IN APPEALS BY WILLIAM O'NEILL, SEBORAH HAYBURN AND DENISE MCNEIL

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APPEAL COURT, HIGH COURT OF JUSTICIARY

[2014] HCJAC 124

XC746/13, XC739/13

& XC738/13

 

Lady Smith

Lord Brodie

Lord Bracadale

 

OPINION OF THE COURT

delivered by LADY SMITH

in

Appeals

by

(FIRST) WILLIAM O’NEILL; (SECOND)  DEBORAH HAYBURN; 

and (THIRD) DENISE McNEIL

Appellants;

against

HER MAJESTY’S ADVOCATE

Respondent:

Appellant:  Moir; Gilfedder McInnes, Edinburgh (First Appellant)

Meehan; John Pryde & Co, Edinburgh (Second Appellant)

Cheyne; John Pryde & Co, Edinburgh (Third Appellant)

Respondent:  Prentice QC AD; Crown Agent

20 November 2014

Introduction
[1]        The Bank of Scotland was defrauded of £78,500 in 2002, of £127,890 in 2007 and of £975,000 also in 2007.  All three sums related to mortgage loans which the bank would not have granted had they known the truth about the incomes of each borrower.  That much was not disputed by the appellants.

[2]        The third appellant is the long term partner of the first appellant.  The second appellant is the first appellant’s sister.

[3]        The £78,500 fraud was attributed to the first appellant.  He, however, denied having had any involvement at all in the obtaining of the mortgage.  The £127,890 was attributed to the second appellant.  She, whilst accepting that she had – through a mortgage adviser - stated her income position to the bank, denied that she had done so falsely.  The £975,000 fraud was attributed to the third appellant.  Similarly, whilst accepting that she had – through the same mortgage adviser - stated her income to the bank, she also denied that she had done so falsely.

[4]        The appellants were all convicted of fraud (charges 1, 2 and 5), by the jury, after trial at Glasgow Sheriff Court.  The first appellant was also convicted of having transferred criminal property to assist the third appellant in buying a house (“Hayhill”, Bardowie Road, Milngavie, Glasgow), in 2007, contrary to section 327(1)(d) of the Proceeds of Crime Act 2002 (charge 3).  The criminal property involved was the net free proceeds of sale of the house for which the mortgage of £78,500 had been granted.  The second appellant was convicted of a contravention of the same statutory provision by having transferred the money she borrowed to the third appellant (charge 4) also to apply to the purchase of “Hayhill”.

[5]        The first appellant was sentenced to 18 months imprisonment on the fraud charge and 3 years imprisonment on the statutory charge.  The second appellant was sentenced to 12 months imprisonment on the fraud charge and 2 years imprisonment, concurrently, on the statutory charge.  The third appellant was sentenced to 3 years imprisonment.

[6]        The first appellant appeals against conviction, his appeal against sentence not having passed the sift, and the second and third appellants appeal against conviction and sentence.

 

The first appellant’s appeal:
Evidence
[7]        In 2002, the first appellant, whose date of birth is 24 March 1966, was a prisoner within HMP Glenochil having been sentenced to a period of seven years imprisonment by the High Court of Justiciary for having been concerned in the supply of drugs, contrary to section 4(3)(b) of the Misuse of Drugs Act 1971.  He could not, accordingly, at that time, have obtained a mortgage other than by dishonest means.  However, an application for a mortgage of £78,500 was made to the Bank of Scotland, in his name – as sole applicant - in May 2002.  In that application, it was stated that he resided at 2 Parkside Gardens, Glasgow, that his date of birth was 24 March 1966 and that he was a warehouse manager, earning £32,000 per annum.  On the basis of that representation, a mortgage loan of £78,500 was granted by the bank, for the purchase of plot 153, Hillgrove Gardens, Ruchill , Glasgow a property which later came to be known as 1 , Colgrain Terrace, Glasgow. 

[8]        The first appellant’s mortgage application had been completed by Terence Carvell. He was a mortgage introducer.  The first appellant’s passport was provided to him, as was a cash dispenser bank slip relating to the first appellant’s bank account , for identification purposes; he copied them and sent the copies to the bank with the application.  Mr Carvell said that the information he wrote on the application came directly from the client or by speaking to the client over the phone or by speaking to a representative of the client either over the phone or face to face.  He could not remember who it was that he spoke to at the time^[1].  There was a chance that he had met the first appellant but there was also a chance that he had not done so^[2].  He did not identify the first appellant in court.

[9]        The bank issued a letter offering to lend £78,500.  A letter accepting that offer, dated 23 August 2002 and signed “William O’Neill” was returned to the bank.  The bank then processed the mortgage and the loan monies were advanced.  Stewart Blackburn, from the Bank of Scotland, said that the bank would not have offered to lend if it had known that the first appellant was in custody or if it had known that the truth was that he was not a warehouse manager earning £32,000.

[10]      Various documents were referred to in evidence which bore signatures that appeared to read “William O’Neill” or “W O’Neill”.  They were a copy of the first appellant’s passport, the mortgage application, the letter dated 23 August 2002 , the missives for his purchase of the Hillgrove Gardens property, and an affidavit declaring that the property was not a matrimonial home.  The documents were, when referred to, shown individually on a document imager.  The signatures were referred to, in passing, when witnesses were being taken through the documents.  The jury did not have copies of the documents.

[11]      It was no part of the Crown case that the evidence showed that any of the handwriting in the documents was that of the first appellant; there was no expert evidence about handwriting and no witness was asked about the handwriting in the signatures.  Rather, the Crown’s  reliance on the documents was for the purpose of showing that they were all used in connection with the mortgage application and that they contained the first appellant’s name and, in various respects, personal details.

