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PART IV

CONDUCT THAT CAN BE PROSECUTED ONLY AS CONSPIRACY TO DEFRAUD

4.1      Many of the defects highlighted in Part III could be resolved by simply abolishing the crime of conspiracy to defraud, and consolidating the existing deception offences into a single offence. This would dispose of an anomalous and excessively broad offence, while simplifying and rationalising the law.
4.2      Unfortunately, the result of having a limited concept of deception, and an over-complex array of deception offences, is that conspiracy to defraud does much of the work in the law of fraud. There are various forms of conduct which could qualify as a conspiracy to defraud, but which would not be an offence if done by one person. If conspiracy to defraud were to be abolished without extending the scope of the present statutory crimes, these forms of conduct would be rendered lawful. The law of fraud would become riddled with loopholes.
4.3      It is important to note, however, that not all the holes which would emerge would necessarily be undesirable. As we have said,^[1] we take the view that conspiracy to defraud is too widely defined. In our view, therefore, some of the conduct which falls within the offence should be rendered lawful. In this Part we discuss these forms of conduct as well as the gaps that, in our view, ought to be filled.
4.4      The kinds of conduct which could suffice for conspiracy to defraud, but which would not be an offence if done by one person, can be divided into two broad categories:

(1) conduct which involves deception, but which is not criminal because the existing deception offences are so defined as to exclude it; and

(2) conduct which involves a view to gain or an intent to cause loss, but not deception.

Conduct involving deception which is excluded from the existing deception offences

4.5      The existing deception offences are narrowly defined. Even the two broadest offences – obtaining property and obtaining services – are considerably narrower in scope than conspiracy to defraud has been held to be. The following situations could give rise to charges of conspiracy, but, despite the element of deception, would not or might not give rise to a deception offence:

(1) Deception which obtains a benefit which does not count as property, services or any of the other benefits defined in the Theft Acts.

(2) Deception which causes a loss and obtains a directly corresponding gain, where the two are not the same property (other than a transfer of funds between bank accounts).^[2]

(3) Deception which causes a loss and obtains a gain where the two are neither the same property nor directly correspondent.

(4) Deception which does not obtain a gain, or cause a loss, but which prejudices another's financial interests.

(5) Deception for a non-financial purpose.

(6) Deception to gain a temporary benefit.

(7) Deceptions which do not cause the obtaining of a benefit.

Deception which obtains a benefit which does not count as property, services or any of the other benefits defined in the Theft Acts.

4.6      There are two principal forms of benefit which cannot found a deception charge. The first is confidential information, which has been held to fall outside the definition of "property" in the Theft Act 1968.^[3] This means that it cannot be stolen or obtained by deception under section 15.
4.7      In Consultation Paper No 150, we considered the offences which are available to prosecute those who dishonestly use or disclose another's trade secrets^[4], and concluded that there are lacunae:

There may be no offence if an individual, acting alone, dishonestly uses or discloses secret information (not protected by copyright or a registered trade mark, and not amounting to personal data protected by the Data Protection Act 1984) without authority, provided that individual

(1) obtains the information with the consent of its owner (albeit in confidence) — for example where an employee is given the information for the purposes of his or her work — or

(2) though not authorised to have the information at all, obtains it without resorting to deception, corruption, unauthorised access to a computer, intercepting post, telephone tapping or any other prohibited means. A simple example would be the industrial spy who gains access to premises without forcing entry (which would involve criminal damage) and inspects the contents of an unlocked filing cabinet.^[5]

4.8      Absolom^[6] demonstrated how the lacuna can operate. The defendant obtained a "graphalog", a technical document prepared by an oil company which was exploring an area off the Irish coast. It set out the company's geological findings, and indicated the prospects of finding oil. It was unique, since no other company was exploring the area. The company had invested £13 million in the exploration, and could have sold the graphalog for between £50,000 and £100,000. The defendant obtained the graphalog with a view to selling it. He was charged with theft, but was acquitted, on the grounds that the graphalog was not "property".
4.9      The lacunae have not been filled since the publication of Consultation Paper No 150. However, in many cases involving a misuse of trade secrets there will be more than one person involved, and if so the lacuna can be filled by charging conspiracy to defraud.
4.10      The second kind of benefit which cannot found a deception charge is land. This was specifically excluded from the definition of "property" in the Theft Act 1968.^[7] Hence in Attorney General's Reference (No 1 of 1985),^[8] the facts of which are set out at paragraph 3.39 above, the defendant's misuse use of his employer's premises could not have given rise to a deception charge, even if he had expressly lied to them in order to obtain access to their premises. However, had he been acting in agreement with another, the misuse of his employer's premises could have founded a charge of conspiracy to defraud.

