Clause 4

Fraud Bill [Lords] – in a Public Bill Committee at 11:00 am on 20th June 2006.

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Fraud by abuse of position

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I beg to move amendment No. 2, in clause 4, page 2, line 22, leave out ‘expected' and insert ‘under a fiduciary duty'.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss amendment No. 7, in clause 4, page 2, line 24, leave out ‘is expected' and insert ‘has a duty'.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

As I indicated to the Solicitor-General earlier, the clause has caused me and, I suspect, some of my hon. Friends and others in the House, a little more trouble than previous clauses. I should make it clear to the hon. and learned Gentleman that the problem does not lie in the principle behind the clause: it is generally agreed that if a person is in a position of trust he owes a duty to the person who has entrusted his or her affairs to him not to abuse that position. That includes not abusing the position

“to make a gain for himself or another, cause loss to another or to expose another to a risk of loss.”

That is a well established principle. Barristers, solicitors, accountants know well the underlying principles behind it, and if people have been abused, civil remedies lie against those who have abused their position in that way. Translating that into the criminal law is, on the face of it, perfectly reasonable.

The greater problem comes in defining who is in a position in which he is

“expected to safeguard, or not to act against, the financial interests of another person”.

Who are we talking about? Historically, we have, I think, been talking about people who, in the old-fashioned parlance—that is the nature of the amendment that I tabled—are “under a fiduciary duty” to another person to act in their best interests. The Government have chosen—the Solicitor-General made that clear on Second Reading—quite deliberately to move away from that description to one that, on the face of it, is much looser. Such a person is defined as one who

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

Who is to make the judgment on who occupies a position in which they are

“expected to safeguard, or not to act against, the financial interests of another person”?

The law should, as far as is possible, contain a degree of certainty. The way in which clause 4 is worded gives me cause for concern, because it is by no means clear to me who is the person referred to in clause 4(1)(a). If it is an accountant or a solicitor, it presents no problem. I suppose that if we were to move and say somebody who has been entrusted with the affairs of a near relative by a power of attorney or a continuing power of attorney, we would not think there was any difficulty, either. But what happens in those myriad informal relationships that arise and on which human relations depend? Where is the dividing line to be drawn in respect of a person occupying a position in which he is expected to safeguard another’s interests?

There is no list. It is not as if Parliament is being asked to be prescriptive. There is an underlying suggestion that the definition will be left to develop on a case-by-case basis and will gradually be evolved over time by the courts and, presumably, by juries in their verdicts and by judges on submissions. I am slightly anxious about that. It ought to be possible for us to define things more tightly.

My amendment would insert the notion of fiduciary duty, which is well understood, but I should like to make it clear to the Solicitor-General that it is in the nature a probing amendment to provoke debate. I appreciate that there may be other ways to approach the matter.

Photo of Ian Lucas Ian Lucas PPS (Bill Rammell, Minister of State), Department for Education and Skills

Of course the hon. Gentleman understands the concept of fiduciary duty, and I hope that I, as a solicitor, understand it, but is not the point that most of the general population would not understand the phrase “a fiduciary duty” and what it means?

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

That is true, although I should have thought that a judge would be capable of explaining to a jury what a fiduciary duty is. In the course of a criminal trial, if a fiduciary duty appears in the relevant statute, the judge ought to be in a position to explain that to the jury. Furthermore, a judge would also be in a position to rule, on a submission of no case to answer, whether the prosecution had laid the basis of whether a fiduciary duty existed.

The difficulty of the present wording of the clause is that, other than leaving the matter to a judge on a ruling of no case to answer, the case is pretty much open to the jury. The old saying, when I was first at the Bar, was that perhaps we should get rid of all forms of criminal code and simply present facts to a jury, which would be allowed to say on its verdict “in order”, “out of order” or “totally out of order.” There is a sense that that is what we are doing with the clause: a set of facts is put to a jury and it is asked, “Is it in order, out of order or totally out of order,” and on that depends guilt or innocence. That worries me.

As I said earlier to the Solicitor-General, hopefully the criminal code is in accordance with moral principles. However, many people are allowed to behave in an immoral fashion and still not face criminal sanction. The wording of the clause leaves a grey area. Let me give an example, which has just come into my head, of the sorts of problems that might arise.

Earlier, I mentioned buying and selling. A person is helping his aged aunt with her affairs, in the course of which she gives him access to all her private papers. From those, he discovers that a bust sold out of the family 20 years before in a house sale was made by Bernini. Nobody knew about that at the time, but it is clear in the family papers to which he has been given a degree of access by his aunt. That bust is now for sale in the antique shop down the road, so he zooms down there; nobody knows that it is a Bernini bust and he buys it at a vastly discounted rate—it is the bargain of a lifetime. He does not tell his aunt; he just takes it home and puts it in his house.

Did that person abuse his position? After all, his aunt allowed him access to her papers. He took advantage of the information that he gleaned from those papers and made use of it for his own benefit. Hon. Members must understand that the aunt was not ga-ga; she just asked him to help her. To what extent would he be caught by clause 4? One might consider what he did to be morally reprehensible, but was it a crime?

I have picked one example; we could pick dozens of others. Mine illustrates my slight anxiety that we might be casting our net too wide on the waters, the consequence of which is to create uncertainty. Of course, Parliament might wish to modify the behaviour of human beings, which is not necessarily an undesirable objective, but we must be careful about making sure that the scope of the criminal law in such an area is properly restricted. Otherwise, as always happens, we encounter the law of unintended consequences.

