Civil Fraud Quarterly Round-Up: Q2 2016

14 July 2016

Contempt of Court

In the most recent instalment of JSC BTA Bank v Mukhtar Ablyazov the Court established a new weapon against fraudsters in respect of unlawful means conspiracy.  Such a claim requires some form of understanding between two or more people, an intention to injure, a form of concerted action using unlawful means which results in damage being caused to the person or entity targeted.  Mr Justice Teare’s decision of 11 February 2016, that contempt of court could constitute ‘unlawful means’ for the purpose of the tort of conspiracy to injure by unlawful means, provides a claimant with the ability to claim damages arising from that contempt by way of a claim in unlawful means conspiracy.  This decision is currently the subject of an appeal.

In the case of Navig8 Chemicals Pool Inc v (1) Nu Tek (HK) PVT Ltd (2) Inder Sharma (3) Murugaiyan Karthukeyan  the Court held that the purported resignation of the defendant company’s sole director was an attempt to evade an obligation on the part of the company to comply with the disclosure requirements of a worldwide freezing injunction.  The Court found that the two individuals who were registered as directors of the company, one at the time the injunction was made and the other appointed shortly after the injunction was made, must have known that they had a duty to comply with the order, including the disclosure requirements.  They were found to be in contempt of Court for failing to do so.  They were committed to custodial sentences despite being absent, on the basis that they had been notified of the hearing and failed to attend, suggesting that an adjournment would not be likely to secure their attendance.

Freezing Injunctions

The Court of Appeal decision of Interactive Technology Corp Ltd v Jonathan Ferster & 13 Ors  deals with the issue of material non-disclosure in the context of an application for a freezing injunction and the duty of full and frank disclosure such an application requires.  The Court looked at issues of non-disclosure and considered whether what was being complained of was sufficiently serious to warrant the setting aside of the freezing injunction.  The Court took into account the fact that the appellants had chosen not to apply for cross examination to test the evidence relied upon, and considered whether the documents which the respondent complained had not been included in the application for the freezing injunction were material to the fraud alleged.  The Court mentioned the fact that a letter which had not been disclosed was just one in a stream of correspondence and concluded that the non-disclosure was not sufficiently material as to set aside the freezing injunction.

Another recent case relating to freezing injunctions is Stewart v Franey & Ors  in which the Court had granted a proprietary freezing injunction over various properties in which the defendants were said to have an interest.  The defendants were allowed by the Court to raise funds against the properties to mount their defence as the Court was concerned that otherwise they would be prevented from properly defending themselves. 

There have been two early 2016 BVI decisions  confirming the BVI Court’s ability to grant stand-alone freezing injunctions (or ‘Black Swan’ orders) in support of foreign proceedings where no other relief is sought in the BVI.  Where there are assets in the BVI which might be used to satisfy a prospective foreign judgment, it may be possible to persuade the BVI Court to use its territorial jurisdiction to freeze those assets pending the outcome of proceedings elsewhere.

In Kazakhstan Kagazy plc & ors v  Bagland Abdullayevich Zhunus & ors  the Court considered whether two defendants could obtain a freezing injunction over the assets of a third co-defendant to support a contribution claim against him.  In this particular instance the defendants had not filed contribution notices at the same time as filing their defences and therefore required permission to do so.  The case was complicated by the fact that the co-defendant from whom a contribution was sought had reached a full and final settlement with the claimant.  The Court refused the application for permission to bring a contribution claim because the defendants were not willing to advance the case against the co-defendant themselves; they wished instead to rely on the case pleaded against the co-defendant in the (amended) particulars of claim. 

The Court found that a contribution notice which did not advance its own claim but instead sought to rely on the claimant’s case which was no longer being pursued could not succeed.  The Court therefore also refused the application for a freezing injunction on the basis that there was no accrued cause of action.


In Eng King Ltd & Ors v Vincent Petrillo  the Court considered the argument that proceedings brought in England and Wales should be set aside on the grounds that as the defendant was not resident here it was not the appropriate forum.  The Court’s decision to allow the English proceedings to continue took into account the fact that a person could be resident and domiciled in more than one country, and looked at whether the Defendant’s links to England had the necessary permanence to allow proceedings to be brought here.  The deciding factors were that throughout the course of the business entered into between the Claimant and the Defendant, the Defendant was contactable on an English mobile phone and landline, that he remained on the electoral role at a property in England and used that address for formal documents, that his Russian bank account was for a non-resident and showed regular transfers to UK accounts.  Also the case was about fraud and would require cross-examination of the parties.  Neither the directors of the Claimant nor the Defendant were native Russian speakers so it made more sense for cross-examination to be undertaken in English.

The importance of a carefully worded jurisdiction clause was highlighted in Perella Weinberg Partners UK LLP & Anor v Codere SA . In this case the Court decided that a clause stating that ‘for the benefit of’ one of the parties to a contract, the English Courts would have non-exclusive jurisdiction, was not an exclusive jurisdiction clause.


In Vincent Aziz Tchenguiz & Ors v Grant Thornton & Ors  the Court considered the wording of a settlement agreement and whether it might also compromise proceedings against a third party.  The Court found that whilst claims in misconduct or deliberate wrongdoing were not listed in the settlement agreement, that was because it was drafted to refer to subject areas rather than specific causes of action.  The misconduct and wrongdoing related to the subject area of the matters compromised and as such was caught by the settlement.  The Court commented on the fact that the parties had taken legal advice in drafting and entering into the settlement agreement and that the claims they now sought to pursue must have been within their contemplation.  This case highlights the need to consider any associated claims you might wish to preserve when entering into a settlement agreement, even if they relate to people or entities who are not party to the agreement.

Relief from Sanction

In Andrew Ian McTear & Anor v Michael Conrad Engelhard & 6 Ors  the Court of Appeal revisited issues of relief from sanction in respect of the late service of witness statements and failures in relation to disclosure.  The Court of Appeal’s decision focussed on the gravity of the allegations of breach of fiduciary duty against the former administrators of a company and found that where allegations involved such an attack on the integrity of the defendants, their explanations, in witness statement format, would be necessary for a fair trial and that it would not, therefore, be proportionate to exclude them from giving evidence.

Third Parties affected by Fraud

In Pioneer Co for Pharmaceuticals Industries v Al-Qerat  the Court held that a Norwich Pharmacal Order could be made against a third party bank on the basis that the Claimant had an arguable case that it was the victim of fraud and that the bank had received funds linked to the fraud.

Finally, there have been two recent developments in claims relating to solicitors caught up in mortgage fraud.  The first, Purrunsing v A’Court & Co  (discussed more here) was a claim for relief under s.61 Trustee Act.  There have been numerous cases considering breach of trust in fraudulent transactions, but this was the first decision in which both the vendor’s and the purchaser’s solicitors were found liable for breach of trust for the release of purchase monies in circumstances in which the transaction itself was a sham. 

In that respect the equitable duties owed by the vendor’s solicitor as trustee were extended beyond the contractual duties established by the retainer which did not establish a duty to the innocent purchaser.  The second case of Chief Land Registrar v Caffrey & Co  involved a firm of solicitors duped by their clients into providing false information to the Land Registry.  Master Matthews found that solicitors owed a duty of care to the Land Registry in respect of representations made in relation to documents submitted which were in fact forgeries.  

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