Here's another one. Say I'm a bricklayer. The QS has agreed a price but now asks me to invoice an extra £10 per 1000. Cash will do nicely, he says. I won't benefit one jot from this. Does that make it OK? Will this pass the sniff test?
One last one. Say I'm an architect and my employer insists I undercertify the sums due to the builder, make up a counterclaim and refuse extensions of time. I won't benefit here either. Does that make it OK? How is the sniff test?
Let me tell you what happened in AL Barnes vs Time Talk (UK) Ltd, a case mentioned (to do with another point) last week by James Bessey (page 56). John Colbert, a director of Time Talk who was in charge of its programme for 200 shopfitting jobs, told prospective shopfitter AL Barnes that Time Talk's contract administrator would be a firm called Craftwork. The consultant's fees were to be built into the shopfitter's account. In other words Time would pay Barnes and Barnes would pay Andrew Craft of Craftwork. Does it pass the sniff test?
In due course Barnes did a good job. But Time did an audit on the account and found its method of paying the CA was a duplication of its direct payment arrangement. In other words, Mr Craft was being paid twice. There was £87,000 involved. Time demanded this cash back. After all, it was paid to Barnes at least by mistake – or worse, as part of a conspiracy between Time director Mr Colbert, Barnes director Robert Gibson, and Mr Craft. The shopfitter wouldn't pay; it had merely done what a Time director had asked it to do. The judge sniffed and said: "I have come to the conclusion that [Time] has established a failure to ask questions, which an honest person in Mr Gibson's position would have asked." What he was getting at was Mr Gibson's behaviour when the proposal was put to him when he was angling to win the work. There was, in short, a rather nasty smell about the request to include Mr Craft's fees in the shopfitter's invoices. According to the judge, the Barnes employee should have said in reply: "That's so unusual, I've never come across it before; what's the point?" The judge concluded that the failure on Mr Gibson's part to ask the question was deliberate, and that the underlying reason was that he knew that no legitimate explanation would be produced. Mr Gibson was therefore dishonest, said the judge.
Dishonesty surrounding commercial contracts is so often regarded as par for the course. The plain fact is that if you take part in, or set up, a transaction that gives you personal gain at the expense of your employer or company or another, that is fraud. You will be personally liable to restore the loss to the party injured. You might also find yourself at the thick end of a criminal conviction. Call this entire fiddle "knowing receipt". But what of the situation like Mr Gibson of Barnes, who simply complied with an iffy request and got nothing out of it himself? This is called "knowing assistance". This facilitator fellow deliberately turned a blind eye; he was an accessory. A fraudulent and dishonest design is not confined to personal gain. It is quite sufficient if you knowingly assist in the wrongful use of another's property.
A fraudulent and dishonest design is not confined to personal gain. It is sufficient if you knowingly assist in the wrongful use of another’s property
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on firstname.lastname@example.org.