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The Supreme Court of UK holds that for cases of curriculum vitae fraud, it would be appropriate, as a pragmatic approximation of the profit gained, simply to base it on the percentage difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job

MMB Advocates > Uncategorized  > The Supreme Court of UK holds that for cases of curriculum vitae fraud, it would be appropriate, as a pragmatic approximation of the profit gained, simply to base it on the percentage difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job

The Supreme Court of UK holds that for cases of curriculum vitae fraud, it would be appropriate, as a pragmatic approximation of the profit gained, simply to base it on the percentage difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job


 

R v Andrewes

[2022] UKSC 24

Supreme Court of the UK

Lord Hodge, DP & SCJ; Lord Kitchin, Lord Hamblen, Lord Burrows & Lord Stephens, SCJJ

August 18, 2022

Reported by Faith Wanjiku and Bonface Nyamweya

Download the Decision

Criminal law-offences – fraud- fraud by false representation- where the respondent obtained a job by false representation of the information in his CV – where the respondent got two other job appointments resulting from additional false representation in his CV – where the respondent’s employment and the two appointments came to an end upon the emergence of truth- where the respondent pleaded guilty to one count of obtaining pecuniary advantage by deception and two counts of fraud as regards to the two appointments- what was the appropriate pragmatic approximation of the relevant profit resulting from CV fraud- Fraud Act, 2006, section 1.

Criminal law-offences-fraud- fraud by false representation- where the respondent obtained a job by false representation of the information in his CV – where the respondent got two other job appointments resulting from additional false representation in his CV – where the respondent’s employment and the two appointments came to an end upon the emergence of truth- where the respondent pleaded guilty to one count of obtaining pecuniary advantage by deception and two counts of fraud as regards to the two appointments- whether the court in a CV fraud case had to address the proportionality question in relation to the recoverable amount rather than the benefit obtained-what was the middle-way principle in determining either the proportionate question or the benefit in CV fraud cases- Theft Act, 1968, section 16; Fraud Act, 2006, section 1; Proceeds of Crime Act, 2002, 6 (5).

Brief facts

In September 2004, the post of chief executive officer at St Margaret’s Hospice, Taunton was advertised. It was specified in the application pack that, as regards qualifications, a first degree was essential and an MBA desirable. In terms of experience, ten years of management experience, with three years in a senior position, were specified as essential and five years in a senior appointment as desirable.

In his application form, the respondent claimed to have obtained a first degree from Bristol University in Social Policy and Politics (1976-1978) and an MPhil in Poverty and Social Justice from the same university. He claimed to have an MBA from Edinburgh University in Management Science (1982- 1984) and to be in the course of studying for a PhD in Ethics and Management at Plymouth University (from 2003). Under the heading of Professional Qualifications, he claimed to have an Advanced Diploma in Management Accounting. None of those was true.

Between 1990 and 1995 he had been employed by Somerset County Council and then by Plymouth Council. Between 1999 and 2000 he had been employed at Plymouth Groundwork Trust for one year, with no record of him being designated chief executive. He was then employed between 2003 and 2004 by Groundwork Plymouth (at a salary of £54,361). Although having claimed to be Chief Executive of the Groundwork Charity between 1998 and 2004, he was not registered with the charity commissioners until 2004. There was no record of him having worked at the Sydenham Charitable Trust. Overall, therefore, his representations as to the essential requirements of management experience were either false or inflated.

In July, 2007 the respondent applied for the additional role of non-executive director at Torbay NHS Care Trust. His application form was certified by him to be complete and correct. It contained the same false academic qualifications as he had used in relation to the application to St Margaret’s Hospice. But he added a PhD qualification and styled himself Dr. His application also contained the same falsehoods as to his employment history. He was appointed on September 19, 2007 for an initial term of four years which was subsequently extended and, from February 2012, he was appointed chair.

The respondent’s employment by St Margaret’s Hospice, and his two appointments at Torbay NHS Care Trust and the Royal Cornwall NHS Hospital Trust, came to an end in 2015 when the truth started to emerge. In January, 2017, the respondent pleaded guilty to one count of obtaining a pecuniary advantage by deception under section 16 of the Theft Act, 1968 (as regards his position at St Margaret’s Hospice) and two counts of fraud under section 1 of the Fraud Act, 2006 (as regards his appointments at, respectively, the Torbay NHS Care Trust and the Royal Cornwall NHS Hospital Trust).

