Privy Council considers Norwich Pharmacal and Bankers Trust disclosure orders against banks

The Privy Council has held that the Supreme Court of Mauritius was wrong to refuse to grant a "Norwich Pharmacal" order requiring a Mauritian bank to disclose information about a customer's account to the victims of an alleged fraud, to assist them in tracing misappropriated funds. Several aspects of the judgment are of relevance beyond the Mauritian context and likely to be influential on courts considering applications for Norwich Pharmacal and Bankers Trust orders, both against banks and more generally: Stanford Asset Holdings Ltd and another v AfrAsia Bank Ltd [2023] UKPC 35.  (NB. The judgment is dated 21 July 2023, when the Privy Council announced a summary of the result, but was only published recently).

The Privy Council held that such a disclosure order would not conflict with the statutory banking confidentiality regime under the Mauritian Banking Act 2004 (the Act) because it would fall within an exception applying to civil proceedings. Notably, it considered that it would be "remarkable" if the statutory regime prevented the courts from exercising such an important jurisdiction to assist the victims of fraud. Nor would the disclosure order conflict with the bank's common law confidentiality duties.

Commenting on the nature of the Norwich Pharmacal jurisdiction (and the similar Bankers Trust jurisdiction), the Privy Council stated that while the jurisdiction is in itself "exceptional" in the sense that it requires an innocent third party to supply information to a party to whom they would otherwise owe no duty, that does not mean that it will only exceptionally be appropriate to grant such relief where the necessary conditions are satisfied. In particular:

• there is not some specially high hurdle to obtain such an order against a bank
• the fact that a fraud is being investigated by a public authority does not mean that a court should not grant such relief to assist the victim to pursue its own civil remedies.

It is important to note that this case concerned an application to the Mauritian courts for a disclosure order against a bank located in Mauritius. This should be contrasted with cases where such an order is sought against a bank outside the jurisdiction.  As discussed here, the English High Court has recently confirmed that special considerations do apply in that situation, given the strong likelihood that compliance with the order would put the foreign bank at risk of breaching local laws (including because such an order by a non-local court may not satisfy a 'compulsion of law' exception to the bank's confidentiality duties). The High Court in that case held that a disclosure order should only be made against a foreign bank in exceptional circumstances. The decision suggests that relevant considerations in that regard might include urgency (ie."hot pursuit" cases) and any other reasons why approaching the local courts for similar orders would not be a viable alternative.

Background

The claimant was a Seychelles company which held an account with a bank in Mauritius. In February 2022 over US$11 million was paid out of the account to another account at the same bank belonging to a third party (the recipient). It was common ground that this payment was fraudulent, having been made on the purported authority of two of the claimant's employees who did not in fact have the necessary authority. There was reason to believe that the recipient had transferred all or most of the stolen monies to other parties, whose identity and location were unknown.

The claimant applied to the Supreme Court of Mauritius seeking an order that the bank disclose the name and other particulars of the onward recipients of the monies. The bank did not oppose the order but the parties were not fully agreed as to the basis of the court's jurisdiction.

The Supreme Court of Mauritius dismissed the application and the claimant appealed to the Privy Council.

The decision of the Supreme Court of Mauritius

The claimant argued that the court had jurisdiction to make the order on two alternative bases: under Section 64 of the Act and on the basis of the decision of the House of Lords in Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133.

The Supreme Court held that there was no power to order the disclosure under Section 64 of the Act but that aspect of the decision is not considered in detail in this blog post.

As to the Norwich Pharmacal jurisdiction, the Supreme Court expressed concerns about whether it was available in a case where disclosure was sought from a bank of information in relation to the affairs of a customer, given the statutory confidentiality regime in the Act. However, it did not express a concluded view on that point.

It held that, in any event, Norwich Pharmacal relief could not be justified in the present case. It cited English and Privy Council authority which it said showed that the jurisdiction was "exceptional and intrusive" and that "Norwich Pharmacal orders are not granted on the mere asking especially against entities such as banks which are bound by a statutory duty of confidentiality to their customer". In particular, it considered that the following factors weighed against making the orders:

• The claimant had already obtained several judicial remedies to secure its interests - including a statutory demand on the known recipient, a freezing injunction against the recipient and the two employees, and a provisional attachment order against the bank.
• There was an ongoing enquiry into the alleged fraud by both the Central Criminal Investigation Division and the Independent Commission Against Corruption. The claimant had not made any complaint as to the conduct of those investigations and had not justified how it would be in a better position to carry out an enquiry than the authorities, which were specifically vested with all the necessary statutory powers to obtain the information.

