Fraud Bill [Lords]

Public Bill Committee, 20 June 2006.

Standing Committee B

Mike O'Brien (Labour, North Warwickshire)

I beg to move,

That—

(1) during proceedings on the Fraud Bill [Lords] the Standing Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 20th June) meet-

(a) at 4.00 p.m. on Tuesday 20th June;

(b) at 9.00 a.m. and 2.00 p.m. on Thursday 22nd June;

(2) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 6.00 p.m. on Thursday 22nd June'.

We look forward to a good debate during the course of the Bill under your wise chairmanship, Mr. Amess.

Dominic Grieve (Conservative, Beaconsfield)

May I welcome you to the Chair, Mr. Amess? I suspect that the Committee may be passed in such harmony that our debates may be even briefer than we expect. However, we will have an opportunity for some serious consideration of the Bill. Although the Opposition do not much care for programme motions, this one is sufficiently innocuous as to not merit too much of my attention.

David Heath (Liberal Democrat, Somerton and Frome)

Mr. Amess, may I also welcome you to the Chair? My suspicion is that the Committee will be a good-tempered, intelligent and well-argued one. It is a pleasure to deal with Home Office or home affairs business that is not as contentious as we have done on occasion.

There is general agreement that the Bill has merit but there are details that we will wish to explore in depth. However, I suspect that the programme motion, for once, gives us adequate time to deal with the niceties of matters before us. There is no need for me to delay the Committee further, other than to say that I know my hon. Friend the Member for Cheadle (Mr. Hunter) is simultaneously serving on another Standing Committee on the Company Law Reform Bill. Therefore, although I will welcome my hon. Friend’s presence, I understand the essential dichotomy that faces him in being a member of two Committees at the same time.

Sir David Amess (Conservative, Southend West)

Presumably, at some stage, the weather will get warm. If Members wish to remove clothing, within reasonable limits, please do so. If anyone has a complaint about any matter, if they would kindly see us, we will do something about it.

I remind Members that adequate notice should be given of amendments. As a general rule, I and my fellow Chairman, Mr. Martin Jones, do not intend to call starred amendments, including any starred amendments that may be reached during an afternoon sitting of the Committee.

Clause 1

Mike O'Brien (Labour, North Warwickshire)

Mr. Amess, it is a pleasure to introduce clause one, which introduces the new general offence of fraud. It establishes the three ways in which the offence can be committed. These are fraud by false representation, failing to disclose information and abuse of position. The new offence will extend to England and Wales and Northern Ireland. It will have a maximum custodial sentence of 10 years. The new offence closely follows proposals set out in the 2002 Law Commission report on fraud, which concluded:

“The existing legislation was deficient in a number of respects.”

The over-particularisation of the deception offences in the Theft Act means that it is possible for some behaviour to fall outside the statutory offences. Therefore, defence lawyers can argue that it may have been some form of deception but it was not that precise form of deception. The prosecutors have charged the defendant with the wrong offence.

There is the risk that the offences are going to result in unjustified acquittals and costly appeals. The reliance on deception, as an essential ingredient of the crime, is problematic if it is not always clear that there is a victim who has been deceived. For example, a shopkeeper may have accepted a credit card for a payment not knowing, or being indifferent to, whether the cardholder has the authority to use the card, provided that the transaction results in the shopkeeper being paid, which it normally would.

The Law Commission concludes that the laws of fraud could be improved by the introduction of a general offence of fraud. A general law would improve the prosecution process, first by reducing the chances of offences being wrongly charged. Secondly it would, by virtue of its simplicity, be fairer to citizens who might face a trial and would better be able to understand the law. Thirdly, it would provide a greater flexibility to keep pace with the increasing use of technology in crimes of fraud.

The proposals for this offence were widely welcomed during the consultations undertaken by the Government and will improve the law of fraud by moving away from the existing patchwork of deception offences towards a clearer definition of fraud. The simplified and rationalised fraud offence will provide those working on the frontline with the necessary tools to be able to tackle fraud more effectively.

Dominic Grieve (Conservative, Beaconsfield)

May I first of all apologise for removing my jacket without permission? I made an assumption of your benevolence that I should not have made, although I am delighted that having done so, I was not ticked off. I thank you for that. Broadly speaking, I welcome the new offence of fraud and have no doubt that the Solicitor-General is right in what he says about the necessity of having such an offence. I also welcome the manner in which the Law Commission put forward the proposals. The Government have followed those proposals inclause 1 and I have every reason to welcome what has been done.

If I was to flag up a concern, it would be one that will become clearer a little further on in the Bill, when we come to fraud by abuse of position. But it is also worth highlighting it as this stage. As the Solicitor-General rightly says, one of the consequences of what we are doing is dealing with the problem of the victimless crime.

Although little crime is victimless, my experience of fraud cases—in particular, one long fraud trial in which I was involved—was that, as the Solicitor-General has highlighted, the prosecution case collapsed precisely because it was unable to show upon whom the false representations had been operated. As I was appearing for the defence I suppose I was jolly glad about this.

The case was one of mortgage fraud. The nature of the crime was that fictitious applications were being made for mortgages in the names of all sorts of people who did not exist, or front individuals were being used to apply for mortgages. But the mortgages all related to real properties. As the case proceeded, it became quite clear that those operating in the building societies at a time when the market was entirely buoyant and was rising spectacularly could not have cared less where the applications for mortgages were coming from. As far as they were concerned, they knew that the lending was secure on the property; therefore, the fact that the circumstances in which this information was coming to them was totally bogus was of no interest to them.

A cynic might have said that they were rather pleased to get the work; as they were all on bonuses according to the amount of mortgages that they were handing out and they knew that the lending was secure, they may even have turned a blind eye to the fact that the person submitting this large number of mortgages was in fact concocting the names of the people making the applications.

That illustrates precisely the sort of point the Solicitor-General and the Law Commission have highlighted and which clause 1 is designed to deal with. The sort of activity I have just described would be caught by the clause because, by its very nature it was a case of false representation and failures to disclose information about what was taking place.

I make that point to the Solicitor-General because as we look at the Bill in its entirety, we will have to be careful to try to ensure that we draw a dividing line between activity we wish to criminalise and activity that we might regard as morally reprehensible but which I have some doubts as to whether we would wish to make criminal. That comes to light particularly when we consider abuse of position. I highlight that now because it may be advantageous to look at it in terms of the broadest framework of the Bill before we move on to the specifics. To summarise, we are completely satisfied with clause 1 and with the broad thrust of the Bill, which merits support.

David Heath (Liberal Democrat, Somerton and Frome)

May I echo the closing words of the hon. Member for Beaconsfield (Mr. Grieve)? There is common agreement that the Law Commission has done an extremely good job in issuing its report and recommendations. Its argument for simplification and rationalisation of fraud offences is one that is difficult to argue against. As Griew noted about theft,

“No one wanting to construct a rational, efficient law of criminal fraud would choose to start from the present position. The law...is in a very untidy and unsatisfactory condition.”

That is a commonly held view. The conclusions are to be applauded not only because they provide clarity where there was a lack of it and because they provide offences that are comprehensive where there was a lack of comprehensiveness in respect of previous offences, but because there is a higher likelihood of successful prosecution when a simple test can be applied. At the moment, there is every opportunity for the defence to produce technical arguments in favour of acquittal that bear no relationship to the actual acts that took place. They are essentially legal arguments rather than arguments about fact. I support clause 1. It is a sensible measure.

I understand the point made by the hon. Member for Beaconsfield about the danger of having something so broad and encompassing that it covers behaviour that we may consider occasionally falls short of criminality, which nevertheless is not to be encouraged. When framing statute and offences, there is a difficulty whether we make them so comprehensive to ensure that criminal acts are without doubt caught within that compass or make them so particular that they fail to do that. There are arguments on both sides and we must accept that often we must make a compromise between those two positions and that a lot depends on the good sense of the prosecuting authorities in respect of what is put before a court.

When considering such matters, we must be extremely careful to make sure that we are not putting in the hands of prosecuting authorities an overbearing offence that can be applied improperly to those who are, in the judgment of most people, acting in a way that is worthy of opprobrium, but not criminal sanction. However, we shall be debating that matter later in the Bill. I welcome clause 1 and feel no need to amend it or argue against it.

Mike O'Brien (Labour, North Warwickshire)

I am grateful to both hon. Gentlemen for the way in which they set out their views. We can clearly deal with the abuse of position when we discuss the amendments. The Government considered some of the points raised, particularly whether there should be a broader offence in respect of fraud but, although a general offence should be created, there would be obvious risks in making it so broad that it would be imprecise and unclear about what would be covered by it.

The Government took the view that the Law Commission’s recommendation that there should be a general offence, with its specific limits categorised in the subsequent clauses that we shall come to, was the best way forward, and that we had therefore got the balance right. I am grateful to both main Opposition parties for saying that they, too, feel that the Law Commission and the Government have got that balance right.

Clause 2

Mike O'Brien (Labour, North Warwickshire)

The clause makes it an offence to commit fraud by false representation. The offence was recommended by the Law Commission and widely welcomed in responses to the Government’s consultation paper. A representation is defined as false if it is “untrue or misleading”, and if

“the person making it knows that it is, or might be, untrue or misleading.”

The types of representation covered by the clause may be of fact or law, including a representation as to a person’s state of mind. They can be stated in written or spoken words, or in non-verbal communication.

Clause 2 goes wider than the existing Theft Act 1968 offences, which rely on the deception of a victim. Under clause 2, it will be immaterial whether the person subject to the false representation believes it to be true. The fact that the representation was made will be sufficient evidence to prove the crime.

Dominic Grieve (Conservative, Beaconsfield)

I do not wish to repeat what I said earlier, and clauses 1 and 2 have a clear linkage. The major change in the law that the clause brings about is that it will no longer be necessary to show that the dishonest representation acted upon the mind of another person. There will therefore be a great simplification in the presentation of cases.

As I highlighted in my earlier example, there will be a grey area in such cases because of the extent to which there is sometimes collusion between the person being “deceived” and the person doing the deceiving. The matter is not always as clear cut as one might think. Certainly, from my experience of criminal practice, the turning of a blind eye to a deception that may be of mutual advantage occurs quite frequently in the fraudster’s canon. Prosecutors and judges will have to exercise a measure of discretion in such cases, particularly when it comes to sentencing, and that may prove quite complex. That having been said, I think it right, as a basic principle, that Parliament should insist that individuals do not make dishonest representations for the purpose of obtaining gain for themselves. I do not see anything wrong with the philosophical principle behind clause 2. For that reason, it commands my support.

David Heath (Liberal Democrat, Somerton and Frome)

I would take a similar view. I just want to make a couple of observations about the framing of the clause, for reference when we discuss later clauses. First, there is a clear mens rea in this clause, which I think is right. Secondly, the term is

“dishonestly makes a false representation”,

not “makes a dishonest representation.” That is an important distinction. There are two factors in play: first, there is the issue of whether the representation is false; secondly, making that false representation is a dishonest act in itself, and there is the issue of whether the person is aware that they are dishonestly making a false representation. That has relevance to debates that we will have on later clauses, but it would be wrong of me to explore that area further at this stage. I simply point out, for the benefit of the Committee, that that is the case.

Mike O'Brien (Labour, North Warwickshire)

I am grateful for the way in which Opposition Members have raised their views on the clause, and for the general support for it. I have one point to make to the hon. Member for Somerton and Frome (Mr. Heath): the current definition of dishonesty was established, as the explanatory notes say, in the case of Ghosh in 1982. The judgment sets out a two-stage test. To respond to the hon. Gentleman’s point about dishonesty, the first question is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If the answer is positive, the second question is whether the defendant was aware that his conduct was dishonest and would be regarded as dishonest by reasonable and honest people. That is the approach to dishonesty that we want to see the Bill take.

Clause 3

Mike O'Brien (Labour, North Warwickshire)

Clause 3 will make it an offence to commit fraud by failing to disclose information. The Law Commission’s initial consultation paper proposed that mere non-disclosure of information should not suffice for an offence of deception. However, during its consultations, a substantial minority of respondents argued that from the victim’s point of view, a failure to reveal material facts can be just as devastating and tantamount to deception by conduct.

The Law Commission, in revising its proposals and moving away from the overriding concept of deception, concluded that the ordinary concept of fraud is wide enough to embrace at least some dishonest non-disclosure. It noted that it is arguable though by no means clear that that is the effect of existing law, at least where there is a legal duty to disclose. In its final report, it therefore recommended creating such an offence, and the Government sought views on that in their 2004 consultation paper.

Reactions to the paper showed that a majority welcomed this second limb of the general offence. The only point of controversy was the issue of going beyond legal duties. A suggestion was made in consultation that failure to disclose information could amount in some cases to a false representation and that such cases were therefore already covered implicitly by the first limb. However, it was also recognised that it might be helpful, particularly for juries, if the point were made clear in law. The Government agreed with that view.

The Government also considered the argument that if the offence is restricted to situations where there is already a legal duty to provide information, it will add little to existing law, as failure to meet the legal obligation will carry its own sanctions. We do not agree. Even though the offence will be limited in that way, it will add to the law, as the existing sanctions for such failures might be of a civil nature, difficult to pursue and unlikely to lead to sufficient sanctions. The clause clearly sets out our position.

There will be difficulties relating to how failure to disclose information arises, and it must be for the prosecutors, the courts and in due course the jury to determine whether the person who failed to disclose the information did so with the intention to act dishonestly. Clause 3 clearly sets out the terms, and I hope that we will have general agreement on it as well.

Dominic Grieve (Conservative, Beaconsfield)

I think that the Solicitor-General will get agreement on the clause, although it and clause 4 are closely linked, so we need to consider both to understand what they will achieve.

As far as the element of offence in clause 3 is concerned, the key issue is what it places a legal duty on individuals to disclose. It might be helpful if the Solicitor-General gave the Committee some examples of individuals under a legal duty to make a disclosure. If I have understood correctly what the Government are seeking to achieve, the clause will place a considerable restriction on who will be caught by the provisions.

Clearly, there are numerous instances in which individuals might elect not to tell somebody something because they think that it is to their financial advantage. The classic example is the person being offered an object for sale at £50 who knows very well from his greater expertise that the item is worth £50,000 and chooses not to tell the vendor. He is under no legal duty to give him that information and, therefore, he would not be caught by the provisions of clause 3.

Those circumstances seem to encapsulate what clause 3 is trying to do. I am broadly supportive of that, but we need to be clear. What might be helpful during the course of the debate is if the Solicitor-General confirmed whether my understanding of clause 3 is correct and amplified examples of what he regards as a legal duty. I take a legal duty to be a duty prescribed by law—no more and no less—and not a duty prescribed by morality. Perhaps a more interesting and difficult area is whether that covers duties that could be thought to be equitably placed upon his shoulders. Having a certain amount of clarification would be helpful before we rush in headlong and—which I would want to do—approve clause 3.

David Heath (Liberal Democrat, Somerton and Frome)

I look forward to the explanations, which will be extremely helpful. My brief comment is in similar form to my comment on the previous clause. I simply point out that clause 3(a) says that he

“dishonestly fails to disclose to another person the information which he is under a legal duty to disclose”

and not information that he is expected to disclose. That has relevance when we come to consider the next clause.

