CMOC Sales & Marketing Ltd v Person Unknown and 30 others

JurisdictionEngland & Wales
JudgeWaksman
Judgment Date26 July 2018
Neutral Citation[2018] EWHC 2230 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2017-000652
Date26 July 2018
Between:
CMOC Sales & Marketing Limited
Claimant
and
Person Unknown and 30 others
Defendants

[2018] EWHC 2230 (Comm)

Before:

HHJ Waksman QC (sitting as a Judge of the High Court)

Case No: CL-2017-000652

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice, Rolls Building

Fetter Lane, London, EC4A 1NL

Paul Lowenstein QC, Philip Hinks, Matthew McGhee (instructed by Cooke, Young & Keidan LLP)

Hearing dates: 10 th – 11 th July 2018

JUDGMENT APPROVED

INTRODUCTION

1

This is the trial of an action where none of the present defendants have engaged in the litigation process at all, bar a few sporadic communications from some of them or their lawyers, which came to nothing.

2

The first defendant is a generic group of defendants whose identities are unknown. The second to 31st defendants are named individuals or companies. The claims made against the 29th to 30th defendants, who did engage, have now been settled.

3

The bare bones of the claim can be stated very swiftly. CMOC is an English company. It is managed by its sister company, CMOC Mining USA, operating from Phoenix, Arizona. Its business is the sale and purchase of Niobium, which is a soft metal predominantly found in Brazil and used in alloys such as special steel and gas pipelines.

4

In October 2017 CMOC discovered it was the victim of a business email compromise fraud whereby the perpetrators of the fraud had hacked into its email system and caused its bank, Bank of China in London, to pay US$6.91 million and €1.27 million out of its bank account by means of twenty separate transfers.

5

Mr Chen, who was one of the directors and authorised signatories, in particular had his email account hacked into and as a result of that, the perpetrators were able to send emails purporting to come from him enclosing purported payment instructions to the relevant people at the Bank of China in London to make the payments and they were to debit CMOC's bank account in London to the extent that I have indicated.

6

CMOC discovered the fraud between 12 and 13 October and then took the action to which I shall refer later on, which led to these substantive proceedings and ultimately this trial.

7

The 23 October 2017 was the first of some 14 pre-trial hearings in this case, 11 of which have been before me. There was a large number of paper applications as well, most of which equally were dealt with by me.

8

While the fact of the fraud is obvious from what I have already said, the identity of the perpetrators and the actual recipients of the funds was not. However, I was invited at the first hearing to grant — and I did grant — a world-wide freezing order against “persons unknown”, which have now become known as the collective first defendant.

9

As amended, those “persons unknown” are defined by reference to the following classes, that is to say those perpetrators of the Fraud (as particularised in the Particulars of Claim) whose identities are currently unknown, including: (1) any person or entity who carried out and/or assisted and/or participated in the Fraud; and (2) any person or entity who received any of the monies misappropriated from the Claimant (including the traceable proceeds thereof) other than in the course of a genuine business transaction with either another Defendant or a third party; in either case, other than (i) by way of the provision of banking facilities, and/or (ii) the Non Cause of Action Defendants named in Schedule 2 to the Claim Form.

10

The process of identifying particular named defendants was undertaken essentially by obtaining information and disclosure orders against the banks into which the funds were originally paid from the CMOC accounts, the CMOC accounts, as I say, being with Bank of China in London.

11

The number of such banks and their location around the world has steadily increased so that to date there are 50 such banks in 19 different jurisdictions. They have been known from the outset as “no cause of action defendants” because, of course, no substantive relief is claimed against them; they were joined simply as respondents to the numerous third party information and disclosure orders which I made.

