Barry Coffey
Partner, Mishcon de Reya
Okay good morning everybody or good afternoon, thank you for joining us. So let’s start first with our scenario; there is a knock at the door or perhaps a call from reception and it’s 8.00am in the morning. You open the door or you head downstairs to reception and there is standing someone in a dark blue suit and they hand you a pack of documents and explain that they are serving a worldwide freezing order either on you and one of your directors or on your company. So what do you do now? In today’s nightmare scenario digital sessions we will consider what you do if you, your company or one of your directors is served with a worldwide freezing order. We are going to touch on the following topics in this 25 minute session – what you can do during the first 48 hours, the points to consider when responding to a worldwide freezing order including the international coordination to respond to your opponent, managing publicity, inoculating your organisation from publicity risk and managing the risks of being de-banked if you are an individual and what to do if law enforcement also attain orders restraining your assets. My name is Barry Coffey and I am a partner in Mishcon de Reya’s dispute resolution team with a focus on commercial disputes, the tracing of assets and allegations of fraud including investment scheme fraud, Ponzi schemes, theft of confidential information and assets and director’s Misfeasance. I am joined today by my partner, Matthew Ewens and Claire Davidson. Matthew would you be able to introduce yourself please and just start by giving us a key point.
Matthew Ewens
Partner, Mishcon de Reya
Yes thank you, I’m a partner in the white collar crime in the investigations team with particular expertise in criminal investigations and criminal restraint orders. One of the key points to have in mind with a criminal restraint order is that the time limit to, to comply and provide disclosure of assets is very short and so for an extension that might be agreed with the prosecutor, you need to get everything in order and get everything in terms of your asset background to your lawyers so that they can get on with preparing your response.
Barry Coffey
Partner, Mishcon de Reya
Thank you Matthew and I am also delighted to introduce Claire Davidson of the DRD Partnership. Claire would you please introduce yourself and let us know the key point that you would like to raise at this point.
Claire Davidson
DRD Partnership
Thank you Barry. DRD is a litigation and complex disputes communications company and we work globally and we have extended experience of handling exactly the situation that Barry and the team are going to be investigating today. My one top tip and I think Matthew and Barry have suggested it already, is speed is of the essence and we would argue you have to gather the best brains together swiftly to be able to get over those next 48 hours and onwards.
Barry Coffey
Partner, Mishcon de Reya
Thank you Claire. I’d just like to flag up to everybody that there is a Q&A tab if you’ve got any questions please drop them into the tab and if we have got time at the end of this session we will try and deal with those. If we don’t, don’t worry either myself, Matthew or Claire as appropriate will be sure to get back to you. Okay so, what should you do in the first 48 hours having been served with a worldwide freezing order. Well put simply you should comply with the terms of that order. Now I understand completely that the temptation is whether it is legitimate or not to engage in fight mode and to fight, fight, fight. The position is that there will be time to do that however the first 48 hours following service of the freezing order is not that time. So if you take one thing away from this session it is comply with the terms of the order when it is served. Why is this important? Well it’s important because on the front of a worldwide freezing order granted by the English Courts there will be a penal notice and it will read something like ‘If you (the respondent)’ - and it will list either your name, the name of your director or the name of your company - ‘disobey this order you may be held in contempt of court and may be imprisoned, fined or have your assets seized’. I cannot stress this enough, do not ignore this warning because there will be certain steps that need to be taken within the first 48 to 72 hours and it is vitally important that you do that so that you do not find yourself on the receiving end of an application for contempt of court and absolutely heaven forbid you end up in a position where you either receive a fine or worse still, a custodial sentence. Okay, so what does compliance in that initial 48 hours look like? So usually a respondent will be required to provide to the best of their ability within that short period following service, information in respect of all of their assets up to a certain threshold - depending on the case it could be a £1,000, it could be £5,000 or it could be £10,000. Now here comes the advert, I’ve got it in early, it’s important that you speak to a specialist who knows what they are doing in this area. It really doesn’t serve to go to a generalist lawyer. Why is that? Well because the sanction for failing to comply with these orders is so draconian. You, as I have already mentioned, may find yourself on the receiving end of an application for contempt if you have failed to properly comply with these orders and nobody wants to find themselves heading off to the chokey. So what should you do with your lawyers after that initial 48 hours? Well there is work that should be undertaken with your lawyers ahead of the next hearing before the Court which is known as the return date. Now when making the application for the freezing order it will more often than not be without notice to the respondent and the rules in England have developed over time. I am not proposing to dwell on what those rules are in this presentation however just to skip through them very quickly; an applicant in that scenario has to show that there is for example a good arguable case against the respondent that there is a risk of dissipation in relation to their assets and the applicant also has a duty of fair presentation which is more colloquially known as the duty of full and frank disclosure. Now if those things are not done properly and if an applicant has failed to hit all of those points properly and has failed to give fair presentation to the court at an ex parte hearing then that will open up the lines of tact for you as a respondent. So one of the things that you can start doing with your lawyers is starting to pick away at what was said to the court at the without notice or put another way, secret hearing. There is also another really important line of work which relates