Fraud Bill [Lords]


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Mr. Grieve: That is true, although I should have thought that a judge would be capable of explaining to a jury what a fiduciary duty is. In the course of a criminal trial, if a fiduciary duty appears in the relevant statute, the judge ought to be in a position to explain that to the jury. Furthermore, a judge would also be in a position to rule, on a submission of no case to answer, whether the prosecution had laid the basis of whether a fiduciary duty existed.
The difficulty of the present wording of the clause is that, other than leaving the matter to a judge on a ruling of no case to answer, the case is pretty much open to the jury. The old saying, when I was first at the Bar, was that perhaps we should get rid of all forms of criminal code and simply present facts to a jury, which would be allowed to say on its verdict “in order”, “out of order” or “totally out of order.” There is a sense that that is what we are doing with the clause: a set of facts is put to a jury and it is asked, “Is it in order, out of order or totally out of order,” and on that depends guilt or innocence. That worries me.
As I said earlier to the Solicitor-General, hopefully the criminal code is in accordance with moral principles. However, many people are allowed to behave in an immoral fashion and still not face criminal sanction. The wording of the clause leaves a grey area. Let me give an example, which has just come into my head, of the sorts of problems that might arise.
Earlier, I mentioned buying and selling. A person is helping his aged aunt with her affairs, in the course of which she gives him access to all her private papers. From those, he discovers that a bust sold out of the family 20 years before in a house sale was made by Bernini. Nobody knew about that at the time, but it is clear in the family papers to which he has been given a degree of access by his aunt. That bust is now for sale in the antique shop down the road, so he zooms down there; nobody knows that it is a Bernini bust and he buys it at a vastly discounted rate—it is the bargain of a lifetime. He does not tell his aunt; he just takes it home and puts it in his house.
Did that person abuse his position? After all, his aunt allowed him access to her papers. He took advantage of the information that he gleaned from those papers and made use of it for his own benefit. Hon. Members must understand that the aunt was not ga-ga; she just asked him to help her. To what extent would he be caught by clause 4? One might consider what he did to be morally reprehensible, but was it a crime?
I have picked one example; we could pick dozens of others. Mine illustrates my slight anxiety that we might be casting our net too wide on the waters, the consequence of which is to create uncertainty. Of course, Parliament might wish to modify the behaviour of human beings, which is not necessarily an undesirable objective, but we must be careful about making sure that the scope of the criminal law in such an area is properly restricted. Otherwise, as always happens, we encounter the law of unintended consequences.
I have given an illustration, and I hope that the Solicitor-General will discuss the issues that it raises so that the matter can be explored further. It is one thing for somebody to be entrusted formally with something, but are we really going to say that taking advantage of information gleaned in the course of a relationship of friendship, without any formalised trust being involved, is a criminal act and that we wish it to fall within the scope of clause 4? That is the difficult dividing line about which we must think.
I emphasise to the Solicitor-General that I have not reached a conclusion on the subject; I am feeling my way. I suspect that the Bill, having gone through the other place, will probably go on to the statute book in its present form. However, I hope that we can reflect on the serious and difficult issues that I have raised through my amendment before we simply rubber-stamp clause 4.
Mr. Heath: I support amendment No. 2, but I shall speak to amendment No. 7, which is on similar lines.
I concur with the hon. Member for Beaconsfield (Mr. Grieve). I do not think that, in its present form, the clause is likely to cause a massive injustice, but I have a nagging feeling that it is sufficiently loosely worded to allow for ambiguity. I draw attention again to the fact that the wording in clause 3 is precise. It mentions
“a legal duty to disclose”,
whereas clause 4 uses less precise language, referring to
“a position in which he is expected to safeguard”
another’s interests. That opens up questions, which I expressed on Second Reading, about who is doing the expecting. Is it to be the judge, the jury or the person who has a form of relationship with the person indicted? Is the view of the man on the Clapham omnibus to be taken on what constitutes a reasonable expectation?
When we intervened on the Solicitor-General on Second Reading, he was anxious to put our minds at rest, but he came close to saying that the phrase “is expected to safeguard” comes close to “what he is under a fiduciary duty to do”. I do not think I am putting words in the Solicitor-General’s mouth by saying that, in his view, there was little difference between an expectation and what formed a duty. He was also at pains to say that, at the end of the day, the courts must decide the matter and that the prosecution has the responsibility of establishing that relationship and that expectation—or, as I prefer it, that duty.
