Fraud: A Jersey Perspective

Investigating and prosecuting serious and complex fraud is about staying ahead of the game. Most serious frauds will have an international element, whether in the substantive action or in asset recovery. It has therefore become increasingly important for fraud lawyers to have knowlege of offshore centres laws and procedures in freezing and tracing assets as well as possible substantive remedies.

Jersey has a legal system which provides proactive criminal and civil international co-operation in cases of suspected fraud. Jersey however has its own systems of law which do not always mirror the English position. This guide by Baker & Partners gives you a practical overview of the legislation and procedure of the Jersey legal system. It provides practical advice to identify the most appropriate solutions to any scenario arising out of fraud, asset recovery, the enforcement of foreign judgments and insolvency. It thus provides legal practioners with an invaluable overview of the Jersey perspective on fraud claims in an easy format. Allowing you to stay ahead of the game.

Criminal Proceedings

A generic offence of fraud has long existed in the common law of Jersey and continues to be charged in appropriate circumstances. To establish this generic offence of criminal fraud it is necessary to show that the defendant deliberately made a false representation with the intention of causing thereby—and with the result in fact of causing thereby—actual prejudice to someone and actual benefit to himself or somebody else.

It is additionally the case that the usual range of specific fraudulent activity is criminalised by Jersey common law and continues to be charged in appropriate circumstances. Fraudulent conversion, obtaining by false pretences, false accounting and forgery are all prime examples of this.

Quite apart from this comprehensive range of common law offences, various statutes are in place to provide investor protection. The Banking Business (Jersey) Law 1991, for example, criminalises unregistered deposit-taking business and fraudulent inducements to invest money. Fraudulent inducement is also criminalised by the Investors (Prevention of Fraud) (Jersey) Law 1967. Heavy penalties are consequent upon conviction (up to 7 years imprisonment and/or an unlimited fine).

The provision of false or misleading information under the Collective Investment Funds (Jersey) Law 1988 is criminalised and punished by up to5 years imprisonment and/or an unlimited fine.

By way of further example, offences relating to insider dealing, market manipulation and providing misleading information, in respect of financial matters are created and made punishable by the Financial Services (Jersey) Law 1998.

As to money laundering, the full range of offences is in place by virtue of the Proceeds of Crime (Jersey) Law 1999, the Drug Trafficking Offences (Jersey) Law 1988 and the Terrorism (Jersey) Law 2002. It is of course the money laundering offence which gives territorial jurisdiction so that the locus of the predicate offending is immaterial to the charging of the money laundering and the freezing of assets within the jurisdiction.

Confiscation orders are available under the legislation and are widely made following conviction. In cases with an overseas component, the Jersey authorities work closely and constructively with the governments and agencies of other countries in the locating, securing, managing and ultimate disposition of assets.

Local legislation gives wide powers to the Jersey authorities to co-operate with other governments and their agencies in the investigation and prosecution of crime and the recovery of the proceeds thereof. The provision of information and evidence and the securing of assets held in the island are all enabled by the Investigation of Fraud (Jersey) Law 1991 and the Criminal Justice (International Co-operation) (Jersey) Law 2001.

Local legislation also enables the enforcement in Jersey of overseas forfeiture orders/confiscation orders.

The relevant authorities in Jersey are authorised to enter into asset sharing agreements with other governments when there has been anything in the nature of a combined operation resulting in the confiscation or forfeiture of assets.

As to the initiation of a criminal prosecution, initial complaints are characteristically made to the States of Jersey Police or to the Law Officers' Department. Depending on the subject matter, the complaint may come to the attention of those authorities by another route, for example a complaint made to the Jersey Financial Services Commission. The complaint is ideally made through the intermediary of a local lawyer although nothing prevents a direct approach to the relevant authority by the complainant.

