Archbold · 2017. 12. 4. · 2 Archbold Review Thomson Reuters (Professional) UK Limited 2017 Issue...

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1 © Thomson Reuters (Professional) UK Limited 2017 Archbold R eview Issue 10 December 18, 2017 CONTENTS Cases in Brief ........................................................ 1 Sentencing Case ................................................... 3 Features................................................................. 4 Farewell to the second limb of the Ghosh test? ....9 Cases in Brief Animals—Animal Welfare Act 2006 s.8(1)(h)—“keeps or trains”—meaning R (WRIGHT) v READING CROWN COURT, RSPCA INTERESTED PARTY [2017] EWHC 2643 (Admin); October 31, 2017 “Keeps” in the Animal Welfare Act 2006 s.8(1)(h) (an of- fence where a person “keeps or trains an animal for use for in connection with an animal fight”) was to be interpreted to include those who may have actual physical possession as well as those who retain control of the animal whilst it was elsewhere. The keeper of an animal may have it in their own home or retain it in the home or place of another. Equally a person may themselves train the animal to fight or arrange for another to carr y out the training for them. A person can keep or train a dog through an agent. There was no sensible basis to restrict the interpretation of s.8(1)(h) to the person who had actual physical possession or actually did the train- ing themselves; to do so would unnecessarily restrict the offence and the policy of the legislation to criminalise those who were involved in training animals to fight. Character—good character direction—observation that accused on level playing field with complainant where no evidence of bad character GREEN [2017] EWCA Crim 1774; November 7, 2017 The judge had been wrong, having earlier given a good character direction in relation to G, to observe, when deal- ing with the complainant’s evidence, that there had been no suggestion that she had ever been in trouble with the police and so there was a “level playing field” between her and G. In all but a very exceptional case (of which the court could not think of any examples), judges should refrain from so directing juries. The direction watered-down the protection that criminal procedure afforded to an accused person of good character, and reduced, to that limited extent, the bur- den of proof on the Crown. Homicide—manslaughter—breach of duty—whether Brown (1984) 79 Cr.App.R 115 direction required ZAMAN [2017] EWCA Crim 1783; November 11, 2017 Z, the owner of a restaurant, was properly convicted of the manslaughter of a man with a peanut allergy who died from eating food from the restaurant that he had been assured contained no peanuts. Z argued on appeal that there were at least three distinct breaches of duty alleged, and that there- fore the judge should have given a Brown (1984) 79 Cr.App.R 115 direction on the need for unanimity in respect of the breach, and directed the jur y that each of the steps set down in Adomako [1995] 1 AC 171 in respect of the breach (obvi- ous and serious risk of death, causation, grossness of neg- ligence) must be proven in respect of the particular breach they found. The submission was based on a false premise. It was agreed that Z was under a duty to take such reasonable steps as necessary to ensure the safety of his customers, in particular those who had made clear they had a food allergy. The prosecution case was that he had failed to take such rea- sonable (or any) steps to that end. There was not a single, unique way in which Z could have complied with his duty of care. Some steps, singly, might have sufficed; or he could have complied with the duty by a variety of measures which, taken together would have been sufficient. Whilst of course the prosecution always bore the burden of proof, it was Z’s case that he had taken all reasonable steps. The prosecu- tion and defence cases painted very different pictures. The prosecution case was that Z had taken no steps; and Z’s case was that he had taken all reasonable steps (but that

Transcript of Archbold · 2017. 12. 4. · 2 Archbold Review Thomson Reuters (Professional) UK Limited 2017 Issue...

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Issue 10 December 18, 2017

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CONTENTS

Cases in Brief ........................................................1

Sentencing Case ...................................................3

Features .................................................................4

Farewell to the second limb of the Ghosh test? ....9

Cases in BriefAnimals—Animal Welfare Act 2006 s.8(1)(h)—“keeps or trains”—meaningR (WRIGHT) v READING CROWN COURT, RSPCA INTERESTED PARTY [2017] EWHC 2643 (Admin); October 31, 2017“Keeps” in the Animal Welfare Act 2006 s.8(1)(h) (an of-fence where a person “keeps or trains an animal for use for in connection with an animal fight”) was to be interpreted to include those who may have actual physical possession as well as those who retain control of the animal whilst it was elsewhere. The keeper of an animal may have it in their own home or retain it in the home or place of another. Equally a person may themselves train the animal to fight or arrange for another to carry out the training for them. A person can keep or train a dog through an agent. There was no sensible basis to restrict the interpretation of s.8(1)(h) to the person who had actual physical possession or actually did the train-ing themselves; to do so would unnecessarily restrict the offence and the policy of the legislation to criminalise those who were involved in training animals to fight.

Character—good character direction—observation that accused on level playing field with complainant where no evidence of bad characterGREEN [2017] EWCA Crim 1774; November 7, 2017The judge had been wrong, having earlier given a good character direction in relation to G, to observe, when deal-ing with the complainant’s evidence, that there had been no suggestion that she had ever been in trouble with the police and so there was a “level playing field” between her and G. In all but a very exceptional case (of which the court could not think of any examples), judges should refrain from so directing juries. The direction watered-down the protection that criminal procedure afforded to an accused person of good character, and reduced, to that limited extent, the bur-den of proof on the Crown.

Homicide—manslaughter—breach of duty—whether Brown (1984) 79 Cr.App.R 115 direction requiredZAMAN [2017] EWCA Crim 1783; November 11, 2017Z, the owner of a restaurant, was properly convicted of the manslaughter of a man with a peanut allergy who died from eating food from the restaurant that he had been assured contained no peanuts. Z argued on appeal that there were at least three distinct breaches of duty alleged, and that there-fore the judge should have given a Brown (1984) 79 Cr.App.R 115 direction on the need for unanimity in respect of the breach, and directed the jury that each of the steps set down in Adomako [1995] 1 AC 171 in respect of the breach (obvi-ous and serious risk of death, causation, grossness of neg-ligence) must be proven in respect of the particular breach they found. The submission was based on a false premise. It was agreed that Z was under a duty to take such reasonable steps as necessary to ensure the safety of his customers, in particular those who had made clear they had a food allergy. The prosecution case was that he had failed to take such rea-sonable (or any) steps to that end. There was not a single, unique way in which Z could have complied with his duty of care. Some steps, singly, might have sufficed; or he could have complied with the duty by a variety of measures which, taken together would have been sufficient. Whilst of course the prosecution always bore the burden of proof, it was Z’s case that he had taken all reasonable steps. The prosecu-tion and defence cases painted very different pictures. The prosecution case was that Z had taken no steps; and Z’s case was that he had taken all reasonable steps (but that

