Your Toolkit For Defending A Civil Fraud Claim

If you are facing a claim for civil fraud, here is some good news. These types of claims are extremely hard to prove.

Commercial fraud is a complex area of law, and civil claims are often brought because the chances of a criminal prosecution are minimal. However, civil fraud claims must be taken seriously.

The Claimant's legal advisors will have explored other, easier-to-plead claims such as breach of contract, negligence, or an action under the Misrepresentation Act 1967. They know that making allegations of fraud or dishonesty without strong evidence may result in the allegations being struck out and wasted costs orders being made against them. So, you can be assured the Claimant has done their homework and they believe their claim has merit.

What is commercial fraud?

Commercial fraud is not an action in itself. The term encompasses many causes of action, such as:

Forgery
False accounting
False representation
Cryptocurrency fraud
Mortgage fraud
Online fraud
Insurance fraud
Banking fraud

What does the Claimant have to prove to establish a civil fraud claim?

To prove fraud, the Claimant must show, on the balance of probabilities, that:

The Defendant made a false representation; and

Knew the representation was false; or
Had no belief in the truth of the representation; or
Was reckless as to whether the representation was true or false; and

The Defendant intended for the Claimant to rely on the representation; and
The Claimant did rely on the representation; and
The Claimant suffered loss and/or damage as a consequence on that reliance.

Will a Freezing Order be applied if a claim for civil fraud is brought against me?

There is a high chance that the Claimant's legal team will apply for a Freezing Order to prevent you from dissipating property or assets which may be subject to the claim.

Most Freezing Orders are made without notice (ex parte), so you will not know the injunction has been granted until you try to deal with your assets or withdraw funds from your bank account and find you cannot.

Should this happen, you must contact an experienced Civil Fraud Solicitor immediately.

What is an Anton Pillar order?

Freezing Orders are not the only intrusive injunction the Claimant may apply for. Searching Orders, also known as Anton Pillar Orders, are a form of civil search warrants. A Search Order allows the Claimant's legal team to enter and search your premises and seize any relevant materials and documents. An Anton Piller Order's purpose is to preserve evidence that may be in danger of destruction or concealment.

How is a civil fraud case defended?

After examining the Claimant's disclosure documents and case particulars, your Civil Fraud Solicitor will advise you on the strength of the Claimant's case.

Case law has shown that the Courts will strike out a civil fraud case where the allegations of fraud and dishonesty have not been sufficiently particularised. Your Solicitor will meticulously examine the facts, matters, and circumstances relied upon to show that you were dishonest (and not merely negligent).

If none of the facts "…tilts the balance and justifies an inference of dishonesty" (Three Rivers District Council [2001] UKHL 16, Lord Millett), your legal team will apply for the case to be stuck out.

If the case proceeds to trial, the Claimant must prove you actually knew, or were reckless as to knowing, that a false representation was made. This has been made easier due to our reliance on electronic communication. In the case of Digicel v Cable and Wireless [2008] EWHC Ch 2522, Morgan J stated:

"It is well known that people say things in e-mails which [they] would not dream of putting into a letter or a minute or a formal note. Further, in litigation involving allegations of conspiracy or similar allegations, it may only take one revealing statement in a document, perhaps in an e-mail, to show clearly what people really thought or what people were really intending to achieve, a matter that might not have been revealed in many tens of thousands of other documents in the trial bundle."

If you know of any electronic communication that may indicate you were dishonest or reckless as to whether dishonesty occurred, you must inform your Civil Fraud Solicitor immediately so they can build a strategy to defend against such evidence.

Are cultural differences a defence in civil fraud claims?

Complex fraud claims often involve cross-border issues; therefore, cultural differences and misunderstandings can arise in the proceedings.

In Lakatamia v Su [2021] EWHC 1907 (Comm), the Court was asked to consider the cultural differences between Taiwan and the UK. Mr Justice Bryan concluded:

"Madam Su's submission about not applying the standards of a substantial UK company to a Taiwanese company (whatever that in fact is intended to mean) also has to be approached with some caution. Any such cultural differences would not explain, still less justify, any conduct that would amount to tortious or civil wrongdoing, whether under English or Monaco law, or a lax or inappropriate approach to corporate structures and governance whatever the law applicable to those companies. Further, there is no evidence before me of any applicable law justifying what would otherwise be wrongdoing."

Article 17 of the Rome II Regulation may also apply to local standards of conduct. It states:

Rules of safety and conduct

In assessing the conduct of the person claimed to be liable, account shall be taken, as a matter of fact and in so far as is appropriate, of the rules of safety and conduct which were in force at the place and time of the event giving rise to the liability.

However, the Courts have made clear that cultural differences may not be used to justify wrongdoing under the applicable law, English or otherwise, nor can they excuse actions that, while lawful, are inconsistent with English public policy.

To discuss any points raised in this article, please call +44 (0) 203972 8469 or email us at [email protected].