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Fraud or not ?
Hi all,
I am trying to establish a clear definition or what is and what is not considered benefit fraud. This is mainly for issues like bankruptcy’s and DRO’s etc.
For example is acceptance of a financial penalty (instead of potential prosecution) fraud? Or is Section 112 considered fraud as there is no dishonesty within the wording, which there is in Section 111?
Does anyone have any categorical information on this topic or an address of someone in DWP policy/legal that I could request this from??
Thanks in advance all,
Chaos
HB/CTB A3/2008 gives some guidance. As I recall, a piece in Adviser magazine a year or so ago in response to a DRO query gave the same explanation:
What is meant by a ‘fraudulent’ overpayment
14 An overpayment can still be recovered after the date of discharge if it is classified
as fraudulent. The word ‘fraud’ in section 281 of the Insolvency Act 1986 is not
defined in the legislation. However, in the High Court judgement of Mander v Evans
(3 All ER 811 [2001]), ‘fraud’, within the context of section 281, was held to mean
‘actual fraud’ and did not include constructive fraud ‘such as undue influence’. It
was emphasised that the word has to be given its natural meaning. It follows that
there must be clear evidence of dishonesty in a particular case in order to classify
an act as ’fraud’. Therefore to be able to recover an overpayment after discharge
the customer must have
• been found guilty of an offence whether under statute or otherwise
• made an admission after caution of deception or fraud for the purpose of
obtaining relevant benefit, or
• agreed to pay a penalty under section 115A of the Administration Act and the
agreement has not been withdrawn
If I am reading it correctly (and please feel free to enlighten me if I am not), my client who pled guilty to S112 - below - (reduced from S111A to avoid potential jail time), has been convicted of benefit fraud and the debt will not be discharged when she proceeds through bankruptcy.
Section 112.—(1) If a person for the purpose of obtaining any benefit or other payment under
the [social security legislation] whether for himself or some other person, or for any other
purpose connected with that legislation–
[1(1A) If a person without reasonable excuse–
(a) fails to notify a change of circumstances which regulations under this Act require
him to notify; or
(b) knowing causes or knowingly allows another person to fail to notify a change of
circumstances which such regulations require the other person to notify, and he knows that he, or the other person, is required to notify the change of circumstances, he shall be guilty of an offence.]
(2) A person guilty of an offence under [this section] shall be liable on summary
conviction to a fine not exceeding level 5 on the standard scale, or to imprisonment for a
term not exceeding 3 months, or to both.
Chaos
Given that “fraud” is to be given its natural meaning, that presumably means dictionary definitions apply unless statute provides otherwise.
On that basis, the general consensus seems to the that fraud means a deception deliberately practised with a view to obtaining an unlawful advantage. A conviction under s.112 would appear to cover the “unlawful” limb. After that, the crux is whether there was a) deception AND b) deliberately practised to obtain an advantage. The latter factors may well depend upon which part of s.112 a clmt is convicted under.
My client plead guilty to failing to notify a change of circumstances - namely LTAHAW.
My client plead guilty to failing to notify a change of circumstances - namely LTAHAW.
It’s difficult to tell whether this constitutes fraud or not, since it’s quite possible to fail to notify a change without fraudulent intent (also, I have no idea what a LTAHAW is). You may be able to argue it was not fraudulent, but the presumption will be that if the client was cautioned then she was fraudulent. The presumption is likely to be rebutable however, and if the client can demonstrate clearly that her reasons for confessing were other than because she had committed fraud, it may be possible to argue otherwise. Naturally with a caution in place, the difficulty of this course should not be underestimated.
While fraud is to be given its natural meaning, I would suggest that in the light of the Fraud Act 2006, the two key elements in determining fraud will be (1) dishonest misrepresentation (including dishonest failure to make a representation) for (2) financial gain (not necessarily for the client). The second of these is pretty automatic in the case of a benefits overpayment, but if your client can demonstrate a lack of dishonesty in her actions, she may be able to argue that the overpayment should not be considered fraudulent.
If you feel that this may be the case, I would strongly advise specialist advice from an insolvency solicitor.
