Wednesday, January 01, 2020
False Accounting- Section 17 of the Theft Act 1968
What is False Accounting?
The offence of false accounting means falsifying or concealing information needed for accounting. The person doing the falsifying or concealing must know that the information is misleading. The offence can be committed in one of two ways:
1. falsifying documents to be used for accounting or
2. using false or misleading documents for any purpose.
The elements of the offence are when someone dishonestly, with a view to gain for themselves/another or with intent to cause loss to another
- dishonestly destroys, defaces, conceals or falsifies any account, record or document
required for any accounting purpose or
- knowingly produces or makes use of any account, record or document for any purpose which is or may be false, misleading, or deceptive in any material way and supplies it for any purpose.
Section 34(2) of the Theft Act 1968 makes clear that “gain” and “loss” are not to be construed as relating only to gain or loss in money or other property but to any gain or loss whether temporary or permanent. This is therefore a broad definition. Under the Act the word “gain” includes a gain by “keeping what one has” as well as a gain by “getting what one has not.” Similarly, a loss includes a loss by “not getting what one might get” as well as a loss by “parting with what one has.”
Section 17(2) of the Theft Act 1968 sets out two ways in which a document can be considered as ‘falsified’:
- either because it has an entry which is misleading, false or deceptive in a ‘material particular’ or
- by the omission of a ‘material particular’.
A leading case on omissions is R v Lancaster  EWCA Crim 370;  1 W.L.R. 2558 in which the Defendant had applied to the local authority for housing benefit and council tax benefit but had omitted from the application forms that he and his wife had interests in and/or control of two companies, had made receipts and drawings from one of them, were using their home address for business purposes and that the defendant was about to sign an agreement for consultancy work. The defence submitted on appeal that the judge had misdirected the jury in the trial because omissions were material only if they in fact caused the local authority to pay benefits to which the defendant was not entitled. The defence relied on the cases of R v Mallett  1 WLR 820 and R v Passmore  1 Cr App R 165.
The Court analysed these cases and rejected this submission. The Court noted that the judge directed the jury in Mallett that “false in a material particular” meant false in an important respect and the Court of Appeal approved this direction. The Court held that Passmore was not relevant to the proper construction of section 17 of the TA 1968 because the offence in that case was section 111A of the Social Security Administration Act 1992 which belonged to a different statutory scheme.
The Court went on to consider what it meant by “omits…a material particular” in the second part of section 17(2) that relates to non-disclosure. The Court noted that section 17(2) identifies two ways in which a document may be regarded as falsified—either by an entry which is or may be misleading, false or deceptive in a material particular, or by omission of a material particular. Whilst the words “misleading, false and deceptive” were only contained in the first part of the subsection that relates to misrepresentation, read as a whole and in its context the Court felt that the subsection deals with documents which are or may be materially misleading either by reason of what they contain or by reason of what they should contain but fail to contain.
In a non-disclosure case the omission will be material if it has the effect that the document is liable to mislead in a way which is significant or in the language of Mallett, in a way which matters. Whether the omission is significant will depend on the nature of the document and the context. Importantly, the Court suggested that the jury should be directed that it is for the jury to judge for themselves, on the particular facts of the case, whether they regard the omission as significant.
The Court of Appeal in R v O (and another)  EWCA Crim 2233;  1 W.L.R. 2936 held that without any further evidence of the accounting practices of the lender, a jury is entitled to come to the conclusion that an application for a mortgage or a loan made to a commercial institution is a document required for an accounting purpose. The Court reiterated the requirement of materiality as it was set out in Lancaster.
Concurs in making a misleading, false or deceptive document or concurs in omitting a material particular from an account or other document
It is important to note that subsection 2 of section 17 effectively ensures that it is not a defence for a defendant to claim that they only agreed to a misleading entry being made or omitted. A defendant would therefore also have committed the offence if they were aware of such a practice and allowed it to take place.
Dishonesty is an essential element of the offence and has recently been redefined in the civil case of Ivey v Genting Casinos (UK) Ltd  UKSC 67,  All ER (D) 134 (Oct). The supreme court overruled the criminal test for dishonesty set out by the Court of Appeal in R v Ghosh  2 All ER 689.
The Supreme Court held that the first step is for a tribunal (the judge or jury) to ascertain subjectively the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence and is often determinative as to whether he in fact held that belief. The question therefore remains whether the defendant genuinely held the belief that he alleges. Once the actual state of mind of the defendant as to knowledge or belief as to the facts is established, the judge or jury will consider, applying the standards of ordinary decent people, whether the conduct was honest or dishonest.
This means that the question is whether the ordinary person would consider that the conduct was dishonest. Whether the defendant appreciates that ordinary people would view his conduct as dishonest is not relevant.
This offence can be tried either in the Magistrates’ Court or the Crown Court. Following a conviction in the Magistrates’ Court, the maximum penalty is six months imprisonment or a fine or both. Following a conviction in the Crown Court, the maximum penalty is seven years imprisonment or a fine or both. Officers of a company (see above) could also face disqualification as a director.
Quentin Hunt is a Criminal Barrister who specialises in theft and fraud cases and has appeared in very high profile cases of this sort and others. Should you wish to consult a legal expert in this area you may contact Quentin for a no obligation conversation about your case.