The European Lawyer

Virgin Islands (British) Corporate/Commercial

31 Jul 2010

International Fraud and Asset Tracing - British Virgin Islands

Editors: Harneys - Andrew Thorp

1. Introduction
The Territory of the British Virgin Islands (the ‘BVI’) is a self-governing British Dependent Territory with a population of around 20,000, located on the north-eastern tip of the Caribbean
The BVI is well known as a mature offshore jurisdiction being home to some 800,000 incorporated international business companies (‘BVIBC’s) as well as a major centre for the registration and licensing of captive insurance companies, mutual and hedge funds and wealth planning vehicles such as trusts. This chapter is designed as a guide to those working in the dominant financial services sector on the discovery of an internal fraud.
The BVI has its own statutes in the form of locally enacted acts and subsidiary legislation promulgated by the Legislative Council. In addition, some United Kingdom legislation (particularly with respect to the implementation of international treaties) has been extended to the BVI and forms part of the laws of the BVI.
Notably, the European Convention on Human Rights (ECHR) has not been extended to the BVI. The BVI constitution has however recently been enacted and includes provisions for the fundamental rights and freedoms of the individual and bears close resemblance to the ECHR.
English common law applies to the BVI by the Common Law (Declaration of Application) Act (Cap 13). Under section 13 of the Eastern Caribbean Supreme Court Act, the principles of English equity also apply. As a result, the common law of the British Virgin Islands is largely identical to that of England (except as modified by statute).
Any decisions by the Judicial Committee of the Privy Council are binding on the BVI courts. In the absence of some local consideration to justify a deviation, the BVI courts will often follow decisions of the English courts (while not strictly binding) and recognise the desirability of having the same common law throughout the Commonwealth.

2. Managing the Internal Investigation
In the absence of detailed employment legislation, the limits and parameters of an employer’s search and investigatory powers over an employee will be based upon common law and the effect of the very newly enacted constitution. It should also be remembered when comparing the provisions with those of the ECHR that they apply directly to the workplace and are not limited to public servants.

2.1 Hard copy documents
Documents prepared for and on behalf of the company and those received in the course of its business remain the property of the company. Care however must be exercised in the retrieval of documents so as to avoid any criticisms about infringing an employee’s right to privacy and breaching the implied duty of trust and confidence.
The constitution provides specifically for a right of privacy, which, despite remaining untested as yet may have a profound effect on how employers should conduct their investigations. For example, the constitution provides that:
‘19(2) Except with his or her own consent, no person shall be subjected to the search of his or her person or property or the entry by others on his or her property.’
While it is unlikely that privacy afforded by the constitution could cover an employee’s work area, care must be taken by employers when conducting searches that may interfere with a person’s rights to privacy. For example, a personal folder or briefcase within the work area could qualify as a person’s property and fall under the scope of the privacy provision.
• It is advisable that a general consent should be sought within the contract of employment for searches to be carried out of an employee’s work area and for a stop and search provision. A protocol should also be put into effect requiring the attendance, wherever possible, of the company’s compliance officer and/or human resources officer.
• Failure to submit to a search, in the absence of a contractual protocol is unlikely to amount to an offence worthy of summary dismissal.
• In the absence of a general consent, as a rule, the search of a person or a person’s property (briefcase, coat, laptop computer) should be carried out only with their consent. It is likely that this consent can be withdrawn at any time by the employee.
• A search of an employee’s work area should be carried out in such a manner as to avoid any obviously personal items.
• Continual searching of the same employee may be indicative of a breakdown of trust and confidence and give rise to a claim for constructive dismissal.

