Property Offences into the
Lecturer and Associate Director
Banking Law Centre, Faculty of Law
(The author wishes to thank Professor C R Williams for his comments on an earlier draft of this article and Jonathan Clough for his general comments. All mistakes and omissions are those of the author.)
This article considers the way in which legal notions of 'property' have evolved over time and the implications of some of these developments upon the prosecution of property offences. As our society moves further into the global information age, many items of value which might have been previously 'owned' by a person in a traditional sense have increasingly come to be replaced by 'intangible', and often electronic, equivalents. This can create significant difficulties in the prosecution of statutory offences which have been framed in the context of more traditional notions of 'property'. The focus of this discussion is on fraud offences involving the misappropriation of property with particular emphasis on recent case law involving cheques and electronic monetary payments. Implications of developments in this area are then extrapolated to other forms of intangible property, notably electronically registered shares.
Keywords: theft, misappropriation, electronic funds transfer, Preddy, Parsons, intangible property
This is a Refereed Article published on 26 February 1999.
Citation: Lipton J, 'Property Offences into the 21st Century', 1999 (1) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/99-1/lipton.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/1999_1/lipton/>
1. Introduction: Problems of 'Property'
Commentators in various areas of law have, in recent years, emphasised the rapidity with which notions of 'property' have changed under the common law. Traditionally the idea of personal property has revolved around items such as factory and office equipment, livestock, crops, vehicles and other tangible items that may be physically owned, possessed or controlled. Admittedly, there have always been certain intangible items accorded proprietary status by the law. The main examples are choses in action such as book debts, company shares, interests in a partnership and the like. Additionally, over the last century or so, the notion of personal property has increasingly incorporated various intangible 'intellectual property' rights generally created by statute. These have included patents, copyright, industrial designs and registered trademarks. Some commentators would also classify these rights as choses in action, whereas others regard intellectual property rights as a totally distinct form of intangible property (Sykes E and Walker S; 1993, pp 759-60).
As the global information age impacts more fully on societies around the world, attempts to maintain traditional notions of property become increasingly problematic. Even the intellectual property area now struggles with the shift in what society considers to be valuable assets which might, loosely speaking, 'belong' to a person. Obvious examples relate to digital technology; for instance, Internet domain names, which clearly have a commercial value to people who are registered to use them but are not 'tangible' in the sense of, say, computer hardware itself, (Brunel A and Liang M; 1997). Another example is the case of electronic databases where standard protection under intellectual property statutes has also been found somewhat lacking (Nimmer R and Krauthaus P; 1993).
There has also been much controversy in intellectual property circles as to what sort of proprietary protection should be granted to computer programs. The consensus appears to be that they should be protected by copyright law as 'literary works'. However, such protection has not proved appropriate in all cases, particularly given the fact that computer programs may be decompiled and recompiled in a different way, to achieve a similar type of program without necessarily being regarded as a 'copy' for copyright purposes (Cornish W; 1996, pp. 450- 54). In some cases, patent protection may be granted to protect computer software, but this has been the exception, rather than the rule.
The question as to which intangibles should be regarded as 'property' in a legal sense is of growing importance as societies increasingly rely on intangible wealth. As observed recently by Heng (1997, p.174) companies tend to own less tangible property and capital equipment in the modern world, relying more heavily on the value and use of intangible assets such as those mentioned above. Allan (1998, p. 1), too, has recently recognised, in the context of personal property security, that, whereas intangible assets were historically regarded as worthless forms of collateral for a loan, today they must be viable as such because: 'So much of what we reckon as wealth today is in the form of intangibles'.
In this category of valuable intangibles, Allan includes items that have traditionally been owned by businesses, such as trade debts, stocks, shares, debentures and various forms of intellectual property (Allen D; 1998, p. 1). He also includes obligations traditionally found on paper which have been replaced by electronic systems (Allen D; 1998, p. 2), such as shares registered electronically under systems - the Clearing House Electronic Sub-Register System (or 'CHESS') in Australia and the 'Crest' system in the United Kingdom, for instance. Under these systems, paper share certificates are replaced by electronic shareholdings such that the only tangible record a person has of his or her shareholding in a company is through a computer statement which resembles a computerised bank statement.
This trend of movement away from tangible property to intangible, and often electronic, property creates issues for lawyers which influence many areas of law including property, finance law, computer law, private international law and, importantly, criminal law. It is necessary to establish clearly what items a person may be regarded as legally 'owning' in order to ascertain whether, and by what means, such items may be criminally misappropriated.
The following discussion examines ways in which increasing levels of ownership of intangible property might impact on the drafting and operation of statutory criminal offences relating to the misappropriation of 'property'. It takes as its starting point the extent to which these offences have gradually become more problematic for courts when dealing with misappropriations of money, where money is no longer represented by actual physical currency, nor even by negotiable instruments in many cases. It then compares legal responses to these problems with situations involving misappropriations of other forms of intangible asset, notably electronically registered company shares. Conclusions are drawn as to the most effective options for reform, given that the term 'property' in general is becoming increasingly ephemeral and is being applied to more intangibles over time.
2. The Offences and the Statutory Definition of 'Property'
Problematic issues about the definition of 'property', particularly in relation to monetary payments, have arisen in recent years in relation to the offence of obtaining property by deception. This offence is embodied in section 15 of the Theft Act 1968 (UK) (the 'UK Act'), and is reflected in legislation in other jurisdictions; for instance, section 81 of the Crimes Act 1958 (Vic) (the 'Victorian Crimes Act').
