How to catch a Fraudster: When private prosecutors should seek to use civil tools, such as a Norwich Pharmacal Order (NPO)

One of the most exciting aspects of fighting fraud is trying to unravel the way in which a fraud was constructed initially. It’s just like crime scene reconstruction without the blood.

One of the most difficult aspects of that reconstruction is figuring out what the structure of the fraud was, what vehicles or trusts were used, what order things happened and who was involved.  However, once you can identify what the modus operandi was, you will often see it repeated in similar ways. Figuring out a complex fraud will require careful dissection, many hours of (often flawed) brainstorming and trying to put oneself in the shoes of the fraudster.

As private prosecutors, we do not have the might of the police for search orders, nor the ability to conduct these as civil solicitors do. Nor are people compelled to speak to us. Nor are we able to arrest. Sadly.

So, what tools do we use? Well, firstly, we use private investigators. Well qualified and experienced private investigators are invaluable for speaking to witnesses and identifying what documents or evidence might exist.

Once that evidence has been identified, we could apply to the court to assist. One way in which the court can assist victims of fraud is the Norwich Pharmacal jurisdiction. Civil solicitors use this tool often as a pre-action disclosure order, often to identify the individuals or companies which should be charged.

What type of evidence will an NPO enable me to access which will help solve a fraud?

There have been a number of NPO applications made to the High Court to identify fraudsters on the internet, often “trolls” or fraudsters. Once identified, it is not possible to hide behind a virtual identity and the individuals can be prosecuted for offences such as fraud or harassment.

Some of the frauds we see are those in which a victim has paid money to an individual pretending to be a reputable person or company. Often, when the internet is involved, the victim may know little more than the username or the blog or the site. However, when a user registers with a blog or site and subsequently accesses it, the system provider would typically record the IP address or IP number of the user’s computer. From that point on, the true identity can be obtained by an NPO via an application to the court. Further, if a company or individual holds material which you know will assist in investigating a fraud (such as accountant’s records or a relevant trust document) then this option should be considered for a client.

From often narrow beginnings, NPOs can now be used to fill gaps in the victim’s knowledge of the offending, including the identity of wrongdoers and the scale of the wrongdoing, and can enable victims to make informed decisions about the appropriate legal action to take.

NPO: A developing jurisdiction

In the case of Norwich Pharmacal Co. v Customs and Excise Commissioners [1974] AC 133, Norwich Pharmacal Co. sought the disclosure of the identity of wrongdoer who was known to the Commissioners.  Without this information, Norwich Pharmacal Co. would have been deprived of a remedy for lack of a defendant, however the Commissioners considered they had no power to release that information.  The House of Lords found in favour of Norwich Pharmacal Co. and stated:

that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrongdoing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers.

Later case law highlights the flexible nature of the remedy.  Lightman J in Mitsui v Nexen Petroleum UK Ltd [2005] 3 All ER 511 notes that Norwich Pharmacal relief can be broad in form and that the jurisdiction has moved on from the ability to merely uncover the identity of an unknown offender. Just as significantly, the judgment recognises that it is unimportant as to whether third parties mixed up in the wrongdoing are innocent bystanders or had their own role to play in the wrongdoing:

… In its original form, the Norwich Pharmacal jurisdiction allowed a claimant to seek disclosure from an ‘involved’ third party who had information enabling the claimant to identify a wrongdoer so as to be in a position to bring an action against the wrongdoer where otherwise he would not be able to do so….Relief can be ordered where the identity of the claimant is known, but where the claimant requires disclosure of crucial information in order to be able to bring its claim or where the claimant requires a missing piece of the jigsaw…. Further the third party from whom information is sought need not be an innocent third party: he may be a wrongdoer himself:…

Finally, although Lord Reid in Norwich Pharmacal v Customs and Excise Commissioners specifically refers to tortious liability, there is now authority from the highest level that Norwich Pharmacal relief is available to the victims of wrongdoing generally to enable them to take a wide range of steps to redress the wrongs done, including private criminal prosecution; see per Lord Woolf CJ in the House of Lords in Ashworth Hospital Authority v MGN [2002] 1 WLR 2033, at paragraphs 53 to 56.  In discussing Sedley LJ’s remarks in Financial Times Ltd v Interbrew SA [2002] EWCA Civ 274, Lord Woolf CJ states:

In relation to crime, I would not accept the distinction Sedley LJ makes. As Sedley LJ recognises, it is likely that in the great majority of circumstances, if the wrongdoing constitutes a crime, it will also constitute a civil wrong so the different treatment is unjustified. In addition the jurisdiction, as it has developed, enables an individual who has caused harm by wrongdoing, wrongdoing with which the defendant has become involved, to be identified. If the law has developed so as to enable, in the appropriate circumstances, the wrongdoer to be identified if he has committed a civil wrong I can find no justification for not requiring the wrongdoer to be identified if he has committed a criminal wrong.

Norwich Pharmacal, private prosecution & the victims of fraud

Lord Woolf’s approach in Ashworth is consistent with our experience of today’s world of complex white collar crime.  It is rare that wrongdoing is confined to a narrow issue and our clients routinely face decisions on a whole range of issues when they discover that they have been the victim of wrongdoing.

In addition to deciding whether to institute criminal proceedings, it is common for our clients to have to consider whether there should be concurrent civil proceedings, and how the wrongdoing impacts on employment related issues, such as a decision to dismiss, and how to get on top of restraint, freezing and confiscation issues as soon as possible – it’s  important not to let the money dissipate!

By using the Norwich Pharmacal jurisdiction, it is possible for victims to gain a better picture of the offending against them and enable them to get redress from fraudsters who have wished to remain anonymous or to have their modus operandi concealed. In order to outsmart a fraudster, our tactics must evolve as quickly as the development of fraudulent scams.

Kate McMahon, Director.

Adrian Sandberg, Senior Associate.