I still do not understand what advantage there is in framing the offence as the Solicitor-General has in the Bill. What circumstances that do not fall within “duty”, but do fall within “expectation” does he expect to catch? I have read carefully at what the Solicitor-General said, which is why I framed my amendment in a perhaps more lax way than it would have been framed had I used the precise term “fiduciary duty”. On Second Reading, the Solicitor-General said
“Of course, the duty may well go beyond a mere fiduciary one; other duties could be encompassed. We can deal with such detail in Committee.”—[Official Report, 12 June 2006; Vol. 447, c. 537.]
Well, here we are and we are now expecting to deal with that detail.
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What I really need from the Solicitor-General is some illustrations what duties might be encompassed. Because I have an expectation and he has a duty to provide such illustrations to the Committee, that is why I have used the phrase “has a duty” in my amendment, so that it could encompass other duties that the Solicitor-General brings forward for our consideration.
Mr. Grieve: I understood that that was what the hon. Gentleman was trying to achieve in proposing the mere word “duty”. Of course, the problem with the mere word “duty” is that, unless the sort of duties one is talking about are defined, it is capable of being as loose as an “expectation”, because what one person regards as a duty another person might not. We shall still have the same problem unless we produce a comprehensive list of expectations or duties.
Mr. Heath: That is probably true. My expectation is that the Solicitor-General will perform his duty in giving us that list in Committee so that the courts have something to work on. That is a firm expectation and one that I expect to see met in a few moments.
I support the purpose of the clause. I do not want it not to work. There must be a reason behind using that loose and ambiguous term without stating a clear view on in whose mind the expectation has formed that there is some requirement for one individual to safeguard another’s financial interests. If it cannot reasonably be argued that the person who is accused of fraud under the clause should be aware of that expectation, it seems that we have a slightly dangerous instrument before us. If there is a legal duty, a fiduciary duty, it is reasonable to assume that the person should know that they are in that relationship and they should be aware of that in legal terms. However, the present wording of the clause falls short of that. There are circumstances in which a jury, judge or court might form the view that there was an expectation but there is no reason to suppose that the person who committed the act was, or could be, aware of that expectation because they had not entered into any form of contractual or professional relationship that implied that expectation. That is my concern and that is what I hope that the Minister will be able to satisfy us on when he replies to the debate.
Mr. Geoffrey Cox (Torridge and West Devon) (Con): I should declare an interest in that I have been a practising lawyer, particularly in the field of fraud, for well over 20 years. I appeared in the case of Regina v. Preddy, to which I believe the Minister referred, in which some of the shortcomings of the Theft Act were illuminated by the House of Lords in 1996. I also appeared recently in a case of some notoriety that collapsed after two years called the Jubilee line extension fraud. I therefore have some considerable experience in the field of the practice of fraud in the criminal courts.
I invite Government Members to consider the position of employees, which may be of substantial concern to them. There is no doubt that, whatever the nature of the employment, an employee is bound by implied, if not expressed, terms of the contract, to a duty of confidentiality. There are certain necessary responsibilities that go with any contract of employment, whether one works in the humblest capacity in the mailroom or at directorial level. On closer examination, it becomes apparent that the clause may become a stick with which to beat employees whom the employers regard as having breached their terms of confidentiality or otherwise breached their expectations.
I will give one example. The employee who, in the hope of a job with a rival firm or company, decides in the pub to let a rival window cleaning firm know that his firm is seeking to extend its business in another part of the geographical area in which they live. On the face of it, that situation would be covered by the offence in the clause—it would be fraud. There would be an expectation on the part of the employer that the employee would not disclose even relatively dilute and unimportant detail of the future plans of his employer.
The employee would have acted in the hope that perhaps one day—particularly if he anticipated that in the shake-up of the company’s organisation, he might be made redundant—he might gain a job with the rival employer at some future date. However, I respectfully submit that it would be hard to contend that that employee ought to be found guilty of the crime of fraud set out in clauses 1 and 4, even though he occupied a position in which he was expected by his employer not to act against the financial interests of another person—his employer.
If an employee disclosed details, even fairly minor and minimal details such as, “I know that a window-cleaning firm is going to expand in Bideford,” that disclosure could be interpreted by a jury as being contrary to the financial interests of the employer. However, the provision would expose thousands of employees the length and breadth of this country to the risk of a complaint of fraud being made to the police by their employers, and given that the offence is so broadly defined, the employees would potentially face conviction.
