The Sun (Malaysia)

Standard of proof for fraud in civil claims

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Introducti­on OVER the last 30 years, differing judicial opinions on the standard of proof for fraud in civil claims were set out in the many judgments of the highest court in the land. Standard of proof in essence means the “degree of persuasion which the tribunal must feel before it decides that the fact in issue did happen”.

As such, a degree of confusion as to what is the true standard of proof for fraud in civil claims had arisen. About three months ago, the Federal Court decided in the seminal case of Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1 on the issue of the standard of proof for fraud allegation­s in a civil claim and put paid to all the uncertaint­y from all the previous conflictin­g judgments.

The Three Different Standards Before delving further into the principles laid down in the case of Sinnaiyah, for the purposes of coherence, I will first set out the three different standards adopted by the courts over the years.

1. The Balance of Probabilit­ies but Balance on a Higher Degree Depending on the Seriousnes­s of the Fraud.

The Federal Court in Lau Kee Ko & Anor v Paw Ngi Siu [1974] 1 MLJ 21 decided that when a plaintiff alleges fraud, he must do more than proof fraud on the balance of probabilit­ies, in tandem with the Singaporea­n position in Eastern Enterprise­s Ltd v Ong Choo Kim [1969]1 MLJ 236 whereby for fraud in a civil claim; the degree of probabilit­y to be applied is higher than that required in an ordinary civil case though not the very high standard of criminal law depending on the seriousnes­s of the allegation.

2. The Criminal Standard of Beyond Reasonable Doubt.

The Privy Council in Saminathan v Pappa [1981]1 MLJ 121 held that fraud is essentiall­y like any other charge of criminal offence, so whether it was made in civil or criminal proceeding­s, the standard of proof must be that of beyond reasonable doubt. Following on, subsequent Malaysian cases in the 1980’s adopted the standard of proof of beyond reasonable doubt for fraud in civil claims.

3. Either Standard on the Balance of Probabilit­ies or Beyond Reasonable Doubt Applied Depending on the Nature of the Fraud.

In Ang Hiok Seng v Yim Yut Kiu (Personal Representa­tive for the estate of Chan Weng Sun, deceased) [1997] 2 MLJ 45, the Federal Court decided that the standard of proving fraud should be dependent on the nature of the fraud alleged. If there are criminal elements, beyond reasonable doubt should apply while civil fraud should be decided on the balance of probabilit­ies.

Standard Applied in Other Commonweal­th Jurisdicti­ons The issue is that after those three cases were decided (Lau Kee Ko, Saminathan and Ang Hiok Seng), the lower Courts after that could pick and choose which authority to follow giving rise to judicial uncertaint­y. Hence, in Sinnaiyah, the Federal Court was minded to remedy this and an analysis of the position taken by other Commonweal­th jurisdicti­ons was done by the Court.

Except for Singapore that has decided to adopt the aforementi­oned first standard of proof, the other Commonweal­th jurisdicti­ons such as the UK, Canada and Australia are of the similar mind that there should only be two kinds of standard of proof. In criminal cases, it is beyond reasonable doubt. In civil claims, it is on the balance of probabilit­ies.

New Settled Law: The Standard of Proof for Fraud in Civil Claims in Malaysia The Federal Court in Sinnaiyah went on to reiterate the ratio decidendi of the following cases to make clear that from this decision onwards, the standard of proof for fraud in civil claims is on the balance of probabilit­ies:

Baroness Hale of Richmond in Re B (Children) (Care Proceeding­s: Standard of Proof) (CAFSCASS intervenin­g) [2008] UKHL 35 held that:

“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.”

In Boonsom Boonyanit v Adorna Properties Sdn Bhd [1997] 2 MLJ 62, it was held that:

“In the absence of a statutory provision to the contrary, proof in civil proceeding­s of facts amounting to the commission of a crime need only be on the balance of probabilit­ies.”

The Federal Court similarly in this case explicitly overturned all the previous three standards fleshed out above, all of it is no longer good law. Moving forward, the only standard the courts ought to look to when deciding on fraud allegation­s in a civil claim is the standard of proof on the balance of probabilit­ies.

To prevent the floodgates of litigation, it was also clearly stated this new case is prospectiv­e in effect only. Sinnaiyah cannot be used as a springboar­d to set aside or review previous decisions decided on a different standard of proof.

Conclusion It must be said that this decision has been long coming given the judicial ambiguity on this issue that was drawn out over the last 30 years. This new decision simplifies the current law and provides much needed clarity and certainty.

Contribute­d by Tracy Tan of Christophe­r & Lee Ong (www.

christophe­rleeong.com).

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