Fraud - An Introduction

My name is James Pants by a member of 36 Civil 36 group in London on today, Talking about fraud. This is a brief introduction to the topic abroad, covering some of the important things that are distinct about fraud in the law, maybe some other videos in due course, covering some more detailed aspect. Most cases in which someone is suspected or alleged to have done something that involved some element of dishonesty are not actually strictly fraud claims. We're dealing today with things that are fraud planes and the distinction those and the things that aren't. It's an awful lot of cases. You'll get people who are against whom claims that brought for, for example, contract talked restitution. One of those sorts of things which don't actually involve an allegation of fraud, even though the things they're accused of doing is inherently dishonest. Come on the significance of that in a moment. But there are a number of causes of action that are specifically recognized as being forces that action in, and there are specific authorities such as Armitage, unless you want that on the moon that tell us precisely what the law considers to be fooled. And there is something in particular and important consequences off something being forward, as opposed to not being brought, not coming to those in a moment to but as a general room. It's easier to for a claimed to get a good remedy, an interesting remedy, and there's some specific one of those, but also where fraud is proven. But it's much harder for a claimant to prove crude because the courts are rather reluctant to accept without some really good evidence that someone has bean dishonest. And therefore, that means that there's an important balance to be struck between whether or not one actually alleges one of the courses of action that a court considers to be fraud. Because of the one hand, you have the better remedies. On the other hand, you have the difficulty in proof and so requires careful judgment. Has to win two alleged for hopefully, this overview would least give you some idea as to some of those consequences, and beginning is to how to reconcile that kind of judge. So what is for? Well, there's no single, all encompassing legal definition of the concept. There are a number of different kinds of planes that are on a number of different kinds of claims that are not recognized by law as being claims in I can't get a comprehensive list. But some of the most important are that deceit and fraudulent misrepresentation. The idea that someone has made a false statement knowing three false or not believing it to be true, which is intended to be acted on by a person which is acted on by person, on which causes that person loss that is very similar to a specific statutory ground for possession. Ground 17 Housing Act 1988 which allows possession to be recovered on the grounds of what essentially amounts to deceit, is that bribery otherwise known as the torture, fraud some some what confusing with deceit but briberies quite distinction and falls largely, and Lord agency. In fact, there's a whole series of cases on procuring disloyalty by an agent which don't involve brights, which is which one might think was a super set. That concept of bribery those are recognized, the authorities is being fooled. Dishonest assistance of breach of trust. As the name implies, an element of dishonesty is required as part of the course of action and that is recognized being. I tried to broaden. Also, fraudulent trading, which is very rarely used these days after the 1986 Insolvency Act introduced the concept of wrongful trading, which is easier to prove and has almost was go to remedy the differences between someone special relations company becoming those today. But the thing that they all have in common and this is the important theme running through the law of fraud specifically is that some sort of dishonesty that type varies. But some sort of dishonesty on the part of the defendant is an essential ingredient in the course of action in case of deceit. For example, it's knowing the statement in question to false or not having a genuine believing. It's proof in the case, for example, of dishonest, a system of breach of trust. It is acting contrary to the ordinary standards of honesty, which is a little bit similar to the testing of criminal, especially its recent modified to abolish the gosh. Now what isn't for There are a number of things that one might think off as they may be full, but actually aren't on there being a number of cases holding a number of specific things that look as they might before inequity. A whole range of things used to be called constructive, for they are not actually fraud. And that was held in the case of Armitage, unless back in 1998. Things like undue influence because no actual dishonest, your wrongdoing is required on the part of a person who is procuring undue influence. Person. Quite it isn't but nonetheless, um, give rise to I'm do influence over person that is not considered in lordly fraud and doesn't attract all the consequences for, as withheld in the case of Armitage, nuts that somebody specific cause of action dealt with in the previous section do another good example, something it doesn't match. Different is where the fact has pleaded inevitably involved in Syria's dishonest. But the cause of action itself does not involve as one of its essential ingredients dishonesty but the paradigm example that in the case of Barclays Bank and coal, as we'll see in a moment, there are particular procedural consequences, including the right to a jury trial. But one gets if one of the defendants to a charge of four in that case, the defendant had robbed a bank and had gone to