Fraud cases on the rise in England and Wales, study finds

Claims involving fraud generally up since 2014 but proportion of non-UK claimants has dipped in recent years, according to new report by litigation boutique Stewarts and analytics platform Solomonic
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The number of claims issued and judgments given involving fraud has generally increased in recent years, though there has been a plateau in judgments since 2019 according to a new report by litigation boutique Stewarts and analytics platform Solomonic. 

The report – Analysing trends: data from commercial fraud cases in England and Wales – found an upward trend in the number of fraud claims since 2014, both as standalone figures and proportionally in the context of other types of claims. 

It noted this would most obviously indicate an increase in fraudulent behaviour but that other factors could be at play, including heightened awareness of and willingness to plead fraud causes of action.

“The data shows that fraud is a constant feature of commercial litigation in the English courts,” said Alex Jay, head of insolvency and asset recovery at Stewarts. Cases involving those issues had hovered at around 2-3% of claims issued since 2019 and 5-11% of judgments given since 2014. 

“That is in and of itself significant,” Jay added. “It is reflective of the experience the English courts have of dealing with these types of issues, the remedies available under English law and procedures and, more fundamentally, the inevitable darker hinterland of commercial dealing in the UK in the context of the economic pressures of the last decade.”

The report also found that there had been a plateau in judgments since 2019 and a notable (26%) reduction in fraud claims in 2022, over and above the wider reduction in all claims issued and judgments given in that period.

It added that it was too early to tell if that was a wider trend or the extent to which Brexit was having an impact, particularly given that the figures showed a relatively high degree of year-on-year fluctuation. 

“Indeed, we would expect the current economic climate to produce more claims in this area, potentially in combination with claims arising from the distribution of funds to support businesses through Covid-19,” Jay said. “What is clear is that commercial fraud will remain a significant part of the work of the English courts.”

The report supports a growing perception that consumer fraud is approaching endemic levels in the United Kingdom, damaging its reputation as a business centre as well as the commercial stability of affected businesses. 

In terms of sector, banking and finance fraud claims had predominated since 2019, though the report noted that real estate disputes spiked last year, as did those involving the technology, media and telecoms sectors. It also highlighted a significant increase in cryptoasset disputes since 2019 that coincided with its emergence into the mainstream, turmoil in the crypto industry and a general uptick in online fraud during the Covid-19 pandemic. 

Stewarts partner Marc Jones noted in the report that English courts have been at the forefront of efforts to develop the law rapidly to enable victims of crime to bring actions for the recovery of cryptoassets, and were amongst the first to recognise that cryptoassets can be legal property.

They have taken a “flexible and innovative approach” to issues such as jurisdiction and governing law to ensure claims can be heard before the English courts, Jones said, with the result that English courts have granted a number of proprietary injunctions over cryptoassets, including worldwide freezing orders relating to cryptoasset frauds. Court procedure has also been amended specifically to make it easier to serve defendants in these kinds of cases outside the jurisdiction, and service has recently been permitted via NFT.

“These developments are no accident but reflect a recognition within the judiciary, from the top down, of the importance of this developing area,” Jones said. “It is fair to say that, when it comes to cryptoassets, the English judiciary ‘get it’. The English High Court is without a shadow of a doubt one of the best venues – I would say the best – in the world for claimants to bring crypto-related fraud claims.”

In terms of international reach, the report found that England and Wales was clearly a popular forum for international litigants to commence fraud claims, due to factors including the governing law of the relevant contract, the location of assets, the domicile of the defendant and remedies offered by the English courts. 

However, a sample study of claim forms found the proportion of non-UK claimants dropped from 57% in 2020 to just 11% in 2021, before rising to 19% the next year. The report noted it was too early to determine if this was part of a wider trend and if issues such as Brexit had had an effect, though it described the drop in EU claimants as “striking”. 

“That said, the international appeal of the English courts remains clear,” added Stewarts partner Pia Mathani. “Notably, the Commercial Court’s own data indicates that the proportion of what it classes as international cases remained high in 2022 (69%), notwithstanding a slight drop from 2021 (74%).”

Both the Commercial Court and the Business List were the two clear courts of choice for general fraud disputes, with the Commercial Court’s dominance reflecting the complexity of the fraud claims being issued.

Luke Harrison, a commercial litigation partner at Keidan Harrison and co-chair of London International Disputes Week (LIDW), said it was unsurprising that civil fraud cases made up a substantial proportion of the work of the Business and Property Courts.

He explained: “[Such cases] arise in circumstances where the parties very often don’t have existing relationships governed by arbitration clauses and as such, claimants shop around for jurisdictions, such as England and Wales, where they are likely to obtain effective relief.”

One key attraction, Harrison said, was how London’s courts offered “a menu of interim relief including worldwide freezing orders and Norwich Pharmacal relief not available in many other jurisdictions.”

Such topics will likely feature at the next LIDW, which is set to take place in June 2024 and is supported by The Global Legal Post as a media partner, and will be covered in our forthcoming Law Over Borders Comparative Guide to Commercial Litigation.

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