Fraud

Question 1

Fraud - statutory reference

Answer 1

Fraud Act 2006, s 1

Question 2

Three different ways in which fraud can be committed

Answer 2

Fraud by false representation (s 2 FA 2006)
Fraud by failure to disclose (s 3 FA 2006)
Fraud by abuse of position (s 4 FA 2006)

Question 3

Maximum penalty for fraud

Answer 3

10 years in prison, or an unlimited fine (FA 2006, s 1)

Question 4

Fraud by abuse of position - statutory reference

Answer 4

‘(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 that abuse of 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.’ (s 4 FA 2006)

Question 5

Fraud by abuse of position - actus reus: occupying a position

Answer 5

Must be one requiring the defendant to look after the victim’s financial well-being.

Question 6

Fraud by abuse of position - actus reus: occupying a position, guidance from Law Commission report

Answer 6

• trustee and beneficiary
• director and company
• professional person and client
• agent and principal
• employee and employer
• partners
• within a family
• in the context of voluntary work
• in any context where the parties are not arm’s length
• in nearly all cases, it is situations were civil law would import fiduciary duties, but there is no essential requirement of this.

Question 7

Fraud by abuse of position - actus reus: occupying a position, case examples

Answer 7

R v Pennock and Pennock - it is a matter which will be determined on a case-by-case basis

R v Marshall - Manager of a residential home for adults with severe learning difficulties had control over the residents’ bank accounts and withdrew money from one to spend on herself. She was convicted of s 4.

R v Valujevs and Another - Gang masters who controlled a group of Latvian and Lithuanian workers in search of agricultural work. They found work for them and took responsibility for paying their wages and finding their accommodation. They had been making deductions from their wages and charging them inflated rents. CoA said that s 4 should not apply ‘in the general commercial area where individuals and businesses compete in markets…and are entitled to and expected to look after their own interests’ but what was crucial here was that the defendants had assumed responsibility for collecting the workers’ wages, putting them in a relevant position for the purposes of s 4.
This is an objective test based on the position of a reasonable person and can be decided by the jury.

Question 8

Fraud by abuse of position - actus reus: abuses that position

Answer 8

No guidance from the Act itself.

R v Pennock and Pennock - Court adopted the definition of ‘uses incorrectly’ or ‘puts to improper use.’

Question 9

Fraud by abuse of position - actus reus: abuse of position by omission

Answer 9

s 4(2) - this offence can be committed by an omission as well as an act, e.g. when an employee who has a duty to collect payment on behalf of their employer fails to do so.

Question 10

Fraud by abuse of position - mens rea

Answer 10

(1) Dishonesty

(2) Intention to make a gain or cause a loss

Question 11

Fraud by abuse of position - mens rea: dishonesty

Answer 11

This requires application of the test from Ivey v Genting Casinos:

(i) What was the defendant’s knowledge and belief as to the facts? (subjective)
(ii) Given that knowledge and those beliefs, was the defendant dishonest by the standards of ordinary people? (objective)

Question 12

Fraud by abuse of position - mens rea: intention to make a gain or cause a loss

Answer 12

• No requirement of actual gain or loss.
• All that is required is that the defendant intended to make a gain for themselves or for someone else, or intends to cause a loss to another or expose another to a risk of loss.
• Where an employee fails to collect sums owed to their employer out of laziness, rather than a desire to assist the person who should be paying or to punish their employer, there would be oblique intention because it would be virtually certain such a gain/loss would be caused and the defendant would appreciate this to be the case (R v Woollin)

Question 13

Fraud Act 2006 s 5: full definition of ‘gain’ and ‘loss’

Answer 13

‘(2) “Gain” and “loss”–

(a) extends only to gain or loss in money or other property;
(b) includes 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 a gain by 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.’

Question 14

Fraud by failure to disclose - statutory reference

Answer 14

‘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 a loss to another or to expose another to a risk of loss.’ (s 3, FA 2006)

Question 15

Fraud by failure to disclose - actus reus

Answer 15

• Existence of a legal duty

- Failure to disclose

Question 16

Fraud by failure to disclose - actus reus: existence of a legal duty to disclose

Answer 16

Not defined by the Act.
Guidance from the Law Commission examples:
a) arising from statute
b) within a transaction of utmost good faith
c) contained in the express or implied terms of a contract
d) arising from a custom in a particular trade or market
e) arising from a fiduciary relationship

Question 17

Fraud by failure to disclose - actus reus: existence of a legal duty to disclose; case examples

Answer 17

R v Razoq - A duty arising from contract, a doctor who signed a contract with a locum agency in which he agreed to inform the agency of any disciplinary proceedings against him. He failed to do so, and was found guilty of s 3 due to the express term of the contract.

R v Mashta - Mashta was an asylum seeker claiming benefits on the grounds of destitution. During this time, he found employment and was held to be under a legal duty to disclose the change in his financial circumstances.

Question 18

Fraud by failure to disclose - actus reus: failure to disclose

Answer 18

A matter of fact, which in most instances will be easy to prove.

Question 19

Fraud by failure to disclose - mens rea

Answer 19

(1) Dishonesty

(2) Intention to make a gain or cause a loss

Question 20

Fraud by failure to disclose - mens rea: dishonesty

Answer 20

Ivey v Genting Casinos test

Question 21

Fraud by failure to disclose - mens rea: intention to make a gain or cause a loss

Answer 21

• see s 5 definition of gain and loss
• no requirement of actual gain or loss
• R v Dziruni: a false representation made with a view to getting a job could be regarded as intention to make a gain. This could also apply to fraud by failure to disclose.

