Civil or Criminal Fraud?
Fraud is a term commonly used, often inaccurately, by laypeople and lawyers.
‘Civil fraud’ or ‘commercial fraud’ is not a recognised civil cause of action. Instead, claims involving fraud are usually pursued under heads of claim such as fraudulent misrepresentation, deceit, fraudulent breaches of trust, or fraudulent trading.
How does civil fraud differ from criminal fraud?
Fraud in a criminal context is an offence governed by the Fraud Act 2006 and carries a penalty of imprisonment and / or a fine, the limit of which will depend on whether it is a summary conviction or conviction on indictment. Criminal fraud is usually prosecuted by the Crown Prosecution Service (CPS) or, in serious cases, by the Serious Fraud Office (SFO), and the standard of proof to be met is ‘beyond a reasonable doubt’ being a very high threshold to meet.
Civil fraud, on the other hand, carries no ‘punishment’ per se but allows for the victim to personally seek restoration of the assets taken by the fraudster and / or damages. Pursuing a civil fraud claim often produces a faster resolution (whether that be judgment against the defendant or a negotiated settlement) than a criminal fraud case, as there is no prosecuting authority deciding whether to investigate and prosecute. The civil standard of proof is also lower, being decided ‘on the balance of probabilities’.
Can allegations of fraud be pursued in a civil and criminal context simultaneously?
Yes. Nothing prevents someone pursuing fraud as a civil and criminal claim simultaneously. A victim of fraud may choose to pursue a civil claim even though a criminal claim exists because of the different remedies available. For example, although a confiscation order may be made by the court in criminal proceedings (restoring stolen property obtained by fraud), the court may choose not to make a compensation order, in which case bringing a civil claim for damages will be the only available option for a victim seeking compensation for their loss.
What if the CPS or SFO decide not to prosecute a case where I’m the victim of fraud?
There are two tests that the CPS prosecutor must apply in deciding whether the CPS should prosecute a case: one based on evidence and another based on public interest. If the CPS prosecutor decides the case does not pass the tests, the victim can ask for the decision to be reconsidered.
Failing the above, you still have the option of bringing a civil claim and, if successful, benefiting from various remedies such as the restoration of assets and damages mentioned above.
Section 6(1) of the Prosecutions of Offences Act 1985 also allows for private prosecution of criminal offences. This operates to allow someone, such as an individual, company, or charity, to bring criminal proceedings against a fraudster, which is particularly useful where a prosecuting authority such as the CPS or SFO refuse to do so. The prosecution process is exactly the same, except that the victim (usually represented by a law firm) will be the prosecutor. Private prosecutions are generally more quickly progressed compared to the typically slower decision-making procedures that come with the CPS or SFO; however, they are expensive. A successful private prosecution of fraud will result in a court sentencing the defendant, in which it may impose a prison sentence, fines, and / or other orders, including confiscation orders, compensation orders, and director disqualification orders.