Deep pockets: professional liabilities in fraud claims

Victims of fraud have extensive legal rights to help them recover assets taken by the fraudster, and to sue him for damages. But sometimes, says Simon Congdon , a partner at Holman Fenwick & Willan, these are not enough. The proceeds of fraud are as often dissipated as saved, leaving the victim with insufficient remedy. In these circumstances, he may look for a “deep pocket”, who has been involved in the fraudulent transaction in such a way as to expose himself to liability.

Simon Congdon may be contacted on tel: +44 (0) 20 7264 8258; email: simon.congdon@hfw.co.uk

To take a standard example of seeking recovery from a deep pocket defendant: a fraudster may procure a corporate vehicle to enter into a transaction with the victim, so that assets are transferred from the victim to the vehicle, and then in turn to the fraudster. The transaction might be a loan, or a sale of corporate or physical assets. In each case, both vehicle and victim may well have employed a raft of professional advisers such as financiers, auditors, lawyers or valuers.