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You are here: BAILII >> Databases >> The Law Commission >> FRAUD [2002] EWLC 276(APPENDIX B) (01 July 2002) URL: http://www.bailii.org/ew/other/EWLC/2002/276(APPENDIX_B).html Cite as: [2002] EWLC 276(APPENDIX B)

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APPENDIX B

SUMMARY OF PROPOSALS MADE PRIOR TO CONSULTATION PAPER NO 155

Working Paper No 56

B.1      In our report Criminal Law: Report on Conspiracy and Criminal Law Reform,^[1] published in 1976, we recommended the abolition of common law conspiracy (a recommendation that was implemented by the Criminal Law Act 1977), but made an exception for conspiracy to defraud because its abolition would have left unacceptable lacunae in the law. We had made provisional proposals for the filling of those lacunae in 1974, in Working Paper No 56.^[2] In the economic field,^[3] they would have involved criminalising

(1) the unlawful taking of property, without deception, which has the effect of depriving the victim of the charge that he or she would have made for the use of the property;

(2) the fraudulent manipulation of machines which enable a person to obtain by payment a service or facility;^[4] and

(3) the use, with intent to make a gain or cause a loss, of any fraud or ill-practice to affect the outcome of any game or event, upon which anyone stands to lose or gain money, whether as a participant or by betting on the outcome;

but not

(4) taking without deception those kinds of property which cannot normally be stolen;^[5] or

(5) commercial practices by which loss is caused without deception.

Working Paper No 104

B.2      In 1987 Working Paper No 56 was superseded by a further working paper on conspiracy to defraud,^[6] in which we set out a number of options but did not express a preference. The main options we considered were:

(A) retention of the present law;

(B) the replacement of common law conspiracy to defraud with a statutory offence of conspiracy to defraud (not necessarily as wide as the common law offence);

(C) the creation of new discrete offences, each concerned with different areas of fraudulent conduct, together with the revision of some existing statutory offences; and

(D) the creation of a general offence of fraud, capable of being committed by an individual acting alone – that is, a general dishonesty offence.

B.3      Option (C), we suggested, might involve

(i) the extension of the definition of "deception" to cover the deception of a machine;

(ii) the extension of fraudulent trading to unincorporated business organisations;

(iii) the creation of a new offence (in place of section 17 of the Gaming Act 1845) of dishonestly, and with a view to gain or intent to cause loss, affecting (a) the outcome of any event upon which anyone stands to lose or gain in money or money's worth, or (b) the amount which stands to be lost or gained by betting on the outcome of any such event; and/or

(iv) the creation of a new offence of making or supplying an article which the defendant knows or believes is likely to be used in the commission of any offence involving fraud.

We expressed the provisional view that, if option (C) were adopted, no new offence (or extension of any existing offence) would be required in relation to the acquisition of confidential information by dishonest means; the making, by a person in a fiduciary position, of secret profits from the abuse of that position; or dishonestly inducing a person performing a public duty to act contrary to that duty. The main advantage of this option, we said,

is that it is consistent with generally accepted principles of the substantive criminal law. The main disadvantage is that it would share few, if any, of the advantages attaching to conspiracy to defraud and could make the prosecution of fraudsters more difficult.^[7]

Law Com No 228

B.4      We returned to these issues in 1994, in our conspiracy to defraud report. We there concluded that conspiracy to defraud adds substantially to the reach of the criminal law in the case of the following kinds of conduct (or planned conduct), all of which we thought should, at least in certain circumstances, be criminal:

(1) the "theft" of land and other property which cannot normally be stolen;

(2) some (but not necessarily all) cases in which the owner of property is temporarily deprived of it;

(3) the dishonest appropriation of property which does not "belong to another" within the meaning of the Theft Act;^[8]

(4) the making of secret profits by employees and fiduciaries;^[9]

(5) the obtaining without deception^[10] of benefits other than property (eg services);

(6) the evasion of liability by deception, without intent to make permanent default;^[11]

(7) dishonest failure to pay for goods or services;^[12]

(8) gambling swindles;

(9) breach of an agent's duty to his or her principal, which is not (or cannot be proved to be) corrupt within the meaning of the Prevention of Corruption Acts in the sense that a bribe has been paid or is expected;

(10) the causing of "prejudice" to another which does not involve financial loss;^[13]

(11) assisting in fraud by third parties;^[14] and

(12) cases in which a party is ignorant of the details of the fraud.^[15]

We did not, however, recommend the extension of the criminal law so as to bring any such conduct within its reach.^[16]

B.5      We added that conspiracy to defraud is also relevant to the criminal law relating to the unauthorised collection or disclosure of confidential information, but expressed no opinion on whether it is right that this should be so. We discussed this issue at length, however, and made provisional proposals to criminalise such conduct in certain circumstances, in Consultation Paper No 150. We hope to return to the issue of confidential information following the publication of this report. If such conduct is to be criminal at all, in our view it should be covered by tailor-made legislation rather than the general law of fraud.

