Civil Fraud Quarterly Round-Up: Q3 2024

This quarterly civil fraud update provides a summary of reported decisions handed down in the courts of England and Wales in the period of July - September 2024.
 

Bribery

The Claimant in Mozambique v Credit Suisse International and others succeeded in its claims for recovery of losses from a Lebanese businessman and his companies it alleged arose from guarantees entered into as a result of bribes.  The relevant defendants were liable for what the Claimant had had to pay under the guarantees, and to indemnify the Claimant for future payments.

Contempt

The Defendant in Hutchcroft v Barrett (which I first discussed in my Civil Fraud Case update Q4 2021) was found to be in contempt of Court where she had deliberately provided false information under oath in CPR Part 71 proceedings and submitted an agreement featuring a forged signature.

Crypto

In D’Aloia v Persons Unknown the Court considered the law on tracing and constructive trusts in respect of crypto exchanges.  The Claimant alleged that assets had ended up in a wallet operated by the Defendant exchange.  However, the Court was not convinced by the evidence presented that the Claimant was able to trace his assets into that wallet or that the Claimant could demonstrate equitable title to the assets in the wallet.  Further, if a constructive trust arose, the Defendant exchange was not the trustee, and this was fatal to the claim.

Fraudulent Misrepresentation

The Claimants in Njord Partners SMA-Seal LP v Astir Maritime Ltd succeeded in their claims in deceit and unlawful means conspiracy (for a discussion of the freezing injunction obtained in the same case see my Civil Fraud Case update Q4 2020).  The Defendants were found to have given an inflated statement of net worth, on which the Claimants had relied in accepting a personal guarantee.  The Defendants had also made representations about the reasons why repayment had not been made on which the Claimants had relied in deciding not to take immediate action to suspend the facility. 

The Court of Appeal in Riley v National Westminster Bank Plc considered whether a settlement deed entered into between the parties had the effect of barring a later claim for fraudulent misrepresentation.  The Court at first instance had concluded that, although the settlement deed did not specifically compromise claims of fraud, the misrepresentations complained of were caught by the wide wording of deliberate wrongdoing in the deed.  The Court of Appeal upheld the decision: a settlement agreement which covered all present or future claims, known or unknown might involve giving up causes of action about which the parties were unaware.  It was not the Court’s duty to re-open bargains freely entered into by parties.

Freezing Injunctions

The Court in Apparel FZCO v Iqbal set aside a freezing order as a result of failures of full and frank disclosure and refused to reinstate it on the basis that there was no good arguable case.  The Court commented that neither the affidavit nor the skeleton argument presented the evidence in a fair and even-handed basis.  The affidavit did not distinguish between facts and inferences, and the skeleton argument did not have a section on full and frank disclosure, which the Court commented, was almost universal practice in without notice applications.

The Court continued a worldwide freezing order in Canada Inc v Sovereign Finance Holdings Ltd.  The Respondent had failed to make payment under a settlement agreement and to pay a judgment debt, as well as failing to provide asset disclosure when ordered to do so.  The Court considered factors which might indicate a risk of dissipation including a history of dishonesty, non-payment and the existence of complicated financial structures. 

The Court in LAX SA v JBC SA was asked to consider whether to continue a freezing order where the Applicant had not been able to fortify its cross undertaking in damages.  The Court considered the imbalance of information which arises where an injunction is obtained, including the standard asset disclosure obligations.  Rather than requiring fortification in circumstances in which evidence had been given that the Applicant was unable to do so as a result of financial restructuring, the Court ordered that the Applicant provide various asset disclosures by a certain deadline, absent which the injunction would be set aside.

