Fraud

What is Fraud?

  • The offence of fraud is extremely wide concept of which includes a wide range of offences. The Fraud Act 2006 covers obtaining or attempting to obtain a property such as cheques or other financial advantage by fraud.
  • The Act also covers fraud in any commercial context including fake mortgages and life insurance applications, fraudulent use of credit cards and also electronic and internet fraud.

Breaches of Fraud

A person is guilty of fraud if he is in breach of any of the sections listed:

1) Fraud by False Representation,

2) Fraud by Failing to Disclose Information and,

3) Fraud by Abuse of Position

 

An Introduction into Fraud

  • The offence of fraud is, essentially, one of dishonest representation.
  • Fraud is not defined by law and is subsequently based on dishonesty.
  • Fraud is a conduct offence and therefore, does not depend on the victim being induced to believe in the fraud.

Key concepts of fraud such as dishonesty and property continue to be defined in accordance with the Theft Act 1968 and the Ghosh Test.

 

Guilty of Fraud

A person who is guilty of fraud is liable

  • On summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);
  • On conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).

Breach of Fraud by False Representation

A person is in breach if they:

  1. dishonestly makes a false representation, and
  2. intends, by making the representation:
  • To make a gain for himself or another, or
  • To cause loss to another or to expose another to a risk of loss.

A representation is false if:

  1. It is untrue or misleading, and
  2. The person making it knows that it is, or might be, untrue or misleading.

State of Mind

“Representation” means any representation as to fact or law, including a representation as to the state of mind of:

  • The person making the representation, or
  • Any other person.

Express or Implied Representation

A representation may be either express or implied.

For the purposes of this section a representation may be regarded as made if it is submitted in any form implied or expressly to any system or device designed to receive, convey or respond to communications (with or without human intervention).

Fraud by false representation consists of two elements; actus reus and mens rea.

Actus reus

Definition:

  • Actus reus is defined by law as the prohibited conduct or behaviour which the law seeks to prevent.
  • Actus reus or ‘guilty act’, includes all aspects of the crime except the accused’s mental state, it is simply just the act.

Actus Reus of False Representation

A representation is a statement or an:

  • Assertion of fact
  • Law
  • Intention or
  • Opinion which is important in the transaction at hand.

What is a False Representation?

A false representation is simply:

  • A false statement
  • Trick
  • ‘Con’ or
  • Lie.

A false representation can be made:

  • Verbally
  • In writing, or
  • By omission or conduct.
  • Face to face,
  • Through a machine, for example a computer, automated cash-dispenser or a chip and PIN machine
  • Whichever form the false representation takes it must be made by the defendant.

The False Representation under The Fraud Act 2006

  • False is defined as being misleading or untrue.
  • There could be many aspects that could potentially be untrue. For example, buying and selling have the potential to be misleading as does advertisements.

Example

The defendant steals a Credit Card and goes to a resturant, upon reciving the bill the defendant uses the stolen card to pay.

The representation in this example is of an implied nature. As the waitress was under the impresson that the Credit Card owner is the defendant, and that they have the right to use the card. The defendant implidly mislead the watiress by omitting the fact that it is not his Credit Card in staying silent.  

By Making the Representation

The victim no longer needs to rely on the false representation, however, there needs to be a link between the false representation and defendant’s intention. The Act requires that by making the false representation the defendant intends to gain or cause a loss to another.

Representation as to Fact, Law and State of Mind

The most common false statements of fact concern goods being sold at really cheap prices, for example in a market place.

Example

A shop keeper makes a statement ‘this ring is 100% gold’, when the ring is in fact brass.

Note: Sometimes though it may be hard to distinguish facts from opinion: ‘In my opinion this ring looks to be gold’ which would be an opinion. However, ‘this ring looks as good as gold’ could be a statement of fact or an opinion.

Mens Rea of False Representation

The defendant must know that the representation was false or that it may be false and that the defendant acted dishonestly with the intention to gain or cause a loss.

There are three parts to the mens rea of fraud regarding the guilty state of mind of the offender. These are;

  1. Dishonesty, and
  2. Knowingly that the representation is or may be false, and
  3. With the intention to gain or cause a loss to another or to expose another to a risk or loss by false representation.

By Making the Representation

The victim no longer needs to rely on the false representation, however, there needs to be a link between the false representation and defendant’s intention. The Act requires that by making the false representation the defendant intends to gain or cause a loss to another.

