Definitions & Legal Issues
The deception must operate to cause the payment of the money or the handing
over of the valuable thing or financial advantage.
Recklessness operates when a person considers the possible consequences of
their actions but acts anyway with indifference to the consequence that they
have considered.
A deception will operate, for example, where a withdrawal slip is presented
to a teller and the person presenting it knows that they had no entitlement to
the money in the account on the withdrawal slip.
"Valuable thing" has a wide meaning and is likely to include a
cheque.
"Deception" is defined to mean: Deception (whether deliberate or
reckless) by words or conduct as to fact or as to law, including:
A deception as to the present intentions of the person using the deception or
of any other person; and
An act or thing done or omitted to be done with the intention of causing (i)
a computer system, or (ii) a machine that is designed to operate by means of
payment or identification, or (iii) to make a response that the person doing or
omitting to do the act or thing is not authorised to cause the computer system
or machine to make.
Fraud Investigations
Most companies and financial institutions now have their own investigation
staff to monitor the behaviour of staff, to protect against offences of stealing
by employees but also to monitor behaviour of staff and other persons whose
conduct falls within that prohibited by various offences in the Crimes Act. For
example, monitoring may reveal an employee of a bank transferring funds from an
account at the bank to his or her own account for that persons own benefit.
Credit Applications and other loan applications are also monitored and
investigations conducted where there are questions about the identity or
statements made by persons when making applications for credit cards and loans.
If you are investigated by the Police or by investigations staff about a matter
allegedly involving fraud, you should seek legal advice before making any
statements, particularly before conducting any recorded interviews which may be
used in evidence in future proceedings.
Definitions & Explanations
The following definitions are of words or phrases commonly used in connection
with offences involving fraud:
"Property" includes every description of real and personal
property; money, valuable securities, debts and legacies; and all deeds and
instruments relating to, or evidencing the title or right to any property, or
giving a right to recover or receive any money or goods; and includes not only
property originally in the possession or under the control of any person, but
also any property into or for which the same may have been converted or
exchanged and everything acquired by such conversion or exchange whether
immediately or otherwise.
To do something "fraudulently" means to act dishonestly.
"Dishonesty" - This term will be considered according to the
standard of ordinary decent people.
"Deception" - is defined to mean: Deception (whether deliberate or
reckless) by words or conduct as to fact or as to law, including:
- A deception as to the present intentions of the person using the deception or
of any other person; and
- An act or thing done or omitted to be done with the intention of causing;
- A computer system; or
- A machine that is designed to operate by means of payment or
identification;
To make a response that the person doing or omitting to do the act or thing
is not authorised to cause the computer system or machine to make.
SPECIFIC FRAUD OFFENCES UNDER THE CRIMES ACT (NSW)
LARCENY AND EMBEZZLEMENT BY CLERKS OR SERVANTS
It is an offence under the Crimes Act of New South Wales for a clerk or
servant to steal any property belonging to his or her employer. The maximum
penalty listed is 10 years. A clerk or servant is defined broadly by the Act to
include any person who is employed in the capacity of a clerk or servant or as a
collector of moneys, and includes people who are employed in that position only
on a temporary basis. The maximum penalty is higher that the usual penalty for
larceny because of the relationship of trust between the employer and the
employee or servant in the position of clerk or servant. A person shall be
deemed to be a clerk or servant even if the person had no authority to receive
money or property from his or her employer if in fact he or she did receive
money or property which belonged to the employer and he or she stole it. To
steal an item of property, one must take the property with an intention to
permanently deprive the rightful owner of it and have no claim of right to the
property, that is, no right recognised by the law as a property right to possess
that property. So if a customer comes into a shop to return a jumper and receive
a refund, if the employee of the shop then steals the jumper, he or she is
guilty of larceny as a servant. If the customer was the employee's mother and
she was returning the employee's own jumper, then the employee has a claim of
right and there can be no larceny as a servant.
The law also imposes the same 10 year maximum penalty for embezzlement by a
servant or clerk. The difference between embezzlement and larceny is that it is
larceny where the property is in the possession of the employer and it is
embezzlement where the property is taken by the clerk or servant before the
property comes into the possession of the employer, but the property must be
received by the clerk or servant on behalf of the employer.
