Fraud

Fraud Act 2006 Abolished several offences in the Theft Acts of 1968 & 1978 and created a single offence called fraud Why was this done ( see page 155 of the subject guide)

Under the Fraud Act 2006 There is one offence called fraud and it can be committed in 3 ways 1. Fraud by false representation 2. Fraud by failure to disclose information 3. Fraud by abuse of position

Causation no longer necessary New law Emphasis on Intention of the wrong doer Old law Emphasis on reactions of the victim

David Omerod In effect the new law criminalises lying in theory captures many less heinous forms of behaviour which are part and parcel of everyday commercial life

Section 2 Fraud by false representation A person is in breach of this section if he – (a) dishonestly makes a false representation, and (b) intends, by making the representation – (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss.

Section 2 Fraud by false representation (2) A representation is false if – (a) it is untrue or misleading, and (b) the person making it knows that it is, or might be, untrue or misleading.

Section 2 Fraud by false representation (3) ‘Representation’ means any representation as to fact or law, including a representation as to the state of mind of – (a) the person making the representation, or (b) any other person. (4) A representation may be express or implied.

Section 2 Fraud by false representation (5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

Section 2 Fraud by false representation A person is in breach of this section if he – (a) dishonestly makes a false representation, and (b) intends, by making the representation – (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss.

Actus rus & the mens rea D made a false representation ( actus reus) D knew that the representation was or might be false (mens rea) D acted intending to make a gain or to cause a loss D acted dishonestly

No need for the representation to be communicated Actus reus D made a representation The representation is false

The meaning of “representation” Section2(3) ‘Representation’ means any representation as to fact or law, including a representation as to the state of mind of – (a) the person making the representation, or (b) any other person. Section2(4) A representation may be express or implied.

Representation Stating /creating an impression/ making out If A hands a ticket inspector a senior citizen’s bus pass with his name and photograph on it he is “making out” or representing that he is a pensioner and that he is entitled to the advantages conveyed by the pass. ( Wilson page 448 ) Words or Conduct e.g. painting over rust damage on a car It can also be implied

General rule = silence cannot amount to a false representation Two situations where silence may amount to a false representation Where there exists a duty of disclosure ( may overlap with fraud by failing to disclose information- section 3) Where the circumstances giving rise to a representation change so that the original representation no longer accurately describes the true state of affairs

Where silence can amount to false a representation 01.Where there is a duty to disclose information ( can overlap with fraud covered in section 3 of the fraud Act) Adam performs a surgical operation on Eve at green Wing Hospital. He does not tell the hospital that Eve is a private patient and as a result the hospital does not invoice him for the cost of the operation ( R v.Firth) He is under a duty to disclose it. So if he does not do so the hospital is entitled to presume that the patients are NHS patients. (see page 157 of the SG )

Where silence can amount to false a representation 02.Where the circumstances giving rise to a representation change so that the original representation no longer accurately describes the true state of affairs

Can a false representation be made to a machine?

Making a representation to a machine Old law Not possible Essence of deception is tricking the human mind New law it is Possible [ see Section 2(5)]

Section 2(5) a representation is regarded as having been made: if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

The representation must be false ( actus reus) (2) A representation is false if – (a) it is untrue or misleading, and (b) the person making it knows that it is, or might be, untrue or misleading. Does this criminalise puffs such as “ what if Heineken describes its larger as ‘the best in the world”

Mens rea of Fraud Since the actus reus can be easily established it is important to keep the mens rea strict.

Mens rea The defendants intention, by making the representation , to make a gain for themselves or another or to cause loss to another or to expose another to a risk of loss Intention here is in line with intention in theft [ purpose or knowledge of virtual certainty] [ such knowledge is intention as a matter of law rather than as a matter of evidence]

If D knows that their representation will cause loss to V or expose V to the risk of loss, D intends that consequence

Gain & Loss defined in s 5(2) & 5(3) 5(2) “gain and : Loss” (a) Extends only to gain or loss in money or other property (b) Include any such gain or loss whether temporary or permanent Property means any property whether real or personal ( including things in action and other intangible property

Gain & Loss defined in s 5(2) & 5(3) 5(3) “gain” Includes a gain by keeping what one has , as well as a gain by getting what one does not have

The gain or loss can be temporary or permanent, so making a misrepresentation to induce a loan of a car or money, or to gain time to pay a debt would be covered. In this latter example, fraud is constituted since ‘gain’ includes a gain by keeping what one has, as well as a gain by getting what one does not have. ‘Loss’ includes a loss by not getting what one might get, as well as a loss by parting with what one has.