Mike O'Brien (Labour, North Warwickshire)

I am grateful to the hon. Gentlemen for the way in which they set out their views on the clause. Probably the best place to start is with the concept of legal duty, as explained in the Law Commission report on fraud, in paragraphs 7.28 and 7.29.

Looking at the duty, with such duties there is an overlap between clauses 3 and 4. There is also a view that a legal duty can arise in a number of ways, primarily by operation of law, but not necessarily prescribed by law in the sense that a duty can arise by the nature of a relationship that has been formed.

I will come back to the Law Commission report in a moment, but let me make that clear. When people are engaged in commercial relationships, there is the principle of caveat emptor, which has been restricted by various pieces of legislation over the years by Parliament. Let the buyer beware. That will still be the case. When people engage in normal commercial relationships, the buyer will need to be beware, to be aware of what the person who is selling the product says.

The clause will do for situations where a legal duty has been created prior to or during the course of a relationship between the alleged victim and the defendant. There is therefore a duty on the defendant to disclose to the potential victim various information. An example would be where a solicitor fails to tell a client relevant information about the law or case that would result in the solicitor gaining financial benefit personally and the client losing. There is a clear relationship between the solicitor and the client. There is a duty to disclose that information. He has failed to disclose that information. He has done so knowing that he has the duty and, therefore, he has acted dishonestly. The result of that should be that he has failed to disclose information and therefore committed an act of fraud.

Another question might arise in a more difficult case, when a person is applying for insurance and has a heart condition, which they failed to disclose. That is a civil matter; to some extent, it involves a breach of an uberrima fides duty to disclose information in particular types of contract. Obviously, insurance companies may well take the view that they would deal with that through the civil procedures and that would be the normal way. However it is possible for someone who was deliberately intending to obtain insurance coverage and, in due course, to make a claim on it to be in a position where they were failing to disclose relevant information where they had a legal duty to do so, with the intention of benefiting, either by insurance coverage or by undertaking a medical procedure using that insurance. The result might be that they are in breach of the clause.

Those are a couple of examples of examples of where there is a clear duty and where failure to disclose information may well put someone in breach of the clause. I hope that those comments deal with hon. Members’ concerns and that the Committee will allow the clause to stand part of the Bill.

Clause 4

Dominic Grieve (Conservative, Beaconsfield)

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

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'.

Dominic Grieve (Conservative, Beaconsfield)

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, or...to 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.

Ian Lucas (Labour, Wrexham)

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?

Dominic Grieve (Conservative, Beaconsfield)

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.

David Heath (Liberal Democrat, Somerton and Frome)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

David Heath (Liberal Democrat, Somerton and Frome)

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.

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.

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?

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.

Jeremy Wright (Conservative, Rugby and Kenilworth)

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.

Mike O'Brien (Labour, North Warwickshire)

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).

Geoffrey Cox (Conservative, Torridge and West Devon)

Will the Solicitor-General give way?

Mike O'Brien (Labour, North Warwickshire)

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—

Geoffrey Cox (Conservative, Torridge and West Devon)

Will the Solicitor-General give way?

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

Will the Solicitor-General give way?

Mike O'Brien (Labour, North Warwickshire)

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.

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

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?

Mike O'Brien (Labour, North Warwickshire)

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.

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.

Mike O'Brien (Labour, North Warwickshire)

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.”

Dominic Grieve (Conservative, Beaconsfield)

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

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?

Mike O'Brien (Labour, North Warwickshire)

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.

David Heath (Liberal Democrat, Somerton and Frome)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

Mike O'Brien (Labour, North Warwickshire)

I was going to respond.

Dominic Grieve (Conservative, Beaconsfield)

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

David Heath (Liberal Democrat, Somerton and Frome)

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.

Dominic Grieve (Conservative, Beaconsfield)

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.

David Heath (Liberal Democrat, Somerton and Frome)

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.

Mike O'Brien (Labour, North Warwickshire)

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.

Clause 5

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 3, in clause 5, page 2, line 38, leave out subsection (3).

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments: No. 4, in clause 5, page 2, line 40, leave out subsection (4).

No. 8, in clause 5, page 2, line 40, after ‘might’, insert ‘reasonably and lawfully’.

Dominic Grieve (Conservative, Beaconsfield)

The first two amendments in the group are probing amendments, but through them we seek to engage in debate on the definition of gain and loss.The Solicitor-General may well be able to reassure me, but my concern is that the definition of gain in subsection (3) specifically includes

“a gain by keeping what one has, as well as a gain by getting what one does not have.”

In ordinary parlance, a gain is normally obtaining something to add to what one already has. Saying that it actually means keeping what one already has raises a number of issues on which I would like further clarification from the Solicitor-General.

I understand that it is possible by dishonesty to avoid paying something to somebody else, thereby retaining it for oneself, but if one is doing that, one is causing the other person a loss. In what circumstances does the Solicitor-General envisage that a gain by keeping what one already has would not include causing a loss to someone else by not paying them what is their due? I simply ask whether subsections (3) and (4) are not in fact otiose and unnecessary.

Subsection (4) does the reverse of subsection (3). It states:

“‘Loss’ includes a loss by not getting what one might get, as well as a loss by parting with what one has.”

That fits precisely with my earlier point: if one prevents someone from getting something that they are entitled to, that is clearly a loss to that person; but what are the Government trying to cover by referring to a person not getting something that they might get? It refers, I suppose, to the chance of getting something. Perhaps that is what the Solicitor-General is aiming at. Iam slightly happier with the definition of loss in subsection (4) than with the need to particularise gain in the manner specified in subsection (3). The central issue is the circumstances in which one might gain by keeping something that one already has when that does not cause a loss to another person.

David Heath (Liberal Democrat, Somerton and Frome)

My amendment in the group is No. 8, and it probes a point similar to that raised by the hon. Member for Beaconsfield. The definitions of gain and loss are imported from the Theft Act 1968, but when we deal with fraud we deal with slightly more mutable subject matter.

My concern is about the phrase

“not getting what one might get”.

One “might get” all sorts of things. One might get things illegally, through serendipity or in a number of ways that should not be encompassed by the definition in the clause. My amendment would insert the words “reasonably and lawfully”, which would at least provide a concept of entitlement—the word used by the hon. Gentleman. It would provide the concept of someone having a reasonable and lawful expectation to receive something. That would narrow the scope a little, without in any way destroying the essential element in the definition or what the Government are trying to achieve.

Jeremy Wright (Conservative, Rugby and Kenilworth)

Does the hon. Gentleman agree that the part-definition of loss as

“not getting what one might get”

is exactly the same as being exposed to “a risk of loss”, which is already explicitly covered in clauses 2, 3 and 4, which deal with the types of fraud that may be committed?

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Gentleman makes a perfectly valid point, and I would welcome the Solicitor-General’s comments on it.

Mike O'Brien (Labour, North Warwickshire)

The Bill is based on the Law Commission’s thorough review, which started way back in 1998, of the deception offences in the Theft Acts. It recommended that the Theft Act definitions of gain and loss should be applied to the new offences because they are well understood in the courts and have caused no great difficulty.

Clause 5(3) fulfils the policy that gain should include keeping what one has. That means that the avoidance of payment may, in certain circumstances, amount to fraud. Section 2 of the Theft Act 1978 has a special offence of evading by deception a liability to make a payment. An example would be when a man borrows money from a neighbour and, when a payment is due, tells a false story about a family bereavement or tragedy, which persuades the neighbour to cancel the debt. That may be the example that the hon. Member for Beaconsfield asked for.

Dominic Grieve (Conservative, Beaconsfield)

But that would cause loss to the neighbour, would it not?

Mike O'Brien (Labour, North Warwickshire)

It would, in the sense that the neighbour would not receive the payment back in a particular way. The payment might not involve the exact same sum as was lent, or there might a different arrangement whereby something else was to be paid back. That might mean that the neighbour had lost not what he had given, but something else that he might have hoped to get. A person may wish to receive payment of a debt in a number of ways; we need to ensure that the law does not create a gap or lacuna that would result in our not taking proper account of all such circumstances.

Insider training is an example of a situation in which there is a gain but no loss or it is difficult to show loss and any loss may be indirect or diffuse. That would include trading to keep what one has. Let me turn to subsection (4) because it is the obverse of this. It derives from paragraph 7.45 of the Law Commission’s 2002 report in which it said that loss in the sense of:

“not getting what one might get should be sufficient for the new fraud offence.”

They added:

“thus, it could be fraud to prevent another person from receiving money or other property, which that person might otherwise have received.”

An example might be where an employee is entitled to some special payment from his employer. The employer wrongly informs him that he is not so entitled. Such cases may also involve gain to the defendant, but the gain may not always be so easy to prove as the loss.

In our 2004 consultations, we asked stakeholders specifically if they agreed with the commission that gain and loss should be defined equally under the Theft Act. More than 70 stakeholders took the trouble to reply and the vast majority agreed with the proposal. In so far as there was any disagreement, it was on the question of whether the definition should go wider. A few respondents did not believe that fraud should be tied to gains or losses in property.

However, we agreed with the majority and with the Law Commission that fraud must be defined as an economic crime, if it is not to become too unhelpfully wide a concept. The vast majority of stakeholders thought that the Bill definitions should be aligned with those of the Theft Act 1968, which apply, for example, to the offence of false accounting. Changes, under both the Theft Act and the Bill, may appear in the same indictment. We therefore consider that it is important that the definitions in the Bill should be consistent with those that apply to the Theft Act offences. If we amend it, we are going to create a real problem of confusion in court with judges having to explain different definitions.

I am aware that Justice, which sadly failed to reply to our invitation to comment in 2004, has provided a briefing argument against the policy, to which the vast majority of stakeholders have agreed. We do not agree with the points in its briefing. It gives an example of a case, which someone raised in the course—

David Heath (Liberal Democrat, Somerton and Frome)

I think it was the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd).

Mike O'Brien (Labour, North Warwickshire)

Ah yes, it was. The hon. Gentleman reminds me that it was the hon. Member for Meirionnydd Nant Conwy who raised that example, but I will not go into it because it was more than a little confusing and more algebraic than legal. We will avoid that. However, I had assumed that the Liberal Democrats had used the Justice amendment.

David Heath (Liberal Democrat, Somerton and Frome)

I, too, found that example more confusing than illuminating. My reading of the provision is that the loss of a gain which might be expected by an illegal act, would still be a loss which the offence could apply to. For example, if someone was intending to supply cocaine and, by fraud, a person substituted flour for the cocaine, so that person would no longer be able to occasion the gain that he would otherwise have done by selling that cocaine, that would be a fraud under this definition, would it not? I ask the Solicitor-General whether that is a reasonable interpretation or one that we should avoid?

Mike O'Brien (Labour, North Warwickshire)

I suspect that anyone engaging in such a report to the police would find themselves quickly arrested themselves. There are all types of circumstances in which criminals can claim that some confederate had breached the criminal law. Nonetheless, I do not find them regularly going to the police to complain. I suspect that I they did, the police would welcome them with open arms and open cell doors as well.

David Heath (Liberal Democrat, Somerton and Frome)

But the supplier who had been defrauded would not be guilty of any criminal offence in that he had not supplied a controlled substance; he would have supplied flour.

Mike O'Brien (Labour, North Warwickshire)

He may well have committed a different kind of offence, unless he was acting as an agent provocateur for the police or something, in which case he may have committed no offence at all. That people would start to report such things to the police is unlikely. He need not worry that those are the sorts of things we are intending to catch. If we do catch them, that would be entirely accidental and fortuitous perhaps, because it would expose other crimes.

The hon. Gentleman also referred to amendmentNo. 8. The amendment seeks to clarify what constitutes “loss” for the purpose of the new offences. As discussed, the offences apply only if there was an intention to make a gain or loss. The amendment seeks to provide that to be a loss the property that the victim might have received had he not been defrauded should be limited to that that he might have reasonably and lawfully received.

If the intention is to provide greater clarity to the definition of “loss”, I do not consider the amendment necessary. As I have made clear, the clause as it stands follows the definitions in section 34 of the TheftAct 1968. The Government’s view is that implicit in the reading of the section 34 definition is that the property lost should be the type that the person ought to have had. Cases are difficult to imagine, but perhaps the hon. Member for Somerton and Frome has described one where we could get ourselves into a position where we need to be sure of the lawfulness of a particular relationship. However, in the real world we need to make sure that we have circumstances that the courts can understand and which the police can deal with straightforwardly. The definitions put into clause 5 of the legislation enable the courts and police to know what they are dealing with, because they have dealt with them over a long period of time in the Theft Act. The Act has not caused a great deal of difficulty, but amending it in any way might produce a lot of difficulty for the courts. I hope, if on no other basis than that and to avoid such difficulties, that the hon. Gentlemen feel they can withdraw their amendment.

Geoffrey Cox (Conservative, Torridge and West Devon)

May I raise a possibility with the Solicitor-General? Section 34 of the Theft Act 1968 defines gain and loss, but defines them against a specific set of statutory-defined offences—theft. He described them as over-particularised, although I do not accept the characterisation of all of the Theft Act as over-particularised.

What troubles me is in subsection (4)—

“‘Loss’ includes a loss by not getting what one might get”.

If that is a definition as in the Theft Act, one can steal something that “one might get”—I suppose one understands that—meaning the loss of a benefit to which one is entitled but has not yet come into possession of. My worry is that that seems to incorporate the loss of chance. That seems to suggest that one can be convicted if all one deprived somebody of is a chance, something I might get. It is not necessarily something I would get and not necessarily something to which I am entitled, which is maybe what the hon. Member for Somerton and Frome has been getting at; not necessarily something to which I am entitled, but something I might have come into.

For example, what if I fail to place a bet? Let us suppose that the Solicitor-General asked me to pop down the road and make a bet on the next election. I do not know which side he would bet on, but let us suppose that he asked me to make such a bet and I decided, because I did not think that he would make a gain in that way, not to place the bet. I could be guilty under the measures if I fulfilled the other criteria. I was expected to safeguard his interests, I ought to have placed the bet and I dishonestly did not do so because I did not want him to gain. All that I have deprived the Solicitor-General of is the chance that he might be right; a rather remote chance, depending on whom he put his money on.

Is that what is intended—that the loss of a chance, perhaps a fairly fragile and implausible chance, should be sufficient? I raise the point in the hope that the Solicitor-General can answer, although I realise that it is rather difficult to answer some questions on the hoof.

Mike O'Brien (Labour, North Warwickshire)

I am looking at a copy of the Theft Act 1968 and of the Fraud Bill. The definitions have not produced such technical problems up to now. The hon. Gentleman’s example is perhaps not a good one, although I realise that he is doing it on the hoof, as am I, because we are discussing a wager. There is no obligation to pay, only a relationship.

Certain circumstances might arise in which a chance of getting something was frustrated. The courts, police and prosecutors would have to consider whether the other circumstances under the clauses had produced sufficient dishonesty and other elements to lead to a charge. The other elements would be key in those circumstances.

