Asset recovery in civil fraud claims in Poland: pre-action considerations

One of the inevitable effects of the COVID-19 has been the increased dependence on digital systems. As we count the cost of the pandemic, this reliance has led to heightened cyberthreats and the accompanying risks of fraud and disinformation. Fraud is a major risk to the global economy and a national security threat in Poland.
 
Also, we live in the times of the ground-breaking inventions. In recent years, artificial intelligence has woven itself into our daily lives in ways we may not even be aware of. It has become so pervasive that many remain unaware of both its impact and our reliance upon it. There is no better time for fraudsters. The growing number of mechanisms for concealing assets have also heightened the need to adapt more effective asset tracing and recovery strategies. As such, it is critical for clients to be aware what measures could be taken, especially in the cross-jurisdictional context.
 
Each fraud is a serious challenge. When we receive the first contact or introduction to a potential client who considers that they have been a victim of fraud, whether it is an individual or a corporate entity, there are a number of important matters that need to be considered at the pre-action stage of a case. The client will often be focused on the loss and the events leading up to it, and will not necessarily give any immediate thoughts to how that loss can be recovered. However, it is important at the outset to not only look at the nature of the complaint, but also to identify who can be pursued and, critically, whether they are worth pursuing financially. To that end, asset tracing is a fundamental consideration at the beginning of a fraud claim, not just at the enforcement stage.
 
Targeting directors
 
Put simply, asset tracing is the identification and recovery of funds or other property misappropriated through crime. However, the purpose of asset tracing is wider than that, as it includes identifying assets owned directly or indirectly by the potential defendants, whether derived from the alleged fraud or otherwise.
 
Where a company that has caused the loss either has no substantial assets or is insolvent (as often seems to be the case in certain fraud claims such as investment fraud claims) it is important to explore whether there are any direct claims against individuals. Demanding payment from individuals creates greater personal pressure on a defendant than pursuit of their company. Under Polish company law, it is possible to demand payment of the company’s debts from directors that managed this limited liability company if only the enforcement against the company had been ineffective. It is a point which is always worth checking. The directors have no defense against these types of claims because their liability for the company’s debts is almost automatic.
 
Gathering evidence
 
Gathering evidence in the case of civil fraud is not an easy task because there are no rules about disclosure of documents in Poland in civil cases. Unlike the common law systems where disclosure refers to the part of the litigation process in which each party is required to make available to the other party documents that are relevant to the issues in dispute at an early stage, Polish civil procedure does not include measures for pre-action disclosure, search warrants or similar orders for obtaining information. Consequently, a victim of a fraud which was committed with the use of the internet usually has no possibility to establish the facts and gather the relevant evidence.
 
Naturally, an important procedure in the criminal law is the search of a suspect’s person or property. Usually a search to be carried out but only if there reasonable grounds for suspecting that evidence will be found. In the case of cyber-fraud this is usually impossible because the victim does not know even the name of the perpetrator. Usually, the victim has to resort to criminal proceedings to obtain information from banks, telecom firms or other entities such as internet service providers.

In theory, there is nothing to prohibit the use of parallel criminal and civil proceedings in Poland. The only caveat to this is when there is a real risk that the defendant would be subject to severe prejudice in either criminal or civil proceedings or both. Notwithstanding these difficulties, the advantages of a multi-pronged attack can be rewarding. Naturally, there are some potential pitfalls that can occur when evidence is gathered through the investigation of one set of proceedings and whether it can be used in the other. This is particularly important in cross-jurisdictional proceedings.
 
Legal vs beneficial ownership
 
It is also important to establish whether individual perpetrators are connected to any assets and what type of ownership they have – legal or beneficial. An individual perpetrator will often conceal their assets of crime by arranging for a third party to hold them, for example via a trust or as a nominee. Are there any assets in the name of a third party where evidence exists to infer that the perpetrator beneficially owns them?
 
Polish law does not recognize the divided ownership nor the trust concept. Legal title to land can generally be assessed based on entries made in land and mortgage registers maintained for each real property by the relevant district courts. The content of the registers is deemed conclusive as to the legal title held by an owner.
 
If, for example, a victim is looking to fund their case through third party litigation funding, funders will be particularly interested in the recoverability of assets, as this will determine their likely return on investment and the timescale for such recovery.
 
Sources of information
 
Where do you start with asset tracing, then? The process of tracing and identifying assets involves obtaining information on their ownership and location, which can be done using a variety of methods. One way is to access public registers or databases, sometimes referred to as open source data.
 
In Poland, we have a number of useful public domains that can be used to trace assets. These are a good starting point and the information obtained from such sites can be helpful to trace other assets. The following public databases are a non-exhaustive list of sources that could be checked:
 
Land and mortgage register: You can search for information on the ownership of property in the land and mortgage register. You need to know the address of the property in question. Legal title to all types of real property can generally be assessed based on entries made in land and mortgage registers maintained for each real property by the relevant district courts. The content of the registers is deemed conclusive as to the legal title held by an owner. The information is accessible online.
 
Commercial register: If you know that the individual perpetrator is a director or a shareholder of a company, you can do a company search at the commercial register, which may reveal the individual’s residential address and the financial position of the company. In this way, it is possible to identify a target defendant as being linked to companies that may be repositories for their assets, which could be a target for enforcement.
 
Social media sites: Individuals put a lot of information about themselves on social media sites such as Facebook, X or LinkedIn. Such sites can give a good indication of an individual’s lifestyle and family connections and may provide information in respect of other assets that could be traced. Conversations via social media platforms can also help to identify useful information.


 
Cases of complex civil fraud pose unique challenges in litigation. Fraud is by its nature covert and deceptive, which makes evidencing a claim all the more difficult and there’s the risk that a fraudster will dissipate assets. The first phase of the process which is an initial assessment to fact-find and gather intelligence, as well as to establish an investigation and tracing strategy is very important stage of the process and requires special attention.