Fraud by Abuse of Position

Introduction

The offence of Fraud by Abuse of Position is contained within section 4 of the Fraud Act 2006 (“the Act”). This offence is a variant of the offence of Fraud which is contained within section 1 of the Act. As the name suggests, it relates to circumstances where a person commits fraud by dishonestly abusing their position. The “position” could be, for example, an employee to an employer. This is illustrated by a recent case of Susan Bailey, a finical administrator at a power company who dishonestly gave herself a £33,000 pay rise as well as misappropriating funds from her employers to a total of £175,000.

The offence is known as an ‘either way’ offence which means that it can be heard either in the Magistrates Court or the Crown Court.

It is also worth noting that this offence can be committed by a company, not just by a person. If that situation occurs those involved in the company management who have consented to or conspired in the offence may also be guilty under s12 of Fraud Act 2006 (outlined here).

What is Fraud by Abuse of Position?

There are four elements to this offence. The defendant will commit fraud by abuse of position if they:

• occupied a position in which they were expected to safeguard, or not to act against, the financial interests of another person;
• abused that position dishonestly; and
• intended by that abuse to make a gain for themselves or another or to cause a loss to another or expose another to a risk of loss.

The definition of "Position" in the Fraud Act

The first element requires the defendant to have occupied a specific “position”. Often the position is described as a “position of trust”. Examples of the position and another person include:

•  Trustee and beneficiary
• Director and company
• Employee and employer
• Partners and within the family

The term has been interpreted broadly to also include those who were not in a relevant position but are a secondary party, such as a beneficiary of a dishonestly awarded contract.

There may also be some overlap with other offences (commonly theft and bribery) and it will be for the police and/or the Crown Prosecution Service to decide which offence(s) to pursue.

For example, theft could not be argued but fraud by abuse of position was successfully pursued in Scott v Metropolitan Police Commissioner [1975] AC 819 where a cinema projectionist copied newly released films for private profit.

"Abused that Position"

The second element, “abused that position”, must involve acting contrary to the financial interests of another person in a way which is made possible because of the position. It can be committed by an omission, not just a positive act. Furthermore, it does not need to result in actual gain or loss.

An example of an omission that would amount to an abuse of position includes where a company director dishonestly fails to secure a lease or contract for the company, with the object of later securing it for themselves.

“Abuse” holds its standard meaning and examples include:

• An employee who fails to take up a contract so that an associate or rival company can take it up instead at the expense of the employer.
• An employee of a software company who uses his position to clone software products with the intention of selling them.
• A person who is employed to care for an elderly or disabled person who has access to their bank account(s) and abuses their position by transferring funds to invest in ventures of their own.

"Dishonestly" and "Intent"

The third and fourth elements cover the mental element that is required for the offence of fraud by abuse of position. The defendant must have been dishonest and intended to make a gain or cause of loss.

Importantly, there is no requirement that the defendant knew that they were expected to safeguard the financial interests of the other person (the first element). The offence can be committed without the defendant even knowing that their act or omission amounted to an abuse of their position.

The test for dishonestly is as amended from R v Ghosh to the Ivey v Genting Casinos (UK) Ltd t/a Crockford [2017] UKSC 67 tesr. I discussed this in detail in a previous article. In brief, the court will apply the two-stage test as follows:

• What was the defendant's actual state of knowledge or belief as to the facts?
• Irrespective of the defendant’s belief about the facts, was their conduct dishonest by the objective standards of ordinary decent people.

If the act or omission is found to be dishonest then the jury or Magistrates Court will consider the intention to make a gain or cause of loss. The gain or loss (whether successful or not) must be related to money or other property, which can have wide application. Gain does not have to amount to a profit (see Attorney-General's Reference (No.1 of 2001) [2002] EWCA Crim 1768) and loss includes simply having the knowledge that the other person is at risk of losing money, it does not have to be a certainty (see R v Sinclair [1968] 1 WLR 1246; R v Allsop [1976] Crim LR 738; R v Wai Yu-Tsang [1992] 1 AC 269).

What are the consequences of Fraud by Abuse of Position?

The offence of fraud by abuse of position is an either-way offence. The maximum penalty for this offence is 10 years’ imprisonment on conviction (on indictment at the Crown Court) and/or an unlimited fine.

As previously stated, the gain or loss does not have to be successful for the offence to be committed. However, this will be a factor when it comes to sentencing.

The court will consider the culpability and harm of the offence, but unlike most other offences, the harm includes part A – assessment of the obtained or intended loss caused and part B – victim impact.

The Part A categorisation as of 2022 is as follows:

The starting points are significant when compared to the figure caused or intended and can give rise to significant custodial sentences depending upon the impact upon the victim. 

There are also subsidiary orders that the Court can make upon conviction including compensation to victims of the offending and the recovery of all funds misappropriated under the Proceeds of Crime Act 2002. 

Conclusion

It is clear that the elements to the offence of fraud by abuse of position can be interpreted broadly by the court. The maximum penalty is also significant; at 10 years’ imprisonment on conviction. It is therefore essential that if you are facing investigation into this offence that you consider getting the best legal representation.

Quentin Hunt is a Barrister who specialises in Criminal Law who accepts instructions both through solicitors and directly from members of the public. 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. Quentin has previously won the accolade of 'Fraud Lawyer of the year' amongst other awards. If you are looking for an experienced fraud lawyer with a reputation for a meticulous approach and fearless client representation then you may contact Quentin for a free, no obligation conversation about your case.