Deception which causes a loss and obtains a directly corresponding gain, where the two are not the same property (other than a transfer of funds between bank accounts)

4.11      As we have discussed at paragraph 3.17 above, when money is transferred directly between accounts, the altered balances are directly correspondent to each other without being the same property in law. Therefore the credit balance is not property which "belongs to another", so it cannot form the basis of a charge of obtaining property by deception. Obtaining a money transfer by deception is now a separate offence,^[9] but there may be other examples of correspondent but non-identical property.
4.12      The financial markets also use accounts and clearing systems to transfer property. It is arguable, although by no means clear, that a person who obtains shares or Eurobonds through a fraud on these clearing systems may be able rely on the Preddy lacuna. In Consultation Paper No 155 we concluded that even if such an argument were ultimately to prove unsuccessful, the uncertainty surrounding these issues is undesirable in itself.^[10] A cautious prosecutor would, perhaps, charge such defendants with conspiracy to defraud, rather than a deception, in order to avoid the possibility of a Preddy argument.

Deception which causes a loss and obtains a gain where the two are neither the same property nor directly correspondent

4.13      In Consultation Paper No 155 we gave the following examples which involve losses which may only linked indirectly to a defendant's view to gain:

(1) D, V's business rival, starts a false rumour that A, V's best customer, is on the brink of insolvency. V hears the rumour, believes it, and withdraws A's credit. A takes his business elsewhere, and V's profits suffer.

(2) D starts a false rumour that B, V's chief supplier, is having production difficulties which will affect B's ability to meet orders. V hears the rumour, believes it, and places most of her orders with another and more expensive supplier. V's profits suffer.

(3) V is trying to sell her house. Her estate agent introduces a prospective buyer, C, whose requirements the house suits perfectly, and arranges for C to view it. Pretending to be an employee of the estate agent, D telephones V and tells her that C has cancelled his appointment. V therefore goes out for the day. C arrives as arranged, but gets no answer, and buys another house instead. V eventually sells her house for substantially less than C was willing to pay.

(4) D, a manufacturer, falsely claims that his products are superior to those of his rivals, who lose sales as a result.

4.14      In each case, D may be motivated by a desire to make money at V's expense, but if so, the relationship between V's loss and D's gain would be too remote to be encompassed within the existing deception offences. The loss and gain may be linked, but they will not be the same property, and are unlikely to be of corresponding value.
4.15      The Guinness fraud^[11] was an example of this kind of non-correspondent relationship between losses and gains. Guinness plc and Argyll Group plc were competing to take over Distillers Company plc. Both Guinness and Argyll made offers which were partly based on their own share price. To make the Guinness offer appear more valuable than the Argyll offer, the Guinness directors entered into a share support scheme. Third parties were paid or given indemnities against losses, in return for accruing Guinness shares. Guinness company funds were used to make these payments and back the indemnities. This practice inflated the share price by driving up demand and driving down supply. The Guinness share price rose dramatically during the course of the bid, and then fell once Guinness was confirmed as the successful bidder.
4.16      Guinness stood to gain from this fraud, because market experts took the view that Distillers was a "bargain". Its share price was not reflecting its underlying value as a company. The individual conspirators also made substantial personal gains in the form of "success fees", which were taken from Guinness company funds.
4.17      The victims were many: Argyll; Distillers; their shareholders; those who bought Guinness shares at falsely inflated prices; other companies who would have received more investment in their shares without the false enthusiasm for Guinness shares; and more indirectly still, all the individual and institutional investors whose investment portfolios were affected by news of the fraud. However, the losses were spread out, in some cases unquantifiable, and in any event, not correspondent to the defendants' gains. It may, perhaps, have been possible to argue that Argyll or Distillers or their shareholders were deceived by the fraud, but none of the existing deception charges would have been able to reflect the way that the gains and losses were caused.
4.18      At that time the Crown was not able to employ charges of conspiracy to defraud either. In 1984, the House of Lords case of Ayres^[12] imposed strict restrictions on the use of conspiracy to defraud. It was only available if the facts did not reveal a statutory conspiracy. This decision was reversed by statute,^[13] but events which took place before the statute came into force on 20 July 1987 had to be prosecuted in accordance with Ayres. The Guinness fraud took place in 1985 and 1986, so the Crown was obliged to put its case as a statutory conspiracy.
4.19      The defendants were charged with conspiring to mislead prospective investors, contrary to the Prevention of Fraud (Investments) Act 1958, s 13(1)(a)(i). Despite being a somewhat obscure offence, it was the only one which could represent the heart of the conspiracy: the defrauding of Argyll, Distillers, their shareholders and others. Charges of conspiracy to defraud would have been more resonant and more widely understood, and would no doubt be employed if similar events took place today.^[14]

