I.F.T. S.A.L. Offshore [2020] EWHC 3125

On 19 November 2020 the High Court handed down judgment in the application of I.F.T. S.A.L. Offshore [2020] EWHC 3125. This application concerned an authorised push payment where the victim had sought to obtain information from the fraudsters bank about the accounts to which the money had been inadvertently transferred.

An application was made against the bank to obtain disclosure to allow the victim to pursue the unknown fraudsters. This was made under the Norwich Pharmacal and Bankers Trust jurisdictions.Where a party receives a Norwich Pharmacal Order they are required to provide certain documents or information specified in the court order to the applicant. This application is not generally available against a respondent who is likely to be a party to the potential proceedings.

Upon receipt of the disclosure it became apparent that there was a case against the bank but under the terms of the order the victim was precluded from using the disclosure provided to pursue a claim against the bank.

I.F.T .S.A.L. Offshore made an application to vary the terms of the order so that they could use the disclosure against the bank. This was resisted by the bank but was granted by the court.

Summary

  • F.T.S.A.L. Offshore was the victim of an authorised push payment scam.
  • They made an application to the court for the fraudsters bank to provide information relating to the account where the money had been transferred.
  • The provisions of the order stated that the application could not use the information obtained in order to make a claim against the respondent.
  • Upon receiving the information it became clear that there was a case against the bank and I.F.T .A.L. Offshore made a further application to vary the terms of the order so that they could use the information against the bank.
  • This was initially resisted by the bank but was granted by the court.
  • The court found that they would only be willing to grant permission where there were special circumstances which constitute a cogent reason for permitting collateral use” and there was a strong public interest.

Background

The Applicant I.F.T .S.A.L. Offshore, was the victim of an authorised push payment scam and had inadvertently transferred $249,721.44USD to an unknown recipient bank account held at Barclays.  It is understood that the bank account was specifically set up to receive these diverted payments.

The money was paid to Barclays by the Claimant’s French bank on 15 January 2019 and subsequently paid out by Barclays to an account in the United Arab Emirates.  When the Claimant discovered the fraud they notified their bank who informed Barclays of the fraud at 11:16 on 18 January 2019 and requested repayment of the money at 12:50 on that same day.

As a result of the disclosure obtained through the Norwich Pharmacal/Bankers Trust application, it became apparent that the monies had been paid out of the Barclays account in three tranches on the 16, 17 and 18 January with the last tranche being paid out just two hours before the notification of the fraud to Barclays.

When the application was made it was confirmed that the applicant had no intention of bringing proceedings against Barclay and an undertaking was given in the original order stating that the documentation could not be used for bringing proceedings against the respondent.

Upon review of the documentation received I.F.T. S.A.L. Offshore realised that they had a potential claim against Barclays and sought permission from the court to bring a claim against Barclays using the disclosure, or to put it another way, discharge the undertaking given.

Judgment

The bank resisted the application on various grounds one of which being that to grant permission would set a precedent for Norwich Pharmacal/Bankers Trust applicants to pursue the bank if their claim against the primary wrongdoers proved to be unsuccessful.  It was argued that to grant permission would encourage the bringing of speculative cases against banks by the victims of fraud causing banks further time and expense and also causing them to oppose Norwich Pharmacal Applications in the future.

The court did not find this argument persuasive and felt that this approach would increase costs and that a better way to discourage claims was to seek a strike out or summary judgment once they are issued.

In order to persuade the court to discharge the undertaking the onus is on the applicant to show that it has cogent and persuasive reasons to make use of the documents for this ‘collateral purpose’.  Reference was given to Tchenguiz v Director of the Serious Fraud Office [2014] WCA Civ 1409.  In this case Jackson LJ indicated that when considering giving permission under CPR 31.22(b) the following basic principles needed to be considered:

  1. The court will only grant permission where there are “special circumstances which constitute a cogent reason for permitting collateral use”; and
  2. There needs to be a strong public interest warranting releasing a party from the collateral purpose rule, which entails a fact sensitive exercise.

In this particular instance these two tests were deemed to have been met by the court and permission was given.

What does this mean?

The fact that the victim had no intention of pursuing the bank when the application was made does not necessarily preclude them from obtaining a variation to the undertaking at a later date provided the application meets the requirements of “special circumstances” and “a strong public interest” as set out above.

This is a welcome judgment for victims of fraud as there is another channel of recourse if it can be shown that there is a cogent and persuasive reason as to why the documents obtained should be used in this manner.

If you need assistance with investigating fraud including making a Norwich Pharmacal application, please contact one of the team or email us at hello@tenetlaw.co.uk

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