In two recent cases, the English High Court has been asked to determine the scope of disclosure (known as discovery in the United States) to which a Claimant alleging fraud may be entitled.
The first case, PSJC Commercial Bank Privatbank v Igor Valeryevich Kolomoisky and others  EWHC 482 (Ch), concerned the disclosure obligations of a number of Defendants pursuant to a worldwide freezing injunction. As is usual, in addition to its primary function of prohibiting the disposal of assets, the freezing injunction required the Defendants to disclose information regarding the “value, location and details” of assets. The Court interpreted “value, location and details” as encompassing information regarding the nature and extent of the assets, including the nature and extent of the Defendants’ interest in those assets. The Court was prepared to order disclosure to the extent that it would assist the Claimant in understanding what further measures were necessary to secure the assets in question and thereby police the freezing injunction.
In the second case, Benherst Finance Ltd and another v Jofa Ltd and others (unreported), the Claimants sought a disclosure order against third-party Respondents whom it was alleged had facilitated, or otherwise become involved in, a fraud perpetrated against the Claimants. The Claimants believed that the Respondents held documents which could evidence and further explain the fraud. The Court considered whether there was an arguable case of wrongdoing and whether disclosure of the documents was necessary (taking into account the potentially oppressive nature of a disclosure order against a third party) and held in the affirmative on both questions. It was also necessary, proportionate and in the interests of justice to grant the order sought.
Accurate, up-to-date and detailed information is essential to the success of any claim which advances allegations of fraud. The Courts require those alleging dishonesty to meet a high evidential threshold, which means that a comprehensive understanding of the facts is of singular importance. Furthermore, the ability of the Claimant to identify, secure and preserve assets for the purpose of any future enforcement proceedings will often depend upon the Claimant being able to obtain information from the perpetrators of the fraud and/or from third parties who (inadvertently or otherwise) have become involved in the wrongdoing.
These recent decisions illustrate the considerable powers available to the English Courts to order disclosure of documents and information as an interlocutory measure in fraud cases, and serve as examples of the circumstances in which those powers will be exercised.
Although the Court in PSJC Commercial Bank Privatbank did not order the Defendants to provide the totality of the disclosure sought by the Claimant, the case exemplifies the pragmatic approach which the Courts will apply in appropriate cases. Here, the Court was willing to interpret the disclosure provisions of a freezing injunction purposefully, so as to help ensure that the injunction achieved its intended effect. At the same time, the Court was careful to limit the scope of its order to include only the information which the Claimant required in order to police the injunction.
Benherst Finance Ltd involved the exercise of a different power by the Court. Here, the disclosure order was made not against the Defendants to the fraud claim, but against third parties (including a bank) that were alleged to have been involved, or inadvertently caught up, in the fraud. The Court’s jurisdiction to order third parties to give disclosure in aid of separate proceedings was established by the House of Lords in Norwich Pharmacal Co v Customs and Excise Commissioners  UKHL 6. In that case, disclosure was sought in order to identify the wrongdoer (and therefore the prospective Defendant), but the jurisdiction has since developed so that it may now be engaged for a range of purposes, including to obtain further information for the purpose of pleading a claim, in support of asset tracing and the preparation of proprietary claims, and the enforcement of judgments.