[12]      After the first appellant was released from prison, he instructed solicitors to act for him in the sale of 1, Colgrain Terrace, to repay the mortgage loan of £78,500 to the bank and, thereafter, to transfer the net free proceeds of sale – amounting to £107,751,69 – to the third appellant, to assist her in the purchase of “Hayhill”.

 

The issues in the first appellant’s appeal
[13]      The first appellant’s appeal raises two issues:

(i)         Was there a sufficiency of evidence to support the allegation that he, either personally or through a representative, made a false pretence to the bank (Criminal Procedure (Scotland) Act 1995 s.97)?

(ii)        Did the sheriff misdirect the jury by failing to direct them regarding what use could be made of the evidence of the signatures on the documents and was that misdirection exacerbated by the sheriff’s directions on business documents?

 

The first issue
[14]      The central contention for the first appellant in relation to the first issue was that there was no direct evidence that he had taken any active part in making representations to the bank.  If the jury had inferred that there must have been communication between him and Mr Carvell by means, for instance, of a telephone call, that would have been mere speculation.  The use of what was admittedly the first appellant’s passport, a bank slip relating to his bank account and the fact that he benefitted from the mortgage was not sufficient evidence albeit that it might, counsel accepted, be said that the whole circumstances were crying out for an explanation.

[15]      For the Crown, the advocate depute contended that there was a sufficiency of evidence to support the charges against the first appellant.  This was a circumstantial case and that meant that examination of the evidence was not a linear exercise.  When all the evidence was considered together, it was clear that there was a sufficiency and that it was open to the jury to convict.  At the time of this mortgage application, the first appellant was a prisoner at HMP Glenochil and had no income; it was an obvious and legitimate inference that he knew he could not have obtained a mortgage if the truth of his circumstances had been known to the potential lender and, in the event, those facts were hidden from the bank.  The advocate depute pointed, in particular to the fact that a false pretence was made in the application form, the application was in the first appellant’s name, it contained his personal details and it was supported by his passport and a bank slip relating to his bank account.  Further, he benefitted from the false pretence, did not dissociate himself from it, there was no evidence of him having questioned the fact of the loan and he had instructed that it be repaid when the property was sold in 2007.  From all that evidence, the jury were entitled to infer that the false representation came from him.

 

Decision on the first issue
[16]      Counsel’s approach was, in essence, to suggest that there could not be a case to answer because there was no direct evidence of the first appellant having instructed that the false representations should be written into the application form on the basis of which the bank offered to lend.  However, such an approach ignores that this was a circumstantial case and also that “in the experience of this court, circumstantial cases often have particular strength” (Doherty v HMA 2014 per the Lord Justice General at para 32).  For sufficiency, direct evidence that the first appellant made the false representation was not required nor was there any requirement for the Crown to prove exactly how the false pretence was made.  In the circumstances of this case, where there were no honest means by which the first appellant could, at the time, have obtained a mortgage and there was evidence that:

• the application falsely represented that the first appellant was a warehouse manager earning £32,000 per annum;
• the application falsely represented that the first appellant was living at 2, Parkside Gardens, Glasgow;
• the application was in the name of the first appellant, stated his correct date of birth and was signed “ William O’Neill”;
• the loan funds applied for were advanced by the bank and used to purchase a property in the name of the first appellant;
• the first appellant instructed the sale of that property in 2007;
• the first appellant at no time questioned or sought to dissociate himself from the loan;
• the first appellant at no time questioned or sought to dissociate himself from the property purchase;
• the first appellant instructed that the loan be repaid in 2007, when the property was sold;  and
• the net free proceeds of same of the property were transferred, on the first appellant’s instructions, to his partner, to assist in the purchase of another property,

 

we have no hesitation in concluding that there was a case to answer; there was a sufficiency of evidence and it was, on that evidence, open to the jury to infer that the Crown case was established.  The strands of evidence, looked at together, were, as counsel for the first appellant went so far as to accept, crying out for an explanation and were such as would permit the jury to infer the guilt of the first appellant , if they considered it appropriate to do so.

 

The second issue
[17]      Counsel contended that the sheriff ought to have directed the jury that they ought not to seek to compare the signatures on the various documents referred to in evidence (the copy of the passport, mortgage loan application form, the acceptance of offer of loan, the missive of sale and the Matrimonial Homes Act affidavit).  What he had in mind was a direction in line with that which is suggested in the Jury Manual as being appropriate where handwriting experts have given evidence ^[3].  Although the first appellant accepted that the signature on the copy passport was his signature, he did not admit that the other signatures were his.  Counsel had specifically indicated, in his speech to the jury, that they should not seek to compare the signatures; they had no evidential value other than that they were handwriting on documents.  The sheriff should, he submitted, have directed them in similar terms.

[18]      Counsel accepted that there were regular references, during the trial, to documents being “business documents” that the forms relating to the first appellant’s mortgage application and offer of loan were business documents, and that forms relating to the charges against the second and third appellants were business documents.  He accepted that the sheriff required, accordingly, to direct the jury regarding the effect of Schedule 8 to the Criminal Procedure (Scotland) Act 1995.  However, his directions on business documents were, counsel submitted, confusing; the jury may not have understood the use to which they could put the business documents and may have thought that the signatures in the documents relating to the case against the first appellant had some special status.

[19]      Counsel confirmed that, during the trial, no two documents were shown on the imager at the same time and that the jury did not have copies of them either in court or in the jury room.

[20]      For the Crown, the advocate depute submitted that it was important to have regard to what were the live issues at trial; the authorship of the signatures was not one of them.  In all the circumstances, whether or not to give a direction in relation to the signatures was a matter for the judgment of the sheriff.  His evident decision to say nothing about them was not a misdirection.

