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You are here: BAILII >> Databases >> The Law Commission >> Offences of Dishonesty: Money Transfers [1996] EWLC 243(6) (15 October 1996) URL: http://www.bailii.org/ew/other/EWLC/1996/243(6).html Cite as: [1996] EWLC 243(6) |
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PREDDY AND THE LAW OF HANDLING STOLEN GOODS
6.1 Under the law as it was generally assumed to be before Preddy, a credit balance obtained from another account by deception would have been "stolen goods"(1) for the purposes of those provisions of the Theft Act 1968 that refer to such goods, and in particular the offence of handling stolen goods contrary to section 22(1), which provides:
A person handles stolen goods if (otherwise than in the course of the stealing) knowing or believing them to be stolen goods he dishonestly receives the goods, or dishonestly undertakes or assists in their retention, removal, disposal or realisation by or for the benefit of another person, or if he arranges to do so.
6.2 Section 24(4) provides that goods are "stolen" if they are obtained, in England or Wales or elsewhere, by blackmail or in the circumstances described in section 15(1). Before Preddy it would have been generally assumed that a credit balance resulting from an inter-account transfer procured by deception was stolen goods, because it was obtained in the circumstances described in section 15(1). On this assumption, the offence of handling would be committed if, knowing or believing the funds to be stolen goods, a person dishonestly receives them or deals with them in any of the other ways set out in section 22(1).(2) According to Preddy, however, the funds are not obtained in the circumstances described in section 15(1); therefore they are probably(3) not stolen goods, and subsequent dealings with them fall outside section 22(1).(4)
6.3 Moreover, even if the funds in question were stolen goods, there would be a further difficulty in applying section 22(1) to them where they are transferred to another account. Before Preddy it had been held by the Court of Appeal in Attorney-Generals Reference (No 4 of 1979)(5)that a person who dishonestly accepts a transfer of stolen funds from anothers account into his or her own account is "receiving" stolen goods within the meaning of section 22(1). But it is hard to see how this reasoning can survive Preddy. It assumes that the funds received by the transferee are the same funds as those that, before the transfer, were in the transferors account; and according to Preddy this is not so.
6.4 It might be argued that the funds received are "stolen" by virtue of section 24(2) of the 1968 Act, which provides:
For purposes of [the provisions of this Act relating to goods which have been stolen] references to stolen goods shall include, in addition to the goods originally stolen and parts of them (whether in their original state or not),
(a) any other goods which directly or indirectly represent or have at any time represented the stolen goods in the hands of the thief as being the proceeds of any disposal or realisation of the whole or part of the goods stolen or of goods so representing the stolen goods; and
(b) any other goods which directly or indirectly represent or have at any time represented the stolen goods in the hands of a handler of the stolen goods or any part of them as being the proceeds of any disposal or realisation of the whole or part of the stolen goods handled by him or of goods so representing them.
6.5 But this rule applies only to goods which represent (or have represented) the stolen goods in the hands of the thief or of a handler; and in the case of stolen funds which are transferred to another account, this requirement is not satisfied. According to Preddy, the funds obtained by the transferee have never been in the hands of the thief at all; and the transferee, in whose hands they are, cannot be regarded as a handler until it has first been determined that the funds received are stolen goods. It would obviously be circular to argue (a) that those funds are stolen goods, (b) that the transferee is therefore a handler of stolen goods, (c) that the requirements of section 24(2)(b) are therefore satisfied, and (d) that the funds received are therefore stolen goods.
6.6 Moreover, even if the funds obtained by the transferee could somehow be brought within the terms of section 24(2), so that they were stolen goods once the transferee had received them, it would still be hard to see how the transferee could be said to have received stolen goods: that expression would seem to mean that the goods received must have been stolen goods before the transferee received them, not that it is sufficient if they became stolen goods once the transferee had received them.
6.7 It is true that this problem existed even before Preddy: it appears to extend to any case where stolen goods in the hands of the thief are converted into other goods in the hands of another, for example where the thief pays stolen cash into anothers bank account.(6) However, before Preddy it appeared not to extend to the case where a stolen credit balance is moved from one account to another, because the Attorney-Generals Reference(7) assumed the property to be the same property throughout. If this is not the case, as Preddy makes clear it is not, the lacuna is now a great deal more serious than was previously thought.