Following such investigation as is required by the nature of the complaint, it is for the Attorney General to decide whether to bring a prosecution and like the prosecuting authorities in the United Kingdom, his decision is taken by reference to transparent published guidelines. The Jersey guidelines are to be found at the following website:

http://www.gov.je/Government/NonexecLegal/LawOfficers/Pages/DecisionProsecute.aspx

Proceedings are brought in the name of the Attorney General and are prosecuted by a Crown Advocate, an appointee of the Attorney General assigned to the case either from within his Department or from the private sector.

It is a feature of Jersey law that common law offences are tried by a jury and statutory offences are tried by a standing panel of lay Justices ('Jurats'), an office well known within European jurisprudence.

In either case an appeal against conviction and sentence is available and is invariably heard by the Jersey Court of Appeal, a tribunal made up predominantly of eminent lawyers from the various United Kingdom internal jurisdictions.

As to requests for international co-operation in the matter of investigation, evidence and the pursuit of criminal assets, the approach is also made in the first instance to the Attorney General, whose contact details are in the Helpful Addresses section to this booklet.

The time taken to bring prosecutions and requests to a conclusion will depend on the nature of the case and the levels of resistance encountered on the part of those who are the subject of the proceedings in question. What can be said with certainty is that the Jersey authorities continue to have an outstanding record of attention to the matters addressed here, be it domestically or internationally. Their history of co-operation with responsible partner jurisdictions is second to none, has been recognized by reporting international bodies such as IMF and FATF and continues to be a matter in which they take great pride.

Civil Remedies

Jersey law provides civil remedies at all possible stages of a fraud claim. Interlocutory injunctions are available with 24 hours' notice to the court. The Jersey Royal Court applies English principles in granting these injunctions and therefore the American Cyanamid principles must be met before an injunction is granted in Jersey. However, unlike the English courts, Jersey allows an injunction to be granted in aid of foreign proceedings even if the only proceedings in Jersey are for the injunction itself. It further allows leave to serve out of the jurisdiction if the defendant is outside the territory and the only Jersey process is that of the injunction. Wide disclosure orders are also available as ancillary orders to injunctions and the Royal Court may order worldwide disclosure orders against the defendant, even if they are not Jersey resident.

Banks and financial institutions are made parties cited to the injunctions in Jersey and are only bound by the injunction by service of the proceedings upon them. Similarly wide disclosure orders may also be made against the parties cited as ancillary orders to the injunction.

If there is insufficient information to obtain an interlocutory injunction, an Order of Justice can be served against a third party financial service provider who has been 'mixed up' in the wrongdoing, under the Norwich Pharmacal jurisdiction. This is dealt with in more detail below. This will enable information to be ordered from a third party, allowing sufficient information to gain the injunction against the defendant and the party cited.

A caveat (or 'opposition') is available which is a Mareva injunction on the sale of Jersey real property. It is available to creditors with a liquidated claim when there is a risk of Jersey real property being sold.

Each of these injunctions are granted by the Bailiff or the Deputy Bailiff of the Royal Court and must be applied for by way of an Order of Justice with an affidavit in support which must comply with the duty of full and frank disclosure.

As regards substantive remedies available in Jersey, Jersey law recognises the concept of a constructive trust as established in Re Esteem1. The Royal Court in Re Esteem also held that a beneficiary of a constructive trust has an equitable proprietary interest in the assets which are subject to that trust. The Royal Court further held that in Jersey, as in English law, when property is obtained by fraud, equity imposes a constructive trust over that property for the benefit of the victim of the fraud, meaning that they have an equitable proprietary interest in that property.

Jersey also recognises concepts of accessory liability. A claim can be made against a third party if they have been guilty of dishonest assistance or unconscionable receipt of property, both causes of action establishing a liability to account as if the accessory was a constructive trustee for the benefit of the victim of the fraud to claim directly against the third party who has received the funds or assisted in the breach of trust with the requisite knowledge.2

Jersey goes further than English law in that it allows a claim in restitution based on 'unjust enrichment'. This does not require an...