Fraud Lecture
1.0 Introduction and Background
The law regarding fraud was reformed through the enactment of the Fraud Act 2006, which came into law on 15th January 2007. Prior to this the fraud offences were set out in sections 15, 16 and 20 of the Theft Act 1968 and sections 1 and 2 of the Theft Act 1978. The decision for reform arose out of the Law Commission’s Report on Fraud published in 2002 which criticised the law at the time for being too broad and complicated and stated that it was out of date in that it did not make any allowance for modern means of defrauding through technological advances.
The Fraud Act 2006 provides one general offence of fraud which can be committed in three different ways:
(i) By false representation
(ii) By failing to disclose information
(iii) By abuse of position.
The Act also created the key new offence of obtaining services dishonestly
Examination Point
The Fraud Act 2006 did create other offences which can be found by looking at the statue itself if you are keen to undertake further reading, however for the purposes of your studies these are the common offences that you are expected to have an understanding of. Pay attention, in legal terms this is a relatively new Act there is not much case law on the topic so it is a very statute heavy area. It is vital, therefore, that you understand the Act well and are able to identify and explain the different offences.
2.0 Fraud
Section 1 of the Fraud Act 2006 provides as follows:
A person is guilty of fraud if he is in breach of any of the sections listed in subsection (2) (which provide for different ways of committing the offence).
(2) The sections are—
(a) section 2 (fraud by false representation),
(b) section 3 (fraud by failing to disclose information), and
(c) section 4 (fraud by abuse of position).
A vital initial point to note is that these offences are all conduct offences and will be committed upon completion of the defendant’s fraudulent conduct. It is not necessary for the purposes of the offence that anyone actually be defrauded. For example, say the defendant is selling his car and is desperate for a buyer. A potential buyer approaches who tells the defendant they are looking to buy a green car. The defendant believes them to be totally colourblind and tells them that he has such a car and is willing to sell it to them, thus making a fraudulent representation with the intention of procuring a sale of the vehicle. It so happens that the buyer is not colourblind, and is thus not defrauded by the lie. For the purposes of the fraud offences this is irrelevant, the offence is completed upon the carrying out of the fraudulent act.
2.1 Fraud by False Representation
Section 2 of the Fraud Act 2006 provides,
A person is in breach of this section if he:
(a) dishonestly makes a false representation, and
(b) intends, by making the representation:
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
2.1.1 Actus Reus
Making a false representation
A representation is a statement that portrays and communicates a situation or state of affairs. Section 2(3) provides that the actus reus of the offence covers:
Any representation as to fact or law, including a representation as to the state of mind of—
(a) the person making the representation, or
(b) any other person.
Representations can be made in numerous ways. For example, using the car discussed above, the colour of that car could be communicated, or represented to another person by each of the following means:
Directly verbally communicating it.
Person 1: “I have a blue car”.
Confirming someone else’s assumption of the colour indirectly.
Person 1: “You have a lovely blue coloured car”
Person 2: “Thank you”
Through a silent physical action.
Person 1: “If you have a blue car please stand on the left hand side of the room.”
Person 2: *moves to the left*
By doing nothing.
Person 1 to Person 3: “Person 2 has a lovely blue car”
Person 2: *does not react*
It can be seen from this, albeit slightly ridiculous example, that there is more than one way of going about communicating information or in legal terms, making a representation to others. Section 2(4) of the Act deals with this by setting out that a representation may be express or implied. The express representation being doing or saying something that directly asserts things to be a certain way. In the example above, this would be achieved by the verbal communication and the physical action. The implied representation is made by acting in a way that implies that things are a certain way. In the example above this would be done by saying thank you in return to the compliment about the way. The two words imply acceptance and confirmation of what has been said prior to this. It would also be done by staying silent in those circumstances as this too implies acquiescence to what is being said about the state of affairs.
Case in Focus: Metropolitan Police Commissioner v Charles (1977)
The defendant had been told by his bank manager that he was not to cash more than one cheque a day and was only authorised to write cheques for amounts up to the value of £30. The defendant, ignoring this, went out and wrote a number of cheques to casinos which subsequently bounced. The House of Lords held that by handing over these cheques he was impliedly representing that he had an account with the bank named on the cheque and that he had their authority to make out the cheques. As this was not the case his representation was held to be false.
