Fraud & MisrepresentationIssues of fraud and misrepresentation come across in other areas of law but it is also helpful to think of some the remedies and consequences that result specifically if fraud or misrepresentation are established. Fraud and both negligent misrepresentation and fraudulent misrepresentation are also independent things that you can sue for. The major consequence is that if you obtain a judgment in either fraud, or fraudulent misrepresentation, any judgment that you obtain cannot typically be discharged by the Defendant through bankruptcy.
Fraud and fraudulent misrepresentation also have special discovery rules that apply to them which may allow fairly dates claims to be litigated even though at first glance the limitation period appears to have expired. Another important aspect of these cases is the scope of damages. While generally the law aims to make you whole, fraud and misrepresentation cases open up the possibility of punitive and exemplary damages which have as their purpose deterrence and punishment. There is the very real possibility that if you are successful your award will exceed your actual damages.
Generally both fraud and misrepresentation require that the Defendant make a false statement, that the Defendant know that the statement was false or was reckless as to its veracity, and the Plaintiff relied upon the false statement and had actual losses. Because of the severe consequences to a Defendant, these cases are often hard fought with no stone being left unturned.
Cases of fraud and misrepresentation require thorough documentary evidence to prove that a false statement was made, that you relied upon it, and that actual loss resulted from that reliance. If the statement is oral proof of the statement may still be done through your testimony, or corroborated by other witnesses or actions undertaken by yourself. If it is written, that makes that element easier to prove and backups should be done to prevent the destruction or spoliation of that evidence.
Evidence of reliance on a statement can be as simple as showing unusual financial transactions, or that steps were done completely consistent with reliance on the false statement. For instance, if a rogue offers you an investment into a Ponzi scheme, the fact that you withdrew money and paid it to the rogue may be sufficient to show reliance – but the rogue may still argue that you didn’t rely on the part of the investment pitch that was actually false.
Fraud and misrepresentation cases also pose additional risk of obtaining a hollow judgment, or one that is particularly difficult to enforce. Fraudsters may conceal assets, disperse them to family members or nominees, falsely claim bankruptcy, or even simply flee the country. Although it is theoretically possible for a lay person to apply for a freezing order, also called a Mareva injunction, it is not an easy task even for lawyers. Similarly, an extraordinary remedy called an Anton Piller Order, equivalent to a civil search warrant can be obtained to seize critical information that would the Defendant may make extraordinary efforts to hide. This can even include the plans of a fraudulent scheme.
Financial losses are not usually difficult to prove but should still be documented, particularly if the transaction occurs entirely in cash that was not recently taken out of a bank account.
Proceedings against fraudsters are usually recommended to be commenced quickly as there are often multiple victims and early engagement allows for early recovery and the highest prospect of recovering all of your money.
Our fraud lawyers act as counsel for Plaintiffs asserting fraud and misrepresentation, as well as for Defendants facing these difficult cases. Our involvement usually commences when a Plaintiff has discovered that they are not getting their money back, and for a Defendant when they have ever received a Notice of Civil Claim, a Certificate of Pending Litigation, or an ex parte Order, including a Mareva order and an Anton Piller order.
We handle cases from investigation through to trial and beyond, which may include having to engage lawyers in other Provinces or jurisdictions to perform enforcement of judgment. Post-judgment remedies, including bankruptcies, garnishment, tracing, sale of property, and proceedings for a fraudulent conveyance or fraudulent preference. Other aspects of a case involve proceedings for contempt which arise far more often in fraud cases than any others.
Unlike most business and commercial cases, if there was a pre-existing relationship there is usually no appetite to revive or keep that relationship going. As a result, mediation and arbitration are not usually as effective of tools as simply going through the trial process on an expedited basis.
We also assist defrauded or injured parties by obtaining pre-judgment security for their loss by way of a Certificate of Pending Litigation, a Mareva Order, or pre-judgment garnishment.
Some aspects of a fraud or misrepresentation case require the involvement of a neutral third party lawyer, usually to act as an independent supervising solicitor for Anton Piller orders, or civil search warrants, or if there are other issues of privilege. We do not currently take on appointments to act as the independent lawyers to a civil search warrant and prefer to be involved directly in the litigation acting on behalf of either party.
