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Norwich Pharmacal Relief in the offshore world: the latest developments in Cayman and the BVI

In recent years, the offshore courts have shown a greater willingness to provide assistance to claimants or potential claimants by ordering third parties to disclose information about wrongdoing. Norwich Pharmacal relief, the equitable principle by which the courts make orders for discovery against innocent third parties who are “mixed up” in the wrongdoing of others, has been used by common law courts for decades. It has become an increasingly attractive tool in the offshore world to assist with tracing assets and enforcing judgments or arbitral awards, particularly against registered agents who hold potentially valuable information about entities incorporated offshore.

History

Norwich Pharmacal v Customs & Excise[1] was decided by the House of Lords some 45 years ago. The leading speech of Lord Reid in that case has been referred to in numerous decisions as the starting point from which the jurisdiction has developed. In particular:

… if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrongdoing he may incur no personal liability but comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers… justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.”

Traditionally, the three conditions to be satisfied for the court to exercise the power to order Norwich Pharmacal relief were:

  • A wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;
  • There must be a need to enable action to be brought against the ultimate wrongdoer; and
  • The person against whom the order is sought must: (a) be mixed up in so as to have facilitated the wrongdoing; and (b) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.

These principles have developed incrementally and there have been some inconsistencies and differences in respect of their application between courts in different jurisdictions. In general, however, and particularly in more recent times, the jurisdiction has been described in broader and more flexible terms.

In Ashworth Hospital[2], it was said “new situations are inevitably going to arise where it will be appropriate for the jurisdiction to be exercised where it has not been exercised previously. The limits which applied to its use in its infancy should not be allowed to stultify its use now that it has become a valuable and mature remedy.”

Developments to the traditional principles were summarised in the decision, Mitsui v Nexen Petroleum[3], where the English courts clarified that:

  1. The jurisdiction is not confined to circumstances where there has been tortious wrongdoing; it is also available where there has been contractual wrongdoing.
  2. The jurisdiction is not limited to cases where the identity of the wrongdoer is unknown. Relief can be ordered where the identity of the wrongdoer is known, but where the claimant requires disclosure of crucial information in order to be able to bring its claim or where the claimant requires a “missing piece of the jigsaw”.
  3. The party from whom information is sought need not be an innocent third party: he may be the wrongdoer himself.

In light of these developments, Norwich Pharmacal relief has been commonly used to identify a proper defendant to a claim or to obtain the information or evidence necessary to plead a claim. The cases emphasise the need for flexibility and discretion.

Cayman Islands

The Chief Justice of the Grand Court of the Cayman Islands described the jurisdiction to make Norwich Pharmacal orders as “broad, flexible and developing, and one in which a common sense non-technical approach would be taken.”

The description of the jurisdiction in this way led to two important findings in Braga v Equity Trust[4] which demonstrate a development of the traditional principles:

  1. There is no absolute requirement that a plaintiff must show that the Norwich Pharmacal relief is needed so that an action can be instituted.
  2. The relief is not limited to cases where the identity of the wrongdoer needs to be ascertained. The relief can be granted where the identity of the alleged wrongdoer is known to a plaintiff but what is needed is disclosure of information to prove the wrongdoing.

Recent cases in the Grand Court suggest that the trend for the Cayman Islands is for disclosure to be ordered.

  • In Discover Investment[5], the court endorsed the use of the Norwich Pharmacal jurisdiction to assist a potential victim of wrongdoing decide whether or not there is a sound basis for bringing proceedings.
  • Earlier this year, the Grand Court also confirmed the availability of Norwich Pharmacal relief to assist in the enforcement of foreign arbitral awards. In Arcelormittal v Essar[6], the court determined that the relief could be sought in respect of foreign wrongdoing (which included wilfully evading a foreign arbitral award or judgment), even in circumstances where no local enforcement proceedings had been commenced.

In these recent decisions, the Grand Court also considered important ancillary points, all of which further demonstrate the court’s willingness to assist, rather than obstruct, victims of wrongdoing.

  • In Discover Investment, the court considered, for the first time, the interrelation between the Norwich Pharmacal jurisdiction and the provisions of the Confidential Information Disclosure Law, 2016 (the “CIDL”). Prior to the enactment of that legislation, it had been a pre-requisite under the (now repealed) Confidential Relationships (Preservation) Law (the “CRPL”) that a further application to court by the respondent was necessary under the CRPL in order to permit the respondent to disclose confidential information to the applicant. The court clarified that there was no need for a separate application under the CIDL, because disclosure of information pursuant to a Norwich Pharmacal order could be in compliance with the law if it was done with a reasonable belief as to “wrongdoing” (a new exemption introduced by the CIDL).
  • This was further advanced in XYZ Limited[7], where the court confirmed that the need to seek directions (under CIDL) should arise only in exceptional circumstances, and the statutory defence to a breach of confidence action would be available in most cases where it appeared the Norwich Pharmacal order was properly made.
  • The Grand Court also recently considered the extent to which Norwich Pharmacal relief is available where a specific statutory regime exists for obtaining evidence in foreign proceedings. The Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 (“the Evidence Order”) confers jurisdiction on the court to respond to requests from foreign courts for evidence to be used in foreign proceedings which are pending or contemplated. England and the BVI have equivalent statutory regimes.

In Ramilos Trading[8], the English court determined that a party seeking evidence in England to use abroad had to use the statutory mechanism and the availability of that mechanism precluded Norwich Pharmacal relief. This decision (which has been applied in subsequent cases both on and offshore) has the potential ability to restrict the availability of the Norwich Pharmacal jurisdiction.

