The English High Court has set aside Bankers Trust disclosure orders made against two Australian banks at a without notice hearing, which required the banks to disclose certain information regarding two of their Australian customers to the claimants. In doing so, the judge reiterated that the English court should only make disclosure orders against foreign banks in exceptional circumstances, because of the strong likelihood that compliance with such an order would put the foreign bank at risk of being in breach of local laws or regulations: Scenna v Persons Unknown and Others [2023] EWHC 799 (Ch).

In order for the English court to make a disclosure order against a foreign bank, the claimant will need to show, amongst other things, that the application falls within one of the “jurisdictional gateways” in Practice Direction 6B of the Civil Procedure Rules (CPR). There was previously some uncertainty as to whether any of the “jurisdictional gateways” applied to applications for disclosure orders, but this was resolved by the amendment of the CPR, with effect from 1 October 2022, to introduce a new “jurisdictional gateway” in respect of such applications. This amendment has been relied upon in a number of recent cases in which the English court has made disclosure orders against foreign cryptocurrency exchanges (see, for example, LMN v Bitflyer Holdings Inc [2022] EWHC 2954 (Comm), considered here).

Following the amendment to the CPR, it is now clear that the English court could, in an appropriate case, make a Bankers Trust disclosure order against a foreign bank. However, the present decision is a helpful indication that it will not routinely do so and that such orders will still only be made in exceptional circumstances. The English court will be particularly reluctant to make a disclosure order against a foreign bank where there is a real risk that providing the disclosure would result in a breach of local law, and where there is an alternative method for obtaining the disclosure through the local courts.

We consider the decision in further detail below.

Background

The claimants, a Canadian individual and his company, were victims of an alleged fraud pursuant to which they transferred money to two bank accounts in Australia and a bank account in Hong Kong. At a without notice hearing on 6 October 2022, the claimants obtained Bankers Trust disclosure orders requiring the Australian and Hong Kong banks to disclose certain information in relation to the accounts to which the money was transferred. The information ordered to be disclosed included the deposit and withdrawal history, the final balance of the account, KYC information, and copies of access logs and details of approved devices.

The Australian banks applied to set aside the disclosure orders on the basis that, amongst other things, providing the disclosure pursuant to an order of the English court, rather than an Australian court, would put them in breach of their obligations under Australian law.

The claimants also asserted substantive claims against the banks in relation to the receipt of the money. The Australian banks successfully challenged the jurisdiction of the English court in relation to those claims but we do not consider that aspect of the decision in this blog post.

Decision

The court considered the five criteria for making a Bankers Trust order as set out in Kyriakou v Christie Manson and Woods Ltd [2017] EWHC 487 (QB).

1. There must be good grounds for concluding that the property in respect of which disclosure is sought belongs to the applicant.
2. There must be a real prospect that the information sought will lead to the location or preservation of the relevant property.
3. The order should not be wider than necessary.
4. The interests of the applicant in getting the disclosure must be balanced against the detriment to the respondent.
5. Appropriate undertakings must be given in respect of the use of the disclosed information and/or documents.

In this case, there was no dispute that the first to third criteria and the fifth criteria were met (or could be met by an appropriately worded order). The real issue was in relation to the fourth criteria (seeking to achieve a balance between the interests of the applicant and respondent).

The court noted that where the respondent to the disclosure order is a foreign bank, additional and special considerations apply when conducting the balancing exercise. While regard should still be taken of the Kyriakou criteria, because of the strong likelihood that compliance with such an order would put the foreign bank at risk of being in breach of local laws or regulations, an order should only be granted in exceptional circumstances (applying the decision of Hoffman J in Mackinnon v Donaldson, Lufkin & Jenrette Corp [1986] Ch 482). One example of where such exceptional circumstances might exist is in cases of urgent necessity or “hot pursuit”.

