Standard of proof for fraud in Civil Cases

19 Mar 2021 | Dina Kanga, Elena Skitsa

Standard of proof for fraud in Civil Cases

 

Fraud, although not precisely defined, usually comprises some type of deceitful or dishonest behaviour, which caused the claimant to suffer loss. (Halsbury's Laws of England, 3rd ed., Vol. 18, p. 189)  According to section 36 of Civil Wrongs Law, Cap. 148, “Fraud consists of a false representation of fact, made with the knowledge that it is false, or without belief in its truth or recklessly, careless whether it be true or false, with the intent that it shall be acted upon by the person deceived”.

 

In order to bring an action for Civil fraud before Court, the following criteria have to be met cumulatively:

  (a) there needs to be intention to deceive,

  (b) the plaintiff must be deceived as a result of the defendant’s deceit,

  (c)to act upon the fraud

  (d)the plaintiff must suffer damage as a result of his reliance upon the fraudulent representation. 

 

Because of the criminal scope of Civil fraud wrongdoing, there has been some degree of strictness in applying the standard of proof in Civil fraud cases.  Recent English case law has resolved all doubt in English Courts and firmly restated that, the standard of proof in finding the necessary facts to establish the threshold of fraud in civil cases, albeit cogent evidence is still required to make out a pleading of fraud, is the simple balance of probabilities.

 

The burden and standard of proof for civil fraud under Cyprus Law

 

Under Cyprus’ Civil Procedure Rules, when fraud is alleged, it has to be pleaded and full particulars thereof shall be stated in the pleadings. (Civil Procedure Rules, Order 19, rule 5)  As with other civil wrongdoings, the standard of proof is generally that of the balance of probabilities.  In cases of civil fraud, the burden is on the party who claims it, to prove fraudulent or dishonest behaviour. However, when Courts apply the ‘balance of probabilities’ standard in cases of civil fraud they seem to apply a stricter or even higher standard of proof, compared to the usual balance of probabilities, which applies in cases of other civil wrongdoings.  The Courts adopted the view that in civil fraud cases, there may be a standard of proof higher than that of the balance of probabilities; the more serious the allegation the higher the degree of probability that is required.  This standard of proof applied is not as high as the criminal cases’ standard, i.e. beyond any reasonable doubt standard, but it is higher and stricter than the normal balance of probabilities, according to the circumstances of the case. The Supreme Court in Electricity Authority of Cyprus v. D & A Charalambous (Frozen Foods) Limited and others (2012) 1 Α.Α.Δ. 448 appears to have accepted this heightened standard of proof, by stating that the Judge at First Instance wrongly applied the standard of proof of beyond reasonable doubt and not the balance of probabilities with a somehow heightened threshold.

 

The standard of proof for civil fraud under English Law

 

In previous English case law there was some degree of confusion as to the standard of proof in civil fraud cases.  However, in the recent case of Bank St Petersburg PJSC v. Vitaly Arkhangelsky [2020] EWCA Civ 408 the Court of Appeal confirmed that in cases of civil fraud the standard of proof in cases of dishonesty is the normal balance of probabilities and not a ‘heightened balance of probabilities’. 

 

In Bank St Petersburg PJSC v Vitaly Arkhangelsky the Court of Appeal concluded that the first instance Judge applied a “too high standard” and a “heavy onus of proof”, in order to prove fraud or dishonesty, and lost sight of the true standard of proof, which is “what explanation was more probable than not, having taken account of the nature and gravity of the allegation”.  The Court of Appeal ruled that the first instance judge erred in his findings because he was “applying an improperly high standard of proof”.  It was accepted by the Court of Appeal that in general, it is legitimate and conventional, and a fair starting point, that fraud and dishonesty are inherently improbable, such that cogent evidence is required for their proof. But that is because, other things being equal, people do not usually act dishonestly, and it can be no more than a starting point. Ultimately, the only question is whether it has been proven that the occurrence of the fact in issue, was more probable than not. 

 

The Court of Appeal noted that there is no doubt in this matter, especially after the clarification given by the House of Lords in Re B (Children) [2008] UKHL 35. In Re B it was stated that the standard of proof in finding the facts necessary to establish the threshold of fraud in civil cases is the simple balance of probabilities, nothing more or less. Neither the seriousness of the allegation, nor the seriousness of the consequences, should make any difference to the standard of proof to be applied in determining the facts.    Additionally, regarding the notion of inherent probabilities, on the often quoted statement which reads “the more serious the allegation the less likely is that the event occurred and hence the stronger should be the evidence before court”, it was commented that it is not a rule of law.  The House of the Lords suggested that common sense, not law, requires that in deciding such question, regard should be had, to whatever extent appropriate, to inherent probabilities.

 

Commentary / Future:

 

It remains to be seen whether Cyprus Courts will continue to apply a rather heightened and stricter standard of proof in civil cases of fraud, or whether the recent developments in English Courts will unravel the path to Cyprus Courts on this by leading them to review their approach.

 

How can we help?

 

Our Lawyers have substantial experience advising on cases concerning civil fraud and conspiracy to defraud and handling cases before Court for both local and international clients, including cases concerning cross-border and multijurisdictional issues. 

 

This publication is provided for your convenience and does not constitute legal advice.

 

Authors: Elena Skitsa, Dina Kanga

About this Article
Author
Dina Kanga

Advocate / Manager

Elena Skitsa

Advocate / Senior

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