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Norwich Pharmacal orders in support of foreign proceedings - targeting wrongdoers in BVI and Cayman

27 March 2020

In March 2020 the BVI Commercial Court ("BVI Court") handed down the first written judgment on the subject of overseas applicants asking for third party disclosure orders ("Norwich Pharmacal" orders) against entities doing business in the Territory of the Virgin Islands ("BVI").

The decision by Wallbank J in K&S v Z&Z BVIHCM(COM) 2020/0016 ("K&S") confirmed that the BVI Court does have equitable jurisdiction to grant Norwich Pharmacal disclosure orders even though BVI has a statutory regime for obtaining evidence for use in foreign proceedings.

Why is this important?
Tools such as Norwich Pharmacal orders are very important to help identify and preserve assets subject to wrongdoing particularly in offshore jurisdictions. The decision in K&S will assist those trying to enforce foreign judgments to recover assets which alleged primary wrongdoers ("APWs") are holding wrongfully in BVI companies in order to hide and dissipate those assets in breach of an overseas court order.

What is a Norwich Pharmacal Order?
A Norwich Pharmacal order may be obtained where a person or entity (A), through no fault of their own, ends up helping someone (B) do something wrong to someone else (C). A’s action may not mean they incur any personal liability, but because they are "mixed up" in the wrongdoing, they come under an obligation to assist C by giving them "full information" and disclosing the identity of the wrongdoers B and certain (but limited) information regarding the nature of the wrongdoing. Norwich Pharmacal orders are regularly made in the BVI, especially against the registered agents of BVI Companies involved in wrongdoing. However, there has been some uncertainty as to their scope and application.

What was the uncertainty?
In Ramilos Trading Ltd v Buyanovsky [2016] EWHC 3175 (Comm), the English Commercial Court found that the equitable jurisdiction to provide assistance had been precluded by the introduction of English legislation containing a statutory regime which set out circumstances and procedures where courts could help obtain evidence to be used in overseas proceedings. BVI has equivalent legislation based on the English legislation, the Evidence (Proceedings in Foreign Jurisdictions) Act 1988 ("BVI Evidence Act"). This raised the question of whether BVI Courts have jurisdiction to grant Norwich Pharmacal orders in aid of foreign proceedings, or if instead an applicant should follow the letter of request procedure in the BVI Evidence Act (the "Ramilos issue").

What did the BVI Court decide?
In K&S, the BVI Court found that the BVI Act’s statutory mechanisms did not preclude Norwich Pharmacal orders in aid of foreign proceedings. Indeed, it found that if the BVI Court had to look to statute rather than equity as the source of its power to order disclosure of information or evidence in aid of proceedings in a foreign court, it could rely on section 24(1) of the BVI Supreme Court Act. If a Norwich Pharmacal order is seen as a type or form of injunction, then the Supreme Court Act.

‘empowers the court to grant injunctions ‘in all cases in which it appears to the Court or judge to be just or convenient…’

K&S is a pragmatic and reasoned decision of the BVI Court which confirms in a welcome written judgment the approach which the BVI Court has been taking in practice. In the K&S decision, the BVI Court only expressly gave reasons for granting the order in support of foreign proceedings, but it seems likely that it is also applicable to the alternative bases in the application (in support of arbitral proceedings and the BVI Court's freezing orders). The decision in K&S has subsequently been applied in a BVI case involving Bedell Cristin, and as far as we know, Wallbank J's order in K&S is not under appeal.

What is the position in Cayman?
In Arcelormittal USA LLC v Essar Global Fund Limited & ors FSD 2 of 2019 (IKJ) (currently under appeal), the Cayman Court considered whether "the two remedies [equitable and statutory] cover precisely the same ground". Kawaley J rejected the notion that the legislature had implicitly intended for the Evidence Order to completely oust the equitable Norwich Pharmacal jurisdiction. He said:

"I accept that where an applicant for Norwich Pharmacal relief can obtain adequate relief via the statutory route for obtaining evidence for use in foreign proceedings, this Court's equitable jurisdiction to grant corresponding relief falls away and is no longer available."

Kawaley J did not accept that the mere fact that that information was being sought for use in aid of foreign proceedings was an automatic ground for refusing relief. He was of the view that the statutory route could not be said to have been be engaged without a thorough analysis of the facts of each individual case.

The decision in Arcelormittal is under appeal. It will be interesting to see how the Cayman Court of Appeal deals with the Ramilos issue, whether it diverges from the English position as Kawaley J did at first instance, and to what extent it considers Wallbank J's decision in the BVI Case of K&S.

To read the full briefing click here.

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