Business Law Articles
By: Hassan Elhais
Al Rowaad Advocates & Legal Consultants
Dubai, United Arab Emirates
Federal Law No.(3) For the Year 1987 on Passing Penal Code Article No.399:
“Shall be punishable by confinement or by a fine any individual who, by using fraudulent practice, assuming a false name or quality, takes possession for himself or for the others of any movable property or written instrument, or obtains any signature upon such instrument, its cancellation, destruction or amendment, whenever it is intended to deceive the victim and bring him to surrender a legal right. Shall also be liable to the same punishment he who alienates an estate or a movable property while being fully aware that it is not his own or that he has no right to dispose thereof; or he who knowing by alienates any of the above mentioned after having previously disposed thereof or having concluded any agreement thereon, whenever such an act operates to the injury of others.
If the object of crime is a property or an instrument pertaining to the State or to any of the authorities mentioned in Article (5) above, this shall be considered a circumstance of aggravation.
Attempt shall be punished with confinement for a period not exceeding two years of with a fine not exceeding twenty thousand Dirhams. And where a recidivist is convicted and sentenced to confinement for a period of one year or more, the Judge may order that he be put under police surveillance for a period neither to exceed two years nor to exceed the duration of the inflicted penalty’.
Fraud is defined as taking or gaining from another, property, money, vouchers or anything of value by deception or lying or trickery which is supported by verbal means or written documents, causing the victim to rely on the same to willingly handover or something of value from himself to the person committing the fraud.
The crime of fraud is considered a serious fraud if committed against government property or object of value. This may result in a serious punishment such as imprisonment.
If a person was convicted of fraud who has served his sentence commits a crime again, he or she can be put under investigation and surveillance for up to 2 years or up to the term of his previous imprisonment
The maximum imprisonment for attempted fraud if 2 years.
Difference between lying and Fraud:
Merely lying does not account for fraud. The element of support has to be present. Therefore, ordinary lies are not considered fraud as the law does not punish for mere lies.
Difference between Fraud and Theft:
The willingness to surrender is what differentiates Fraud from theft. In fraud the victim willingly surrenders the object of value. In theft, the victim is not willing to hand over his object of value and it must be forcefully taken from him.
Difference between Fraud and Breach of Trust:
In fraud, the intent to de-fraud, and bad faith have to be present from onset. Whereas in Breach of Trust, the intent changes during the process. The presence of bad faith and intent from onset can be proven by evidentiary support.
Elements of Fraud:
In order to successfully prove Fraud, two elements have to be present: Material, the method and object of value or a third party; and the Intent to deceive.
The material can be any deceiving means, false identity or character, or taking an action on property not owned by the deceiver.
Deceptive methods fulfilling the requirement for comprising a fraud are general documents, written or verbal expressions, circumstances or appearance, or using other persons in order to deceive the victim, and the victim relies on such supported documents or persons or verbal expressions to handover an object of value. Lying, unsupported by any such acts do not constitute fraud.
The general circumstance required to make a fraud can be by coincidence or engineered by the party itself. In both cases it shall satisfy the requirement for fraud.
Fraud is based on actions or circumstances that convince the victim into handing over his property. Such acts or circumstances could be made or taken advantage of by the accident himself.
Cassation Dubai court 10/11/2001: “taking the appearance of rich people and appearing like them and driving their cars to invite people to one’s house and convincing them to handover their money, after which he disappears, or claiming he has connections with people holding high ranking in the government or that he does business management or opened a branch or an office of a fake company or claiming he can cure people, or double their money or do whatever they want by using black magic”.
Exception to the rule:
Lying shall constitute the crime of Fraud if committed by an individual employed by the government and he takes advantage of his job or his position to deceive another. In all such cases lying shall equate to Fraud.
General by the 3rd party:
If the lie is supported by a 3rd party, it is considered a fraud on the condition that 3rd party must be moved by the fraudulent party for supporting the lie. The 3rd party shall be considered a main-doer of the crime if he had an agreement with the fraudulent party to deceive the victim prior to committing the crime or provided support to the deceptive party and vice versa. Any documents issued in order to support the lie in such a case must be written by another party and issued to the party committing the crime. The only scenario in which the 3rd party shall be considered a victim if he had good faith and was unaware of the deceit.
