Practice Direction 6B (PD 6B) of the Civil Procedure Rules 1998 (CPR 1998) was amended in October 2022 to make it relatively uncomplicated to seek third-party information orders, such as Norwich Pharmacal Orders (NPOs) and Bankers Trust Orders (BTOs) (both which are critical in fraud disputes) against foreign defendants and parties who are non-privy to English litigation.
Although it was possible to obtain BTOs and NPOs before the amendment, their availability, especially NPOs, was restricted. Such issues were further exacerbated by the defendant being a resident outside England and Wales. Overall, there was a lack of consistency in the English courts’ approach to granting such orders.
Thus, this change is fundamental in ameliorating cross-jurisdictional issues, making it significantly easier to obtain critical information, especially in corporate fraud cases.
The CPR 1998 came into force in 1999 after Lord Woolfe’s report, ‘Access to Justice‘, on the failings of the civil justice system in England and Wales.
As a precursor to any civil litigation, all parties must ensure they subscribe to the ‘Overriding Objective’ of the Rules and Practice Directions of CPR 1998. The ‘Overriding Objective’ states that ‘these Rules are a procedural code with the overriding objective of enabling the court to deal with cases, justly and at proportionate cost’ (Part 1, Rule 1.1 (CPR 1998)).
The CPR 1998 manages pre-action protocol and conduct through to conduct and compliance during civil proceedings and thereafter. As a statutory instrument, non-committal or non-compliance to its legislative requirements entails tough penalties imposable on offending parties; be they a winning party or otherwise.
Nonetheless, as the civil justice system evolves at a whistle-stop pace, so must the CPR 1998. Such pace demands regular amendments of this legislative instrument, and as such, its 149th Practice Direction Update came into force on 1st October 2022, with particular attention paid to PD 6B.
PD 6B allows service external to England and Wales’s jurisdiction with the court’s permission via its jurisdictional gateways; however, these gateways have been clarified and expanded.
Jurisdictional gateways expedite the exercising of jurisdiction by the English courts over foreign defendants so long as there is a sufficient connection with England; for example, under the contract gateway, where a term of a contract to which the disputing parties are privy is administered by English law, or under the tort gateway, which could be a result of an act that is governed by English law, having been committed or may be committed under a foreign jurisdiction.
With the most recent Update, a new gateway has been created under PD 6B by way of Paragraph 3.1(25) as follows:
‘A claim or application is made for disclosure in order to obtain information
(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 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′.
According to Farrer & Co, ‘this amendment is of particular note for those involved in fraud proceedings. In such proceedings, it is often particularly challenging to establish the identity of potential defendants, how a fraud has been perpetrated, and the location of misappropriated assets, especially where – as is so often the case – there are cross-border elements. Such challenges can be even greater when dealing with fraud concerning digital assets’.
The new gateway refines the harsh restrictions imposed by the court system, reducing the difficulties faced when permission for service out of jurisdiction is sought. It also clarifies the processes involved in obtaining BTOs and NPOs, thus increasing the effectiveness and efficiency of the civil court system.
Further, it is more likely than not that those who seek cross-jurisdictional haven in the hope of disrupting due processes under English law will see those options restricted.
So long as law firms and their clients can primarily prove that the information for which they seek foreign third-party disclosure relates to the issues expounded under Rule 3.1, (25)(a) of PD 6B and the information requirements satisfy the ‘piercing the corporate veil for fraud test’ under VTB Capital plc v Nutritek International Corp , international corporate fraud prosecutions would, in simpler terms, be more straightforward.
The improved expediency means fewer obstacles, be they financial or otherwise, encountered in obtaining remedies to realise justice. The more successful a law firm is in securing remedies for its clients, the greater its standing in the legal sector.
It is important to note that although the new gateway will go some way in piercing corporate fraud veils, there are some limitations to its power; a foreign defendant subject to an English disclosure order may choose to disregard it or seek recourse of the order through their local jurisdiction.
However, a word of warning, especially for those clients with corporate branches in the UK who opt to disregard a disclosure order; defying such orders would mean the aggrieved may initiate proceedings for contempt, a process which would cause irreparable damage to the trust in and reputation of a company.
An English law firm must therefore advise its clients, be they the aggrieved party or the alleged aggressor, of the full measure of the new gateway.
*PD 6B supplements The Court of Protection Rules 2017. The Court of Protection is a special court of England and Wales which makes financial and welfare decisions on behalf of those deemed lacking the mental capacity to do so).