Fraud Bill [HL]

My Lords, 45 years ago as a young barrister, I used to go up to Cambridge at weekends to teach undergraduates. One subject that I taught was criminal law and I had to struggle to keep ahead of my students, because I was not then—or, indeed, later—involved with criminal law as a practitioner. However, I still remember the complications of the law of fraud, as it then was, and especially of what was then called obtaining by false pretences. I therefore believe that the Bill represents an admirable piece of work by the Law Commission. It broadens the definition of fraud offences. In doing so, it simplifies the law and makes it more understandable to non-lawyers. It gets the balance right between a law that is too detailed so that dishonest actions are not crimes unless they fall within the precise wording of the statutory offence, and making the law too general, which creates uncertainty about what is a crime and leaves too much to interpretation by the courts. Many speakers have compared the Bill with the Law Commission’s original draft Bill. I shall take up and enlarge on some of those points. Clause 3 is about fraud by failing to disclose information. In the Bill, that is limited to failure to disclose information that there is a legal duty to disclose. As the noble and learned Lord the Attorney-General explained, the Law Commission’s Bill provided that it should also be a criminal offence to   fail to disclose information where there was a relationship of trust that the defendant had abused by failing to disclose relevant information. The noble and learned Lord gave reasons of some force for not going as far as the Law Commission. He said that to do so would convert what is at present a moral obligation alone into a legal obligation, which might be a step too far. The standard scenario, or one of them, is that of someone who has a collection of pictures that they want to sell. The owner has a personal friend who is a dealer and says to him, ““I know that I can trust you. Make me an offer for my pictures””. The dealer recognises that one picture is far more valuable than the owner realises and makes an offer that ignores its true value, and that offer is accepted. That is plainly a breach of a moral obligation. Whether it should also be treated as a criminal fraud should be probed further in Committee. A supplementary question that follows from that was raised by the noble Lord, Lord Brennan. Is the scenario an example of an offence anyway under Clause 4? Is the dealer someone who occupies a position and, if so, is he in a position in which he is expected not to act against the financial interests of the owner of the pictures? As the noble Lord said, it is important to decide what is meant by ““position””, a word with which the courts are not generally familiar in this context. Clause 9 extends the crime of fraudulent trading to   unincorporated businesses. Of course, fraudulent trading was originally an offence under the Companies Act. That was because the offence was originally meant to cover the abuse by companies of limited liability. The   directors of a loss-making business with no hope of recovery continued to run the business, and pay themselves substantial salaries for doing so, until the balloon finally went up. That originally left the creditors with no personal claim against the directors and no funds in the company. That was less of a problem in unincorporated businesses, where owners faced the risk of personal bankruptcy. Therefore, are the Government satisfied that the new offence is needed? What is the evidence of existence of a problem in relation to unincorporated businesses? The clause heading refers to,"““business carried on by sole trader etc.””" Does the ““etc.”” mean partnerships? I assume that it does, but can that be confirmed? I turn to the point that has been strongly made by the   noble Baroness, Lady Anelay, my noble friend Lord   Thomas of Gresford and by the noble and learned Lord, Lord Lloyd of Berwick, regarding the recommendation by the Law Commission of the abolition of the common law offence of conspiracy to defraud and the rejection of that recommendation by the Government. Conspiracy to defraud is a strange offence. People can be charged and convicted of conspiracy to defraud, even when the contemplated action would not have been an offence if it had been carried out by one person on their own. The Law Commission makes a strong case for abolition of the common law offence. The new provisions in the Bill will be broad enough to catch some conduct which previously could be prosecuted only as a conspiracy to defraud. But where such conduct is not caught by the new provisions, it probably does not deserve to be treated as a crime. The common law offence should either be repealed, or, at least, restricted by excluding cases where the acts envisaged by the members of the conspiracy would not in themselves be offences. To say that the common law offence of conspiracy to defraud must be retained because otherwise multiple counts would be needed in fraud prosecutions would have the tail of procedure wagging the dog of substantive law. That is the wrong way round. I shall finish by repeating that, overall, the Bill is a fine example of the value of the Law Commission and a tribute to its creator, Lord Gardiner.