The initial steps of a fraud or misrepresentation file are usually quick and extensive on both sides of the file. When we act for Plaintiffs we must take quick steps to prevent further asset dissipation through either a Certificate of Pending Litigation, pre-judgment garnishment, or a Mareva injunction. Claims can be filed in usually under a week at which point an ex parte application may be brought at the same time. Usually ex parte applications will have a returnable date at which point the application will be heard fresh with a full opportunity for the Defendant to provide their evidence. It is not uncommon for fraud and misrepresentation files to be extremely urgent and require us to drop all other non-essential work, and to burn the midnight oil.
Similarly, for Defendants that are subject to an ex parte process, we work to ensure that you stay on the right side of the law while we develop a defence strategy that minimizes your exposure and allows you to keep your normal business operations and pay for the costs of living (and for your legal fees). If appropriate to do so, we will act quickly to either appeal, or set aside ex parte injunctions granted against you. We will also explore all defences available to you, which may include the defence of ex turpi causa non oritur action – which prevents a Plaintiff who was engaged with a Defendant in an illegal scheme from suing if the illegal scheme went off the rails.
Fraud cases can sometimes be resolved relatively quickly, particularly if early efforts to catch the impugned funds or assets were successful. If the Defendant is insolvent and unable to pay back the liquidated damages, then fraud cases usually evolve to complex matters which require detailed financial records, tracing where money went, and seeking to have the money revert back to the Defendant through declarations that people hold money or other assets in a resulting construct, as bare nominees, or setting aside any transaction with a friend or family member under the Fraudulent Preference Act or Fraudulent Preference Act.
If your case cannot be resolved quickly then extensive discoveries are usually involved, which may extend beyond the parties and require interviews of third party witness and records from other persons, such as banks. Because fraud and misrepresentation cases are so hotly contested, often applications are required to obtain records from both the Defendant and all third parties, and many applications are strongly contested.
Trial dates can be set relatively quickly for fraud matters in order to keep the pressure on and to secure earlier dates. The choice of courthouse at which a claim is filed will have an impact as to how quickly you can get a trial date. We will also have a discussion regardless of which side of the file we are acting on as to whether it would be appropriate to have a jury trial or not.
If money or assets have escaped the jurisdiction then we will work with counsel in other jurisdictions to try and catch it there. To a certain extent it can seem like a game of cat and mouse, and to a certain extent it is. The remedy however is usually an award of punitive damages, which may be on the same order of magnitude as the financial losses, and an order for special costs. If the Defendant continues to frustrate the court process there may also be the opportunity, or need, to pursue contempt of court.
When we do fraud and misrepresentation cases for Plaintiffs we often charge a flat fee for preliminary and urgent work, such as the drafting of Notice of Civil Claim, filing, and obtaining injunctive relief, including Mareva injunctions, and due diligence as to the Defendant’s assets. After the preliminary work is done, and we can see the response of the Defendant we will have a hint as to the difficulty and complexity of the case. At that point we may offer to continue working on an hourly rate, a contingency rate, or a mix of both a reduced hourly rate and a reduced contingency rate.
When we act for Defendants, we charge an hourly rate for all work but may give estimates for certain steps, such as applying to set aside an ex parte order, opposing a summary trial, or proceeding through discoveries. Defendants do not have the option to have us work on a contingency basis, and a retainer will always be required.
The overwhelming majority of fraud and misrepresentation cases occur in Supreme Court. If successful a Plaintiff can usually obtain an award of special costs which should cover 75% or more of your actual legal fees. However, a Defendant that is able to show the allegations of fraud were vexatious, scandalous, or unfounded then you may be able to recover special costs against the Plaintiff.
Contact us either at (604) 259-6200 or using the form below for assistance with Fraud and Misrepresentation
The foregoing provides legal information and does not constitute legal advice. As an analogy, legal information are equivalent to learning the rules of chess, and legal advice is the tactics and strategy that goes into winning a game. Lawyers are trained to give valuable advice that is specific to you after learning about the details of your case. Readers are cautioned that they will rarely achieve the best outcome for their case without actual advice. A consultation is often the best next step to take.