Paragraph 4.6 of the Law Commission report points out that conspiracy to defraud can apply to cases that put another’s financial interests at risk, and considers that a new fraud offence should apply to exposing another to a risk of loss. One of the key questions that Opposition Members raised on Second Reading was whether conspiracy to defraud should be removed from the Bill or should be included in the Bill so as to remove it from law. Their view has strong arguments, and indeed our view does too.

Conspiracy to defraud is a common law development that has quite a broad ambit and is very youthful. We feel that we ought to maintain it for the time being, but we hope that at some point in the future we will be able to remove it. To do so, we will have to create new legislation in the Bill to ensure that we cover the circumstances previously covered by conspiracy to defraud.

Section 34 of the Theft Act 1968 and clause 5 of the Fraud Bill will produce the coverage that will enable that. We hope to be able to consider the Fraud Bill’s effects once it has been passed and the way that it is being used in the context of the guidance that the Attorney General will issue shortly—I have distributed the drafts to Committee members—and decide whether we can remove conspiracy to defraud. If we removed the wording in question, we would restrict the clause’s ambit, knowingly failing to cover some of the area now covered by conspiracy to defraud.

Geoffrey Cox (Conservative, Torridge and West Devon)

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.

Sir David Amess (Conservative, Southend West)

Order. I simply make the point to the Committee that there is traditionally a difference between speeches and interventions, but I did not want to spoil the hon. Gentleman’s flow.

Mike O'Brien (Labour, North Warwickshire)

I was so lost in the example that I also thought it was a speech.

Our objective is to deal with circumstances in which there is an exposure to risk of financial loss. It is also the case that any prosecutor, and, in due course, any court, would have to examine the remoteness of any chance in determining whether there had been an element of dishonesty and the other elements necessary to prove the case. I am not sufficiently aware of the case law to say whether this has produced a lot of difficulty in terms of definition.

We are not proposing to rewrite the whole of the Theft Act 1968. As I pointed out on Second Reading, when it was originally drafted it was regarded as a model of clarity and of showing the particular circumstances in which the criminal law applied. In some, but not all, of its sections, we have had to deal with the problem of over-particularity because society has changed. That is what we are trying to deal with in the clause.

Any court and prosecutor will have to consider the element of remoteness in deciding whether the other elements of the case are proved, and whether the provisions of clause 5(4) are sufficiently met. I suspect that, if it is too remote, it will not be prosecuted. We cannot here deal with all the details of the various cases; we have to do our best to set out the intentions of Parliament in the wording of a clause, in a way that does not produce unnecessary confusion in the courts. That is what we have tried to arrive at in the clause. In view of the fact that we use the definition in the clause in other clauses, I hope that we can stick to it. It may well be that the Law Commission later decides to change it and to deal with some of the points raised, but I do not think that this is the point at which to change it.

Dominic Grieve (Conservative, Beaconsfield)

This has been a fascinating debate, and I am particularly grateful to my hon. Friend the Member for Torridge and West Devon for his contribution on the issue of loss. Our two amendments sought to delete subsections (3) and (4). The Minister has persuaded me that we should leave in subsection (3). It may be a belt-and-braces job, but I certainly do not think that there is any mischief in it. It may be otiose, but let it remain.

I certainly will not press our amendment to delete subsection (4), and I shall ask to withdraw it, but I shall think about the matter a little further, because as I listened to the interesting exchanges between the Solicitor-General and my hon. Friend, it became apparent to me that there was an issue at stake that I had perhaps not originally looked into or fully understood when I drafted the amendment. Could one not re-word subsection (4) so that it said “‘loss’ includes the risk of loss, as well as a loss by parting with what one has”? If one did that, it would entirely cover the important point of the risk of being put at a disadvantage because one has not been given the full facts, and it is quite right that that should be criminalised. The example that my hon. Friend gave was not being given the full facts on which one is lending for a mortgage. That wording would also remove the thing that caused me slight anxiety, and that originally led me to table my amendment—it clearly causes my hon. Friend a great deal of anxiety, too—namely the matter of the loss of chance, which I think is a separate issue. I remain unpersuaded that it needs to be covered by the definition of loss. My wording would separate the two out.

I say that to the Solicitor-General because he may like to reflect on the matter before Report. He might even wish to write to us, when he has taken that opportunity to reflect, and tell us whether there is another way of approaching the matter. We could then potentially return to the subject on Report. I simply highlight it because the rewording that I put forward meets the Government’s objectives in defining loss, whereas there is something unhappy about the expression,

“includes a loss by not getting what one might get”.

Mike O'Brien (Labour, North Warwickshire)

I am happy to look into that, and to write to the hon. Gentleman on the point, but how does he deal with the issue of section 34 of the Theft Act? We might end up with a situation in which there were two charges with two different definitions on the indictment, which the judge would then have to explain to a jury. The assumption is that if Parliament changes the wording, it intends to make a change in the substance. What change in substance is he making? It seems that he is not seeking to make any such change, in which case it is a recipe for confusion in court.

Dominic Grieve (Conservative, Beaconsfield)

Perhaps I should say that I shall go away and reflect on that. Perhaps we may have come up with a better definition than the draftsmen of the Theft Act did. However, the Solicitor-General makes a perfectly good point and I shall think about it as well. I beg to ask leave to withdraw the amendment.

Clause 6

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 5, in clause 6, page 3, line 3, after ‘article', insert ‘intended'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments:

No. 9, in clause 6, page 3, line 3, leave out ‘for use' and insert

‘which he intends to be used'.

No. 10, in clause 6, page 3, line 3, leave out ‘connection with' and insert ‘furtherance of'.

No. 11, in clause 6, page 3, line 3, at end insert

‘carried out by him or any other person'.

Dominic Grieve (Conservative, Beaconsfield)

In clauses 6 and 7 we deal with an issue of detail that is of some importance and althoughit may be of greater importance in the context ofclause 7, clause 6 is the right place to tackle the matter.

I have difficulty with the clause, which says:

“A person is guilty of an offence if he has in his possession or under his control any article for use in the course of or in connection with any fraud.”

As we discussed on Second Reading—going back to the old Theft Act—this is a mixture of IT fraud and the old offence of going equipped to cheat and covers both areas; that is, having in one’s possession something that could be used in connection with fraud. What does “for use” mean? Does it mean that the prosecution has to prove that the article was for use with a fraud or merely that it can be used in a fraud? If it is the latter, the clause is too widely drawn. The specific intent must be proved. As I said on Second Reading, I am anxious about that because articles that could be used in fraud could also be put to innocent uses. I am concerned to ensure that the person who we criminalise and prosecute successfully is the person who intends to use an article in fraud, not just the one who has it in his possession.

David Heath (Liberal Democrat, Somerton and Frome)

Both of us want to incorporate that intent into the clause. May I suggest that his formulation does not quite do that? It provides for the object or article to be intended for use, but that intent does not fall on the person who is judged to be guilty of the offence. There might be a flaw in his drafting in the use of the passive rather than the active mood of the verb.

Dominic Grieve (Conservative, Beaconsfield)

I intended that my amendment should refer to the intent of the person when he had the article in his possession. Perhaps the hon. Gentleman’s amendment is better than mine. We shall discuss that with the Solicitor-General and if the matter is pressed to the vote and I prefer the hon. Gentleman’s amendment, I shall support his and ask leave to withdraw mine.

We are both looking at the same issue. Perhaps the Solicitor-General is in a position to provide us with reassurance. However, I am anxious, because as I have said it seems possible to have in one’s possession an article that could be used for a fraud but have it for use in a conjuring trick or to manufacture it for the purpose of using it in a conjuring trick. I am sure that one could find numerous examples. It is important that we ensure that we are not suddenly outlawing the possession of all sorts of devices or gadgets that may have a lawful application as well as a potentially unlawful one.

David Heath (Liberal Democrat, Somerton and Frome)

I rise to speak—briefly, I suspect—in support of the basic intention of the hon. Gentleman’s amendment.

Standing Committee B

Clause 6

Martyn Jones (Labour, Clwyd South)

I remind the Committee that with this we are discussing the following amendments: No. 9, in clause 6, page 3, line 3, leave out ‘for use' and insert

‘which he intends to be used'.

No. 10, in clause 6, page 3, line 3, leave out ‘connection with' and insert ‘furtherance of'.

No. 11, in clause 6, page 3, line 3, at end insert

‘carried out by him or any other person'.

David Heath (Liberal Democrat, Somerton and Frome)

I welcome you to the Chair of the Committee this afternoon, Mr. Jones. I cannot claim to have made more than introductory comments on the group of amendments under consideration during this morning’s sitting, so I will reiterate.

The clause, as the Committee will recall, deals with the possession of articles for use in frauds. The issue is whether there should be an express intent in the clause. There is no mens rea provision at the moment. Interestingly, in clause 7, there is such a provision, so there is a difference between the two clauses. The only thing that might be construed as intent is the importation of the form of words from the Theft Act 1968:

“for use in the course of or in connection with any fraud.”

I understand that that has been construed to imply intent. It is certainly not explicit and it requires interpretation.

The question is whether we should make it absolutely explicit that the article in question should be in the possession of the person with a clear intent to commit a fraud. The hon. Member for Beaconsfield (Mr. Grieve) has already moved amendment No. 5, which would insert the word “intended” after “article”, so the clause would read

“any article intended for use in the course of or in connection with any fraud.”

As I intimated to him in an intervention, my difficulty with that wording is that an article may be intended for use in fraud but by a different and separate person from the person who is carrying the article or has control of it. So I am not sure that the amendment specifically addresses the issue that we wish to raise.

In amendment No. 9, I propose an alternative form of words, which makes it clear that the person who is guilty of the offence has the article in his possession or under his control and intends it to be used in the course of, or in connection with, fraud. That makes the connection between possession and intent absolutely explicit and, I think, improves the wording of the clause.

Amendment No. 10 would make the connection still more explicit. I understand that the Solicitor-General may say that it is better to have conformity between the two pieces of legislation, so that they are expressed in the same terms. I think that “in furtherance of” is better than “in connection with” because there are many items that could be used in connection with fraud but are not intended for use in a fraud. A printer on which counterfeit documents are produced might be an article that is used in connection with fraud but there may be no intent to do that, whether implicit or explicit, in possessing that printer. The words “in furtherance of” make it clear that there is a causal relationship and one of intent between possession and use in the prosecution of a fraudulent or dishonest act. I commend that amendment to the Committee.

Amendment No. 11 is perhaps a counter-balance to what I said earlier. If it is clear that the intent must be proven by the prosecution, it seems to be entirely reasonable that the provision should not require that the article for use in the fraud is to be used by the self-same person. What I am suggesting is that, by inserting

“which he intends to be used”

and adding

“carried out by him or any other person”

we will retain the sense by which an article might be carried by one person, to be used by another, but we insert the clear requirement for intent to be proven.

The clause as currently worded is capable of being construed in the way that I want it to be construed, but it is not unambiguous. My amendments would strengthen the provision, make the intent clear, and to a considerable degree bring clause 6 into line with clause 7, where the intent is clearly stated.

Mike O'Brien (Labour, North Warwickshire)

Welcome to the Chair, Mr. Jones. Hopefully we will make some brisk progress today under your chairmanship. I am sure that we will all have an interesting debate on some of the clauses.

I detect some difference in view between the Opposition parties. The Conservatives seem to want a more specific intention drawn into the clause, whereas the Liberal Democrats want a broader, or general intention of the sort that the Government favour. The objective of the Liberal Democrats seems to be to insert into the clause that which we believe is already there by case law. The view of the Conservatives, unless I have misinterpreted it, is to be much more specific about the nature of the intention.

We have been living with an offence worded in the same way as clause 6 for nearly 40 years. That offence is in section 25 of the Theft Act 1968, which applies not only to burglars but to those going equipped to commit a cheat. A cheat is defined as a crime of obtaining property by deception under section 15 of the Theft Act. The years since 1968 have provided case law on the provisions, the most important of which for our present purposes is Ellames, which I mentioned on Second Reading and is referred to in the explanatory notes.

I will be a bit broader than the explanatory notes in identifying some of the issues here, as that may be helpful to the Committee. Mr. Justice Brown said during the Ellames case:

“In our judgment, the words in section 25(1) of the 1968 Act: ‘has with him any article for use’ mean ‘has with him for the purpose’ (or ‘with the intention’) ‘that they will be used’. The effect of section 25(3) is that if the article is one ‘made or adapted for use in committing a burglary, theft or cheat’, that is evidence of the necessary intention, though not of course conclusive evidence. If the article is not one ‘made or adapted’ for use, the intention must be proved on the whole of the evidence—as it must be in the case of an article which is so made or adapted, if the defendant produces some innocent explanation. We agree with the learned authors of Smith and Hogan: Criminal Law...that section 25 is directed against acts preparatory to burglary, theft or cheat”—

and that questions of Mr. “D’s”, the defendant’s—

“knowledge of the nature of the thing can hardly arise here, since it must be proved that he intended to use it in the course of or in connection with”

the burglary, theft or cheat

“and that the mens rea for this offence includes ‘an intention to use the article in the course of or in connection with any of the specified crimes”.

He continued:

“In our view, to establish an offence under section 25(1) the prosecution must prove that the defendant was in possession of the article, and intended the article to be used in the course of or in connection with some future burglary, theft or cheat. But it is not necessary to prove that he intended it to be used in the course of or in connection with any specific burglary, theft or cheat; it is enough to prove a general intention”—

I think that is the important phrase here—

“to use it for some burglary, theft or cheat; we think that this view is supported by the use of the word ‘any’ in section 25(1). Nor, in our view, is it necessary to prove that the defendant intended to use it himself”—

which is the point that the hon. Member for Somerton and Frome (Mr. Heath) made—

“it will be enough to prove that he had it with him with the intention that it should be used by someone else.”

Dominic Grieve (Conservative, Beaconsfield)

I shall take this opportunity to clarify a remark that the Solicitor-General made earlier, when he thought that there was a difference of approach between the hon. Member for Somerton and Frome and me. I do not believe that there was. I understood fully the difference between the two forms of wording and, as I acknowledged at the outset, the wording proposed by the hon. Gentleman may be better than mine, but our intention was identical. I want to make it clear that I certainly was not seeking, by way of the amendment, to narrow the provision so that it had to be proved that the person intended to use the article in some specific form of fraud. On the contrary, the proposal was merely that it would be for use in fraud.

Mike O'Brien (Labour, North Warwickshire)

I am grateful to the hon. Gentleman for that clarification of his position and I accept that both Opposition spokespersons want an outcome that is not too different from what the Government want. The question is whether we need to import that by way of amendment or whether it is, in effect, already imported.

Section 25 of the Theft Act 1968 needs to be replaced by clause 6, because it does not cover cases in which the possession takes place in the home, and the objective is that the provision should include such cases. Concern about it being used against people who have no fraudulent intention is misplaced, as Ellames makes it clear that an intention is required. Amendments Nos. 5 and 6 are unnecessary because the Ellames case will be imported, in effect, into the clause.

