Differences between Criminal & Civil Breach of Trust

A breach of trust occurs when someone is entrusted with a certain duty, and then proceeds to breach that duty. Depending on the circumstances, a breach of trust situation in Malaysia may be dealt with in a criminal or civil court. 

The distinctions between a civil breach of trust and a criminal breach of trust lie in the elements that are required to be proven. 

Under civil law, a breach of trust occurs when a person breaches their duty which is imposed by a trust instrument (e.g. a will), by statute, or by common law. Common examples include the executor of an estate pursuant to a will, and directors in regards to the company.

On the other hand, the criminal offence of breach of trust is contained in Sections 405 to Section 409 of the Penal Code. Essentially, the elements which the prosecution will have to prove is:

• The Accused was entrusted with property or with dominion (i.e. control) over it;
• That the Accused then dishonestly misappropriated, converted, used or disposed of the property or willfully suffers any other person to do so; and
• That such acts were in violation of law or any legal contract. 

The following is a discussion on 4 main distinctions between a criminal breach of trust and a civil breach of trust:

(1) Who Initiates Legal Proceedings?

For criminal breaches of trust, all the victim is required to do is to lodge a police report. After the police investigation, the matter will then be referred to the Attorney General’s Chambers and they will make the final decision as to whether or not to initiate a criminal trial against the accused on behalf of the victim. 

However, no such government assistance will be rendered in civil proceedings. The victim will have to initiate legal proceedings, prove every element of a civil breach of trust, and bears the costs of proceedings unless the Court awards costs after the matter. 

(2) Burden & Standard of Proof 

Whether in criminal or civil proceedings, the ‘burden of proof’ (i.e. the obligation to prove the breach of trust) lies with the complainant (in criminal proceedings, this will be the ‘Prosecution’ and in civil proceedings, this will be the ‘Plaintiff).

This is the standard burden of proof for all legal proceedings and which is enshrined in Section 101 of the Evidence Act 1950:

“(1) Whoever desires any court to give judgment as to any legal right or liability, dependent on the existence of facts which he asserts, must prove that those facts exist.

(2) When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.”

It should also be highlighted that the standard of proof differs. In a Criminal breach of trust, the standard of proof is beyond reasonable doubt.

In contrast, a Plaintiff in a civil breach of trust need only show that in the balance of probabilities, the Defendant had acted in breach of trust towards the Plaintiff. Therefore, the standard of proof is higher and harder to prove in a criminal case. 

The ‘standard of proof’ (i.e. the extent of proof that is required before the Court will rule that there is a breach of trust) also differs. The Prosecution must prove all the elements of a criminal breach of trust ‘beyond reasonable doubt’.

Although there is no need to reach ‘certainty’ or ‘beyond the shadow of a doubt’, the Court should be considered that there is a ‘high degree of probability’ that the Accused committed the criminal breach of trust.

In the case of Miller v Minister of Pensions, it was held that: 

“must reach the same degree of cogency as is required in a criminal case before an accused person is found guilty. That degree is well settled. It need not reach certainty, but it must carry a high degree of probability. Proof beyond reasonable doubt does not mean proof beyond the shadow of a doubt. The law would fail to protect the community if it admitted fanciful possibilities to deflect the course of justice. If the evidence is so strong against a man as to leave only a remote possibility in his favour which can be dismissed with the sentence “of course it is possible, but not in the least probable,” the case is proved beyond reasonable doubt, but nothing short of that will suffice.”

On the other hand, a Plaintiff in a civil claim will have to prove that it is ‘more probable than not’ that the Defendant committed the breach of trust. Even if fraud is alleged in a civil suit, the standard of proof will still be on the balance of probabilities.

In the case of Sinnaiyah, it was held that: 

 “[49] With respect, we are inclined to agree with learned counsel for the plaintiff that the correct principle to apply is as explained in In re B (Children) (supra). It is this: that at law there are only two standards of proof, namely, beyond reasonable doubt for criminal cases while it is on the balance of probabilities for civil cases. As such even if fraud is the subject in a civil claim the standard of proof is on the balance of probabilities. There is no third standard. And “(N)either the seriousness of the allegation nor the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts”.

(3) The Existence of ‘Mens Rea’

In a criminal breach of trust, the prosecution will have to prove the ‘mens rea’, or the ‘guilty mind’, of the Accused. This means that the prosecution will have to show that the Accused intended to dishonestly misappropriate a property. 

However, a person can still be held liable for a civil breach of trust even if she did not intend to commit a breach of trust, for example when a trust property is lost due to the trustee’s negligence. Even if the breach of trust was done innocently, the trustee may still be held liable. 

The only exception to the above is when a third party is sued for ‘knowing receipt’ and/or ‘knowing assistance’. For example, if a money changer agent received a suspicious transaction and failed to make inquiries, there is a case of willful blindness on part of the agent that could make him liable for knowing receipt. In these circumstances, the Plaintiff in a civil action will still have to show that the third party acted dishonestly in receiving and/or assisting in the breach of trust. 

(4) Damages  

Criminal 

If the Court finds a person guilty of a criminal breach of trust, the Court may order the guilty person to recompense the victims of the offence and/or the Court for the costs of prosecution upon the application of Public Prosecutor. Although the decision on how much compensation will be awarded lies with the Court and varies from case to case, this does not preclude the victim of a criminal breach of trust from proceeding to file separate civil proceedings against the guilty person to recover damages and/or property above and beyond the sum ordered by the criminal court.  

Civil

The remedies for breach of trust in civil proceedings can be either personal or proprietary, which means you can pursue action against either the person who breached the trust, or the person with whom your trust property eventually ends up with. 

(5) Acts vs Omissions

A person can only be convicted of criminal breach of trust if she did a positive act, e.g. dishonestly causing money belonging to the beneficiaries of a trust to be transferred to herself. However, a civil breach of trust may arise from either a positive act, or an omission (i.e. a failure to do something).

A common example is when a trustee negligently invests trust money using methods specifically prohibited by a trust instrument. 

Conclusion

In conclusion, this article seeks to differentiate criminal breach of trust and civil breach of trust. The main factor in deciding whether to take an action in criminal breach of trust or civil breach of trust is by looking to whether there is any element of dishonesty in the act.

Criminal breach of trust is harder to prove in a court of law as it requires a high threshold of beyond reasonable doubt in comparison to its civil counterparts. However, it is an accessible means to everyone as criminal breach of trust is handled by the prosecutor and the Court may order compensation for the victim whereas in a civil case, the aggrieved party had to commence the action themselves in order to obtain remedies.