Fraud

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Fraud occurs when a person uses deception in order to obtain property, cause a financial advantage or cause a financial disadvantage. The offence of fraud has been reenacted in statute, and has one of the most complex formulation out of any offence in the course. To establish Fraud (:s 192E), the following three requirements must be satisfied (each of the requirements has their own actus reus and mens rea):

  1. The person used deception
    • Actus reus: deception can be by word or conduct (false statements, silence, wearing a disguise): s 192B (1).
      • Includes certain omissions: M,[1]
      • Doesn't extend to puffery: Bryan.[2]
    • Mens rea: intention or recklessness to deceive: s 192B (2).
  2. That the deception caused the person to either:
    • (a) obtain property belonging to another,
      • Actus reus: the accused or a third party gain control or possession of the property of another: s 192C (1).
        • Property is defined in s 4 to include both tangible and intangible property (including land).
        • 'Belongs to another' is defined as when the person has possession, control, or a proprietary right to the property.
      • Mens rea: an intention to permanently deprive: 192C (2).
        • Includes an intention to “treat the thing as his or her own to dispose of regardless of the other’s rights": 192C (4).
    • (b) cause a financial advantage or disadvantage,
      • Actus reus: obtain a financial advantage or oneself or another person, cause a financial disadvantage, or induce a third-party to do those things.
        • Financail advantage/disadvantage is left undefined so as to have the boradest scope: Vasic.[3].
      • Mens rea: intent or recklessness to the causing: as per He Kaw Teh.
  3. and that obtaining/causing was dishonest.
    • Actus reus: automatically satisfied, since deception is obviously dishonest and was already proved by this point.
    • Mens rea: that the accused had knowledge that the obtaining/causing would be considered dishonest according to everyday standards (subjective inquiry): s 4B.
      • Can be negated by a claim of right.

The maximum sentence for fraud is 10 years imprisonment.

This article is a topic within the subject Criminal Laws.

Contents

Required Reading

Brown et al, Criminal Laws: Materials and Commentary on Criminal Law and Process in New South Wales, (5th edition, Federation Press, 2011), pp. 940-962.

Component of Fraud

[4] Many of the issues that have arisen with regards to larceny are also relevant to fraud. These include to what extent the concept of property should be limited and what role the notion of dishonesty should play.

In 2010 the law was reformed and now contains one general fraud offence (s 192E), and the definitions of key terms (s 192B - 192D). The offence of fraud can be summarised as follows:

  • Fraud occurs when:
    1. a person uses deception
    2. in order to either:
      • (a) obtain property belonging to another, or
      • (b) cause a financial advantage or disadvantage,
    3. and that obtaining/causing was dishonest.

The maximum sentence for fraud is 10 years imprisonment. The actus reus and mens rea of fraud are explained below.

Deception - the method/act of fraud

[5] For fraud to occur, the accused must have engaged in deception (first component of the offence). Deception is defined in s 192 B, and has a combination of both actus reus and mens rea elements. Section 192B (1) sets out the physical conduct and section 192B (2) sets out the mental elements.

s 192B - Deception

(1) In this Part, deception means any deception, by words or other conduct, as to fact or as to 
    law, including:

    (a) a deception as to the intentions of the person using the deception or any other person, or
    (b) conduct by a person that causes a computer, a machine or any electronic device to make a
        response that the person is not authorised to cause it to make.

(2) A person does not commit an offence under this Part by a deception unless the deception was 
    intentional or reckless.

The actus reus of deception

False statements

[6] The most common form of deception is making a false statement. This may be outright lies or partially true.

  • In M,[7] a case dealing with the publication of a false statement, the Court held that “It is now well established that the falsity of a statement may arise, not only because a fact therein alleged in falsely alleged, but because the statement, by omitting material facts, creates a false impression.”
  • It is important to distinguish between a deception and statements that amount to mere puffery (an exaggerated or enthusiastic claim intended to increase interest in the property).
    • For example, a claim that a spoon was made “the the best material” and “had as much silver on them as Elkington’s” was held to be merely puffery in Bryan.[8]
    • On the other hand, telling a customer that a diamond was 7½ carats, when it was only 4 was held to a false statement in Patmoy.[9]

Deception by conduct and silence

[10] Conduct without words can amount to a deception. In Barnard[11], the defendant, dressed in an academic cap and gown, created the impression that he was a student of Oxford University and thereby credit from a shopkeeper.

