered with respect to count 15 that it was a potentially legitimate inference that the jury would be entitled to conclude that as the person who benefited from the loan, Julie Clarke would have been aware of the information that was being submitted on her behalf to the mortgage lender.
27. The appellant submits that this did not constitute a sufficient basis to leave the matter to the jury. Mr Bromley-Martin QC, in an attractive argument for Mrs Clark, submits that the judge was right to conclude that the crucial evidence in relation to count 14 which might implicate her in the conspiracy was the circular payment by Danny Downs coupled with the subsequent cheque into Julie Clark's personal account of £110,000. However, the purported authorisation showed that the payment to Downs out of her client account was a forgery, and the prosecution did not seek to contend otherwise even at half time. In view of that, there was no proper basis on which it could be inferred that she was a party to that repayment.
28. That same flaw essentially then tainted the verdict on count 15. If the appellant was not aware of the initial transfer of funds involving Danny Downs, it could not be safe to assume that she was knowingly and dishonestly aware of their return. As to the contention that she would have known that false information was given to the mortgage company on her behalf, that too was tenuous at best, particularly since the prosecution did not assert that it was her signature.
29. Counsel also submitted that the judge was wrong in an observation in his ruling that it was enough for the case to go to the jury that Julie Clark "had some knowledge…. of what was involved." He submits that it has to be shown that she knowingly participated in the conspiracy.
30. Furthermore, counsel submitted that it was highly material that she had been acquitted of count 10 in relation to count 15. In that count it was alleged that she had made false statements to a mortgage company in order to secure a loan. Counsel points out that there were only two particulars directly relied on by counsel with respect to count 14. The first was that she had submitted an application with false income and business information, and the second was the payment into her personal account of £110,000 from Danny Downs. If that latter evidence had not been before the jury, as it would not have been had count 14 not been left to the jury, then the only proper and legitimate conclusion is that the jury would have approached count 15 as they did count 10 and would have acquitted her of that count also.

What was the nature of the fraud?

31. A preliminary issue in this case is precisely what the alleged conspiracies were alleged to be. We heard argument about whether the conspiracy in count 14 was properly characterised as an inflated price fraud, or a bogus purchaser fraud; and whether the count 15 conspiracy was simply focused on her alleged misrepresentations to the mortgage company or whether this too was an inflated purchase price fraud. By the latter, we mean a situation where the amount actually paid for the property is less than the price recorded in the sale documents, which recorded price is likely to have influenced the decision of the lenders as to what sum they may be prepared to lend.
32. Mr Shorrock QC, counsel for the prosecution, submitted that these were not legal labels and were not a helpful way of approaching this appeal. The only relevant issue was whether the jury could on the facts find the defendant guilty of the offence for which she was charged, namely being party to a fraud on the building society.
33. That is plainly correct; it is not necessary that a defendant in a conspiracy charge should know all the details of the scheme to which he attaches himself: see R v Griffiths [1966] 1 QB 589, 597. It is enough that there is a common criminal purpose, in this case to deceive the lender. So whilst we accept, looking at the way the case was put in opening by the prosecution, and again in the judge's summing up, that the means whereby the deception was to be practiced in count 14 was to set up a bogus purchaser, it does not follow that Julie Clark had to have knowledge of that particular fact. She could have left it to others to determine the precise method of deception. We do accept, however, that the alleged deception was not stated to be a misrepresentation of the true price. The prosecution did indeed allege that the true price was less than the ostensibly agreed price, but only by the unexplained allowance. It was not suggested that the payment from Downs reduced the true price (perhaps because this was ultimately paid back by Downs to Julie Clark). Moreover, the allowance was not focused upon as a significant element in the conspiracy. So we accept that this was not relied upon as a means of deceiving the lender.
34. Similarly, with respect to count 15 the judge said in terms that Julie Clark could only be found guilty if the jury were sure that she was knowingly a party to submitting false information to the lender. It was not suggested that this was an inflated purchase price fraud. Accordingly, we approach this appeal on the basis that the judge had to be satisfied at half time that the evidence was capable of sustaining convictions for conspiracies on these two bases. On the assumption that this was indeed always how the case was presented, as the appellants say, it must follow that the judge was satisfied that the evidence adduced by the prosecution was sufficient to sustain the counts so understood.
