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Lord Lloyd of Berwick: My Lords, it seems to me that this is one of the best Bills to have come out of the Home Office for many a long year. I did not read the Law Commission report when it was published in 2002 but I have read it since. It seems to me that it is a model of what such a report should be. It is very well researched. It is very well argued. It exposes with great clarity the many defects in the existing state of the law.
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Above all, it contains a draft Bill; so much so that I sometimes think that all we actually need to do is to compare the draft Bill in the Law Commission report with the Bill which is now before the House. That is all that I have done.
That brings me to the government response to the Bill, which again is excellent. I obtained it this morning by a miraclea miracle for meon the Home Office website. It seems to me again a model of what a government response to such a report should be. It suggests a number of small changes: improvements in Clauses 2(2) and 3(1) and in the omission of the word "secretly" in Clause 4(1)(b), with all of which I would agree. All that is to the good.
There is a flaw, and the flaw is the one which the noble and learned Lord the Attorney-General has already foreseen, and it is one which has been independently foreseen by three previous speakers: the failure to abolish the common law offence of conspiracy to defraudas strongly recommended by the Law Commission.
I say at once that I have an instinctive dislike, and I think that many judges have, of these catch-all offences such as conspiracy to defraud. Of course, as the noble and learned Lord the Attorney-General has pointed out, it makes it easier for prosecutors, but that surely is the whole danger.
It seems to me that offences of such generality, and so amorphous as conspiracy to defraud, offend against one of the more fundamental principles of our judicial system: the principle of legal certainty. How can anyone know whether they are guilty of a conspiracy to defraud until it is too late as far as they are concerned? So I urge the Government to think again on that point.
There is a practical argument. We now have good new offences which I greatly welcome. Surely it ought to be a working rule for the Government that for every new offence that they create they should repeal at least two old offences. Here they have a chance to repeal the old common law offence of conspiracy to defraud, and I hope that they will think again before the matter comes to Committee.
There is a very strong recommendation in the report on that, but it is the weakest point in the Government's response. It said that there were differing views as to whether there should be a conspiracy to defraud. There was a reference to a case in the House of Lords called Hollinshead, which is not a shining example of English jurisprudence. Indeed, it underlines the danger of having an offence such as that still as part of our system. If no one else does, and I suspect others will, I will certainly wish to table an amendment in Committee to restore the views of the Law Commission on that point. I would be willing to agree to the compromise proposal, as referred to in the Government's response, that we should abolish common law conspiracy now, but perhaps not bring that part of the Bill into force until we have seen how the rest of the Bill works. That seems a sensible compromise.
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The only other point that I want to make is on the concept of dishonesty. I am glad that dishonesty has been chosen as the basis of the new offences. I am indeed glad that there has been no attempt to define dishonesty in the Bill, nor should there be. At this point, I declare an interest as the author, or at any rate the part author, of the decision in Ghosh. When Ghosh came before the court, I was being led by the Lord Chief Justice, the noble and learned Lord, Lord Lane. He takes the credit, although I may have done the work. There had been a long-running dispute as to whether the test of dishonesty is subjective or objective. There have been many conflicting decisions in the Court of Appeal, which the lawyers here will recall. In Ghosh, we decided that it was both objective and subjective. That simple approach seems to have silenced everyone from then until now. Some of the academics did not like it to begin with, but it has stood the test of time since 1982, although it has never been formally approved in the House of Lords.
It is referred to with approval in the Law Commission report, and it is referred to in the Explanatory Notes. I hope that the noble and learned Lord the Attorney-General might say when he comes to reply that the Ghosh approach is the basis on which we are being asked to enact the Bill. I hope that is not pushing my pride of authorship too far. I certainly would not support a Bill in which the test of dishonesty was to revert to the old-fashioned objective test. I hope that the noble and learned Lord the Attorney-General will be able to say, "We are enacting this Bill on the basis that Ghosh is the law as we understand it".
Lord Brennan: My Lords, my noble and learned friend the Attorney-General can be confident of the support of his own Benches for the passage of this Bill. The lawyers here present might be excited by its detail, but at Second Reading it seems to me more important for us to consider some of the policy implications of this important legislation.