[21]      As for the directions on business documents, they were directions that the sheriff required to give, it was not suggested that they were wrong in law, and it was to be assumed that the jury had understood and followed them:  Clow v HMA 2007 SCCR 201, Casey v HMA 2010 SCCR 467.  Further, the procurator- fiscal depute had made no mention of the signatures in his speech.  The only mention of them came from counsel for the first appellant who told the jury not to carry out a comparison exercise and he was not contradicted about that.  There was no risk that the jury would have thought that the fact of the documents being business documents meant that they all bore the first appellant’s signature. 

 

Decision on the second issue
[22]      We are not persuaded that the sheriff required to direct the jury not to compare the signatures; their authorship was not an issue at trial, counsel had – without contradiction – told them not to do so, none of the signed documents appeared on the imager at the same time, and at no time did the jury have copies of them.  There was accordingly no opportunity for comparison. As this court has often said before, the directions in the charge should reflect the live issues in the trial and where some aspect of the evidence has not been in issue, it is very much a matter for the trial sheriff to judge, having himself heard and experienced the feel and atmosphere of the trial and the tenor of the whole evidence and speeches, whether or not he ought to mention that aspect.  In all of the above circumstances, we can readily understand that a trial sheriff might decide to say nothing about the signatures; the absence from the sheriff’s charge of any mention of the subject was not a misdirection. 

[23]      Regarding that part of the charge which contained the directions about business documents, as the advocate depute pointed out, it is not suggested that they were wrong in law; indeed, they were not.  As for the submission that the jury might somehow have thought that their import was, when combined with the absence of direction about not comparing the signatures, that the sheriff was directing them that the signatures had a special status, we reject it.  It was no part of the Crown case that the signatures were in fact the first appellant’s.  Further, nothing said by the sheriff about business documents can, we consider, be construed as suggesting that the signatures appended to them were those of the first appellant.

[24]      In these circumstances, the first appellant’s appeal is refused.

 

The second appellant’s appeal
Evidence
[25]      In November 2007, the second appellant obtained a mortgage loan of £127,890 from the Bank of Scotland.  The loan was secured over a flat she already owned, at 125 Bell Street Glasgow.  When the loan was advanced, £124,755.50 was, on her instructions, transferred by the solicitor acting for her to the third appellant, to assist her in the purchase of “Hayhill”. None of that was disputed.

[26]      The loan was obtained through a financial consultant, Scott McHugh, of a business called “One Mortgages”.  He gave evidence that “Fact Find” documents were used by him in the course of his normal business and a Fact Find document was “information you gather from a client that enables you to give them advice”^[4].  He also said that the Fact Find document was a record of what was discussed at client meetings and that there was no other record^[5], and that the client would be “walked through” the form^[6].  He met with the applicant on 18 September 2007 and took notes; a member of the administrative staff typed the information from his notes into the Fact Find document after their meeting.  His handwritten notes were no longer available.  He said that he got the information in the Fact Find document from the second appellant^[7].  The “Client’s Declaration” at the end of the Fact Find document was signed by the second appellant before she left the office (and therefore before the rest of the document had been completed by the typing in of the details taken from the notes made by Mr McHugh during their meeting); it is on the last page of the form and it included the following:

“I/We confirm (a) receipt of the above documents and (b) that the details given in this form (including all details in the credit history section) are correct to the best of my/our knowledge. I/We understand that giving false information may jeopardize our mortgage and/or insurance application.”

 

There then followed a series of statements authorising Mr McHugh  to act for her and to pass her personal information to others such as credit agencies, lenders or the FSA.

[27]      The Fact Find form included the following questions, answers and statements:

Q. “What is your occupation?”  A. “Head of Care”;

Q. “Employer’s name?”              A. “ Glasgow City Council”;

Q. “ Employed income”

“What are your earnings?”                            Basic annual income:  A. £85,000”

“I wish to self certify my income                   Yes”

“I self certify my gross income at                    £95,000”

“Please enter annual amounts for any other income

Investment income                                         £10,000.”

The form stated that there was a single applicant and the borrower was stated as being the second appellant.  

[28]      The second appellant told the police, when interviewed, that she was the owner of the flat at 125 Bell Street, that she had remortgaged it and that she did so by going to “One Solution” who had “done everything for me.”

[29]      Mr McHugh applied to the Bank of Scotland, on behalf of the second appellant, for a mortgage, on the basis of the information in the Fact Find document.  The bank then wrote to her by letter dated 7 November 2007, in terms which included:

“…We enclose a copy of your application details so that you have a permanent record of the information you supplied to us. Please check the form and let us know if there are any errors or if it needs any change as soon as possible. As this information is the basis on which we will make you an offer of mortgage you should not enter into any agreement to purchase if any of the details are incorrect. If you have any questions about your application please contact One Mortgages…………………………………………………………………………………

…..

This offer is based on your declared income of £95,000. If the figure is incorrect you must notify us immediately by telephoning…..and you must not proceed with the transaction without prior approval.

 

Your attention is drawn to the notes below relating to self –certification loans. You must read these carefully and by proceeding with the advance you will be deemed to have read and understood the notes and to have accepted the provisions contained in the notes in their entirety.

 

• 1The offer has been made based upon the declared income on the application…….”

 

The second appellant was, however, not employed as head of care and she was not earning £85,000.  She was employed by Glasgow City Council as a home carer and, in the years 2006 – 2010, her annual salary was between £18,293 and £20,006.

[30]      There was no evidence that the bank was, following this letter, contacted by the second appellant or anyone else on her behalf.  There was no evidence that One Mortgages were, following the letter, contacted by the second appellant or anyone else on her behalf.

[31]      Stewart Blackburn, of the Bank of Scotland, gave evidence that the second appellant was provided with the mortgage loan referred to in charge 2 and that that was on the basis that her income was as stated in the application.  Had the bank known that she was not earning £85,000 per annum and her earned income was in fact only between £18,000 and £20,000, her application would have been dismissed out of hand; she would not have been granted the mortgage.

