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Complex Civil Fraud Cases - How to Approach

Author: Nicola Sharp  3 October 2023
3 min read

Cases of complex civil fraud pose unique challenges in litigation. Fraud is by its nature covert and deceptive, which makes evidencing a claim all the more difficult, and there’s the risk that a fraudster will dissipate assets. If they do, recovery may be futile, even if a claim is successful.

Of course, fraud is a particularly aggravating accusation, and pleading fraud will ramp up the temperature of any litigation from the start. So, approaching a case of complex civil fraud requires particular considerations.

Table of Contents

Complex Civil Fraud Cases - How to Approach

Question: Is it necessary to plead fraud?

Decide on Your Cause of Action

Gather Evidence

Investigate The Assets

Seek an Injunction to Preserve the Assets

Send The Letter of Claim

Issue Proceedings

Question: Is it necessary to plead fraud?

The first question is whether it’s necessary to plead fraud at all. For example, pleading negligent misrepresentation can achieve the same measure of damages as a claim in fraudulent misrepresentation. But pleading negligent, rather than fraudulent misrepresentation avoids the escalation in acrimony between the parties.

The claimant should think carefully about the remedy they want to achieve, and if it is available via another route, then they may choose to avoid pleading fraud.

However, a pleading of fraud may be necessary for the wider litigation strategy, and to achieve the extent of damages that the claimant requires.

Decide on Your Cause of Action

‘Fraud’ is not an action in itself. It comes in many guises including:

  • Deceit.
  • Breach of contract.
  • Unlawful interference.
  • Breach of trust.
  • Knowing receipt.
  • Dishonest assistance.

We previously wrote an article to explain how to decide which civil fraud action to pursue, and it will depend upon the facts of your case.

Gather Evidence

In any litigation, gathering evidence is a crucial stage. But in a claim for complex civil fraud, there are additional complications.

First, lawyers have professional obligations in respect of pleading fraud. A claim in deceit can only properly be advanced if there is reasonably credible material to support the allegation.

Secondly, the allegation of fraud must be made clearly, unequivocally and with sufficient particularity that the defendant understands the case he/she is required to meet. In order to satisfy themselves of their professional obligations, the lawyers will need to see the evidence.

While proving a claim in civil fraud will be assessed on the balance of probabilities, in practice, the evidence will need to be relatively strong to overcome this hurdle because “the more serious the allegation, the less likely it is that the event occurred.Re H (Minors) [1996] A.C. 563. Or in other words, it’s more likely that a defendant was negligent or incompetent than deceptive and fraudulent.

In certain circumstances, sufficient evidence can be derived from the claimant’s documents; the emails, phone records, contracts and other documentation between the parties.

But often in civil fraud cases, the evidence is covert. Where the claimant needs more information, they can seek disclosure orders from the court, which we explore below.

Investigate The Assets

Disclosure orders are often key in fraud claims because they help the claimant identify the current location of the proceeds of the fraud, and the identity of the defendant or additional defendants. They also help to establish the value of the assets against which a judgment can be enforced, helping claimants determine whether the defendant is worth the money.

Norwich Pharmacal relief is available even before the commencement of proceedings to allow a claimant to obtain sufficient information so he can come to a “careful and considered view as to what claims could be made, and where they should be launched(Shlaimoun v Mining Technologies International Inc [2011] EWHC 3278 (QB)) With an NPO, the claimant can request information from an innocent third party who has unwittingly become embroiled in the fraudulent actions of the defendant.

Bankers Trust Orders allow the claimant to trace funds or assets by requiring an innocent third party (usually banks) to provide information and documents about the location and ownership of those assets.

Seek an Injunction to Preserve the Assets

Disclosure orders are usually made in the context of, and ancillary to, freezing orders.

The courts have powers to freeze assets wherever they may be situated in the world, against defendants who may or may not be within the jurisdiction. The primary purpose of a freezing order is to stop the injuncted defendant dissipating or disposing of property which could be the subject of enforcement if the claimant goes on to win the case 

Claimants usually seek a freezing order at the outset of the claim, and without notice to the defendant. The defendant will have their chance to challenge the order at the return date, which is usually 7 days after the order is granted.

While freezing orders are most often sought before the claimant issues proceedings, it’s possible to apply for one during the course of proceedings, or even after judgment is given.

Send The Letter of Claim

Before the substantive claim can be issued, the claimant must comply with the pre-action protocol and issue a letter of claim. In complex cases of civil fraud, the defendant will have three months to respond, which is extended from the usual position of two weeks to take into account the complexity of the case. (JSC BTW Bank v Ablayzov [2013] EWCA Civ 928)

Issue Proceedings

If the claim cannot be resolved at the pre-action stage, then the claimant will issue proceedings in the relevant court. Complex cases are likely to be high value (over £100,000) and therefore issued in the High Court.

Nicola Sharp C 09983

Nicola Sharp

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nicola.sharp@rahmanravelli.co.uk
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Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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