AIMS AND OBJECTIVES
After reading this chapter you should be able to:
Understand the reasons for the enactment of the Fraud Act 2006
Understand the offences of fraud created by the Fraud Act
Understand the offence of obtaining services by fraud
Analyse critically all the above offences
Apply the law to factual situations to determine whether an offence of fraud has been committed
Prior to the Fraud Act 2006 there had been various attempts at creating laws to cover situations of fraud. There had been a major reform of the law with the Theft Act 1968 which abolished all earlier offences involving deception or fraud. This Act created an offence of obtaining property by deception (s 15) and an offence of obtaining a pecuniary advantage by deception (s 16). This latter offence originally could be committed in one of three ways, but part (a) of s 16 quickly proved to be unsatisfactory and it was repealed by the Theft Act 1978. This second Theft Act created offences of obtaining services by deception (s 1) and securing remission of a liability (s 2). Section 2 of the Theft Act 1978 was complex as it included three ways in which the offence could be committed. These were:
remission of a liability
inducing a creditor to wait for or forgo payment
obtaining an exemption form or an abatement of a liability
One gap in the law was highlighted in the case of Freddy (1996) 3 All ER 481 where the defendants made false representations in order to obtain a number of mortgage advances from building societies to purchase houses. They intended to repay the mortgages when they sold the houses, as they hoped, at a profit. The mortgage advances were in the form of money transfers. The House of Lords quashed Ds’ convictions on the basis that no property belonging to another had been obtained. As a result of this decision a further amendment was made to the Theft Act 1968 by the Theft (Amendment) Act 1996. This inserted an extra section (s 15A) into the Theft Act 1968 creating the offence of obtaining a money transfer by deception.
All the reforms to the Theft Act 1968 left the law very fragmented and difficult to apply. The Law Commission in their Report Fraud (2002) (Law Com No 276) stated that:
‘3.11 Arguably, the law of fraud is suffering from an “undue particularisation of closely allied crimes”. Over-particularisation or “untidiness” is undesirable in itself, but it also has undesirable consequences.
3.12 First, it allows technical arguments to prosper. When the original Theft Act deception offences were first proposed by the CLRC in their Eighth Report, this problem was foreseen by a minority of the committee members: To list and define the different objects which persons who practise deception aim at achieving is unsatisfactory and dangerous, because it is impossible to be certain that any list would be complete. …
3.20 The second difficulty that arises from over-particularisation is that a defendant may face the wrong charge, or too many charges.’
Various cases had highlighted areas where the law was difficult to apply. One problem that arose was whether silence could be a deception. In DPP v Ray (1973) 3 All ER 131 D had ordered a meal and then run off without paying for it. At that time (1973) there was no offence of making off without payment (see section 14.11), so D was charged with obtaining property by deception. The Court of Appeal quashed his conviction, but the House of Lords reinstated the conviction, taking the view that ‘where a new customer orders a meal in a restaurant, he must be held to make an implied representation that he can and will pay for it before he leaves’. They also thought that this was an ongoing representation.
Another problem was that the prosecution had to prove the deception caused the obtaining. V must have acted because of D’s deception. This meant that if V knew D was lying, and still handed over property, then the offence of obtaining property by deception had not been committed (although there would have been an attempt).
It also created problems where V stated that the deception had not been relevant to the handing over of property. For example, in Laverty (1970) 3 All ER 432 D changed the registration number plates and the chassis number on a car and sold the car to V. The changing of the numbers was a representation that the car was the original car to which these numbers had been allocated. However, D’s conviction was quashed as there was no evidence that the deception regarding the number plates had influenced V to buy the car, so there was no proof that D had obtained the purchase money from V as a result of that deception.
This showed a gap in the law, although in later cases the courts became inventive in finding that V had acted as the result of the particular deception. This was seen in Lambie (1981) 2 All ER 776.
Lambie (1981) 2 All ER 776
D had a credit card (Barclaycard) with a £200 limit. She exceeded this limit and the bank which had issued the card wrote asking her to return the card. She agreed that she would return the card, but she did not do so. She then purchased goods in a Mothercare shop with the card. She was convicted of obtaining a pecuniary advantage by deception, contrary to s 16(1) of the Theft Act 1968. The departmental manager in Mothercare made it plain that she made no assumption about the defendant’s credit standing at the bank. Provided the signature matched that on the card and the card was not on a ‘stop list’ the manager would hand over the goods.
Because of this the Court of Appeal allowed her appeal as the deception had not been the cause of the obtaining, but the House of Lords reinstated the conviction. The Law Lords held that it was not necessary to have direct evidence of the reliance on a particular deception if the facts were such that ‘it is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money’. They thought that in the case of credit cards it would make the law unworkable if there had to be direct evidence that the deception induced the obtaining in every case.
