A previous blog on the conviction of the surgeon Ian Paterson for multiple counts of unlawful wounding considered whether the provisions of the Proceeds of Crime Act 2002 could be extended to cover the actions of Ian Paterson and one of the hospitals at which he practised, Spire Parkway Hospital in Solihull. This further blog asks whether the provisions of the Fraud Act 2006 might cover the case.
There is now a single primary offence of fraud, contained in section 1 of the Act. The offence can be committed in three different ways: by a false representation; by a failure to disclose information when there is a legal duty to do so; and, by abuse of position. Under section 1(3) of the Act, the maximum term of imprisonment for an offence is 10 years. As with other financial offences in the UK, an offender can also receive an unlimited fine.
It is arguable that Spire Parkway and/or its employees could be held criminally accountable for an offence under section 2 of the Fraud Act 2006. Here, the defendant must have not only dishonestly made a false representation but must have also intended, by making that representation, to either make a gain (for themselves or any other person), or to cause or expose an individual to the risk of a loss. The offence is entirely offender focused; as long as a false representation is actually made and the requisite dishonest intention (mens rea) element exists, the offence is made out. There is no need to prove that an actual gain or loss was achieved. From the information available it could be suggested that Spire Parkway’s marketing claims about the quality of their surgeons was potentially fraudulent, given Mr Paterson’s previous suspension from similar institutions.
Section 12 of the Fraud Act 2006 imposes criminal liability of company officers for offences by the company, stating:
- Subsection (2) applies if an offence under this Act is committed by a body corporate.
- If the offence is proved to have been committed with the consent or connivance of—
(a) a director, manager, secretary or other similar officer of the body corporate, or
(b) a person who was purporting to act in any such capacity,
he (as well as the body corporate) is guilty of the offence and liable to be proceeded against and punished accordingly. - If the affairs of a body corporate are managed by its members, subsection (2) applies in relation to the acts and defaults of a member in connection with his functions of management as if he were a director of the body corporate.
In order for section 12 to be applicable here the Crown Prosecution Service must also be able to satisfy the requirements of the doctrine of corporate criminal liability. The doctrine of corporate criminal liability has attracted a great deal of criticism; most of which has been directed at the House of Lords’ decision in Tesco Supermarkets v Nattrass.(([1972] A.C. 153.)) The courts began to consider the restrictive application of criminal law to companies in the nineteenth century, which included public nuisance, criminal libel and breach of statutory duty. The doctrine was further extended by three Court of Appeal decisions in 1944, which concluded that a company could be directly held accountable, as opposed to vicariously liable, for the actions of their employees. In DPP v Kent and Sussex Contractors Ltd the Court of Appeal concluded that a company could be held criminally liable where it had produced false documents and provided false information.(([1944] 1 K.B. 146.)) This decision was followed by R v ICR Haulage Co Ltd where it was determined that a company could be held criminally accountable for conspiracy to defraud by the acts of one of its directors.(( [1944] K.B. 551.)) The final relevant decision from the Court of Appeal was Moore v Bresler Ltd where the secretary of the company, who was also the general manager of a branch of the company, was accused of defrauding the company. Here, the company was found criminally liable because one of its officers was acting within the scope of their responsibilities.(([1944] 2 E.R. 575.)) But in 1972, in Tesco Supermarkets v Nattrass(([1972] A.C. 153.)), the House of Lords concluded that a company is allowed to determine a defence under the Trade Descriptions Act 1968 provided it has created an effective procedure to avert the commission of a criminal offence, and the offence is committed because of the failure by of the company’s employees to fulfil their obligation. Whilst giving the leading opinion in the House of Lords, Lord Diplock stated that when the court considers the directing mind of the company it can refer to the memorandum of association and articles of association, thus implicating the directors of the company and other senior company officers.(([1972] A.C. 153, at 198.)) Therefore, in order for Spire Parkway Hospital and Ian Paterson to be found guilty of a criminal offence, a person who has the directing mind of the company and the self-determination of the company would also need to be found to have had criminal intent. The test might thus potentially be passed if the actions of Spire Parkway were shown to have been the responsibility of a senior manager.
This decision of the House of Lords resulted in the creation of the unsatisfactory ‘identification doctrine’, the test to determine if a corporations is to be held liable for breaches of criminal law, and it is the principal reason that prevents UK prosecutors bringing criminal proceedings against corporations.((Ministry of Justice Corporate Liability for Economic Crime (Ministry of Justice, 2017) 7.)) The restrictive interpretation of this doctrine has been highlighted by several subsequent cases including the Herald of Free Enterprise,((R. v P&O European Ferries (Dover) Ltd (1991) 93 Cr. App. R. 72 (Central Crim Ct).)) the Clapham rail disaster,((The British Rail Board admitted vicarious liability but there was no corporate manslaughter prosecution. See generally Hidden, A. Investigation into the Clapham Railway Junction Railway Accident (Department of Transport: London, 1989).)) the Transco gas explosion,((Transco were fined £15m for breaches of the Health and Safety at Work Act 1974. The Appeal Court in Edinburg rejected the charge of ‘culpable homicide’, the Scottish equivalent of the corporate manslaughter offence. See Transco Plc v HM Advocate (No.3) 2005 1 J.C. 194; 2005 S.L.T. 211; 2005 S.C.C.R. 117; 2005 G.W.D. 4-40.)) the Hatfield Disaster((Here, the directors of Network Rail were acquitted of corporate manslaughter but Balfour Beatty Rail was convicted for breaching s. 3 of the Health and Safety at Work Act 1974. See R v Balfour Beatty Rail Infrastructure Services Ltd [2006] EWCA Crim 1586.)) and the sinking of the Marchioness.((Prosecutions were ruled out by the Crown Prosecution Service in 1989 due to insufficient evidence and two separate prosecutions for negligence (failing to keep an adequate lookout) of the captain of the Bowbelle, Douglas Henderson, also failed as the two juries were unable to reach a verdict. See generally House of Commons Thames safety inquiry: final report by Lord Justice Clarke, Cm 4558, February 2000.)) In some of these instances, the liability was limited to the imposition of a fine for breaches of the Health and Safety at Work Act 1974.
The most important legislative development in this area since Tesco Supermarkets v Nattrass has been the Corporate Manslaughter and Corporate Homicide Act 2007, which criminalised harm that leads to a person’s death.((Corporate Manslaughter and Corporate Homicide Act 2007, s. 1.)) Between 2008 and 2016 a total of 19 criminal charges have been brought under the 2007 Act, with convicted defendants paying fines.((Crown Prosecution Service Corporate manslaughter statistics: Freedom of Information Act 2000 Request (Crown Prosecution Service: London, 2016) at 2-3.)) Therefore, in order for section 12 of the Fraud Act 2006 to be used against Spire Parkway Hospital it would be necessary to show that the requirements of both the doctrine of corporate criminal responsibility and the identification doctrine had been met. As outlined above, this is not an easily determined common law test, due to the restrictive nature of the judicial precedents.
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