  • If a person makes a statement that at the time is true (or not recklessly false), there is no obligation on that person to alert the victim to a change in circumstances that make the representation false.
    • Unlike English law, the Australian criminal law does not recognise a doctrine of continuing representation such as exists in equity.

The mens rea of deception

[12] Under the common law, deception had to be intentional (there had to be knowledge of the falsity of the statement and intent to defraud).[13] However, this has been changed by s 192B (2), which states that deception has to be either intentional or reckless.

  • As there is no statutory definition for recklessness, it is assumed that the applicable test is an awareness of the possibility that the behaviour is deceptive.[14]

Consequences of fraud: obtaining property from another

[15] In contrast to the common law offence of larceny, where the offence is defined by common law, fraud is statutorily defined and thus the statutory definition of "property" in s 4 is used. This definition includes both tangible and intangible property (including land). Consequently, ‘belonging to another’ cannot be restricted to possession, but has to extend to include control of intangibles.

  • Given the availability of the far simpler 'financial advantage' consequence as an alternative, it is unlikely the property limb of the legislation will be widely used, particularly in cases where there is difficulty defining the property.

Section 192C (1) defines the obtaining of property to require only that the accused or a third party gain control or possession of the property.

  • Therefore fraud covers situations where the victim is tricked into temporarily handing over possession or control, but does not intend to hand over the property permanently.

The mens rea of obtaining property – intention to permanently deprive

There must be an accompanying mens rea element to permanently deprive (s 192B(2)).

  • However, under section 192C a person is still considered to have the intention to permanently deprive if it is the person’s intention to “treat the thing as his or her own to dispose of regardless of the other’s rights.”
  • Borrowing or lending may amount to this intention only if it is “for a period and in circumstances making it equivalent to an outright taking or disposal” (s192C).

Consequences of fraud: obtaining financial advantage

[16] “Financial advantage” is a very broadly expressed basis for a criminal offence and goes beyond the property based boundaries of larceny and false pretences offences. Financial advantage is defined by s 192D to include any situation where the accused, whether temporarily permanently:

  • (a) obtains a financial advantage for oneself or for another person
  • (b) induces a third person to do something that results in oneself or another person obtaining a financial advantage
  • (c) keeps a financial advantage that one has,

Case law has expanded on this definition:

  • In Vasic,[17] under the Victorian version of the legislation, Nettle JA noted that “financial advantage was deliberately left undefined so as to allow it to have the broadest scope possible.”
  • In the Tasmanian case of Murphy,[18] the court held that “services, money or property amount to financial advantage” and that the length of time the financial advantage is held may be transitory.
  • In Coelho v Durbin,[19] the term “financial” advantage was considered to have some limiting effect:
    • Facts: a car was presented for registration in circumstances where it had been ‘re-birthed’ by attaching a compliance plate from another vehicle, giving the impression that the car was in fact a different vehicle.
    • Held: the registration of a motor vehicle is an advantage in a practical sense but not financial. “...a benefit which can be valued in terms of money and a benefit which can be seen to be financial as distinct from benefits of another kind” is the meaning of financial advantage.

Consequences of fraud: causing a financial disadvantage

[20] Causing a financial disadvantage is also defined in s 192D, which defines it as:

  • (a) cause a financial disadvantage to another person, or
  • (b) induce a third person to do something that results in another person suffering a financial disadvantage,whether the financial disadvantage is permanent or temporary.

Financial disadvantage includes where the defendant attempt to evade a debt. The liability hinges on the disadvantage caused to the creditor by the dishonest failure to repay by the debtor.

  • Liability is also allowed in situations where the defendant engages in spiteful actions designed to cause harm to a victim irrespective of any personal gain.
  • The section allows prosecutors to choose the forensically easier side of a fraud, as in some instances it may be easier to demonstrate that the defendant has removed money from a victim’s account rather than that the money has in some way been used to the defendant’s advantage.

The mens rea of obtaining financial advantage or causing financial disadvantage

The legislation is silent as to mens rea in terms of causing a financial disadvantage. However, as per the principles of He Kaw Teh, there is still an implied mens rea standard of intention or recklessness.