6.8 In order to ensure that the transferee of stolen funds (including funds obtained by deception) can be charged with handling them, additional provisions appear to be needed. We considered attempting simply to return the law of handling to what it was generally believed to be before Preddy, without treating anything as stolen goods that would not previously have been so treated. However, just as we encountered difficulties in reversing the decision in Preddy through the extension of existing offences, and eventually decided that there should be a completely new offence, so we discovered that there were intractable technical problems involved in filling this second lacuna solely by extending the existing provisions relating to stolen goods. Most of these problems seemed to derive from the requirements
(1) that the thing handled must be goods that is, property which includes a credit balance of an account, but not a credit which reduces the extent to which the account is overdrawn (unless, perhaps, the account-holder has a legal right to overdraw to an extent greater than that to which the overdraft is reduced);(8) and
(2) that if that thing is not the goods originally "stolen" (which includes goods obtained by blackmail or contrary to section 15) then it must at some point have represented those goods either
(a) in the hands of the thief, as being the proceeds of a disposal or realisation of those goods or of goods so representing them, or
(b) in the hands of a handler of the stolen goods, as being the proceeds of a disposal or realisation of the stolen goods handled by that person or of goods so representing them.
6.9 We therefore decided that the simpler course was to recommend the creation of a new offence which, though analogous to handling, would not include these requirements. The result is that, under our recommendations, certain conduct would be criminal which would not have been criminal even before Preddy. Although our main objective is to restore the pre-Preddy position, we believe that it must be right to go further than this if the alternative would produce anomalous and confusing results. In particular, we see no convincing reason to insist that it should be possible to identify specific property as stolen a requirement which may involve proof that each of a number of bank accounts was in credit at the material time.
6.10 We considered the possibility of a new offence which would be committed only on the willing receipt of funds into an account (as a result of a transfer of stolen funds from another account) by a person who knows or believes the funds to represent the proceeds of stolen funds. However, we rejected this idea in favour of an offence of failing to take reasonable steps to cancel a credit already made. We adopted this approach for two reasons.
6.11 First, it would often be difficult or impossible to prove that the account-holder knew or believed the funds to be stolen, and consented to their being paid into the account, at the time of the transfer; whereas it may well be possible to prove that he or she knew or believed this at some later stage, but did nothing about it.
6.12 Secondly, the new offence is intended to correspond broadly to the existing offence of handling stolen goods. Under the present law a person who discovers that stolen funds have been paid into his or her account can be guilty of handling those funds by dishonestly allowing them to remain there.(9) We think that such conduct ought to be criminal, and that a similar principle should apply where a person discovers that a credit has been made to his or her account and knows (or correctly believes) that it was obtained by deception, contrary to the new section 15A, or that it derives from a previous offence under section 15A, from stolen goods, or from theft or blackmail.(10) We are reinforced in this view by section 52(1) of the Drug Trafficking Act 1994, under which a person who discovers, in the course of his trade, profession, business or employment, that another person is engaged in drug money laundering is guilty of an offence if "he does not disclose the information to a constable as soon as is reasonably practicable". We agree that liability for omission is justified in such circumstances.
6.13 The existing offence of handling requires that the offence be committed "otherwise than in the course of the stealing": a person who assists in the theft itself (or the obtaining of property by deception or blackmail) is not thereby guilty of handling. We considered the possibility of an analogous rule under which a person who accepts a wrongful credit to an account is not guilty of the new "handling" offence if the credit is made in the course of the theft, the offence under section 15A or the blackmail (as the case may be). It would follow that, where A dishonestly secures the transfer of funds into Bs account, B might (depending on the nature of her involvement) be guilty of aiding and abetting As offence; but she would not, without more, be guilty of the new "handling" offence. However, we decided against such a rule, for two reasons.
6.14 First, the new "handling" offence would catch not only the case where B knows or believes that dishonestly obtained funds are going to be transferred to her account, and consents to the transfer, but also the case where B does not find out about the transfer until after it has been made, and dishonestly does nothing to cancel it. In the former case B would inevitably be guilty of aiding and abetting As offence, and it is therefore unnecessary that she should be guilty of the new "handling" offence too. In the latter case, however, B would not be guilty of aiding and abetting As offence, because that offence would have been committed before B became dishonestly involved. If the new "handling" offence did not extend to the credit initially obtained by dishonest means, B would escape liability altogether.
