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Fraud by misrepresentation?


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Hi all, I was speaking with someone I know recently, who was having issues, I gave him advice but just want to check what everyone else thinks. This is what he has told me so far..

 

He was mentioned to a customer that he was interested in buying a property via auction, this property was valued at a lot more than it was expected to reach at auction, and basically the customer offered to lend him the money for deposit etc if he went to the auction.

 

He went to the auction and budded on the property, paid the deposit via a cheque, knowing the full amount wasn't in the account yet but reliant on the knowledge the customer would forward the funds. (The customer is not connected with property a customer of the guys employer)

 

On informing the customer the required amount to complete, the customer advised funds would not be available for a couple of weeks. Subsequently the cheque bounced, he then contacted the auction house and requested more time, which was allowed for ten days, or until the next auction can't remember which.

 

Customer came through with the funds, and he contacted the auction house and solicitors etc, auction house informed the property had been resold to another party. He was then left with a contract of loan for the amount plus five percent owing to the customer.

 

The solicitor informed sale had been cancelled, and that he would be responsible for the deposit owing.

 

In order to try make the money owed, the guy used the money to pay off some of the debts incurred with the failed purchase, and invested the rest into his business.

 

He since made payments to the customer but not at the agreed amounts, the business then failed due to ill health, and the guy does have cash flow problems, he contacted the customer and informed them of this and has made a payment since, and basically said would pay what he can when he can, the customer said they wanted a large payment weekly until sum is paid, which the guy can't make. Again he said he would pay what he can when he can and is a genuine lad to be fair.

 

The customer has since contacted the police who have been to see him, they now want him to go into the police station alleging fraud by misrepresentation.

 

I advised that this could not be the case and in extreme would and could only be breach of contract and in any case a civil mater, not criminal.

 

Any thoughts or advice would be greatly appreciated and forwarded.

 

Many thanks as usual

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Fraud by false representation

 

(1)A person is in breach of this section if he—

 

(a)dishonestly makes a false representation, and

 

(b)intends, by making the representation—

 

(i)to make a gain for himself or another, or

 

(ii)to cause loss to another or to expose another to a risk of loss.

 

(2)A representation is false if—

 

(a)it is untrue or misleading, and

 

(b)the person making it knows that it is, or might be, untrue or misleading.

 

He was advanced money for one specific business purpose, and used it (and lost it!) on another non-agreed purpose. Sounds like fraud by false representation to me, if when the deal fell through he didn't return the money to the 3rd party, or seek their agreement to use the money as "a different investment".

Edited by BazzaS
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Fraud by false representation

 

(1)A person is in breach of this section if he—

 

(a)dishonestly makes a false representation, and

 

(b)intends, by making the representation—

 

(i)to make a gain for himself or another, or

 

(ii)to cause loss to another or to expose another to a risk of loss.

 

(2)A representation is false if—

 

(a)it is untrue or misleading, and

 

(b)the person making it knows that it is, or might be, untrue or misleading.

 

He was advanced money for one specific business purpose, and used it (and lost it!) on another non-agreed purpose. Sounds like fraud by false representation to me, if when the deal fell through he didn't return the money to the 3rd party, or seek their agreement to use the money as "a different investment".

 

I have known this guy for about 4 years, and had business dealings with him in the past, all went as he said, I don't think for one second he is the fraud type, not that they have badges on them or anything like that. I can see where you are coming from though by definition, but as he has explained to me, the loan was not for a specific property, or purpose, the loan body as far as I can gather is the amount plus five percent, he says at no time did he he mislead the customer into the agreement.

 

I don't know the customers background or anything like that and I am sure if I was to speak to them as ever there would be slight differences, but as I said this doesn't seem like fraud to me more like a business deal gone wrong, and they guy is returning the money all be it at a reduced amount. What are the defining points for you to feel that it is fraud by misrepresentation.

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Defining points: as per my post above:

 

1) Was it a loan for any general purpose or for the specific purpose of the property at auction?

 

From your original post:

"basically the customer offered to lend him the money for deposit etc if he went to the auction."

 

If it was for "any general purpose" then it is only a contractual / civil matter.

 

If it was agreed for the purpose of the specific property deal, but later "diverted" elsewhere : that is the false representation, if (as noted above) when the original property deal fell through he didn't return the money to the 3rd party, or seek their agreement to use the money as "a different investment".

 

By the fact it was then lost shows that the lender was exposed to risk of loss, and how then would it then be that the offence wasn't made out, if the lender felt that the use of the money had been falsely represented and the money then lost.

Edited by BazzaS
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I have spoken to him again yesturday, the guy is really upset, i asked him to clarify some points, and at best they are a bit grainy.

 

He said that him and tbis customer had spoken for some time over other business offers he hadand alternative investments, and the customer had mentioned that they usually use shares as an investment which were not returning the desired amounts.

 

The original deal was to purchase property abroad, and the customer wrote him a cheque which he was not allowed to bank. The agreement which was not written down but verbal the changed to a loan for investment. Which the guy guaranteed to return personally. It was at a later stage the guy mentioned to the customer about a uk property.

 

The money was then transferred into his bank and he returned the cheque, he gave a receipt for investment which was the only written document within this agreement but that was given when the cheque was handed over but never cashed.

 

It all seems very complicated to me, but im assured by the guy that it was a general investment and nothing was agreed with where of how the cash would be spent. My opinion is neither party expected the worst and therefore xid not documeng what would happen should the worst become a reality.

 

The guy has made several payments back to the customer and hopes to rectify the full amount as agreed verbally within a realistic time frame.

 

I have told him to speak to a solicitor to vet tbere view on it.

 

Thanks for your advice so far

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He has been incredibly foolish - yet another person stung by trying to gamble on the property market with money they don't have - but I can't see how this would be fraud by misrepresentation. Your post does not identify a clear false "representation" (i.e. statement) made by your mate before the money was transferred.

 

A purely civil matter.

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