2.2 Electronic documents
Monitoring is to some extent a routine part of the employer/employee relationship. Most employers make some checks on the quantity and quality of work produced by their staff, and employees will generally expect this. The right to privacy is enshrined in the new BVI constitution.
‘19(1) Every person has the right to respect for his or her private and family life, his or her home and his or her correspondence, including business and professional communications.’
There is no known case law in the BVI which has tested the parameters of monitoring phone calls or email traffic from an employee’s workstation. Whilst the constitutional safeguards of privacy discussed above are present, they are not countered by legislation enjoyed in other countries which specifically allow for the limited monitoring both covertly or with consent (such as in the UK which has the Regulation of Investigatory Powers Act 2000 or the Telecommunications (Lawful Business Practice)(Interception of Communications) Regulations (2000) or any data protection legislation).
The wording of 19(1) was probably designed to avoid the lengthy case law that has arisen in Europe. The provision aims to give effect to the monitoring of all employees’ correspondence, both personal and private, access being limited to the employer in accordance with a clear stated email and internet policy. Again, the wording has yet to be tested however it is  important that a company provide a clear policy and gain consent for the monitoring of all emails and telephone calls if they are to monitor lawfully. This is especially prevalent given the direct implementation of the right to the private workplace.
Without such a policy there is the possibility that evidence obtained via covert monitoring could be subject to constitutional challenge. Any such challenge could substantially delay or hinder any action through the Courts and in extreme circumstances may be excluded from later evidence under the provisions of the Evidence Act 2006.
• Companies operating in the BVI should implement a full code of practice regarding monitoring of emails and telephone calls.
• Without a monitoring policy and gaining employee consent, there is the risk that intercepting phone calls and emails even for quality control purposes could fall foul of the privacy laws. Companies in the BVI should make this a priority.
• Despite the provisions of 19(1) care should be taken when reviewing employee emails to avoid those that are of an obvious personal or private nature.
• The newly gazetted Criminal Code (Amendment) Act 2007 provides new offences where data is intentionally destroyed or there is interference with computer data. The Act also gives search powers to the police in respect of such offences.

3. Obtaining oral evidence from employees
Given the nature of the financial services industry in the BVI, an early decision should be taken as to whether the incident involves a money laundering activity.
This is of key importance as a failure to comply with money laundering regulatory guidelines could cause criminal proceedings to be brought against a company.

3.1 Fraud and money laundering
BVI financial services providers should be well aware of compliance issues with respect to any ‘suspicious activity’. Identification of money laundering issues is key to an internal investigation as this will have a profound effect on how the investigation is carried out.
• The Financial Services Act 2001 requires that a compliance officer be appointed by ‘licensees’ which will cover almost all providers in the financial services sector. The officer should be involved at an early stage of the investigation.
• Have in place a compliance system which includes ‘key staff’ monitoring and being aware of any suspicious transactions and a protocol in place to identify and report suspicious activity.
• Complete a suspicious activity report to the Financial Investigation Authority (‘FIA’), advising them of the activity. This step should protect the company against any liability under the Proceeds of Criminal Conduct Act.
• Further consultation should also be sought with the FIA before any internal interview takes place. A company is vulnerable to an offence of ‘tipping off’ in the event that it makes aware any perpetrator of fraud which may result in notification via the employee. Clarification and even permission should be sought before the allegations are put before the employee.
A company should consider whether a reportable suspicious transaction has taken place before it considers discussing the matter with the employee.
• The Labour Code in the BVI does not address the issue as to whether an employee being questioned with respect to a fraud has the right to be accompanied by a colleague or legal representation.
• There is no requirement to provide advance notice of questioning or documentation.
• While there is no ‘right to silence’ with respect to civil proceedings, the investigator should bear in mind the interface with any criminal prosecution. The Evidence Act 2006 provides protection, in certain circumstances, to a witness giving evidence on the grounds that it may prove an offence under the laws of the BVI or give rise to civil liability in other proceedings.
• The Evidence Act provides detailed commentary on hearsay rules of evidence and in particular admissions and representations made by a party and employee. Detailed interview notes should be taken and both the interviewer and employee should sign contemporaneous notes to safeguard future admissibility.
• Good practice would be to reproduce any contemporaneous notes into a witness statement or, better still, a sworn affidavit.

