Email frauds have become everyday events, with both businesses and individuals losing substantial sums, sometimes running into the millions. In a case before Carr J on 24 August 2017, the High Court confirmed that claimants who have suffered such losses can access a range of interim remedies to try to recover such losses and pursue those involved.
The claimant, a high net worth Australian businessman, lost US $1 million as a result of a sophisticated email fraud, the money being transferred to a financial institution in London. The position could have been worse, as the fraudsters almost got their hands on a further US $5.19 million, before the fraud was discovered. Having lost US $1 million, the claimant, quite understandably, set about seeking to recover his money and identify the fraudsters.
A range of applications were issued against those then known to have been involved in the fraud. This included successive interim applications seeking:
- An order for Norwich Pharmacal relief against the email hosting company which had generated the fraudulent emails. This order required it to disclose information about those behind the fraudulent emails.
- A hybrid order seeking both Norwich Pharmacal relief and a preservation order against the financial institution known to have received the US $1 million.
Both applications were granted by the High Court, with valuable information being provided as a result.
This in turn allowed the identification of an individual centrally involved with the fraud: Mr Aldridge. Based upon this new information, the claimant sought a freezing order against Mr Aldridge’s assets. The Norwich Pharmacal jurisdiction was also used to require the provision of further information about the fraud. It was this application that was heard by Carr J. The application was contested by Mr Aldridge, who had by now been made a defendant. He resisted the application on the basis that he no longer had the US $1 million and that there was no real risk of his other assets being dissipated.
Despite there being no evidence that the defendant was aware of the fraud or that he retained any of the US $1 million, the application was granted. The court took the view that, given the nature of the fraud and Mr Aldridge’s involvement, there was a serious question as to his honesty and the status quo should be protected for the benefit of the claimant.
The case provides comfort that, when faced with an email fraud, the courts are willing to provide effective interim relief. From an initial basis of having very limited information, the claimant, through successive applications, was able to end up freezing relevant assets and identifying an alleged wrongdoer.
In respect of each application, what was important was that a proportionate response was adopted, taking into account the nature of the different respondents and their level of likely involvement.
By way of illustration:
- In respect of the email hosting company, the traditional Norwich Pharmacal jurisdiction was used; that is, asking a third party to provide information and documents.
- Then, in respect of the financial institution to which monies were transferred, a preservation order was sought limited to the US $1 million in issue. This was also coupled with a Norwich Pharmacal request for information and documents.
- Finally, as against Mr Aldridge, a freezing order was sought against his assets, together with an order for the provision of detailed information and documents. This latter part of the order utilised the more flexible Norwich Pharmacal jurisdiction which has developed over recent years, whereby alleged wrongdoers themselves can be required to provide information.
What the case shows is a willingness on the part of the courts to provide assistance to a claimant who has been the victim of a fraud. This was not to say that the courts are partisan in such matters. Rather, it is a recognition that a claimant, with very limited knowledge as to what has actually happened, is entitled to information to allow a potential recovery to be made. In other words, a claimant is not required to provide evidence of “a complete picture”, together with any certainty in outcome, before the court will grant relief.
This court’s treatment of the Kahlbetzer claim provides encouragement to other claimants who might be worried that courts will take too strict an approach. As seen, the court’s approach was entirely pragmatic.