Case in Focus: R v Rai (1999) the Times, November 10
In this case, the defendant Mr Rai applied to the council social services for a sum of money to enable him to undertake necessary adaptations in his home in order that he could care for his elderly mother there. The council agreed to provide assistance amounting to £9,500 and later that year they began works in Mr Rai’s home. At the time the council had started works, however, Mr Rai’s mother had passed away and Mr Rai did not inform the council of the change in circumstance as he wished to keep the grant regardless. The Court considered Mr Rai’s conduct as a whole and held that it had amounted to a continuing representation that his mother was alive and that the works were undertaken for her benefit. As she had died already this was no longer the case and Mr Rai held a new intention that the works would be carried out for his own benefit. By doing nothing and allowing the works to be undertaken in his house Rai was continuing the representation. This case demonstrates how a representation will be held to have been made where the defendant has deliberately omitted to change a perception that another person holds.
In modern day times it is not just other people that representations are made to. Increasingly digital communication and machinery are taking over more and more aspects of life especially information handling. Every time that you, the reader, sign up to a new social media site you are representing to that server that you are the person whose details you are entering in. When you use an ATM machine you are representing to that machine that you are the owner of the account that you are withdrawing from or that you have permission to be withdrawing from that person’s account. Examples of technological means could be listed at length and accordingly, the Act provides in s.2(5) that for the purposes of the offence a representation may be regarded as made if it is submitted to a system or device designed to receive, convey or respond to communications.
Having gained an understanding of what will constitute a qualifying representation for the purposes of the Act it is necessary to consider the requirement that the representation be false. Section 2(2) provides an explanation of what will be considered a false representation stating that a representation is false it is untrue or misleading.
2.1.2 Mens Rea
- Dishonestly;
- Knowing the representation is untrue or misleading, and;
- Intending to make a gain, cause a loss, or cause a risk of loss.
Dishonestly
For the purposes of fraud, dishonesty is a subjective concept which is assessed using an application of the common law test set out in R v Ghosh [1982] 3 WLR 110. It is a two-part test which asks:
- According to the ordinary standards of reasonable and honest people were the defendant’s actions dishonest?
- If it was dishonest by those standards, then did defendant himself realise what he was doing was dishonest?
Only where both prongs of this test are answered in the affirmative will the conduct be considered dishonest. This test is a matter of fact to be considered by the jury.
Knowing the representation is untrue or misleading
In order for the representation to be considered false the person making it must know that it is untrue or misleading. This requires a subjective understanding on the part of the defendant. Going back to the car scenario from earlier, if the defendant was to for whatever reason honestly believe the car to be green then this will not be satisfied, even though the car was clearly blue.
This element of the mens rea requires actual knowledge that the representation might be untrue and not simply a reckless awareness of a risk that it might be untrue.
Of course it is not sufficient for the defendant to simply say what they believed and for it to be accepted as fact. Their state of mind is a matter of fact for the jury to decide based on an assessment of all of the evidence before them.
Intending to make gain, cause a loss or cause a risk of loss
Section 5 of the Act explains how gain and loss will be interpreted.
Section 5 (2) states that gain and loss extends to any gain or loss in money or other property. Property is interpreted widely and means any property whether real or personal and includes things in action and other intangible property such as shares or intellectual property rights.
Unlike the offence of theft, for the purposes of fraud there is no need for an intention to permanently deprive as the gain or loss includes any gain or loss whether it is temporary or permanent. The gain must merely be a general gain and does not have to be a selfish gain. An intention to make a gain for another person is sufficient for the mens rea.
Section 5 (3) expands further and stated that gain encompasses keeping what one has, as well as a gain by getting what one does not have and s.5 (4) explains that loss includes a loss by not getting what one might get, as well as a loss by parting with what one has.
As can be seen from the s.5 definition, there is no requirement for a gain to include making a profit and accordingly Attorney General’s Reference (No.1 of 2001) is authority for the fact that a gain can occur simply where a defendant obtains money that he is already entitled to.
Examination Point
A typical essay question on this topic might focus upon the way in which these reforms in the law have been designed to target and encompass the reality of modern technological advances and 21st century crime. Of particular note is the modern activity of phishing. That is where a typically mass email is sent out to large groups of people purporting to be sent on behalf of a trustworthy entity such as a financial institution asking the reader to provide sensitive details such as usernames, passwords and credit card numbers so that the sender can gain access to their assets. This crime would be encapsulated by the s.2 offence.
