Publish date

9 February 2023

Fraud and theft – what are your options?

It is always a shock to discover that a director, senior manager or other valued staff member of a business has acted in a way that may prejudice the business for their own or another’s gain.  For example, where a departing employee has stolen valuable intellectual property or a director has misappropriated funds or property belonging to the business.  Often these events can be categorised as criminal behaviour such as theft or fraud. The instinct is to report the conduct to the police.

The criminal law system is designed to investigate and punish offences.  However, this can offer little comfort to a victim seeking to protect or restrict the loss to their business.  There are actually two different ways to deal with these issues in the English legal system; the first is the process of a prosecution in the criminal courts.  Alternatively, it is open to a victim of fraud or theft to pursue the wrongdoer through the civil courts.

The criminal and civil court systems in England and Wales have different purposes and objectives, but in responding to an incidence of fraud or theft, there are two main differences to focus on: remedy and control.

What happens when you report fraud or theft?

The criminal and civil courts in England and Wales have different aims for the end result.

If you report the matter to the police, then they will deal with it through the criminal justice system.  The focus of criminal justice is to punish wrongdoing.  The criminal justice system requires the prosecution to prove “beyond reasonable doubt” that the defendant committed the criminal act. This is a high standard of proof and it can take a long time for the police or Crown Prosecution Service to decide whether there is sufficient evidence in a case for this burden of proof to be met.

At the end of the criminal justice process, if the perpetrator is found guilty then they may be sentenced to a fine or time in prison.  The Court can also make a compensation order requiring the defendant to pay money to the victim to compensate for any loss suffered, but only if the Court considers that the defendant has the means to pay.

What remedies can be offered to the victim of fraud or theft?

In contrast, the civil law system is concerned with remedying the wrongdoing suffered by the victim.  The onus is on the claimant in the case to prove “on the balance of probabilities” that the defendant committed the act alleged.  This is a lower standard of proof and therefore it may be easier to obtain the remedy sought from the Court.

A victim can seek redress to recover a sum of money or property lost to the person committing the fraud, and potentially payment of compensation.  In addition, there are other remedies available, such as an injunction to stop the fraudulently obtained property or funds being disposed of, or to stop the person using the information or trade secrets that they have wrongfully taken.

An award of damages will reflect the loss suffered and is not dependant on the defendant’s ability to pay. Most beneficially, the civil justice system provides mechanisms to enforce judgments awarded to a claimant at trial.  For example, by instructing bailiffs to seize property to the value of the judgment or by seeking a charging order to secure the judgment debt against the defendant’s property.

In conclusion, although the criminal justice system can impose punishment on the wrongdoer, there are limited remedies available through this system to protect the business or make good the loss that has been suffered. Bringing a civil claim is likely to offer a better opportunity to obtain a financial remedy that can benefit the business.

Does the victim have any control over criminal proceedings for fraud or theft?

Secondly, the two different legal systems work in quite different ways.  In criminal proceedings, it is the Crown Prosecution Service taking action against the perpetrator.  This means that the actual victim has limited contribution to and control over the ongoing proceedings.  This has the benefit that the costs of this court case are funded by the State, but in turn the victim has limited control over the pace of proceedings and the time it can take to bring the perpetrator to justice.

In contrast, in a civil claim the Claimant has control over whether to bring the proceedings and the different types of claims which can be progressed.  There are a number of different civil claims available which commonly sit under the umbrella “fraud”. This means that there is a wide range of claims (each which require different elements) to fit the circumstances and the evidence available, and a menu of appropriate remedies depending on the specific fraud or wrongdoing.

There is also the option to apply for urgent relief such as a freezing order which can be progressed as quickly as necessary.  Instituting a civil claim can provide the option to settle the matter with the wrongdoer for an amount, potentially less than the full claim, for the certainty of actually receiving something.  A civil claim enables a business to take a more proactive role in responding to a wrongful action and seeking resolution.

 An example of the process of reporting fraud or theft?

BoxCo Limited uses a number of suppliers for its stationery needs.  It received invoices purported to be from PenCo Ltd for the supply of stationary over a number of months.  The accounts team arranges payment of these invoices, which are approved by the Financial Director in accordance with company procedure.  It later transpires that the invoices are in fact false.  The bank details on the invoices belong to BoxCo’s Financial Director, who has falsified and submitted the invoices and received payment to her own account.  It total, the Financial Director has received payment for £50,000 worth of goods, plus VAT (a total of £60,000) which of course would also go into her pocket.

The Financial Director can certainly be reported to the police, who may choose to prosecute her for fraud or theft.  But how will BoxCo recover the money it has lost?  Initially, BoxCo may seek an injunction from the Court to freeze the Financial Director’s bank accounts to ensure that the misappropriated funds are not dissipated. BoxCo may have civil claims for deceit and/or fraudulent misrepresentation.  In addition, as the wrongdoer is a director of BoxCo, there may be claims for breach of trust or breach of fiduciary duty.  The amount of money taken by the Financial Director is sufficient to justify the issue of court proceedings if necessary to try and recover BoxCo’s loss.

What needs to be considered before reporting fraud or theft?

Therefore, although employee or officer misconduct will at first appear to be a criminal matter, it is always worth considering any potential civil claims with a solicitor.  Pursuing the wrongdoer through civil court proceedings offers a greater opportunity to obtain financial redress for the business or protect future damage from occurring.  These outcomes cannot be achieved through criminal proceedings.
Choosing whether to pursue the matter through the civil or criminal justice systems can be a complex and multi-faceted decision.  A good dispute resolution solicitor can guide you from the outset on the options available and the potential remedies to assist you in making the best decision for your business.


If you have any questions about this topic, please get in touch

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