2.2.8 Fraud – s.4 Fraud by Abuse of Position

Statutory Provision

• s.4(1) Fraud Act 2006:
  • “A person is in breach of this section if he—
    (a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
    (b) dishonestly abuses that position, and
    (c) intends, by means of the abuse of that position—
    (i) to make a gain for himself or another, or
    (ii) to cause loss to another or to expose another to a risk of loss.”
• s.4(2):
  • Abuse may be by act or omission.
• Maximum penalty: 10 years’ imprisonment (indictable) or 12 months summary.

Actus Reus of s.4

1. Occupying a Position of Trust or Responsibility

• D must hold a position where he is expected to safeguard or not to act against another’s financial interests.
• Includes:
  • Employees (cashiers, accountants, bankers).
  • Fiduciaries (trustees, company directors).
  • Carers managing finances of elderly/vulnerable persons.
  • Government/public officials.

Case Examples:

• R v Valujevs [2014] EWCA Crim 2888 – Latvian gangmasters exploited migrant workers by overcharging and underpaying them. Court held abuse of position applied even though relationship not strictly fiduciary — broad interpretation of “position of trust.”
• R v Marshall (2009) – shop manager abusing ability to process refunds to steal money.

2. Abuse of Position

• Abuse = acting contrary to the expectation of safeguarding another’s financial interests.
• Can be by act (misappropriation, overcharging) or omission (failing to safeguard funds).
• No requirement that victim suffers actual loss; offence complete once position is dishonestly abused.

Case:

• R v Pennock & Pennock (2014) – defendants managing elderly relative’s finances diverted money for personal use. Abuse of fiduciary position satisfied AR.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Law Full Scale Course

3. No Need for Reliance or Actual Loss

• As with other frauds, no requirement that victim relies on abuse or that loss occurs.
• Offence focuses on dishonest misuse of entrusted position with intent to gain/cause loss.

Mens Rea of s.4

1. Dishonesty

• Judged by Ivey v Genting Casinos [2017] UKSC 67:
  • Step 1: Determine D’s actual belief about facts.
  • Step 2: Would ordinary decent people consider conduct dishonest?
• Old Ghosh [1982] test now abandoned.

Case:

• R v Pennock (2014) – dishonesty found where defendants exploited control over elderly person’s funds.

2. Intention to Gain or Cause Loss

• As per s.5 Fraud Act 2006:
  • “Gain” and “loss” include temporary or permanent.
  • Gain = getting what one doesn’t have, or keeping what one has.
  • Loss = losing what one has, or not getting what one might get.

Case:

• R v Doukas (2012) – bank worker diverted customer funds intending to replace later. Still fraud — intent to gain and expose to risk of loss sufficient.

3. Knowledge of Position and Abuse

• D must know he is in position of responsibility and deliberately abuse it.
• Recklessness not enough; must be intentional.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Law Full Scale Course

Distinctions Between s.2, s.3, s.4

Evaluation

• Strengths:
  • Targets abuse of trust (employees, carers, fiduciaries).
  • Wide wording covers acts and omissions.
  • Prevents loopholes where silence/inaction is exploited.
• Weaknesses:
  • Broad scope: uncertainty over which relationships count as “expected to safeguard.”
  • Risk of criminalising mere breaches of employment contract.
  • Reliance on dishonesty test leaves discretion to juries → inconsistency.

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change AS Level Law Full Scale Course

Reform Proposals

• Law Commission (2020 Review of Fraud):
  • Suggested clearer statutory definition of “position of trust.”
  • Called for guidance distinguishing contractual breach from criminal fraud.
  • Recommended updating for modern contexts: online account managers, digital fiduciaries.

Exam Application Strategy

1. Quote s.4 Fraud Act 2006.
2. Apply AR: position of trust (Valujevs, Pennock), abuse of position (act/omission).
3. Apply MR: dishonesty (Ivey), intent to gain/cause loss (Doukas).
4. Distinguish from s.2 and s.3.
5. Conclude liability.

Conclusion

• Fraud by Abuse of Position (s.4):
  • Actus Reus: D occupies position where expected to safeguard another’s interests, and abuses it by act/omission.
  • Mens Rea: Dishonesty + intent to gain or cause loss.
• Case law (Valujevs, Pennock, Doukas) confirms scope.
• Protects against exploitation of trust but criticised for vagueness.