15 January 2008

No nonsense in clear cases of fraud

This recent case shows the ‘no nonsense’ attitude that will be adopted by courts in clear cases of fraud.

Facts of the Case

An office assistant at Costain noticed some ‘dodgy invoices’ and, on further investigation, uncovered fraud which had cost the company over £550,000. Under the scam, a contractor of the company would raise false invoices which a member of Costain’s accounts team processed. They would then split the proceeds.

Initially, the two defendants denied liability and so the claimant sought summary judgment on the basis that neither defendant had any real prospect of successfully defending the claim. At this point, one of the defendants, the independent contractor, entered into settlement negotiations with the claimant, leaving the other defendant, the accountant, to face the summary judgment application alone. 

The first defendant said that there was prevalent among certain employees of the claimant, a culture of dishonesty and ‘rule bending’. This particularly involved four employees senior to him. It was this ‘gang of four’ who initiated the scheme and who benefited from it. Indeed, he said that, insofar as he received any money from the contractor, he would have to pay it on to these people. He was not, however, prepared to name any of them for fear of reprisals. He also said that their joint position and status was such that they represented the heart and mind of the claimant and so, in effect, should not be permitted to pursue a claim regarding a scam that they initiated and benefited from. He also said that it would be premature to give summary judgment because there had not been adequate disclosure of documentation on the alleged culture of dishonesty.

The Decision

The judge had no truck with any of this. As to the involvement of others, he pointed out that this had no relevance to the defendant’s own culpability. Furthermore, he scorned the lack of evidence in support of the defendant’s claim that he remitted money onwards to these individuals. As to his assertion that he could not disclose their identity to the court ‘for fear of reprisals’, the judge found this ‘absurd’.

Points of Interest

Costain sought judgment for the full amount; the judge declined. Despite the fact that the claimant was entitled to judgment for the whole amount, the court entered judgment only in respect of the amount the claimant had proven the defendant had actually received.  (The judge did say that he would be open to further applications in due course depending on the result of negotiations with the second defendant).

Category: Article