Bringing a claim for commercial fraud

The term ‘commercial fraud’ is a broad description covering many different activities. Possible causes of action resulting from the fraud might include  ‘undue influence’ or ‘abuse of confidence’. Judges have been reluctant to define the term precisely for fear that it may limit the ability of a party to proceed with a claim. 

Although the word ‘fraud’ tends to suggest criminality, in fact wronged parties often seek redress through civil and contract law. Criminal fraud is prosecuted by the Crown, and not the wronged party, so there are several advantages to bringing a claim under civil or contract law if you believe you are the victim of commercial fraud. These advantages include:

• Unlike normal negligence cases, it is possible that individuals will be held personally liable rather than being able to hide behind the name of the company.

• Bringing a claim for commercial fraud prevents the defendant being able to rely upon the defence of contributory negligence (where the defendant seeks to pin some of the blame on the claimant). This defence is often used in other civil and contractual disputes but it is not available when defending alleged commercial fraud.

• There is a greater chance of the limitation periods being more flexible than in normal contractual or civil claims where courts usually adopt a more rigid approach. In fraud cases, time does not run until after its discovery or when, with reasonable diligence, it could have been discovered by the claimant.

• Potentially the most lucrative reason to pursue a claim for commercial fraud is that the courts take a much more expansive approach to losses suffered by a claimant. If the court is satisfied that there has been fraudulent conduct, they will be more willing to infer substantial losses than in other standard cases such as breach of contract or negligence.

Of course, there are inherent risks involved in any litigation because there is never a guarantee of success. The pros and cons of bringing a claim for commercial fraud will need to be weighed carefully before proceeding. 

Litigation partner Paul Gordon has acted for major clients including Kohler Mira, American Express, Morgan Stanley, GE Capital, and PizzaExpress. He has wide experience in financial services and banking disputes as well as shareholder and partnership matters, commercial supply, agency distribution and franchise contracts and often acts in construction disputes and advises on intellectual property issues.