CMOC Sales & Marketing Ltd v Person Unknown & Ors

Money procured by theft or fraud is impressed with a constructive trust and may be traced into mixed bank accounts, subject to the lowest intermediate balance rule. A participant in a fraud may be liable for dishonest assistance, knowing receipt and unlawful means conspiracy even if unaware of the victim’s precise identity, provided that the participant knew of a fraudulent scheme with a victim and played an active part.

In unjust enrichment, a claimant cannot ordinarily obtain overlapping personal judgments against both direct and indirect recipients of the same payment. A claim against direct recipients succeeds where payments were made by mistake and induced by fraud. The court may grant a worldwide freezing order against a sufficiently defined class of persons unknown, particularly where electronic fraud makes identification initially impossible.

The claimant was the victim of a business-email-compromise fraud. Hackers obtained access to a director’s email account and caused its London bank to make twenty unauthorised payments totalling US$6.91 million and €1.27 million. The money was transferred through bank accounts in numerous jurisdictions.

None of the remaining defendants filed a defence or adduced evidence. The claimant had obtained disclosure from banks, identified recipients at several levels, and served defendants by conventional and alternative means. It sought proprietary tracing relief, dishonest-assistance damages, damages for unlawful means conspiracy, knowing receipt, and unjust enrichment.

The central issues were whether the fraudulent payments remained traceable trust property, which defendants were personally liable, and whether unjust-enrichment claims could extend simultaneously to direct and indirect recipients.

1. Judgment was entered for the claimant. Cogent evidence established the email fraud on the balance of probabilities. The defendants’ informed decision not to participate did not relieve the claimant of that burden, but the evidence justified the inferences drawn.
2. The stolen money was held on constructive trust for the claimant and was traceable into recipients’ mixed accounts. Recovery of identifiable funds was limited to the lowest intermediate balance. Where the amount could not be quantified, the appropriate declaration was that the recipient held the traceable proceeds on trust.
3. The perpetrators and participation defendants were liable for dishonest assistance and unlawful means conspiracy. Their receipt, retention and rapid onward transfer of funds, coupled with the absence of any innocent explanation, established dishonest participation and concerted action. A conspirator who knows that a fraud has a victim, and that the victim’s loss is the conspirator’s gain, cannot avoid liability merely because the victim’s exact identity or the complete mechanics of the scheme are unknown.
4. Receiving defendants were liable in knowing receipt. The funds were trust assets transferred in breach of trust, received beneficially, and retained in circumstances making retention unconscionable. Knowledge of the precise beneficiary was immaterial.
5. The unjust-enrichment claim initially failed against indirect recipients because the claimant sought overlapping recovery against direct and subsequent recipients. Following an election made after judgment, the claim succeeded against the Level 1 payees only, as direct recipients enriched at the claimant’s expense by payments made under mistake and fraudulent misrepresentation.
6. Compound interest was awarded on the proprietary, knowing-receipt and dishonest-assistance claims; simple interest was awarded for unlawful means conspiracy. The claimant was entitled to indemnity costs. Overseas costs reasonably incurred to secure recovery could in principle be claimed as mitigation damages.

In supplementary, legally significant observations, the court held that it had jurisdiction to grant a worldwide freezing order against a sufficiently certain class of persons unknown. That conclusion was stated to extend existing law and to be citable in future cases.

Not stated in the judgment. This was a first-instance trial following numerous interlocutory hearings, including worldwide freezing and disclosure orders.