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Mr. David Heath (Somerton and Frome) (LD): I join in the general welcome for the Bill and for the way in which the Solicitor-General and the hon. Member for Beaconsfield (Mr. Grieve) opened the debate. There is a general view that the Law Commission has done an extremely good job in addressing issues relating to the prosecution of fraud, and a general realisation that we should take fraud a great deal more seriously than we have perhaps sometimes done. Indeed, there is much frustration at the fact not only that high-profile serious
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fraud cases have often appeared to founder, but that low-level fraud is frequently not prosecuted at all—at the fact that it is somehow regarded as a lesser offence than others that are, perhaps, committed by people not wearing white collars and ties at the time. I do not accept that view; fraud is a serious crime that should be prosecuted with as much assiduity as any other offence.

Three factors are involved in the general approach to achieving successful prosecutions. The first is the law, which we are addressing today by simplifying the law relating to the relevant offences; the second is the prosecuting and investigating authorities; and the third is the management of court cases.

I have long had a serious concern about the disjunction between the various prosecuting authorities. I know that it is fashionable to criticise the Serious Fraud Office and, to a certain extent, the prosecuting department of Her Majesty’s Revenue and Customs, but the real problem lies in the lack of resources available across the field, and in the fact that, too often, we have different compartments. Some deal with fraud against Government, and others deal with serious fraud. There is the Serious Organised Crime Agency, which is in its infancy and deals with organised crime; and the City of London police, which does a wonderful job—within the City of London. Beyond that, there is very inadequate provision across the territorial forces of this country. I know from my own experience in policing that there simply is not the expertise in most provincial forces effectively to investigate and to provide the wherewithal for successful prosecution of fraud.

The Solicitor-General: The City of London police are responsible not only for fraud in the City, but more widely for London and the south-east, hence the extra resources that they receive. They have built up enormous expertise and I endorse the hon. Gentleman’s comments about the way in which they carry out their duties. We are all very grateful to them.

Mr. Heath: I concur, and, as one of the rare breed of council tax payers in the City of London, I am glad that it is not solely my contribution that enables them to do their job on behalf of the wider community. I have thought for a long time that we need a single, all-embracing anti-fraud organisation, with much better internal connections, to provide better investigations in parts of the country that are not currently well served. I hope that that will form part of the conclusions of the review that the Solicitor-General mentioned.

Even when we have successful investigations, we still have problems with the management of fraud cases. The over-simplistic view sometimes expressed on behalf of the Government that that is somehow the result of juries who cannot cope with the amount of information and the time scale of cases is unsupported by evidence. We must be clear about that. If we want an instructive case study, we need look only at the Enron trial in Houston. It was the fraud case of the century—a huge case, with huge ramifications. It did not lack for evidence, because it took evidence from 56 witnesses, but those responsible managed to conclude the trial in 15 weeks. The jury had nearly six days of deliberation and found the defendants guilty as charged. If that is possible
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before a Texas jury and a Texas judge, it is not beyond the wit of UK juries and UK judges to effect similar management. In contrast, the BCCI litigation—although it was a misfeasance trial, not a fraud trial—took more than two years, and cost more than £100 million in legal bills. The two opening speeches alone took 200 days of court time, only for the action to be abandoned, with all that work proving abortive. That is an effective comparison of the effectiveness of trial procedures and the Lord Chancellor—as he is at the moment—the Attorney-General and the Solicitor-General need to consider the issue carefully to see how we can make improvements.

Like the hon. Member for Beaconsfield, I hope that we will hear no more of the implementation of section 43 of the Criminal Justice Act 2003. I think that we have had an assurance from the Attorney-General that if the Government take the view that they need to restrict jury trial further—which I would oppose with every fibre of my being—he will do so by means of new primary legislation. If that is the case, he will no doubt support the amendment that I intend to table in the course of proceedings on the Bill to repeal that section as entirely otiose. We shall then have proof of the Government’s intentions.

I shall mention several issues that I hope to address further in Committee. We had a short debate on clause 4, which states:

I was not entirely persuaded by what the Solicitor-General said about that provision. He seemed to be saying that he actually means “the person occupies a position in which he has a duty”—wording that seems entirely appropriate. However, the wording “he is expected to” opens the provision to all sorts of challenge, which is entirely unnecessary because there is no suggestion that there is an additional general duty on an individual citizen. I think that is what the hon. and learned Gentleman said, so it is something that we could usefully consider in Committee.

The Solicitor-General: I have looked through my notes for the exact quote from the Law Commission about clause 4, which I shall read out as the hon. Gentleman has expressed concern about the issue. It states that the “necessary relationship” of a position of trust

But—and this is important—it states:

In other words, the Law Commission has set out the type of relationships in which a position of trust might arise.

Mr. Heath: I hear what the Solicitor-General says, but I still do not entirely understand the point. I do not want to detain Second Reading by trying to reach that
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comprehension, so perhaps we can explore it in Committee. All those cases suggested a duty that could be expressed in those terms, so the idea that there may be some other context in which a court could be persuaded that a person had a reasonable expectation of that duty without it comprising a duty seems a very nice point, of which I would need some persuasion before embracing it.