Deception which does not obtain a gain, or cause a loss, but which prejudices another's financial interests

4.20      Wai Yu-Tsang^[15] was an appeal to the Privy Council from Hong Kong. The Defendant was the chief accountant of the Hang Lung Bank which suffered a loss of US$124m as the result of the unravelling of a "cheque kiting" cycle. The client of the bank, whose cheques to that amount were dishonoured, was Overseas Maritime Co Ltd SA ("OMC").
4.21      In theory, the cheque kiting cycle was to be wound up at a time when OMC had sufficient funds from other sources to be able to honour the last few cheques without extending the duration of the cycle by writing yet more cheques. Unfortunately, before OMC was in such a position there was a run on the bank. It had no money with which to cash fresh cheques from OMC. So OMC's income stream dried up at a time when it did not have sufficient funds from other sources to honour the last few cheques it had written. They totalled US$124 million. This meant that the bank had worthless cheques from OMC to that value, but it had effectively lost the money, the amount of which exceeded the assets of the bank at that time.
4.22      There was no suggestion that the defendant was involved in the cheque-kiting cycle, but it was alleged that he conspired with others to defraud the bank and its existing and potential shareholders, creditors and depositors by concealing the fact that the last few OMC cheques had been dishonoured. In breach of his duty to the relevant regulator, he did not report the dishonour of the cheques, nor did he record the dishonour in the bank's computerised ledgers. The details of the transactions were recorded only in private ledgers. These private ledgers hid the true state of affairs behind manufactured transactions.
4.23      The defendant did not dispute that he had set up the misleading private ledgers, but he argued that they were created for the purpose of preventing junior staff from hearing of the dishonoured cheques and precipitating a second run on the bank. He also argued that he believed that the manufactured transactions were actually bona fide. Ultimately, his defence was that he had not gained from the arrangement, and that he was acting in what he thought was the best interests of the bank and its potential shareholders, creditors and depositors.
4.24      Nonetheless, the judge directed the jury that imperilling the economic or proprietary interests of the shareholders, creditors and depositors was sufficient to constitute fraud, even if the defendant had no view to gain and no intent to cause loss. He was convicted. The defendant appealed on the basis that this direction was wrong, but he was unsuccessful. Citing Allsop,^[16] Lord Goff stated that

… it is enough for example that… the conspirators have dishonestly agreed to bring about a state of affairs which they realise will or may deceive the victim into so acting, or failing to act, that he will suffer economic loss or his economic interests will be put at risk.^[17]

4.25      The conviction for conspiracy to defraud stood, whereas a deception charge would not have succeeded without evidence that the defendant did more than merely put another's economic interests at risk.

