Oxford Investigation Service – 7th Annual Fraud Conference
One of the best conferences of any year – the Annual Fraud Conference organised by the Oxford Investigation Service – is due to take place on 17 November 2022 at Oxford Town Hall. This year’s theme is ‘Prevent to Protect’ and the draft agenda is:
As you can see from the programme above, there are some great and knowledgeable speakers, and a typically broad range of topics.
To book your place, simply go to the OIS’s website.
Housing fraud in the criminal courts – an introduction
For many housing practitioners – whether that be those working for a social landlord, investigators or lawyers – their primary experience of seeking to ‘apply’ the results of their work in the fraud field is in the civil courts. In particular, it is in the context of (residential) possession proceedings in the county court.
However, the “crossover” into the criminal courts is not unusual and a quick review of the Cornerstone on Social Housing Fraud twitter account (@CSHousingFraud) for 2021 will show, by way of example, references to 13 convictions:
B. Housing fraud (criminal) charges
The usual offences charged in this field (primarily allocation fraud/unlawful sub-letting) are:
(1) Fraud Act 2006
Section 2 (fraud by false representation)
Section 3 (fraud by failing to disclose information)
Section 4 (fraud by abuse of position)
Section 7 (making or supplying articles for use in frauds)
Conviction (section 1(6))
– Summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum (or to both);
– Conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).
Sentencing guidelines (Magistrates’ Court) can be seen here.
Sentencing guidelines (Crown Court) can be seen here.
(2) Prevention of Social Housing Fraud Act 2013
Section 1 (unlawful sub-letting: secure tenancies)
Section 2 (unlawful sub-letting: assured tenancies)
Conviction (sections 1(5)(6), 2(6)(7))
– A person convicted of an offence under sections 1(1), 2(1) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
– A person convicted of an offence under sections 1(2), 2(2) is liable—
(a) on summary conviction, to imprisonment for a term not exceeding 6 months or a fine not exceeding the statutory maximum (or both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or a fine (or both).
(3) Housing Act 1996
Section 171 (false statements and withholding information)
Section 214 (false statements, withholding information and failure to disclose change of circumstances)
Conviction (sections 171(2), 214(4))
A person guilty of an offence under these sections is liable on summary conviction to a fine not exceeding level 5 on the standard scale.
*Note that section 85 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 replaced the previous statutory maximum of £5,000 in the magistrates’ court with an unlimited fine. This applies only to offences committed on or after 12 March 2015.
C. Sentencing guidelines
The Sentencing Council website says:
“On 1 December 2020 the Sentencing Code came into effect in England and Wales, consolidating existing sentencing procedure law into a single Sentencing Act.
The Code covers sentencing for adults and under 18s and applies to all convictions made on or after 1 December 2020, irrespective of the date on which the offence was committed. From this date, judges and magistrates need to refer to the Code, rather than to previous legislation, although there will be some transitional cases where an offender is convicted before 1 December but is sentenced later.
The Code includes general provisions relating to sentencing procedure, the different types of sentences available to the courts, and certain behaviour orders that can be imposed in addition to a sentence. It is a consolidation only so has made no substantive changes to the law.”
And so, for example, section 59 of the Sentencing Act 2020 provides:
“(1) Every court—
(a) must, in sentencing an offender, follow any sentencing guidelines which are relevant to the offender’s case, and
(b) must, in exercising any other function relating to the sentencing of offenders, follow any sentencing guidelines which are relevant to the exercise of the function,
unless the court is satisfied that it would be contrary to the interests of justice to do so.
(2) The duty imposed by subsection (1) is subject to—
(a) section 125(1) (fine must reflect seriousness of offence);
(b) section 179(2) (restriction on youth rehabilitation order);
(c) section 186(3) and (6) (restrictions on choice of requirements of youth rehabilitation order);
(d) section 204(2) (restriction on community order);
(e) section 208(3) and (6) (restrictions on choice of requirements of community order);
(f) section 230 (threshold for imposing discretionary custodial sentence);
(g) section 231 (custodial sentence must be for shortest term commensurate with seriousness of offence);
(h) sections 273 and 283 (life sentence for second listed offence for certain dangerous offenders);
(i)section 321 and Schedule 21 (determination of minimum term in relation to mandatory life sentence);
(j) the provisions mentioned in section 399(c) (mandatory minimum sentences).”
