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Fraud Charges – Elements to Prove:
The purpose of this document is to provide a brief outline of private prosecutions and the elements to prove in a fraud case where potential offences may lie under the Fraud Act 2006 or conspiracy to defraud. For completeness section 17 Theft Act 1968 is also briefly considered.
Private Prosecutions – General:
A private prosecution is one brought by a private individual or body not acting on behalf of the police or any other statutory prosecuting authority. It was recognised in the case of Gouriet v Union of Post Office Workers  AC 435 that the right to bring a private prosecution was “a valuable constitutional safeguard against inertia or partiality on the part of authority”.
The right to bring a private prosecution is found in section 6 Prosecution of Offences Act 1985. It provides that:
(1) Subject to subsection (2) below, nothing in this Part shall preclude any person from instituting any criminal proceedings or conducting any criminal proceedings to which the Director’s duty to take over the conduct of proceedings does not apply.
(2) Where criminal proceedings are instituted in circumstances in which the Director is not under a duty to take over their conduct, he may nevertheless do so at any stage.
Private prosecutions are commenced by way of a summons. An information (a formal document outlining the proposed charges which the defendant will face) is laid at the Magistrates Court (where all criminal cases commence, regardless of how serious they are). The information is considered by the Magistrates and if it satisfies certain criteria (e.g. is there a prima facie case; is the offence one known in law and does the court have jurisdiction to deal with the matter) a summons is issued. This is served upon the defendant and will state what the charges are s/he is to face and the date s/he is required to attend court.
Should the defendant fail to attend court on the day appointed the prosecutor can ask the court to issue a warrant for his arrest and the defendant will be arrested by the police and brought before the court. Once at court the defendant will then be remanded on bail to attend all future court appointments (or remanded in custody if he is felt to be a flight risk and faces serious charges).
The matter will then proceed through the criminal courts in exactly the same way as a case brought by a public prosecuting authority and will be treated no differently.
Please note however section 6 (2) Prosecution of Offences Act 1985. The Director of Public Prosecutions (DPP, the head of the Crown Prosecution Service (CPS)) has the right to take over a private prosecution if he is satisfied that there is insufficient evidence to support the allegations or if it is not in the public interest to proceed with the matter or if the private prosecution interferes with the investigation or prosecution of another criminal offence.
Potential Offences under the Fraud Act 2006 and Conspiracy to Defraud:
The Fraud Act 2006 came into force on the 15th January 2007. It cannot be used for offences that occurred before this date (unlike section 17 Theft Act 1968 and conspiracy to defraud).
1. Section 2 Fraud Act 2006: 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.
(2) A representation is false if—
(a) it is untrue or misleading, and
(b) the person making it knows that it is, or might be, 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.
(5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).
Elements to prove:
To prove a fraud by misrepresentation the prosecution must prove the following:
i. That the defendant acted dishonestly:
The test for dishonesty is found in the case of R v Ghosh  QB 1053 and is a two stage test. The jury must first be satisfied according to the ordinary standards of reasonable and honest people that what was done was dishonest. If it was not dishonest by those standards the prosecution will fail. If it was dishonest by those standards the jury must then go on to consider whether the defendant himself must have realised that what he was doing was by those standards dishonest.
It is dishonest for a defendant to act in a way which he knows ordinary people consider dishonest even if he asserts or genuinely believes that he is morally justified in acting as he did.
ii. Intention to make a gain or cause a loss:
Gain and loss only extend to gain and loss in money or other property (this would include e.g. money transfers or where a person is tricked into incurring a liability such as under a contract or a guarantee). Gain does not mean making a profit – thus there can be a gain where a person obtains money to which he is entitled (Att.Gen’s Reference (No 1 of 2001)  3 All ER 840). Therefore if a person uses a false representation to trick a debtor into paying money which he is owed he will commit an offence if he acts dishonestly. The gain or loss can be temporary or permanent. It also includes exposing another to loss or to the risk of loss.
iii. Making a Representation which is untrue or misleading:
The offence is committed when the representation is made and must be untrue or misleading. The representation may relate to fact or law and may be made orally or in writing.
iv. The person making the representation must know that the representation is or might be untrue or misleading. In DPP v Ray  AC 370 HL the court held that continuing a representation which is true initially but subsequently becomes false becomes a deliberate deception. This can only be so under section 2 Fraud Act 2006 if the representation is made again once the person making it knows that it has or might have become untrue or misleading.
2. Section 4 Fraud Act 2006: 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) o 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.
Elements to Prove:
i. Occupying a position
The prosecution must show that the person occupied a position in which he is expected to safeguard or not to act against the financial interests of another person. The Act does not specify by whose expectation the position is to be judged. It could therefore be the reasonable member of the public sitting on a jury. Examples given in the Act include the relationship between a trustee and beneficiary; director and company; employee and employer; between partners and within the family.
A person who did not occupy such a position could nonetheless be guilty of section 4 offence as a secondary party such as the beneficiary of a dishonestly awarded contract.