four possible cases of this mens rea requirement. 1 four possible cases of this mens rea requirement. 1. The intention to make a gain for oneself by false representation (this will be the most usual case). 2. The intention to make a gain for someone else, for example giving a false reference to secure someone a job or a loan.

four possible cases of this mens rea requirement. 3. The intention to cause a loss to another. Usually this will go hand-in-hand with an intention to make a gain, either for oneself or for another, but it will include cases where the representor’s purpose is purely destructive. Janice, a committed vegetarian, places an advertisement in the Daily Globe newspaper, implying that the hotdogs of HotdiggetyDog hotdog manufacturers, actually contain dog meat. The representation, which is false, is made in an attempt to damage sales of HotdiggetyDog meat products.

four possible cases of this mens rea requirement. 4. The intention not to cause a loss to the representee but to expose them to the risk of loss (this is more unusual). A, a mortgage broker, puts false earnings particulars on clients’ mortgage forms to induce the lender to lend to her clients.

Mens rea- Dishonesty Gosh dishonesty S 2 of the Theft Act will not apply This means that a person who makes a false representation in order to gain what they believe they are in law entitled to is not automatically to be acquitted: it will be a matter for the jury. This was made clear in the pre-2006 Act case of R v Woolven (1983) 77 Cr App R 231 CA and one must assume the position is unaltered. For criticism of Ghosh, see above in relation to theft, and Wilson, Section 15.2.G.1 ‘Fraud by false representation’, Section (b)(ii) ‘Dishonesty’.

Section 2 Fraud by failing to disclose information failure to disclose information which one has a duty to disclose counts as a representation for the purpose of s.2 Is s 3 unnecessary? Section 3 was included in order to simplify the proof of guilt. (proof of the duty to disclose and the failure to do so with the relevant intent.)

S 3 D must be under a legal duty to disclose. A moral duty is not enough Such a duty may derive from statute (such as the provisions governing company prospectuses), from the fact that the transaction in question is one of the utmost good faith (such as a contract of insurance), from the express or implied terms of a contract, from the custom of a particular trade or market, or from the existence of a fiduciary relationship between the parties (such as that of agent and principal). ( Law Commissions report on fraud )

Mens rea of section 3 The mens rea for s.3 of the Fraud Act is as for s.2. There is no requirement that the defendant be aware that they are under a legal duty of disclosure, although evidence of lack of awareness will, no doubt, influence the jury’s assessment of dishonesty.

Section 3 states: A person is in breach of this section if he – (a) dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and (b) intends, by failing to disclose the information— (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss.

S 4 Fraud by abuse of position (1) A person is in breach of this section if he – (a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, (b) dishonestly abuses that position, and (c) intends, by means of the abuse of that position – (i) to make a gain for himself or another, or (ii) to cause loss to another or to expose another to a risk of loss. (2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

Type of relationships intended to be covered The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. We see no reason, however, why the existence of such duties should be essential. Law Commission

Whether a person occupies a position in which they are expected to safeguard the interests of another is a question of law for the judge. Usually this will be because the relationship, as in the case of trustee/beneficiary, contains, or is constituted by, explicit duties of acting in the other’s interests or not acting against those interests. It may, however, simply be understood as where A permits B to use her apartment while she is holiday. It goes without saying that B would abuse his licence if he were to use A’s apartment to deal in drugs or sell weapons from.

The mens rea for s.4 is as for s.2. There is no requirement that the defendant be aware that they are under a duty to safeguard the other’s financial interests although evidence of lack of awareness will, no doubt, influence the jury’s assessment of dishonesty.

S 11 Obtaining services dishonestly replaces s.2 of the Theft Act 1978. (1) A person is guilty of an offence under this section if he obtains services for himself or another – (a) by a dishonest act, and (b) in breach of subsection (2). covers any case where services, for which payment would be expected, are obtained as a result of dishonest conduct

Actus reus: obtaining services dishonestly previous law = only where there was a deception. Now = any dishonest act will be covered. D parks her car in a pay-and-display car park. She does not pay for a ticket, hoping that she will return before a ticket inspector arrives. Under the Theft Act 1978 & S 2 = no offence as no false representation has been made. under s.11 = it is an offence because D has obtained a service and her conduct is dishonest.

Section 11 also differs from ss.2, 3 and 4 of the Fraud Act 2006 In s 3 – the service should be actually obtained However, where the relevant services are obtained as a result of a false representation, rather than by some other form of dishonest act, it will be possible to proceed under either section.

