Fraud - Herring - Part I - The Law

Question 1

Fraud - overview

Answer 1

> Fraud Act 2006 was passed after increasing dissatisfaction with the previous law on deception.
Under the Fraud Act 2006, fraud can be committed in 3 different ways:
1. By false representation
2. By failing to disclose information
3. By abuse of position.
Recognised as single offence so no need for prosecution to prove which means as long as jury satisfied with one of them.

Question 2

Fraud by false representation - broken down

Answer 2

> S. 2(1).
Broken down into:
1. There must be false representation.
2. The false representation must be made by D.
3. D must know the statement is or might be untrue or misleading.
4. The statement must be made with the intention to make a gain or a loss.
5. There must be dishonesty.

Question 3

Fraud by false representation - broken down - there must be a false representation

Answer 3

> Can be made anyway, e.g. orally, written, on website.
Idrees v DPP[2011] = D convicted for taking written part of driving test for another.
S. 2(2)says representation may be regarded as false if it’s ‘untrue or misleading.’
Fraud if use credit card or reached credit limit and use card even if unauthorised to do so. V = shop.

Question 4

Fraud by false representation - broken down - false representation must be made by D

Answer 4

> Made by D.
‘Made’ may indicate that silence is insufficient however, not straightforward.
S. 2(4) says representation can be express or implied..
So can be fraud if act in way which impliedly makes a statement.
In Barnard (1837), D dressed in garb typically worn by Oxford students and so received discount in shop. This amounted to false representation.
No need to show the false representation has been made to anyone.
S. 2(5): offence can be committed against computer or other mechanical representation.
So offence can be made out even if V knew D lying or if D sent fraudulent email even if never read by anyone.

Question 5

Fraud by false representation - broken down - D must know statement is or might be untrue or misleading

Answer 5

> S. 2(2)(b).
might
CA emphasised that test is subjective in Augunas [2013]:
-“What is required is that the accused person knows that the representation is, or might be, misleading. It is not enough that a reasonable person might have known this; what matters is the accused person’s actual knowledge.”
-“Of course, if an accused person willfully shuts his eyes to the obvious doubts as to the genuineness of the misrepresentation he is making, then he knows that it might be untrue or misleading and he would be guilty of the offence.”

Question 6

Fraud by false representation - broken down - the statement must be made with the intention to make a gain or loss

Answer 6

> Doesn’t need to be shown D made gain or V suffered loss, intention suffices so fraud has flavour of an attempted crime in that there is no need to show V actually suffered harm.
Simon Gardner thinks that the fact D must be shown to have intended to make gain by the representation might provide a defence to a person in a market making wildly extravagant claims for goods they are selling.
‘Gain’ or ‘loss’ must be in property or monetary terms.
In Gilbert [2012], the opening of bank account was not considered a gain or loss in itself.
Risk of loss is sufficient.

Question 7

Fraud by false representation - broken down - there must be dishonesty

Answer 7

> No definition in Fraud Act 2006 so presumably the Ivey test for dishonesty applies, as the government’s explanatory notes on the Act say.
At time Parliament would have intended Ghosh test but courts more likely to decide that parliamentary intent was that dishonesty in Fraud Act 2006 should have whatever the common law meaning of dishonesty was.
S. 2 of TA 1968 doesn’t apply to Fraud Act so circumstances set down for when D will not be dishonest can’t be relied upon by D.
No good reason why s. 2 wasn’t replicated in FA

Question 8

Fraud by false representation - issues

Answer 8

> David Ormerod, ‘The Fraud Acct 2006 - Criminalising Lying?’ [2007].
S. 2 - Fraud by false representation:
-Such a dramatic shift to go from a result-based deception to a conduct-based representation offence.
-Unlike under old law, there is no need to prove a result of any kind or that an alleged V believed any representation or acted on it; or crucially that D succeeded in making gain/causing loss by his representation.
-This wholly inchoate offence appears to criminalise lying.
-Should lying be a sufficient basis for criminal liability? Does this warrant criminal sanction?
-The wrong seems to be the act of lying or misleading with intent to gain or cause loss; the harm might be construed as one of destabilising society’s processes of property & financial transfers. Even if this is sufficient to warrant criminal sanctions, is it properly called fraud?
-Classic definitions such as that from Stephen J. include, even at their widest, an element of intent to deceive which is much narrower than an intention to gain.
-Absence of any direct or potential loss to V’s may make evaluation of degree of blameworthiness & appropriate punishment v. difficult.
-Shift also means that whereas V formerly cast a leading role in proving the causal effects of D’s deception, now V becomes an optional extra. Liability complete on D making representation, no specific V(s) need to be identified.
-Unlike previous deception offences, there will be an overlap with theft cases in which false representation enables D to ‘appropriate’ V’s property, even if with V’s consent, as in Gomez,

