Fraud Flashcards
What are the three ways of committing fraud?
fraud by false representation, section 2;
* fraud by failure to disclose, section 3; and
* fraud by abuse of position, section 4.
What the requirements for fraud by false representation?
Actus reus- false representation
* Express or implied representation
* Representation as to fact, law or state of mind
* Representation must be untrue or misleading
A false representation can arise in certain circumstances of overcharging (Silverman, Jones) and representations include those made to a machine (s 2(5)).
Mens rea-
* Dishonesty- use the test from Ivey v Genting Casinos
* Mens rea for the false statement
* Intention to make a gain or cause a loss- see s 5
What can an implied representation arise from?
- what the defendant says- in R v King [1979] Crim LR 122 a second-hand car dealer who stated that the mileage reading on a particular car ‘may not be correct’ impliedly represented that he was not certain the reading was wrong when in fact he knew it was wrong as he had altered it; or
- the defendant’s conduct- in DPP v Ray [1974] AC 370 the court held that the respondent made a continuing implied representation when entering a restaurant, ordering and eating a meal that he had the means and the intention of paying for it before he left.
Pure silence, without an accompanying action cannot amount to a representation, R v Twaite.
What is the test for dishonesty?
(i) What was the defendant’s knowledge and belief as to the facts?
(ii) Given that knowledge and those beliefs, was the defendant dishonest by the standards of ordinary decent people?
What is required for fraud by failure to disclose?
Actus reus-
* Existence of a legal duty to disclose e.g. from statute, a transaction of the utmost good faith, contained in the express or implied terms of a contract, arising from a custom in a particular trade or market or arising from a fiduciary relationship.
* Failure to disclose information to another person- a matter of fact.
Mens rea-
* Dishonesty - use the test from Ivey v Genting Casinos
(i) What was the defendant’s knowledge and belief as to the facts?
(ii) Given that knowledge and those beliefs, was the defendant dishonest by the standards of ordinary decent people?
* Intention to make a gain or cause a loss- see s 5.
What type of legal duty to disclose is a contract of insurance?
A duty within a transaction of the utmost good faith
Can you be criminally liable for fraud by failure to disclose if there was no gain or loss?
Yes
the mens rea does not require an actual gain or loss just an intention to make a gain, cause a loss or expose someone to a risk of loss.
What is required for fraud by abuse of position?
Actus reus
* Occupy a position- which requires D to look after V’s financial wellbeing. Determined on a case-by-case basis. Can be a professional, fiduciary or long-term business relationship or even within the family or voluntary work.
* Abuse that position – use it incorrectly or put it to improper use, R v Pennock and Pennock
Mens rea
* Dishonesty - use the test from Ivey v Genting Casinos:
(i) What was the defendant’s knowledge and belief as to the facts?
(ii) Given that knowledge and those beliefs, was the defendant dishonest by the standards of ordinary decent people?
* Intention to make a gain or cause a loss- see s 5
Can fraud by abuse of position be committed by omission?
Yes
Who decides whether the defendant occupies a position for the purposes of fraud by abuse of position?
The judge and the jury have a role in this
The jury will decide on the facts whether the necessary relationship exists for D to have occupied a position in which they are expected to safeguard or not act against the financial interests of another person. However, before the jury decide this, the judge will consider whether the particular facts are capable of giving rise to D occupying a position and may give specific directions to the jury on this point.
A man starts visiting his elderly neighbour, helping with her shopping and collecting her pension from the Post Office. How is the man occupying a position for the purposes of fraud by abuse of position?
Voluntary work
An art dealer displays a painting depicting Hong Kong harbour in the 19th century. It is marked ‘artist unknown.’ The art dealer does not know the name of the artist, but the third party from whom he bought the picture said it was painted by a friend of his. A buyer comes into the gallery and expresses interest in the painting. The art dealer says he believes the artist to be a famous 19th century painter who spent much time in Asia, but he has no proof of this. The buyer has not heard of the famous 19th century painter and is not interested in the picture’s origin. The buyer purchases the painting for £40,000 because he likes it.
Is the art dealer criminally liable for fraud by false representation?
He is liable fraud by false representation as has clearly overcharged the buyer.
He is not liable for fraud by false representation as his comment about the famous 19th century painter did not influence the buyer in making the purchase.
He is not liable for fraud by false representation if the art dealer honestly believes that the buyer would have the purchased the painting anyway, knowing its real origins.
He is not be liable for fraud by false representation as the art dealer has not made a false representation.
He is liable for fraud by false representation
He is liable for fraud by false representation.
Correct. The art dealer has made a false representation as to his state of mind. This is included in the definition of representation in s 2(3) Fraud Act 2006. He intends to make a gain in terms of money paid for the painting and the jury are likely to consider him to be dishonest on the Ivey v Genting Casinos test.
The other options are incorrect or not the best answer.
While the art dealer is criminally liable for fraud by false representation, overcharging is not the reason why. The cases of overcharging in Silverman and Jones have been applied in circumstances of mutual trust or where the defendant has been a trusted friend; the facts do not suggest this.
The art dealer has made a false representation as to his state of mind, s 2(3) Fraud Act 2006. The art dealer says he believes the artist to be a famous 19th century painter who spent much time in Asia, but he has no proof of this. However, he knows the picture was painted by a friend of the third party he bought the painting from.
It doesn’t matter that the art dealer’s comment about the famous 19th century painter did not influence the buyer in making the purchase. It is not necessary to show a causal link between the representation and what the person making it hopes to achieve.