In conducting the balancing exercise required by the fourth Kyriakou criteria, the court took account of two main factors:

• First, there was a real risk that compliance with the disclosure order would place the banks in breach of Australian law and thereby expose them to financial and/or reputational damage. There was a real risk that the banks would suffer significant prejudice and detriment and this was a significant factor to be taken into account in the balancing exercise.
• Second, there was an alternative and broadly equivalent remedy available in Australia. The banks had confirmed that they would not oppose an application to the Australian courts and that they would comply with any order made. While discharging the disclosure order might cause the claimants some inconvenience and increased cost, it would not cause them to suffer any irremediable damage in their pursuit of the alleged underlying fraudsters, because they could apply for and would probably be granted the same relief in Australia.

In respect of whether there were exceptional circumstances, the court found that this was not a case of “hot pursuit” and that, at best, the pursuit could be described as “lukewarm”. The alleged fraud had taken place in March/April 2022, it had been discovered in June 2022 and the proceedings were issued in October 2022.

The court also considered the recent case of LMN, which concerned an application for Bankers Trust disclosure orders against various foreign cryptocurrency exchanges. In LMN, Butcher J found that the approach in Mackinnon was inapplicable and granted the disclosure orders. The court distinguished the reasoning in LMN from the present case on the basis that, in LMN, it was not known where the relevant documents were located, such that the applicants did not know in which jurisdiction to make an application. In the court’s view, it would have been impractical and contrary to the interests of justice to require victims of an alleged fraud to make speculative applications in different jurisdictions. That was different from the present case where it was known that the information was in Australia, there was a very significant risk that compliance with the order would breach Australian law, and the Australian courts offer a similar remedy which would probably be granted.

The court held that there were no exceptional circumstances to justify a departure from the general rule that a disclosure order should not be made against a foreign bank. On the contrary, the balancing exercise came down clearly in favour of discharging the disclosure orders.

Julian Copeman

Partner

+44 20 7466 2168

Ceri Morgan

Professional Support Consultant

+44 20 7466 2948

Gary Horlock

Senior Associate

+44 20 7466 2917

The High Court has ordered a number of banks to provide disclosure to various foreign companies, following an application seeking disclosure in accordance with a letter of request (LOR) issued by a Canadian court. The application was issued in the context of certain Canadian civil proceedings alleging that a former foreign government minister and others orchestrated an international scheme to defraud the companies of USD 3.47 billion: Sakab Saudi Holding Co v Al Jabri & Ors, Re: HSBC & Ors [2021] EWHC 3390 (QB).

This decision will be of interest to financial institutions faced with applications under the Evidence (Proceedings in other Jurisdictions) Act 1975 (the 1975 Act) and CPR 34.17 for the disclosure of bank documents for use in foreign legal proceedings. The decision highlights that the English courts will, if they can properly do so, accede to LORs issued by foreign courts seeking evidence for use in foreign litigation. However, in deciding what response to make to a LOR, the English courts can have regard to the balance to be struck, under section 2(4) of the 1975 Act, between the legitimate requirements of foreign courts and the burden those requirements may place on the intended witness. If the LOR is irrelevant, or fishing, or speculative, or oppressive, the English court can refuse it.

In the present case, the High Court was satisfied that there were no grounds on which to refuse the disclosure requested from the banks. It could not conclude in respect of the evidence sought from the banks either that: (a) the requesting court had plainly not considered the question of relevance; or (b) it is clear to the English court, even on a broad examination, that the evidence is not relevant. It was also clear that the documents sought from the banks were not part of a fishing expedition; they had not merely been requested solely for investigative purposes, and they were clearly relevant to the Canadian civil proceedings. The High Court also did not consider that there was any basis to refuse disclosure on the grounds that the documents were too broadly drafted or were oppressive. The documents identified to be produced by the banks did meet the requirements of section 2(4) of the 1975 Act. No oppression was caused to the non-respondent party and none of the banks had suggested that it would be onerous to produce the documents.

We consider the decision in more detail below.

Background

In 2008, a former Saudi Arabian government minister (Dr Al Jabri) and others allegedly carried out an international scheme to defraud several Saudi Arabian companies (the Applicants) of the equivalent of $3.47 billion. Dr Al Jabri subsequently fled to Canada.