[32]      Mr McHugh said, in his evidence in chief, that the second appellant had “various income from various sources

”which was “to the best of my recollection...her own salary, what her husband brought into the house, rental income and savings that she had.”^[8];

 

and, in cross‑examination, he agreed with a suggestion that the income figure on the Fact Find form had a number of components consisting of the second appellant’s income, her husband’s income and savings^[9].  He also said that “on her own”, she would have qualified for the mortgage, because the banks were lending “five, six, seven, eight times what your gross income was in those days.”^[10].

 

[33]      There was evidence of what the second appellant said when she was interviewed by the police.  She said that she owned the flat at 125 Bell Street, that she had “rethingwd it” using One Mortgages to do so and she gave her employment details.  She also referred to Mr Campbell as being the solicitor who acted in the remortgage transaction; that too was correct information.  Otherwise, her answers were “No comment”.  That evidence was of some assistance to the Crown.

 

The issues in the second appellant’s appeal
[34]      The second appellant’s appeal raises five issues:

(i)         Whether or not there was a case to answer/ sufficiency of evidence (Criminal Procedure (Scotland ) Act 1995 ss 97 and 97A(2))?

(ii)        Whether or not the sheriff’s directions regarding a mixed statement in the second appellant’s police interview were a misdirection?

(iii)       Whether or not the sheriff misdirected the jury regarding the drawing of inferences?

(iv)       Whether or not the jury returned a verdict which no reasonable jury, properly directed, could have returned (Criminal Procedure (Scotland) Act 1995 sec 106(3)(b)) ?

(v)        Whether, when sentencing the second appellant, the sheriff erred in concluding that imprisonment was the only appropriate disposal and whether, in the event that imprisonment was appropriate, the length of the sentence was excessive?

 

The first issue
[35]      Counsel said that Mr McHugh  had given evidence that the second appellant had told him she had various income from various sources; rightly or wrongly he regarded them as sources which were available to support the mortgage application.  Also, he had said that she would in fact have qualified for the mortgage obtained, on the basis of her own earned income.  In these circumstances, it was not open to the jury to infer that the second appellant had told Mr McHugh  that her earned income was £85,000 and her total gross income was £95,000.

[36]      Whilst it was accepted by counsel that the Fact Find was a business document and that, therefore, Schedule 8 to the 1995 Act applied, he submitted that that did not mean that it was evidence of there being any link between the second appellant and the business record; it did not mean that the information was provided in the form it appeared in the document.  He sought to compare the effect of Schedule 8 to the use, in evidence, of a witness’ prior statement; before it could be relied on, the witness had to adopt it as their evidence.  In a submission which appeared to recognise that Schedule 8 presented a difficulty for his argument, counsel accepted that the plain meaning of paragraph 2 (1) of Schedule 8 was that the Fact Find document was admissible as evidence that the second appellant had provided the information contained in the document. However, he said that to approach the import of the business documents on the strictly legal basis of Schedule 8 would, whilst technically correct, not be fair.  Counsel stressed that, as had been explained by Mr McHugh, the second appellant’s signature was appended to the Fact Find before the detailed information was typed into it.

[37]      The advocate depute explained that the position of the Crown was that there would have been a sufficiency even if there had been no evidence from Mr McHugh at all.  It was agreed in the joint minute that the second appellant’s earned income was between £18,000 and £20,000 gross and there was the letter to her from the bank offering to lend on the basis that her “declared income” was £95,000; from that evidence alone it would, he submitted, have been open to the jury to infer that the second appellant had falsely overstated her income.  Then there was evidence from Mr Blackburn that if the bank had known the true position, the offer of loan would not have been made.  However, there was other evidence as well.  The Fact Find was a business document to which Schedule 8 applied, whilst Mr McHugh  had given the “various income from various sources” evidence referred to by counsel for the second appellant, the Crown had invited them to reject that part of his evidence and there was a rational basis for doing so in that it was inherently implausible in all the circumstances, that it was common sense that in the case of a sole applicant for a mortgage it was that person’s income that mattered, that patently false information was written in the Fact Find and that, at various points in his evidence, Mr McHugh actually said that the information in the Fact Find document came from the second appellant.

 

Decision on the first issue
[38]      It became apparent that the issue being raised by counsel for the second appellant was not truly one of sufficiency; success of the argument depended, it seemed, on a blind eye being turned to the sharp contrast between what the second appellant was actually earning and the evidence in the offer of loan letter of the representation that had been made to the bank, to the second appellant admitting that she had “gone to One Solutions” to arrange the remortgage of her flat, to the occasions when Mr McHugh had said in evidence that the information in Fact Find documents comes from the client, that, in this case, he had obtained the information in the Fact Find document from the second appellant, and to the effect of Schedule 8  to the 1995 Act which provides:

“2. – (1) Except where it is a statement such as is mentioned in paragraph 3(b) and (c) below, a statement in a document shall be admissible in criminal proceedings as evidence of any fact or opinion of which direct oral evidence would be admissible…”.

 

[39]      There are then specified, in Schedule 8, three conditions which must be satisfied before a document can qualify as a business document; it was accepted by all parties that the conditions were satisfied in relation to the Fact Find documents.  Accordingly, the effect of Schedule 8 was that, the Fact Find relating to the second appellant being a business document, any statement in it was evidence of any fact to which that statement related including that, on 18 September 2013, she stated that her earned income was £85,000 and that she had other income of £10,000.  Further, the terms of the Fact Find were such that it was evidence of her having made that statement to Mr McHugh.

