High Court issues ground-breaking ‘persons unknown’ injunction in fraud case

Young: Creative approaches

The Commercial Court has issued what is believed to be the first worldwide freezing order over the assets of ‘persons unknown’ who committed a large-scale, international financial fraud via the internet.

One of a number of innovative approaches taken in the case, such injunctions have hitherto been used in trespass or online libel cases.

The order was made a year ago but only because public in the last few days in the trial of CMOC Sales & Marketing Ltd v Person Unknown & Ors [2018] EWHC 2230 (Comm).

His Honour Judge Waksman QC – sitting as a High Court judge – upheld the claims of the English subsidiary of China Molybdenum Company (CMOC) against 28 identified individuals and companies and against ‘persons unknown’ for the recovery of money stolen from CMOC through online fraud.

Noting that the defendants had barely engaged with the litigation, he ordered the repayment of the stolen money, and awarded damages of approximately £7m along with indemnity costs.

The freezing order “reflects the need for the procedural armoury of the court to be sufficient to meet the challenges posed by the modern electronic methods of communication and of doing business”, the judge said.

The case also saw the service of documents by an encrypted online data room, and by Facebook and WhatsApp.

CMOC was granted ground-breaking wide-ranging permission by the Commercial Court to enforce its freezing and disclosure orders globally.

The injunction and ancillary disclosure orders granted earlier this year required 35 international and overseas banks in at least 19 jurisdictions to freeze the assets of the fraudsters and the stolen funds, and to reveal the identity of the alleged fraudsters and the details of any onward transfers.

CMOC’s solicitors, specialist dispute resolution firm Cooke Young & Keidan, then used the details disclosed by banks to trace the stolen funds around the world and to identify the perpetrators and recipients of the funds.

The next stage in the case will be to enforce the judgment in various jurisdictions, as well as to undertake further investigation into the individuals involved. This has already led to criminal prosecutions in certain cases.

The judge praised CMOC and its lawyers for the way they have pursued the litigation: “[It] has been marked by (a) scrupulous attention to detail and to the requirements of the very many applicable procedural rules, and (b) rigorous observance of the obligations of material disclosure on the many without notice applications on the part of solicitors and counsel involved for the claimant, and the obligations of fair presentation otherwise, to which I have referred.

“There have been no short cuts taken and no glossing over of any problematic points. This is also the case for the trial itself.”

Cooke Young & Keidan partner Philip Young said: “Online crime of this kind is becoming increasingly common and it is not always easy to identify the perpetrators in order to serve an injunction upon them and to take effective steps to recover assets.

“We are very pleased that the Commercial Court was open to our creative approaches to tracing the funds and identifying the perpetrators and believe that this demonstrates the primacy of London as the leading jurisdiction of choice for effective dispute resolution globally.

“This position can only be reinforced by the Lord Chancellor’s recent announcement of a new fraud and cyber-crime court for London.”

The counsel team was led by Paul Lowenstein QC together with Philip Riches and Matthew McGhee, all of 20 Essex Street, and Philip Hinks of 3 Verulam Buildings.

Mr Lowenstein said: “This litigation demonstrates the willingness of the London Commercial Court to work with the victim of a novel form of cyber-fraud to provide effective and flexible remedies that allowed much of the stolen money to be rapidly frozen around the world, information regarding its whereabouts to be ordered from banks in many overseas jurisdictions and for a trial to be held within nine months of the start of the action”.

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