Two Innocent Victims of the Same Fraud – Where Does the Loss Fall?
Sophisticated fraudsters can intercept emails or other digital traffic in order to divert payments away from their intended recipients. However, where should losses arising from such deceit fall where there is more than one innocent victim? The High Court faced that vexed issue in the context of the sale of a Maserati sports car.
The seller agreed to pay an internet-based company a fixed £995 fee for organising the sale. Once a buyer was found and the car changed hands, the company was obliged to pay the seller £51,800. However, email exchanges between them were intercepted by a fraudster who convinced the company to pay him £30,000. Subsequently, he has not been traced.
After the company failed to pay the seller his due balance, he sought to have the company wound up. The company responded by suggesting that the most likely explanation for the fraud was that the seller had not taken care to guard the security of his email communications. It sought an injunction, preventing him from presenting a winding-up petition.
In ruling on the matter, the Court found that the company had no real prospect in establishing that their contract with the seller should require him to take reasonable care for the security of his emails. Whilst the contract might have been improved by the addition of this term, it was not required.
The Court also rejected the company’s plea that, by agreeing to communicate by email, the seller had implied that he would take reasonable care over the security of his email account. The reality was that the company had failed to perform its own security checks. Therefore, the company alone was responsible for sending money to an unauthorised account based on instructions received from an unknown third party.
The Court acknowledged that the use of winding-up petitions as a means of debt collection is generally discouraged. However, the seller’s claim did not fall into that category in that there was no substantial dispute that the balance of the purchase price was due and owing to him. The company’s injunction application was dismissed, thus enabling the seller to present his petition.
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