Mr.
Heath: I think it was the hon. Member for Meirionnydd Nant
Conwy (Mr. Llwyd).
The
Solicitor-General: Ah yes, it was. The hon. Gentleman
reminds me that it was the hon. Member for Meirionnydd Nant Conwy who
raised that example, but I will not go into it because it was more than
a little confusing and more algebraic than legal. We will avoid that.
However, I had assumed that the Liberal Democrats had used the Justice
amendment.
Mr.
Heath: I, too, found that example more confusing than
illuminating. My reading of the provision is that the loss of a gain
which might be expected by an illegal act, would
still be a loss which the offence could apply to. For example, if
someone was intending to supply cocaine and, by fraud, a person
substituted flour for the cocaine, so that person would no longer be
able to occasion the gain that he would otherwise have done by selling
that cocaine, that would be a fraud under this definition, would it
not? I ask the Solicitor-General whether that is a reasonable
interpretation or one that we should
avoid?
The
Solicitor-General: I suspect that anyone engaging in such
a report to the police would find themselves quickly arrested
themselves. There are all types of circumstances in which criminals can
claim that some confederate had breached the criminal law. Nonetheless,
I do not find them regularly going to the police to complain. I suspect
that I they did, the police would welcome them with open arms and open
cell doors as well.
Mr.
Heath: But the supplier who had been defrauded would not
be guilty of any criminal offence in that he had not supplied a
controlled substance; he would have supplied
flour.
The
Solicitor-General: He may well have committed a different
kind of offence, unless he was acting as an agent provocateur for the
police or something, in which case he may have committed no offence at
all. That people would start to report such things to the police is
unlikely. He need not worry that those are the sorts of things we are
intending to catch. If we do catch them, that would be entirely
accidental and fortuitous perhaps, because it would expose other
crimes. The
hon. Gentleman also referred to amendmentNo. 8. The amendment
seeks to clarify what constitutes “loss” for the purpose
of the new offences. As discussed, the offences apply only if there was
an intention to make a gain or loss. The amendment seeks to provide
that to be a loss the property that the victim might have received had
he not been defrauded should be limited to that that he might have
reasonably and lawfully
received. If
the intention is to provide greater clarity to the definition of
“loss”, I do not consider the amendment necessary. As I
have made clear, the clause as it stands follows the definitions in
section 34 of the TheftAct 1968. The Government’s view
is that implicit in the reading of the section 34 definition is that
the property lost should be the type that the person ought to have had.
Cases are difficult to imagine, but perhaps the hon. Member for
Somerton and Frome has described one where we could get ourselves into
a position where we need to be sure of the lawfulness of a particular
relationship. However, in the real world we need to make sure that we
have circumstances that the courts can understand and which the police
can deal with straightforwardly. The definitions put into clause 5 of
the legislation enable the
courts and police to know what they are dealing with, because they have
dealt with them over a long period of time in the Theft Act. The Act
has not caused a great deal of difficulty, but amending it in any way
might produce a lot of difficulty for the courts. I hope, if on no
other basis than that and to avoid such difficulties, that the hon.
Gentlemen feel they can withdraw their
amendment. Mr.
Cox: May I raise a possibility with the Solicitor-General?
Section 34 of the Theft Act 1968 defines gain and
loss, but defines them against a specific set of statutory-defined
offences—theft. He described them as over-particularised,
although I do not accept the characterisation of all of the Theft Act
as
over-particularised. What
troubles me is in subsection
(4)— “‘Loss’
includes a loss by not getting what one might
get”. If
that is a definition as in the Theft Act, one can steal something that
“one might get”—I suppose one understands
that—meaning the loss of a benefit to which one is entitled but
has not yet come into possession of. My worry is that that seems to
incorporate the loss of chance. That seems to suggest that one can be
convicted if all one deprived somebody of is a chance, something I
might get. It is not necessarily something I would get and not
necessarily something to which I am entitled, which is maybe what the
hon. Member for Somerton and Frome has been getting at; not necessarily
something to which I am entitled, but something I might have come
into. For example,
what if I fail to place a bet? Let us suppose that the
Solicitor-General asked me to pop down the road and make a bet on the
next election. I do not know which side he would bet on, but let us
suppose that he asked me to make such a bet and I decided, because I
did not think that he would make a gain in that way, not to place the
bet. I could be guilty under the measures if I fulfilled the other
criteria. I was expected to safeguard his interests, I ought to have
placed the bet and I dishonestly did not do so because I did not want
him to gain. All that I have deprived the Solicitor-General of is the
chance that he might be right; a rather remote chance, depending on
whom he put his money on.
