The Costs Consequences Of Alleging Improper Conduct
If you are alleging fraud or dishonesty on the part of another, you better have the evidence to back it up.
At least that’s what the Courts have been indicating in recent years. When a party pleads fraud and does not have the evidence to substantiate it, Courts often will depart from the normal costs consequences and award costs on a substantial indemnity scale. In some cases, the Courts have even been willing to award costs against the party making unfounded allegations of fraud on a full indemnity scale.
It is not only allegations of fraud that attract higher costs consequences when unsubstantiated, but other claims, such as conspiracy, deceit, misrepresentation and misappropriation, that, in effect, call into question a party’s integrity.
The reasoning for this is straightforward. Allegations of fraud and dishonesty are serious and prejudicial to the character and reputation of the party that they are levied against. Given that litigation can—and often does—last years, these allegations will stand in the public record and hang over a party’s head until the action comes to an end. Even when a party alleges fraud, and then withdraws it before walking through the courtroom door, the Courts will award costs on a substantial indemnity scale for the time that such allegations were hanging in the air.
Plaintiffs should be wary of making allegations of this nature in the absence of supporting evidence and defence counsel should be live to these types of allegations and seek increased costs in circumstances where the is a lack of supporting evidence. Tactically, the risk of higher costs consequences can be used as a ‘stick’ in negotiations to resolve a claim.
This blog entry has been placed on our website to inform readers in a general way of the authors’ view of the law at the time of its presentation. It is not intended as legal advice and no reliance may be placed on its contents. Some principles of law or procedure may have changed and may no longer be applicable since its publication. The authors and our firm disclaim any liability arising from reliance on any part of this blog entry.