In
English law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, b ...
, 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 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 ...
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 o ...
's premises and business facilities in order to engage in unauthorised trade on his own behalf. A common example is a
bar
Bar or BAR may refer to:
Food and drink
* Bar (establishment), selling alcoholic beverages
* Candy bar
* Chocolate bar
Science and technology
* Bar (river morphology), a deposit of sediment
* Bar (tropical cyclone), a layer of cloud
* Bar ( ...
manager
Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business.
Management includes the activitie ...
who purchases
beer
Beer is one of the oldest and the most widely consumed type of alcoholic drink in the world, and the third most popular drink overall after water and tea. It is produced by the brewing and fermentation of starches, mainly derived from ce ...
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 bee ...
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, 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
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 due to unjust enr ...
ee of the profit for the employer and the employer has
proprietary interest in the profit. Hence, it is
theft
Theft 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 shorthand term for som ...
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 or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...
owed by the employee to the employer,
according to the case of
FHR European Ventures LLP v Cedar Capital Partners LLC
is a landmark decision of the United Kingdom Supreme Court which holds that a bribe or secret commission accepted by an agent is held on trust for his principal. In so ruling, the Court partially overruled ''Sinclair Investments (UK) Ltd v Versai ...
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 employee could be guilty of
fraud by abuse of position
In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensa ...
.
[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 (2002)
Fraud
', (Law Com No 276)
*Martin, J. E. (1987) "Constructive trusts of the beer money", ''Conveyancer and Property Lawyer'', 209-211
Criminal law
Fraud
Equity (law)
Common law
English legal terminology