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Civil Fraud Quarterly Round-Up: Q4 2021
This quarterly civil fraud update provides a summary of reported decisions handed down in the courts of England and Wales in the period January - March 2022.
The Court of Appeal in Tuke v Hood looked at whether the “time value” of cash received could be taken into account when calculating damages as a victim of fraud. The underlying case involved the sale of valuable cars at an undervalue as a result of various fraudulent inducements made by the Appellant. The Appellant appealed against a decision that the notional benefit of receiving cash should have been taken into account and calculated in the same way as an award of interest. The appeal was dismissed: the time at which credit was to be given for benefits received was normally the date of the fraudulent transaction (unless that would overcompensate the victim). There was no link between the “time value” as proposed and either the date of the transaction or the date of trial. The Court of Appeal also commented that there were public policy reasons to reject the appeal as it would have the effect of reducing the amount of damages recoverable the longer a fraud went undetected, therefore allowing a fraudster to benefit from concealment of the fraud, and would be contrary to the policy of seeking to award full compensation to victims in cases involving dishonesty.
In Business Mortgage Finance 4 Plc v Hussain the Court dispensed with requirements under CPR Part 81 to display a penal notice prominently on the front page of an injunction and granted retrospective permission to dispense with personal service where there was no prejudice or injustice to the Defendant in doing so. The Claimants applied for the Defendant’s committal for contempt of court for breaches of an injunction and in so doing applied to remedy the procedural errors. The Court found that although there was no express power in the new Part 81, there had been such a power under the old rules and it would be contrary to the over-riding objective for an otherwise compliant application to be defeated by a procedural error which caused no injustice. Part 81 contained a power to dispense with personal service and there was no reason to treat that power as only applicable to cases where an application to dispense was made before the application for committal.
The Court extended the period of suspension of a sentence in Dattani v Rasheed (discussed in my Civil Fraud Quarterly Round Up: Q4 2021) notwithstanding the Defendant’s continued non-compliance with an order, to allow him to receive fast track treatment for cancer. The Defendant’s case was assisted by the fact that bank statements sought by the Claimant had been made available.
In Ocado Group Plc v McKeeve (mentioned in my Civil Fraud Quarterly Round Up: Q1 2021) the Claimant wished to cross examine witnesses, who were employees of the Defendants (and therefore not likely to agree to assist the Claimant), in the committal proceedings. However, if the Claimant called those witnesses it would fall foul of the usual rule that it accepted their evidence meaning cross-examination would not be available. The Court held that it had the power under Rule 81.7 in committal proceedings, to compel witnesses to attend for cross-examination.
The Court considered allegations of forgery, deceit, unlawful means conspiracy, procuring breach of contract and knowing receipt in the case of ED&F Man Capital Markets v Come Harvest Holdings Ltd. The allegations involved the use of forged warehouse receipts and the Claimant, having been granted judgment, was entitled to a declaration that it had rescinded various contracts. Further, the corporate defendant was found to have been sufficiently aware of the fraud, through its employees, and could properly be said to have been acting with them to facilitate a fraudulent scheme. The claim in knowing receipt failed: it was not possible to make out a retrospective claim for knowing receipt of trust property where the trust did not arise until rescission of the contracts.
Permission to appeal was granted in Salfiti v Seedo where a Judge had failed to explain findings of fact in a claim against a solicitor for fraudulent misrepresentation. The Judge might have given too much weight to recollections when documentary evidence was a more reliable guide to the truth. There was a real doubt about whether the evidence had been properly weighed.
In State Bank of India v Mallya discussed previously in my Civil Fraud Quarterly Round Up: Q2 2018) the Court allowed assets which might have been caught by a freezing injunction to be realised. Whilst the transactions were not in the ordinary course of business of the company, they were not a dissipation of assets, but were being transferred into another form of asset.
In Gupta v Shah the Court declined to make unless orders to compel compliance with disclosure orders contained in a freezing injunction on the basis that it was disproportionate in circumstances in which contempt proceedings were already underway and other remedies (such as cross examination) were available and where the information sought had already been provided by a third party.
