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Socialism and Civil Fraud: Claimant Groups

View profile for Daniel Dodman
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This is the third part in my series of articles on the difficulties and dangers involved in attempting to assist clients who have lost funds through fraud but where the quantums may not be huge. Today I review whether it is possible to change the game entirely.

The nature of civil fraud makes bringing these cases a typically expensive job. There is real difficulty in attempting to trace assets, obtain freezing orders or bring to trial any matter that is worth less than £100,000. But what if 10 or so individuals were able to join together, share costs/information and make a collective sum that was worth pursuing? This is something we are all aware either by the informal use of multiple claimants in a piece of litigation or the more formal Group Litigation Order but how does this work in practice with civil fraud?

The honest answer is that it’s not easy, although it’s also far from impossible. There are two major issues, one practical and one far more emotive.

The practical problem is one of common facts. In order for a GLO or multi-claimant actions to work, the facts need to be similar enough in all cases to make it possible to draft Particulars that are common enough for all those that have been defrauded. This inevitably immediately limits the type of cases where this kind of action is feasible. Complex frauds where the only common denominator is the fraudster in question are immediately out if the mechanism of the fraud is different for each potential claimant. Similarly difficult are fraudulent misrepresentations made at different times and in different manners.  

However, there are claims that do work without difficulty. Any fraudster involved in a scam that he has tried and tested on a number of individuals should be prepared for those people to compare notes and club together. The facts will be sufficiently close to make the combined drafting of the Particulars and evidence relatively straight forward.  

The second issue is, in some ways, far more difficult to address. Being defrauded is normally a violating experience. Those that have suffered often feel a host of emotions varying from embarrassment and anger to extreme distress. This level of emotion makes it hard to keep a group of claimants focused and aligned on their interests. Some individuals will want an early settlement with the recovery of money being he most important motivation. Others will focus on some level of “punishment” to the fraudster. Unpacking these emotions can be a nightmare for a solicitor. Moreover, the nature of civil fraud litigation is that it is heavily involved and often overarching. Accusations flow both ways and the process can be exhausting for all.  

So how do you keep claimants aligned whilst also ensuring that costs are kept down without multiple calls to each Claimant to establish how they view the process? In my experience, one of the most effective measures is a litigation agreement entered into by all of the Claimants. This can designate a couple of individuals as those from which instructions are sought. It can also deal with the thorny issue of costs liability and how Claimants can exit from the group.

Crucially, all Claimants will need to understand what this means and will normally need to be happy to devolve day to day decisions (whilst having protection that key decisions in the case will be agreed collectively). The challenge for a lawyer is also getting a sense of the Claimants, their goals and personalities before taking a case on. Having ultra aggressive claimants and risk adverse individuals in the same Claimant group is a recipe for disaster.

I think the most important step with this kind of claim is to identify litigation where this kind of arrangement might work. Group litigation is not an occasion for fitting a square peg into a round hole, but, where the case is right, the law recognises the strength of the collective and so should we.  

Civil fraud - further guidance

Having litigated a number of cases recently where the damages, although small in the context of traditional City civil fraud matters, were crucial to the clients involved, I wanted to explore the ways in which lawyers can be thinking creatively about Civil fraud. To that end, I am writing a series of articles  that will show how we can assist clients who do not have a vault of assets to spend on legal fees by creatively applying the law and technology.

I am also forming a network of like minded fraud professionals so if you have experience in this area then please do get in touch.

Dan Dodman

Dan Dodman is a litigator with a wealth of experience in high profile, high value cases in both the commercial litigation and financial regulation sectors. He acts on a broad range of disputes, both nationally and internationally for corporate, individual and institutional clients.

Civil Fraud - Goodman Derrick

The experienced partners in Goodman Derrick's dispute resolution department have built a strong reputation and impressive track record for defending and bringing civil fraud claims.

The team of three specialists, supported by eight lawyers, bring wide ranging experience, covering small claims for SMEs to the very largest and most complex claims, usually involving multiple defendants, often working in tandem with large international firms.

Please visit the Civil Fraud page of our website for further information about our specialist service.

Goodman Derrick LLP - a London law firm focused on delivering an exceptional service to ambitious businesses and entrepreneurs.

More information

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.

If you require any further information about the issues raised in this article please contact Dan Dodman.