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Fraud by False Representation

Key definitions

Fraud: Criminal deception intended to result in financial or personal gain.

False representation: A factual statement/gesture which is untrue or misleading made by one party in order to induce another party to do something.

Representation: A statement about something which is based on fact or law. Statements of opinion can be fraud but are very difficult to prove as being untrue.

Loss: can mean losing something you already have, OR missing out on a chance to get something.

Gain: can mean getting something new OR keeping something you already have.

This offence is part of a suite of three offences that come under the general offence of fraud found in s1 of the Fraud Act 2006. s2, fraud by false representation is the only offence needed for the exam.

Key Facts

1. Involves a factual statement gesture which is untrue or misleading made to induce the to other party to suffer a loss. 2. Indictable only offence 3. Max sentence is 10yrs

The definition of Fraud by false representation

A person makes a false representation

S (1): if they dishonestly make a false representation and intends S(1)(i): To make a gain for himself or another or risk causing a loss to another.

S(2): A representation is false if is untrue or misleading and the person knows it is or might be untrue or misleading

S(3): Representation means a statement as to fact or law and includes the state of mind of the D or another person.

S(4): A representation may be express or implied.

S(5): A representation is made when it sent by any form that is electronic even if no human has been part of the transmission process.

Makes a false representation (the actus reus). Version 1 Page 2 4/25/2018

Fraud is a conduct crime so the P do not have to prove and end result. P do not need to prove anyone would believe the representation was false. The offence is complete once the representation as be made.

S2(2) The word ‘representation’ is not defined in the Act. Representation in Contract law means a factual statement made in order to induce another person to make a gain or cause a loss.

S2(3) makes it clear it is irrelevant whether the representation is about fact or law, eg It could be a statement that a piece of jewelry is silver when it is in fact silver plated only. Or it could be a statement that a contract entitles the person to sell a house when it doesn’t, law. A statement of opinion can be Fraud if the person is not genuine in making the opinion, e.g. a car is in working condition but the person knows the engine is about to explode.

If the representation was true when made, but later becomes false, the offence can be committed by not telling of the change.

DPP v Ray (1974) facts: D a student went to a Restaurant with his friends and ordered a meal. At the time he entered the restaurant the D only 10p on him but one of his friends had agreed to lend him some money to pay. He ate the meal and they then decided not to pay and to run out of the restaurant. They did so some 10 minutes later. No payment was offered or made, and no money was left, for the meals served. D tried to argue that at the time he entered he had made no false representation as he was going to pay.

Ratio: Where there was an implied representation that payment would be made when the meal was ordered this remains the case until the D lets the other party no differently. As the D did not tell the other party he could not pay then at the point the D decides not to pay then this becomes a false representation.

R v Rai (2000) facts: D was owner of a property and applied for a grant towards providing a downstairs bathroom for use of his elderly and infirm mother. The council approved the grant on 29th July 1996. Two days later, on 31 July, his mother died. He did not tell the council of the changed circumstances, and used the grant for the agreed modifications to his house.

Ratio: Where the D has expressly stated that a fact is true but those facts change then the D must inform the other party of the change facts. It doesn’t matter the D has used the money as originally agreed, this a decision the other party must take based on the new facts. Therefore, the failure to inform the other party of the change of facts is a false representation.

Section 2(3) says a representation about the state of mind of a person can also be sufficient for criminal liability.

Example: If you were to go to your father to ask for £10 to help buy a law textbook, but you really want the £10 to go the pub, you would be falsely representing your state of mind. If you were to go to your father to ask for £10 to help your brother buy a law textbook, but you really want the £10 to go the pub, you would be falsely representing the state of mind of ‘any other person’.

Under s2(4), a representation may be express or implied. It can be expressly made in many ways; the Act puts no limit on this. For example, be written or texted, spoken directly or by phone or radio, posted on a website, put on a podcast or sent by e-mail. Version 1 Page 3 4/25/2018

A representation can be implied by conduct. This could occur when a person uses a credit card or pretends to make a payment from his bank account say by debit card.

MPC v Charles facts: The D went to a casino and used cheques from his cheque book to purchase chips for gambling. For each cheque he used his bank card which said the bank would honour all cheques paid. D went over his overdraft limit by a large amount.

Ratio: By using his cheque book together with the bank card are an implied representation by the D that he had authority to make the cash withdrawals. However, the representation is implied to false when the D clearly knows that he has no more funds in his count as the bank would clearly not allow him to use his bank card or cheque book in this situation.

This principle has been extended to cover credit cards.

R v Lambie (1982) Facts: The D had a credit card which was issued subject to current conditions of use. It was an express condition of its issue that it should be used only within the given credit limit. D knew her credit limit was £200. Between November 1977 and December 1977 she used the card for at least 24 separate transactions amounting to £533. The bank became aware of this debt and requested the card be returned. She agreed to return the card but did not do so and used the card for at least 43 further transactions, incurring a total debt to the bank of over £1,000.

Ratio: The representation arising from the presentation of a credit card is a representation of actual authority to make the contract with the shop to whom the payment is to be made. Therefore this is implied false representation that the D has sufficient credit to make the payment at the point the D knows her credit limit has been exceeded.

A representation can be made through a gesture such as a nod of the head or by presence in a restricted area which implies the right to be there. This would include presence within a secure computer system or being dressed or wearing an identification badge that implies a certain status or right to be present. A representation can also be about a person’s identity and will be relevant for identity fraud. All these become possible because of the meaning of false being untrue or misleading.

This is all confirmed in the explanatory notes to the Act, which states that even where the shop, credit card company or other party is not deceived by the gesture it is still a false representation.

E.g., Where an email is sent stating it is from a D’s bank asking for card details and password and no details are supplied as the D knows the email is from a fraudster in Africa (known as ‘phishing’)

S2(5) makes it clear that the offence can be committed by making a representation to a machine such as an ATM (automated ticket machine). Version 1 Page 4 4/25/2018

S1: Dishonestly (first part of the mens rea)

This is the crucial element of the offence. Throughout the passage of the Fraud Act 2006, it has been considered that the Ghosh test applies.

R v Ghosh (1982) (see theft notes for facts).

D is dishonest as to making a false representation if:

1. Defendant’s behaviour would be regarded as dishonest by the standards of reasonable and honest people, based on the evidence? AND 2. The defendant is aware that his conduct would be regarded as dishonest by reasonable and honest people?

Important: There are no honest defences for Fraud. S2: Knowing that the representation was or might be untrue or misleading (second part of the mens rea)

‘might be untrue or misleading’: The words ‘might be’ do not mean recklessness. Actual knowledge that the representation might be untrue is required rather than an awareness of a risk that it might be untrue.

Statement must be untrue or misleading: The D cannot be convicted if the statement is true. If it is the case that the statement is untrue or misleading, then the defendant must know that is the case.

Example: Where a debit or credit card has been used fraudulently, evidence of the rightful owner and that he or she did not carry out the transaction in question will suffice to show that producing the card by the D must know that any statement he makes about his authority to use the card is (or might be) untrue. S1(1)(i): With intent to make a gain for himself or another, to cause loss to another or to expose another to risk of loss (third part of the mens rea)

‘with intent to’: This means that there is no need for anyone to have suffered any actual loss or be exposed to any loss or even that the defendant makes a gain. This is all about what the defendant intends by carrying out his act. It is very similar to the definition of ‘blackmail’.

R v Parkes (1973) facts: The D was using the threats to get money that was lawfully owing to him.

Ratio: Where D is intending to get money owed to him earlier than pursuing a legal right to the money through the courts this is regarded as an intent to make a gain as he is getting access to the money earlier than he is legally allowed