35. The prosecution submit that even on this analysis the judge was right to allow the case to go to the jury. They note that Julie Clark had not put the property on the market but had instead chosen to sell it to Graham Rogers, a person who did not in fact exist. The prosecution submit that the fact that Julie Clark was not the author of the letter authorising repayment to Danny Downs did not preclude the jury from drawing an inference that on the evidence as a whole she must have known about this repayment. This, say the prosecution, is classically a jury point. There was a circular money chain which the prosecution say had no obvious purpose other than artificially to inflate the true price being paid for the property and induce the lender to lend more money than they would otherwise have done. Even if that was not the purpose, the fact of these payments supported an inference that she was a party to the unlawful conspiracy. The subsequent payment directly into her account by Danny Downs was evidence from which a jury could infer that she knew him - particularly since it was in her maiden name. Furthermore, the time-line was highly significant. She did not receive the £110,000 from Danny Downs into her own account until some three weeks after she had received the residue of the purchase moneys. If she were an innocent party, one would expect her to have queried why she had not received the full purchase price at the time. Also there was the oddity about the allowance, which again called for some explanation. There was therefore a proper basis for inferring that she must have known that there were deceptions being practiced whose only purpose would have been to deceive the lender.
36. As to count 15, counsel submits that there was again evidence to support the inference that she must have been a knowing party to the false information. There were a number of odd features in the deal to which the jury could properly have regard when considering the nature of her involvement. Again there is the allowance of £28,000 without explanation; in this case, there is also a payment of £150,000 to her husband, Stephen Clark, with no explanation; and a payment by Kelly Mitchell herself, the vendor, of £16000. Although some explanations were subsequently given for some of these payments, they were not known at the time the judge held that there was a case to answer, and in any event it was for the jury to assess those explanations. In addition there was the admitted fact that false details of Julie Clark's employment and income had been submitted. The prosecution accepted at half time that the signature did not appear to be hers, but there were matters to explore. A jury would have been entitled to infer that she would have known that income details had to be provided and that it was unlikely on the basis of her actual income that a loan of this amount would be paid. It was, said the prosecution, inconceivable that the conspiracy in this count could have proceeded without the applicant for the mortgage being in the know.
37. We agree with the thrust of that analysis. In our judgment, there was evidence from which a reasonable jury could infer that Julie Clark was guilty of these offences. She must have known that she was receiving less than the ostensible price for Canister Hall, and indeed until she received the £110,000 from Danny Downs into her personal account, she had received far less than the ostensible purchase price. As the purchaser, that must have caused her concern and demanded some explanation. The focus of the defence is essentially that the document authorising the repayment to Danny Downs did not emanate from her, and was consistent with someone, and in particular Mitchell, seeking to conceal from her the nature of the arrangements. We accept that the fact that the appellant's signature is forged on the repayment to Daniel Downs is potentially evidence of an exculpatory nature, but it does not only bear that construction.
38. In addition, Mr Bromley-Martin emphasised that Danny Downs had a vested interest in organising to lend money to the purchaser in the circular way he did because he was making the loan in order to launder dishonestly acquired cash. It is of note, says counsel, that he was ultimately charged with money laundering only with respect to the loan in count 14, not as a party to the conspiracy. He pleaded to that charge.
39. We do not accept that this is of any real materiality. There are many reasons why the prosecution may have been content to accept money laundering pleas and not to pursue the conspiracy count. In any event, this was not known when the judge made his ruling. It seems to us that the essential question was whether she was an innocent party duped by Mitchell or whether she knew much more than she was claiming and was involved in these two conspiracies. In our view the judge was entitled to conclude that this was a question for the jury to decide, and we agree that there was sufficient evidence on which the jury properly directed could have found her guilty.
40. We would add that we do not accept that counts 14 and 15 necessarily stand or fall together. The latter did not involve a bogus purchaser and we think that there may well have been a case to answer with respect to that count even if we had found no case to answer with respect to count 14. However, we are satisfied that once there was a case on count 14, as we have found, then there was inevitably a case to answer on count 15 as both appellants realistically accepted.
41. In view of this conclusion it is common ground that the verdict on count 16, the money laundering transaction, is therefore safe.
42. It follows that Stephen Clark's appeal on this ground also fails. In fact, he never sought to have the case dismissed on the basis that there was no case to answer, although he says that he would have made that application if his wife's application had succeeded. We accept that and had we found in favour of his wife, we would have been minded to allow his appeal also.
43. Mr Magarian QC, counsel for Stephen Clark, also contended that there were inconsistent verdicts arising out of the fact that he was acquitted on count 11 but not these counts. Count 11 concerned what counsel says was on its face a much stronger case in which it was alleged that he was a party to a conspiracy with, amongst others, Warren Mitchell who was convicted of the conspiracy. It was, says counsel, a bizarre conclusion to find that Stephen Clark had not been a party to that conspiracy and yet was a party to the count 14 conspiracy. It may have been a surprising outcome, but it does not in our view begin to meet the rigorous test necessary to establish that there were inconsistent verdicts. They were not logically inconsistent. The nature of the two conspiracies was different, the parties were different, and the evidence for each was different. A jury properly following the injunction to be sure before convicting could perfectly properly convict on one count without doing so on the other.