Mr. Greg Hands (Hammersmith and Fulham) (Con): Does my hon. Friend agree that that may become a particular problem in the City of London where such discussions happen all the time between employees, current employers and future employers? Might not the measure imperil London’s position as the No. 1 financial centre in Europe?
The clause refers to a person being “expected to safeguard”, but expected by whom? By the employer, in the case that I just suggested? The clause continues:
“or not to act against, the financial interests”.
Does that mean the immediate financial interests, or would it be a defence to say, “Well, it may not have been in his short-term financial interests, but in the long term, what I did was definitely in the interests of my employer, for the following reasons”? We will have endless debates in the courts of law on whether something was in the financial interests of the person who is said to be the victim, because, as my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) pointed out, we are not always looking at auntie and nephew; we are often looking at vast multinational organisations, where it is not easy to judge whether a particular act by a director or employee may have jeopardised those financial interests. The argument may well be advanced: “I did it in the best interests of the firm.” Thus the court will become bogged down in examining the economic status of the entire company or economic enterprise concerned when trying to decide whether an action was in its financial interests.
The Committee may regard my argument with a degree of scepticism, but let me assure hon. Members that that is precisely what will happen. It is precisely what happened in the Jubilee line case to which I referred. The charge in that case was conspiracy to defraud, but it was at the ultimate frontier of what had in the past been considered conspiracy to defraud. The passing of very low-level commercial intelligence—similar to the information that I mentioned on whether a window cleaning firm should extend its activities into the town of Bideford—was regarded as a conspiracy to defraud. The question was bound to arise whether it could be proven that passing that intelligence had a damaging effect on London Underground’s financial interests.
I submit that that is a question that the Committee ought to consider with extreme care. Any precision that we can bring to the clause, particularly along the lines suggested in the amendment proposed by my hon. Friends, would have something to commend it. The amendment would insert “a fiduciary duty”, rather than leaving the offence to rely on an expectation. We would like more precision. Let me explain the reasons why. To go back to my employment law example, not every employee is in a fiduciary relationship with his employer. A fiduciary relationship is a precise legal term; the law defines it well, and it applies in a range of relationships. The law understands it, and it is not difficult to interpret to a jury. Inserting that phrase would remove the great mass of employees from the risk of prosecution for what the employer regards as an abuse of the employee’s position.
I urge the Committee to consider extremely carefully whether the amendment should be made. It would further define the offence and make it more precise. It would assist, because there would be no question of the ordinary employee being caught by the offence, whereas under the current drafting there is a real risk that we will get bogged down. I assure the Minister, although I am sure that he does not need assuring, of the ingenuity of defence advocates, who will find much to be pleased by in the Bill. However, by the insertion of the phrase proposed by my hon. Friends, some greater precision could be brought and some of those arguments will be avoided.
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Jeremy Wright (Rugby and Kenilworth) (Con): Mr. Amess, may I also welcome you to the Chair this morning? It is a delight to follow my hon. Friend the Member for Torridge and West Devon (Mr. Cox), although I suspect a disadvantage, but I will do my best. I want to make a couple of points about the clause and to support amendment No. 2.
It seems that there are two difficulties with the use of the phrase “expected to” in relation to the position that the clause describes. We must be clear—other hon. Members have already made reference to it—who has the expectation and how realistic that should be.
Not every expectation is realistic or reasonable. As Members of Parliament, we know that. The Solicitor-General, as a Minister, knows that. The public sometimes have expectations of their Government, which he may regard as unrealistic or unreasonable. If that word is to be used, we must be clear about how realistic or reasonable any expectation should be.
There is another difficulty. The hon. Member for Wrexham (Ian Lucas) indicated that the advantage of language such as “expected to” is that the public will readily understand it, whereas “a fiduciary duty” is something that must be interpreted by lawyers. We must look at paragraph 7.38 of the Law Commission’s report, which is reported in paragraph 20 of the explanatory notes. I accept, incidentally, that the Law Commission says that it does not believe that fiduciary duties should be the limitation of the clause. However, it goes on to say:
“This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions.”
It seems clear that, in the Law Commission’s view, lawyers would have to be involved in the definition of “expected to” in respect of the relationship that it describes. If that is so, the legislation does not provide the clarity for which the hon. Member for Wrexham is looking. It ought to be this Committee’s task to give as much clarity to the law as we can at this stage and to save the courts the job of doing so at a later date.
 
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