The decision of the Privy Council

The Privy Council noted that the claim had been framed as a Norwich Pharmacal application but that it could equally have been advanced as an application in support of a proprietary claim, by reference to the principles in Bankers Trust Co v Shapira [1980] 1 WLR 1274.  While the two jurisdictions are formally distinct, the differences between them were not material to the issues being considered here, and the judgment expressly confirms that the discussion can be treated as applying equally to the Bankers Trust jurisdiction.

Norwich Pharmacal orders: Jurisdiction

The Mauritian Courts have the same jurisdiction to grant equitable remedies as the English High Court, exercised in accordance with the same principles. They therefore have jurisdiction to make orders under the Norwich Pharmacal principles.
The Privy Council held that the Act did not have the effect of excluding the Norwich Pharmacal jurisdiction:

(i)   On its terms, the statutory duty was imposed not on the bank itself but on its individual employees and agents. The only duty of confidentiality imposed directly on the bank was its common law duty (in respect of which there was "no difficulty" in recognising an exception under equitable principles such as those in Norwich Pharmacal)

(ii)  It would be wrong to order the bank to disclose material if it could only comply by requiring an employee or agent to breach their statutory duty. However, that would not be the case because the Act specified that the duty did not apply "where…civil proceedings arise involving the financial institution and the customer or his account". While the scope of that exception appeared very broad, and it might be necessary to imply some limitations to it, it must at least extend to where disclosure has been ordered by the court.

In considering the exceptions to the statutory duty, the Privy Council commented:

"It would in truth be remarkable if the...Act had the effect of preventing the Court from exercising what is an important and salutary jurisdiction to assist victims of fraud and other wrongdoing from recovering their property or obtaining other appropriate redress in cases where the relevant information was held by banks. It  seems clear to the Board that that was not the purpose of [the provision]."

Norwich Pharmacal orders: Exercise of the discretion

The Privy Council went on to consider the four-stage test for granting Norwich Pharmacal relief, as summarised in Collier v Bennett [2020] EWHC 1884 (emphasis added):

1. The applicant has to demonstrate a good arguable case that a form of legally recognised wrong has been committed against them by a person.
2. The respondent to the application must be mixed up in it so as to have facilitated the wrongdoing.
3. The respondent must be able, or likely to be able, to provide the information or documents necessary to enable the ultimate wrongdoer to be pursued.
4. Requiring the disclosure is an appropriate and proportionate response in all the circumstances of the case, bearing in mind the exceptional but flexible nature of the jurisdiction.

It was clear that the first three conditions were satisfied in this case. In relation to the fourth, the Privy Council stated that the reason why the Norwich Pharmacal jurisdiction is referred to as exceptional is that it involves an innocent third party being required to supply (typically confidential) information to an apparent victim of wrongdoing to whom they would otherwise owe no duty. However,

".. it does not follow from the fact that the jurisdiction itself is, in that sense, exceptional that it will only exceptionally be appropriate or proportionate to grant relief in a case where the first three conditions are satisfied".

In particular:

"nor .. does the Board believe that there is some specially high hurdle to be surmounted before a Norwich Pharmacal order can be made against a bank".

It noted that such relief is regularly ordered in the Business and Property Courts in London, either as freestanding relief or as an adjunct to a freezing order.

On the facts in this case, the Privy Council considered that such an order was an appropriate and proportionate response and necessary in order to do justice.  It noted that the question of whether the applicant can readily obtain the information by another means is, in principle, relevant to deciding whether to grant Norwich Pharmacal relief. However:

• In this case, the actions already taken against the known recipient and the employees were not an alternative means of finding out what had happened to the stolen monies if they had been paid away. They might establish  those defendants' liability and secure any funds still in their hands, but they would not enable any monies paid away to be traced into the hands of onward recipients.
• The fact that law enforcement agencies were investigating the alleged fraud did not mean it was wrong for the court to provide assistance to the victim to pursue their own civil remedies. Nor should such assistance depend on there being a cause for complaint about how the public agencies are performing their duties. The role of a public authority investigating a fraud is not the same as that of a victim seeking to recover its money, and their interests and priorities are unlikely to be identical.

The Privy Council allowed the appeal and ordered that the disclosure order should be made, with the claimant to pay the bank's reasonable costs of complying.