A 3rd party is considered a partner in Fraud if he supports the fraudulent party.
Purpose of the Deceit:
Under the USE law, the purpose of the deceit is not conditional. Any action taken, regardless of the purpose, if done to take another’s money or property is considered fraud.
Abu Dhabi appeal No.173/79 criminal hearing date 5/8/1979:
“The deceiving party is the one who must, take the action that leads to the interference of the other party supporting him. Whether that party, had bad intentions or was deceived as well with the deceived party”.
Doctrines for victim’s protection under the law:
- The person
The criteria is applied on a case basis and on the merits of each case. So a court will assess the IQ of the victim, among other things to assess whether the deceit was an obvious one or not. This ensures that the person committing fraud does not evade the law or the punishment. This is most often used by the court to protect victims of fraud.
- The Standard of Average person
It is considered as fraud if the court determines that an average person of average intelligence would have succumbed to the deception. If so, then the crime is fraud. However, this is a loophole most likely to be used by those committing fraud since they intentionally target people of below average intelligence or means.
- The intentions of the deceiver
The law shall protect the victim if the deceiver intended to deceive and the means used by him to deceive were successful in deceiving the victim. If yes, ten the law shall protect the victim. However, of the deceiver was not successful in deceiving the victim, it shall be considered attempted fraud. The disadvantage, however, with this condition is that it merges the elements of the crime; the intent and the actions.
Using a false name or identity:
A person is said to be committing a fraud if he takes a false name, in part, or in full. It is, however, not considered fraud is a person uses his commonly known name which is different to his name, or if he shares the same name with another person. However, if he convinces the victim of his false identity of being the other person, with whom he shares his name, it shall come under fraud.
Taking on a false quality:
The above is defined as an image an individual acquires due to his position or reputation in a society or due to his affinity with another persono of importantce. Such quality could be due to the individual’s profession, job, status etc. It is considered fraud to assume the personalities of another person in order to deceive someone out of their property.
The requirements for the above are timing, and exaggeration. Hence claiming a characteristic like being a court judge if you were one in the past, is still a fraud. Additionally, if a person exaggerates his position in order to deceive, it is a fraud. So any elevation of a person’s profile to a higher one in order to lure the victim is enough for fraud.
If the fraud is successful due to using a false name or characteristic, it does not need documentations or third party or any other form of proof.
3 conditions have to be met to prove fraud by assuming another’s name or characteristic:
Firstly, the name or characteristic assumed should lead the victim into handing over his property. What shall be considered to have ‘lead’ the victim is at the judge’s discretion.
Secondly, there must be positive action from the deceiver to convince the victims of the false characteristic in order to e considered fraud. Hence staying silent shall not be considered fraud even if it misleads the victim into assuming the other’s identity.
Thirdly, the characteristic undertaken by the one committing fraud should not be evidently inconsistent. It should be such that an ordinary person does not immediately suspect a wrongful act.
If the above 3 conditions are met, it shall be considered fraud under Article 399. If any of the above is in writing, it shall be an additional crime of falsification which carries a higher punishment is a more serious crime. In such cases, Article 88 shall apply which states if a person is guilty of two crimes, he shall be punished for the more serious crime. As a result the person shall be guilty and punished for falsification.
Immovable and moveable Property
Under Article 399, any action taken on an immovable property such as land, which does not belong to a person, is also considered fraud. This is to protect all immovable property. This kind of fraud has two conditions:
Firstly, an action must be taken on the immovable property and this action must that of rights in rem or ‘real rights’, and not rights in personam i.e. personal rights. An example of such an action would be selling a property fraudulently that does not belong to the person. Renting the property that does not belong to a person shall not be fraud since it’s not a right in rem. Such an action can be oral or written. Evidence Law requires that any contact or action, whose values exceeds more than AED 5000 shall be in writing. However, that does not apply here and hence this could be considered as an exception to the Law of Evidence.
