Source: https://cornerstoneonsocialhousingfraud.com/2018/11/
Timestamp: 2019-04-18 16:34:14+00:00

Document:
The last few months have seen a number of reported cases which, though not directly concerning matters concerning housing on their facts, do explain some important cause of action, evidential and procedural issues that are referable to this blog’s focus on social housing fraud. 4 of those cases are described below.
In Gilani v Saddiq & Ors  EWHC 3084 (Ch) the claimant applied for permission to use documents disclosed by the defendants in that civil claim as evidence for a private prosecution he had brought against the first and second defendants on charges of fraud arising out of the same matters that had given rise to the civil claim (though that claim had not pleaded fraud).
(c) the party who disclosed the document and the person to whom the document belongs agree.
(2) The court may make an order restricting or prohibiting the use of a document which has been disclosed, even where the document has been read to or by the court, or referred to, at a hearing which has been held in public.
(b) by any person to whom the document belongs.
(4) For the purpose of this rule, an Electronic Documents Questionnaire which has been completed and served by another party pursuant to Practice Direction 31B is to be treated as if it is a document which has been disclosed.
The “considerable public importance in facilitating the effective prosecution of serious crimes such as fraud” – paragraph 22.
The prosecutor “has the duty to lay before the criminal court all the evidence relevant to the offences charged, and would be hindered in doing so if evidence that would otherwise be relevant has to be withheld because this court refused permission.” – paragraph 23.
There were no issues concerning the privilege against self-incrimination – paragraph 24.
There was no injustice to the defendants in granting permission, indeed they had opposed the claimant’s application for a stay of the civil proceedings pending the outcome of the criminal prosecution – paragraphs 25 to 29.
It cannot be said that use of the documents in criminal proceedings is in any respect an “improper” purpose – paragraph 30.
In Canary Riverside Estate Management Ltd v Circus Apartments Ltd  EWHC 1376 (Ch) Master Shuman was faced with a CPR r. 3.4(2) application by the defendant in a breach of Lease claim to strike out paragraph 9 of the Reply in which the claimant had made an allegation of dishonesty against the defendant.
There was no factual basis alleged to plead the dishonesty – paragraph 11.
You cannot plead a fresh cause of action in a Reply – paragraph 11, 16PD para. 9.2.
A strike out application should be made as soon as possible – paragraph 13.
The pleading party must have a proper basis for making an allegation of dishonesty in their pleading – paragraph 16; Three Rivers District Council v Bank of England  UKHL 16;  2 All ER 513 at .
(1) The hope that something may turn up during cross-examination of a witness at trial does not suffice.
(2) The allegation of fraud must not be equivocal.
(3) There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.
(4) At an interim stage the court is only considering whether the facts as pleaded would justify the plea of fraud.
“34. I accept Mr Rainey QC’s submissions at paragraph 34 of his skeleton argument that, against the background of the 9 July 2015 agreement and the 45 under lettings, the fact that a junior employee of Bridge Street who was in sales said that he understood that position to be that Bridgestreet have the building for another 10 years is wholly insufficient to tilt the balance and to justify an inference that the defendant is dishonestly concealing an unconditional agreement to grant a lease of the whole of the Property to Bridgestreet for a term of 10 years. It does not come close. I accept that the statement by the employee is equivocal and equally consistent with an honest belief that Bridgestreet could remain in the Property for 10 years.
35. As to the other evidence relied on by the claimant in the witness statements put before me, this is not pleaded. However for completeness I have considered that evidence. I note that in relation to Mr Wallace he has refused to provide a witness statement to the claimant. In relation to the attendance note I consider that when Mr Wallace said that he had been told by either Mr Beck or Mr Rands that Bridgestreet had the property for 10 years that is explicable on the same basis as the email of 29 July 2015, that Bridgestreet were confident that they would be in the Property for the next 10 years. It was certainly in the defendant’s commercial interests for the underleases to be renewed. In relation to the email about the term “3+3+3+ 1 =10” I fail to see how this is evidence supporting the claimant’s contention that the defendant is dishonest. It demonstrates the mechanics of the agreement between the defendant and Bridgestreet and specifically refers to the fact that the defendant is awaiting the consent of the claimant which would alter these mechanics and therefore provide a single term of 10 years rather than a multiple of different terms adding up to 10 years.
