Fraud Bill [HL]

My Lords, it is a pleasure to deal with a piece of legislation which has had so much considerable thought devoted to it, and a long period of gestation, as the noble and learned Lord said in his opening remarks. It has been considered by the Law Commission and the Government’s respondees on consultation, and now, finally, it is being considered in the Bill before the House. It is a Bill that is clear in its terminology and intent. Whether it has all the ingredients quite right is a matter that we shall debate both today and in Committee, but the general thrust of the Bill is in the right direction. In particular, the Bill avoids a tortuous definition of fraud, establishing as it does three basic areas within which the Government hope that the generality of charges will fall. The Explanatory Notes on Clause 2, which deals with false representation, make a number of interesting and useful points. In the first place, the representation ““must be made dishonestly””, as in the leading case of R v Ghosh. The Ghosh test is referred to at length in the Law Commission’s report. In replay of yesterday’s argument, I remind your Lordships that that test is, first, whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people and, secondly, whether the defendant was aware that his conduct would be regarded as dishonest by reasonable and honest people. So while emphasising that it is essentially ordinary and reasonable people who   decide what honesty and dishonesty is, on the one hand, the Government on the other hand—ironically—propose to alter that test in certain cases so that a judge will ask himself, ““Would that conduct be regarded as dishonest by me, a traveller on the Clapham omnibus as I always am?””. That is a totally different sort of test from the Ghosh test. The representation in Clause 2 can occur in written or electronic form. We are pleased to see that the ambit of criminality has been widened quite substantially to bring the charge into line with current forms of deception and fraud. I refer, as previous speakers have, to the misused credit card. It is a good thing also that it is immaterial what the person on whom the fraud is being perpetrated thinks. The person who accepts the credit card has no idea whether it is valid; only the person presenting the card has that information. The fact that the defendant knows that he is misusing the card will be sufficient under this Bill. As the noble and learned Lord the Attorney-General pointed out, that is very important when so many commercial transactions, particularly in the consumer field, are conducted through the use of machines, in one way or the other. That point touches on the very serious issue of identity theft. I take this opportunity to emphasise the utmost misery that identity theft can bring on its victims. There is no real remedy at present: the banks are unable to address the issue properly, because there is no networking between the banks to ascertain names of victims whose cards or whose details have been stolen. In many cases, police officers at police stations, who may be less than sympathetic, discourage a criminal report. Most of the time a victim cannot prove with immediate ease the fact that he did not consent to what happened, or that he did not incur a specific expenditure. Banks sometimes issue new debit or credit cards, but that is of little consequence, as the defrauders continue to apply for additional cards—and all too often those applications are granted, without any further confirmation. Another problem with identity theft is that it can be used and furthered abroad. Again, there is no form of protection—there is nothing worse than having an identity stolen by a person getting hold of passport details. I make those comments because it seems to me that one of the excellent intentions behind the Bill is to address that sort of problem. The emphasis in Clauses 3 and 4 is on dishonesty and intention on the part of the defendant, and not on recklessness. That is something of a relief for those of us who have had to deal with the concept of recklessness over the years. Clause 3 deals with failing to disclose information. The wording does not follow that of the Law Commission draft, however, which used the expression ““wrongfully””, both in the title and in the body of the draft clause. The Law Commission also defined how ““wrongfully”” was to be interpreted, in paragraph (a), where there is a duty to disclose, and paragraph (b), where he knows that the other party is trusting him to disclose. I wonder what the thinking is behind the Government’s decision to drop the word ““wrongfully”” from the position that it held in the Law Commission’s draft Bill. By contrast, the new clause, which has come into being since consultation, as the noble and learned Lord told us, does not mention dishonesty at all. It seeks to replay Section 25 of the Theft Act 1968, on going equipped. In that Act, the wording was that:"““A person shall be guilty of an offence if when not at his place of abode, he has with him any article for use in the course of or in connection with any burglary, theft or cheat””." There is a presumption that if the article was in his possession, it was evidence that he had it with him for such use. Clause 6 introduces the concept of the defendant having an article,"““in his possession or under his control””." No statutory defence is suggested in the Bill that he did not know or had no reason to suspect that the article was for use in a fraud, although the Explanatory Notes suggest that knowledge