2.2 Fraud by Failing to Disclose Information
Section 3 of the Fraud Act 2006 provides for the offence of fraud by failing to disclose information in situations where there exists a legal duty to disclose information. The section provides that:
A person is in breach of this section if he
(a) dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b) intends, by failing to disclose the information—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
2.2.1 Actus Reus
- Legal duty to disclose information is in existence; and
- Failure to disclose that information.
Legal duty to disclose
This legal duty to disclose exists for example when applying for insurance. There is a legal duty to disclose all the relevant information so that the insurer can make a full assessment of whether to offer the insurance and at what premium. If a person was suffering from advanced cancer this would likely affect any decision or premium payable relating to life insurance so it is evident why the duty to inform the insurer exists. The duty would also exist when selling a house in relation to enquiries raised by the purchaser. All information must be disclosed honestly in order to allow the purchaser to make an informed decision regarding the purchase of the house. If the house is suffering from rising damp and the purchasers ask whether the house is in good condition, there is a duty to disclose the information about the damp as it would clearly have some bearing on whether the purchasers wish to go ahead with the purchase or whether they might want to renegotiate the price of the house to reflect the work that would need to be done.
It is impossible to list an exhaustive set of situations where this legal duty would arise, however in general it can be said to arise in the following situations:
- Under contract law
- Under certain statutory provisions for example those governing company prospectuses.
- During good faith transactions
- From the custom of particular trades
- Under the existence of a fiduciary relationship
- Between professionals and their clients
- When claiming social security
It is not a defence that a defendant was ignorant to or unaware of the existence of the legal duty to disclose. The duty arises strictly from the existence of the relationship.
Examination Point
Make sure you are aware of all the situations where this could arise and have a full understanding of fiduciary relationships.
A fiduciary relationship is one where a duty of good faith is owed and exists for example between a director and his company, where the director must disclose all information available to him that may affect transactions of the company. It also exists between a trustee and beneficiary where a trustee has a duty of disclosure of matters effecting the trust to the beneficiary.
For more information on the situations where a relationship creating a duty to disclose could arise look into the Law Commission’s Report on Fraud where this concept is explained more fully at paragraphs 7.28 and 7.29.
Note here that this offence is only committed where there is a legal duty to disclose the information. If there is no legal duty, there is no offence under this section. For example, if a person has an interest in mechanics and their friend is buying a car and that person notices something wrong with the car but does not inform the friend, they are not in breach of any legal duty to disclose that information, merely a moral duty. There will be no offence under s.3. If however in this situation the seller of the car offers £10 to the person not to give their opinion to the friend, they may by acquiescing to the sale be in breach of s.2 by dishonestly making a representation to the friend that the car is in good condition, knowing that this is not the case, in order to make a gain for themselves.
Failure to disclose the information
This is a situation in English law where the actus reus requires not a positive act, but instead an omission. The defendant does not have to do anything per se in order to fulfil this element of the actus reus, it is completed upon them omitting to provide the requisite information when the legal duty arises.
There is no requirement that the failure to disclose relates to relevant information that is material to the matter and further, there is no de minimis standard in place. Accordingly, if the defendant were to disclose 99% of the information legally required to him but failed to disclose a potentially unimportant remaining 1% this could still be sufficient to complete the actus reus of the offence.
2.2.2 Mens Rea
- Dishonestly; and
- Intending to make a gain, cause a loss or cause a risk of loss
Dishonestly
As before, this is assessed subjectively by applying the Ghosh test.
Intending to make a gain, cause a loss or cause a risk of loss
This is assessed by applying the s.5 provision of the Act in order to assess what a qualifying gain or loss is and then coming to a conclusion as to whether the defendant subjectively intended to make such gain or cause or expose the victim to the loss.
2.3 Fraud by Abuse of Position
Section 4 of the Fraud Act 2006 provides that:
A person is in breach of this section if he—
(a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b) dishonestly abuses that position, and
(c) intends, by means of the abuse of that position—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
2.3.1 Actus Reus
- Occupation of a position where an expectation to safeguard or not to act against the financial interests of another exists, and;
- Abuse of that position.
Occupation of a position where an expectation to safeguard or not to act against the financial interests of another exists
For the purposes of this provision there are numerous instances and relationships where such a position could arise. The Law Commission explained instances encompassed by the term position at paragraph 7.38 of its Report on Fraud. These include but are not limited to:
- The relationship between trustee and beneficiary
- The relationship between director and company
- A professional person and client relationship
- Between an agent and his principal
- In the relationship of employee and employer
- As between partners
- Certain situations within a family
- In the context of voluntary work
- Any context where the parties are not at arm’s length.
