Help for fraud claims: Service out of third party information orders

The expansion of the ‘jurisdictional gateways’ in CPR Practice Direction 6B, which took effect on 1 October 2022 (covered here), includes the introduction of a new gateway 25 allowing service of third-party information orders outside of the jurisdiction. This gateway enables a claimant to seek information about the identity of a potential defendant or what has become of the claimant’s property. It will, for example, assist claimants seeking to trace the proceeds of fraud by helping them to obtain information such as from an innocent bank or exchange located outside England and Wales.

This post explains, and then examines the impact of, this new gateway, particularly in relation to the rise in sophisticated cross-border cyber fraud, which often takes place via crypto-exchanges or other digital networks.

Information orders

For victims of fraud to obtain redress, they often need information about the wrongdoer from an innocent intermediary such as a bank, financial institution, exchange or website operator. Claimants seeking disclosure of information in order to identify wrongdoers or trace stolen assets can apply to the Courts for established orders such as Norwich Pharmacal orders (NPOs) and Bankers’ Trust orders (BTOs). Where the information is held in England and Wales, the Courts have issued these orders for the disclosure of information from innocent third parties. However, where the innocent third party and relevant information is located overseas, the Courts have been reluctant to exercise their jurisdiction to order disclosure. In relation to NPOs, claimants have been unable to rely on the existing jurisdictional gateways. Even where a gateway can be relied upon in relation to a BTO, there are practical difficulties in obtaining an order for service out. This has left victims of international money transfer fraud and other cross-border crimes with limited means of redress.

The new gateway 25

CPR PD 6B paragraph 3.1(25) reads:

(25) 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.

This new gateway covers service out of both applications to uncover the identity of a defendant or potential defendant and orders to trace property, therefore catching most (but not all) scenarios where NPOs and BTOs are sought. Although the gateway was developed to aid victims of cyber fraud, it is not a requirement for fraud to have taken place, giving it a wider application.

The additional requirement in (b) that proceedings have already been or are intended to be commenced in England and Wales prevents prospective claimants from using the English Courts to obtain information prior to issuing proceedings elsewhere.

Key takeaways

The new gateway significantly expands the availability of third party information orders and will provide a useful tool for claimants in tracing money outside of the jurisdiction. However, permission to serve out will not be granted automatically; claimants must still satisfy the other aspects of the test for service out, with the question of whether England and Wales is the appropriate forum to hear the substantive dispute being the main hurdle. Further, there remain some limits to the application of the gateway. For example, it will not assist an applicant seeking to find out something about a defendant other than their identity, or to find out what has happened to property that was under the applicant’s control but it did not own. In such situations, the claimant will need to seek to rely on another gateway and existing case law will remain relevant.

The effectiveness of the new gateway will depend on the extent to which third party respondents based overseas are willing to comply with an extra-territorial information order from the English Courts. The reputational damage if a respondent is found in contempt of court in England and the potential consequences for the business and its directors may be enough of an incentive, particularly where they have at least some connection with England and Wales. Failing that and where necessary, information orders may be recognised or registered by the local court of the respondent.

It will be interesting to see how the new gateway is developed by judges in the coming months, in particular, any safeguards for innocent third parties required to provide information about their clients and customers. In any case, this development is consistent with the courts’ general approach to expanding the gateways and will bolster the reputation of England and Wales as a leading jurisdiction for international fraud litigation.

With thanks to Ella Dixon-Nuttall for her assistance in preparing this post.