1

All England Law Reports/1980/Volume 2 /A and another v C and others - [1980] 2 All ER 347

[1980] 2 All ER 347

A and another v C and others

QUEEN'S BENCH DIVISION

ROBERT GOFF J

17, 18 MARCH 1980

Injunction - Interlocutory - Danger that defendant may transfer assets out of jurisdiction - Discovery or
interrogatory in aid of injunction - Discovery of amounts standing in defendant's bank account - Inspection of
bankers' books - Whether power to order discovery or interrogatories relating to defendant's bank account -
Banker's Books Evidence Act 1879, s 7 - Supreme Court of Judicature (Consolidation) Act 1925, s 45(1) -
RSC Ord 24, r 7(1), Ord 26, r 1(1).

Equity - Tracing property - Plaintiff seeking to trace money paid under mistake of fact induced by fraud -
Power to make interlocutory order for disclosure of bankers' books to show amount standing in defendant's
account.

The plaintiffs alleged that they had been defrauded by the first five defendants, all of whom were resident
outside the jurisdiction. They issued a writ on 12 March 1980 claiming against the first five defendants
damages amounting to £5·437m and against the sixth defendant, a bank, a tracing order in respect of
£383,872 which, it was alleged, the second plaintiff had paid, under a mistake of fact induced by fraud, into
an account at the bank. The account, although in the name of a third party, was allegedly operated by the
first defendant. On the same day, prior to the issue of the writ, the plaintiffs applied ex parte and were
granted by the judge (i) a Mareva injunction against the first five defendants limited to £1·435m and an
injunction against all six defendants restraining them from disposing of the £383,872 and (ii) orders which, by
para 3, required disclosure by the defendants of the sums standing in accounts in their names or in the third
party's name at the bank and, by para 5, required disclosure of the facts within the defendants' knowledge as
to the whereabouts of the £383,872 if that sum was no longer in the third party's account. On 14 March
another judge suspended the orders in paras 3 and 5. The plaintiffs applied to the first judge to have the
injunctions continued and the orders renewed, although in respect of the order in para 5 the relief applied for
against the bank was limited to the discovery of documents. The judge continued the injunctions and then
considered the application to have the orders renewed. The defendants contended that the court ought not to
make orders for discovery or interrogatories in aid of a Mareva injunction because to do so would
unjustifiably widen the Mareva jurisdiction.

Held - (1) The court had power to make an order for discovery of documents or for interrogatories in aid of a
Mareva injunction where it was necessary to do so for the proper and effective exercise of the Mareva
jurisdiction, eg where the defendant had a number of bank accounts or there were several defendants and
such orders were necessary to protect the defendant's bankers. Moreover, there was power under RSC Ord
24, r 7(1)a and Ord 26, r 1(1)b to make an order for discovery or interrogatories at such an early stage of
proceedings; alternatively, there was power under s 45(1) c of the Supreme
 3

a
Rule 7(1) provides: 'Subject to rule 8, the Court may at any time, on the application of any party to a cause or matter, make
an order requiring any other party to make an affidavit stating whether any document specified or described in the application or
any class of document so specified or described is, or has at any time been, in his possession, custody or power, and if not then
in his possession, custody or power when he parted with it and what has become of it.'
b
Rule 1(1) provides: 'A party to any cause or matter may apply to the Court for an order--(a) giving him leave to serve on any
other party interrogatories relating to any matter in question between the applicant and that other party in the cause or matter,
and (b) requiring that other party to answer the interrogatories on affidavit within such period as may be specified in the order.'
c
Section 45(1) is set out at p 351 j, post
[1980] 2 All ER 347 at 348

Court of Judicature (Consolidation) Act 1925 to make such orders in aid of a Mareva injunction; and, where
the asset in respect of which the injunction was sought was a bank account, the court could, if it held that the
plaintiff was entitled to discovery of the balance of the account, exercise its power under s 7 d of the Bankers'
Books Evidence Act 1879 to order that the plaintiff be at liberty to inspect and take copies of entries in the
bankers' books (see p 351 e to p 352 d, post).

d
Section 7 provides: 'On the application of any party to a legal proceeding a court or judge may order that such party be at
liberty to inspect and take copies of any entries in a banker's book for any of the purposes of such proceedings. An order under
this section may be made either with or without summoning the bank or any other party, and shall be served on the bank three
clear days before the same is to be obeyed, unless the court or judge otherwise directs.'

