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Now You See Me, Now You Don't: What Can be Done if a Bank Fraudster's Identity is uUnknown? 

by Kirin Shanti Mogan, Manpreet Kaur Sandhu

Published: September, 2021

Submission: September, 2021

 



Introduction


In the age of the Internet and technology, banking scams and fraud abound. Where such bank fraud is committed, it is often the case that the fraudster disappears and their identity remains unknown. How courts grant relief where the identity of the perpetrator of a bank fraud is unknown was addressed in two Malaysian court decisions in 2021:


  • Zschimmer v Persons Unknown[2021] 7 MLJ 178 (Zschimmer); and
  • Zschimmer v Persons Unknown (No 2)[2021] 3 CLJ 587 (Zschimmer No. 2).

 


Facts


A German company and manufacturer of chemical products (the plaintiff) engaged in a business arrangement with its representative company in South Korea, pursuant to which the South Korean company was to sell the plaintiff's products in return for commission payments made by the plaintiff to the South Korean company.


The plaintiff was a victim of a type of cross-border banking fraud known as a "push payment" fraud. The fraud took place in two stages. First, the fraudster (the first defendant) attempted to deceive the plaintiff to pay monies into a separate bank account. This attempt failed. Second, the first defendant defrauded the plaintiff into paying monies into the second defendant's bank account.


The fraud took place via email. The first defendant infiltrated the plaintiff's and the South Korean company's emails and defrauded the plaintiff into making a "legitimate" payment of 590,470.32 ringgit into a Malaysian CIMB bank account. The plaintiff was defrauded into believing that it was making commission payments to the South Korean company. The payment was instead channeled into the second defendant's account. The first defendant then siphoned the money out of the account.


The fraud was discovered when the South Korean company informed the plaintiff that it had not received the commission payment. Investigations were carried out by the plaintiff, the plaintiff's bank and the plaintiff's German solicitors.


The plaintiff brought an urgent ex parte action against the defendants for relief, including a proprietary injunction and Mareva injunction, and for substituted service by way of email and advertisement against the first defendant. The court granted the plaintiff the relief sought.


Following the action, the plaintiff obtained discovery orders against the first and second defendants to trace its money. The plaintiff was then able to discover additional parties involved in the fraud.


Decision


Proprietary injunction


InZschimmer, the plaintiff applied for, among other things, a proprietary injunction. The purpose of a proprietary injunction is to restrain a defendant from dealing with the plaintiff's assets or assets in which the plaintiff has an existing proprietary interest.


The English High Court(1)has previously listed the necessary elements for the grant of a proprietary injunction – namely, that:


  • the claimant has shown that there is a serious issue to be tried on the merits;
  • the balance of convenience is in favour of granting an injunction; and
  • it is just and convenient to grant the injunction.

The court inZschimmerstated that the courts would be able to grant interlocutory orders against the first defendant, despite their identity being unknown. The court recognised English case law that granted similar orders against such unknown persons.(2)The court also held that there is no provision in the Rules of Court 2012 that prevents a writ of summons and/or applications from being filed against unknown persons.


The court held that the plaintiff needed to establish a good arguable case in order for the court to exercise its persons unknown jurisdiction.


The court also took the opportunity to discuss the differences between a Mareva freezing injunction and a proprietary injunction. The court held that a Mareva freezing injunction is aimed at protecting a claimant against the dissipation of assets available to execute judgment against, whereas a proprietary injunction is aimed at preserving assets in which a claimant has a proprietary interest, after which these assets may be transferred to the claimant should the claimant emerge successful in the action.


Substituted service


The court granted an extension of time to serve the ex parte order on the defendants, given the difficulty and delay involved in effecting service on the first defendant.


The court also accepted that there were grounds in support of an order for substituted service against the first defendant as it was impracticable to effect personal service thereon. Substituted service was to be effected by way of email (to the fake email addresses used by the first defendant to carry out the bank fraud), an advertisement in the New Straits Times, and a Dropbox link to be included in the email sent to the first defendant to facilitate the large file size that was to be served.


Spartacus orderInZschimmer No. 2, the plaintiff applied for, among other things, a Spartacus order against the first defendant. A "Spartacus order" requires a person whose identity is unknown to identify themselves and to provide an address for service. Essentially, it is a self-identification order.


The court referred to various English cases(3)and held that although such cases related to blackmail and threats of publication of data, the principles are equally applicable to cases involving bank fraud.


InZschimmer No. 2, the self-identification order required an advertisement of a notice against the first defendant to be placed in a local newspaper – namely, Berita Harian. The purpose of the notice was to inform the unknown persons of the order for them to identify themselves within seven days, failing which committal proceedings would be brought.


Comment


The principles set down inZschimmerandZschimmer No. 2demonstrate a forward-looking judicial approach to facilitating the service of cause papers on and identification of bank fraudsters as well as the freezing of assets stolen by such unknown person. It is hoped that this welcome judicial development will facilitate the access and recourse to justice by litigants who have fallen victim to bank fraud schemes.


For further information on this topic please contactK Shanti MoganorManpreet Kaur Sandhuat Shearn Delamore & Co by telephone (+60 3 2027 2911) or email ([email protected]or[email protected]). The Shearn Delamore & Co website can be accessed atwww.shearndelamore.com.


Endnotes


(1)AA v Persons Unknown[2020] 4 WLR 35.


(2)CMOC Sales & Marketing Limited v Persons Unknown[2018] EWHC 2230 (Comm),World Proteins KFT v Persons Unknown[2019] EWHC 1146 (QB) andAA v Persons Unknown[2020] 4 WLR 35.


(3)PML v Person(s) Unknown[2018] EWHC 838 (QB),PML v Person(s) Unknown[2018] EWHC 838 (QB),NPV v QEL[2018] EWHC 703 (QB) andCMOC Sales & Marketing Limited v Persons Unknown[2018] EWHC 2230 (Comm).



 

 

 
 

 

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