Client Type: Individual

The Perfect Fraud? Investing in private companies (Part 2) The unravelling…

On 6 July 2021, judgment was handed down sealing victory for our clients in what has been a long and drawn-out legal battle against two individuals who sought to defraud them causing loss of over £1m. The judgment confirms that the Defendants were “…wilfully and deliberately dishonest.” In this second article we discuss how we were able to unravel the fraud and construct a successful claim for fraudulent misrepresentation…

The Perfect Fraud? Investing in private companies (Part 1) From the outside looking in…

On 6 July 2021, judgment was handed down sealing victory for our clients in what has been a long and drawn-out legal battle against two individuals who sought to defraud them causing loss of over £1m. The judgment confirms that the Defendants were “…wilfully and deliberately dishonest.” In the first of two articles discussing the case, we assess how the Defendants committed an almost perfect fraud…

Tenet success in fraudulent misrepresentation claim

Tenet has recently achieved success for its clients in the Central London County Court in respect of a claim for fraudulent misrepresentation against the authors of a highly inflated valuation of a well-known business coaching company, in which our clients were persuaded to invest.

Over the coming weeks we will be publishing a two-part article discussing this case in more detail as it was a well-planned approach by the defendants to distance themselves from responsibility whilst also creating a number of other commercial and practical factors in the way of the claimants.  Our two-part article shall also look at the lessons which can be taken from it to try and help people avoid being caught by a similar situation.

However, in the meantime, we are keen to share our success and that of our clients, for which this has been a long and drawn-out battle for justice.

Whistleblowing: why are people still afraid to speak out?

On 23rd June 2021, it was World Whistleblowing Day. There is much to celebrate with a noticeable shift in global attitudes towards whistleblowing and those who lift the lid on criminal or unethical conduct thanks to movements such as the #MeToo movement. However, in an online poll conducted by Tenet Compliance & Litigation, an incredible 93% of respondents stated that they still thought becoming a whistleblower would impact their career. So, what is it about whistleblowing that makes people so fearful?

Recent case law: remedies in fraud

There is no “one size fits all” when it comes to ways to argue and seek the Court’s assistance in fraud claims. This is largely due to the fact that the umbrella term “fraud” covers a wide variety of possible causes of action and different remedies available depending upon the nature of the claim itself. This broad menu of both causes of action and remedies allows the courts to be flexible in terms of the way that fraud is dealt with.

Indeed, where there is a pleading of fraud there is often a greater scope for recoverable damages and the courts may take a more expansive approach to loss. Two recent cases provide clarity on common remedies in fraud, namely damages for fraudulent misrepresentation and an account of profits.

Fraud and summary judgment

Historically, where a claimant pleaded fraud, they were not entitled to make an application for summary judgment. The reason for this so called “fraud exception” was that due to the serious nature of the allegations and consequences of such, it would be inappropriate for such matters to be determined at an interim stage without defendants being afforded the opportunity to fully explore the issues at trial. This exception was abolished in England and Wales in 1992, and yet it has remained difficult to meet the threshold for summary judgment in fraud cases.

The one where the company sued its managing director

Advice was provided to a large manufacturing company which had been misled in relation to procurement of office copying equipment under the guise of a post franking savings scheme.

The client company had high expenditure of postal costs in relation to supply of goods to its customers. The client company was approached by a third party on the introduction of an existing postal services supplier. This resulted in the client company being misled to enter into finance agreements with numerous finance houses through a scheme which was alleged to provide savings on postal services via purchase of office equipment.

In fact, the alleged savings were being provided from the funds provided received from the finance houses in a scheme similar to a Ponzi scheme as contracts were rolled into new contracts annually.

Upon discovery of the fraudulent scheme, it became apparent that the client company’s managing director had been negligent in failing to read any of the lease agreements prior to signing them which formed part of the fraudulent scheme. The managing director had taken a sales representative’s word without assessing what was proposed or offered.

It should have been plain on the face of the agreements that he was committing the company to hundreds of thousands of pounds of debt, and that the debt from the previous annual agreement was being “rolled over” each time.

The managing director had the benefit of Directors in Office insurance which ought to have covered losses caused to the company as a result of his negligence.

The client company continued to employ the managing director given the highly commendable way he had acted since discovery of the fraud and generally throughout his many prior years of service with the company. However, the company client did consider he had been negligent with respect to his duty to exercise reasonable care, skill and diligence in accordance with s.174 of the Companies Act 2006.

Tenet were instructed to bring a claim in negligence against him for the loss sustained as a result of his negligence. The managing director in turn sought indemnity from his policy of insurance.

Following a long but successful mediation the claim against the managing director was resolved and resulted in a very substantial financial settlement from the insurance company on behalf of the managing director.

The learning point for other businesses is that where a loss is sustained as a result of fraud, think widely about the scope of cover on insurance policies and director duties innocently duped into causing a company to enter into a fraudulently misrepresented scheme or contract. It may be that cover exists even where there is not a policy overtly covering the ‘fraud risk’.

Cryptocurrencies: How are they regulated in the UK?

We’ve all heard of Bitcoin, but for a long time the concept of a “cryptocurrency” seemed to belong to another world, the online world, and was something far removed from day-to-day life. In recent years, cryptocurrencies have crept further and further into the real world with Mastercard announcing plans to support cryptocurrency payments on its network this year, and a number of traditional banks planning to welcome Bitcoin and other cryptocurrencies, eventually treating them like any other asset.

dale-v-banga-and-others

Dale v Banga & others: When is new evidence not sufficiently connected to factual matters to show a judgment has been obtained by fraud?

The principle of “fraud unravels all” relies upon new evidence being capable of demonstrating that there was “conscious and deliberate dishonesty” which was causative of the original judgment being obtained by fraud. Where the fresh evidence adduced is not sufficiently related to the issues which were before the court in the original trial, the scales of justice will favour the finality of litigation.

recordings

Recordings

Covert or illicit recording – Can it be used as evidence in a civil fraud dispute?

What if a fraud victim obtains or is in possession of an audio recording, obtained improperly, which contains information that the victim believes proves a civil fraud has been committed?  Will the Court allow such material to be admitted as evidence in support of the victim’s fraud claim?

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Email: hello@tenetlaw.co.uk

Fax: 0843 216 4240

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10th Floor, Lyndon House, 62 Hagley Road, Birmingham, B16 8PE

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