Fraud by False Representation

The offence of fraud by false representation is contained within section 2 of the 2006 Fraud Act and is one of the most commonly prosecuted offences under that Act. The offence is known as an ‘either way’ offence and can be heard either in the Magistrates Court or the Crown Court; it should be taken seriously as it is punishable with a maximum sentence of 10 years’ imprisonment.

It is an offence which is popular with the Police and the Prosecution authorities and is a versatile tool in their hands. I have seen cases charged under s2 of the Fraud Act where the underlying facts are wildly different – from Benefit Frauds prosecuted by the Department of Work and Pensions, through to rogue builders prosecuted by Local Authorities, to ‘Boiler Room’ frauds prosecuted by the Financial Conduct Authority and ‘con men’ prosecuted by the CPS. However, whatever the underlying facts and whatever the value and seriousness of the case the ‘elements’ of the offence which the prosecution has to prove are the same.

What is fraud by false representation?

The Fraud Act 2006 outlines the offence of fraud by false representation within section 2, this states that a person commits an offence if they:

 

• dishonestly
• make a false representation, and
• intend, by making the representation to either
• make a gain for themselves or another, or
• cause loss to another or to expose another to a risk of loss.

In order to prove that a person is guilty of this offence the prosecution must prove all of these ‘elements’ of the offence to the requisite standard- this is ‘beyond reasonable doubt’, or so the jury are ‘sure’. If they are unable to prove any one of these elements, then the accused is Not Guilty. For example, I recently represented a man accused of Insurance fraud by the City of London Police. He did not deny that the representations that he had made were false or that he made them to make a gain for himself but he claimed that he did not act dishonestly in making the representations as they were made by mistake. He therefore contended that he was Not Guilty. The Court agreed, following a trial at the Old Bailey he was acquitted of all charges.

I will examine these ‘elements’ in turn.

What is Dishonesty?

The well-known legal ‘Ghosh’ test for dishonesty has now been amended, it used to have both an objective and a subjective part. So in the past the prosecution had to prove:

1. that the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people and
2. that the defendant must have realised that ordinary honest people would regard the behaviour as dishonest.

In Ivey v Genting Casinos [2017] UKSC 67 the Court removed the need for part 2- so the test is now entirely objective and only relates to part 1. The judgement stated:

‘When dishonesty is in question the fact-finding tribunal must first 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 (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.’

Therefore to show that a person has been dishonest the Prosecution need only prove that the conduct complained of was dishonest by the lay objective standards of ordinary reasonable and honest people.

What is a false representation?

A “Representation” means any representation as to fact or law. This can be made orally, in writing, in an email, on a document or in nearly any way in which a person can assert something. It may include a representation as to the state of mind of the person making the representation, or any other person. A representation may also be either express or implied but does not include a promise as to the future.

Section 2(2) of the Fraud Act 2006 states that a representation is false if—

• it is untrue or misleading, and
• the person making it knows that it is, or might be, untrue or misleading.

So from the above it is clear that the offence must be deliberate. The actual knowledge of the person who makes the representation is the important thing and it does not matter what they should have or ought to have known, or what a reasonable person would have known.

A person who dishonestly makes a representation which, without him knowing, is true may be guilty of attempted fraud by false representation but not of the offence itself.

What is a “gain” or a “loss”

In the context of the 2006 Fraud Act “gain” and “loss” can extend only to gain or loss in money or other property. So it would not extend to something vague or nebulous like a loss of reputation or enjoyment. “Property” means any property whether real or personal and can include things in action and other intangible property. A gain or loss does not have to be permanent, it can be temporary and the offence is still made out.

A “gain” includes a gain by keeping what one has, as well as a gain by getting what one does not have. For example, in telling a lie to keep hold of something that you do not want to have to give up.

By the same token, a “loss” includes a loss by not getting what one might get, as well as a loss by parting with what one has. So for example I represented a person who caused loss to his customers by fraudulently failing to sign them up to the electricity feed in tariff scheme. He did not himself gain these monies but it was said that he caused loss to the customers as they did not get money that they should have done despite the fact that he had actually not taken the money directly from them or gained the money himself.

Can company directors be guilty of a fraud by false representation?

In short- yes. A company is a legal entity in the same way as human beings and is classed as a "person" for the purposes of the criminal law. Where the “person” guilty of a fraud by false representation is a company, the management who have consented to or connived in the offence are also guilty of it.

Defences to fraud by false representation

As outlined above there are many circumstances in which a fraud by false representation may be committed and most defences are fact specific. However, when boiled down every defence involves challenging the prosecution on one or more of the ‘elements’ of the offence that they have to prove. If you are accused of such an offence, it is important that you instruct the best false representation lawyer that you can find. Such an individual will be able to analyse the factual matrix of your case and apply the relevant law to make sure that you are fully advised as to the legal position and as to what defences may or may not be available.

Quentin Hunt- fraud lawyer

Quentin Hunt is a Barrister who specialises in Criminal Law. He has defended fraud cases for over two decades and has been involved in some of the largest and most complicated fraud cases in the country, from multi-jurisdictional MTIC VAT frauds, to commodity ‘boiler room’ frauds through to inheritance and pharmaceutical frauds. If you are looking for a experienced fraud lawyer with a reputation for ruthless determination then you may contact Quentin for a free, no obligation conversation about your case.