Fraud and the Fraud Act 2006

Fraud is the point in Part IA Criminal Law at which the general architecture of liability meets the practical world of economic wrongdoing. The Fraud Act 2006 replaced a notoriously technical law of deception with a simpler set of conduct offences centred on dishonesty, false representation, non-disclosure, and abuse of position. Its organising idea is deliberately broad: D need not actually deceive V, V need not rely on D’s conduct, and no gain or loss need eventuate. Liability is complete where D acts dishonestly and intends, by the relevant means, to make a gain for himself or another, or to cause loss to another or expose another to a risk of loss. That is the crucial distinction from theft, studied in Week 8. Theft requires appropriation of property belonging to another with intention permanently to deprive. Fraud is more anticipatory and more communicative: it criminalises dishonest creation or exploitation of a risk to proprietary interests. The Fraud Act is therefore closer to an offence of dishonest interference with another’s economic decision-making or financial interests than to a completed transfer offence. For Cambridge purposes, three points should be kept separate. First, the Act creates three principal routes to liability under sections 2, 3 and 4, all feeding into the single offence of fraud in section 1. Section 2 concerns false representation; section 3 concerns failure to disclose information where there is a legal duty to disclose; section 4 concerns abuse of a position in which D is expected to safeguard, or not to act against, another’s financial interests. Secondly, dishonesty is now governed by Ivey v Genting Casinos and its criminal-law confirmation in Barton and Booth. The Ghosh second limb, under which D had also to realise that ordinary people would regard his conduct as dishonest, no longer represents the law. The tribunal determines D’s actual knowledge or belief as to the facts, then applies the objective standards of ordinary decent people. Thirdly, fraud is not confined to lies told to human victims. A representation may be express or implied and may be made to a machine, system or device. That provision is essential for card transactions, online applications, automated payment systems and digital commerce. In supervision and examination answers, fraud rewards disciplined statutory analysis. Start with the applicable subsection. Identify the conduct element precisely. Then address falsity or legal duty or position of trust-like responsibility. Then dishonesty. Then intention to gain, cause loss, or expose to risk of loss. Do not import requirements from the old law unless the case is being used historically or analogically. Above all, avoid treating fraud as a result crime. The Act is drafted so that attempted economic manipulation, where dishonest and accompanied by the requisite intention, is already the full offence.

The Fraud Act 2006 is best understood as a reaction against the complexity of the deception offences in the Theft Acts 1968 and 1978. The old law contained multiple offences: obtaining property by deception, obtaining a pecuniary advantage by deception, obtaining services by deception, evasion of liability by deception, and related provisions concerning cheque cards and credit facilities. The distinctions between them generated elaborate litigation. Courts had to ask whether there had been a deception, whether it had operated on a human mind, whether it had caused the obtaining, whether what was obtained was property, a service, a pecuniary advantage, or a release from liability, and whether the particular offence charged matched the form of advantage secured. The result was a body of law that was doctrinally intricate but often poorly adapted to modern commercial practice. The pre-2006 cases nevertheless remain important. They explain why the Act is drafted as it is. In DPP v Ray, diners who had originally entered a restaurant intending to pay were held capable of deception when, after eating, they decided to leave without payment. Their remaining in the restaurant could amount to a continuing implied representation that they would pay. In Metropolitan Police Commissioner v Charles, use of a cheque card was treated as an implied representation that the drawer had authority from the bank to use it in that way. These cases show the judicial expansion of deception through implication and continuing representation. Yet that expansion did not solve the structural difficulty: deception presupposed a person deceived, and causal reliance was often awkward where transactions were automated. The Law Commission’s Report on Fraud, Law Com No 276, identified the old law’s fragmentation and technicality as central defects. Its proposed reform shifted attention away from whether V had in fact been deceived and towards D’s dishonest conduct and intended economic consequence. That shift was decisive. The 2006 Act made fraud complete without proof of deception, reliance, actual gain or actual loss. It created a general offence with three modes of commission, each broad enough to catch modern frauds but sufficiently structured to avoid a single undefined offence of dishonesty. The Act also preserved specific offences outside section 1, notably obtaining services dishonestly under section 11 and possession or making of articles for use in fraud under sections 6 and 7. Historically, therefore, the Fraud Act represents both simplification and expansion. It simplified by replacing several outcome-specific deception offences with a unified structure. It expanded by making liability possible even where the victim detects the lie, where the computer rejects the application, or where the dishonest risk never matures into financial harm. That expansion explains continuing academic concern about breadth. But it also reflects the preventive logic of modern economic crime: the criminal law intervenes at the point of dishonest attempted manipulation of property interests, not merely after completed transfer.

