Mishcon de Reya page structure
Site header
Main menu
Main content section

Asset tracing in fraud cases: navigating cross-border challenges when seeking disclosure orders from foreign banks

Posted on 31 May 2023

The importance of disclosure order relief in fraud cases

Fraud and asset recovery cases are increasingly being fought against unidentified defendants, as individuals hide behind computers, fake emails and false online personas. The availability of disclosure order relief through the English courts is therefore an essential tool in uncovering the identity of fraudsters trying to hide their true identities and often the first step in the successful recovery of assets. As these cases are almost always multi-jurisdictional, claimants are often seeking such information from entities based overseas. Whilst the English courts have repeatedly demonstrated their willingness to intervene and provide meaningful relief in cross-border cases, additional considerations do apply and it is important that these are properly considered and addressed in any application for relief.

The pitfalls in seeking Bankers Trust relief in cross-border cases

The recent case of Daniel Carlos Scenna v Persons Unknown et al. (Claim No. BL-2022-001711) [2023] EWHC 799 (Ch) highlights the pitfalls to be aware of when seeking Banker's Trust relief in English proceedings involving foreign banks and demonstrates the importance of planning your global strategy from the outset in multi-jurisdictional cases.

Mr Scenna claimed that he had been the victim of a sophisticated fraud scheme orchestrated by a group of unidentified individuals, pursuant to which he was persuaded to transfer almost $3 million to accounts held at a bank in Hong Kong and at two Australian banks. He sought freezing orders against the alleged fraudsters, further alleged recipients of the monies, and the banks where the accounts were held. He was successful in obtaining freezing orders against the first and second categories of defendants but freezing order relief against the banks was refused. He was however granted certain disclosure orders against the banks pursuant to the Bankers Trust jurisdiction but the banks subsequently challenged those orders.

In the case of foreign banks, the courts have made clear that such an order should be granted only in exceptional circumstances (Mackinnon v Donaldson [1986] Ch 482), as the courts recognise the strong likelihood that compliance with such an order could put the bank at risk of being in breach of local laws or regulations. 

Ensuring compliance with local laws and regulations and identifying alternatives  

It was precisely this risk that was raised by the Australian banks when they applied to challenge the disclosure orders. They argued that compliance with the orders would put them in breach of Australian law (including breach of a common law duty of confidentiality and the Privacy Act 1988), and would result in severe financial and reputational damage in Australia.

Having heard expert evidence on this point from both sides, the judge agreed that there was a "real risk" that the banks would be in breach of Australian laws and thereby exposed to financial and/or reputational damage.

In addition, he found there was an alternative, and broadly equivalent remedy available in Australia. The Banks had indicated they would not oppose any such application to the Australian courts and would comply with any order made. When the Claimants were asked why they had not made an (unopposed) application to the Australian court, they explained that they were reluctant to have proceedings afoot in multiple proceedings and had a clear preference to have all matters dealt with within a single set of proceedings. Whilst the judge understood this position, he was not persuaded that it provided an answer where the alternative was to expose a respondent bank to some form of liability. 

Importantly, the judge distinguished the decision in LMN v Bitflyer [2022] EWHC 2954 where Butcher J had made a disclosure order against a number of foreign cryptoexchanges. In Bitflyer, it was not known where the relevant documents were located such that the applicants did not know in which jurisdiction to apply. This is often the case when dealing with exchanges where there is often less clarity regarding the jurisdiction in which the exchanged is based. In such circumstances, the judge in that case had found it would be “impractical and contrary to the interests of justice to require a victim of fraud to make speculative applications in different jurisdictions”.

In contrast, in Scenna, it was known that the information was in Australia, it was known that there was a very real risk that compliance with the English court order would breach Australian law, and it was known that the Australian courts offered a similar remedy which would probably be granted. As such, "while the discharge of the disclosure order might cause the Claimants some added inconvenience and increased costs, it would not cause them to suffer any irremediable damage in their pursuit of the underlying fraudsters."

Conclusion: ensuring the appropriate relief is sought in the appropriate jurisdiction

Although the disclosure orders were discharged on the facts of this particular case, Bankers Trust relief can still provide a valuable and important tool in asset recovery cases, including against foreign banks where exceptional circumstances can be shown. Cases of 'hot pursuit' will be the obvious example of this.

Unfortunately for Mr Scenna, the judge considered that the pursuit in this case could at best be described as "lukewarm".  It is also extremely important when seeking ex-parte relief to consider whether the Courts are being asked to grant interim relief in foreign jurisdictions which may cause the Respondents to be acting in breach of local laws and/or regulations so that this can be drawn to the attention of the Court in order for Applicants to properly discharge their duties of full and frank disclosure. The Scenna case highlights the importance of careful consideration of the particular circumstances of a case at the outset to ensure that the appropriate relief is sought in the appropriate jurisdiction.

Mishcon de Reya regularly advises on multi-jurisdictional matters requiring cross border injunctive strategies. This is made possible with the support of our International Fraud Group Network of 46 members in 53 jurisdictions (including Australia).

How can we help you?

How can we help you?

Subscribe: I'd like to keep in touch

If your enquiry is urgent please call +44 20 3321 7000

I'm a client

I'm looking for advice

Something else