DESTRUCTION OR FALSIFICATION OF RECORDS BY CLERK OR SERVANT
It is an offence carrying a maximum penalty of 5 years for a clerk or
servant, or anyone acting in that capacity, to do any of the following things:
- destroy, alter, mutilate or falsify any book, paper, writing, valuable
security or account belonging to or in the position of or received for his or
her employer; or
- make, or concur in making, any false entry in or to omit or alter, or concur
in omitting or altering, any material particular from or in any book, writing or
account referred to in paragraph (a) above, with intent to defraud.
LARCENY BY PERSONS IN THE PUBLIC SERVICE
The Act extends to make it an offence carrying a maximum penalty of 10 years
for any person employed in the Public Service to steal any property, or any part
thereof, entrusted to him or her or taken into his or her possession, custody or
control by virtue of his or her employment as a Public Servant.
The statute reflects in part the extra standards expected by the community,
and thereby in the law, of persons in responsible positions of trust, such as
persons working in the public sector.
The person must have authority to receive the property which is the subject
of the charge in order for it to come into his or her possession, custody or
control by virtue of his or her employment as a Public Servant.
Again, it is a maximum penalty of 10 years imprisonment if a Public Servant
embezzles property which has come into his or her possession, custody or
control. The statute is worded so that it includes any fraudulent secreting or
removal of the property, or any fraudulent application. "Property" in
the statute includes any part of the property.
AGENT MISAPPROPRIATING MONEY ENTRUSTED TO HIM OR HER
It is an offence for an agent who is "entrusted" with any money or
security for the payment of money (for example, a cheque) with a direction from
another person in writing to apply any or all of the money or security to any
purpose, to misappropriate it in violation of good faith and contrary to the
terms of such direction. The offence carries a maximum term of 10 years jail.
"Entrusted" is defined as meaning both entrusted solely or
entrusted jointly with any other person.
In practice, this sort of offence can be one of the most difficult to prove.
Often there will be minute details of evidence which may affect whether or not
an offence has been committed. For example, what was the precise agreement or
direction between the person giving the money and the person to whom it is
"intrusted"? Was there a commercial relationship? Is it really a
matter of a commercial debt, rather than a criminal offence? It will often come
down to conversations between people, where recollections may not be complete or
accurate.
Our advice therefore, it to get professional legal advice if you are charged
with this offence, say nothing to the police, do not participate in any
interview, and make as detailed written statement as you possibly can to give to
your lawyer for the purpose of legal advice.
It is also an offence for an agent intrusted with property to sell that
property fraudulently, or to otherwise transfer or pledge the property
fraudulently.
Equally, a person who does so under a power of attorney commits an offence
with a maximum penalty of 10 years jail.
FRAUDULENT APPROPRIATION OF PROPERTY BY DIRECTORS
It is an offence under the Crimes Act for a director, officer or member of
any body corporate or public company to fraudulently take or apply to his or her
own use or benefit, other than the use or purpose of the body corporate or
public company, or to fraudulently destroy the property of the body corporate or
public company.
The maximum penalty listed is imprisonment for 10 years.
An "officer" is to be given its ordinary meaning in this section
and it is not necessary for that person to be an employee of the body corporate
or public company. However, the term "executive" is not used and its
use as a title or position in the company or body corporate is not the final
test to be adopted by the Court. The Court will look to all the surrounding
circumstances when making a decision.
The statute therefore includes both officers and directors of the body or
company. Directors ought not to think that they are immune from prosecution in
relation to the operations of their company.
Similarly, it is an offence for a director, officer or member of a body
corporate or public company to destroy or alter the records or books of the body
or company, or to cheat or defraud the body or company, once again carrying a
maximum penalty of ten years jail in each case.
There are other, specific offences with respect to the management of
companies in the Crimes Act and also in the Corporations Law, which applies
throughout Australia in a uniform system of laws, and our advice is that if you
have been charged or are under investigation by police or the Australian
Securities Commission in relation to any alleged offence then you should seek
specialist legal advice urgently.