4. Privilege
BVI law generally follows English law in the area of privilege. There is generally a protection from production of confidential documents or communications that have been created either to obtain ‘legal advice’ or in the preparation of legal proceedings (‘anticipated or pending’).
Privilege is common law-based and also referred to in the Evidence Act 2006. Both types of privilege are defined and importantly, so is the definition of ‘client’ a term that has been subject of both controversy and scrutiny in England and Wales following the decisions in Three Rivers District Council v The Governor and Company of the Bank of England No5. In this instance, the House of Lords upheld the very narrow interpretation of ‘client’ and while matters will be considered on a case-by-case basis, there is a real risk that communication with, for example, a relatively junior employee will be treated the same as with a third party and not be protected.
The ‘client’ as defined in the Evidence Act takes on a wider meaning and includes:
(a) an employee or agent of a client;
(b) a person acting, for the time being, as manager, committee or other person however described, under a law that relates to a person of unsound mind and in respect of whose person, estate or property, the person is so acting; or
(c) if the client has died the personal representative of the client.
The definition at (a) suggests that any communication between a legal practitioner and an employee or agent of the client falls under the umbrella of privilege. Therefore communication passing between the client and the legal practitioner ‘providing legal advice’ should attract privilege (section 114). There is however also specific provision in the Act for privilege between the client and his legal practitioner provided in relation ‘to legal proceedings, or anticipated or pending legal proceedings (section 115)’.
The question of privilege is a very important one when considering tactically how an internal investigation should take place. Whilst the legislation provides a wide framework for privilege, in-house counsel should tread very carefully to ensure that this is maintained:
• if possible seek evidence from senior employees;
• contemporaneous notes should record that the evidence is being collated as a result of specific proceedings (be they anticipated or pending);
• communications with an employee or agent of the ‘legal practitioner’ should attract privilege under the Act. In-house counsel should take care to ensure that they are admitted to practice in the BVI to minimise the risk of a technical challenge or alternatively instruct legal representation at an early stage;
• where the question involves the enforcement of a court order, the court may not recognise the privilege;
• voluntary disclosure can act as a waiver of privilege; and
• the Financial Services Commission Act 2001 grants regulatory bodies in the BVI very wide powers of information gathering in an investigatory capacity. Great care should be taken in the production of internal memoranda and documents with may become discoverable to an investigator.

5. Disclosure from third parties
In essence, the companies registry is the only major source of information and records that are publicly available otherwise than by recourse to litigation.
A search of the public register file should reveal the following information: Certificate of Incorporation; the Memorandum and Articles of Association; the identity of the Registered Agent and the location of its registered office; and possibly details of directors. A search would not normally reveal the names of the shareholders or details of assets and in practice almost none do.
Unlike CPR 31.16 of the Civil Procedure Rules (UK), there is no equivalent provision in the BVI that allows a party to apply to the court for an order for disclosure before proceedings have commenced. This tends to be generally of lesser significance given that actions for discovery against third parties normally lie against trust companies and registered agents, which can be targeted by Norwich Pharmacal applications.
A Norwich Pharmacal disclosure and production order is available to obtain documents from ‘innocent’ third parties. Under this procedure, a claimant may bring proceedings for disclosure by an innocent third party which, through no fault of its own, gets mixed up in the tortious acts of others so as to facilitate their wrongdoing. While each case is based on its own facts, the BVI court will normally require the following:
• a party possessing information or documentation has innocently become involved in the infringement of the applicant’s rights;
• the ‘innocent’ wrongdoer possesses relevant information or documentation;
• the applicant has a prima facie cause of action against a party whose identity could not be ascertained without the information sought;
• the applicant intends to sue the ‘real’ wrongdoer, and needs the information or documentation in order to initiate that claim;
• the information would not otherwise become available, so that to withhold relief would amount to a denial of justice; and
• the applicant can, and will, pay the ‘innocent’ party’s costs in complying with the order sought against it (for instance, the cost of searching and locating records and taking legal advice).
The following matters need to be borne in mind in BVI actions:
• The ‘innocent’ third party is often the banker or the registered agent of the company, who has been passively involved rather than having actively facilitated the fraudster’s wrongdoing.
• A registered agent will typically hold company formation documents, including the Certificate of Incorporation, the Memorandum and Articles of Association, the share register, the register of directors, and minutes of any shareholders’ or directors’ resolutions (although minutes of resolutions are often not passed to the registered agent). The registered agent will normally have some correspondence showing the source of instructions, which can be extremely valuable to an applicant.
• However, a Norwich Pharmacal order may not reveal details of the shareholding if the company has issued bearer shares. In these cases, the bearer of the share certificate is deemed to be a member of the company and needs only to produce the share certificate as evidence of his or her membership of the company. As a result, the share register may only list the number of each bearer share but will not reveal the identity of the shareholders. However, a registered agent’s obligation to keep due diligence information can be an important source of information which can lead to the beneficial owner.
• The Court of appeal recently held in Morgan & Morgan Trust Corporation Limited v Fiona Trust & Holding Corporation et al 3/2006 that the jurisdiction is ‘a special one to be used only where no other procedure will achieve the ends of justice’ and applicants should be wary of conducting fishing expeditions.
It is much more difficult to obtain a Norwich Pharmacal order against a law firm because under BVI law, communications between a lawyer and his client are protected by professional privilege. Most BVI law firms have an association with a trust company providing a registered office, registered agent and company secretarial services. However, legal professional privilege should not extend to communications between clients and a trust company associated with a law firm where incorporation advice is given.
Finally, it is important to note the importance of obtaining a gagging order and an order sealing the court file when obtaining a Norwich Pharmacal order in the BVI. If the client of record were inadvertently tipped-off by the registered agent, the client might take steps to destroy or conceal evidence held outside the BVI or otherwise frustrate the objective of the Norwich Pharmacal order. If adequate evidence of this danger is shown, the BVI court will allow a party to apply ex parte.