I have given an illustration, and I hope that the Solicitor-General will discuss the issues that it raises so that the matter can be explored further. It is one thing for somebody to be entrusted formally with something, but are we really going to say that taking advantage of information gleaned in the course of a relationship of friendship, without any formalised trust being involved, is a criminal act and that we wish it to fall within the scope of clause 4? That is the difficult dividing line about which we must think.

I emphasise to the Solicitor-General that I have not reached a conclusion on the subject; I am feeling my way. I suspect that the Bill, having gone through the other place, will probably go on to the statute book in its present form. However, I hope that we can reflect on the serious and difficult issues that I have raised through my amendment before we simply rubber-stamp clause 4.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I support amendment No. 2, but I shall speak to amendment No. 7, which is on similar lines.

I concur with the hon. Member for Beaconsfield (Mr. Grieve). I do not think that, in its present form, the clause is likely to cause a massive injustice, but I have a nagging feeling that it is sufficiently loosely worded to allow for ambiguity. I draw attention again to the fact that the wording in clause 3 is precise. It mentions

“a legal duty to disclose”,

whereas clause 4 uses less precise language, referring to

“a position in which he is expected to safeguard” another’s interests. That opens up questions, which I expressed on Second Reading, about who is doing the expecting. Is it to be the judge, the jury or the person who has a form of relationship with the person indicted? Is the view of the man on the Clapham omnibus to be taken on what constitutes a reasonable expectation?

When we intervened on the Solicitor-General on Second Reading, he was anxious to put our minds at rest, but he came close to saying that the phrase “is expected to safeguard” comes close to “what he is under a fiduciary duty to do”. I do not think I am putting words in the Solicitor-General’s mouth by saying that, in his view, there was little difference between an expectation and what formed a duty. He was also at pains to say that, at the end of the day, the courts must decide the matter and that the prosecution has the responsibility of establishing that relationship and that expectation—or, as I prefer it, that duty.

I still do not understand what advantage there is in framing the offence as the Solicitor-General has in the Bill. What circumstances that do not fall within “duty”, but do fall within “expectation” does he expect to catch? I have read carefully at what the Solicitor-General said, which is why I framed my amendment in a perhaps more lax way than it would have been framed had I used the precise term “fiduciary duty”. On Second Reading, the Solicitor-General said

“Of course, the duty may well go beyond a mere fiduciary one; other duties could be encompassed. We can deal with such detail in Committee.”—[Official Report, 12 June 2006; Vol. 447, c. 537.]

Well, here we are and we are now expecting to deal with that detail.

What I really need from the Solicitor-General is some illustrations what duties might be encompassed. Because I have an expectation and he has a duty to provide such illustrations to the Committee, that is why I have used the phrase “has a duty” in my amendment, so that it could encompass other duties that the Solicitor-General brings forward for our consideration.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 11:15 am, 20th June 2006

I understood that that was what the hon. Gentleman was trying to achieve in proposing the mere word “duty”. Of course, the problem with the mere word “duty” is that, unless the sort of duties one is talking about are defined, it is capable of being as loose as an “expectation”, because what one person regards as a duty another person might not. We shall still have the same problem unless we produce a comprehensive list of expectations or duties.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

That is probably true. My expectation is that the Solicitor-General will perform his duty in giving us that list in Committee so that the courts have something to work on. That is a firm expectation and one that I expect to see met in a few moments.

I support the purpose of the clause. I do not want it not to work. There must be a reason behind using that loose and ambiguous term without stating a clear view on in whose mind the expectation has formed that there is some requirement for one individual to safeguard another’s financial interests. If it cannot reasonably be argued that the person who is accused of fraud under the clause should be aware of that expectation, it seems that we have a slightly dangerous instrument before us. If there is a legal duty, a fiduciary duty, it is reasonable to assume that the person should know that they are in that relationship and they should be aware of that in legal terms. However, the present wording of the clause falls short of that. There are circumstances in which a jury, judge or court might form the view that there was an expectation but there is no reason to suppose that the person who committed the act was, or could be, aware of that expectation because they had not entered into any form of contractual or professional relationship that implied that expectation. That is my concern and that is what I hope that the Minister will be able to satisfy us on when he replies to the debate.

Photo of Geoffrey Cox Geoffrey Cox Conservative, Torridge and West Devon

I should declare an interest in that I have been a practising lawyer, particularly in the field of fraud, for well over 20 years. I appeared in the case of Regina v. Preddy, to which I believe the Minister referred, in which some of the shortcomings of the Theft Act were illuminated by the House of Lords in 1996. I also appeared recently in a case of some notoriety that collapsed after two years called the Jubilee line extension fraud. I therefore have some considerable experience in the field of the practice of fraud in the criminal courts.

I have to say that although I usually appear on the defence side I often wonder, sometimes aloud and sometimes silently, at the difficulties—the mire—into which prosecutions appear to get themselves when they are confronted with prosecuting major frauds. I have no doubt that the offence in the clause will make it  easier for the prosecution to bring their case and to explain it to a jury, which is why I broadly support it. However, I believe that particularity and precision are vital components of the criminal law and that when the ambit of the criminal offence is broadened and relaxed, one runs into a fundamental problem whereby, as my hon. Friend the Member for Beaconsfield said, forms of conduct are criminalised which, on reflection, no responsible legislature would wish to criminalise. Clause 4 crystallises that concern.