Section 60 then goes on to say:
“(1) This section applies where—
(a) a court is deciding what sentence to impose on an offender for an offence, and
(b) offence-specific guidelines have been issued in relation to the offence.
(2) The principal guidelines duty includes a duty to impose on the offender, in accordance with the offence-specific guidelines, a sentence which is within the offence range.”
Section 73 deals with guilty pleas and the reduction of sentence that thereupon applies (depending on when the plea is made, minimum sentences that apply to some sentences, etc). See the Sentencing Council reference here.
By way of example, if a person has been convicted of a section 1 Fraud Act offence in the Magistrates’ Court and the court is retaining the case for sentencing then the court will:
- Determine the offence category – high, medium or lesser culpability – and as part of that consideration determine the harm by reference, in the latter instance, to value and impact.
- Use that to reference the case in the tables provided – that covers custodial sentences, fines and community orders, and allows for aggravating factors.
- Consider any factors which indicate a reduction, such as assistance to the prosecution – see section 74.
- Reduction for guilty pleas – see section 73.
- Totality principle – If sentencing an offender for more than one offence, or where the offender is already serving a sentence, consider whether the total sentence is just and proportionate to the overall offending behaviour. See guidance here.
- Confiscation, compensation and ancillary orders – see re magistrates’ court here and re Crown Court here.
- Reasons for sentence – see section 52.
- Consideration for time spent on bail (tagged curfew) – see section 240A of the Criminal Justice Act 2003 and section 325.
The Crown Court “version” can be seen here.
This blog is by way of an introduction to the criminal prosecution of housing fraud, and future articles will aim to build on its operation and the practical considerations that may need to be borne in mind in considering whether to go down this route instead of or, more likely, in addition to the civil litigation process. In the meantime there are earlier articles available on this site covering confiscation orders and compensation orders.
Annual Fraud Conference 2021 – Oxford Town Hall
On 24 November 2021 I will be “going home” to speak at the Annual Fraud Conference 2021 – The Power of Partnerships – being held at Oxford Town Hall. This is in its 6th year now and is organised by Oxford City Council’s Oxford Investigation Service (OIS).
From 1987 to 1997 I worked in Oxford for the Oxfordshire Money Advice Project, a debt training, support and advocacy agency funded by Oxfordshire County Council and run by the National Association of Citizens Advice Bureaux. During that time I also spent 4 years as a city councillor, including almost 2 years as chair of the Housing Committee.
Oxford, and the Town Hall in particular, has always therefore held precious memories for me and I have always enjoyed my returns since coming to the Bar in 1999, primarily to the County Court, and the nostalgia-bug invariably grips me whenever I am there.
This time I am privileged to be surrounded by such an impressive line-up covering fraud from its detection and investigation stage through to its prosecution and appropriate response.
I am especially lucky to be talking in a workshop with Raj Vine, the fantastic Counter Fraud Specialist at Riverside. I worked with Raj, and indeed the OIS, in a sub-letting possession trial I wrote about earlier this year.
The title of this year’s conference is especially important for two main reasons. Firstly, when you look at any housing fraud case which has produced a successful outcome for the landlord then it will always have only done so because of the input of various agencies, individuals and professions. I am fortunate that by the time I get involved much of the hard work has already been done!
Secondly, it illustrates for me as a lawyer where I could do more, listen more and learn more – whether that be investigation work, officer input, etc. Teamwork is not, and should never be, an empty mantra and partnerships are essential to identify the true factual scenario, maximise prospects of success and hone the case to the extent it warrants.
Housing fraud in the Courts – 6 recent cases
Local authorities detect or prevent frauds worth £302 million in 2017/18
The CIPFA “Fraud and corruption tracker” summary report, based on responses from 144 local authorities, estimates that approximately 80,000 frauds have been detected by local authorities in 2017/18 with a value of £302 million.
71.4% of that figure is under the heading of ‘housing fraud’ (though the number of cases represents only 5.7% of the total, the largest number of cases being with regard to council tax):
– 1518 Right to buy cases at a value of £92m
– 1051 unlawful sub-letting cases at a value of £55.8m
– 2164 other cases (e.g. wrongful assignments and tenancy successions, false applications) at a value of £68.3m
1. Public sector organisations need to remain vigilant and determined in identifying and preventing fraud in their procurement processes. Our survey showed this to be one of the prime risk areas and practitioners believe this fraud to be widely underreported.