5.1 Disclosure to safeguard missing assets
The court also has an equitable jurisdiction to order disclosure against either defendants or innocent third parties to aid in the protection of missing trust assets. This method, commonly referred to as a Bankers Trust v Shapira order has been used sparingly in the BVI, probably because of the overlap with Norwich Pharmacal type orders but nevertheless is a powerful tool in tracing and safeguarding against further dissipation.
There must be a real prospect that an order for discovery will assist in the location and the subsequent preservation of assets. Any application should be targeted at respondents who have information regarding the assets and have been involved in their disposal.
• The orders will usually be aimed at trust companies in the BVI, although there have been instances in other jurisdictions where orders have been obtained against banks.
• In Omar v Omar [1995] 1 WLR, the Court pierced the corporate veil of a company to assist a shareholder in pursuing the missing assets of the company.
• The court will also balance the interests of the intrusion into the privacy of the respondent against the potential detriment to the claimant if the information is not provided.
• The information is limited to the use of tracing the assets and, as in Norwich Pharmacal orders, the claimant will pay the respondent’s expenses in complying with the order.
• Applications should not be general and as far as possible should define the missing assets and information sought – see Gee, Commercial Injunctions and Arab Monetary Fund v Hashim (No. 5) [1992] 2 All ER.
• Applications will not improve with time and should be brought promptly.

5.2 Banker’s Books (Evidence) Act 1881 (Cap 7)
The provisions of the Banker’s Books (Evidence) Act 1881 (Cap 7) are broadly similar to those contained in the Banker’s Books Evidence Act 1879 (UK). Section 7 of the Act allows an applicant to apply for an order to inspect and take copies of entries in banker’s books for use in legal proceedings. Section 2 defines ‘banker’s books’ as including ledgers, day books, cash books, account books, and all other books used in the ordinary business of the bank.
The power to allow a litigant to inspect banker’s books is discretionary and exercised with great care. The BVI courts are more likely to grant the application if the relevant bank account belongs to a party to the litigation. The statute does not remove privilege from otherwise legally privileged documents or allow inspection of irrelevant documents. The purpose of the statute is to allow pre-trial inspection of bank documents to save the bank officials the trouble of appearing in court when served with a witness summons. Disclosure under Norwich Pharmacal principles in aid of tracing is wider than that available under the Act.

6. Steps to preserve assets/documents
On the discovery of a fraud, it is important that urgent relief is considered to protect against any further dissipation of assets. The granting of relief is often dependent on the matter being brought before the courts with expedience. On a practical basis, time lags tend to hinder asset tracing as funds become mixed and harder to identify.
The BVI courts are well versed in the provision of ancillary relief orders designed to preserve assets, including documentation pending the resolution of a dispute. In the case of freezing orders (formerly known as Mareva injunctions) and the appointment of a receiver, it is important to note that the Siskina principles will apply and that a substantive cause of action is required (ie, there is no ‘free-standing’ injunctive relief).

