Recent decisions on when third parties can be required to disclose information under Norwich Pharmacal jurisdiction

On two occasions in recent months the courts have considered the extent to which a third party must have been (innocently) involved in wrongdoing before it can be required to provide information under the court's Norwich Pharmacal jurisdiction.

The first decision restricts the scope for Norwich Pharmacal relief post-judgment in aid of execution: NML Capital Limited v Chapman Freeborn Holdings Ltd and others [2013] EWCA Civ 589. The Court of Appeal left open the question of whether Norwich Pharmacal orders can in fact be made post-judgment, but held that in any case an order would not be made simply on the basis that a third party had traded with someone who turned out to be a judgment debtor. The decision suggests that a third party would have to be involved in the wilful evasion of execution before an order could be made.

In the second decision, the High Court adopts a flexible approach to the question of what amounts to sufficient involvement at the pre-judgment stage: Various Claimants v News Group Newspapers Limited and others [2013] EWHC 2119 (Ch). In the court's view, it was not necessary for the third party to have participated in or facilitated the wrongdoing; the question was whether the third party was more than a "mere witness". 

Gary Milner-Moore and Maura McIntosh comment further on the decisions below. Gary is co-author of “Disclosure of Information: Norwich Pharmacal and Related Principles” which was published by Bloomsbury Professional at the end of April.

	Gary Milner-Moore Partner +44 20 7466 2454

NML Capital decision

Facts 

The applicant, NML, was a hedge fund that was seeking to enforce an English judgment in respect of Argentinian distressed bonds which it had purchased at a discount. The respondent, Chapman Freeborn, was an English company which operated as an aircraft charter broker and had entered into a charter agreement with the Office of the Argentinian President. According to press reports in Argentina, the charter agreement was entered into because the government had decided not to use the presidential plane for the president's Asian tour "out of fear of it being seized by hedge funds".

The application was for a Norwich Pharmacal order requiring Chapman Freeborn to disclose information about the bank accounts from which payments under the charter agreement might have been made, to assist NML in identifying assets against which it could pursue enforcement.

Cooke J in the Commercial Court accepted that he had jurisdiction to make a Norwich Pharmacal order, since Chapman Freeborn had become innocently caught up in an arrangement aimed at avoiding attachment of Argentina's assets to pay judgment debts. He also accepted that the Norwich Pharmacal jurisdiction was available post-judgment in aid of execution. However he refused relief on discretionary grounds, taking into account (among other factors) the damage to Chapman Freeborn's commercial interests that would arise from such an order.

NML appealed, arguing that the judge had exercised his discretion on a flawed basis. Chapman Freeborn sought to uphold the judgment not only on the basis that the judge had correctly exercised his discretion but also on grounds that:

• the Norwich Pharmacal jurisdiction does not apply to the enforcement of judgments; and
• Chapman Freeborn was not mixed up in any wrongdoing so as to give rise to the availability of Norwich Pharmacal relief.

Decision

The Court of Appeal (Tomlinson LJ, with whom Floyd and Jackson LJJ agreed) upheld the judge's refusal of Norwich Pharmacal relief, but on the ground that Chapman Freeborn was not mixed up in any wrongdoing in the necessary sense. Although the court recognised the need for flexibility in the development of the Norwich Pharmacal principle, Tomlinson LJ said it is clear that:

 "if the development of the Norwich Pharmacal jurisdiction is not to become wholly unprincipled, the third party must be involved in the furtherance of the transaction identified as the relevant wrongdoing".

It was therefore necessary to analyse precisely the alleged wrongdoing. It could not be said that trading by a judgment debtor which uses his assets for a purpose other than satisfying the judgment debt was in itself wrongdoing. That "would lead to a jurisdiction of absurd width" such that third parties would be exposed to applications for disclosure on the basis simply that they had traded with a person who turned out to have been a judgment debtor.

This, in the court's view, was completely different from a situation in which assets were removed from a jurisdiction for the purpose of insulating them from execution; such a transaction would arguably be wrongful for relevant purposes.

In any event, the court concluded that, on the facts, there was simply no connection between Chapman Freeborn's conduct and any transaction which might be characterised as relevant wrongdoing.  Thus the application failed.