Question 22

Fraud by false representation - statutory reference

Answer 22

‘(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 a loss to another or expose another to a risk of loss.’ (s 2 FA 2006)

Question 23

Fraud by false representation - actus reus: false representation

Answer 23

‘(2) A representation is false if–

(a) it is 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.’ (s 2 FA 2006)

Question 24

Fraud by false representation - actus reus: three aspects of a false representation

Answer 24

(1) Express or implied representation
(2) Representation as to fact, law or state of mind
(3) Representation is untrue or misleading

Question 25

Fraud by false representation - actus reus: implied representation

Answer 25

Can arise from:

(a) what the defendant says - in R v King, a second-hand car dealer who stated that the mileage reading on a car ‘may not be correct’ impliedly represented that he was not certain the reading was wrong when in fact he knew it was because he was the one who altered it;
(b) the defendant’s conduct - in DPP v Ray, a respondent made a continuing implied representation when entering a restaurant, ordering and eating a meal that he had the means and intention of paying for it before he left.

Pure silence, without an accompanying action, cannot amount to a representation (R v Twaite)

Question 26

Fraud by false representation - actus reus: false representation by conduct

Answer 26

Idress v DPP - Idress had failed his driving theory test 15 times. An unknown person then took the test pretending to be Idress and passed. There was good evicence that Idress had arranged this. It was found that the person who took the test made a false representation by conduct and he did this as Idress’ agent, so Idress was convicted of fraud by false representation.

Question 27

Fraud by false representation - actus reus: representation as to fact, law or state of mind

Answer 27

• A representation as to fact or law will usually be straight forward.
• A representation as to the state of mind of the defendant or another person requires further consideration.
• It will satisfy the requirements of s 2 if it can be shown that the defendant does not in fact hold that opinion or belief.

Question 28

Fraud by false representation - actus reus: representation as to state of mind cases

Answer 28

Edgington v Fitzmaurice - ‘very difficult to prove what the state of a man’s mind at a particular time is, but if it can be ascertained it is as much fact as anything else.’

R v King - The defendant had impliedly represented that he was not certain the mileage reading on the car was wrong. In fact, he knew it was wrong. This was a fact about his mental state.

Smith v Land and House Property Corporation - ‘if the facts are not equally well known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of material fact, for he impliedly states that he knows facts which justify his opinion.’

DPP v Ray - If the defendant states an intention to do something, when D in fact has no such intention, this may also amount to a false representation.

Question 29

Fraud by false representation - actus reus: the representation must be untrue or misleading

Answer 29

An issue of fact for the jury to determine.

Question 30

Fraud by false representation - cases of overcharging

Answer 30

Basic principle in English law that a person is entitled to charge whatever sum they consider appropriate. However, criminal liability has been imposed in certain circumstances:

R v Silverman - a false representation arose because of ‘circumstances of mutual trust’. A builder who had worked for the family of two elderly sisters for a number of years charged excessive amounts for work done. The defendant contended he had never said the charges were fair ones. The victims were described as ‘unquestionably gullible’ and ‘relied implicitly upon the word of the appellant.’ CoA implied false representation into the dealings between the defendant and the victims that the charge made was a fair one. Question of whether the victim being in some way ‘vulnerable’ is an essential factor for overcharging?

R v Jones - the defendant was referred to as being the victim’s ‘trusted friend’. They were a milkman convicted of overcharging for milk. The purchaser regarded the defendant as a friend. In this case, the defendant was not ‘gullible’ in the sense of Silverman, he was an experienced businessman, but it was ‘a stupidity or carelessness born of trust…of which the appellant was aware and of which he was able to take advantage of’

Question 31

Fraud by false representation - deceiving a machine

Answer 31

‘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’ (FA 2006, s 2(5))

This catches those using stolen credit cards and PIN codes to get money for ATMs or to make online purchases.

Question 32

Fraud by false representation - mens rea

Answer 32

(1) Dishonesty
(2) Mens rea for the false statement; and
(3) Intention to make a gain or cause a loss

Question 33

Fraud by false representation - mens rea: dishonesty

Answer 33

Ivey v Genting Casinos test

R v Clarke - Clarke, a private investigator, falsely told a group of potential clients that he was a former fraud squad officer and a court bailiff. As a result, he was engaged to trace funds of a group of victims of fraud. The judge directed the jury that he was dishonest if he made these deceptions. Clarke’s case was that he believed he was able to do the work well, so was not dishonest. An appeal was allowed because the essence of the judge’s direction was that he thought it was necessarily dishonest to tell lies about employment. There should instead have been a direction on dishonesty for the jury to decide.

Question 34

Fraud by false representation - mens rea for the false statement

Answer 34

The defendant must know, or be aware, that the statement is untrue or misleading (s 2(2)(b) FA 2006). It seems this will be satisfied if D is subjectively aware of the possibility that what they are saying or implying is false.

R v Staines - Recklessness with regard to a false statement requires more than mere carelessness or negligence; there must be an indifference to, or disregard of, whether a statement is true or false. A belief, however unreasonable, that the representation is true will prevent the defendant’s conduct from amounting to deception. If the person knows the statement they are making might be false, they should make this clear. If they give a clear caveat, they do not make a false statement.

Question 35

Fraud by false representation - mens rea: intention to make a gain or cause a loss

Answer 35

Reference to be made again to s 5 FA 2006