Another problem arose where the deception was made to a machine so that no human person had been deceived. The Law Commission in their Report Fraud (2002) (Law Com No 276) explained this problem:
‘3.34 A machine has no mind, so it cannot believe a proposition to be true or false, and therefore cannot be deceived. A person who dishonestly obtains a benefit by giving false information to a computer or machine is not guilty of any deception offence. Where the benefit obtained is property, he or she will normally be guilty of theft, but where it is something other than property (such as a service), there may be no offence at all.’
This was becoming an increasingly important gap in the law as the Law Commission went on to point out in the next paragraph of the Report:
‘3.35 This has only become a problem in recent years, as businesses make more use of machines as an interface with their customers. There are now many services available to the public which will usually be paid for via a machine. For example, one would usually pay an internet service provider by entering one’s credit card details on its website. Using card details to pay for such a service without the requisite authority would not currently constitute an offence. As the use of the internet and automated call centres expands, this gap in the law will be increasingly indefensible.’
In 1999 the Law Commission published a Consultation Paper No 155, Legislating the Criminal Code: Fraud and Deception. They followed this by publishing a report, Fraud (Law Com No 276) which had a draft Bill attached to it. In 2004 the Government consulted on the report and this led to the passing of the Fraud Act in 2006.
The Fraud Act 2006 repealed sections 15, 15A, 15B, 16 and 20(2) of the Theft Act 1968 and also sections 1 and 2 of the Theft Act 1978. The previous offences are replaced by four new offences under the Fraud Act 2006. These are:
fraud by false representation (s 2)
fraud by failing to disclose information (s 3)
fraud by abuse of position (s 4)
obtaining services dishonestly (s 11)
The 2006 Act also creates other offences connected to fraud. The main ones are:
possession etc. of articles for use in frauds (s 6)
making or supplying articles for use in frauds (s 7)
Under s 2 of the Fraud Act 2006, the offence of fraud by false representation is committed if D:
‘2(1)(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.’
The actus reus of the offence is that the defendant must make a representation which is false. The mens rea has three parts to it. The defendant must be dishonest, he must know the representation is or might be untrue or misleading and he must have an intention to make a gain or cause a loss.
Section 2 of the Act defines false representation.
‘2(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.
2(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.
2(4) A representation may be express or implied.’
From this, it can be seen that ‘representation’ covers a wide area. A representation as to fact clearly covers situations where someone uses a false identity or states that they own property when they do not. It also covers situations such as someone stating that a car has only done 22, 000 miles when they know it has done double that amount.
A representation as to state of mind covers such matters as a customer saying they will pay their bill when they have no intention of doing so.
The Act also states that a representation may be express or implied (s 2(4)). For an express representation, the Explanatory Notes to the Act make it clear that there is no limit on the way in which the representation must be expressed. The notes point out that it could, for example, be written or spoken or posted on a website.
The Explanatory Notes to the Act also point out that the offence can be committed by ‘phishing’ on the Internet. That is where a person sends out an email to a large number of people falsely representing that the email has been sent by a legitimate bank. The email asks the receiver to provide information such as credit card and bank numbers so that the ‘phisher’ can gain access to others’ assets.
There have been no cases appealed on substantial points of law, but there have been appeals on sentencing in cases charged under the Fraud Act. These cases give examples of the type of conduct charged under s 2 and two examples are given below.
Hamilton (2008) EWCA Crim 2518
V’s son had bought some new fence panels for V’s garden, but as they had turned out to be the wrong size he left them leaning up against the side of the house until such time as he was able to replace them. D and his brother called at V’s house claiming that they had come to collect payment for the panels. In fact, the victim’s son had already paid for them in full. D told V that once that sum was paid they would arrange for replacement panels to be delivered. V paid them £60.
This is clearly an express representation as D told V the panels had not been paid for when they had. Another case where there was an express representation was Cleps (2009).
Cleps (2009) EWCA Crim 894
D went to a building society and falsely claimed to be George Roper. He opened a Liquid Gold account in the name of George Roper. Two days later D returned to the same branch. He produced a passport in the name of George Roper and the passbook for the Liquid Gold account as identification. He asked to close a Guarantee Reserve account (held by the real George Roper) and had the £181, 950 in that account transferred into the Liquid Gold account. He then obtained a banker’s draft for that amount.
The representation that he was George Roper was an express representation.
There are many ways in which it is possible to make an implied representation through one’s conduct. This was shown by the old case of Barnard (1837) 7 C & P 784.
Barnard (1837) 7 C & P 784
D went into a shop in Oxford wearing the cap and gown of a fellow commoner of the university. He also said he was a fellow commoner and as a result the shopkeeper agreed to sell him goods on credit. The court said, obiter, that he would have been guilty even if he had said nothing. The wearing of the cap and gown was itself a false pretence.
In fact the case of Barnard demonstrates both an implied representation and an express representation. The wearing of the cap and gown was an implied representation while the statement that he was a fellow commoner was an express representation.
A more modern example of an implied representation would be standing on a street corner with a collecting box labelled ‘Guide Dogs for the Blind’. This is implying that D is collecting on behalf of the charity. If D intends to pocket the money then he is guilty of an offence under s 2 of the Fraud Act 2006.
