Norwich Pharmacal Orders – Where’s my money?
Situated a short distance from the High Courts in central London, Saunders Law is well placed and versed in acting quickly in emergencies where money has been stolen or accidentally transferred to the wrong recipient.
Cybercrime is on the increase and unsuspecting busy companies are often targeted, and can be supplied with wrong accounting details for valued customers by hackers.
Suppliers' correspondence can be intercepted and the bank details changed, so that bank transfers, which appear legitimate, go to a criminal instead.
Sometimes money is simply stolen from accounts, without any pretence of a legitimate commercial transaction. Sometimes it can take a while to discover the wrongdoing.
Quite often, the party who takes or receives the money hides their identity and remains unknown, and the wronged party can be left scratching their head and wondering what they should do and who to come after.
Time is of essence
If the money has likely been stolen, regrettably time is of the essence as the money or assets are probably at high risk of being moved around further or mixed with or substituted with other assets by the wrongdoer.
Banks may refuse to help
Sometimes it is possible to trace the bank where the monies went, but the bank may refuse to release details on grounds of privacy or confidentiality, and it may be they genuinely need court permission to do so.
The good news is there are some legal remedies that can assist, to try and speed up the process.
In circumstances where the wrongdoer is hiding behind another party, for example a bank, or Customs and Excise, or a social media platform, which is refusing to help, it is possible to apply for a court order from a third party, to obtain documents or information which identify who the wrongdoer is. These are known as Norwich Pharmacal Orders, or NPOs.
When are NPOs appropriate
NPOs are held to be an exceptional remedy, and there are very specific requirements for them to be granted. The court may look to all the circumstances.
An NPO is not appropriate against the wrongdoer themselves, but can be brought against a third party who likely knows who the wrongdoer is, but who is refusing to assist or genuinely cannot release that information.
If the third party is likely themselves to be sued in the subsequent litigation, a NPO may not be allowed.
Overlap with other types of orders
NPOs do not serve itself to freeze assets or monies themselves, and a further freezing order may be necessary to freeze bank accounts.
Bankers Trust Order
There is a separate type of order known as a Bankers Trust Order, which is based in equity, (but is in effect a type of NPO against banks), often used where money has been transferred or intercepted fraudulently.
It may a Bankers Trust Order is necessary against a particular bank account, but a NPO may also be required as against some other assets at the same time and in conjunction.
Gagging / secrecy order
It may sensible to include a gagging or secrecy order against the innocent third party, from tipping off the wrongdoer that the wronged party is likely to find out who they are. Otherwise the wrongdoer has a heads up and head start.
It is possible to include a penal notice within a gagging order, outlining if this is breached, the party risks being imprisoned.
Do other court remedies exist?
If a party applies for a NPO, when other court remedies for disclosure are available, the NPO is likely to fail.
There are other mechanisms in litigation rules (the CPR), to get missing information from the wrongdoer themselves, even before litigation has started, or against a third party if litigation has already commenced, and these alternative processes should be used where available.
Notice to third party
Whether or not the wronged party needs to give notice to the third party of the NPO application depends on the apparent need for urgency or secrecy.
It is often better to give notice to the third party in advance unless it is critical not to, as it may be the third party does agree to provide information willingly. It may mean they are more willing to cooperate later on if they do first need court permission. Doing so, and if they agree, may allow the application to be decided on the papers, without the need for a hearing.
If urgency and secrecy are necessary, it is possible to apply for a NPO without notice. Early advice is sensible.
Need to disclose all material evidence
Whether or not a wronged party gives notice to the third party, the courts may expect the wronged party to disclose all material issues to the court, both those that support and work against their application, and may require this whether or not the third party has notice.
I.e. if the wronged party can foresee what defence the third party is likely to raise or already has raised, they are required to set this out to court. This might seem unfair, but is designed to try and prevent the third party suffering unnecessary harm.
Requirements for NPO
The wronged party needs to do several things to stand a chance of getting a NPO, including but not limited to:
- Show there are no other court procedures available
- Show why they think third party has the documents or information, and that this is likely
- Show the third party is not likely to be a defendant in the prospective litigation itself
- Show that the application is in interests of justice, and does not offend against public policy
- Disclose all material facts, both that work for and against the application to the court
- Set out a suitably narrow body of documents or information required
- Provide a promise to compensate the third party if the application is found to be wrongful, and prove funds are available to do so in case of need.
