Fraud Flashcards
Fraud
The Fraud Act 2006 provides a general offence of fraud which can be committed in three ways (by false representation, by failing to disclose information and by abuse of position). It also deals with offences of obtaining services dishonestly and possessing, making and supplying articles for use in fraud. In addition to the offence of fraud, there is a series of closely related offences which deal with the falsification of documents or other ‘instruments’.
The essence of these fraud offences is in the conduct and ulterior intent of the defendant. This means that a defendant’s unsuccessful ‘attempt’ to commit the offence of fraud may amount to the commission of the substantive offence, effectively excluding the possibility of an offence under the Criminal Attempts Act 1981.
Fraud—Fraud Act 2006, s. 1
- Triable either way
- 10 years’ imprisonment and/or a fine on indictment
- Six months’ imprisonment and/or a fine summarily
The Fraud Act 2006, s. 1 states:
(1)
A person is guilty of fraud if he is in breach of any of the sections listed in subsection (2) (which provide for different ways of committing the offence).
(2)
The sections are—
(a)
section 2 (fraud by false representation),
(b)
section 3 (fraud by failing to disclose information), and
(c)
section 4 (fraud by abuse of position).
Gain and Loss
Fraud offences under ss. 2, 3 and 4 are all committed when the defendant carries out the actus reus of the offence intending to ‘make a gain for himself or another’ and/or ‘to cause loss to another’. As the ‘gain’ and ‘loss’ elements are essential to these offences, it is useful to examine their meaning before looking at the specific offences.
It is important to note that the ‘gain’ and ‘loss’ relate only to money and other property. The definition of property includes intellectual property.
In all of the offences under ss. 2, 3 and 4, the ‘gain’ and/or ‘loss’ do not actually have to take place.
The Fraud Act 2006, s. 5 states:
(1)
The references to gain and loss in sections 2 to 4 are to be read in accordance with this section.
(2)
‘Gain’ and ‘loss’—
(a)
extend only to gain and loss in money or other property;
(b)
include any such gain or loss whether temporary or permanent;
and ‘property’ means any property whether real or personal (including things in action and other intangible property).
(3)
‘Gain’ includes a gain by keeping what one has, as well as getting what one does not have.
(4)
‘Loss’ includes a loss by not getting what one might get, as well as a loss by parting with what one has.
The Fraud Act 2006, s. 2 states:
(1)
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 the risk of loss.
(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.
(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.
(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).
Dishonestly
‘Dishonestly’ in s. 2(1)(a) refers to the test of dishonesty as per the decision in Barlow Clowes and Royal Brunei Airlines (see para. 3.1.4). The same test applies to ss. 3 and 4 of the Act.
Representation
A representation is false if it is untrue or misleading and the person making it knows this is or knows this might be the case; an untrue statement made in the honest belief that it is in fact true, would not suffice. The words ‘or might be’ involve a subjective belief of the person making the representation. Where a defendant makes a false representation knowing that it is false or might be, the offence of fraud is complete.
The representation may be express or implied and can be communicated in words or conduct. There is no limitation on the way in which the representation must be expressed, so it could be written, spoken or posted on a website.
A representation may be implied by conduct. For example, a person dishonestly misusing a credit card to pay for items hands the card to a cashier without saying a word. By handing the card to the cashier, the person is falsely representing that he/she has the authority to use it for that transaction. It is immaterial whether the cashier accepting the card for payment is deceived by the representation as the cashier’s state of mind plays no part in the commission of the offence.
Any representation made must be one as to fact or law, so a broken promise is not in itself a false representation. However, a statement may be false if it misrepresents the current intentions or state of mind of the person making it or anyone else. For example, D visits V’s house and tells V that he needs emergency work carried out on his roof. D states that he is in a position to do the work immediately but only if V pays him £1,000 there and then. V gives D the money and D then leaves without carrying out the work; the truth of the matter was that D had never intended to carry out the work. Such a ‘promise’ by D would amount to an offence as it involved a false representation, i.e. he never intended to keep the promise.
