CHASING FRAUD: Bankers Trust information order made using a new jurisdictional gateway following fraud worth millions

Jurisdiction under Bankers Trust

In relation to the information order sought by C, the court considered whether Bankers Trust orders to provide information should be granted. A Bankers Trust order may be granted where there is strong evidence that a claimant's property has been misappropriated. The five requirements set out in later authorities, applying the Bankers Trust decision, are:

1. There must be good grounds for concluding that the money or assets about which information is sought belonged to the claimant.
2. There must be a real prospect that the information sought will lead to the location or preservation of such assets.
3. The order should, as far as possible, be directed at uncovering the particular assets which are to be traced but should not be wider than necessary in the circumstances.
4. The interests of the claimant in obtaining the order must be balanced against the possible detriment to the respondent in complying with the order.
5. The applicant must provide undertakings to: pay the expenses of the respondent in complying with the order; compensate the respondent in damages, should loss be suffered as a result of the order; and only use the documents or information obtained for the purpose of tracing the assets or their proceeds.

Requirements for an order permitting 'service out'

Turning to C's application to serve the claim out of the jurisdiction, the court considered Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7:

1. Was there a serious issue to be tried on the merits?
2. Was there a good arguable case that the claim fell within one of the 'gateways' in CPR PD 6B 3.1?
3. Was England and Wales the appropriate forum for the claim to be tried?

Jurisdictional Gateways under PD 6B 3.1

The new gateway under PD 6B, 3.1(25) allows a court to order service out of the jurisdiction where:

A claim or application is made for disclosure in order to obtain information –

(a) 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; and

(b) the claim or application is made for the purpose of proceedings already commenced or which, subject to the content of the information received, are intended to be commenced either by service in England and Wales or pursuant  to CPR rule 6.32, 6.33 or 6.36

The court also considered CPR PD 6B, 3.1(11) and/or (15):

(11) The subject matter of the claim relates wholly or principally to property within the jurisdiction, provided that nothing under this paragraph shall render justiciable the title to or the right to possession of immovable property outside England and Wales.
…
(15) A claim is made against the defendant as constructive trustee, or as trustee of a resulting trust, where the claim –

(a)  arises out of acts committed or events occurring within the jurisdiction;

(b) relates to assets within the jurisdiction; or

(c) is governed by the law of England and Wales.

Requirements for an order for service by alternative means

Lastly, in relation to the application to serve the defendants by alternative means pursuant to CPR 6.15, 6.27 and 6.37(5)(b), a 'good reason' was required for permission to be granted. In relation to defendants situated in Hague Service Convention countries (as in the present case), there must be exceptional or special circumstances for service by alternative means.

Bankers Trust relief

The court concluded that the five requirements for an order under the Bankers Trust jurisdiction had been met:

• There was a good arguable case that cryptocurrencies are a form of property and anyone who held cryptocurrency or traceable substitutes derived from the claimant's cryptocurrency did so as a constructive trustee for C as the property was obtained by fraud.
• There was a real prospect that the information sought would lead to the location or preservation of the misappropriated cryptocurrencies on the basis that the nature of the fraud and the information sought was particular as to the identity of account holders and the destination of the transfers.
• The fifth defendant made a number of points as to the terms of the order, and in particular as to the width of the information which should be provided. The information ordered to be produced reflected these submissions, and in doing so, the court ensured compliance with the third requirement under Bankers Trust that the order should not be wider than is necessary.
• There was a clear benefit to C obtaining the information sought and 'the potential detriment to the defendants could be eliminated or at least very effectively mitigated by C's undertakings as to expenses and damages, the restriction on collateral use…'.
• The fifth principle was satisfied by undertakings offered by C.

The court distinguished Mackinnon v Donaldson Lufkin & Jenrette Securities Corp [1985] 11 WLUK 32.  In the present case it was not known where the relevant documents were located and as the court was faced with novel challenges of fraud in relation to cryptocurrency, the approach adopted in relation to obtaining information in 1985 did not seem appropriate.

In the information order the defendants were required to provide C with, amongst other things, all 'Know Your Customer' information and account details likely to identify the holder of the account.

Application for 'service out' under new jurisdictional 'gateway'

The information sought by C fell within the terms of CPR PD 6B, paragraph 3.1 (25)(a)(i) and (ii). In relation to 25(b), C stated that proceedings would be commenced in England and Wales if the information obtained revealed a potential cause of action against the defendants in the jurisdiction. If the information indicated that the defendants were located outside the jurisdiction, C's intention was to commence proceedings in England and Wales and seek to serve out of the jurisdiction. The court was therefore satisfied that there was a good arguable case as to the availability of a gateway for service out on the basis of the potential applicability of the 'gateways' in PD 6B 3.1(11) and/or (15).

England and Wales was held to be the appropriate forum for the claim to be tried: there were good grounds for considering the situs of the cryptocurrency to be in England as C was resident and carried on its relevant business in England and Wales and the law of England and Wales at least arguably governed the proprietary claim.

Application for service by alternative means

The court was satisfied by the nature of the claim that there was a good reason, and exceptional circumstances (to the extent necessary), for steps to be taken as soon as possible to seek to identify the defendants and preserve the property, resulting in orders being made for service by alternative means by email at a number of select email addresses and also by posting a link to the documents on the online contact form on the relevant defendant's website. It was held that expedition was still important notwithstanding the lapse in time between the fraud occurring and the case being heard.