English Court will grant civil remedies notwithstanding parallel criminal proceedings
While criminal investigations and proceedings can assist victims of fraud, a proactive approach to seeking civil remedies in relation to the same stolen assets can also help victims take steps themselves to identify the putative fraudster, reduce the risk of the dissipation of their assets and aid recovery.
Such civil relief can place additional burdens on defendants already facing criminal proceedings. However, the aims of public authority criminal investigations are unlikely to align perfectly with the aims of the direct victim of a fraud. This can weigh in favour of claimant fraud victims seeking concurrent civil remedies and protections.
Norwich Pharmacal relief
In Stanford Asset Holdings Ltd, the appellant was seeking disclosure from the respondent, a bank in Mauritius, of the identities of the recipients of an alleged US$11m fraudulent payment (i.e. a Norwich Pharmacal order (NPO)). The payment was already being investigated by local Mauritian criminal law enforcement agencies, who had statutory powers to obtain the information sought by the appellant.
In its judgment, the Privy Council allowed the appeal and granted relief requiring the bank to disclose documents or information to the appellant which may assist with identifying the putative fraudster or obtaining information to assist with pleading a civil claim.
An NPO requires a third party to disclose documents or information to the applicant. In Stanford Asset Holdings Ltd, the Privy Council adopted the following summary of the conditions for the granting of an NPO:
- there must be a good arguable case that a form of legally recognised wrong has been carried out by an ultimate wrongdoer;
- the respondent must have been "mixed up in" so as to have facilitated the wrongdoing;
- the respondent must be able or likely to be able to provide the information or documents necessary to enable the ultimate wrongdoer to be pursued; and
- requiring disclosure from the respondent must be appropriate and proportionate in all the circumstances of the case.
An NPO is an important tool for claimant fraud victims. NPOs can help claimants find out who they should pursue and to gather crucial information to follow their assets. This can facilitate redress relating to the alleged fraud.
Frauds are often also of concern to the criminal law, as was the case in Stanford Asset Holdings Ltd. But as the Privy Council explained, the interests and priorities of law enforcement agencies in their enquiries are "unlikely to be identical" to those of the victim of an alleged fraud seeking to recover their assets. In addition, the statutory powers of law enforcement agencies may not be effective where the stolen funds have been removed from the jurisdiction.
There should not, therefore, be a presumption that the civil courts should decline to assist a fraud victim if a criminal investigation is ongoing. It is not the case that it is wrong for the Court to afford appropriate and proportionate assistance to the victim of a fraud to pursue their own civil remedies, or that it should only do so where it can be shown that there is cause for complaint about how the public agencies are performing their duties.
The Privy Council made clear that civil claimants should be afforded "appropriate and proportionate assistance … to pursue their own civil remedies" even while a criminal investigation was ongoing and therefore concluded that an NPO was necessary and proportionate relief for the appellants.
Worldwide Freezing Orders (WFOs) and Criminal Restraint Orders (CROs)
Whilst not a recent case, we briefly touch on related guidance on the interplay between civil remedies and criminal actions which was given in the case of AA & Others v BB and CC  EWCA Civ 1017. In that case, the Court of Appeal considered whether WFOs should be continued in circumstances where CROs extending to all assets of the appellants had been made and remained in force.
A CRO is a restraint order under the Proceeds of Crime Act 2002 (as amended) prohibiting the alleged offender from dealing with any realisable property they hold, where (among other circumstances) there is a criminal investigation regarding an offence and there is reasonable cause to believe that the alleged offender has benefitted from his criminal conduct. The purpose of a CRO is to preserve assets for the purposes of any confiscation order that may be made. They are thus often used by investigators investigating allegations involving economic benefit. CROs had been made on the application of the UK Serious Fraud Office (SFO) to assist with their criminal investigation into the matters arising from the same facts as a prospective civil case.
One of the grounds of appeal argued by the appellants was that, given the existence of the CROs, there was no real risk of dissipation such as to justify the continuation of the WFOs. However, the Court exercised its discretion to maintain the WFOs and, in so doing, provided the following analysis on this point.
- Whilst a CRO is a material fact when considering the grant of a WFO and the risk of dissipation, it does not follow that the existence of a CRO is determinative against making a WFO. For example, the civil claimants could have separate and well-founded objections to the disposal of assets to which the SFO was willing to consent. Without the WFO in force, and with the SFO not being required to give the claimants notice of any discharge or variation, they would be unable to prevent such a disposal.
- Freezing orders place significant burdens on defendants. A combination of criminal and civil restraints on a defendant increases their costs in time and legal fees in complying with orders for disclosure. The burden of seeking consents to disposal will also be increased by the existence of both the CROs and WFOs. However, the court concluded that such challenges faced by defendants do not mean that the existence of a CRO or similar criminal order should "prima facie exclude" a WFO or other second civil order.
The existence of parallel criminal proceedings and remedies will not act as a bar to victims of fraud seeking civil interim remedies from the English Court.
Whilst those matters will form important context when considering to grant such relief, the English Court will take steps to assist victims of fraud through the provision of "appropriate and proportionate assistance". As demonstrated in the Stanford Asset Holdings Ltd case, this extends to interim relief against innocent third parties and not only defendant.