  • Murphy,[21] suggests that there need not be an intention to cause a permanent change.

Causation

[22] Since fraud requires either the accused obtaining property or causing a financial advantage/disadvantage, fraud is a consequence or result based offence, similar to murder or manslaughter. Accordingly, there must be a causal link between the deception and the dishonest obtaining of property/causing a financial advantage/disadvantage.

The issue of causation arose in Ho and Szeto:[23]

  • Facts: the defendants deceived their clients and employers into believing that contracts were being traded on the Futures Exchange, when they were actually being traded within the business. The issue was whether this was actually relevant to the amount of money the clients received.
  • Held: there must be a causal connection between the deception and the obtaining of money. The deception was not the effective cause of the payment.

Thus, if the representation is one to which the victim is indifferent (ie, it did not induce the result), there is no effective deception. Another example is the WA case Clemesha:[24]

  • Facts: the accused had hired a plate compacter from the victim by using a false name and address.
  • Held: the victim agreed to the transaction before the defendant had given the false details and was therefore not induced by them. The deception did not cause the obtaining of property.

Such cases may amount to an attempt to obtain by deception instead.

Last component of fraud: dishonesty

[25] The last component of fraud is that the obtaining of property or the causing of a financial advantage/disadvantage was dishonest. Note: dishonesty only applies to the obtaining or causing and not to the use of deception. In other words, the deception does not need to be 'dishonest', but the obtaining or causing does.

  • Dishonesty is defined in the Crimes Act 1900 s 4B as “dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to...” these standards. The section also specifies that it is a matter for the jury to determine.
  • The above definition amounts to a rejection of the test propounded by the High Court in Peters.[26]

A test for dishonesty was formulated in Feely:[27]

  • Facts: Feely borrowed money from his employer’s till with an intention to repay it, despite a notice from his employers that such borrowing should cease.
  • Held: ‘Dishonestly’ can only relate to the state of mind of the defendant. The word has its common usage and should be applied by the jury as the “current standards of ordinary decent people.”

In Ghosh,[28] the above test was examined:

  • Facts: the defendant claimed fees for himself when operations had been carried out by somebody else or under National Health Service provisions.
  • Held: the Feely test only confirmed that it is the role of the jury to determine the meaning of dishonestly and it is undesirable for a judge to direct on the issue. The test should be:
    1. Whether according to the ordinary standards of reasonable and honest people what was done was dishonest.
    2. Whether the defendant himself must have realised that what he was doing was by those standards dishonest.

Criticisms of the Ghosh test

The Ghosh test has been criticised for combined a subjective and objective test and being unworkable in practice.

  • In Peters, the High Court firmly rejected the Ghosh test, holding that it is incongruous.
  • The Feely test has since been applied to fraud in NSW.

Does dishonesty have a moral basis?

See textbook pp 951-52 for theory.

The role of the jury

The current test leaves the determination of dishonestly to the jury.

  • In Salvo,[29] Fullagar J said it is contrary to the common law that “the judge of the courts of law should set themselves up, or allow themselves to be set up, as judges of morals or moral standards.”

Ordinary people

See textbook p 563 for theory.

  • It is arguable that the standards of the ordinary person are non-existent or difficult to determine in a multi-cultural society.
  • It may be particularly difficult to determine dishonesty when complex business transactions unfamiliar to jurors are involved.

Alternative approaches to defining dishonesty

In Peters,[30] Kirby J preferred a completely subjective test.

  • McGarvie J suggested a formulation of dishonesty in Bonollo as “the accused obtaining the property by deception, would obtain it dishonestly if then of the belief that by obtaining it he will produce a consequence affecting the interests of the person deprived of it; and if that consequence is one which would be detrimental to those interests in a significant practical way.”[31]

Dishonesty and claim of right

[32] As in larceny, a protection against dishonesty is a claim of right. A person who engages in deception and dishonestly obtains property/causes financial advantage/disadvantage may still be innocent if their obtaining or causing is not itself dishonest because the person claims that the property or financial advantage is actually theirs.