Amendments Nos. 10 and 11 are also unnecessary. The part of Ellames that I quoted makes it clear that the intended fraud does not have to be committed by the possessor; it may be committed by someone else.

The same case provides authority for attaching a wide meaning to “in connection with”. This part of the Ellames judgment is relevant to that. I think that I have already quoted some of it, but essentially it says:

“The object and effect of the words ‘in connection with’ is to add something to ‘in the course of’.”

Whether “in furtherance of” would carry such a wide meaning is open to question. We do not want to risk not covering any of the huge variety of acts that may be preparatory to fraud. Opposition Members may believe that “in connection with” is too wide, but I do not agree, as the whole offence is underpinned by the requirement for a general intention to commit fraud, so no truly innocent person has, in my view, anything to fear.

All four amendments are not only unnecessary but undesirable, because they would take us away from the section 25 wording and thus deprive us of the case law associated with the existing provision, and the case law has been extremely useful in making it clear to the courts where they ought to be going. Accepting the amendments would have implications for section 25, which will remain in force to cover burglary and theft. We do not want to have one form of wording for one set of offences and different wording for a very similar set of offences relating to fraud. The courts would want to construe what the difference was, and we know from this discussion that no difference is intended.

It is necessary to ensure that we keep the similar case law and the similar intention. I do not think that there is any great disagreement of principle between any of us on how we would like the clause to be applied, but I want to ensure that we maintain the clarity of the provisions, that the courts know what they are about and that the jury is therefore able in due course to make a judgment about the outcome of a case.

David Heath (Liberal Democrat, Somerton and Frome)

I am most grateful to the Solicitor-General for the way in which he has approached this discussion. I agree with him: I do not think that there is any difference in our intentions—in what we want the clause to do. I believe that, were section 25 of the 1968 Act not to be in place and were we to be creating an offence today in isolation, my wording would be better. I have been quite plain about that. My wording is more explicit.

However, the Solicitor-General is confident that the Ellames case, imported into consideration of this offence, will identify the necessity to prove intent and will be construed in terms of the article being in the possession of one person, although possibly being used by another person in the commission of a fraudulent act. If that confidence is well placed—I have no reason to suppose that it is not—I think that the provision comes to the same conclusion as my amendment, were it agreed to.

Mike O'Brien (Labour, North Warwickshire)

Let me provide some reassurance. In construing a statute, the courts are able, under Pepper v. Hart, to take account of ministerial statements in the House and explanatory notes. The explanatory notes on the Bill draw attention to the case of Ellames. It may be helpful to tell the hon. Gentleman that Lord Steyn said in Westminster city council v. National Asylum Support Service in 2002 that explanatory notes

“cast light on the objective setting or contextual scene of the statute and the mischief at which it is aimed, such materials are always admissible aids to construction.”

The fact that the explanatory notes specifically mention Ellames means that the case is important.

David Heath (Liberal Democrat, Somerton and Frome)

I think that we have successfully Pepper-and-Harted Pepper v. Hart, which is helpful in respect of any future construction placed on the clause. On that basis—I understand what the hon. Member for Beaconsfield said—I do not intend to press my amendments.

Dominic Grieve (Conservative, Beaconsfield)

I welcome you to the Chair, Mr. Jones. I reiterate what I said to the Solicitor-General a moment ago in my intervention. The purpose of my amendments was not to narrow in a huge fashion the definition of the person who would be caught by clause 6.

It is worth bearing in mind—perhaps we have not touched on it—that the clause differs in one important material particular from going equipped to cheat or to commit theft, in that that is restricted to a person not at their place of abode. It was clearly envisaged that that definition should refer to the person with the bag marked “swag” with a jemmy inside it. That has a rather old-fashioned ring about it when viewed by the standards of 21st century crime. The Bill would widen the scope of the effects to include equipment found in a person’s home. There may be some common ground between the hon. Member for Somerton and Frome and I on that.

In view of the fact that I suspect that a great deal of the relevant equipment could also have an innocent use—I am not an expert, but I can see that there may be innocent uses for the sorts of equipment that could be used for the purpose of fraud, including computer fraud—we have to be careful about ensuring that we leave people with the ability to mount a satisfactory defence and prove their innocence and do not start moving towards an offence of strict liability.

Michael Fabricant (Conservative, Lichfield)

May I give an example? I have a CD-ROM, as have many members of PICT—the parliamentary information and communications group, or whatever it stands for—that enables us to enter a locked PC. That could conceivably be used to break into a computer illegally to extract internet banking information—

David Heath (Liberal Democrat, Somerton and Frome)

A virtual jemmy.

Michael Fabricant (Conservative, Lichfield)

Yes; an internet jemmy, in fact. Would that not fall under the auspices of the clause?

Dominic Grieve (Conservative, Beaconsfield)

My hon. Friend makes a good point. That was precisely the source of my concern. As to the difference in wording between what I should like to see included and that of the hon. Member for Somerton and Frome, on reflection I am not sure that it makes a huge difference. It is clear that the word “intended”, inserted by my amendment, could apply to an article that was intended for use by another as well as for use by that person. My amendment is more limited in scope than the hon. Gentleman’s, which is why I was surprised to hear the Solicitor-General suggest that I was trying to narrow the scope further than the hon. Gentleman.

Mike O'Brien (Labour, North Warwickshire)

The observation was from the hon. Gentleman’s broader comments, rather than on the clause. I tend to agree with his interpretation of the difference—or not—between his amendment and that of the Liberal Democrats. It was listening to his remarks rather than looking at the clause that caused me to make the comment.

Dominic Grieve (Conservative, Beaconsfield)

I am grateful to the Solicitor-General. This was a probing amendment, and he has provided a great deal of reassurance. I hope that the debate, having gone on the record, can, if necessary, be quoted along with the explanatory notes should any issue arise. I certainly agree with the Solicitor-General that it is probably undesirable for there to be a difference in wording between this and going equipped. However, there is an inherent difference of wording in that the scope of the offence is wider because it applies to people’s domestic premises.

With that in mind, I beg to ask leave to withdraw the amendment.

Clause 7

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendmentNo. 1, in clause 7, page 3, line 15, leave out ‘or' and insert ‘and'.

This follows on from our earlier debate, but is slightly different because there is no equivalent offence to making or supplying an article as that is defined here. Subsection (1) states:

“A person is guilty of an offence if he makes, adapts, supplies or offers to supply any article—knowing that it is designed or adapted for use in the course of or in connection with fraud, or intending it to be used to commit, or assist in the commission of, fraud.”

If paragraph (a) were confined to knowing that it is designed for use in the course of fraud, I should not be so concerned. However, adapted for use in the course of or in connection with fraud seems to be a wide term. I worry that it could catch somebody who makes a perfectly reasonable device for legitimate use. On Second Reading, I used the example of the conjuring trick. Such tricks usually require somebody to commit a fraud upon a willing group of spectators. To say that an article of that sort is unlawful causes me concern, particularly as it is not “and” intending it to be used to commit, or assist in the commission of fraud but “or” intending it to be used to commit, or assist in the commission of fraud.

One way of dealing with the matter would be to say that it should not be “or” but “and”. That is what the amendment would achieve. However, I am aware that that would create a restricted offence of specific intent. I acknowledge straight away to the Solicitor-General that that might be too restrictive. Therefore, this, too, is a probing amendment, designed to tease out in the course of debate whether what has been drafted here correctly meets what we are trying to achieve, or whether it goes a little too far.

I shall listen to the Solicitor-General with interest, but my first reading of the clause made me slightly surprised, because articles made, adapted, supplied or offered is a wide term. The nature of fraud being what it is, all sorts of items could be included in that category. I shall be interested to know what defence could be raised, for example, if a person knows that he is supplying an article to a conjuror. He knows very well that it is designed or adapted for use in the course of or in connection with fraud—or could be—but that is not what is intended. Does he have a defence? That is the key question that the Committee needs to debate.

Mike O'Brien (Labour, North Warwickshire)

The clause makes it an offence for a person to make, adapt, supply or offer to supply any article for use in fraud. The impact of the amendment would be to place a highly undesirable restriction on the breadth of the offence. It would narrow the offence much too much.

As it stands, clause 7 allows for a precise distinction to be made between the parts played by those who know that an article is made or adapted for use in the commission of fraud and those who intend that it should be used for fraudulent purposes. I assure the Committee that the distinction is a significant one. For example, it is possible to imagine the supply of an ordinarily innocent article—in other words, an article, that under any circumstances, could be used legitimately—to be used in the commission of a fraud.

The example of a credit card reader comes to mind. The device has not been made or adapted with the fraud in mind but could be supplied with the intention of it being used fraudulently. There are other examples. A person may have software that is capable of being used fraudulently, but it has not been made for that purpose. The hon. Member for Lichfield (Michael Fabricant) referred to such an item. A person supplies security devices that are designed either to prevent fraud or to give legitimate access to something and it may well be that a person intends that they be used for a fraudulent purpose. A person might sell credit card numbers, usually on the internet, knowing that they could be used to commit fraud. There are all types of things that might come to mind.

Conversely, a criminal may make an article specifically for a fraud—for example, a device covertly to copy credit cards—but be ambivalent about whether the person to whom it is supplied will use it for fraud. He will not have the intention necessary for clause 7(1)(b) but will fall within clause 7(1)(a).

The amendment seeks to provide not only that the article must be specifically made or adapted for use in fraud but that the person who makes or adapts it must intend that it be used in fraud. That would significantly limit the clause’s effect and would not catch either of those examples.

The importance of the clause is that it should be able to cover both varieties of offence, thereby allowing for the fact that those who make, adapt or supply articles for use in fraud may not have any intention to carry out the fraud themselves. That carries weight in the fight against organised criminal gangs, which often prefer to engage in fraud at several moves from the action, for example, by selling personal financial information. The aim is that that will be used for a fraud, but they do not carry out the fraud themselves. Clause 7 will not capture the actions of the innocent, which necessarily include the actions of those innocently unaware but somehow caught up in the commission of an offence.

The clause 7 offence, like the existing law in section 25, does not contain a dishonesty requirement, but requires that the article be made for use in a fraud. Therefore, the supply or manufacture of articles, such as devices and software, which are designed innocently, but might possibly be misused to commit a fraud would not be grounds to give rise to a charge for fraud.

The wording used in clause 7 follows the existing law in section 25 of the Theft Act and, as we have discussed, case law has established that it requires a general intention to commit fraud. I hope that hon. Members are reassured by that and that we can make some progress.

Dominic Grieve (Conservative, Beaconsfield)

I am reassured. We can move on. I beg to ask leave to withdraw the amendment.

Clause 8

Mike O'Brien (Labour, North Warwickshire)

The clause defines “article” for the purposes of clause 6 and 7 offences and some other connected provisions. It gives the term a breadth of meaning that is needed in these days of computer crime. It makes it clear that the definition includes any programme or data held in electronic form that may be used in the course of, or in connection with, fraud.

Given the intense and rapid extension of technology in recent years, it is vital that the new offences give sufficient coverage to articles such as computer programmes that generate real credit card numbers, or computer templates that can be used to produce fake utility bills as proof of identity. The wording of this part of the clause follows wording in section 17 of the Computer Misuse Act 1990.

Clause 9

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move amendment No. 14, in clause 9, page 4, line 1, leave out paragraph (b) and insert—

‘(b) for any fraudulent purpose.'.

The amendment is probing the precise terms of the clause. It suggests replacing subsection (2)(b) with a briefer paragraph (b).

The clause is important, and I do not want in any way to reduce its effectiveness in dealing with fraudulent business carried out by a sole trader. However, I do not understand the requirement to show

“intent to defraud creditors of any person or for any other fraudulent purpose.”

The clause does not refer to creditors of the business but to creditors of any person, which I suggest is the universality of people. Most people will be creditors, at least temporarily, of at least one other person and will be debtors to at least one other person. Therefore, I do not understand what is meant.

“Fraudulent purpose” includes creditors of the company, and indeed creditors of any other person or any other trader. Therefore, it is a simplification and a clarification to use the simple phrase “for any fraudulent purpose” rather than the obscure phrase that is in the Bill. Perhaps the Solicitor-General will be able to tell me that I am quite wrong and that there is a specific meaning that necessarily attaches to the phrase and must be in the Bill. I look forward to his response.

Mike O'Brien (Labour, North Warwickshire)

The amendment is designed to rationalise the wording of clause 9 by focusing solely on the fraudulent nature of the offender’s conduct. In my view, it is unnecessary.

The new fraudulent trading offence originates with a recommendation in a 2002 Law Commission report on multiple offending. It was based on what the commission concluded was a gap in the law that arises because it is possible to prosecute UK incorporated companies for fraudulent trading but not to pursue other fraudulent traders for that offence.

Clause 9 extends the fraudulent trading offence in section 458 of the Companies Act 1985 by creating a corresponding offence that will apply to all businesses not already covered by the 1985 Act. Logically, the wording of clause 9 must follow that found in section 458—hence the wording in the Bill.

It is important to bear it in mind that clause 9 creates a parallel offence linked to the existing fraudulent trading offence. The rationale and structure of the new offence flow directly from the Companies Act offence, and as such attract the case law that attaches to it. If we were to start changing the legislation, the courts would be busy trying to work out why we changed precise wording in section 458. We must remain consistent. Initiating a change here would have consequences for the interpretation of section 458. Therefore, it is sensible and desirable that the wording of clause 9 should stay as it is.

We used the phrase to ensure that we got the parallel offence right. The new offence applies to businesses that obviously are not companies. The creditors can be creditors of the business, but the business is not of itself a legal person in the sense that companies or individuals are legal persons. A partnership, or another business relationship, may not of itself be a legal person, and the creditors can be creditors of the business, but the business is not a legal person in its own right; rather, the creditors will be creditors of the owners of the business, who may or may not be the defendant.

I hope that that answers the hon. Gentleman’s concerns, and that he can withdraw the amendment.

David Heath (Liberal Democrat, Somerton and Frome)

Predictably, it does not. I have always found that consistency in error bedevils our debates; it seems a pointless view that just because a thing was done once before, it needs to be done again, even if it is self-evidently unnecessary or otiose. I cannot conceive of any circumstances in which

“intent to defraud creditors of any person”

would not be encompassed in the phrase “for any fraudulent purpose”. It is a tautology, and plainly so. The only part of the Solicitor-General’s argument that commends itself to me is the need to apply consistency between the two company offences. If we introduce no error in law by removing a tautology, it is worth doing. That is my personal opinion, but I give way to the hon. Member for Beaconsfield, who may tell me why I am wrong.

Dominic Grieve (Conservative, Beaconsfield)

For what it is worth—and the hon. Gentleman knows the number of times that I have argued over drafting—I agree entirely with him. That said, the words are completely innocuous if they remain in the Bill as they are. They are just odd, and no more than that can be said.

David Heath (Liberal Democrat, Somerton and Frome)

No more than that might be said, but it undoubtedly will be. The words are odd, but what nags away at the back of my mind is the fact that someone at some stage must have had an intention: someone, in drafting the original Act, must have detected a circumstance in which

“intent to defraud creditors of any person”

did not fall within the general compass of a fraudulent purpose. However, we have not heard yet what that distinction might have been.

