In
English law
English law is the common law list of national legal systems, legal system of England and Wales, comprising mainly English criminal law, criminal law and Civil law (common law), civil law, each branch having its own Courts of England and Wales, ...
, a secret profit is a
profit
Profit may refer to:
Business and law
* Profit (accounting), the difference between the purchase price and the costs of bringing to market
* Profit (economics), normal profit and economic profit
* Profit (real property), a nonpossessory inter ...
made by an
employee
Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a cor ...
who uses his
employer
Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any ot ...
's premises and business facilities in order to engage in unauthorised trade on his own behalf. A common example is a
bar manager
Management (or managing) is the administration of organizations, whether businesses, nonprofit organizations, or a government bodies through business administration, nonprofit management, or the political science sub-field of public administra ...
who purchases
beer
Beer is an alcoholic beverage produced by the brewing and fermentation of starches from cereal grain—most commonly malted barley, although wheat, maize (corn), rice, and oats are also used. The grain is mashed to convert starch in the ...
from a
brewery
A brewery or brewing company is a business that makes and sells beer. The place at which beer is commercially made is either called a brewery or a beerhouse, where distinct sets of brewing equipment are called plant. The commercial brewing of b ...
in his own right and sells it in the bar in competition with, or in preference to, that of his employer. The profit made thereby is a secret profit.
['' Lister v Stubbs'' (1890) 45 Ch D 1, CA][''Attorney-General's Reference (No 1 of 1985)'' 986QB 491, CA][Law Commission (2002) 3.39-3.40, 4.40-4.45]
Where the employee deceived a customer before 15 January 2007 he could be prosecuted for
obtaining property by deception
Obtaining property by deception was formerly a statutory crime, offence in England and Wales and Northern Ireland.
England and Wales
This offence was created by section 15 of the Theft Act 1968. Sections 15(1) and (2) of that Act read:
This off ...
, the property being the customer's money and the deception that he was selling his employer's produce. Such offences were predicated on the presumption that a customer would not purchase illicit goods were he aware of their true provenance. The offence of obtaining property by deception has since been
repeal
A repeal (O.F. ''rapel'', modern ''rappel'', from ''rapeler'', ''rappeler'', revoke, ''re'' and ''appeler'', appeal) is the removal or reversal of a law. There are two basic types of repeal; a repeal with a re-enactment is used to replace the law ...
ed and is now replaced by the offence of
fraud by false representation.
[Law Commission (2002)]
The employee is a
constructive trust
In trust law, a constructive trust is an equitable remedy imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding a legal property right which they should not possess ...
ee of the profit for the employer and the employer has
proprietary interest in the profit. Hence, it is
theft
Theft (, cognate to ) is the act of taking another person's property or services without that person's permission or consent with the intent to deprive the rightful owner of it. The word ''theft'' is also used as a synonym or informal shor ...
from the employer and the profit is not merely a civil
debt
Debt is an obligation that requires one party, the debtor, to pay money Loan, borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Co ...
owed by the employee to the employer,
according to the case of
FHR European Ventures LLP v Cedar Capital Partners LLC 014UKSC 45. Where more than one person is involved there could be a
conspiracy to defraud
Conspiracy to defraud is an offence under the common law of England and Wales and Northern Ireland.
England and Wales
The standard definition of a conspiracy to defraud was provided by Lord Dilhorne in ''Scott v Metropolitan Police Commissioner' ...
and, since the coming into force of the
Fraud Act 2006
The Fraud Act 2006 (c 35) is an Act of the Parliament of the United Kingdom which affects England and Wales and Northern Ireland. It was given royal assent on 8 November 2006, and came into effect on 15 January 2007.
Purpose
The Act gives a sta ...
, the employee could be guilty of
fraud by abuse of position.
[Fraud Act 2006]
s.4
/ref>
References
{{reflist
Bibliography
*J. C. S. (1986) "Theft: whether employee received property on account of his employer", ''Criminal Law Review'', 476-379
*Law Commission
A law commission, law reform commission, or law revision commission is an independent body set up by a government to conduct law reform; that is, to consider the state of laws in a jurisdiction and make recommendations or proposals for legal chang ...
(2002)
Fraud
', (Law Com No 276)
*Martin, J. E. (1987) "Constructive trusts of the beer money", ''Conveyancer and Property Lawyer'', 209-211
Criminal law of the United Kingdom
Fraud
Equity (law)
Common law
English legal terminology