In Mex Group Worldwide Ltd v Ford the Court of Appeal rejected an appeal against the setting aside of the Appellant’s freezing injunction.  There was evidence of a risk of dissipation, and both parties had a good arguable case which should be determined at trial.  Nonetheless, the Court of Appeal found that the first instance judge was entitled to find that there had been material non-disclosure of sufficient gravity to set aside the order, including in respect of the timing of the underlying proceedings (for a wider discussion on this topic please see our blog on material non-disclosure)  Further, the application had been made under s.25 of the Civil Jurisdiction and Judgments Act 1982 in support of proceedings in Scotland.  The first part of the test under s.25 had been satisfied: the facts alleged would warrant the relief sought if the case had been brought in England.  However, the lack of any connecting link to England (the Appellant was based in Hong Kong and the Respondents had no assets or presence in England) meant there was no good reason for the English Court to intervene.

The consequences of failing to comply with a freezing order can be seen in the decision in Ahmad v Ouajjou.  The Court made an unless order compelling the Defendants to pay a costs order made in committal proceedings following numerous admitted breaches of a freezing order.  Absent payment, the Defendants’ defence and counterclaim would be struck out.

The costs aspect of a freezing order was also considered in Cancrie Investments Ltd v Haider.  The Court confirmed that the correct approach to costs was that a costs order should be made following the return date/hearing of a continuation application, but that the costs of the without notice hearing should be reserved.  The alternative, where all costs were reserved gave a Respondent the ability to run up costs with a potentially unreasonable challenge at the return date without having to face costs consequences until much later.

As mentioned in my Civil Fraud Case update Q1 2024 the Court of Appeal in Dos Santos v Unitel SA has now considered the correct test to be applied when considering an application for a freezing order and concluded that it would be preferable to use “serious issue to be tried”, leaving the terminology of a “good arguable case” to be used in the context of jurisdictional gateways.

In Uconinvest LLC v Jysan Holding LLC the Court refused to stay proceedings on the basis that even where the parties were bound by arbitration clauses, the issues in dispute did not fall under the agreements containing those clauses.  The Court also set aside freezing orders on the basis of a failure of full and frank disclosure.  The position put before the Court at the without notice hearing was selective and favourable to the petitioner.  A more limited order was re-granted for a smaller sum against one of the Respondents.

A worldwide freezing order was granted against Dr Craig Wright in respect of costs orders awarded against him in the defamation proceedings he brought in Wright v McCormack.  The Court also set aside various interim costs orders which had been made in favour of Dr Wright on the basis that they were founded on his claim to be Satoshi Nakamoto which had been found to be false (for more information about that claim please see our blog about COPA v Craig Wright).

Partnership

In Hamilton v Barrow the Court of Appeal dismissed an appeal against a decision that the parties involved in running a failed investment scheme were in partnership with one another, considering issues such as how the scheme was run, how profits were dealt with and the frequency of certain meetings.  As partners they were therefore jointly and severally liable for damages payable to an individual investor in the failed scheme.

Privilege

In McGuiness v Mawer the Respondent to an application for permission to bring committal proceedings was ordered to disclose various documents setting out advice received, which apparently explained the inclusion of false evidence in a witness statement.  By placing reliance on and advancing a positive case as to the nature of the advice, the Respondent had waived privilege.

Proceeds of Crime

In National Crime Agency v Nuttall the Court made an order that funds in three bank accounts could be treated as recoverable property under the Proceeds of Crime Act 2002.  The Court found that it was sufficient for the NCA to show, on the balance of probabilities, the unlawful conduct by which the funds had been obtained.

Proprietary Injunctions

The Court continued a proprietary injunction in Gill v Kaur in order to preserve assets which were the subject of proceedings in Texas.  There was no risk of inconsistency or overlap of orders, there was a serious issue to be tried, and damages would not be an adequate remedy.

Unlawful Means Conspiracy

In 4VVV v Spence (which I first discussed in my Civil Fraud Case update Q3 2022) the Court entered judgment in favour of the Claimants.  The Defendants had deliberately or recklessly made false representations of fact about an investment scheme they were running, with the intention that they be relied on.  The promised returns were unachievable, the track record of parties involved was false and the promise of buy-back was misleading.  The scheme was a collective investment scheme and the Defendants were not authorised.  The investors were therefore entitled to either recover the outlay or enforce the agreements they had entered into.

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.