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his staff had failed to comply with his verbal instructions). The prosecution case was thus based upon a single alleged breach of duty: that Z had failed to take reasonable steps to avoid injury to customers who had a declared allergy. It was never the prosecution case that individual acts or omissions constituted separate breaches of duty. Whilst the burden of proof always lay upon the prosecution, and so they had to prove that the reasonable steps which Z said he had taken had either not been taken or did not amount to reasonable steps, that did not mean that it became the prosecution case that each discrete matter raised in the defence was capable of amounting to a breach of duty. Because it was never the prosecution case that any one of the specific acts and omis-sions was in itself capable of constituting a breach of duty, it was not a case in which the whole jury had to be satisfied in respect of one matter before they could find breach of duty proved. This was simply not a case in which a Brown direc-tion was required, or even appropriate.

Magistrates—information—whether erroneous corporate name could be amended; appeal by way of case stated—against interlocutory decisionPLATINUM CROWN INVESTMENTS LTD v NORTH EAST ESSEX MAGISTRATES’ COURT, COLCHESTER BOROUGH COUNCIL INTERESTED PARTY [2017] EWHC 2761 (Admin); October 24, 2017(1) Where informations were laid charging “Platinum Crown Limited”, but it was noticed at a comparatively late stage that that company was defunct, and that the proper defendant was “Platinum Crown Investment Limited”, the magistrates had been entitled to conclude that the defend-ant was merely mis-named, and the error could be correct-ed by amending the name in the informations under the Magistrates’ Courts Act 1980 s.123. T, the director of both companies, was also charged. New informations against PCIL would have been out of time, as it would have been more than six months’ after the offences. A factual in-quiry was necessary to distinguish between a mistake as to identity (which could not be corrected out of time) and a mis-statement of name (which may be): R (Essence Bars Ltd) v Wimbledon Magistrates’ Court [2016] EWCA Civ 63, [2016] 1 WLR 3265. In cases such as Marco (Croydon) Ltd (t/a A & J Bull Containers) v Metropolitan Police [1984] RTR 24, v Greater Manchester Justices ex parte Aldi GmbH & Co (13 December 1994) [1994] 159 JP 717 and R (J Sains-bury Plc) v Plymouth Magistrates’ Court [2006] EWHC 1749 (Admin), [2006] 170 JP 690, relied on by PCIL, there was scant material for finding a mere mis-statement of name, there being in each case an extant company within the same group which had been recognised as being wrongly identified. In PCIL’s case it was evident on the facts that the local authority always intended to prosecute PCIL, and that both the company and T were aware of that prior to the lay-ing of the informations. (2) The respondent argued that on a proper construction of the Magistrates’ Courts Act s.111(1), the magistrates had no power to state a case until they had reached a fi-nal determination on a matter before them and the High Court had no jurisdiction to consider or determine a case stated by the justices in excess of their power, in reliance on Streames v Copping [1985] QB 920. The court consid-ered subsequent cases (Greater Manchester Justices ex parte Aldi, above, Sunworld Ltd v Hammersmith & Fulham Lon-

don Borough Council [2000] 1 WLR 2102; Gillan v Director of Public Prosecutions [2007] EWHC 380 (Admin), [2007] 1 WLR 2214; and Balogun v Director of Public Prosecutions [2010] EWHC 799 (Admin)) and concluded that, notwith-standing the general rule that the court had no jurisdiction to deal with an interlocutory appeal from the magistrates’ court in a criminal matter by way of case stated, a degree of flexibility in dealing with the matter was available to the court in exceptional circumstances. The trial in this case had been adjourned in anticipation of the decision of the court, the substantive point in issue has been identified in the case stated, it was supported by clear factual findings in relation to the relevant evidence and both parties were ready to proceed. A strict application of Streames v Copping would cause delay, additional expense and might well result in the same point returning to the court if the magistrates were to convict. It was right to deal with the jurisdictional point by applying the degree of flexibility which the authori-ties permitted. The appeal would be treated as an applica-tion for judicial review, the formalities were dispensed with and permission granted.

Psychoactive Substances—nitrous oxide produced for catering use and sold for recreational use—whether exempted substance—whether medicinal product; appeal—reception of expert evidence on appeal in relation to an issue formally agreed at trialCHAPMAN AND OTHER APPLICATIONS [2017] EWCA Crim 1743; November 1, 2017(1) The applicants were properly convicted of possessing nitrous oxide (laughing gas) with intent to supply contrary to the Psychoactive Substances Act 2016 s.7, where they sold nitrous oxide canisters manufactured for use in the catering industry to people for recreational purposes. It was not disputed that nitrous oxide was a psychoactive substance within the Psychoactive Substances Act 2016 s.2(1)(a) (“any substance…capable of producing a psy-choactive effect”), but the applicants contended that it was an “exempted substance” within s.2(1)(b). Exempted sub-stances, as listed in sch.1 (see s.3) included a “medicinal product”, which in turn was defined by Human Medicines Regulations 2012, reg.2. It was argued that nitrous oxide, widely used in medicine as an analgesic and anaesthetic, fell within reg.2(b) (“any substance …that may be used by or administered to human beings with a view to (i) re-storing, correcting or modifying a physiological function by exerting a pharmacological…action”). The Regulations were, in turn, made to implement Directive 2001/83/EC on the Community Code Relating to Medicinal Products for Human Use. Definitive guidance provided by the Eu-ropean Court of Justice in D and G (C-358/13, C-181/4) on the relevant limb (the “functional limb” as opposed to the “presentational limb”) of the definition was to the ef-fect that in determining whether a product was a medicinal product, national authorities must determine the ques-tion on a case-by-case basis taking into account, among various other characteristics, the manner in which it was used. As was clear from the Luxembourg jurisprudence, the regulatory regime contemplated that a substance may be a medicinal product for one purpose (and thus subject to control under the 2012 Regulations) but not another. The manufacture and supply of nitrous oxide for medical purposes was covered by the 2012 Regulations because in

