Freezing order case shows willingness of English courts to assist victims, expert says

The victim in the case, according to reporting by Westlaw, had entered into an agreement with friends to invest a large inheritance in oil and gold. The victim agreed a £250,000 bridging loan secured on her house as part of the scheme, but when this expired she found herself facing possession proceedings.

When she asked her friends to return the money they repaid just under £100,000. She asked for details of the investment, but when her friends did not supply these, she filed a claim for fraudulent misrepresentation, saying they had persuaded her to invest in fraudulent investment schemes.

Given that her home was subject to possession proceedings, the victim was unable to provide a cross-undertaking in damages – usually a requirement to obtain a freezing injunction – in the event that the freezing injunction she was asking for was not granted.

However, as there was a substantial risk that the friends would seek to dissipate their assets and avoid repaying the victim, Judge Simpkiss said it was still appropriate to grant the freezing injunction.

Civil fraud expert Alan Sheeley of Pinsent Masons, the law firm behind Out-Law, said: “This case demonstrates that the English court is willing to assist victims of fraud against parties who refuse to comply with requests to explain was has happened to the victim’s money even if the victim cannot provide a cross-undertaking in damages.

“All too often the cross-undertaking in damages can be a cost that is just too high for a victim of fraud. This case demonstrates that in the right circumstances, the court will allow justice to be done despite the victim not having deep pockets,” Sheeley said.

Civil fraud expert Bill Geiringer of Pinsent Masons said the judgment was a warning to fraudsters.

“The judge’s ruling confirms that the court will not allow fraudsters to delay, avoid questions and simply put a claimant to proof. A failure to provide information requested will be a significant factor when a court decides whether to grant an injunction to protect the claimants’ position. The court has clearly taken the position that fraudsters cannot simply stonewall without facing significant repercussions,” Geiringer said.

Sheeley said the case demonstrated the need for victims of fraud to consult lawyers early on in a potential claim.

“In fraud cases it is really important to develop the correct strategy from the outset and therefore people need to consult specialist civil fraud litigators when deploying some of the most aggressive weapons available to the litigation, such as the freezing injunction,” Sheeley said.