The new service out gateway for third party information orders

Introduction

The Civil Procedure Rule Committee has approved a number of new gateways for service out of the jurisdiction, along with amendments to the scope of the existing gateways, under paragraph 3.1 of Practice Direction 6B. These changes came into force on 1 October 2022.

This article considers the new gateway relating to third party information orders at paragraph 3.1(25) of Practice Direction 6B. The gateway will be of particular interest to fraud practitioners or lawyers involved in fraud disputes with a cross-border element. It provides that a claimant may, with the Court’s permission, serve proceedings out of the jurisdiction where:

“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.”

While the introduction of a new gateway ostensibly eases the way for claimants in cross-border fraud claims to obtain the information necessary to plead their case, the long arm of English law might meet with short shift from foreign jurisdictions. We explore below the utility of this new gateway in practice.

Third party information orders against foreign respondents

Norwich Pharmacal orders

Norwich Pharmacal orders (NPOs) are a type of disclosure order made at the Court’s discretion against third parties to a claim. NPOs are typically used by claimants in fraud litigation to trace their property, obtain information relating to the wrongdoing in question and/or identify defendants against whom the claim should be brought. They are commonly served on financial or corporate services providers who have handled assets on behalf of the alleged wrongdoer.

Historically, the English courts have held that they did not have the power to extend NPO relief outside of the jurisdiction. This conclusion was on the basis that none of the gateways in Practice Direction 6B expressly permit the service of an NPO application (or an application for third party disclosure generally) outside of the jurisdiction. Although there have been a few reported cases in which the Court reached the opposite conclusion (see, for example, Lockton Companies International v Persons Unknown¹ and Bacon v Automattic Inc²), subsequent authorities have cast considerable doubt on those judgments. A claimant pursuing information or documents from a foreign respondent would need to seek relief in the local courts in accordance with local laws. 

The limits of NPOs as a remedy have become evident in recent years with the growth of cross-border fraud and in particular cryptocurrency fraud, where claimants will frequently be reliant on information in the control of third parties such as crypto exchanges or marketplaces located outside of the UK. This appears to have been the impetus for the introduction of PD 6B.3.1(25). The minutes of Civil Procedure Rule Committee approving the new/expanded gateways state that “the concern regarding the ability of the Courts to assist parties seeking to obtain information from non-parties where assets have been removed from the jurisdiction has been carefully considered. The issue has been particularly acute in cases where a party has needed to identify the destination of money or cryptoassets and the increasingly important context of ever advancing digital working.”

Bankers Trust orders

Bankers Trust orders (BTOs) are another type of third party disclosure order similar to NPOs. BTOs are typically made against a bank for information or documents which may be used to trace the defendant’s assets. The Court will grant this remedy in relatively limited circumstances where the claimant can show a strong prima facie case of fraud.

Unlike NPOs, it has been held that BTOs are available as a remedy against foreign respondents in exceptional circumstances. In two recent cases, Ion Science Limited v Persons Unknown and others³ and Fetch.ai Limited and another v Persons Unknown Category A and others⁴, the Court granted BTOs against foreign respondents under the “necessary and proper party” gateway at PD 6B.3.1(3)).

In a speech on 24 February 2022, the Master of Rolls noted that the inconsistency which had developed between the Court’s approach to the two types of disclosure orders. He stated that he hoped developments in the Court’s rules would make this distinction less significant and make it easier to litigate issues arising in relation to cryptocurrency fraud.

Impact of the new gateway

The introduction of the new gateway for third party information orders resolves the divergence in the Court’s treatment of NPOs and BTOs. The Court will now be able to grant NPOs or BTOs against foreign respondents, so long as (i) the information sought relates to the matters set out at PD 6B.3.1(25)(a); and (ii) the test in VTB Capital v Nutritek International⁵ for permission to serve out of the jurisdiction is met.

A foreign respondent served with an NPO or BTO application (or the disclosure order itself) can decide to ignore the jurisdiction of the English courts and refuse to comply with order. However, the adverse reputational consequences arising from being in breach of an order by the English court and/or the risk of being subject to contempt proceedings in England are likely to incentivise respondents to comply irrespective of whether the English courts’ jurisdiction is accepted. This should particularly be the case where respondents have business interests or assets in the UK. For example, in Lockton, Google indicated that it would comply with the requirements of any NPO served on it despite not accepting jurisdiction. 

A less amenable foreign respondent may seek recourse to their local courts by (for example) applying for the application to be determined or the NPO / BTO to be set aside in accordance with the law of that jurisdiction. The claimant will consequently be forced to engage local counsel and participate in the concurrent proceedings. In those circumstances, it is unclear what real benefit the new gateway would afford claimants, who might effectively find themselves in the same position as they were in prior to the introduction of the new gateway. Depending on the law of the jurisdiction in which the foreign respondent is based, it may be more expedient for a claimant to bypass the English courts entirely and make an application for relief directly in the relevant jurisdiction, if equivalent or similar relief is available.

Overall, the new gateway represents a positive development for claimants pursuing cross-border fraud claims. However it is important for claimants to be realistic about the extent to which this gateway facilitates their ability to secure information necessary for their claim. When seeking disclosure from foreign respondents, claimants (and their advisors) will need to make a judgment call as to the respondent’s willingness to comply with an order from the English courts, and consequently whether it would be more effective to pursue information through the new gateway or to seek relief locally.