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that context it fell within the definition of a medicinal prod-uct, but the canisters in these cases were manufactured for use unconnected with medical purposes, a strong indicator that they were not medicinal products. Furthermore, the purpose for which it was intended to supply the canisters was purely recreational with nothing whatsoever to do with health. This last feature coupled with the fact that the gas was intended to be used in circumstances which were not beneficial to health, indeed imported some risk to health, was sufficient to take it outside the definition of medicinal product whatever label may have been on the boxes in which the canisters were originally packed.(2) In the case of each applicant, it had been accepted at trial (or for the purposes, in two cases, of guilty pleas) that nitrous oxide was a psychoactive substance within the meaning of the Act, the Crown having relied on evidence from Professor Cowen to that effect. The court declined to accede to a late application from the applicants to adduce evidence from Professor Nutt that questioned whether nitrous oxide was such a substance. In very rare cases it might be possible to seek to call expert evidence on appeal on a matter that was not in issue at trial, or, as here, formally agreed at trial. But in this case the reality was that the is-sue was not disputed because Professor Cowen’s opinion would not be seen by most as remotely controversial. The court summarised the effect of Professor Nutt’s evidence. It was couched in the language of the prosecution’s failure to prove, rather than a clear different conclusion, because as presented in this report it did not grapple with Professor Cowen’s opinion or undermine it. Had Professor Nutt set out a clear explanation of how each of the well-recognised effects of nitrous oxide were caused, supported by such ac-ademic and research material as was available, with a clear conclusion that it did not stimulate or depress a person’s central nervous system and thereby affect a person’s men-tal functioning or emotional state (see s.2(2)), the position might have been different.

Road traffic—requirement on keeper to provide information as to driver of a vehicle—nature of duty of keeperPHIRI V DPP [2017] EWHC 2546 (Admin); October 10, 2017Where P, in receipt of a notice under the Road Traffic Act 1988 s.172(2), had completed the appropriate form identify-ing the driver of a car of which he was the registered keeper, had placed the properly addressed envelope in an out-tray in the post room at his place of work, and the form had not been received by the relevant police force, he was properly convicted under s.172(3) of failing to provide the required information. Section 172 imposed a personal burden on the recipient of a notice to prove on the balance of probabilities that they had discharged the obligation imposed, which was to give the police information about the driver of a ve-hicle when a traffic offence had been uncovered. P placed what was his personal responsibility in the hands of a third party, the post room employee charged with collecting let-ters and posting them. He did not place the letter either in the hands of the Post Office by posting the letter or by using one of the other private posting companies which provided

a comparable service. By not doing that himself, he had not given the notice to the police as required by the statute.

IVEY v GENTING CASINOS (UK) LTD (t/a CROCKFORDS) [2017] UKSC 67; October 25, 2017. See page 9 below.

SENTENCING CASEAllowing or causing the death of a child; constructive knowledgeWILTSHIRE AND BAKER [2017] EWCA Crim 1686 (27 October 2017)The appellants had each been convicted of causing or al-lowing the death of a child contrary to s.5 of the Domestic Violence, Crime and Victims Act 2004 and sentenced by the Recorder of London to 11 years’ imprisonment. The medical evidence established that, while their baby daughter Imani was living with both of them, she was in-jured by at least three separate events. First, in chrono-logical order, a shaking which caused a number of rib frac-tures. Secondly, an event which entailed Imani sustaining fractures to her skull, an underlying head injury, a number of rib fractures and a wrist fracture. These injuries would have been immediately distressing to Imani, and obvious to anyone caring for her, although she later fell into an almost unconscious state. Thirdly, she suffered further fractures and/or re-fractures to the ribs. The Recorder sentenced both appellants on the basis that each of them allowed Im-ani’s death rather than caused it and on the basis that they ought to have been aware of a significant risk of really seri-ous harm being caused to her, and then failed to take such steps as they could reasonably have been expected to take to protect her from that risk. The court granted leave to appeal in relation to whether the Recorder gave sufficient weight to his finding, as the basis for sentencing, that each applicant ought to have been aware of the significant risk of serious harm being caused to Imani, as opposed to being subjectively aware of it. The court accepted that there was a difference for the purposes of sentence (though not conviction) between cases of actual and constructive knowledge. However, con-structive knowledge involved matters of fact and degree. The “doomed pathetic individual” (one so dominated by the other defendant that, notwithstanding their awareness of the risk of really serious bodily harm, they lacked a will of their own) referred to in the case of Ikram and Parveen [2008] EWCA Crim 586, [2009] 1 WLR 1419 will be low on the scale of culpability. By contrast there will be situations where a defendant, although lacking the awareness re-quired by the first limb of s.5(1)(d)(i), only just falls short of doing so. This was such a case. Concluding that the Recorder gave insufficient weight to his finding that this was a case of constructive knowledge only, albeit one at the upper end of the spectrum of gravity, the court allowed the appeal and substituted sentences of 10 years’ imprison-ment for the 11 years’ originally imposed.

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FeaturesNational Crime Agency v N: Balancing the Interests of the Public, Banks and Customers in the Fight against Money LaunderingBy Alice Lepeuple1

IntroductionThe consent regime in Pt.7 of the Proceeds of Crime Act 2002 (POCA) purports to strike a balance between the inter-ests of the State in preventing money laundering and those of businesses and individuals in carrying out economic ac-tivities. Since the implementation of Pt.7 in February 2003, however, a number of cases have illustrated the persisting tensions between law enforcement agencies, banks and their customers.2 Most recently, in National Crime Agency v N,3 the Civil Division of the Court of Appeal was called upon to determine the circumstances in which the courts could grant interim relief where that relief had the effect of disap-plying the consent regime. The decision is summarised and discussed below. It is suggested that the decision leaves those who are the subject of consent-seeking suspicious ac-tivity reports exposed to severe financial loss and that the balance of interests struck by the regime is skewed.

