Civil Fraud Quarterly Round-Up: Q3 2017

9 October 2017

Freezing injunctions

The claimant in Kahlbetzer v VFX Financial Plc & Another sought the continuation of a freezing injunction in circumstances in which he had been defrauded by an email fraud resulting in him transferring US$1 million to an account held by a currency trading firm of which the defendant was a beneficiary.  The defendant admitted to being involved in dissipating the funds transferred into the account but claimed to have done so innocently, although his explanation was disputed by the claimant.  There was a strong likelihood that the defendant was not an innocent party which provided a risk of dissipation of assets. The defendant had also attempted to withdraw £6,000 from the account which demonstrated a potential to disregard court orders. The injunction was therefore continued. 

In my article Testing Times  I discussed the case of Ras Al Khaimah Investment Authority & Others v Bestfort Development LLP & Others in which the Court of Appeal considered what test should be applied to determine whether a respondent has sufficient assets to justify a freezing injunction.  The Court accepted that an applicant cannot always be expected to know exactly what assets are held by a respondent and that grounds for believing that assets exist would be sufficient.  In the case itself the Court of Appeal over-ruled a refusal of the lower court and granted injunctions in respect of those respondents for whom there was evidence of assets on which a freezing injunction could bite.

Fraud and Banking

In Chudley v Clydesdale Bank plc (t/a Yorkshire Bank) the Commercial Court considered whether a defendant bank was liable to investors for losses arising out of a fraudulent property development scheme.  The defendant’s involvement in the scheme was that the fraudsters operated an account with the defendant into which the investors’ money was paid.   The Court found that:

  • There had been no breach of contract and that the investors had failed to show a loss on a balance of probabilities or loss of chance analysis;
  • The necessary proximity between the defendant bank and investors which would have imposed a duty of care did not exist and there could therefore be no claim in negligent misrepresentation;
  • There had been no intention to create a trust and, even if there had been, the trustee would have been the company in whose name the account was set up, not the defendant bank, so there could have been no breach of trust on the part of the defendant;
  • The employee of the defendant bank who had provided references for some of the fraudsters had been foolish but not dishonest and there was not enough evidence to make out a claim for dishonest assistance; and
  • There had been no reliance on a letter of intention provided by the defendant bank, nor had the defendant been enriched so the investors were not entitled to restitution by the defendant.


In the case of Sabbagh v Khoury the Court of Appeal considered (obiter) that when exercising jurisdiction under Article 8(1) of the Brussels I (Recast) Regulation (1215/2012) (formerly Article 6(1) of Regulation 44/2001) it was necessary to consider the merits of the claim against an ‘anchor defendant’ whose domicile in a Member State will allow a claim to be brought in that country.  The discussion was obiter as the appeal itself was against a judgment that one part of the appellant’s case did not have prospects of success.  The appeal was successful.  The majority obiter decision of the Court of Appeal was that where the claim against the anchor defendant did not have good prospects of success the Court should consider it a strategy to oust the co-defendants from their jurisdictions and that this should not be permitted.  In such circumstances the foreign defendants should be sued in their country of domicile.

Committal and Contempt of Court

In Patel v Patel & Others the Court found that there was no reason to stay committal proceedings simply because there were also criminal proceedings underway.  The Court considered whether there was any benefit or reason for the various cases in which the respondent was involved to be dealt with in any particular order.  The Court found that there could be no prejudice simply because the respondent was fighting several claims at once, particularly where they were not listed to be heard concurrently.  Whilst there was an overlap of issues between the criminal proceedings and the contempt proceedings that did not justify staying the contempt proceedings to allow the criminal proceedings to be heard first and there would be no specific prejudice caused by the contempt proceedings being heard first.

In Baz v Singapore Airlines the Court of Appeal considered an appeal against a suspended committal order made after the appellant failed to attend an oral examination listed in order to provide information for the enforcement of a costs order against her.  The appellant had not had the opportunity to take legal advice or be informed of the possibility of legal aid.  The committal order had been granted as if it was part of a routine matter and the rules set out in CPR Part 81 should not have been circumvented.  The defects were fatal to the order, the appeal was allowed and the matter remitted to the lower Court.

Accident Exchange Ltd v Broom provides a cautionary tale for expert witnesses.  The claimant insurer applied to commit the seven defendants for contempt following a systematic and endemic fabrication of evidence in road traffic claims.  The defendants were involved in the provision of evidence of daily car hire rates.  Some of the defendants had verified documents when they knew they were false, others had given false evidence in court.  Whilst the loss involved in each case was relatively small, the total loss suffered by the claimant as a result of the defendants’ provision of false evidence was estimated to be more than £100million.  The sentencing was fact specific and ranged from 10 months to 13 months and one week.  It is worth noting that a separate civil claim has also been brought.

Solicitors and Fraudulent Transactions

The Court of Appeal case of Main & Others v Giambrone & Law (a Firm) & Others is an interesting case relating to the scope of a solicitor's duty when acting on a property transaction.  In this particular case the transactions in question were the purchase, by English and Irish investors, of holiday properties on the Italian coast in Calabria.  The property development was seized by the Italian authorities on suspicion of money-laundering and links to organised crime.  At first instance Giambrone, the Anglo/Italian solicitors who acted for the investors, were found to have been in breach of trust by releasing the investors' deposits without ensuring suitable guarantees were in place, and in breach of their duties to investors by failing to disclose the level of commission paid to introducers.  The Court also found that Giambrone should have undertaken enhanced due diligence in respect of planning permission and should have warned investors about the risk of criminal activity in the construction industry in Calabria.  The Court of Appeal upheld the first instance decision, including an award of equitable compensation for the breach of trust.  Whilst this is an unusual case and in many respects will be limited by its facts, it will be helpful for victims of property development scams to have a decision concluding that a firm of solicitors instructed by a group of investors had a duty to warn about possible criminal activity.

Fraud exceptions in contracts

In O3B Africa Ltd v Interactive E-Solutions JLT the Court considered the wording of a fraud exception in a contract.  The claimant had brought a claim for unpaid invoices and the defendant in its defence and counterclaim attempted to show that a clause in the contract limiting the scope of the defendant’s remedies did not apply because there had been a fraud.  The case was decided on the facts, but the Court confirmed that to rely on the fraud exception the defendant’s pleadings would have to disclose the basis of a fraud claim such as a cause of action in deceit or fraudulent misrepresentation.  To trigger the fraud exception in the contract required a cause of action in fraud rather than a mere allegation of dishonesty.


The claimant in Guiseppe Conte v National Westminster Bank plc applied to set aside a registered charge over his property on the basis that his signature had been forged, or on the grounds of non est factum, or on the grounds of undue influence or as a result of fraud.    The claimant had approached the defendant bank and was aware of the nature of the transaction.  There was no evidence of forgery and there was nothing to suggest that the claimant did not know what the charge was when he signed it.  Whilst the claimant might have been reluctant to sign the charge there was nothing to suggest that there had been a fraud or any other wrongdoing, nor that the defendant bank had notice of any wrongdoing.

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