Subsection 15(1) of the UK Act provides that:
A person who by any deception dishonestly obtains property belonging to another, with the intention of permanently depriving the other of it, shall on conviction on indictment be liable to imprisonment for a term not exceeding ten years.
It appears that 'property' for the purposes of this offence, was originally considered to be something capable of being owned or controlled, even if not particularly 'tangible'. Subsection 15(2) provides that, for the purposes of subsection 15(1): 'a person is to be treated as obtaining property if he obtains ownership, possession or control of it'. 'Property' is defined in subsection 4(1) as including: 'money and all other property, real or personal, including things in action and other intangible property' (emphasis added).
On one view it might be considered strange that this definition makes a distinction between 'things in action' and 'other intangible property'. However, there is no clear consensus as a matter of law as to whether most, or all, types of intangible property are properly described as choses in action. Some commentators suggest that true choses in action are a species of property premised on the law of obligations where the existence of proprietary rights depends on the ability of the holder of the chose to bring an action in personam to enforce a debt. This is distinguished from other intangibles, such as intellectual property rights, which are generally regarded as rights in rem and are not premised on the notion of a potential action against another (Sykes E and Walker S; 1993, pp. 759-60).
At first glance, there appears to be little doubt that the section 15 offence is intended to apply to the dishonest appropriation of money by deception, including, presumably, situations where money is represented by some thing in action or other intangible item, rather than by physical currency. However, the section has proved problematic in the context of the dishonest obtaining of money payments in the form of cheques and electronic funds transfers in both the United Kingdom and Australia.
In 1998, the Court of Appeal of the Supreme Court of Victoria in R v Parsons ( 2 VR 478) was faced with determining whether fraudulently obtained cheque payments met the section 81 criteria of obtaining property by deception, and held that they did. However, in so doing, they expressly rejected the reasoning of Lord Goff of Chieveley in R v Preddy ( AC 815) which was obiter in respect of cheque payments. However, that case did set a precedent that payments by electronic funds transfer do not meet the equivalent criteria under section 15 of the UK Act. On 9 February 1999, the High Court of Australia upheld the Victorian Court of Appeal decision. However, the High Court did not engage in as detailed an analysis of Preddy as the Court of Appeal did, so it is worth referring to the Court of Appeal judgement on some relevant points.
Parsons' case involved the trial of an individual who ran a stationery importing business and, in this capacity, perpetrated a number of frauds on various newsagents in Victoria. He obtained payments by cheque totalling over $160,000 from these businesses in return for promises to supply substantial quantities of cheap copy paper from a distributor in South East Asia. He never placed any orders for the paper, and presented fraudulent contract documents and untrue excuses about shipping stoppages in response to queries about its whereabouts. As indicated above, both the Victorian Court of Appeal and the Australian High Court upheld a conviction for the section 81 offence of obtaining property by deception in respect of the cheques in question.
Preddy involved payments by both cheque and electronic funds transfer in the context of a mortgage fraud scheme. The defendants had obtained mortgage advances from a number of building societies by various deceptions which consisted of false statements made in mortgage loan application documents to induce the relevant payments.
The key issue in each case was whether the transfer of certain choses in action representing money in a bank account might amount to 'property belonging to another' for the purposes of the relevant offence. The answer to this question clearly has implications for other similar offences, such as basic theft, which are also premised on the misappropriation of property belonging to another.
Section 1 of the UK Act, for example, sets out a basic definition of the crime of 'theft' as follows:
A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it ... (emphasis added)
While 'money', in the sense of notes and coins, is clearly tangible property which may 'belong to another' for the purposes of these property offences, it has been argued, and held by various courts, that payments by way of cheque and electronic funds transfer cannot be construed in the same way.
In the case of cheques, the argument runs that cheques are choses in action and the paper cheque form evidences a debt owed by the drawer of the cheque to the payee. Consequently, the property in the chose or the debt itself always belongs to the payee, that is the person who has misappropriated the cheque by theft or deception, and never actually belongs to the drawer, or victim. Although the piece of paper which evidences the debt may well have belonged to the drawer, the actual valuable obligation to pay, which is the relevant 'property', has always belonged to the payee of the cheque. The payee has therefore not taken any property 'belonging to the drawer' other than the piece of paper, which, as such, is not worth anything.
In the case of electronic payments, the argument runs that the mechanism of payment involves the diminishing or extinguishing of one chose in action belonging to the payer / victim (that is, the debt owed to him / her by his / her banker) and the creation of another chose in action in favour of the wrongdoer (that is, a deposit into the wrongdoer's bank account which represents a debt owed to him / her by his / her banker). Thus, the original 'property', debt, or chose in action which belongs to the victim is different to the property which is ultimately acquired by the wrongdoer. Arguably, the wrongdoer has not obtained property 'belonging to another'. He or she has merely obtained an equivalent value debt in his or her own bank account. The relative merits of each of these arguments are examined below.
3. Property Offences and Intangible Property
3.1 The Problem of 'Intangibility'
In considering the shortcomings of standard property offences which deal with the increasing intangibility of personal property, it is worth considering the issues which have proved problematic in the area. The most obvious are cheques and money paid under electronic payment systems. These have already been tackled, to some extent, in the relevant case law. From the difficulties faced by courts in these areas, one can extrapolate issues which may arise in relation to some other forms of intangible property.