I invite Government Members to consider the position of employees, which may be of substantial concern to them. There is no doubt that, whatever the nature of the employment, an employee is bound by implied, if not expressed, terms of the contract, to a duty of confidentiality. There are certain necessary responsibilities that go with any contract of employment, whether one works in the humblest capacity in the mailroom or at directorial level. On closer examination, it becomes apparent that the clause may become a stick with which to beat employees whom the employers regard as having breached their terms of confidentiality or otherwise breached their expectations.

I will give one example. The employee who, in the hope of a job with a rival firm or company, decides in the pub to let a rival window cleaning firm know that his firm is seeking to extend its business in another part of the geographical area in which they live. On the face of it, that situation would be covered by the offence in the clause—it would be fraud. There would be an expectation on the part of the employer that the employee would not disclose even relatively dilute and unimportant detail of the future plans of his employer.

The employee would have acted in the hope that perhaps one day—particularly if he anticipated that in the shake-up of the company’s organisation, he might be made redundant—he might gain a job with the rival employer at some future date. However, I respectfully submit that it would be hard to contend that that employee ought to be found guilty of the crime of fraud set out in clauses 1 and 4, even though he occupied a position in which he was expected by his employer not to act against the financial interests of another person—his employer.

If an employee disclosed details, even fairly minor and minimal details such as, “I know that a window-cleaning firm is going to expand in Bideford,” that disclosure could be interpreted by a jury as being contrary to the financial interests of the employer. However, the provision would expose thousands of employees the length and breadth of this country to the risk of a complaint of fraud being made to the police by their employers, and given that the offence is so broadly defined, the employees would potentially face conviction.

Photo of Greg Hands Greg Hands Conservative, Hammersmith and Fulham

Does my hon. Friend agree that that may become a particular problem in the City of London where such discussions happen all the time between employees, current employers and future employers? Might not the measure imperil London’s position as the No. 1 financial centre in Europe?

Photo of Geoffrey Cox Geoffrey Cox Conservative, Torridge and West Devon

I did not want to draw in such vulgar realms as the City of London. I wanted to bring it  down to the level of the ordinary person’s experience. I am genuinely concerned about this clause. There is a real problem with it. What on earth does “occupies a position” mean? The Minister says that the clause and the Bill in general are designed to remove from defence advocates the rich harvest of opportunity to argue over the terms and definitions of criminal offences, but I have to tell him that I can see a very broad realm for my colleagues at the Bar to explore. They may ask questions such as: what is “a position”? It seems to have some kind of formal connotation. Does it mean a position of employment, a position of trust, or simply a type of position in some informal relationship, as my hon. Friend the Member for Beaconsfield said?

The clause refers to a person being “expected to safeguard”, but expected by whom? By the employer, in the case that I just suggested? The clause continues:

“or not to act against, the financial interests”.

Does that mean the immediate financial interests, or would it be a defence to say, “Well, it may not have been in his short-term financial interests, but in the long term, what I did was definitely in the interests of my employer, for the following reasons”? We will have endless debates in the courts of law on whether something was in the financial interests of the person who is said to be the victim, because, as my hon. Friend the Member for Hammersmith and Fulham (Mr. Hands) pointed out, we are not always looking at auntie and nephew; we are often looking at vast multinational organisations, where it is not easy to judge whether a particular act by a director or employee may have jeopardised those financial interests. The argument may well be advanced: “I did it in the best interests of the firm.” Thus the court will become bogged down in examining the economic status of the entire company or economic enterprise concerned when trying to decide whether an action was in its financial interests.

The Committee may regard my argument with a degree of scepticism, but let me assure hon. Members that that is precisely what will happen. It is precisely what happened in the Jubilee line case to which I referred. The charge in that case was conspiracy to defraud, but it was at the ultimate frontier of what had in the past been considered conspiracy to defraud. The passing of very low-level commercial intelligence—similar to the information that I mentioned on whether a window cleaning firm should extend its activities into the town of Bideford—was regarded as a conspiracy to defraud. The question was bound to arise whether it could be proven that passing that intelligence had a damaging effect on London Underground’s financial interests.

I submit that that is a question that the Committee ought to consider with extreme care. Any precision that we can bring to the clause, particularly along the lines suggested in the amendment proposed by my hon. Friends, would have something to commend it. The amendment would insert “a fiduciary duty”, rather than leaving the offence to rely on an expectation. We would like more precision. Let me explain the reasons why. To go back to my employment law example, not every employee is in a fiduciary relationship with his employer. A fiduciary relationship is a precise legal term; the law defines it well, and it applies in a range of relationships. The law understands it, and it is not difficult to interpret to a jury. Inserting that phrase  would remove the great mass of employees from the risk of prosecution for what the employer regards as an abuse of the employee’s position.

I urge the Committee to consider extremely carefully whether the amendment should be made. It would further define the offence and make it more precise. It would assist, because there would be no question of the ordinary employee being caught by the offence, whereas under the current drafting there is a real risk that we will get bogged down. I assure the Minister, although I am sure that he does not need assuring, of the ingenuity of defence advocates, who will find much to be pleased by in the Bill. However, by the insertion of the phrase proposed by my hon. Friends, some greater precision could be brought and some of those arguments will be avoided.

