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Fraud 

Chapter:
Fraud
Author(s):

Paul Connor

DOI:
10.1093/law/9780198806387.003.0020
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Subscriber: null; date: 15 August 2018

20.1 Introduction

The Fraud Act 2006 takes a relatively simplistic approach to dealing with offences of fraud. However, this does not mean that understanding fraud offences automatically becomes an ‘easy’ task as a consequence. You must, once again, treat this area of law with respect—particularly as fraud questions are commonplace in the NIE.

20.2 Aim

The aim of this chapter is to provide you with an understanding of the issues surrounding some of the fraud offences contained in the Fraud Act 2006.

20.3 Objectives

  1. 1. Outline the offences under ss. 2, 3 and 4 of the Fraud Act 2006.

  2. 2. Provide examples of how these offences could be committed.

  3. 3. Describe the offences under ss. 6 and 7 of the Fraud Act 2006.

  4. 4. Demonstrate your knowledge of the topic by completing the exercises in this section.

  5. 5. Apply your knowledge to the multiple-choice questions.

20.4 Fraud

20.4.1 Exercise—The Three Fraud Offences

The offence of ‘fraud’ can be committed in three broad ways. What are they?

  1. 1. __________________________________________________________________________________

  2. 2. __________________________________________________________________________________

  3. 3. __________________________________________________________________________________

20.4.2 Exercise—Conduct or Consequence?

Before you examine these offences in a little more detail, attempt to answer the questions in the following exercise.

ERWIN is examining an oil painting on display in an antique shop owned and run by HOWARD. HOWARD approaches ERWIN and asks him if he is interested in the painting to which ERWIN responds, ‘Yes I am’. HOWARD states, ‘Well I’m afraid it will cost you a great deal as this is by John Gordan who I’m sure you know is a famous local artist.’ When HOWARD tells ERWIN the painting is by John Gordan he is lying as he knows that it is not, and is intending to make far more money on the sale of the painting than he should.

  1. 1. ERWIN knows that HOWARD’s statement is a lie but he likes the painting so buys it from ERWIN at ERWIN’s asking price. Is this an offence of fraud?

    • Yes / No

  2. 2. ERWIN does not rely on HOWARD’s statement but actually arrived at the incorrect conclusion it was a John Gordan painting from his own observations. Is this an offence of fraud?

    • Yes / No

  3. 3. As HOWARD tells ERWIN the painting is by John Gordan, ERWIN is intently examining the painting and is not listening to HOWARD. He does not hear HOWARD’s comment and pays the asking price for the painting. Is this an offence of fraud?

    • Yes / No

20.4.3 Exercise—Common Elements in the Definitions

The definitions under ss. 2, 3 and 4 of the Fraud Act 2006 contain two very important common elements. What are they?

  1. 1. __________________________________________________________________________________

  2. 2. __________________________________________________________________________________

20.4.4 Dishonesty

The test for ‘dishonesty’ for the purposes of fraud offences is that established in the case of R v Ghosh [1982] QB 1053. You have dealt with this test in the ‘Theft’ section of the Investigators’ Manual and also this Workbook. It is no different in fraud.

20.4.5 Gain and Loss

Gain and loss in fraud, although referred to in the offences under ss. 2, 3 and 4, is specifically defined by s. 5 of the Act. This is a similar position to that you examined when considering the offence of blackmail. The beauty of this previous work is that if you understand ‘gain and loss’ for the purposes of the offence of blackmail then you also understand it for the purposes of the offence of fraud because it is exactly the same. The key issue to remember is that ‘gain and loss’ is all about ‘money and other property’ and so just like blackmail, fraud is an economic offence.

20.5 Fraud by False Representation

There is quite a lot going on with the definition of the offence of fraud by false representation under s. 2 of the Act but if you look at the title and consider our common elements you have the ‘heart’ of the offence:

What is of critical importance when considering this offence are the words ‘false representation’.

20.5.1 Exercise—False Representation

Consider the following comments on the term ‘false representation’ and answer the associated questions.

  1. 1. In order to be a ‘false representation’ the representation must be untrue. A representation will not be false if it is merely misleading.

    • True / False

  2. 2. A representation will only be false if the person making it knows that it might be untrue.

    • True / False

  3. 3. A false representation will always require some form of verbal communication to take place otherwise the representation is not made.

    • True / False

  4. 4. A broken promise is a false representation.

    • True / False

  5. 5. A false representation can be made to a machine.

    • True / False

  6. 6. If a false representation is made before, during or even after property has been passed to the victim, the offence will still be committed.

