Fraud

Question 1

Definition of fraud

Answer 1

The FA 2006 creates a general offence of fraud, which can be committed in three different ways. Section 1(1) provides for the offence of fraud, but does not define it, and s 1(2) sets out the methods by which fraud may be established. These are:
(a) by making a false representation (s 2);
(b) by failing to disclose information (s 3); and
(c) by abuse of position (s 4)

Question 2

Fraud by false representation

Answer 2

Section 2(1) of the FA 2006 provides that a person commits fraud if they dishonestly make a false representation and intend, by making the representation, either to make a gain for themselves or another, or to cause loss to another or to expose another to a risk of loss.

Question 3

False representation

Answer 3

Section 2(2) states that 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.

For the offence of fraud under s 2 of the FA 2006, the prosecution need only prove that
a false representation was actually made; there is no need to prove that anyone was actually deceived.

Question 4

Mens rea

Answer 4

For the offence to be committed, the defendant must know the representation is untrue or misleading, or know that it might be so

Question 5

Fraud by failing to disclose information

Answer 5

Under s 1 of the FA 2006, a person is guilty of fraud under s 3 if they:
(a) dishonestly fail to disclose to another person information which they are under a legal duty to disclose; and
(b) intend, by failing to disclose the information, to make a gain for themselves or another, or to cause loss to another or to expose another to a risk of loss.

The FA 2006 does not define a ‘legal duty’, but the Explanatory Notes state that it includes ‘duties under oral contracts as well as written contracts’. Examples of where there is a legal duty to disclose would include those derived from:
* statute (such as the provisions governing company prospectuses or the requirement to notify a change in circumstances in relation to a welfare benefits claim);
* the fact that the transaction is one of utmost good faith (for example, contracts of insurance);
* the express or implied terms of the contract;
* the custom of a particular trade or market; and
* the existence of a fiduciary relationship between the parties (such as agent and principal).

Question 6

Mens rea

Answer 6

The mens rea required for an offence of fraud by failing to disclose information under s 3 is dishonesty and an intention to make a gain for themselves or another, or to cause loss to another, or to expose another to risk of loss

Question 7

Fraud by abuse of position

Answer 7

This is dealt with in s 4 of the FA 2006, which provides that a person is in breach of this section if they:
(a) occupy a position in which they are expected to safeguard, or not to act against, the financial interests of another person;
(b) dishonestly abuse that position; and
(c) intend, by means of the abuse of that position to make a gain for themselves or another, or to cause loss to another or to expose another to a risk of loss.

Question 8

Actus reus

Answer 8

Occupation of a relevant position:
* trustee and beneficiary;
* director and company;
* professional person and client;
* agent and principal;
* employee and employer.

A position of financial trust may also arise in other circumstances such as within a family, or in the context of voluntary work.

Fraud under s 4 requires the existence of a position of financial trust between the defendant and the victim.

Abuse of position: Many people are in positions of trust but, to be liable for fraud, the defendant must go on to abuse their position

Question 9

Mens rea

Answer 9

The mens rea required for an offence of fraud by abuse of position under s 4 is dishonesty and an intention to make a gain for themselves or another, or to cause loss to another, or to expose another to risk of loss