When fraud practitioners are considering what tools they have available, freezing orders and search and seizure orders may come to mind. However, we have noticed a rise in Norwich Pharmacal orders (“NPO”) in fraud actions, including circumstances when freezing orders have been granted against parties unknown and an NPO has been used to identify the wrongdoer. An NPO can be an overlooked tool, that can be very effective in fraud actions and should be considered when the identity of the wrongdoer or the details of the fraudulent act may be unclear.

An NPO stemming from the case Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133, provides an option for a party to obtain information from a third-party who is innocently involved in an alleged wrongdoing, to aid in the pursuit of justice.

The role of third-party respondents in civil litigation has evolved significantly, particularly in fraud actions and the application of freezing orders. Freezing orders, previously known as Mareva injunctions, freeze assets and prevent a party from dissipating assets. Third-parties often face substantial challenges when served with a NPO, and must consider their response carefully.

This article considers the legal implications of an NPO from the perspective of third-party respondents in relation to fraud actions, focusing on the risks, obligations, and defences available to them.

Norwich Pharmacal Orders – what are they?

An NPO is an equitable remedy designed to aid the enforcement of legal rights, particularly in fraud or where a wrongdoer cannot be easily identified. An NPO can also be used alongside or before a freezing injunction to force the third party to disclose information about the wrongdoer they may have.   The order compels an innocent third party to disclose information they hold to assist the applicant in identifying the correct party to pursue.

For example, if a party suspects that fraud has occurred but lacks the necessary information about the identity of the wrongdoer or the nature of the fraudulent transaction, they may seek an NPO against a third party who may hold this information, such as a bank, email service provider, or domain host company. NPO’s are particularly widespread in cases which surround activity on the internet, where it is easier for wrongdoers to stay anonymous. We have seen a rise of NPO’s against domain and website hosts to obtain information relating to the details of those hiding behind websites to commit fraud.

To obtain an NPO, the claimant must meet a specific set of requirements:

  • There has to be a good arguable case and that some form of wrongdoing has taken place.
  • The respondent is likely to have the required information or documents.
  • There is no CPR provision that would provide the appropriate relief.
  • The respondent is likely to have relevant documents or information.
  • An NPO will not be granted if the applicant could have achieved the information via pre-action disclosure (CPR 31.16) or via order for disclosure against a person not a party (CPR 31.17).
  • The respondent is involved in the wrongdoing.
  • The order is necessary in the interests of justice and is not sought for an improper purpose.
  • The applicant is good for the cross-undertaking in damages.

How to make an NPO application

Depending on if proceedings have been commenced or not, will depend on how the application may be made for an NPO. It can be using a Part 8 claim form or under CPR 23. The CPR do not expressly state the procedure for seeking an NPO. However, the Chancery Guide has provided some guidance on this.

Paragraph 14.81 – 14.83 of the Chancery Guide states:

“Applications for disclosure pursuant to Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133, [1973] 2 All ER 943, HL should be made by Part 8 claim form unless made within existing proceedings when an application can be made under Part 23. An application under Part 23 is otherwise likely to be rejected.

14.82 The Norwich Pharmacal jurisdiction is an exceptional jurisdiction and careful scrutiny will be given both to the need for an order and to the scope of the order which is sought. In principle it should be no wider than is strictly necessary to enable the applicant to pursue its proposed claims.

14.83 Applications should be made in the first instance to a Master. The application will be referred to a HCJ if the complexity and/or importance of the application warrants it. If the applicant wishes to apply direct to a HCJ, release from a Master should be sought in accordance with the procedure at paragraph 14.20 above.”

Therefore, if there are no substantive proceedings commenced, then a Part 8 Claim form against the third-party respondent should be used. If proceedings have already been commenced, it is more appropriate to issue an application under CPR23. It is clear from the Chancery Guide that an NPO should only seek information to pursue proposed claims, and it should not be made any wider than that.

When making an application for an NPO, evidence must be provided (usually in the form of a witness statement). This must include the following information:

  1. Relevant background to the application
  2. If an application is made without notice, the reason for the without notice application.
  3. It must be shown that the mere witness rule will not be broken. The applicant must provide evidence that an action cannot be brought without the information sought.
  4. Show that the respondent has been involved with or mixed up in the wrongdoing.
  5. It must be clear what specific documents or information sought from the NPO.
  6. Show clearly why the applicant believes the respondent is the correct party.
  7. The purpose for which the order is sought.
  8. The applicant’s intention to pursue the wrongdoer and not to pursue the respondent.
  9. That disclosure is necessary and the likely consequence if the order is refused.
  10. Evidence in support of the undertaking in damages.
  11. Any matters which any party (either the respondent or the wrongdoer) might wish to bring to the attention of the court, pursuant to the applicant’s duty of full and frank disclosure.