In Winter v Hockley Mint Ltd  EWCA Civ 2480 the Court of Appeal was faced with an appeal against a damages award of £531,803.98 made for vicarious liability for fraudulent misrepresentations made to the respondent company.
The Court only had to consider the first of four grounds – the Judge applied the wrong legal test in determining that Mr Winter was vicariously liable for the deceit of Mr Ramsden, and should have applied the test that a principal is only liable for the fraudulent misrepresentations of his or her agent where those misrepresentations were made within the scope of the agent’s actual or apparent authority – because they found in the appellant’s favour and remitted for re-hearing and determination the issue of Mr Winter’s vicarious liability on the grounds of Mr Ramsden’s ostensible authority.
“36. Lloyd v Grace, Smith & Co  AC 716 concerned the liability of the defendant firm of solicitors for the conveyancing fraud of their managing clerk, who conducted the conveyancing business of the firm without supervision. One of the issues was whether it was a defence that the fraud was committed, not for the benefit of the firm, but for the benefit of the managing clerk. The firm contended that Barwick v English Joint Stock Bank (1867) LR 2 EX 259 was authority for the proposition that a principal was not liable for the fraud of his agent unless the fraud was committed for the benefit of the principal.
Armagas Ltd v Mundogas Ltd  AC 717 “is binding authority of the House of Lords that, where a claimant has suffered loss in reliance on the deceit of an agent, the principal is vicariously liable if, but only if, the deceitful conduct of the agent was within his or her actual or ostensible authority” (paragraph 48).
This issue was recently considered by the Court of Appeal in Terry v BCS Corporate Acceptances Ltd & Ors  EWCA Civ 2422, where the defendant failed in his appeal, having unsuccessfully applied to strike out the claimant’s claims post default judgment.
The primary means of doing so was by bringing a fresh action seeking the equitable relief of setting aside the judgment – paragraph 26; see Flower v Lloyd  6 Ch D 297; Hip Foong Hong v H Neotia & Company  AC 888.
In order to succeed in setting aside the judgment it will be necessary not only to prove the alleged fraud but also that it involved “conscious and deliberate dishonesty” and that it was “material” to the decision reached – paragraph 35; Royal Bank of Scotland Plc v Highland Financial Partners LP & Others  EWCA Civ 328 at .
There might be special reasons for departing from this “established practice” in certain cases, but, if so, “the necessity for stating the particulars of the fraud and the burden of proof are no whit abated and all the strict rules of evidence apply”: paragraphs 27, 29; Jonesco v Beard  AC 298 at .
The other established means of challenging a judgment obtained by fraud is by appealing and seeking to adduce fresh evidence in accordance with the conditions laid down in Ladd v Marshall  1 WLR 1489, that is the evidence (1) could not have been obtained with reasonable diligence for use at the trial; (2) is such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) is apparently credible, though it need not be incontrovertible – paragraph 31.
It will also be necessary to establish that the evidence which is relied upon to establish the fraud could not with reasonable diligence have been obtained for the trial (the “reasonable diligence condition”) – paragraph 39; Takhar v Gracefield Developments Ltd  EWCA Civ 147,  Ch 1. It is to be noted, however, that an appeal against this decision has recently been heard in the Supreme Court.
The wrong procedure was therefore followed by the defendant and the court had no jurisdiction to strike out a claim post-judgment.
75. In summary, the circumstances in which CPR 3.1(7) can be relied upon to vary or revoke an interim order are limited. Normally, it will require a material change of circumstances since the order was made, or the facts on which the original decision was made being misstated. General considerations such as these will not, however, justify varying or revoking a final order. The circumstances in which that will be done are likely to be very rare given the importance of finality. An example is provided by cases involving possession orders made when the defendant did not attend the hearing where CPR 39.3 may be relied upon by analogy – see Hackney London Borough Council v Findlay  EWCA Civ 8,  HLR 15. Another example is the use of powers akin to CPR 3.1(7) to vary or revoke financial orders made in family proceedings in relation to which there is a duty of full and frank disclosure and the court retains jurisdiction – see, for example, Sharland v Sharland  UKSC 60,  AC 871 and Gohil v Gohil (No 2)  UKSC 61,  AC 849.