The Court continued a freezing injunction in Ngubeni v LJC & TN Accounting Services Ltd. Although there were potential disputes about who should properly be party to the claim, there was a serious issue to be tried, a risk of dissipation of assets and a risk that any judgment entered would go unsatisfied.
In Saka Maka 2 Ltd, Re the Court considered the issue of costs following the continuation of a freezing injunction. The freezing injunction and return date were treated separately for the purpose of costs with the costs of the freezing injunction reserved to trial (as they could reasonably be affected by the issues at and outcome of trial) and the costs of the return date assessed summarily on a standard basis.
The Court in Bacci v Green ordered a bankrupt Defendant to delegate certain rights over a pension scheme to Claimants whom he had defrauded and who had the benefit of a judgment debt against him. Those rights included the ability to call for a pension commencement lump sum, a lifetime allowance excess lump sum and a pension from the remaining funds.
In Kireeva v Bedzhamov, Vneshprombank LLC v Bedzhamov, Basel Properties Ltd v Kireeva (mentioned in Civil Fraud Quarterly Round Ups: Q4 2019 and Q2 2021) the Court of Appeal found that it had been wrong to recognise a Russian bankruptcy order at common law and the receiver appointed under the order as trustee in bankruptcy in relation to property in the UK where the bankrupt alleged that the order had been obtained by fraud. The bankrupt should have been cross-examined on his account. However, the decision not to vest the UK property in the receiver/trustee in bankruptcy was upheld: whilst relief for a foreign office holder in respect of immovable property was available under the Insolvency Act, that relief depended on statutory powers rather than under common law which was how the receiver/trustee was recognised in this case.
The Court was asked to consider whether the iniquity exception to privilege applied in Candey Limited v (1) Basem Bosheh (2) Amjad Salfiti. The Claimant sued its former client for fraud and breach of a conditional fee agreement (which related to a case discussed in my Civil Fraud Quarterly Round Up: Q4 2018) and sought to rely on documents from its file which would otherwise be treated as confidential and subject to privilege. The Court refused to allow use of the documents, confirming that even if a client deceived their solicitor, that did not mean the communications were made other than in the ordinary course of the professional engagement such that the solicitor/client relationship was abused and privilege would be negated. The Court struck out the privileged material from the Claimant’s witness statements and particulars of claim.
The Court of Appeal ruled in Philipp v Barclays Bank UK Plc (first discussed in my Civil Fraud Quarterly Round Up: Q1 2021) that the Quincecare duty to refrain from acting on a payment instruction where the bank was on inquiry of an attempt to misappropriate funds applied to a customer giving instructions in respect of their own account where they were a victim of Authorised Push Payment fraud as it did to an agent of a customer. The extension of the duty was neither onerous nor unworkable according to evidence filed by the Consumers’ Association (as intervener). The issue of whether that duty arose in this particular case was one which should be decided at trial.
The Court of Appeal also allowed the appeal in Skatteforvaltningen (Danish Customs and Tax Divisions) v Solo Capital Partners LLP (in Special Administration) (see previous discussion in my Civil Fraud Quarterly Round Up: Q2 2021) finding that the claim to recover tax refunds which were alleged to have been induced by fraudulent misrepresentations was an attempt by a victim of fraud to recover monies of which it had been defrauded rather than a claim to enforce a foreign tax law. The claim did not, therefore, fall foul of Dicey Rule 3 as found by the lower Court.
In Tulip Trading Ltd v Bitcoin Association for BSV the Court considered the correct approach to security for costs against an impecunious party. The starting point in impecuniosity cases was to evaluate the amount that the successful party was likely to recover on detailed assessment. The Court was not in a position to hear detailed argument about the merits of the claim and could not determine whether there was a real possibility of an indemnity costs award. The Court found that in this case the appropriate amount of security was 70%. However, the Court refused to order that security be provided in the form of crypto assets even where that would be least onerous to the Claimant: the provision of crypto assets was no equal to the provision of a payment into Court or a guarantee. In particular the Court could take into account the volatility in the value of a crypto asset such as Bitcoin.
About the author
Mary Young is a Partner in the Dispute Resolution team. Her practice covers a wide range of areas but Mary’s particular interests and expertise lie in civil fraud and asset tracing as well as claims against professionals in negligence, breach of fiduciary duty and breach of trust.
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