Civil Fraud Quarterly Round-Up: Q1 2019

4 April 2019

Freezing Injunctions

I have written about Kazakhstan Kagazy Plc & 5 Others v Baglan Abdullayevich Zhunus & Others on a number of previous occasions, most recently in my civil fraud case update Q2 2018.  In this new iteration of the long running litigation, charging and freezing orders were varied to permit the owners of properties to grant tenancies.  The use of rental income to fund legal costs was strictly prohibited on the basis that no evidence had been provided that the Applicants had no other source of income or funds which could be used to fund their defence to the charging order application.

The Court refused to make a freezing order in Khan & Anor v Five Rivers Haulage Ltd on the basis that the agreement which formed the subject of the dispute was entered into by the Applicants and the shareholder of the Defendant company, rather than the Defendant company itself.  As such the Applicants were not able to show a good arguable case against the Defendant company.

In Paul Charles Markham v Moira O’Hara (formerly Moira Karsten) the Court of Appeal considered whether the lower Court had been wrong to order only a partial and conditional discharge of a freezing order first made in 2009.  The Court of Appeal paid regard to the consideration that an injunction which had no further use should not be maintained, but nonetheless found that the requirements for the freezing order remained, including a real risk of dissipation of assets by a debtor who had previously ignored Court orders.

In my civil fraud case update Q2 2018 I discussed the case of Revenue & Customs Commissioners v Malde in relation to an unsuccessful application by the Defendant to discharge a freezing order made in 2015.  The most recent decision in this case involves the variation of the freezing order to allow the Defendant to spend up to £1.26 million on the refurbishment of his family home which had fallen into disrepair.


In an interesting decision for those representing victims of mandate fraud, the Court in Nigeria v JP Morgan Chase Bank NA considered the circumstances in which a bank owed a Quincecare duty of care to refrain from withdrawing funds from a customer’s account where there were reasonable grounds to believe that the payment was part of a scheme to defraud the customer.  The Court found that there was no duty to make enquiries prior to having reasonable grounds for believing that fraud was at play.  However, the duty of care owed by the bank to its customer was to decline payment until any reasonable grounds for suspecting fraud had been satisfied.  This applied regardless of whether the account was a depository or current account.

The Court of Appeal looked at the nature of a bank/customer relationship in First City Monument Bank plc v Zumax Nigeria and declined to uphold the imposition of an express or Quistclose trust in favour of the intended recipient of transferred funds.  The fact that a bank transfer had been carried out for a reason did not mean it was intended to create a trust.

In Elite Property Holdings Ltd & Anor v Barclays Bank plc the Court of Appeal upheld the dismissal of applications to amend particulars of claim to include pleadings in unlawful means conspiracy as a fresh cause of action against the Defendant bank.  The Claimant companies had already entered into a settlement agreement with the Defendant bank relating to missold interest rate hedging products.  The settlement agreement included a definition of “claim” wide enough to cover the claim in unlawful means conspiracy that the Claimants sought to bring.  Further, the Claimants had not made out the essential elements of a claim for unlawful means conspiracy.  The Claimants therefore had no real prospect of success in respect of that claim.

Judgments, decisions and allegations of fraud

I first discussed the case of Takhar v Gracefield Developments Ltd & Others in my civil fraud case update Q1 2017.  This case was referred to the Supreme Court to consider whether a judgment could be set aside on the basis that it was obtained through fraud and whether there was a requirement for a degree of due diligence to be undertaken at the time of the initial trial in respect of the veracity of documents.  The Supreme Court found that: on a public policy basis, people should not have to arrange their affairs on the assumption that others would commit fraud.  It was not in the public interest for a fraudster to benefit from a lack of reasonable diligence.  To allow a judgment to survive in circumstances in which it had been obtained through fraud would allow a fraudster to get away with deceiving both the Court and the rule of law.  However, where fraud had been raised at the original trial and an application to set aside judgment was made on the grounds of new evidence, a Court considering that new evidence would have discretion to decide how to proceed.

The Court in Brearley & Others v Higgs & Sons (a firm) looked at whether a defence referring to (rather than making) allegations of fraud made against the Claimant in separate proceedings needed to state whether the Defendant made a positive assertion of the truth of those allegations.  It was held that the truth of the allegations was something which could be determined by the trial judge based on the evidence available.

In Simer Kaur Dhillon v (1) Barclays Bank plc (2) Chief Land Registrar the Claimant was seeking to rectify title to a property by removing a charge registered against the title.  Her request was based on an allegation that the charge had only been registered following a transfer of the property which was completed on the basis of transfer documents which were forged.  The Court considered whether the charge should be removed or whether there were exceptional circumstances to refuse such an application.  The Claimant’s application to remove the charge could only succeed if she adopted and relied on a document which was a forgery and which she stated she had never seen before.  Further, she would be put in a better position than she would have been in had the fraud not taken place.  By leaving the charge in place, the Claimant was left in approximately the same position she would have been in had there been no fraud.  The Court found that whilst the Claimant had the locus to apply to alter the register, there were exceptional circumstances to justify a decision not to remove the charge.


In (1) Atlantica Holdings Inc (2) Baltica Investment Holding Inc (3) Blu Funds Inc v (1) Sovereign Wealth Fund Samruk-Kazyna JSC (2) BTA Bank JSC (Defendants) & (1) Pavel Prosyankin (2) John Howell (Applicants/Third Parties)  the Court refused an application to set aside an order that UK-resident third parties to US fraud proceedings be orally examined under oath.  There was no oppression and there were good reasons for international cooperation on cases of international fraud.

Transactions defrauding creditors

The Court of Appeal gave a decision in the case of Sequana –v- (1) BAT Industries plc & Others dismissing the appeal that payment of a dividend by a company can be challenged under s.423 Insolvency Act 1986.  In particular, there is nothing in the wording of s.423 which prevents it being applied to dividends.

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