Frustrating the Fraudster — Civil Law Weapons

Published date01 April 1999
Date01 April 1999
AuthorRinita Sarker
Subject MatterAccounting & finance
Journal of Money Laundering Control Vol. 3 No. 2
Frustrating the Fraudster Civil Law Weapons
Rinita Sarker
Fraud has never respected national boundaries. But
the advent of the Internet and modern technology
has increased the ease with which money and docu-
ments can be transferred worldwide. The Fraud
Advisory Panel's first annual report estimates that
fraud could be costing £5bn a year and is likely to
get worse following the introduction of the Euro
and the growth in e-commerce1. When fraud is
unearthed, there arc three key elements to frustrating
the fraudster and recovering the monies, namely
speed, secrecy and surprise.
This paper focuses on the steps that can be taken to
find and freeze assets utilising these key elements. In
particular, it concentrates on what has been described
as 'the law's two nuclear weapons'2 the freezing
injunction and the search order. The majority of
cases referred to pre-date the new civil procedure
rules and as such are no longer binding. However,
they may still be regarded as persuasive.
The article also briefly examines some of the
problems that can arise if jurisdictional considerations
are ignored.
What is it?
Despite being described as a 'nuclear weapon' this is
something of a misnomer, as the intention behind a
freezing injunction and search order is preservation,
not destruction. A freezing injunction restrains an
alleged wrongdoer from dealing with his assets (up
to the value of the claimant's claim) until trial or
further order. It docs not provide the claimant with
security over the defendant's assets or priority over
other creditors. If the defendant disobeys the order
he will be in contempt of court and may be liable
to imprisonment.
To obtain the injunction there are a number of
pre-conditions that need to be satisfied.
Pre-conditions to granting
a freezing injunction
The claimant has to establish the following.
(1) A cause of action over which the English court
has jurisdiction. It has no jurisdiction to grant a
freezing injunction in support of proceedings
before the courts of a foreign country except
those party to the 1968 Brussels and 1988
Lugano Conventions. Article 24 of the Brussels
Convention and ss. 24—25 of the Civil Juris-
diction and Judgments Act 1982 empower the
English court to grant protective measures in
aid of substantive proceedings elsewhere within
the EU.
(2) The claimant must also establish that:
2.1 there are assets which can be frozen;
2.2 if a UK freezing injunction is being sought
there must be assets in the UK;
2.3 if a worldwide freezing injunction is being
sought it must be demonstrated, amongst
other things, that the defendant has foreign
(3) The claimant must establish that there is a
substantive action:
3.1 that he has a good arguable case; and
3.2 that there is a real risk of dissipation of the
A freezing injunction may be granted at any time
before or after judgment.
The injunction will usually be applied for ex parte,
that is on a without-notice basis where secrecy is
essential, before proceedings are issued so as to
avoid alerting the defendant.
Otherwise the application is made on three days'
notice by application to a judge in chambers. Papers
to be lodged at court include the draft order with,
if possible, a copy on computer disk to allow for
speedy amendments at the hearing; an affidavit in
support (although the CPR generally dispenses
with affidavits, they are still required for the purpose
of freezing and search orders); a draft claim form; and
an application notice.
In cases of emergency, applications can be made on
documentation alone, on oral representation alone,
by telephone and, in extreme cases, out of court
The claimant has an absolute duty to make full
and frank disclosure of all material facts including
any defence which the defendant has indicated in
Journal of Money Laundering Control
3, No. 2, 1999, pp. 143-146
© Henry Stewart Publications
ISSN 1368-5201
Page 143

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