prison, and the bank wants to get its money back. It brought a civil claim against, and the defendant argued, the civil papers and conversion on The defendant argued that he ought to be entitled to a jury trial because what was being alleged amounts to an assertion that he committed theft, and that involves dishonesty in the court of appeal. So, no, that's not right, because the tort of conversion does not require proof off dishonesty as one of its essential ingredients. This isn't a claim which involves dishonesty. This isn't a claim for the defense of their fourth title for a jury trial. So all of the consequences for no matter what, the facts of the case can only arise where one of the essential ingredients in the course of action is the dishonesty in one sense or another of the different. Another thing that looks as though it on the floor but actually isn't is a claim under Section 423 off insolvency Act 1986 on the reason of that, looks as though taught before because they're hitting the short hitting in section his transactions. Defrauding creditors. It actually is. A very broad section doesn't require any dishonesty crew from the part of offending. It's a section that entitles a person who has being what the section described is the victim of a transaction which adversity prejudices a creditor by having transferred property. London To reverse that transaction and recover that property. And it doesn't require the defendant to be dishonestly. It's much easier to prove them. And so as a result of that, it doesn't attract any specific consequences that attracted that attached to specific claims of fraud. And finally, another thing that looks as though it ought to be fraud because it's in name but actually isn't is what's called a fraud on the power inequity. And we know that that's not considered fraud because there's no dishonesty required. And in the case of venture and pull way back in 1915 in there for that reason, the old terms of names that dr being the improper purposes doctor maybe a better way of referring to fraud in power but be aware the other name exists, but it's not really for in the sense way discussing. So we talked about the fact that fraud planes have specific consequences and quite a few let's deal now with some of those consequences, first of all, with substantial consequences and then the procedural consequences. What are the subjective consequences? Will, firstly, in some cases, especially the deceit frauds involving this representation for something equivalent to a more generous tests for possession applies where the claimant is able to prove a floors of misrepresentation for deceit in a claim for negligent or innocent misrepresentation. But claimants must prove that, but for the defendant was representation, the claimant would not have done a thing of alleged lots. And the same applies in the case of next mistake. The tortured nation mistaking heavy banner headline as normal was taught that if they claimed, must prove that. But for the thing that amounts to the court claimed would not have suffered the loss in fraud. It's different in fraud one only if the claimant has to prove. But the defendants deceitful statements made a significant in the sense of nontrivial contribution to the claimant's decision to do the thing, but caused the loss or entry into the country. And we know that from the case of a parabola and Brown Elliot 2009 or loaded building on the number very authorities at the most recent authority to confirm that point. And that could be fairly significant for a claimant in a misrepresentation case where there are a number of things or deceit case with a number of things that way on the claimant's decision. And it might be difficult to say if the claims were alleging negligence or even in isn't reception. But But for this one was specific, isolated factor before statement. I would not have done the very thing that caused me lost. What made me enter into this country so it could make a real difference between winning and losing case in the right kind of case. Another really important consequence. Being able to prove full is that exclusion clauses are absolutely invalid in so far as they purport to exclude liability. In other cases, exclusion clauses are may well be that they are limited, especially in consumer cases, by requirement of reasonableness by the various right Some right now Levi nonsense human cases. The Contract Terms Act 1977 limits the extent to which the exclusion course family relied. But it's a matter largely discretion the court in those cases, the degree of uncertainty about whether an exclusion clause might be in so far as it purports to exclude liability fraud. There is no discretion. It is simply invalid. Natural public policy on that comes from the case of H. I H Casual to General Chase Manhattan. It's the House of Lords case again that builds on 2003 built on scenario. Certainly contributory negligence is no defense to So, for example, in case of negligent misstatements, the fact that a Cleveland was also negligent in relying on that statement or believing a thing to be true might be a partial defense that might allow the defendant to reduce the amount of damages. Not so, if acclaimed is able to prove pull Claimed is able to perform that it doesn't matter how careless that the claimant has. Bean claim is entitled. Recover complete damages against. And again, there are a number of cases, much that make substantial difference, and that may out weigh some of the disadvantages depleting for which will come on. Likewise, the rules on vicarious liability fraud are a bit different, especially in the case of employees. The rules are by carris liability for anything else. Um, in the case of fraud, vicarious