Question 9

Fraud by false representation - issues with fact representation must be ‘made’ expressly or impliedly

Answer 9

> David Ormerod, ‘The Fraud Acct 2006 - Criminalising Lying?’ [2007].
Will silent inaction suffice?
Is S. 2 an undesired extension of law?
S. 3 = failure to disclose if has duty to.
1. If D made false statement with MR he is guily irrespective of V’s belief.
2. D is under duty to correct V’s error even if he hasn’t actively misled V but has realised he is acting under a misconception.
3. Where to D’s knowledge, but not to V’s, circumstances have changed materially since D made a true representation, by continuing to act without V’s understanding might be said to be ‘failing’ to ‘undeceive’ by impliedly making a fresh & now false representation. If so he is liable under s. 2.

Question 10

Fraud by false representation - ‘false’ representation - issues

Answer 10

> David Ormerod, ‘The Fraud Acct 2006 - Criminalising Lying?’ [2007].
The concept of falsity is central to s. 2, yet remains ill-defined, highlighting a recurring problem with the Act: Parliament was unwilling to defined elements of the offence, leaving matters to be resolved by courts.
Fails to promote certainty in an area where experience teaches us it is vital.
Home Office suggested term “misleading” meant “less than wholly true and capable of interpretation to the detriment of the victim.”
Extension from lying to misleading creates an astonishingly wide scope of liability and avoids making the finer moral distinctions between lying and misleading.
If everything turns on the jury’s perception of honesty. will stereotypically mistrusted trades and professions - estate agents, antique dealers, car salesmen - be exposed to conviction on prejudices?
Certainly cannot subscribe to the view of Home Office that “the law is not being widened in any significant way.”

Question 11

Fraud by false representation - issues - dishonesty

Answer 11

> David Ormerod, ‘The Fraud Acct 2006 - Criminalising Lying?’ [2007].
Breadth of this fault element may extend even further if courts demonstrate their customary willingness to interpret knowledge as “shutting one’s eyes to an obvious means of knowledge” or “deliberately refraining from making inquiries the results of which the person does not care to have.”

Question 12

Fraud by failing to disclose information - definition

Answer 12

> S. 3 of FA 2006:
“A person is in breach of this section if he -
a) dishonestly fails to disclose to another person information which he 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.”

Question 13

Fraud by failing to disclose information - key issue

Answer 13

> When is D under a legal duty to disclose information?
Gov. explanatory notes on Act should understand legal duty as put in the Law Commission Report No. 275, Fraud (2002):
-“Such a duty may derive from stature, from the fact that the transaction in question 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 the parties.”
-“There is a legal duty to disclose information if the defendant’s failure to disclose it gives V a cause of action for damages, but also if the law gives V a right to set aside any change in his/her legal position to which he/she may consent as a result of the non-disclosure.”
In R v D [2019], CA referred to LC’s report as useful and took strict approach in interpreting it.

Question 14

Fraud by failing to disclose information - R v D

Answer 14

> R v D [2019]:

• D charged with fraud under s. 3 after failing to notify local authority that she had moved property and so become liable for full council tax payments.
• No legal duty so not convicted and appeal dismissed.
• Court clarified that although it may seem obvious D was expected to make the disclosure, there was no explicit statutory requirement to do so.
• Suggests courts require proof of a specific legal obligation to disclose & it will be insufficient to argue that it was “obvious D was meant to disclose.”

Question 15

Fraud by abuse of position - statute

Answer 15

> S. 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 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.

Question 16

Fraud by abuse of position - commentary

Answer 16

> Broadly drafted offence.
Act fails to define ‘a position in which he is expected to safeguard, or not act against, the financial interests of another person.’
Jennifer Collins notes uncertainty as to whether the expectations are of D, V, or reasonable person?
Gov. refers to Law Commission Report in its explanatory notes on the Act:
-“The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
Guidance offered on what kind of relationship s. 4 covers in R v Valujevs.