6.1 Freezing orders
The jurisdiction to grant a freezing order is found in section 24 of the West Indies Associated States Supreme (Virgin islands) Ordinance, Cap 80 and Pt 17 of the Civil Procedure Rules. The jurisdiction is available where it ‘appears to the Court or Judge to be just and convenient to do so.’
To pursue this avenue of relief, an applicant must be able to show:
• A good arguable case, one which is neither vexatious or frivolous.
• The subject matter of the claim is in danger if left in the possession or under the control of the defendants until trial. ‘Solid evidence’ must be adduced by an applicant in support of this contention.
• A freezing order will more readily be granted where the assets in question are the subject of a proprietary claim than where a claimant seeks a monetary judgment (damages being an adequate remedy). Freezing order relief is usually obtained without notice to the defendant, however it should be stressed that it is a requirement to show the Court that:
• If notice was given to the other side, then action would be taken to defeat the purpose of the order. This is a very important consideration and any delay in bringing the application may prove fatal.
• A cross-undertaking is provided to compensate for any damage that may be caused as a result of the order or that the risk of loss that could not be compensated by a cross- undertaking is outweighed by the risk of injustice should the matter be be heard on notice.
• There is no equivalent jurisdiction of the English Supreme Court Act section 37, nevertheless, BVI courts have assumed jurisdiction to freeze assets outside as well as within the jurisdiction, based on English case law, notably Derby & Co Ltd v Weldon [1980 1 WLR 1259 and further explained in Danone Asia Pte v Golden Dynasty et al BVI 262/200.

6.2 Disclosure orders
A freezing order will usually be accompanied by an ancillary disclosure order. This is often as important as the freezing order itself as it will require a defendant to provide documentary evidence, usually by list followed by affidavit, with respect to the assets which are frozen. The order is designed to ensure that the freezing order properly fulfils its objective and is not abused. It can also be utilised to assist in identifying specific assets and obtaining full redress against a defendant abroad, care must be taken however to avoid a mere fishing expedition.

6.3 Cross-examination orders
In certain circumstances it is possible for a deponent to a disclosure order to be cross-examined in circumstances where it would facilitate the location and preservation of assets. (House of Spring Gardens Ltd v Waite [1985] FSR 173).
Early cross-examination can be an effective manner to amplify shortcomings in written disclosure evidence but the BVI court will only make such an order where there is a real prospect that assets subject to a freezing order will be identified. (Michael Wilson and Partners v Hakissan et al BVIHC 2005/307).

6.4 Privilege against self-incrimination
Privilege against self-incrimination may be available to a defendant pursuant to common law and the, as yet, untested provisions within the Evidence Act. Essentially, a defendant will be able to invoke privilege where a defendant may expose himself to criminal proceedings or, where he has failed to comply with the order, contempt proceedings.
A negative inference may be drawn against a person who invokes such a privilege.

6.5 Receivership orders
Where a freezing order can be shown to be insufficient to preserve assets pending a trial then the court also has jurisdiction to make the more draconian order of appointing a receiver. This will require real evidence as to why a freezing order will not suffice and, pursuant to Michael Wilson and Partners v Norgulf Holdings Limited 2005/07, a minimum threshold of at least a good arguable case.

