The
Solicitor-General: We should begin by acknowledging that
the hon. Member for Rugby and Kenilworth raised the matter with me on
Second Reading, and I have considered it again. My reaction was to
wonder whether, in order to get some parallel with offences relating to
property and money, there was an argument for extending the measures. I
thought about it with some care. There is always an argument for
increasing sentences, but then I looked at the average sentence for
obtaining services by deception, the parallel existing offence that the
measures will replace. The average sentence handed down in 2004 was
just over six months. In those circumstances, a penalty of five years
and an unlimited fine rather than the average sentence appears
adequate. We must consider what is proportionate in the
circumstances. The Law
Commission considered the issue in its 2002 report on fraud. I did not
explore it in great depth, but paragraph 8.16
says: “On
conviction on indictment, the maximum sentence available for the
existing offence of obtaining services by deception is five years, and
we see no reason why the maximum for the new offence should not be the
same.” We
consulted on the matter, but received few responses. It might have been
useful if the hon. Member for Rugby and Kenilworth, who originally
raised the point, had suggested it at that time. I am sure that he was
otherwise engaged winning his seat in Rugby.
If the average for even the
most serious offences is just over six months’ imprisonment, a
five-year maximum has the degree of proportionality that one seeks when
trying to assess what the appropriate sentence ought to be. In view of
the fact that those consultees who responded endorsed the five-year
limit, that the Law Commission believes that it is right and that the
average sentence for the existing offence appears to be just over six
months, I believe that it is the right balance.
I shall not close my mind on
the issue. If we feel at a later stage that the penalty is inadequate,
we can reconsider it, but given how the courts are dealing with such
offences, the measures will give judges enough flexibility to impose
the maximum sentence in the most serious cases while preserving the
average sentences for those that are indeed
average. 5.15
pm
Mr.
Grieve: I listened carefully to what the Solicitor-General
said. I would simply make one point to him, of which he may already be
aware. The fact that the average sentence is of six months’
imprisonment comes as no surprise to me, but I am not sure that it is
the central issue to the argument. On the whole, the sort of offence
and the reasons why such offences tend to be charged is because they
are of a rather low-grade kind. There are instances where, as I
indicated in my opening remarks, substantial services of substantial
value can be
obtained. It is in such instances that I raise the question as to
whether five years is necessarily sufficient. Rather than looking at
the average of the sentences passed for this type of offence, that
would require looking at whether there were instances where judges had
been imposing the maximum and may even in their sentencing remarks been
making suggestions that the sentence does not entirely meet the gravity
of the offence, as the Solicitor-General will be only too
aware. Because
of the nature of the discount that a person attracts for pleading
guilty, as an example, often in such cases—and my experience is
that they often end in guilty pleas—that will already be
substantially shortening any sentence that is going to be served,
because it will start with five years as the maximum and then have to
discount it against that. I respectfully suggest to the
Solicitor-General that that is a more fertile area to look at than the
average sentence passed. That said, and mindful and grateful that it
will be looked at again, I beg to ask leave to withdraw the
amendment.
Amendment, by leave,
withdrawn. Clause
11 ordered to stand part of the Bill.
Clause
12obtaining
services
dishonestly Question
proposed, That the clause stand part of the
Bill.
Mr.
Heath: I have a brief inquiry. I take the view that
officers of a company should be individually responsible for the
actions of the company when it acts dishonestly. However, as has been
pointed out, there is no mens rea provision in the clause. The company
officer does not have to have formed the dishonest intention himself or
herself to be guilty of an offence under this section unless there is
perhaps another construction on the clause of which I am unaware. That
is of some concern. Is the Solicitor-General’s view that as an
officer of the company they have a duty and responsibility to be aware
of whether the action in which they are consenting or conniving is a
dishonest and fraudulent act? If that is the view then by consenting or
conniving, as the clause says, they would have formed the dishonest
intent at that point. I would be grateful if the Solicitor-General told
me whether that is the construction that he places on the clause and
explained how precisely it would work.
Mr.
Grieve: I find myself pipped to the post by the hon.
Member for Somerton and Frome in rising so quickly to his feet, and I
would not rise myself unless there were a further slight gloss to apply
to precisely the same point I wanted to raise. I think that part of the
answer to his question can be given; namely, that as a company can only
commit an offence through its officers, it must follow that if the body
corporate is going to commit the offence, someone in the body corporate
must be acting dishonestly. That would normally be the person who would
be seen to be consenting or conniving to the commission of the
offence. But the nub,
and maybe the point that the hon. Gentleman is getting at, is that it
seems to me that it at least technically possible on the reading of
clause 12—I am aware of its derivation; this has been around for
rather a long time—for one to have a company where a body
corporate commits an offence through the dishonesty of one of its
directors, but with the consent of another of its directors who is not,
himself, acting dishonestly. Technically, in such circumstances both of
them would be convicted of the offence when the body corporate was
convicted. If that is the case, it might be readily curable. However,
the Solicitor-General might indicate that that is not necessary, or
that if we were to try to cure it we would cause all sorts of other
problems. However, that was what struck me about the clause as, I
suspect, the main issue struck the hon. Member for Somerton and
Frome. The
Solicitor-General: In essence, clause 12 follows section
18 of the Theft Act 1968. It is the standard provision that makes
company officers who are party to the commission of an offence under
the Bill by their body corporate liable to be charged for the offence
as well as the company. A director, manager, secretary or other similar
officer of the body corporate, or a person purporting to act in that
capacity, has to be in a position in which he can be diligent about the
work that he does. There must be a reasonable standard of diligence;
such people must know what they are about. The requirement in the
legislation is connivance or consent, so they must know what they are
conniving or consenting to. If they are conniving or consenting to
something that is clearly dishonest, and they are sufficiently aware of
that to be aware of the implications, then they are in a position in
which they have connived or consented to an
offence.
