High Court makes Bankers Trust disclosure order against foreign trustee in relation to assets in foreign trust and bank accounts

The High Court has made a Bankers Trust disclosure order requiring a foreign trustee to provide information and documents in relation to assets held in a foreign trust and foreign bank accounts. The application was made following judgment on a fraud claim by a group of companies against an individual in relation to the unauthorised extraction of company funds: Tonstate Group Ltd & Ors v Wojakovski & Ors [2024] EWHC 975 (Ch).

Although set in a non-financial context, this decision will be of interest to financial institutions which have been victims of fraud as it provides guidance on the circumstances in which the courts are willing to make disclosure orders to assist the recovery of misappropriated assets, particularly in a cross-border context.

As well as having personal jurisdiction over the party against whom the order is sought, in the sense that there is a basis on which they can properly be served with the proceedings, the court must also be satisfied that there is a sufficient connection with England and Wales that it can properly regulate the respondent's conduct abroad – what the court described as the question of "subject matter jurisdiction", though that term is more commonly used in the US. The same point could also be referred to as the territorial limits of the court's powers. This applies even where the disclosure order is sought post-judgment so that, as the court found in this case, it need not consider the usual test of forum non conveniens (ie where the case may most suitably be tried in the interests of justice). However, similar factors may to be relevant to both questions.

In the present case, the central issue before the court was whether it had subject matter jurisdiction over the dispute given that the order sought was: (i) against a foreign trustee; (ii) seeking access to documents and information held at least partly abroad; and (iii) seeking to regulate the trustee's conduct outside the jurisdiction. The court distinguished Mackinnon v Donaldson, Lufkin & Jenrette [1986] 1 Ch 482, in which the court declined to make a disclosure order against an American bank in relation to documents in the US. In that case, the judge said that the court should not (save in exceptional circumstances) impose a requirement on a non-party outside the jurisdiction to produce documents outside the jurisdiction concerning business outside the jurisdiction, in particular a foreign bank. However, Mackinnon did not establish a blanket prohibition which prevented the court from making the order sought in the present case. It was simply that on the facts of Mackinnon (in contrast to the present case) there was not a sufficient connection with England to justify the court acting.

Overall, the decision shows that, before requiring a foreign bank or other third party to produce documents outside the jurisdiction concerning business outside the jurisdiction, the courts will consider carefully whether there is a sufficient connection with England and Wales to justify such an order. The courts may be particularly hesitant to make such orders against banks, given their duties to customers which may in some countries be reinforced by criminal sanctions, but even in the case of banks an order may be justified in some circumstances.

We consider the decision in more detail below.

Background

The claimant group of companies was the victim of a fraud, which involved the unauthorised extraction of company funds by an individual. The companies brought an action against the individual to recover the extracted sums. In January 2020, the High Court entered judgment against the individual and recognised the companies' proprietary interest in the extracted sums. However, many millions of pounds remained unaccounted for.

The companies subsequently applied for a Bankers Trust order seeking information and documents relating to: (i) assets held in a foreign trust linked to the individual; and (ii) foreign bank accounts held in the name of the individual's late father. The respondent to the application was the individual's brother (a foreign citizen and non-UK resident) who was also a trustee of the foreign trust and joint executor of the father's estate.

Decision

The High Court found in favour of the companies and allowed the application against the trustee, for the reasons set out below.

Personal jurisdiction

First, the court said it was satisfied that it had personal jurisdiction over the trustee, ie the jurisdiction to decide whether in principle he should be made subject to an order directed to him personally.

At the time of the service of the application, the trustee was a director of a UK company and had registered a UK address for service under the provisions of s.1140 of the Companies Act 2006. It did not matter that the application was not concerned with his business as a director of the UK company as s.1140(3) of the Companies Act 2006 provides that the section applies whatever the purpose of the document in question. This service was thus good service and sufficient to establish personal jurisdiction over the trustee.

The court also underlined that it was not persuaded that the doctrine of forum non conveniens, which is concerned with where a case may most suitably be tried for the interests of all the parties and the ends of justice (as per Spiliada Maritime Corp v Cansulex [1987] 460), was relevant in the present context. The action had already been tried. The present concern was whether disclosure should be ordered to vindicate the companies' established right to reclaim their property (or the traceable proceeds of such property). However, many of the same points relied on in support of the respondents' contentions on forum non conveniens were relevant to the question of subject matter jurisdiction, discussed below.

