R v Preddy

The House of Lords allowed the consolidated appeals and quashed the convictions for obtaining property by deception contrary to section 15(1) of the Theft Act 1968. The court held that a bank debit in the lender's account and the corresponding credit in the borrower’s or solicitor's account do not amount to the defendant obtaining property "belonging to another" within section 15(1). The credits created new choses in action in favour of the payee's bank and extinguished or reduced the lender's prior chose in action; there was therefore no transfer of the lender's property to the defendant.

The Lords answered the first and second certified questions in the negative (electronic transfers or payments to solicitors do not ordinarily constitute obtaining property for the purposes of section 15(1)) and declined to decide the third certified question as unnecessary. The court noted gaps in the statutory scheme created by the legislative history and observed that the offence of obtaining services by deception under section 1 of the Theft Act 1978 and other reform proposals may be a more appropriate vehicle to capture dishonest mortgage lending schemes.

The appeals arose from consolidated challenges by defendants convicted of obtaining or attempting to obtain mortgage advances by deception contrary to section 15(1) of the Theft Act 1968. The appellants submitted that, because the lending institutions' bank accounts were debited and other accounts credited (by electronic transfer, CHAPS, telegraphic transfer or cheque), no property of the lender had been obtained by the defendant.

Background and procedural posture:

• The appellants (Freddy, Slade and Dhillon) were convicted in the Crown Court of multiple counts of obtaining or attempting to obtain mortgage advances by deception; the Court of Appeal dismissed their appeals. Leave to appeal to the House of Lords was granted and certain questions were certified for consideration.

Issues framed:

• Whether a dishonest debiting of a lender's bank account and corresponding credit to another account (including a solicitor's client account) amounts to "obtaining property" within section 15(1) of the Theft Act 1968.
• Whether the answer differs if the credit is to a solicitor acting in the mortgage transaction.
• Whether an intention to repay (redeem) the mortgage in full is relevant to the question of permanent deprivation under section 15(1) or only to dishonesty.

Court’s reasoning and subsidiary findings:

• The Lords examined the nature of bank account balances as choses in action and emphasised the distinction between extinction/creation of rights and transfer of property. A debit in the lender's account extinguishes or reduces its chose in action, while the corresponding credit creates a distinct chose in action belonging to the recipient. That process does not involve the defendant obtaining property "belonging to another".
• The same analysis applied where the payee was a solicitor acting as agent for the lender; the money held in a solicitor's client account did not convert the lender's property into property of the defendant on the facts posed.
• The court reviewed the legislative history of sections dealing with deception, noting that Parliament intended a narrower set of offences and that the omission of a general offence of obtaining credit by deception left difficult lacunae; the Lords suggested that reform (for example under section 1 of the Theft Act 1978 or Law Commission proposals) might be needed to capture dishonest loan-inducing conduct.
• The court declined to answer the third certified question on permanent deprivation as it was unnecessary once the first questions were resolved negatively.

Relief sought: quashing of convictions and setting aside of Court of Appeal and Crown Court orders. The House of Lords allowed the appeals and quashed the convictions.

Appeal allowed. The House of Lords quashed the appellants' convictions because a debit to a lender's account and corresponding credit to the defendant's or a solicitor's account do not constitute the defendant obtaining property "belonging to another" within section 15(1) of the Theft Act 1968; questions 1 and 2 were answered in the negative and the third question was not decided as unnecessary.

Appeals from the Court of Appeal (Criminal Division), which had dismissed the appellants' appeals against convictions for obtaining property by deception; the Court of Appeal's decision in relation to Freddy and Slade is reported at [1995] Crim. L.R. 564. The House of Lords granted leave to appeal and heard consolidated appeals, quashing the convictions and setting aside the Court of Appeal and Crown Court orders.