The Law Commission

PART V

THE WAY FORWARD

Analysis

5.1      The legal system should operate so as to reflect in full each of the fundamental principles identified earlier:

Defendants should only be sentenced for that which they have admitted, or which has been proved following a trial, in which both sides can be examined on the evidence; and

It should be possible to sentence for the totality of an individual's offending. Defendants should not escape just punishment because the our present law, practice and procedure does not make this possible.

5.2      The constraints that together prevent full recognition being given to both of these principles are three-fold:

(1) the requirement that all issues that go to guilt must, if not admitted, be proved to a jury/magistrates;

(2) the strict limitations to the inclusion of more than one offence in any single charge/count;

(3) the limit to the number of separate counts or charges that can be managed within a trial.

If a solution to this problem is to be found, it will need to address one or more of these constraints.

Consultation

The Consultation Paper

5.3      Our approach in the Fraud Consultation Paper,^[1] was to address the second of these constraints by suggesting a compendious offence that would make use of the concept of a "scheme" ^[2] to enable more than one instance of offending to be the subject of a single charge or count.^[3] We have seen that although a majority of respondents who addressed this issue supported this approach, the serious concerns about the practicality and likely effectiveness of this proposal^[4] identified by both supporters and dissenters led us to rethink the proposal. We considered three other options upon which we consulted informally in July 2000.

Informal consultation - July 2000

5.4      In the informal consultation paper we considered the possibility of a course of conduct offence. Respondents expressed concerns, which we accept, about that approach. Principally the concerns relate to the concept of a course of conduct. It was thought that this might be difficult to establish, could lead to vague and uncertain charging and lead to a defendant having to be acquitted in some cases where the jury are sure of some offences but not of others. In addition, without special measures, the judge might not to be able to determine the basis for sentencing from the verdict of the jury.
5.5      In the July 2000 paper we also examined further the scope for making use of a compendious offence, or activity offence. There are already a number of "compendious offences" on the statute books and we considered whether the creation of an additional compendious offence, or offences, could provide a solution to the multiple fraud conundrum. Compendious offences criminalise certain activities, with the result that the activity, rather than just any single instance of that activity, may be charged in a single count, without infringement of rule 4(2) of the Indictment Rules. Examples of compendious offences may be found in the Value Added Tax Act 1994,^[5] the Financial Services Act 1986,^[6] the Companies Act 1985^[7] and the Customs and Excise Management Act 1979.^[8]
5.6      There is also now a social security offence which incorporates a compendious element. Section 111A(1) of the Social Security Administration Act 1992^[9] makes it an offence dishonestly to make a false statement or representation; or to produce or furnish any document which is false in a material particular, with a view to obtaining any benefit or other payment or advantage under the relevant social security legislation. Thus, it proscribes the doing of certain dishonest acts with a view to the activity of obtaining a public benefit. The maximum sentence for this offence is seven years' imprisonment, which suggests that the offence is designed to encompass cases where the act in question either has led, or would, if left undetected, have led to the obtaining of a significant sum.^[10]
5.7      The DSS thus made use of a compendious type of offence in an effort to resolve some of the difficulties^[11] faced in prosecuting multiple offences of benefit fraud. In the light of the development by the DSS of their own version of an activity offence we do not believe that it would be useful for us further to consider a variation on that theme and, accordingly, we propose to make no recommendation on this issue, save to indicate that we recognise that the offence which has now been developed is consistent with one of our general approaches, and that we agree that it provides a possible solution to this aspect of the problem.^[12]
5.8      The inherent limitation of the concept of an activity offence is that there has to be a particular activity which would constitute the actus reus of the offence. Unless it is possible to identify a specific activity which should, of itself, constitute an offence, the concept can be of no use. We recognise that it is only in relation to context specific offences that the concept of an activity offence can be of any use. It is in the context of benefit claims that use of this concept is made in the above social security provisions.
5.9      We have identified one further context in which we believe an activity offence would provide an effective and appropriate solution to the problems under consideration. This concerns the non-corporate fraudulent trader in respect of whom we now recommend the extension of section 458 of the Companies Act 1985.^[13]

