Commercial Fraud

A report in August 2023 showed an increase in the number of commercial fraud cases being heard in the English courts in recent years.

The ICAEW has reported that the total value of reported fraud in the UK rose to £2.3 billion in 2023, representing a 104% increase compared to 2022 figures. This was the second-highest annual fraud total in the past decade.

What is fraud?

Fraud is defined differently depending on whether it's in a civil or criminal context, and even within civil and criminal law, the definition changes depending on the type of claim or offence being pursued.

Criminal fraud is an offence that can be prosecuted in the criminal courts, resulting, if successful, in a criminal conviction and punishment, which can include a custodial sentence. In criminal proceedings, each element of the offence must be proven ‘beyond reasonable doubt’.

Civil fraud, sometimes called ‘commercial fraud’, is often by way of making a false statement or the suppression or withholding of the truth, where there is a duty to disclose the truth. 

Where representations are involved, proof of absence of actual and honest belief is all that is necessary to establish fraud. 

English law does not recognise a single cause of action that describes as civil or commercial fraud. Civil fraud is only actionable as a specific claim, which must be proven ‘on the balance of probabilities’.

What action can be taken for commercial fraud?

In civil / commercial fraud, a range of claims can be brought depending on the circumstances and the available causes of action.  Some of the claims that can be made in civil fraud cases include: 

1. Fraudulent Misrepresentation: This claim arises when a party makes a false statement with the intention to deceive another party, inducing them to enter into a contract or take a certain action.  The claimant can seek remedies such as rescission of the contract, repayment of money, recovery of assets, or damages. 
2. Deceit: Deceit is a tort claim that involves intentional or reckless misrepresentation, where the claimant suffers harm as a result. The claimant can seek damages as a remedy.
3. Conspiracy: A claim of conspiracy can be made when two or more parties agree to commit a fraudulent act or pursue an unlawful objective. The claimant can seek damages or other appropriate remedies.
4. Breach of Contract: If fraud is involved in the formation or performance of a contract, a claim for breach of contract can be made. This can include situations where bribery or corruption is involved. The claimant can seek remedies such as damages or specific performance.
5. Breach of Fiduciary Duty: If a person in a fiduciary relationship, such as a director or trustee, breaches their duty by engaging in fraudulent activities, a claim for breach of fiduciary duty can be pursued. The claimant can seek remedies such as damages or an account of profits.
6. Secondary Liability Claims: These claims involve parties who have knowingly assisted or received the benefits of fraudulent activities. Claims such as knowing receipt or dishonest assistance can be made against such parties, seeking remedies such as restitution or damages.
7. Wrongful or Fraudulent Trading: In cases involving insolvency, a claim for wrongful or fraudulent trading can be pursued against directors or officers who engaged in fraudulent activities that caused harm to the company or its creditors. Remedies can include compensation or other appropriate relief.

It is important to note that the specific claims available and the remedies sought will depend on the facts of each case and the applicable laws in the jurisdiction where the claim is brought. 

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This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only. 

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