Deception for a non-financial purpose

4.26      Conspiracy to defraud has not been confined to financial gains and losses. In Welham v DPP^[18] the defendant appealed his conviction on a forgery charge. Argument centred on the meaning of "defraud" within that context.
4.27      Welham was a sales manager of Motors (Brighton) Ltd. Originally he and others were charged with conspiring to defraud certain finance companies, through drawing up fictitious hire-purchase agreements, as a result of which the finance companies advanced money to Motors (Brighton) Ltd. His co-conspirators were convicted on these charges but he was acquitted. His defence, which was clearly accepted, centred on his intent to defraud. He said that he believed that the fictitious hire-purchase agreements were to protect the finance companies from their regulators, because they were not permitted to lend money directly. He therefore had no intent to defraud the finance companies, hence his acquittal on the conspiracy charge.
4.28      The trial judge, however, directed the jury that with regard to the forgery charge, it would be enough if the jury were to find that he had intended to defraud anyone, including the supposed regulators of the finance companies. He was therefore convicted on this count. On appeal, it was argued on his behalf that he did not intend to defraud the regulators, he merely intended to deceive them, because he had no intent to cause them economic loss.
4.29      With the agreement of the other members of the House, Lord Denning rejected this argument:

Put shortly, 'with intent to defraud' means 'with intent to practise a fraud' on someone or other. It need not be anyone in particular. Someone in general will suffice. If anyone may be prejudiced in any way by the fraud, that is enough.

At this point it becomes possible to point to the contrast in the statute between an 'intent to deceive' and an 'intent to defraud. ' 'To deceive' here conveys the element of deceit, which induces a state of mind, without the element of fraud, which induces a course of action or inaction… For instance, where a man fabricates a letter so as to puff himself up in the opinion of others. Bramwell B put the instance: 'If I were to produce a letter purporting to be from the Duke of Wellington inviting me to dine, and say, "See what a respectable person I am"': Reg v Moah.^[19] There would then be an intent to deceive but it would not be punishable at common law or under the statute, because then it would not be done with intent to defraud.^[20]

4.30      Welham thought that the hire-purchase agreements were intended to induce the supposed regulators not to take any action against the finance companies. Therefore he intended the deception to induce a course of inaction, so he intended to "defraud" them. In Wai Yu-Tsang, Lord Goff expressed approval for this approach:

[Welham] establishes that the expression 'intent to defraud' is not to be given a narrow meaning, involving an intention to cause economic loss to another. In broad terms, it means simply an intention to practise a fraud on another, or an intention to act to the prejudice of another man's right.^[21]

4.31      It is evident that none of the deception offences would have been available to cover a non-financial "defrauding" such as that in Welham.

Deception to gain a temporary benefit

4.32      As we argued in Consultation Paper No 155, temporary benefits and deprivations do not fall within the general policy of the Theft Acts.^[22] Theft, obtaining property by deception, obtaining more time to pay a debt, and making off without payment are all offences which require proof that the defendant intended to permanently deprive the victim of their entitlement.^[23] Conspiracy to defraud has no such requirement.

Deceptions which do not cause the obtaining of a benefit

4.33      As explained in paragraph 2.18 above, charges under the Theft Acts require the defendant's deception to be operative. This means that the defendant's false representation must first have caused the obtaining of the benefit, and second must have done so by inducing a mistaken belief in the deceived person.
4.34      Causation points of this nature have been made in many cases over the years. For example, in Roebuck^[24] the defendant offered a metal chain to a pawnbroker, and falsely claimed that it was silver. The pawnbroker did not take the defendant's word, and inspected the chain himself. He accepted the chain as security for a loan, but this was on the basis of his own examination. He had placed no reliance on the defendant's statement. The defendant's false representation neither induced a false belief in the pawnbroker, nor did it result in the obtaining of the benefit. Therefore the defendant could be guilty of an attempt, but could not be guilty of a completed offence.
4.35      Because conspiracy is inchoate, it can be charged even if the deception is non-operative. As soon as the conspirators agree to employ a fraudulent deception, the offence is complete. It is not, therefore, necessary to prove that the deception was operative. (However, to prove that a defendant conspired with intent to defraud, it will be necessary to show that he or she intended the fraudulent deception to be operative.)

