Friday 26 November 2021

UK: England and Wales: fraudulent trading under section 993 of the Companies Act 2006

Judgment was delivered today by the Court of Appeal in R v Hunter v [2021] EWCA Crim 1785, a case concerning what has become known as 'ticket touting'. The judgment is now a leading authority on the scope of the fraudulent trading offence found in section 993 of the Companies Act 2006. Section 993(1) provides: "If any business of a company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who is knowingly a party to the carrying on of the business in that manner commits an offence". 

In considering the scope of section 993, the court rejected the following arguments: that an intention to deceive is a necessary component of the offence; that the conduct must involve deliberately putting another person's property in jeopardy; that section 993 should be construed as being subject to the common law limitations applicable to the offence of conspiracy to defraud. Moreover, the court observed (para. [120]):

The focus upon purpose means that the law is prophylactic. A fraudulent purpose might be proven before anyone is actually defrauded or becomes an actual victim of the fraud. In the present case if the Prosecution had charged the defendants after they had acquired the relevant bots and other software and the multiple credit cards and had set up a system for using an array of false identifies, but before the defendants had put that system into operation and used it to trick ticket vendors into selling them tickets and/or to place end consumers at risk, then the offence would still have been committed even though there was no actual fraud and no actual harm to end consumers and therefore no victims. A fraudulent purpose would still be in existence and business acts to achieve that purpose would have been carried out. Of course, evidence of implementation might afford powerful additional evidence of the fraudulent purpose, but implementation of a fraudulent purpose is not an essential ingredient of the offence". 

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