R v Lambie (1981)

English Criminal Law

R v Lambie
‘Red Purse’ by Vladimir Kush

Fraudulent misrepresentation and the need for proof of inducement, may at first seem like prudent adjudication, however when the facts are properly assembled, there is little doubt as to whether the act itself was one of corroboration through personal gain, or a simple exploitation of the contractual arrangements between credit and debtor.

In the winter of 1980, the now respondent was convicted for obtaining pecuniary advantage by deception under s.16(1) of the Theft Act 1968 after an indictment on two counts, one of which was quashed, while the second occurred during a period after the lending bank had recalled the credit card used.

Having been granted use of the card in spring 1977, the bank had, after a period of time, requested its return after the respondent had incurred a debt far in excess of the prescribed limit of £200. On 6 December 1977, the respondent agreed to return the card, after which she entered into a transaction in a Mothercare store on 15 December 1977, before returning the card on 19 December, at which point the debt had increased to a princely £1005.

At the trial, the jury returned a verdict against the respondent, after which she appealed on grounds that the store clerk had, by her application of store policy regards their relationship with the bank, allowed the transaction to proceed, not because she had been falsely induced, but rather because the credit card was (i) within the expiration date, (ii) not on the store’s ‘stop list’ and (iii) the respondent’s signature matched that on the card. It was also argued that the mere presentation of the card did not indicate anything more than that of a right to use it, as opposed to any representation on behalf of the bank, therefore liability for deception could not stand.

With doubts as to the exactness of related precedent, the Court of Appeal reluctantly overturned the conviction, during which Cumming-Bruce LJ remarked:

“By their contract with the bank, Mothercare had bought from the bank the right to sell goods to Barclaycard holders without regard to the question whether the customer was complying with the terms of the contract between the customer and the bank.”

At which point the County Chief Constable appealed under s.33(2) of the Criminal Appeal Act 1968, and the matter was again presented before the House of Lords. Here, the facts of R v Charles were given deliberate consideration, in particular the commentary by Diplock LJ who had explained:

“By exhibiting to the payee a cheque card containing the undertaking by the bank to honour cheques drawn in compliance with the conditions endorsed on the back, and drawing the cheque accordingly, the drawer represents to the payee that he has actual authority from the bank to make a contract with the payee on the bank’s behalf that it will honour the cheque on presentment for payment.

What creates ostensible authority in a person who purports to enter into a contract as agent for a principal is a representation made to the other party that he has the actual authority of the principal for whom he claims to be acting to enter into the contract on that person’s behalf.

[T]hen, is he bound by the contract purportedly made on his behalf. The whole foundation of liability under the doctrine of ostensible authority is a representation, believed by the person to whom it is made, that the person claiming to contract as agent for a principal has the actual authority of the principal to enter into the contract on his behalf.”

Which meant that despite the protestations of exemption from the transaction, the respondent was inevitably liable for deception when using the card in the knowledge that it was the property of the issuing bank, and that the period for its used had since expired. It was also noted by the House that when introducing the concept of inducement into any act of fraud, the words of Humphrey J in R v Sullivan reminded the judiciary that:

“[I]t is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money, and that is the false pretence, if it was a false pretence.”

At which point the House unanimously reversed the decision of the Court of Appeal and awarded due judgment for the Crown, while holding that:

“[W]here the direct evidence of the witness is not and cannot reasonably be expected to be available, reliance upon a dishonest representation cannot be sufficiently established by proof of facts from where an irresistible inference of such reliance can be drawn.”

Fraud

Insight | May 2017

Fraud
Image (left) ‘Self-Potrait with Pallette’ by Vincent Van Gogh (Right) Forgery

Finding effect through the inception of the Fraud Act 2006 there are three means by which fraud can occur; namely fraud by false representation, failure to disclose information and by abuse of position. Here we shall look at each one respectively and support with suitable cases where applicable.

Fraud by False Representation

S.2(1) of the Fraud Act clearly states that a person is guilty of fraud by false representation when it is proven that they did so to (i) cause gain for themselves or another party or (ii) cause or expose another person to loss or a risk of loss (this can be achieved in a number of ways and so oral and written methodology equally apply). This was demonstrated in R v Lambie in which a consumer continued to use her credit card despite exceeding her credit limit and after being asked by the bank to return it.

When carrying out a purchase in a Mothercare store the appellant in the appeal case was accused by the defedant of knowingly encouraging a transaction in the knowledge that the bank had no longer given the respondent authority to continue using the card. This argument was stringently dismissed while emphasis was placed squarely upon the intention of the respondent to knowingly defraud the store. An illustration of fraud by false representation was summed up by Lord Roskill who explained:

“[I]t is in my view clear that the representation arising from the presentation of a credit card has nothing to do with the respondent’s credit standing at the bank but is a representation of actual authority to make the contract with, in this case, Mothercare on the bank’s behalf that the bank will honour the voucher upon presentation.”

This ethos was also outlined in Rex v Sullivan where Humphreys J stressed:

“[T]he facts are such that it is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money, and that is the false pretence, if it was a false pretence.”

Fraud by Failure to Disclose Information

Subject to s.3 of the Fraud Act a person dishonestly failing to disclose information when (i) under a legal duty to so and (ii) by intention gains for themselves or another or causes or exposes another to a loss or risk of loss is thus guilty (where proven) of fraud.

As this relates more to those in public body roles or parties to contract, the establishment of guilt falls to the judicial interpretation of civil law and statute as opposed to the collective opinion of a jury. An example of this R v Padellec in which a man accused of harbouring indecent images on his computer refused to disclose the encryption password as required under s.53 of the Regulation of Investigatory Powers Act 2000. After being summarily convicted the appellant appealed under plea in order to reduce his sentence at which point Singh J exclaimed:

“The whole point of requiring access is so that it can be seen what was in fact there. We express the hope that in a situation such as arose in this case, and in the context of an offence under the Regulation of Investigatory Powers Act (section 53), there will never again be a basis of plea accepted which is based upon keeping the contents secret and the defendant saying, to his advantage, what was or was not contained.”

Fraud by Abuse of Position

S.4(1) of the Fraud Act convicts those (again where proven) for gainful abuse of a position held to safeguard and preserve the financial interests of another. The gain can be both personal or on behalf of third party(s) while such profits must cause (or expose those assigned protection) loss or risk of loss.

Given the nature of the breach it is typically applied to fiduciary or professional relationships where trust has been given under express conditions, however it could just as easily apply to family matters depending upon the relationship shared and the declarations made. As with fraud by failure to disclose information the judgments are typically free from jury persuasion and will benefit from equitable principles as much as civil laws for guidance.

An example of this was found in R v Conway (Catherine) in which a domestic care worker abused the trust placed in her by her client by obtaining and then keeping the victim’s debit card before defrauding her of £27,000 over a period of three years. Once caught and convicted, the defendant then accused the victim’s family members of conspiring to the fraud before admitting full liability. When passing sentence, Weir LJ illustrated the gravity of the abuse when he said:

“This was the calculated and systematic theft over years of a vulnerable lady’s life savings by the very person employed to assist and befriend her at a time in her life when she was at a low ebb and grateful for the help which this appellant cynically pretended to be giving her by buying her a few necessaries using her post office savings card.”