Reid, R. v

For confiscation under the Proceeds of Crime Act 2002, a fraudulently obtained remortgage is not materially different from a fraudulently obtained acquisition mortgage. Repayment, or an undertaking to repay, the secured loan does not itself remove benefit where the loan enabled the defendant to retain an interest in property that increased in value.

Absent other property obtained, the appropriate benefit will generally be the proportion of the property's increase in value represented by the remortgage, together with proportionate rent. The court must nevertheless avoid double counting. It cannot add an unexplained cash balance from the secured remortgage to the equity-based calculation without evidence of a separate identifiable benefit.

The appellant had been convicted at Southwark Crown Court of offences involving dishonest mortgage applications. Following proceedings under the Proceeds of Crime Act 2002, the Crown Court made a confiscation order for £703,501.

Three properties had been acquired using untainted funds and were later remortgaged through fraudulently induced loans. By the confiscation hearing, one loan had been repaid and the appellant had undertaken to repay the others. The principal issue was whether the benefit attributable to each remortgage was nil because the loan had been, or would be, repaid, or whether it should reflect the resulting increase in equity.

A separate issue concerned an additional £165,000 included as benefit on one remortgage, notwithstanding that the full advance had already been used in the equity calculation.

Appeal allowed in part. The court upheld the general approach to remortgage benefit but corrected an impermissible double count on one count.

1. The Proceeds of Crime Act 2002 must receive a fair and purposive construction. Its object is to remove financial benefit obtained from criminal conduct, while maintaining the fair balance required by Article 1 of the First Protocol to the European Convention. A confiscation order is generally disproportionate where all criminal proceeds have been restored, or restitution is assured, and there is no remaining benefit.

2. Applying R v Waya [2013] 1 AC 294, the court held that this principle did not make the benefit from the remortgages nil. A remortgage replaces one equity of redemption with another. Although legal title does not change, the fraudulent advances enabled the appellant to discharge prior borrowing and preserve his interests in properties which then rose in value. His use of those advances over many years produced a benefit beyond the loan sums themselves.

3. Absent other property obtained, benefit from a fraudulent remortgage is likely to be the proportion of the property's increased value represented by the remortgage, plus rent earned after the remortgage on the same proportionate basis. This does not require repayment of the loan a second time. Actual or promised repayment does not extinguish the distinct benefit represented by the increased property value.

4. On count 7, however, the £165,000 cash balance could not be added to the proportionate increase in equity. It had already formed part of the full loan used to calculate the tainted proportion of the property, was fully secured, and there was no evidence of a separate use generating an identifiable benefit. The benefit figure was reduced from £834,360.08 to £669,360.08. As that figure was below the available amount, it became the sum payable. The order otherwise remained unchanged.

• Court of Appeal (Criminal Division) — By [2018] EWCA Crim 628, the court allowed the appeal only as to the additional £165,000 included in the count 7 benefit calculation. It substituted a benefit figure of £669,360.08 and otherwise upheld the confiscation order.
• Southwark Crown Court — The appellant was convicted on 7 April 2016 and sentenced on 25 April 2016. On 21 July 2017, the court made a confiscation order under section 6 of the Proceeds of Crime Act 2002 requiring payment of £703,501.