Question 17

Fraud by abuse of position - R v Valujevs - facts & judgment

Answer 17

> R v Valujevs [2014]:
-D acted as part of unlicensed gangmasters who took illegitimate deductions from workers’ earnings, charged excessive rental payments, and imposed unwarranted fines.
-Charged under s. 4 of FA 2006.
-Key question = do the gangmasters occupy “a position in which he is expected to safeguard, or not act against, the financial interests of another person”?
Fulford J:
-“The prosecution are able to contend that the Ds had taken on the obligation of paying the wages of the workers, and it is inherent in that commitment that the wages received by the workers will not be reduced by unwarranted financial deductions or penalties…”
-“It is for the judges to assess whether the position held by the individual is capable of being one ‘in which he is expected to safeguard, or not to act against, the financial interests of another person.’ If it is so capable it will be for the jury thereafter to determine whether or not they are sure that was case.”
-“It would be untenable to suggest that the expectation should be that of either the potential V (the test would, in all likelihood, be too low) or the D (the test is likely to be set too high). Therefore, it is an objective test based on the position of a reasonable person.”
-“Section 4 does not apply to those who simply supply accommodation, goods, services or labour, whether on favourable or unfavourable terms and whether or not they have a stronger bargaining position.”
-“Section 4 should not apply in ‘the general commercial area where individuals and businesses compete in markets of one kind or another, including labour market, and are to and expected to look after their own interests.”
-Role assumed by gangmasters because “Ds arguably assumed control of, and responsibility for, collecting the wages of the workers, or they controlled the wages at the moment that they were paid over.”

Question 18

Fraud by abuse of position - R v Valujevs - commentary

Answer 18

> CA confirmed test for whether D ‘is expected to safeguard, or not act against, the financial interests of another person’ is objective (of the reasonable person).
Pennock [2014] also adopted this approach.
Concern that D unknowingly assumed position is not pressing as unlikely D would satisfy dishonesty test.
Fulford LJ’s suggestion that s. 4 doesn’t apply “the general commercial area where individuals and businesses compete in markets of one kind or another, including labour market, and are to and expected to look after their own interests” overlooks that some people are unable to look after own interests e.g. D could escape liability having exploited vulnerable worker/tenant.
Concept of abuse may be particularly problematic where D’s position is not technically a fiduciary one & so the exact standards of behaviour expected by the law are uncertain, especially problematic where a person’s position of trust is an informal one.
Precise width is uncertain but potentially very wide although Jennifer Collins argues this is necessarily a bad thing.

Question 19

Fraud by abuse of position - Pennock

Answer 19

> Pennock [2014].
Abuse of position means ‘uses incorrectly’ or ‘puts to improper use’ the position held in a manner that is contrary to the expectation that arises because of that position.

Question 20

Fraud by abuse of position - Jennifer Collins

Answer 20

> J. Collins, ‘Fraud by Abuse of Position: Theorising Section 4 of the Fraud Act 2006’. [2011]:

• Uncertainty over precise width not necessarily a bad thing because the moral basis of the offence is disloyalty.
• “Disloyalty… is criminalised because it has a corrosive effect on an important basic value held by society: the importance of trust relationships where an individual is entrusted with the oversight of financial affairs of another. The risk of harm to these trust relationships (in themselves a public good) passes the threshold for criminalisation.”
• This is the ‘neglected advantage of the breadth of s. 4’.
• “If the offence were not drafted in such broad terms it would not be able to uphold effectively the basic public good of protecting trust relationships in dealing with another’s financial interests.”
• Offence can ‘recognise need for loyalty outside the fiducial paradigm’ and can be narrowed down accordingly.

Question 21

Fraud and possession offences

Answer 21

> S. 6(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.”
No MR required = ‘lamentable’ in David Ormerod’s words.
HM Government 2006: “proof is required that D had the article for the purpose or with the intention that is be used in the course of or in connection with the offence…”

Question 22

Obtaining services dishonestly

Answer 22

> S. 11 creates an offence for obtaining services dishonestly.
Replaces s. 1 of TA 1968 & specifically drafter to include obtaining services through dishonest electronic means.
Restricted to provision of services on basis they be paid for not for persuasion to obtain service gratuitously.
Only committed where the deception has caused the obtaining and offence, unlike fraud, requires D to have actually obtained the service.
Carol Withey.