National Crime Agency v N & Royal Bank of Scotland

The consent regimePart 7 of POCA contains the UK anti-money laundering statutory regime. Sections 327 to 329 create three princi-pal money laundering offences of concealing, disguising, converting, transferring, removing criminal property from England and Wales; acquiring, using, possessing criminal property; and entering into an arrangement that facilitates the acquisition, retention, use or control of criminal prop-erty on behalf of another person. Section 340 defines crimi-nal property as property that constitutes or represents the benefit of criminal conduct, and that the defendant knows or suspects constitutes or represents such benefit.It is a defence to each of the principal money laundering offences to make an authorised disclosure under s.338 and obtain appropriate consent under s.335. An authorised dis-closure is a disclosure to a constable, a customs officer or a nominated officer that property is criminal property. In practice, authorised disclosures are made to the National Crime Agency (NCA) in the form of consent-seeking suspi-cious activity reports. The disclosure can be made before the prohibited act is done, while the prohibited act is being done as soon as the suspicion arises, or after the prohibited act is done if the defendant has a reasonable excuse for not making the disclosure earlier.

1 Research Assistant at the Law Commission. The views expressed are those of the author and not the Law Commission.2 See for instance K Limited v National Westminster Bank [2006] EWCA Civ 1039; Squirrell Limited v National Westminster Bank [2005] EWHC 664 (Ch); UMBS v SOCA, HMRC [2007] EWCA Civ 406; Shah v HSBC [2010] EWCA Civ 31 and Shah v HSBC EWHC [2012] 1283 (QB); N v S [2015] EWHC 3248 Comm.3 [2017] EWCA Civ 253.

Appropriate consent is the consent of a nominated officer, constable, or customs officer to whom an authorised dis-closure was made. Appropriate consent can be actual or assumed. When the disclosure seeking consent is made, a notice period of seven days commences. Within the notice period, if notice of consent is given, the discloser can pro-ceed with the prohibited act. If no notice of refusal is given, the discloser can assume that consent is given and similarly proceed with the prohibited act. If notice of refusal is given, a moratorium period of thirty-one days commences. At the end of the moratorium period, if consent has not been sent, the discloser can assume that consent is given and proceed with the prohibited act. Section 336A gives the court power to extend the moratorium period to up to six additional pe-riods of thirty-one days.Sections 330 to 332 create additional offences of failing to disclose knowledge or suspicion that another person is engaged in money laundering. Section 333A creates an of-fence of tipping-off applicable to the regulated sector. The offence prohibits the disclosure of information contained in a disclosure made under Pt.7 where such disclosure is likely to prejudice an investigation.

FactsThe first respondent (N) is an authorised payment institu-tion which provides foreign exchange services. In October 2015 the second respondent bank froze the accounts and online banking facilities of N as it suspected the credit bal-ance on these accounts constituted criminal property. The bank sought consent from the NCA to return the funds to N upon terminating the banking relationship. On 15 October, the bank received consent and terminated N’s banking fa-cilities with immediate effect.On the same day, N applied to the Commercial Court for a mandatory interim injunction requiring the bank to carry out payment instructions and for interim declaratory relief. Following a hearing on 19 October, Burton J made a number of orders requiring the bank to make specified payments and declaring that in doing so it will “not commit any criminal of-fence under the Proceeds of Crime Act 2002 or otherwise”. The orders also absolved the bank from any obligation “to make any disclosure as would or may be required by the Criminal Law or any other law” in respect of the payments. The NCA appealed the orders with a view to avoid setting a precedent for disapplying the consent regime.

The Court of Appeal’s decisionThe Court of Appeal held that the courts had jurisdic-tion to make orders for interim relief that interfered with the anti-money laundering statutory regime, but that the

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existence of the regime was an important factor for the courts to take into consideration when exercising their discretion. The regime served the public interest in pre-venting money laundering, which outweighed the inter-ests of the bank in avoiding criminal liability and the inter-ests of N in mitigating loss. Interfering with the consent regime was only justified in exceptional cases, such as when a respondent had made an authorised disclosure in bad faith.The court also accepted the NCA’s submission that the judge had erred in law in three ways in granting interim declaratory relief. First, it held that Burton J had erred in relying on Bank of Scotland v A,4 where the Court of Appeal suggested that a court may, in appropriate circum-stances, make an interim declaration protecting a bank from criminal liability in relation to the tipping-off offence. The decision was narrowly interpreted as applying to the tipping-off offence under s.333A only.5 More importantly, the court held that Burton J had erred in inferring from the NCA’s consent to the return of funds to N that there was no evidence that the funds were criminal property. There were many reasons why the NCA may give consent and consent was merely a defence to the principal money laundering offences.6 Finally, the case was not sufficiently exceptional to grant interim relief that would suspend the consent regime.

Analysis: is the consent regime striking the right balance?The decision in NCA v N clarifies the circumstances in which the courts can grant interim relief that has the effect of disapplying the consent regime. Interim mandatory relief is available when the interests of the applicant in carrying out economic activity exceptionally outweigh the interests of the public in preventing money laundering and when the bank can be granted protection from criminal liability. In-terim declaratory relief is then available when there is no real prospect of criminal liability. The decision in NCA v N builds upon the decision in K Ltd, 7 where the Court of Appeal held that it would be “entirely inappropriate for the court” to grant mandatory relief to the claimant, unless it could show that the bank could not be criminally liable un-der the principal money laundering offences.