Before considering the different views on this issue it is worth noting that, despite the physical embodiment of a cheque in a tangible piece of paper, it nevertheless consists of significant and valuable intangible elements. What is valuable about the cheque is the authority it gives the payee to present it to a bank and obtain credit for it either in the form of cash or in the form of funds credited to his or her account. An analogy may be drawn with a paper share certificate. It is not the tangible quality of the document that is of value. Rather, the paper certificate evidences a number of intangible rights and obligations between the shareholder and the company in question; in particular, it represents a shifting market value which may be realised by transferring it to another for good consideration.
The value of the share, like the cheque, is evidenced by the paper document, but the inherent intangible qualities of these items are worth more than the paper on which they are printed. In both cases, in the modern world, the paper documents are gradually being replaced by electronic equivalents. A share is just as valuable to a shareholder even if there is no longer any paper representation of it in existence; that is, if it exists solely as part of an electronic share trading system like CHESS or Crest. Likewise, a money payment is of the same value whether made by cheque or by electronic funds transfer. Thus, the important intangible qualities of these items must be recognised because, in a very real sense, this is where their true value lies.
The reason for making this point is to emphasise that one of the main underlying difficulties with traditional property offences is that they are premised on historical notions of tangible property. Even though cheques and other items of significant intangible value have been in existence for well over a century, many statutory offences are drafted more with the ideals of tangible, physical property in mind than with the difficulties of valuable, but intangible, debts and other rights and obligations. This may well have been because the original statutory offences from which many of the modern offences were derived were conceived at a time when value was mainly inherent in tangible property. Even money payments were often originally transfers of physical currency (Fox, D; 1996, p. 459).
The most logical items to consider first are cheques, as they are the most 'tangible' of these intangible items in terms of being paper-based. They also have the longest common law history in this context. The common law is currently unsettled as to the status of cheques in relation to property offences. Judges and commentators have taken varying attitudes as to whether or not the obtaining of a cheque by deception, and, by parity of reasoning, the theft of a cheque, could amount to the misappropriation of property belonging to another.
In point of fact, the 'tangibility' or otherwise of cheques has been one of the major issues arising in the case law relating to whether cheques are capable of being dishonestly obtained by deception for the purposes of provisions such as section 15 of the UK Act. Lord Goff, in his obiter comments in Preddy, side-stepped this issue to some extent by concentrating instead on the question whether they could be 'property belonging to another' ( AC 815, 835-6). However, he did acknowledge that a 'third party cheque', that is, a cheque misappropriated from the original payee by a another person, would be 'property', presumably intangible property, in the sense contemplated in section 4 of the UK Act ( AC 815, 835).
On the other hand, the Court of Appeal of the Supreme Court of Victoria, in Parsons, favoured the view that cheques are more than mere choses in action or intangible property. For various reasons, the judges held that cheques are either a special form of tangible property as a 'valuable security' and / or as an equivalent to cash. Tadgell JA merged these two views in his judgement, taking the view that a cheque amounts to a 'valuable security' which is in essence equivalent to cash. In his judgement, he states that:
What each of the drawers had had and lost was a valuable security - i.e. a title to money in the drawer's bank account - and that was also what the applicant obtained. That the cheques should be treated, in the circumstances and for the purpose of this case, merely as creating choses in action would indeed be ironical. (emphasis added) ( 2 VR 478, 490 (per Tadgell JA))
He later adds:
[T]he cheques which the applicant obtained . . . are readily capable these days of being regarded as property pretty well equivalent to cash. Looking realistically at the cheques which the applicant obtained, they are not to be regarded simply as part of 'a mere process by which instructions are communicated and debts settled between banks'. Cheques nowadays - especially those made payable to 'bearer', or bank cheques . . . are . . . well nigh as valuable by way of security as cash. (emphasis added) ( 2 VR 478, 491 (per Tadgell JA))
These views were reflected in the unanimous judgement of Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in the High Court on appeal. The High Court relied on various provisions of the Cheques Act 1986 (Cth) and the common law of negotiable instruments in holding that cheques, embodied by paper documents, have intrinsic value beyond their quality as mere pieces of paper ( 1 HCA 1, 14-15). They may thus be dishonestly appropriated for the purposes of section 81 of the Victorian Crimes Act as tangible assets evidenced by paper with particular inherent value.