First and foremost, it is an important exemplar of the way in which Parliament, by the use of the Law Commission, can step by step reform the criminal law of our country. That is an important task; indeed one that is vital to the proper functioning of our society. By proper legislation that encodes the criminal law we hope toand I expect usually willproduce clarity of offence and the reasonable certainty of those involved as to how the matter will progress in the course of a criminal investigation and trial.
I hope that this is one step and that my noble and learned friend will bring forward more legislation in the life of this Parliament implementing the Law Commission's proposals to change the criminal law, and that he will do so with the same admirable economy with which this Bill addresses the law of fraud. Whatever 100 or 200 pages it might occupy in a textbook now, to encompass it in five pages and 12 principal sections is to be described as a success, subject to its passage through Committee. As a piece of law reform, it was and is a model.
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This Bill is no lawyers' piece of art; it is a practical protection of the public billions, affecting many, many people. It therefore requires two important considerations of policy. First, it should be efficiently implemented at three stages. At the beginning, by ensuring that the investigating police officers in this country who will be tasked with applying the law will be trained to understand it; able to relate its content to the multifarious ways of modern technological crime that they all encounter; and that they will then be assisted by lawyers from the Crown Prosecution Service or the SFO as to the appropriate charges that might arise from an inquiry. Good law becomes best law when it is effective in practice.
The second step of efficient implementation is to ensure that this Bill becomes psychologically connected in the mind of every lawyer, police officer and court with the legislation on the proceeds of crime. We prosecute crime and fraud not just to convict and punish but to recover stolen assets. I said billions, using the quotation from Ros White. The public will expect, as time goes by, a recovery that can reasonably be made from the activities of major fraudsters.
The last point is that any Bill of this kindmomentous as it is in the life of our criminal lawwill be met by legal analysis and appeals. I invite my noble and learned friend to invite the Lord Chief Justice and the Court of Appeal Criminal Division to ensure that appeals arising under the Act, when it becomes an Act, are dealt with promptly in groups according to topic or whatever, and certainly within a period of three or four months. The last thing that we want is several years of uncertainty about its proper interpretation by the courts.
So, efficient interpretation is the first policy point. The second general policy point is that the Bill should take its place as an effective part of the framework of combating financial crime. Its terms generally deal with fraud and dishonesty, but two clauses deserve emphasis in the context of major financial crimeClause 4, which is on the dishonest abuse of position, and Clause 12, which is about the liability of corporate officers for their company should it be found to have committed one of the crimes.
Taking the two together in the realm of high finance, what is an abuse of position? The legal concepttechnical, sound, fiduciaryis easy to understand, in that one person should show loyalty to another if it is his responsibility to protect the other's interests. In Committee, Clause 4 deserves especial attention in the context of major financial crime. That is because it goes beyond technical financial offences and the specific offence of insider trading, and produces an area of concern to the public of which the financial world should be astuteand so, I suspect, should we lawyers in applying the Bill.
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The Bill should form part of the framework of combating fraud, as I said. We have reached the stage where we have a Financial Services Authority and a Serious Fraud Office with experts assisting them, and an efficient procedure in court in the sense of trial, appeal, recovery of the proceeds of crime and so on. That framework should be used as a composite system of control. We are not talking about disparate and unrelated parts of combating fraud.
When the Bill comes into force, I expect that those involved in chasing convictions for fraud and recovering assets will look at the framework in the following way. The Financial Services Authority will attack through fines or regulation and control the level of financial defalcation appropriate to that kind of penalty. If the Serious Fraud Office recommends that there be criminal proceedings the next stage should be, as I understand the law to be applied in future, a plea-bargaining system in which fraudsters are punished and relieved. They will be punished be being made to pay up, and relieved with the consequence of perhaps getting a lesser sentence or no sentence of imprisonment, if that fits the justice of the case.
After that, if the plea bargain did not work and there was a trial and conviction, there would be long sentences. Ten years is the maximum. I am not recommending draconian reactions, but is that the right level at which to pitch public sentiment about very serious financial crime? The crime may involve hundreds of millions, or be a major pension fraud that damages the lives of many. In America, the test for sentence is, "How much, and how many people were affected?". Then you fix a sentence. The framework is the product of existing legislation plus the Bill, and it is one that we should start applying.
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