The Fraud Act 2006: Has It Had Any Impact?

The Fraud Act 2006, which represents the most radical

change in the law of criminal fraud since the Theft Act 1968, came

into force on January 15, 2007. We are now over a year into the new

law, which seems a reasonable juncture to pose the question: has it

had any impact?

INTRODUCTION

It may simply be too early to tell what impact, if any, the

Fraud Act 2006 has had; its provisions do not apply

retrospectively, which means that only conduct which has taken

place entirely since January 15, 2007 can be prosecuted under the

new provisions. If we factor in the length of time which

investigations and prosecutions typically take, it is obvious that

the first major trials are only likely to be before the courts in

the coming months. There is then a further delay, of course, until

any cases are heard in the appeal courts, meaning there is a

paucity of reported cases, as well as a significant delay in the

publication of any useful prosecution and conviction

statistics.

I would ask instead, what impact can the Act be expected to

make? What are the problems and what were the solutions, both in

theory and in practice, based on what little anecdotal evidence

there is? I will therefore consider:

problems with the "old" law;

whether the Act can solve these problems;

that case law under the Act which does already exist;

prosecutorial attitudes towards the Act;

defence perspectives on the Act; and finally

other recent measures which may have an impact on fraud.

THE OLD LAW

The problems with the old law have been rehearsed many times

before; the Fraud Act was the response to long and sustained

criticism from the judiciary, practitioners and academics.

The overriding criticism of the law as it then stood was that

there were too many specific fraud offences, defined with reference

to different types of consequences and it was not always easy to

identify which offence to charge, and often, even less easy to

secure a conviction. This in turn led prosecutors, wherever

possible, to a rely heavily upon the common law offence of

conspiracy to defraud.

The specific nature of the law invited technical arguments. The

prime example of the problem arose in 1996 when section 15 of the

Theft Act 1968 (obtaining property belonging to another by

deception) came under judicial scrutiny in the case of

Preddy [1996] AC 815. The case concerned good old

fashioned mortgage fraud in which the defendants had obtained

mortgages from lenders on the basis of false representations.

The Court of Appeal held that where D dishonestly, and by

deception, procured a transaction whereby V's bank account was

debited and consequently there was a credit to D's account, D

had not obtained property belonging to another by deception. The

debt owed by V's bank to V had been extinguished, and what D

obtained was a newly created debt owed by his bank to him, not

property belonging to another. One chose in action had been

extinguished and another created; although a chose in action is

capable of being appropriated by another, here there were two

separate legal rights, not a single piece of property. This is fine

from a jurisprudential point of view and very neat logical

thinking, but a disaster in Magistrates' and Crown Courts

throughout the country.

The introduction of the new section 15A to the Theft Act 1968 by

the Theft (Amendment) Act 1996 followed very swift consultation on

the issue. Fears ran out across the legal and banking worlds that

those "appropriating" bank balances were now immune from

prosecution since no offence in the criminal calendar was able to

tackle the behaviour. Section 15A, which created a new offence of

obtaining a money transfer by deception, was intended to close the

Preddy loophole, by removing the requirement to show that

property "belonging to another" was obtained, in that as

long as a balance was transferred as a result of the deception it

did not matter that it was not the same legal property that was

obtained.

However, even this solution demonstrated the very problem from

which our criminal law suffered, namely that piecemeal reform did

nothing to tackle its over-technical nature and instead exacerbated

the problem of too many, over-specific offences. For example, the

1968 Act had already been amended by the Theft Act 1978 which

created new offences of obtaining services by deception, evasion of

a liability by deception, and making off without payment. The Theft

Act 1968 had itself been an attempt to codify and simplify a

complex web of offences created by the Larceny Act 1916. It is

almost as if legislators have a long and distinguished history of

over-complication in this area.

There were also difficulties with charging attempts. D attempts

to get a bank cashier to hand over money from an account; the

cashier is suspicious and refuses: D does not during this stage of

the process stipulate how he would like the transaction effected.

