Norwich Pharmacal Orders Explained Part 2

Prerequisites of a Norwich Pharmacal Order

Before granting a Norwich Pharmacal Order NPO, the Court will need to be satisfied of the following:-

Evidence that the Respondent is involved in the wrongdoing.

1. There is much case law in this area as to what is meant by wrongdoing but as Lord Reid stated in the Norwich Pharmacal case itself, the Respondent cannot simply be an “innocent bystander”. There has to be some evidence that the Respondent (whether innocently or not) was mixed up in the wrongdoing.
2. An example of this is an application made against a telecommunications company for disclosure of the wrongdoers’ contact details in circumstances where it had not been possible to locate that particular individual.
3. It is even possible to apply for Norwich Pharmacal Orders against lawyers subject to issues of privilege. However, applications against entirely innocent lawyers are unlikely to be granted. Lawyers who, for example, who draft documentation which then enables the wrongdoer to facilitate a fraud could be held subject to an Norwich Pharmacal Order.

The Defendant will not later be called as a witness – the “mere witness” rule

As a general rule, Norwich Pharmacal Orders are not available against individuals who may at a later stage may be called as a witness in the proceedings. This is known as the “mere witness” rule. There are exceptions for example where an Applicant cannot identify the wrongdoer without the information being provided by the party subject to the Norwich Pharmacal Order application. 

• The interests of justice in making the Order

The Court will also consider the interests of justice when granting a Norwich Pharmacal Order. In so doing, it will balance the following factors when deciding whether to make an Order:-

1. The likely consequence if the Order were refused.
2. Whether there are any alternative remedies available.
3. The potential advantages to the Applicant versus the potential harm to the Respondent.
4. The nature of the compliance and whether it is likely to be onerous.

Developing area of the law

Norwich Pharmacal Orders are a developing area of the law and there is recent authority (as or writing) for the fact that a Norwich Pharmacal Order could not be challenged on the basis that the information sought might be available from other sources.

This recent case also made it clear that each application before the Court is to be determined on the circumstances of that particular case, taking into account  the size and resources of the Applicant, the urgency of its needs to obtain the information and any public interests in having the Applicant’s needs satisfied. 

Applying for a Norwich Pharmacal Orders

Much depends on whether the application is urgent or not.

If it is not urgent, then the first port of call is to write to the potential Respondent seeking voluntary disclosure of the information and setting out the reasons why it is sought.

If the Respondent is unable or unwilling to comply then an application to Court might be the only way forward. However seeking the cooperation of a Respondent even in circumstances where it cannot provide the information (for example due to privacy) can still be a useful approach as that information can be put before the Court when asking for an Norwich Pharmacal Order.

Often, for privilege, data protection or other reasons, the Respondent will invite the Applicant to apply for a Norwich Pharmacal Order so that the Respondent can be relieved of its obligations to withhold such information.  In such circumstances, as described above, the application should be relatively straightforward and the Applicant will have to provide for the Respondent’s costs in attending the proceedings and complying with the Norwich Pharmacal Order.

In terms of the procedure (both for urgent and non-urgent applications), an application must be supported by a detailed witness statement setting out the following:

1. The factual background arising to the application;
2. The nature of the claim sought by the Applicant;
3. The most likely cause of action against the wrongdoer;
4. Evidence that the mere witness rule will not be breached;
5. Evidence that the Respondent has been involved or mixed up in the wrongdoing (although not always necessary);
6. Specifying which documents or information is being sought and giving reasons for this;
7. Stating why the Respondent is believed to be in possession of the documents or information;
8. Stressing the Applicant’s intention to pursue the wrongdoer and not the Respondent.
9. If dishonesty is being alleged attention should be drawn to this.
10. That the application is in the interests of justice.
11. Any apparent basis on which the Respondent may seek to claim privilege against self-incrimination.
12. Any other relevant factors the Court may consider when exercising its discretion such as criminal activity etc.
13. Evidence in support of the undertaking in damages.

If the application is made without notice, then the need for urgency needs to be explained.

Administrators: Powers To Bring Fraudulent/Wrongful Trading Claims

Currently, going back to the introduction of the Insolvency Act 1986, claims for wrongful and fraudulent trading (the latter being a far more serious allegation) could be brought against company directors by liquidators appointed over the company.

The Bill proposes to amend this provision to also allow appointed Administrators to bring such claims against directors (and also shadow directors as per the changes referred to in the previous blogs), perhaps with a view to attempting to reduce the cost of two sets of insolvency proceedings.

This is an expanded power for recovery of company losses against directors and also provides for circumstances where a company faces administration and is immediately dissolved following conclusion of the administration proceedings. Ordinarily, if any such wrongful trading or fraudulent trading claim existed, the Administrator would need to convert the insolvency to a liquidation for these purposes, a potentially expensive step with no guaranteed promise of any recovery being made.

Additionally, Section 107 of the Bill provides that any recoveries on the basis of these (and other) pre-insolvency transactions would not be payable to any holder of a fixed or floating charge (which is usually the purpose of an Administrator’s appointment) and so this may ultimately lead to a scenario where an appointed liquidator may be required to investigate such matters but is unlikely to issue proceedings in light of the requirement to convert to a liquidation if monies are recovered.

A future blog will discuss the payment of prescribed part sums to unsecured creditors out of Administration, but Section 107 recoveries do not appear to relate to such sums.

Both Insolvency Practitioners, directors and banks (or any other secured creditor) should be fully aware of these changes. At Francis Wilks & Jones we can advise on such matters.