Asset Tracing
Circumstances
John was the managing director of a limited company, who sold his thriving business to an individual.
Both parties were introduced via a broker, who had advertised the business for sale. The broker received a 15% fee for their part in introducing both parties and brokering the deal. The bulk of the purchase £500,000.00 was paid on completion and the remainder (£200,000.00) was to be paid by way of a deferred payment over the next 6 years, by way of monthly instalments. A further £100,000.00 was held in an escrow account and paid to John shortly after the sale was completed. Therefore, the total agreed sale price for the business was £800,000.00. The buyer made the first three payments of £2,778.00 and defaulted on further payments, blaming an historic issue with HMRC as a reason for holding back further payments. This was found not to be the case.
John commenced a civil claim against the purchaser for breach of contract. Although John had performed checks on the purchaser he hadn’t conducted any in depth due diligence.
Paul was instructed by John’s solicitors with a view to tracing assets held by the purchaser to be able to obtain a freezing order. It became apparent that the purchaser had previously liquidated several companies and in fact used nominees and offshore trusts in which to ‘shield’ his assets, he held no directorships within the United Kingdom. A pattern of ‘underhand’ business deals was to emerge. His home was registered with the Land Registry in a family member’s name, there were no traceable assets found within the UK.
Paul, using local agents, undertook a global asset trace, which provided a web of links between the subject and his agents/nominees. The search revealed several entities and trusts located offshore. Paul was able to ‘infer’ ownership by obtaining considerable circumstantial evidence. This was achieved by indicating that a relationship existed between the subject (UBO) and his nominees. Background checks conducted on the nominees indicated that they did not have the wherewithal to purchase certain assets, whilst the subject had the ability to pay for them and had continued use and possession of them.
Having proved a ‘wrong doing’, Paul’s report was used as a basis to obtain a Norwich Pharmacal or (disclosure order) to cause parties to disclose specific documents or information which further aided in linking the subject to his assets. Once obtained the information was used to ultimately obtain a freezing order to prevent the dissipation of those assets. The report was also used to indicate a quantification of loss (compensatory damages), which could be liquidated in order to remedy John’s loss and pay his litigation cost.
