UK Law and Practice Contributed by: Simon Bushell and Gareth Keillor, Seladore Legal
adviser invests in an opportunity alongside their client, but fails (in breach of their fiduciary duty) to disclose a conflict of interest, the client may be able to claim the financial adviser’s share of the profits from the investment (in addition to retaining their own profit). In this regard, a propri - etary interest can dramatically increase the value of any claim. “Following” and “Tracing” Transferred Property The proprietary remedies available are assisted by the evidential rules of “following” and “trac- ing” transferred property. These are processes by which a claimant can identify the relevant property or proceeds that will form the focus of the claim. In broad terms, the claimant generally has a choice to either “follow” the relevant prop - erty and recover it from the third party (assuming they are not a good-faith purchaser, for value, without prior notice) or instead to “trace” and recover any proceeds or new assets the fraud - ster obtained from the third party. In the event that the proceeds of fraudulent activity become mixed with other funds, there are rules for identifying what the wronged party is entitled to (either in terms of a share of the fund or any asset purchased with it). 1.6 Rules of Pre-Action Conduct Claims in England and Wales are governed by certain “pre-action protocols” that set out the steps the courts will expect parties to take pri - or to commencing proceedings. These steps include: • setting out the claim in full; • providing the other side with an opportunity to respond; and
• considering whether the dispute is suitable for alternative forms of dispute resolution, such as mediation, and so on. While there is no specific protocol for instances of fraud, an allegation of fraud is serious and has far-reaching consequences even if it is not proved. Given this, any allegation of fraud must be clearly and accurately pleaded (as discussed in 2.7 Rules for Pleading Fraud ). Note that the pre-action protocols do not apply in respect of “without notice” applications, although there are other steps that must be tak - en in such circumstances (see 2.4 Procedural Orders ). 1.7 Prevention of Defendants Dissipating or Secreting Assets A wronged party may seek an interim “freezing injunction” that prevents a defendant from dis - posing of, or otherwise dealing with, their assets. This is intended to prevent the defendant from hiding, moving or dissipating their assets in a way that makes them “judgment-proof” . Such orders typically also require the defendant to promptly disclose a list of their assets (which they are subsequently required to verify by way of affidavit). Failure to comply with the order may result in the defendant being in contempt of court, which can result in the defendant being fined or (in serious cases) imprisoned. Failure to comply is also likely to affect the defendant’s credibility and may have other consequences for their substantive defence of the claim. Freezing orders are in personam orders, meaning they operate over individuals, rather than over specific assets. This is significant as it means they not only limit dealings with assets that are located within England and Wales (a “domestic freezing order” ) but also dealings with assets
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