6.15 Secondly, we suspect that most people would think it odd that, for example, a solicitor who dishonestly accepts the payment of a mortgage advance obtained by deception should be guilty only on the basis that he has aided and abetted the obtaining, whereas an accomplice who dishonestly accepts part of the proceeds from the solicitor is guilty, in effect, of handling stolen funds. In terms of culpability there seems little or no difference between the two.
6.16 It is true that if the new "handling" offence extends to the receipt of the credit initially obtained by deception, theft or blackmail there is a substantial overlap with those offences: for example, a person who by deception dishonestly obtains a credit to his or her own account would be guilty not only of the offence under section 15A but also of the new "handling" offence. It would be difficult, if not impossible, to devise a simple way of excluding the case where A dishonestly secures a credit to his own account, while including the case where A dishonestly secures a credit to Bs.
6.17 We do not see this as a major difficulty. There is already an enormous degree of overlap between many of the existing offences under the Theft Acts. Nearly every offence of obtaining property by deception, for example, and nearly every offence of handling, is also theft. It is the task of the prosecutor to select the offence that is most appropriate to the case. It seems most unlikely that any prosecutor would choose to charge the new "handling" offence, which would require proof not only of deception, theft or blackmail but also of an unreasonable failure to cancel the credit thus obtained, when the case could more conveniently and comprehensibly be put on the basis of the obtaining itself.
6.18 We recommend the insertion into the Theft Act 1968 of a new section 24A, creating an offence of retaining a credit from a dishonest source, which would be committed where a credit made to an account
(1) is the credit side of a money transfer obtained by deception, contrary to the new section 15A, or
(2) derives from theft, blackmail or an offence under the new section 15A, or from stolen goods,
and the keeper of the account, knowing or believing that the credit is wrongful, dishonestly fails to take reasonable steps to cancel it. (Recommendation 6)
6.19 The new offence of retaining a credit from a dishonest source would be committed only where a credit is made to an account: it would not in itself catch those who dishonestly handle cash withdrawn from the account credited. Such conduct is, we believe, best left to the existing offence of handling stolen goods. In order to enable that offence to bite, we recommend that any money dishonestly withdrawn from an account to which a wrongful credit has been made should, to the extent that it derives from that credit, be regarded as stolen goods. (Recommendation 7)
6.20 It may be helpful to give some examples of how the rules we recommend would work.
(1) A, by deception, dishonestly obtains a transfer of funds from Vs account into his own. A is guilty of obtaining a money transfer by deception, and also (unless he has an immediate change of heart and returns the money) of retaining a credit from a dishonest source though we doubt that any sensible prosecutor would charge the latter, because it would be harder to prove(11) and would confuse a jury.
(2) A steals funds from Vs account by transferring them into his own. (He may, for example, be authorised to draw on Vs account.) A is guilty of theft(12) and also (unless he returns the money) of retaining a credit from a dishonest source.
(3) A blackmails V into transferring funds from Vs account into his own. A is guilty of blackmail and also (unless he returns the money) of retaining a credit from a dishonest source.
(4) A, by deception, theft or blackmail, obtains a transfer of funds from Vs account into Bs. A is guilty of obtaining a money transfer by deception or of theft or blackmail (as the case may be). The credit to Bs account is therefore wrongful. B is guilty of retaining a credit from a dishonest source if, knowing or believing the credit to be wrongful, she dishonestly fails to take reasonable steps to cancel it.
(5) A, by deception, theft or blackmail, obtains a transfer of funds from Vs account into his own, and transfers the proceeds to Bs. Bs position is the same as in example (4). If B transfers the proceeds to Cs account, the same rules apply in respect of Cs liability; and so on, ad infinitum.
(6) A steals banknotes (or obtains them by deception or blackmail) and pays them into Bs account. B, if she knows the circumstances but does not take steps to cancel the credit, is guilty of retaining a credit from a dishonest source.
(7) A obtains a money transfer by deception, theft or blackmail, withdraws the proceeds from his account and hands the cash to B. The cash is stolen goods. If B knows or believes this, she is guilty of handling.