It doesn’t matter if the art dealer honestly believes that the buyer would have the purchased the painting anyway, knowing its real origins. The negative definitions of dishonesty contained in the Theft Act 1968, section 2(1) do not apply to offences under the Fraud Act 2006. While this might be a relevant consideration if the art dealer was charged with theft, section 2(1)(b) Theft Act 1968 is irrelevant when considering whether the art dealer is criminally liable for fraud by false representation.
A hairdresser runs a small business from a converted garage at her home. She gives her clients that are over 65 years old a 25% reduction. One day she sees an article about one of her clients in a newspaper. She discovers that her 85-year-old client, whose hair she has been doing for 15 years, is extremely rich. The next time that client comes to have her hair done, the hairdresser charges the client the full price, saying she is no longer giving a 25% reduction for those over 65 years old. This is untrue.
Which of the following best explains the hairdresser’s criminal liability for fraud?
The hairdresser will be liable for fraud by false representation if she is found to be dishonest.
The hairdresser will be liable for fraud by abuse of position because she has lied, she is therefore dishonest.
The hairdresser will be liable for fraud by false representation because she has lied, she is therefore dishonest.
The hairdresser will not be liable for a fraud offence.
The hairdresser will be liable for fraud by abuse of position because she occupies a position where she would be expected to safeguard or not act against the client’s financial interests.
The hairdresser will be liable for fraud by false representation if she is found to be dishonest.
Correct. This best explains the hairdresser’s criminal liability for fraud as she has clearly made a false representation with an intention to make a gain in money terms (the increased payment). The false representation is that she is no longer giving a 25% reduction.
Her liability for fraud by false representation will hinge on dishonesty. Just because she has lied does not make her dishonest, see **R v Clarke. **A jury may find her not to be dishonest on the Ivey v Genting Casinos test in these circumstances.
Fraud by abuse of position is unlikely to apply as, although the hairdresser and the client have a long relationship and the client probably trusts her, this relationship concerns nothing of a financial safeguarding nature. It is by no means certain that she occupies the position required for fraud by abuse of position – that she would be expected to safeguard or not act against the client’s financial interests.Whether such a relationship is capable of arising on the facts is a question for the judge to decide on a case by case basis then the jury determine if they are sure that was case. See R v Valujevs and another.
A woman lost her job and claimed benefits. Later, she acquired well-paid employment. She did not inform the benefits office of her new income, so the benefits continued to be paid into her bank account. She did not spend the continuing benefits as she is saving them for a deposit for a house.
Which of the following best describes the woman’s liability for fraud?
The woman will be liable for fraud committed by abusing the position she occupied in which she was expected to safeguard or not act against the financial interests of any other person.
The woman will be liable for fraud by failure to disclose information which she was under a legal duty to disclose.
The woman will not be liable for fraud by failure to disclose until she spends the money paid into her account after she gained her new employment.
The woman will be liable for fraud by false representation, failure to disclose and abuse of position.
The woman will be liable for fraud by false representation as she has made an implied representation by conduct that she is still unemployed.
The woman will be liable for fraud by failure to disclose information which she was under a legal duty to disclose.
Correct. The facts of this case are very similar to those in R v Mashta. The answer reflects the wording of s 3 Fraud Act 2006 which is committed where a defendant dishonestly fails to disclose to another person information which he/she is under a legal duty to disclose. The woman fails to inform the benefits office of her employment, which she is legally required to do. She is dishonest and intends to make a gain for herself by keeping the money she has received.
The other answers are incorrect.
The actus reus of fraud by failure to disclose is committed as soon as she obtains the new job and fails to inform the benefits office of her employment.
She does not occupy a position in which she is expected to safeguard or not act against the financial interests of any other person for the purposes of fraud by abuse of position.
The case of R v Twaite suggests that pure silence, without an accompanying action, as in Idrees v DPP, cannot amount to a representation for the purposes of fraud by false representation
A man applies for car insurance and fails to put on the form that he made a large claim from the Motor Insurance Bureau. The Motor Insurance Bureau is an organisation which pays out money on behalf of uninsured drivers and the man’s claim arose after an uninsured drunk driver crashed into the man’s parked car.
Which of the following explains the man’s liability for fraud by failing to disclose information he is under a duty to disclose?
The man will not be liable if he believes that the previous claim does not make him more likely to make a future claim
He will not be liable if the insurance company would have kept his premium the same if they knew about the previous claim
The man may not be liable as a jury may find him honest if he believes that the previous claim does not make him more likely to make a future claim
He will not be liable as the insurance contract is invalid due to his failure to mention the claim, so the insurance company will not suffer any loss
The man will not be liable as the previous claim does not make him more likely to make a future claim
The man may not be liable as a jury may find him honest if he believes that the previous claim does not make him more likely to make a future claim
Correct. Although the actus reus aspect of the offence is made out in that he has failed to disclose information which he is under a duty to disclose, the mens rea of the defendant is less clear. The man’s knowledge and beliefs will be considered by the jury when applying the test in Ivey v Genting Casinos and deciding whether he is dishonest by the standards of ordinary decent people and he might be found not to be dishonest. He does have an intent to gain money (a reduced insurance premium) by his omission, which is presumably why he did not put it on the form.
The other options are incorrect or not the best answer.
Just because the man believes that the previous claim does not make him more likely to make a future claim, doesn’t mean that the jury will agree and find him honest.
The defendant must intend to make a gain for himself or another, or to cause loss to another. It is not necessary to show any gain or loss in fact. Whether in fact the previous claim does not make him more likely to make a future claim is irrelevant.
There is no need for a causal link between the failure to disclose and the gain or loss of money or property. Whether the insurance company would have kept his premium the same if they knew about the previous claim is irrelevant. It would also be irrelevant if the insurance contract was invalid due to his failure to mention the claim, for the same reason.