20.6 Fraud by Failing to Disclose

Once again you can include the common elements along with the title of the offence but you must remember that a person will only commit this offence if they are under a legal duty to disclose information.

20.6.1 Exercise—Legal Duty

You are best to approach this from a common sense perspective. What kind of relationships do you think would create a ‘legal duty’?

Give three examples:

  1. 1. __________________________________________________________________________________

  2. 2. __________________________________________________________________________________

  3. 3. __________________________________________________________________________________

20.7 Fraud by Abuse of Position

Taking the standard approach to the definition we can include the title, dishonesty and gain and loss along with the specifics of the offence.

20.7.1 Exercise—Abuse of Position?

Consider the following scenarios and decide whether there has been an abuse of position amounting to this offence—explain your reasons.

  1. 1. CARTER is the manager of a pub owned by a brewery. CARTER purchases several cheap barrels of beer from a friend of his and brings them to the pub. He attaches the barrels to the pumps at the pub and sells his own beer at a cheaper price than normal pub prices, making a profit for himself as a consequence.

    • Abuse of position?

    • Yes / No

    • Why / Why not?

    • ____________________________________________________________________________________

  2. 2. MILES works in a care home and is entrusted by TRANT (an elderly resident of the home) to look after her financial affairs. MILES takes a large amount of money from TRANT’s account to bet with, hoping to win as a result. MILES wins, keeps the winnings and returns the money in full to TRANT’s account.

    • Abuse of position?

    • Yes / No

    • Why / Why not?

    • ____________________________________________________________________________________

  3. 3. LANGHAM works for a company which sells shares in high-risk markets to wealthy customers. As the shares are invested in fragile markets, those markets need to be closely monitored so that the shares can be bought and sold at a moment’s notice. LANGHAM is supposed to monitor those markets and sell shares quickly to minimise losses to customers but after an argument with his boss he decides to play a computer game on his laptop all day. Fortunately, the markets are quiet that day and the customers of the company suffer no loss.

    • Abuse of position?

    • Yes / No

    • Why / Why not?

    • ____________________________________________________________________________________

20.8 Possession or Control of Articles for Use in Frauds

20.8.1 Exercise—True or False?

Answer the following questions regarding this offence.

  1. 1. This offence can be committed anywhere except a person’s home.

    • True / False

  2. 2. ‘Possession or control’ means that distance becomes important—you could not have ‘control’ over something 50 miles away from where you are.

    • True / False

  3. 3. Programs and data held in electronic form are covered by the term ‘article’.

    • True / False

  4. 4. The offence covers articles that could be used in all types of fraud.

    • True / False

  5. 5. The offence would not cover a credit card that had been used to commit offences of fraud by false representation.

    • True / False

  6. 6. The offence would cover a person possessing a credit card reader intending to allow her friend to use it to commit fraud offences.

    • True / False

  7. 7. Possessing a forged passport to use in connection with but not to actually commit a fraud offence, would be covered.

20.9 Making or Supplying Articles for Use in Frauds

This is another one of those ‘catch all’ offences where pretty much every kind of activity has been covered.

The word ‘article’ is used again and you should take the same approach to this as in the previous offence of possession or control of articles for use in frauds, i.e. an article is ANYTHING. Even an innocuous article is covered if the person making it or supplying it intends it to be used in some way in fraud.

The situation with ‘supply’ and ‘offer to supply’ is exactly the same as it would be in relation to offences under the Misuse of Drugs Act 1971 and these activities are discussed in more depth in the ‘Misuse of Drugs’ section of your Manual and also this Workbook.

See Investigators’ Manual, para. 3.8.8

20.10 Conclusion

Having completed this section of the Workbook, you should be able to identify the connections between the major fraud offences and, of course, their differences. You should also be able to see how other legislation can assist you to understand Fraud Act 2006 offences. You should pay particular attention to the examples given in this section of the Workbook as well as those in the Manual as they may figure in any questions on fraud in the NIE.

20.11 Recall Questions

Try and answer the following questions.

  • What does FAD stand for?

  • What is the major difference between the offences under the Fraud Act 2006 and previous Theft Act 1968 ‘deception’ offences?

  • What is the most important thing you should remember about ‘gain and loss’?

  • What does ‘dishonestly’ mean for fraud?

  • What is a ‘false representation’?

  • What is the one limitation of the offence of possessing or controlling articles for fraud?

20.12 Multiple-Choice Questions

Answers to these questions can be found in the ‘Answers Section’ at the end of the book. All explanations also include a reference back to the Investigators’ Manual 2018.

