Taking legal action
Once victims or creditors are faced with the realisation that the investment which seemed “too good to be true” actually was, they then have to decide what legal action to take to recover or mitigate their losses. They are often faced with a choice between appointing – or supporting the appointment of – insolvency practitioners in their capacity as creditors of the scheme or bringing their own civil claims in their capacity as the victims of fraud.
Appointing insolvency practitioners
Insolvency practitioners have extensive investigatory powers which allow them to obtain information about the fraud from third parties, including under compulsion from the court where necessary. There are also Insolvency Act claims which only insolvency practitioners can bring, such as claims for transactions at an undervalue and preferences. In cross-border cases, the scope for the international recognition of English insolvencies is another significant advantage.
Bringing civil claims
The main advantages of the civil litigation route, on the other hand, is that it gives victims the benefit of having lawyers who act in their sole interests, not those of the wider creditor group, along with control over the litigation process – including settlement negotiations. One of the practical consequences of this is that the first step victims often take in a civil fraud action is to seek proprietary injunctions in respect of the particular assets which represent the…
