Beware: Fraud is on the Rise

Members of the public remain a prime target for fraudsters, with the total value of claims involving individuals in 2021 being around £116m.  However, businesses are also lucrative targets for those intent on committing fraud.   Businesses face the risk of fraud from a number of sources including unknown third parties, employees and other associates.  This is demonstrated by the recent case of MAD Atelier International B.V. v Axel Manes 2021, which is summarised below.

Background
MAD Atelier International BV (“MAD Atelier”) is an international restaurant operator.  Mr Manes, one of the youngest chefs to obtain a Michelin star, is a renowned French chef and was the executive chef at L’Atelier de Joel Robuchon in Paris (“the Paris Restaurant”).

In 2015, MAD Atelier and Mr Manes entered a joint venture to develop an international chain of franchised restaurants under the “L’Atelier de Joel Robuchon” name. As a part of the joint venture, ownership of the Paris Restaurant was transferred from Mr Manes to MAD Atelier for the sum of €7.5m.  On 3 August 2016 Mr Manes met with one of MAD Atelier’s directors, Mr Padberg and, on MAD Atelier’s case, Mr Padberg was tricked into signing documents which had the effect of transferring ownership of the French Restaurant back to Mr Manes which he fraudulently re-acquired for approximately €3m. The joint venture between the parties was ultimately terminated.

MAD Atelier claimed damages for fraud, breaches of the joint venture agreement and loss of profits due to the early termination of the joint venture agreement.  Mr Manes sought to argue that MAD Atelier willingly transferred ownership of the Paris Restaurant back to him due to the fact that he was unhappy with the way in which the joint venture was progressing.

Decision
The Judge held that Mr Manes had deliberately deceived Mr Padberg into signing documents which transferred ownership of the French Restaurant back to him.  Those documents had been deliberately concealed in a large bundle of documents, most of which were company accounts in French.  Mr Manes was aware that Mr Padberg was expecting to sign off, on each page, the lengthy company accounts and he was also aware that Mr Padberg would have difficulty in understanding the documents he was being asked to sign given that they were in French.

The Judge awarded MAD Atelier damages in excess of £11m as a result of Mr Manes actions.

Conclusion
KPMG predicts that fraud cases will continue to increase, and their statistics also show that there is expected to be a considerable increase of cases arising from “insider threats”, like was the case in the MAD Atelier case, and as a result of weaknesses in internal controls and procedures being exploited because of remote / hybrid working.  Our previous update set out key areas to consider in order to try and limit the risk of your business being a victim of fraud.

Our Disputes team are highly experienced in dealing with fraud claims. If you believe that your business may have been a victim of fraud, please get in touch.