Dishonesty

  • Under these circumstances the jury are left with the Ghosh test to decide on whether the accused is guilty of dishonesty through false representation.

Knowing the Representation Is or May Be False

This is much demanded than belief or suspicion, this part of the mens rea is intended to cover, knowledge of future facts.

With the Intention to Gain or Cause a Loss to Another or to Expose Another to a Risk or Loss by False Representation

The defendant’s false representation must be made with the intention to make a gain or cause a loss, or by exposing the victim to a risk.

Note that temporary deprivation is included in the definition of “loss”.

Fraud by Failing to Disclose Information

A person is in breach of fraud by failing to disclose information if:

  • They dishonestly fail to disclose information to another person which he is under a legal duty to do so, and
  • Intention, by failing to disclose the information to make a gain for himself or another, or
  • To cause loss to another or to expose another to a risk of loss.

Legal Duty to Disclose Information

The circumstances in which one is under a legal duty to disclose information are and not exclusive to:

  • Insurance contracts,
  • Statutory obligations in respect of company prospectuses and reports,
  • The express and implied terms of a contract,
  • Where there is a fiduciary relationship between parties. (A fiduciary relationship is one of trust and confidence).

If there is no legal duty to disclose, then the conduct will not be caught in this section. This section does not cover moral duties to disclose or moral/financial exploitation.

Fraud by Abuse of Position

A person is in breach of fraud by abuse of position if they:

  1. Occupy a position in which he is expected to safeguard, or not to act against the financial interests of another person; and
  2. Dishonestly abuse that position; and
  3. Intends, by means of abusing the position:
  • To make a gain for himself or another, or
  • To cause loss to another or to expose another to a risk of loss.

A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

Definition of Position

The word ‘position’ is not defined by law for this provision. However, a person in a position of trust will be included. A person in a position of trust would for example include;

  • Professional and a client
  • Trustee and a beneficiary
  • Director and a company
  • Partner or a councillor.

A person in the position of trust has the ability to abuse their position.

Gain and Loss

‘Gain’ and ‘loss’ are:

  • Extend only to gain or loss in money or other property, and
  • Includes any such gain or loss whether temporary or permanent

‘Gain’ includes a gain by keeping what one has, as well as a gain by getting what one does not have.

‘Loss’ includes a loss by not getting what one might have gotten, as well as a loss by losing what one has.

Definition of Property and Trade Secrets

‘Property’ means any property whether real or personal (including intangible property).

  • The exact limitations will apply in respect to land and intangible property, as well as to trade secrets.
  • Regarding trade secrets is that any persons committing a fraud, is interested in the financial advantages that they may secure, and not the information.
  • Conspiracy to defraud would apply to agreements to obtain trade secrets.

Obtaining Services Dishonestly

A person is guilty of an offence if they obtains services for themselves or another:

  • By a dishonest act, and
  • If a person obtains services in breach;
    • The service was made available on the basis that payment has been, is being or will be made for or in respect of the defendant,
    • The defendant obtains them without any payment having been made for or in respect of them or without payment having been made in full, and
    • When the defendant obtains them, knows:
  1. That they are being made available on the basis described above or,
  2. That they might be,
  3. BUT the defendant must intend that the payment will not be made, or will not be made in full.

A person guilty of an offence under this section is liable:

  • On summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);
  • On conviction on indictment, to imprisonment for a term not exceeding 5 years or to a fine (or to both)
  • This applies in relation to Northern Ireland as if the reference to 12 months were a reference to 6 months.

Actus Reus of Fraud through Dishonesty

  • Obtaining (act not omission)
  • Service that requires payment
  • Failure to pay in full

Mens Rea of Fraud through Dishonesty

  • Knowledge that services require payment
  • Dishonesty
  • Intent to avoid full or part payment at the time of obtaining
The defendant must obtain a service that requires payment. The defendant’s dishonest act must cause them to obtain such service. An omission is insufficient. The defendant must intend to not pay in whole or in part at the time of obtaining the service.Services under this Act include but not exclusive to:
  • Bank
  • Building Society
  • Credit card services.
ExampleThe defendant climbs over the wall of a football ground to watch a match without paying. The defendant has acquired a paid service without paying for it knowingly.

The Ghosh Test

This is the test for dishonesty within theft. Following the decision in R v Ghosh the jury should if necessary be directed to apply the test:

“Was what the defendant did dishonest by ordinary standards of a reasonable honest people.”

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

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