Conduct involving a view to gain or an intent to cause loss, but not deception

4.36      On one view, there can be no fraud without deception:

To defraud is to deprive by deceit: it is by deceit to induce a man to act to his injury.^[25]

4.37      The House of Lords, however, has held that this definition of fraud is not exhaustive.^[26] The following are examples of frauds which do not necessarily involve deception:

(1) Making a secret gain or causing a loss by abusing a position of trust or fiduciary duty.

(2) Obtaining a service by giving false information to a machine.

(3) "Fixing" an event on which bets have been placed.

(4) Dishonestly failing to fulfil a contractual obligation.

(5) Dishonestly infringing another's legal right.

4.38      Conspiracy to defraud will often be the only charge available to prosecute these instances of fraud, although some are partly covered by other legislation, and others may not even be covered by conspiracy to defraud.

Making a secret gain or causing a loss by abusing a position of trust or fiduciary duty

4.39      Many cases of this kind can be prosecuted as thefts. The most common instances involve employees using their position to steal from their employers. Likewise, trustees of an express trust who appropriate trust property, or solicitors who appropriate client money, will usually commit theft.
4.40      There are, however, many instances where the dishonest conduct will not be covered by theft. At paragraph 3.39 above, we set out the facts of Attorney-General's Reference (No 1 of 1985).^[27] In that case it was held that there could be no theft of a secret profit made by an employee at his employer's expense, because the secret profit was not property "belonging to another". The Court of Appeal decided that the secret profit was not property belonging to another because (1) it was not held on a constructive trust for the employer; and (2) even if it were, the employer's equitable interest in the secret profit was not such that it could be described as "belonging" to him, within the meaning of s 5(1) of the Theft Act 1968:

Property shall be regarded as belonging to any person… having in it any proprietary right or interest…

4.41      This decision has been somewhat undermined by a Privy Council case, Attorney-General of Hong Kong v Reid and others.^[28] The defendant accepted a bribe as an incentive to breach his fiduciary duty, and it was held that although the bribe belonged to the defendant in law, in equity he held it on constructive trust for the person to whom the fiduciary duty was owed. In other words, D took a bribe from X to induce him to breach his fiduciary duty to V. The constructive trust arose immediately. D was the trustee, and V was the beneficiary. In law, the bribe belonged to D, but in equity, the bribe belonged to V as the beneficiary under the trust.
4.42      This reasoning suggests that a constructive trust does arise over secret profits: If D makes a secret profit in breach of his duty to V, a constructive trust should arise with D as trustee and V as beneficiary. On the other hand, a bribe could be distinguished from a secret profit. Reid was a public servant who owed his fiduciary duty to the Crown. If he had merely betrayed the trust of a private employer there may have been less grounds for a constructive trust to arise.
4.43      Furthermore, the alternative finding in Attorney-General's Reference (No 1 of 1985) applies even if a constructive trust does arise over secret profits. If the alternative finding is correct, V's rights as a beneficiary under a constructive trust are not a "proprietary interest", within the meaning of s 5(1) of the Theft Act 1968. Therefore the secret profit does not "belong" to V. It must be pointed out, however, that the alternative finding may not be correct. The Act makes it quite clear that trust property does "belong" to the beneficiary of an express trust.^[29] Moreover, a conviction for theft of property held on a constructive trust was upheld in Shadrokh-Cigari.^[30]
4.44      It may be that Attorney-General's Reference (No 1 of 1985) would survive an attack based on the reasoning in Reid. In any event, since no attack has yet been mounted, the decision stands: the Theft Act 1968 does not recognise secret profits as property belonging to anyone other than the profit-maker. Therefore, it cannot be stolen by the trustee.
4.45      This applies not only to employees making secret profits, and public servants taking bribes, but to any fiduciary or entrusted person who uses their position to make money on the side. For example, we set out the facts of Tarling (No 1) v Government of the Republic of Singapore^[31] and Adams (Grant)^[32] at paragraph 3.40 above. Both of these cases involved fiduciaries abusing their positions. It would also apply to the following situations:

(1) agents acting against their principals' interests (where bribery or corruption cannot be proved);

(2) solicitors or accountants breaching their professional rules on client accounts (where theft cannot be proved because there is no trust over the property in question); and

(3) employees who turn a profit from their position, for example accounts clerks passing money through their own high-yield accounts before sending it on to their employers' creditors.

