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Fraud recovery litigation process

Region: Ontario Answer # 1521

What to do if you discover a fraud

Upon discovering a fraud, it is in the best interests of the victim to take some time to decide what to do before taking action. It is a good idea to contact a fraud recovery lawyer before:

  • contacting police,
  • confronting the fraudster, or
  • discussing the discovery with anyone who has had anything to do with the fraud.

Fraud victims should also find and organize documents relating to any contact with the fraudster and to any financial transactions, along with any other possibly relevant evidence.

Civil litigation process

The intake meeting

Before deciding whether to proceed with litigation, it is important to meet with a fraud recovery expert and assess your case. In the meeting the victim should tell their story in the order that things happened.

You can begin with explaining who the fraudster is and how they came in contact with you; describe what happened up-to the point when you discovered your loss and that fraud had taken place. The lawyer will then ask follow-up questions to be clear about all the facts of the case. This is especially important if they believe there may be an opportunity to freeze your money which is in the possession of the fraudster.

When deciding if a fraud victim should spend money and time to recover their loss, the following points will typically be discussed and considered:

  • limitation periods,
  • process of fraud recovery,
  • cost of legal fees and expenses, and
  • emotional commitment.

One of the first questions a fraud victim should ask him or herself is: Am I willing to accept the loss and move on, or do I want to fight and bring the fraudster and anyone who may have participated in or benefitted from the fraud to justice?  Fraud victims must decide this within the limitation period that applies from the discovery of the fraud. If they don’t, the claim may be disallowed. However, the decision to proceed should really be made as soon as the fraud is discovered.  If the decision to proceed with the case is made later, this helps the fraudster and makes it more difficult to recover the loss.

Retainer agreements

If fraud victims want to try and recover their money, they should discuss the costs of each step of the process and the likelihood of success. Initial assessments should give clients an estimate on how much time it would take to to complete a number of tasks, including:

  • conduct the initial interviews,
  • review any related documents,
  • conduct any necessary searches, and
  • outline an initial legal opinion.

If the victim then decides to go forward with the case, they will be asked to sign an agreement with their lawyer and give them a deposit – this is called a retainer.  If the time estimated or amount of disbursements (extra expenses) discussed are more than agreed, the client can ask to negotiate a fair resolution so that the case can move forward. For information on retainer agreements, refer to topic #1516 Contact a fraud recovery expert.

Summary of victim’s anticipated evidence

In cases where the victim decides to pursue a civil action for recovery, the process typically starts by creating a summary of the victim’s anticipated evidence. The lawyer will then have a record of the information the fraud victim provided for the purposes of drafting a legal opinion, as well as drafting their claim. If it is decided it is appropriate to make a complaint to police, this summary will be used as the basis for the complaint.

It is during this stage that the lawyer will ask fraud victims to tell them anything about the victim that might possibly be negative or could hurt their case or prevent it from moving forward. For example, if the fraud victim willingly evaded taxes with the help of the fraudster before realizing they were being scammed. In such a case, it is not the best strategy for the fraud victim to attempt a recovery through the court system. While it is not necessary that this type of information be included in the summary, it should be disclosed under confidentiality and solicitor-client privilege and the lawyer should consider it when providing the initial opinion to their client.

Collecting and preserving documents

It is very important to obtain and preserve all of the documents that pertain to the fraud as early as possible. Relevant documents include:

  • financial documents, such as bank account information and money transfers,
  • contracts,
  • invoices, and
  • records of communication.

Lawyers often use electronic forensics specialists in fraud recovery cases. These specialists can preserve and collect all emails, texts and other electronic communications which can then be scanned into the lawyer’s computer systems and easily used in preparing and presenting the case.

When the documents are being collected and preserved, the lawyer can also conduct searches on the fraudster and any others related to the fraud, as well as find and interview witnesses who may be relevant to the case. Fact summaries are then created using information uncovered during these searches and witness interviews. A fact summary is the document that forms the basis of the litigation file and it is used for several purposes, including drafting the Statement of Claim and motions.

The lawyer’s recommendations

The initial investigation, including the drafting of the victim’s summary and fact summaries, is an important part of the litigation process.

During the initial investigation, the lawyer will:

  • draft a legal opinion,
  • summarize the facts, and
  • summarize the different legal arguments that can be brought against both the fraudster, and any third-party defendants who may have taken part in and benefitted from the fraud.

Based on this, the fraud victim will decide:

  • who they will sue,
  • the type of allegations they will make,
  • if there are others who should be investigated, and
  • it there are other recovery methods that should be considered?

