Introduction

With the rapid development of science and new technologies, commercial frauds have become more and more expansive over the past years. In particular, there has been an increasing trend of cybercrimes being carried out through email scams, whereby fraudsters impersonate key personnel in corporations and siphon off money by giving fraudulent transfer instructions to banks. However, it is often difficult to take enforcement actions against fraudsters in these cybercrimes as they often attempt to hide behind a cloak of anonymity in cyberspace.

In a recent case of CMOC v Persons Unknown [2017] EWHC 3599 (Comm), the English Commercial Court has developed a rather “novel” way to tackle such issue by granting a worldwide freezing injunction over assets of “persons unknown” who were accused of committing large-scale, international financial fraud over the internet. This is believed to be the first time in UK that a worldwide freezing injunction order has been obtained against unidentified individuals and entities in order to freeze financial assets.

Facts

The case concerns a claim that arose out of an alleged fraud, which has been committed by unknown person(s) who infiltrated the email account of a member of senior management of the company. The fraudster was able to send purported payment instructions from a “Mr. Chen” to the administration of the company which in fact did not come from the real “Mr. Chen”.

As a result, a number of payments of significant amounts were sent out from the company’s bank account with the Bank of China in London to various other banks around the world. The sums allegedly stolen as a result of such fraud amounted to around £6.3 million in total.

The Decision

The major question that the Court had to determine in this case was whether it had jurisdiction to make orders against person(s) unknown and/or unidentified defendants.

In this regard, the Court cited Bloomsbury v News Group Newspaper [2003] EWHC 1205 and held that the proper test to be applied was whether the description of the defendant(s) was “sufficiently certain as to identify both those who are included and those who are not”. If the answer to the said question is affirmative, then it does not matter that the description may apply to no one or to more than one person or that there is no further element of subsequent identification whether by way of service or otherwise.

Although the Bloomsbury case concerned an application for an interlocutory injunction (as opposed to a “freezing injunction”), the Court held that there are two strong reasons justifying the Court’s decision to extend such principle to a “freezing injunction” in this case:-

1.        First, the Court noted that a “freezing injunction” is often a “springboard” for the grant of ancillary reliefs in respect of third parties. In other words, in most cases, it is unlikely for ancillary reliefs to be granted against third parties unless there has been a prior freezing injunction. That is very much the situation in the present case as the first object in this case was to notify the banks of the freezing injunction so that they can freeze the relevant bank accounts – irrespective of if and when it comes to the attention of the underlying defendants; and

2.        Secondly, the Court noted that vital information could be obtained from various banks after the “freezing injunction” is granted which may assist the Court to identify some or all of the defendants.

Applying the principles established in Bloomsbury to the present case, the Court was satisfied that the defendants have been identified with sufficient clarity in this case, because reference was made to those who have been involved in the activities said to have constituted the fraud in the body of the claim form and was also made to particular transfers from the Bank of China accounts to other bank accounts.

In light of the above, the Court took the view that there is at least a good arguable case that the Court has jurisdiction to allow the claimants to bring a claim against person(s) unknown and/or unidentified defendants in this case.

Ancillary Disclosure Orders and Service

To this end, the Court also made several ancillary orders supporting the worldwide freezing order which includes disclosure orders against major financial institutions in several jurisdictions who are believed to have been used by the fraudsters in their scheme, which will assist in tracing and recovering of the stolen funds.

In addition, the Court also granted permission for worldwide enforcement of the freezing injunction and for service out of jurisdiction by alternate modern means, including email, by the social media forum Facebook and by an encrypted online data room.

Implication and Takeaways

Currently, Courts in Hong Kong also have the power to grant an injunction against unnamed defendants. Having said that, before exercising their discretion to make an injunction order against unnamed defendants, the Courts have to be satisfied that the description as to the unknown defendants’ conducts is sufficiently certain such that only those who should be necessarily included can be identified (Billion Star Development Ltd v Wong Tak Chuen [2013] 4 H.K.C. 539). 

In light of the aforesaid, it is foreseeable that the decision in CMOC v Persons Unknown will be of significance to the Hong Kong Courts because, although not yet binding, English authorities are still regarded as highly persuasive in Hong Kong. With the ever-increasing threat posed by sophisticated and large-scale cybercrimes, it is therefore interesting to see whether the Courts in Hong Kong will follow the approach adopted by the English Courts in CMOC v Persons Unknown when a similar application is heard in Hong Kong.