In the second of four posts on asset recovery in fraud claims, Arun Chauhan and Elizabeth Rhodes look at options for gathering information about assets through court procedures.
Often, in cases where a client’s initial instructions provide good grounds for making a fraud claim, they may also provide the necessary ingredients to enable the client to seek a freezing injunction against the proposed defendant(s). If a freezing injunction is granted, the respondent is generally obliged to produce a sworn affidavit detailing their assets, whether held in their own name or not, within seven days of the injunction order being made.
In other cases, clients may not obtain an injunction and will issue a claim and either obtain judgment in default, or be forced to take matters through to trial and obtain a judgment.
In all of the scenarios above, a victim of fraud should not be surprised if the defendant isn’t forthcoming with information about their assets, or if money obtained by fraud has been hidden.
So, how does a victim of fraud unravel the true state of affairs as to the assets of the defendant, be it in relation to a defendant who has not given full disclosure of assets in response to a freezing injunction, or one who has received a judgment against them and is attempting to make enforcement difficult?
The benefit of third parties’ knowledge
The answer often lies not in the defendant’s knowledge, but in that of third parties linked to the defendant. It is important to understand which third parties hold information that may assist in identifying assets and to build an asset profile of a defendant. We often receive information that is not directly relevant to the merits of a case, but which informs us of professional advisers, banks, agents and other entities linked to the defendant that may hold information about the defendant and their assets. It is vital to retain these details for review post-judgment or to cross reference them against any evidence served by a defendant about their assets.
However, how do you go about obtaining details of third parties that may hold information about a defendant’s assets without the third party breaching confidence or data protection laws? Can you obtain it without the defendant being made aware? If you can, what are the costs consequences to a client?
Orders for disclosure against third parties
There are a number of types of third parties that may hold information that will aid the building of an asset profile, such as banks, professional advisers, property agents, pension providers and the Land Registry.
Such information can be obtained through a court order. The two main options are:
- An order for disclosure under the Banks Book Evidence Act 1879.
- A non-party disclosure order.
We don’t intend to go into detail regarding the procedure for obtaining either of these orders in this blog post but, in summary, each option results in the court directing a third party to disclose information, subject to certain criteria being met. As the costs of the third party must be met by the applicant, it is good practice to try and agree such costs before disclosure is made (be it before the application is made or before the order is acted upon) to avoid any unnecessary satellite litigation as to the level of those costs. It is also good practice to seek a provision in the order permitting a further request for information once the first set of disclosure has been provided and reviewed, so as to avoid the cost of making a further application.
We should flag that often a party will have to make further applications as information is built about assets, as a result of discovering new third parties that hold information. For example, an application against the Land Registry may reveal information about properties owned by an individual. Upon inspecting the title of those properties, you may realise that a certain bank helped finance their acquisition. You may then make an application against the bank for disclosure of the information held on the secured property, as it may identify further information held by that bank about an individual defendant.
It may also be advisable to seek a non-disclosure order, also known as a gagging order, against the third party respondents to ensure that they do not disclose the existence of any order made against them.
Norwich Pharmacal disclosure
There may be some cases where it is not possible to make applications for disclosure under the CPR.
You may, for example, find that your client knows that it has been the victim of a wrongdoing but is unable to identify the ultimate wrongdoer in order to bring a claim against them. Your client may, however, be able to identify a third party involved in the wrongdoing, even innocently, who can identify the wrongdoer.
In this instance, applying for a Norwich Pharmacal order may be your best option. An NPO is an order for the disclosure of documents or information by a third party (the respondent) to your client (the applicant). It is often used to obtain information regarding the identity of persons and can be obtained pre-action, during the course of action and post-judgment. An NPO order is made against the respondent who innocently or otherwise is mixed up in the wrongdoing by a potential defendant who cannot be identified without first obtaining information from the respondent. Obtaining information from the respondent would then allow the applicant to sue the defendant wrongdoer and potentially identify information about them and their assets. Until then, there is no form of redress for the applicant, as it is unable to identify the wrongdoer to pursue legal action against them.
Conclusion
As set out in our first blog post in this series, it is important to ensure that a client considers the asset profile of a defendant before taking action. Where that is not possible, a client should be advised as to the importance of identifying third parties that may hold information on the defendant and their assets, as they may prove to be the key to building an asset profile and finding a route for recovery and may make taking the step into litigation ultimately worthwhile.