Secondly, the action taken on the property must not come from the owner of the property. An owner in such instances could be the owner himself, or authorized by contract e.g. a Power of Attorney, or established through judgment of the court e.g. in the case of minors. If the rightful owner has taken any action on his rightfully owned property, it cannot be a fraud. If a minor takes any action, it’s not a fraud, however, it is categorized as another crime. The same will apply if a son, for example, took an action on his father’s property. This shall be deemed fraud.
In case of immovable property, if the owner of the property has entered into an agreement with Party ‘A’ but has yet to transfer ownership, and sells to Party ‘B’ instead, this shall be considered fraud. Following the same path, if ‘A’ sells to ‘B’ without transferring ownership to himself sells the same property to ‘C’, this too shall be the crime or fraud. These rules shall apply regardless of the knowledge of the victim or the court of the true owner of the property.
The Result of the Crime of Fraud:
The conditions on the property or money: it is conditional that the property must be movable. So it could be money, vouchers or a contact etc. In case the property is real estate and the agreement is fraudulent it will be enough to qualify as a fraud since an agreement is a movable property. Another condition is that the property must have a material value, and not just an emotional value to the owner. This condition differentiates it from theft. In fraud a person must ‘take’ something of value, for if a person deceivingly identifies himself to be a policeman to avoid paying the metro ticket, it shall not be fraud. However, if he does the same in order to ‘take’ discounted or free tickers. It shall be fraud. Hence it is important for the person to ‘take’ something to satisfy this condition.
Taking of the property: This crime of fraud must result in the taking of the property of the victim. The deception has to have happened before taking the property to be liable for fraud. The action leading to the handover of the property must be performed by the victim. It is immaterial whether the person committing the fraud has benefitted from the property or the crime or not. Even if he donated the taken property, it shall still be a fraud. Additionally, if the victim handed over the money under a fraudulent pretext for an illegal purpose, that shall not absolve the fraudulent party of liability.
In order that fraud takes place, the deceiving ways must drive the victim to hand over the property which the deceiver intended to take. Therefore the deceiving ways must take place before handing over the property”.
Damage: Article 399 says that there must be damage to the victim in order to successfully prove fraud. Even if the victim was compensated that the deceit did not result in the specific damage, fraud cannot be established. Two conditions for causation should be resent:
Firstly that deceit should transpire before the property is wrongfully attained by the deceiver. And secondly, the handing over of the property by the victim under the deceit should be the result of the deception. A situation where the victim becomes aware of the deceit and continues with handing over the property, for whatever reason which might include the victim trying to complete the crime in order to attain evidence of the fraud, it shall not be considered fraud. It can only be a crime of fraud of the victim is truly deceived into handing over his property.
It is the judge’s discretion whether causation has occurred or not or whether the kink between the deceit and the damage is established.
Moral Requirement: Intention
Two conditions must exit together to fulfill the ‘intention’ requirement for the crime of fraud. Firstly, a general intention for a party to deceive another party. Secondly, an intention to gain the other’s property by this deception. The motive of intentions is immaterial in this matter. The evidence and proof of intent and what qualifies as evidence is also discretion available to the judge.
The punishment of fraud is imprisonment or fine. The person convicted of fraud could face anywhere from 1 month to up to 3 years prison sentence. If the fraud is a more serious one, for example if committed against a government entity, the prison sentence could be up to 6 years. The fine for such a crime can range from between AED 30,000 to AED 60,000.
For cases where attempted fraud has been successfully proven against someone, the maximum imprisonment if 2 years and the maximum fine is AED 20,000.
If someone convicted one, commits the crime of fraud again, and additional punishment of surveillance for up to the tenure of his prison time and between 1-2 years can be applied.
If both parties decide to settle the matter, this shall not discharge the case against the accused. However, it can reduce the sentence of the imprisonment or the amount of the fine.
In the case where the parties to a fraud are siblings, a case can only be filed against the deceiver by the victim. In such cases the prosecution shall not act independently to charge the person of the crime.
After the final judgment, in cases where the two parties are siblings, if they reach a settlement the prosecution can suspend the prison sentence or the fine. In case they reach settlement before the judgment, the court issues a verdict to drop the charges and close the case with settlement.
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