The Causation Shift: Fraud, Unfair Trading and Europe
First published in the Criminal Law & Justice Weekly (2011) 175 JPN 307 and 321.
Changes in legislation, over recent years, have resulted in offences of deception through the making of false representations becoming easier to prove in mainstream criminal law whilst becoming more difficult to prove, in relation to specialist regulatory offences relating only to false representations made by traders. In particular, the need to prove causation, in the sense that the falsity has acted on the mind of the victim, has been removed from general criminal law but has been added to unfair trading law. Meanwhile, unfair trading law has fallen under the influence of European with a consequent shift from the clarity provided by a literal interpretation, to the murky world of purposive interpretation.
TDA 1968 and TA 1968
In 1968 Parliament passed two quite different statutes containing provisions dealing with deception. They were the Trade Descriptions Act ("TDA") and the Theft Act ("TA"). The TDA was aimed almost exclusively at the unacceptable activities of traders who misled consumers by applying false descriptions to goods (or false statements to services). Under the primary provision, s 1(1)(a) TDA, an offence was committed, of applying a false trade description to goods, whether or not the trader was dishonest and whether or not the falsity had acted on the mind of a consumer. It was sufficient to prove that the false description had been applied to the goods in the course of a trade or business and it mattered not whether anyone was misled or even likely to be misled by the falsity (R v Southwood [1987] 1 WLR 1361 CA). In short, neither dishonesty nor causation were elements of the offence. Whereas the TDA could be prosecuted by any individual, s 26 TDA imposed a duty on weights and measures authorities (that is Trading Standards) to enforce it.
Under S 15 of the TA, it was an offence for a person, by any deception, to dishonestly obtain property belonging to another with the intention of permanently depriving another of it. Similarly, under s16, it was an offence to obtain a pecuniary advantage by deception. In contrast with the offences under the TDA, it was not an element of these offences that the defendant acted in the course of a trade or business, but it was necessary to prove dishonesty and that the deception acted on the mind of the person deceived or at least that a necessary inference could be drawn that the deception had caused the obtaining (Etim v Hatfield [1975] Crim LR 234). Causation was therefore an element of these offence which, as with the basic offence of theft, were traditionally prosecuted by the Crown.
Forty years later - FA 2006 and CPUTR 2008
The Fraud Act 2006 ("FA") repealed ss 15 and 16 TA and came into force on 15th January 2007. Offences of obtaining by deception were effectively replaced by the new offences of fraud in s 1 FA. S 2(1) FA sets out how such an offence is committed by the making of a false representation. Dishonesty remains an element of the offence and it is necessary for the prosecution to prove that the defendant had the intent to make a gain or to cause a loss. Notably, however, there is no overall causation element. The prosecution does not have to prove that the false representation acted on the mind of the victim. Indeed, the offence is complete once the false representation is made so that it is not necessary, in order to constitute an offence, that anything was actually obtained or lost. In essence, but for the dishonesty element, the offence of fraud became more aligned to that of applying a false trade description under s 1 TDA than to the former offences of obtaining by deception. Furthermore, S 2(2) FA, which provides that a representation is false if it is either untrue or misleading, emulates s 3 TDA under which a trade description was false if it was either false or misleading. S 9 FA even provides an offence to deal with those who participate in a fraudulent business and there is a counterpart of this offence, where the business is a corporation, in s 993 of the Companies Act 2006.
The Consumer Protection from Unfair Trading Regulations 2008 ("CPUTR") repealed most of the TDA, including s 1 thereof, and came into force on 26th May 2008. The CPUTR were made so as to comply with the United Kingdom's duty to implement the requirements of the Unfair Commercial Practices Directive 2005/29/EC ("UCPD") and they incorporate, largely verbatim, the UCPD's cumbersome wording. Whereas the CPUTR deals with the same mischief as did the TDA, namely the making of false representations by traders and, whereas it does not in the main require proof of dishonesty, it introduces a new burden on the prosecution to prove that the false representation caused, or was likely to cause, an average consumer to make a transactional decision. It follows that, whereas in mainstream crime, Parliament has moved away from the necessity to prove that a fraud acted on the mind of the person receiving a false representation, it has moved in quite the opposite direction in relation to regulatory crime.
Whereas Trading Standards authorities have a duty to enforce the CPUTR, they also have the option of prosecuting under mainstream legislation. Looking at the menu of offences now available to Trading Standards, they are inevitably attracted by the FA. Not only is it couched in far simpler terms than is the CPUTR, in many respects it more closely resembles the familiar TDA than does the CPUTR. Indeed the only hurdle which might deter Trading Standards from utilising the FA is that it requires proof of dishonesty. In many instances, however, the dishonesty of rogue traders is easy to establish. Furthermore, Trading Standards had to grapple with proving mens rea (in the form of knowledge or recklessness) for offences under the former s 14 TDA (false statements as to services) and would now have to do so for offences under reg 8(1) CPUTR (contravening the requirements of professional diligence). Indeed, the challenge of proving dishonesty, is often less of a burden than was wrestling with the TDA's due diligence defence which has been re-enacted in the CPUTR. Particularly in the magistrates' court, where defence statements are still not mandatory, it is easier to ambush the prosecution with a due diligence defence than with a defence of honesty. That is so, notwithstanding that the burden of proving dishonesty lies on the prosecution whereas, it is for the defence to prove that it acted with all due diligence.
Although there have been some prosecutions under the CPUTR, the indications are that they would have been significantly outnumbered by continuing prosecutions under the TDA had it survived. Particularly in times of dwindling local authority budgets, Trading Standards authorities will be reluctant to prosecute under untried and tested legislation if there is a real risk of legal challenge on points of law. Whereas factors such as reduced Trading Standards funding may in themselves have contributed to a reduction in appeals, the enactment of the complex CPUTR appears to have played a major part.
The TDA came into force on 30th November 1968. It was not entirely new as it built on the legacy of the not dissimilar Merchandise Marks Acts 1887 to 1953. Despite that, however, judgment was given in the first reported appeal under the TDA, barely a year later, on 10th December 1969 (Beckett v Kingston Bros (Butchers) Ltd [1970] 1 QB 606). There were at least ten appeal judgments given in the High Court on the interpretation of the TDA in its second year of enforcement. The CPUTR came into force on 26th May 2008. The first High Court judgment on the CPUTR was not given until 2nd February 2011, more than two and two thirds years after they came into force. Even then the decision was not in relation to an appeal and was not as a result of a prosecution. The decision in Office of Fair Trading v Purely Creative Ltd and ors [2011] EWHC 106 (Ch) ("Purely Creative"), was in relation to a first instance application by the OFT for an enforcement order under the Enterprise Act 2002 based on breaches of the CPUTR. The lack of precedent setting appeal decisions under the CPUTR tends to confirm its paucity of use or, at least, a lack of confidence by potential appellants that their understanding of the meaning of its provisions will be shared by the judiciary.
Continued in Part 2.