Almost all of the above listed instances encompass a traditionally recognised fiduciary relationship as discussed above and indeed any relationship that is classed as fiduciary will be recognised as sufficient, however the existence of a fiduciary relationship is not essential for the purposes of a qualifying position. Where there is a question as to whether the relationship gives rise to a qualifying position this will be a question of law for the judge upon which if necessary a direction must be given to the jury.
The term ‘financial interests’ is not defined in the Act so much be taken to have its ordinary meaning, that is any monetary matter relating to the victim.
Abuse of that position
The meaning of abuse for the purposes of committing the offence is not defined by the Act so must be taken to consist of the ordinary meaning of the word. To rely of the Oxford Dictionary definition, abuse means using something for a bad effect or for a bad purpose or more simply a misuse of something.
Applying the lay meaning of the word to the offence, it can be seen that an abuse of the position will occur where the position is used to do something that it is not intended for. For example, a Power of Attorney is put in place as a mechanism of handling the financial interests of another in their best interests and to organise the provision of their affairs for them. It would be a misuse of this power to use the power granted by it to access to the person’s money for the holder of the Power of Attorney to purchase a holiday for themselves. This use is not what the power intends nor what the position was designed for, and thus constitutes an abuse.
Note the wording of the provision is that the defendant “occupies a position”, and thus his suggests a present context. Accordingly, in order to abuse that position the defendant must occupy it at the time in question. If the defendant no longer occupies the position at the point at which abuse occurs, then there will be no offence. For example, consider the defendant was an employee and in this position gains access to sensitive trade information. If the defendant is subsequently fired and then uses this information to set up a new company competing with his old employers this will not be an offence.
Examination Point
Be aware of the facts and study them carefully. Consider the ex-employee example from above where he has been fired and no longer holds a position. This does not automatically mean that he is released from his position as in many cases a contractual obligation will exist beyond the departure from the job. For example, it is common in employment contracts to contain a clause such as: “the employee agrees that upon termination of the contract, howsoever caused that he will not engage in any competitive business within 2 months of the termination.”
Further to this, the employee, or indeed anyone who at a time holds a qualifying position for the purposes of the offence, will be guilty of an offence if they take steps to plan actions whilst they still hold the position, even where they do not put the plan into action until the relationship has ceased. To demonstrate this using the employee from above, consider that the employee transfers company information and customer details from his office computer to his home laptop during the course of his employment. Having been fired by the company the employee utilises this information in starting a competing company. In this scenario the employee will satisfy the actus reus of the offence as although he no longer occupies his position he was an employee at the time the offence of transferring the information was committed.
Section 4(2) of the Act further provides that:
A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.
It can be seen from this that once again no positive action is required from the defendant in order to fulfil the actus reus of the offence as the abuse can be committed by either an act or omission. For example, a trustee could fulfil this by not engaging in any aspect of their duty as a trustee or a director could satisfy this by not taking proper care, or being negligent in his role as a director.
2.3.2 Mens Rea
- Dishonestly, and;
- Intention to make a gain, cause loss or a risk of loss.
These two elements of the mens rea carry the same meaning as for the other fraud offences and should be assessed in the same way.
2.4 Charging and Sentencing
Section 1 (3) of the Fraud Act 2006 states that:
A person who is guilty of fraud is liable—
(a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).
3.0 Obtaining Services Dishonestly
Section 11 of the Fraud Act 2006 provides for the offence of obtaining services dishonestly stating that:
A person is guilty of an offence under this section if he obtains services for himself or another-
(a) by a dishonest act, and
(b) in breach of subsection (2).
(2) A person obtains services in breach of this subsection if—
(a) they are made available on the basis that payment has been, is being or will be made for or in respect of them,
(b) he obtains them without any payment having been made for or in respect of them or without payment having been made in full, and
(c) when he obtains them, he knows—
(i) that they are being made available on the basis described in paragraph (a), or
(ii) that they might be, but intends that payment will not be made, or will not be made in full.
3.1 Actus Reus
- Obtaining services
- Payment required but not made
- Dishonesty caused the services to be obtained
Obtaining services
This is satisfied upon the successful obtainment of any service. Neither obtain or service is given further definition in the Act, and thus must be taken at the ordinary and natural meanings of the words.