The first principle is that section 1 is a gateway, not an independent conduct definition. A person is guilty of fraud if he is in breach of section 2, 3 or 4. In an exam answer, do not say simply that D committed fraud because he acted dishonestly. Identify the route. If D lies on an insurance claim form, section 2 is the natural route. If D omits material information from a transaction where he has a legal duty to disclose it, section 3 may apply. If D exploits a position in which he is expected to safeguard another’s financial interests, section 4 may apply. Some facts support more than one route; a well-structured answer chooses the strongest and then notes alternatives. The second principle is that section 2 fraud by false representation is very broad. A representation may concern fact or law, and includes a representation as to D’s state of mind or another person’s state of mind. It may be express or implied. It may be made to a person or to a machine. A representation is false if it is untrue or misleading and D knows that it is, or might be, untrue or misleading. The word ‘misleading’ matters. Half-truths, carefully selected facts, and conduct conveying a false impression may suffice. So may representations implicit in using a bank card, submitting an online form, presenting a document, or continuing with a transaction after the factual basis has changed. But the mental element is not negligence as to truth. D must know the representation is, or might be, untrue or misleading. The third principle is that section 3 is not a general offence of immoral silence. Liability arises only where D is under a legal duty to disclose information. That duty may arise from statute, contract, fiduciary relationship, the incidents of particular civil-law relationships, or perhaps from particular dealings recognised by law. The Act does not make every failure to volunteer relevant information criminal. This limiting function is important. A seller who remains silent about a defect may be morally unattractive, but section 3 requires a legal duty to speak. If the silence also implies a false representation, section 2 may be considered; but that must be reasoned, not assumed.

The leading cases perform three different functions: they explain the pre-Act concept of deception, define dishonesty, and illustrate the breadth of abuse of position. Pre-Act cases remain relevant because the Fraud Act deliberately incorporates express and implied representations and permits liability without the older requirement that the deception actually operate on a victim. DPP v Ray is the classic example of implied continuing representation. The defendants entered a restaurant honestly intending to pay, ate, then decided to leave without paying. The House of Lords held that their conduct after changing their mind could constitute deception: remaining in the restaurant could imply continuing readiness to pay. The modern significance is not that causation remains required under section 2; it does not. Rather, Ray explains why implied representation is a powerful idea in fraud. Metropolitan Police Commissioner v Charles developed the same logic in the context of cheque cards. Presenting a cheque with a card conveyed implied representations about authority and use within the card scheme. Under section 2, comparable reasoning applies to bank cards, online payment interfaces, and automated systems, reinforced by section 2(5). Rai is a bridge between deception and abuse of position. A donor gave money to fund adaptations to the defendant’s mother’s house. When the defendant later used it differently and failed to correct the donor’s misunderstanding, the Court of Appeal upheld liability under the old law. Its continuing significance lies in the relationship between entrustment, expectation and dishonest departure from the basis on which money is held. Valujevs is important for section 4. The defendants exploited migrant workers through a labour-supply arrangement. The Court of Appeal held that section 4 is not confined to formal fiduciaries. The question is whether, on the facts, D occupied a position in which he was expected to safeguard, or not act against, another’s financial interests. That expectation may arise from the relationship itself. The two indispensable dishonesty authorities are Ivey and Barton and Booth. Ivey was a civil case concerning cheating at baccarat, but Lord Hughes reformulated the test for dishonesty and rejected the second limb of Ghosh as wrong. The tribunal ascertains D’s actual knowledge or belief as to the facts, then applies the standards of ordinary decent people. Barton and Booth held that this is the test in criminal proceedings. Its practical consequence is considerable. Defendants can no longer escape liability by saying that, although ordinary people would think the conduct dishonest, they did not realise that ordinary people would think so. The cases collectively show the modern law’s trajectory: from deception operating on a mind, through implied representations in commercial dealings, towards a broad statutory scheme centred on dishonest risk to proprietary interests.

See practice questions section below.

See further reading section below.