Overstepping the mark

Fraud, in the context
of a civil claim, refers
to an allegation in a statement of case involving
the dishonesty of a party to proceedings and is obviously
a serious allegation. As such, there can be significant adverse consequences of averring fraud inappropriately.

Sufficient basis

Aside from the obvious costs implications of asserting unsuccessful or unnecessary allegations of fraud, and the costly nature of adducing fraud, it is a regulatory requirement
on barristers and solicitors
that they must not allege
fraud speculatively. It is
a serious matter to make allegations of dishonesty in statements of case to be put before a court and should not be done without sufficient basis.

There are therefore regulatory requirements imposed on barristers and solicitors. In that regard, the conduct rules in the Bar Standards Board's handbook require that barristers must not draft any statement of case, witness statement, affidavit or other document containing 'any allegation of fraud, unless you have clear instructions to allege fraud and you have reasonably credible material which establishes an arguable case
of fraud.'

The SRA code of conduct states at indicative behaviour
5.7 that: drafting any documents relating to any proceedings containing any allegation of fraud, unless you are instructed to do so and you have material which you reasonably believe shows, on the face of it, a case of fraud, may show that a solicitor has not complied with the principles of the SRA code of conduct.

The quandary is that, in
failing to plead fraud where
it is appropriate, a solicitor
can deprive their client of key arguments in their case: asserting fraud successfully
can prove very beneficial to proceedings in terms of liability, remedy and enforcement.

Some such benefits in litigation include:

• limitation: in a claim based on fraud, the clock starts ticking from the date of its discovery or the date on which, with reasonable diligence, it could have been discovered, rather than from the date on which the cause of action accrued;
• fraud may be the only basis on which a claim can be brought such that the client may lose their case without it;
• a fraudulent party will be unable to avail itself of the defence of contributory negligence, which may be available to the other (non-fraudulent) defendants (see Nationwide Building Society v Dunlop Haywards (DHL) Limited (t/a Dunlop Heywood Lorenz), Cobbetts (A Firm) [2009] EWHC 254 (Comm));
• an individual defendant against whom judgment is handed down in a case for fraud can still be pursued if the defendant is made bankrupt, as per section 281(3) of the Insolvency Act 1986.

Tricky question

The question of whether to plead fraud is often a tricky one. The main problem with fraud is that, in general, it cannot be easily detected.

The defendant cannot plead fraud on the basis that its investigations may later prove its suspicions right. Thus, solicitors acting for defendants may be faced with suspicious claims that they wish to investigate, only to be met with arguments regarding cost proportionality of asserting or adducing the same and, obviously, their own regulatory obligations under their respective codes of conduct.

However, where there is
a properly arguable claim in fraud, solicitors and barristers should consider carefully in every case whether the advantages of doing so for the client outweigh the regulatory risks and costs implications.

Obviously, a practitioner has a duty to act in their client's best interests, and this becomes a careful balancing act to ensure that the solicitor complies with its duties to the court, while at the same time presenting the best case possible for their
client. SJ