PRELIMINARY OBSERVATIONS

12

I make a number of preliminary observations. First of all, none of the present defendants have engaged so as to file a defence, or even an acknowledgement of service, or to put in evidence. As CMOC recognises, I still have to be satisfied on the balance of probabilities that the claim is made out, and as the underlying allegation is one of fraud, as always, cogent evidence is required in order to satisfy that burden of proof. Indeed, in that regard I have been referred to the well known observations of Lord Hoffmann in Re B (Children) [2009] 1 A.C. 11 at [14] to [15]:

“The court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.”

13

It follows, particularly in this case but often in cases of fraud, that much of CMOC's case depends on the drawing of inferences, and it's important to note, as I have been reminded by CMOC, that an inference of fraud or dishonesty should only be drawn where it's the only reasonable inference to be drawn; see the observations of Mr Justice Teare at paragraph 8 of his judgment in JSC BTA Bank v Mukhtar Ablyazov [2012] EWHC 237 (Comm).

14

Where the trial is not attended by one of the parties, there is still an obligation of fair presentation which is less extensive than the duty of full and frank disclosure on a without notice application. Mr Justice Cresswell in Braspetro Oil Services v FPSO Construction Inc [2007] EWHC 1359 (Comm) said as follows, that he required the claimant to draw to the attention of the court: points, factual or legal, that might be to the benefit of [the defendant].” He noted that claims which were considered not to be sustainable were not in fact pursued. He said that the claimant brought to the attention of the court points which the defendant had taken before it decided to play no further part. He said that the claimant brought to his attention points which had never been taken by the defendant but which might have been had it decided to defend the proceedings, and it had taken all steps to bring to the attention of the defendant what has been happening here. The court had, in that case, through the eight-day hearing, carefully examined and tested the claimant's case. I adopt those observations and I consider that the injunctions of Mr Justice Cresswell have been fully followed here. I also did not regard this trial as merely an exercise of rubber-stamping but tested and considered all aspects of the case.

15

Another feature of this case which follows on is that, in my judgment, this litigation brought by CMOC has been marked by (a) scrupulous attention to detail and to the requirements of the very many applicable procedural rules, and (b) rigorous observance of the obligations of material disclosure on the many without notice applications on the part of solicitors and counsel involved for the claimant, and the obligations of fair presentation otherwise, to which I have referred. There have been no short cuts taken and no glossing over of any problematic points. This is also the case for the trial itself.

16

Thirdly, there have been a number of innovative features of this case which I'm going to refer to at the end of the judgment in some supplemental observations, but I should say that so far as service is concerned, these include alternative service by way of Facebook Messenger and WhatsApp. There have been numerous applications before me to ensure that the method of service that is proposed is authorised by the court, and I have received throughout these proceedings updates on how the service has in fact been effected.

SERVICE

17

It is not necessary or proportionate for me to go through the service history of each particular defendant, but I have read carefully paragraph 27 of the skeleton argument which sets out in summary form when each defendant was served and how they were served and the underlying witness statement or affidavit which actually sets out the evidence for that.

18

In addition to that, I have a defendant summary for each of the defendants, each of which has a section concerned with service, and that again sets out by reference to the underlying evidence precisely how and on what occasions the defendant has been served and the reaction of those defendants, if any.

19

The same is true for notification of this trial. Indeed, CMOC has gone to the trouble of producing a table dealing with that matter by reference to each of the defendants, stating the method of service, address or Facebook account details, what the outcome was, when the step was taken, when it is deemed to be served, and where I might find the evidence on it, and in some cases that is done by hard copy.

20

So for example, in relation to the second defendant, Mr Juan Carlos Carrasco Garcia, there was personal service which was accepted by Mr Garcia in relation to Spanish translations but not in relation to the English underlying documents. Then there are Facebook Messenger, email and courier modes of service as well, running through from February until early July in relation to the date of the trial. The date when most defendants were first notified of trial is 21 February.

21

It follows that the decision of the defendants not to participate in these proceedings has been both voluntary and informed.

22

As with all other hearings in this case, I have been provided with a very detailed and meticulously prepared skeleton...

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