Dominic Grieve (Conservative, Beaconsfield)

I think that the hon. Gentleman is over-optimistic in his view that there was necessarily a rationale behind the drafting. I have seen too much such legislation. There was the Public Processions (Northern Ireland) Act 1998, which dealt with the playing of “musical or other instruments”, and nobody was able to explain what an “other instrument” might be. We actually got that deleted as a result of my participation in that debate, but I leave the hon. Gentleman to speculate on what was in the mind of the draftsman in that occasion. I suspect that in this case the legislation, particularly in view of its derivation and origin, belongs to the classic period of belt-and-braces drafting.

David Heath (Liberal Democrat, Somerton and Frome)

I say one word to the hon. Gentleman: bagpipes. That is perhaps unfair; I am actually rather fond of bagpipes, but they are commonly held not to be the most musical of instruments, stirring though they are. He is probably right: it is a belt-and-braces provision. I do not want to make a meal of it, and I do not think that there is any mischief in the words remaining as they are; it just irritates me when drafting is tautologous. When I rule everything, I shall not have laws drafted like that. However, I shall withdraw the amendment.

Geoffrey Cox (Conservative, Torridge and West Devon)

I do not know whether this is a speech or an intervention; it was intended to be the first, but it will be very short.

The answer to this very interesting and learned debate may lie in the fact that the section was originally drafted in the Companies Act. For companies, there are multifarious opportunities to have related companies—subsidiaries, parent companies and so on—and one may very well operate a company in order either to defer the debts or to defraud the creditors of a related parent or subsidiary company.

Michael Fabricant (Conservative, Lichfield)

Enron.

Geoffrey Cox (Conservative, Torridge and West Devon)

I hear one company appositely named; I could probably think of quite a few others. The point is that the wording was probably interpolated from the Companies Act to deal with cases where, although the creditors were not of the specific limited company, they were creditors of a related company. The danger was that the defence might argue that the debts related not to the company but to the subsidiary or affiliated company. It might therefore be otiose to insert that when one is charging a sole trader or a partnership.

One suspects that that was the reasoning behind section 458 of the Companies Act 1985, the wording of which is not

“for any other fraudulent purpose”,

as it is in clause 9(2)(b), but rather relates to any fraudulent purpose. The general theory applying to fraudulent trading is that a person can be charged for continuing to trade in order to defraud the creditors of the company, or a related company or person, or for carrying on the company to operate as part of a wider fraud. I suspect that because the wording

“for any other fraudulent purpose”

has been translated from companies to sole traders, it might actually not be necessary. The Government might simply have translated wording apposite to limited companies to sole traders.

If that was an intervention, it was very long; if it was a speech, I hope that it was relatively short.

David Heath (Liberal Democrat, Somerton and Frome)

I am most grateful for that intervention by the hon. Gentleman, who knows an awful lot more about the matter than I do. His interpretation suggests that the requirement was supposed to be inclusive and to expand the scope of the provision, rather than to be exclusive and to narrow the scope. In that case, it is most likely that the wording has been translated from one enactment to another, simply as a matter of course, without anyone thinking about whether it is necessary.

I repeat what I said earlier: I do not think that any mischief is involved. I want the clause to be able to be used for lots of actions on the part of traders—the disposal of assets prior to liquidation and matters of that kind. I hope that it will be enforced rigorously for those purposes. I want it to be as wide as possible in its application. Given that retaining the words does not reduce the width of the application but simply states it in two different ways—one partially and the other totally—I can find no fault with it. So, for the second time, I beg to ask leave to withdraw the amendment.

Clause 10

Mike O'Brien (Labour, North Warwickshire)

The clause implements a recommendation by the company law review in 2001 that the penalty for the offence of fraudulent trading in the Companies Act should be increased from seven to 10 years in order to align it with the most serious fraud offences in the Theft Act 1968. We agree that that is a sensible change, particularly in the context of the Fraud Bill, under which 10 years is the maximum penalty for the general offence of fraud. Fraudulent trading can have serious consequences, and although relatively few cases are prosecuted, average sentences are higher than for other types of fraud.

Clause 11

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move amendment No. 12, in clause 11, page 4, line 33, leave out ‘by a dishonest act’ and insert ‘dishonestly’.

Martyn Jones (Labour, Clwyd South)

With this it will be convenient to discuss amendment No. 13, in clause 11, page 5, line 2, at end insert—

‘( ) A person shall not be guilty of an offence under this section if—

(a) the services obtained comprise only observing a performance, sporting or other event, and

(b) he is not within, nor has he sought to enter, the premises within which the performance or event are being held.'.

David Heath (Liberal Democrat, Somerton and Frome)

The amendments are quite separate, and I shall deal with them in turn.

Amendment No. 12 might sound like a very small distinction, but actually it has greater import than would first appear. First, stylistically, it brings the text of the clause in line with the clause title: “Obtaining services dishonestly”. That seems appropriate.

Secondly, however, there is a difference between a dishonest act and a person who performs an act dishonestly. A dishonest act is, or could be, interpreted to be so at a later date, and the perpetrator may not be party to that interpretation. In other words, he may not have been behaving dishonestly but may have committed an act that, on consideration, is seen as dishonest. That puts the act at one remove from the intent.

The distinction is very narrow: in most cases, a person who commits a dishonest act will know perfectly well that they are doing so and will have been acting dishonestly. However, on a limited number of occasions, an act that could be interpreted as dishonest is committed by a person who believes that he is acting honestly. Using the adverb rather than the adjective would remove any possibility of ambiguity or legal argument on that nice distinction. There could be no distinction: if the person was obtaining services dishonestly, he would be doing so by a dishonest act, but would also know that he was doing so by a dishonest act because he was acting dishonestly.

Michael Fabricant (Conservative, Lichfield)

The hon. Gentleman is saying that the person should have mens rea—a guilty mind—and that there should be an intent to obtain services dishonestly. However, subsection (1) also says that the act should be in breach of subsection (2). Does that not also imply that he must have a guilty mind?

David Heath (Liberal Democrat, Somerton and Frome)

I do not think that it does. Subsection (2) lists a number of circumstances in which a person has obtained services, and I do not think that the two necessarily relate.

The amendment is narrow and I do not want to labour the point. However, simply using the adverb improves the clause and makes it say exactly what the Minister would want it to say. He may feel that the clause will be interpreted in that way in any case, in which case the amendment becomes unnecessary.

The second amendment in the group, No. 13, is a probing amendment to enable the Minister to say what I understood him to have said on Second Reading. It relates to a particular circumstance in which the service obtained is watching or taking in an event—a sports match or a performance perhaps—without paying. There are circumstances in which that would clearly be a fraudulent and dishonest act. A person who goes under a fence, knowing perfectly well that he has avoided going through the turnstile, is trying to obtain a service without paying. That is not in dispute.

However, there is a further and greyer area: when a person is watching a match because he has secured a vantage point from which he can see it, clearly with the intent of not paying, but nevertheless without potential detriment to the person who has put on the event. I can give an example of that from Bath.

I regularly watch Bath play rugby; the experience used to be good, although it is often unhappy nowadays. People can pay for seats at the Rec, the recreation ground in Bath. I received my season tickets just today and am now much less well off than I would otherwise have been. If a person happens to live in one of the houses on Great Pulteney street that overlook the ground, he can see the match for free. I do not think that in any circumstances a person could be deprived of the right to look out of his window or stand on his balcony and watch the match for free. He is as entitled to look out of his property in that direction as any other. That is not the problem.

However, if one is clever, one can also go down one of the side turnings off Great Pulteney street, hoick oneself up to look over a wall and see the match equally free from a public thoroughfare. I do not believe that that should be a criminal offence. It is merely a happenstance. The simple fact that one can see the match from there does not mean that Bath rugby football club—or Bath Rugby plc—would be entitled to commence proceedings against someone who happened to be able to see the match from that vantage point outside the ground’s perimeter.

I hope that the Minister will make it absolutely clear in his response, so that I do not need to press the amendment, that in such circumstances an offence would not be committed, despite the fact that the person was not on their own property and was partaking of the event—the spectacle or match—without paying and with the intent of not paying, as they had no intention of going through a turnstile. Will he reassure me that just because they have not tried to secure entry to the ground, arena, theatre or whatever, they are not securing that service dishonestly and would not be liable to prosecution under the provision? If he can do so, it is not my intention to press the amendment.

Dominic Grieve (Conservative, Beaconsfield)

I listened carefully to the hon. Gentleman. Although I understand what he is doing with the first amendment, I am not sure that I agree with him. I wait with interest to hear what the Solicitor-General will have to say, because it seems to me that the nature of the obtaining of a service requires a “dishonest act” to obtain it. Using that expression rather than the word “dishonestly” might well be a correct piece of drafting and does not in any way imply that dishonesty does not have to be proved. I shall wait to hear what the Solicitor-General has to say.

As regards the second amendment, again I shall wait with interest to hear what the Solicitor-General has to say, but as the service is the thing being obtained it strikes me that if someone is perching out of their window watching a cricket match that they are not paying for, they are not obtaining a service, which is the entry into the ground to watch the cricket or football match.

David Heath (Liberal Democrat, Somerton and Frome)

That is precisely the point. Is the service entry to the ground or watching the match, event, spectacle or whatever? I am not sure that we are as clear cut in that distinction as we would like to be.

Dominic Grieve (Conservative, Beaconsfield)

And the hon. Gentleman was right to raise it. Applying some common sense to subsection (2), I think that the service must be the right to enter a particular area in order to watch the game. If in fact one can watch the game from somewhere where one does not have to pay for the service, that is tough on the service provider. I certainly do not think that the Government intend to criminalise people who look off their balconies, nor do I think that that the subsection does so. His argument is ingenious, but I do not think that it would carry much weight with the court.

Jeremy Wright (Conservative, Rugby and Kenilworth)

Does my hon. Friend agree that there might be another potential difficulty that perhaps the hon. Member for Somerton and Frome has not considered? One of the issues that the Government considered in relation to clause 11 was the problem of those who watch television through cable or other connections that are supplied through fraudulent means. The difficulty with the clause, if it were to be drafted as the hon. Gentleman wishes, would be that those who watch sporting performances on television might be caught by his redrafted clause. I am sure that he would not want that.

Dominic Grieve (Conservative, Beaconsfield)

My hon. Friend raises an interesting point—perhaps another conundrum for the Solicitor-General to answer—and it seems to me that his argument has some force.

I shall wait to hear from the Solicitor-General, but on both matters I think that the hon. Member for Somerton and Frome, with whom I often agree, is for once probably worrying about nothing.

Mike O'Brien (Labour, North Warwickshire)

I shall begin with amendment No. 13, and reassure those who want to watch the rugby from Great Pulteney street that they should be able to continue to do so. Not only that, the crowds who sometimes watch the cricket from windows and rooftops around the Oval are not intended to be caught by the clause.

The test is the one in the Ghosh case in 1982 that I mentioned earlier. It is a two-stage test that is well known. The first part is whether the defendant’s behaviour would be regarded as dishonest by the ordinary standards of reasonable and honest people. If it would, the second part is whether the defendant was aware that his conduct was dishonest and would be regarded as such by reasonable and honest people. When we apply those tests, we can distinguish the sorts of circumstances that hon. Members are concerned about.

I reassure those who watch a game by luck and opportunity that they should not be in a position where reasonable and honest people would regard them as acting dishonestly. That test enables reassurance to be given in the particular circumstances that concern hon. Members with regard to amendment No. 13.

Amendment No. 12 would alter clause 11(1)(a), which requires that for the offence to be made out a “dishonest act” is required. The hon. Member for Beaconsfield has set out my case very well. Just to assist him in that, I shall quote the Law Commission’s 2002 report, which stated:

“It should not be possible to commit the offence by omission alone. This offence would not, for example, be committed by a person who innocently happened to be on a boat and, despite hearing an announcement that anyone who had not paid for the next trip should disembark, remained on the boat and thus received a free ride”.

The Government agree with the view that there should be an act and that it should be explicit that there is an act. We do not want to criminalise the obtaining of services by omission, as that risks leaving citizens too much at the mercy of unscrupulous service providers, who provide unrequested services, for example through the internet or by telephone.

While the dishonesty requirement should provide protection from prosecution for the innocent, we also wish to avoid a situation in which unscrupulous service providers might feel able to pressurise anyone who had obtained services that they had not requested. Indeed the formulation of clause 11 may discourage those service providers from making unwanted services available in the first place. In our consultations in 2004, clause 11 was widely welcomed and no problems were raised on this aspect of it. I hope that, given those reassurances, the hon. Gentleman will feel able to withdraw the amendment.

David Heath (Liberal Democrat, Somerton and Frome)

I am most grateful to the Solicitor-General. That was what I hoped to hear, and it will be of great reassurance to the hon. Member for Broxbourne (Mr. Walker), who raised the issue of watching sporting events on Second Reading. I am sure that he will be satisfied with the response, and on the basis of what the Solicitor-General has said, which is entirely what I expected him to say, I beg to ask leave to withdraw the amendment.

Dominic Grieve (Conservative, Beaconsfield)

I beg to move amendment No. 6, in clause 11, page 5, line 7, leave out ‘5’ and insert ‘10’.

The amendment simply deals with the penalty for the offence. I am mindful of the fact that the existing penalty for the offence under the Theft Act is five years’ imprisonment and that that has been translated as a maximum into this new offence. My reason for tabling the amendment was simply to discuss whether, in the light of current circumstances, we might consider raising the maximum limit. We know that the obtaining of services by deception or dishonestly, as the new offence will be described, can run to many hundreds of thousands of pounds in some cases. Admittedly, it may sometimes be that the service provider is foolish, but there have been instances when the fraud has been of considerable scope. Some operate a system over time that deceives large numbers of people in a number of ways, and as a result they receive a multiplicity of services and can live a life of ease and luxury—until they are caught—but it is those who supply the services who are the losers, because those who received them are often unable to pay.

The question arises in my mind whether five years’ imprisonment in such circumstances will always be sufficient. That is particularly so given that we are living in an era when the perpetration of fraud of various sorts is so much more sophisticated. One could put another figure on it—perhaps seven years—but I ask the Committee to consider that, because five years is what appeared in the Theft Act 1968, it does not necessarily have to remain at five years.

As I reread the Theft Act prior to the Committee stage, I realised how deliciously dated certain aspects of it seem. Indeed, we touched on that when talking about going equipped to cheat; and obtaining of services by deception has the slight ring of a person coming along and, in rather a small way, obtaining some service and being unable to pay for it. The classic example is of a person going into a restaurant, ordering a meal and then being unable to pay for it—and never having had the intention of doing so. We are not dealing with such problems here. In financial terms, they will often be substantial offences.

Against that, I am mindful that it may not be the only chargeable offence. In certain circumstances, especially if a great deal of money is involved, other fraud may be involved that could lead to a charge under clause 2. However, I would like the Solicitor-General to consider why we should make that distinction in such circumstances, and whether it is time to raise the maximum penalty. In the vast majority of cases, a penalty of more than five years imprisonment may not be required, but it would be a pity if prosecutors found themselves facing the fact that the easy and sensible offence to charge attracted a penalty that they considered insufficient to meet the gravity of the case.

