Area of Law: Fraud and Fraud Recovery
Answer # 1523
Punitive damages in fraud casesRegion: Ontario Answer # 1523
What are punitive damages?
Punitive damages are amounts ordered by the Court to punish the defendant (fraudster). Punitive damages are awarded over and above compensatory damages, which are meant to compensate victims for their loss.
What amounts are awarded for punitive damages in fraud cases?
In Canada, punitive damages are not awarded very frequently. In addition, even if awarded, punitive damages tend to be limited by the Courts to a small percentage (usually 10% or less) of the total amount of loss suffered by the victim.
When are claims for punitive damages awarded?
In fraud cases, the issue of whether punitive damages can be claimed is often based on breach of trust. Whether the Court will award punitive damages is often based on the finding of exceptional circumstances and after the Court has considered many factors, such as:
- Was the conduct of the defendant planned and intentional?
- Was the conduct of the defendant malicious?
- Does the conduct of the defendant offend the ordinary standards of decency?
- Did the conduct of the defendant extended over a long period of time?
- Was the defendant in a position of trust or fiduciary duty?
- Did the defendant attempt to conceal their misconduct?
- Did the defendant profit from their misconduct?
- Did the defendant have a history of similar behaviour and misconduct?
- Did the plaintiff suffer egregious harm due the fraud?
- Was the plaintiff in a position of extreme vulnerability and weakness?
However, if an equal balance of power existed between the victim and the fraudster, and the fraudster did not personally profit or benefit in any way from his or her misconduct, then it is unlikely that punitive damages will be awarded. For example, an equal balance of power may exist in a business relationship between two partners with equal ownership and responsibility.
In addition, there is a higher probability that punitive damages will be awarded:
- in motions for default judgment, where the defendant has not filed a defence, and
- where the fraudster does not dispute their liability, but instead only challenges compensatory and punitive damages.
Claiming punitive damages against the fraudster’s professional
It is also possible to claim punitive damages from the fraudster’s professionals (such as accountants, lawyers, investment advisors, banks) if they assisted the fraudster in perpetrating the fraud. In making a decision to award punitive damages against such a professional, the Court will consider similar factors as discussed above.
Does a complaint to police prevent a punitive damages claim?
In many cases, because of the great harm caused, fraud victims want to pursue punitive damages against the fraudster. Because punitive damages are awarded to punish or deter a defendant, if the person has already been punished, such as being convicted in Criminal Court, it is far less likely that punitive damages will be awarded in Civil Court. In Canada it is rare that the courts punish someone a second time for the same conduct.
However, if there is a civil case brought against the fraudster and a decision is made by the judge before a complaint is made to the police, the judge might award punitive damages. In addition, awarding punitive damages does not preclude the fraudster from being charged by the police and punished in Criminal Court.
This rule against double punishment is something fraud victims should consider before making a complaint to the police.
Fraud victims should be aware that under the Criminal Code it is an offence to threaten to make a criminal complaint in order to collect money on a civil debt.
However, it is not an offence for fraud victims to tell a fraudster that they may proceed with both a civil action and a criminal complaint. And it is not considered extortion under the Criminal Code to threaten to start a civil action.
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.
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