The trial court made a confiscating order of confiscating the recoverable amount of £96,737.24 because it was some 15% of the benefit figure. The respondent appealed at the Court of Appeal and his appeal was allowed on the reasoning that the confiscation order was disproportionate under the proviso in section 6(5) of the Proceeds of Crime Act, 2002, hence the appeal at Supreme Court.

Issues

i.        What was the appropriate pragmatic approximation of the relevant profit resulting from CVfraud?

ii.        Whether the court in a CVfraud case had to address the proportionality question in relation to the recoverable amount rather than the benefit obtained.

iii.        What was the middle-way principle in determining either the proportionate question or the benefit in CVfraud cases?

Relevant provisions of law

Fraud Act, 2006

Section 1- Fraud

(1) A person is guilty of fraud if he is in breach of any of the sections listed in subsection (2) (which provide for different ways of committing the offence).

(2) The sections are—

(a)section 2 (fraud by false representation),

(b)section 3 (fraud by failing to disclose information), and

(c)section 4 (fraud by abuse of position).

(3) A person who is guilty of fraud is liable—

(a)on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);

(b)on conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).

Theft Act, 1968

Section 16- obtaining pecuniary advantage by deception

(1) A person who by any deception dishonestly obtains for himself or another any pecuniary advantage shall on conviction on indictment be liable to imprisonment for a term not exceeding five years.

(2) The cases in which a pecuniary advantage within the meaning of this section is to be regarded as obtained for a person are cases where—

 (a)any debt or charge for which he makes himself liable or is or may become liable (including one not legally enforceable) is reduced or in whole or in part evaded or deferred; or

(b)he is allowed to borrow by way of overdraft, or to take out any policy of insurance or annuity contract, or obtains an improvement of the terms on which he is allowed to do so; or

(c)he is given the opportunity to earn remuneration or greater remuneration in an office or employment, or to win money by betting.

Proceeds of Crime Act, 2002

section 6(5)- Making of order

If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to, it must—

(a)decide the recoverable amount, and

(b)make an order (a confiscation order) requiring him to pay that amount.

Paragraph (b) applies only if, or to the extent that, it would not be disproportionate to require the defendant to pay the recoverable amount.

