An extract from The Asset Tracing and Recovery Review, 8th Edition

Seizure and evidence

i Securing assets and proceeds

In England, it is possible to obtain an order before an action has been started, during the course of the action or after judgment has been granted in favour of a victim of fraud called a freezing injunction, which can freeze all property belonging to the defendant. Similar proprietary injunctions can be obtained where a claimant is seeking to freeze property in which he or she has an equitable interest (see above).

Both freezing and proprietary injunctions can attach to assets wherever they are in the world. A freezing injunction affects the defendant and, if he or she does not obey it, makes him or her potentially liable for contempt of court and sanctions involving fines or imprisonment. It would also affect third parties who break the terms of an order, or help or commit the defendant to break them, but only if those third parties are in England or subject to the jurisdiction of the English court.

Freezing orders can be granted to freeze assets inside or outside England and anywhere in the world; in support of English proceedings or proceedings in other countries anywhere in the world; and in support of arbitration proceedings wherever they are taking place. They are not, however, available against foreign states unless a state has given written consent.

Despite the fact that freezing and proprietary orders are available in potentially a broad range of situations, they are granted sparingly.

To obtain a freezing injunction, the applicant must show that:

  1. he or she has a good arguable case. This does not mean that it necessarily has more than a 50 per cent chance of success, but the case must have some substance to it;
  2. there are assets that the injunction would catch; and
  3. there is a real risk that the judgment will not be satisfied in view of what the defendant is likely to do.

The applicant must also provide an undertaking to pay for any damage that the defendant suffers as a result of the injunction having been granted when it should not have been.

There is no right to a freezing injunction; it is very much for the court to decide whether one is appropriate given all the circumstances. In addition, unlike a similar relief in other jurisdictions, a freezing injunction does not give security in the insolvency of the defendant. It is possible to obtain a freezing injunction without notifying the defendant and, indeed, most freezing injunctions are obtained in this way. However, in these circumstances, the applicant will have to satisfy an obligation of full and frank disclosure, whereby he or she explains to the court any arguments that the defendant might have made, had he or she been present, as to why the injunction should not have been granted. The requirements for a proprietary order are similar, save that it is sometimes said that the strength of a case to support one need not be so high.

ii Obtaining evidenceSearch orders

A search order is an order available to litigants in England and Wales entitling them and their representatives (usually lawyers and forensic accountants) to enter a defendant's premises and search for a copy of and remove documents or material that may be used in court proceedings. They are also available against a third party, even where there is no cause of action against that party and no third-party disclosure order in place. To obtain a search order, there must be:

  1. a very strong prima facie case;
  2. strong evidence that the defendant's actions have resulted in serious damage to the claimant's interests; and
  3. very clear evidence that the defendant will have on his or her premises incriminating documents or other items, and that there is a real possibility that he or she will dispose of them if he or she learns that the claimant might apply for one.

Search orders are therefore almost always granted ex parte, and the duty of full and frank disclosure is taken very seriously.

Search orders are increasingly common in fraud litigation in England and Wales where the claimant wishes to establish what has happened to the proceeds of fraud but believes that the defendant will not comply with court orders of the Norwich Pharmacal kind or otherwise (see below) that are intended to enable him or her to track them down. Almost always, search orders entail copying of computer records held by the defendant.

Because the search order is such an extreme remedy, very careful safeguards are set out to ensure that they are not used oppressively. They will normally be executed in the presence of an independent solicitor (the supervising solicitor) who will ensure that they are not abused and resolve any issues relating to their execution.

Should a defendant fail to comply with the search order by refusing the claimant and the supervising solicitor access to his or her premises, he or she could be found in contempt of court, the punishment for which can be imprisonment or a fine.

Norwich Pharmacal orders

A Norwich Pharmacal order requires someone to disclose documents or information to the applicant, often a victim of fraud. Frequently, they are sought to identify those who have assisted in perpetrating a fraud, to explore the full nature of that fraud or, perhaps most commonly, to trace assets that are subject to proprietary claims (see above). Very commonly, when the victim of a fraud discovers that his or her money has been misappropriated, he or she will apply for a Norwich Pharmacal order against a bank (sometimes called a Bankers Trust Co v. Shapira order). The intention of such an order is to obtain information about where funds have gone, or who has received them or assisted in transmitting them for the purposes of no-receipt or no-existence claims.

Again, the order is not available as of right, but the court will decide on the basis of all the information available to it whether it is appropriate to grant it. It will not usually do so unless it is necessary for the order to be made to assist the applicant to trace his or her assets or money so that he or she can protect them or unless it is just and convenient for some other reason. To obtain such an order, it is necessary to demonstrate that the respondent has been involved in the defendant's wrongdoing, if only unwittingly. A bank that innocently transmits funds that later turn out to be the proceeds of fraud would be therefore be involved. However, if it has taken no action in connection with the fraud, the risk is that it will be regarded as a mere witness and a Norwich Pharmacal order will not be available. It is also necessary to show that there are no other relevant provisions or procedures available under English law by which information could be obtained, that the respondent is likely to have relevant documents or information, and that there is a good arguable case if there is wrongdoing.

Norwich Pharmacal relief is invariably used in respect of respondents and material within the jurisdiction. Whether it can be used outside the jurisdiction has been seriously doubted.

Disclosure

In civil proceedings in English courts, parties are typically ordered to disclose a list, to the court and the other parties, of all documents:

  1. on which they rely;
  2. that adversely affect their own case;
  3. that adversely affect another party's case; and
  4. that support another party's case.

This is known as standard disclosure. The court can order, with or without the agreement of the parties, that a different level of disclosure is required, and will often do so to ensure that only a proportionate disclosure exercise is undertaken.

Of the documents disclosed in the list, the other party will have the right to inspect those documents that are not privileged. There are many grounds of privilege, but the most pertinent are as follows:

  1. legal advice privilege: communications by which a client seeks or receives legal advice from a lawyer are privileged;
  2. litigation privilege: communications made or received by a party that have the predominant purpose of relating to the litigation are privileged; and
  3. privilege against self-incrimination: a party is not required to disclose documents that might incriminate him or her or increase his or her exposure to criminal prosecution. This will be relevant where the conduct complained of would be a crime.

Disclosure occurs after proceedings have been commenced, so the fraudster will have had time to destroy or conceal evidence. A party can apply to the court for an order for pre-action disclosure, but this relies on the cooperation of the party being asked for documents. In cases where there is a risk of evidence being destroyed or concealed, a search order (see above) should be considered.

A party can apply to the court for an order that specific documents are searched for and made available for inspection by another party or a third party, and there is EU legislation governing the obtaining of evidence from other countries in the EU.

Letters rogatory

A letter rogatory is a request from a court in one country to the judiciary of a foreign country to perform a specified act that might otherwise violate the foreign country's sovereignty if done without approval. By way of example, letters rogatory can be used to request evidence from a foreign jurisdiction. In many cases, foreign letters rogatory are sent to firms of solicitors in England who then register them in the English High Court and assist in relation to the implementation of the order. It is similarly possible for a letter rogatory to be sent to the courts of another jurisdiction as part of proceedings in England.