The explanatory notes to the Fraud Act 2006 section 4 state that in relation to fraud by abuse of position:
Section 4 makes it an offence to commit a fraud by dishonestly abusing one’s position. It applies in situations where the defendant has been put in a privileged position, and by virtue of this position is expected to safeguard another’s financial interests or not act against those interests. The Law Commission explain the meaning of “position”:
The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. We see no reason, however, why the existence of such duties should be essential. This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
Abuse is not defined in the Act but it must involve acting contrary to the expectation by which the position is defined and in a way which is possible because of the position. It will include theft in breach of trust and the offence can be committed by omission. The explanatory notes to the Fraud Act explain abuse as follows:
21.The term “abuse” is not limited by a definition, because it is intended to cover a wide range of conduct. Moreover subsection (2) makes clear that the offence can be committed by omission as well as by positive action. For example, an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer, commits an offence under this section.
22. An employee of a software company who uses his position to clone software products with the intention of selling the products on would commit an offence under this section.
23. Another example covered by this section is where a person who is employed to care for an elderly or disabled person has access to that person’s bank account and abuses his position by transferring funds to invest in a high-risk business venture of his own.
Abuse of position (in line with other ways of committing the offences of fraud) need not result in actual gain or loss and extends to exposing a victim to the risk of loss.
iii. Dishonesty and Intent to make a gain or cause loss:
The abuse must be dishonest (please see above) and must be accompanied by the requisite intent as to gain or loss. There is no express requirement that the defendant must know that he is expected to safeguard or not to act against the financial interests of the other person or know that his act or failure to act constitutes an abuse of position. But he must intend that the act/failure to act which the prosecution say constitutes the abuse of position will make a gain/cause loss to another (i.e. not necessarily the person whose interests he’s expected to safeguard).
3. Conspiracy to Defraud:
Conspiracy to defraud is a common law offence (i.e. one not in a statute). The essential element of conspiracy is an agreement between 2 or more persons. A single person can be charged with conspiracy even if the identities of his fellow conspirators are unknown.
In general terms, the agreement must be for a course of conduct to be pursued which if the agreement is carried out will amount to or involve the commission of an offence by one or more of the parties. An intention only by individuals to commit a criminal offence is insufficient to satisfy the prosecution – there must be proof of an agreement between the parties.
To prove conspiracy to defraud the prosecution must prove that there was an agreement by two or more persons to dishonestly prejudice the rights of another or to take the risk of prejudicing another’s right knowing that there is no right to do so (Welham v DPP ).
It is not necessary for the prosecution to prove any intention to deceive the victim or cause him a financial loss. All that is required is a dishonest agreement to expose the proposed victim to some form of economic risk or disadvantage to which he would not otherwise have been exposed. It is not necessary for the fraud to be intended to be perpetrated by the conspirators themselves.
The prosecution must prove that the defendant was dishonest (please see above for the test of dishonesty as set out in R v Ghosh) and that he intended to defraud the proposed victim.
Illustrations of agreements amounting to a conspiracy to defraud include an agreement to conceal a bank’s losses or liabilities from it’s shareholders, creditors and depositors; agreement by company directors to conceal secret profits from the company; agreement to falsify hire purchase or credit applications so as to induce credit companies or other lenders to make loans they might not otherwise be willing to make.
4. Section 17 Theft Act 1968: False accounting.
Section 17 of the Theft Act 1968 states:
(1) Where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another,—
(a) destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or
(b) in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular;
he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years.
(2) For purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.
The prosecution must prove that:
• The defendant acted dishonestly (as defined above);
• Intended to make a gain either for himself (or another person not necessarily the defendant) or cause loss to another. Loss also includes a loss by not getting what one might get as well as a loss by parting with what one has.
• That the document or record which has been falsified/defaced/concealed or destroyed was made for an accounting purpose or required for an accounting purpose. Whether a document is required for an accounting purpose is a question of fact. Thus for example a claim form for housing benefit has been held to be a document required for an accounting purpose.
5. Liability of Company Officers:
Where the “person” in breach of sections 2 to 4 of the Fraud Act 2006 is a body corporate those involved in its management who have consented to or connived in the offence are also guilty of it by virtue of section 12. It is identical in terms to section 18 Theft Act 1968 which states:
Section 18 Theft Act: Liability of company officers for certain offences by company:
(1)Where an offence committed by a body corporate under section 17 of this Act is proved to have been committed with the consent or connivance of any director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, he as well as the body corporate shall be guilty of that offence, and shall be liable to be proceeded against and punished accordingly.
(2)Where the affairs of a body corporate are managed by its members, this section shall apply in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body corporate.
Transactions defrauding creditors.
(1)This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if—
(a)he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;
(b)he enters into a transaction with the other in consideration of marriage [F1or the formation of a civil partnership]; or
(c)he enters into a transaction with the other for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself.
(2)Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for—
(a)restoring the position to what it would have been if the transaction had not been entered into, and
(b)protecting the interests of persons who are victims of the transaction.
(3)In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose—
(a)of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or
(b)of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.
(4)In this section “the court” means the High Court or—
(a)if the person entering into the transaction is an individual, any other court which would have jurisdiction in relation to a bankruptcy petition relating to him;
(b)if that person is a body capable of being wound up under Part IV or V of this Act, any other court having jurisdiction to wind it up.
(5)In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as “the debtor”.