Photo of Jeremy Wright Jeremy Wright Conservative, Rugby and Kenilworth 11:30 am, 20th June 2006

Mr. Amess, may I also welcome you to the Chair this morning? It is a delight to follow my hon. Friend the Member for Torridge and West Devon (Mr. Cox), although I suspect a disadvantage, but I will do my best. I want to make a couple of points about the clause and to support amendment No. 2.

It seems that there are two difficulties with the use of the phrase “expected to” in relation to the position that the clause describes. We must be clear—other hon. Members have already made reference to it—who has the expectation and how realistic that should be.

Not every expectation is realistic or reasonable. As Members of Parliament, we know that. The Solicitor-General, as a Minister, knows that. The public sometimes have expectations of their Government, which he may regard as unrealistic or unreasonable. If that word is to be used, we must be clear about how realistic or reasonable any expectation should be.

There is another difficulty. The hon. Member for Wrexham (Ian Lucas) indicated that the advantage of language such as “expected to” is that the public will readily understand it, whereas “a fiduciary duty” is something that must be interpreted by lawyers. We must look at paragraph 7.38 of the Law Commission’s report, which is reported in paragraph 20 of the explanatory notes. I accept, incidentally, that the Law Commission says that it does not believe that fiduciary duties should be the limitation of the clause. However, it goes on to say:

“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.”

It seems clear that, in the Law Commission’s view, lawyers would have to be involved in the definition of “expected to” in respect of the relationship that it describes. If that is so, the legislation does not provide the clarity for which the hon. Member for Wrexham is looking. It ought to be this Committee’s task to give as much clarity to the law as we can at this stage and to save the courts the job of doing so at a later date.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I was much taken with the question posed by the hon. Member for Somerton and Frome, as to whether a Minister is in a fiduciary relationship in dealing with questions in Committee. It  is debatable, in that my duty is to the Crown as a Minister and secondarily, probably, to Parliament as a whole. Am I in a fiduciary relationship with the hon. Gentleman? Those questions are perhaps academic.

It is important that we are clear about what the law says. The law has to cope with a vast array of different circumstances which arise from time to time. The danger that we have seen with the 1968 and 1978 Acts is precisely the problem that the hon. Member for Torridge and West Devon appeared to be anxious to repeat here. He said that particularity is vital. However, the Law Commission defines the problem with the law on deception as over-particularisation of the definitions that are imposed. The world has moved on—there have been technological developments and changes in the way in which our society behaves. The legislation was not able to cope with that because it was over-particular. We need to avoid that. Those amendments aim to reduce the scope of clause 4. They would go against the recommendations of the Law Commission, which have already been mentioned by the hon. Member for Rugby and Kenilworth (Jeremy Wright).

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

Let me make the point and then I will give way to the hon. Gentleman. Let us look at the whole paragraph. The hon. Gentleman quite fairly looked at the final part of that paragraph. The hon. Member for Somerton and Frome asked, “So who is he and where does the relationship arise?” The hon. Member for Beaconsfield asked “Is it all in order?” It is more than that. It is also more than a mere fiduciary relationship.

The Law Commission states:

“The necessary relationship will be present between trustee and beneficiary, director and company, professional person and client, agent and principal, employee and employer, or between partners. It may arise otherwise, for example within a family, or in the context of voluntary work, or in any context where the parties are not at arm’s length. In nearly all cases where it arises, it will be recognised by the civil law as importing fiduciary duties, and any relationship that is so recognised will suffice. 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.”

The Conservative amendment seeks to provide that clause 4 will apply only if a person has a fiduciary relationship to safeguard the interests of another. The Liberal Democrat amendment refers only to a duty. By that I assume that it means some kind of legal duty, which may or may not go wider than a fiduciary duty. I assume from how the hon. Member for Somerton and Frome put it that he was referring merely to a fiduciary duty.

My concern is that the criticism made of the Government—that the measures will lead to legal wrangling—is the very issue that might arise if the amendments were accepted. Lawyers would have the opportunity for a lot of discussion about precisely where a fiduciary relationship arises. We should remind ourselves—

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

Let me first quote Lord Justice Millet, because what he said about fiduciary relationships is important:

“He is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”

The duties create the nature of the relationship; the relationship is not of itself the cause of the fiduciary duties.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I shall give way to the hon. Member for Torridge and West Devon first and then to the hon. Gentleman, but I want to develop my argument.

Photo of Geoffrey Cox Geoffrey Cox Conservative, Torridge and West Devon

Will the Solicitor-General incorporate into the development of his argument his understanding that the concept of fiduciary duty is flexible in law? The categories of fiduciary duty are not closed. At its heart is the concept of trust. The law will extend fiduciary duties where it recognises the hallmarks and characteristics of a relationship based fundamentally on trust, specifically trust relating to the management of property and finance.

The amendment would give greater soundness and solidity to the question of what relationship the accused party should have, and would exclude—I ask the Solicitor-General to incorporate this question into his argument—employees who would otherwise be faced with exposure to abuse. The concept is flexible. I am sure that he understands that.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

The concept of a fiduciary was set out in 1996 by Lord Justice Millet in the Court of Appeal, in Bristol West building society v. Mothew. He said:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances that give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty”— that phrase is important—

“of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not put himself in a position where his duty and interest may conflict; he may not act for his own benefit or that of third person without the informed consent of his principal”.

