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Injunctions against persons unknown – use in fraud cases

We reported in our September 2019 edition (p25) about the use of injunctions against persons unknown as a potential remedy in trespass cases. An article discusses the use of this remedy in a recent case involving ‘push payment fraud’.
 
Payments are described as push payments when the payer obtains the payee’s account details and instructs their bank or other payment service provider to send (‘push’) money into it. A push payment fraud will therefore involve the fraudster persuading the customer/victim to organise a transfer from its account to the fraudster’s account. A freezing order is an injunction which restrains a defendant or potential defendant from disposing of or dissipating assets. It is typically obtained by a claimant who wishes to ensure that a potential defendant’s assets remain available pending the enforcement of a court judgment. Freezing orders have a restrictive impact, thus there are strict requirements as to when the court will issue one:
  • the applicant must have a substantial cause of action against the defendant;
  • the applicant must have a good arguable case;
  • there must be a real risk of dissipation of assets; and
  • it must be just and convenient to grant a freezing order bearing in mind the conduct of the applicant, the rights of any third parties who may be affected and whether such an order would cause legitimate and disproportionate hardship for the respondent.

In a recent case, the claimant received two legitimate invoices and several legitimate emails relating to outstanding payments from a long-standing supplier. An unknown individual hacked the email account of the supplier and sent several fake emails purporting to be from the supplier. The result was that the claimant sent €1.5m and €500,000 to the fraudster. Upon realising the fraud, the company recalled the €1.5m but not the €500,000. It then issued an urgent claim for the €500,000 and applied for a freezing order in respect of the fraudster’s bank accounts. The court granted an urgent interim freezing injunction as the claimant had met the requirements above.

 
The name of the fraudster was not known at the outset but the person was clearly identifiable as the beneficiary of the bank account to which the payments were made. The identification of the fraudster and his address was discovered which enabled the named fraudster to be added as a known defendant to the substantive claim. Soon after the freezing injunction, and directly as a result of the assets having been frozen and the fraudster identified, HC granted default judgment in the claimant’s favour declaring that all sums held by the respondent as a result of his fraud must be returned to the claimant within 14 days.
 
The practical steps that any fraud victim should take are:
  • In addition to following any internal incident management regime, victims should immediately notify the police. They may be able to recover stolen money and take criminal action against the fraudsters.
  • It may be necessary to notify any insurer, other interested parties and/or any industry representative body.
  • Practitioners should consider requesting an order from the court requiring disclosure of assets to be provided by the suspected fraudsters.
  • Victims should also consider a range of remedies that may be available to them including: the possibility of fraud, breach of contract, negligence, breach of trust, unjust enrichment and/or tracing claims. Any such claim could mitigate any losses and potentially help to recover lost funds.
Source: [2019] 86 Commercial Litigation Journal 20 and see World Proteins v Persons Unknown [2019] 4 WLUK 35.

 

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