The Fraud Act 2006: An Overview

• The chapter focuses on applying legal principles and rules to client-based fraud scenarios for newly qualified solicitors.
• Students do not need to recall specific case names/cite statutory or regulatory authorities, these are for illustrative purposes only.
• Learning outcomes include defining fraud and identifying the three ways it can be committed.

Introduction to Fraud

• According to the National Crime Agency, fraud is the most commonly experienced offence in the UK.
• Fraud victims range from individuals to businesses and the public sector.
• The annual cost of criminal activity as fraud to the UK economy is £190 billion.

Fraud Overview

• The Fraud Act (FA) 2006 created the offence of fraud itself.
• The FA 2006 replaced multiple older deception offences.
• The Act was drafted broadly to keep pace with technology and inventive criminal methods.
• Fraud may be a Crown Court offence with a maximum penalty of 10 years imprisonment or an unlimited fine, or both.

Definition of Fraud

• The FA 2006 creates a general fraud offence with three different methods of commission.
• Section 1(1) provides for the offence of fraud generally but does not define it.
• Section 1(2) outlines the methods to establish fraud:
  • Making a false representation (s 2)
  • Failing to disclose information (s 3)
  • Abuse of position (s 4)
• Proving the defendant actually obtained anything isn't required, only that they intended to.
• Dishonesty is a key element of the mens rea.

Fraud by False Representation

• Section 2(1) of the FA 2006 states a person commits fraud if they dishonestly make a false representation to make a gain or cause a loss.
• Proof is required that a false representation was made, but not that anyone was deceived.
• The offence can be committed by making a false representation to a machine.
• Section 2(5) specifies a representation can be made if it is submitted in any form to any system or device (with/without human intervention).
• The statute is drafted so that the representation need be 'submitted' only not necessarily 'communicated', to remain relevant in a modern world with changing tech. Practical effects:
  • A representation by email becomes an offence as soon as it is sent, whether its read or even reaches its intender victim.
  • Withdrawing money from a cash point machine is covered by the FA 2006.
  • Inputting the pin is the representation.
  • Entering stolen bank details on online website is a representation.

Elements of False Representation

• A key element of the offence: a false representation must be made.
• Section 2(2) defines a representation as false if:
  • It is untrue or misleading.
  • The person making it knows or might be untrue/misleading.
• The defendant must have awareness of the falsehood or misleading nature.
• A representation may relate to a fact, the law, or the state of mind of the person making the representation.
• A representation may be express or implied.
• Representations may be in words or communicated by conduct in writing, spoken or posted.
• When the defendant has made such a representation is determined by jury as a question of fact.
• It would usually involve a victim being deceived or misled by something said or written to or about them.

Mens Rea for False Representation

• The defendant must know the representation is untrue or misleading, or might be.
• The defendant must act dishonestly with the intention to make a gain or cause a loss.
• The defendant must intend to make the gain or cause the loss 'by' making the false representation, it must be a result of said representation.
• The Fraud Act 2006 does not define dishonesty.
• Dishonesty is to be left to the jury or magistrates to determine the evidence presented.
• The Ivey v Genting Casinos test is to be used in cases of further assistance to determine the objective facts.

Gain and Loss

• 'Gain' and 'loss' only extends to money or property.
• Includes real or personal property, intangible property.
• May be temporary or permanent.
• "Gain" includes keeping what one has or getting what one does not have.
• "Loss" inclues not getting what one might get or parting with what one has.

Summary of Fraud by False Representation

• The defendant needs only to make a false representation with the necessary mens rea.
• It is irrelevant if anyone is misled/relied upon it/if the representation actually resulted in the defendant gaining anything or causing any loss.
• A defendant is convicted on the basis of the representation they make rather than if they were actually successful in their aim.

Fraud by Failure to Disclose Information

• Under s 1 of FA 2006, a person is quilty of fraud by s 3 , if they:
  • Dishonestly fail to disclose information which they are under a legal duty to disclose.
  • Intend, by failing to disclose the information to make a gain/cause a loss/expose another to a risk of loss.
• The FA 2006 does not define "legal duty".
• The Explanatory Notes state that it includes 'duties under oral contracts as well written contracts".
• A legal duty to disclose would derived from:
  • Statute
  • Transaction of good faith e.g., contracts of insurance
  • Express or implied terms of the contract
  • The custom of a particular trade or market
  • The existance of a fiduciary relationship between the parties

Mens rea for Fraud by Failure to Disclose Information

• A requirement to prove dishonesty and an intnention to make a gain or causse loss mirrors s 2 elements of making a false representation.

Fraud by Abuse of Position

• A defendant must have some form of privilaged postion to the victim to be charged here under s 4.
• A person is in breach of this section if they:
  • Occupy a position in which they are expected to safeguard, or not to act against, the financial interests of another.
  • Dishonestly abuse that position.
  • Intend, by means of the abuse of that position to make a gain/cause loss/expose another to a risk of loss.

Actus Reus for Fraud by Abuse of Position

• A position of financial trust must exist between the defendant and the victim.
• This further defines a defandant which is expected to safeguard or not to act against the fincianal interests of another.
• The FA 2006 does not define the word "position" by the the FA 2006 suggest:
  • trustee to beneficiary
  • director to coompany -professional person to client -agent to principal
  • employee to employer.
• A position of financial trust may/can also arise in other circumsatnces within a family/voluntary work.
• With all these example of an abuse of position of financial trust a voluntarly plced defandant is in a privilaged potition so that the the defendant is able to act in reagrds to those interests without reference to the victim.
• Professionals like lawyers and accoutnantts in a position to safegaurd the fincial interests where more than one office may commit the same event.

Mens rea for Fraud by Abuse of Position

• Dishonesty and an intention to make a gain or cause loss. Mirrors elements of s 2.

Overlap Between Fraud Offences

• Defendants can be criminally liable for different FA 2006 offences; ss 2 to 4 describe ways fraud is satisfied.
• Three types of fraud share the same mens rea, with s 2 having an additional requirement.
• Dishonesty is a key element.
• Definitions for 'gain' and 'loss are found under s 5 of FA 2006.
• S 2 requires the defendant to make a false representation knowing it untrue or misleading.
• The FA 2006 is a general offence that can be committed three ways: false representation, failing to disclose information, and abuse of position.