A thoroughly modern approach to dealing with cyber fraud - CMOC v Person Unknown & 30 Others

The court granted a worldwide freezing order against persons unknown, and allowed the use of technology and social media in various innovative ways to manage the litigation.

On 20 September 2018 the High Court ordered what is believed to be the first worldwide freezing order (WFO) against persons unknown. As set out in our article Using the Civil Procedure Rules to ensure that crime doesn’t pay, the courts have shown themselves willing to use the CPR flexibly and imaginatively in order to protect parties which have suffered at the hands of cyber criminals. This decision extends the law of injunctions against defendants whose identity is unknown, which is of particular use in cybercrime situations. The court also ordered service of documents via private messaging applications Whatsapp and Facebook messenger, and the use of data rooms to serve background documents.

The facts of CMOC Sales & Marketing Limited v Person Unknown and 30 Others were straightforward. Hackers gained access to the company’s IT systems and created fake payment instructions to initiate transfers to foreign bank accounts controlled by the hackers. From there, they effected a series of rapid transfers to multiple accounts in different jurisdictions. The claimants brought proprietary claims involving the use of tracing and alleged dishonest assistance, unlawful means conspiracy, knowing receipt and unjust enrichment. All of the claims succeeded as pleaded, save that the unjust enrichment claim only succeeded against those defendants who had received the misappropriated funds directly from the claimant (as opposed to those who had received the funds later from the hackers’ accounts).

The hackers were, by design, anonymous, and did not engage with the litigation in any way. When the claimants had discovered the fake payment instructions, they had successfully applied for a WFO in order to protect the stolen money. In his substantive judgment, Waksman J reaffirmed the rationale for this WFO, going on to say that the court’s jurisdiction to grant this type of injunction against unknown persons was clearly established and that there was no good reason not to extend the principle of injunctions against unknown persons to WFOs. Indeed, he made clear that in cases such as CMOC, WFOs against unknown persons are particularly necessary. As in most cases of international fraud litigation, the application for a freezing order was made in urgency. Under such circumstances, a claimant would not have time to begin investigating the perpetrators’ identity before the entire amount of the stolen funds was dissipated. Furthermore, the banks holding the accounts to which the stolen funds were transferred often hold the best information about the perpetrators’ identities. A WFO, as Waksman J noted, can act as a springboard for third party injunctive relief, such as disclosure orders against the banks “which arguably could not get off the ground unless there had been a primary freezing injunction.” WFOs in claims against persons unknown could, and did in this case, constitute a vital step in ensuring that as many defendants as possible are named by the time the claim reaches trial.

Based on CMOC, an application for a WFO against persons unknown is worth making where:

  • the misappropriated funds are being transferred to multiple payees in different jurisdictions
  • the perpetrators can be described with sufficient certainty to identify both those who are included in the description and those who are not. In CMOC, it sufficed to describe the perpetrators as those who carried out the fraudulent actions and whose identity was currently unknown, and
  • the identity of the defendants is unknown is because of their activities as hackers.

Decisions such as this show that the English Court is willing to adapt its procedures and extend its jurisdiction as required in order to assist the victims of cybercrime; the confirmation that those victims now have an additional tool at their disposal is welcome.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.