In A1 v R1(1) a novel point appears to have arisen as to whether the High Court could grant Norwich Pharmacal relief in relation to the disclosure of documents and information concerning a bank account held not in Hong Kong but with the overseas branch of a Hong Kong bank – in this case, in Macau. The Court of First Instance decided that it did have such power and, in doing so, reviewed the usual procedures for the grant of Norwich Pharmacal orders against a bank and the general principles for giving full and frank disclosure when making a court application on an ex parte (without notice) basis.
The background detail in the case is limited because, in addition to the disclosure orders sought against the three respondent banks in respect of four bank accounts, the applicants also sought gagging, confidentiality and anonymity orders. The three banks operated in Hong Kong where they are also incorporated.
It appears that the applicants are investors in a Cayman Islands fund. It also appears that a large amount of money may have been misappropriated from the fund, causing a substantial loss to the applicants. The applicants commenced court proceedings in the Cayman Islands (among other places), which included applications against the fund and its general partner. The applicants obtained a judgment in their favour from the Cayman court in mid-2020.
During the Cayman proceedings, the applicants obtained disclosure of certain documents which allegedly showed payments misappropriated from the fund and received by four bank accounts at the three banks. It also appears that of the four bank accounts alleged to have received the misappropriated payments, two were held with the Macau branch of two of the Hong Kong banks. Each Macau branch is an overseas branch of the respective Hong Kong bank and not a separate legal entity.
On the basis that all three banks are regulated by the Hong Kong Monetary Authority (HKMA) and required to comply with the HKMA's record-keeping requirements, it appears that the two Hong Kong banks with a branch in Macau are likely to ensure that their respective branch complies with such requirements – therefore, the applicants submitted that it could be inferred that these two banks may have in their possession documents and information relating to the bank account held with the respective branch in Macau.
The applicants applied for Norwich Pharmacal disclosure orders against the three banks in Hong Kong, together with gagging, confidentiality and anonymity orders. These applications were made on 9 March 2021, on an 'ex parte on notice' basis on account of the urgency and need for secrecy. On 3 March 2021 the applicants' lawyers wrote to the banks informing them of the applicants' intention to make the court applications, giving them details of the applications and asking the banks to refrain from taking steps that would frustrate the gagging order – such as notifying any third party (including the account holder or connected persons) of the intended court applications.
Interestingly, the court considered that the applications did not justify proceeding on an ex parte basis because there was no genuine urgency or secrecy – on the facts, this was not fatal to the applications because the banks appeared to have adopted a neutral position and five days had passed since the applicants' lawyers' letter to the banks.(2)
However, the court did use the opportunity to remind parties which apply for Norwich Pharmacal relief and gagging orders against banks that the correct procedure is twofold. An applicant should first apply on an ex parte basis for a gagging order against the bank, followed by the hearing of an application for Norwich Pharmacal disclosure against the bank on either an inter partes basis or an ex parte on notice basis giving the bank sufficient notice to provide a meaningful reply – in the meantime, an applicant would be protected by the gagging order until the conclusion of the application for disclosure (for further details please see "The gagging order and Norwich Pharmacal two step").
The court also reminded applicants generally of best practice when giving full and frank disclosure in the context of ex parte applications – particularly, when summarising important allegations and counter-allegations referred to in documents exhibited to sworn statements made in support of such applications.(3)
As for the novel point that arose, the court had to decide whether it had the power to grant Norwich Pharmacal relief in relation to the disclosure of documents and information concerning a bank account held not in Hong Kong but with an overseas branch (in this case, in Macau) – there appeared to be no previous reported case regarding this issue.
The court decided that it did have the power to grant Norwich Pharmacal relief in relation to the disclosure of documents and information concerning a bank account held not in Hong Kong but with the overseas branch of a Hong Kong bank. Applying similar principles from an English case, the court considered that it was appropriate to grant the orders sought by the applicant (as amended by the court) and that such orders would likely serve a useful purpose.(4)
The court noted the absence of reported cases in Hong Kong but was persuaded by the reasoning in the English case. There was also no principle of law or other reason that prevented the court from ordering the disclosure sought by the applicants simply because the information sought is contained in the Macau branch of a bank incorporated in Hong Kong of which the branch is a part.
The court also considered that it was fair to proceed on the basis that a Hong Kong bank as a legal entity has possession, or the ability to obtain possession, of documents held by another part of the entity including its overseas branches. Given that the banks are regulated in Hong Kong by the HKMA, there was also a likelihood that the two banks with Macau branches would have access to the documents and information held by their respective Macau branch.
The court granted the orders (as amended) sought by the applicants.
The court's decision is a useful development – particularly in the context of cross-border fraud and the increased incidence of electronic scams where money is often misappropriated in one jurisdiction and dissipated to one or more other jurisdictions.
In addition to the novel point in respect of disclosure orders relating to bank accounts held with the overseas branch of a Hong Kong bank, the court took the time to remind parties of:
- general principles that underpin ex parte applications (particularly for Norwich Pharmacal disclosure against banks); and
- some points of best practice on giving full and frank disclosure in the context of ex parte applications.
With regard to the first point, the court noted that the correct procedure (save for exceptional cases justifying otherwise) was twofold – namely, an ex parte application for a gagging order against a respondent bank followed by an inter partes or an ex parte on notice application and hearing for Norwich Pharmacal relief. This twofold process is important because it gives a bank the opportunity to make submissions on (for example) the requirement for confidentiality pursuant to a gagging order, while also considering its duty of confidentiality (and other duties) to its customer.
With regard to the second point, the court made some observations about best practice when specifically drawing the court's attention to matters that the court will, or is likely to, take into account. These observations are made in the context of lengthy sworn statements made in support of ex parte applications with detailed documentary exhibits. The final word is, perhaps, best left to the court:
It has been said on many previous occasions that full and frank disclosure of the contents or purport of a document is not made simply by placing the document somewhere in a bundle of exhibits to an affidavit, even if there is some glancing reference to that document in the affidavit itself. The greater the amount of material placed before the court, the more likely the court will need – and is entitled to – clear sign-posting to the various aspects of that material.(5)
Endnotes
(1) [2021] HKCFI 650, HCMP 307/2021, 16 March 2021.
(3) Supra note 1, at (for example) paras 29 to 36 – in particular, para 36.
(4) Credit Suisse Trust v Intesa San Paulo SPA [2014] EWHC 1447 (Ch).
