It may also very well be that a person who suspects fraud, and wishes to allege it, is unable to point to any more than mere speculation as a means of supporting the allegation. Hard as it may be for such a person to appreciate the fact, it is nevertheless inappropriate to allow such an allegation to go forward to trial if the person making the allegation does not have sufficient evidence to support it, then sooner the allegation is removed from the list of issues between the parties, the better. The Court should not be concerned with hunches, no matter how reluctant litigants might be to put their hunches aside. In such cases, the Court should act to save the subject of an allegation of fraud which cannot be substantiated "from the vexation of the continuance of useless and futile proceedings": General Steel Industries Inc v Commissioner for Railways (NSW).[127]
Having acknowledged the force of that point, however, one must also bear in mind the nature of the allegation of fraud. Such an allegation will almost invariably only be made out if the appropriate inference can be drawn. An inference is a deduction from known facts. An allegation of fraud must therefore state the facts upon which the inference is sought to be drawn. Once that is done, then it is for the tribunal of fact to determine whether or not the inference is the only inference reasonably open (as it must be if it is to form an essential link in a chain of reasoning leading to a conviction on a criminal charge) or whether (in a civil case) the inference is more probable than not. But the process of reasoning itself cannot be the subject of pleading; all the pleading can do is to set out the facts upon which the inference might be drawn.
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The first defendant says that all the material allegations of fact pleaded in the amended defence support an inference that the first defendant was, at worst, negligent. Alternatively, she argues that, put at their highest, those allegations are at least as consistent with negligence as they are with fraud. This being so, the ultimate tribunal of fact could not, after trial, find fraud because the requirement to prove fraud on the balance of probabilities would not be met.
I am not convinced by this argument. To the contrary, it seems to me that the material facts pleaded in the amended defence would if proved form an ample basis upon which an inference of fraud or other dishonesty might be proved.[128] The amended defence includes allegations which, if made out at the trial, would establish a motive: a desire to retain as clients members of a group of companies, including the second defendant, which might put considerable work [her way]...
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The third party might or might not be able to prove these allegations at the trial. The trial judge might or might not be prepared to find in them an inference that the first defendant acted fraudulently, or otherwise dishonestly. But the point is that, once proved, the pleaded facts would be capable of supporting the inference upon which the third party relies; and the proper inference to be drawn from the pleaded facts is one which ought not to be determined as a pre-trial pleading exercise, but rather should only be determined at the trial itself. The inference properly to be drawn must be seen against the whole of the evidence as given viva voce with the benefit of testing under cross-examination. Indeed the drawing of inferences is pre-eminently a matter for the ultimate tribunal of fact after hearing and seeing the witnesses who are called to give oral evidence. In a case such as this, it is the evidence given at trial which would almost certainly tip the scales one way or the other. Such evidence, in the main, cannot form part of the pleadings... [129]