CIVIL CLAIMS FOR FRAUDULENT MISREPRESENTATION (DECEIT)
The preceding pages deal with a fraud action taken by authorities whereby the
penalty would usually be a fine or a jail sentence imposed by the Court and
payable to the Court. An individual seeking compensation for damages for a
fraudulent misrepresentation may have a civil action under the tort of
fraudulent misrepresentation (deceit).
For an action of fraudulent misrepresentation (deceit) to be successful an
individual (plaintiff) must prove five (5) elements. The onus of proof is on the
plaintiff throughout the matter, but an evidentiary burden may fall on the
defendant to displace inferences to be drawn from the facts.
Element number 1: The first element required is that there must be a
misrepresentation of facts. The misrepresentation of facts may be oral or
written or may be imparted by conduct. It has been held by the Courts that
silence or mere failure to disclose the truth cannot amount to a
misrepresentation. Notwithstanding it has been held that only telling half the
truth and ignoring other significant facts may amount to a misrepresentation of
the total facts. Further, a change circumstances may have the effect of changing
a true statement into a false statement if the representee does not communicate
the fact of the change in circumstances to the representor.
A misrepresentation of law will not found an action for deceit. Unfortunately
the dividing line between fact and law is in most cases blurred and a
misrepresentation as to a state of law in a particular case might nevertheless
be regarded as a misrepresentation of fact in another.
Some people, such as company directors are required by common law legislation
to disclose certain information and therefore they have a heavier burden with
respect to this element.
Element number 2: Scienter (knowledge of falsity). This element requires that
the representor must have known the misrepresentation to be untrue or the
representor made a misrepresentation recklessly, that is, not caring whether it
was true or false. Mere carelessness is not sufficient to satisfy this element.
Element number 3: Intended reliance. This element requires that the
representation must have been made by the representor with the intention that
the plaintiff would act upon it. This does not necessarily mean that the
misrepresentation need be made directly to the plaintiff. For example, a
representation to an early owner cannot be invoked by subsequent purchaser
unless the representor intended the subsequent purchaser also to act on the
misrepresentation. But if the representor has made a misrepresentation and
intended a certain class of people to act upon it, for example purchasers, and
then if the individual is one of that class then this element will be satisfied.
Therefore a person who makes a false and fraudulent misrepresentation is only
liable to the persons to whom it is made, that is, to the persons whom it is
intended should act upon it. It is not necessary for liability that the
misrepresentation should be made directly, it can be made to one, to be passed
onto another; it is not necessary that it should be made to a particular person;
it can be made to a group to which the plaintiff belongs so that the plaintiff
is one of those intended to be deceived. The representation must, however, in
one way or another, be made to the plaintiff to induce him to act upon it.
Element number 4: Reliance. This element requires that the plaintiff has
relied on the misrepresentation and as a result has suffered a detriment.
Therefore a representee's knowledge of the falsity may not necessarily defeat
the claim. It is no defence that the representee had means at his disposal to
check the accuracy of the representation.
Element number 5: Damage. The last element requires that damage must have
been suffered by the plaintiff which was a direct and foreseeable consequence of
the misrepresentation. The amount of damages can include: the loss suffered as a
result of the deceit, including consequential loss. It has also been held that
aggravated damages may be available.
Statutory remedies:
If the defendant's conduct is "in trade or commerce" the plaintiff
may have recourse to the Trade Practices Act or the Fair Trading Act.
Section 52(1) of the Trade Practices Act 1974 Commonwealth prohibits a
corporation in trade and commerce from engaging in conduct that is misleading or
deceptive or is likely to mislead or deceive. Misleading or deceptive conduct
not caught in the net of the Commonwealth Trade Practices Act will most likely
be caught under the Fair Trading Act. The Fair Trading Act is a New South Wales
Act which has provisions which mirror the misleading and deceptive provisions of
the Trade Practices Act.
