Clause 4 — Fraud by abuse of position

Part of Orders of the Day – in the House of Commons at 1:45 pm on 26th October 2006.

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Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department 1:45 pm, 26th October 2006

One of the criteria recommended by the Law Commission for the application of clause 4 was whether a person

"occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person."

Amendment No. 1 would alter the wording of clause 4 to refer to a person who "by reason of position" is expected to safeguard, or not to act against, the financial interests of another person. In our view, such a change would introduce an undesirable lack of clarity into the clause. The phrase "by reason of position" is not only inelegant but is less clear than the criterion of whether a person "occupies a position". I am not sure that there is a great deal of elegance in that phrase, either, but it is clearer.

I understand that the amendment's intention is to catch cases where the defendant no longer occupies the position in question, but it does not clearly express that intention. There is no policy problem here. A defendant will not escape prosecution for fraud by abuse of position, committed while he occupied the position in question, just because he no longer occupies the position at the time of his arrest or trial. It is true that he will not be prosecutable under clause 4 if he manages to abuse the position after he ceases to occupy it, but in any event, there are limits to how he could do that.

I accept that information obtained during the course of employment could be valuable, but, as I made clear in Committee, we expect breaches of confidentiality to be a matter of civil law. That will certainly be the case once the employee ceases to occupy his position, which must be right.

Clause 4 is designed to tackle financial crime. If a person no longer occupies a position where he is expected to safeguard another person's financial interests, how can he commit such fraud under the clause? He would probably need to commit another type of fraud—perhaps under clause 2—to access or exert influence over the person's financial interests. If he still has de facto access or influence, he surely "occupies" a position. That is one advantage of the way in which the clause is drafted in not being limited to those who have fiduciary duties.

Amendment No. 2 brings us back to our interesting discussions in Committee. Again, the Law Commission expressed a view. It said that although a fiduciary relationship was important,

"We see no reason, however, why the existence of such duties should be essential. This does not of course mean that it would be entirely a matter for the fact-finders whether the necessary relationship exists. The question whether the particular facts alleged can properly be described as giving rise to that relationship will be an issue capable of being ruled upon by the judge and, if the case goes to the jury, of being the subject of directions."

Amendment No. 2 would provide that clause 4 applies only if one person has a fiduciary duty to safeguard the interests of another. We are concerned that in some cases it might be difficult for prosecutors to prove the existence of that duty. While in most cases the clause will apply to circumstances where a duty clearly exists, there will be some cases where a formal fiduciary duty does not exist. These will arise particularly in personal and family relationships.

The great majority of those who responded to our consultations in 2004 supported clause 4, and some made comments that are pertinent to this debate. The Institute of Legacy Management, in welcoming clause 4, referred to the need to tackle the increasing financial abuse of the elderly. It told us that

"charities have noticed an alarming rise in estates where the testator's funds had been misappropriated prior to death".

It cited as a typical example the case of a tradesman—perhaps a milkman—who, having helped an old lady with odd jobs, gains increasing influence with her and misappropriates funds from her account.

The north of England trading standards group said that in most cases where vulnerable elderly people were deprived of property unlawfully, the perpetrators were relatives or workers who were supposed to be supporting the victim's independent lifestyle. Many elderly people are looked after by helpers who do not have formal powers of attorney but take various degrees of responsibility for their finances. Sometimes it is not entirely clear where the fiduciary relationship begins and ends. Very few people abuse their position, but it would not be right to create a technical defence whereby those who had done so did not fall within the full ambit of a definition of a fiduciary relationship and used technical means to evade the appropriate response of the courts and the criminal justice system. One of the aims of the Bill is to remove some of the technical get-outs and defences that have been used under the Theft Acts and other previous legislation.

I can see no problem in fact-finders determining when one person occupies a position in which he is expected to safeguard the interests of another. Furthermore, in most cases the crucial issue will not be the relationship between the defendant and the victim but whether the defendant's actions were dishonest. It seems sensible and desirable to leave the wording of clause 4 as it is, and I hope the hon. Gentleman will feel able to withdraw his amendment.