[40]      Mr McHugh  gave evidence which could be construed as him saying that it was his assessment that the second appellant had various income from various sources, including her husband’s income. That could be construed as him saying that all that income was relevant.  He also gave evidence that his understanding was that she would have qualified for the loan obtained on the basis of her own earned income alone. It was open to the jury to reject that part of his evidence and accept those parts in which he indicated that the information in the Fact Find simply came from the second appellant. However, there was other evidence. The advocate depute was, we consider, correct in his submission that there would have been a sufficiency of evidence even without the evidence of Mr McHugh.   Further, the evidence arising from the application of Schedule 8 was a powerful adminicle independent of the evidence of Mr McHugh.

[41]      In all these circumstances, we reject the submission that there was no case to answer and that there was not a sufficiency of evidence.  To the contrary, there was clearly a case to answer and a sufficiency of evidence from which the jury would have been entitled to conclude that the second appellant made the false representations alleged.  In particular, they were entitled to draw the inference that she was guilty of fraud (and, therefore, also of the statutory offence) from:

• the fact that it was the second appellant who had applied for the mortgage;
• the fact that it was the second appellant who benefitted from it;
• the figure of £85,000 appeared on the Fact Find as earnings from employment, together with other income of £10,000;
• the figure of £95,000 gross, as being the second appellant’s income, was referred to by the bank, in its offer of loan, as being the basis on which she had applied for a mortgage;
• the second appellant’s employment was stated, on the Fact Find, as being “Head of Care”;
• it was obvious from the form of the Fact Find, that if the income of a person other than the second appellant was being relied on, it required to be stated in the “Applicant Two” section;
• the second appellant’s earnings were substantially less than £85,000, as was her gross income; and
• the bank would not have offered to lend to the second appellant if they had known the truth.

 

The second issue

[42]      When interviewed by the police, the second appellant said some things which were of assistance to the Crown, as above noted.   When charging the jury, the sheriff directed them that she “…said some things that could point to innocence and some which could point to guilt. You can look at the whole of it……”^[11].  The full terms of the usual direction on mixed statements then followed. 

[43]      Counsel for the second appellant submitted that the sheriff had misdirected the jury as to how they should deal with the evidence of what the second appellant said during her police interview. There were two aspects to this.  First, while accepting that what was said was properly regarded as a mixed statement, counsel submitted that the sheriff had been wrong to suggest that the second appellant had said anything that could be construed as an admission that she made a false representation to One Mortgages Limited.  Second, counsel submitted that the sheriff had misdirected the jury by failing to include , in his directions, wording that told the jury that if they believed the part of the second appellant’s statement pointing to innocence or if it raised a reasonable doubt in their minds about her guilt, then they required to acquit her.  For the Crown, the advocate depute submitted that the sheriff’s directions were correct and that he did not, in the circumstances, require to  include such additional wording.  The second appellant had provided answers that were of assistance to the Crown but that was all.  There was no content to her other answers apart from “No comment” so there was no basis for any further direction.

[44]      In our opinion the sheriff was correct to treat what was said by the second appellant as a mixed statement.  The second appellant may not have admitted to making a false representation but she had given helpful answers showing that it was her flat that was remortgaged, that she was evidently happy to do so, and that she went in person to One Mortgages whom she instructed in the matter.  She qualified that by stating that One Mortgages “done everything for me”.  This was open to interpretation as supporting the evidence of Mr McHugh as to the way in which he had arrived at the income figure and was to some extent exculpatory.  She was, accordingly, entitled to the protection which a mixed statement direction affords. Insofar as this ground of appeal may have arisen from the sheriff’s use of the term “could point to guilt”, it was accurate and did not, we consider, in all the circumstances, create any risk of the jury thinking that that evidence alone would be sufficient for guilt.

[45]      Regarding the submission that the sheriff required to add the wording to the effect that if the jury believed that part of her statement pointing to innocence or it raised a reasonable doubt in their minds, they should acquit,  it is to be borne in mind that the sheriff gave the standard directions as to the presumption of innocence, about the onus being on the Crown to prove its case beyond reasonable doubt and that “[if], having considered the whole of the evidence, you are left with a reasonable doubt as to whether the Crown has proved the guilt of the accused, in that situation, the benefit of that doubt must go to the accused and he should be acquitted.”[12] The sheriff had directed that the evidence which the jury could consider included everything said by the second appellant during her police interview.[13]  Whilst it is clear from the authorities to which we were referred (Scaife v HMA 1992 SCCR 845;  McGirr v HMA 2007 SCCR 80) that there may be a need to give the direction contended for by counsel where, for instance, an accused has given some positive account, explanation or statement that is exculpatory,  we do not consider that it was necessary to do so in  this case.  Whilst she  made a very general remark to the effect that One Solutions had done everything for her,  she made no specific exculpatory statements in response to questions about the allegation that she had made a false representation.  In answer to those questions she responded “No comment”.  The sheriff correctly directed the jury that they should draw no adverse inference from that.  This ground of appeal is, in these circumstances, not well founded.

 

The third issue
[46]      The sheriff was criticised for failing to identify what evidence the jury could rely on to draw an inference of guilt if they rejected that part of Mr McHugh’s evidence in which he referred to it being his assessment of “various income from various sources” on which the second appellant’s mortgage application was based – and, inferentially, therefore not based on any false representation by her.  He did not, it was said, direct them that there had to be an evidential basis for an inference of guilt.

[47]      The advocate depute referred to various parts of the sheriff’s charge where he directed them that inferences could be drawn from such facts as they found to have been established^[14] and to the sheriff, in his report, having explained that he did not regard this as a complex case.  It was not incumbent on a trial judge to spell out every piece of evidence that may be relied on for the drawing of inferences:  Shepherd v HMA 1996 SCCR 679.  The sheriff’s directions were, in all the circumstances, adequate.