Had the deception worked, and depending upon what D had intended to

go on to say, the cashier could have either given cash, a cheque or

transferred money between accounts. There was certainly an attempt,

but of which offence?

The same could be said for conspiracies, although there are the

authorities to the effect that an agreement to commit either one or

another crime, although unlikely, is possible: Hussain

[2002] 2 Cr App R 26.

All these were certainly issues, but the most acute problem

which the Fraud Act 2006 was intended to remedy was the focus on

the mind of the victim, rather than the mind of the offender. Under

the old law it was necessary to prove that the deception had acted

on the victim, for example that he/she would not have parted with

the goods but for the deception. This increasingly created

difficulties as technology developed and the use of credit cards

and payment through machines or over the internet became

prevalent.

If, for example, payment is made by credit card with the vendor

receiving payment immediately from the card issuer, it may be that

the vendor does not really care whether or not the purchaser had

authority to use the card and does not give the matter any thought.

Although the House of Lords held that it was possible to infer that

the merchant did not wish to be a party to a fraud on the card

issue, and therefore that the deception could be inferred

(Charles [1977] AC 177 and Lambie [1982] AC 449),

what would happen if the merchant gave evidence that he did not

care? This was a tactic defence practitioners often deployed

(myself included): cross examination of the victim to demonstrate

that they gave no thought what so ever to the question of

representations, express or implied, and therefore any

misrepresentation did not "operate" upon their mind and

hence the property was not obtained as a result of any

deception.

There was also the problem that a machine, such as a ticket

machine at a railway station, does not have a "mind",

cannot think and therefore cannot be deceived: Holmes v The

Governor of Brixton Prison and another [2004] EWHC 2020.

A further problem resulting from the focus on the mind of the

victim rather than the offender was that, although a failure to

disclose may be as harmful and culpable as making a representation,

it was difficult for prosecutors to successfully imply a

representation from silence. People in positions of trust do not

need to make false representations to get what they want. They can

simply misuse what they have been entrusted with. A well known

example is that of the manager of a pub who sold his own beer on

his employer's premises; he was not guilty of theft and was not

guilty of conspiracy to defraud, because he was acting alone:

AG's Ref (No 1 of 1985) [1986] QB 491. However, two

employees who sold their sandwiches in place of British Rail ones

were guilty of conspiracy to defraud, as they acted together:

Cooke [1986] AC 909. The law created an anomalous

situation in which an act was capable of prosecution when carried

out by more than one person, but not when carried out by someone

acting alone.

Other problems included the fact that fraud (in the lay sense)

is not always committed with an obvious view to gain. There was no

offence of obtaining services without a deception, so jumping over

a turnstile at a football match could not easily be charged. In

addition to offences involving an element of deception or

"fraud" in the everyday sense, the Fraud Act 2006 was

also designed to deal with other specific lacunae in the existing

law such as these. The offence of going equipped to steal only

applied if the person was found with the necessary equipment

outside their own home, meaning it was legal to have, for example,

skimming devices at home. Fraudulent trading needed a corporate

entity: there was a potential injustice where a fraudster sought to

give the appearance that he was trading through a company but did

not go through any of the formalities of acquiring one.

Having noted these elements of the Fraud Act 2006 I am afraid I

must pass over them when considering whether the Act as a whole has

had any impact of fraud and instead I will focus on fraud in the

more everyday sense.

PROBLEMS SOLVED?

The new Act, which arises out of the Law Commission Report of

2002, goes back to the pre-1968 idea that it is not what the result

of conduct is, or its effect on the victim, which is important, but

rather the intention of the fraudster and what he/she actually

did.

The Act repeals all the deception offences in the Theft Acts of

1968 and 1978 and replaces them with a single offence of fraud (s

1), with a maximum sentence of 10 years imprisonment, which can be

committed in three different ways by:

false representation (s 2);

failure to disclose information when there is a legal duty to

do so (s 3); or

abuse of position (s 4).

The idea of having one offence of fraud, which can be committed

in three ways, seeks to sweep away the technicalities which beset

the old law by capturing the base elements of fraud, but in a

manner which is...