A massively important case in the realm of Confiscation Orders in Mortgage fraud cases.
The Supreme Court has slashed a confiscation order imposed by the Court of Appeal on a Nigerian businessman convicted of mortgage fraud from £1.11m to only £392,400.
Mr Waya was convicted in 2007 of obtaining a money transfer by deception after buying a flat in St John’s Wood for £775,000.
The Supreme Court heard that £310,000 came from his own resources, with the rest coming from a mortgage Waya obtained from G E Money Home Lending. In order to obtain the loan Waya made “false statements about his employment record and earnings”.
Two years later Waya redeemed the mortgage in full, paid a £58,000 early redemption fee, and remortgaged the flat to the Birmingham Midshires Building Society.
Delivering the leading judgment in R v Waya [2012] UKSC 51, Lord Walker and Sir Anthony Hughes said “the present case, like many mortgage frauds, is one of substantial benefit gained from the fraud in the form of the large increase in value of the flat which the fraud enabled the offender to buy.”
Lord Walker said there was “no clear evidence” what happened to Waya’s original equity of £310,000, but the judge accepted that he spent up to £150,000 on improvements to the flat.
The Court of Appeal, ruling on the case in 2010, reduced the trial judge’s confiscation order of £1.54m to £1.1m or 60 per cent of the market value of the property.
Lord Walker said this represented the 60 per cent of the purchase price that Waya obtained through his initial mortgage of £465,000.
He went on: “Mr Waya’s sentence of 80 hours’ community service reflected the judge’s view of the relatively low level of his culpability.
“He was not guilty of a serious mortgage fraud involving dishonest overvaluation of property. There was no loss to the mortgage lender.
“Nevertheless he did, by dishonestly misrepresenting his own financial position, obtain credit on terms which might not otherwise have been available.”
Lord Walker said it was wrong to say that Waya ‘obtained £465,000’, because all he had obtained was a “thing in action which was an indivisible bundle of rights and liabilities, and it cannot be correct to fasten onto the rights and ignore the liabilities”.
He said the chose in action or ‘thing’ had no market value on or after completion, but there would be other mortgage fraud cases where it had a value, such as false representations as to income combined with dishonestly inflated valuation of the property or a case where the property does not exist.
Lord Walker recalculated the value of Waya’s benefit by deducting the second mortgage from the current market price of the flat, then deducting the equity that Waya had put in.
The final amount represented 60 per cent of the remaining money or ‘appreciation’ £654,000. Lord Walker and Sir Anthony Hughes allowed the appeal and substituted a confiscation order for £392,400.
Lady Hale, Lord Judge, Lord Kerr, Lord Clarke and Lord Wilson agreed.
In their dissenting judgment, Lords Phillips and Reed said it was an “over-simplification to say that the bundle of rights and liabilities constituted a single chose in action.
“The bundle of rights and liabilities arose under two interlinked contracts, the purchase contract and the loan agreement.”
Lord Phillips and Lord Reed said the “real benefit” Waya obtained from his criminal conduct was that he obtained the loan on better terms than he would have done had he told the truth.
“In theory the case could be remitted for determination of that benefit. But after the time that has elapsed and the stress that these proceedings must have involved for Mr Waya, we would not think it just to adopt that course. We would simply allow this appeal and quash the confiscation order. “
