What to consider during investigations in the fraud litigation process

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The 2007 decision of Hill v. Hamilton-Wentworth Regional Police Services Board was the first case that recognized the tort of negligent investigation in Canada as it applies to police. The issue before the Court was the conduct of police officers during the course of a criminal investigation. Writing for the majority, McLachlin C.J.C. held that police officers owe a duty of care in negligence to suspects being investigated.

The essence of negligence is that people should exercise reasonable care when they act by taking into account (foreseeing) the potential harm that they might cause to other people by their actions. It involves harm caused by carelessness, as opposed harm that is intentionally inflicted on another. In a claim of negligence, a plaintiff must prove a duty of care existed and, if so, that the standard of care was breached by the defendant and that the breach of the standard of care caused harm to the plaintiff.

Investigation workplace theft

In the case Correia v. Canac Kitchens, in 2008, the Ontario Court of Appeal considered whether the reasoning in Hill could be extended to recognize a duty of care in negligence to suspects being investigated by private investigators. In Correia, an employer hired a private investigator to work undercover to investigate workplace theft.

But, due to a clerical error by the employer, the investigator’s report mistakenly identified the plaintiff as a thief as opposed to another person with a similar name. Neither the private investigators nor the police verified the employee information, allowing the employer error to go undetected. The undercover investigator was not involved in the arrest, and the police blindly arrested an uninvolved person with a similar name to that of one of targets of the investigation. The plaintiff’s employment was terminated and he was criminally charged.

The plaintiff’s negligent investigation claim was summarily dismissed at the Superior Court on the basis that the private investigators did not owe a duty of care to the plaintiff, a non-target of their investigation, but the Ontario Court of Appeal allowed an appeal from that decision. The Court of Appeal held that there was a triable issue as to whether the relationship between the plaintiff, the private investigator and the employer disclosed sufficient foreseeability and proximity to establish a prima facie duty of care. The Correia case settled for a confidential amount following the Court of Appeal decision.

There has been very little development in the law relating to the tort of negligent investigation since Correia. One of the reasons for the lack of judgments against police is because the Courts have held that the standard of care is that of gross negligence. It is unclear what the standard of care will be against private investigators.

Unlicenced private investigators

While in Canada the public, media, and private investigative associations have raised legitimate concerns about unlicenced investigators offering investigative services to the public, concerns about unregulated private investigations are greater in other jurisdictions. For example, the regulation of private investigators in the U.K. is likely to come into force in the fall of 2014 as a result of private investigators being convicted of unlawfully obtaining personal information for media (Guardian, News of the World), insurers and others.  Remarkably, private investigations are currently not regulated in the U.K.

According to press reports in the U.K., two private investigators for the firm ICU Investigations were recently found guilty of breaching the U.K.’s Data Protection Act. Their firm allegedly pretexted organizations, including medical and utility companies, into disclosing personal information of the people they were trying to trace. Five other private investigators from the company previously pleaded guilty to breaching the U.K.’s Data Protection Act. They will be sentenced on January 24, 2014. Under U.K. law they may be fined but not issued custodial sentences for this type of conviction.

The Financial Conduct Authority, a regulatory body in the UK for the financial services industry, warned that managers at insurance firms are generally unaware of the scope of investigations carried out in their name by private investigators (The Guardian). The regulation of private investigators and licences will be granted to investigators with a government-recognized qualification who have confirmed their identity and undergone a criminality check.

By Norman J. Groot
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