Civil asset recovery – jurisdictional issues

Parallel proceedings

Is there any restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings concerning the same subject matter?

No, there is no legal restriction on civil proceedings progressing in parallel with, or in advance of, criminal proceedings on the same subject matter. The courts have discretion to stay civil proceedings where there is a real risk of substantial prejudice that could lead to injustice. However, the courts rarely exercise this discretion. In Shiva Ltd v Boyd [2021] EWHC 371 (Admin), the court refused a stay of proceedings and emphasised that there is a high bar for what constitutes a real risk of substantial prejudice. It stressed that there is a ‘public interest in civil proceedings being determined in a reasonable time’.

Forum

In which court should proceedings be brought?

Except for small value claims, which proceed in the County Court, proceedings should be brought in the Business and Property Courts division of the High Court of England and Wales. Within the Business and Property Courts, claimants have a choice of commencing proceedings in specialist divisions. In practice, most large-scale asset recovery cases are brought in the Commercial Court, which has significant experience in dealing with ancillary orders that are common in fraud and asset recovery, such as freezing and receivership orders.

Limitation

What are the time limits for starting civil court proceedings?

Asset recovery claims span a range of different types of claim, which all have different time limits. Under the Limitation Act 1980, the limitation period for tort and contract claims is six years. In fraud claims, the limitation period does not start until the claimant has discovered the fraud or reasonably could have discovered it. Where the claim is based on foreign law, the English courts generally apply the foreign limitation law, although there are some exceptions to this. There is no time limit for starting claims for a fraudulent breach of trust or claims by a beneficiary of a trust to recover trust property. Different limitation periods apply in insolvency claims. Claims for wrongful or fraudulent trading are generally subject to a six-year limitation but claims to set aside transactions and recover property may be subject to a 12-year limitation period under section 8 of the Limitation Act 1980.

Proceedings to enforce English High Court judgments are not subject to any limitation period, although delays may make them more difficult. Proceedings to enforce arbitration awards are generally subject to a six-year limitation period. Enforcement of foreign judgments has different limitation periods, depending on the basis on which the judgment is being enforced.

Jurisdiction

In what circumstances does the civil court have jurisdiction? How can a defendant challenge jurisdiction?

For the English courts to establish jurisdiction, proceedings must be served. If a defendant can be served in England, the English courts automatically have jurisdiction, although defendants can challenge this by arguing that England is not the proper place for the claim to be heard. An English jurisdiction clause also automatically gives jurisdiction to the English courts.

In other circumstances, Part 6 of the Civil Procedure Rules contains jurisdictional gateways. The gateways that are most frequently used in asset recovery cases are:

• a defendant is domiciled in England;
• in cases with multiple defendants, if one defendant is subject to English jurisdiction and there is a real issue to be tried against them (which is reasonable for the English courts to hear), the claimant can treat them as an anchor defendant and obtain the court’s permission to sue any other necessary or proper party to that claim. This gateway is very often used in conspiracy claims;
• a claim relates to a contract made within the jurisdiction or is subject to English law, or both;
• a claim relates to a breach of contract committed within the jurisdiction of the English courts; or
• in tort claims, England is the place where the harmful event occurred or may occur.

The English courts permit the enforcement of foreign judgments and awards. There are various registration regimes or it is possible to enforce under common law provided the judgment satisfies certain criteria, including that the judgment is final and for a definite sum of money.

The United Kingdom has adopted the United Nations Commission on International Trade Law Model Law in the Cross Border Insolvency Regulations 2006 and recognition is regularly granted to foreign insolvency proceedings.

A defendant can challenge jurisdiction. To do so, they must file an acknowledgement of service that disputes the jurisdiction of the English courts and specifies why jurisdiction is disputed.

Civil asset recovery – procedure

Admissibility of evidence

What rules apply to the admissibility of evidence in civil proceedings?

Evidence that is relevant to the disputed factual issues in the case is generally admissible, although the courts have discretion and there are some exclusions. The key exclusions are:

• opinion evidence;
• evidence protected by privilege; and
• evidence obtained by torture.

