First Malaysia Decision on a Persons Unknown Injunction

The High Court has issued its grounds of judgment dated 22 December 2020 in the Zschimmer & Schwarz case (now reported as Zschimmer & Schwarz GmbH & Co KG Chemische Fabirken v Persons Unknown & Anor [2021] 7 MLJ 178). The Court granted novel orders for a Mareva freezing injunction and proprietary injunction against Persons Unknown.

The Persons Unknown jurisdiction was justified in allowing for injunctive and tracing remedies against the unknown fraudster or fraudsters. The Court also allowed orders for substituted service on such Persons Unknown through email and a Dropbox link.

Summary of the Decision and Significance

First, this is the first known Malaysian court decision setting out the ability to grant such injunctions against persons unknown. The Judicial Commissioner Ong Chee Kwan noted in his first paragraph that the facts involved an increasingly common cyber fraud known as a “push payment fraud.” The victim is tricked over emails to make payment for a legitimate transaction but into a different bank account under the control of the fraudster.

This decision confirms that Malaysia will follow the same approach in the UK in the cases of CMOC Sales & Marketing Limited v Persons Unknown [2018] EWHC 2230 (Comm), World Proteins KFT v Persons Unknown [2019] EWHC 1146, and AA v Persons Unknown [2020] 4 WLR 35. The Malaysia Court will be quick to adopt such innovative reliefs to keep pace with increasingly sophisticated fraud.

Second, this is also the first known Malaysia decision to allow for a proprietary injunction. This is a related but different species of injunction compared with the Mareva freezing injunction. A victim may require both types of injunctions in order to preserve and assert the proprietary interest in the siphoned assets.

Third, the Court also allowed substituted service through email and a Dropbox link and the court papers would be sent to the fraudster’s fake email addresses used in the scheme.

Background Facts

The victim was a German company had been communicating with its South Korean counterparty. Through the emails, the German company thought that it was about to make a genuine payment to its South Korean counterparty for a commission payment.

The fraudster, being Persons Unknown, had eventually managed to deceive both the German company and the South Korean counterparty. The Persons Unknown essentially slotted themselves in between the email communications.

On the one hand, the Persons Unknown had seemingly been able to send out emails using the South Korean company’s email address to the German company. This was in order to eventually deceive the German company to make payment of the commission into a Malaysian bank account.

On the other hand, the Persons Unknown created fake but similar worded email addresses in order to impersonate the German company. The Persons Unknown passed themselves off as the German company to communicate with the South Korean company to complete the fraud.

Eventually, the German company made payment of close to RM600,000 into a Malaysian bank account, thinking that there was the legitimate request by the South Korean company to make such a payment.

The fraud was discovered. The German company then sought to file this urgent application on an ex parte basis.

Decision

First, the Court summarised the principles for the grant of a proprietary injunction and a Mareva freezing injunction. A proprietary injunction is to restrain a defendant from dealing with the assets of the plaintiff or with assets in which the plaintiff has an existing proprietary interest in. A Mareva freezing injunction is designed to protect a plaintiff against dissipation of assets which he might execute judgment against.

Second, the Court was satisfied that it had jurisdiction to grant such orders against persons unknown. There is nothing in the Rules of Court 2012 that would prevent the Writ of Summons and applications from being filed against persons unknown. The Court referred to CMOC, World Proteins KFT and AA v Persons Unknown.

Third, the Court also ordered substituted service against the Persons Unknown by way of email and advertisement. It was impracticable to effect personal service on the Persons Unknown (the 1st Defendant).

I was fortunate to be the counsel to argue this matter. I was ably assisted by my team of Pang Huey Lynn and Wong Li Qi. In such cases of fraud, it is useful to have diagrams and a step-by-step breakdown of the different components of the fraud. The Judicial Commissioner adopted the diagrams as part of the grounds of judgment.

Here is a list of recommended reading on the persons unknown developments:

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