He goes on to make the point that I referred to earlier:

“He is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”

The obligations may not be present in a range of informal personal relationships and it would be difficult for the prosecution to prove the existence of fiduciary relationships in certain informal circumstances, even though it would be clear to the man on the Clapham omnibus or the man in the street—however the hon. Gentleman wants to describe it—that one person occupied a position in which he was expected to safeguard the interests of another. We do not want to get ourselves into a situation where a complex legal argument about  the nature of a fiduciary relationship and whether it exists is the subject of the case, rather than the court and jury looking at the relationship as a whole and taking a view as to whether those circumstances produced a relationship where there is a legitimate and proper expectation that there was a duty owed and someone was expected to safeguard or not to act against the financial interests of another person, and that position was dishonestly abused.

I will take interventions from the hon. Members for Rugby and Kenilworth and for Beaconsfield, but I still have to develop the argument and it might be easier if they waited until then before they intervened. However, I will happily give way.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I shall try not to intervene too much, but we are having a good dialogue. What I found rather odd was that the Solicitor-General developed the argument about fiduciary duties and read out Lord Justice Millet’s judgment, but in fact that precisely encapsulated the sort of behaviour and person we wanted to cover. The hon. and learned Gentleman emphasised that fiduciary relationships are not fixed and that the category can be expanded, but that again provides me with greater reassurance that that is the correct definition.

The problem is that once we start moving into such informal relationships we get into an area where things become indefinable. I gave an example earlier. I would be interested how the Solicitor-General would respond to the young man who takes advantage of his aunt’s benevolence but does not owe or is not specifically being asked to safeguard her financial affairs, even though he takes advantage of the trust she places in him to get a financial advantage for himself. Is that intended to be covered by the legislation?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I disagree with the hon. Gentleman only to some extent. In my view, a fiduciary relationship includes those relationships that we wish to see part of the clause, but does not encapsulate—to use his word—the whole of the nature of those relationships. I will come to the auntie and employees in a moment, if I can.

Photo of Jeremy Wright Jeremy Wright Conservative, Rugby and Kenilworth

I rise to reinforce the point of my hon. Friend the Member for Beaconsfield. From the Solicitor-General reading out that definition, it already seems clear that the inherent advantage of the amendment is that we can clearly define a fiduciary duty. As far as I am aware, there is no comparable definition of a person who is expected to safeguard the interests of another.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

If the hon. Gentlemen had waited, they would have seen how the argument has developed and why it has developed as a result of the consultation. It would be difficult in some circumstances for prosecutors to argue that a particular relationship, which members of the public may well see as a relationship where someone is expected to safeguard the interests of another, was necessarily a fiduciary relationship. While in most cases the measure would apply to circumstances where a duty clearly exists, there would be some cases where a formal legal  duty may not exist. Those cases will arise particularly in personal and family relationships. The great majority of those who responded to the consultations in 2004 supported clause 4 and some made comments that were pertinent to the debate. For example, in welcoming clause 4, the Institute of Legacy Management referred to the need to tackle the financial abuse of the elderly, an issue that was increasingly causing it concern. It said that

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

It cited the case of a tradesman who, having helped an old lady with odd jobs, gained increasing influence over her and misappropriated funds from her account.

The North of England trading standards group also said that, in most cases when vulnerable elderly people were deprived of property unlawfully, the perpetrators were either relatives or workers who were supposed to be supporting the victims’ independent lifestyle. Many elderly people are looked after by helpers who do not have formal power of attorney, but take various degrees of responsibility for their finances. Few abuse their position, but it would not be right that those who do so should escape prosecution for fraud just because they have no full legal or fiduciary duty to that elderly person or because the Crown Prosecution Service has a difficulty proving that fiduciary duty beyond reasonable doubt.

We see no problem in a jury determining when one person is in a position 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, in its sum, dishonest.

A number of questions and examples have been put to me. As for the auntie and the nephew to whom the hon. Member for Beaconsfield referred, that depends on the nature of the relationship and what has been taken. If, of course, the nephew had stolen a bust there would be no doubt about what had happened. However, difficult cases always make for an interesting analysis. On the face of it, the particular item was no longer in the aunt’s possession. She had dispensed with it. He obtained information about its value, so he decided to buy it. If there were a relationship in which he was supposed to be looking after her interests in a particular way, that relationship might produce a expectation, but it does not seem on the face of it that that is likely to happen if it were merely the case that he happens to come across the information, purchases the bust and makes some money on it. That is just a receipt of information that results in his becoming slightly wealthier. It may be immoral; perhaps he should have shared it, but I do not think that it would be unlawful unless the relationship was a more particular relationship than the one that he described.

Paragraphs 21 to 23 of the notes on clauses cite several examples involving employees. One is about

“an employee who fails to take up the chance of a crucial contract in order that an associate or rival company can take it up instead at the expense of the employer, commits an offence under this clause.”

Another example concerns an

“employee of a software company who uses his position to clone software products with the intention of selling the products on would commit an offence under this clause.”

The notes also refer to an example

“where a person who is employed to care for an elderly or disabled person has access to that person’s bank account and abuses his position by removing funds for his own personal use.”

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 11:45 am, 20th June 2006

It is impossible to understand why that last example, from paragraph 23, was included, because the person would simply have committed theft. That highlights my anxiety that this will turn into the catch-all provision to get round the need to charge other perfectly clear offences. It is not needed in the context that is claimed in the explanatory notes.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

It may be theft, but the individual may also have the right to remove items from the account and only later take them for his personal use. Whether that were so would depend on the precise circumstances that might arise.