NPO v Non-party disclosure

When considering making an application against a third party to obtain information or documents in order to assist or enable you to pursue a claim against a wrongdoer, there is the option of applying for an NPO or a non-party disclosure. Which option will depend on the information being sought.

Norwich Pharmacal Orders

An NPO can be used to obtain information and documents from a third-party respondent.

In some circumstances a prospective claimant will not be able to request documents under CPR 31.17 non-party disclosure as there are no active proceedings.

An example would be where a prospective claimant does not have the name of a prospective defendant.  In this case, they will be unable to issue proceedings.

In such circumstances, an NPO can be useful. In addition, an NPO can require a respondent to supply the applicant with information rather than just documents, which an order under CPR 31.17 cannot.

In Collier v Bennett [2020] EWHC 1884 (QB) paragraph 68 of the judgment states “One of the main purposes of the Norwich Pharmacal application was obtaining the identity of [the wrongdoer] by way of a requirement that [the respondent] simply answer that question. The PAD application cannot obtain answers to questions but seeks disclosure of documents.”

Therefore, an NPO should be utilised to request answers to questions/ information from a party who is not involved in the proceedings.

Non-party disclosure

Non-party disclosure is dealt with under CPR 31.17.

CPR 31.17 can be used to obtain documents from a party who is not involved in the proceedings.

For an application to be made under CPR 31.17, proceedings must have been commenced.

The court will only order disclosure where the documents sought are likely to support the case of the applicant or adversely affect the case of one of the other parties to the proceedings and disclosure is necessary in order to dispose fairly of the claim or to save costs (CPR 31.17(3)).

An order made under CPR 31.17 must:

  1. specify the documents or the classes of documents which the respondent must disclose; and
  2. require the respondent, when making disclosure, to specify any of those documents –
  3. a) which are no longer in his control; or
  4. b) in respect of which he claims a right or duty to withhold inspection.

If an application is made under CPR 31.17 it should be framed as an application for disclosure of documents, not information about the unknown wrongdoer.

Implications for Third-Party Respondents

Complying with an NPO can be burdensome and comes with many risks, including the risk of damage to their reputation and loss of business. Therefore, most third-party respondents may be willing to assist, but will insist upon a court order to protect themselves from any consequences arising from the potential wrongdoer.

Third-party respondents must consider a multitude of aspects when an NPO has been served on the third party, some of the key considerations a third party should think about are:

  • Confidentiality – One of the main concerns for third parties in the context of an NPO is the potential breach of confidentiality or data protection laws, such as GDPR in England and Wales. International businesses may need to be advising on the different privacy laws within different jurisdictions, this may cause conflict with their internal procedures and their own jurisdiction. In some instances, the third party may need to balance their legal obligations to preserve confidentiality with the requirements of the court order.
  • Reputation – Disclosing customer information may harm the relationship between the third party and its clients. This can cause repercussions, including loss of business or future litigation, which the third-party will be keen to avoid.
  • Potential defences – Third parties may attempt to resist the order by arguing that they do not meet the legal criteria for an NPO, or that compliance would breach certain laws (such as privacy or data protection). If the claimant has no legitimate reason for requesting the information or if the information requested is too broad or invasive, the third party may challenge the scope of the order.
  • Correct party – When the third-party is a complex corporate structure, it may be that the claimant pursues the wrong entity in the corporate structure, or it may be the wrong party completely. The third party will consider if someone in the corporate structure can assist, and if so, they may defend on the basis it is the wrong entity but would agree by consent for the correct party to be added and then provide the information with a court order.
  • Costs and Liability – Third parties can also be concerned about the potential costs of complying with an NPO. It is the usual course that the claimant will cover the third-party costs for complying with the order. This can ease the cost burden for the third-party respondent.

Conclusion

An NPO can be a useful option in fraud actions and can be overlooked by fraud practitioners. When pursuing a fraud action, it is worth keeping in mind that NPO’s can be at your disposal and a handy tool to have.

However, for third-party respondents it can be a challenging time for weighing up their duties and ensuring they minimise potential risks of further litigation and loss of reputation or business. It is important for third-party respondents to ensure they engage quickly and if they can comply, to ensure that there is a strongly worded court order to protect them from future risks.

Originally published in the Young Fraud Lawyers Association spring newsletter.