Both Winneke ACJ in the Court of Appeal and the High Court judges expressly follow the reasoning of Professor J C Smith as to the true characteristics of a cheque in the context of property offences. Professor Smith (1997, p. 400), in criticisms of Preddy with which Australian authority now agrees, dissected a cheque as having three complementary and distinct proprietary characteristics as: (1) a tangible piece of paper; (2) a chose in action; and, (3) a 'valuable security' which was commonly regarded as 'property' for the purposes of the Larceny Acts which preceded the UK Act. In this context, it is perhaps worth setting out Professor Smith's words at length:
After the Theft Act [1968 (UK)] courts and commentators alike have tended to consider the question of obtaining cheques primarily as one of obtaining a thing in action, apparently losing sight of the fact that cheques were undoubtedly the subject of obtaining by false pretences [as a 'valuable security' under the previous Larceny Act] before there was any possibility of committing an offence by obtaining a thing in action as such. Judges and writers have regarded the cheque as being either a thing in action or a 'piece of paper'; but the 'valuable security' contemplated by the Larceny Act, though not a thing in action, was not just a piece of paper, any more than a key is just a piece of metal or a swipe card is just a piece of plastic, or a theatre or railway ticket is just a piece of pasteboard. The physical thing was one which had special properties. It is not any old piece of paper which will cause, say, a bank clerk to hand over £1,000; but a cheque will do that. Of course the cheque is (i) a piece of paper which (ii) creates a thing in action but it is also (certainly if given for value) (iii) a valuable security. The Theft Act 1968 does not specifically refer to valuable securities as property which may be stolen or obtained any more than it refers to title deeds to land, or dogs, or other things which the Larceny Acts specifically provided could be stolen. There was no need to refer to any of them, because they were all property, as widely defined for the purposes of theft and obtaining by section 4(1) [sic]. Just as a dog or title deeds may now be stolen, so may a valuable security; and that means, not the thing in action, not a mere piece of paper, but the instrument, the physical thing with certain writing on it. And, if it may be stolen, if may also be obtained by deception. It is certain that the wide definition of property in the Theft Act 1968 was intended to include anything which could be stolen or obtained under the Larceny Acts or at common law. (Smith J C; 1997, p. 400)
Clearly the view preferred by Professor Smith, and by the Australian courts to date, is that a cheque is a special kind of tangible property which embodies valuable intangible characteristics, and which is capable of being 'owned', 'controlled' or 'possessed' by both the drawer and the payee for the purposes of relevant property offences. In the context of section 81 of the Victorian Crimes Act, Winneke ACJ concluded his judgement in Parsons, in agreement with Professor Smith, stating that:
[T]he courts of this State have regarded cheques as instruments of inherent value which are capable of being stolen or obtained, and not simply as intangible property or choses in action . . . [I]t is appropriate . . . for the courts to continue to so regard them. ( 2 VR 478, 488 (per Winneke ACJ))
As noted above, this view was accepted by the High Court of Australia in the recent appeal.
Whether or not one agrees with this analysis, it does avoid difficult questions relating to property offences as they apply to intangible property. By effectively construing a cheque as being in a special class of tangible property, the difficult question of when intangible property is to be regarded as 'belonging to another' is left until another day. Even though the chose in action embodied by a cheque may 'belong to' a dishonest wrongdoer as payee, the cheque itself may still be regarded as possessed or controlled by the drawer, and therefore 'belonging to another', in the relevant sense under subsection 5(1) of the UK Act, and its equivalents in other jurisdictions, if it is tangible property. It can thus be misappropriated by a dishonest payee in the sense contemplated by the legislation. In supporting this proposition, the High Court of Australia in Parsons relied to some extent on analogies with the civil law relating to tortious conversion of cheques. Relevant tort law has accepted the piece of paper on which a cheque is written as 'goods' belonging to the plaintiff in this context ( HCA 1, 13-14).
It is perhaps worth noting here that there are alternatives to relying on provisions like section 81 of the Victorian Crimes Act in this context. Sections 82 and 86(2) of the Victorian Crimes Act, for example, relating to obtaining financial advantage by deception, and dishonestly procuring the execution of a valuable security, respectively, might be relevant. These and other similar provisions are discussed below.
3.3 Electronic Funds Transfer Systems
In contrast to cheque payments, there is no way that a payment by electronic funds transfer can be construed as involving physical, tangible property. The electronic system itself does not constitute 'property'. It is merely a mechanism through which a payment is made. In theory, it effects the transfer of money from one person's bank account to that of another. However, the 'money' in question is not tangible property in the form of notes and coins, nor even in the form of a negotiable instrument. Rather, the funds are represented electronically by entries in the relevant banks' accounts representing debts owed by the banks to their respective customers. As Fox (1996, p. 457) has put it:
An EFT is not a form of property. We cannot rectify, and regard as property, a mere process by which instructions are communicated and debts settled between banks. The so-called 'transfer' [in Preddy] was only a transaction which adjusted the parties' rights to demand money from their bank. The transfer had consequences for the parties' property, without being property itself.
Of course, the debts constituting the parties' respective bank accounts are in and of themselves intangible choses in action. The problem has been that when a debt owed to the victim by his or her bank is diminished or extinguished simultaneously with the creation of an equivalent debt owed to the wrongdoer by his or her bank, the 'property' obtained by the wrongdoer arguably has not 'belonged to' the victim in the relevant sense. Rather, one chose is extinguished and another completely different chose of equivalent value is created. As Lord Goff put it in Preddy's case:
In truth the property which the defendant has obtained is the new chose in action constituted by the debt now owed to him by his bank, and represented by the credit entry in his own bank account. This did not come into existence until the debt so created was owed to him by his bank, and so never belonged to anyone else. True, it corresponded to the debit entered in the lending institution's [i.e. the victim's] bank account; but it does not follow that the property which the defendant acquired can be identified with the property which the lending institution lost when its account was debited. In truth, section 15(1) is here being invoked for a purpose for which it was never designed, and for which it does not legislate. ( AC 815, 834)
The House of Lords overturned the decision of the Court of Appeal in Preddy, the Court of Appeal having held that the transfer of a valuable asset from the victim's account to that of the defendant is in effect equivalent to an obtaining of cash from the victim:
The only difficulty, perhaps a rather technical one, is that the thing in action gained by the defendant is a different thing in action from that lost by the victim. However, this symmetrical debiting and crediting might reasonably be described as an obtaining [for the purposes of section 15(1)]. Effectively, the victim's property has been changed into another form and now belongs to the defendant. There is the gain and the equivalent loss which is characteristic of, and perhaps the substance of obtaining. ( Crim LR 564, 565)
It might be said that the Court of Appeal here took a more pragmatic view of the situation, considering the presumed purpose behind subsection 15(1) and coming to a result that would achieve justice in the case at hand. To this, Lord Goff would probably have said that it was not the legislative purpose of that subsection to achieve such a result and that the prosecution should have relied upon a different provision, assuming a suitable one had existed at the time.