The hon. Member for Torridge and West Devon gave an example of an employee disclosing commercial information to another potential employer. The question arises about whether that employee is acting dishonestly. The prosecution would have to prove that there was a particular relationship, that the information was the subject of that relationship, that the employee ought to have known that and that the employee acted dishonestly to better himself. I was surprised by the intervention by the hon. Member for Hammersmith and Fulham, who took the view that that would virtually bring down the whole City and the clause would bring the financial set-up in the UK crashing down around us. I do not think that it will do so.

The clause says that a relationship, which can and in most cases will be fiduciary, may sometimes—as we have seen from our consultation—go beyond a fiduciary relationship and may involve a relationship where there is a legitimate expectation on the part of a potential victim that the person who has access to their money, or whatever, should not behave in a way that abuses that position. That may go beyond a fiduciary relationship. I do not want to end up with the problem of the over-particularisation of a clause, from which we are trying to extract ourselves with the Bill.

The clause enables us to deal with the fiduciary problems that hon. Gentlemen have suggested exist, and it goes beyond that. A number of those who replied to the consultation indicated that there are issues beyond fiduciary relationships—so, too, has the Law Commission. In view of the fact that both the Law Commission and those consultees have put to us strong points to the effect that a fiduciary relationship is important but not adequate, we should enable the clause to go beyond that. I hope that, in view of that explanation, the hon. Member for Beaconsfield will ask leave to withdraw the amendment.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

There is another issue that only occurred to me as I read the clause again. The clause makes it clear that it applies to a person who occupies a position, not somebody who occupied a position. Will the Solicitor-General comment on that? As it is drafted, the clause creates the interesting consequence that it would apply  to a person who was still in employment as an employee, but if he abused his position of trust after he had ceased to occupy that position he would not be caught by it. Is that what the Government intended?

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

It is an interesting proposition. A person can occupy a position where they owe a duty that goes beyond the performance of a job. A contract that is entered into that obliges a person to have duties of confidentiality, perhaps, can go well beyond the time when that employment ceases. The duty may, however, still arise. The person entered into the duty at the beginning of the employment and it exists indefinitely. Therefore a person may still occupy a position in which there is a legitimate expectation. That may well, by virtue of a contract and the agreement that the employee entered into voluntarily, go beyond redundancy or the point when he leaves the post.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I found the last point raised by the hon. Member for Beaconsfield interesting and disturbing because it seems to me that my amendment would have been better if it had required the omission of the words

“occupies a position in which he is expected” instead of merely the words “is expected” so that the clause would have described someone simply as having a duty to safeguard the relevant interests. That is something that we may need to explore again on Report.

I entirely respect the Solicitor-General’s argument, but I am a little alarmed by the paucity of examples of matters that fall outside the concept of a duty, whether that is narrowly defined, in relation to the fiduciary duty—we have already had an explanation about that—or viewed as a wide, expandable and mutable definition and nevertheless coming within the definition of expectation. This is one of the rare occasions when I can criticise the Law Commission, because its report also fails to deal with the matter. It baldly says that there may be cases and that it will be for the court to determine them and for the prosecution to demonstrate its case, but it gives no examples of what those instances might be, and why they would be of such import as to require a redefinition of what is a stand-alone offence in the provision. Someone would be required to have done nothing else besides being subject to the ill-defined expectation and, in that context, to have acted in the dishonest way specified.

I am still concerned, although as I said at the beginning I do not think that if the clause is not amended grave injustices will result. However, there will be an ambiguity in the law, which will be susceptible to argument, and could have the reverse effect to the one intended by the Minister of tightening the legislation. It provides an alternative legal argument, whereas a crisp and clear definition would not enable such ambiguity to arise. I am interested in what the hon. Member for Beaconsfield has to say, but if he intends to press his amendment I am inclined still to support it. I am not yet persuaded, despite my best intentions to be so, by what the Solicitor-General has had to say.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I have listened carefully to the Solicitor-General and am mindful of the point that he has made, which was restated by the Law Commission, that fiduciary  duties on their own may be too restrictive a definition because of the nature of informal relationships. That seems a valid point, which the Committee must consider. If we do not succeed in considering it properly here, perhaps we need to return to it on Report.

I remain troubled, however, and the last question that I asked, about what it means to occupy a position and whether the wording covers “occupied” as well as “occupies”, seems to go to the heart of the issue. As the reply came back, I heard my hon. Friend the Member for Torridge and West Devon say sotto voce exactly what was coming into to my mind: the provision covers every breach of confidence.

Let me give an example that goes back to my childhood. In her memoirs, the Queen’s nanny told some entirely innocuous, but nevertheless revelatory stories about the time when she looked after the Queen. I have no doubt that nannies who take their charges out, once those charges are at toddler age, have a responsibility to safeguard them and not to act against the financial interests of another person. Apart from anything else, they should make sure that the shilling is not dropped in the gutter, but actually used to pay for the ice cream, although they are clearly unlikely to have responsibility for the detailed finances of the person concerned. Given the Solicitor-General’s comments, however, it seems to me that, quite apart from a potential breach of confidence and a civil liability, the way in which the clause is drafted means that such a person is potentially subject to a criminal responsibility. That may be what the Government intend. It may be what the Law Commission intended. However, reluctant though I am to enter into a difference with the Law Commission, which is a body of learned people, I wonder whether it has fully thought through the consequences of the way in which clause 4 is drafted.

