Kausar, R v

For the purposes of section 329 of the Proceeds of Crime Act 2002, consideration bears its ordinary legal meaning. A genuine mortgage deed may therefore provide adequate consideration for an advance through the borrower’s enforceable undertaking to repay with interest and the lender’s charge over the property. The prosecution must prove that the consideration was inadequate. It cannot establish inadequacy merely by showing that the borrower knew or suspected the money to be criminal property. Where no inadequacy is shown, the statutory exception in section 329(2)(c) prevents conviction.

The appellant was convicted at Stoke-on-Trent Crown Court, by an 11:1 majority, of acquiring criminal property contrary to section 329(1)(a) of the Proceeds of Crime Act 2002. She had been acquitted of converting criminal property.

A mortgage broker completed a buy-to-let mortgage application containing forged signatures and false information about the appellant’s employment and income. The Crown alleged that the mortgage was obtained by deception and that the appellant knew or suspected this. The appellant denied involvement in the false application and contended that, in any event, the mortgage advance was acquired for adequate consideration.

The appeal concerned whether a borrower’s repayment obligations and mortgage charge could amount to adequate consideration under section 329(2)(c).

1. Appeal allowed and conviction quashed. The appellant should not have been charged or convicted under section 329(1)(a) of the Proceeds of Crime Act 2002.

2. Section 329(2)(c) provides a substantive exception where criminal property is acquired for adequate consideration. The Crown accepted, on the authority of Hogan [2007] EWHC 978 (Admin), whose correctness had been accepted in Davis [2008] EWCA Crim 2756, that the prosecution bears the burden of proving inadequate consideration.

3. The court rejected the Crown’s proposed special meaning of consideration. Parliament had used a familiar legal term of art, and nothing in section 329 justified departing from its ordinary contractual meaning. The statutory requirement that inadequacy be assessed separately reinforced that conclusion.

4. The undisputed mortgage deed supplied consideration for the advance: the appellant undertook to repay the loan with interest, and the lender obtained a charge over the mortgaged property. The deed was not alleged to be a sham, and there was no suggestion that the interest rate or any other part of that consideration was inadequate. A promise to repay was not incapable of being adequate consideration merely because the recipient knew or suspected that the money was criminal property.

5. The court did not decide the separate question whether mortgage monies could constitute criminal property when first acquired by the appellant. It was unnecessary to resolve that issue.

A defendant’s costs order was made under section 16 of the Prosecution of Offences Act. The court declined to certify the proposed question.

• Court of Appeal (Criminal Division): Allowed the appeal and quashed the conviction: [2009] EWCA Crim 2242.

• Crown Court at Stoke-on-Trent: Convicted the appellant, by an 11:1 majority, of acquiring criminal property contrary to section 329(1)(a) of the Proceeds of Crime Act 2002; she was acquitted of converting criminal property.