(2) Where the remedy sought by a plaintiff was the tracing of property which in equity belonged to him, the
court had power not only to grant an interlocutory injunction restraining disposal of the property but also to
make an interlocutory order directed to ascertaining the whereabouts of the property. In particular, the court
could order a bank (whether or not it was a party to the proceedings) to give discovery of documents
regarding a bank account of a defendant who was alleged to have defrauded the plaintiff of his property, and
could order the defendant and his employees or directors to answer interrogatories (see p 351 a b, post).

(3) The order in para 3 requiring disclosure of the amounts in the defendants' bank accounts was necessary
for the purposes of both the Mareva injunction and the tracing claim. In regard to the Mareva injunction the
order was necessary because there were several defendants and the injunction could be restricted to a
particular account if it was known that in that account there was an unencumbered amount exceeding the
plaintiffs' claim. In regard to the tracing claim it was essential for the second plaintiff to discover the
whereabouts of the £383,872 and it was therefore desirable that it should know the amount standing in the
third party's account at the bank. The order could properly be made under s 7 of the 1879 Act and would, in
the circumstances, be renewed (see p 352 f to h, post).

(4) The order in para 5 requiring disclosure of the whereabouts of the £383,872 was also justified for the
purpose of assisting the plaintiffs to ascertain the whereabouts of that sum and would therefore be renewed
in its modified form (see p 352 h j, post).

Notes

For injunctions restraining the disposition of property, see 24 Halsbury's Laws (4th Edn) para 1018.

For the Bankers' Books Evidence Act 1879, s 7, see 12 Halsbury's Statutes (3rd Edn) 849.
 4

For the Supreme Court of Judicature (Consolidation) Act 1925, s 45, see 25 ibid 717.

Cases referred to in judgment

London and County Securities Ltd v Caplan (26 May 1978, unreported).

Mediterranea Reffineria Siciliana Petroli SpA v Mabanaft GmbH [1978] Court of Appeal Transcript 816.

Action

By a writ issued on 12 March 1980 the plaintiffs claimed against the first five defendants damages
for conspiracy to defraud and for deceit, and against them and the sixth defendant, a bank, a
declaration that sums amounting to £383,872·4344 paid by the second plaintiff to the first
defendant's account at the bank in the name of a third party belonged to the second plaintiff as
money paid by them under a mistake of fact, and an order against the first and sixth defendants for
repayment of the money. On 12 March, before the issue of the writ, the plaintiffs, on an ex parte
application, obtained from Robert Goff J an order which granted them a Mareva injunction limited to
£1·435m against the first five defendants, a further interlocutory injunction against all six
[1980] 2 All ER 347 at 349

defendants restraining them from disposing of the £383,872·4344 or any lesser sum in accounts
with the sixth defendant and orders requiring the defendants to disclose to the plaintiffs the sums at
present standing in accounts with the sixth defendant in the names of any of the first five
defendants or in the name of the third party and, if the £383,872·4344 was no longer in the third
party's account, disclose all facts known to each of the defendants as to the whereabouts of that
sum. On 14 March Peter Pain J, on the first five defendants' ex parte application, suspended the
orders but not the injunctions. The plaintiffs applied to Robert Goff J for continuation of the
injunctions granted by him until after the trial of the action or further order and for the renewal in a
modified form of the orders suspended by Peter Pain J. The facts are set out in the judgment.

MarkWaller QC and R Siberry for the plaintiffs.

A Ward for the first five defendants.

M Dean for the sixth defendant.

18 March 1980. The following judgment was delivered.

ROBERT GOFF J.

