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But everybody did it…


Serious Organised Crime Agency v Pelekanos [2009] EWHC 2307 (QB)

Just a quick note to observe that this case – well off our usual patch – makes clear that a significant misrepresentation on a mortgage application that would be likely to induce the lender to enter into the contact (and this can be inferred by the court and does not need evidence from the lender) means that the property, or other property into which it can be traced, is liable for confiscation via a civil recovery order under Part 5 of the Proceeds of Crime Act 2002. This is because it constitutes the proceeds of an unlawful act, to wit fraudulent misrepresentation. Just to be clear though, it is the proportion of the property (and any gains made on it) that was acquired by the unlawful act that is subject to the recovery order, so not the 5% deposit…

This must include all those exaggerations of earnings from the days of self-certification. As the Defendant in this case discovered, ‘that was what everybody did’ isn’t a viable defence:

Mr Pelakanos acknowledged in evidence that the filling out of the application forms was “quite creative”, and claimed that that was how things were at the time. He also acknowledged that he did not do anything “too wrong” in the forms. It may well be that practices were lax at this time and that mortgage applicants such as Mr Pelakanos thought that they could get away and did get away with false and exaggerated statements being made. However, a false statement is a false statement regardless of the prevalence of the practice of making such statements. If a person knows a statement he has made to be untrue then it is a fraudulent statement regardless of how many other applicants may be doing likewise. In the present case all the false statements of income made were substantially false and I am satisfied that in each case Mr Pelakanos knew this.

Now call me an old cynic, but this has got to potentially impact on a lot of people, both residental buyers and buy-to-let ‘speculators’ who got a bit optimstically creative with the income section of the mortgage applications back in the days to the boom.

Thanks to Nikki for the pointer.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.


  1. M Dooley

    Having read the case I think that you are overreaching on the impact in general cases of a lender seeking redress from a borrower inflating income on a self certified mortgage application. If a straightforward case occurs where a lender seeks to claim from a borrower on the basis of fraudulent misrepresentation it will be interesting to see if the Court takes a view on contributory negligence.

    • NL

      I didn’t mention lenders seeking redress. This is about confiscation orders, where an unholy triumverate of the Treasury, SOCA and the Courts Service gets the money. The lender is, as far as I can see, stuffed, save that they may have a claim for the original loan.

      • Marcin

        It does seem a little unfair that this money doesn’t go to those who have been defrauded (at least to the extent of their loss).

        • NL

          But given that recovery doesn’t depend on the finding of a specific individual unlawful act, and thus there may be no specific identified ‘victim’, perhaps understandable.

          “it is not necessary to prove the commission of a specific criminal offence, it is necessary to identify the kind(s) of unlawful conduct being alleged and to prove that the property was obtained by or in return for criminal conduct of an identifiable kind”.

          That said, in a fraudulent mortgage app, the ‘victim’ should be clear, but, as in this case, the recovery may be traced into subsequent property/funds, if the initial property has been sold.

          I would also presume that where the original fraudulently obtained mortgage remains in existence, the seized property would still be subject to the mortgagor’s charge, but this is a guess.

        • Marcin

          Not very comforting if the property has fallen in value, and not if it is property not charged.

  2. simply wondered

    i don’t see cross-over between fraudulent misrep and contrib. they just don’t belong together.
    what courts might take into consideration is the failure of the misrep’ee to take the steps available to it to check the truth of the representation. however on the case law it will not lie in the mouth of the fraudulent misrep’or to blame part of the damage on such a failure.


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