In 2021, the Applicants issued proceedings in Canada against Dr Al Jabri in relation to the fraudulent scheme. The Canadian court then made a Norwich Pharmacal order (the Norwich Order) against various third parties including three banks in England and Wales (the Banks), requiring the disclosure of certain categories of documents. The Norwich Order also requested the judicial assistance of the appropriate courts of the United Kingdom to give effect to the Norwich Order in their jurisdiction. Since the Norwich Order was not directly enforceable outside of Canada, and the Banks refused to provide voluntary disclosure, the Applicants issued a Notice of Motion asking that the Canadian court issue a LOR to the English court for the production of documents from the Banks. The Canadian court subsequently issued the LOR attaching the Norwich Order.

The Applicants then made an application to the English High Court for an order for the disclosure of the documents specified in the LOR from the Banks. The application was not opposed by the Banks; they indicated that they either remained neutral or had no comments.

Although not a party to the application, Dr Al Jabri contested it on a number of grounds.

Decision

The High Court found in favour of the Applicants and ordered that the documents requested from the Banks be disclosed.

The key issues which may be of broader interest to financial institutions are set out below.

General principles relating to LORs

The High Court, in its analysis, highlighted the following key principles relating to LORs:

• The court’s power to make an order pursuant to a LOR from a foreign court derives from sections 1 and 2 of the 1975 Act and CPR 34.17. It may make such an order only if satisfied that: (i) the application is made in pursuance of a request issued by and on behalf of the requesting court; and (ii) the evidence to which the application relates is to be obtained for the purposes of civil proceedings instituted before the requesting court.
• While it is ordinarily a respondent witness who will be concerned to object to a LOR, a non-respondent party to the underlying civil proceedings before the requesting court has locus standi to apply to set aside an order obtained ex parte under the 1975 Act (as per Boeing Company v PPG Industries Inc [1988] 3 All E.R. 839).
• English courts should, if they can properly do so, accede to LORs issued by foreign courts seeking evidence for use in foreign litigation. This is particularly important in the context of litigation arising out of fraud practised on an international scale (as per First American Corp v Zayed [1999] 1 WLR 1154).
• The authorities show that the burden is on the applicant to establish that a document sought by way of evidence does in fact exist, and the jurisdiction of the English courts under the 1975 Act is to obtain documents by way of evidence for trial rather than for investigatory purposes; section 2(3) of the 1975 Act is aimed at preventing general pre-trial discovery or ‘train of enquiry’ disclosure. However, the authorities made it clear that a dual-purpose request does not necessarily mean that the request will be refused (as per In Re State of Norway’s Application [1987] 1 QB 433).
• The question of relevance of evidence is generally one for the requesting court, as the court seised of the proceedings (as per Rio Tinto Zinc Corporation v Westinghouse Electric Corp. [1978] AC 547, Re Asbestos Insurance Coverage Cases [1985] 1 W.L.R. 331 and First American). If the requesting court has itself considered questions of relevance, then the English court should not embark upon a close examination of questions of relevance. However, English courts may conclude that the intended witness should not be required to give evidence on a particular topic if two conditions are satisfied: (a) the requesting court has plainly not considered the issue of relevance; (b) it is clear to the English court on a broad examination that the evidence is not relevant (as per Galas v Alere Inc [2018] EWHC 2366 (QB)).
• In deciding what response to make to a LOR, the court should bear in mind the need to protect intended witnesses from an oppressive request. There is a balance to be struck, under section 2(4) of the 1975 Act, between the legitimate requirements of foreign courts and the burden those requirements may place on the intended witness (as per First American). If the court considers that the request is irrelevant, or fishing, or speculative, or oppressive, the court should refuse it (as per Senior v Holdsworth, ex-parte Independent Television News Ltd [1976] QB 23).

Application of the LOR principles to the present case

(1) Relevance of evidence

The High Court said it would not refuse the order sought against the Banks on the grounds of relevance. It could not conclude in respect of the evidence sought from the Banks either that: (a) the requesting court had plainly not considered the question of relevance; or (b) it is clear to the English court, even on a broad examination, that the evidence is not relevant.

The High Court commented that the Canadian court did consider the issue of relevance in the Norwich Order, albeit in the context of an investigatory order rather than considering evidence for trial. The Canadian court also concluded in the Norwich Order that the documents ordered to be produced by the Banks were relevant for establishing the existence, nature, and extent of the alleged fraudulent scheme, and to trace assets. In the High Court’s view, both of those topics would also be relevant to the trial in Canada.

