Convicted director personally liable for deceit in respect of fraudulent invoices relating to energy project

The director, who had committed fraud in the UK in respect of funding provided by the Department of Energy & Climate Change and had been imprisoned and made subject to a confiscation order of in excess of £1 Million following criminal proceedings, also fraudulently inflated invoices from third party suppliers which a foreign government body had agreed to fund at a rate of 75%. Following the discovery of the criminal conviction an investigation revealed that the company, through its sole director, had fraudulently inflated invoices from third party suppliers who had assisted on the energy project thereby creating a surplus of funds that the company received from the foreign government body and to which it was obviously not entitled to have received.

The criminal proceedings in the UK found that the director had personally benefitted from in excess of £2 Million in respect of both sources of government funding and that funds received by the Company had been transferred to the director’s personal bank account and moved abroad. The UK confiscation order subsequently resulted in repayment by the director of in excess of £1 Million to the Department of Energy & Climate Change. No payment was made to the foreign government body as whilst the fraud committed against it had been accounted for in the UK criminal convictions, it had not been included as a beneficiary of the confiscation order.

Following the provision of pre-litigation advice, Phil and his team were instructed to issue civil court proceedings, before limitation expired, against the company and the director personally. The amount claimed was in excess of £400,000 plus interest and costs.

The Director admitted fraud but disputed the claim on the basis that:

1. That the amount claimed was incorrect as it did not account for the sums that had been paid to the third-party suppliers for their services;
2. That he and his company did not have any assets with which to meet the claim;
3. that the £2 Million he had been found to have benefitted from included the amount of the fraud committed against both the Department of Energy & Climate Change and the foreign government body; and
4. therefore, whilst the confiscation order originally set at just in excess of the £1 Million worth of assets that had been identified as available and which had been ordered to be paid as compensation to the Department of Energy & Climate Change only, could if he later came into money/assets (using the example of a lottery win), be increased to cover the remaining £1M balance that he was said to have fraudulently benefitted from; and
5. that judgment in favour of the foreign government body would, therefore, result in him potentially paying twice.

The Judge dismissed all of the above and granted summary judgment inclusive of interest in the sum of £452,340.52 plus legal costs and disbursements as claimed in the sum of £29,610.40 on the basis that:

1. the terms of the funding agreement provided for the fraudulent invoices to be rejected in their entirety notwithstanding that the third-party suppliers may have been paid what they were actually entitled to receive from the funds paid to the company by the foreign government body;
2. a suggestion of a lack of assets to meet a claim was not a valid defence;
3. that whilst the UK criminal proceedings found the director had benefitted from the fraud of in excess of £2 Million, the terms of the confiscation order and subsequent correspondence from the CPS confirmed that the foreign government body’s funding had not been taken into account when making the £1 Million confiscation order and which had been ordered to be paid to the Department of Energy & Climate Change for its benefit only;
4. If the CPS was to pursue a new confiscation order at a later date, then the director would have a valid defence that the new confiscation order could and should be adjusted to account for the value of the judgment in this claim;
5. It would be unfair on the foreign government body to not award damages as the principle of no double recovery had not and could not be infringed.