In the course of a commercial dispute, it is not uncommon for parties to seek information and documents relating to bank accounts. However, obtaining pre-action discovery against a bank may not be a simple matter, as applicants must fulfil the discovery requirements without breaching banking secrecy rules.
The case of La Dolce Vita Fine Dining Co Ltd and another v Deutsche Bank AG and another  SGHCR 3 presents an example of a successful application for pre-action discovery against two banks. The decision provides a look at the framework which must be satisfied before such discovery is allowed.
The Plaintiff companies had acquired shares in a business owned by an individual (the “Founder”). They later alleged that the Founder had fraudulently manipulated accounting information to create a higher valuation for the business.
The Plaintiffs commenced arbitration proceedings in the China International Economic and Trade Arbitration Commission (“CIETAC”). They also commenced court proceedings in Hong Kong and Singapore, obtaining injunctions prohibiting the Founder from disposing of her assets.
The current application arose over concerns that the Founder had transferred funds from her Hong Kong bank account into Singapore bank accounts in the name of Success Elegant Trading Limited (“SE”) held with Deutsche Bank Aktiengesellschaft (“DB”) and Credit Suisse AG (“CS”). The Plaintiffs believed that the Founder was the owner of SE, and thus sought documents and information relating to the SE accounts in order to identify third parties for the potential commencement of proceedings against them, to ascertain the full nature of wrongdoing perpetrated by the Founder and to enable the Plaintiffs to plead their case properly, and/or to trace assets in support of their proprietary claim against the Founder and third parties.
The court thus had to determine:
- Whether the requirements for pre-action discovery had been satisfied; and
- Whether the exceptions to the banking secrecy rules had been satisfied.
The court has the power to order pre-action discovery against a non-party under O24 r6(5) of the Rules of Court, or under its inherent jurisdiction to make an equivalent Norwich Pharmacal order. The requirements are:
- The person holding the money must have been involved in the wrongdoing, whether innocently or otherwise;
- The applicant must show an arguable or prima facie case of wrongdoing against the person of whom information is sought; and
- The discovery order must be necessary, just and convenient.
The court also acknowledged that it had the jurisdiction to make an order (known as a “Banker Trust order”) to compel non-parties to provide documents to assist with the applicant’s tracing claim where there is a prima facie case of fraud.
In this case, the court found that the Plaintiffs had fulfilled the requirements for a Norwich Pharmacal/ Banker’s Trust order.
- There was evidence that the Founder intended to transfer funds out of the jurisdiction, and that she had actually transferred funds to SE’s CS account. It was further found to be probable that she had similarly transferred funds to SE’s DB account. This was sufficient to fulfil the requirement of involvement.
- There was a prima facie case of fraudulent misrepresentation against the Founder, which may entitle the Plaintiffs to rescind the sale agreements and obtain a proprietary claim against the Founder. The court held that it was not necessary for the Plaintiffs to prove actual wrongdoing or that there was an existing proprietary claim. Further, there was a prima facie case that SE’s CS and DB accounts were beneficially owned by the Founder, as SE at no point even challenged the freezing of its accounts under the injunction made against the Founder.
- It was necessary and just to order disclosure against the banks as the Plaintiffs would otherwise be unable to trace or the Founder’s funds.
The court also dealt with the question of whether it had the jurisdiction to make the discovery order in light of the fact that the main proceedings were not based in Singapore, but were CIETAC arbitrations. It held that this did not deny the court of jurisdiction under O24 r6(5) as the discovery proceedings themselves were commenced in Singapore, and it was likely that further proceedings would be commenced if the monies were indeed in SE’s Singapore bank accounts. Otherwise, the court would in any event have jurisdiction to make the relevant discovery orders under its inherent jurisdiction.
While banks are subject to banking secrecy under section 47 of the Banking Act, they are permitted to disclose documents in the circumstances stated in the Third Schedule of the Banking Act. This includes circumstances where disclosure is necessary to comply with an order of court pursuant to Part IV of the Evidence Act.
To comply with the requirements of the Evidence Act, specifically section 175 which provides for inspection of bankers’ books, it must be shown that:
- There have been separate legal proceedings commenced by the applicant; and
- The inspection is for the purposes of such proceedings.
On the facts, the court held that the Plaintiffs had complied with the requirements.
- The Plaintiffs had commenced CIETAC arbitrations, which fall within the definition of legal proceedings.
- The inspection would be for the purposes of the CIETAC proceedings. If the Plaintiffs successfully rescinded the agreements and obtained a proprietary remedy, the requested discovery would assist in tracing the Founder’s money.
Therefore, the court granted the discovery orders sought by the Plaintiffs, while also confining the discovery to documents which are necessary to trace the funds.
This judgment provides a detailed and useful guide on the criteria which must be fulfilled in an application for pre-action discovery against a bank. There are a number of hurdles to cross in obtaining such discovery, and the court’s analysis provides a greater clarity for future applications.