Terrence Smith's conviction for defrauding the Bermuda Housing Corporation of $1.2 million has been quashed by the Court of Appeal, and a re-trial ordered.

The court ruled that the foreman of the jury which convicted him, businessman Gerald Simons, was potentially biased due to being the half brother of former BHC chairwoman Valerie Dill.

Smith's 19-day-trial last year cost the taxpayer an estimated $500,000. The Royal Gazette understands that fresh proceedings against him may be shorter, on fewer fraud charges than the 42 upon which he was convicted.

Delivering their ruling yesterday, the three-strong appeal panel criticised both Chief Justice Richard Ground, who heard the trial, and Smith's former defence lawyer Larry Scott for allowing Mr. Simons to participate.

They said: "When we consider the circumstances surrounding the acceptance of Mr. Simons on the jury, we find that they demonstrate a good example of someone who should never have been sworn to deliberate on the merits of the issues advanced in the case in question."

They observed that Mr. Simons expressed sympathy for Mrs. Dill's plight even as he was being selected as a juror, but no objection was made by either Mr. Scott, Mr. Justice Ground or prosecutor Kulandra Ratneser.

"Certainly a conviction of someone connected with that fraud would go a long way in easing her burden," observed the justices of Mrs. Dill, adding later that Mr. Simons "expressly informed the court that he could not honestly say that the sympathy he had for his sister would not affect him in his deliberations."

They also said: "In this case, Mr. Simons served as the foreman of the jury. As such, he could have exercised great influence, even unknowingly, on the jury.

"Could Mr. Simons' presence on the jury lead a fair-minded and informed observer to conclude that there was a real possibility of bias in him which could also have influenced his fellow jurors? We think the answer is clearly in the affirmative."

They said Mr. Justice Ground should have disqualified him even in the absence of objections from the lawyers, and that his failure to do so resulted in a miscarriage of justice.

"Where there are clear reasons for disqualifying a prospective juror, judges ought not to rely entirely on the acts or omissions of counsel.

"Indeed, it is not unknown for some counsel to sit back and allow errors to go uncorrected, only to thereafter use those errors as bases for appeals. Judges must be vigilant and must guard jealously the conduct of proceedings," they said.

Smith alleged through his new lawyer, Patrick O'Connor QC, that his concerns over Mr. Simons were raised with Mr. Scott but he failed to convey these to the court.

"The judges did not comment on this, but did say: "We cannot leave this issue without expressing our disapproval of defence counsel's consent to such a juror being sworn to sit in judgment on his client, given all the circumstances.

"We expect counsel to be more vigilant in the exercise of their function to protect their clients' interests."

Mr. O'Connor had further argued that Mr. Simons, the CEO of Argus Insurance, could be biased against Smith due to connections to the United Bermuda Party.

He told the court Mr. Simons is a former UBP Cabinet Minister with links to Michael Dunkley, current leader of the party.

Mr. Dunkley was the person who triggered the Police investigation into the BHC by comments made in Parliament, argued Mr. O'Connor. Mr. Smith also alleged that he had been persecuted by Mr. Dunkley on racial grounds.

The Court of Appeal made no reference to these claims in their ruling, with their judgment focused solely on the bias they said could have arisen from Mr. Simons' relationship to Mrs. Dill.

In addition, they upheld the appeal on the basis that a record of payments in relation to the alleged fraud should not have been entered into evidence as it was at trial.

Smith was sentenced to eight years behind bars after being convicted of siphoning cash from the BHC, which provides housing for the needy.

He was alleged to have abused his former position of Property Officer at the Corporation to authorise fraudulent overpayments to a contractor, who passed the profits back to him.

Smith's earliest parole date was next November, after serving a third of his sentence.

This had prompted Mr. O'Connor to argue that a re-trial should not be ordered, but the judges said this would not be in the interest of justice.

Although his conviction was quashed, he did not walk free yesterday.

Instead, he must remain behind bars until a later appearance at Supreme Court, when he will apply for bail.

He showed little reaction as the judgment was read, and his family declined to comment as they left court.

Both veteran prosecutor Mr. Ratneser and Director of Public Prosecutions Rory Field declined to comment on the Court of Appeal decision today, beyond saying they needed to discuss the issue of the re-trial.

Smith is the only person ever convicted over the BHC affair, which is rumoured to have cost the taxpayer $8 million.

According to extracts from leaked Police files relating to the scandal, published by the Mid-Ocean News earlier this year, Premier Ewart Brown, former Premier Jennifer Smith, former Minister Renee Webb, construction boss Zane DeSilva and others were investigated by Police looking into allegations of corruption at the quango.

When the probe concluded in 2004, then acting Director of Public Prosecutions Mr. Ratneser said many of those investigated could only be accused of bad ethics.

Mr. Ratneser also said some of those investigated escaped prosecution due to Bermuda's antiquated corruption laws.

Smith's was the second high-profile case this week to result in charges being quashed and a re-trial ordered.

The Court of Appeal did the same yesterday in the case of Andre Hypolite, who had been convicted of murdering father-of-two Nicholas Dill in 2004.