Appellant: Jackson QC; John Pryde & Co (for Fleming & Reid, Glasgow)

Respondent: Bain AD; the Crown Agent

2 July 2014

[1]        On 12 February 2014, during the course of a trial at Glasgow Sheriff Court, the appellant pled guilty to four charges: two of fraud, that is charges 2 and 5; and two under the Proceeds of Crime Act 2002; namely, charges 6 and 9.  Pleas of not guilty on behalf of the appellant’s wife, who had also been charged, were accepted by the respondent.  On 12 March 2014, the appellant was sentenced to 19 months on each of charges 2, 5 and 6 and 5 months on charge 9, with the periods on charges 2 and 6 to be concurrent and those on charges 5 and 9 to be consecutive to those and to themselves.  The total sentence imposed was one of 43 months, which had been discounted for the plea at the trial diet from 48 months.  All of this had followed upon prolonged proceedings, which had commenced with the appellant’s appearance on petition in July 2010; the charges being deserted pro loco et tempore in April 2013, before being reinstated in October of that year. 

[2]        The two charges of fraud involved the appellant applying for and obtaining secured loans in his wife’s name in order to buy two houses for family use in Bridge of Weir and Kilmacolm respectively in 2004 and 2006/7.  The loans were for a total of £1,287,955, that is to say £429,955 for the first house and £858,000 for the second.  The loans were from the Birmingham Midshires Building Society and then the Bank of Scotland, each obtained through a broker.  The nature of the fraud was that on both occasions the appellant exaggerated his wife’s income from her company, namely McDonald Interiors, as being between £160,000 and £224,000 per annum.  In fact, the business had ceased trading in 2003.   The appellant had paid the instalments on the loans over time.  Ultimately, following the sale of the Bridge of Weir house in 2007, the loan was paid off and no loss resulted.  The loan over the Kilmacolm house continues to be paid.  At the time of the fraudulent statements, lenders had been keen to provide funds to borrowers.  In each case there could have been no loss because the amounts of the loans were substantially less than the values of the properties.  The statutory offences involved acquiring criminal property of £128,885.25, partly converted into a £30,000 Rolex watch.  The proceeds were relative to the primary fraud offences. 

[3]        It was said in mitigation, and not disputed, that the appellant could have obtained the loans in his own name, as he had a number of property interests with a substantial degree of equity in them.  However, in relation to the first house, his father-in-law, who had provided a substantial sum as a deposit, had insisted on the title being taken in his daughter’s name.  At the time of the second loan the appellant had been involved in divorce proceedings and there had been a potential reconciliation based partly on the title to the second house also being taken in her name.  In respect of that transaction, the appellant had previously arranged loan funding in his own name, but had returned the money, which had actually been sent to his solicitors, and obtained a different loan from the Bank of Scotland in terms of the libel.

[4]        At the time of sentencing the appellant was aged 35 and described as a successful businessman.  The appellant had no “previous” convictions, although he has now acquired a further two.  The first is for possession of a knife, for which he was fined £5,000, and the second is an assault to injury, for which he received 150 hours community service.  He had four children of school age and his wife was then pregnant.  He now, of course, has five children.  The court was told that his background was in boxing and he was involved in various other business ventures, including property and sport.  The court was not given any precise, or even approximate, details of his capital or income, other than that he would be in a position to pay a substantial fine of, for example, £100,000.  The court proceeds on the basis that his assets are substantial.

[5]        The sheriff had reasoned that the offences were grave, involving what he described as extravagant and audacious representations regarding his wife’s earnings.  He took the view that only a custodial sentence was appropriate, notwithstanding the terms of section 204 of the Criminal Procedure (Scotland) Act 1995.  He had taken into account the extraordinarily protracted procedure in the case, with all its numerous callings, and that the ultimate plea had had some utilitarian benefit worth around 10% by way of discount.

[6]        It was submitted that a custodial sentence was not appropriate in circumstances where, not only was there no loss caused to the financial institutions lending the money, but also there could never have been any such loss standing the values of the loans relative to the properties concerned.  Indeed, it was said that the financial institutions had gained substantially in the form of interest payments of £70,000 and £300,000 in respect of each property.  Reference was made to a case before the Scottish Solicitors’ Discipline Tribunal (Council of the Law Society v Cowan 4 October 2011), in which a solicitor had inflated his income in order to obtain a secured loan over his home.  This action had resulted in a modest penalty consisting of a restriction in his practicing certificate for 3 years and a censure.  Reference was also made to R v Waya [2013] 1 AC 294, in which there is reference (Lord Walker at para 41) to a penalty in similar circumstances of 80 hours community service, where repayment of the loans had been effected after the criminal activities of the offender had come to light.  In this case, as it was submitted, there was no question of repayment, as there were no losses. The intention of the appellant had not been to deprive the financial institutions of money, but to create a substantial family home. 

[7]        The appellant’s family circumstances were prayed in aid relative to the affect that any custodial sentence might have on the appellant’s children (Gorrie v MacLeod 2014 SCCR 187).  There were a number of testimonials referring to the appellant’s charity work.  It was also said that the sheriff had effectively duplicated the penalties, simply because the appellant had spent some of the money following upon the sale of the first house.  Although the court was not provided with the details, recovery proceedings are ongoing and it is understood that the respondent is seeking recovery from the appellant in respect of unexplained income over many years.  The ultimate outcome of these proceedings is uncertain. 

[8]        The question is whether a custodial sentence was appropriate in all the circumstances, including of course the protection which the appellant had in terms of section 204 of the Act.  Having regard to the absence of any losses to the financial institutions concerned, and to the fact that no losses could have been sustained by these institutions given the values of the loans relative to the properties, the court is of the view that a custodial term was not appropriate.  It must therefore seek an alternative, having regard to the value of the sums borrowed, with such limited information as it has from the appellant as to his substantial means.  The appropriate penalty is a financial one.  The court will, accordingly, substitute for the periods of imprisonment a cumulo sentence in respect of all charges of £45,000, which it calculates from a starting point of £50,000 and discounts for the limited early plea.