Interestingly, the Court of Appeal had differentiated the case of an electronic funds transfer from that of a cheque on the basis that a cheque never 'belongs to' the victim in the relevant sense whereas the debt owed to it by its bank does:
This transaction does not involve the problem with obtaining a cheque, which is that, as a thing in action, the cheque never belongs to the victim. The lender's bank balance, on the other hand, certainly belongs to him; and there is an intention permanently to deprive him of that thing in action. ( Crim LR 564, 565)
It is difficult to see how this reasoning could be correct. If one is taking the pragmatic view that the chose in action constituting the victim's bank account is property which may be obtained dishonestly by deception for the purposes of section 15, how can it be said that a chose in action in the form of a cheque, which merely represents a method by which money from the victim's bank account may ultimately be transferred to the wrongdoer, cannot also be dishonestly obtained for the purposes of the offence? If the Court of Appeal is really considering substance rather than form, can a cheque really be distinguished from an electronic funds transfer? If one is really talking about the removing of value from the victim's bank account and the concurrent addition of value to the defendant's, should not the same reasoning apply to both the case of a cheque and that of an electronic funds transfer?
It is important to note here that Australian case law has not yet dealt with the electronic funds transfer situation in this context. The comments of the various judges in Parsons were clearly limited to the situation of cheque payments. It will be interesting to see what directions Australian laws take in the future, bearing in mind that Australia is a federal system with differing criminal laws and practices prevailing amongst its various states and territories.
3.4 Dishonest Money Transfers: Other Statutory Possibilities
In any case, the question of electronic funds transfers in the United Kingdom has now become somewhat of a moot point for two reasons. The first is that it has been clearly held by the House of Lords in Preddy that payments by electronic funds transfer cannot constitute the offence of dishonestly obtaining property by deception under subsection 15(1) of the UK Act. The second is that, in any case, the UK Act has now been amended to include a new section 15A which deals with obtaining a 'money transfer' by deception to cover this type of situation[11 ]. Further, a new subsection 1(3) was inserted into the Theft Act 1978 (UK) (the '1978 UK Act') at the same time to make it clear that the obtaining of loan services by deception does fall within the subsection 1(1) offence of obtaining services from another by deception.
Historically, the question of whether the obtaining of loan services fell within the terms of the original offence in subsection 1(1) of the 1978 UK Act was problematic because of the Court of Appeal decision in R v Halai ( Crim LR 624) to the effect that loan services did not amount to 'services' for the purposes of that provision. Although this decision had received much criticism, it had never been formally overturned.
Theoretically, the issue of electronic funds transfers, and arguably even payments by cheque, should equally not be problematic under the Victorian Crimes Act because of the existence of the alternative section 82 offence of obtaining financial advantage by deception. This is different to the situation in the United Kingdom where prosecutors could not avail themselves of the equivalent offence set out in section 16 of the UK Act. That section is narrower in scope such that only certain classes of financial, or 'pecuniary' advantage are caught and those classes would not include payments by cheque or electronic funds transfer.
One would assume that the questions put to the Victorian Court of Appeal and the Australian High Court in Parsons could have been avoided if the prosecution had simply charged the defendant with the section 82 offence, rather than under section 81. The problem in Victorian criminal law has historically been a practical one, that as a matter of fact, prosecutors have tended to use the section 81 offence, rather than that in section 82, in respect of cheques ( 2 VR 478, 484 (per Winneke ACJ)) and might, in fact, continue to do so in the case of electronic funds transfers, although this proposition has not yet been tested.
Alternatively, Victorian prosecutors could avail themselves of the subsection 86(2) offence which deals with dishonestly procuring the execution of a valuable security by deception, in the context of cheque payments. However, this provision might not apply to payments via electronic funds transfer because the definition of 'valuable security' in subsection 86(3) relates to a document under which property rights are created or transferred. It is questionable whether any of the elements of an electronic funds transfer would fall within this definition, although final determination of this question may have to wait until another day. It might be that a written direct debit authorisation would suffice, or that an electronic payment instruction or record would meet the requirements of the definition.
Section 38 of the Interpretation of Legislation Act 1984 (Vic) defines 'document' very broadly for, inter alia , the purposes of the Victorian Crimes Act. This may have some bearing on the outcome of the question as to whether any element of an electronic funds transfer could meet at least the 'documentary' aspect of the definition of 'valuable security'.
In summary, the position in Victoria to date is that there is no common law authority on whether or not electronic funds transfers will suffer the same fate in respect of section 81 of the Victorian Crimes Act that they suffered in the United Kingdom in respect of section 15 of the UK Act. The reasoning in Preddy was distinguished by the Court of Appeal in Parsons largely because Preddy's case was regarded as being about the particular situation of mortgage frauds. The High Court expressly distinguished the United Kingdom cheque law from the Australian law without mentioning electronic funds transfers which did not, in any event, arise on the facts of the case.
