On 30 May 2024, Rebecca Hume, Partner at Howard Kennedy, was joined by experts Jonathan Huth (Partner and Head of Middle East Group, Howard Kennedy), Zack Bluestone (Bluestone Law, New York and Washington DC), Wendy Lin (Deputy Head of the Commercial & Corporate Disputes Practice and a Partner at Wong Partnership, Singapore) and Simon Hurry (Partner and Head of the Insolvency and Corporate Disputes team at Collas Crill, Jersey). The panellists discussed recent legal developments as well as novel strategies used to trace assets and monetise claims against recalcitrant debtors and the ever increasingly complex and sophisticated tactics being deployed by bad actors to try to avoid claims against them.
The countless challenges that are faced by claimants when trying to recover assets, even with a judgment in hand, mean that novel strategies often have to be deployed across jurisdictions to make a successful recovery.
Targeting Third Parties with Deep Pockets
There is an increasing trend to try to target directors and officers for breach of their duties, beneficial owners and those who control corporate entities as well as third party service providers through economic torts. Claims for conspiracy and inducement of breach of contract can be very effective, particularly when combined and are being pursued with more frequency in Asian common law jurisdictions such as Singapore. Inducement of breach of contract by a director can be straightforward to prove where you have evidence of a valid and enforceable contract, the director knew about the relevant terms, intended the company to breach those terms, caused the breach and either acted outside the scope of their authority or acted in bad faith.
In Singapore (as well as some other English common law jurisdictions), conspiracy claims may be helpful to establish jurisdiction over a director who resides out of the jurisdiction. If a conspiracy claim is brought against a foreign director in conjunction with a Singapore director, if they have both conspired to cause/facilitate the harm that has occurred, it is likely that the court would assume jurisdiction of the foreign as well as the Singapore director. This may avoid having multiple actions (including enforcement action) across jurisdictions.
Finding the Money
Establishing where the money is, how it got there and deploying the most efficient tactics to ascertain precisely what has happened is often key to a successful recovery. Taking steps such as issuing a Section 1782 Application in the U.S. for discovery and issuing subpoenas can result in basic but invaluable information being obtained. The ability to "fish" for documents in the U.S. is the envy of jurisdictions like England & Wales where discovery must be relevant to the issues which are disputed. The breadth of disclosure in the U.S. means that you may quickly identify the various parties involved so that you can answer the question of "who do I sue". This may include any professionals involved, for example, lawyers. Not only is there a lower threshold against which a Judge will assess a lawyer's wrongdoing in contrast with a layperson, but there is also a greater chance of recovery in circumstances where they carry insurance. This makes the overall exercise more efficient and cost effective whilst maximising recovery.
More recently, auditors have become a huge target in Asia. Not only are auditors covered by professional indemnity insurance, but there are wider reputational considerations to be had. Professional outfits are hesitant to allow such claims to proceed to trial since their actions (or inaction) would be discussed in open court and could result in irremediable reputational damage.
Pressure to Settle
A good international asset recovery and enforcement lawyer will look to find pressure points that can be leveraged to achieve a settlement. Three key areas to consider are:
- establishing where the individual's real estate holdings and economic interests are located to devise strategies which involve legitimate interference with business interests, threats to liberty and restrictions on travel that can be leveraged to provide a return to the client;
- targeting a debtor's reputation by lawfully publishing a narrative that the individual would not want to become public knowledge; and
- making applications in jurisdictions where a debtor has business or other interests which can be used to get facts into the public domain that may be used in a media campaign against the debtor. Instructing an investigator can be helpful in establishing information about the debtor, their family, business, travel and other interests which can help inform what pressure points might exist and how they can best be leveraged.
Offshore Jurisdictions are not Black Holes
Offshore jurisdictions like Jersey are not global black holes which offer bullet proof protection for bad actors, quite the contrary. Jurisdictions like Jersey, which is a well-known trusts jurisdiction, are heavily regulated. When considering taking steps in Jersey it is important to have local advice. English common law jurisdictions like Jersey are not England & Wales. Limitation periods for bringing claims in Jersey are different to those in England & Wales., Some remedies have shorter limitation periods of only 3 years. Jersey has become more progressive as a jurisdiction which is now feeding across the onshore world. Relief and actions such as Mareva injunctions, Norwich Pharmacal and Bankers Trusts orders are available as well as some additional tools that are peculiar to Jersey such as "arrét entre mains" over property in the hands of a third party, which is similar to an English third party debt or garnishee order but with increased flexibility because it can attach to any intangible movable property or chose in action. Jersey Courts have been vocal in stating that they are not averse to assisting creditors. Proving an interest in a Jersey trust could result in the trust being penetrable and providing a road to recovery.
Key Takeaways
Germane to identifying an effective and efficient solution which will result in maximising recovery are:
- Taking appropriate steps to work out who it is that you want to target, what assets they have and where they are located;
- Identifying a debtor's family members, business associates, property and economic interests to try to use them to help inform out of court strategies to create pressure for settlement;
- Considering whether there are any third party "deep pockets" that may be easier to pursue to make a recovery such as professional service providers, financial institutions or parties that have insurance and identifying alternative and/or novel claims and remedies that may be used to pursue them to make a recovery; and
- Not falling prey to misconceptions about remedies available in jurisdictions which globally may be considered a black hole or safe haven for wrongdoers. Always seek advice in the jurisdictions which might be in play early on so you are informed about what is and is not possible.
This article has been co-written by Rebecca Hume (Partner), Ajay Fournillier (Associate) and Sanchita Agrawal (Solicitor).
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