 

Decision on the third issue
[48]      The sheriff directed the jury that, when drawing inferences, they were not to guess or speculate^[15].  Later, having referred to Mr McHugh’s evidence that he was the person who had arrived at the figure of £85,000 for the second appellant’s income, he said that if they accepted that evidence, that would be an end of Crown case in relation to the second appellant.  He said that if they rejected that evidence, they were not to jump to the conclusion that the opposite was proved^[16].  He then reminded them that if they rejected that evidence, the Crown invited them to infer that the information that her earned income was £85,000 came from her and that in deciding whether or not to do so, they required to consider all the evidence.  He reminded them of what counsel for the second appellant had asked them to take from the evidence, including what Mr McHugh said and what was shown on a bank statement that she had given to him for identification purposes^[17].  That bank statement showed payments to her from Glasgow City Council which were said, by counsel, to support the true figure for her earnings, not the sum of £85,000.  We observe, in passing, however, that there was never any suggestion that that document was tendered by the second appellant as being evidence of her income; it was a document which had her name and address written at the top of it, above the box containing the financial entries and the sole purpose of her giving it to Mr McHugh was so as to provide vouching of her identity. 

[49]      This was not a complex case. It related to two straightforward events namely the meeting between Mr McHugh and the second appellant and the subsequent letter to her from the bank, offering to lend.  The issues of fact were clear cut.  Had the second appellant told Mr McHugh that she had earned income of £85,000 and other income of £10,000 or not?  Was she the recipient of a letter from the bank which specifically said that their offer of loan was based on an application from her in which her income was stated as being £95,000 gross or not?  Was it correct that she took no steps to tell the bank that that was not right?  In such a case, there is no obligation on the trial judge to rehearse the evidence or to spell out how any part or parts of it might give rise to inferences.  Shepherd v HMA; Snowden & Jennings v HMA 2014 HCJAC.  We are not persuaded that the sheriff required to give any further general directions to the jury about the drawing of inferences or about the evidence from which an inference of the second appellant’s guilt could be drawn.

 

The fourth issue
[50]      The contention for the second appellant was that no reasonable jury could have returned a guilty verdict having regard to Mr McHugh’s evidence that the income figure on the Fact Find emanated from his assessment of the second appellant’s “various income from various sources”, and to the lack of Crown challenge to that evidence.  Whether the second appellant regarded the declared income figure as accurate would have depended on her understanding of a “self certified” mortgage, Mr McHugh had said that the income figure depended on the global household income and there was no evidence that the second appellant had read the bank’s offer of loan.

[51]      The advocate depute reminded the court that the test for setting aside on this ground was a high one: King v HMA 1999 SCCR 330.  The Crown were under no obligation to challenge Mr McHugh’s evidence or to lead contrary evidence.  In any event, the tenor of the prosecutor’s questioning had made it clear that the Crown’s position was that the second appellant had falsely stated her income, as had the Crown speech, and there was contrary evidence:  Mr Blackburn had given evidence that it was hard to believe that Mr McHugh would have mistakenly believed that the income of anyone other than the applicant could be taken into account, Ms Caldwell (also from the bank) had said that any intermediary would know that the bank’s policy was that they would not take account of any income other than that of the applicant,  there was the  nature and layout of the Fact Find form, there were the terms of offer of loan letter and there was the  absence of any evidence of communication from the second appellant to explain that her income was not £95,000 gross at all.  The jury were entitled to reject the exculpatory parts of Mr McHugh’s evidence because it was inconsistent with other evidence which it was open to them to accept.

[52]      We are not persuaded that this was a verdict that no reasonable jury could have returned.  The submissions for the Crown were well founded.  There was a sound and rational basis in the evidence for the jury to reject those parts of Mr McHugh’s evidence to the effect that it was he who put together “various income from various sources” as being the basis of the second appellant’s application.

 

Fifth issue
[53]      The sheriff’s explanation for the sentences he imposed is shortly stated; in view of the amounts involved in the charges and the extent of the second appellant’s involvement, he considered that a custodial sentence was required, notwithstanding that she had no previous convictions.  Whilst – correctly – he considered that since the offences in the two charges were part of the same criminal transaction, he imposed concurrent sentences, he does not explain why he imposed a sentence on the statutory charge that was, in length, twice that which he imposed on the common law fraud charge.

[54]      Counsel submitted that the sheriff had erred in concluding that custody was the only appropriate disposal.  There was no loss to the bank; regular mortgage payments had been and were being maintained. In fact, the bank had made a profit.  The value of the flat exceeded the amount of the loan and there was a valid standard security in place.  Counsel said that the flat had a current value of £145,000.  The second appellant was 49 years old, she was in a stable marriage of some 20 years, she had an excellent work record, and she had performed voluntary work including working with young people.  Since she would now be subject to the enhanced disclosure procedures, she would not be able to work as a home carer in the future.  The criminal justice social work report had assessed her as being at low risk of re‑offending and a suitable candidate for carrying out unpaid work in the context of a community payback order.

[55]      By way of illustration, counsel referred to R v Waya [2012] UKSC 51 where a defendant who had been convicted of obtaining £465,000 by way of mortgage as a result of making false statements, received a sentence amounting to 80 hours community service.  He also referred to Hughes v HMA [2014] HCJAC 74, another mortgage fraud (involving the fraudulent obtaining of almost £1.3m) where the appellant’s sentence of 43 months was quashed and a fine of £45,000 substituted;  the court there had had regard to the absence of any loss to the financial institutions concerned and to the fact that no losses could have been sustained, given the loan to value ratio.

 

Decision on sentence  
[56]      The sheriff was, we consider, entitled to consider imposing a custodial sentence.  This was a deliberate fraud involving a large sum of money and a very substantial overstatement of income.  This was a transaction which the bank would not have entered into if it had known it was dealing with a fraudster.  Those factors alone merit a custodial sentence being given serious consideration.  The bank was at risk and, on the available information, remains at risk of payments due to the bank not being maintained; there was no information before the sheriff or, indeed, before us which demonstrated that the second appellant had sufficient income or earning potential to support them.  If the mortgage payments are not maintained, the bank will suffer an interruption of its income stream and require to undergo the time, trouble and expense of enforcing their security.  Whilst there is some equity in the flat, it is not substantial; it does not approach the level of available resources that were available to the appellant in the case of Hughes.