A representation may be proved by inference. Where an elderly person has paid D vastly more for a job or product (such as gardening work) than it was worth, it may be open to a court or jury to infer that D must dishonestly have misrepresented the value of that job or product, even if there is no direct evidence of any such misrepresentation (R v Greig [2010] EWCA Crim 1183). When an unidentified imposter presented himself to take a driving theory test in D’s name, it could be inferred that D was complicit in any false representations made by that person with a view to gaining a pass certificate in his name (Idrees v DPP [2011] EWHC 624 (Admin)).
The offence is complete the moment the false representation is made. The representation need never be heard or communicated to the recipient and, if carried out by post, would be complete when the letter is posted (Treacy v DPP [1971] AC 537).
Phishing
The offence is committed by someone who engages in ‘phishing’ (the practice of sending out emails in bulk, usually purporting to represent a well-known brand in the hope of sending victims to a bogus website that tricks them into disclosing bank account details).
Machines
The offence of fraud applies to cases where the representation is made to a machine (for example, where a person enters a number into a ‘chip and PIN’ machine) (s. 2(5)).
The Fraud Act 2006, s. 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.p. 514
Fraud by Failing to Disclose
The term ‘legal duty’ has not been defined but will include duties under oral contracts as well as written contracts. The Law Commission’s Report on Fraud dealt with the concept of legal duty and stated that duties might arise:
- from statute;
- where the transaction is one of the utmost good faith;
- 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 parties.
The legal duty to disclose information will exist if: - the defendant’s actions give the victim a cause in action for damages; or
- if the law gives the victim the right to set aside any change in his/her legal position to which he/she may have consented as a result of the non-disclosure.
A fiduciary relationship is one relating to the responsibility of looking after someone else’s money in a correct way. Examples of such behaviour would include solicitors failing to share vital information with a client in the context of their work relationship, in order to carry out a fraud upon that client, or if a person intentionally failed to disclose information relating to a heart condition when making an application for life insurance. Where recipients of benefits dishonestly fail to disclose income etc. that they are legally required to disclose, fraud by failing to disclose is an appropriate charge (R v El-Mashta [2010] EWCA Crim 2595).
The Fraud Act 2006, s. 4 states:
(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.
Fraud by Abuse of Position
The ‘position’ that the defendant occupies may be the result of an assortment of relationships. The Law Commission explained the meaning of ‘position’ at para. 7.38 of the Report on Fraud:
The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principle, 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.
The term ‘abuse’ is not defined by the Act.
Liability for the offence could develop from a wide range of conduct, for example:
- an employee of a software company uses his position to clone software products with the intention of selling the products on;
- an estate agent values a house belonging to an elderly person at an artificially low price and then arranges for the agent’s brother to purchase the house;
- a person who is employed to care for a disabled person and has access to that person’s bank account, abuses that position by transferring funds to invest in a high-risk business venture of his own.
The offence can also be committed by omission, for example: - an employee fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead of and at the expense of the employer.
Possession or Control of Articles for Use in Frauds—Fraud Act 2006, s. 6
- Triable either way
- Five years’ imprisonment and/or a fine on indictment
- Six months’ imprisonment and/or a fine summarily
The Fraud Act 2006, s. 6 states:
(1)
A person is guilty of an offence if he has in his possession or under his control any article for use in the course of or in connection with any fraud.
The Fraud Act 2006, s. 8 states:
(1)
For the purposes of—
(a)
sections 6 and 7, and
(b)
the provisions listed in subsection (2), so far as they relate to articles for use in the course of or in connection with fraud, ‘article’ includes any program or data held in electronic form.
(2)
The provisions are—
(a)
section 1(7)(b) of the Police and Criminal Evidence Act 1984 (c 60),
(b)
. . .
(c)
. . .