Held

  1. There was a legitimate aim of stripping a criminal of the fruits of crime and confiscation was a rational means of achieving that aim. There were no less intrusive means of doing so. Although there appeared to be no direct authority on the point, it was clear that, given the criminal context, the legal burden of proof in respect of the proviso in section 6(5) of the Proceeds of Crime Act, 2002, was on the prosecution. It was for the prosecution to establish that it would not be disproportionate to require the defendant to pay the recoverable amount.
  2. Although the performance of the services was not restoration as such – services could never be restored in the same way as money or goods (i.e. specific restoration of services was impossible) and, in any event, the services had normally been performed prior to the receipt of earnings so that the language of restoration was inapt – the position was analogous.
  3. If the confiscation order did not reflect a deduction for the value of the services rendered, while requiring the defendant to repay the net earnings, the order would constitute double recovery or what could most accurately be labelled double disgorgement. Double disgorgement went beyond disgorgement and constituted a penalty. That would be disproportionate.
  4. For example, a person was appointed to a job as a surgeon or airline pilot or HGV driver because he or she had lied in the job application about having the necessary qualifications or licence to be appointed to that job. In that situation, the performance of the services by that person would constitute a criminal offence and it would not be disproportionate to confiscate the full net earnings because the performance of those services had no value that the law should recognise as valid. There was no lawful market for the performance of those services by that person.
  5. Confiscation of the full net earnings would not therefore constitute double disgorgement. That could be regarded as the equivalent to the confiscation of the turnover from the illegal sale of goods such as criminal drug dealing or arms dealing. Confiscation of the turnover from the illicit drugs or arms dealing was proportionate without making any deduction for the illicit value of the drugs or arms supplied. The costs of acquiring or manufacturing the drugs or arms were the non-deductible costs of carrying on an unlawful business. The same applied analogously to the value of services that it was illegal for the defendant to perform.
  6. The respondent had performed valuable services for the hospice and the two trusts in return for the net earnings and, if one were to focus solely on his performance of the services (before his fraud was uncovered), it would be hard to deny that the hospice and the two trusts were receiving full value in exchange for the salary paid. But the hospice and the two trusts sought to employ or engage in a senior managerial position a person of honesty and integrity and the respondent would not have obtained the employment or office, which would have gone to another candidate, if the truth about his qualifications had been known. The fraudster would be profiting from his crime if no confiscation order were made.
  7. The relevant benefit from the fraud that it was proportionate to disgorge was not the full net earnings but rather the difference between the higher earnings that the respondent had obtained and the lower earnings that he would have obtained had he not used fraud and hence had not been offered the particular job. That was to take away the profit made by the fraud. That approach provided a principled middle way between the take all or take nothing approaches to confiscation in CV fraud cases.
  8. The principled middle way did not involve plucking a figure out of the air or a discretionary multi-factorial approach. It required some evidential basis for comparing earnings with and without the CVfraud (and, the legal burden of proof was on the prosecution). However, it was important to emphasise that the Supreme Court was not suggesting that a detailed or precise evidential or accounting exercise was needed. That would be inappropriate for confiscation ordered where clear rules and a broad-brush approach were necessary so as to avoid complicating the administration of justice in the Crown Courts. In many and perhaps most situations of CVfraud, it would be appropriate, as a pragmatic approximation of the relevant profit, simply to take the difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job.
  9. Applying the middle way to the facts of the present case, one could compare the salary of the respondent in the new job and the salary that he was already earning. He was earning £54,361 gross in 2004. The higher initial salary he obtained by reason of his fraud was £75,000 gross. The contrast between the two was 38%. On a broad-brush basis (and assuming, simplistically, that one could simply add in the earnings made in the two subsequent additional posts to which he was appointed) a proportionate confiscation order (assuming not exceeding the recoverable amount) would therefore be 38% of £643,602.91 which amounted to £244,569. That was the profit he has made from his CV fraud.
  10. However, the middle way would not be appropriate where the performance of the services constituted a criminal offence because the employee or office-holder in that situation had not provided restoration by performing valuable services. Performance of those services had no value that the law should recognise as valid. In that situation confiscation of the full net earnings would not be disproportionate. The take all approach was a proportionate approach in that situation and there was no justification for taking the middle way leading to a lower confiscation order.
  11. In CV fraud cases, where, focusing solely on the performance of services, the fraudster had given full value for the earnings received — and putting to one side where the performance of the services constituted a criminal offence — it would normally be disproportionate under the proviso in section 6(5) to confiscate all the net earnings made. But it would be proportionate to confiscate the difference between the higher earnings made as a result of the CV fraud and the lower earnings that the defendant would have made had he or she not committed the CVfraud.
  12. In many situations of CV fraud, it would be appropriate, as a pragmatic approximation of that profit, simply to base it on the percentage difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job. Moreover, there was no need for much time and effort to be expended in assessing, even in a broad-brush way, the difference between the earnings with and without the CVfraud if it was clear that, in any event, that difference would exceed the recoverable amount.

Appeal allowed; confiscation order made by Recorder Meeke QC restored.

Relevance to Kenyan jurisprudence

Section 312 of the Penal Code talks of fraud as a representation by words, writing or conduct, in either past or present, that was false and made by a person knowing it to be false or believed not to be true. Section 313 further provides that any person who by false pretense and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a misdemeanor and is liable to imprisonment for three years.

The court in Charles Mutua Mutemi v Republic [2022] eKLR stated thatthe other ingredient for the offence of obtaining money by false pretences is to demonstrate that there was false pretense. In Gerald Ndoho Munjuga v Republic [2016]eKLR, the court held that for an offence of false pretence to be proved, the prosecution had to demonstrate that there was pretence, the pretence emanated from the accused person, that it was false, that the accused person knew it was false or did not believe in its truth, that there was an intention to defraud, that the thing was something that was capable of being stolen and that the accused person induced the owner to transfer his whole interest in the property.

In Joseph Wanyonyi Wafukho v Republic [2014] eKLR, the court held that:  

 It [the trial court’s judgement] did not, inter alia, contain the point(s) for determination; the evaluation of the defence; the decision arrived at; and reasons for that decision.  Ultimately, I find that the charge of obtaining money through false pretences was not proved at all. For those reasons, I allow the appeal; quash the conviction and set aside the sentence. The Appellant shall be set to liberty forthwith unless he is lawfully held in custody.

This case is therefore relevant to the Kenyan jurisprudence as it enlarges the scope of the offence of CV fraud, by holding that for cases of CVfraud, it would be appropriate, as a pragmatic approximation of the profit gained, simply to base it on the percentage difference between the fraudster’s initial salary in the new job obtained by fraud and the fraudster’s salary in his or her prior job.





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