Fraudulent acts involve deliberately misleading another person in order to either make a gain for themself or cause the other person to incur a loss. Fraud itself is not a type of civil claim. Instead, it is a way of describing multiple types of civil claim. It is, however, a criminal offence. The key difference between fraud and other actions is that a person doesn’t just act negligently or recklessly. To have committed fraud that person must have acted dishonestly.
Is it a civil matter or a criminal offence?
It can be both.
A civil matter refers to a private action brought in the civil courts by an individual who is the victim of fraud. The victim decides whether to file their claim and start proceedings. A judge will decide whether a defendant has committed fraud on the balance of probabilities. If they have, the judge can order that defendant to pay damages to the victim.
Criminal offences are dealt with in the criminal courts. They are usually prosecuted by the Crown Prosecution Service and decided by a jury. In certain circumstances, an individual can bring a private prosecution and prosecute a case themselves in place of the Crown Prosecution Service.
A jury will decide whether a defendant has committed fraud beyond reasonable doubt. If they have, that person can be sentenced to 10 years’ imprisonment and ordered to pay an unlimited fine or compensation.
Which is better, a civil claim or a criminal prosecution?
In civil claims, you have control over how your matter is conducted, subject to any court orders. The litigation process includes stages such as disclosure, which can allow you to obtain information from the defendant about what has happened to your assets. This can improve your chance of recovering any lost assets by tracing what has happened to them since they were transferred out of your possession or control. Civil proceedings are generally quicker than criminal prosecutions and the focus is on recovering assets rather than imposing a sentence of imprisonment. In civil proceedings, a court will make an order, which might be capable of being enforced in another jurisdiction. When assets have been dissipated around the world in multiple jurisdictions, this can be vital in order to recover lost assets.
You are usually not required to report any alleged fraud to the police so it’s your decision whether or not to do so. Civil claims and criminal prosecutions can happen at the same time or one after the other.
In simple terms, if you want to recover your assets, your best option is likely to be a civil claim. Fraud cases often involve complex facts, however, and it’s important to make a decision based on the specific facts of each case.
Types of civil fraud claim
Some common types of claim that are brought in civil cases involving fraud are deceit, conspiracy, breach of fiduciary duty, breach of trust, fraudulent misrepresentation, dishonest assistance and conversion. The court will apply different standards in civil fraud claims such as what loss can be claimed, the time limit for starting a claim and piercing the protection offered by structures such as a limited liability company or a trust.
Deceit is the common law equivalent to fraudulent misrepresentation. It arises when an individual knowingly makes a false statement with the intention of causing another person to act on that statement and suffer a loss as a result. This can occur in cases of tax fraud, where false information is provided to the tax authorities to evade taxes or obtain an unlawful gain.
Conspiracy involves two or more individuals collaborating to commit an unlawful act, such as a fraudulent act, or a lawful act by unlawful means. Under the Fraud Act 2006, a claim for conspiracy can be brought against those involved in various types of fraud, including investment fraud, where individuals manipulate the stock market for personal gain or to deceive investors.
Breach of Fiduciary Duty
This is when a person who has a duty to act in the best interests of another breaches that duty, resulting in a loss to the other person. This can include financial advisers or trustees engaging in fraudulent activities, mismanaging investments or providing false information to clients for their own benefit.
Breach of Trust
Breach of trust is when someone entrusted with property or assets misuses them for personal gain. In cases of bank fraud, for example, individuals may misuse their position within a financial institution to embezzle funds, manipulate accounts or engage in fraudulent transactions.
Fraudulent misrepresentation arises when a person makes a false statement with the intent to deceive another, leading to a loss for the deceived party. This can occur in various contexts, including criminal fraud schemes where individuals provide false information to solicit investments or participation in fraudulent schemes.
In cases of fraudulent misrepresentation, to prove fraudulent activity, it is essential to demonstrate that the defendant made false statements with the intention to deceive and that the claimant suffered harm as a direct result of relying on those statements.
The following elements need to be established:
False Statement: the defendant made a false statement of fact or concealed material information.
Intent to Deceive: the defendant acted with the intention to deceive or with knowledge of the falsity of their statements.
