Theft (Amendment) Bill
Proposed offence of "Fraud"

Introduction

During the last meeting held with the Bills Committee, the Administration explained and the Bills Committee accepted that the common law offence of conspiracy to defraud should be retained.

2. The Bills Committee further requested the Administration to revert on the following matters:

  1. to consider whether the words "except in section 16A" are still required to be added before "to be construed" in section 8(2) of the Theft Ordinance, Cap.210, in view of the Committee Stage Amendments to be proposed to the definitions of "benefit" and "prejudice" in the new section 16A of the Ordinance;

  2. to explain why references to "relating to the past, the present or the future" and "opinions" are necessary in the definition of "deceit" under the new section 16A (clauses 3 of the Bill); and

  3. to explain the effect of the amendments in clauses 8 to 11. Does section 8(2) of the Theft Ordinance require amendment?
3. After careful consideration of this matter, the Administration is of the view that it is necessary to exclude the application of the definitions of "gain" and "loss" in section 8(2) to the new offence of fraud, by inserting the words "except in section 16A" before the words "to be construed" in the existing subsection, in order to give full effect to the Law Reform Commission's recommendation as to the new offence set out in [the proposed] section 16A(1). This is because an essential element of the new offence is that it must result in either a "benefit" or "prejudice or a substantial risk of prejudice." "Benefit" is defined as "any financial or proprietary gain, whether temporary or permanent," and "prejudice" is defined as "any financial or proprietary loss, whether temporary or permanent." Whilst it is intended that "gain" in the definition of "benefit" and "loss" in the definition of "prejudice" are to have the same meanings respectively, as "gain" in section 8(2)(a) and "loss" in section 8(2)(b), the introductory words in section 8(2) i.e "gain or loss in money or other property," are different to the words used in the definitions of "benefit" and "prejudice" i.e. "financial or proprietary gain/loss," although of similar meaning.

4. It is considered if the terms "benefit" and "prejudice" are to remain essential parts of the offence of fraud, it would cause confusion and problems in interpretation by the courts, if the meaning of the terms "gain" and "loss" where they appear in the definitions of "benefit" and "prejudice," was to be ascertained by reference to section 8(2) of the Theft Ordinance. For the sake of clarity the Administration feels that the definitions of "benefit" and "prejudice" and "gain" and "loss" should be included in section 16A, signifying that these definitions are relevant to the proposed new offence.

The definition of "deceit"

5. Members of the Committee are aware that the proposed definition of "deceit" is similar to the definition of "deception" in section 17 of the Theft Ordinance.

    (a) "...the past, the present or the future"
6. Our research has revealed that the definition of "deception" in the English Theft Act, 1968, differs from the Hong Kong definition. Under the English definition
    '"deception" means any deception (whether deliberate or reckless) by words or conduct as to fact or as to law, including a deception as to the present intentions of the person using the deception or any other person.'
7. It will be noted that there is no reference in this definition to the "past" or the future." Professer Edward Griew in his distinguished work entitled The Theft Acts 1968 and 19781 considers that the words
    '"a deception...by words...as to fact" involves the making of an untrue statement as to some past or present fact....'
8. Professor Griew does not support his opinion by reference to any decided case, and our research has failed to find any such case to support this contention, but if the Professor is correct, then representations as to future events such as "I will inherit $5m from my father's estate when he dies, and I will pay you for the new car, including interest, when I receive that money" in circumstances where the person making the representation knows that the $5m has been left in his father's will to his brother (his father being extremely ill and expected to pass on shortly), and where, because of this representation, the person making the representation is permitted to take possession of a new car, would not be covered by this definition.

