What is a private prosecution?

A private prosecution is a criminal prosecution brought by someone other than the Crown or other prosecuting authority (e.g. CPS or HSE). Section 6(1) Prosecution of Offences Act 1985 expressly allows any individual or company to bring a private prosecution. Aside from this significant difference, private prosecutions operate in exactly the same way as if the prosecution had been brought by the Crown.

Why bring a private prosecution?

Private prosecutions are an excellent opportunity for insurers to take the initiative and proactively fight fraudulent claims in cases where there is sufficient evidence to defeat the traditional civil claim.

Given the spectre of fraud pervades all types of insurance claims, criminal prosecutions are a comprehensive approach that can be applied to all fraud cases across all lines of business. Indeed in many instances private prosecutions represent the only realistic means of bringing criminal prosecutions. Despite the creation of IFED, the Police and CPS are insufficiently resourced to investigate or prosecute the vast majority of fraudulent claims. IFED’s investigations have so far led to 470 arrests and 85 prosecutions since it was set up in 2011, which is a fraction of the two thousand dishonest claims identified by the insurance industry on a weekly basis.

How to bring a private prosecution

The process for bringing a prosecution breaks down as follows:

  1. Investigation and evidence gathering

This will usually be the same evidence as that which would be used to defend a civil fraudulent claim, albeit to the higher standard of proof; beyond reasonable doubt.

  1. Evidence assessment and drafting charges 

Consideration needs to be given to whether the case meets the full code test given in the Code for Crown Prosecutors. In order to satisfy the test there must be a realistic prospect of conviction and it must be in the public interest to prosecute.

  1. Bringing Charges

When a decision has been made as to which charges to bring, an "Information" (which provides details of the offence and the legislation that created it) will be presented to the Magistrates’ Court. The Magistrates’ Court will decide whether to issue a summons which will be served on the accused detailing the offence and when attendance at Court is required.

  1. Trial

The seriousness of the offence will determine which Court the matter will be heard in, with the Crown Court hearing the more serious offences.

The benefits

Insurers will no doubt be more familiar with using civil courts to resolve fraudulent matters, as they routinely react to claims for damages brought by fraudulent claimants. However, criminal litigation is a clever alternative to civil litigation and can run in conjunction with civil litigation to offer a comprehensive fraud protection strategy to insurers.

Criminal prosecutions should be considered for the following reasons:

  • Given the tight budgetary constraints under which insurance companies operate, prosecutions are cheaper and quicker than civil litigation. Once a summons has been issued for an offence, a case will usually be heard at the Magistrates’ Court within a few weeks, and it would normally conclude within 6-9 months (about half the time of civil claims)
  • The client controls the manner and tempo of the investigation and prosecution, rather than relying upon the Police or CPS. This enables costs to be closely controlled and the evidence to be perfected prior to charges being brought
  • If a fraud investigation is required in any event (due to a reacting to a civil claim) this information can be used for both civil and criminal litigation without additional expense
  • Prosecutions provide a good deterrent because of the powers and sanctions of the criminal court – including confiscation, a custodial sentence and a criminal record. These sanctions are notably absent from civil defences of fraudulent claims
  • Prosecution results can be publicised very easily, providing valuable positive free publicity for insurer clients
  • It is possible to apply to central government funds for the investigative costs as well as the legal costs. Accordingly criminal litigation might make commercial sense despite the (lack of) assets of the fraudster which would prevent a civil action being brought or the costs of defending a civil claim from being recovered. For example in the recent public liability fraud prosecution of Paul Gustar brought by AXA Insurance, the Judge ordered the entire costs of the private prosecution to be paid out of central funds
  • Where a company has financially suffered as a result of a crime, it is possible to claim compensation for this loss. Indeed there is a presumption than an order should be made, apart from where there is good reason for not doing so, i.e. where proceedings have been initiated without good cause. Happily there is no limit to the amount of compensation that can be awarded in the Crown Court and the limit in the Magistrates’ Court is GBP 5,000. Compensation includes reimbursement of both the investigation and prosecution costs, ensuring a successful prosecution results in no loss to the insurance company
  • Where a defendant has been convicted of a criminal offence and benefited financially from their crime the Court may make a confiscation order. The recent case of R (Virgin Media Ltd) v Zinga [2014] has approved the use of the somewhat draconian powers contained in the Proceeds of Crime Act 2002 in private prosecutions. This legislation was enacted to deprive criminals of their illegal gains and allows for significant financial punishment of offenders
  • If a fraudulent civil claim is anticipated, a criminal conviction can be persuasive evidence in a civil case. A successful prosecution is also likely to prevent a fraudulent civil claim altogether
  • There is no time limit for bringing a prosecution, whereas a civil action must usually be brought within 6 years of the date of loss. Habitual historic fraudsters will no longer be safe from sanction

Alternative/complimentary tactics

A significant number of other tools are available which, although not securing a criminal conviction, may serve to achieve a similarly satisfactory outcome for clients. Briefly, these include:

  • When faced with a litigated civil claim, the use of Part 20 Claims to join in additional parties for strategic reasons and seek financial recovery if the opportunity arises
  • The use of pre-emptive strike proceedings for cases which are abandoned pre-litigation to pursue a damages claim in the tort of deceit and/or recovery of pre-litigation investigation costs
  • The bringing in of co-conspirators to an action for the purposes of pursuing a joint and several costs liability claim against all suspected protagonists

The risks

The following potential risks exist in respect of private prosecutions:

  • The financial costs of bringing a private prosecution. This is more of a cash flow issue, given that the costs of successful prosecutions (both legal and investigatory) will be reimbursed
  • The CPS may decide to take over a private prosecution and possibly discontinue it, although this is evidence or public interest dependent
  • As with public prosecutions, there can be significant delay between the offence and the trial
  • If the prosecution fails, the insurer may be at risk of being sued by the defendant for malicious prosecution; although this is very difficult to prove. Moreover if the prosecution fails because it is improper, an adverse order for costs may be made against the private prosecutor
  • There is a danger that witness evidence obtained may be not compliant with PACE (as it was obtained for civil proceedings) and will be deemed to be inadmissible
  • A failed prosecution also brings bad publicity which can have serious repercussions for the insurers’ business

However, with appropriate planning and execution the pitfalls and risks associated with private prosecutions can be mitigated to a large extent in order to ensure that only meritorious and successful prosecutions are brought.