Payment required but not made
The services must be given in return for an expected, legally required payment which is not provided by the defendant.
Dishonesty caused the services to be obtained
This is a causation element of the actus reus as unlike the fraud offences discussed above, the offence of obtaining services dishonestly is a result crime and as such a service must actually be obtained as a result of the dishonesty. Apply the ‘but for’ test to establish causation, but for the defendant’s dishonesty would the services have been obtained? Then apply the legal causation test to ensure that the defendants dishonesty was more than a slight or trifling factor of the decision to provide services.
3.2 Mens Rea
- Dishonesty
- Knowing that payment was required
- Intending to avoid payment in whole or in part
Dishonesty
This is established by applying the Ghosh test.
Knowing payment was required
This requires a subjective understanding from the part of the defendant that payment was expected in return for the service rendered to them.
Intending to avoid payment in whole or in part
This part of the mens rea establishes that the offence cannot merely be committed by the omission of not knowing as the defendant must commit the positive act of knowing that payment was required when he obtained the service and then not providing it. The simple omission of failing to provide a payment where there was no knowledge that one was due, or not paying as there was a belief that payment had already been paid is not sufficient for the purposes of the offence. As the defendant must actually intend to avoid the payment this presupposes that he carry out the positive act of taking steps to avoid it as opposed to simply failing to provide it.
Payment in whole or in part ensures that all situations are covered so it is not a defence if some form of consideration is provided i.e. a deposit or a nominal sum in relation to a larger amount due. It is not necessary that the defendant intends then to avoid the entire payment, an intention not to pay the full amount is sufficient.
Examination Point
This offence overlaps with making a false representation and often the s.2 offence will be the preferable charge as there is no requirement that any deception need occur. However s.11 offence will apply in situations where no false representation or deception has been made, and only requires that dishonesty is present. For example, climbing over the gates to watch a football match for free is a dishonest obtainment of that services but does not involve any representation or deception on the part of the defendant. Accordingly these acts could only be charged under the s.11 provision.
3.3 Charging and Sentencing
Section 11(3) provides that:
A person guilty of an offence under this section is liable—
(a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);
(b)on conviction on indictment, to imprisonment for a term not exceeding 5 years or to a fine (or to both).
Examination Point
Having read over the unit, it can be seen that there is a heavy dependance on the concept of dishonesty which is present in the mens rea of all of the offences discussed. This concept however is undefined in the Act, despite featuring so heavily in it, and is left for the jury to apply the Ghosh test. This is difficult as this test depends firstly on what a reasonable person would consider dishonest. This concept is difficult as there is no set universal standard of dishonesty and this will in cases where the conduct is contentious, vary significantly from jury to jury.
An interesting point is that the legislators have not only omitted to provide a definition in general but that they have failed to take the opportunity to codify the Ghosh test. Does this signify that they recognise the issues with the test and the concept of a reasonably honest person and were reluctant to solidify the test into law, thus leaving it open to the courts to modify should they see fit through the common law doctrine of precedent?
As a general point of critique that you could conduct in any question presented on fraud, consider whether you think that in making the reforms the legislators should have provided a statutory definition? Would it have been worth them codifying Ghosh or were they right to leave this open to modification? Could you suggest a more preferable test for dishonesty?
Hands on Example
The following scenario will assess your knowledge of the fraud offences and give you a chance to try applying the law in a practical context.
Read over the following passage and pull out and key facts and legal issues as you go. Once you have done this try and identify what relevant offences arise on the facts and if you’re feeling really confident, have a go at putting together an answer!
If you don’t feel confident just yet, there is absolutely no need to worry! These types of questions take time to get your head around and you’re taking all the right steps just by having a look and familiarising yourself with them. A step by step outline answer has been provided for you that contains pointers as to how you should go about addressing the scenario. Use this as guidance in putting together or checking your own answer. There is nothing raised in this question that we haven’t already covered so if you get stuck look back over the notes. You’ll find that you have all the tools necessary to do a great job!
Ben is going on a big night out to see a famous DJ with his friends Will and Alex. It is day 5 of Freshers Week at their university and Ben has no money as he spent it all earlier in the week, however Ben does not want to admit this in front of his new friends. As they are arriving at the club Ben tells Will and Alex that he will meet them inside as he needs to run back to the flat to pick up his ID. Once Ben sees that the other two have gone inside the club Ben sneaks round the back and enters through the fire exit in order to avoid paying the entrance fee on the door.