Although there is no definition of what is meant by implied false representation by conduct in the Fraud Act, the Explanatory Notes to the Act state that:
‘An example of a representation by conduct is where a person dishonestly misuses a credit card to pay for items. By tendering the card, he is falsely representing that he has the authority to use it.’
This example is the same situation as occurred in the case of Lambie (1981) under the old law on deception (see section 15.2). It is likely that the courts will still look back to decisions under the old law on the point of whether D’s acts are an implied representation, though, of course, the courts do not have to do so.
Under the old law several other situations of implied representation were identified. These included the following:
Ordering and eating a meal in a restaurant: this is a representation that the meal will be paid for.
Paying by cheque: this is a representation that the bank will honour the cheque.
Use of a cheque guarantee card: this represents that the bank will meet any cheque up to the limit on the card.
All these situations were considered in cases under the law prior to the Fraud Act.
DPP v Ray (1973) 3 All ER 131
D went to a restaurant with three friends. He did not have enough money to pay for a meal but one of his friends agreed to lend him enough to pay for the meal. After eating the meal they all decided not to pay for it. Ten minutes later when the waiter went into the kitchen all four ran out of the restaurant without paying. The Court of Appeal had quashed the defendant’s conviction for obtaining a pecuniary advantage under s 16(2)(a) of the Theft Act 1968 (this section has now been repealed). The House of Lords reinstated the conviction. The problem was whether the defendant could be guilty when his original representation that he would pay was genuine. Did the change of mind produce a deception? The House of Lords held that it did.
Paying by cheque
Gilmartin (1983) 1 All ER 829
D, a stationer, paid for supplies with post-dated cheques which he knew would not be met. This was held to be a deception. By drawing the cheques he was representing that there would be funds in the account to meet the cheques on the dates they were due to be presented.
Use of a cheque guarantee card
Metropolitan Police Commander v Charles (1976) 3 All ER 112
D had a bank account with an overdraft facility of £100. The bank had issued him a cheque card which guaranteed that any cheques he wrote up to £30 would be honoured by the bank. D wrote out 25 cheques for £30 in order to buy gaming chips and backed each cheque with the cheque card. He knew that the bank would have to pay the gambling club the money so there was no deception in respect of the fact that the cheques would be honoured. However, he knew that he did not have enough money in his account to meet the cheques and also that the amount would exceed his overdraft limit. He had also been told by the bank manager that he should not use the card to cash more than one cheque of £30 a day.
The House of Lords held that there was a false representation that he had the bank’s authority to use the card in the way he did and upheld his conviction under s 16 of the 1968 Act of obtaining a pecuniary advantage by deception.
Representations to machines
The representation can be made to a person or to a machine. Section 2(5) of the Fraud Act 2006 specifically covers representations made to any system or device. It states:
‘2(5) A representation may be regarded as made if it (or anything implying it) it submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).’
This is designed to cover the many situations in the modern world where it is possible to obtain property via a machine or the Internet or other automated system such as cash dispensers or automated telephone services. The provision in the Act is wide enough to cover putting a false coin into a machine to obtain sweets or other goods or submitting a claim on the Internet. The Explanatory Notes to the Act make this clear. They state:
‘The main purpose of this provision is to ensure that fraud can be committed where a person makes a representation to a machine and a response can be produced without any need for human involvement. (An example is where a person enters a number into a “CHIP and PIN” machine.)’
The Explanatory Notes also state:
‘This offence would also be committed by someone who engages in “phishing”: i.e. where a person disseminates an email to large groups of people falsely representing that the email has been sent by a legitimate financial institution. The email prompts the reader to provide information such as credit card and bank account numbers so that the “phisher” can gain access to others’ assets.’
For the purposes of the Fraud Act 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.
So making a false representation means representing what one knows is untrue or might be untrue or what one knows is misleading or might be misleading. It does not matter whether anyone believes the representation.
It is a matter of fact whether something is true or not. The difficult word in the phrase is ‘misleading’. It is not defined in the Act, but the Government in their paper, Fraud Law: Government Response to Consultation (2004) stated that a representation was misleading if it was:
‘less than wholly true and capable of interpretation to the detriment of the victim’
A statement can be misleading even if it is true. For example, if a salesperson says of a car ‘I have never had anyone complain about this model’ but in actual fact the salesperson has never sold anyone this particular model before. This statement is literally true, but it is clearly misleading.
Another problem area is the scenario where the statement is true when D makes it, but it later becomes untrue and D knows this. If D is under a legal duty to disclose information, then he can be charged under s 3 of the Fraud Act 2006 (see section 15.5). However, if D is not under a legal duty to disclose information, can he be guilty under s 2? The likelihood is that the courts will follow the case of DPP v Ray (1973) (see section 15.4.1 above) and hold that D, by staying silent when he knew the circumstances had changed, made an implied representation.