If your organisation has been a victim of fraud, the commercial fraud itself is not a specific cause of action but a term that describes various activities that may give rise to multiple causes of action, examples of which are outlined in our article, "Common examples of criminal and civil fraud". The courts recognise the need for flexibility in dealing with commercial fraud, and as a result, they provide a variety of potential remedies for victims. We have set out an overview of these remedies below.
The courts recognise the need for flexibility in dealing with commercial fraud, and as a result, they provide a variety of potential remedies for victims. We have set out an overview of these remedies below.
Recission
Recission unwinds a contract and puts the parties back in the position as if the contract had never been entered into. Recission can be available where a party’s consent to enter into a contract has been rendered invalid in some way - such as where one party’s consent wasn’t actually given because of the fraud involved. As a result, any rights and obligations under the contract are effectively extinguished and the parties must restore to each other any benefits they have received under the contract as far as is possible.
Damages
Damages can be awarded by a court to compensate a claimant who has suffered loss as a result of a wrongful act committed by a defendant. A basic principle of breach of contract is that a party is entitled to be put in the position they would have been if the wrongful act had not occurred. Claimants are required to take all reasonable steps to minimise the losses that result from the defendant’s breach.
Restitution
If a defendant party has been unjustly enriched as a result of a fraudulent act, the claimant party may seek to recover restitutionary damages. This differs from standard damages as there is no need to establish actual loss to the claimant, instead the claimant seeks to recover any profits gained by the defendant that stem from the fraudulent act.
Proprietary remedies
In certain circumstances, the court may be willing to find that where property has been handled unconscionably, or there has been a breach of fiduciary duty, the property is held in a constructive trust by the defendant in favour of the claimant. For example, if a fiduciary takes a secret commission or bribe, the court may find that the commission is held on trust. This gives a claimant a proprietary right to the trust property, which can be beneficial in circumstances of insolvency or where the property has passed into the hands of a third party. The claimant can then seek to recover the property from the third party, whether or not the third party knows about the fraud.
Please also see our article “What to do if...you suspect your organisation is being defrauded by someone you have a commercial relationship with” for a list of tools you can use to go after a fraudster.
If you would like to find out more about how these remedies can be sought, or for detailed advice tailored to your specific needs, please contact our team at Mills & Reeve.
As tackling fraud becomes a priority in both the private and public sectors, Mills & Reeve has launched a new fraud forum, Deception Diaries. This forum will keep you informed about the evolving landscape and offer expert advice on trending fraud topics.
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