LC: Theft (Amendment) Bill 1998

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Following is the speech by the Secretary for Justice, the Hon Elsie Leung, in moving the Second Reading of the Theft (Amendment) Bill 1998 in the Legislative Council today (Wednesday):

Ms President,

I move that the Theft (Amendment) Bill 1998 be read a second time.

The purpose of the Bill is to improve the existing law in respect of fraud-related crimes by creating a new statutory offence of fraud. The Bill also provides for the retention of the existing common law offence of conspiracy to defraud.

It may come as a surprise to many to learn that there is at present in Hong Kong no general offence of fraud, either at common law or under any Ordinance. Instead what might loosely be described as fraudulent conduct is dealt with in a variety of ways.

* First, the Theft Ordinance creates a number of specific offences of fraud-related dishonesty, such as obtaining property by deception. But these offences are drawn in very specific terms, and are too restrictive and technical to cover all acts of fraud-related dishonesty. For example, a person borrowing property from another person by deception, but without the intention of permanently depriving the owner of it, cannot be charged with any of the existing offences under the Theft Ordinance.

* Secondly, some fraudulent conduct can only be prosecuted by charging the offenders with the common law offence of conspiracy to defraud. However, a conspiracy charge can only apply to the actions of two or more persons. The actions of a single person acting alone fall outside the offence of conspiracy to defraud and are only criminal if one of the specific fraud-related offences applies.

In July 1996, the Law Reform Commission published a report on the "Creation of a Substantive Offence of Fraud". The Report followed the issue of a consultation paper in June 1995 on the Commission's preliminary proposal that a new offence of fraud should be enacted in Hong Kong. The Report also recommended the abolition of the common law offence of conspiracy to defraud.

Concerns have recently been raised that, if the new offence of fraud were enacted as recommended, and the common law offence of conspiracy to defraud were repealed, the law of fraud would be defective. This is because the proposed offence would not cover two situations , which are now covered by conspiracy to defraud. The first situation is where a non-financial or non-proprietary prejudice or benefit is caused by deception e.g. a public officer is tricked into acting in a way in which he would not have acted if he had known the true position. The second situation is where no deception is involved e.g. directors of a company put the company funds at risk by making a loan other than on a commercial basis and hence prejudice the company's interest.

In order to address these concerns, it is proposed firstly that the new offence should not be restricted to deception causing financial or proprietary loss or gain. As a result, the new offence will protect not only the individual's proprietary interest, but also the public interest in the integrity of the administration of public affairs. That was indeed the approach favoured by the LRC in its original formulation of the offence. Secondly, to meet the concern that certain conduct not involving an element of deceit (currently covered by the existing common law conspiracy to defraud) would fall outside the new offence, it is considered that the existing offence of conspiracy to defraud should be retained, alongside the new substantive offence of fraud.

Another reason for retaining the offence of conspiracy to defraud is that the offence is listed as an extraditable offence in most of Hong Kong's agreements on the surrender of fugitive offenders. Common law jurisdictions in particular were anxious to ensure that extradition would be available for the common law offence of conspiracy to defraud and were assured that such an offence existed in the Hong Kong law. If the common law offence is abolished in Hong Kong and the new statutory offence does not comprehend all the conduct previously comprehended by the common law offence, some requests for extradition to Hong Kong could fail for want of double criminality. This could give rise to allegations of bad faith by Hong Kong's treaty partners.

The proposed new offence of fraud will remedy the deficiencies and shortcomings in the existing law, will correspond to what most people believe should be the law, will be a welcome addition in the fight against crime, and will add to Hong Kong's reputation as an international financial centre.

Let me now turn to the Bill. Clause 3 adds a new section 16A to the Theft Ordinance to create the offence of fraud. The offence will be committed when a person by deceit induces another to act or to make an omission resulting either in prejudice, or a substantial risk of prejudice, to another, or in benefit to the fraudster or another. The advantage of the new offence is that it would enable conduct to be properly charged as a substantive offence against an individual acting alone, without the necessity of involving another participant.

Clause 3 also provides that the common law offence of conspiracy to defraud shall not be affected or modified by the creation of the offence of fraud.

Ms President, this Bill is short but important. By putting in place a general offence of fraud, it will enable us to deal more effectively with all types of fraud. It would also help further enhance Hong Kong's position as the leading financial centre in the region. I commend the Bill to the Council.

End/Wednesday, December 2, 1998

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