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which carries with it the risk of
loss. This is most famously exem-
plified in Wai Yu-Tsang [1992] AC 269,
where the defendant's conduct risked
imperilling his employer's economic
interests, even though his intention may
have been to protect those interests-
this was held capable of amounting to
common law conspiracy to defraud.
This broad fraudulent intention ensures
that it no longer matters in what form the
defendant obtained, or intended to obtain,
the gain. There is no longer any room for
technical arguments about the form of
what was obtained; TA 1968 was mortally
wounded when the House of Lords held in R
v Preddy [1996] AC 815 that obtaining bene-
fit by way of money transfer did not amount
to obtaining property belonging to another
within the meaning of TA 1968.
The offence is complete when the defend-
ant makes the false representation. The
deception offences needed something to be
obtained, before they were complete. The full
offence under the new law would include most
conduct which was an attempt under the old
law. The emphasis has shifted away from a
deception operating on the mind of the victim
to a definition dependent solely on the mind
of the defendant. This overcomes two critical
difficulties with the deception offences.
The first relates to the fraudulent use
of payment cards. If a credit card is prof-
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ike an elephant, a fraud is difficult to
define, but most people would claim to
recognise one if it were in front of them.
The Fraud Act 2006 (FrA 2006) continues the
legislature's efforts to define fraud offences-a
process that began with repeated larceny acts
in the 19
th
century and continued with the
Theft Acts 1968 (TA 1968) and 1978 (TA
1978) and the Theft (Amendment) Act 1996.
However, there is a feeling that this time they
have got it right. Lord Lloyd expressed the
view of many commentators when, during the
Bill's second reading in the House of Lords,
he said: This is one of the best Bills to have
come out of the Home Office for many a long
year" (see second reading, Hansard, 22 June
2005, column 1664).
His compliments are only to be partially
tempered by the fact that the majority of
the Bill was drafted by the Law Commis-
sion to accompany its July 2002 fraud paper,
Fraud-Report on a Reference under Section
3(1)(e) of the Law Commission Act 1965 (Law
Com No 276 Cm 5560). The declared aim
of that paper was to define statutory offences
that would make it no longer necessary to
retain common law conspiracy to defraud.
The FrA 2006 has probably achieved this
ambition, but Parliament has not abolished
conspiracy to defraud, for the time being.
FrA 2006, which came into force on
15 January 2007, replaces the deception
offences under TA 1968 and TA 1978, and
should greatly reduce the use of common law
conspiracy to defraud. It also:
Creates a new broad fraud offence-the
first time there has been a statutory
offence called fraud.
Ensures any dishonest obtaining of
services is an offence-the old law only
applied where a deception was involved.
Ensures that those who are caught at
their home address with equipment for
use in fraud, such as ATM skimming
devices, may be prosecuted-the old law
of 'going equipped' applied only to those
not at their place of abode.
Creates a wide fraudulent business
offence, analogous to fraudulent
trading under the Companies Act
1985 (CA 1985) which applies to
all businesses, not just corporations.
In this article, I consider the new offence
of fraud. In the second I will consider the
remaining provisions of FrA 2006, and the
decision to retain conspiracy to defraud.
FALSE REPRESENTATION S 2
The most important provision of FrA 2006
is s 1 which creates the new offence of fraud.
FrA 2006 is drafted such that there is a single
offence which may be committed in three
broad ways, as defined by ss 2-4.
The first of these is fraud by false repre-
sentation. This branch should cover all of the
conduct that properly fell to be prosecuted
under the old deception offences. A person
commits fraud if he dishonestly makes a false
representation, intending to make a gain for
himself or another, or to cause loss to another
or to expose another to a risk of loss.
The mens rea of the offence has two
elements:
Dishonesty-which the Solicitor General
made clear at the House of Commons'
committee stage, has the same meaning
as it does under the extant law (as defined
in R v Ghosh [1982] QB 1053, [1982] 2
All ER 689).
Fraudulent intention-to make a gain
for oneself or another, or to cause loss
to another or to expose another to a risk
of loss. This gain or loss is deliberately
restricted to gain or loss in economic
terms, as is the case with false account-
ing or blackmail. It is intended by includ-
ing in its terms, exposure of another to a
risk of loss, to cover conduct which is not
necessarily intended to be malign, but
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2J3 MEV LAV !CRMAL P Februory 200Z
fered to a shop-
keeper, it is clear that
the purchaser makes an implied
representation that they have authority to
use the card. Where, for whatever reason,
they do not, the merchant may not care
greatly, as the terms of the contract with the
card company probably means the shop will
receive payment anyway. In these circum-
stances it is difficult to conclude that goods
are obtained by deception-the deception
does not operate on the mind to cause the
obtaining. The House of Lords held that the
jury can infer that it is causal, but academic
commentators are not so sure. This problem
has been resolved under the fraud offence.