2. Effective practices on detecting and preventing adult social care fraud should be shared and adopted across the sector. Data matching is being used by some authorities with positive results.
3. All organisations should ensure that they have a strong counter-fraud leadership at the heart of the senior decision-making teams. Fraud teams and practitioners should be supported in presenting business cases to resource their work effectively.
4. Public sector organisations should continue to maximise opportunities to share data and to explore innovative use of data, including sharing with law enforcement.
5. The importance of the work of the fraud team should be built into both internal and external communication plans. Councils can improve their budget position and reputations by having a zero- tolerance approach.
CIPFA’s chief executive, Rob Whiteman, said in a recent article for “Public Finance”:
“…the number of serious and organised crimes detected and prevented by councils has doubled this year to 56, highlighting the seriousness of the issues faced – and the effectiveness of councils’ efforts. Overall, 636 prosecutions were completed in 2017-18, up from 614 the previous year.
However, these successes were owing not to increased resources but increased capability and collaboration. The number of in-house qualified financial investigators appears to have dipped slightly, but shared services structures have risen from 9% to 14% of authorities. Fraud is a crime that crosses organisational and geographic boundaries. By collaborating, sharing data and jointly investing in new technologies, councils can improve resilience and cost-effectiveness.
The London Counter Fraud Hub, a data-sharing and analytics solution led by Ealing Council and London Councils and run by CIPFA and other partners, is an example. About to go live, it forms a part of CIPFA’s enhanced counter fraud services, which seek to drive a collective change in councils’ approach to fraud.
It’s important to maximise opportunities to share and explore innovative use of data, including working with law enforcement. Fraud is not a victimless crime. It inevitably diverts resources away from those who need it most. With local government running on empty, councils must preserve every drop.”
See the earlier blog article on the National Fraud Initiative Report 2018
Private prosecutions – a cautionary tale
The right of private prosecution is expressly preserved by section 6 of the Prosecution of Offences Act 1985.
On 23 May 2018 Lord Justice Gross and Mr Justice Sweeney handed down judgment in R (on the application of Martin Kay and Scan-Thors (UK) Limited) v Leeds Magistrates’ Court (Defendant) and Marek Karwan (Interested Party)  4 WLR 91, allowing a judicial review challenge to 2 decisions of a district judge at the Magistrates’ Court in Leeds:
1. Her refusal to dismiss summonses for offences of fraud between 2007 and 2012, which had been issued against the Claimants on the basis of an information laid at the behest of the Interested Party.
2. Her refusal to stay proceedings as an abuse of process, having decided that this issue should be determined in the Crown Court.
The District Judge’s decision and the summonses were quashed because of breaches of the duty of candour on the part of the private prosecutor, Mr Justice Sweeney concluding:
“38. As this case demonstrates, the grant of summonses, typically conducted ex parte, can have far reaching consequences. Compliance with the duty of candour is the foundation stone upon which such decisions are taken. In my view, its importance cannot be overstated.
39, The DJ undoubtedly had the power to deal with the breach of the duty of candour in this case by quashing the summonses. Logically, that was the first issue that she should have engaged with, but she failed to engage with it at all.
40. Whether breach of the duty of candour comes under the broad umbrella of abuse of process, or falls to be dealt with in its own right, applying the test most favourable to Mr Karwan (see  above), namely whether the inaccurate and/or non-disclosure would have made a difference to the judge’s decision, my answer is, unhesitatingly, “yes”, Even if the application had not been refused without more, it would inevitably have resulted in more focussed enquiries, the notification of the Claimants, and (in my view) the Claimants being heard.”
Costs were determined on 26 October 2018, they being awarded against the Interested Party on an indemnity basis, Mr Justice Sweeney explaining:
“21. In our view there is no merit in either the Interested Party’s principal or alternative submissions under this heading. He was the driving force in obtaining the summonses in significant breach of his duty of candour, and in persuading the District Judge to act as she did (whilst still failing to disclose the content of the Polish Regional Prosecutor’s second written justification). In all the circumstances we conclude that it is not appropriate to make an order for costs out of central funds in relation to the proceedings in the Magistrates’ Court or in this Court, nor to order that the Interested Party should only be liable for a portion of the costs. Put bluntly, these submissions are misconceived….