Interim declaratory reliefThese circumstances will rarely arise in practice. In rela-tion to interim declaratory relief, one way to evidence the absence of a real prospect of criminal liability under s.327 to 329 is to adduce evidence of the absence of a predicate offence; that is, evidence of the absence of criminal conduct giving rise to criminal property. The principal money laun-dering offences require the prosecution to either prove that the property derives from specified criminal conduct or submit that the circumstances give rise to an “irresistible inference” that the property could only derive from criminal conduct.8 In practice, this requires claimants applying for interim declaratory relief to prove a negative: that their cus-

4 [2001] 1 WLR 751. The case concerned previous legislation, namely ss.93A to D of the Criminal Justice Act 1993.5 Then under s.333 POCA.6 See also the National Crime Agency UK Financial Intelligence Unit, Requesting a defence from the NCA under POCA and TACT, Version 1, June 2016.7 [2006] EWCA Civ 1039.8 Anwar (Nasar) [2013] EWCA Crim 1865.

tomers and themselves have not engaged in criminal con-duct. (Conversely, this requires respondent banks resisting an application for interim mandatory and declaratory relief to adduce evidence of criminal conduct to satisfy the court that the relevant transaction may involve criminal property – thus creating a prospect of criminal liability for the bank. In practice, respondent banks will rarely have evidence of predicate criminal conduct, even where they suspect prop-erty to be criminal.9 A suspicion that funds on an account constitute criminal property may be triggered by no more than, say, the size of a related transaction, so that suspicion on the part of a bank does not mean that it has probative evidence of criminal conduct.)10 A more promising way to evidence an absence of prospect of criminal liability is to adduce evidence that the bank does not have the relevant suspicion.11 The relevant suspicion is subjective suspicion and the threshold of suspicion has been defined in Da Silva in terms of a belief that “there is a possibility, which is more than fanciful, that the relevant fact exists”.12 The vagueness of this definition renders cross-examination as to suspicion difficult. Additionally, in both cases, the offence of tipping-off limits or complicates the disclosure of evidence of suspicion of criminal conduct in proceedings for interim relief, as there is a risk that such disclosure would prejudice an investiga-tion into the claimant by the NCA contrary to ss.333A of the Act. Before the repeal of s.333 by the Terrorism Act 2000 and the Proceeds of Crime Act 2002 (Amendment) Regulations 2007/3398, ss.333(2)(c) and (3)(b) enabled a legal adviser to make a disclosure otherwise prohibited by s.333(1) to any person in connection with legal proceed-ings. In K Ltd, the Court of Appeal described the disclosure mechanism in ss.333(2)(c) and (3)(b) as “the only sure way in which [the tipping-off] offence could be avoided” by the respondent bank.13 However, the dispensation in those provisions was not replicated in ss.333B(4), 333C(1)(c) or 333D(2) of the Act, under which it is now limited to the dis-closure of information by a legal advisor to another legal or relevant professional adviser and to the advisor’s client. As a result, the only way for the respondent bank to disclose evidence of suspicion or criminal conduct and avoid crimi-nal liability would be to discuss which evidence it can dis-close without prejudicing an investigation with the NCA or other relevant agency, as indicated by the Court of Appeal in Bank of Scotland v A.14

Interim mandatory reliefAs to interim mandatory relief, it is unclear what will make a case sufficiently exceptional to tip the balance of interests in favour of the claimant, other than the re-spondent’s bad faith in making an authorised disclosure.15 In the present case, the Court of Appeal held that N’s potential losses should not have been regarded by Bur-ton J as “sufficiently exceptional” to “grant interim relief which would have the effect of displacing the statutory

9 As noted by Lord Hamblen in National Crime Agency v N [2017] EWCA Civ 253 at [63].10 On the size of transactions as a basis of suspicion see Shah v HSBC Private Bank (UK) Ltd [2011] EWCA Civ 1669.11 On this see K Ltd v National Westminster Bank Plc [2006] EWCA Civ 1039, and National Crime Agency v N [2017] EWCA Civ 253.12 Da Silva (Hilda Gondwe) [2006] EWCA Crim 1654 at [16].13 At [18]. Even then, the legal adviser would not normally have been the person who held the suspicion and therefore could not properly have been cross-examined on it.14 [2001] EWCA Civ 52.15 Example given by the court in National Crime Agency v N [2017] EWCA Civ 253 at [60].

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procedure.”16 N’s evidence was that the freezing of the accounts entailed a real risk of loss to N’s customers, con-sequent civil liability for damages, damage to reputation, and severe financial loss. N estimated that “it might be able to continue for a matter of days before business had to cease altogether”.17 Arguably, the court’s assessment of N’s situation as non-exceptional suggests that the balance of interests struck by the regime is skewed. The current regime stands in ten-sion with the individual’s right to peaceful enjoyment of his or her possessions under Article 1 Protocol 1 of the Euro-

16 At [93] and [95].17 At [46].

pean Convention on Human Rights. Although the regime’s interference with that right pursues the legitimate aim of preventing money laundering, it is questionable whether it does so proportionately – a fortiori following the extension of the moratorium period to over seven months pursuant to s.11 of the Criminal Finances Act 2017.18 The prevention of money laundering cannot justify exposing innocent parties to severe financial loss without remedy. It is submitted that an independent review of the consent regime should be un-dertaken for the purpose of, notably, ensuring its fairness and compatibility with Convention rights.

18 See s.336A POCA.

The Fraud Act 2006 – Ten Years On By Professor Graham Virgo QC (Hon.)*The Fraud Act 2006 came into force on January 15 2007. It is appropriate, over a decade later, to consider what impact this legislation has had, whether its aims have been fulfilled and whether fraud law is fit for purpose today.Before the enactment of the Fraud Act, the law relating to fraudulent activity operated across a complex palimpsest of different offences, with new offences built on the old in re-sponse to the inadequacies of those older offences. These offences, under the Theft Acts 1968 and 1978, primarily focused on deception operating to benefit the defendant, whether through obtaining property, services, a pecuniary advantage, or a valuable security; or by remission, abate-ment or exemption from liability; or, as a consequence of the Theft (Amendment) Act 1996, by obtaining a money trans-fer. In addition, the common law offence of conspiracy to de-fraud expanded liability to encompass agreements to com-mit fraudulent activity dishonestly which did not necessarily constitute a crime in its own right. The Law Commission in 20021 recommended abolition of all of these offences and their replacement with a much more streamlined and coher-ent group of offences. Most of these recommendations, save specifically for that relating to conspiracy to defraud, were affirmed by the Home Office in 2004.2 The Home Office con-sidered that the deception offences were too specific (re-quiring careful identification of the nature of the benefit ob-tained), overlapped and were out-dated. The Fraud Act 2006 consequently sought to clarify the law, make its operation more straightforward for juries and practitioners and ensure that it was modern and flexible so that it could respond to increasing sophistication in the nature of fraudulent activity and to rapid technological advances of fraudsters.Most of the old deception offences were replaced with a general fraud offence in inchoate form which could be com-mitted in three different ways:

(i) by false representation, knowing that the representa-tion was or might be false, which is the most com-monly charged form of the fraud offence;3

* Professor of English Private Law, University of Cambridge.1 Fraud, Law Com No.276.2 Fraud Law Reform: Consultation on Proposals for Legislation.3 Ministry of Justice, Post-legislative Assessment of the Fraud Act 2006: Memorandum to the Justice Select Committee (London, 2013), para.13.

