In October 2017 an English company, CMOC, discovered that it had been the victim of business email compromise fraud. Once hackers had obtained access to the company’s email system they sent multiple prompts to its bank, the Bank of China, from the account of an authorised director and signatory. In doing so the perpetrators successfully instigated the transfer of US $6.91 million and €1.27 million spread across 20 different transactions.
At the first hearing in October 2017, CMOC sought to freeze the bank accounts into which the hackers had fraudulently diverted funds to prevent the dissipation of those funds and to hopefully assist with the eventual tracking of the perpetrators.
The judge presiding, HHJ Waksman QC, granted a worldwide freezing order (WFO) against persons unknown on the basis that there was a ‘good arguable case that the court had jurisdiction’ to do so. By the time the matter came to trial in July 2018 the original WFO had been enforced against 50 international and overseas banks across 19 jurisdictions.
Prior to the High Court trial of the matter in July 2018, CMOC used the WFO granted by the Court to conduct a large-scale asset-tracing and freezing exercise. This laid the groundwork for recovery of its stolen funds. At the trial, HHJ Waksman QC granted relief in the terms sought by CMOC under multiple heads of claim including, amongst others, dishonest assistance and unjust enrichment. The impact of the judgment was that all named defendants were found jointly and severally liable for the entirety of the sum stolen.
In his final judgment HHJ Waksman QC remarked that the jurisdiction of the Court to grant WFO’s against persons unknown is now:
‘…clearly established by reference to the principles underlying existing cases and the recognition… that injunctive relief against persons unknown will be particularly apposite where the reason they are unknown is because of their activities as hackers.’
The notion of obtaining injunctive relief against ‘persons unknown’ is not new and has in the past year alone been notably utilised in a number of scenarios by English courts. For instance, guarding against trespass and preventing the dissemination of private/confidential information.
CMOC v Persons Unknown (2018 EWHC 2230 Comm) is, however, the first time that the injunction sought has been a freezing injunction and undoubtedly represents ‘an extension of the present law’.
The increased prevalence cybercrime and sophisticated fraud in recent years appear to have featured heavily in the reasoning which underpins the court’s decision. There is clear recognition that there is a need for the ‘procedural armoury of the court’ to evolve at the same pace as the technological advances which continue to shift modern means of conducting business.
The precedent set by CMOC v Persons Unknown will come as a welcome development to those involved with international fraud litigation or asset recovery. In such circumstances the ability to freeze relevant accounts can often prove critical to both preventing dissipation of misappropriated assets and tracing wrongdoers. It will of course be interesting to see how the precedent is applied and potentially extended in the near future.