liability employees is limited to where the employee has actual or stencil authority to do. To make the representation that amounts to the deceit in the first place can, in some cases, be a tricky question to consider. But there's no actual sensible authority in the case off library by Carris. I don't, for example, make regions. So if one employer, one employee history of fraud in the right cases but his cable, we're making real different plenty of cases where it would make it by the state of the employees ostensible authority. But there have been some cases in this made a big difference in one of those was the case of Lloyd and Grace Special in 1912 in the court, appeal actually has brought my posters where the employee, in that question in question that case had made statements which weren't even within. The court found the scope of his off central. But there's an important caveat. Vicarious liability, which is this liability vicarious liability in fraud can, whereas direction either is he cannot be excluded by an exclusion fools, and that's because the public policy reason for not permitting exclusion clauses in the case of fraud does not apply to buy caress liability because the person doing the excluding is not the very same person who has personally being dishonest. Another important consequence unless they make a real difference if the defendant more, which doesn't have very much money, has been made bankrupt. If the debts are rising out of fraud, survive bankruptcy. Normally, when a person has incurred a debt or liability in damages and that person has been made bankrupt on discharge from bankruptcy, that's big expires completely. One of the main exceptions to that other students. It's fraud, but there's rises out of four, then it survives. Bankruptcy doesn't matter. How many times have been being made bankrupt. The claimant can still provide it. Still, with imitation could still bring a claim against the defendant to recover the whole. If the defendant is an under start, back up to the claimant will still need to have permission to bring. But as withheld in the case of royal brunette Brunei Airlines and 10 the court is far more likely to grant permission because of the rule that allows the defendant So I last claiming to bring a case against the defendant and recover damages notwithstanding the defendant and have subsequently being discharged from accuracy. And that's provided by statute that Section 281 subsection three of insult Exactly six. Another very important substantive consequences. Limitation the rules as far as limitation concerned claims much more lenient, much more generous, reclaimed where the cause of action is in fraud than where the cause of action isn't something else. And that's provided by statute that is section 32 subsection one paragraph a off the limitation X imagination and that provides that where the claim is a claim in fraud. The time starts to run from the time when fraud waas, all with regional divisions, could have Bean discovered, whichever to the I'm not making a very big difference to acclaimed where the floor happened a long time ago. That's where it's only been discovered recently because the normal rules of courses of action other than is that time starts to run from when the cause of action accrued. Even if the claimant doesn't discovery until a long time. There are specific exceptions for what I call fraud of consumed again. That's not strictly for deliveries. Conceivable what's required, which I'm not going to go to now. But nonetheless, if your cause of action isn't for you don't have to show any of those specific exceptions. Time starts running all cases of fraud from when the claims could. For these four threes, Magilton's could have discovered the another important consequences. If it on awful lot of things can be undone, which could not otherwise be undone, it's fraud could be proved. And the famous quips that is from Lord Justice. Denning is that was, in the case of Lazarus of States and Beasley, way back in 1956. And it's worth reading out in full because this is a paradigm statement. Oh, fraud. In English law, the consequences of no court in this land will allow a person to keep an advantage, which he has obtained by fraud. No judgment of a court order of the minister can be allowed to stand if it has been obtained by for fraud, unravels everything. The court is careful, not defined fraud unless it is distinctly please improve. But once it is approved, officiates judgments, contracts and all transactions, what's like all transactions. The range of things that can be undone when Ford proved is very they include contract fraud, misrepresentation, Will's some have been induced, created will by fraud that will is invalid. Transfers of property, including registered transfers of land on a specific procedure, hundreds of different. And the person who's being prejudiced by a wrong entry on the land registry as a result of fraud, complained compensation from the land registry. That's actually very important aspect of the land registration system and judgments. It's possible actually to go behind a judgment. Say this judgment should be returned because it has been procured by four. And it's a specific action high court quite separate from appeal to set aside of judgment procured by food. It's very difficult to do that if the court applies quite stringent conditions, including a novel standard of proof that is different to an intermediate between civil and criminal standards, the whole series. Of course, this is just introduction. I'm not going to get into that in full detail, but be aware that is a possible thing that can be done and also settlement agreements, and that some interesting recent