“CARTELS”

pecuniary advantage

Sally Ramage

Obtaining property or pecuniary advantage by deception now classed as fraud

The Criminal Lawyer No 161 April 2006

The Theft Act 1968 created two offences of deception which replaced the offences of cheating, obtaining property by false pretences, obtaining credit by fraud and several similar offences. The Fraud Bill[1], when it receives Royal Assent, will repeal ss.15, 15A-B of the 1968 Act, and the Theft Amendment Act 1996, ss.1-3[2], all of which deal with offences of criminal deception.

The reasoning for changing the terminology to “fraud” ‘rather than “theft” is to remove the technical loopholes in the 1968 Act which hitherto required prosecutors to stipulate exactly what the offence(s) consisted of. This was because the 1968 Act specified the cases in which a pecuniary advantage is to be regarded as obtained for a person. By way of contrast the Fraud Bill, once given Royal Assent, will focus on the mens rea, i.e. the person’s intention. A person here means a legal person and so may be either a human being or a corporation.

Sections 15-16 of the 1968 Act lay down specific offences of obtaining property, money transfers or a pecuniary advantage by deception:

1 Where any debt or charge for which a person makes himself liable or is or may become liable is reduced or in whole or in part evaded or deferred (a debt or charge which is not legally enforceable is included).

2 Where a person is allowed to borrow by way of overdraft, or to take out any policy of insurance or annuity contract, or obtains an improvement of the terms on which he is allowed to do so.

3 Where a person is given the opportunity to earn remuneration or greater remuneration in an office or employment, or to win money by betting (illegal and unlicensed betting as in the case of R. v Clucas (Bayden Geoffrey[3]. The Fraud Bill when enacted will concentrate on the dishonesty of a fraud, rather than its deceit and the test for dishonesty will be the criminal law test in R. v Ghosh[4].

This most common offence, treated very lightly to date in the United Kingdom, is such a worry to the authorities in the United States, that the state of Washington is considering a Bill to outlaw the practice of ‘résumé padding’. This summary offence is as follows:-

- stating that a person possessed a degree when this was untrue $1-$1,000;

- failing to disclose that a degree held, as stated on one’s curriculum vitae, is an internet degree;

- committing a criminal offence of fraud by selling internet degrees[5].

In the United Kingdom, if someone were appointed as company secretary under the Companies Act 1985, section 286, with false qualifications, would be eligible for their appointment to be voided.

Companies Act 1985 section 286: Qualifications of company secretaries

(1) It is the duty of the directors of a Public Company, to take all reasonable steps to secure that the secretary (or each joint secretary) of the company is a person who appears to them to have the requisite knowledge and experience to discharge the functions of secretary of the company, and who-

(a) on 22nd December 1980 held the office of secretary or assistant or deputy secretary of the company, or (b) for at least 3 of the 5 years immediately preceding his appointment as secretary held the office of secretary of a company other than a private company, or

(d) is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom, or

(e) is a person who, by virtue of his holding or having held any other position or his being a member of any other body, appears to the directors to be capable of discharging those functions.

(2) The bodies referred to in subsection (1) (c) are-

(a) the Institute of Chartered Accountants in England and Wales;

(b) the Institute of Chartered Accountants in Scotland;

(d) Institute of Chartered Accountants in Ireland;

(e) the Institute of Chartered Secretaries and Administrators;

(f) the Institute of Company and Management Accountants;

(g) the Chartered Institute of Public Finance and Accountancy.

Such instances of obtaining pecuniary advantage by deception may be voided. An old case is that of R v Barnard[6], in which a court indicated that merely wearing an Oxford University gown amounted to a deception. A modern case was that reported on Monday 28 November 2005, in the Times newspaper. ‘A man who acted as a specialist in a men’s health clinic in London’s Harley Street has been jailed at the Old Bailey this week for two and a half years on five counts of obtaining money transfers by deception. Purporting to be both qualified doctor and registered with the General Medical Council, Jameel worked out of the Harley Street Wellman Clinic and had many patients who paid a considerable amount for treatment .. .’

The Theft Act’s meaning of property is as follows:-

“Property includes money’ and all other property, real or personal, including things in action and all other property, real or personal, including things in action and other intangible property. It is regarded as belonging to any person having possession or control of it, or having in it any proprietary right or interest (other than an equitable interest arising only from an agreement to transfer or grant an interest.)”

As to the offence carried out by a legal person, that is, a limited company, the Theft Act provides at present that where an offence is committed by a body corporate under the foregoing provisions is proved to have been committed with the consent or connivance of any director, manager, secretary or other similar officer, or any person who was purporting to act in any such capacity, he or she also is guilty and is liable to be proceeded against and punished accordingly. This in fact is what is meant by the Theft Act 1968 section 18(1) of which states that where a body’s affairs are managed by its members, this applies in relation to the acts and defaults of a member in connection with his functions of management as if he were a director (section 18(2)).

Such a case as Darayan Holdings Ltd v Solland International Ltd[7] could be treated as directors obtaining pecuniary advantages in the form of secret commissions by deceiving their company of that fact. In this case the fifth defendant extracted from the third and fourth defendants and their companies (the first and second defendants) about 1.8 million pounds between 1997 and 2001, which represented 10% commission on receipts from contracts with the claimants for the luxurious refurbishment of properties.

Pecuniary advantage could mean services since a person’s labour is something of economic value and this is the principal means by which most people acquire property. This type of pecuniary advantage is covered by section 1 of the Theft Act 1978, which overlaps with the soon to be repealed sections 15 and 16 Theft Act 1968. Since the supply of a credit card is obviously a service, this offence would apply. The obtaining dishonestly of a credit card will soon be a fraud offence.

Dishonesty here could mean fooling a computer by typing in false information. This will be a crucial arrow of the Fraud Bill 2006 when it receives Royal Assent. Here, English law means any device for storing and processing information and any reference to information to information being derived from other information is a reference to its being derived therefrom by calculation, comparison or other process[8]. Where more than one computer is used, all the computers, must, in certain circumstances, be treated as constituting a single computer. This would be a hearsay statement in this credit card case because the computer records were made in the course of business and court rules apply to hearsay statements. For the purpose of deciding whether or not a statement is admissible, the court may draw any reasonable inference from the circumstances in which the statement was made or otherwise came into being or from any other circumstances including, in the case of a statement in a document, the form and content that document.

Since the offences of obtaining pecuniary advantage by deception are at present committed where the property is obtained. An example of this is the case of R v Ellis[9], in which the defendant obtained credit in Durham, England by means of false representations he made in Glasgow. It was held that the crux of the offence is the obtaining of the property and was perhaps irrelevant where the false representations were made, following the reasoning in a similar case, R v Holmes[10] and in R. v Thompson[11].l1

Sally Ramage BA(Hons), MBA, LLM, MAAT, MCMI, and annotator of the Fraud Bill for Sweet and Maxwell’s Current Law Statutes Annotated

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[2] Theft (Amendment) Act 1996 ss, 1-3

[3] [1959] 1 WLR 244; [1959] 1 All ER 438; (1959) 43 Cr App R 98.

[4] [1982] QB 1053; [1982] 2 All ER 689; 3.

[5] “Policing Résumé Padding”, Accounting Web, February 16, 2006.

[7] [2004] EWHC 622; [2005] Ch 119; [2004] 3 WLR 1106