High Court issues innovative orders to manage complex fraud claim

Out-Law News | 28 May 2020 | 7:00 pm | 1 min. read

The High Court in England has used its powers under the Civil Procedure Rules (CPR) to help manage a complex fraud case involving a large number of victims, in order to help identify the owners of assets connected to an ongoing claim. 

The case follows the conviction of businessman Gerald Smith for fraud in 2005, and litigation between Smith’s investment company Orb and former business associate Andrew Ruhan. The UK’s Serious Fraud Office and a number of other claimants have made claims against various assets held by Orb and Ruhan. A group of parties is now seeking to recover additional assets, including property and jewellery.

Following a case management conference, Mr Justice Foxton said resolving the issues relating to the additional assets within the main proceeding was “likely to be conducive to a quicker and more efficient resolution of the disputes overall than requiring the commencement of fresh proceedings”.

The judge said the CPR gave him the power to join additional parties to the case as their claims were connected to matters in dispute. He said it was important that the parties who were said to be the beneficial owners of the identified assets could be bound by any judicial determination of ownership.

The judge also ordered that the fact that the court will be determining who has claims to assets involved in the proceedings should be advertised, giving any beneficial owners time to notify the court of such claims. The order will bar anyone who fails to file a claim from bringing it without the court’s permission.

According to the judgment, CPR 19.8A gives the court the power to make judgments binding on non-parties in respect of property which is subject to a constructive trust. The judge used this power to grant the advertising and debarring orders.

Civil fraud expert Andrew Barns-Graham of Pinsent Masons, the law firm behind Out-Law, said: “The court’s confirmation that the CPR 19.8A power extends to property held under a constructive trust may seem a technical point; however, as the advertisement and debarring orders illustrate, it has important practical significance in cases involving frauds which have affected large groups of victims, whose identities cannot all be ascertained.”

Civil fraud expert Alan Sheeley of Pinsent Masons said the case highlighted the need to seek advice early on in proceedings.

“This decision reminds us that, when faced with major fraud claims affecting large groups of victims, the court has at its disposal a wide array of powers which are not limited to group litigation orders. Each case is different and victims of major frauds should be encouraged by this decision to seek advice from fraud specialists at the earliest opportunity on the most appropriate procedures and relief,” Sheeley said.