Fraud Bill [HL]

My Lords, then we are in agreement on what the Law Commission said. The Law Commission recognised that some of the things that would not be covered were things that it accepted there was a good case for saying should be criminal. I make this point at this stage because I have said that we do not yet have a clear picture of whether repeal is possible, and if so whether ancillary changes to the law are needed. Despite the fact that this point has arisen at Second Reading and in Committee, no one has come forward with amendments proposing changes that would go along with the repeal of the common law offence of conspiracy to defraud so as to fit those gaps. I will come back to that—it is one of the disadvantages of a prospective repeal, because we have not identified those gaps perhaps with sufficient precision to be able to say what would need to be put in their place. The most important point is that we are not yet in a position to draw conclusions from the operation of the new fraud offences. We intend and hope that when the Fraud Act is in force, it will be the primary tool used to prosecute fraudsters. The offences in the Bill, and the charge of conspiracy to commit them, should be flexible enough to cover a wide variety of fraudulent activities, some of which have until now been difficult to capture. Aside from the new general offence, the offences of possessing and making articles to commit fraud and of fraudulent trading applicable to businesses other than companies will assist law enforcers to tackle frauds that previously may have required to be dealt with under the common law. I have said before that we need to retain common law conspiracy to defraud for two reasons. We have spent a lot of time looking at this. It has meant not just that noble Lords have focused more on this, but we have focused more on this. I certainly have done so in detail. If anything, I am more persuaded at this point than I was before that we need to retain common law conspiracy to defraud for the time being. First, it has a broad practical application that the Bill’s offences may not be able to reproduce in every case. The flexibility of the common law offence is most effective in containing the detail involved in very large and complex cases, where there may be many defendants and multiple counts on an indictment. The conspiracy to defraud offence provides the ability for the prosecution to reveal and for the court to see a fraudulent course of conduct from beginning to end. On 19 July, I identified some of those people who had taken the view and responded to the Government’s consultation by saying that the common law offence should not be repealed. They included, and that had been apparent from the start, those prosecutors who are charged with the responsibility of prosecuting these offences, the Crown Prosecution Service and the Serious Fraud Office. It went beyond that to the Association of Chief Police Officers; the Fraud Advisory Panel, which has a wide and experienced membership; the Law Society; the Confederation of British Industry; the NHS Counter Fraud and Security Management Service; the British Bankers’ Association; the Association for Payment Clearing Services; and the British Retail Consortium. Quite a number of different bodies have supported it. I referred also to the Rose committee in particular. The noble and learned Lord, Lord Lloyd of Berwick, asked me at that stage whether there was any record of what the Rose committee had said. I undertook to follow that up, and I sent to him and to others who took part in the debate the views of Lord Justice Rose and his committee in a letter dated 26 July 2005. As it has been referred to by all those who have spoken so far, it is right that I should put on the record what Lord Justice Rose wrote. He said:"““It would be risky to repeal common law conspiracy to defraud as it can be the most effective charge in a case where multiple defendants are engaged in a fraudulent course of conduct. There are limitations on the law of statutory conspiracy, which has had something of a chequered history. All the judges present at the meeting agreed the Bill should not repeal common law conspiracy to defraud””." I find that a very strong endorsement of where we stand at the moment and of the approach that we ought to adopt. We will all recall the legislative solutions that we have proposed in the past to solve all problems, but which turned out, in the event, not to do so. This may have been in the mind of the Rose committee at the time. The Theft Acts themselves come into that category; they had to be amended several times and we are now making an even more radical change. It may therefore be cautious of us to want to retain the offence for the time being, but the caution is well supported by those who know what they are talking about. It is an appropriate caution in a serious matter. The alternative—I used the word on the last occasion—would be irresponsible. In the face of prosecutors, police and senior judges saying that this is a risk, it is not a risk that I am prepared to take. Nobody who is serious about prosecuting fraud—as I hope the whole House is—would want to take that risk. Nor do we want to add to the real problems we already face in the management of some trials of large or complex cases. We are grateful for the steps that the Lord Chief Justice has taken to address this issue in the protocol for the control and management of heavy fraud and other complex criminal cases. Yet it is too early to reach a conclusion on its affect. We will return to that in the course of this Bill. We also hope that the provisions on multiple offending in the Domestic Violence, Crime and Victims Act, which we plan to implement this year, will have an impact on the management of complex fraud trials. Yet we need experience of how that operates before we can conclude that it has had the affect that we hoped for. The second reason not to repeal the common law is that there remain some specific forms of conduct that can be prosecuted only as conspiracy to defraud. One reason for that is the problem with statutory conspiracy, because of the limitations in that area of the law. In Committee, and in a letter sent out before that stage, I explained—probably at too much length—some of the problems. A particular problem is where the final offence is committed by somebody outside the conspiracy. A number of people can conspire together, the purpose of which is to ultimately enable someone else to commit an offence. If that person is outside the conspiracy, then they cannot all be charged as part of a statutory conspiracy. Statutory conspiracy also requires a degree of knowledge of the substantive offence to be committed. I have done my best to draw attention to what these problems are; I set it out in the letter, I explained it in the House, and I held an open meeting to which I invited all noble Lords who were interested to hear from technical experts so that we could go into these problems. Unfortunately, only the noble Baroness, Lady Anelay, was able to attend that meeting, but I have done by best to demonstrate the problems. I therefore strongly urge the House to recognise the undesirability of removing this offence for the time being. The noble Lord, Lord Goodhart, would say that this is not what he is doing, because he leaves a minimum three-year period before the repeal would come into effect. That is not a satisfactory conclusion. It is not tidy, as far as legislation is concerned, to put prospective repeals on to the statute book. I certainly do not think that it is a good way of proceeding when one of the reasons for waiting is to see what gaps, if any, the new offences throw up. Surely the right way to proceed is to review the operation of the new offence, and see whether it establishes not only that the common law offence can after all be repealed, but also what changes may need to be made to go along with that, by bringing certain other offences into statute, and so forth. I recognise two things: first, that it is necessary to review the operation of the act. I have made that clear, and that the act will be reviewed in three years’ time, as the noble Lord, Lord Goodhart, says. That is where he gets his three years from. It will be reviewed. Secondly, I propose to recognise the concerns that some noble Lords have expressed about the overuse of conspiracy to defraud by giving guidance to prosecutors when the new Act comes into effect, outlining the criteria to be considered before they use the common law offence. It will ask prosecutors to consider first whether the behaviour could be prosecuted under statute, under the Fraud Act 2006, or under some other Act as a statutory conspiracy. It will also outline the cases in which the common law charge may be appropriate and—noble Lords may think this important—will ask prosecutors to record their reasons for using the common law charge in any case for which they do so. That will have two benefits: it will ensure that the reviewing prosecutor has focused his or her mind on why the common law offence is the right one to use in that case; but it will also provide us with a record which we can then use to inform our further deliberations in three years’ time. I am concerned that prospective repeal would create difficulties, leaving us with a degree of uncertainty in the law by having something on the statute book which might or might not come into effect. Prosecutors have to plan how they will deal with offences. These offences take time—quite some time, in some cases—to investigate. Knowing what charge you are going to be able to bring is important. I will be happy to share with noble Lords a working draft of the guidance, if that will be helpful, but I urge noble Lords to see that my proposed review guidance, which will help to inform that review, ought to meet their concerns. It ought to be a happy compromise from our current position.