1. BRADNICK is struggling to pay her mortgage and she is cutting corners in every aspect of her life to save money. BRADNICK has parked her car in a pay-and-display multi-storey car park and on leaving the car park hands over her parking ticket to RICE who is working in the pay booth at the car park exit. RICE tells BRADNICK her parking costs £20. Attempting to get a reduction on the price of the car parking BRADNICK says, ‘I thought nurses like me only had to pay £5’ (BRADNICK is not a nurse). RICE is not fooled by BRADNICK and realises that she is trying to ‘con’ him. He tells BRADNICK that there is no such discount and the full fee needs to be paid. BRADNICK reluctantly pays the fee and drives off.

Considering the offence of fraud by false representation (contrary to s. 1(2) of the Fraud Act 2006), which of the following comments is correct?

  1. A BRADNICK does not commit the offence because RICE was not fooled into thinking she was a nurse.

  2. B BRADNICK has committed the offence.

  3. C BRADNICK does not commit the offence because she did not obtain any financial gain from her activities.

  4. D BRADNICK has not committed the full offence although this is an attempted fraud in the circumstances.

Answer _____________________________

2. HAMMERTON is a financial advisor and has an oral contract with URWIN to provide URWIN with financial advice (the contract creates a legal duty for HAMMERTON to advise URWIN). Part of URWIN’s financial portfolio includes £100,000 worth of shares in a Far East car manufacturing company. HAMMERTON is provided with information by the car manufacturing company that they are in difficulties due to a problem with a new car they have designed and as a consequence the share prices in the company are highly likely to drop significantly. HAMMERTON has never really liked URWIN and so, intending to cause URWIN to lose money on the shares, he keeps this information to himself. As it happens, the market does not react badly to the announcement by the car manufacturing company and the share price remains exactly the same.

Taking into account the offence of fraud by failing to disclose (contrary to s. 3 of the Fraud Act 2006) which of the following comments is true?

  1. A The fact that HAMMERTON exposed URWIN to a potential loss in this way means that he has committed the offence.

  2. B HAMMERTON has not committed the offence as the contract that he has with URWIN is not a written one.

  3. C The offence has not been committed as no loss was actually caused to URWIN.

  4. D HAMMERTON has not committed the offence as he did not intend to make a gain for himself or another.

Answer _____________________________

3. VALE is a career criminal with a string of convictions for fraud-related offences. He intends to carry out a number of fraud offences in the near future and has assembled a variety of items to assist him in this task. He is sitting in the lounge of his house, examining a number of blank forged credit cards he has obtained. He considers that they are of good quality and that he will actually be able to use the cards in fraud offences. VALE decides to use a machine he has in his car (which is parked outside his house) to stamp false details into the cards. He considers that he may need other items to assist him and remembers that he has several forged driving licences and passports in a storage unit 10 miles from his home. He decides that he will collect these items as a ‘back up’ to use if anyone challenges his identity when he commits the offences.

Considering the offence of possession or control of articles for use in fraud (contrary to s. 6 of the Fraud Act 2006), which of the following statements is correct?

  1. A VALE commits the offence but only in relation to the forged credit cards as these are the only items that will actually be used to carry out fraud offences.

  2. B VALE commits the offence in relation to the forged credit cards and the machine in his car but not the identification documents.

  3. C VALE commits the offence in relation to all of the items (forged credit cards, stamp machine and identity documents).

  4. D VALE does not commit the offence in this scenario.

Answer _____________________________

4. ROTHWELL works for WebSaints, a computer software company. He has an argument with the owner of the company and feels insulted and undervalued and decides to leave the company. Before he leaves, he decides he will have his revenge on his employer in some way. In the week before he tenders his resignation, he is contacted by JONES who works for another computer company. JONES asks if WebSaints can do some work for his company which will mean a large income for WebSaints. ROTHWELL lies to JONES and tells him that WebSaints cannot do the work and he should try another company called Net Inc who will do the work at a cheaper price, intending that WebSaints will lose money. ROTHWELL then clones a large amount of software owned by WebSaints with the intention of selling the software on to any buyer he can find.

In relation to the offence of fraud by abuse of position (contrary to s. 4 of the Fraud Act 2006), which of the following statements is correct?

  1. A ROTHWELL commits the offence when he lies to JONES and also when he clones the software products.

  2. B ROTHWELL commits the offence but only when he lies to JONES.

  3. C ROTHWELL commits the offence but only when he clones the software products.

  4. D The offence is not committed in these circumstances.

Answer _____________________________