Expansion of Norwich Pharmacal and Bankers Trust jurisdiction against foreign non-parties

Of special note for fraud practitioners is the adoption of a new gateway for the service of information orders against non-parties, making it possible to obtain permission to serve Norwich Pharmacal and Bankers Trust orders (NPOs and BTOs respectively) outside of the jurisdiction.

The need to obtain information from foreign non-parties is a common feature of fraud claims. These changes should increase the ability of parties to acquire such information and ensure that the English courts remain at the forefront of international dispute resolution.

The new gateway at paragraph 3.1(25) of PD 6B is widely drafted and covers claims or applications for disclosure to obtain information 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" that is needed for proceedings brought in England and Wales, or which are intended to be brought here using the information sought.

NPOs and BTOs

NPOs were developed nearly 50 years ago[1] as a means for claimants to get information they need for their case from a third party mixed up in wrongdoing by a prospective defendant. In the original Norwich Pharmacal case, the claimant alleged that its patent rights had been infringed by import of a compound patented by it, but did not know who had made those imports. The court granted the original NPO requiring Customs & Excise to disclose the names of those who had imported the compound, thus providing Norwich Pharmacal with the identities of those it should pursue in a claim for breach of its patent rights. Since then, the NPO has become an invaluable tool in the fraud lawyer’s arsenal and can be strategically deployed at an early stage to shape a claim and obtain important information.

The BTO is a similar equitable remedy, derived from the 1980 case of Bankers Trust Company v Shapira [1980] 1 WLR 1274. The claimant sought and obtained an order that a third party bank be required to give disclosure of correspondence, cheques and banking records of people who had presented forged cheques. The purpose of this was to allow the claimant to trace funds that belonged to it in equity.

These equitable remedies have become powerful ways of discovering who has committed a tort, or the location of assets. Their development and availability is an important factor in the popularity of the English court for fraud victims seeking redress. However, traditionally, if the respondent to a NPO and the information that the claimant is pursuing are outside of the jurisdiction of the English Court, a NPO has not been available from England and local relief will need to be sought. This is reflective of the English court historically being wary of appearing to assert jurisdiction over foreign third parties. However, the changes to PD 6B appear to show a relaxation of this approach and will open the door for increased use of NPOs against foreign non-parties. It should be remembered that NPOs and BTOs are not intended to be made against the defendant of a substantive claim, and the respondent to such an order will likely recover their associated costs.

It has been somewhat easier to serve BTOs overseas than NPOs, but with the rise in digital asset fraud cases this disparity was increasingly being questioned. It is good news for users of these remedies that this gap is now being closed and there will be parity between the two types of information order in the future and a more widespread ability to use them in international matters.

The case for change

Sophisticated frauds are invariably committed through international networks and using a wide range of foreign entities, intermediaries and service providers. Whilst policy considerations may in the past have held the English court back from seeking to exercise jurisdiction over foreign entities, it is arguable that in the globalised world in which we now operate, it would be unsustainable to take a narrow view on the appropriateness of allowing service out.

The ability to serve these orders overseas will be of great assistance in fraud claims and asset tracing cases, where cross-border issues have become a standard feature and assets may have been moved through offshore exchanges and markets and been unwittingly assisted by international non-parties.

The rise of frauds relating to digital and cryptoassets are undoubtedly a factor which has led to these changes. As the Master of the Rolls, Sir Geoffrey Vos, recognised in a recent speech "[i]n the world of crypto fraud, there are no national barriers and unlawfully obtained cryptoassets can be difficult to trace."[2] Recognising that the impediment to service out has been a significant obstacle in proceedings attempting to deal with crypto frauds, the Master of the Rolls set up a sub-committee of the CPRC to consider amending the grounds for service out in order to render it easier to litigate about and trace cryptoassets where necessary.

The future

It should be noted that introduction of a new gateway does not mean that it will automatically be possible to serve NPOs and BTOs out of the jurisdiction. Permission will still be required from the court and it will continue to be necessary to satisfy the full test for permission to serve out, which requires not only identification of a relevant gateway from PD 6B, but also (i) that England and Wales is the proper place to bring the claim, and (ii) that there is a serious issue to be tried. The adoption of this new gateway at paragraph 3.1(25) of PD 6B might shift the burden onto the other limbs of the test. It does, though, remove the automatic obstacle that previously there was no gateway available to serve these types of orders overseas, which was a significant limitation on their utility.

The fact that the CPRC recognised the difficulty with this and approved these changes underlines the attractiveness of England and Wales as a jurisdiction keen to assist fraud victims. For fraud victims trying to work out where their assets have gone, or who might have taken them, the ability to serve information orders on overseas non-parties will be welcome news. A gateway opening up the ability to serve information orders on overseas exchanges and marketplaces which hold digital assets should make a significant difference to claimants in the crypto-litigation space. However, more broadly, these changes will assist all claimants who are the victims of international fraud and open the door to obtaining NPOs against foreign non-parties.

[1] Norwich Pharmacal v Commissioners of Customs & Excise [1974] UKHL 6

[2]Contracts, just smarter. Seizing the opportunity of smarter contracts, Lawtech. UK Launch of Smarter Contracts report, 24 February 2022 at paragraph 19