25.3 Fraud

The Fraud Act 2006 replaced the old Theft Act deception offences with one offence of fraud, committed in three ways. Section 1(1) makes a person guilty of fraud if he is in breach of section 2, 3 or 4. On indictment the maximum is 10 years. SQE1 problems rarely ask you to recite that maximum. They ask you to choose the correct route, and to drop a charge that is missing a legal duty, a position, or a representation.

Fraud is a conduct offence. The Crown does not have to prove that anyone believed D, that property moved, or that a loss landed. The prohibited act, plus dishonesty, plus an intention to make a gain or cause a loss (or to expose another to a risk of loss), is enough. That is why a failed scam is still fraud, and why "but the company would have sold the ticket anyway" is usually irrelevant.

The common elements: dishonesty and gain or loss

Every s.1 charge needs dishonesty and the s.2(1)(b) / s.3(b) / s.4(1)(c) intention.

Dishonesty is the Ivey test, applied in R v Barton and Booth: D's actual knowledge or belief as to the facts, then whether ordinary decent people would regard the conduct as dishonest. The Fraud Act does not reproduce Theft Act 1968 s.2, so there is no statutory list of beliefs that are "not dishonest." A genuine belief in a legal right to the money, or a genuine belief that the other person consented, will still almost always mean that ordinary decent people would not find D dishonest. Do not, however, treat s.2 of the 1968 Act as if it were written into the 2006 Act.

Section 5 defines gain and loss. Both are confined to gain or loss in money or other property, and include temporary as well as permanent gain or loss. Gain includes keeping what one has. Loss includes not getting what one might get. Intention to expose another to a risk of loss is enough; the risk need not materialise. Inflating a claim, hoping the insurer might pay more, is an intention to make a gain and to expose the insurer to a risk of loss even if the claim is later refused.

Fraud by false representation: section 2

Section 2(1) is breached if D dishonestly makes a false representation, and intends, by making the representation, to make a gain for himself or another, or to cause loss to another or to expose another to a risk of loss.

A representation is false if it is untrue or misleading, and D knows that it is, or might be, untrue or misleading (s.2(2)). Knowledge that it "might be" misleading is enough. A salesperson who does not know whether a mileage reading is genuine, and sells the car as having that mileage, is within s.2(2) if they know the figure might be untrue.

"Representation" means any representation as to fact or law, including a representation as to the state of mind of D or of any other person (s.2(3)). "I will pay on Friday" is a representation as to D's present intention. If D has no such intention, the representation is false. A representation may be express or implied (s.2(4)). Tendering a payment card implies that D has authority to use it. Remaining in a restaurant after deciding not to pay implies a continuing representation that payment will be made. Occupying a hotel room, or using a filling-station forecourt, can imply the same present intention to pay.

Section 2(5) is the machine limb. A representation may be regarded as made if it, or anything implying it, is submitted in any form to any system or device designed to receive, convey or respond to communications, with or without human intervention. Keying a false date of birth into a ticketing website, presenting a stolen card to a chip-and-PIN terminal, or submitting a false identity to an automated test booking system, is a representation. It is not a defence that no employee ever read the entry.

Because the offence is complete when the representation is made with the required mental elements, it does not matter that the website rejected the application, that the cashier was not fooled, or that D's account was empty. Do not drag the old "obtaining" language of the Theft Act 1978 into a s.2 analysis.

Fraud by failing to disclose: section 3

Section 3 is breached if D dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and intends by that failure to make a gain or cause a loss (or a risk of loss). The legal duty is the gate. A moral expectation, a feeling that it would be "only fair" to mention something, or a regulation of good practice that does not create a duty to the other party, is not s.3.

The duty can arise from statute, from a transaction that is uberrimae fidei on its facts, from a contract term, from a fiduciary relationship, or from a custom of the trade that the law recognises. Insurance proposal forms, company directors dealing with the company, solicitors dealing with the client on client money, and parties to a contract that expressly requires disclosure of named facts are the clean examples. A diner who does not volunteer that they have changed their mind about paying is not under a s.3 duty merely by sitting at the table; that fact pattern is usually an implied representation under s.2.

The failure must be dishonest on Ivey/Barton, and the intention must be to make the gain or cause the loss by failing to disclose. An applicant who omits a cancelled policy because she wants a lower premium has the gain intention. An applicant who omits it because she honestly believed the question did not cover that policy may fail dishonesty even if, as a matter of construction, the duty existed. Actual reliance by the insurer is not an element.

Fraud by abuse of position: section 4

Section 4(1) is breached if D occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person, dishonestly abuses that position, and intends by that abuse to make a gain or cause a loss (or a risk of loss). Section 4(2) provides that a person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

The position is a relationship of trust in relation to financial interests: employee, director, trustee, professional adviser, carer with control of a bank card, executor, or a person whose role is to look after another's money. R v Valujevs confirms that the "expectation" is an objective characterisation of the position, not a purely private hope of the victim. An unlicensed gangmaster who controlled workers' wages could occupy such a position even though the relationship was exploitative.

Abuse is using the position in a way that is contrary to that expectation. Skimming from the till, awarding a contract to a spouse, running a secret competing business with the employer's contacts, or remaining silent while an automated bonus is paid in error, can all be abuse. The omission limb is the trap: a finance director who notices an overpayment into his own account and says nothing, intending to keep it, may commit s.4 without making any representation. There may also be theft via s.5(4), but the fraud charge does not need a representation and does not need a s.3 duty if the position itself supplies the expectation.

Section 4 does not require that D's position be a formal office. It does require more than a one-off commercial deal between equals. A market seller who tells a lie about the origin of goods is in s.2, not s.4, unless some further position of financial guardianship exists.

Neighbouring offences, and overlap with theft

Section 6 (possession of articles for use in fraud) and s.7 (making or supplying articles for use in frauds) are separate offences. A cloned card in a wallet, a phishing kit, or a false identity document kept for a coming application can be a s.6 article. They are useful charging options where the s.1 representation has not yet been made. Section 11 (obtaining services dishonestly) is also separate: it catches dishonest obtaining of services, with intent not to pay, where the thing obtained is not "property" for s.5. Do not force a gym membership or a train ride into s.2 if the better fit is s.11, and do not call s.11 a way of committing s.1 fraud.

Overlap with theft is common and is not a problem. A director who siphons company money may commit theft (appropriation of property belonging to the company) and s.4 fraud. A person who keys a false student code to obtain a cheaper ticket may commit s.2 fraud; whether they also steal the ticket depends on the property analysis and is not needed for the fraud conviction. When the facts show a lie, start with s.2. When they show silence plus a legal duty, start with s.3. When they show a trusted position and no lie, start with s.4.

SQE application

Read the client's role before you pick the section. A one-line lie on a website is s.2, even if no human being reads it. A failure to tick a box that a proposal form and the law required to be ticked is s.3. A bookkeeper who simply does not correct a payment that favours him is s.4. Then apply Ivey/Barton to the facts D actually believed, and check that the intended gain or loss is in money or other property. If D only wanted a free ride, and no property interest moved, look at s.11 rather than inventing a s.5 gain. If D believed the other person would have consented, that belief goes to dishonesty; it is not a s.5 Criminal Damage Act excuse transplanted into fraud.