Once inside Ben reconvenes with Will and Alex and the boys go to the bar to buy drinks. Ben has taken out his flat mate Sebastian’s ID with him. Sebastian is a Freshers Rep and the club are offering free drinks to the Reps that night in order to thank them for their hard work throughout the week. Ben show’s Sebastian’s ID to the bar man and as it is very dark and busy the bar man cannot check it properly and assumes that the picture is of Ben. Ben is given Gin and Tonic for free.
Later that week, Ben gets home sick and misses his girlfriend a lot. He decides that university is not for him and that he will quit his studies immediately. Ben is in receipt of a student loan never tells his loan provider that he is no longer studying and continues to receive his loan payments, using them to fund rent on a new flat back in Nottingham.
Discuss Ben’s liability for any potential fraud offences.
Nightclub entry
Possible offence of obtaining services dishonestly under s.11 of the Fraud Act 2006.
Actus Reus
- Obtaining services
Ben gains access to the nightclub facilities and the DJ’s performance.
- Payment required but not made
There was a fee due on the door in order to gain access to the club but this was not paid.
- Dishonesty caused the services to be obtained
But for Ben’s actions of sneaking through the fire exit, he would not otherwise have gained access to the club. It was the only reason for his access to the club, and thus causation is established.
Mens Rea
- Dishonesty
Applying Ghosh, it is likely that Ben’s conduct would be considered dishonest by a reasonably honest person and also that Ben knew what he was doing was dishonest. This is evidenced on the facts buy him keeping his actions secret from his friends.
- Knowing that payment was required
Ben knew that payment was required on the door which was why he did not enter the club that way.
- Intending to avoid payment in whole or in part
By sneaking around the back through the fire exit Ben intended to avoid making payment in whole.
Therefore, on the facts it is likely that Ben will be found guilty of the s.11 offence.
Free Drink
Possible offence under s.2 of the Fraud Act 2006 of fraud by making a false representation.
Actus Reus
- False representation
It can be seen that through showing Sebastian’s ID at the bar, Ben was falsely representing to the bar man that he was the person in the picture, and thus that he had earned the free drink. It could be argued that this representation was express or implied but either way, applying s.2(4) it will constitute a representation for the purposes of the offence.
- Knowing representation was false
Applying s.2(2) Ben knows that he is not Sebastian and that this is untrue so this is easily satisfied on the facts.
Mens Rea
- Dishonesty
Applying Ghosh it is likely that Ben’s actions will be deemed dishonest by a reasonably honest person and that Ben knew they were dishonest.
- Intention to make a gain, cause a loss or risk of loss
By showing the ID Ben is not merely just intending to convince the bar man that his name is Sebastian, he is intending to take advantage of the free drink offer, and thus applying s.5 he is making a gain of the drink and the money that he has already by not parting with it for a drink.
Applying the law to the facts it is likely than Ben will be guilty for a s.2 offence.
Loan Payments
This is a possible offence of fraud by failing to disclose under s.3 of the Act if there exists a legal duty to inform the loan provider of the change in circumstance.
Actus Reus
- Legal duty to disclose information is in existence
If there is a contractual duty under the loan agreement to inform the loan provider of any change in circumstance, then this will satisfy this element of the actus reus. Similarly, the provision of student loans can be likened to social security access and a duty will arise.
- Failure to disclose the information
Ben does not inform his loan provider of that he is no longer studying which assuming that he has a duty to do so satisfies this element of the actus reus.
Mens Rea
- Dishonesty
Applying Ghosh it is likely that not informing the loan provider would be seen as dishonest by a reasonably honest person and that Ben is aware of that.
- Intention to make a gain or cause a loss or risk of loss
Ben intends by not informing the loan provider of his change in circumstance that he will continue to receive the payments, and thus make a financial gain.
Although this is a loan that Ben will one day have to repay this is irrelevant for the purposes of the offence as applying s.5(2)(b) of the Act there is no requirement of a permanent gain or loss. The temporary gain of the money is sufficient.
Assuming that Ben is under a legal duty to disclose the information, Ben will be guilty of a s.4 offence. In the unlikely event that there is found to be no such duty then applying the law in R v Rai there may still be an offence of fraud by making a false representation in that Ben’s student status is an on-going representation that becomes false when he ceases to be a student but intends to make a gain of access to the money in order to rent a flat.
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