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21 May 2019
The Norwich Pharmacal order is an important tool for combating fraud. Given the prevalence of electronic and identity fraud, the ability of victims to recover lost money through the civil courts (in addition to reporting matters to the police) has assumed a high profile of late. For plaintiffs who fall prey to such fraudsters, the ability to obtain a court order prohibiting a defendant from disposing of (among other things) money in a bank account (ie, a Mareva injunction) and to obtain timely disclosure of details of alleged wrongdoing from a defendant's bank (eg, Norwich Pharmacal relief) is often crucial. Applying for a Mareva injunction without giving a defendant notice is one thing – it is quite another to seek a disclosure order against a bank without giving it notice. In the recent case of Asiya Asset Management (Cayman) Ltd,(1) the High Court reiterated what it considers normally to be good practice in such situations, in order to balance the interests of the plaintiff, the account holder and the bank. The courts will be concerned to see that due process is followed.
The details are a bit scant, but it appears that the plaintiff lost some money due to an alleged fraud and obtained a Mareva injunction (in effect) to freeze some assets held by the defendant, including money in a bank account. The plaintiff was able to satisfy the court of the need for an ex parte (ie, without notice) Mareva injunction. That order was originally obtained on a Friday 'summons day' and continued one week later on a court return date.
At the same time, it appears that the plaintiff applied for a disclosure order against the bank where the account was held, in order to obtain details of the identity of the alleged wrongdoers and the identity and whereabouts of the recipients of the plaintiff's money. The power to order disclosure exists pursuant to (among other things) common law Norwich Pharmacal relief and Section 21 of the Evidence Ordinance (Cap 8).(2)
An issue arose as to whether the court should grant a Norwich Pharmacal disclosure order against the bank on an ex parte basis.
While the court was willing in principle to grant the disclosure order, it declined to do so on an ex parte basis. Based on established case law,(3) the court preferred to grant an order for partial disclosure by the bank limited to the balance of the bank account, coupled with a gagging order prohibiting the bank from disclosing to any third party (including the defendant) the existence of the court proceedings until a certain date – so as to allow the plaintiff sufficient time to take such action as was necessary to protect its interests before the bank informed the defendant of the court proceedings.
In so ruling, the court commented as follows:
22. While the Court may well have jurisdiction to make an ex parte order against a bank without notice to it for Norwich Pharmacal discovery, it would however be hard to think of any appropriate case where it should exercise its discretion to do so on that basis.
The court made clear that, in its opinion, where a plaintiff seeks a Norwich Pharmacal disclosure order against a bank in the process of seeking (for example) Mareva relief against a defendant, the correct practice is normally for the plaintiff to go through a two-step process – rather than, at the outset, seek an ex parte disclosure order against a bank. First, the plaintiff could apply for an ex parte gagging order against the bank pending a hearing of an application for disclosure which (in turn) could be on an inter partes or an ex parte on short notice basis. Second, at the hearing of the application for disclosure, the court would have an opportunity to consider the bank's submissions, while in the meantime the plaintiff would be protected by a gagging order. If necessary, the gagging order could remain in place for an extended period while balancing the interests of the plaintiff and the bank.
The court's clarification will be welcomed by interested parties and generally by respondents on the receiving end of ex parte court applications. As the decision makes clear, such applications are not the norm as a matter of procedural fairness. Indeed, ex parte court applications are justified only in cases where secrecy is justified or in cases of genuine urgency – with the trend increasingly being for the courts to scrutinise such applications, particularly in terms of urgency (for further details please see "Ex parte injunctions with or without you").
The decision also makes clear that while a bank may take a neutral position where credible allegations of fraud are raised by a plaintiff, this does not (of itself) justify proceeding straight to an ex parte application for Norwich Pharmacal disclosure against the bank.
The court's decision is underpinned by existing case law and is likely to be well received by an appeal court in Hong Kong. It also gives due consideration, as a matter of principle, to the position that third parties may find themselves in and to the interests of bank customers (who may or may not be at fault).
For some time in Hong Kong, the courts have been warning litigants and their legal representatives about the proper jurisdiction for ex parte procedures and some tough court sanctions can be foreseen in the not too distant future. Parties and their legal representatives who miss a step should be prepared for the consequences.
For further information on this topic please contact Jonathan Crompton or Jacky Darsono at RPC by telephone (+852 2216 7000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
(2) "Court or judge may direct copies of entries in banker's record to be taken". For the practice on an application pursuant to Section 21 of the Evidence Ordinance see Hong Kong Civil Procedure 2019 (the 'White Book'), Volume 1, Order 38/13/1 and Volume 2, Part J1/21.
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