to identifying the exceptions in the worldwide freezing orders. So if we take a company, a trading company as an example, there will usually and in most instances be an exception which does not prohibit that trading company from dealing with or disposing of its assets in the ordinary and proper course of business. When we’re talking about individuals there will often be an exception for ordinary living expenses if you have a modest lifestyle like mine, that will mean money will remain available to pay the mortgage, the gas bill, electricity and other utilities. However, many of the clients that come to Mishcon de Reya have got yeah, a less modest lifestyle as compared to me and it may often be the case that they are running significant households with staff including nannies, drivers, gardeners etc. If that is what your ordinary life is like although its extraordinary I suppose in some senses then the order will have to accommodate that. Similarly, there will be an exception for reasonable legal expenses. Why is that? Well a respondent in this jurisdiction has to be allowed to use their assets to pay their lawyers to defend themselves. Now in this regard one of the points to consider when we’re thinking about having to pay our lawyers and ancillary professionals is insurance. Many directors and officers of companies if they find themselves having been served with this type of order will be able to rely on insurance cover and it is often the case that service of an order such as this will trigger or will be a trigger event and that’s the case for civil litigation, criminal investigations such as those undertaken by Matthew and other types of investigations by other entities like the FCA or similar and these policies can provide significant cover well in excess sometimes of 5-10 million pounds. What they also provide is a fighting fund not just to pay for lawyers and Barristers but also communication specialists such as Claire. Now, during this initial phase it is also important to think about what your opponent might be doing. Now taking first what the applicant for the worldwide freezing order might be thinking about in terms of the international reach of these orders. Now a freezing order made in England will bite on the respondent any person subject to the jurisdiction of the English court, for instance a bank here in England or a foreign bank with a branch here in England. However foreign banks and other entities that may hold assets belonging to a respondent are not necessarily bound to the freezing order so it is important in this initial stage to try to figure out and put yourself in the shoes of your opponent. Try to understand what their private investigators and what their comms teams may have been up to in order to try and figure out where your assets may be located and have a think about whether they are off other jurisdictions getting similar orders in those jurisdictions or alternatively whether they may be going for back to back type orders. Similarly, when we’re thinking about our opponents game plan we need to think about our communication strategy and I’d like to bring Claire in here and Claire can you please speak to a couple of the following questions; what can we do to manage publicity and inoculate organisations from publicity risk and similarly, can we talk about some of the risks to the individuals?
Claire Davidson
DRD Partnership
Certainly, thanks Barry, I think the key thing that you’ve outlined and we mentioned at the very front end is to move rapidly. Communication is very much part of the strategic armoury that the entity on the other side will be executing and their team behind them will be looking to everything they can do to reinforce why they are seeking that freezing order and why hopefully they are having a video team or a camera team or somebody following that moment of the raid at 0800 and more importantly what they are going to do to try and reinforce the fact that there are potentially back to back orders. So it’s vital that you move swiftly to control the narrative, remembering anything that you state in those 48 hour period by your client or a company or a Board, it’s important if they are saying anything to the media or to shareholders that they are doing it very carefully because that might feature in litigation further down the line and potentially in other jurisdictions but I’ll come on to that. So importantly create a strategic Crisis Management Team, a CMT. They need to have external advisors – that’s my advert Barry – and they also need to make sure they have people like Barry’s team on that, legal colleagues, members of the Board or the family office and advisors and the key thing is the individuals in that team need to be able to make decisions and have license to do so as part of this rapid movement. Having set up the CMT, they need to build a decision making bridge between the work that Barry’s doing with his colleagues and what’s being done at the client to do the investigative piece that Matthew’s going to be talking about. You need to consider to whom you must communicate with, when and why and in what order. You need to manage consistent communication, so what you are saying to one stakeholder group has to be replicated to another so you are not creating any conflict but importantly you are trying to neutralise the other side’s point of view and at times, because it’s not just the family office or an individual, you could be a quoted entity that finds yourself in this situation. You have obligations that you must undertake and so you might have to issue an RNS for shareholders, you might also want to make sure that you don’t have legal or indeed, commercial risk and that means you have to think about how you will communicate to your suppliers or to your employees or in some cases, state authorities in which country you are working and in which you are paying taxes and/or using banking services. So, to do all of that at the same time you need a team of people monitoring and looking for information because the other side will be talking hard on their behalf. They will be on social media, they will be getting other people to speak on their behalf, they’ll have ex-politicians backing them, they have other people who are former employees backing them and they will be working really hard to create an environment where their messages are stronger and more wide reaching than yours and they might have been doing that in more than one jurisdiction, in more than one language so you need to move very quickly to make sure you’re there and tracking that and where possible and if right and strategically you are countering it. Then quickly moving on to how do we make sure that you can undertake various actions. To Barry’s point it’s very important that you emphasise in your