4.46      For cases of this kind, conspiracy to defraud may be the only available charge.

Obtaining a service by giving false information to a machine

4.47      At paragraph 3.34 above we explained that providing false information to a machine does not amount to a deception offence, because machines cannot be "deceived".^[33] If the benefit obtained is a service rather than property, it cannot be stolen, so a lacuna appears. On the other hand, if there is evidence of a conspiracy, conspiracy to defraud could be employed to close the lacuna.

"Fixing" an event on which bets have been placed

4.48      This may be done, for example, by "doping" a horse, bribing a sportsman or loading dice. In most, but not all, instances it will be possible to charge the "fixer" under section 17 of the Gaming Act 1845:

Every person who shall, by any fraud or unlawful device or ill practice [(a)] in playing at or with cards, dice, tables, or other game, or [(b)] in bearing a part in the stakes, wages, or adventures, or [(c)] in betting on the sides or hands of them that do play, or [(d)] in wagering on the event of any game, sport, pastime, or exercise, win from any other person to himself, or any other or others, any sum of money or valuable thing, shall… be liable to imprisonment…

4.49      Anyone who loads dice, fixes roulette wheels, or cheats at cards can be prosecuted under the limb of the offence which we have designated (a). However, the crime is only committed if the fraud is practised during the playing of the game. A person does not commit the crime by practising a fraud in order to induce another to play a game.^[34] A "hustler" commits no offence if he convinces others to compete with him by pretending to be inexperienced. On the other hand, a group of hustlers could commit a conspiracy to defraud, if the jury were prepared to categorise their behaviour as dishonest.
4.50      Under the limb we have designated (d), the offence is committed by practising a fraud in order to induce another to enter into a wager,^[35] as well as by fixing the event which the wager is based upon.^[36] On the other hand, the wording of the provision suggests that those who fix an event but do not enter into a wager will not commit this crime: "Every person who shall, by any fraud… in wagering on the event…"
4.51      Thus if a contestant fixed an event in order to obtain the prize money, it seems it would not be an offence. For example, if a racehorse owner arranged to have the other horses drugged before a big race purely to obtain the prize, there would be no crime under this section. Again, such conduct could be caught by a charge of conspiracy to defraud, if there were evidence of a conspiracy.
4.52      We were unable to find any reported decisions on limbs (b) and (c) of the offence, perhaps because it is not clear what purpose they serve. Most fraudulent gambling possibilities seem to fall into the description of gaming in (a) or wagering in (d).

Dishonestly failing to fulfil a contractual obligation

4.53      Dishonest breach of a contractual obligation is not in itself an offence, though there will be a deception offence if the defendant intends to break the contract from the start. Even if the breach consists in a dishonest dealing with property, it will not be theft unless the property "belongs" to someone other than the defendant at the material time. For example, if P pays in advance for goods to be supplied by D, when the money changes hands it becomes D's money. If D then fails to provide the goods, the money still belongs to D, despite the fact that P has a right to sue D for damages or restitution. P cannot assert any direct claim over the money itself. The result is that, if D breaches the contract and "appropriates" the money, it may be impossible to show that the money "belongs" to P at the time of the appropriation.
4.54      In some such cases it may be possible to rely on section 5(3) of the Theft Act 1968, which provides:

Where a person receives property from or on account of another, and is under an obligation to the other to retain and deal with that property or its proceeds in a particular way, the property or proceeds shall be regarded (as against him) as belonging to the other.

