Fraud

Fraud is where a person deceives another person in order to gain some financial or other advantage.

Fraud can be committed by the making of a false representation.  This is where a person:

• makes a false representation to another person knowing that the representation is, or might be, untrue or misleading; and
• intends, by making that representation, to make a gain or to cause a loss.

A representation is any statement made to influence opinion or action.  The representation may be express or implied, and may be oral or written (e.g. a statement in a contract claim, letter, e-mail, invoice, meeting etc.). 

The gain or loss may be financial or non-financial, and may be for the benefit of the person making the representation or for another person.

Fraud can also be committed by failing to disclose information.  This is where person A:

• fails to disclose to person B information which person A is under a duty to disclose, and
• intends, by failing to disclose the information, to make a gain or to cause a loss.

In the context of an infrastructure project, a person will normally be under a duty to fully disclose all relevant information in relation to e.g. claims for payment, variations and extensions of time. 

Examples: 

• A concrete supplier knowingly supplies a client with concrete which is of a cheaper and inferior specification than is contractually required, but invoices the client for concrete of the contractually required specification. The invoice therefore contains a false representation that the concrete supplied was of the required specification.  The fraudulent gain is the difference between the amount wrongly charged for concrete of contract quality and the amount which should have been charged for the cheaper concrete which was supplied.
• A contractor is contractually entitled to claim an extension of time and additional cost from the project owner in the case of a delay which is the project owner’s fault.  The contractor submits a claim for additional cost to the project owner based on delays allegedly caused by the project owner, but knowingly withholds evidence that the contractor was partially responsible for these delays.
• An earth-works sub-contractor accidentally invoices a client for 30% more earth moved than was actually moved. The sub-contractor discovers the mistake but does not issue a corrected invoice and accepts payment based on the incorrect invoice. Although the sub-contractor did not deliberately issue a false invoice, it subsequently, by failing to correct the invoice, knowingly represented that the invoice was correct so as to make a fraudulent financial gain.
• In order to obtain employment, an applicant for the post of contract manager states in a job application that she has previously worked as a contract manager when in fact she has never held such a position.
• In making a claim from his employer for reimbursement for business travel by car, an employee exaggerates the distance travelled so as to receive a higher payment.

Avoiding fraud: 

To be liable for fraud, you will normally need to have known that your representation was false (i.e. deliberate act), or to have known that it might be false (i.e. reckless act). You are unlikely to be liable if you make a false representation which you honestly believed to be true (i.e. innocent act). 

Therefore, never make any oral or written representation in connection with your work unless you know or honestly believe it is true. If you make a representation and are not sure whether it is true, then you should explain this as part of the representation. If you make a representation and later discover that you have made a mistake, inform the other party as soon as possible of the mistake.

You should also always fully disclose all relevant information which you are under a duty to disclose, particularly if failure to do so may mislead the other party.

If you know or suspect that an activity involves fraud, then avoid or withdraw from the activity and do not assist it in any way.