(8) A obtains a money transfer by deception, theft or blackmail and transfers the proceeds to Bs account. B dishonestly withdraws the proceeds and hands the cash to C. The cash is stolen goods, and C is guilty of handling if he knows or believes this. If he pays the cash into Ds account, the credit is wrongful, and D is guilty of retaining a credit from a dishonest source if she knows or believes this but takes no steps to cancel it.
6.21 Handling stolen goods is one of the "Group A offences" under Part I of the Criminal Justice Act 1993, which extends the territorial jurisdiction of the English courts over a number of offences of dishonesty. We think that the same rules should apply to the new offence. We recommend that the offence under section 24A should be included among the Group A offences listed in Part I of the Criminal Justice Act 1993. (Recommendation 8)
6.22 We make no recommendation as to the maximum sentence for the new offence of retaining a credit from a dishonest source.
6.23 We have already recommended that nothing done before the new section 15A comes into force, which would not have been an offence had that section not been enacted, should amount to an offence by virtue of that section;(13) and exactly the same considerations apply to the new offence of retaining a credit from a dishonest source. We recommend that the new section 24A should apply only to wrongful credits made after it comes into force. (Recommendation 9)
6.24 Since the obtaining of a money transfer by deception will not be an offence under the new section 15A if it is effected before the date on which the legislation comes into force, even a credit made after that date will not give rise to liability under the new section 24A, on the ground that it derives from a transfer obtained by deception, if that transfer took place before that date. If A dishonestly obtains a money transfer by deception on 31 March, the legislation comes into force on 1 April, and B accepts a transfer of the funds on 2 April, B would not be guilty of an offence under section 24A because the transfer obtained by A was not an offence contrary to section 15A. B would, however, be guilty of an offence if the first transfer had been obtained by theft or blackmail, because the obtaining of a transfer in either of those ways is already an offence.
Footnotes to Part VI
(1) "Goods" includes money and every other description of property except land: Theft Act 1968, s 34(2)(b).
(2) It would also be committed if cash representing those funds were withdrawn from the account by the person who had dishonestly obtained them, and received by a person who knew or believed it to represent the proceeds of stolen funds: see s 24(2), para 6.4 below.
(3) It is arguable that they are obtained by theft (see paras 3.13 3.15 above); but if this is on the basis that the transferors chose in action is extinguished, it would seem to be that chose in action that is stolen (though it cannot be stolen goods because, once stolen, it no longer exists), not the chose in action acquired by the transferee.
(4) It is possible that subsequent dealings with them might amount to theft, on the basis that even if they have not already been stolen they still belong to another: see paras 3.16 3.22 above.
(5) [1981] 1 WLR 667.
(6) See A T H Smith, Property Offences (1994) para 30-15.
(7) A-Gs Reference (No 4 of 1979) [1981] 1 WLR 667.
(8) See Kohn (1979) 69 Cr App R 395; para 3.15, n 19 above.
(9) Pitchley (1972) 57 Cr App R 30.
(10) Although goods obtained through theft or blackmail are normally stolen goods, the draft Bill refers expressly to a credit deriving from blackmail because it is possible that a money transfer might be procured by blackmail without there being any goods which can be described as stolen goods eg where both accounts are overdrawn in excess of any agreed overdraft facility. In the case of a credit which is the immediate result of a theft it is arguable that there must inevitably be stolen goods from which the credit will derive, namely the victims chose in action. However, we think it might also be arguable that a credit cannot be said to derive from stolen goods unless it derives from goods which, at some previous time, fell within the definition of stolen goods. If this were right, it would follow that a credit does not "derive from stolen goods" where it is the credit side of a money transfer whose debit side is a theft of a chose in action: the victims chose in action never qualifies as "stolen goods" because as soon as it is stolen it ceases to exist. But even if the credit does not derive from stolen goods, it does derive from theft, and the Bill therefore includes the latter alternative as well as the former.
(11) It would require proof not only that A dishonestly obtained the funds by deception but also that he dishonestly failed to take reasonable steps to return them.
(12) Provided that Vs account was in credit or, if it was overdrawn, V was entitled to make further withdrawals.
(13) See para 5.36 above.