Clause 5 gives definitions of gain and loss and, again, we can usefully explore those points in Committee. Subsection (3) notes:

So how would the law apply, for instance, in the case of overpayment of a sum of money that one has received in good faith, such as a child tax credit? Again, that is something that we can explore at a later stage.

On clause 6, the point has already been raised about mens rea in the case of possession of an article and we heard warm words in support of conjurors, who will be able to go about their legal business, using their paraphernalia without fear of arrest. I am not absolutely sure that that is what the Bill says, although I accept the assurances of the Solicitor-General. At what point does a conjuring trick become a dishonest act? The three-card trick seems to be the turning point at which a conjuring trick starts to become a confidence trick. I shall be interested to know how the definition will work in such cases. The Solicitor-General was at pains to say that it would not be an absolute offence, but there is at least an intimation that it is, because the Bill does not specify a statutory defence.

I am less worried about conjurors, however, and more worried about unwitting agents of fraudsters. There are many examples of a person carrying forged credentials—forged documents or letterheads—believing that they are acting lawfully and appropriately for an enterprise when in fact they are not. It worries me that they might unwittingly find themselves in possession of an article that was being used and had been produced for the purpose of fraud, but which they were not aware was being used or had been produced for the purpose of fraud. We need to be clear about the defence that could be used in those circumstances.

We do not want to create a defence that is too easily used by someone who is probably guilty of an offence but who wishes to use their ignorance as a means of avoiding prosecution. We must also be careful to ensure that innocent people are not found guilty of an offence when they are genuinely ignorant of the purpose to which the article in their possession could be used.

The Solicitor-General: As I indicated earlier, it is not a strict liability offence. It is the responsibility of the prosecution to show that the individual had an article in his possession with an intention that it should be used in some fraud. That is not on the face of the Bill, but the provisions import the case law of Elan from the previous legislation. That is clear. I say it with all the authority that a Minister has on presenting a Bill. It is intended that the provision should import previous case law.

Mr. Heath: That is extremely helpful. It is clearly not on the face of the Bill. I do not think that we can assume, but the Minister has gone a long way to
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helping us to assume in a way that the courts will recognise. I am grateful to him for that.

I welcome the new provisions for fraudulent business carried on by sole traders. An area that I would like to explore in Committee and perhaps at later stages is where actions are taken in anticipation of receivership or bankruptcy. I perceive that there are many instances where people carry out actions that have the long-term effect of defrauding creditors or employees of a company in the expectation of a company ceasing to trade or in anticipation of that happening. My belief is that that is fraudulent. My belief also is that there can be a deliberate intention to remove assets from a company prior to it ceasing to trade, in a way that is intended to prevent genuine creditors, including the employees of the company, from getting their proper recompense. That is not adequately covered, and is certainly not adequately prosecuted at present. I would wish to explore that.

We have already dealt with clause 11, which is the replacement of part of the Theft Act 1968. I made an intervention about downloading. I do not defend those who illegally download music. Equally, there have been occasions when large corporations have been extremely heavy-handed in either threatening to or carrying out legal action, particularly against minors who have perhaps unwittingly committed an offence. If the clause can be used to launch a private prosecution of a 12-year-old with a computer who is downloading songs off the internet, with mum and dad having no idea that that is happening, that worries me. Perhaps we shall receive some reassurance about that at a later stage.

We need a slightly more specific definition of the related offences on non-incrimination. Under clause 13 there is a requirement that a person is not to be excused from answering questions on matters relating to an offence under the Bill or a related offence. We need to know what the related offences are, rather than have an open-ended commitment at that point.

Lastly, in terms of what is in the Bill, there is the extent. I know that there has been an issue about whether we should assume extraterritorial jurisdiction in the Bill. The Government have broadly decided that they should not do so. However, the extent to which extraterritorial jurisdiction is appropriate in relation to some of the offences is still an open question. Certainly, internet crime is a real issue, as the Solicitor-General well knows. There is also an issue with unsolicited mail—something that bedevils an awful lot of our constituents. Often it originates from abroad and constitutes what I would consider a fraud on the recipient. When someone receives what purports to be a demand for money, which may have a fraudulent intent, we shall need to be careful about the point at which that becomes prosecutable and in what jurisdiction.