It is possible that the tabloid press have missed the point and that clause 4 is the dynamite that the Government intend to use to bring to an end to the frequent breaches of confidence that appear in the tabloid press. That might be a good thing. I often think that people who publish the kind of books that I have described are acting in a dubious way and in accordance with a dubious morality, but it has never crossed my mind that that was an appropriate area for criminal sanctions, yet that is what the Bill would introduce. Of course, such a case would have to get past a jury, and juries, with their robust viewpoint, may decide that they are not happy with this developing area of the law and simply refuse to convict people, as we have seen them do on other occasions. Indeed, those of us who have been barristers have come across juries who have refused to convict a person on clear evidence that an offence has been committed, because their own moral sense tells them that the person was in some way entitled to commit the offence. On the whole, those of us who draft law should try to avoid provoking such problems, but, in the clause, we are creating them.

My amendment might well be too restrictive, but in the absence of anything else, I am inclined to press it to a vote, if only to register with the Solicitor-General the desire—I do not suppose that we will carry the vote—that the Government go away and think again. I am prepared to help, to co-operate and, if a better formula is produced, to go along with it. As things stand, however, I have an  underlying anxiety that the clause is too widely drafted and covers a vast range of behaviour, some of which should undoubtedly be subject to criminal sanction, but some of which should not. We are in danger of creating a catch-all provision that will be a nightmare of judicial interpretation and which could ultimately help to bring the law into disrepute, which is undesirable. [Interruption.] The Solicitor-General wishes to intervene, so I shall give way to him.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I am grateful. In that case, I shall bring my remarks to a close. I shall listen to what the Solicitor-General has to say and then perhaps say one or two words about whether I shall withdraw my amendment or press it to a Division.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I am grateful to the hon. Gentleman for the way in which he put things, so let me see whether I can assist him.

I have two points to make. First, I fear that if we go along with the approach that the hon. Gentleman suggests and restrict the ambit of the clause, we shall leave elderly people as the Institute of Legacy Management and the north of England trading standards group suggested. Both organisations were concerned that elderly people were being exposed, in effect, to fraud by relatives or workers who would not be covered by the ambit of a fiduciary relationship. It is for the hon. Gentleman to decide whether he feels that it is right to leave elderly people exposed in this way. A number of people who feel that they should not be left exposed in this way have made representations to the Government.

Secondly, I fear that the hon. Gentleman exaggerates the effect that he expects the clause to have far too much. He exaggerated a small point about whether we should use the word “occupies” rather than “occupied” into a massive point. Let me read out the provision, which refers to a person who

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

(b) Dishonestly abuses that position, and

(c) Intends, by means of the abuse of that position—

(i) to make a gain for himself or another, or

(ii) to cause loss to another”.

That drafting provides several additional safeguards, so we do not have the massive expansion of imprecision that the hon. Gentleman fears. Many of the examples to which he referred of breaches of confidentiality and so on would properly be the subject of civil law, and the civil court is where they would normally be dealt with. There may well be circumstances in which a person can generally have fulfilled all the conditions of the clause: that is, they occupy a position in which they are expected to safeguard another’s interests, they act dishonesty and they intend by means of abuse of that position—that is the additional safeguard included in the clause—to gain thereby.

Clause 4 is therefore limited to cases where individuals have a position of some kind of trust. A person who is no longer in such a position—for example someone who no longer occupies the position of trustee—is not caught by the clause, provided that  the abuse takes place subsequently. One can abuse a position only if one has one or if one has created one by the nature of one’s contractual relationships. There are safeguards in the provision.

I hope that the hon. Gentleman will feel, on reading the clause as a whole, that those safeguards will be sufficient to ensure that we are not creating some sort of, as he put it, catch-all. We do not wish to create one. We want to provide the basis on which to deal with circumstances that arise not only in fiduciary relationships, but in the sorts of cases that the Institute of Legacy Management and the north of England trading standards group have identified—cases in which all of us would want the elderly to be safeguarded.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I certainly want the elderly to be safeguarded and I do not wish to restrict the scope of the clause to prevent that from happening. Clearly, the elderly and the vulnerable are categories of person whom I would assume were specifically in mind when the clause was drafted.

I have another question. I shall allow the Solicitor-General to intervene again if necessary, because we have time to debate this matter fully. He read out Lord Justice Millet’s judgment. A carer employed by a person who is vulnerable might be given their credit or bank card and their PIN and might try to extract money from a cash machine; leaving aside the question of theft if they appropriate some of that money for their own use rather than giving it to or using it for the benefit of the person concerned, that carer has a fiduciary duty. I would find it difficult, on the basis of Lord Justice Millet’s cogent definition, to say that such a relationship did not exist.

Fiduciary, by its nature, means a relationship of trust wherein someone is imparted information that can be abused. That is why I am by no means certain that if we were to restrict the definition to a fiduciary one, all the people whom the Solicitor-General thinks would thereby be excluded would in fact drop out of the picture. If he thinks that I am wrong about that, I would be happy to hear why, because, on the basis of the judgment that he quoted and the definition that he read out, it seems to me that such people would in all probability be caught.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

Lord Justice Millett said that

“The principal is entitled to the single-minded loyalty of his fiduciary.”