Seminar paper and seminar held in February 2002

5.10      We recognised that it would not be possible to produce one solution which would address the problems associated with prosecuting multiple offending. We therefore formulated two further proposals upon which we consulted in February 2002. Those proposals broadly met with favour from respondents, although some concerns were expressed and we have addressed them in this paper. These proposals each address the procedures for prosecuting multiple offending rather than creating any further new forms of offence and, on that basis, we are now making two additional recommendations for reform.
5.11      The first addresses the duplicity rules and explores ways in which the approach of the court in Barton^[14] might operate at the Crown Court so as to enable multiple offending to be contained within a single count. It takes the type of offending in Barton as representing the limit of the single continuous offence. In these cases, where the characterisation of the conduct as a single continuing offence makes it intrinsically likely that the person who has committed one of the offences has committed all the others, our recommendation is to try to replicate, in questions to be asked of the jury, the thought process which enabled the Stipendiary Magistrate in Barton to form a view of the extent of the offending for which the defendant is to be sentenced. This procedure will not be suitable where the repeated individual offences lack the necessary connection in time and place of commission or common purpose, so that they cannot fairly be recognised as forming part of the same transaction, or where the issues raised between prosecution and defence are sufficiently numerous and incident specific that it would not be in the interests of justice for the case to be considered as a single continuous offence. We describe the form of single offence to be used as a "compound allegation".
5.12      The second procedure would apply to multiple offending against the same or different victims but where the degree of similarity between instances of alleged offending is such that the offences may properly be linked to take advantage of the special procedure which we propose. This procedure involves a two stage trial, the first before a jury, the second before a single judge (presumptively the first stage trial judge). It combines aspects of two familiar elements: "specimen counts" and "Newton hearings".^[15]
5.13      Our procedural recommendations have been designed to apply to proceedings in the Crown Court. The compound allegation recommendation would be unnecessary in relation to summary proceedings because of the common identity of the fact-finder and the sentencer in such proceedings.
5.14      We formulated the two stage trial process for use in the Crown Court. It is in the Crown Court that the consequences of the court being confined to dealing with only a proportion of the defendant's offending will have the most serious effect. In the Magistrates' Courts, it will be the limited sentencing powers, presently of six months for one offence or twelve months in total, that will stop the magistrates from imposing a longer sentence rather than the inability for them to take into account the full scale of offending. Were the scale of offending to be such that a longer sentence should be imposed in the event of a conviction, the magistrates are empowered to commit the defendant to the Crown Court for trial. If the facts and circumstances are such that the Crown Court judge is satisfied at a pre-trial hearing that a two stage trial should follow, the two stage proceedings would take place in the Crown Court.
5.15      We will elaborate on each of these recommendations in the following three parts of this report.

Impact of our recommendations on resources

5.16      Our recommendations for revision of procedure in the Crown Court so that multiple offences can, as appropriate, be prosecuted by way of a compound allegation and by way of the two stage trial process would confer the benefits identified elsewhere in this report.^[16] Some extra court time could be expected to be required for dealing with stage two proceedings. The extent of this would, however, be likely to be reduced by two factors. First is the expected incidence of guilty pleas at the end of the first stage of the two stage process, where guilty verdicts have been returned.^[17] Second, the very existence of the two stage process might encourage defendants to plead early on to the full extent of their offending, asking that scheduled offences be taken into consideration in order to obtain the maximum discount on sentence.^[18] It is to be expected that some lengthier prison sentences would be imposed because the purpose of the two stage procedure is to enable the full extent of the defendant's offending to be placed before the court in cases where, at present, it is not possible to do this. It is not likely that the compound allegation recommendation would lengthen court proceedings by any significant amount. While the more effective process for sentencing might encourage the prosecution of continuous offences as such, the opportunity for jurors to specify instances of offending of which they are not sure might lead to shorter sentences in some cases.

