High Court sets aside disclosure orders against Australian banks in 'lukewarm' pursuit case

In Scenna v Persons unknown using the identity ‘Nancy Chen’[2023] EWHC 799 (Ch), the High Court set aside disclosure orders made against two Australian banks which had previously been granted at an urgent hearing without notice.

The court came to its conclusion on two bases: (i) the disclosure orders should be set aside pursuant to the terms of the ex parte order following the court's balancing exercise as between the interests of the applicant in obtaining the disclosure and the detriment to the respondent, and (ii) the permission to serve out the disclosure orders should be set aside on the basis that the test set out in Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd¹ had not been satisfied.

Background

The case concerned a claim brought by a Canadian resident and his Ontario-registered company in relation to an alleged cross-border fraud. The claimants claimed that several unknown persons and international companies persuaded them to make payments totalling c.US$2.9 million to various bank accounts based in Hong Kong and Australia.

In October 2022, the claimants applied for ex parte relief. The claimants were granted worldwide freezing orders against the first three defendants (the alleged fraudsters) and the fourth to sixth defendants (the recipients of the allegedly stolen monies).  The claimants were refused worldwide freezing injunctions but were granted disclosure orders as against the seventh to ninth defendants, namely a Hong Kong bank and two Australian banks to which the payments had been made by the claimants.

The Australian banks applied to challenge the disclosure orders on the following grounds:

1. that compliance with the disclosure orders would put them in breach of local law;
2. that the claimants could make a similar application for disclosure relief in Australia, which the banks confirmed they would not oppose; and
3. that there had been a lack of urgency and significant delay by the claimants, and this was therefore not a 'hot pursuit' case.

The Australian banks also issued further applications seeking to challenge the jurisdiction of the English court in respect of the substantive claim.

Decision

The court ultimately set aside the disclosure orders against the two Australian banks. In doing so, it considered whether it should (i) discharge the disclosure orders pursuant to the terms of the ex parte orders in the usual way (which entitles anyone served with or notified of the order to apply to vary or discharge it), and (ii) set aside the permission to serve out.

When considering whether to discharge the orders pursuant to their terms, the court noted that four of the five conditions for granting a disclosure order commonly known as Bankers Trust relief, as set out in Kyriakou v Christie Manson and Woods Ltd², had been satisfied. However, the issue in this case lay with the criteria that 'the interests of the applicant in getting the disclosure must be balanced against the detriment to the respondent', for which the court noted there were additional considerations with the respondents being foreign banks. It was at this juncture that the court noted that a disclosure order against a foreign bank should only be granted in 'exceptional circumstances'.

As to the Australian banks' challenges, the court found as follows:

Breach of Australian law

Following consideration of the expert evidence offered by the Australian banks, the court accepted that compliance with the disclosure order would put the Australian banks in breach of local law, including both (i) the breach of the implied duty of confidentiality owed by a bank, and (ii) a statutory prohibition not to act or engage in a practice that breaches an 'Australian Privacy Principle'.

Availability of an alternative procedure

The court accepted that, under Australian law, similar alternative disclosure relief was available to the claimants. In doing so, it noted that the availability of similar relief in other jurisdictions was not determinative, but a factor to be taken into account during the balancing exercise.

'Hot pursuit'

As to the argument that this was not a 'hot pursuit' type of case, the court agreed with the Australian banks, noting that the claimant's pursuit was 'lukewarm' at best. As with the availability of alternative relief, the court noted that a lack of urgency was not a determinative factor in itself, but a factor to be considered during the balancing exercise.

Permission to serve out the disclosure orders

The court summarised the test to serve out of the jurisdiction, which was set out in Altimo Holdings, namely:

1. there must be a good arguable case that the claim falls within one of the relevant jurisdictional gateways;
2. there must be a serious issue to be tried on the merits; and   
3. in all the circumstances, England must be clearly or distinctly the most appropriate forum.

On the question of whether there was a good arguable case that the claim falls within one of the relevant jurisdictional gateways, the court concluded that paragraph 3.1 (25) of the new Practice Direction 6B which came into effect on 1 October 2022 provides for a new gateway specifically directed at such disclosure orders:

"(25) A claim or application is made for disclosure in order to obtain information—

(a) regarding:

(i) the true identity of a defendant or a potential defendant; and/or

(ii) what has become of the property of a claimant or applicant; and

(b) the claim or application is made for the purpose of proceedings already commenced or which, subject to the content of the information received, are intended to be commenced either by service in England and Wales or pursuant to CPR rule 6.32, 6.33 or 6.36."

Therefore, the court found this limb of the test to be satisfied.

As to whether there was a serious issue to be tried on the merits, the court concluded there was no such issue, and the disclosure application had no merit. In coming to this conclusion, the court noted that the disclosure orders would expose the banks to liability, there was an alternative remedy available in Australia, and there were no exceptional circumstances in this case. The court therefore found that the permission to serve out should be set aside.

Further, the court concluded that, as the proceedings concerned the disclosure by an Australian bank of information in Australia where a key issue was the application of Australian law, England was not the most appropriate forum.

Jurisdiction challenge of substantive claim

As to the claimants' application to challenge the jurisdiction of the English court in respect of the substantive claim against them, the court noted that, as before, the requirements set out in Altimo Holdings would need to be satisfied for the claim to be allowed to continue. The court concluded that, although the Australian banks accepted that gateway (3) of paragraph 3.1 of Practice Direction 6B applied ("A claim is made against a person (‘the defendant’) on whom the claim form has been or will be served (otherwise than in reliance on this paragraph) and – (a) there is between the claimant and the defendant a real issue which it is reasonable for the court to try; and (b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim"), there was no serious issue to be tried on the merits in respect of the equitable proprietary claim, the claim in unconscionable/knowing receipt, or the claim in unjust enrichment. Further, the court concluded that the claimants had not shown that England was the most appropriate forum.            

Comment

As to the requirements for granting a disclosure order, the decision in Scenna provides useful guidance on the balancing exercise as between the interests of the applicant in obtaining the disclosure sought and the detriment to the respondent. It is clear that considerations such as whether (i) the compliance with the disclosure order would put a party at real risk of breaching local law, (ii) alternative remedies in other jurisdictions are available, (iii) the case is a 'hot pursuit' type of case are given great weight. The decision also demonstrates that the English courts should only grant disclosure orders against overseas banks in exceptional circumstances, something which parties and practitioners ought to be mindful of when considering whether to apply for a disclosure order outside of the jurisdiction against financial institutions and the like.

As to permission to serve out the disclosure orders, the decision in Scenna confirms that the introduction of the new gateway at paragraph 3.1 (25) of the Practice Direction 6B has not substantially transformed the pre-existing landscape. Although the new gateway removes any obstruction with identifying an applicable gateway for the purpose of satisfying the first limb of the Altimo Holdings test in respect of information orders against non-parties (around which there had been a lack of consistency in the court's approach, particularly as between Norwich Pharmacal and Bankers Trust orders), applications for permission to serve out disclosure orders pursuant to the gateway still face many of the same hurdles as before, specifically with the final two limbs of the Altimo Holdings test. If a party cannot satisfy the court that there is a serious issue to be tried on the merits and that England is clearly or distinctly the most appropriate forum, an application for permission to serve out a disclosure order under the gateway will ultimately fail.

¹[2011] UKPC 7; [2012] 1 WLR 1804

²[2017] EWHC 487 (QB)