R v Preddy (R v Dhillon, R v Slade)

A transfer between bank accounts does not constitute obtaining property belonging to another under section 15(1) of the Theft Act 1968. The payer’s chose in action is extinguished or reduced, while a new chose in action is created for the payee. The payee therefore does not acquire the payer’s property.

The same principle applies when funds pass through a solicitor acting in a mortgage transaction. It also prevents the payee of a fraudulently procured cheque from obtaining the drawer’s chose in action, because that right comes into existence as the payee’s property. The distinction is between transferring an existing right and extinguishing one right while creating another.

The three appellants obtained, or attempted to obtain, mortgage advances after making dishonest statements to lending institutions. They were convicted of obtaining or attempting to obtain property by deception under section 15(1) of the Theft Act 1968.

The Court of Appeal (Criminal Division) dismissed Preddy and Slade’s appeals in [1995] Crim.L.R. 564. It subsequently dismissed Dhillon’s appeal, which raised the same points, in an unreported decision. The House granted leave to appeal.

The principal issue was whether debiting a lender’s bank account and correspondingly crediting the account of a borrower or solicitor amounted to obtaining property belonging to another. The House also considered whether interposing a solicitor changed the answer and whether an intention to repay was relevant to an intention permanently to deprive.

1. The appeals were allowed unanimously and the convictions quashed. Lord Goff of Chieveley delivered the leading speech. Lord Mackay of Clashfern LC, Lord Jauncey of Tullichettle, Lord Slynn of Hadley and Lord Hoffmann agreed that the appeals should be allowed.

2. Per Lord Goff, a credit balance in a lender’s bank account represents a debt owed by the bank and is therefore a chose in action falling within “property” in section 4(1) of the Theft Act 1968. That identification did not establish an offence under section 15(1), which required the defendant to obtain property belonging to another.

3. When the lender’s account was debited, its chose in action was extinguished or reduced. Crediting the borrower’s or solicitor’s account created a new chose in action against a different bank. The new right had never belonged to the lender. The borrower consequently did not obtain the lender’s property. Lord Jauncey emphasised the decisive distinction between transferring an existing right and extinguishing one right while creating another.

4. The analysis also applied to payment by cheque. A cheque obtained by its named payee creates a chose in action belonging to that payee; the right had not previously belonged to the drawer. Reg. v. Danger (1857) 7 Cox C.C. 303 was followed. Reg. v. Duru [1974] 1 W.L.R. 2 and Reg. v. Mitchell [1993] Crim.L.R. 788 were held wrongly decided to the extent that they treated such a cheque as property belonging to the drawer obtained by the payee.

5. Payment into the client account of a solicitor acting for both lender and mortgagor did not change the result. While the solicitor held the funds as agent and bare trustee for the lender, the lender retained control. Any chose in action created by crediting the client account had never belonged to the lender. Nor did the mortgagor obtain the lender’s equitable interest when the solicitor, with authority, paid the vendor’s solicitor.

6. The first two certified questions were answered in the negative. The third question, concerning an intention to repay, depended on the contrary premise that property belonging to the lender had been obtained. It did not arise and was left unanswered. The House also declined to determine whether a mortgage advance was a service under section 1 of the Theft Act 1978.

1. House of Lords: The consolidated and conjoined appeals were allowed unanimously. The Court of Appeal and Crown Court orders were set aside, and the convictions were quashed.

2. Court of Appeal (Criminal Division): Preddy and Slade’s appeals were dismissed in [1995] Crim.L.R. 564. Dhillon’s appeal, raising the same legal issues, was dismissed in an unreported decision.

3. Crown Court: The appellants were convicted on counts of obtaining or attempting to obtain property by deception under section 15(1) of the Theft Act 1968.