May I conclude with what is not in the Bill? The major issue, of course, is the fact that the Bill does not repeal the common law offence of conspiracy to defraud. The hon. Member for Beaconsfield said that the Law Commission was fairly explicit. It could not have been more explicit. Its report refers to

It is an indefensible anomaly that the Solicitor-General now finds himself in a position to defend. I am not convinced by the arguments. They are based on the existing law of fraud, rather than the law as it will be
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following the Bill’s enactment, and the existing law on multiple offences, rather than the position that will be the case after the rather belated implementation of provisions on multiple offences in the Domestic Violence, Crime and Victims Act 2004

The offence is a catch-all offence, which, if there are adequate alternatives, I find repellent in itself. The offence provides an easy route for dual criminality, which is becoming more and more of an issue in extradition proceedings, given that almost anything that is a lawful activity on behalf of one or more people might be interpreted as a conspiracy to defraud and might therefore provide that dual criminality to enable extradition. We need to look at this matter again, both in Committee and probably on Report. In the interim, I ask the Solicitor-General seriously to consider why it would not be appropriate to have a repeal provision in the Bill with a later commencement date or a commitment involving, in effect, a sunset clause for that particular provision, which could be reversed by Order in Council. There are ways of providing the primary legislative framework for the repeal of the existing offence, which we can do by virtue of the Bill and still have the precautionary approach that the Solicitor-General advises. The advice to prosecuting authorities needs to be extremely robust when it comes to why they should not use the conspiracy to defraud. I would like a commitment from the Solicitor-General, if he can give it, that he would be prepared to use noli prosequi powers to prevent a prosecution on that basis if he believes that there are other more appropriate offences as a result of the Bill that should be used as an alternative.

There are other matters that could have been placed to advantage in the Bill. We do not have that many Bills working in this broad area. I would have liked the Bill to be not just the Fraud Bill, but the fraud and corruption Bill. It is a perfect Bill for the incorporation of the provisions of the Corruption Bill that is before the House in the name of the hon. Member for City of York (Hugh Bayley). Many people feel that that is an essential part of our armoury against corruption on a wider scale and fulfils the expectations on this country by treaty to provide better anti-corruption legislation. It is consistent to join fraud and corruption, as there is a considerable overlap between the two, and the Bill is an appropriate vehicle to do so.

Some things that could be construed as fraud or corruption are not investigated or prosecuted. It is perhaps over-fashionable to talk about association football, but it is inappropriate for bung allegations to be investigated by the Football Association and other sporting bodies. They should, at least on a prima facie basis, be investigated by the police and other investigating authorities, and I am surprised that no such investigation has taken place on the basis of the evidence that has been made public.

Finally, does the Solicitor-General think that anything could be included in the Bill so we can deal more effectively with carousel fraud, which has become an extraordinarily serious issue? A report on figures recently released by the Office for National Statistics in the past few days says:


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That is a staggering figure—14 per cent. of all Britain’s imports and exports are subject to carousel fraud, yet we have been unsuccessful in achieving effective prosecutions and indictments. If we can do anything to make such fraud easier to investigate, to bring charges and to secure convictions, we should use the Bill to do so, as it is an appropriate legislative vehicle. I invite the Solicitor-General to consider whether that is possible.

On the whole, this is a good Bill. We wish to explore some issues in Committee and on Report, but we certainly support its passage and hope to improve it along the way.

5.32 pm

Jeremy Wright (Rugby and Kenilworth) (Con): May I begin by declaring an interest as a non-practising barrister? Like every speaker in our debate, I welcome the Bill, which is a good measure that deals effectively with an unnecessarily complex area of the criminal law.

As has been said, there can be no doubt that fraud is a serious business. The criminal law is required to deal with it effectively, and we do not want to construct laws that allow criminals to find loopholes. The Solicitor-General has made it clear that that is the purpose of the Bill, which I welcome wholeheartedly. I particularly welcome the fact that it deals with the fraudster’s intentions, rather than the consequences of fraud. Instead of dealing with deception and the question of who is deceived, which causes the problems that we have discussed, it addresses the fraudster’s intentions and whether or not they are dishonest. That is an extremely effective riposte to the fact that, as fraud is increasingly perpetrated electronically, there is no one to be deceived.

I wish to make three points about the Bill against the background of my broad welcome. First, I echo the remarks of my hon. Friend the Member for Beaconsfield (Mr. Grieve) about jury trials. This is a good Bill, because it makes the law of fraud simpler, thus weakening considerably what, in my view, is an already weak argument for a reduction of the right to jury trial for individuals accused of fraud. In my experience juries are well able to deal with the matters put before them in a fraud trial, so long as the lawyers putting those matters before them do so in a straightforward way. The Bill will help them do that, which means that juries will be more, not less, able to deal with fraud trials. I recognise that, as the Solicitor-General said, these arguments are for the time when we deal with another piece of legislation, but I hope that he will not do something counter-intuitive, by passing one piece of legislation that helps juries, and then not taking that into account when he considers whether juries are able to deal with fraud trials.

The second issue that I want to raise also follows on from comments by the Solicitor-General with which I wholeheartedly agree. It should not be up to the criminal law alone to deal with fraud. It is up to the Government to consider the other ways in which they can reduce the likely incidence of fraud. Fraud prospers in complex systems. It is much easier to perpetrate a fraud in a system that is difficult to follow, because that makes it difficult for those who enforce the rules to work out how the rules have been flouted, and difficult for a court and a jury to work out how the system has been abused.


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