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Recovery of Legal and Investigation Costs for Fraud Victims

Canadian Fraud Lawyer

On January 13, 2014, the DutchNews.nl [1] reported that prisoners in Dutch jails have to pay 16 Euros a day for their time in jail, and to pay for the investigation costs to put them there

 

The cabinet is planning to make convicted criminals pay towards the cost of the investigation into their crimes as well as a fee for each day they spend in jail.

The justice ministry said in a statement on Monday it is to introduce a charge of €16 a day for prisoners, people in psychiatric prison and the parents of juveniles in detention.

Prisoners and parents would be liable to pay the charge for a maximum two years, costing them up to €11,680.

Investigation

 At the same time the ministry is planning to make convicted criminals pay towards the cost of the investigation into their crime and the court costs.


‘In doing this, the Netherlands is following a large number of other European countries which have similar systems,’ the ministry statement said.
 

In addition to recovering a loss resulting from fraud on behalf of our client fraud victims, we often ask the Court for judgment for full recovery of our costs and investigation costs. As by their nature, fraudsters rarely provide truthful accounts of the money they have swindled, the cost for investigating fraud can be substantial. As noted by the courts:

A breach of that faith by way of fraud is often very difficult to detect and costly to investigate.[2]

 This blog provides some law on the issue of recovery of costs where fraud is alleged.

 

Substantial Indemnity Legal Costs

There is a general rule in the civil litigation world imposed by the Courts that elevated costs should only be granted where there is a clear finding of reprehensible conduct. Fraud attracts such elevated costs. However, full recovery is not automatic, and is often not granted. One of the reasons why full recovery is not granted is because counsel for the fraud victims fail to provide sufficient evidence to the Court to prove their claim for costs is fair and reasonable. Claims for costs must be detailed and backed up by supporting documentation.

This is why there is a differentiation between awards of full recovery and substantial indemnity. Full recovery means that all legal costs claimed are awarded by the Court. Substantial indemnity means that most of the costs claimed are awarded by the Court. In cases where reprehensible conduct is not at issue, the Courts normally only award partial indemnity costs to the successful party.

Fraud victims often are frustrated that the Courts do not award them costs that reflect the full value of the costs they paid their fraud lawyers. Their lawyers should explain to the client at the outset of their case that Courts will often not grant full indemnity if it is of the view that the costs claimed are excessive proportionate to the amount at issue in the law suit, reflect over lawyering caused by duplication of legal work, or for a host of other reasons such as the claim for costs not being backed up by evidence to prove the costs were actually incurred.

Investigative Costs

Investigative costs are generally not awarded in civil litigation, but should be claimed in fraud cases. For example, Justice Brown considered a claim for investigative costs in Elekta Ltd. ats Rodkin et al. (2012), ONSC 2062. Elekta involved the a claim by an employer against its internal account for approximately $12M. The employer retained forensic accountants to detect, investigate, and quantify the loss, and incurred fees of approximately $500K. The Court held that “the damages fro the cost of investigating and quantifying an employee fraud flow naturally and directly from the employee’s breach of its duties to its employer under contract and as a fiduciary and therefore should be recoverable, upon proof, as special damages.[3]

Civil Recovery Costs

There are a few lawyers for shoplifters who have written us letters taking issue with retailer demand letters for recovery of their investigative costs. Some of these lawyers for shoplifters even write letters to the Law Society complaining its improper. Retailers have most often relied on the decision of Hudson’s Bay Company v. David James White, [1997] O.J. No. 307 (O.C.J. Gen. Div.) and its subsequent appeal at [1998] O.J. No. 2383 (Ont. Div. Ct.). What the shoplifter lawyers fail to appreciate is that even the Law Society itself, and other regulatory bodies, also make claims for investigative costs for their actions.[4] It is for this reason why their complaints are deemed unfounded.

 

Inquiries

 

Costs in fraud cases is often a concern for fraud victims. For further information on this issue, or to have your case assessed, please contact us at www.investigationcounsel.com.

 

Disclaimer


 

[2] R. v. Master Corporal K.M. Roche, 2008 CM 1001 (CanLII)

 

[3] See also Jefflin Investments Ltd. ats Crown Grading & Sodding Ltd., [2009] O.J. No. 5348 (SCJ); Novo Nordisk Canada Inc. ats Murray (November 21, 2011; Court File No. CV-11-432161).

[4] Trites (Re), 2010 IIROC 48 (CanLII); Hoang (Re), 2013 IIROC 2 (CanLII).

Norman Groot

About Norman Groot

Based on my police experience and my experience thereafter as a litigator, I have joined forces with other lawyers with police experience and created the law firm Investigation Counsel Professional Corporation.

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