Understanding Civil Fraud: Common Categories Explained
The UK legal system differentiates between two main types of fraud: civil fraud and criminal fraud. Both forms of fraud may involve deceit, misrepresentation, or intentional concealment of the truth to gain a dishonest advantage over another party. They also differ significantly in several respects, including who initiates the legal action, the burden of proof required, and the potential penalties that can be imposed on the defendant amongst others.
When trying to differentiate whether your situation falls under civil fraud and criminal fraud, remember, civil fraud is pursued by the victim in civil courts, while criminal fraud is a criminal offence prosecuted by UK authorities in criminal courts.
In criminal fraud, the person alleged to be responsible is normally prosecuted by the State and, if found guilty, will be punished, according to the severity of the offence, by penalties such as a fine or imprisonment.
In cases of civil fraud, the wronged party may pursue the recovery of funds or assets and/or seek compensation or damages. The outcome in a civil trial is determined by a judge.
In this article, Nazaquat Maqsoom highlights common types of civil fraud claims that are pursued in court and the remedies available to those who have suffered financial harm due to fraudulent misrepresentation or deceit. Understanding these nuances can help individuals and businesses better protect their interests and navigate complex legal disputes.
Civil Fraud
Frauds derived from common law, generally known as torts, rely heavily on ‘case law’ established from previously decided litigation and which provides guidance for the conduct of subsequent court proceedings.
Claims are pursued by the injured party through the appropriate Civil Court according to the nature, size and importance of the loss claimed to have occurred.
It is important for both individuals and businesses, regardless of their size or structure, to appreciate the general nature of fraud. This knowledge helps prevent accidental involvement in fraudulent activities and recognise the signs that they are, or may potentially become, victims of both civil and criminal fraud.
Anyone who has been a victim of fraud can report the matter to the police, which may lead to a criminal prosecution. In addition it is open for the aggrieved party to pursue the appropriate remedy through a Civil Court. Both criminal and civil cases for the same fraud may be conducted simultaneously, although very careful consideration will be required to determine exactly how and when to proceed.
Fraud by False Representation
An action for misrepresentation may be brought in respect of a misrepresentation of fact or law. This arises where one party makes an untrue statement of fact or law which induces the other party to enter into a contract, resulting in loss to that party.
There are three types of misrepresentation:
- Fraudulent misrepresentation: where a false representation has been made knowingly, or without reasonable belief in its truth or recklessly as to its truth, (also known as the tort of deceit).
- Negligent misrepresentation: one which is made carelessly in breach of duty to take reasonable care owed by the one party to the other that the representation is accurate.
- Innocent misrepresentation: is one made which is neither fraudulent nor negligent.
The general remedies, subject to various limitations, available before a Civil Court are:
- rescission of the contract, i.e. cancelling or unwinding the contract, placing the parties in the position they were in before entering the contract, and/or
- a sum in respect of damages.
Unlawful Means Conspiracy
In order to establish such a conspiracy five elements must be shown:
- Two or more persons agree, or in some way informally combine, to injure another person. It is possible for a director of a company to conspire with that company against another.
- The conspirators must carry out a deliberate act.
- The deliberate act involves unlawful means such as the commission of another tort, a breach of contract, etc.
- One of the purposes of the conspiracy must be to cause injury to the victim.
- Damage must be suffered by the victim.
Bribery
A bribe describes any advantage offered to a person with the intent of persuading them to perform a specific action, typically for financial or personal gain of the person offering the bribe.
A bribe of this nature might occur, for instance, when a payment is made during a commercial transaction to an individual acting in the position of an agent, in order to influence the terms of a contract without the knowledge of his/ her Principal, who is a party to the contract.
In other words, it is a ‘secret payment’ designed to influence an outcome without the knowledge of other interested parties.
A Claimant seeking damages arising from such activity does not have to prove the dishonest nature of the bribe as this will be presumed. However, if the payment is regarded as being too small and insignificant to cause any worthwhile conflict of interest, it will probably not be regarded as being sufficient to represent any significant influence.
Generally, a Court will have to consider whether there is a ‘real possibility’ that the bribe amounted to a detrimental conflict of interest which occasioned the alleged resultant damage.
Dishonest Assistance
Dishonest assistance arises when a person assists or facilitates a dishonest or fraudulent act of a wrongdoer.
There must be a breach of trust or fiduciary duty by another involving a dishonest act or omission. Such dishonesty may be actual dishonesty or ‘blind eye’ dishonesty, where a person suspects a dishonest act but deliberately avoids ascertaining the true position.
Breach of Fiduciary Duty
A fiduciary is a person who has assumed a position involving a high level of trust thereby creating a relationship of trust and confidence.
Fiduciary duties include:
- acting in good faith,
- avoiding conflicts of interest,
- not profiting from the privileged trusted position.
Common instances where a fiduciary duty may be created include instructing someone to conduct a sale of property, a business, manage a portfolio of shares or negotiate a confidential contract.
A fiduciary who has profited from their breach will be liable to account for the profits that they have made, regardless of whether the profits would have been made had they not breached their fiduciary duty.
How Can We Assist?
If you are facing allegations of civil fraud or criminal fraud, the consequences can be severe, impacting reputation, finances and potentially your freedom. At KANGS, we understand the complexities of fraud cases and the potential consequences involved.
Our experienced team of fraud litigation solicitors is committed to protecting your rights, uncovering the facts, and building a strong case. Whether it is negotiating settlements, navigating civil claims, or defending you in a criminal court, we are always there to guide our clients every step of the way.
The team at KANGS brings a wealth of experience gained from supporting clients through a wide range of civil and criminal fraud cases, covering virtually every conceivable nature of fraudulent activity. Contact us using the details below for a confidential consultation with our skilled solicitors:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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