Jeremy Wright (Conservative, Rugby and Kenilworth)

I welcome you, Mr. Jones, to the Chair. I too should declare an interest—perhaps I should have done so earlier today—as a non-practising barrister, but not in such an illustrious capacity as my hon. Friend the Member for Torridge and West Devon (Mr. Cox).

I support the amendment. The Solicitor-General knows that I raised the matter on Second Reading, and it is worth the Committee considering it. As my hon. Friend the Member for Beaconsfield said, it would equalise the position between the fraudulent obtaining of services and the fraudulent obtaining of property or money. When we as legislators consider maximum sentences, we should consider two things. The first is the level of criminality and the second is the value of what has been obtained.

It seems perfectly conceivable that the level of ingenuity used by the criminal to fraudulently obtain the provision of services may be just as intricate and well developed as that needed to obtain property or money. I therefore see no logical reason for drawing a distinction in the maximum sentences.

The second question is the value of what has been obtained. As my hon. Friend the Member for Beaconsfield said, other parts of the Bill recognise the fact that the world has moved on, as has the British economy. For example, it recognises that it ought to be possible to commit an offence in which a machine is deceived, although that takes away the concept of deception; it recognises that today’s economy is different to that of 1968 or 1978. However, it should also recognise that the economy has moved on, in the sense that it is predominantly a service economy, or at least more so than ever it was.

We should not just examine professional and financial services, although they are valuable and if they are obtained by deception or fraudulently a service of great value could have been gained. We should also consider the worlds of sport and entertainment. The hon. Member for Somerton and Frome talked about what may be obtained by somebody who watches a sporting performance. How about what may be obtained by someone who gains the services of a footballer or pop star by some form of fraud? The value of such services could be very high indeed.

To take topical examples, if a small football club were fraudulently to obtain the services of David Beckham or Wayne Rooney, the value of those services—metatarsals allowing—would be extremely high, higher than if that club had by some form of fraud managed to obtain Wayne Rooney’s car or house. When we consider the situation in the modern British economy, which is substantially a service economy, it would be wrong not to accept that a criminal with the same degree of ingenuity as one carrying out another type of fraud, obtaining services of the same value, also merits a sentence of 10 years’ imprisonment.

Of course, not every example of obtaining services dishonestly would merit a sentence of 10 years, and it may be that my examples are somewhat extreme, but surely maximum sentences are designed to cater for extreme examples. The Committee should consider making sentences equal for criminal acts of equal value.

David Heath (Liberal Democrat, Somerton and Frome)

One is rather loth to enter the great debate about sentencing at the moment, given the extreme views that have been taken on all sides of the matter by various people in the past few days. However, we would all like to see a degree of consistency. I have argued for a long time personally and on behalf of my party that the basis on which sentences are made should be quite different and that there should be more openness and honesty about the intention of the sentencer. That is a commonly held view, and I do not know why it is not done.

Offences under clauses 1, 2, 3, 4, 7 and 9 carry a ten-year maximum sentence, whereas the offence under clause 6 and the one that we are currently considering under clause 11 carry a five-year maximum. The hon. Member for Rugby and Kenilworth (Jeremy Wright) was right to say that we should consider carefully the degree of criminality. If one were to take that to its absolute, one would have to say that there is no difference in the level of criminality of an offence under clause 6 from the other offences, only in the opportunity to put it into effect. There is a time difference between going equipped and committing an offence. A person may never actually commit the offence, which I presume is why it carries a lower penalty. We are satisfied that the five-year maximum is appropriate in clause 6.

On clause 11, I hear what the hon. Gentleman says about the value of services dishonestly obtained, but I have some difficulty in thinking of circumstances in which the clause would cover high-value services. The opportunity to ask Mr. Rooney to play for the local football team with the intent of not paying him at the end of his contract is unlikely and the idea that he would do so for very long is rather a far-fetched example and may involve other actionable offences such as breach of contract or misrepresentation. We need a degree of proportionality on the matter. I am open to the suggestion that a higher maximum sentence is required, but I would be much happier with it if I were satisfied that sentencing policy was in a fit state to accommodate maximum sentencing at different levels, that judges were given the proper discretion to do their job effectively and that there was a clarity and honesty in sentencing that is not there presently.

In general, some balance is appropriate between this Bill’s provisions and those dealing with analogous offences under the Theft Act. To what degree has the Solicitor-General made that assessment? Is this simply a read-across, or has he formed the view that the offences set out in clause 11 are consonant with similar offences under the Theft Act and will carry the same and appropriate penalties? If that assessment has not been made, it should be made at the earliest opportunity.

Mike O'Brien (Labour, North Warwickshire)

We should begin by acknowledging that the hon. Member for Rugby and Kenilworth raised the matter with me on Second Reading, and I have considered it again. My reaction was to wonder whether, in order to get some parallel with offences relating to property and money, there was an argument for extending the measures. I thought about it with some care. There is always an argument for increasing sentences, but then I looked at the average sentence for obtaining services by deception, the parallel existing offence that the measures will replace. The average sentence handed down in 2004 was just over six months. In those circumstances, a penalty of five years and an unlimited fine rather than the average sentence appears adequate. We must consider what is proportionate in the circumstances.

The Law Commission considered the issue in its 2002 report on fraud. I did not explore it in great depth, but paragraph 8.16 says:

“On conviction on indictment, the maximum sentence available for the existing offence of obtaining services by deception is five years, and we see no reason why the maximum for the new offence should not be the same.”

We consulted on the matter, but received few responses. It might have been useful if the hon. Member for Rugby and Kenilworth, who originally raised the point, had suggested it at that time. I am sure that he was otherwise engaged winning his seat in Rugby.

If the average for even the most serious offences is just over six months’ imprisonment, a five-year maximum has the degree of proportionality that one seeks when trying to assess what the appropriate sentence ought to be. In view of the fact that those consultees who responded endorsed the five-year limit, that the Law Commission believes that it is right and that the average sentence for the existing offence appears to be just over six months, I believe that it is the right balance.

I shall not close my mind on the issue. If we feel at a later stage that the penalty is inadequate, we can reconsider it, but given how the courts are dealing with such offences, the measures will give judges enough flexibility to impose the maximum sentence in the most serious cases while preserving the average sentences for those that are indeed average.

Dominic Grieve (Conservative, Beaconsfield)

I listened carefully to what the Solicitor-General said. I would simply make one point to him, of which he may already be aware. The fact that the average sentence is of six months’ imprisonment comes as no surprise to me, but I am not sure that it is the central issue to the argument. On the whole, the sort of offence and the reasons why such offences tend to be charged is because they are of a rather low-grade kind. There are instances where, as I indicated in my opening remarks, substantial services of substantial value can be obtained. It is in such instances that I raise the question as to whether five years is necessarily sufficient. Rather than looking at the average of the sentences passed for this type of offence, that would require looking at whether there were instances where judges had been imposing the maximum and may even in their sentencing remarks been making suggestions that the sentence does not entirely meet the gravity of the offence, as the Solicitor-General will be only too aware.

Because of the nature of the discount that a person attracts for pleading guilty, as an example, often in such cases—and my experience is that they often end in guilty pleas—that will already be substantially shortening any sentence that is going to be served, because it will start with five years as the maximum and then have to discount it against that. I respectfully suggest to the Solicitor-General that that is a more fertile area to look at than the average sentence passed. That said, and mindful and grateful that it will be looked at again, I beg to ask leave to withdraw the amendment.

Clause 12

David Heath (Liberal Democrat, Somerton and Frome)

I have a brief inquiry. I take the view that officers of a company should be individually responsible for the actions of the company when it acts dishonestly. However, as has been pointed out, there is no mens rea provision in the clause. The company officer does not have to have formed the dishonest intention himself or herself to be guilty of an offence under this section unless there is perhaps another construction on the clause of which I am unaware. That is of some concern. Is the Solicitor-General’s view that as an officer of the company they have a duty and responsibility to be aware of whether the action in which they are consenting or conniving is a dishonest and fraudulent act? If that is the view then by consenting or conniving, as the clause says, they would have formed the dishonest intent at that point. I would be grateful if the Solicitor-General told me whether that is the construction that he places on the clause and explained how precisely it would work.

Dominic Grieve (Conservative, Beaconsfield)

I find myself pipped to the post by the hon. Member for Somerton and Frome in rising so quickly to his feet, and I would not rise myself unless there were a further slight gloss to apply to precisely the same point I wanted to raise. I think that part of the answer to his question can be given; namely, that as a company can only commit an offence through its officers, it must follow that if the body corporate is going to commit the offence, someone in the body corporate must be acting dishonestly. That would normally be the person who would be seen to be consenting or conniving to the commission of the offence.

But the nub, and maybe the point that the hon. Gentleman is getting at, is that it seems to me that it at least technically possible on the reading of clause 12—I am aware of its derivation; this has been around for rather a long time—for one to have a company where a body corporate commits an offence through the dishonesty of one of its directors, but with the consent of another of its directors who is not, himself, acting dishonestly. Technically, in such circumstances both of them would be convicted of the offence when the body corporate was convicted. If that is the case, it might be readily curable. However, the Solicitor-General might indicate that that is not necessary, or that if we were to try to cure it we would cause all sorts of other problems. However, that was what struck me about the clause as, I suspect, the main issue struck the hon. Member for Somerton and Frome.

Mike O'Brien (Labour, North Warwickshire)

In essence, clause 12 follows section 18 of the Theft Act 1968. It is the standard provision that makes company officers who are party to the commission of an offence under the Bill by their body corporate liable to be charged for the offence as well as the company. A director, manager, secretary or other similar officer of the body corporate, or a person purporting to act in that capacity, has to be in a position in which he can be diligent about the work that he does. There must be a reasonable standard of diligence; such people must know what they are about. The requirement in the legislation is connivance or consent, so they must know what they are conniving or consenting to. If they are conniving or consenting to something that is clearly dishonest, and they are sufficiently aware of that to be aware of the implications, then they are in a position in which they have connived or consented to an offence.

Dominic Grieve (Conservative, Beaconsfield)

I take the Solicitor-General’s point, but there is a difference between consent and connivance. Connivance, by its nature, implies guilty knowledge—that is how I always understand the word, given its ordinary meaning—whereas consent need not. It might be that there is a flaw in the Theft Act 1968, or it might be a problem that has never arisen, but it is at least possible, taking the strict technical meaning, that the body corporate commits an offence because one of its directors does so deliberately—so the dishonesty comes from that director—but several other directors consent innocently to the commission of that offence. In that case, as the clause is drafted, they could be caught with all the draconian consequences that flow from it. I have to accept that the reality is that the prosecutor probably would not prosecute them. However, if there is a way of avoiding the danger that they could be prosecuted, it might be worth considering, because they are not the people against whom the clause is, or should be, aimed.

Mike O'Brien (Labour, North Warwickshire)

The clause is aimed against those who have given informed consent, to use the phrase, in relation to an act that has been done. As the hon. Gentleman said, for a company to be liable, an officer of that company has to have committed the offence. That is the identification principle. Others may connive or consent, but they must know what they are conniving or consenting to. It must be an informed consent, or a connivance, so they must be sufficiently informed that they are aware of the nature—or, at least, to some extent, of the dishonesty or implications—of the act.

Some provisions of this type include neglect, but that is not included here. This is not about somebody who is a bit negligent and does not know; he has to have the ability to take a view on a matter, and then to have taken that view by having given his consent in a practical way. We consider that that informed consent is sufficient to amount to a knowledge of dishonesty. Whether a person is, himself, dishonest might well be a different matter; it is a fine line. The question is whether they are they well enough informed about the implications to have taken a step that amounts to consent based on uninformed knowledge of the possible consequences.

Clause 13

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move amendment No. 15, in clause 13, page 6, line 3, at end add

‘that the Secretary of State may by order prescribe.'.

First, I thank the Solicitor-General for his letter in response to my point made to his ministerial colleague on second reading. The intention of the amendment is to add clarity to subsection 4(b), which defines “related offence” as “conspiracy to defraud” and

“any other offence involving any form of fraudulent conduct or purpose.”

That definition does not have any clear indication of what appendices are intending to be included, and I accept that there are a finite number. It would be of value, in terms of clarity, if the Secretary of State prescribed the offences that he considers to be caught by that definition. Everyone would then be clear about which offences are being referred to in applying section 13. It is a fine point. The Solicitor-General may be able to help me out by saying whether he will accept the amendment or what his definition is—that will have almost the same effect—if he cares to read it into the transcript.

Mike O'Brien (Labour, North Warwickshire)

I am not going to read a definition as such. As drafted, in our view, clause 13 makes clear that the offences under discussion are those involving any form of fraudulent purpose or conduct. That provides the right degree of specification for the context. We should bear in mind that the clause addresses the needs of civil justice and not to be deprived of evidence in property proceedings on the grounds that the answers and documents given may incriminate the person who gives them.

At the stage when someone is giving answers, the matter of whether an answer or a document discloses a fraud under the Bill, or some other type of fraud, may not be clear. It is likely that it will only be clear that his answers might show that some form of fraud has taken place. That might be a fraud that could be prosecuted under the Bill, or possibly under section 458 of the Companies Act, VAT legislation or tax law. We should not tie the law to a specific list of offences which might leave gaps in which a person who does not want to answer questions, might say that it may or may not fit into a particular list.

We want any form of fraudulent purpose or conduct to be covered by that provision. For example, with a list of specific offences, a person might say that the clause does not apply. Therefore, he is not going to answer any questions because he might disclose an offence of benefit fraud, for example, that should be dealt with under the Social Security Acts. We would have to list everything in order to make sure that we do not give a loophole, that someone could use not to answer questions in a civil case.

We could put the Social Security Acts on the list and all the offences that could be characterised as fraud. However, it would be much simpler, more straightforward and understandable for individuals and for the court, to know that we have a generalised definition in the Bill. Ultimately, it will be a matter for the judge in the trial as to whether a party to civil proceedings can refuse to answer questions on grounds of self-incrimination. It is the judge who has to decide whether clause 13 should apply or not and clause 13 exemption applies. Judges are perfectly capable of applying clause 13. Our approach is better than the specific list of offences that the amendment suggests. A specific list would add to a great deal more confusion. It might also encourage persons who wish to refuse to answer questions to find a loophole. Something might not be on the list, which they might have cause to fear, and they might not want to incriminate themselves.

Geoffrey Cox (Conservative, Torridge and West Devon)

Let us suppose the party to the civil litigation was obliged under the clause to concede that part of the property that had been accumulated had been invested in a drugs enterprise. Would he be protected under the first line of subsection (2), as further defined in subsection (4)? I respectfully suggest that he might very well not be, which would be a grave lacuna in the protections under the Bill and likely to be incompatible with the European convention on human rights. If a party to civil litigation—let us say that he is a trustee—is obliged to answer that part of the property has been invested in a drugs enterprise, and if he answers honestly, as he must, he could, as I read the Bill, be prosecuted on the strength of his admission, because drugs enterprises would not necessarily include fraudulent conduct. Will the Solicitor-General give urgent and genuine consideration to the real risk that there is a lacuna in the clause and particularly to the compatibility of its provisions with article 6, among others, of the convention.

