New Guidance: Norwich Pharmacal Orders and Registered Agents

Mr Justice Wallbank of the Commercial Division of the High Court of Justice in the British Virgin Islands recently provided guidance on the Court’s Norwich Pharmacal jurisdiction in the case of CIF v (1) DLG and (2) GIY BVIHCM2023/0050 (29 February 2024). The judgment answers four questions dealing with procedural and costs aspects of Norwich Pharmacal orders that should be of particular interest to Registered Agents in the jurisdiction because they clarify what notice should be given to Registered Agents and what costs Registered Agents should be looking to recover from applicants for Norwich Pharmacal relief.

Background

The applicant was a judgment creditor for a final sum of money rendered by an overseas Court. The defendant had a history of dishonesty and there was evidence he had evaded various legal obligations. The applicant had good reason to believe that the defendant was behind certain BVI companies for which the respondents were the Registered Agents, and it sought documents and information from the Registered Agents to confirm this. The Court made the orders sought.

The application was made without notice to the respondent (ex parte) and sought a ‘seal and gag’ order at the same time as a Norwich Pharmacal order (made together, often referred to a “wrap-up” order), and an interim costs cap of US$4,000. A Norwich Pharmacal order is an order that allows information to be obtained from third parties who have knowingly or unknowingly become involved in a wrongdoing. A seal and gag order prevents a respondent from communicating anything about a Norwich Pharmacal application to any other person before the application has been determined. The order is intended to prevent a suspected wrongdoer from taking any steps to frustrate the purpose of the Norwich Pharmacal application; it also directs the Registrar of the Supreme Court to seal the Court file.

Questions and Answers

QUESTION 1: When is it appropriate for an applicant to seek a ‘wrap-up’ order (an ex parte seal and gag together with a Norwich Pharmacal Order) against a BVI Registered Agent?

The Court acknowledged that there had been a lot of debate in the jurisdiction as to whether an application for a seal and gag order should be heard before or at the same time as an application for a Norwich Pharmacal order. Debate had arisen because of a fundamental principle of natural justice that says that a party should have a right to be heard before the Court makes an order that affects him.

The Court considered the Court Rules that circumscribe the circumstances in which a party’s right to be heard could be departed from in ex parte proceedings and noted it could only be departed from where there was good reason and only for a maximum period of twenty-eight days, and only then if (i) the matter was so urgent that no notice was possible; or (ii) giving notice would defeat the purpose of the application.

Accordingly, the Court found that it was only appropriate for an applicant to seek a ‘wrap-up’ order against a BVI Registered Agent in cases of urgency, “in the sense of literally no time to give notice of the Norwich Pharmacal” application. The Court said that such cases would be rare and exceptional but where the urgency arose from the genuine need for urgent disclosure, and where the Court Rules are satisfied, the wrap-up procedure could be justified.

QUESTION 2: When is it appropriate for an applicant to seek Norwich Pharmacal relief without notice to a respondent registered agent?

Based on the forgoing analysis, the Court similarly held that it would only be appropriate to seek Norwich Pharmacal relief without notice to a Registered Agent in cases of urgency, “in the sense of literally no time to give notice of the Norwich Pharmacal application”. Again, the Court said that such cases would be rare and exceptional. Outside cases of urgency, the Court held that it would not be appropriate for an applicant to seek Norwich Pharmacal relief without notice to a responded even though this was technically possible. Where there is no urgency, the Court said that a two-step approach (of applying first for an ex parte seal and gag order to be determined on the papers or at a hearing, and then to apply on notice for Norwich Pharmacal relief) is to be preferred because this upholds and applies the fundamental principle of natural justice of a party’s right to be heard.

QUESTION 3: What is the entitlement of a respondent to a Norwich Pharmacal application to his costs of compliance and of the application?

The Court considered the possible costs consequences of having two hearings (the first for the seal and gag application and the second for the Norwich Pharmacal application), acknowledging that it was in the interests of the applicant to avoid a multiplication of hearings in respect of which he would (a) have to incur legal costs and fees for his own legal representation; and (b) in principle have to indemnify the respondent for its costs of having to comply with any orders that were made. The Court said that in most cases the first hearing could be avoided by the applicant asking the Court to determine the seal and gag application on the papers, with the Norwich Pharmacal application being dealt with at an oral hearing.

The Court accepted that this could leave the applicant “vulnerable to an unpredictable costs liability” given its undertaking to pay a respondent’s reasonable costs associated with an occasioned by the both applications, but it sought to deal with this possible issue by saying that (a) the applicants and respondents to such applications could reach an understanding on costs with their respective lawyers; (b) the Court could put an order in place dealing with costs that “prevents unpleasant surprises” (see below for cost capping orders); and (c) by applying “robust costs assessment orders…to relieve an applicant from having to meet unreasonably high legal costs incurred by a respondent”. As regards (c), the Court noted the following:

• The Norwich Pharmacal jurisdiction is well-established and the degree of legal assistance that may have been necessary in the “early years of the remedy…should no longer be necessary”, suggesting that Registered Agents should already understand how such orders work and not incur costs unnecessarily.
• There is no reason why a Registered Agent respondent should not reach out to the applicant in an effort to reach an agreement that keeps costs within agreed bounds.
• That Registered Agents and their legal representatives should be “taking a neutral stance in relation to the substantive merits of an application” and it would in principle be unreasonable for them to “forge ahead in isolation with preparation of his case as is if this were ordinary commercial adversary proceedings”.
• That it would be “in principle be unreasonable for an applicant to have to pay costs swollen by reason of the registered agent’s files being disorganised”.
• As part of a robust costs assessment, a Registered Agent “should expect to have to justify with particularity time and expense incurred and, if appropriate, by disclosing written work product (redacted to preserve privilege and confidentiality where strictly necessary).”

Consistent with the established case law, the Court remained firmly of the view that the applicant for relief would be responsible for the full costs of the application and any expenses incurred by the respondent Registered Agent in providing the requested information. This is subject to the caveat of reasonableness, which will include the points set out above, together with any other Court orders.

QUESTION 4: Whether it is proper for an applicant seeking Norwich Pharmacal relief, on an ex parte basis, also to seek an order limiting the total costs that may be recovered by the respondent for complying with the order?

The Court acknowledged that the advent of the interim costs cap was relatively recent. The interim costs cap wording is inserted into the ex parte Norwich Pharmacal order limiting, in the first instance, the amount of costs a Registered Agent is allowed to incur complying with the Norwich Pharmacal order from the date the ex parte order is made until the return date. The Court said that it would typically expect to see a cap of between US£2,000 and US£3,000.

The Court took the opportunity to clarify what it considered to be a misconception about costs caps. The misconception is that an interim costs cap derogates from the well-established principle that an applicant for a Norwich Pharmacal order should indemnify the respondent for its reasonable costs of having to deal with the Norwich Pharmacal application. The Court said this was not the case and that the interim costs cap acted as a control mechanism to prevent the applicant’s costs becoming excessive, reminding respondents that they do not have a blank cheque from the applicant, and should not be “profiteering from other people’s money.” It made the further point that if the respondent considers that the interim costs cap is insufficient, it can seek to negotiate a higher cap with the applicant or apply to the Court on the return date to have the cap varied.

So, to answer the fourth question, the Court found that yes, it is appropriate for an applicant for a Norwich Pharmacal application to ask the Court for an interim costs cap, provided the limitation on costs is (a) imposed as an interim measure pending the return date; (b) expressed to be subject to the respondent’s right to apply to vary or discharge the ex parte order; and (c) reasonably sufficient to enable the Registered Agent to consider the application and comply with the order.