There is before the court an application by the two plaintiffs to continue certain junctions, and to renew
certain other interlocutory orders, against the defendants. The matter was heard in chambers; and I have
given that part of my judgment which deals with the continuation of the injunctions. However I have, with the
consent of the parties, decided to deliver the remainder of my judgment in open court, since it involves
matters of general interest affecting in particular the grant of Mareva injunctions in this court; but having
regard to the nature of the case, I direct that in any report of the case the parties shall not be identified by
name and that the two plaintiffs shall be referred to respectively as A and B, and the six defendants shall be
referred to respectively as C, D, E, F, G and H.
 5

The factual background of the case is that the plaintiffs claim to be the victims of a fraud which they say was
master-minded by the first defendant, but which implicated the second, third, fourth and fifth defendants.
They have placed before the court affidavit evidence which constitutes prima facie evidence that a fraud has
been committed; though whether such a fraud may hereafter be proved depends on the effect of the
evidence given at the trial of the action. In their writ, they are claiming against the first five defendants
damages for conspiracy to defraud and damages for deceit, and against the fifth defendant damages for
breach of warranty, in a sum of £5·437m. They are also claiming to trace a sum of £383,872·4344 which they
say was paid, under a mistake of fact induced by the fraud, into an account at the sixth defendant's bank.
There is no allegation of malpractice against the sixth defendant, simply a claim to trace money into its hands
which the plaintiffs say is their property in equity.

The writ was issued on 12 March 1980. On the same day, before the issue of the writ, the plaintiffs obtained
from me ex parte an order which provided (inter alia) for (1) a Mareva injunction against the first five
defendants limited to £1·435m, (2) an injunction restraining all the defendants from disposing of the sum of
£383,872·4344 or any lesser sum standing to the credit of accounts in the name of any of the first five
defendants or of another party (which I shall refer to as WL) at the sixth defendant's bank, (3) an order
requiring all the defendants to disclose to the plaintiffs forthwith the sums at present standing in accounts in
the names of any of the first five defendants or WL at the sixth defendant's bank, and (5) an order that if the
sum of £383,872.44 is no longer in WL's account at the sixth defendant's bank each defendant disclose all
facts within their knowledge as to the present whereabouts of that sum.

On the afternoon of Friday, 14 March Peter Pain J, on an ex parte application by the first five defendants,
suspended the orders under 3 and 5 above.

The plaintiffs applied to me yesterday in chambers to continue the injunctions under 1 and 2 above, and to
renew (though in a slightly modified form) the orders under 3 and 5. I have already decided to continue the
two injunctions, for a period of 14 days, the first injunction (which is a straightforward Mareva injunction)
against the first, fourth and fifth defendants, subject to an increased limit of £5·437m, and the second
injunction
[1980] 2 All ER 347 at 350

(which is concerned with the property which the plaintiffs are seeking to trace) against the first, fourth, fifth
and sixth defendants, likewise for a period of 14 days. There remains however the question whether I should
restore paras 3 and 5 of the order. It is because this part of the application raises novel questions of law, that
I have decided to give my judgment in respect of this part of the application in open court.

The argument before me was in fact concentrated on 3 and 5, and on the court's power to make orders of
this kind in the circumstances of the present case. In this connection, it is to be borne in mind that the
injunction and associated relief were being sought in respect of two separate matters: (a) the second
plaintiff's proprietary claim to the sum of £383,872·4344 paid by them to the sixth defendant for the account
of WL, and (b) both plaintiffs' claim to a Mareva injunction against the first five defendants, all of whom are
resident outside the jurisdiction. Of course, the basis of these two forms of injunctive relief is different, the
first being granted to restrain the disposal of assets of which the second plaintiffs claim to be the beneficial
owners, and the second being granted to prevent a possible abuse, viz the abuse of foreign parties causing
assets to be removed from the jurisdiction in order to avoid the risk of having to satisfy any judgment which
may be entered against them in pending proceedings in this country.

I take first the proprietary claim. In such cases, there is good authority that the court may make orders with
the purpose of ascertaining the whereabouts of the missing trust fund. Thus in London and County Securities
Ltd v Caplan (26 May 1978, unreported) in which the plaintiffs alleged that the defendant had defrauded
them of about £5m, Templeman J made an order restraining the defendant from disposing or otherwise
dealing with his assets, and in addition ordered that a certain bank (not a party to the action) by its servants
 6

or agents should forthwith produce or cause to be produced to the plaintiffs all statements or other
documents relating to any account or accounts maintained by or on behalf of the defendant and cause the
plaintiffs or their agents to take copies thereof. This latter order was made with the purpose of enabling the
plaintiffs to trace property acquired by the defendant and so take steps to seize that property if it derived from
their assets. The case was described by the judge as--

'... a case of interlocutory relief granted to preserve the assets which are the subject of the litigation and are the subject
of criminal proceedings. It is a case where, unless effective relief is granted, justice may well become impossible
because the evidence and the fruits of crime and fraud may disappear.'