Mike O'Brien (Labour, North Warwickshire)

In the end, it will be up to a judge to decide how to apply the provisions. However, I shall examine the hon. Gentleman’s point and its implications, and I shall then write to him, if that is appropriate. I suspect that there is not a lacuna, but he raises an interesting and potentially difficult point, and I ought to give it more thought. If necessary, we can return to it on Report.

David Heath (Liberal Democrat, Somerton and Frome)

This is an interesting point. I am not clear—perhaps I am being particularly obtuse—which judge makes the judgment. Is it the judge in the civil proceedings who determines whether the person can be excused from answering the question on the grounds of self-incrimination?

The Solicitor-Generalindicated assent.

David Heath (Liberal Democrat, Somerton and Frome)

The Solicitor-General is nodding, so that is the point at which the person is excused or otherwise. In that case, what happens in cases where criminal proceedings take place subsequently and the prosecution wishes to use evidence that was given on the basis of a decision by the civil court judge? What if that person was not covered by the clause, and the civil proceedings judge had wrongly directed that the person was obliged to answer the questions, because the offence was not an offence or a related offence under the clause? The judge in the criminal proceedings would inevitably say that the evidence was admissible, and nothing could be done to turn back the clock. The defendant’s convention rights would be breached by virtue of those two decisions, both of which could be entirely proper. Obviously, one of the decisions must be mistaken, but they can both be made in good faith by two judges in quite different proceedings.

A degree of clarity in the definition, rather than it allowing an infinitely expandable group of related offences, would therefore be advantageous. It would be perfectly in order in statute terms to say that all offences are covered by the provision. That would very debatable in terms of convention rights, but it is a perfectly arguable position to say that all offences could be covered. The Minister would then have a provision to say that, on any offence, that the information would not be admissible.

The Minister is in some difficulties, having two points at which an offence is included or not: first, when the judgment is made in civil proceedings, and then when it is made in subsequent criminal proceedings. The judgments can be different on quite proper grounds. So, I invite the Solicitor-General to give that further consideration before Report, as I fear that we may unintentionally be producing a new difficulty through that lack of precision.

Dominic Grieve (Conservative, Beaconsfield)

I am sorry to have been out of the room briefly when the hon. Gentleman first raised the question. It seems to me that it cannot have been the Government’s intention to remove the privilege against self-incrimination in criminal proceedings—if that is indeed what clause 13 does, as highlighted by my hon. Friend the Member for Torridge and West Devon, outside the scope of fraud and related offences—and that in those circumstances, the provision must be wrong. If the Solicitor-General can reassure us on Report or in writing that we have misunderstood the position, so be it. Otherwise, the Government will be constrained to do something about it, because it is clearly incompatible with every principle of law in this country, quite apart from the Human Rights Act 1998.

David Heath (Liberal Democrat, Somerton and Frome)

I think the waters are rather murkier than might have been presumed, so a little further consideration is required, but if the Solicitor-General does not accept that and thinks that the provision perfectly self-evident, I have obviously failed to understand the situation—which is entirely likely, as I do not have the expertise in these matters of the hon. Members for Torridge and West Devon and for Beaconsfield. If I have misunderstood, I would be delighted if the Solicitor-General explained what I have misunderstood.

Mike O'Brien (Labour, North Warwickshire)

Briefly, the intention of clause 13 is to remove the right relating to self-incrimination in property cases. However, if the person answers in civil proceedings, the evidence cannot subsequently be used in a criminal trial—in a drugs case of the sort to which the hon. Member for Torridge and West Devon referred and which I said I would examine in greater depth. If the person refused to answer questions in civil proceedings, the privilege against self-incrimination is not removed, if his answer relates to a drugs offence.

If a person refused to answer but the civil judge ruled that subsection (1) applied, and ordered him to do so, the use of the evidence is prohibited by subsection (2). We do not consider that a criminal judge, who has to comply with human rights legislation, would take a different view from a civil judge. Even if neither applied the Human Rights Act 1998, the evidence would be excluded under section 78 of the Police and Criminal Evidence Act 1984. I think that we are covered, but I hear what the hon. Gentlemen have said, so I shall look again at this complicated area of law. On the face of it, the provision seems reasons, but, as I have indicated, I will look at it again.

David Heath (Liberal Democrat, Somerton and Frome)

I am grateful to the Solicitor-General and look forward to hearing his further consideration at a later stage.

Geoffrey Cox (Conservative, Torridge and West Devon)

I wonder if I might make a supplementary point on the clause. I am necessarily thinking as I go along, but I ask the Solicitor-General to consider one further point. Under subsection (1), and leaving aside the question of “complying with any order” for now, the person would not be excused from

“answering any question put to him in proceedings relating to property...on the ground that doing so may incriminate him”—

leaving aside also the other persons referred to—

“of an offence under this Act or a related offence.”

It would appear that if what the Solicitor-General just said is correct, someone would retain their privilege if answering might incriminate them of a drugs offence. That was the Solicitor-General’s answer to my question. In those circumstances, the defendant would be entitled at the first stage to say to the civil judge, “I am not answering because my answer may incriminate me of an offence.” The difficulty I foresee is that the judge in a civil case will not be able to inquire much further. He may have to say, “Will you tell me for what offence you think I may afford you the grounds to refuse before I can decide whether you are correct?”

I foresee some difficulty that may benefit from further consideration by the Solicitor-General. Would he be good enough to write to me on how the system would work under clause 13? Clearly, if the offence is a drugs offence or another offence unrelated to property, the system will be highly unsatisfactory at the civil stage of proceedings. I imagine that it will be a judge with a glowering face who faces a litigant who says, “I am taking the fifth and the offence is not one relating to property.” It is difficult to see how the system will work, so I would be most grateful for further examination.

Mike O'Brien (Labour, North Warwickshire)

I am very happy to consider that.

David Heath (Liberal Democrat, Somerton and Frome)

The hon. Member for Torridge and West Devon raised a point that I was coming on to: the fact that the litigant must decide during the civil proceedings what he might be accused of at a future stage by a prosecuting authority. He must decide about the range of offences on which he might be indicted before seeking to excuse himself of giving evidence. That is not an entirely satisfactory position to be in. Given that the Solicitor-General has said that he will reconsider the matter and communicate his views to the Committee, and with the specific leave of the hon. Member for Torridge and West Devon because I do not want to catch him out again, I beg to ask leave to withdraw the amendment.

Clause 14

Mike O'Brien (Labour, North Warwickshire)

The clause gives effect to schedules 1, 2 and 3, which set out, respectively, the legislation to be amended, the transitional provisions and savings and the legislation to be repealed by the Bill.

Clause 15

David Heath (Liberal Democrat, Somerton and Frome)

I beg to move amendment No. 16, in clause 15, page 6, line 11, at end insert—

‘( ) The Secretary of State may not appoint a day by order for section (Abolition of conspiracy to defraud) until he has received a report on the operation of this Act, and in any case not earlier than three years after the commencement of the Act.'.

Martyn Jones (Labour, Clwyd South)

With this it will be convenient to discuss the following: New clause 2—Abolition of conspiracy to defraud—

‘(1) The common law offence of conspiracy to defraud is abolished for all purposes not relating to offences wholly or partly committed before the commencement of this Act.

(2) An offence is partly committed before the commencement of this Act if—

(a) a relevant event occurs before its commencement, and

(b) another relevant event occurs on or after its commencement.

(3) “Relevant event” in relation to an offence, means any act, omission or other event (including any result of one or more acts or omissions) proof of which is required for conviction of the offence.'.

New clause 9—Abolition of conspiracy to defraud—

‘The offence at common law of conspiracy to defraud shall be abolished and no further prosecution brought thereunder, upon the expiration of a period of five years from the day on which this Act is passed, unless there has been a resolution of both Houses of Parliament within the said period to a contrary effect.'.

David Heath (Liberal Democrat, Somerton and Frome)

We come now to the clauses on commencement. The amendments deal with the common law offence of conspiracy to defraud. We could have a long debate on the merits or otherwise of the offence, but that would not be a productive use of the Committee’s time because there is broad agreement on both sides that the common law offence should be abolished. That is the theoretical position of the Law Commission, which indicated that it was insupportable to retain the offence in law once the new statute was in place as a replacement. However, on Second Reading, the Minister said, quite properly, that although he wanted the common law offence to be abolished, he had to take note of the very strong reservations expressed in the consultation process, not only by the wider spectrum of consultees but specifically by parts of the judiciary, who together with some of the prosecuting authorities perceived the offence of conspiracy to defraud as being of value.

I slightly discount the opinions of prosecuting authorities, because it is always helpful to them to have the widest possible number of offences at their disposal to secure a conviction. For them to argue that they should have a wider spectrum, even in the context of new offences, is to some extent to be expected and is natural. However, it is not a position that we as a legislature should take if we are content that the full range of offences under the broad title of fraud is covered by the new law.

The offence of conspiracy to defraud has been widely criticised. As I said on Second Reading, one of my principal concerns about it is that, because it is a catch-all offence, it provides a very straightforward route by which the dual criminality requirements of an extradition application can be met. It is easy to establish that someone has, or could have, committed the offence in this country and that that person is therefore extraditable on a related fraud offence in another country. I instinctively feel that that is a dangerous position.

Despite having listened to the arguments on both sides and being firm in my conviction that the offence of conspiracy to defraud should be removed at the earliest opportunity, I accept the Minister’s comment that he would prefer a “suck it and see” approach in the short term, so that an assessment can be made of how the new offences bed down and of the pattern of prosecutions. He was kind enough to provide the draft guidance for prosecutors, which I think is extremely helpful.

We therefore have a choice. The first course of action open to us is to have a period of review in which the Solicitor-General or the Attorney-General carefully consider the prosecution patterns and whether there have been offences that have proved impossible to prosecute except under conspiracy to defraud, followed by introduction of new primary legislation to abolish the common law offence. Alternatively, at this stage and as a better process, we could incorporate into the Bill a provision for abolition, with safeguards for the Minister in the form of a delay in commencement, as I have suggested, or a sunset clause for the offence, as suggested in the amendment tabled by the hon. Member for Beaconsfield. Either approach ends at almost precisely the same result. The hon. Gentleman’s approach has an automaticity that mine does not—mine simply allows for a delay in commencement of the relevant part of the Bill until such time as the Minister introduces an Order in Council. To some extent mine is a more Government-friendly amendment than the hon. Gentleman’s in that his forces their hand, whereas mine invites them to consider the point. The merit of both courses is that we would not have to start from square one with a new Bill or find another suitable vehicle for the repeal or abolition of the conspiracy to defraud offence. Either way, the spade work is done, the legislation is on the statute book and someone only has to press the button to make it happen.

Given that the Solicitor-General has made it clear that he would prefer to abolish the offence in due course, it is unquestionably better in procedural terms to deal with it in the Bill now, rather than revisit the matter later. However many Home Office and Department for Constitutional Affairs Bills we have to deal with month in, month out and year in, year out, hon. Members can bet their lives that someone will say that none of them are appropriate for the specific purpose and there will be a substantial delay, which is avoidable and unnecessary. I commend my amendment and the new clause to the Committee.

Dominic Grieve (Conservative, Beaconsfield)

The hon. Member for Somerton and Frome is quite right: new clauses 2 and 9 set out different ways to achieve the same thing. I prefer my amendment, because the implication in the hon. Gentleman’s is that although the common law offence of conspiracy is abolished, that can be delayed to enable a review to take place. I drafted my amendment on the basis that we should have a five-year period to see how the new Act operates, after which it would be incumbent on the Government, if they decided to keep the common law conspiracy to defraud offence, to get a resolution of both Houses of Parliament to do so. I was trying to reflect the debate on Second Reading. I was persuaded by the Solicitor-General and by rereading the Bill that in the next five years we may conclude that, despite best efforts, the common law offence of conspiracy to defraud must be retained. I am open-minded about that. The arguments about why it would be desirable to get rid of the offence—if that is possible—have been well rehearsed.

The common law offence is wide and has some unintended consequences, the worst of which is the possibility of an individual being prosecuted for conspiracy to commit an offence which, if he had acted on his own, would not amount to a substantive offence at all. That has always been the greatest criticism levelled against it. However, having said that I also accept—after conversations with others who have had greater use of the conspiracy offence—that it is and may remain an important tool in bringing prosecutions that cannot be covered by the offences that we have identified.

I am open to persuasion. I should like the common law conspiracy offence to go, but that might not be possible. New clause 9 would enable that to happen in a straightforward fashion. If there were unanimity that it should not go within five years, the Government would only have to introduce a resolution in both Houses of Parliament, on which we could vote pretty readily—it is a matter of half an afternoon’s business in both Houses—in which case we would have decided that it should remain. Knowing after nine years in the House how the place works, my worry is that if we do not do that or accept the proposal advanced by the hon. Gentleman, it will be difficult to find Government time even for a short Bill to get rid of the common law offence of conspiracy. I should add that it would be difficult whether the present Government or a Conservative Government were in office. That is the reality, so I do not want us to let this moment pass and lose the opportunity for what I think can be relatively short consideration, probably backed up by a report produced by the Government or a further report produced by the Law Commission on which Parliament can base a final decision, having had an opportunity to see how the Act works in practice.

I urge the Government to consider in a constructive light either my proposal or that of the hon. Member for Somerton and Frome, because it is difficult to see, particularly as regards new clause 9, any real downside for the Government in accepting it, or any downside in the operation of the courts system or the bringing of justice. It is a simple device that would ensure that, within the next five years, the matter would be reconsidered in a manner that did not take up too much of the House’s time, and we could make a final decision with the benefit of a more informed view of the operation of the legislation.

Jeremy Wright (Conservative, Rugby and Kenilworth)

It seems clear in the draft guidance that the Solicitor-General has helpfully allowed all of us on the Committee to see that the Government’s intention is, if they can, to persuade prosecutors not to use the common law offence, but to use instead the new statutory offences in the Bill. As has been said, there is a measure of agreement in the Committee that that is a wise thing for the Government to do. If that is the case, it would also be wise of the Government to make it as clear as possible to prosecutors that the Government’s intention is that the common law offence should, if possible, be phased out. Adopting new clause 9 would give the clearest possible signal in that regard and might help the Government to achieve what they are properly trying to achieve in the draft guidance. For that reason, I support the new clause.

Geoffrey Cox (Conservative, Torridge and West Devon)

Not having been present for previous debates on the Bill, I am uncertain of the basis on which the Solicitor-General advanced the argument for continuing the conspiracy to defraud offence. I can understand the need to see how the clause unfolds—I was going to say “unravels”, but that would probably be an unfortunate way of putting it. I hope that it does not unravel. I can understand the need to see how the clause unfolds in practice in the courts. It is presumably possible to indict a defendant for conspiring to commit fraud under the Bill, so that one would have a charge of conspiracy to commit fraud with the particulars of the offence to be committed in one of the three ways set out in the Bill.