Statements of Claim and Defence

Statement of Claim

The next step in litigation is the pleadings stage. Pleadings are formal documents filed with the Court by both parties in a lawsuit. The main documents are the Statement of Claim and Statement of Defence.

Once the victim and their lawyer have formulated the case against the fraudster, a Statement of Claim is drafted and filed with the Court. Motions may also be brought against third parties, for instance financial institutions such as banks, in order to obtain evidence such as where the victim’s money is.

Once the Statement of Claim is issued by the Court it is then served on (delivered to)  the fraudster. In some cases, motions to the court may be brought without giving notice to the fraudster. These are called ex parte motions. Such motions are often made because the victim is trying to preserve or freeze the fraudster’s assets.

Statement of Defence

The fraudster (and other defendants, if any) must respond by filing their Statement of Defence and then serving it on the victim. If the fraudster does not file a defence, they can be noted in default. If no defence is filed, a default judgment motion can be brought. This may prolong the litigation process and increase legal costs. When a defence is received, or the fraudster is noted in default, the pleadings stage ends and it is time for  discovery.

Making a criminal complaint

It is usually advisable for the fraud victim to wait until they have received a response to their Statement of Claim from the defendants before they decide if they want to make a criminal complaint.

The discovery phase

In the discovery phase, each party can has an opportunity to obtain information and facts from the other party and gather evidence about the case in order to be better prepared for trial.

Fraud victims and defendants are required to exchange a discovery plan setting out a timetable for discovery. Often, fraudsters and their lawyers refuse to do so, which then requires fraud victims to bring motions in court to force the fraudster to comply. These types of tactics can become both expensive and cumbersome. Sometimes fraud victims will elect to skip the discovery phase if they feel their case is strong enough.

Discovery includes the exchange of documents and the process of questioning the other party.

As with the failure to submit discovery plans, fraudsters will often fail to attend their examinations for discovery, requiring the victim to bring a motion to compel them to do so. And often, when fraudsters do attend their examinations, they refuse to answer relevant questions and refuse to disclose relevant documents. This can lead to further motions, which means further delays and expenses. Estimating the cost for intentional delay tactics by the fraudster is impossible at the time when the initial opinion is given to them by their lawyer. Therefore, it is a good idea for the victim to budget more than the lawyer’s estimate and to evaluate whether the case is worth pursuing given these types of added costs. In addition, bringing motions in Court can be a slow process, and can involve many court appearances if the Court allows the fraudster multiple opportunities to comply.

Postponing Discovery

It is because the discovery phase of litigation can be so difficult and expensive that some fraud victims chose to wait for the results of the criminal trial before they proceed with their civil case. In such cases, the victim may hope to achieve the following results:

  1.  If the fraudster is convicted, there is a presumption of liability in the civil recovery case, and the fraud victim can apply to the Court for a summary judgment which is a much shorter and less costly process. With summary judgment cases, the victim only has to prove the the actual amount of the loss to the Court.
  2. Fraud victims may wish to wait to see if the fraudster will try to settle the civil claim so they can show the criminal courts that they have made restitution in the hopes of obtaining a lighter sentence.

The trial phase

At some point before trial, fraud victims should consider mediation to see if a settlement can be reached. In fact, in many provinces mediation is mandatory before a case can be set down for trial. If a fraud victim is dealing with a particularly offensive fraudster, the fraud victim can bring a motion to forgo mediation. Also, telephone mediations can be used to make the process quicker and less expensive.

If mediation and settlement attempts fail, the case must go to trial.

The Court will issue pre-trial and trial dates. Pre-trials are held before the trial begins so that a judge can make an attempt to settle the case, and if that fails, the judge will have an opportunity to make sure the case is ready for trial.  At the end of the trial, the judge may order several types of relief. If the victim is successful, the judge will order:

  • a ‘Declaration’ of the torts alleged in the Statement of Claim,
  • a ‘Declaration’ that the judgment survives bankruptcy,
  • a judgment for the amount lost by the fraud victim together with interest,
  • the victim’s legal costs, and
  • the victim’s investigation costs.

If you discover you are a victim of fraud, it is a good idea to contact a fraud recovery expert for advice.

If you a have a criminal record due to fraud-related charges (or for any other criminal offence), and wish to erase your record, call toll-free 1-888-808-3628 or learn more at Pardon Partners. It’s easier than you think.

Pardon Partners – Fraud ONPardon Partners – Fraud ON


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