Is the hon. Gentleman suggesting that a fiduciary duty is owed by a worker who comes on behalf of meals on wheels to supply food to an elderly lady at lunch time and in the evening, and who takes advantage of that position? Clearly there is an expectation that that worker should not take advantage of her position, but does she owe a fiduciary duty and a single-minded loyalty? I think not. Do relatives who come in from time to time to help have a legal fiduciary relationship? The hon. Gentleman may well be able to argue in court that such a relationship exists, but I suspect that the lawyer for the other side would argue strongly that it does not, and if the latter argument were accepted, the hon. Gentleman would leave that elderly lady exposed to such behaviour.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I understand what the Solicitor-General is saying, but it seems to me that he is referring to a completely separate category of offence. It frequently happens that individuals take advantage of a degree of trust and to abuse that trust in order to steal from another person. A carer who is given access to a house and who, instead of preparing or serving the meal, steals money from the mantelpiece commits theft. I had assumed that fraud by abuse of position was designed to deal with individuals who were entrusted with information that could be dishonestly abused to make a gain or to cause loss. The obvious example is the one I gave, where one gives one’s PIN and card to someone, saying, “Could you please go down to the bank and extract the money?” Such an individual is in a completely different category, because the point at which one has given them all the elements to carry out a financial transaction on one’s behalf is the point at which those elements can be abused. That is a different category from the one in which carers fall.

I would be surprised if the Solicitor-General was really saying that clause 4 was intended to try to provide an easy way of prosecuting individuals such as informal carers who gain access to property and then steal it. There is plenty in the armoury of the criminal law to deal with that problem.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

I assure the hon. Gentleman that if someone goes into an elderly person’s home and steals some money, that situation is covered elsewhere in the criminal law. Nobody is suggesting otherwise. The new provision is meant to catch other circumstances. It may cover that situation too, but one would not choose to prosecute such a theft as a fraud.

We are considering circumstances in which people may have the key to someone’s house, or their pension card or pension book, and may collect their pension, or obtain information as a result of documents that may be in the house. The situations about which those who made representations to us were concerned were those in which someone has a relationship with such a person that supports their level of independence—situations in which there is an element of trust, but that does not extend to what Lord Justice Millett described as the “single-minded loyalty” of the fiduciary. The hon. Gentleman’s argument that the provision be restricted to fiduciary relationships would leave a vulnerable group of people exposed, and I do not think he wants that. We do not, and we have had representations from others that they do not, either. It is on that basis that we put the wording in the clause,

“he is expected to safeguard”.

Such a person is in a position where they are trusted, but it might not go as far as having a legal relationship which involves an entitlement on the part of the other person to their single-minded loyalty. The person may have loyalty to many others.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General 12:15 pm, 20th June 2006

As a practising barrister I have a loyalty to all sorts of people, with lots of clients going at the same time. I have to say to the Solicitor-General that I am not wholly satisfied with his use of that single-mindedness. To me, a person who is handed a benefit book is in a fiduciary relationship with the person who has entrusted it to him. “Fides”—that is where the word comes from.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I am glad that the hon. Gentleman said that. It seems to me that the example the Solicitor-General uses is most peculiar. The element of trust that has been given to that meals on wheels lady implies a single-minded duty and a single-minded loyalty. There is a fiduciary relationship. That may not apply to everything that person does in her capacity as a meals on wheels lady, but in respect of that position of trust which has been formed, it seems to me as a layman that a fiduciary duty does exist. It also seems that if it does not exist, there is no reasonable expectation that could be demonstrated in a court of law that that person has a duty to safeguard the financial interests.

Photo of Dominic Grieve Dominic Grieve Shadow Attorney General

I agree with the hon. Gentleman. The last thing that I would want to do is, by pressing my amendment to the vote, remove the elderly and vulnerable that he describes from the proper protection they ought to have from people who abuse positions of trust. However, I do not think that my amendment would do that. It would provide greater clarity in relation to the informal relationships that we touched on earlier, which constitute an extremely grey area. It will also clarify the potential problem of this law extending into breach of confidence generally.

This is not an easy area but, having listened carefully to what the Solicitor-General has said, he has not persuaded me. Therefore I wish to press my amendment to a Division.

Question put, That the amendment be made.

The Committee divided: Ayes 6, Noes 8.

Division number 1 Nimrod Review — Statement — Clause 4

Aye: 6 MPs

No: 8 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part ofthe Bill.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I shall be brief. I would like the Solicitor-General to put on record why it was felt that it was not necessary to accede to the original recommendation of the Law Commission in respect of a secrecy element to the offence in the clause. The Law Commission took the view that one of the necessary requirements of the offence was that the person against whom the fraud was committed should not be aware of the fact that the person was acting in the way that they did; if they were aware, it negated the offence. That has not been incorporated into the Bill, and it would be helpful if the Solicitor-General explained why.

Photo of Mike O'Brien Mike O'Brien Solicitor General, Law Officers' Department

Although the Law Commission recommended that there should be an offence of fraud only if the abuse of a person’s position is both dishonest  and secret, after considering the arguments advanced during the consultation, the Government decided not to make secrecy part of the offence. It is difficult to define exactly when something is secret and when it is not. How many people have to know about it? What if people can say, “It was secret from me, but it may not have been secret from my colleague at work.”? It difficult to define exactly what secrecy means, and it becomes an unnecessary complication and an over-particularisation. We felt that an offence may well be committed even if the information or the circumstances in which the abuse takes place are not secret. On that basis, and to avoid a lot of technical and legalistic arguments, as well as the problem of over-particularisation, we took the view that we would not include secrecy as an element of the offence.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.