Striking A Balance: Disclosure Orders Against Foreign Banks

The value of securing a disclosure order can be particularly significant in the case of cross-border proceedings. But there are no guarantees an order will be made – or permitted to stand: recently the court set aside a disclosure order against two Australian bank in a case of alleged cross-border fraud.

The award-winning commercial litigation lawyers at ParrisWhittaker are experienced in securing disclosure orders for individuals and businesses based in the Turks and Caicos Islands (TCI). We also have a successful record in defending proceedings on behalf of domestic and foreign clients who are at risk.

What is a disclosure order?

Different types of disclosure order are potentially available, depending on the circumstances. If one party to the litigation is, or is suspect of withholding documents or information, they can ask the court for specific disclosure requiring the party to disclose specific documents/information or classes of document. Disclosure orders against financial institutions are commonly known as Bankers Trust relief.

Where disclosure is sought against a third party (ie not a party to the proceedings), a disclosure could be made requiring the third party to disclose information or documents in its possession.  Typically, is a Norwich Pharmacal order – made where it is believed the third party – themselves innocent of any crime or misconduct – has information that can assist the applicant in identifying the actual wrongdoer.

What happened in this case?

The claimants (a resident in Canada and his company) were victims of an alleged fraud – a complex high value fraud involving several jurisdictions. They sued several parties including the alleged fraudsters, the recipients of the alleged stolen cash and two Australia banks who hold the accounts of the alleged recipients.

Following an urgent hearing without notice, the UK High Court¹ made a disclosure order against the banks – who then challenged the making of the disclosure orders. In its ruling, the court set out a helpful reminder of 5 criteria to be satisfied before the court will make a disclosure order:

1. There must be good grounds for concluding that the property in respect of which disclosure is sought belongs to the applicant;

1. There must be a real prospect that the information sought will lead to the location or preservation of the relevant property;

1. The order should not be wider than necessary;

1. The interests of the applicant in getting the disclosure must be balanced against the detriment to the respondent; and

1. Appropriate undertakings must be given in respect of the use of the disclosed information and/or documents.

In this case, 4 of the 5 issues had been satisfied. However, the High Court identified no 4 as the “real issue” – that is to say, the balancing exercise that needed to be undertaken in relation to the interests of the applicant seeking disclosure and, on the other hand, the potential prejudice and detriment to the banks.

The court noted that, importantly, there were additional and special considerations where a respondent to an application for a disclosure order is a foreign bank. The principle is that only in exceptional circumstances should a disclosure order be made on a foreigner – particularly a foreign bank, given the regard to be had to the issue of sovereignty.

This is given the strong likelihood that compliance with such an order would put the bank at risk of being in breach of local laws or regulations (here, the Australian Private Act 1988 and the implied contractual duty of confidentiality at common law).

On balance

As for the necessary balancing exercise, the judge identified two key matters:

• If the disclosure order stays in place, there is a real threat that the banks will be in breach of Australian law and therefore exposed to financial and/or reputational damage.

• A similar alternative remedy was available in Australia. The banks also indicated they would not oppose this and would comply. However, the judge noted it may well cause the claimants additional inconvenience and added costs.

On balance, a disclosure order should not be made against the two banks and so it was discharged (as was the order permitting its service out of jurisdiction).

What does this mean?

Disclosure orders against foreign banks and other foreign organisations may be harder to secure than if an order is sought against an individual.  The court will consider the relevant criteria closely and conduct an important balancing exercise before deciding whether a disclosure order should be granted.

If you are seeking or challenging a disclosure order, urgently contact the experienced commercial litigation lawyers at ParrisWhittaker on info@parriswhittaker.com or +1.242.352.6112

¹Scenna v Persons unknown  [2023] EWHC 799