[57]      However, we are satisfied that the sheriff was wrong to double the custodial sentence in relation to the statutory charge; there was no apparent reason for deciding on a longer sentence.  Further, we note that the second appellant had served 132 days in custody by the time she was granted interim liberation on 22 April 2014.  In these circumstances, we consider that it would be appropriate to quash the sentences imposed by the sheriff and now substitute a community service order with a condition that she carry out 200 hours of unpaid work in the community provided, of course, that she undertakes to comply with the conditions of such an order.  To that extent and to that extent only, we would be prepared to uphold the second appellant’s appeal.

 

The third appellant’s appeal
Evidence
[58]      The third appellant had a meeting with Mr McHugh, in September 2007, to discuss obtaining a mortgage in connection with purchasing a property for £1.3m.  The first appellant was also present.  Mr McHugh identified the third appellant in court.  A Fact Find document was prepared in connection with her application.  Mr McHugh’s evidence that the information in Fact Find documents comes from the client (see above) also applied in relation this appellant. Further, Mr McHugh said that the information in this Fact Find came from the third appellant and the first appellant.  The Fact Find included the following entries:

EMPLOYMENT AND INCOME	Applicant 1	Applicant 2
What is your current occupation	Executive
Employer’s name	Bankroll Ltd – Business Management
	Number of years in business: 22
Last 3 years pre tax Net profit	£ 2006 30000 Yr end

 

Mr McHugh said that the figure “30,000” was an error.  It should have stated “300,000”.  He then carried out a rough calculation of what would be her net monthly income if she had a gross income of £300,000 and arrived at the figure of £13,000.

[59]      The Fact Find also included the following:

AFFORDABILITY CALCULATOR

Net regular monthly income (applicant 1) £13,000

Net regular monthly income (applicant 2)

Net other monthly income (applicant 1)

Net other monthly income (applicant 2)

 

Total monthly income for the first applicant (the third appellant) was, accordingly, stated as being £13,000.  Provision was then made for various outgoings and her total monthly disposable income was stated as being £10,300.

[60]      The third appellant signed a declaration – in the same terms as that signed by the second appellant – that the details in the Fact Find were correct to the best of her knowledge.  She also, on 7 September 2007, signed a document issued by One Mortgages headed “SELF CERTIFICATION MORGAGES - Supplemental Information” which included the following:

“We would like to record for details of the income to be self- certified for our files to ensure that any product recommended to you is both affordable and suitable for your requirements.

 

Sources of income:

Employment Income              300,000

2^nd income from Employment……

…………….

I/We declare that the above information is correct to the best of my/our knowledge and authorise the firm to recommend a suitable based on this

Information

Signed : “Denise McNeil (1) _______________________(2)

Date : 07/09/07”.

 

[61]      As in the case of the second appellant, Mr McHugh said that all the details on the Fact Find would have been obtained during his discussions with the third appellant.  Further, he said that he had sent a letter to the third appellant confirming that she had told him she had a regular monthly income of £13,000, that her monthly disposable income was £10,300, that she required a mortgage of £975,000 and that the value of the property to be purchased was £1.3m.  The Bank of Scotland offered to lend to the third appellant and, as in the case of the second appellant, wrote offering to do so and specifying that their offer was based on the third appellant’s declared income of £300,000.  If they had known that the information in the third appellant’s application was not correct, they would not have offered to lend.  Further, as in the case of the second appellant, what mattered was the income of the applicant, not global family income; it was a basic lending principle that only the income of the applicant would be taken into account and intermediaries such as Mr McHugh would know that.

[62]      Mr McHugh  said that income comes in many forms and that, in the case of the third appellant he had gone through various sources of income to arrive at the figure of £300,000;  it related not only to her earned income but also dividends, capital savings and her partner’s business income.  The £300,000 income figure related to the family unit.  However, he accepted that her mortgage application was “not his finest work”.

[63]      The third appellant was not earning £300,000 per year.  HMRC evidence showed that in the period April 2005/ 2006, her business profits were £12,721 and in the following year, they were £13,656.  Her drawings in the year to 30 April 2006 were £3,122.  A letter from her to HMRC dated 4 June 2007 stated that Bankroll Ltd had been inactive since it was incorporated in March 2007.

[64]      A loan of £975,000 was advanced to the third appellant and applied towards the purchase of “Hayhill”.

 

The issues in the third appellant’s appeal

[65]      The third appellant’s appeal raises the following issues:

(i)         Whether or not there was a case to answer/ sufficiency of evidence (Criminal Procedure (Scotland) Act 1995 ss 97 and 97A(2))?

(ii)        Whether or not the sheriff misdirected the jury regarding the drawing of inferences?

(iii)       Whether or not the jury returned a verdict which no reasonable jury, properly directed, could have returned (Criminal Procedure (Scotland) Act 1995 sec 106(3)(b)) ?

(iv)       Whether, when sentencing the second appellant, the sheriff erred in concluding that imprisonment was the only appropriate disposal and whether, in the event that imprisonment was appropriate, the length of the sentence was excessive?

 

The first issue
[66]      Counsel’s contention that there was no case to answer and no sufficiency of evidence turned principally on there being an important distinction to be drawn between affordability and income and on Mr McHugh ’s evidence that his approach was to take account of global family income.  He also pointed to there being no evidence that the third appellant had seen the mortgage application form.  He placed some reliance on the statement in the Fact Find form that the third appellant’s profit was “30,000” whilst accepting that the later figures for monthly income supported a representation that the annual gross income was of the order of £300,000.  He referred to each adminicle of evidence and submitted that most of them were irrelevant.  None of them were, of themselves, evidence of a false misstatement having been made by the third appellant.