Bankers Trust jurisdiction

Subject to the question of subject matter jurisdiction, the court would not hesitate to exercise its Bankers Trust jurisdiction (as per Bankers Trust v Shapira [1980] 1 WLR 1274). This enables the court to make strong orders to ascertain the whereabouts of claimants' property where there is strong evidence that it has been misappropriated (as had been established in this case by the court's judgment in 2020).

The court referred to the criteria set out in Kyriakou v Christie Manson & Woods Ltd [2017] EWHC 487 (QB) for making a Bankers Trust order:

• There must be good grounds for supposing that the money or assets about which information is sought belong to the claimant.
• There must be a real prospect that the information or documents sought will lead to the location or preservation of assets.
• The order should, so far as possible, be directed at uncovering the particular assets which are to be traced – or at any rate the order should not be any wider than is necessary in the circumstances.
• The interests of the claimant in obtaining the order must be balanced against the possible detriment to the respondent in complying with it, which may include an infringement or potential infringement of rights to privacy or confidentiality.
• The applicant must provide appropriate undertakings.

The court concluded that these criteria were satisfied and it was appropriate to make a Bankers Trust order in this case. In the court's view, the information sought had a real prospect of leading to the location or preservation of assets as there was clear evidence of family monies being used to disguise the destination of the extracted sums. Although the order was wide, as it sought the nature, location and estimated value of all assets over £5,000 held by the trust and an associated company, and copies of all bank statements for that company worldwide since 1 January 2000, it was justified in the circumstances as it would encourage transparency and flush out the truth about the assets which had been deliberately withheld from the companies. The collation of documents and information was not unduly burdensome, and the companies would give an undertaking not to make use of any sensitive and confidential information or documents obtained except for the purpose of recovering the extracted sums.

Subject matter jurisdiction

Given that the trustee was resident abroad and that the order was seeking access to documents and information held at least partly abroad, and to regulate the trustee's conduct outside the jurisdiction, the court had to consider the question of subject matter jurisdiction (ie the extent to which it had power to regulate conduct abroad).

The court noted that, as per Mackinnon, in principle a court should not (save in exceptional circumstances) impose a requirement on a non-party outside the jurisdiction to produce documents outside the jurisdiction concerning business outside the jurisdiction, in particular a foreign bank. This principle applied equally to orders made under the Bankers Book Evidence Act 1879 (which was at issue in Mackinnon) and the Bankers Trust jurisdiction.

In Masri v Consolidated Contractors International Company SAL & Anor (includes Addendum) [2008] EWCA Civ 303, Lawrence Collins LJ (as he then was) explained that the existence of a sufficient connection with England will usually justify the exercise of the court's powers. Thus, much will depend on the facts and the context. Any power or discretion must be exercised in accordance with internationally recognised principles on the limits of the exercise of jurisdiction.

In the court's view, Mackinnon did not establish a blanket prohibition which inhibited the making of the order sought in the present case. It was simply that, on the facts of Mackinnon, there was an insufficient connection with England to justify the court acting on the basis of internationally recognised principles on the exercise of jurisdiction. The case involved a commercial third party bank which operated wholly abroad in connection with the relevant transactions. Further, the court in that case considered that banks fell into a special category due to their duty of confidence to customers, which in some countries is reinforced by criminal sanctions. Even in the case of banks though, there might be exceptional circumstances justifying a disclosure order in relation to documents abroad (as per London and County Securities Ltd (In Liquidation) v Caplan (unreported) 26 May 1978, where a disclosure was made in circumstances of commercial "hot pursuit").

The court considered that a number of factors in the present case justified the conclusion that it could properly exercise its power to order disclosure in accordance with internationally recognised principles on the limits of the exercise of jurisdiction. There was a sufficient connection with England. The trustee was not an entirely arm's-length commercial third party, like the bank in Mackinnon; he was involved in making representations to an English law firm as to the derivation of funds paid to them, which were subsequently identified as the proceeds of the unauthorised extractions. There were also at least some relevant assets within the jurisdiction. Further, the context was different to that in Gorbachev v Guriev [2022] EWCA Civ 1270 (see our blog post) which was concerned with a pre-trial application for third party disclosure; what the court was now concerned with was giving effect to an existing judgment which had already determined that the individual had defrauded the companies of their property.

Accordingly, for all the reasons above, the court found in favour of the companies and allowed the application against the trustee.