Again in Mediterranea Reffineria Siciliana Petroli SpA v Mabanaft GmbH [1978] Court of Appeal Transcript
816, another case which was concerned with tracing the product of the plaintiff's assets, viz a cargo of oil,
delivery of which was alleged to have been obtained without the production of bills of lading, Mocatta J
granted an injunction restraining the disposal of the proceeds of sale of the cargo; but he also made a
sweeping order requiring directors and an employee of the defendant company to make full disclosure of
certain specified facts on affidavit, and directed that one of them should file an affidavit of documents. His
order was upheld by the Court of Appeal. Lord Denning MR described Mocatta J's order as 'a very good and
effective order so as to ascertain where the money has gone'. Templeman LJ said:
'It is a strong order but the plaintiff's case is that there is a trust fund of $3,500,000. This has disappeared; and the
gentlemen against whom orders are sought may be able to give information as to where it is and who is in charge of it.
A court of equity has never hesitated to use the strongest powers to protect and preserve a trust fund in interlocutory
proceedings on the basis that, if the trust fund disappears by the time the action comes to trial, equity will have been
invoked in vain. That is why orders of this sort were made long before the recent orders for discovery, and they are at
the heart of the Chancery Division's concern, and it is the concern of any court of equity, to see that the stable door is
locked before the horse has gone.'

[1980] 2 All ER 347 at 351

Now these cases provide ample authority that, in an action in which the plaintiff seeks to trace property which
in equity belongs to him, the court not only has jurisdiction to grant an injunction restraining the disposal of
that property; it may in addition, at the interlocutory stages of the action, make orders designed to ascertain
the whereabouts of that property. In particular, it may order a bank (whether or not party to the proceedings)
to give discovery of documents in relation to the bank account of a defendant who is alleged to have
defrauded the plaintiff of his assets; and it may make orders for interrogatories to be answered by the
defendants or their employees or directors.

I turn next to the Mareva jurisdiction. Here, I have not the benefit of authority to guide me, no doubt because
the jurisdiction is still in its infancy, though it is (in the Commercial Court at least) very much a thriving infant.
In these circumstances I must fall back on principle; and, as I have already stated, it is plain from the
authorities that the principle underlying the jurisdiction is the prevention of an abuse, the abuse of a foreign
resident causing assets to be removed from the jurisdiction in order to avoid the risk of having to satisfy any
judgment which may be entered against him in pending proceedings in this country.

There is no doubt that this jurisdiction is in a process of development, and that it is still in the course of
throwing up problems which have yet to be solved. The customary form of order is in a very wide form; it
restrains the defendant from removing from the jurisdiction or otherwise disposing of or dealing with any of
his assets within the jurisdiction including and in particular [a certain specified asset] save in so far as such
assets do not exceed in value the sum of [the plaintiff's claim]. The order is made in a wide form in the first
instance; but it may later be qualified, for example, to enable the defendant to make payments bona fide in
the ordinary course of business, or (in the case of a personal defendant) to provide for his own living
expenses. It is invariably supported by an undertaking by the plaintiff in damages.
 7

Now the exercise of this jurisdiction may lead to many problems. The defendant may have more than one
asset within the jurisdiction, for example, he may have a number of bank accounts. The plainiff does not
know how much, if anything, is in any of them; nor does each of the defendant's bankers know what is in the
other accounts. Without information about the state of each account it is difficult, if not impossible, to operate
the Mareva jurisdiction properly; for example, if each banker prevents any drawing from his account to the
limit of the sum claimed, the defendant will be treated oppressively, and the plaintiff may be held liable on his
undertaking in damages. Again, there may be a single claim against a number of defendant; in that event the
same difficulties may arise. Furthermore, the very generality of the order creates difficulty for the defendant's
bankers, who may for example be unaware of the existence of other assets of the defendant within the
jurisdiction; indeed, if a more specific order is possible, it may give much needed protection for the
defendant's bankers, who are after all simply the innocent holders of one form of the defendant's assets.