28. The Claimants underline that, for Orders on an indemnity basis, proportionality is irrelevant. They submit that Mr Kay is a man of 71 of impeccable good character who, when faced with serious charges of fraud, was entitled to instruct lawyers with the necessary skill and experience to deal with such a case, and that the amount of work that was carried out by his lawyers was entirely reasonable – including proper delegation with the majority of his solicitors’ work being done at associate rather than partner level. The Claimants draw attention to R (Haigh) v City of Westminster Magistrates’ Court  EWHC 232 in which the Court made an Order for costs of £190,000 against a private prosecutor for the Magistrates’ court proceedings alone (albeit that two sets of defence lawyers were involved). The Claimants went on to rebut each of Interested Party’s submissions in relation to particular items of expenditure.
29. We have considered these submissions and the Amended Costs Schedules, having regard to s.51 of the Senior Courts Act, CPR 44.2 and s.19 of the Prosecution of Offences Act 1985. In the result we have decided, in the exercise of our discretion, to assess costs summarily in the total amount of £250,000. We are satisfied that, looked at robustly and in the round, this figure does justice to both parties. Accordingly, we propose to make an Order in favour of the Claimants, here and below, in that total sum – payable within 28 days. The Claimants must draw up a draft Order accordingly.”
This case not only serves as a warning to would-be prosecutors that their duty of candour must be taken seriously but also, in the substantive judgment, provides a helpful update on the procedure applicable to bringing such a prosecution.
Tenancy Fraud Forum 2018
The Tenancy Fraud Forum (TFF) held its annual conference at the BMA in London on Wednesday, 3 October 2018:
The TFF was launched in April 2012 and arose out of a recognition that there was an increasing need for a fraud forum that focused solely on tenancy fraud issues because of the complex law that surrounds such matters, and the requirement for niche investigations. The Executive Committee of TFF is made up of fraud specialists from local authorities and housing associations.
The annual event was as ever well attended and I was privileged to be asked to give the keynote speech, and focused on the need for greater understanding of the extent of fraud ‘in the system’, the litigation tools at the disposal of landlords and the need to consider widening the local authority investigation powers to be found in the Prevention of Social Housing Fraud (Power to Require Information) (England) Regulations 2014/899 and the Prevention of Social Housing Fraud (Detection of Fraud) (Wales) 2014/826 beyond the suspected fraud and their family.
The lasting impression I got from listening to some excellent speakers on topics such as money laundering, surveillance and right to buy fraud – and speaking to many delegates – was that there was some tremendous work going on in the social housing sector to detect fraud and an increasing cross-working practice in the sector, alongside an acknowledgement that there is a long way to go:
The TFF is a an important organisation led by the brilliant and indefatigable Katrina Robinson MBE…I’m already looking forward to the 2019 Conference!
National Fraud Initiative Report 2018
The Cabinet Office has produced the National Fraud Initiative Report 2018, the headline figure of which is that the National Fraud Initiative (NFI), the Cabinet Office’s data matching service, has enabled participating organisations to prevent and detect over £300 million UK fraud and error in the period April 2016 to March 2018, a rise from £222 million in 2014/15.
The NFI compares sets of data, such as the payroll of a company with benefit records, allowing fraudulent claims and payments to be identified. Between April 2016 and March 2018, the NFI worked with over 1,200 public and private sector organisations.
The report highlights 4 NFI products:
- National – Data is collected from organisations across the UK for national fraud detection batch matching. Matches are accessed through a secure web application.
- AppCheck – Fraud prevention tool that helps organisations to stop fraud at the point of application, thereby reducing administrative and future investigation costs.
- ReCheck – Flexible batch matching tool that allows an organisation to repeat national batch matching at a time to suit them.
- FraudHub – this enables groups of organisations to regularly screen more than one dataset with the aim of detecting errors in processing payments, or benefits and services.
