Faking It To Make It Or Not Quite!

You may have read recently the story of Anna Sorokin, the fake billionaire heiress, who tricked the elite and finance sector in New York into parting with substantial sums of money. Miss Sorokin claimed to be a German heiress to a substantial fortune and claimed to have a Trust fund worth around $60 million.

She came to New York with the claim that she intended to set up a high end art foundation. With this goal in mind, she set about living the billionaire lifestyle by forging proof of assets with a view to securing a six figure over draft and considerable credit card limits. She lived in high end hotels, went on shopping sprees and enjoyed all the things that wealth brings but without any wealth at all. Matters came crashing down around Miss Sorokin’s ears when credit cards started to bounce and she was thrown out of her hotel accommodation. Miss Sorokin now faces up to 15 years in prison in respect of her antics.

Cases involving civil fraud in England and Wales

Whilst this case is extreme, set in the criminal context and based outside of England and Wales, it did get me thinking about such fraudulent activities in England and Wales and how the Civil Courts would deal with them here when an injured party sought to recover their assets. The first and most important point to note is that, whilst the word fraud is commonly used, it actually has no direct meaning in civil law. In Reddaway & Co v Banham & Co (1895-1899), Lord MacNaughton described civil fraud in the following terms:

Given that this case was from the late 1800s, I suspect that Lord MacNaughton could not possibly in his wildest dreams have conjured up the current state of the world’s technology and the new ways that unscrupulous individuals have found to exploit the same in fraudulent ways. The reality is that ‘civil fraud’ is a generic terms given for many different possible arguments, including (but not limited to) the tort of deceit, fraudulent misrepresentation and breach of fiduciary duties.

The Courts have grappled with trying to define more closely these category of cases. By way of example, in Barclays Bank v Cole (1966), Lord Justice Diplock said:

Whilst the above generic definition is helpful in allowing the average man on the street to understand whether they have been defrauded, there are many, many different ways that a case in fraud can be pleaded and whether each one is appropriate will depend on the facts of the specific case. If a Claimant pleads the wrong head of claim, there is every prospect that that Claimant will lose or worth be liable to have their case struck out along with a substantial costs order against them. It is therefore essential to get it right when pleading an allegation of fraud and this is where expert legal advice is invaluable.

Two words of caution before advancing an argument in fraud:

1. An allegation of fraud is extremely serious. Notwithstanding a case is proceeding through the Civil Courts, it can have criminal repercussions for a Defendant found guilty of fraud. The Courts do not therefore entertain an allegation of fraud lightly and the burden of proving the same rests with the Claimant and the evidence required to prove such an allegation is much higher than it would be with most other arguments; and
2. A target Defendant is only as good as their asset base. Miss Sorokin as an example is unlikely to have substantial assets to enforce a judgment against and accordingly any victory against her is likely to be an expensive exercise in a pyric victory. Before launching a case therefore it is always sensible to determine whether the target Defendant has any assets against which you are able to enforce.

The final point to note is that you should not be surprised if a solicitor that you instruct to pursue an argument in fraud presses you quite hard for solid proof. This is partly to do with the point above about the standard of proof in fraud cases but also because the solicitors Code of Conduct confirms that a solicitor should only advance an argument in fraud if they have clear proof of the same. This is not to say that they will not fight your corner. It simply means that the approach will be different. Given how many heads of claim can be advanced, it is possible to advance many different arguments with a view to probing and testing the evidence, ultimately with the aim of formulating an argument in one of the fraud heads of claim.