communications in that first 48 hours that compliance is not acceptance or acquiescence, it is purely a legal process that has to be undertaken and you are ready for and able to undertake the legal process that is about to come towards you, your family office or your clients. Media can be briefed by a firm like ours or others to explain exactly what the Board’s view of the freezing order and the claim against it by the activists has means for the organisation and it can outline in very sketchy terms but in positive terms what it’s planning to do. This is about wrestling your narrative back, it’s about you controlling and being consistent about your narrative and it’s about making sure that as the CMT works together with Barry and his team, you’re actually planning out how you deliver something today but at the same time right behind us are a group of people mapping out all of the scenarios going forward. As Barry said, there is a legal cadence to this and we need to be ready to be able to handle each of those. Now quickly to answer your last question Barry because I know we’re tight, I wanted to share an experience we had recently where we were able to move with the intelligence gathering at massive speed when we found out that our client, the respondent had a claim that was being orchestrated against them. What was very interesting was our information gathering is we were able to discover that many small websites around the world were featuring the same story and all of those websites had one VPN, one URL and they were all going back into one geography. We were then able to work very closely with firms like your own to discover who might be on the other side and why they particularly enabled the opportunity for this action. That meant that there was a legal reason to challenge the case but also it meant we could take that information to banks and other organisations who were concerned about what they’d read about in the press and what they were seeing in more than one bone fide website. That was important because we were able to stop the de-banking process to our client and demonstrate very, very clearly that this was an orchestrated attempt. Sorry it was a real rush through everything.
Barry Coffey
Partner, Mishcon de Reya
Just two very quick points off the back of the, the final point that you made there. One, is when we are undertaking these investigatory steps for instance, looking at trying to identify where websites have been produced it’s, it’s important that we do it in a coordinated way so the lawyers working with the investigators in turn working with the communication specialists so that as a for instance we are able to cloak those investigations in privilege if that’s required. One other point to bring out clearly goes back to what we mentioned at the top of this presentation and about what you can do as a respondent to try to get a freezing order discharged. As I’ve mentioned, applicants have got this duty of fair presentation before the courts and if we are able to identify and put before the court evidence which shows that those applicants have not come to the court with clean hands or that they have manipulated evidence or they have actively planted evidence then that gives us a fantastic route through to get a freezing order discharged and also when we’re litigating here in England an opportunity to get our costs and also potentially claim the cost undertakings in damages the applicants are required to give under freezing orders. Okay, so turning now to Matthew, so Matthew it’s often the case in these scenarios that when a private individual is bringing a civil claim it may also be that law enforcement starts to get interested and may also seek to restrain assets and require disclosure of financial information. Can you speak to this for a couple of moments now?
Matthew Ewens
Partner, Mishcon de Reya
Yes thanks Barry. Yeah if you’re subject to a worldwide freezing order it may seem excessive and unduly unfair that you are also going to be the subject of a criminal restraint order but the reason for that is two-fold. First, the prosecutor will want to have certainty that they can recover assets should there ever be criminal proceedings, you are charged with a criminal offence and they convict you, they want to have the security of recovery and secondly it relates to the civil parties. That party wants to have certainty in equal measure because they have no skin in the game in the criminal proceedings often and they are at the, they’re at the mercy of the prosecutor because they could decide to not continue the proceedings against the individual or after a trial that individual might be acquitted so both of those steps, the criminal restraint order will fall away and that would leave a civil applicant with, with no, with no protection over the assets for enforcement in their proceedings. Just touching on a few of the similar themes that you’ve mentioned, obviously a criminal restraint order has appeal notice to anybody served or aware of the order. Usually banks are provided with a copy of the order simultaneously with the Land Registry so they are already on notice so you will find that even when you’re served with the order probably your banks have already decided to shut any payment systems on your accounts so you need to get back to the prosecutor with your nominated account for living expenses and probably followed immediately by a request to extend that the allowable living expenses because normally they are limited to about £250 a week which is to anyone’s standard, very low. In relation to business trading, often if the business that you are involved in isn’t part of the criminal allegations then they will be allowed to continue to trade but it’s worth checking that and if it’s not then that may also be the subject of an immediate request. Legal expenses unfortunately aren’t covered for the restraint order, underlying criminal investigation but if you are dealing with a worldwide freezing order then that would be a permissible legal expense. There is the function to set aside the order and vary the order but I would just, just want to flag a note of caution there because although the proceedings are private in restraint cases, obviously you’ve got the prosecutor sat there with the investigator so anything you do say is, is going to be fuel to the investigation so you have to have an eye on that and an eye on communications as well. I know we are running short of time but when dealing with communications it is very important to, to have everybody’s heads in the room on each step that you take but just be careful that ultimately once everything else is dealt with you will possibly have a criminal investigation that you then have to, have to answer. I think Barry I’ll move back to you at that point in time.