Looking at the figures in a housing context for England (£275.3 million of the £300 million figure) the report shows:
- £5.5 million related to tenancy fraud, £25.5 million to waiting lists, and £1 million to right to buy (RTB – 4 cases);
- 58 social housing properties were recovered, a small increase from the 54 properties in 2014/15. The NFI use an estimate of £93,000 per property recovered based on average four year fraudulent tenancy – this includes temporary accommodation for genuine applicants; legal costs to recover property; re-let cost; and rent foregone during the void period between tenancies;
- 7601 false applications were removed from local authority allocation schemes during 2016/17 – over half of these applications were cancelled by one council. The NFI works on an estimate of £3,240 per case for future losses prevented as a result of removing an applicant from a list;
- The NFI estimate a saving of £65,000 per RTB application withdrawn based on average house prices and the minimum right to buy discount available (this has some regional variations such as with London it is £104,000 per application withdrawn to reflect the maximum value of RTB discount available for London properties);
- The Annual Fraud Indicator 2017 highlights that housing tenancy fraud costs local government £1.83 billion. This has increased from the £1.76 billion quoted in 2016;
- Whilst there are 400 local authority participants in the NFI, there are just 7 Housing Associations.
The report gives 2 examples of local authority use of NFI initiatives:
- Royal Borough of Greenwich – an NFI housing tenancy to housing tenancy match showed two matching tenancies between two London boroughs. Investigations in the Royal Borough of Greenwich showed their tenant had used false identity documents to gain a one bedroom flat in May 2013; claimed housing benefit; used the same documents to gain employment as a waste operative in the borough four years earlier, in October 2009 (he was no longer in that employment at the time of the investigation). The Royal Borough of Greenwich evicted the tenant from the property in February 2017 and he was prosecuted and sentenced at Woolwich Crown Court on 4th October 2017 to 33 months imprisonment. In total the man had received in excess of £60,000 in employment and housing benefit payments.
- Portsmouth City Council – a housing tenants to housing benefit match identified a tenant in a property owned by Portsmouth City Council. The tenant had however been claiming housing benefit in excess of £150 per week for a different property in a nearby authority area since January 2016. The match revealed the tenant had let the property from Portsmouth City Council in February 2013, but investigations found the tenant’s partner had been subletting the Portsmouth property for up to two years. The council sought a prosecution in October 2017 and the property was successfully recovered.
Proving fraud – the basic principles
The recent judgment of Kazakhstan Kagazy Plc & 5 Others (Claimants) v (1) Baglan Abdullayevich Zhunus (2) Maksat Askaruly Arip (3) Shynar Dikhanbayeva (Defendants) & Harbour Fund III LLP (Additional Party)  EWHC 369 (Comm) handed down on 28 February 2018 dealt with consequential orders following the court’s earlier substantive judgment in this fraud claim –  EWHC 3374 (Comm) – given by Mr Justice Picken on 22 December 2017.
Paragraphs 155 to 165 of that earlier liability judgment helpfully set out the basic and established principles relevant to proving fraud:
- Fraud has to be both clearly alleged and proved: Paragon Finance plc v DB Thakerar & Co  1 All ER 400 at p. 407 per Millett LJ (as he then was).
- The court should not have to rely on inferences from facts not pleaded: Elena Baturina v Alexander Chistyakov  EWHC 1049 (Comm).
- Nor will it find fraud from facts which have been pleaded but are consistent with honesty: Three Rivers District Council v Bank of England (No 3)  2 All ER 513 per Lord Millett at para. 186.
- It is however perfectly legitimate for the Court to proceed by way of inference from circumstantial evidence: JSC BTA Bank v Ablyazov  EWCA Civ 1411 at para. 52 per Rix LJ.
- Although fraud need only be proved to the civil standard of probability, in practice more convincing evidence will often be required to establish fraud than other types of allegation (see Clerk & Lindsell on Torts, 21st Ed., paragraph 18-04):
“When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence …”
[In re H (Minors)  AC 563 at pp. 586-7 per Lord Nicholls]
“The burden of proof lies on the [Claimants] to establish their case. They must persuade me that it is more probable than not that [the Defendants] made fraudulent misrepresentations. Although the standard of proof is the same in every civil case, where fraud is alleged cogent evidence is needed to prove it, because the evidence must overcome the inherent improbability that people act dishonestly rather than carelessly. On the other hand inherent improbabilities must be assessed in the light of the actual circumstances of the case …”.
[Foodco UK LLP v Henry Boot Developments Ltd  EWHC 358 (Ch) at para. 3 per Lewison J (as he then was)]
These cases provide a useful reminder of the importance of careful and clear pleading, and proper consideration of the evidence available and its proper and most appropriate conclusion.