Thus the position on payments by electronic funds transfer may have been settled by legislation in the United Kingdom, and remains an issue with which Australian courts and parliaments may well have to deal at some future time. Other jurisdictions, too, will be faced with this difficulty. It has been noted (Quin F; 1996, p. 460) that under the Crimes Act 1961 (New Zealand) (the 'NZ Crimes Act'), the standard offences of theft and obtaining property by deception are, in effect, limited to tangible items. This may include cheques if Professor Smith's analysis of a cheque as a tangible item is accepted. However, electronic funds transfers will be more problematic.
Quin (1996, pp. 460-61) has noted that there are some offences set out in the NZ Crimes Act which might capture frauds involving electronic funds transfers. These include the section 247 crime of obtaining 'credit' by fraud and the section 229A offence of taking or dealing with certain documents with intent to defraud, although it may be difficult to identify a relevant 'document' in respect of an electronic funds transfer. The problem is that, unlike the recent amendments to the relevant United Kingdom legislation, none of these offences is specifically drafted with the electronic funds transfer situation in mind. Courts may have to apply 'creative' reasoning to cover electronic funds transfer cases. In the alternative, the New Zealand parliament may have to expressly remedy the situation. As Quin (1996, p. 461) summarises the position in New Zealand:
[T]he facts of R v Preddy . . . could easily occur in New Zealand. Increasingly, businesses are using electronic funds transfers to effect and receive payments. Because of the intangible nature of the proprietary interests at play, our traditional law of theft and fraud will be found wanting. Recourse will be had to s 229A, if there is a physical document used as part of the conduct. Unsatisfactory decisions are likely to follow as the section is . . . applied in ways never envisaged by its promoters. Of course, if there is no physical document having the requisite capability under the section, it will not be available. The offence of obtaining credit by fraud may prove to be the only criminal provision available. If a large amount of money is involved, this offence - commonly associated with decamping from a restaurant or taxi without payment - will find itself in a spotlight for which it was never intended.
The moral is plain to see. Reform of our law of theft and fraud should be back on the legislative agenda and, this time, with a resolve to see it through.
Whatever avenues are followed to resolve the issues on electronic funds transfers in these jurisdictions, it should be noted that, in the context of offences involving the misappropriation of 'property belonging to another', it is both the concept of 'property' and that of 'belonging to another' which will be problematic with electronic funds transfers. The initial difficulties have been with identifying the relevant intangible property. Because an electronic funds transfer system is not property per se, but rather a payment mechanism, courts and commentators have had to find property in either the debts owed by a bank to its customer or in the value of those debts. Then, depending on how one has defined the intangible property, one is left to ascertain whether that property 'belongs to another' in the sense contemplated by the relevant statutory offence. It may be true that these questions are just too difficult to deal with when one is attempting to secure criminal prosecutions and the best course of action is to side-step the issue by relying on other offences and, if they do not exist in the relevant jurisdiction, enacting appropriate new legislation following the recent example of the United Kingdom.
4. Future Problems for Property Offences: Other Intangibles
The increasing 'intangibility' of money is not the only such question that prosecutors will have to consider in relation to property offences. As noted above, societies around the world are moving more and more rapidly into an electronic information age in which 'value' lies not so much in physical, tangible assets, but in processes, information and electronic representations of assets and information:
Information technology creates new products, new capabilities, and new commercial property that challenge ancient assumptions in our law. These assumptions formed in an industrial economy which has now evolved into a global information age. The information age comprises a fundamental shift from tangibles as the sole measure of wealth and unit of exchange, to services and intangibles as major factors in commerce. Faced with this shift, basic precepts of law and property must be rethought. (Nimmer R and Krauthaus P; 1993, p. 3, emphasis added)
Although speaking in the context of property law as it applies to new information products, and notably electronic databases, these words could apply equally to the need to rethink criminal laws to deal with new concepts of property. In fact, in the context of property offences, it would benefit the development of criminal law for commentators, judges and legislators in the area to carefully monitor new developments in property law.
If property lawyers are struggling with the concepts of how to define 'property' and how to ascertain indicia of ownership in the modern world, the question for criminal lawyers is not going to be an easy one. This is evidenced by the recent example of the United Kingdom Law Commission Consultation Paper on Misuse of Trade Secrets (1997) which deals with the need to create particular offences targeted specifically at the misuse of trade secrets as a form of intangible 'quasi-property'. Obviously, a significant aspect of such an inquiry relates to the extent to which such items should be treated like property particularly in relation to their possible 'misappropriation' or misuse.
Similar issues are likely to arise in the context of other intangibles, particularly newer forms of electronic assets such as electronic databases, computer software and Internet domain names. A detailed discussion of the extent to which such items may be regarded as property or 'quasi-property' capable of some form of criminal misappropriation is beyond the scope of this article. However, the issues may well require some future consideration, particularly as such items gain commercial currency. It may be that the most effective forms of protection for such assets will develop in the civil law context as remedies for misuse of intellectual property or associated rights, rather than as a matter of criminal law.
One comparison perhaps worth making here with the position on cheques and electronic funds transfer is the case of company shares. This is because shares, like funds in a bank account, are generally regarded as choses in action. Additionally, recent technological advances in a number of jurisdictions such as Australia and the United Kingdom have seen moves to replace paper-based share trading with electronic transfer systems. Again, there may be some analogy here with recent moves away from cheques to electronic funds transfer systems for monetary payments. A comparison of the position on criminal conduct involving theft or dishonest misappropriation of shares with that relating to money transfers may therefore be a good illustration of issues likely to arise in the future in the property offences area.