[67]      For the Crown, the advocate depute relied on all the evidence and the fact that it was open to the jury to reject that part of Mr McHugh’s evidence to the effect that the £300,000 figure was his assessment of global family income.  As for the “30,000” figure, It was obvious that it was an error; it could not seriously be maintained that that would have supported a loan of £975,000. The operative entries were those on the page which showed the third appellant’s net monthly income as being £13,000.  There was, overall, ample evidence available to the jury to support the conviction for fraud.

 

Decision on first issue
[68]      Again, the contention in this part of the appeal depended on ignoring a significant part of the evidence which was available to the jury.  If, however, all the evidence is taken into account and recognition afforded to the fact that it was open to the jury to reject Mr McHugh’s evidence about the income statements being the result of his global family income approach rather than as a result of the third appellant’s representations, it is clear that there was ample evidence available to them from which an inference of guilt could be drawn.  Mr McHugh said that all the details on the Fact Find came from his discussion with the third appellant. The application of Schedule 8 to the 1995 Act meant that the contents of the Fact Find document was evidence that the third appellant had stated to Mr McHugh that her income was £13,000 net per month, a figure which would have been the equivalent of about £300,000 per annum gross.  There was evidence from the offer of loan that the information passed on to the bank was that her income was £300,000 per annum.  The evidence was very similar in character to that available in the case of the second appellant. Moreover, in the case of the third appellant,  there was also the evidence about the status of Bankroll Ltd and, significantly, of the third appellant’s signed declaration on the “Self Certification Mortgages” form.  It is of no moment that some of the adminicles of evidence were not, of themselves, evidence of the making of a false statement; as we have already observed, this was a circumstantial case.

 

The second issue
[69]      Counsel’s submissions were really no different from those which had been advanced on behalf of the second appellant in relation to this issue save to emphasise that, in the case of the third appellant, the sheriff was obliged to highlight the evidence on which the jury could rely for the purpose of drawing inferences and that that meant that he had to direct them that if they rejected Mr McHugh ’s evidence, they still had to consider the evidence of the first appellant and if it raised a reasonable doubt, it could prevent them from drawing an inference of guilt.  The latter was relevant for the purposes of section 97A(2)(b), once the first appellant had given evidence.  The advocate depute referred, in response, to those parts of the charge in which the sheriff directed the jury not to speculate^[18] and directed  them that if they rejected Mr McHugh’s evidence about the source of the income information then they could infer that the information that she was earning £300,000 from employment had come from her^[19].  He was not, thereafter, it was submitted, required slavishly to rehearse the evidence.

 

Decision on the second issue
[70]      The only respect in which the contentions for the second and third appellants differed on this issue was that, in the case of the latter, it was said that the sheriff required to point out to the jury that if they rejected Mr McHugh’s evidence, they still had to consider the first appellant’s evidence and whether they accepted it or it raised a reasonable doubt.  We do not accept that the sheriff required to do so; he clearly directed the jury that if anything caused them to have reasonable doubt about the guilt of the third appellant, they must acquit and that was, in the context of the issues at this trial, sufficient.

[71]      Otherwise , we do not see that there is any distinction to be drawn between the submissions for the second and third appellant on this issue and reject counsel’s for the third appellant’s submissions for the same reasons as stated in the section relating to the second appellant, above. 

 

The third issue

[72]      We can deal with this briefly since, once again, there is little distinction to be drawn between the contentions of the second and third appellant.  In common with counsel for the second appellant, counsel for the third appellant pointed to the absence of direct challenge to Mr McHugh’s evidence and referred to the undermining of his evidence by the banker’s evidence as being peripheral.  Again, the advocate depute, for the Crown, relied on the test being a high one and on there having been a cogent body of evidence available to the jury on the basis of which they could properly reject the evidence of Mr McHugh .

 

Decision on third issue
[73]      We again have no hesitation in rejecting the contentions for the third appellant.  There was a sound and rational basis in the evidence for the jury’s verdict; as in the case of the second appellant, it provided them with good reasons for rejecting Mr McHugh’s evidence about global family income, particularly since, in this case, there was the additional evidence to which we have referred above.

 

The fourth issue
[74]      The submissions in relation to the third appellant’s appeal against sentence mirrored those made on behalf of the second appellant.  She too was a first offender, of low risk and she relied on the same points regarding the effect of her fraud, not that it was suggested that this was not a serious crime or that it was victimless.  In her case, as with the second appellant, the interest had been and was being paid on the loan.  The bank had adequate security; the property – which had been purchased for £1.45m -  was currently worth about £1.3m.  The third appellant’s current income was £30,000 per annum.  The third appellant had been assessed as low risk.  She too had served 132 days in custody before being released on interim liberation.  Reference was made to R v Waya and Hughes v HMA.

 

Decision on sentence
[75]      Our observations about the nature of the fraud committed by the second appellant and the appropriateness of a custodial sentence apply with even greater force in this case, given the size of the fraud, the enormous disparity between the falsely stated income of £300,000 and the third appellant’s true income position and the fact that the third appellant had and has, according to the available information, an income that was and is manifestly inadequate to support borrowings of £975,000.  However, as in the case of the second appellant, we have concluded that it would now be appropriate to quash the sentence imposed by the sheriff and substitute a community service order. As in the case of the second appellant, we attach significance to the fact that the third appellant has served a not insignificant period in custody. It would be a condition of the community service order that the third appellant carry out 250 hours of unpaid work. We would be prepared to impose such an order if she undertakes to comply with the relevant conditions. To that extent and to that extent only, we would be prepared to uphold the third appellant’s appeal.