While fraud is to be given its natural meaning, I would suggest that in the light of the Fraud Act 2006, the two key elements in determining fraud will be (1) dishonest misrepresentation (including dishonest failure to make a representation) for (2) financial gain (not necessarily for the client). The second of these is pretty automatic in the case of a benefits overpayment, but if your client can demonstrate a lack of dishonesty in her actions, she may be able to argue that the overpayment should not be considered fraudulent.
LTAHAW = living together as husband and wife.
Had a conviction been sought and secured under the Fraud Act, “dishonesty” would have been unarguable. However, I respectfully suggest that where a meaning from a provision that DOES rely on dishonesty is absent from one that does not, it is properly arguable that “dishonesty” cannot be imported into s.112 and neither can any meaning of “fraud” be imported from another provision - especially where that other provision would have been an option under which to seek a conviction.
Under s.112, the test is “knowingly” instead of dishonestly (NB: “dishonesty” doesn’t apply in Scotland under s.111A). In this case, the info given suggests the clmt “knowingly” failed to notify a change of circs. Under s.112, a conviction can only be properly secured if that change in circs was one that affected benefit. On that basis, it implies there was unlawful gain by the clmt.
On the face of it, I think the clmt in this case will have an uphill struggle to successfully argue there was no fraud.
[ Edited: 4 Apr 2011 at 01:05 pm by Kevin D ]LTAHAW = living together as husband and wife.
Ah, back in the day, we called this “cohabitation”, which i feel is somewhat clearer.
Under s.112, the test is “knowingly” instead of dishonestly (NB: “dishonesty” doesn’t apply in Scotland under s.111A). In this case, the info given suggests the clmt “knowingly” failed to notify a change of circs. Under s.112, a conviction can only be properly secured if that change in circs was one that affected benefit. On that basis, it implies there was unlawful gain by the clmt.
On the face of it, I think the clmt in this case will have an uphill struggle to successfully argue there was no fraud.
Yes, it would be hard to argue that a knowing failure to disclose was not in fact dishonest.
Isn’t accepting a caution an admission of guilt.
Therefore by accepting the caution your client has admitted committing fraud.
A caution should only be given in the following circumstances:
- there must be evidence of the offender’s guilt sufficient to give a realistic prospect of conviction;
- the offender must admit the offence;
- the offender (or, in the case of a juvenile, his parents or guardian) must understand the significance of a caution and give informed consent to being cautioned.
If the above is not complied with then the caution can be quashed and expunged from the record. Otherwise it stands as an admission of guilt (R v the Chief Constable of Hampshire ex parte Wyman (2006) CA).
However, to answer your question, it all depends exactly which offence he admitted committing. However, as you and others have said, there is a fair chance that fraud is in there somewhere if only by inference.
The article I mentioned earlier is in Adviser 137, p45. It quotes a subsequent HB circular to the one I mentioned, which has some useful clarification on the definitions:
http://www.dwp.gov.uk/docs/g5-2009.pdf
Specialist Support also suggest that even where is no clear admission or court decision, there is still a “grey area”, and suggest referral to a benefits advisor to establish whether a debt was actually incurred through fraud or not. Perhaps this is because it is still open to creditors to bring up objections to a debt’s inclusion in bankruptcy when the petition has been made.
So it would seem I am no further forward - it is all about interpretation and the DWP naturally assume everything is fraud!
So how do I establish my client’s O’P debt can be discharged through bankruptcy? Any ideas on who in the DWP I write to? Because Cl naturally does not want to fork out for a bankruptcy if the O’P (her largest debt) won’t be discharged, and the O’P amount means a DRO not applicable.
Chaos
As a debt adviser (one of my other hats) I’ve always understood that a conviction for a benefit offence should render the overpayment recoverable on discharge. On the basis of the detail in this thread I’m still not sure why there is any real doubt about this. Perhaps CAB’s Money Advice SSU could give a further opinion. You might try running the facts past a friendly receiver, if you are in touch with your local OR’s office. But, the only grey area I think would be in the event that the DWP had not (yet) started fraud proceedings, while the facts of the case suggested that fraud were a plausible view. I’m not sure what anyone at the DWP could tell you about their policy, other than that they would object to fraudulent debts being found provable in bankruptcy, and their definition of fraud includes offences committed under sections 111A and 112.
If your client wanted to proceed with insolvency, I would certainly be advising about the risk of a restriction order, as well as the likelihood of this debt remaining payable.