Product Code Database
In English law, a secret profit is a profit made by an employee who uses his employer's premises and business facilities in order to engage in unauthorised trade on his own behalf. A common example is a bar management who purchases beer from a brewery 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) 1986 QB 491, CALaw 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. R v Rashid (1977) 64 Cr App Rep 201, CA Such offences were predicated on the presumption that a customer would not purchase illicit goods were he aware of their true provenance. R v Doukas 1978 1 All ER 1061, CA The offence of obtaining property by deception has since been and is now replaced by the offence of fraud by false representation.Law Commission (2002)
The employee is a constructive trustee of the profit for the employer and the employer has Ownership in the profit. Hence, it is theft from the employer and the profit is not merely a civil debt owed by the employee to the employer, according to the case of FHR European Ventures LLP v Cedar Capital Partners LLC 2014 UKSC 45. Where more than one person is involved there could be a conspiracy to defraud R v Cooke 1986 1 AC 909 and, since the coming into force of the Fraud Act 2006, the employee could be guilty of fraud by abuse of position.Fraud Act 2006, s.4
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