'Persons Unknown' freezing orders set to turbo-charge worldwide asset recovery actions
The use of injunctions against 'Persons Unknown', a class of defendants who cannot be identified, has been well-established in the English Court for several years – most notably in claims for misuse of private information and theft of confidential information where their use has been targeted against preventing anonymous persons from wrongly distributing, publishing and using private or confidential information. But until now the Persons Unknown jurisdiction had not been applied to a world-wide freezing injunction in the English Court.
In CMOC v Persons Unknown [2018] EWHC 2230 (Comm) the Claimant sought a freezing injunction against persons who had hacked into its email system and had fraudulently diverted several millions of pounds into bank accounts across the world. Whilst the fraudsters were initially unidentifiable and untraceable, the monies could be traced. Accordingly, the Claimant sought to restrain the bank accounts to which the monies had been transferred, even though no defendants could be identified. The Court concluded that there were good reasons to extend the persons unknown jurisdiction to a freezing order as it could act as a springboard for ancillary relief in respect of third parties; which would not happen unless there was a primary freezing injunction. In other words, the banks could be notified to freeze the relevant accounts. The Court also concluded that vital information could be obtained from banks, notably their KYC, off the back of the freezing injunction. This could assist the Claimant in identifying the ultimate wrongdoers.
This case demonstrates the English Court's ability to adapt to the increasing sophisticated nature of fraudulent enterprises which utilise hacking and technological subterfuge. This is a very welcome development and has the potential to turbo-charge the use of High Court actions to combat worldwide fraud.
In addition, it will be intriguing to see how this precedent will be developed. One area of particular interest is how it might be used to track stolen assets which are put into cryptocurrency. In that situation, could the Court still freeze the crypto monies which are held anonymously and where there are no KYC documents about an account holder as is the case with a traditional bank? Would the Court make such an order where there is little prospect of the custodian of the asset being able to provide any information that identifies the wrongdoer (as the custodian is whoever holds the 'key' (a passcode) to the crypto monies)?
It will also be interesting to see whether a Persons Unknown freezing order might be granted in order to assist proceedings overseas pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982. This provides that an English court may grant interim relief in support of court proceedings overseas. In these circumstances, the claimant must undertake to serve proceedings in the local court expeditiously (where the defendants will typically need to be named). As the Persons Unknown freezing order cannot be expected to immediately deliver information about the ultimate wrongdoers (i.e. pending provision of a bank's KYC), it remains to be seen whether the Court would allow a claimant to defer local service until the names of the defendants are known.