4.55      In virtually every case falling within this provision, either section 5(1) or section 5(2) will also apply, so that the property will "belong to another" in any event. If the person to whom the obligation is owed has a proprietary interest in the property section 5(1) will apply; or, if the property is subject to a trust enforceable by that person, it will "belong" to that person under section 5(2).^[37] However, it seems that the CLRC intended section 5(3) to go further than the preceding sections.
4.56      Section 5(3) was considered, in Hall,^[38] where a travel agent was charged with stealing money paid by customers for tickets which never materialised. The Court of Appeal declined to construe section 5(3) as extending to every case in which one person transfers property to another for a particular purpose. It held that the contracts in question did not put the defendant under an "obligation" to retain and deal with the money "in a particular way". He was merely under an obligation to provide the tickets. The result of this ruling is that section 5(3) of the Theft Act 1968 does not apply to normal contracts for the sale of goods or services. A contractual obligation to provide goods or services is not to be equated with an obligation to deal with the purchase price in a particular way. It therefore remains unclear whether section 5(3) will apply in any circumstances other than those already encompassed by sections 5(1) and 5(2).
4.57      A similar issue came up in Clowes (No 2)^[39] This was an infamous case: over a period of years, the defendants persuaded customers to provide them with millions of pounds, by promising to invest it in gilts. In fact almost none of it was. The fraudsters were charged with numerous offences. Ultimately, two of them were convicted of a number of counts of theft. Legal argument at their appeal centred on whether the agreements which the victims signed were contracts, or trust documents. The wording was ambiguous. If the agreements created express trusts, the victims had a beneficial interest in the money provided for investment in gilts, and therefore it was property "belonging to another". On the other hand, if the agreements were merely contracts, and the victims had no legal or beneficial interest in the money once it changed hands, and no enforceable rights over it under any implied trust, it "belonged" to the defendants alone. (Interestingly, the court did not consider s 5(3) in any detail. Given the trust-like wording of the agreements, it seems that they may have imposed an "obligation" on the defendants to retain and use the victims' money solely to buy and sell gilts, even if they were in fact intended to be contracts. Therefore the property could have "belonged to another" according to s 5(3), even if it did pass under contract.)
4.58      In the end the Court of Appeal affirmed the trial judge's ruling that the money was held under trust. The theft convictions were therefore upheld. It is also worth noting that the prosecution could probably have chosen to press charges of obtaining by deception instead of theft.^[40] However, there are clearly cases where a dishonest breach of contract cannot be prosecuted as theft or deception, because the innocent party has no enforceable rights over the particular property appropriated. Hall was such a case. At present, however, such a case could be prosecuted as a conspiracy to defraud. (The Clowes defendants could have been prosecuted in this way, but for the fact that that the fraud largely took place during the Ayres period – see 4.18 above.)

Dishonestly infringing another's legal right

4.59      In Scott v Metropolitan Police Commissioner^[41] the conspirators "borrowed" films from cinemas. After making copies for illegal distribution, they returned the films. They could not be charged with theft of the films, since there was no intent permanently to deprive, but they were convicted under charges of conspiracy to defraud.
4.60      In the absence of conspiracy to defraud, the Scott defendants could have been prosecuted under what is now section 107 of the Copyright, Designs and Patents Act 1988.^[42] However, not all intellectual property rights have a specific offence relating to them.^[43] If, for example, a person dishonestly exploited someone else's patent, they would commit no offence unless there was evidence of a conspiracy. (It should be noted, however, that we are not aware of any case in which conspiracy to defraud has been used to fill this lacuna.)
4.61      There could also be other instances of legal rights and entitlements which, if dishonestly transgressed, could give rise to a charge of conspiracy to defraud. For example, there could be a conspiracy dishonestly to trespass on land, or a scheme dishonestly to secure longer periods for debt repayment.

Note 1    See para 3.6 above.    [Back]

Note 2    Which is caught by the new s 15A of the Theft Act 1968, inserted by the Theft (Amendment) Act 1996; as recommended in our money transfers report.    [Back]

Note 3    Oxford v Moss (1979) 68 Cr App R 183.    [Back]

Note 4    Paras 1.4 – 1.23. The offences were Copyright, Designs and Patents Act 1988, ss 107 and 198; Trade Marks Act 1994, s 92; Computer Misuse Act 1990, s 1; Data Protection Act 1984, s 5; Interception of Communications Act 1985, s 1; deception and corruption offences, which may be employable in very particular circumstances; and conspiracy to defraud.    [Back]

