Boutique firm Milosevic & Associates establishing itself as Canada's go-to for investor fraud claims
This article was produced in partnership with Milosevic & Associates
A few years ago, David Milosevic was working late when the office phone rang. The person on the other end of the line had been defrauded by an investment advisor to the tune of a few million and knew of others in the same situation.
Within a week, there were almost 100 people on the claim. Within 16 months, a mediation resulted in an eight-figure settlement. And within a few years, what Milosevic thought would be a one-off had ballooned to 20 multi-party investor fraud claims, 12 of which are currently active.
“The numbers are striking — it’s an epidemic,” he says, adding that Milosevic & Associates, a boutique law firm with an impressive reach handling complex commercial litigation, receives an average of 50 calls a week from individuals who have been defrauded.
“It’s like being an oncologist in that you don’t want more business, but you’re dealing with reality. This is the nature of the modern economy.”
Though fraud is a worldwide threat, it’s growing massively here at home. With a wealthy population and an overwhelmed enforcement arm, Canada is a popular target. Viable group claims involve local fraudulent investment schemes that spread through tight-knit communities — members of the same church or club, for example — within which the fraudster is known and trusted.
A typical scenario involves real estate, where people believe their money will be used to develop properties that will result in a great return at sky-high interest rates once completed. Many involve institutional defendants who might not have looked the other way, but didn’t look closely enough at financial transactions that would indicate these schemes are occurring, Milosevic notes.
Inevitably, those promised repayments are late and suddenly investors realize it’s a Ponzi scheme — and that’s when they turn to someone like Milosevic. The first step is assessing the viability of the claim, because the firm doesn’t offer false hope: nobody wants a situation where they’ve “lined the pocket of a lawyer but disappointed a lot of people,” he notes.
From there, the firm develops an email list of everyone who’s interested in being part of the group and then there’s an initial town hall meeting that sets out how the litigation works.
“We want to get them a good result, but we make sure they go in with their eyes wide open,” Milosevic explains. “One I’m working on now is good — a few evidentiary issues might make it very good — but it’s also a bit speculative. But some are riskier than others, and I advise people of that upfront: I want them, to know exactly what we’re doing.”
If the group chooses to move forward, a committee usually of five people is created to provide instruction to the firm on behalf of all members. Another key point to communicate is that because the retainer is spread across all members, it’s cost-effective to participate.
“It’s a no-brainer for a relatively small amount of money, to get a chance to recover at least ome of the lost investment,” Milosevic adds.
Milosevic does both group actions and class actions. But after bringing a class action for 170 people who had been defrauded by an investment advisor, decided that investor loss claims are often better as group actions. The trial judge dismissed the certification motion for failing to disclose a reasonable cause of action — a decision Milosevic successfully overturned at the Court of Appeal — but the class action was ultimately dismissed. He learned a hard lesson from the experience: there's just too much risk on these investment claims when it comes to trying to pursue them as a class action.
Class actions require establishing commonality, with the representative plaintiff’s circumstances substantially the same as everybody else. The defendants in this case argued they’re not common. Each person in the class had a different relationship with the advisor; the conversations weren’t the same; each person’s investment profile was different.
“My response was that it’s the same advisor telling them the same thing in order to defraud them in the same way — that makes it common,” Milosevic says. “But it’s up to court to find if it is or isn’t. Suddenly you’ve spent two years trying to certify it and you’ve got the group nowhere.”
Milosevic decided to run these cases as group claims over class actions and the biggest challenge, rather than fostering a hard-to-define energy among members — “There’s a spark to the groups that are good, that work, that recover; they come together fast, they’re motivated,” Milosevic explains — is the administrative side. Each person must sign individual retainers, details of their investment must be gathered, and settlement amounts must be tailored individually as well.
For Milosevic, the latter is a significant upside, allowing him to aggregate the amount better to individual losses.
“Although our staff is proficient it’s still a huge burden for the office, but I don’t care about the administrative headache,” Milosevic says. “Funding group claims is easier, it’s generally a better settlement situation, and the risk of lack of commonality in many of the cases I do is eliminated.” The case begins once its filed, and is not waiting a long time for a certification motion that may not succeed.
Litigation in the fraud context often involves Mareva injunctions up front. Meant to freeze the assets of the fraudsters, time is of the essence. Applied for via an ex-parte application, the lawyer must balance swift action with ensuring they’ve got all the facts.
For the first time, a Mareva injunction Milosevic brought was vacated recently because the client wasn’t upfront about receiving commission from referring friends and family to the person who was ultimately discovered to be a fraudster. A common occurrence in these investment frauds, victims often are embarrassed to share the full scope of the event. Viewed as a lack of disclosure, the Mareva injunction was set aside.
“I’ve been doing these professionally for two decades and last year alone, we did over a dozen of these injunctions — a lot for a small office,” Milosevic says. “The appearance of not having been completely above board with the court was a blow. These are delicate situations and a huge responsibility for the lawyers.”
Armed with years of experience as well as his cautionary tale, Milosevic is participating in an Ontario Bar Association professional development course on urgent injunctions on May 22. Viewing his responsibilities as a lawyer as two-fold — a duty to clients to act as an ethical conduit between the public and the justice system, and an obligation to the court as someone responsible for the administration of justice — something like a Mareva injunction engages both sides of the coin.
A Mareva injunction rests on a lawyer’s reputation before the court, with the judge relying on the lawyer to tell the truth, good and bad, of the case. Milosevic is eager to share with his colleagues his on-the-ground insights.
“I hope my war story will stand as a lesson when it comes to bringing these applications, so we continue to help justice and not hinder it,” he says. “It’s usually from our failures that we learn the most.”
Milosevic encourages fellow lawyers to lean into the education available on fraud because it’s not going anywhere. In fact, it’s only evolving. For example, the new frontier is crypto fraud which are increasingly sophisticated scams run by overseas criminal groups.
Though some of these frauds are quite large, there’s rarely anything to be done. Milosevic’s office fields 40-50 calls a week related to crypto scams, and while the person may have information such as a record of Bitcoin transactions, “we don’t know who holds the ultimate wallet — those funds are gone.”
Milosevic continues to set his sights and significant skill on combatting investment fraud on Canadian soil, talking to groups of comprised of hundreds of investors weekly. Draw to interesting fraud cases, he finds it satisfying to obtain settlements for those who have lost nearly everything.
“You do feel good as a lawyer, being able to recover a lot of money for a lot of people who otherwise have no recourse,” he sums up. “These cases are interesting to me, they're in the area I like, so it works well for me: we’ve got a great team of lawyers and admin staff who are all motivated to help; it is a challenging and satisfying area to work in.”