As a general rule, the English courts admit evidence rather than excluding it, even if it has been unlawfully obtained. In Ras Al Khaimah Investment Authority v Azima [2021] EWCA Civ 349, the Court of Appeal confirmed that evidence that was allegedly obtained by illegal hacking would not be excluded.

The court has a wide discretion to control evidence under Part 32.1 of the Civil Procedure Rules, including the ways in which evidence is presented and the issues it covers. Evidence by video link is allowed, including where the witness is in another jurisdiction, subject to permission of the English court and any rules governing the giving of evidence in the jurisdiction in which the witness is located.

UK criminal convictions are admissible, but foreign criminal convictions are generally inadmissible, subject to certain limited exceptions.

Witnesses

What powers are available to compel witnesses to give evidence?

In civil proceedings, parties usually rely on a written witness statement (namely, parties do not question their own witness in court). A witness is normally only questioned by the opposing side in a process known as cross-examination.

If a witness within the jurisdiction will not provide evidence voluntarily, a witness summons can be served. This obliges the witness to provide documents or give oral evidence, or both. However, serving a summons can be a risky strategy because, without a witness statement, the party serving the summons often has no advance knowledge of the witness’s evidence. If a witness fails to comply with a properly issued summons, the court can fine or imprison the witness, or hold the witness in contempt of court.

If a witness outside the jurisdiction will not provide evidence voluntarily, the party requiring that witness’s evidence can ask the English court to send a letter of request from the English court to the court in the foreign jurisdiction. The letter will ask the foreign court to take and send evidence from the witness. The English court has discretion regarding whether it sends letters of request and the English court will evaluate the evidence received for admissibility before it can be deployed in the English proceedings.

Publicly available information

What sources of information about assets are publicly available?

The key sources of publicly available information include the following:

• Companies House operates a database of all UK-registered companies and limited liability partnerships. Available information includes details of shareholders, directors, persons with significant control, registered charges and company accounts;
• under the new Economic Crime (Transparency and Enforcement) Act 2022, Companies House will also hold a public register of overseas entities, including information about beneficial owners of property or land;
• the Driver and Vehicle Licencing Agency operates a database of the registered keeper of all taxed vehicles in the United Kingdom;
• the Land Registry operates a database of English and Welsh properties that can be searched if the property details are known. It clarifies if a property is mortgaged, but not the outstanding sums under the mortgage;
• publicly listed companies are obliged to publish filed accounts on their website and file information with the relevant stock exchange; and
• public registers of certain other assets are also available, including aircraft and ships.

Cooperation with law enforcement agencies

Can information and evidence be obtained from law enforcement and regulatory agencies for use in civil proceedings?

Evidence can be requested from law enforcement and regulatory agencies for use in civil proceedings. It is generally at the discretion of the relevant law enforcement agency whether to comply with a request. In practice, they rarely comply.

In very rare circumstances, the court can grant an order that compels public authorities to provide information. For example, in Various Claimants v News Group Newspapers & Others [2013] EWHC 2119 (Ch), the court ordered the Metropolitan Police in London to disclose information obtained in phone hacking investigations to claimants in civil proceedings.

Third-party disclosure

How can information be obtained from third parties not suspected of wrongdoing?

There are various types of order that allow this.

A type of disclosure order called a Norwich Pharmacal order is available against third parties (eg, banks) who may have relevant documents or information, but are unlikely to be defendants to proceedings. These orders can be obtained before a claim is issued. These orders normally prohibit the respondent or respondents from disclosing the existence of the order to anyone else (namely, they usually include a gagging order).

Under Part 31.17 of the Civil Procedure Rules, the court can order disclosure against third parties, but only after proceedings have been commenced. An applicant must prove disclosure is necessary to dispose fairly of the claim or to minimise costs, and that the documents requested will support their case or adversely affect the case of the other parties.