Is that what is
intended—that the loss of a chance, perhaps a fairly fragile and
implausible chance, should be sufficient? I raise the point in the hope
that the Solicitor-General can answer, although I realise that it is
rather difficult to answer some questions on the
hoof.
The
Solicitor-General: I am looking at a copy of the Theft Act
1968 and of the Fraud Bill. The definitions have not produced such
technical problems up to now. The hon. Gentleman’s example is
perhaps not a good one, although I realise that he is doing it on the
hoof, as am I, because we are discussing a wager. There is no
obligation to pay, only a relationship.
Certain
circumstances might arise in which a chance of getting something was
frustrated. The courts, police and prosecutors would have to consider
whether the other circumstances under the clauses had produced
sufficient dishonesty and other elements to lead to a charge. The other
elements would be key in those circumstances.
Paragraph 4.6
of the Law Commission report points out that conspiracy to defraud can
apply to cases that put another’s financial interests at risk,
and considers that a new fraud offence should apply to exposing another
to a risk of loss. One of the key questions that Opposition Members
raised on Second Reading was whether conspiracy to defraud should be
removed from the Bill or should be included in the Bill so as to remove
it from law. Their view has strong arguments, and indeed our view does
too.
Conspiracy to
defraud is a common law development that has quite a broad ambit and is
very youthful. We feel that we ought to maintain it for the time being,
but we hope that at some point in the future we
will be able to remove it. To do so, we will have to create new
legislation in the Bill to ensure that we cover the circumstances
previously covered by conspiracy to
defraud. Section 34 of
the Theft Act 1968 and clause 5 of the Fraud Bill will produce the
coverage that will enable that. We hope to be able to consider the
Fraud Bill’s effects once it has been passed and the way that it
is being used in the context of the guidance that the Attorney General
will issue shortly—I have distributed the drafts to Committee
members—and decide whether we can remove conspiracy to defraud.
If we removed the wording in question, we would restrict the
clause’s ambit, knowingly failing to cover some of the area now
covered by conspiracy to
defraud.
Mr.
Cox: I understand the Solicitor-General, but it has long
seemed to me that there is a serious terminological inexactitude used
when talking about the risk of loss. Fraud law discusses risk of
loss—the loss of the chance that one might get something, or the
remote prospect when betting on a horse that it might come
home—but if one examines the case law behind it, one finds that
when it talks about exposure to the risk of loss, it always means that
a director or somebody in a fiduciary position has taken a risk with a
specific, identifiable and tangible asset.
12.45
pm Let me give the
Committee a classic example. A director takes money from the company
that he is director of, invests it in the overnight market in Tokyo but
returns it to the company bank account the following morning. He says
that he had no intention of causing loss, because he was going to
return the money and he wanted to make a profit for the company whose
money it was He was just going to cream off part of the profit that was
made over the 24-hour period. The danger is that in moving it in that
24 hours and putting it on the market in Tokyo he exposed that sum of
money—that identified asset—to loss. That is the meaning
that the law of fraud attributes to the phrase “risk of
loss”. I fully
accept that there has been a confusion for many years, but clause 5
adopts the loss of a chance as being sufficient. It will be enough if
the betting ticket is not submitted and the horse comes home first or
third. That is so remote in terms of causation—there is such a
lack of proximity between the act done and the potential
loss—that there is a real risk that people will be indicted for
forms of losses of a chance or risk that are remote. That is a genuine
concern and we must not get foxed in respect of the idea of the risk of
loss; it really means exposing something to a risk that depreciates its
value.
