Fraud Act 2006 Summary

Prior to the Fraud Act 2006

The Fraud Act came into force on the 15^th January 2006 and replaced the eight deception offences contained within the Theft Act 1968 and 1978. Prior to the introduction of the Fraud Act 2006 the former law had been the subject of criticism^[1]. This criticism had been recognised by the Law Commission who produced a report on fraud, drawing attention to some of the difficulties contained within the law at the time^[2]. One of the major problems that had been raised within the report was that there were too many offences as opposed to only one offence. The report suggested that a single crime of fraud should be introduced which would simplify the law^[3]. The previous law was considered perplexing in places, containing overlaps which meant that prosecutors were confused as to which offence they should proceed with. In addition, the over particularisation of offences risked a defendant being faced with “the wrong charge or too many charges”^[4].

The courts were faced with difficulty relating to interpretation such as whether a representation could be applied^[5], whether truth of representation excluded an operative deception^[6] and whether a machine could be the subject of deception^[7]. In conjunction with this issue there was also the problem that prosecutors would often be tripped up over such aspects of the offence like the method by which a fraudster would have used as payment as these could be cash under Section 15, money order under Section 15A or cheque Section 20^[8].

The aim of the Fraud Act 2006

Some offences contained within the Theft Act 1968 were so difficult for the courts to apply that parliamentary assistance was required and the Theft Act 1978 was brought in to replace section 16 (a) of the 1968 Act. This however did little more than exacerbate the issues of overlapping and over particularised offences that had also been present in the previous Act. The notable case of Preddy^[9] determined that attempting to repair the law could only ever provide a temporary and less than optimal solution. If the law was to keep up with evolving technology and the changes and in turn provide an efficient solution to the act of fraud, then a longer term method was required. This long term method came in the form of the Fraud Act 2006 whose objective was to modernise and clarify the law in order to keep up with the changes in technology which related to the way that fraud was committed^[10].

Changes made by the Fraud Act 2006

Section 1 of the Act introduced a new offence of fraud which could be committed in three ways. By way of false representation (Section 2), failing to disclose information (Section 3) and abuse of position (Section 4).

The Act made way for the replacement of fraud with a maximum of 10 years if indicted, as well as making way for two ancillary offences. The first being the possession of articles for use in fraud contained in Section 6, an either way offence and therefore more serious than that contained within section 25 of the Theft Act 1968. The second is making or supplying articles for use in fraud which is noted within Section 7.

There are a number of prominent differences between the old and the new law. Under the old law the focal point was the Defendants conduct which was used to deceive the victim which in turn cause V to do the inappropriate act. Under Section 2 of the new act there is no requirement to prove that the victim or another person believed the representation or acted on it. This means that the Defendant may be considered liable even if the victim is aware that the statement made is false, it is sufficient that the defendant intended to cause loss or to make a gain. Another main difference between the old and the new law are that in the old law, deception offences required that the defendant obtained something as a result of his deception. However, in the new act under the offence of fraud by false representation it is not a requirement that the defendant obtain anything.

Despite its attempts to rectify the failings of the previous law in this area, the Fraud Act 2006 has still been subject to some criticism. Section 3 of the Fraud Act 2006 covers the less controversial form of fraud were by the defendant is liable if they dishonestly fail to disclose information under which they are under a legal duty to disclose and in failing to do so, they make a gain. Lord Lyell has drawn attention to the failure of the Act to provide further guidance as to what defines a legal duty that in turn would trigger liability^[11]. The Law Commission has also concluded that the scope of the Act is bound by the limitations imposed by civil law^[12]. This has been confirmed by the Attorney General who stated: “The government believe that it would be undesirable to create a disparity between the criminal and the civil law, it should not be criminal to withhold under civil law”^[13].

The advantages of the Fraud Act are that it allows jurors to easily understand complex aspects of the law, removes over particularisation of offences and the duplicating of the indictment. Whilst these are notable advantages of the fraud Act, the sheer scope of the offences promotes astonishment as stated by Professor Greene:

“if fraud were to encompasss not just stealing by deceit, but also deceptive and non-deceptive breaches of trust, conflicts of interest, non-disclosure of material facts, exploitation, taking unfair advantage, non-performance of contractual obligations, and misuse of corporate assets, it would be virtually impossible to distinguish between different offenses in terms of their nature and seriousness, and even to know whether and when one had committed a crime^[14].”

Despite this assertion, one major advantage that the Fraud Act has made way for is the clearer expression of large scale criminal acts under one charge.

Bibliography

Cases

Davies v Flackett [1973] R.T.R. 8

MPC v Charles [1977] A.C. 177

R v Preddy [1996] AC 816

Ray v Sempers [1974] A.C. 370

Legislation

The Theft Act 1968 Section 15, 15A, 16A, 20, 25

The Theft Act 1978

The Fraud Act 2006 Section 1, 2, 3, 4, 6

Books

Green S. P, Lying, Cheating and Stealing: A Moral Theory of White Collar Crime (OUP, 2006, 1^st edition)

Journals

Withey C, The Fraud Act 2006 – some early observations and comparisons with the former law (2007) J. Crim. L. 2007, 71(3)

Ormerod D, The Fraud Act 2006 – criminalising lying? (2007) Crim. L.R. Mar

Reports

Great Britain: Ministry of Justice Post -legislative Assessment of the Fraud Act 2006. Memorandum to the Justice Select Committee (Cmd 8372, 2012). Accessed via: https://books.google.co.uk/books?id=TmzCA7yl_EYC&printsec=frontcover&dq=fraud+act+2006&hl=en&sa=X&ved=0ahUKEwjq94uqgPPKAhXCXRQKHUkgALcQ6AEIJzAB#v=onepage&q=fraud%20act%202006&f=falseAccessed 10^th February 2016.

Hansard HL, Col 1426 (July 19, 2005)

Hansard HL, Col 1427 (July 19, 2005)

HC Research Paper 06/31

Law Commission, Fraud, Law Com, Report No 276, Cm 5560 (2002)

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^[1] C Withey, “The Fraud Act 2006 – some early observations and comparisons with the former law” (2007) J. Crim. L. 2007, 71(3), 220-23.

^[2] Law Commission, Fraud, Law Com, Report No 276, Cm 5560 (2002).

^[3] Ibid para 1.6 (3).

^[4] Ibid 3.20

^[5] Ray v Sempers [1974] A.C.370.

^[6] MPC v Charles [1977] A.C.177.

^[7] David v Flackett [1973] R.T.R.8.

^[8] D Ormerod, “The Fraud Act 2006 – criminalising lying?” (2007) Crim. L.R. Mar, 193-21.

^[9] R v Preddy [1996] AC 816.

^[10] Great Britain: Ministry of Justice Post -legislative Assessment of the Fraud Act 2006. Memorandum to the Justice Select Committee (Cmd 8372, 2012) para 3

^[11] Hansard HL, Col 1427 (July 19, 2005) (Lord Lyell of Harkyate)

^[12] HC Research Paper 06/31 pp12-13

^[13] Hansard HL, Col 1426 (July 19, 2005) Para 7.69

^[14] S.P. Green, Lying, Cheating and Stealing: A Moral Theory of White Collar Crime (Oxford University Press, 2006, 1^st edition) pg 151.