The proceeds from properties which had mortgages created by a fraudulent South Island bookkeeper will remain in Crown hands after a failed appeal to overturn a court forfeiture order.

Lindsay Beckett Smith was a well-known accountant on the West Coast and involved in several business ventures, including property development, a mining operation, and a heliport project in Franz Josef.

But he was also a fraudster - which led to his imprisonment in 2017 for two years and two months.

One of his property ventures involved a subdivision and residential development at Blue Spur near Hokitika, which he had gone into with long-time friends Michael and Lilian Ross. A company, Ballarat Terrace Limited (Ballarat), was incorporated for the purpose.

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But Smith would ultimately betray the Picton couple, who held 50 per cent of the shares in Ballarat through a family trust, by forging Michael Ross' signature on two loans totalling $784,000.

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The loans had been advanced by FM Custodians Ltd (FMC) to entities associated with Smith, which were secured against several properties.

As part of Smith's sentencing, however, the Crown sought and was granted the forfeiture of the proceeds of sale from the properties - totalling $647,870.

FMC applied for relief against forfeiture but the District Court found the firm did not have a valid interest in the property because its mortgage was created by fraud. Judge Raoul Neave added that if he was wrong in his conclusion, FMC was in any event involved in the qualifying instrument forfeiture offence.

An appeal was launched by FMC but later dismissed by the High Court in May last year, with Justice Gerald Nation finding the properties were an instrument of crime and agreeing with Judge Neave's reasoning.

FMC then took the case to the Court of Appeal and a hearing was held in May this year.

As part of FMC's argument, its lawyer Greg Blanchard QC said the High Court had erred in treating the properties as instruments of crime and the properties were not used to commit or facilitate the commission of the qualifying offence.

Blanchard argued the forged documents were the tools of the fraud and the properties, and its equity, were the target of the offending.

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However, in the Court of Appeal's decision, released today, it said while the forged documents were a necessary part of the offending, so were the properties and particularly, the equity in the properties.

In the court's written reasons, Justice Geoffrey Venning said: "Without the equity in the properties being available as security, FMC would not have agreed to make the loan advances. The transaction would not have proceeded. The offence would not have been completed."

While FMC itself was not guilty of fraud, the Court of Appeal ruled it had breached its policies and procedures, while employees displayed a "wilful blindness" to Smith's offending.

"Mr Smith was the lender's dishonest agent acting within the scope of his apparent agency procuring all necessary signatures through fraud.

"The entire fraud would have collapsed had any of the professionals involved carried out their functions competently."

The court dismissed the appeal.

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Smith pleaded guilty to a representative charge of using forged documents to obtain a pecuniary advantage and one charge of failing, without reasonable excuse, to comply with the Insolvency Act 2006.

Along with his prison sentence, he was also ordered to pay reparations of $764,000 and convicted and discharged on the insolvency charge.

As a result of Smith's fraud, the Rosses were forced to sell their home and lost much of their life savings.