In his pioneering judgment in CMOC Sales & Marketing Limited v Persons Unknown and 30 others, HHJ Waksman QC (sitting as a judge of the High Court) has confirmed that the court has jurisdiction to grant freezing injunctions against persons unknown. This follows his previous interim ruling on this point when he granted what is believed to be the first freezing injunction against persons unknown.
The judgment further discusses a number of topics concerning the “number of innovative features” of this case. Many of the judge’s remarks will be of great assistance to those who fall victim to online fraudsters and wish to take steps to recover their funds. What is clear throughout his judgment is that the judge was assisted greatly by the claimant’s legal representatives, who had “scrupulous attention to detail and to the requirements of the very many applicable procedural rules” with “no short cuts taken and no glossing over of any problematic points”. There are thus a number of important practical points to be taken from the judgment, some of which are not limited to freezing orders and are applicable more generally in litigation. Three of these are discussed below.
To summarise the case, CMOC was the victim of a business email compromise fraud. The fraudsters had hacked into the company’s email system and sent emails causing the company’s bank to pay US $6.91 million and EUR 1.27 million out of its bank account under 20 separate transfers. CMOC brought proceedings and obtained a worldwide freezing order against “persons unknown”, the unidentified perpetrators of the fraud. Various named defendants were added once disclosure orders were obtained against the numerous banks into which the funds had been paid. The claims against two defendants were settled. None of the remaining defendants filed acknowledgments of service, defences or any evidence.
In this judgment, HHJ Waksman QC allowed all of CMOC’s claims against the relevant defendants, save for the unjust enrichment claims, which succeeded against only particular defendants. The following are some of the key points.
Freezing orders against persons unknown
The main point is that the judge confirmed that the court has jurisdiction to make freezing orders against persons unknown. While acknowledging that this was an extension to the present law, he considered that there were strong reasons in favour. These included that freezing injunctions can often be a springboard for the grant of ancillary relief in respect of third parties which arguably could not get off the ground unless there had been a primary freezing injunction, and that vital information is likely to be obtained from banks in particular as to the identity of account holders via a Norwich Pharmacal order, which may result in the claimant being able to name and investigate particular defendants.
The judge considered that his conclusion reflects:
“… the need for the procedural armoury of the court to be sufficient to meet the challenges posed by the modern electronic methods of communication and of doing business”.
He also stated that although the principle had arisen in hearings attended by only one party, it could be cited in future cases.
This approach is a welcome one, and will assist other parties against whom such frauds are committed.
Obligation of fair presentation
The judge discussed the principle that where a trial is not attended by one of the parties, there is still an obligation of fair presentation, though this is less extensive than the duty of full and frank disclosure on a without notice application. He cited Braspetro Oil Services v FPSO Construction Inc., a case in which the claimant had brought to the attention of the court points which the defendant had taken before it decided to play no further part, and points which had never been taken by the defendant, but which might have been had it decided to defend the proceedings, and the claimant had taken all steps to bring to the defendant’s attention what was happening. HHJ Waksman QC considered that CMOC had fully followed the steps taken by the claimant in the Braspetro case and that he had tested and considered all aspects of the case.
Practitioners should therefore ensure that where they are involved in any kind of case in which the defendant does not attend, they should seek to bring to the court’s attention all points which the defendant may have taken and that the defendant is kept informed of the status of the proceedings.
Alternative methods of service
During the course of the proceedings, CMOC had to make a number of applications for the court’s approval of its method of service against some of the defendants. The methods included service by way of Facebook Messenger and WhatsApp.
The judge was impressed by the meticulous manner in which CMOC’s legal representatives had set out to him in a summary for each defendant, referencing the underlying evidence, precisely how and when each defendant had been served and any reactions. CMOC had also prepared a table stating for each defendant the method of service, when the step was taken, the date of deemed service, the outcome, and how the judge could locate the evidence on that. On the basis of this, the judge concluded that the decision of the defendants not to participate in the proceedings had been both voluntary and informed.
This case demonstrates that alternative methods of service can be permitted by the court in any type of proceedings where it is not possible to serve a party using a method prescribed by the CPR. The judge commented that, in his view, the court will proactively consider different forms of alternative service where they can be justified in the particular case. He had permitted the use of a data room in order to serve the banks with the voluminous background information. This is yet another example of the judge’s willingness to allow the use of modern technology that may not have been expressly permitted by the CPR, but which was clearly the most sensible method in the circumstances.
Once again, when dealing with such methods of service, which will be particularly appropriate in cases with many parties and huge quantities of documentation, practitioners should follow the approach taken by CMOC’s lawyers and ensure that service on each party can be evidenced clearly.
This judgment is an excellent example of the court demonstrating flexibility in order to assist those who become victim to cybercrime. This is exactly what is needed, given that such perpetrators are continually devising new ways to succeed in their schemes, and the law should evolve to provide as much protection to victims as possible.
However, the judge was clearly assisted by the meticulous manner in which CMOC’s legal representatives dealt with all aspects of the proceedings and practitioners seeking the same flexibility should ensure that they follow this approach.