(ii) by failing to disclose information when there is a le-gal duty to do so;

(iii) by abuse of position where, by virtue of the defend-ant’s privileged position, he or she is expected to safe-guard another person’s financial interests or not to act against those interests.

For each form of the general fraud offence the defendant must have intended either to make a gain, cause a loss or expose somebody else to the risk of a loss and must have been dishonest. Being inchoate, the focus is only on the de-fendant’s conduct and not the result; no gain needs to be obtained nor any loss caused.A number of other offences were created by the Fraud Act 2006, including dishonestly obtaining services and posses-sion of an article for use in the course of any fraud or mak-ing, adapting or supplying articles for use in fraud, which expands the ambit of liability significantly to encompass preparatory offences to the commission of the substantive offences.The enactment of the Fraud Act was immediately wel-comed for its simplification of the law into a short statute containing only 16 sections. This can be compared with the almost contemporaneous enactment of the Serious Crime Act 2007, Part II of which creates offences of assisting and encouraging crime, knowing or believing that a crime or crimes would or might be committed. This required 23 largely impenetrable and prolix sections. At the time of en-actment it was predicted that these provisions would cause confusion to prosecutors and the courts,4 which has proved to be the case.5 The Fraud Act 2006 has resulted in very few appellate decisions in comparison, in part due to the simple structure and clear language used. But this clarity and simplicity did leave the Fraud Act open to criticism, because of its open-ended and nebulous nature. Ormerod,6 for example, considered that the statute had the potential to create serious practical problems because of the excessive breadth of the offences and a lack of defini-4 J Spencer and G Virgo, “Encouraging and Assisting Crime: Legislate in Haste, Repent at Leisure” (2008) 9 Archbold News 7.5 See the problems in interpreting s.46, now resolved by Sadique (No. 2) [2013] EWCA Crim 1150, [2014] 1 WLR 986.6 D Ormerod, “The Fraud Act 2006: Criminalising Lying?” [2007] Crim LR 193.

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tion of key terms, resulting in undue emphasis placed on dishonesty and the prospect of the criminal courts becom-ing entangled in complex civil law issues. Despite these concerns, the Joint Parliamentary Committee on Human Rights considered that the general fraud offence would be compliant with Article 7 of the European Conven-tion on Human Rights, specifically because dishonesty was embedded as an element in the definition of the offence, so that there must be “some identifiable morally dubious con-duct to which the test of dishonesty may be applied”.7 Fur-ther, the Post-legislative Assessment of the Fraud Act 2006, prepared by the Ministry of Justice for consideration by the Justice Select Committee in 2012,8 concluded, in the light of responses to a consultation received from the Crown Prosecution Service and other agencies, that the Act had simplified fraud law and that the fraud offences were easily understood by those responsible for their investigation and prosecution. The conclusion of the Ministry of Justice was that:

Our overall assessment of the Act is that it has been successful in achiev-ing its initial objectives of modernising the former array of deception offences. It provides a clear statutory basis for fraud offences, targets complex fraud and introduces new offences specifically designed to as-sist in the prosecution of technology focused crime.9

But they would say that, wouldn’t they? When assessing the impact of legislation, it is, of course, vital to determine its impact on the prosecution particularly, but the impact on criminal justice generally needs to be considered. Whilst it is abundantly clear that incidences of fraud continue to grow, with police-recorded fraud increasing by 5% in one year to March 2017,10 such that the police and prosecuting authorities need to have appropriate tools to respond, when considering the success of the legislation it is also impor-tant to consider more fundamental principles, such as its compatibility with the rule of law, assessed with reference to clarity, consistency and accessibility.In assessing whether the Fraud Act 2006 has been a suc-cess, six significant themes should be considered.

(i) Responding to technological developmentsA key aim of the Fraud Act was to modernise fraud law so that the offences are appropriate to respond to ever more sophisticated and technologically advanced methods for perpetrating fraud. It appears that the Fraud Act has been successful in this regard, largely because of the open-ended definition of the general fraud offence and because it is in-choate in form, focusing on conduct rather than the result and regardless of how the fraud is perpetrated. This was ac-knowledged by the Ministry of Justice in its Post-legislative Assessment where the legislation was commended for its relevance to technology-based crime and that the offences could be deployed to respond to emerging types of technol-ogy. The flexibility of the legislation is especially well illus-trated by the obtaining services offence which, since no de-ception needs to be established, can be committed through an automated process, whereas the old offence of obtaining services by deception would typically have been defeated 7 London: TSO, 2006, para.2.14.8 Cm 8372.9 Ibid, [41].10 https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/yearendingmar2017.

by such processes, because it was not possible to deceive a machine. Specific provision was also made in the Fraud Act to ensure that the use of technology would not defeat li-ability. So, for example, fraud by false representation can be committed even though the representation is made to “any system or device designed to receive, convey or respond to communications (with or without human intervention)”.11 Ten years on this still appears fit for purpose.

(ii) EfficiencyThe simplicity of the Fraud Act and its focus on conduct rather than result has inevitably made prosecution and in-vestigation more efficient. This was specifically recognised by the Ministry of Justice in its Post-legislative Assessment which commended the efficiency gains of the legislation, especially in complex fraud cases, which has resulted in prosecutors needing only to focus on a few files and doc-uments to establish the core elements of the relevant of-fence. Evidence was also adduced that the Fraud Act of-fences have led both to more guilty pleas and trials being quicker. Another advantage of the new offences is that they provide a comprehensive suite of crimes which provide for a diverse range of cases. A particular example12 is the exist-ence of s.6 which prohibits the possession of an article for use in fraud, which has been used to prosecute offenders for recording films in cinemas; as a result of which it has not been necessary to create a specific new offence to tar-get this particular conduct, since s.6 enables prosecution at a much earlier preparatory stage.