Bankers’ trust orders are disclosure orders available against third parties, typically banks. They are orders intended to assist in tracing assets where a party has a proprietary claim. These orders require disclosure of any information that may assist in the tracing process.

Documents can be obtained under section 7 of the Bankers’ Books Evidence Act 1879. This permits any party to a legal proceeding to inspect entries in a banker’s book for the purposes of those proceedings. In Wangzhou Meng v HSBC & Others [2021] EWHC 342 (QB) the court held that this only applies to legal proceedings in England, and that the types of documents that can be inspected are documents with a transactional focus and not, for example, records that are maintained for regulatory compliance.

Civil asset recovery – remedies and relief

Non-compliance with court orders

How do courts punish failure to comply with court orders?

The courts normally penalise non-compliance with case management orders by making adverse costs orders.

However, injunctions – including freezing orders and search orders – contain a penal notice. This notice warns the recipient of the order or anyone within the jurisdiction with notice of the order that breach of the order may result in the respondent being held in contempt of court. The courts can hold a party that disobeys an order with a penal notice in contempt of court and punish them with fines, asset seizure and imprisonment for up to two years.

Obtaining evidence from other jurisdictions

How can information be obtained through courts in other jurisdictions to assist in the civil proceedings?

The English courts can issue letters of request to courts in other jurisdictions to obtain information to assist in civil proceedings under the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters 1970 (the Hague Evidence Convention).

Assisting courts in other jurisdictions

What assistance will the civil court give in connection with civil asset recovery proceedings in other jurisdictions?

The English courts will respond to letters of request issued in compliance with the Hague Evidence Convention. Further, the English courts will grant freezing orders in support of foreign proceedings under section 25(1) of the Civil Jurisdiction and Judgments Act 1982 in appropriate cases.

There are various reciprocal enforcement conventions in force, such as the Hague Convention on Choice of Court Agreements 2005, the Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933. Orders that fall under these conventions can be enforced through a registration process. Foreign arbitration awards can be enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

Causes of action

What are the main causes of action in civil asset recovery cases, and do they include proprietary claims?

The main causes of action in civil recovery cases are the following:

• fraud. This is known as the torts of deceit or fraudulent misrepresentation. Fraud involving multiple defendants is usually brought as a conspiracy to defraud claim;
• breach of trust or breach of fiduciary duty. These types of claims can include proprietary claims, (namely, claims that the complainant has a direct interest in an asset in dispute);
• knowing receipt (which means receiving trust property in breach of trust) and dishonest assistance (which means assisting someone else in committing a breach of trust). For a claim for knowing receipt, the claimant must show that the defendant knew that the property they received was received in breach of trust. For a claim for dishonest assistance, the claimant must have evidence of the defendant’s dishonesty. These types of claims can include proprietary claims (namely, asserting claims over the assets themselves);
• bribery, or the receipt or payment of a secret commission;
• unjust enrichment. Here, the claimant brings claims that a defendant who received funds, by which they were unjustly enriched, must repay an equivalent sum to the claimant;
• a transaction defrauding creditors claim under section 423 of the Insolvency Act 1986. This is applicable to cases where a defendant has entered into a transaction at an undervalue for the purpose of putting assets beyond the reach of claimants or potential claimants, or has otherwise defrauded current or future creditors; and
• insolvency office holders (namely, administrators, liquidators and trustees in bankruptcy) have powers to pursue other claims (eg, to set aside transactions) that are often used in asset recovery litigation.

Remedies

What remedies are available in a civil recovery action?

The principal remedies in asset recovery claims are restitution (to restore to the claimant the benefit that a defendant obtained at the claimant’s expense) or an award of damages to compensate the claimant for losses they have suffered.

Where a claim relates to trust property or unjust enrichment, a proprietary remedy may be available to recover the relevant assets (namely, the disputed asset, or its traceable proceeds, are returned to the claimant). In these cases, the court will usually impose a constructive trust over the asset. Equitable tracing claims may also be available to recover specific assets.

