Modern Slavery Act 2015: Under Review
In 2016 the Association of British Insurers (ABI) reported that insurers detected 125,000 dishonest insurance claims valued at £1.3 billion. It is further estimated that a similar amount goes undetected each year. This significant threat to the industry demands effective action to be taken. However, massive cuts to police and Crown Prosecution Service (CPS) funding means that the traditional enforcement agencies have increasingly less resources to commit to the investigation and prosecution of insurance fraud. Against that backdrop the use of private prosecutions by insurers is on the rise.
In this article I explain what a private prosecution involves, how to mitigate the risks associated with them and consider why insurers should use private prosecutions as a weapon to tackle fraud.
What is a private prosecution?
The concept of a private prosecution may not be familiar to all. It is a criminal prosecution brought by someone other than the traditional enforcement agencies. In England and Wales, section 6(1) of the Prosecution of Offences Act 1985 (POA) permits any natural person or company to commence a prosecution in the criminal courts for any offence, unless the offence is one which requires the consent of the Attorney General or Director of Public Prosecutions (DPP).
The first step in conducting a private prosecution is to review the available information to ascertain whether there is sufficient evidence and, if so, whether it would be in the public interest to prosecute. If, on review, there is insufficient evidence then the assistance of an independent investigator may be required to advance the case. Once sufficient evidence has been obtained a charging decision will be made and the evidence will be prepared for the criminal proceedings. At this stage Counsel will be instructed.
A private prosecution is commenced in the same way as a public prosecution, by laying a charge sheet referred to as an ‘information’ in a Magistrates’ Court. Once the information has been laid in court the Clerk or Magistrate will check to see if it is in the correct form and if it is they will issue a warrant or summons in order to secure the attendance of the defendant at court on a future date.
There is an obligation on the prosecution to disclose its evidence in advance of trial. This is evidence which it intends to rely upon to prove its case and discharge its evidential burden at the trial of the defendant. From the start of criminal proceedings, as well as considering what evidence should be served on the defendant, the prosecutor should consider what (if any) immediate disclosure should be made in the interests of justice and fairness in the particular circumstances of the case.
The Criminal Procedure and Investigations Act 1996 as amended by Part V of the Criminal Justice Act 2003 (‘CPIA’) sets out the test for disclosure in criminal proceedings, namely that the prosecutor must disclose to the defence any prosecution material which has not previously been disclosed and which might reasonably be considered capable of undermining the case for the prosecution against the accused or assisting the case for the accused.
Once the prosecution is underway it is to all intents and purposes identical to a state-run prosecution. At the conclusion of the trial, if the defendant is convicted, the prosecutor may seek financial recovery of their loss through the route of the Proceeds of Crime Act 2002 (POCA) confiscation regime. In R v Somaia  EWCA Crim 2267 the Criminal Division of the Court of Appeal approved the use of POCA by private prosecutors.
Unlike a public prosecution a private prosecution is funded by the party bringing the prosecution rather than the taxpayer. Accordingly the private prosecutor needs to have sufficient funds available to conduct the case from beginning to end. Providing the prosecution is in respect of an indictable offence, which will be the case for all offences under the Fraud Act 2006, the private prosecutor is entitled to seek recovery of their legal costs from central funds pursuant to section 17(I) of POA, regardless of whether the defendant is convicted or acquitted. The default position is that such reasonably necessary costs should be awarded from central funds unless ‘the court considers there are circumstances that make it inappropriate for the prosecution to recover the full amount’, in which case, the amount paid from central funds must be that which the court considers ‘just and reasonable’- s.17(2A) of POA. The opportunity for the prosecutor to recover their legal costs at the conclusion of the case is undoubtedly one of the most attractive features of a private prosecution.
What are the risks?
Commencing a private prosecution it not a step to be taken lightly. Private prosecutions are costly and when they go wrong they can give rise to financial and reputational damage for all involved.
First, the DPP is always entitled to take over the conduct of a private prosecution under s 6(2) of POA. Once the DPP has taken over the proceedings then they may discontinue proceedings if they are of the view that the evidence is insufficient, there is no public interest in the prosecution or the prosecution would otherwise damage the interests of justice.
Second, proper disclosure is fundamental to ensuring fairness in criminal proceedings. A failure to ensure disclosure obligations are discharged may have the following serious consequences:
Third, a costs award can be made against the private prosecutor under s19(1) of POA where the court is satisfied the defendant has incurred costs as a result of an “unnecessary or improper act or omission” by the prosecutor.
These risks to the putative prosecutor can be mitigated by seeking advice from lawyers with expertise in the field at the earliest opportunity.
What does this mean for insurers?
A private prosecution avails a corporate body of a number of benefits. The corporate will have greater control over the proceedings than they would in a state-run prosecution and criminal proceedings will normally be completed within a shorter timeframe than civil proceedings. Furthermore, by taking action this will help to protect the corporate brand and have the deterrent effect of pursuing criminal wrongdoing.
Thomas Cook Group (TCG) are one business who are already seeing the benefits of using private prosecutions to tackle insurance fraud. TCG forewarn that fraudulent illness claims will not be tolerated and they will take action when it is identified. In October 2017, TCG brought a private prosecution against Deborah Britton and Paul Roberts for falsely seeking compensation for all-inclusive holiday sickness. They were sentenced to nine and 15 months imprisonment respectively.
When the state agencies refuse to act then private prosecutions are an effective weapon in the enforcement arsenal to hold fraudsters to account. In my view, it is only a matter of time before more insurers start using private prosecutions to tackle fraudsters.
A version of this blog first appeared as an article on the No Office Walls platform for counter fraud professionals in the insurance industry in July 2018.
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