The Law Commission

The Law Commission

(LAW COM No 276)

FRAUD

Report on a reference under section 3(1)(e) of the Law

Commissions Act 1965

Presented to the Parliament of the United Kingdom by the Lord High Chancellor

by Command of Her Majesty

July 2002

Cm 5560

The Law Commission was set up by the Law Commissions Act 1965 for the purpose of promoting the reform of the law.

The Law Commissioners are:

The Right Honourable Lord Justice Carnwath CVO, Chairman

Professor Hugh Beale QC

Mr Stuart Bridge

Professor Martin Partington CBE

Judge Alan Wilkie QC

The Secretary of the Law Commission is Mr Michael Sayers and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ.

The terms of this report were agreed on 14 June 2002.

The text of this report is available on the Internet at:

http://www.lawcom.gov.uk

CONTENTS

Part I: INTRODUCTION	Part 1
Summary of recommendations	1.6
The structure of this report	1.10
Part II: OUTLINE OF The Present Law	Part II
Conspiracy to defraud	2.1
Conspiracy	2.2
Dishonest intent to defraud	2.3
The meaning of "defraud"	2.4
Implied statutory restrictions	2.7
The statutory offences	2.8
Theft	2.10
Appropriation	2.11
Property belonging to another	2.12
With the intention of permanently depriving the other	2.14
The deception offences	2.17
Deception	2.17
Actus reus elements	2.23
Other offences involving fraud	2.26
Part III: DEFECTS OF THE PRESENT LAW	Part III
Conspiracy to defraud	3.2
An anomalous crime	3.2
The definition of "to defraud"	3.6
The statutory crimes	3.10
The need for simplification and rationalisation	3.10
The limitations of "deception"	3.25
Payment cards and "deceiving" merchants	3.29
Computers and machines	3.34
Non-disclosure and abuse of position	3.36
Part IV: CONDUCT THAT CAN BE PROSECUTED ONLY AS CONSPIRACY TO DEFRAUD	Part IV
Conduct involving deception which is excluded from the existing deception offences	4.5
Deception which obtains a benefit which does not count as property, services or any of the other benefits defined in the Theft Acts	4.6
Deception which causes a loss and obtains a directly corresponding gain, where the two are not the same property (other than a transfer of funds between bank accounts)	4.11
Deception which causes a loss and obtains a gain where the two are neither the same property nor directly correspondent	4.13
Deception which does not obtain a gain, or cause a loss, but which prejudices another's financial interests	4.20
Deception for a non-financial purpose	4.26
Deception to gain a temporary benefit	4.32
Deceptions which do not cause the obtaining of a benefit	4.33
Conduct involving a view to gain or an intent to cause loss, but not deception	4.36
Making a secret gain or causing a loss by abusing a position of trust or fiduciary duty	4.39
Obtaining a service by giving false information to a machine	4.47
"Fixing" an event on which bets have been placed	4.48
Dishonestly failing to fulfil a contractual obligation	4.53
Dishonestly infringing another's legal right	4.59
Part V: THE ROLE OF DISHONESTY IN THE CRIMINAL LAW	Part V
The nature and meaning of dishonesty as a fault element	5.1
Is it possible to define dishonesty?	5.2
The Ghosh approach	5.6
What purpose does dishonesty serve as a defining element?	5.12
Would a general dishonesty offence be desirable?	5.20
The arguments for a general dishonesty offence	5.23
The arguments against a general dishonesty offence	5.25
Legal certainty and fair warning	5.25
Human rights	5.29
Fair labelling	5.34
Effect on other dishonesty offences	5.36
Is dishonesty criminal?	5.38
Discretion	5.39
The role of the jury (and other fact-finders)	5.41
Other jurisdictions	5.45
Canada	5.45
Hong Kong and New Zealand	5.50
Other common law jurisdictions	5.54
Summary	5.56
Conclusion	5.57
Part VI: OUR PREVIOUS PROPOSALS	Part VI
Consultation Paper No 155	6.2
The discussion paper of July 2000	6.6
A general deception offence	6.7
The concept of deception	6.10
Part VII: A NEW FRAUD OFFENCE	Part VII
A fresh approach	7.1
What kinds of conduct should suffice?	7.14
Misrepresentation	7.14
Secrecy	7.18
Non-disclosure	7.22
Legal duty of disclosure	7.28
Defendant trusted to disclose	7.31
Secret abuse of position	7.35
Consequences other than actual financial loss	7.43
Parting with money or other property	7.44
Not receiving money or other property	7.45
Having one's economic interests put at risk	7.46
Financial gain without a corresponding loss	7.47
Non-economic prejudice	7.53
Fraud as an inchoate offence	7.54
Intended causation	7.56
Our recommendation	7.58
Possible defences	7.59
Lawful conduct, "claim of right" and "belief in a claim of right"	7.59
Public interest	7.73
Mode of trial and sentence	7.78
Part VIII: OBTAINING SERVICES DISHONESTLY	Part VIII
Deceiving a machine?	8.3
A "theft-like" offence	8.7
Services provided otherwise than on the understanding that they have been or will be paid for	8.14
Mode of trial and sentence	8.16
Part IX: ABOLITION OF EXISTING OFFENCES	Part IX
Part X: OUR RECOMMENDATIONS	Part X
Appendix A: FRAUD BILL WITH EXPLANATORY NOTES	Appendix A
Appendix B: SUMMARY OF PROPOSALS MADE PRIOR TO CONSULTATION PAPER NO 155	Appendix B
Appendix C: PERSONS AND ORGANISATIONS WHO COMMENTED ON CONSULTATION PAPER NO 155	Appendix C








ABBREVIATIONS

In this paper we use the following abbreviations:

Ashworth on Criminal Law: A Ashworth, Principles of Criminal Law (3rd ed 1999)

CLRC: Criminal Law Revision Committee

CLRC Eighth Report: Criminal Law Revision Committee, Eighth Report: Theft and Related Offences (1966) Cmnd 2977

Consultation Paper No 150: Legislating the Criminal Code: Misuse of Trade Secrets (1997) Consultation Paper No 150

Consultation Paper No 155: Legislating the Criminal Code: Fraud and Deception (1999) Consultation Paper No 155

our conspiracy to defraud report: Criminal Law: Conspiracy to Defraud (1994) Law Com No 228

DPP: Director of Public Prosecutions

ECHR: European Convention on Human Rights

Griew on Theft: Edward Griew, The Theft Acts (7th ed 1995)

Hong Kong report: The Law Reform Commission of Hong Kong: Report on Creation of a Substantive Offence of Fraud (Topic 24) (July 1996)

our informal discussion paper: Fraud and Deception: further proposals from the Criminal Law Team (July 2000) unpublished

our money transfers report: Offences of Dishonesty: Money Transfers (1996) Law Com No 243

Smith on Theft: J C Smith, The Law of Theft (8th ed 1997)

Working Paper No 104: Criminal Law: Conspiracy to Defraud (1987) Working Paper No 104