In a recent press release in December 2012, the independent fraud watchdog the Fraud Advisory Panel commented that the legal system in the UK was effectively fighting fraud with one hand tied behind its back by under-valuing and under-utilising the civil remedies that are available to victims of fraud.
Fraud Advisory Panel Chairman, Ros Wright, stated that “The high costs of civil legal remedies compounded by limited awareness of their value, is leaving the UK’s individual and smaller business fraud victims severely disadvantaged” and that “there is a growing need for victims, counter-fraud professionals and official agencies alike to make better use of the non-criminal route to obtain redress”.
Whilst victims of fraud may think to report their complaint to the relevant law enforcement agency, many are not aware that they may also have grounds to pursue civil proceedings against the perpetrator of the fraud or to pursue a civil action in conjunction with the criminal investigation.
There are a number of advantages in doing so including the fact that with specialist legal advice fraud victims can use a variety of civil tools to help them recover their losses and, equally importantly for many victims, attach liability to those who are primarily responsible for the fraud or who assisted or benefitted from the wrongful acts. In comparison to criminal proceedings, bringing a civil action also offers the advantages of speed, a greater degree of control and flexibility and a lower standard of proof (the balance of probabilities) as opposed to the higher criminal standard.
A few of the interim remedies in the arsenal of a civil claimant include:
- Freezing Orders: Once described by Donaldson LJ in Bank Mellat v Nikpour  FSR 87 as “one of the law’s two nuclear weapons”, the Freezing Order is an interlocutory injunction which restrains the defendant from dealing with or disposing of any assets to assist, where possible, in preserving sufficient assets to satisfy a monetary judgment against the defendant.
- Search Orders: Search orders are designed to preserve evidence which the defendant might otherwise seek to destroy or suppress and allow the Claimant’s solicitors to attend the defendant’s “premises” to search for and seize specified evidence.
- Proprietary Injunctions: Where a claimant seeks to recover specific property from the fraudster (including cash) or the traceable proceeds of that property, the Court subject to certain requirements can grant an interlocutory injunction restraining the disposal of these proprietary assets.
- Third Party Disclosure Orders: A third party disclosure order (or Norwich Pharmacal Order as they are known) requires third parties to disclose information which may for example assist in identifying the wrongdoers or allowing assets to be traced.
In addition to pursuing causes of action against the fraudster, including breach of contract (or procuring the breach of contract), breach of trust and fiduciary duty, deceit and fraudulent misrepresentation, a fraud victim can also employ a number of causes of action which impose accessory liability on those who assisted in or benefitted from the fraud. These causes of action include:
- Unjust enrichment: This is a common law cause of action which imposes an obligation on the recipient of stolen monies to repay an equivalent sum to the victim if he or she is found to have been “unjustly enriched” at the expense of the victim.
- Dishonest Assistance: An accessory to the fraud can be held liable for the loss flowing from the fraud if they are found to have dishonestly assisted in a breach of trust or fiduciary duty.
- Knowing Receipt: This restitutionary remedy imposes liability on third parties who receive monies knowing that these monies are being given to them in breach of trust.
In conclusion, whilst civil proceedings can be expensive and the prospects of ultimately recovering all of a victim’s losses from the fraudster can never be guaranteed, the Courts in the UK have broad powers to grant injunctive relief and damages and there are a number of options available to the victims of fraud to pursue the perpetrator of fraud.