Mary untruthfully tells the sales assistant in a cinema that she is underage so as to be allowed in at a lower price.

What conduct does ‘obtaining services’ cover? Subsection 11(2) clarifies what is mean by ‘obtaining services’. As with the previous offence, it refers to a narrower range of conduct than you might think.

Subsection 11 (2) (2) A person obtains services in breach of this subsection if – (a) they are made available on the basis that payment has been, is being or will be made for or in respect of them, (b) he obtains them without any payment having been made for or in respect of them or without payment having been made in full, and (c) when he obtains them, he knows – (i) that they are being made available on the basis described in paragraph (a), or (ii) that they might be, but intends that payment will not be made, or will not be made in full. 11(2) makes it clear that only services made available on the basis that payment has been, is being or will be made for or in respect of them are covered.

Mens rea: obtaining services dishonestly The offence requires Ghosh dishonesty, knowledge that payment is required or might be, and an intention not to pay for the service or not to pay in full. Section 2 of the Theft Act 1968 does not apply.

Section 3 of the Theft Act Making off without payment (1) Subject to subsection 3 below, a person who, knowing that payment on the spot for any goods supplied or service done is required or expected from him, dishonestly makes off without having paid as required or expected and with intent to avoid payment of the amount due shall be guilty of an offence.

Section 3 of the Theft Act Making off without payment (2) For purposes of this section ‘payment on the spot’ includes payment at the time of collecting the goods on which work has been done or in respect of which service has been provided.

Section 3 of the Theft Act Making off without payment (3) Subsection (1) above shall not apply where the supply of the goods or the doing of the service is contrary to law, or where the service done is such that payment is not legally enforceable.

This offence is designed to enable a prosecution where, although the defendant has acted dishonestly, it may be difficult to prove or prevent fraud or theft. It is easier to prove that a driver has dishonestly made off without paying for their petrol than to prove that they had an intention not to pay when first filling up the car – which would ground a charge of theft or fraud.

Actus reus: making off without payment liable only if they have made off from the spot where payment was due. McDavitt (1981), D, following an argument about his bill, made for the restaurant door having refused to pay for his meal. He was stopped and the police were called. D admitted having intended to leave without paying. A submission of no case to answer was accepted on a charge of making off without payment. The Court of Appeal ruled that ‘making off’ means making off from the spot where payment is required or expected. In this case the spot was the restaurant. The jury should have been directed that it could not convict of this offence but it was open to them to convict of an attempt.

Actus reus: making off without payment liable only if they have made off from the spot where payment was due. Moberly v Allsopp (1992), in which D travelled on a train without paying for a ticket. He was apprehended, having gone through the ticket barrier, and charged with making off without paying. He argued that he had not made off without paying because the spot for paying was the ticket office and he had not made off from there. Indeed, he had never been there! This argument was rejected.

Making off without payment only if, when making off, payment on the spot is required or expected. If, therefore, the expectation is that D will be ‘billed’ for the goods or services they are not guilty, even if it was their intention when making off that they would not pay. So also D will not commit the offence if there has been a breach of contract or if the contract was otherwise unenforceable.

Making off takes no particular form Making off takes no particular form. A person can make off by stealth, or brazenly without any form of dissimulation.

A question does, however, surround the status of permitted departures, as when a customer dupes a creditor into allowing them to depart by pretending to have left their wallet at home. Is this a making off?

In Vincent (2001), the Court of Appeal concluded that it was not, since the effect of the deception is to pre-empt any expectation that payment would be made on the spot. Fraud could have been charged, but only if it could be proved that D had at some stage decided not to pay before receiving any goods or services. Under these circumstances D would, by staying on in the hotel, have been impliedly representing that he intended to pay for the goods or services when he did not (DPP v Ray (1973)).

Mens rea: making off without payment 1.dishonesty and 2. an intention to avoid payment of the amount due. does not state that the intention must be to make permanent default. The commonsense view is this should not be the case because having to prove D intended to make permanent default will make the prosecution’s burden of proof rather difficult.

It is easy to claim that one intended to pay later and difficult to disprove this beyond reasonable doubt. Nevertheless in Allen [1985] AC 1029, the House of Lords held that the offence was constituted only upon proof of an intention permanently to avoid paying the amount due. So a hotel customer who checked out without paying did not commit the offence if he was temporarily financially embarrassed and intended to pay later.