Fraud by Misrepresentation
Fraud by Misrepresentation. Section 2 of the Fraud Act - what does it really mean?
Why might I be accused of fraud by misrepresentation?
In business and in life, statements are made every day that enable deals to be done and agreements to be made. In the rough and tumble of business, statements and undertakings can be made with the best of intentions. Later down the line, a deal can go sour, a relationship can deteriorate, or a business can collapse, often leaving innocent parties facing a fraud investigation.
Mistakes can be made in business dealings and negotiations which are only really obvious in hindsight. It does not always follow that this is fraud. Sometimes an innocent employee or associate can end up as the fall guy and face Serious Fraud Office or Police investigation as a result of the actions of another person who doesn't even appear in the prosecution's case. It is a fraud solicitor's job to know the difference between a dishonest misrepresentation or an honest statement which turned out to be a mistake.
What exactly is fraud by misrepresentation?
Section 2 of the Fraud Act 2006 gives the fraud by misrepresentation solicitors the framework of the offence. The offence usually consists of some sort of dishonest statement made to gain something or so that someone else makes a loss. This offence is one that will often apply to an offence committed in business. The four necessary elements that must be proved in order to result in a conviction are:
A representation must be made
The representation must be known to be false
The representation must be dishonestly made
The person making the representation must intend to gain something, or intend that the person receiving it loses something
What is a representation according to the Fraud Act 2006?
‘Representation' means any representation as to fact or law, including a representation as to the state of mind of:
The person making the representation, or
Any other person
A representation may be express or implied
For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention). A plain English example would be someone using a stolen credit/debit card at an ATM. As soon as the PIN is entered the person using the card is making a representation they know to be false, intending to make a gain.
What makes a representation false under the Fraud Act?
A representation is false if:
It is untrue or misleading, and
The person making it knows that it is, or might be, untrue or misleading
For a person to be guilty of fraudulent misrepresentation, the representation must be false at the time it is made - a promise which is not kept is not a misrepresentation the person who makes the promise must know or intend that the promise is not kept.
Dishonesty - the law
The test for dishonesty is now entirely objective - in simple terms, a person's actions are judged by the ordinary standards of honest and reasonable people. It means the accused person can no longer argue that they did not realise that what they were doing was dishonest by those standards - the subjective element. It is the job of your fraud by misrepresentation solicitors to explain just how this might affect you.
What is an intention to cause personal gain or loss of another under the Fraud Act?
Fraud by misrepresentation solicitors might use the example of a former manager of a supermarket who believes that the food sold is of a low standard and therefore people should avoid that store for the benefit of their health. They decide to make public allegations of a rat infestation at the premises - they cannot be guilty of making a fraudulent misrepresentation. They have made a statement, it is false, and they knows it is so it is probably dishonest, but they appear not to have done it to cause loss to the supermarket or personal gain, rather for some sort of misplaced view of public protection. On the other hand, if they expressly wants that store to lose money and be closed down and that is why he makes the false allegations, he could well be guilty of a fraudulent misrepresentation.
It is also important to note that the intention to expose another to a risk of loss is enough. The loss does not have to take place or be a certainty.
What are some examples of fraudulent representations?
Any behaviour involving dishonestly making a false statement or indication in the course of any dealings for personal gain or so that someone else suffers loss falls into this category. This covers a wide range of activities - from allegations of collecting money for non-existent charities at one end of the spectrum to major complex conspiracies at the other. However, some common large scale operations that fraud by misrepresentation solicitors should be aware of are listed below.
False information about the viability of a company on the balance sheet before a sale
‘Boiler room' frauds
‘Ponzi style' frauds (A notable example is the Bernard Madoff case, in which the total loss was estimated to be 18 billion USD.)
So-called '419 scams' and ‘phishing', usually internet based
Any kind of company set up to provide a service that the directors have no intention of carrying out
Factoring frauds and other business finance related offences
Mortgage fraud - value of property, owner of property, interests in property.
This list is by no means exhaustive but should be useful to show the types of cases that you should expect a good fraud solicitor to have some experience or knowledge of.
How can I defend a fraud by misrepresentation allegation?
Every fraud case is different as a natural consequence of the complexity of the subject matter. No two cases require an identical strategic approach. There are fundamentals, however, to the preparation of all complex, specific industry-based crime.
Detailed knowledge of all of the prosecution and potential defence evidence by all of the defence team, including the barrister and the client. This requires a well organised and hard working team.
Expertise in the relevant areas of law
Experience in similar types of case
Understanding of practical business and usual industry practices - this bit is the common sense that clients sometimes complain their fraud solicitors don't have
Fraud cases are complex and result in people who have never faced criminal proceedings undergoing the full stress of a state legal prosecution. We always advise getting in contact with specialist fraud by misrepresentation solicitors if you are called by an investigator or are arrested.
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