Considerations such as these point, in my judgment, to the conclusion that the court should, where
necessary, exercise its powers to order discovery or interrogatories in order to ensure that the Mareva
jurisdiction is properly exercised and thereby to secure its objective which is, as I have described, the
prevention of abuse. That the court has power to order discovery of particular documents and interrogatories
at an early stage of proceedings is, I think, not in doubt. I refer in particular to RSC Ord 24, r 7(1) in relation
to discovery of documents, and to the general terms of RSC Ord 26, r 1(1) in relation to interrogatories. If
necessary, however, the court's power to make an appropriate order in aid of a Mareva injunction can be
derived from the power to make mandatory orders conferred on the court by s 45 of the Supreme Court of
Judicature (Consolidation) Act 1925 itself, sub-s(1) of which provides:
'The High Court may grant a mandamus or an injunction or appoint a receiver by an interlocutory order in all cases in
which it appears to the court to be just or convenient so to do.'

[1980] 2 All ER 347 at 352

If the court were to deny itself the right to exercise this jurisdiction in aid of the Mareva injunction, it could
prevent the Mareva jurisdiction from being effective to achieve its purpose; for a plaintiff, faced with lack of
knowledge of the value of a specified asset of a particular defendant, may, in the examples I have given, be
deterred from giving his undertaking in damages with the result that he is unable to obtain the relief. In any
event, in the examples I have given, the information may be necessary in the interests of justice to ensure
that the jurisdiction is properly exercised.

I am not suggesting that it would be right to make general use of this power to enable the plaintiff to discover
whether the defendant has assets here. In order to establish his right to relief at all, the plaintiff has at least to
give grounds for believing that the defendant has assets here; but, having established that, it may be
necessary for the proper exercise of the jurisdiction that the defendant should be required to give discovery,
or provide information, about a particular asset, though, obviously, if the asset is worth more than the
plaintiff's claim, he need do no more than establish that fact. But, if the asset is a bank balance, the court, if it
holds that the plaintiff is entitled to discovery in respect of that balance, may exercise its power under s 7 of
the Bankers' Books Evidence Act 1879, and order that the plaintiff be at liberty to inspect and take copies of
any entries in the bankers' books.

For the first five defendants, counsel argued that to order discovery of documents or interrogatories in aid of
the Mareva jurisdiction would constitute an unacceptable widening of that jurisdiction. It would constitute, he
submitted, an unwarranted invasion of the defendant's private affairs; it would really be taking what was no
more than a first step in the process of execution; and it should be for the defendant to decide, not for the
court to order, whether such information should be made available, especially as the defendant will in many
cases have an incentive to reveal the true state of his affairs, particularly if the injunction is operating to
freeze more of his assets than is necessary to protect the plaintiff's claim. But these considerations are not,
in my judgment, sufficient to outweigh the desirability of making an order for discovery or interrogatories in
circumstances where it is necessary to do so for the proper exercise of the Mareva jurisdiction.
 8

Turning to the present case, I can see no reason for not imposing an order under para 3 of my original order.
Such an order is, in my judgment, necessary both for the purposes of the tracing claim and the Mareva
injunction. So far as the tracing claim is concerned, it is essential that the second plaintiff discover the
whereabouts of the sum of £383,872·4344 which it claims to be its property in equity; for that purpose it is
desirable that it should know what sum is now standing in the account at the sixth defendant's bank in the
name of WL. Furthermore, for the purposes of the Mareva jurisdiction, since this is a case involving a number
of defendants, it is necessary for the proper exercise of that jurisdiction to know how much money is standing
in the identified bank account; if, for example, that account should be unencumbered and in excess of the
plaintiffs' claim, the Mareva injunction can be restricted to that amount. The order against the sixth defendant
can properly be made, in these circumstances, under s 7 of the Bankers' Books Evidence Act 1879.

The relief asked for under para 5 of my original order is now, as against the sixth defendant, limited to an
order for discovery of documents. So limited, the order is, in my judgment, fully justified for the purpose of
assisting the plaintiffs in ascertaining the whereabouts of the money which they claim to be their property. I
would however be grateful for the assistance of counsel as to the precise form of the order under these two
heads.

Order accordingly.

Solicitors: Herbert Smith & Co (for the plaintiffs); Lorenz & Jones (for the first five defendants); Bryan Lincoln
& Co (for the sixth defendant).

K Mydeen Esq Barrister.