The CIPFA “Fraud and corruption tracker” summary report, based on responses from 144 local authorities, estimates that approximately 80,000 frauds have been detected by local authorities in 2017/18 with a value of £302 million.
1. Public sector organisations need to remain vigilant and determined in identifying and preventing fraud in their procurement processes. Our survey showed this to be one of the prime risk areas and practitioners believe this fraud to be widely underreported.
2. Effective practices on detecting and preventing adult social care fraud should be shared and adopted across the sector. Data matching is being used by some authorities with positive results.
3. All organisations should ensure that they have a strong counter-fraud leadership at the heart of the senior decision-making teams. Fraud teams and practitioners should be supported in presenting business cases to resource their work effectively.
4. Public sector organisations should continue to maximise opportunities to share data and to explore innovative use of data, including sharing with law enforcement.
5. The importance of the work of the fraud team should be built into both internal and external communication plans. Councils can improve their budget position and reputations by having a zero- tolerance approach.
“…the number of serious and organised crimes detected and prevented by councils has doubled this year to 56, highlighting the seriousness of the issues faced – and the effectiveness of councils’ efforts. Overall, 636 prosecutions were completed in 2017-18, up from 614 the previous year.
However, these successes were owing not to increased resources but increased capability and collaboration. The number of in-house qualified financial investigators appears to have dipped slightly, but shared services structures have risen from 9% to 14% of authorities. Fraud is a crime that crosses organisational and geographic boundaries. By collaborating, sharing data and jointly investing in new technologies, councils can improve resilience and cost-effectiveness.
The London Counter Fraud Hub, a data-sharing and analytics solution led by Ealing Council and London Councils and run by CIPFA and other partners, is an example. About to go live, it forms a part of CIPFA’s enhanced counter fraud services, which seek to drive a collective change in councils’ approach to fraud.
The right of private prosecution is expressly preserved by section 6 of the Prosecution of Offences Act 1985.
1. Her refusal to dismiss summonses for offences of fraud between 2007 and 2012, which had been issued against the Claimants on the basis of an information laid at the behest of the Interested Party.
2. Her refusal to stay proceedings as an abuse of process, having decided that this issue should be determined in the Crown Court.
“38. As this case demonstrates, the grant of summonses, typically conducted ex parte, can have far reaching consequences. Compliance with the duty of candour is the foundation stone upon which such decisions are taken. In my view, its importance cannot be overstated.
39, The DJ undoubtedly had the power to deal with the breach of the duty of candour in this case by quashing the summonses. Logically, that was the first issue that she should have engaged with, but she failed to engage with it at all.
“21. In our view there is no merit in either the Interested Party’s principal or alternative submissions under this heading. He was the driving force in obtaining the summonses in significant breach of his duty of candour, and in persuading the District Judge to act as she did (whilst still failing to disclose the content of the Polish Regional Prosecutor’s second written justification). In all the circumstances we conclude that it is not appropriate to make an order for costs out of central funds in relation to the proceedings in the Magistrates’ Court or in this Court, nor to order that the Interested Party should only be liable for a portion of the costs. Put bluntly, these submissions are misconceived….
28. The Claimants underline that, for Orders on an indemnity basis, proportionality is irrelevant. They submit that Mr Kay is a man of 71 of impeccable good character who, when faced with serious charges of fraud, was entitled to instruct lawyers with the necessary skill and experience to deal with such a case, and that the amount of work that was carried out by his lawyers was entirely reasonable – including proper delegation with the majority of his solicitors’ work being done at associate rather than partner level. The Claimants draw attention to R (Haigh) v City of Westminster Magistrates’ Court  EWHC 232 in which the Court made an Order for costs of £190,000 against a private prosecutor for the Magistrates’ court proceedings alone (albeit that two sets of defence lawyers were involved). The Claimants went on to rebut each of Interested Party’s submissions in relation to particular items of expenditure.
This case not only serves as a warning to would-be prosecutors that their duty of candour must be taken seriously but also, in the substantive judgment, provides a helpful update on the procedure applicable to bringing such a prosecution.

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