Reliance: the claimant relied on the false statement, believing it to be true.
Damages: the claimant suffered actual harm or financial loss as a direct result of relying on the false statement.
Dishonest assistance involves a person assisting a trustee to commit a breach of trust or a fiduciary to breach a fiduciary duty. These breaches could constitute a fraudulent act, even if that person does not receive any direct benefit. Professional advisors, such as accountants or lawyers, who knowingly assist in unlawful activities, including tax fraud or investment fraud, can be held accountable for their involvement.
Conversion refers to the wrongful interference with or appropriation of another person's property or assets for personal gain. Bank fraud cases may involve individuals wrongfully diverting funds, manipulating transactions or forging documents to benefit themselves at the expense of others.
Types of court order
The court may make a number of orders including freezing a person’s assets, searching their premises, compelling that person or a bank to disclose documents or information and ordering payment of damages. Fraud claims must be carefully prepared and specifically described in evidence. They require a high standard of evidence but in return offer a powerful arsenal of legal weapons. In short, as declared by the court over a century ago, “fraud unravels all.”
What is the definition of criminal fraud in England and Wales?
In England and Wales, the criminal offence of fraud is defined as an act of deception carried out for personal gain or to cause loss to another person or organisation. It is a criminal offence under the Fraud Act 2006, which outlines three main types of fraud:
Fraud by false representation: this happens when a person makes a false representation on purpose with the intention of causing someone else to suffer a loss.
Fraud by failing to disclose information: this occurs when a person fails to disclose information which they have a legal duty to disclose, with the intention of causing someone else to suffer a loss.
Fraud by abuse of position: this occurs when a person abuses their position in order to dishonestly make a gain for themselves or cause a loss to another person.
To commit fraud under English law, a person must have acted dishonestly and with the intent to deceive. This can include fraudulent conduct or activities such as forging documents, falsifying accounts or misleading investors.
What is fraud? An example
Simple fraud can take many forms. One common example of a fraudulent activity is identity theft. This occurs when a person uses another person's personal information, such as their name or credit card details, for fraudulent purposes.
For instance, someone may use another person's credit card to make purchases without their permission or knowledge. Alternatively, they may use another person's identity to open a new credit card account and run up charges for which the victim is ultimately responsible. Identity theft is a serious criminal offence under English law and can result in significant financial loss and damage to an individual's credit history.
It is important to take steps to protect personal information, such as using secure passwords, shredding documents containing sensitive information and monitoring credit reports for any signs of fraudulent activity. If you suspect that you have been a victim of identity theft or any other type of fraud, it is important to seek legal advice straight away to understand your options for recovery.
What is Identity Theft?
Identity theft occurs when someone gains access to another person's personal or financial information and uses it for fraudulent purposes. This can include stealing a person's name, date of birth, national insurance number or credit card details.
Identity theft can be carried out in a number of ways, such as phishing scams, hacking or by physically stealing documents containing personal information. Once a fraudster has this information, they may use it to open a bank account, apply for a credit card or make purchases using the victim's name.
This type of fraud often involves the use of false or misleading information and can result in significant financial loss and damage to an individual's credit history.
If you suspect that you have been a victim of identity theft, it is important to act quickly to obtain legal advice, report the fraud to the relevant authorities and take steps to recover any lost assets.
Reporting Fraud and Seeking Legal Assistance
If you suspect that you have been a victim of fraud, it is crucial to take immediate action. The first step is to gather any evidence or documentation that supports your claim. This may include contracts, financial records, emails or any other relevant information. It is advisable to consult with a solicitor who specialises in commercial law or fraud cases to assess your situation and provide guidance on the best course of action.
Depending on the circumstances, you may choose to pursue a civil claim, a criminal prosecution or both. A civil claim allows you to seek compensation and recover lost assets through legal proceedings, while a criminal prosecution usually involves reporting the fraud to the appropriate authorities for potential criminal charges.
Fraud cases can involve complex facts and legal concepts. Each case is unique and it is essential to make informed decisions based on the specific facts of the case and advice from an experienced lawyer.