6.6 Liquidation and interim relief
Another potential weapon in a company’s armoury against fraud is the use of the Insolvency Act 2003.
A ‘creditor’ under the Act may seek the winding-up of a company on the grounds that it is insolvent or that it is ‘just and equitable’.
• The applicant must show that he is a creditor and therefore has a claim against the company which would be admissible in the liquidation or, in other words, a debt must be owed at the time of presenting the original winding up application (section 9 Insolvency Act 2003 and commentary in Akai Holdings Limited (in Compulsory Liquidation) v Brinlow Investments et al BVIHC 2006/0134).
• For a creditor to proceed under insolvency, it must be able to establish insolvency in one of four ways: failure to meet a statutory demand; an unsatisfied judgment; balance sheet insolvency; or an inability to pay debts as they fall due (section 8(1)).
• It is generally accepted that when a company is utilised as an instrument of fraud, the BVI Courts will have a discretionary jurisdiction to wind the company up on just and equitable grounds. This may, in some cases, include applications against ‘alter ego’ companies under the control of the target fraudster.
• The just and equitable ground in cases of fraud will require a creditor to have a good prima facie case that the respondent company and its principal were engaged in fraud, in order to show a good arguable case that it is just and equitable that the company be wound up. (Re RGB Global SA BVIHC 2002/152).
This appointment of a provisional liquidator can be sought by a creditor (section 170 of the Insolvency Act 2003) where the company consents but more probably in cases of fraud where:
• The Court is satisfied that the appointment of a provisional liquidator is necessary for the purpose of maintaining the value of the assets owned or managed by the company (Insolvency Act 170(4) (b)).
• The Court can appoint provisional liquidators on such terms as it thinks fit, these will usually include useful and extensive investigatory powers but stop short of any ability to liquidate or distribute assets.
• Utilising a provisional liquidator in the pursuit of fraudsters operating through a BVI company can be an effective way of investigating the fraud while preserving assets in the interim.
• It is however not enough for an application to be brought on the basis of a requirement to investigate a company, the applicant must fall under the definition of creditor in section 9.
• One main advantage in bringing insolvency proceedings is that the process is envisaged to conclude within six months of the application being issued and can often be both quicker and cheaper than a writ action.
• Insolvency proceedings are class remedies and therefore an appointed liquidator will act in the interests of all of the creditors rather than a receiver appointed pursuant to a claim against a company.

6.7 Search orders
Search orders (formerly known as ‘Anton Piller’ orders) are available in the BVI pursuant to CPR 17(1)(l):
‘(l) an order (referred to as a search order) requiring a party to admit another party to premises for the purpose of preserving evidence, etc.’
There have been no known orders in the BVI because the usual target of such orders (for example, the directors of a company) are generally not domiciled or resident in the BVI and very few documents are to be found in the BVI, other than those held by either trust companies or registered agents.
The relief is however available and an applicant will need to show that:
• there is an extremely strong prima facie case;
• the ‘potential or actual’ damage must be very serious for the applicant;
• there must be ‘clear evidence’ that the defendants have in their possession ‘incriminating documents or things’ (which was the subject matter sought to be preserved in that case); and
• that there is a ‘real possibility’ that the defendants may destroy such material before any application can be made on notice (see Anton Piller KG v Manufacturing Processors Limited [1976] Ch 55 and Gee, Commercial Injunctions 17.018).
Akin to Norwich Pharmacal relief, it is usually advisable for a gagging order to be put in place to prevent dissemination of the search to third parties, especially in the context of preserving assets or evidence in another party’s possession.

7. Civil proceedings
The remedies available to claimants are varied and can be founded both in equity and common law. On the whole they will closely mirror those approved in the English courts and the BVI courts have looked towards England for authority on such points.

7.1 Constructive trust claims against third parties
Constructive trust liability can arise in two main ways. First, liability in dishonest assistance, and second where a third party knowingly receives property impressed with a trust in favour of the claimant.

Liability in dishonest assistance
An ‘assister’ can be liable in dishonest assistance where there is (Royal Brunei v Tan [1995] 2 AC 378):
• a breach of trust or fiduciary duty;
• the party assisted in that breach of trust or breach of fiduciary duty; and
• the target defendant has been dishonest.
Third party claims are of considerable assistance in pursuing fraud claims, especially where the principal wrongdoer cannot be traced or is impecunious. The victims of fraud will need to be able to establish that a fraud amounted to a breach of duty or trust, common in cases involving financial and professional individuals or entities.
One issue has recently been the subject of debate in the higher English courts and most notably in the Privy Council decision, Barlow Clowes v Eurotrust International Ltd [2006] 1 All ER. The test in that case suggests that it is not necessary that a third party be aware that its conduct was dishonest by its own standards. The test instead being given the party’s state of mind, intelligence and knowledge at the appropriate time would be deemed dishonest by objective ordinary standards (followed in the BVI decision of Akai Holdings (in liquidation) v Brimlow Investments et al).
‘Wilful blindness’, where a person knows of the risk but chooses to ignore its existence where an honest and reasonable person would have made further investigation may also give rise to dishonest assistance. An assister need not know the details of the transaction or the initial breach of trust, it may be sufficient under the test in Barlow Clowes that the person was suspicious that he was dealing in misappropriated funds.
If successful, the claimant will be entitled to equitable compensation for the losses arising from the assistance. These will not be reduced by contributory negligence on the part of the claimant.

