How have courts dealt with an application for special costs arising from an allegation of fraud?

In Ip v. Insurance Corp. of British Columbia (1994), 89 B.C.L.R. (2d) 251 (S.C.), Mr. Justice McKinnon dealt with an application for special costs. That case involved an allegation of fraud made by the defendant. The fraud was pleaded without foundation as found by the trial judge. At p. 253 of the decision, Mr. Justice McKinnon said this: I appreciate that the defendant is faced with many fraudulent claims and that it has a duty to refuse payment where reasonable grounds exist for so doing. An allegation of fraud, wilful misstatements, or other such claims made against a person casts a serious pall over his or her reputation in the community. Very careful consideration must be given by the defendant before making such serious allegations. At the very least, a prima facie case must exist and if it does not then special costs by way of "chastisement" is a reminder to the defendant to exercise better care in the future.