(2) Investigatory purposes/Fishing expedition

The High Court noted that the documents ordered to be produced under the Norwich Order were primarily ordered for an investigative purpose, but that the range of documents was cut down substantially in the LOR to comply with the requirements of the 1975 Act.

The High Court then said that it did not conclude that the documents sought from the Banks were requested solely for an investigative purpose. The LOR stated that the documents ordered ‘will be admissible and relevant at trial’. Given this, and the conclusion made in respect of the relevance of the documents for trial above, in the High Court’s view the documents requested could not be regarded as part of a ‘fishing expedition’ in the way the term is commonly understood.

(3) Request for documents drafted too broadly

The High Court said that it did not consider that there was any basis to refuse disclosure on the grounds that the documents were too broadly drafted or were oppressive.

The High Court commented that the documents identified to be produced by the Banks did meet the requirements of section 2(4) of the 1975 Act. No oppression to Dr Al Jabri was caused as he was not being asked to produce the documents and none of the Banks had suggested that it would be onerous to produce the documents.

The High Court also noted that the documents ordered from financial institutions in the Norwich Order would not have met the requirements of the 1975 Act. However, the documents requested in the LOR were far more narrowly drafted, and the LOR listed specific documents or categories of documents.

(4) Section 2(3) of the 1975 Act

The High Court said that it was apparent from its consideration of the other heads of challenge to the order sought that it considered that section 2(3) of the 1975 Act was satisfied in respect of the documents sought from the Banks.

Accordingly, for all the reasons above, the High Court found in favour of the Applicants and ordered that the documents requested from the Banks be disclosed.

Simon Clarke

Partner

+44 20 7466 2508

Ceri Morgan

Professional Support Consultant

+44 20 7466 2948

Nihar Lovell

Professional Support Lawyer

+44 20 7466 2529

The High Court has dismissed an application (under the Bankers’ Book Evidence Act 1879) by the CFO of a telecommunications company for access to bank documents for use in Canadian extradition proceedings (initiated by US prosecutors who were seeking to join the CFO as a co-defendant to criminal proceedings in the US because she was alleged to have misled the respondent banks into processing transactions linked to Iran which were in contravention of US sanctions law): Meng v HSBC Bank Plc & Ors [2021] EWHC 342 (QB). 

This decision is a reassuring one for financial institutions faced with applications under the Bankers’ Book Evidence Act 1879 (the Act) for disclosure of bank documents for use in foreign or domestic legal proceedings. Such applications may be made by parties to legal proceedings in addition to disclosure applications under the CPR and other avenues for obtaining disclosure, which may increase the administrative burden and cost of business for a financial institution. Despite the longevity of the Act, there is relatively little reported authority interpreting the Act. This decision highlights the narrow scope of the court’s jurisdiction, and helpfully limits the type of documents which may be obtained, under the Act. Additionally, the decision underlines the fact that even if certain conditions in the Act are met for ordering disclosure, the court still ultimately retains the discretion as to whether to order disclosure.

In summary, the court found that it had no jurisdiction under the Act to make the disclosure order sought by the applicant. The Act was limited to UK legal proceedings and did not extend to making orders for the purposes of foreign legal proceedings. The court also said that if even it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act (which was limited to transactional records and did not include non-transactional records, such as attendance notes or correspondence between a bank and its customer). The court also noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application. A number of factors which the court took into account in declining to exercise its discretion included the express US prohibition order on the use of the documents in the Canadian extradition proceedings, the likelihood of the applicant having a fair trial before the Canadian courts and the failure of the applicant to link the documents requested sufficiently clearly to specific regulatory duties to maintain records.

We consider the decision in more detail below.

Background

The applicant was the CFO in a telecommunications company (Company), which had a banking relationship with a global banking group. Between 2007 and 2017, the Company, two of its subsidiaries, and the applicant allegedly deceived the global banking group which included the respondents and the US government as to the Company’s business activities in Iran. The employees of the Company are alleged to have made misrepresentations about the relationship of the Company with an unofficial subsidiary in Iran and to the effect that the Company had not violated any US laws or regulations relating to Iran.

