Metropolitan Police Commissioner v Charles

Facts

The defendant, Charles, had a bank account with an agreed overdraft limit and a cheque card under which the bank guaranteed payment of any cheque up to a fixed amount, provided the card's conditions were met. In one evening at a gaming club he drew a series of cheques, each backed by the card, to obtain gaming chips, taking his account far beyond the overdraft limit. The bank was bound to honour the cheques. The club's manager gave evidence that, provided the card's conditions were satisfied, he was not concerned with the state of the customer's account.

History

Charles was convicted of obtaining a pecuniary advantage by deception, namely being allowed to borrow by way of overdraft, under s 16(1) and (2)(b) of the Theft Act 1968. The Court of Appeal dismissed his appeal, and he appealed to the House of Lords.

Issue

Whether a person who uses a cheque card to back a cheque makes any representation to the payee, and if so whether the payee, who is guaranteed payment by the bank whatever the state of the account, is deceived by it so that the pecuniary advantage is obtained by deception.

Held

Appeal dismissed; the conviction was upheld.

Ratio

• A drawer who uses a cheque card to back a cheque represents that he has actual authority from the bank to make, on its behalf, the contract by which it undertakes to honour the cheque. Where the payee would not have accepted the cheque had he known that the drawer lacked that authority, the representation is operative and the advantage is obtained by deception, even though the payee is indifferent to the drawer's account because the bank must pay.

Key reasoning

• Drawing a cheque ordinarily carries an implied representation about the drawer's existing relationship with the bank. Producing a cheque card adds a further representation: that the drawer is authorised by the bank to commit it to the guarantee on the card.
• The card's value to the payee lies precisely in that authority. A payee who knew the drawer was using the card in breach of his agreement with the bank would not knowingly participate in that breach, so the jury could infer that the payee relied on the representation.
• The manager's evidence that he was unconcerned with the account did not prevent the jury from finding that he would have refused the cheques had he known that Charles had no authority to use the card in that way.

Where it fits in the module

In the property offences topic, Charles is the leading illustration of implied representations by conduct and of the causal requirement of the old deception offences. It shows the courts stretching inducement to reach a defendant who was plainly dishonest, and so explains the move under the Fraud Act 2006 to an offence focused on the defendant's dishonest representation rather than the victim's state of mind.

Criticisms

• The finding of inducement is artificial: the payee was guaranteed payment and was, on his own evidence, indifferent to the drawer's authority, so the representation did not in reality operate on his mind.
• Implying a representation of authority from the bank attributes to an ordinary payment transaction a legal analysis that neither party had in mind, which risks making liability turn on technicalities of banking law.
• The real loss fell on the bank, not the club, yet the offence was framed around a deception practised on the club; the case shows the poor fit between the deception offences and dishonest misuse of payment instruments.