There are now two basic methods of dealing in shares in many jurisdictions - the traditional paper based method and the newer electronic method. A paper share certificate is similar to a cheque in certain important respects. The paper document in and of itself is of little value, but the rights and obligations embodied in the document are valuable. In fact, one could probably apply Professor Smith's analysis of a cheque as a special form of tangible property, the 'valuable security', to a paper share certificate. The paper share certificate would have a threefold character, as: (1) a piece of paper; (2) embodying rights and obligations between the company and the shareholder; and, (3) also a valuable security in its own right which may be traded on or off market.
Although paper share certificates are perhaps not negotiated, or transferred, as readily as cheques, particularly bearer cheques, they are physically transferable and may be fraudulently transferred by forging a paper transfer document. It might be possible for a wrongdoer to commit a property offence by dishonestly obtaining a transfer of a paper share certificate from a victim. The same reasoning could apply here, presumably, as to the obtaining of a cheque. The share certificate is a particular species of tangible 'valuable security' that is originally controlled or possessed by the victim and is then wrongfully transferred to the wrongdoer.
However, it should be remembered that the same argument in respect of cheques is not fully accepted by the relevant authorities particularly in the United Kingdom, and it may be that reasoning such as that of Lord Goff in Preddy in relation to cheques ultimately prevails. By analogy, this could mean that misappropriation of a paper share certificate would not ultimately amount to the obtaining of property 'belonging to another' by deception as the rights in relation to the share obtained by the wrongdoer would not be the same as the rights initially held by the victim in relation to the share.
Perhaps a relevant point of distinction between a share and cheque in such circumstances might be that paper share certificates in most jurisdictions have historically included share 'numbers' which identify a particular allotment of shares in a shareholder's hands. When the shares are transferred to another, the transferee usually obtains the same notional allotment of shares identified by the same share numbers as the transferor. This might be sufficient evidence that what has been obtained by the wrongful transferee of the shares is, in fact, the same property that had previously belonged to the victim / transferor.
However, as with the electronic funds transfer complications, the situation with shares becomes more problematic when one introduces an electronic share transfer and registration system. Under such a system, there are no paper share certificates and shareholdings are represented only by computerised shareholding records. Unlike the case with traditional paper based share transfer and registration systems, electronic systems such as CHESS have also done away with share 'numbers' relating to a particular allotment of shares.
As with electronic funds transfer systems, the electronic share system is not property, but a 'mere process' by which instructions are communicated and trades settled between players on the stock market. An electronic transfer of shares, like an electronic transfer of funds, will have consequences for the parties' property without being property itself.
Again, a victim-shareholder may hold property in an electronic shareholding but it will be intangible property which consists of obligations owed by the relevant company to him or her, and the right to deal with the shares on or off market. If these rights are extinguished in the original shareholder and passed to the wrongdoer as a result of theft or other dishonest conduct, the wrongdoer arguably obtains similar rights but they are not the same rights that the victim originally held. This is particularly so in the absence of identifying 'numbers' relating to particular share allotments which would have existed in a paper-based share trading system. If 'money' represented electronically cannot be stolen or obtained by deception for the purposes of these offences, it is difficult to see how shares represented electronically could be misappropriated in such ways.
Moreover, legislation of the type enacted in 1996 in the United Kingdom in the wake of Preddy's case would not assist prosecutions in an electronic share scenario. Section 15A of the UK Act will not be relevant as a share transfer is not a 'money transfer' for the purposes of the section. Further, it is difficult to see how a share transaction obtained dishonestly could come within the definition of obtaining services by deception for the purposes of subsection 1(1) of the 1978 UK Act. This latter offence may be relevant if the receipt of shares is, in fact, part of receiving some broader service and payment is simply made wholly or partly in shares. Again, section 16 of the UK Act is unlikely to be relevant here because of its narrow drafting. However, in Victoria, section 82 may catch the conduct as it may well amount to the obtaining of a 'financial advantage' by deception provided that the shares are worth something.
Again, subsection 86(2) would be of questionable relevance because of the 'documentary' nature of the definition of 'valuable security' in subsection 86(3). However, given the broad definition of 'document' for these purposes, a case brought under subsection 86(2) may not be hopeless. Additionally, and along similar lines, section 83A may also be relevant here. This section relates to the falsification of documents to another person's prejudice. It would clearly be relevant in the case of falsified paper share transfer documents, but the question is open as to whether a falsified electronic share transfer instruction would meet the statutory requirements.
Clearly, the situation of intangible electronic property proving problematic when seeking to enforce traditional property offences will not be limited to methods of monetary payment. Other forms of electronic property may well create difficulties for prosecutions in the future and may require the enactment of specific legislation.
5. Summary and Conclusions
A consideration of the above forms of intangible property emphasises the shortcomings of standard property offences in dealing with the increasing intangibility of property. If and when new situations begin to emerge involving the dishonest misappropriation of new forms of intangible property, relevant legislatures may have to reconsider the statutory position in relation to them. If particular situations, such as electronic funds transfers, appear likely to become problematic within a jurisdiction, the relevant legislature can always enact a specific new offence to deal with that particular class of case, as has been the United Kingdom experience in relation to electronic funds transfers.