Let me give the
Solicitor-General another example. Often the case law on risk of loss
refers to a deception in a mortgage case. The mortgage company will
have advanced a loan based on a detail that is false; someone will have
exaggerated their net worth or some such thing. That loan is an asset
and it is less valuable because, on any credit analysis of it, it is a
less secure loan. Thus, the risk of loss that is created by the
deception—someone has failed to produce honest details about
their net worth—impacts on the value of the
asset. If the truth were known, its value as an asset would be less
than it would otherwise have been. That is the context in which the law
refers to risk of loss.
The danger of this phraseology
is simply that one can expose somebody to the chance that he might, if
happenstance had happened in a particular way, have gained something.
That is very vague and has an attendant danger. I invite the Minister
at least to reflect on that.
The
Chairman: Order. I simply make the point to the Committee
that there is traditionally a difference between speeches and
interventions, but I did not want to spoil the hon. Gentleman’s
flow.
The
Solicitor-General: I was so lost in the example that I
also thought it was a speech.
Our objective is to deal with
circumstances in which there is an exposure to risk of financial loss.
It is also the case that any prosecutor, and, in due course, any court,
would have to examine the remoteness of any chance in determining
whether there had been an element of dishonesty and the other elements
necessary to prove the case. I am not sufficiently aware of the case
law to say whether this has produced a lot of difficulty in terms of
definition. We
are not proposing to rewrite the whole of the Theft Act 1968. As I
pointed out on Second Reading, when it was originally drafted it was
regarded as a model of clarity and of showing the particular
circumstances in which the criminal law applied. In some, but not all,
of its sections, we have had to deal with the problem of
over-particularity because society has changed. That is what we are
trying to deal with in the clause.
Any court and prosecutor will
have to consider the element of remoteness in deciding whether the
other elements of the case are proved, and whether the provisions of
clause 5(4) are sufficiently met. I suspect that, if it is too remote,
it will not be prosecuted. We cannot here deal with all the details of
the various cases; we have to do our best to set out the intentions of
Parliament in the wording of a clause, in a way that does not produce
unnecessary confusion in the courts. That is what we have tried to
arrive at in the clause. In view of the fact that we use the definition
in the clause in other clauses, I hope that we can stick to it. It may
well be that the Law Commission later decides to change it and to deal
with some of the points raised, but I do not think that this is the
point at which to change it.
Mr.
Grieve: This has been a fascinating debate, and I am
particularly grateful to my hon. Friend the Member for Torridge and
West Devon for his contribution on the issue of loss. Our two
amendments sought to delete subsections (3) and (4). The Minister has
persuaded me that we should leave in subsection (3). It may be a
belt-and-braces job, but I certainly do not think that there is any
mischief in it. It may be otiose, but let it
remain. I certainly
will not press our amendment to delete subsection (4), and I shall ask
to withdraw it, but I shall think about the matter a little further,
because as I listened to the interesting exchanges between the
Solicitor-General and my hon. Friend, it became apparent to me that
there was an issue at stake that I had perhaps not
originally looked into or fully understood when I drafted the
amendment. Could one not re-word subsection (4) so that it said
“‘loss’ includes the risk of loss, as well as a
loss by parting with what one has”? If one did that, it would
entirely cover the important point of the risk of being put at a
disadvantage because one has not been given the full facts, and it is
quite right that that should be criminalised. The example that my hon.
Friend gave was not being given the full facts on which one is lending
for a mortgage. That wording would also remove the thing that caused me
slight anxiety, and that originally led me to table my
amendment—it clearly causes my hon. Friend a great deal of
anxiety, too—namely the matter of the loss of chance, which I
think is a separate issue. I remain unpersuaded that it needs to be
covered by the definition of loss. My wording would separate the two
out. I say that to
the Solicitor-General because he may like to reflect on the matter
before Report. He might even wish to write to us, when he has taken
that opportunity to reflect, and tell us whether there is another way
of approaching the matter. We could then potentially return to the
subject on Report. I simply highlight it because the rewording that I
put forward meets the Government’s objectives in defining loss,
whereas there is something unhappy about the expression,
“includes a loss by not getting
what one might
get”.
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