Barry Coffey
Partner, Mishcon de Reya
Thank you Matthew. We are running short on time. We’ve had some questions on the chat and I’ve also had a question sent to me directly by email from someone who has actually requested to remain anonymous and this is something which is interesting and reflects on a part of my prior practice and also goes to Claire’s practice and it’s really, is the strategies that we’ve been discussing applicable in circumstances where the applicant for the freezing order is a State owned enterprise or an entity backed by a State actor, Claire do you want to go first and then I’ll say a few words.
Claire Davidson
DRD Partnership
Yikes so it is very, very complex because if your business is in that geography Barry and you are banking in that geography and you are undertaking activity and employees are working with you it can be very troubling and difficult and I have sadly worked on quite a few geographies where that has been the case. There’s a new piece that we haven’t talked about which is the political engagement piece and hopefully companies that are already involved in those in certain geographies where politics and geo-politics is incredibly important have people who have a real understanding of the temperature but, but what you do then have to do is you have to introduce a whole new piece which some would call lobbying, other people would call government relations and you have to, to Matthew’s point, all of this has to be carefully calibrated and discussed and the Crisis Management Team and your legal team and the in-house legal team need to look at what strings and armoury you have to involve at each particular point and what are the repercussions of those. That scenario planning is incredibly important but it’s a much harder world when there’s a State involved.
Barry Coffey
Partner, Mishcon de Reya
Yeah I won’t say too much but, but just to say I’ve got many years of experience dealing with commercial litigation and more often than not we are dealing with two actors who really are fighting about money ultimately. When we have State owned enterprises involved or we’re dealing with politically exposed people the position is as you’ve identified, multi-layered and often it’s the case that the proceedings are part of, they are one part of a many pronged attack on an individual and the usual strategies that we would deploy in order to bring a commercial solution which ultimately is try and find the number can sometimes not be the only solution and we have to engage in a much more layered approach to how we deal with things.
Matthew Ewens
Partner, Mishcon de Reya
It’s worth also adding Barry that we’ve been looking at restraint orders from the point of the prosecution and their investigation but they may also be acting through mutual legal assistance on behalf of a foreign entity to restrain assets in this county.
Barry Coffey
Partner, Mishcon de Reya
A very good point. I am mindful that there are other questions on the chat. If we may we are going to take those away and we will contact those people directly and I’ll make sure that it’s either me or Matthew or Claire who’s most appropriate to deal with that, I will ensure that we get back to you shortly. Claire and Matthew can I just get a final take away from you both, perhaps Claire you could go first?
Claire Davidson
DRD Partnership
Sure I would say scenario plan for the horrible eventuality that this may happen. God willing it will never but at the time, in that moment is not a time for original thought. Get your act together, get your planning together and work out who your CMT will be before you ever need to.
Barry Coffey
Partner, Mishcon de Reya
Matthew?
Matthew Ewens
Partner, Mishcon de Reya
Yeah I would echo that and just say that dealing, having experience of dealing in civil jurisdictions and criminal jurisdictions at the same time it’s, it’s really important to have the right people in the room at every stage and that’s, that’s what you should have, have in mind when coming to this.
Barry Coffey
Partner, Mishcon de Reya
Great, okay. The Mishcon Disputes, Essential and Nightmare scenario session is going to be continuing through the Autumn and the Winter and you can click on the button below in order to see forthcoming events or you can also visit our website. I’d like to thank you all for joining, I’d also like to thank Matthew and Claire for their contribution. That now brings our session to a close. Thank you and we’ll see you next time.
Claire Davidson
DRD Partnership
Thank you.
Matthew Ewens
Partner, Mishcon de Reya
Thanks very much.