If the Government’s objective of drawing a wide offence of fraud is achieved, it is hard to see what is left for conspiracy to defraud. I know that the Solicitor-General is not necessarily saying that anything may be left; it is just a question of testing to see. I imagine that I am right about that, but if any specific instance or occasion of fraud were thought to be omitted potentially from the Bill, I would be interested in hearing about it in the Minister’s response. I, for my part, cannot see one and I am surprised by the Solicitor-General’s want of confidence in the Bill that he is presenting.

Fraud is a broadly defined offence and it seems to me that there will be little opportunity for indicting the common law conspiracy to defraud. Judges will, I suspect, want to hear a justification in the light of the Act—as the Bill will be—for why the common law conspiracy is being indicted. Once the Bill becomes law and has settled into the mind of the profession, I would be surprised to see any further conspiracies to defraud on indictment, because judges have historically wanted to understand what it is about a conspiracy to defraud—a common law conspiracy—that it is required on an indictment. Why not a substantive offence? Why not a conspiracy to commit a substantive offence? When the new offence exists, they will ask, “Why not conspiracy to commit these substantive offences, or this offence committable in a number of ways?” Many prosecutors will feel, before they put a conspiracy to defraud count on the indictment, that they will be forced to justify it in a preliminary hearing, or possibly a preparatory hearing. I suspect that they will be deterred by that prospect when the Bill is enacted and its provisions become available to them.

I wonder whether there will be many opportunities for the Government to watch how this measure is used. I hope that I have not perplexed the Solicitor-General; If I have not made my point clear, it is basically that if I were prosecuting, and I had this measure to indict fraud, whether it be on the basis of a conspiracy to commit it, or a substantive charge of fraud, I would expect the judge to be quite harsh to me if I chose to indict for a conspiracy to defraud. He would want to know why—what was the specific reason? What did I espy in the conspiracy to defraud that went wider than the charges of conspiracy to commit the other substantive offences?

I suspect, therefore, that there will not be much testing of the provision. I very much doubt whether many conspiracies to defraud will be seen on the indictment. I imagine that the Solicitor-General will respond, “Well, if that’s the case, then so be it—we’ll get rid of it,” but if, as I predict, it simply withers on the vine, would it not be better to interpolate into this Bill a provision for its termination, than to wait for all the process to be gone through, in years to come? It would have to be removed by a special Act of Parliament, or by some insertion in another Act reforming the criminal law; I would suggest the latter.

Mike O'Brien (Labour, North Warwickshire)

I hoped not to have to go into why we need to retain conspiracy to defraud, because I thought that there was consensus on that, but for the benefit of the hon. Member for Torridge and West Devon I shall explain why we need to retain it. There is broad consensus that we probably need to retain it for the time being, because there are circumstances in which it may need to be used. I have circulated a copy of the working draft of the Attorney-General’s guidance on the use of the common law offence of conspiracy to defraud and the circumstances in which it may continue to be used. I hope that the hon. Gentleman has it; we hope to be able to publish it when Royal Assent is given to this Bill. The aim of that guidance is to indicate the Attorney-General’s wish that we do not use conspiracy unless it is necessary to do so, but it accepts that there may well be circumstances in which it is necessary.

We wish to review the operation of conspiracy to defraud after three years. We want to see how this Bill, when it is law, affects the way in which prosecutions take place. We hope that it will cover most circumstances, although it will not cover them all, and that the courts and prosecutors can therefore examine the Bill and other legislation to see whether most of the mischiefs that we want to deal with can be dealt with otherwise than by conspiracy to defraud.

We all want that common law offence to be removed, and we hope that we will be able to do that in due course. We hope at the end of three years to be in a position to say that we will remove it. We all accept that we need to wait for that three-year period to end. My concern about the amendments is that they seem an untidy way of going about that removal. Having a sword of Damocles dangling over the legislation, or over the common law offence, would create a level of uncertainty among prosecutors about whether they ought to be charging it. Parliament will clearly have said that it should not be there, and there will be a time scale on it. Well, perhaps we do that with other offences, but in this circumstance we would be saying, over a period of five years—or, alternatively, a shorter period—that the intention is to get rid of it. The concern is that that would have a negative effect on our prosecutions from the moment of Royal Assent, as Parliament would have expressed its view that the offence should be abolished. There would then be uncertainty and possibly a little confusion among prosecutors about how very serious alleged offences and offenders should be investigated and charged, and whether they should be using the offence at all. Arguably, there would be the Attorney-General’s guidance to reassure them, but there would also be the will of Parliament suggesting that Parliament does not have a great deal of faith in this offence. That is an untidy and uncertain way of proceeding.

I do not think that there is any great difference in view, at least among Front Bench Members, on what ought to be done. In terms of how things should be done, I think that there is a fear that perhaps the Government will not get round to doing them. I have noticed—the Opposition have made quite a point of saying this—that there has not been a dearth of criminal justice Acts in recent years. I suspect that in the coming years there will not be a dearth of such Acts either, and that will enable conspiracy to defraud to be dealt with.

Dominic Grieve (Conservative, Beaconsfield)

My heart sinks. The last thing that I want to do is to encourage another criminal justice Act in any circumstances. Swords of Damocles concentrate minds wonderfully. The one thing that I have learned in politics in the past nine years is that most of the problems that we experience are due to inertia. Anything that shifts inertia is worth having.

I find it difficult to accept that introducing my sunset clause will suddenly mean that the existing law becomes unusable. I find that a poor argument. There are sunset clauses for all sorts of other things that we have done—or that we do—in this Parliament. They do not mean that the legislation becomes unusable as a result.

Mike O'Brien (Labour, North Warwickshire)

Not so much unusable, because that is not what I have argued. I have argued that such a provision would produce uncertainty. It is untidy and uncertain, and that uncertainty would lead to some prosecutors feeling that they should not charge under conspiracy to defraud. That might well mean that the full range of the culpability of a particular defendant might not be covered, even though our intention is that it should be.

We are saying, “Prosecutors, you need to continue to use this in particular circumstances”—we shall discuss those in a moment—“but we do not think it is a good piece of law and we intend to abolish it in due course.” Sunset clauses have been used on occasion, but they are not the best way of proceeding. They have some faults, particularly when we are dealing with a common law offence that is based on case law and the development of the law over a long period. There is an understanding of it and the way in which it should be used. That understanding would be complicated by a sunset clause that says, “This isn’t very good at all. You ought not to use it—or you should not use it very much—except when the Attorney-General says perhaps you should.” It is probably workable to do what the hon. Gentleman says; it is just that it is not the best way of proceeding. This is matter of judgment. Such a provision would be untidy and would lead to a degree of uncertainty that we do not need.

I do not think that we will be in a position where we are unable to remove the provision in three years’ time, because a Bill will doubtless be present then, or shortly thereafter, to allow a Government to deal with a conspiracy to defraud—a common law offence—and to remove it from the statute book if that is the desirable approach.

Jeremy Wright (Conservative, Rugby and Kenilworth)

I would entirely follow the line of argument that the Solicitor-General is taking if it were not for the fact that the Government, by the draft guidance, are clearly trying to influence the behaviour of prosecutors. He cannot have it both ways. He cannot argue that the problem with new clause 9 is that it would deter prosecutors from doing what they were otherwise going to do when the draft guidance has precisely that effect. Surely it must be right that if over the next three or five years prosecutors, despite the draft guidance, say that conspiracy to defraud is the appropriate charge in a large number of sets of circumstances, under the proposed procedure set out in new clause 9 both Houses of Parliament would understand that and doubtless conclude that conspiracy to defraud, as a common law offence, should remain.

Mike O'Brien (Labour, North Warwickshire)

The approach that prosecutors will actually take is set out in the draft guidance. Paragraph 6 reads:

“In selecting charges in fraud cases, the prosecutor should first consider”—

which we have—a couple of tests:

“whether the behaviour could be prosecuted under statute—whether under the Fraud Act 2006 or another Act or as a statutory conspiracy;”

and, further,

“whether the available statutory charges adequately reflect the gravity of the offence.”

Those tests need to be passed, but we are not deterring a prosecutor from using conspiracy to defraud where that is the most appropriate approach. We are saying that if one is considering that, look at the tests set out by the Attorney-General and then make a decision about whether one should proceed by way of conspiracy to defraud. In many cases, I suspect that a prosecutor will decide that that is the appropriate way to proceed. Then we will be able to consider the outcome of those cases and take a view in three years’ time as to whether it is appropriate to decide to remove conspiracy to defraud, not just because of the Bill but because other pieces of legislation and other views about how legislation should develop will have come to pass.

I will deal with the point of the hon. Member for Torridge and West Devon because that will enable me to elaborate what else will take place. We have a number of things moving forward by way of consideration of how legislation should develop that may well have an impact. The Fraud Bill—or the Fraud Act, as in due course I hope it will become—is not the whole answer to the issue of conspiracy to defraud in the common law offence. Even when the Bill receives Royal Assent there will be examples of dishonest conduct that it will not be possible to prosecute under statute; for example, where it is intended that the final offence be committed by someone outside the conspiracy. So, a group of people has conspired in order to defraud, but the final act is committed outside the conspiracy. Secondly, there will be cases where it cannot be proved that the accused had the necessary degree of knowledge of the substantive offence, so the degree of knowledge is an issue there. Moreover, as Lord Rose’s Committee—which took a very strong line on support for conspiracy to defraud remaining as an option for prosecutors—emphasised, conspiracy to defraud is a vital tool in prosecuting cases with multiple defendants and multiple frauds.

Therefore, vital as the Bill is, other pieces of the jigsaw have to fall into place before the offence can be safely repealed. In addressing the issue of multiple offences, we need time to gauge the effect of the Lord Chief Justice’s protocol on the control and management of heavy fraud cases and the sample count provisions in the Domestic Violence, Crime and Victims Act 2004 that we hope to implement later this year.

In ensuring that the law fully covers forms of participation in crime that do not amount to statutory conspiracy, we need to consider a new law on assisting and encouraging crime in the light of the Law Commission’s study of that issue, which we hope will be published shortly. That again may lead to new law, which may affect the way in which conspiracy to defraud is able to be removed.

The Government’s review, which is expected in three years’ time, will thus need to consider the situation not only in the light of the practical operation of the new fraud offences, but other relevant changes including any that may flow from the ongoing review of fraud. We hope that that fraud review will be published shortly. I cannot give a precise date at the moment, but I am aware that the conclusions are nearing fruition. That, too, might have an impact.

If the conclusion of the 2009 review is that the offence should be abolished, that would be achieved with proper safeguards after a time in which the Government and Parliament have been given a proper opportunity to consider the matter, including whether any alternative provisions are required. To suspend the sword of Damocles over the whole proceedings would not be the best approach. It would lead to an element of confusion. I hope that the Committee will not consider that an appropriate way to proceed. It is important to remember that one possible, indeed likely, scenario is that we will not just repeal conspiracy to defraud but simultaneously make other changes on statutory conspiracy or criminal procedure. We do not know what those changes might be, because they have not yet been recommended by the appropriate committees, but we may well have to examine a different way of covering parts of conspiracy to defraud in a more satisfactory way that will require different legislative changes. The amendments would not allow for that; they would mean simply that the offence was going. That could create a level of difficulty in developing future legislation that we really do not need.

The Government have made it clear that they are committed to repealing conspiracy to defraud at some stage. We have said that

“it remains our long-term aim to repeal this common law crime and we will review the position”

in due course. We need to be sure that all the pieces of the jigsaw are in place before we make the decision to repeal, and it would be inappropriate to do so now.

David Heath (Liberal Democrat, Somerton and Frome)

That was an interesting little debate. One must assume that prosecutors will not listen to the Solicitor-General when he says that the Government’s clear intention is to repeal the law, because if they did they might become confused as to whether they are to use the conspiracy to defraud provisions. As an aside, I think that Damocles and Canute dealt wisely with people who got the wrong end of the stick. In the case of Damocles, the concentration of the mind was greatly enhanced by the provision of his simple memento mori.

I take seriously what the Solicitor-General says on the matter, and he rightly says that there are not great differences in the Committee on what we want to see. I welcome the guidance, which carries a clear intimation that the conspiracy common-law offence is no longer the preferred route for prosecutions. I part with him on his view that it will be the lot of a future Government to repeal the provision. In my experience, Governments are not very good at repealing laws or removing offences. They are very good at creating new offences and laws, which is why we have criminal justice Bills coming one after another like buses in the high street, but we do not often have Bills that repeal existing offences or laws. That is one of the difficulties of our system: it has a ratchet effect. We constantly accrete new laws but we do not remove the old ones, thus ending up with more confusion and a less comprehensible legal system.

There was a great deal of merit in what the hon. Member for Beaconsfield said about a sunset clause, but I understand why the Minister might be nervous about that. To an extent it would take the matter out of his control, meaning that he or his successor would have to take action to prevent the law from being repealed. I concede that there is a possibility that that might affect the view of prosecutors, as we approach the time of the expiry of the offence, as to whether it is a proper offence to prosecute. I do not think that that can possibly be true of the commencement clause that I have suggested as an alternative device. It is common for Government to put provisions in Bills and then not to commence with them when the Bill comes into force. One of the reasons why we have difficulties with conspiracy to defraud is the problem of multiple counts, which we dealt with in a provision in the Domestic Violence, Crime and Victims Act 2004 that the Government have not yet brought into force because it has a delayed commencement.

This is a perfectly normal way of dealing with things as far as this and other Governments are concerned. Therefore, it is within the gift of future Ministers never to commence this part of the Bill if the evidence is that the conspiracy to defraud offence is still required to prosecute certain cases. I do not accept that it shows any lack of clarity or decisiveness on the part of the Government simply to provide the means by which a future Government can take a decision without having to start from scratch with primary legislation. I hope that my new clause 2 passes the drafting test, as it is lifted directly from the original recommendations of the Law Commission, which is pretty good at drafting such things.

I still believe that the Government would be much better advised to include the provision now and then to make a decision in three, four or five years’ time—at any time, in fact, as there is no time limit. My new clause requires only that commencement should not be within three years in order to accommodate the Solicitor-General’s reservations, but it does not require him to take action at any stage unless he or his successors are satisfied that the law is working properly. The new clause would mean that we would not have to start with new primary legislation.

In conclusion, I remind the Committee what the Law Commission had to say about conspiracy to defraud. It stated:

“On any view, the present position is anomalous and has no place in a coherent criminal law.”

It could not have been more damning of the use of this offence. The purpose of the Bill is to replace it, and replace it it does. Reservations are still expressed partly because we have not implemented the multiple count provisions and partly because nobody is absolutely sure that circumstances would not arise in which conspiracy to defraud or something similar might be required. In three or four years’ time, we will know that. We will know whether there are any circumstances in which it makes sense to retain a common law offence of this sort. My suspicion is that there will not have been any such circumstances, and my provision would make it easy for the Government then to take a decision without wasting parliamentary time. I am still hopeful that the Minister will reconsider that between now and Report.

If the hon. Member for Torridge and West Devon is not planning to intervene on me at this stage, I beg to ask leave to withdraw the amendment.