Freezing order made against unknown parties

HHJ Waksman has recently granted a freezing order against persons unknown, in the case of CMOC v Persons Unknown.

The case

CMOC were the victims of fraud. An unknown person or people (the fraudster) infiltrated the email address of a member of senior management. The fraudster then sent out emails in the senior manager’s name asking for payments to be made out of the company’s bank accounts. CMOC lost in the region of £6.3 million due to the scam.

CMOC applied for a worldwide freezing order (WFO) against the fraudsters.

HHJ Waksman’s decision

In his judgment, HHJ Waksman asked whether he had jurisdiction in relation to “Persons Unknown”. He confirmed that the case law in relation to injunctions provided that he did. In particular, he referred to Bloomsbury v News Group Newspapers. This case involved the matter of Harry Potter manuscripts that had been taken from the publishers and offered for sale to the press. Bloomsbury had sought an injunction, preventing the publication, but did not know who the perpetrators were. The then Vice Chancellor stated that the key point in relation to “Persons Unknown” is that:

“… the description used must be sufficiently certain as to identify both those who are included, and those who are not. If that test is satisfied then it does not seem to me to matter that the description may apply to no one or to more than one person, or that there is no further element of subsequent identification whether by way of service or otherwise.”

HHJ Waksman then went on to comment that, in the case before him, CMOC was requesting a freezing order; therefore, for such an order to be made, the principle in Bloomsbury would have to be extended.

In his judgment, HHJ Waksman accordingly extended the principle in Bloomsbury. In support of that extension, he commented that freezing injunctions can be a ”springboard for the grant of ancillary relief in respect of third parties, which arguably could not get off the ground unless there has been a primary freezing injunction”. In so extending the principle, he gave the example that such an order would result in obtaining information from banks which may identify some or all of the defendants.

HHJ Waksman also considered the identification of the defendants in the case before him, as per the principle set out in Bloomsbury. He was satisfied that they had been properly identified, as the pleadings made reference to those persons:

“… who have been involved in the activities said to have constituted the fraud.”

HHJ Waksman also made orders relating to alternative service, allowing service upon recipient banks at particular email addresses.

Commentary

This is an important extension to the principle in Bloomsbury, and the jurisdiction of the court which can be found under section 37 of the Senior Courts Act 1981.

In an age where such frauds are commonplace, it is helpful that the courts have provided a way to freeze the assets of people who, more often than not, cannot be identified.

In this judgment, the court has shown that it understands the threat of modern cybercrime and has equipped the victim with a useful tool by which to recover fraudulently obtained monies.

It is interesting to note that, at the second return date on 17 November 2017, HHJ Waksman continued the freezing order. It would appear that at that time, none of the defendants had engaged with the claim at all.

Points to consider

• As in any freezing order, an application must be made promptly.
• Consider carefully how you describe the “Persons Unknown”. Can they be identified by describing their wrongdoing, as was the case here?
• Consider carefully the requirement for a cross undertaking in damages (Practice Direction (PD) 25.5.1 (5)(a)). If the wrong person’s accounts are frozen, the applicant for the freezing order may have to pay considerable damages.

This article first appeared on the Practical Law Dispute Resolution Blog; March 2018.