authorities which again, this being introduction time to go to fully as to when fraud can unravel a settlement agreement. But settlement agreements on consent orders providing 1/4 can be proven certainly can be unraveled. We've looked so far the substantial consequences of feeding, fraud and proving. Now just look at some of the procedural consequences. And while the substantial consequences tend to be favorable, proclaimed apart from some of vicarious liability rules, the procedural consequences tend to be somewhat unfaithful. But first of those procedural consequences is the requirement in civil procedure rules for an allegation of fraud to be explicitly set out, and that comes from the practice direction to Part 16 of the civil procedurals at paragraph 8.2. Sub paragraph one paragraph 8.2 is a whole list of things must be explicitly set out in a statement of case if a claim is too loud and fraud is right at the very top of that list. Another thing to bear in mind is there are specific professional ethics requirements depleting for for both solicitors and bastards, which are that one must have some ground, some evidence for doing so. You needn't necessarily be admissible. It must be some evidence and explicit instructions producing that doesn't apply to any other kind of plane that's of the professional bodies are keen to make sure that fraud be not alleged unmet herself. Another important consequence is that the courts will more stringently scrutinize they claim in full and will be less likely to find it proven the standard of proof in a civil case. Apart from that very specific claim to set aside judgment, procure room is the same. Namely, the balance of problems is but as withheld in the case of Horrible and Newberger, the court will more readily find that that standard discharged in a case of negatives or something else it doesn't have actual landing for. And the reason the court gave for that was that fraud, it was thought, was inherently less like. Interesting question is to what extent that really is the case, but in any event, bear in mind. But it is hard to persuade a cold on the balance of problems. He's a fraud occurred when the negatives has occurred, and that may well just be a tactical matter because, of course, is not inherently easy to plead. What is in to prove the content of someone's mind. Person knew something wasn't true or a person acting country to standards of honesty. Another important consequence And perhaps one of the most important consequences is in costs. The costs of proceedings where fraud is alleged unlikely to be hired for a number of reasons. Some of those reported discussed some of those guys come on to. But if a party have a claimant alleges fraud unsuccessfully or unnecessary, then the claimant is likely to have to pay the costs of doing so even if they came in with everything else. So they came and brings a case of negligence. All 24 succeed elections but doesn't improve all the courthouse it holds. It wouldn't make a difference to claim that brought a plane in sections in the floor doesn't add anything but number that's added to the costs claimed made to pay the defendant's costs of having a troll. And that comes from the case of NatWest and Canoe to costs back in 2006 in the high court. Another important consequence, which may well significantly increase the cost, although it's one of which very few people seem to be aware, is that a person against whom a charge of fraud had been made in civil proceedings is entitled to elect trying by Judy unless certain things apply. So unless the cases in the chance for family Division of the High Court, unless the court is in quotes off, the opinions of the trial requires any prolonged examination documents or accounts for any scientific or local investigation which cannot be community made of the jury. I'm certain perceives where closed material applications may be made. That's confined to national security cases in the middle of those exceptions, like has been most important, which practically rules out all the complicated cases of fraud. But the roof a lot of cases were actually read is very straightforward, and the defendant may well be entitled to rely, entitled Electric Your Truck. And one of the examples may well be where a landlord is claiming possession underground 17 which we earlier pointed out, did a match to it, claiming for and that of course, enormously inflated cost difference having during trial, especially the cost of a trial, and that may well be one of the consequences which a claimant has to pay, it claimed, then doesn't go on to succeed on that issue. So as will be apparent, legend full has a number of important consequence, alleging it successfully can make a really big difference in favor of a case alleging successfully might be able to claim to have to succeed in the course of action where otherwise it wouldn't be possible, might allow claims, even if successful, to recover damages for debt my way of even after defendant be made banquet or otherwise they wouldn't be possible. But it's hard to establish proof and doing so unsuccessfully or unnecessarily has adverse consequences and costs, which may be really very substantial easing, especially complex case. And so I said at the outset it requires careful judgment. Asked whether it's a good idea to bring a claim for, and it's important to know what counter claim and what the potential prizes and pitfalls are in order to do so, have a hope of this brief introduction has given at least an hour flying off what those advantages and disadvantages. Maybe so one could at least begin to have a sensible consideration off where it is sensible to electoral and where it isn't. I hope that's helpful. Thank you