(iii) Rationale of liabilityThis efficiency of the legislation, from the perspective of the police, prosecutor and Government, is primarily due to the significant expansion of liability arising from the formula-tion of the general fraud offence in inchoate mode. It fol-lows that there is no longer any need to prove any prohib-ited result of the fraud. So, for example, in Jeevarajah13 the defendants had dishonestly claimed payment on a winning lottery ticket which they had not purchased themselves; even though no payment was made to them they were still convicted of fraud. Further, fraud will be committed even if nobody was deceived, such as where the victim did not believe the representation which was made. The old decep-tion offences can be characterised as primarily operating to protect proprietary rights in a variety of different assets. Whilst aspects of the fraud offences can similarly be justi-fied as protecting property rights where, for example, the defendant has obtained property as the result of a misrep-resentation, the ambit of the offences are much wider. They could be considered to be protecting broader economic in-terests, but the inchoate nature of liability suggests a rather different rationale. As Ormerod identified,14 fraud by repre-sentation essentially criminalises lying, so the key interest that is being protected from abuse is the victim’s psycho-logical condition. Further, fraud by abuse of position can be justified as criminalising the exploitation of a weaker party. What is at the core of all the fraud offences is an attempt to manipulate or take advantage of another, which also ex-plains fraud by failing to disclose where there is a duty to

11 Fraud Act 2006, s.2(5).12 Post-legislative Assessment of the Fraud Act 2006, para. 17.13 [2012] EWCA Crim 1299.14 “The Fraud Act 2006: Criminalising Lying?” [2007] Crim LR 193.

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do so, since breach of this duty involves a desire to take an unacceptable advantage of another. Analysed in this way, the significant expansion of liability from the deception to the fraud offences is easier to justify, because a different and broader type of conduct is being criminalised.

(iv) Breadth of liabilityWhilst the Fraud Act has expanded criminal liability sig-nificantly it does not follow that this is uncontrolled. Useful CPS guidance has been published which operates to modify the breadth of liability.15 The offences require proof of dif-ferent types of fault, including dishonesty and intention to make a gain or to cause a loss. Further, the courts have identified some restrictions on the ambit of liability. For ex-ample, in Gilbert16 the defendant’s conviction for fraud was quashed where he had lied to a bank in order to have an account opened into which he intended to pay profits from property transactions. It was held that the offence would only be made out if the defendant intended to make the gain from the misrepresentation and, since the causative link between the misrepresentation and the intended gain was not properly addressed, the conviction was quashed. Presumably, even if the causative link had been considered, it could not have been established because the intended profits were too remote from the misrepresentation which had resulted in the account being opened. This emphasis on the intended direct causative link between misrepresen-tation and gain or loss is likely to make it difficult to estab-lish fraud when a misrepresentation as to qualifications is made to obtain a job, with the salary paid for the work done arguably being too removed from the misrepresentation. Another example of judicial restriction on the breadth of li-ability relates to the possession of an article for use in the course of fraud. On the face of the statutory provision this could be interpreted as being a strict liability offence, which would mean that anybody in possession of a pen or a com-puter could be convicted since such items can always be used to perpetrate fraud. Such an absurd interpretation was rejected in Sakalauskas,17 where the defendant was in pos-session of a jerry-can in his car which he used to store pet-rol which he had fraudulently obtained using bank cards. It was held that he was not guilty of the possession of article offence because the defendant must intend to use the item to commit fraud then or in the future.

(v) Conspiracy to defraud retainedThe decision to retain conspiracy to defraud was commend-ed by the Ministry of Justice in its Post-legislative Assess-ment. Some of the reasons suggested to support this assess-ment appear largely to be a defence of charging conspiracy, whether statutory or common law, rather than the general fraud offence, since conspiracy enables the prosecution of multiple offences and demonstrates the full range of crimi-nal activity for the benefit of the court. This is particularly illustrated by the response of the Attorney-General’s Office, the Crown Prosecution Service and the Serious Fraud Of-fice to the Ministry of Justice’s consultation.18

Conspiracy to defraud allows the agreement that is the es-sence of the conspiracy to be reduced to one, short, well

15 http://www.cps.gov.uk/legal/d_to_g/fraud_act/.16 [2012] EWCA Crim 2392.17 [2013] EWCA Crim 2278, [2014] 1 WLR 1204.18 Post-legislative Assessment of the Fraud Act 2006, para. 33.

drafted count that reflects the totality of the criminal enter-prise. That in turn enables the case to be effectively repre-sented before a court. In fact conspiracy to defraud contin-ues to have certain advantages over statutory conspiracies to commit fraud,19 particularly that it enables one conspira-cy to be charged even though the intended perpetrator of the fraud is not party to the conspiracy, so enabling a broad-er range of criminal behaviour to be encompassed. It also enables conspiracy to be charged where there is evidence of significant but different kinds of criminality; where the conspiracies took place in different jurisdictions or where the agreement relates to more than one objective. Further, conspiracy to defraud is not confined to where the defend-ant intended to make a gain or to cause a loss.20

It follows that the common law offence of conspiracy to defraud has a legitimate continuing role and has proved to be invaluable especially in prosecutions involving complex fraud, such as motor insurance fraud21 and LIBOR rate-fix-ing.22 Conspiracy to defraud is, however, subject to impor-tant limits to restrict the ambit of liability, most notably, as confirmed by the House of Lords,23 the need to show an aggravating factor, such as misrepresentation, deception, violence, intimidation or inducement of breach of contract.The Ministry of Justice in its Post-legislative Assessment24 report concluded:

Whilst it would be possible to consider codifying the common law of-fence in statute, the evidence strongly suggests that the current situation is working perfectly satisfactorily and therefore we have concluded that we should leave matters as they are.

Although the continued existence of conspiracy to defraud can legitimately be considered to be unprincipled, it serves an important residuary function and continues to provide a useful safety net where the substantive offences and statu-tory conspiracy may not work, such that the decision to re-tain the common law offence was patently correct.