that the article was for such use is an ingredient. They say:"““A general intention to commit fraud will suffice””." The expression,"““in his possession or under his control””," has caused great difficulty, certainly in the field of firearms and drugs legislation. There is strict liability in both those fields. I am seeking to find out whether that is what is proposed in Clause 6. For example, in the case of Vann and Davis, in 1996, it was decided that since the clear purpose of firearms legislation was to impose a tight and effective control on the use of highly dangerous weapons, Section 5 of the Firearms Act, on its true construction, made it an offence knowingly to possess an article that was in fact a prohibited weapon, and it was not necessary for the prosecution to prove that the defendant had known that it was such a weapon. It would be no defence in firearms legislation for him to prove that he had not known and could not reasonably have been expected to have known. Similarly, in drugs legislation, in the case of Lambert, in 2001, the Judicial Committee was concerned whether it was an essential element of the offence of possession of a controlled drug under the Misuse of Drugs Act 1971 that the accused knows that he has a controlled drug in his possession. The noble and learned Lord, Lord Slynn of Hadley, pointed out in that case that the prosecution must prove that the accused had a bag with something in it in his custody or control, and that the something in the bag was a controlled drug, but it was not necessary for the prosecution to prove the accused knew that the thing was a controlled drug let alone a particular controlled drug. Those are in areas of serious crime—really serious crime where drugs and firearms are a danger. However, the wording of Section 6 is such that it seems to be added to that category of cases. Clause 7 does indeed introduce the concept of ““knowledge”” in subsection (1)(a). I would invite the Minister to include in Clause 6 the words ““knowledge”” or ““knowingly””, expressly so that there can be no argument about it. It should not be enough for the prosecution merely to prove that a person has an article in his possession for use in fraud. The prosecution should prove that he knew it was for use in fraud. I think that that is a very important omission. If the omission is intentional, I should be glad to know why. In Clause 9, the offence is to be,"““knowingly a party to the carrying on of a business to which the section applies””," and the Explanatory Notes say specifically that the principles established with regard to fraudulent trading will apply. Looking at Clause 9, I have this question. One of the principles with regard to fraudulent trading is that   the offence can be committed only by a person who   exercises some kind of controlling or managerial function within the company. Is Clause 9 to be interpreted in the same way? If it is and the person charged must have some kind of controlling or managerial function, can we not sensibly have that on the face of the Bill? The common law offence of conspiracy to defraud has been maintained. The issue then arises, which I am sure others will address: what areas are the common law offence intended to cover which are not covered by the specific offences? Here we have a broad definition of fraud which is satisfactory, so why do we have to retain the common law offence? The Law Commission was concerned that the common law offence of conspiracy to defraud might cover conduct such as failing to fulfil a contractual obligation or infringing a legal right and that conspiracy to defraud at common law could impose criminal liability for what would otherwise be civil wrong or torts. At paragraph 9.4 of the report, the Law Commission said:"““To retain conspiracy to defraud on the ground that it might occasionally prove useful in such a case would in our view be an excess of caution. Since it is not practicable to identify all such cases in advance, it would mean that we could never be in a position to abolish conspiracy to defraud . . .  The advantages of abolishing it, in our view, greatly outweigh any possible advantage that might accrue from retaining it alongside the new offences which we recommend””." I emphasise the words ““greatly outweigh””. What has happened in the consultation process that has reversed that standard so that it is now advantageous to maintaining what is the most vague concept? A conspiracy to defraud is the vaguest concept, and yet here we are trying to clarify matters for the benefit of a jury, or even for a judge alone, so that people can understand what the ambit of a particular offence is. The noble and learned Lord said that the Government’s intention is to retain conspiracy to defraud at common law ““for the meantime””. How long is the ““meantime””? If he says ““for the meantime””, why does he envisage that at some unknown future date it will become all right to abolish that offence? Why not do it now? I hope that I have indicated my general support for the Bill. I hope that I have indicated the areas where I have criticisms, and I hope there will be answers to those criticisms. I end with this. If judges are to be permitted to sit alone in fraud trials, surely it would be useful for that to be a part of the Bill. Then it would clearly ring-fence the type of case which would be tried by judge alone to fraud, and we would not have the fear which we expressed yesterday that trial by judge alone will be extended to all sorts of areas which at the moment we are not told about.