In Arcelormittal v Essar[9], the Grand Court accepted the reasoning in Ramilos and confirmed that if adequate relief can be obtained under the Evidence Order for obtaining evidence for use in foreign proceedings, the Cayman court’s equitable jurisdiction to grant corresponding Norwich Pharmacal relief falls away and is no longer available. However, on the facts, the court (making specific reference to the breadth and flexibility of the Norwich Pharmacal jurisdiction) determined that the statutory remedy did not displace the equitable jurisdiction to grant the relief. Specifically, the court found that the Evidence Order was not engaged because the relief sought included (a) the preservation of documents, and (b) information needed to enable the plaintiff to determine whether the suspected wrongdoing (transferring assets to the prejudice of the creditor) had in fact occurred and, if so, to seek appropriate relief.

British Virgin Islands

The Norwich Pharmacal jurisdiction has also been broadened in the BVI in recent years, demonstrating a move away from the BVI Commercial Court’s previous reluctance to grant such relief. In JSC BTA Bank v Fidelity[10], the Eastern Caribbean Court of Appeal found that a registered agent cannot, by virtue of its role in providing registered agent services to companies, , be considered a mere onlooker. The registered agent will usually be “mixed up” in the affairs of the principal company, and therefore the wrongdoing, for the purpose of a Norwich Pharmacal application.

The scope has since been expanded further:

  • In UVW v XYZ[11], the relief was held to be available post judgment in aid of enforcement. The court concluded that the relief was appropriate in circumstances where it was satisfied that a “general pattern of wilfully evasive conduct” sufficed as wrongdoing. It was not necessary for the applicant to show a particular transaction to demonstrate the concealment of assets to frustrate enforcement of judgment debts.
  • In Rui Manuel v Harneys[12], the court confirmed the jurisdiction was sufficiently flexible to allow for disclosure to be ordered for a purpose other than bringing legal proceedings – in this case, for the purposes of obtaining customer due diligence documents. The court found that the failure to provide the documentation demonstrated a pattern of wilful and evasive conduct that amounted to wrongdoing for the purposes of engaging the Norwich Pharmacal jurisdiction.
  • The BVI Commercial Court also recently considered the fundamental basis for the Norwich Pharmacal jurisdiction. In Q v R Corp[13], Wallbank J said that the jurisdiction “is not a mechanism whereby this Court assists a foreign court with obtaining evidence. That is not its primary purpose. Indeed any part of its purpose in fact.” Rather, he said, the focus of a Norwich Pharmacal application is to “enforce the duty in a person who has facilitated the wrongdoing to assist and provide information.” On the basis that the duty arises first, which then enables a victim to file an application for disclosure showing the Norwich Pharmacal requirements are fulfilled, the court was of the view that the narrow analysis adopted in Ramilos was wrong. For those reasons, Wallbank J indicated (as a preliminary view without having heard argument on it) that the BVI court would not follow Ramilos.

This is a particularly important development in the BVI, where the courts had been grappling with the extent to which Norwich Pharmacal relief was available in support of foreign proceedings where a statutory mechanism was available. If Wallbank J’s analysis is correct and followed in future cases, the statutory restriction would fall away (or not be engaged) because the duty of the person who has been mixed up in the wrongdoing to provide information to the victim would arise first. It is only after that duty arises, that the victim can approach the court for relief.

Conclusion

The latest developments offshore confirm that the Norwich Pharmacal jurisdiction is a powerful tool for victims of international fraud. The recent cases demonstrate that both the Cayman and BVI courts will not permit offshore structures to be used to misappropriate assets, and that a broad and flexible approach will be taken in ordering disclosure against innocent third parties, or wrongdoers themselves, to reveal information about the wrongdoing.

[1] Norwich Pharmacal Co. v Customs & Excise Commrs [1974] A.C. 133
[2] Ashworth Hospital Auth v MGN Ltd [2002] 1 WLR 2033
[3] Mitsui & Co. Ltd. V Nexen Petroleum UK Ltd. [2005] EWHC 625 (Ch)
[4] Braga v Equity Trust Company (Cayman) Limited and Four Others [2011 (1) CILR 402] [5] Discover Investment Company v Vietnam Holding Asset Management Limited & Saigon Asset Management Corporation (unreported, Kawaley J, 5 November 2018)
[6] Arcelormittal USA LLC v Essar Global Fund Limited & Essar Capital Limited (unreported, Kawaley J, 29 March 2019)
[7] In the matter between XYZ Ltd. and Genesis Trust & Corporate Services Ltd (unreported, Kawaley J, 12 February 2019)
[8] Ramilos Trading Limited v Buyanovsky [2016] EWHC 3175
[9] Arcelormittal USA LLC v Essar Global Fund Limited & Essar Capital Limited (unreported, Kawaley J, 29 March 2019),
[10] JSC BTA Bank v Fidelity Corporate Services Limited and others HCVAP 2016/035
[11] UVW v XYZ (A Registered Agent), (unreported, Wallbank J, 27 October 2016)
[12] Rui Manuel v Harneys Corporate Services BVIC HC (Com) 182 of 2017
[13] Q v R Corp (unreported, Wallbank, J, 13 December 2018)

Jane Hale

Senior Associate
+852 3708 3013
Guy Manning - Partner, Campbells Grand Cayman - Litigation, Insolvency & Restructuring

Guy Manning

Partner, Head of Litigation, Insolvency & Restructuring
+1 345 914 5868