Hong Kong Court of First Instance lays the foundation for disclosure orders against bank accounts in overseas branches of Hong Kong banks

In the recent case of A1 and Another v. R1 and Others [2021] HKCFI 650, the Court of First Instance has, for the first time in a reported Hong Kong judgment, granted a Norwich Pharmacal order for disclosure relating to bank accounts held in overseas branches of banks incorporated in Hong Kong. Herbert Smith Freehills acted for the applicants in this case.

The applicants in this case sought a Norwich Pharmacal order against three respondent banks regarding disclosure relating to four bank accounts, two of which were accounts in their respective Macau branches.  The applicants also sought gagging, confidentiality and anonymity orders.  All orders were granted.  In giving his reasons for the decision, the judge considered, amongst other things, whether it was appropriate to grant a Norwich Pharmacal order in relation to discovery of documents and information in respect of a bank account held not in Hong Kong but instead in Macau.

The underlying dispute arose out of investments made by the applicants as limited partners in a Cayman Islands fund (Fund).  The applicants asserted reasons to believe that the Fund was subject to a large-scale fraud committed by various individuals and entities including their investment manager and the general partner of the Fund, resulting in misappropriation of over US$100 million of the Fund’s assets.  As a result, legal proceedings were commenced in the Cayman Islands and other jurisdictions.  In the proceedings in the Cayman Islands, the applicants successfully sought disclosure of information and documentation relating to the business and financial condition of the Fund.  The disclosure of information revealed payments and other information which evidenced the fraud including the payments which were the subject of the Norwich Pharmacal application in this case. The payments in issue were said to have been made in consideration for advisory services which were allegedly never provided or (if provided, were) not justified particularly bearing in mind the wider context of evidence suggesting other wrongdoing that took place within the fund.

The payments were held with four bank accounts, two of which were in Macau.  One branch belonged to Bank A whilst the other branch belonged to Bank B (the actual names of the banks being anonymised in light of the confidentiality of the proceedings). Both these banks were incorporated in Hong Kong.  The Macau branches were not separate legal entities but instead each an overseas branch and part of the same Hong Kong entity.  Dominic Geiser of Herbert Smith Freehills, representing the applicants, submitted that both banks are regulated by the Hong Kong Monetary Authority (HKMA) and are required to ensure that their respective Macau branches comply with the extensive record-keeping requirements imposed by the HKMA.  On this basis, it was submitted that it is reasonable to infer that Bank A and Bank B may have possession or custody of documents and information relating to the bank accounts in question, and/or that such documents and information may be within their power. Reliance was placed on an English High Court authority in Credit Suisse Trust v Intesa San Paulo SPA & Banca Monte Dei Pasche Di Siena [2014] EWHC 1447, where the Court granted Norwich Pharmacal relief in respect of information held by London branches of two Italian banks.

The judge held that there is no authority in Hong Kong or other reason which prevent the court from making the order sought by the applicants in this case, simply because the information sought is contained in the Macau branch of a bank incorporated in Hong Kong, and of which entity that branch is a part.  Further, on the evidence provided and, in particular, relating to the regulation by the HKMA, it seems that there is the likelihood that each of Bank A and Bank B can have access to i.e., they have control or power over, and can obtain possession of the documents and information held in their respective Macau branches.

Comments

This is not only a novel judgment in Hong Kong but also an important one as it paves the way for other similar applications in the future given the recent surge in the number of cross-border fraud cases, where funds can be transferred to a number of jurisdictions and where victims of dishonest schemes have often turned to the court for relief including for Norwich Pharmacal and/or Bankers Trust disclosure orders. Whether or not the Court will be prepared to grant disclosure in respect of an overseas branch of a bank incorporated in Hong Kong will likely depend on the specific facts of the case including the precise nature of the relationship between the branch and the bank.