Liability in knowing receipt
Unlike liability in dishonest assistance, knowing receipt (or unconscionable receipt) does not require an element of dishonesty on the part of the recipient of the trust assets.
To establish a claim in knowing receipt it must be shown that:
• the assets were disposed of in breach of fiduciary duty and received with such knowledge (El Ajou v Dollar Land Holdings plc [1994] 2 all ER 685);
• the recipient beneficially received the assets; and
• the recipient’s state of knowledge at the time of receipt is such that it is unconscionable for him to retain the benefit (BCCI v Akindele [2001] Ch. 437).

7.2 Tracing
The rules of tracing are an important tool whereby a victim of fraud can identify its asset or the proceeds and those persons who have handled or received them, and asks the court to award a proprietary claim against the property, or alternatively an asset substituted for the original property.
The rules are complex and a detailed commentary is beyond the scope of this work however it is important to know under what circumstances property can be traced into the hands of third parties:
• There must be a distinct equitable title to the property in order to trace it. As in the case for accessory liability discussed above, this will usually arise in cases of breaches of fiduciary duty or trust.
• In the event that the fraudster has transferred the asset to a third party, the claimant can elect to follow the original asset and enforce his equitable title or alternatively trace the ‘substituted’ asset in the hands of the fraudster. The latter is often preferable or necessary as a third party who purchased the asset in good faith without notice will extinguish the claimant’s equitable title.
• Where the asset remains in the ownership of the fraudster, the claimant can choose whether to enforce an equitable lien for the value of the original asset or claim the entire beneficial ownership of the substituted asset under a constructive trust. The latter provides a potential increase in the value of the recoverable asset.
• Tracing can take place into a mixed fund to which the fraudster has contributed, although where the fund is mixed, beneficial ownership over the entire substituted asset cannot be asserted. This regularly occurs where funds are mixed in a bank account and the court will look to apply favourable identification rules to ascertain the claimant’s contribution.
• Where tracing into a mixed fund which includes funds belonging to an innocent volunteer, the court will use different identification rules that provide parity between the parties (as set out in Clayton’s case, see Snell’s Equity, 31st edition).
• Where the mixed fund has been used to buy a further asset then the claimant will be able to trace his share in the new asset which may increase or depreciate in value.

7.3 Common law claims
The common law equivalent of knowing receipt, monies had and received, is a personal rather than a proprietary claim. It is usually used in more straightforward recovery cases, where the claimant still retains title at the time of its receipt by another party. In the absence of payment of any consideration or a potential change of position defence, a court can order that monies be paid back.
Restitutionary claims arising from unjust enrichment are, like most other common law jurisdictions, available to a claimant in the BVI. The claims do not require any wrongdoing on the part of the recipient but the recipient must have been directly enriched at the claimant’s expense and without its consent. The claim is a personal one and is not dependent on tracing into any specific property. A bona fide purchase for value or a change in position will act as defences.
Tracing money at common law is a more difficult exercise than at equity, especially where it has gone through bank (or similar) accounts, because of problems of identification. Identifying the money in equity is far easier, because equity is not defeated by the mixed bank account.

7.4 Conspiracy
There are two conspiracy claims in tort, an intentional infliction of harm by unlawful means and unlawful means conspiracy. Both require intentional conduct by the defendant aimed at harming the claimant (Douglas v Hello [2005] EWCA Civ 595). Unlike dishonest assistance, there is no requirement of dishonesty. Recovery will be in the form of damages

7.5 Fraudulent misrepresentation
A fraudulent misrepresentation is a statement of fact made without belief in its truth, knowingly or recklessly with the intention that it should be acted on. Male fides are not a prerequisite for a fraudulent misrepresentation to be proved. Where a contract has been entered into by reason of fraudulent misrepresentation, the person induced may rescind the contract, claim damages or both.