Question 23

Obtaining services dishonestly - Carol Withey

Answer 23

> C. Withey, ‘The Fraud Act 2006 - Some Early Observations and Comparisons with the Former Law (2007):
S. 11 of FA replaces s. 1 of TA, which was dishonestly obtaining services by deception.
Deception nor false representation is now required.
The fact a machine can’t be deceived is now irrelevant.
Also allows conviction where services are gained through provision of credit/debit cards particularly on internet.
As previous, omission doesn’t suffice, but what is the nature of an act?
R v Nabina, D dishonestly lied about his personal details to obtain credit cards so this would now be an offence under s.11.
In contrast to s. 2 of FA, under s. 11 there must be an obtaining of services and although there is no longer a requirement to show that a deception leads to the obtaining of the service, a causal link must still be established between the act and obtaining of service as statute says ‘by his dishonest act obtains the service.’
Need evidence that D was never going to pay.
Problem with proving that dishonesty preceded the act of obtaining means D could argue that he didn’t decide not to pay until after acquired services.
MR = D’s act must be dishonest & D knows that the service is being made on basis it will be paid for although he intends not to pay fully for it.
R v Ghosh test for dishonesty applies.
Dishonesty must exist at time of act.

Question 24

Conspiracy to defraud

Answer 24

> Debate over whether to abolish conspiracy to defraud when drafting FA but final decision was that it shouldn’t be abolished.

Question 25

Making off without payment - key points

Answer 25

> S. 3 of Theft Act 1978 = making off without payment.
Key elements of the s. 3 offence are:
1. making off
2. dishonestly
3. without having paid as require or expected
4. knowledge that payment on the spot is required for goods or services.
5. intent to avoid payment.
AR = making off without having paid as required of expected.
MR = dishonesty: knowledge that payment on the spot is required for goods & services, and an intent to avoid payment.
NB: no need to prove deception.
CA stated that ‘section 3(1) is indeed intended to create a simple & straightforward offence.’ (Vincent [2001]).

Question 26

Making off without payment - key elements - making off from the place where payment was expected

Answer 26

> ‘Making off’ = leaving.
CA held that doesn’t had mean D had to of left surreptitiously as D argued in Brooks and Brooks (1982).
McDavitt 1981: held D wouldn’t have committed offence until left restaurant without paying so in apprehending him before he left, he could only be guilty of an attempted offence.
Seems to be gap in this section - Benion 1983 says what if D gives taxi driver fake money and then taxi driver leaves. Here D hasn’t made off; it is V who has left .

Question 27

Making off without payment - key elements - goods supplied or services done

Answer 27

> Broadly interpreted to inc. wide range of things people pay for.
However, there may be loophole, e.g. D plays a sport and leaves without paying.
Dispute over D taking goods from a self-service supermarket/restaurant: are such goods supplied?
Griew argues not, but J.C Smith suggests the goods are supplied in that they are ‘made available for sale’.
Theft available though.
Courts would be unlikely to take restrictive interpretation of the offence.
S. 3(3): goods/services must be part of legally enforceable contract.

Question 28

Making off without payment - key elements - without having paid as required or expected

Answer 28

> If V has broken contract D in such a way that D isn’t obliged to pay for the service/goods D doesn’t commit offence by leaving without paying.

Question 29

Making off without payment - key elements - dishonesty

Answer 29

> Ivey.

>Dishonesty at time of making off.

Question 30

Making off without payment - key elements - knowing that payment on the spot is required or expected of him

Answer 30

> D may try to persuade jury that they thought goods/services provided on basis that they would pay at some point in the future or another would pay.
Payment on the spot = at time and place
Aziz [1993]: D didn’t pay for taxi so driver took him back to start but D ran off mid-journey. D argued payment was expected at destination not when he ran off but CA rejected this argument: he had left place where payment expected (i.e. the taxi) at a time when he was liable to pay full fare.

Question 31

Making off without payment - key elements - intent to avoid payment

Answer 31

> Section doesn’t specifically state that D intended to avoid payment, but this was established in R v Allen [1985].