In most cases if a person makes a statement in trade or commerce and by
reason of this misrepresentation the plaintiff suffers financial harm, the
plaintiff will be better advised to pursue an action under the Trade Practices
Act or the Fair Trading Acts rather the common law tort of deceit. The
advantages of these statutes is that it does not impose on the plaintiff the
burden of proving the defendant's state of mind.
The advantages of pursuing an action under the common law of deceit is that
the plaintiff need not have taken reasonable care to check the defendant's
statement. Therefore the plaintiff who is particularly gullible and who takes no
measures to check the representor's statement and suffers as a result, more from
his/her own foolish, may not have a remedy under statutory provisions because
under those provisions an objective reasonable man test is usually applied. But
the plaintiff's gullibility would not preclude suing the defendant under the
common law tort of deceit. Further if the defendant's misrepresentation was not
in trade or commerce then the plaintiff may have no other choice but to rely on
the common law action.
OBTAINING CREDIT BY FRAUD & FALSE PRETENCES
Another significant area of the Crimes Act in relation to fraud is the
offence against obtaining credit by fraud.
It is an offence to incur any debt or liability or to obtain credit by any
false pretence or by a wilfully false promise, or partly by false pretence or
wilfully false promise, or by any other fraud.
The offence carries a maximum penalty of 1 years jail.
Again there is a fine line often between what may be allegedly fraudulent
conduct and what in reality is a commercial debt which can be sued for in a
civil Court. Specialist legal advice should be obtained before entering any plea
of guilty to this charge, or any charge related to fraudulently obtaining goods
or benefits.
In relation to fraudulently obtaining goods, the Crimes Act makes it an
offence for any person to obtain from any other person property, with intent to
defraud, by any false pretence or wilfully false promise (or partly false
pretence and partly wilfully false promise). The maximum penalty is 5 years
jail.
Similarly, it is an offence carrying a maximum 7 years jail to falsely
personate or pretend to be another person with intent to fraudulently obtain any
property.
CONCLUSION
We have not attempted to list exhaustively all the different areas of fraud
in the Crimes Act, and we have only mentioned the Corporations Law provisions in
passing. There is simply too much material to cover it all in detail in the
space available here.
Each case will turn on its own facts. In cases of alleged fraud, often the
police become involved in what is really a commercial arrangement gone bad. One
person is owed a debt and the police become involved on a criminal investigation
when in reality the remedy for the person owed the debt is to sue the debtor in
a civil Court.
It is vital then that if you are under investigation by police that you
exercise your right to remain silent until such time as you can obtain
specialist legal advice.
This applies equally to investigations being carried out in the context of a
company or body corporate, for example, by auditors. Resist the temptation to
speak to auditors. Anything that you say may later be used in evidence. It is
far better to exercise your right to remain silent, use the advantage of the
presumption of innocence, and then have the case against you presented to you by
the prosecution (in the form of a brief of evidence which must be served on you
or your solicitor at least 14 days before any hearing of the criminal charges)
so that you can then spend the time that is necessary to answer detailed
allegations, often about specific transactions which occurred some time in the
past.
It is far easier to mount a successful defence this way, than to allow
yourself to be drawn into answering questions to auditors or police or other
investigating officials, in a pressured situation where you do not have all the
facts and figures at your fingertips. Remember, get legal advice URGENTLY and
exercise your right to remain silent until you speak to a solicitor.
FURTHER INFORMATION
This information is provided by the firm of Ryan & Bosscher Lawyers
who specialize in this area of law. They are located at Level 1, 255
Castlereagh Street Sydney 2000, or call them on (02) 9266 0708.
Ryan and Bosscher, Lawyers, is a specialist Criminal Law firm committed to
providing quality service to clients. There are very few firms practising
exclusively in the area of Criminal Defence, and with a reputation of hard
headedness, dogged determination and fearlessness, Ryan and Bosscher has become
a leading Criminal Defence firm in New South Wales. We are committed to Justice
and the protection of an individual's rights. Our specialisation ensures
provision of the highest standard of representation to any person charged with a
criminal offence. Our familiarity with Criminal Law also ensures that Counsel
briefed for complex advocacy matters are also highly qualified in the Criminal
Defence field.
