Is there credible material of fraud? The Bermuda Court clarifies the high threshold for pleading fraud
This blog focuses on the issue of pleading fraud which, in the field of asset recovery especially, is a recurring theme.
Bermuda Barrister’s Code of Professional Conduct 1981 (Code of Conduct)
Rule 41 of the Code of Conduct provides that a barrister must have clear instructions in writing to plead fraud and must have before him reasonable credible material which establishes a prima facie case of fraud (our emphasis). The plaintiff must also show “deliberate concealment”.
Applicable test
The Bermuda Court summarised the legal requirements for pleading fraud as determined by the UK Court of Appeal in Sofer v Swissindependent Trustees SA:
- Fraud or dishonesty must be specifically alleged and sufficiently particularised and will not be sufficiently particularised if the facts alleged are consistent with innocence.
- Dishonesty can be inferred from primary facts, provided that those primary facts are themselves pleaded. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be pleaded.
- The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an interference of dishonesty is more likely than one of innocence or negligence.
- Particulars of dishonesty must be read as a whole and in context.
Determination
The Court concluded, after having considered the evidence upon which the attorney relied to plead fraud, that:
“… I find that all the documents exhibited to the [attorney’s affidavit in support of the case for fraud] do not in any way qualify as “credible material” to establish a prima facie case of fraud.”
The claim was therefore struck out with the Court granting the defendants’ costs on an indemnity basis to be borne equally between the plaintiffs and their attorneys of record (ie the law firm and not the individual attorney personally).