Note 5    Para 1.24.    [Back]

Note 6    The Times, 14 September 1983.    [Back]

Note 7    Theft Act 1968, s 4(2).    [Back]

Note 8    [1986] QB 491.    [Back]

Note 9    Theft Act 1968, s 15A. This offence was introduced by the Theft (Amendment) Act 1996, following the decision in Preddy [1996] AC 815, 831, and our money transfers report.    [Back]

Note 10    Paras 2.43 and 2.50.    [Back]

Note 11    The fraud resulted in a number of civil and criminal proceedings. The basic facts are set out in the judgment of the European Court of Human Rights: Saunders v UK (1997) 23 EHRR 313.    [Back]

Note 12    [1984] AC 447.    [Back]

Note 13    Criminal Law Act 1987, s 12(1).    [Back]

Note 14    The Crown also employed charges of theft and false accounting in respect of the “success fees” and illegal payments to share-purchasers. These charges identified Guinness itself as the victim, despite the fact that it stood to gain by the fraud. Perhaps it was this which gave rise to the notion that the Guinness fraud was a “victimless crime”.    [Back]

Note 15    [1992] 1 AC 269.    [Back]

Note 16    (1976) 64 Cr App R 29.    [Back]

Note 17    [1992] 1 AC 269, 280.    [Back]

Note 18    [1961] AC 103.    [Back]

Note 19    7 Cox CC 503, 504.    [Back]

Note 20    [1961] AC 103, 133.    [Back]

Note 21    [1992] 1 AC 269, 276.    [Back]

Note 22    See para 4.34.    [Back]

Note 23    On the other hand, there are offences under the Theft Acts which are deliberately intended to apply to temporary deprivations, for example, taking a conveyance without authority (contrary to s 12 Theft Act 1968).    [Back]

Note 24    (1856) D & B 24.    [Back]

Note 25    In re London Globe Finance Corporation Ltd [1903] 1 Ch 728, 732, per Buckley J.    [Back]

Note 26    Scott v Metropolitan Police Commissioner [1975] AC 819, 836, per Viscount Dilhorne.    [Back]

Note 27    [1986] QB 491.    [Back]

Note 28    [1994] 1 AC 324     [Back]

Note 29    Theft Act 1968, s 5(2).    [Back]

Note 30    [1988] Crim LR 465.    [Back]

Note 31    (1978) 70 Cr App R 77.    [Back]

Note 32    [1995] 1 WLR 52.    [Back]

Note 33    Other than by special deeming provisions in certain specific legislation. See, eg, Value Added Tax Act 1994, s 72(6); Forgery and Counterfeiting Act 1981, s 10(3).    [Back]

Note 34    R v Governor of Brixton Prison ex parte Sjoland and Metzler [1912] 3 KB 568.    [Back]

Note 35    Clucas [1949] 2 KB 226.     [Back]

Note 36    Fountain [1966] 1 WLR 212.    [Back]

Note 37    This is certainly true of the example given by the CLRC, viz the treasurer of a holiday fund: Eighth Report, p 127.    [Back]

Note 38    [1973] 1 QB 126.    [Back]

Note 39    [1994] 2 All ER 316.    [Back]

Note 40    The defendants invested almost none of their victims’ money in gilts, despite the fact that they clearly promised to under the agreements. This failure to comply with the agreements lasted for a period of four and half years. New agreements continued to be signed, and the money kept coming in. “Income” was paid to some victims, but this came from the money received from new victims. Instead of investing the money in gilts, the defendants simply spent it on luxuries for themselves: houses, farms, yachts, cars, antiques, a vineyard and company shares. The natural inference from these facts is that the defendants never intended to invest the money in gilts. It seems likely, therefore, that they obtained the “investments” by deception.    [Back]

Note 41    [1973] 1 QB 126.    [Back]

Note 42    Copyright Act 1956, s 21.    [Back]

Note 43    Trade mark infringements may be criminal under the Trade Marks Act 1994, s 92. There are no equivalent provisions for patents, registered designs or unregistered designs.    [Back]