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Insights

ARTICLE

Reminder litigants should withdraw unfounded allegations of fraud and do it early

In TBM Holdco,the British Columbia Supreme Court awarded special costs to a third party to the proceeding, Mr. Timothy  Urquhart, who was the former President and Chief Executive Officer of the defendant TBM Holdco Ltd. The defendants had maintained allegations of fraudulent misrepresentation against Mr. Urquhart up until the day before trial, when they were withdrawn.

Despite abandoning this claim prior to trial, Burnyeat J. concluded that the allegations had cast a "serious pall" over Mr. Urquhart's professional reputation since the date of the commencement of the action, such that the defendants' conduct was reprehensible and deserving of rebuke. The allegations were "there for all to see" for 14 months, which put Mr. Urquhart's professional reputation in a small and highly competitive business community at risk.

The court also found it troubling that, despite the seriousness of the allegations, the defendants had little to no evidence of any fraudulent conduct committed by Mr. Urquhart prior to launching the claim, and had failed to take even basic steps to investigate.

Although it was open to the court to make a partial award for special costs, Burnyeat J. awarded special costs throughout the proceeding, including the costs incurred at trial. This should serve as a caution to litigants to refrain from advancing frivolous or unfounded claims of fraud or deceit – or abandon them well in advance of trial - especially where a party's professional reputation is at stake.