On the other hand, legislators may choose to draft offences more broadly in the hope of catching most, or all, foreseeable future conduct that results in a dishonest gain to an alleged wrongdoer, or possibly even just a loss to the alleged victim, whatever type of property may be involved. As Lord Goff noted in Preddy, this system works effectively in Scotland under the common law where there is a common law offence of 'fraud' which consists of 'the bringing about of some definite practical result by the means of false pretences' ( AC 815, 830). Although such offences theoretically run the risk of generating uncertainty and catching conduct that one might not expect to attract a criminal sanction, where prosecutors exercise sensible and practical discretion in such matters, this may not be an insurmountable problem. Lord Goff has noted that sensible prosecutorial discretion keeps the system in Scotland operating effectively without adverse consequences in practice ( AC 815, 831).
It may be that a middle ground could be established if reasonably general statutory offences were to be liberally interpreted by courts. An example of this might be section 82 of the Victorian Crimes Act which, as noted above, deals with the obtaining of a financial advantage by deception where 'financial advantage' is not defined in the legislation and so may be broadly interpreted by the courts. Provided that it can be established that an alleged wrongdoer has made some kind of financial gain for himself or herself or another, the offence may be made out.
The main policy question for legislators in this context will presumably be whether, and to what extent they believe that certain conduct should attract criminal sanctions. If a policy decision is taken to attempt to catch conduct involving a particular type of intangible property which may result in a gain to a 'wrongdoer' or a loss to a 'victim', then broadly drafted legislation, giving prosecutors a wide discretion is to be preferred. If, on the other hand, the concern is with predictability and certainty in relation to the criminal laws, notably in relation to specific instances involving 'newer' types of intangible property, legislators may choose to be more conservative in their approach to the development of particular property offences.
New offences could be drafted to cover new types of situations as and when the need arises. However, the increasing intangibility of property, particularly in relation to the electronic replacement of paper documents and the increasing value of information and information products as property, is likely to force the issue as to how, and indeed if, criminal laws should attempt to deal with 'misappropriations' of such property over the next few years. Further, the speed of such developments suggests that relevant authorities should not be slow to tackle these issues.
Cases like Preddy and Parsons will be the tip of the iceberg in relation to the problems prosecutors are likely to encounter when attempting to apply traditional property offences to intangible forms of property. The controversies over whether or not payments by cheque and / or electronic funds transfer may amount to dishonest misappropriations of property remain, to a large extent, unsettled under the laws of a number of jurisdictions. Meanwhile, various other similar, and potentially even more complicated, controversies are waiting in the wings for relevant fact situations to emerge before the courts.
As Quin (1996, p. 460) says, the now pervasive use of computers and electronic communications technology in modern society creates an urgent need for property offences to be revisited by the legislature. The problems created by such technology are not insurmountable, but some preliminary thought should preferably be given to them by legislators and prosecutors sooner rather than later.
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1 See, for example, section 3(1)(b) Copyright, Designs and Patents Act 1988 (UK); section 10(1)(b) Copyright Act 1968 (Cth).
2 See, for example, IBM Corporation v Commissioner of Patents (1991) 22 IPR 417; Koch v Sterzel  O.J. EPO 19; Vicom's Application  O.J. EPO 14; (Cornish W; 1996, 181-185).
3 Subsection 81(2) of the Victorian Crimes Act is drafted in similar terms.
4 Subsection 71(1) of the Victorian Crimes Act defines 'property' in similar terms.
5  HCA 1 (available at http://www.austlii.edu.au/au/cases/cth/high_ct/1999/1.html, 10 February 1999).
6 See also section 72 of the Victorian Crimes Act which is framed in similar terms.
7 In the case of cheque payments, it has also been noted that there is no requisite intention to permanently deprive the victim of the piece of paper constituting the cheque because the paper cheque form is always returned to the drawer via its bank after presentation. For a discussion of this issue, see, for example: Hooley R (1998). This was also discussed recently by the High Court of Australia in R v Parsons  HCA 1, 15-17.
8 As a matter of banker-customer law, money in a bank account is a debt owed to each customer by his or her banker repayable to the customer on demand, made consistently with the contractual terms of the relevant account. See Foley v Hill (1848) 9 ER 1002, 1005 (per Lord Cottenham); (Tyree A; 1998, 29-30).
9 Subsection 5(1) provides that property shall be regarded as belonging to any person having, inter alia, possession or control of it. This is arguably the case of the drawer of a cheque before he or she hands the cheque over to the wrongful payee. The High Court made much of this fact in R v Parsons  HCA 1, 15.
10 See, for example, subsection 71(2) of the Victorian Crimes Act.
11 For a critical commentary on this new legislation, see Salt M and Southern D (1996).
12 See discussion of this issue by Lord Goff at  AC 815, 839-40.
13 See, for example, the comments of Winneke A C J  2 VR 478, 485-6.
14 Section 229A bears some resemblance to section 83A of the Victorian Crimes Act in this respect. Section 83A deals with making or using false documents to another person's prejudice and might also be relevant here, particularly given the broad definition of 'document' in Victoria under section 38 of the Interpretation of Legislation Act 1984 (Vic).
15 See Re Harvard Securities Ltd  2 BCLC 369 for a general discussion of proprietary interests in undifferentiated parcels of shares.
16 See section 38 of the Interpretation of Legislation Act 1984 (Vic).