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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 an 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 year's 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.