9. An examination of some old departmental files relating to the 1970 Theft Bill and of Hansard reveals that the legislature intended that the definition should incorporate the best of the English definition whilst at the same time retaining provisions derived from the definition of "false pretence" in the Larceny Ordinance (the predecessor to the Theft Ordinance); "false pretence" is defined as including :-

    "..a false pretence or false representation relating to the past, the present or the future and a false statement or false representation of intention or opinion.."
10. So far as this particular part of the proposed definition of "deceit" is concerned, the Administration is of the view, in order that the law in this regard is abundantly clear, to the extent that false representations as to future events are covered, that the definition as proposed should go forward.
    (b) "opinion"
11. The term "opinion" was included in the definition of "deception" for the same reason as representations as to past, present and future events were included, i.e. an intention on the part of the legislators to incorporate the best of the English definition whilst retaining provisions from the old legislation.

12. However, as Professor Griew2 states,

    "....Usually it is easy enough to identify a fact falsely asserted by words used. But difficulties can occur where the defence is in a position to argue that the statement made was one of opinion rather than fact;
Another eminent academic, Professor Sir John Smith also opines3 that
    "The Theft Act gives no guidance as to whether a misrepresentation of opinion is capable of being a deception..."
13. The leading case on this type of conduct is a case called Bryan [a copy of which is attached]. Both Professor Smith and Professor Griew express the view that facts similar to those in the Bryan case, would support a prosecution, although to date the concept does not appear to have been tested in Court.

14. The Administration is of the view that this part of the proposed definition of "deceit" should also be left intact, so that persons such as retailers of electrical and luxury items, are left in no doubt that if they falsely or recklessly express an opinion as to the value or quality of their merchandise, that such conduct will not be tolerated; this aspect is particularly important to the tourist industry, where we regularly hear of cases in which tourists have been deceived into purchasing poor-quality goods of low value, at an inflated price, as a conequence of dishonest retailers misrepresenting the true quality and value of the goods.

Consequential Amendments

15. Clause 8 of the Bill adds the new offence of fraud in section 128(3) of the Merchant Shipping (Seafarers) Ordinance, Cap.478 so that the power to cancel or suspend a certificate of competency may be exercised against a certificate holder who has been convicted of the new offence of fraud in relation to a certificate of competence or of a conspiracy to commit any such offence.

16. Clause 9 of the Bill adds the new offence of fraud in section 17(3) of the Merchant Shipping (Seafarers) (Certification of Officers) Regulation (Cap.478 sub.leg.) so that the power to cancel or suspend a certificate of competence or a certificate of service may be exercised against a certificate holder who has been convicted of the new offence of fraud in relation to a certificate of competence or a certificate of service or of a conspiracy to commit any such offence.

17. Clause 10 of the Bill adds the new offence of fraud in section 7(2) of the Merchant Shipping (Seafarers) (Engine Room Watch Ratings) Regulation (Cap.478 sub. leg.) so that the power to cancel or suspend an Engine Room Watch Rating Certificate may be exercised against a Certificate holder who has been convicted of the new offence of fraud in relation to such Certificate or of a conspiracy to commit any such offence..

18. Clause 11 of the Bill adds the new offence of fraud in section 7(2) of the Merchant Shipping (Seafarers) (Navigational Watch Ratings) Regulation (Cap.478 sub.leg.) so that the power to cancel or suspend a Navigational Watch Rating Certificate may be exercised against a Certificate holder who has been convicted of the new offence of fraud in relation to such Certificate or of a conspiracy to commit any such offence..

19. Under the above provisions in the Merchant Shipping (Seafarers) Ordinance and its subsidiary legislation, the power to cancel or suspend the relevant documents may be exercised against a document holder who has been convicted of offences relating to false representation, fraudulent using or conspiracy to defraud in relation to a document referred to the relevant provisions. It is considered that the power to cancel or suspend the relevant documents under these provisions should similarly be extended to the new offence of fraud in relation to the relevant documents.

Department of Justice
May 1999

1Sweet and Maxwell, London 1990 @ p142, para. 7-14.

2 supra para. 7-14

3The Law of Theft, 8th edn. para. 4-31.