In Love,[33] claim of right arose:

  • Facts: in a family dispute over the ownership of a parcel of land, Love, who believed he had a right to the land, deceptively induced his relatives to effect the transfer of the land into the name of a fictitious person whose identity he assumed.
  • Held: the question was whether the appellant believed he had a legal right to obtain the property not whether he believed he had a right to practice the deception. The court dismissed the appeal.

Other Fraud Offences

[34]

Other general fraud offences

Sections 307A-C were added to the Crimes Act 1900 and provide up to two years’ imprisonment for the knowing or reckless provision of false information in applications, statements or documents provided to government authorities in attempts to obtain benefits or comply with statutory requirements. There is no dishonesty requirement.

Forgery and false instruments

Forgery is a preparatory fraud offence. It prohibits the making of fake documents to achieve fraudulent ends. The offence is complete once the document is (there is no need to attempt the fraud).

  • Section 253 is the offence of forgery (making a false document). The document must “tell a lie about itself” or convey a false impression about its entire nature, not just contain a false statement. Section 250 gives the meaning of a false document.
  • Prosecutors are significantly aided by a series of sections which lessen the specificity of intention required on the part of the defendant.

Identity theft and fraud

Identity theft is often a computer-based offence, where the perpetrator seeks to avoid detection by the use of a fictitious identity or that of another person.

  • The assumption of a false identity is not a crime in itself.
  • Cowley v Cowley provides that this behaviour should not be criminalised if “its use is not calculated to deceive and to inflict pecuniary loss.”
  • The current concern over fraud relates to:
    • Increased reliance on digital forms of identity to transact business over the internet.
    • Fears over security and the accountability of individuals in a climate of fear of terrorism.
    • Illegal immigration.
    • Drug couriers and criminals engaged in money laundering and organised crime.
  • Everyday opportunities for criminals to obtain personal information include:
    • Purchasing petrol, meals, clothes
    • Renting a car or video
    • Receiving mail
    • Taking out rubbish for collection

Identity theft offences in NSW

In 2010 a new Part of the Crimes Act 1900 entitled Identity Offences came into force. Offences and definitions are given in section 192I-M.

See textbook pp 958-9 for theory.

Commonwealth Offences

See texbook pp 959-960 for the commonwealth versions of the offences.

Conceptual bases for identity crimes

The NSW and Commonwealth offences tend to have opposing justifications for criminalisation based upon the obtaining of information on the one hand and the intention of use on the other. Both appraoches are extremely inchoate and reflect the difficulty of detection and prosecution.

Is idenity theft a discrete crime?

See textbook pp 960-62 for David Solove's discussion on identity theft as an incident of the way society collects personal data.

End

This is the end of this topic. Click here to go back to the main subject page for Criminal Laws.

References

Textbook refers to Brown et al, Criminal Laws: Materials and Commentary on Criminal Law and Process in New South Wales, (5th edition, Federation Press, 2011).

  1. [1980] 2 NSWLR 195 at 204.
  2. (1987) Dears B 265.
  3. [2005] VSCA 38.
  4. Textbook, pp. 940-41.
  5. Textbook, pp. 941-43.
  6. Textbook, pp. 942.
  7. [1980] 2 NSWLR 195 at 204.
  8. (1987) Dears B 265.
  9. (1944) 62 WN (NSW) 1.
  10. Textbook, pp. 942-43.
  11. (1837) 7 C&P 784.
  12. Textbook, pp. 943.
  13. Greene (1949) 79 CLR 353.
  14. Stokes and Difford (1990) 51 A Crim R 25.
  15. Textbook, pp. 943-44.
  16. Textbook, pp. 944-45.
  17. [2005] VSCA 38.
  18. [1987] Tas R 178.
  19. unreported, NSWSC, 29 March 1993, BC9304122.
  20. Textbook, pp. 946.
  21. [1987] Tas R 178.
  22. Textbook, pp. 946-48.
  23. (1989) 39 A Crim R 145.
  24. [1978] WAR 193.
  25. Textbook, pp. 948-53.
  26. (1998)192 CLR 493.
  27. [1973] 1 QB 530.
  28. [1982] 1 QB 1053.
  29. [1980] VR 401 at 430.
  30. (1998)192 CLR 493.
  31. [1981] VR 633.
  32. Textbook, pp. 953-54.
  33. (1989) 17 NSWLR 608
  34. Textbook, pp. 954-62.
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