An Equitable Assessment of Rights and Wrongs

by Dr Michael Nassim

7.  Probity and honesty, awareness, aversion, passive dishonesty, professed ignorance, denial, active dishonesty, concealment, diversion, deception, fraudulence and criminality

7.  Probity and honesty, awareness, aversion, passive dishonesty, professed ignorance, denial, active dishonesty, concealment, diversion, deception, fraudulence and criminality

When it comes to the assessment of culpability and damage, much depends upon whether the above sequence is read in ascending or descending order.  Few would disagree that fraudulent intent from the outset is criminal, and hence reprehensible- even a police matter. We may call this first-degree fraud, and must address its possibility in the context of wrongs and damages.  But when ordinary honesty yields progressively to the pressure of circumstance, does it ever amount to criminality?  Again the stark answer from history is yes, if relatively infrequently. And if the dictionary criterion for fraud is deceit, and fraud is recognised as a crime, there is an inevitable conclusion once the rising scale has attained deceit.  This we may term second-degree fraud.  As an example, the writer maintains that allowing or causing it to be put about that losing the House of Lords case would be inconsequential was a significant deceit.

The five legal elements of fraud are:

1.       “Scienter” (Latin adverb/noun = “knowingly” in legal parlance), or knowledge of facts, events or circumstances by one party;

2.       Misrepresentations (including non-disclosure) of that knowledge by that party in dealings with another;

3.       Reliance on those misrepresentations by the second party;

4.       An agreement, contract, or transaction between the parties which a reasonable person would not have entered into if privy to the first party’s knowledge, and

5.       Harm or damage to the second party as a result.

With this in mind, it is now evident that the overall coherence, consistency and duration of the Society’s stance and conduct have been tantamount to fraud, whether of the first or second degree.  Onto this pattern we have been able also to cast the light of the Chief Actuary’s own words, and see more clearly the extent to which the expectations of policyholders and fellow actuaries have been betrayed.  As a result it is not merely the so-called Late Joiners who have legitimate grounds for complaint because the problems track back to March 1989 at the very latest. Moreover current legal niceties over the conditions under which compensation “as if” for fraud may be appropriate are thus irrelevant, and may now be set aside.   In compassionate mitigation one should add that there are also distinct generations of officers and directors, such that the younger inherit the positions vacated by their elders, and not always in full knowledge.  The next generation is thus under pressure to justify and defend its inheritance, and so what may have begun nearer the first degree can end in the second.  When the stable is empty, it can be rough justice to dismiss the groom if a coachman has made off with the horse.  Even so, persistent pretence that the stable remains full is a serious matter, and delays pursuit of the coachman.  Once again there is need to recall and examine Roy Ranson’s assertion that Board members were kept informed.  Clearly this is of greatest relevance to the situation in which erstwhile non-executive directors of the Society now find themselves. A useful insight into this, and to some of the issues opened up in section 5, may be had from Mr. Justice Langley’s decision on Oct 17^th 2003 to deny the request of ex-directors that the Equitable’s case against them be struck out²⁰.