Clause 5
Fraud Bill [Lords]
12:30 pm
Geoffrey Cox (Torridge and West Devon, Conservative)
I understand the Solicitor-General, but it has long seemed to me that there is a serious terminological inexactitude used when talking about the risk of loss. Fraud law discusses risk of loss—the loss of the chance that one might get something, or the remote prospect when betting on a horse that it might come home—but if one examines the case law behind it, one finds that when it talks about exposure to the risk of loss, it always means that a director or somebody in a fiduciary position has taken a risk with a specific, identifiable and tangible asset.
Let me give the Committee a classic example. A director takes money from the company that he is director of, invests it in the overnight market in Tokyo but returns it to the company bank account the following morning. He says that he had no intention of causing loss, because he was going to return the money and he wanted to make a profit for the company whose money it was He was just going to cream off part of the profit that was made over the 24-hour period. The danger is that in moving it in that 24 hours and putting it on the market in Tokyo he exposed that sum of money—that identified asset—to loss. That is the meaning that the law of fraud attributes to the phrase “risk of loss”.
I fully accept that there has been a confusion for many years, but clause 5 adopts the loss of a chance as being sufficient. It will be enough if the betting ticket is not submitted and the horse comes home first or third. That is so remote in terms of causation—there is such a lack of proximity between the act done and the potential loss—that there is a real risk that people will be indicted for forms of losses of a chance or risk that are remote. That is a genuine concern and we must not get foxed in respect of the idea of the risk of loss; it really means exposing something to a risk that depreciates its value.
Let me give the Solicitor-General another example. Often the case law on risk of loss refers to a deception in a mortgage case. The mortgage company will have advanced a loan based on a detail that is false; someone will have exaggerated their net worth or some such thing. That loan is an asset and it is less valuable because, on any credit analysis of it, it is a less secure loan. Thus, the risk of loss that is created by the deception—someone has failed to produce honest details about their net worth—impacts on the value of the asset. If the truth were known, its value as an asset would be less than it would otherwise have been. That is the context in which the law refers to risk of loss.
The danger of this phraseology is simply that one can expose somebody to the chance that he might, if happenstance had happened in a particular way, have gained something. That is very vague and has an attendant danger. I invite the Minister at least to reflect on that.