Undertaking in damages
The court requires a party applying for an NPO to provide an undertaking in damages, which is a promise to compensate the third party if the application turns out to be wrongful, and if it causes the third party loss. There may be no cap on the level of compensation payable if harm is caused.
The applicant also has to evidence they are good for the money. This may prevent impecunious parties from applying for NPOs.
Time is of the essence, and this can serve to increase legal costs. A considerable amount of work may be required by lawyers, to produce a witness statement and evidence on short notice, and front loads the costs, but if a NPO works it can reap rewards later on. There may be little other choice.
The wronged party is usually required to cover the costs of the third party in complying with the NPO, including copying charges. It may be the wronged party is able to later to recover the cost from the wrongdoer in subsequent litigation.
The party applying for a NPO should try and limit what information or documents they require to as narrow a pool as possible, ideally a specific piece of information, such as a particular bank account, or narrow list of people.
If the courts perceive the application is simply fishing for information, they may refuse to grant it.
Cross border disputes
If the information sought under a NPO is obtainable by making enquiries in other jurisdictions which sit more readily with the dispute, the English and Welsh courts may refuse to award a NPO.
Case law is mixed for NPOs made against third parties situated outside of the jurisdiction of England and Wales.
Some cases have permitted it, but courts are reluctant to interfere with other jurisdictions, as releasing information may offend laws within that jurisdiction.
This may be an issue trying to find an anonymous person on the internet via a NPO if the servers for the website are offshore.
If the wrongdoer and the wrongdoing are out of the jurisdiction, but the application is against a third party company in London, subject to English law, that may be less problematic.
Additional uses of NPO
Obtaining key documents
The most common use of NPO is to identify the potential wrongdoer, but NPOs can be used to obtain documents which may be critical to bring a claim against the wrongdoers.
Means of investigation
The courts have shown some trends of permitting NPOs more widely if it appears equitable to do so, and if it will likely help a wronged party to ascertain whether or not there is a good case against the wrongdoer, potentially even if not all tests are strictly met.
NPOs can be used to track someone making defamatory statements online that is hiding behind an anonymous ID.
NPOs can serve as a precursor to tracing claims, to see where money or assets have gone.
NPOs have been successful in employment claims, where someone has been fired after an anonymous third party has made allegations to the employer about the employee. If the employer refuses to set out who made the allegations or what they were, an NPO can potentially compel disclosure. However, if the employer is likely to be joined to any subsequent litigation however, this may cause the NPO to fail.
Enforcement of judgment
NPOs can be helpful in enforcing judgment, where the court orders the losing party to pay, but they are refusing to cooperate. An NPO may assist to trace assets.
Defence of complying with NPO
There are some, but limited defences for third party, to excuse them complying with a NPO.
In cases where NPOs are brought to try and reveal journalists' sources, these have been refused or challenged on human rights grounds, and not being in public policy, and which the courts have upheld.
If the information is sensitive to national security, it may be protected.
Bizarrely, if the act of disclosing the document sought against a third party under a NPO, risks criminal prosecution being brought against the third party, they may legitimately be able to refuse to assist. This defence would not likely include instances of fraud.
If the NPO is sought tactically simply to try and strengthen someone's position in litigation, it may be refused (i.e. if the information would be helpful, but is not absolutely crucial to the case). Similarly if the information is solely trying to discredit a witness to litigation, that would like fail.
Privacy / confidentiality concerns
A third party may say the information is not disclosable due to privacy, confidentiality or GDPR concerns, or by virtue of it being privileged between professional advisers, and these objections may be genuine and prove preventative, but is subject potentially to judicial interpretation.
Risk for both sides
The courts may also consider as an overarching principle, what are the prospective risks of awarding the NPO for the third party, compared to the risks to the wronged party if they don't: if the risk to the wronged party is much greater, this may assist.
In short, Norwich Pharmacal Orders can be a powerful means of obtaining the identity of a wrongdoer, where no other avenues of investigation exist. The information may greatly assist in tracing assets, identifying the wrongdoer, and help risk assess whether to bring a claim against them.
However, they do require careful handling, and a measured assessment.
If you are affected by any of the issues above, please contact Saunders Law on 0203 811 4850 to see how we can help.