Mr.
Grieve: I take the Solicitor-General’s point, but
there is a difference between consent and connivance. Connivance, by
its nature, implies guilty knowledge—that is how I always
understand the word, given its ordinary meaning—whereas consent
need not. It might be that there is a flaw in the Theft Act 1968, or it
might be a problem that has never arisen, but it is at least possible,
taking the strict technical meaning, that the body corporate commits an
offence because one of its directors does so deliberately—so the
dishonesty comes from that director—but several other directors
consent innocently to the commission of that offence. In that case, as
the clause is drafted, they could be caught with all the draconian
consequences that flow from it. I have to accept that the reality is
that the prosecutor probably would not prosecute them. However, if
there is a way of avoiding the danger that they could be prosecuted, it
might be worth considering, because they are not the people against
whom the clause is, or should be,
aimed.
The
Solicitor-General: The clause is aimed against those who
have given informed consent, to use the phrase, in relation to an act
that has been done. As the hon. Gentleman said, for a company to be
liable, an officer of that company has to have committed the offence.
That is the identification principle. Others may connive or consent,
but they must know what they are conniving or consenting to. It must be
an informed consent, or a connivance, so they must be sufficiently
informed that they are aware of the nature—or, at least, to some
extent, of the dishonesty or implications—of the act.
Some provisions of this type
include neglect, but that is not included here. This is not about
somebody who is a bit negligent and does not know; he has to have the
ability to take a view on a matter, and then to have taken that view by
having given his consent in a practical way. We consider that that
informed consent is sufficient to amount to a knowledge of dishonesty.
Whether a person is, himself, dishonest might well be a different
matter; it is a fine line. The question is whether they are they well
enough informed about the implications to have taken a step that
amounts to consent based on uninformed knowledge of the possible
consequences. Question
agreed
to. Clause 12
ordered to stand part of the
Bill.
Clause
13Evidence
Mr.
Heath: I beg to move amendment No. 15, in clause 13, page
6, line 3, at end add ‘that the
Secretary of State may by order
prescribe.'. First,
I thank the Solicitor-General for his letter in response to my point
made to his ministerial colleague on second reading. The intention of
the amendment is to add clarity to subsection 4(b), which defines
“related offence” as “conspiracy to
defraud” and
“any other offence
involving any form of fraudulent conduct or
purpose.” That
definition does not have any clear indication of what appendices are
intending to be included, and I accept that there are a finite number.
It would be of value, in terms of clarity, if the Secretary of State
prescribed the offences that he considers to be caught by that
definition. Everyone would then be clear about which offences are being
referred to in applying section 13. It is a fine point. The
Solicitor-General may be able to help me out by saying whether he will
accept the amendment or what his definition is—that will have
almost the same effect—if he cares to read it into the
transcript.
The
Solicitor-General: I am not going to read a definition as
such. As drafted, in our view, clause 13 makes clear that the offences
under discussion are those involving any form of fraudulent purpose or
conduct. That provides the right degree of specification for the
context. We should bear in mind that the clause addresses the needs of
civil justice and not to be deprived of evidence in property
proceedings on the grounds that the answers and documents given may
incriminate the person who gives them.
At the stage when someone is
giving answers, the matter of whether an answer or a document discloses
a fraud under the Bill, or some other type of fraud, may not be clear.
It is likely that it will only be clear that his answers might show
that some form of fraud has taken place. That might be a fraud that
could be prosecuted under the Bill, or possibly under section 458 of
the Companies Act, VAT legislation or tax law. We should
not tie the law to a specific list of offences which might leave gaps in
which a person who does not want to answer questions, might say that it
may or may not fit into a particular list. We want any form of fraudulent
purpose or conduct to be covered by that provision. For example, with a
list of specific offences, a person might say that the clause does not
apply. Therefore, he is not going to answer any questions because he
might disclose an offence of benefit fraud, for example, that should be
dealt with under the Social Security Acts. We would have to list
everything in order to make sure that we do not give a loophole, that
someone could use not to answer questions in a civil case.
We could put the Social
Security Acts on the list and all the offences that could be
characterised as fraud. However, it would be much simpler, more
straightforward and understandable for individuals and for the court,
to know that we have a generalised definition in the Bill. Ultimately,
it will be a matter for the judge in the trial as to whether a party to
civil proceedings can refuse to answer questions on grounds of
self-incrimination. It is the judge who has to decide whether clause 13
should apply or not and clause 13 exemption applies. Judges are
perfectly capable of applying clause 13. Our approach is better than
the specific list of offences that the amendment suggests. A specific
list would add to a great deal more confusion. It might also encourage
persons who wish to refuse to answer questions to find a loophole.
Something might not be on the list, which they might have cause to
fear, and they might not want to incriminate
themselves.
5.30
pm
Mr.
Cox: Let us suppose the party to the civil litigation was
obliged under the clause to concede that part of the property that had
been accumulated had been invested in a drugs enterprise. Would he be
protected under the first line of subsection (2), as further defined in
subsection (4)? I respectfully suggest that he might very well not be,
which would be a grave lacuna in the protections under the Bill and
likely to be incompatible with the European convention on human rights.
If a party to civil litigation—let us say that he is a
trustee—is obliged to answer that part of the property has been
invested in a drugs enterprise, and if he answers honestly, as he must,
he could, as I read the Bill, be prosecuted on the strength of his
admission, because drugs enterprises would not necessarily include
fraudulent conduct. Will the Solicitor-General give urgent and genuine
consideration to the real risk that there is a lacuna in the clause and
particularly to the compatibility of its provisions with article 6,
among others, of the convention.
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