(vi) Boundary between criminal and private lawOrmerod in 2007 identified the blurring of the boundary between criminal and private law as one of the significant dangers of the Fraud Act. This remains the case, since the breadth of the Fraud Act means that conduct, which might be regarded as commercially acceptable, might be criminal-ised. For example, a defendant who enters into a contract to sell property to the victim without disclosing a defect will typically be able to enforce the contract because of the fun-damental principle of “let the buyer beware”. But, assuming the defendant was dishonest, he or she might be guilty of fraud. Although usually such a defendant would not have been under a legal duty to disclose the defect, there might well be circumstances where the defendant could be con-sidered to have made an implied misrepresentation, such that the most common form of fraud might have been com-mitted, resulting in a significant conflict between the crimi-nal and private law.

19 Identified in both the Post-legislative Assessment of the Fraud Act 2006 and the Attorney-General’s guidance on the use of conspiracy to defraud, first published in 2007 and republished in 2012.20 See Moses and Ansbro [1991] Crim LR 617. 21 McKenzie [2013] EWCA Crim 1544, [2014] 1 Cr.App.R (S) 68.22 Hayes [2015] EWCA Crim 1944, [2016] 1 Cr.App.R (S) 63. 23 Norris v Government of the United States [2008] UKHL 18, [2008] 1 AC 920; Goldshield Group plc [2008] UKHL 17, [2009] 1 WLR 458. 24 Post-legislative Assessment of the Fraud Act 2006, para.43.

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This tension is particularly apparent as regards the abuse of position form of fraud, where the expectation that the defendant is to act in the interests of another could encom-pass a moral rather than a legal expectation, meaning that the defendant would not be civilly liable to the victim for abusing his or her position but might still have commit-ted a crime. This tension is particularly well illustrated by Valujevs,25 where the defendants, who were unlicensed gangmasters, made unwarranted deductions from workers’ legitimate earnings, charged the workers excessive rent and imposed unwarranted fines on the workers. It was held that, even though the defendants and the workers were not in a fiduciary relationship of trust and confidence, the defendants would be expected to safeguard the workers’ financial interests if a reasonable person would have held such an expectation. The Court of Appeal considered that fraud by abuse of position should be left to the jury because the defendants had assumed responsibility for paying the workers what they were due.But this tension between criminal and private law in Valuje-vs is not as marked as first appears because, on the case be-ing referred back to the Crown Court, the defendants were found not guilty of fraud by abuse of position.26 Even more significantly, the Court of Appeal recognised the need to respect commercial freedom. The fact that the defendants had charged excessive rent, withheld work or lent money to the victims were not sufficient to establish the expectation that the defendants would look after the victims’ interests. As the Court of Appeal acknowledged:

[Fraud by abuse of position] does not apply to those who simply sup-ply accommodation, goods, services or labour, whether on favourable or unfavourable terms and whether or not they have a stronger bargaining position.27

25 [2014] EWCA Crim 2888, [2015] QB 745. 26 See J Collins, “Fraud by Abuse of Position and Unlicensed Gangmasters” (2016) 79 MLR 354.27 [2014] EWCA Crim 2888, [2015] QB 745, [43].

It follows that victims are expected to exhibit a degree of resilience, since they “are entitled to and expected to look after their own interests”.28 Taking advantage of a strong bargaining position is consequently not sufficient to engage the abuse of position form of fraud and maintains a vital di-vide between valid commercial conduct and the realm of the criminal law. Similar tensions about the boundary between crime and pri-vate law are evident with respect to conspiracy to defraud, since there is a danger that this offence might be used to criminalise commercial sharp practice. This, however, does not appear to be borne out in practice and the danger of inconsistency between crime and private law has been re-duced by the decision in Norris v Government of the United States,29 requiring proof of an aggravating factor.A further reason why the potential tension between crimi-nal and private law as regards fraudulent activity, whether through the general fraud offence or conspiracy to defraud, is dispelled is the fact that that both offences require proof of dishonesty as defined by Ghosh,30 requiring proof of the defendant’s awareness that the reasonable person would consider the conduct to be dishonest. Where this can be established, it is legitimate to conclude that what might otherwise be characterised as legitimate commercial sharp practice should be punished.

ConclusionsLegal analysis needs to strike a balance between principle and pragmatism. The Fraud Act on its face might be criti-cised for infringing fundamental criminal justice principles, by virtue of its breadth and uncertainty, but if the legislation enables appropriate responses to be reached, assisted by ju-dicial interpretation where appropriate, it can be defended. This is the case with the Fraud Act 2006. Initial concerns about the ambit and interpretation of the legislation have largely proved unfounded. It remains a model of criminal legislation which remains fit for purpose.

28 Ibid, [44].29 [2008] UKHL 16, [2008] 1 AC 920. 30 [1982] QB 1053. Though as to Ghosh, see now Ivey v Genting Casinos UK Ltd [2017] UKSC 67.

Farewell to the second limb of the Ghosh test?Ivey v Genting1, a civil case, turned on the meaning of “cheating”2 – on account of which the defendants refused to pay Ivey the £7.7 million which he claimed to have won at Baccarat in their casino. Ivey denied cheating. An ingre-dient in cheating, he said, is “dishonesty” as defined, for the purpose of the Theft Act, in Ghosh.3 This requires (i) conduct in breach of accepted standards of behaviour and (ii) awareness in the actor that it is so. Yes, he admitted he had used a covert stratagem to raise his chance of winning: but he thought that it was legitimate to do so. Dismissing his appeal, the Supreme Court held that that “dishonesty”

1 Ivey v Genting Casinos UK Ltd (t/a Crockfords Club) [2017] UKSC 67, [2017] 3 WLR 1212 (25 October).2 As prohibited by s.42 of the Gambling Act 2005.3 [1982] 2 QB 1083.

is not an ingredient in cheating. But having done so it then condemned, at length, the second limb of the Ghosh test, which it said did not correctly represent the law. All this was obiter, of course; but in DPP v Patterson4, de-cided shortly after, the Divisional Court has made it clear that, when the time comes, the Court of Appeal is likely to follow it. So even if the operation to amputate the second limb of the Ghosh test was technically irregular, it has prob-ably succeeded.

JRS

4 [2017] EWHC 2820 (Admin) (2 November); and see GMC v Krishnan [2017] EWHC 2892 (Admin).

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