Simply the offering up of the card with-
out authority to use it is a false represen-
tation-presumably done dishonestly and
with intent to make a gain in the form of
the goods-so constitutes a complete fraud
offence. There is no need for the representa-
tion to have any effect on the mind of the
shopkeeper.
The second difficulty is that machines
cannot, in law, be deceived. As a machine
performs an automated process rather than
thinking as such, it is incapable of being
deceived. Knowingly using false coins to
buy cigarettes over the counter was a decep-
tion offence, but using the same coins in a
vending machine was not. This problem had
come to prominence with the increased use
of automated systems for commerce on the
internet-in particular, where a service is
bought on the internet with a false or stolen
credit card, there was no obvious offence to
charge. Again, as there is no need to prove
an effect on the mind of the victim, the
fraud offence resolves this problem. By
entering credit card details onto an
internet commerce site, the defend-
ant makes a representation that he
has authority to use it. If this is false,
then he is likely to have committed
the fraud offence.
FAILURE TO DISCLOSE S 3
Under the second branch of the fraud
offence, a person commits fraud if he
dishonestly and with the fraudulent
intention fails to disclose to another
person information which he is under a
legal duty to disclose. This extends the fraud
offence to cases where there is no positive
representation for the purposes of the first
branch, in situations where there is a legal
obligation to disclose information.
An example is R v Firth (1989) 91 Cr App
Rep 217, [1990] Crim LR 326. The defend-
ant was a consultant gynaecologist who omit-
ted to inform a hospital that certain patients
referred by him for treatment were private
patients. Had the hospital known this, either
he or the patients would have been charged
for the services. It was held that he had
evaded a liability by deception. However, it
is not easy to establish that there was a decep-
tion from his mere silence. Under the new
law he would be guilty of the fraud offence,
provided he has a legal duty to disclose such
information.
Originally the Law Commission proposed
extending the offence to cases where there is
a moral duty to disclose, as where a travelling
antique dealer preys on elderly victims, by
offering substantial undervalue for antiques,
while implying he is giving a fair price. This
was rejected as too uncertain by the govern-
ment during consultation.
ABUSE OF POSITION S 4
A person is also guilty of fraud if he occu-
pies a position in which he is expected to
safeguard, or not to act against, the finan-
cial interests of another person, and he
dishonestly, and with the fraudulent inten-
tion, abuses that position. A person may be
regarded as having abused his position even
though his conduct consisted of an omission
rather than an act.
Where a person occupies a position of
trust, such as that of an employee, he can
commit fraud against his employer, without
the need to trick him by using a false repre-
sentation. He already has entrusted to him
everything necessary to commit fraud, such
as the employer's premises and monies.
A classic example of this sort of fraud is
the case of the manager of the public house
who sold his own beer at the premises rather
than that supplied by his employer. He
was clearly acting to the detriment of his
employer by depriving them of the profit
that would have been made by selling their
beer. However, it was held that there was no
appropriation of a secret profit belonging
to another, so it was not theft (see Attorney
General`s Reference (No 1 of 1985) [1986] QB
491, [1986] 2 All ER 219. This type of case
starkly demonstrates the absurdity of the
common law offence of conspiracy to defraud
which makes it an offence to agree with
another to pursue fraudulent conduct, even if
it would not be an offence when committed
by one of them alone: in a similar case to the
beer case, it was held that two people selling
their own sandwiches in the place of British
Rail sandwiches, were guilty of conspiracy
to defraud (see R v Cooke [1986] AC 909,
[1986] 2 All ER 985).
DEFINING THE ELEPHANT
FrA 2006 has introduced a widely defined
offence of fraud which can be committed
in three broad ways. It is apparent that
the definition will overcome many of the
difficulties presented by the old deception
offences. It has also extended the offences
to avoid the anomaly of conduct which was
a conspiracy to defraud when performed
with another, but not an offence when
performed alone. With some trepidation, I
conclude that Parliament may have finally
succeeded in defining the elephant. Only
time will tell.
Nicholas Yeo is a barrister at 3 Raymond
Buildings
Part two will be published in a future edition
of NLJ
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