Pursuing fraud claims – the correct approach


Author: Leigh Callaway


A party claiming fraud in proceedings brought under English law must adopt an exacting standard when setting out their allegations. Claims of fraud need to be unambiguous and specific, and the relevant causes of action and relief claimed clearly identified. The party alleging fraud must also be prepared to back up their claims in evidence, whether in the form of documents or witness testimony. The court will not accept unsubstantiated allegations of fraud, and will often be particularly damning of parties who opt to pursue such a course.

The principles governing the conduct of fraud claims in the English court are set out in both the Civil Procedure Rules and precedent. The recent amendments to the Chancery Court Guide, for example, make it abundantly clear that parties pursuing fraud claims must provide “full particulars” of any allegation of fraud or dishonesty and the facts upon which such an allegation is brought, and must not make allegations of fraud or dishonesty unless there is “credible material to support the contentions made”. A failure to do so may result in the claim being struck out and wasted costs orders being made against the legal advisers responsible.

There are also a multitude of judicial decisions which provide helpful guidance to parties pursuing such allegations, most recently the judgment in Republic of Djibouti (the Republic) and Others v Mr Abdourahman Boreh (Mr Boreh) and Others.

The specifics of the allegations in this matter, and the court’s findings in respect of each of them, are set out in detail in the judgment of Flaux J here. The judgment highlights a number of practical points for both litigators and clients considering or currently pursuing claims in fraud:

Avoid “scattergun” claims

In consequence, the court considered that this “cavalier” approach of pursuing and then abandoning claims, particularly claims of dishonesty, must lead the court to subject the remaining claims to closer scrutiny.

Thirteen claims, many of which involved allegations of dishonesty, serious breaches of duty or receipt of bribes, with a quantum in excess of US$35m, were abandoned by the claimants at trial, without proper explanation. The court held that it was: “left with the distinct impression that the Republic was intent on pursuing a scattergun approach against Mr Boreh of throwing as much mud as it could in the hope that something would stick”.

The importance of contemporary documents

The events with which this litigation was concerned took place between 1998 and 2008. The court accepted and reiterated the generally held position that given the historic and wide-ranging timeframe, contemporaneous documents were the best guide to establishing the real course of events.

The court also adopted the approach of the court in The Ocean Frost [1985] 1 Lloyd’s Rep 1 in that: “[It is] essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts provided independently of their testimony, in particular by reference to the documents in the case.

Oral evidence

In circumstances where there are “gaps” in the documentary evidence, and/or where a case is ultimately a “swearing match” between opposing witnesses, it is essential that the key protagonists in the proceedings are called to give oral testimony. The importance of doing so was made abundantly clear by Flaux J in his judgment: “Mr Boreh did give evidence at the trial … I had the opportunity to observe Mr Boreh in the witness box, not just in terms of the evidence he gave but the way in which he gave it, which was of invaluable assistance in assessing the extent to which he was an honest and reliable witness… I was deprived of that opportunity in relation to … President [Guelleh of the Republic]”.

As the Republic was claimant in these proceedings, and due to the gaps in the documentary evidence and direct contradiction between key witnesses in the witness evidence (namely Mr Boreh and President Guelleh), it was incumbent upon the President to provide oral testimony. As he did not, and citing the decision in Wisniewski v Central Manchester Health Authority, the court found it appropriate to draw adverse inferences against the Republic for its failure to call the President to give evidence.

Witness training

A witness should give his own evidence, in his own words, as opposed to being influenced by what anyone else has said to him. Witness coaching is not permitted. However, specialist familiarisation, involving a trainer with no connection to or knowledge of the case, which is designed to familiarise the process and expectations of giving evidence, is allowed.

Nevertheless, in this judgment the court, whilst not suggesting that witness training in itself was improper, felt it was to be discouraged, as it can reflect badly on a witness who “may appear evasive because he or she has been trained to give evidence in a particular way.

Motivation

Normally, the motivation for bringing a claim is of no particular relevance. The claim is either a good one or a bad one. However, here the court felt that the conduct of the claimants was so egregious that the motivation and behaviour of the claimants cast doubt upon the bona fides of the claims.

Claims of fraud are often the most difficult claims to pursue in litigation, but it is only right that a claimant alleging serious wrongdoing comes to trial with clean hands, a case that is properly made out, and witness statements and documentary evidence to support it. It will not be acceptable to bring claims without a reasonable belief that there is a legitimate and sustainable claim, and, as shown in The Republic of Djibouti, a claimant attempting to do so will likely suffer the strong disfavour of the court.

Leigh Callaway, Associate, Fladgate LLP (lcallaway@fladgate.com)

 

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