What if a fraud victim obtains or is in possession of an audio recording, obtained improperly, which contains information that the victim believes proves a civil fraud has been committed? Will the Court allow such material to be admitted as evidence in support of the victim’s fraud claim?
We advised an individual who believed that they were investing in a property investment scheme that offered an alleged significant 20% return of investment within one year. The scheme allegedly operated by receiving monies from investors to build luxury residential properties, with the sale proceeds to then be distributed accordingly. In reality, the individual was misled in relation to the existence of the scheme and alleged return on investment.
The individual believed that they were making a sound financial investment for their family’s future that could not be matched with “high street” investment schemes. The initial investment was successful, and the individual received positive financial returns. This led the individual to being lulled into a false sense of security and reinvesting the initial returns, together with further money, into a further three alleged property investments.
It transpired that the further properties did not exist. It was a sham. Advice was provided in relation to their options for recovery which were founded in negligent/fraudulent misrepresentation.
We prepared pre-action correspondence alleging fraud against those individuals operating the company that was alleged to have misled our client dishonestly about the scheme. After a relatively short period of exchange of correspondence, the individual was able to recover a large proportion of the money they had invested in the scheme.
In 2017, the British Standards Institution (“BSI”) launched a code of practice for financial institutions (including banks) that sought to give recommendations to organisations for protecting vulnerable customers from financial harm. Whilst a breach of the protocol may not mean immediate reimbursement by an organisation it is certainly a helpful indicator of what standards they are expected to meet and a weapon in your arsenal if you can show breaches.
On 19 November 2020 the High Court handed down judgment in the application of I.F.T. S.A.L. Offshore [2020] EWHC 3125. This application concerned an authorised push payment where the victim had sought to obtain information from the fraudsters bank about the accounts to which the money had been inadvertently transferred.
An application was made against the bank to obtain disclosure to allow the victim to pursue the unknown fraudsters. This was made under the Norwich Pharmacal and Bankers Trust jurisdictions.Where a party receives a Norwich Pharmacal Order they are required to provide certain documents or information specified in the court order to the applicant. This application is not generally available against a respondent who is likely to be a party to the potential proceedings.
Upon receipt of the disclosure it became apparent that there was a case against the bank but under the terms of the order the victim was precluded from using the disclosure provided to pursue a claim against the bank.
I.F.T .S.A.L. Offshore made an application to vary the terms of the order so that they could use the disclosure against the bank. This was resisted by the bank but was granted by the court.
In our article “Fraud unravels all…?” (https://tenetlaw.co.uk/articles/fraud-unravels-all/) we considered the decision of the Supreme Court in Takhar v Gracefield Developments Ltd and others [2019] UKSC 13 (20 March 2019) where the Court sought to balance two conflicting principles of legal policy, namely that fraud unravels all, and that there must be a finality to litigation. The resulting judgment was a welcome clarification of when a judgment can be set aside for fraud. The High Court has now considered the correct test to be applied when assessing materiality, resulting in the judgment finally being set aside (Takhar v Gracefield Developments Ltd and others [2020] EWHC 2791 (Ch)).
We’re delighted that Tenet has been named as runner up in the Clio Reisman Awards 2020 for Legal Innovation, and that Tenet’s founder, Arun Chauhan, has been highly commended in the Sole Practitioner of the Year Award in the Law Society Excellence Awards 2020.
The Clio Reisman Awards celebrate excellence and innovation within the legal profession, recognising practitioners internationally for their contribution to the field.
The Law Society’s Sole Practitioner of the Year award also commends innovative and pioneering practitioners, who bolster new and unique ways of working within the legal industry.
The recent case of Hickox v Dickinson & Anor [2020] EWHC 2520 (Ch) considers the requirements for obtaining a Norwich Pharmacal order (“NPO”). The ability of the court to make such an order remains an exceptional jurisdiction, and the courts are alive to the need to prevent mere “fishing expeditions”. The judge gave welcome guidance on the requirement of a “good arguable case” of wrongdoing.
The claimant was a first-time purchaser of a property in London. He was also a cash buyer, using savings he had accumulated over a number of years. Despite these obvious vulnerabilities, his conveyancing solicitors (the defendant in this case) did not take the time to find out how much he knew about the conveyancing process or talk him through it. He never met his solicitor in person and had few phone calls; the majority of the transaction was conducted by email.
Unbeknown to the claimant, the defendant’s computer system had been hacked. A fraudster was intercepting emails and impersonating the defendant and its clients in communications with each other. The fraudster had set up email addresses which at first blush looked the same as the genuine email addresses of the claimant and the solicitor firm. However on closer inspection they were very slightly different with two letters having been swapped around.
The defendant was on notice that this had happened to two clients already, however they failed to alert their other clients and tell them to be vigilant. Instead, the defendant (having failed to double-check the recipient’s email address) sent an email about where the purchase money should be sent to the fraudster who was impersonating the claimant. The fraudster then emailed the claimant pretending to be the defendant and persuaded him to pay the purchase money of in excess of £400,000 to a bank account in Hong Kong which was controlled by the fraudster. This money was never recovered.
The claimant brought a claim for professional negligence, alleging that the defendant had failed to exercise reasonable vigilance for detecting fraud, failed to provide advice about the conveyancing process and where money should be paid to, failed to provide any advice about cyber fraud and how it might materialise in a property transaction, and failed to warn the claimant that there was a fraudster at large. The defendant similarly blamed the claimant for failing to exercise vigilance for fraud and also blamed its own IT contractors who had advised the defendant solicitor firm incorrectly that it was several of the defendants’ clients who had been hacked and not the defendant itself – a conclusion that the defendant should have challenged given the enormous coincidence.
We were confident that our client would succeed at trial, albeit it was likely that the court would make a deduction from his damages to reflect the extent to which he was the author of his own misfortune in not, for example, picking up the phone to the defendant before transferring the purchase money to Hong Kong. The claim was resolved in a confidential settlement with our client receiving a substantial amount of money.
In a recent article, we considered the requirements for pleading dishonesty against a corporate body. The Court of Appeal has recently considered the standard of proof for dishonesty in the case of Bank St Petersburg PJSC v Arkhangelsky [2020] EWCA Civ 408 which resulted in the reversal of the High Court’s dismissal of a counterclaim, and a welcome clarification of the standard required to prove dishonesty.
Confidentiality throughout the mediation process is key to enabling parties to discuss settlement options frankly and without fear of those matters disclosed at mediation being used against them in any continuing litigation. However, the recent case of Berkeley Square Holdings & Ors v Lancer Property Asset Management Ltd & Ors [2020] EWHC 1015 (Ch) serves as a reminder that the confidentiality of mediation is not completely impenetrable.