The court did not have to consider whether Norwich Pharmacal relief is available post-judgment in aid of execution. It had been argued that the line of authorities following Mercantile Group (Europe) AG v Aiyela [1994] QB 366 should be seen as examples of relief granted in support of freezing injunctions, rather than being pure applications of Norwich Pharmacal principles.  Tomlinson LJ did not directly address this question, but expressed the view that if such relief is available it will only be "in very particular and restricted circumstances" and it could not be enough merely to trade with the judgment debtor. In his view, involvement in conduct which necessarily amounts to "wilful evasion of execution" should be a prerequisite, as anything short of that would have the potential to inhibit international trade.

It was also unnecessary to consider whether there was any basis on which to interfere with Cooke J's discretion. However, Tomlinson LJ commented that Cooke J was "obviously correct" to take into account Chapman Freeborn's commercial interests in considering whether to grant relief.

News Group Newspapers decision

Facts

Various parties applied for a Norwich Pharmacal order requiring the Metropolitan Police Service (MPS) to disclose information relating to alleged phone hacking activities of journalists engaged by News Group Newspapers (NGN). The information sought included evidence of who was involved in hacking and the extent of the hacking, which had been discovered as a result of police investigations.

MPS did not oppose the application. However, NGN argued that the court had no jurisdiction to make a Norwich Pharmacal order including on grounds that the MPS were not involved in the original wrongdoing.

Decision

The High Court (Mann J) held that the court did have jurisdiction to make the order, and that it was appropriate to do so as a matter of discretion.

Although a number of authorities had formulated the Norwich Pharmacal principle as applying where a person had (though no fault of his own) participated in or facilitated another's wrongdoing, the judge concluded that that was not a necessary element of the jurisdiction. The real question was whether on the facts the respondent was more than a "mere witness", or bystander, such that the Norwich Pharmacal jurisdiction was engaged. As the judge put it:

"It is true that the traditional formulation of the test is in [terms of participation or facilitation], but that is because those are the usual circumstances in which someone becomes something beyond a mere witness."

On the facts of this case, the court held that the MPS had been sufficiently engaged in the wrong. It was not like someone who happened to witness an offending act and thereby acquired relevant information. Its duty was to acquire information about the phone hacking; it had in fact provided a limited amount of information to victims of the phone hacking; it had indicated that it did so as a result of some sort of sense of obligation; and it had not resisted the application for Norwich Pharmacal relief. All of these factors combined meant that the MPS was not a "mere witness".

The court ordered disclosure of fairly broad categories of information.  It had been argued that this material was not necessary to enable the claimants to plead a case and thus should not be the subject of Norwich Pharmacalrelief but should be dealt with as a conventional disclosure matter once proceedings were underway.  The court rejected this submission, the judge concluding that "quite how it can be said that ... it would be better to start with a thinly pleaded action and wait for discovery is beyond me".

The court dismissed NGN's "floodgates" argument, i.e. that the court's decision would mean other public and private bodies that had an information-garnering function would be similarly susceptible to Norwich Pharmacal applications. The decision to grant relief was not based solely on the MPS's investigatory activities; the other factors were also significant. The court left open whether the investigatory activities in themselves would have represented a sufficient degree of involvement to justify the order.

Comment

These decisions are of interest in considering the extent to which a third party must be involved in relevant wrongdoing before it can be required to disclose information about that wrongdoing under the court's Norwich Pharmacal jurisdiction.

Together, the two decisions provide interesting illustrations of the limits of the requirement that the respondent must be involved in the underlying wrongdoing.  The Court of Appeal in NML Capital was clearly concerned to restrict the jurisdiction within manageable bounds, albeit in the context of post judgment enforcement, while the High Court decision in News Group Newspapers (seven weeks later) emphasised the flexible nature of the relief. Taken together, the cases demonstrate that a particular respondent's conduct must have some connection to the wrongdoing, though this need not be sufficient to amount to facilitation or participation. 

Following NML Capital, it seems unlikely that Norwich Pharmacal relief will be granted post-judgment save where the third party has been involved in furthering the transaction identified as the relevant wrongdoing, for example removing assets from the jurisdiction to evade execution.

The News Group Newspapers case is also an interesting example of relief extending to information about the wrongdoing, even where the applicants already had sufficient material to plead a case.  This accords with more recent authorities which have softened the former requirement for necessity.