In reliance on the misrepresentations by the Company, the global banking group and its US subsidiary in particular cleared more than USD $100 million of transactions relating to the Company’s unofficial subsidiary in Iran between 2010 and 2014; this was in contravention of US sanctions law and exposed the global banking group to potential civil or criminal penalties.

In 2019, US prosecutors brought criminal charges against the Company, the two subsidiaries involved and the applicant for financial fraud. The applicant had in the meantime been detained in Canada. The US government sought the applicant’s extradition to the US so that she could be prosecuted as a co-defendant in the US criminal proceedings.

The applicant subsequently applied to the English High Court under section 7 of the Act seeking disclosure from three UK subsidiaries of the global banking group (the respondent banks) of 13 categories of documents to support her arguments in the Canadian extradition proceedings. The applicant’s case was that the documents were held by the US government, emanated from within the global banking group and were not ‘discoverable’ in the Canadian extradition proceedings or through the US criminal proceedings.

Decision

The court found in favour of the respondent banks and dismissed the application. In summary, the court held that it had no jurisdiction to make the disclosure order sought by the applicant. The court also said that even if it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act. The court also noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application.

We consider below some of the key issues considered by the court in relation to the application.

Issue 1: Jurisdiction

The applicant argued that the court had the necessary jurisdiction under section 7 of the Act to make the disclosure order sought on the basis that the Act also applied to foreign legal proceedings anywhere in the world, not just legal proceedings in the UK.

The court held that it had no jurisdiction to make the disclosure order sought by the applicant. The court commented that Parliament had intended that the scope of the Act be restricted to legal proceedings in the UK and that there were statutory schemes in place for foreign courts, public authorities and international authorities – not a private party or criminal defendant – to make a formal request for assistance in obtaining evidence. Such statutory schemes would in effect be bypassed in the case of entries in bankers’ books if the court acceded to the applicant’s submissions; however, the court did not accept that this could have been Parliament’s intention with respect to how the Act was intended to operate.

Issue 2: Documents/Records

The applicant argued that the references in the Act to “entries in” and “other records used in the ordinary business of the bank” included both transactional records and non-transactional records maintained for regulatory compliance.

The court said that even if it had found in favour of the applicant on the jurisdiction issue, it would have still refused the application on the basis that the documents/records sought by the applicant did not fall within the scope of the Act as they were not transactional records. The court underlined that “entries in” and “other records used in the ordinary business of the bank” meant transactional records and did not include non-transactional records maintained for regulatory compliance. The court noted that the Act was never intended to cover everything that a bank has, or does, or writes down, in the course of its ordinary business as a bank; for example, an attendance note of a conversation with a customer or prospective customer or correspondence between the bank and a customer or prospective customer will not fall within the scope of the Act.

Issue 3: Exercise of the court’s discretion

The applicant argued that the court should exercise its discretion to order the respondent banks to provide access to the 13 categories of documents sought in order to promote and ensure fairness in the Canadian extradition proceedings. The applicant said that: (i) the US prosecuting authorities’ case against her was clearly based to a significant extent on information provided to the US authorities by entities and individuals within the global banking group; (ii) the documents sought were plainly material to the Canadian extradition proceedings; and (iii) nothing would be forced on the Canadian courts who would still have to decide admissibility and relevance.

The court noted that even if the applicant had been successful on both the jurisdiction and the records issues, the court would not have not exercised its discretionary power to grant the application. The court said that the documents sought were subject to an express prohibition order, made in the US criminal proceedings, that they could not be used in the Canadian extradition proceedings; the court must therefore proceed on the basis that the express prohibition was lawful under US law. Also, in the court’s view, there was nothing to suggest that without those documents the applicant would be denied a fair hearing before the Canadian court. Finally, the court highlighted that the applicant had failed to provide a clear link between the particular documents sought and specific regulatory duties to maintain records; if it was correct that records for regulatory compliance did fall within the scope of the Act, the applicant was required to specify the records sought and reference them to a specific regulatory duty to maintain those records.

Simon Clarke

Partner

+44 20 7466 2508

Nihar Lovell

Professional Support Lawyer

+44 20 7374 8000