Fraud Flashcards
What is fraud?
The Fraud Act 2006 (FA) abolished the old offences related to deception. They were replaced primarily by one offence of fraud under s 1 FA. The Act lists three different ways in which fraud can be committed:
* fraud by false representation (s 2);
* fraud by failure to disclose (s 3); and
* fraud by abuse of position (s 4).
The maximum penalty for fraud, in relation to each of the different ways in can be committed, is the same and is also set out in s 1. If the defendant is tried on indictment, the maximum penalty is
ten years in prison, or an unlimited fine.
What is fraud by false representation?
(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 loss to another or to expose another to a risk of loss.
What is the actus reus of fraud by false representation?
(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
What constitutes a false representation?
The representation that forms the heart of the case can be made expressly by the defendant, or can be implied (s 2(4)). An implied representation can 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)
Idrees had failed his driving theory test 15 times. An unknown person then took the test pretending to be Idrees and passed. There was good evidence that Idrees had arranged this: Idrees had booked the test slot and he had booked it in English despite having taken the previous 15 tests in
Urdu. It was found that the person who took the test made a false representation by conduct that he was Idrees and he did this as Idrees’s agent. The magistrates’ court convicted Idrees of fraud by false representation and the High Court upheld the conviction.
It is 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 a fact as anything else. A misrepresentation as to the state of a man’s mind is therefore, a misstatement of fact […]
Key case: R v King [1979] Crim LR 122
A second-hand car dealer stated that the mileage reading on a particular car ‘may not be correct’. The court held that the defendant had impliedly represented that he was not certain the reading was wrong (in fact he knew it was wrong as he had altered it). The latter representation is
one of present fact, about the dealer’s mental state.
Key case: Smith v Land and House Property Corporation (1884) 28 Ch D 7
Bowen LJ stated: 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.
The state of mind required can also relate to an intention. 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.
In this case, it was implied from the respondent’s course of conduct that he would pay for his meal before leaving the restaurant, which was a false representation of his intention/ state of mind after he made the decision to leave without paying.
What constitutes a representation being untrue or misleading?
Overcharging
This case concerned a builder who had worked for the family of two elderly sisters for a number of years. On several occasions, he charged excessive amounts for work done on their home. He argued that he made no specific comment about the fairness of the charge.
It seems clear to us that the complainants, far from being worldly wise, were unquestionably gullible […]. [T]hey relied implicitly upon the word of the appellant about their requirements in their maisonette. In such circumstances of mutual trust, one party depending upon the other for fair and reasonable conduct, the criminal law may apply if one party takes dishonest advantage of the other by representing as a fair charge that which he but not the other knows is dishonestly excessive.
J, a milkman, was convicted of obtaining property by deception for overcharging for crates of milk. The purchaser regarded J as a friend.
This provision will catch those using stolen credit cards and PIN codes to get money from ATMs, and also those who use such cards to make online purchases. In such cases a defendant could be charged with the theft of the card, and also for using the card to falsely represent to a machine
that they are entitled to withdraw the funds, or are entitled to make a payment for the sum, which D attempts to spend.
What does intention to make a loss or gain mean?
s it is enough that the defendant:
* Intends to make a gain for themselves;
* Intends to make a gain for someone else;
* Intends to cause a loss to another; or
* Exposes someone to a risk of loss.
In R v Dziruni [2008] EWCA Crim 3348 a false representation made with a view to getting a job
could be regarded as intention to make a gain in terms of money.
Reference must be made to s 5 to find the full definition of ‘gain’ and ‘loss’:
(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).
What are the elements of fraud by failure of duty to disclose?
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 loss to another or to expose another to a risk of loss.
The actus reus of fraud by failure to disclose requires:
* Existence of a legal duty; and
* Failure to disclose.
What constitutes a legal duty to disclose?
(a) Arising from statute (such as the provisions governing company prospectuses);
(b) Within a transaction of the utmost good faith (such as a contract of insurance);
(c) Contained in the express or implied terms of a contract;
(d) Arising from a custom in a particular trade or market; and
(e) Arising from a fiduciary relationship (such as that between a principal and agent).
Razoq was a doctor who signed a contract with a locum agency in which he agreed to inform the agency of any disciplinary proceedings against him. When he failed to disclose this information, he was found guilty of s 3 FA on the basis that his legal duty to disclose arose from an express term of a contract.
Mashta was claiming benefits on the grounds of destitution.
During this time, he obtained employment.
He was held to be under a legal duty to disclose the change in his financial circumstances.
What are the elements for fraud by abuse of position?
(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 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.
(2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.’
Fulford LJ agreed with the judge that s 4 should not apply in ‘the general commercial area where individuals and businesses compete in markets of one kind or another, including labour markets, and are entitled to and expected to look after their own interests’. So he concluded that the fact
that the defendants provided accommodation for the workers did not give rise to the relevant position. What was crucial and put them into the required position was that the defendants
assumed responsibility for collecting the workers’ wages.
Although the statute does not provide any assistance on the issue, in our view the
“expectation” in section 4 of the 2006 Act is an objective one. It is for the judge 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.