Note 1    Criminal Law: Report on Conspiracy and Criminal Law Reform (1976) Law Com No 76.    [Back]

Note 2    Criminal Law: Conspiracy to Defraud (1974) Working Paper No 56.    [Back]

Note 3    In the non-economic field, they would have involved criminalising (1) the making of false statements in relation to legislative schemes; (2) fraudulently inducing non-fulfilment of statutory duty; (3) fraudulently obtaining the grant of a licence, certificate, permission or the like; (4) fraudulently obtaining membership of an organisation which confers, or confers a prerequisite to, some qualification; (5) fraudulently obtaining information; and (6) fraudulently obtaining overdraft facilities; but not (7) fraudulently obtaining membership of a purely social organisation; (8) making false statements to hamper the investigation of contraventions of the law; or (9) fraudulently obtaining entry to premises where no charge is made for entry.    [Back]

Note 4    “This conduct should be penalised by specific legislation as required in particular instances”.    [Back]

Note 5    Land, things growing wild, and game.    [Back]

Note 6    Working Paper No 104. We explained at para 1.7 that “It had been the Commission’s intention to follow up the proposals in Criminal Law: Conspiracy to Defraud, Working Paper No 56 with final recommendations, but progress was held up by the need to complete work on other projects and for other reasons. There have been a number of substantial changes and developments in the law since then which means that many of the original proposals require reconsideration. More importantly, however, it has become evident that in formulating those proposals insufficient weight was given to the procedural and other advantages in being able to charge conspiracy to defraud which must now be taken into account if a satisfactory reform of the law in this field is to be achieved. In the light of these matters we decided to initiate further consultation. This working paper therefore supersedes the earlier paper …”.    [Back]

Note 7    Para 14.16.    [Back]

Note 8    Eg Preddy [1996] AC 815.    [Back]

Note 9    But, as the report pointed out, in view of the Privy Council’s decision in A-G for Hong Kong v Reid [1994] 1 AC 324 this is arguably theft.    [Back]

Note 10    Or by “deceiving” a machine, which in law does not count as deception.    [Back]

Note 11    That is, deceiving a creditor into allowing more time to pay, with the intention of paying the debt in full eventually. This is not an offence under s 2 of the Theft Act 1978.    [Back]

Note 12    This is criminal only if (a) payment “on the spot” is required or expected, (b) the defendant “makes off” without paying, and (c) the defendant intends never to pay: Theft Act 1978 s 3, as interpreted in Allen [1985] AC 1029.    [Back]

Note 13    Eg Welham [1961] AC 103, where forged documents were used to evade statutory credit restrictions.    [Back]

Note 14    Eg Hollinshead [1985] AC 975, where the defendants sold “black boxes” designed to impair the proper functioning of electricity meters and thus enable the user to defraud the electricity supplier. This point is now being dealt with in the context of our separate project on assisting and encouraging crime.    [Back]

Note 15    We explained: We have been informed by a number of prosecutors of cases in which it is clear that substantive offences have been committed in the furtherance of a fraudulent scheme, but it is doubtful whether persons on the fringe of the scheme can be charged as parties to those offences, or to conspiracies to commit them, because there is insufficient evidence that they knew the details of what was planned. In a mortgage fraud, for example, if a number of defendants are charged with a substantive offence of deception, or with conspiracy to commit such an offence, the prosecution must prove that each defendant knew what form the deception was to take and how the desired benefit was to be obtained – for example, in the case of a conspiracy to procure the execution of valuable securities by deception, what valuable securities were to be procured. It would not be sufficient to prove, against a particular defendant, that he knew in general terms that something dishonest was going on but was not sure of the details. On a charge of conspiracy to defraud, however, this would be enough: fraud requires only the dishonest causing of prejudice, and one can therefore be a party to it without any detailed knowledge of how the prejudice is to be caused. … We believe that liability should extend, and should be clearly understood to extend, to a person who knowingly participates in a fraud without knowing exactly what substantive offences are to be committed, or how, or against whom. (paras 4.69 – 4.72) Again, this issue is more appropriately dealt with in the context of our work on assisting and encouraging crime generally, rather than as a problem peculiar to fraud.    [Back]

Note 16    With the exception of our recommendation, implemented by the Theft (Amendment) Act 1996, that section 1 of the Theft Act 1978 be amended so as to make it clear that the obtaining of a loan can constitute the obtaining of services.    [Back]