Note 1    Consultation Paper No 155.    [Back]

Note 2    See para 1.1, n 1 above, for detail of these consultation issues.    [Back]

Note 3    Although as Martin and White [1998] 2 Cr App R 385 demonstrates, the fundamental principles of duplicity must still be complied with when charging a compendious offence, we thought that this might overcome some of the difficulties faced. In Martin and White, it was necessary to have two counts, one dealing with each of the two different methods used in the fraudulent evasion of duty contrary to s 170(2) of the Customs and Excise Management Act 1979. There were 27 transactions encompassed in count 1A (method A) and 227 transactions in count 1B (method B).    [Back]

Note 4    The Crown would still be faced with the risk of overloading an indictment, where a large number of deceptions are required to show the overall level of criminality. The wide scope of the concept of a “scheme” as an offence could lead to uncertainty for judge, jury and the defendant. The “scheme” offence would be very prone to the type of objections addressed in Brown (1983) 79 Cr App R 115; the concept of the scheme itself could be difficult to prove. There may be difficulties for the judge in determining the basis on which to sentence.    [Back]

Note 5    Section 72(1): If any person isknowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion of VAT by him or any other person, he shall be liable … . (emphasis added)    [Back]

Note 6    Section 47(2): Any person who does any act or engages in any course of conduct which creates a false or misleading impression as to the market in or the price or value of any investments is guilty of an offence if he does so for the purpose of creating that impression and of thereby inducing another person to acquire, dispose of … those investments. (emphasis added)    [Back]

Note 7    Section 458: If any business of a company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who was knowingly a party to the carrying on of the business in that manner is liable to imprisonment or a fine, or both … . (emphasis added)    [Back]

Note 8    Section 170(2) of the Customs and Excise Management Act 1979 provides, inter alia, that Without prejudice to any other provision of the Customs and Excise Acts 1979, if any person is, in relation to any goods, in any way knowingly concerned in any fraudulent evasion or attempt at evasion– (a) of any duty chargeable on the goods; … he shall be guilty of an offence under this section and may be [arrested]. (emphasis added)    [Back]

Note 9    Created by the Social Security Administration (Fraud) Act 1997 s 13, as amended by the Child Support, Pensions and Social Security Act 2000, Sched 6, para 5.    [Back]

Note 10    By analogy with the approach taken to the length of sentence in cases of theft and fraud committed by abuse of position of employment, considered in Clark [1998] 2 Cr App R 137 which reviewed the guidelines given in Barrick (1985) 7 Cr App R (S) 142. Generally appropriate levels were: under £17,500 - up to 21 months; between £17,500 and £100,000 - 2 to 3 years; between £100,000 and £250,000 - 3 to 4 years; £250,000 - £1 million - 5 to 9 years and for over £1 million, 10 years and upwards.    [Back]

Note 11    In addition, the Social Security (Fraud) Act 2001 s 16 creates numerous specific offences, which proscribe, in effect, the knowing failure, by the claimant or another, to notify to a prescribed person of a material change in circumstance, either with or without dishonesty. By focusing on the element of “failure” to notify, these offences avoid some of the difficulties associated with proving the series of obtainings that might flow from that failure.    [Back]

Note 12    To the extent that, in practice, it does not, the recommendations we make below, in Parts VI and VII, would be available in such cases.    [Back]

Note 13    This is addressed in Part VIII of this report.    [Back]

Note 14    [2001] EWHC Admin 223, see para 3.6, above.    [Back]

Note 15    Newton (1983) 77 Cr App R 13 established that the judge can adopt the role of the jury in cases where the defendant pleads guilty to a charge, but disputes certain facts of the case, which would significantly affect his or her sentence. See also Eubank [2001] Crim LR 495 (discussed in para 3.17 n 35, above). The judge in a Newton hearing must direct his or her mind according to the same burden and standard of proof required in ordinary criminal trials (McGrath and Casey (1983) 5 Cr App R (S) 460, Kerrigan (1993) 14 Cr App R (S) 179).    [Back]

Note 16    See para 7 of the Executive Summary, above and paras 6.43 – 6.44 and paras 7.98 – 7.102, below.    [Back]

Note 17    There will be no second stage of proceedings in cases where there have been no convictions after the first stage of the trial.    [Back]

Note 18    See para 7.102, below.    [Back]