Where a claim is against a fiduciary (for example, a trustee or director of a company) acting in breach of duty or trust, the defendant may be ordered to provide an account of profits. This remedy can also apply in some other claims, depending on the circumstances.

Punitive damages are not generally available. However, in cases involving the tort of deceit, punitive damages may, very rarely, be awarded.

Judgment without full trial

Can a victim obtain a judgment without the need for a full trial?

If the defendant does not respond to the claim, a judgment can be ordered in default and without a trial. If the defendant responds to the claim but their defence has no real prospect of success and there is no other compelling reason for the claim to go to trial, summary judgment is available. The bar for succeeding on these applications is high, particularly in fraud cases.

In extreme cases, where a defendant is in contempt of court for disobeying an injunction or repeatedly breaching court orders, the court may bar the defendant from defending the claim unless they cure their contempt. While this still results in a full trial, if the trial is undefended, it may be reduced to proceedings that last just one day.

Post-judgment relief

What post-judgment relief is available to successful claimants?

Freezing orders are available both post-judgment and pre-judgment.

The court can also order a judgment debtor to provide information under oath regarding their assets under Rule 71 of the Civil Procedure Rules. If a judgment debtor fails to attend court to provide information, the court can hold them in contempt of court and penalise them with fines, asset seizure or imprisonment, or a combination of these penalties.

The court can also appoint a receiver post-judgment to preserve assets. Finally, insolvency office holders have extensive powers under English law, and claimants and judgment creditors should consider whether an insolvency process would put them in a better position than enforcement. This will usually depend on what other creditors are pursuing the same debtor.

Enforcement

What methods of enforcement are available?

The main methods of enforcement available are:

• a charging order over land, following which a creditor can seek an order for sale;
• a third-party debt order, which can be obtained over assets like bank accounts and require the third party (eg, a bank) to pay money to the judgment creditor instead of their client;
• an attachment of earnings order, requiring an employer to pay a proportion of the debtor’s salary to the judgment creditor;
• a writ of control, which enables a court officer to take control of a judgment debtor’s assets and sell them to satisfy the debt; and
• a court-appointed receiver with the power to manage income from the judgment debtor’s assets and apply it to satisfy the judgment debt.

Personal bankruptcy or liquidation proceedings are an alternative route to enforcement, although they are collective processes (namely, any monies realised by the insolvency officer will be divided between creditors).

Funding and costs

What funding arrangements are available to parties contemplating or involved in litigation and do the courts have any powers to manage the overall cost of that litigation?

Parties are legally permitted to use the following:

• third-party funding. The market in England is well established, although still nascent in the context of asset recovery litigation. Litigation funders cannot exercise full control over the claim;
• a damages-based agreement under which a lawyer takes a percentage of the damages recovered instead of a traditional hourly billing arrangement. These arrangements have not been common, due to a lack of clarity in the regulations. However, following the court’s clarification of the regulations in early 2021 in Zuberi v Lexlaw [2021] EWCA Civ 16, damages-based agreements may become more common;
• a conditional fee agreement under which a lawyer agrees to charge no fee or a lower fee if the claim is unsuccessful, but an increased fee if the case is successful; and
• after-the-event insurance, which typically covers liability for an opponent’s legal costs if an adverse costs award is made. This can also cover a party’s liability for its own disbursements and legal costs, although this is rare.

In England, the court normally orders the party that loses litigation to pay part (or sometimes all) of the winning party’s legal costs. All the arrangements listed above are legal, but the additional costs (over and above lawyers’ standard costs) that they incur cannot be recovered from a counterparty in litigation. For example, a claimant will still be able to recover their own legal costs (namely, the lawyers’ costs funded by a litigation funder), however, the claimant will not be able to recover the costs of the litigation funding itself.

In small claims, the courts exercise significant control over costs by setting cost budgets. Where the value of a claim is over £10 million, the courts do not usually exercise direct control over costs by setting budgets. However, the court exercises indirect control, for example by taking into account the reasonableness of costs when it makes an order for the losing party to pay the winner’s costs. Usually, the courts only order part of these costs to be paid.