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Discovery Against The Non-Party

Nicolas Journeaux

Introduction

When will the Royal Court order someone to disclose confidential information to another in order to enable the applicant to formulate a civil claim?  Such a question may arise in numerous  different circumstances.  For example, this might be the question on the lips of the victim of fraud trying to recover stolen money which has passed through a bank account in Jersey where only the branch and account number are known to him.  It will also concern the manager of the wholly innocent bank. 

Because Jersey has based its answer to this question on English legal theory this article will compare the way in which the Jersey and English courts have dealt with the issue.  In this respect England and Jersey have sought to apply, interpret and develop the legal principle which takes its name from the House of Lords decision in Norwich Pharmacal Co. v Customs & Excise Commissioners[1].  The Jersey cases show the Royal Court has, rightly or wrongly, been prepared to go further than the English courts in granting such orders.  It may be helpful to begin with an explanation of the Norwich Pharmacal principle from that case.  

The basic rule and the search for the wrongdoer’s identity.

In Norwich Pharmacal the House of Lords reaffirmed the long established rule that no independent action for discovery (that is disclosure of information) might be brought against a person where no separate cause of action for some wrongdoing  could be alleged against him.  However the court said that there were certain exceptions.  In so stating the court was recognising the need to strike a balance between the obligation of the citizen to assist in the pursuit of a likely claim, and his right to be free from harassment from those on “fishing expeditions”, that is hunting for evidence of  wrongdoing not previously established.  

Tomes, Deputy Bailiff, in IBL Ltd. v Planet Financial and Legal Services Ltd. and another[2](the facts of which are discussed below)neatly summarised Norwich Pharmacal in the following terms :-

“That case involved a tortious infringement of the appellants’ patent.  The appellants tried to discover the identity of the importers of the infringing material in order to bring legal proceedings against them, but were unable to do so.  The respondents, in the exercise of their statutory duty, had obtained information relating to the goods including the names of the importers.  The appellants asked the respondents to supply them with these names but the respondents replied that they had no authority to do so.  The appellants then brought an action against the respondents claiming, inter alia, an order for discovery of the names of the importers.   Graham, J. granted the order but the Court of Appeal reversed his decision, holding (i) that since the appellants had no cause of action against the respondents they could not obtain an order for discovery against them and (ii) that in any event, since the names of the importers had been given to the respondents in confidence and under a statutory duty, the public interest required that they should not be compelled to disclose them.  On appeal, the House of Lords held that the appeal would be allowed and an order for discovery made for the following reasons: (a) although as a general rule no independent action for discovery would lie against a person against whom no reasonable cause of action could be alleged, or who was in the position of a mere witness in the strict sense, the rule did not apply where (i)without discovery of the information in the possession of the person against whom discovery was sought no action could be begun against the wrongdoer, and (ii) the person against whom discovery was sought had himself, albeit through no fault of his own, been involved in the wrongful acts of another so as to facilitate the wrongdoing.  In such circumstances, although he might have incurred no personal liability, he was under a duty to assist the person who had been wronged by giving him full information and disclosing the identity of the wrongdoer; and (b) even if the respondents had been right in treating the information relating to the identity of the importers as confidential, there was no statutory provision which prohibited the court from ordering discovery for the purpose of legal proceedings if the public interest in the proper administration of justice required it. In the circumstances the public interest in such confidentiality as might attach to the names and addresses of the importers was outweighed by the interests of justice in disclosure for the purpose of the appellants’ intended proceedings.”  (My emphasis added.)

In Norwich Pharmacal Lord Reid[3] explained that an objection to such discovery orders was that embodied in the “mere witness” rule.  That rule, he went on, was that “… information cannot be obtained by discovery from a person who will in due course be compellable to give that information either by oral testimony as a witness or on a subpoena duces tecum”.  He went on to explain that “… the foundation of the rule is the assumption that eventually the testimony will be available either in an action already in progress or in an action which will be brought later”.  As to the facts in Norwich Pharmacal, he said  that “… it appears to me to have no application to a case like the present case.  Here if the information in the possession of the respondents cannot be made available by discovery now, no action can ever be begun because the appellants do not know who are the wrongdoers who have infringed their patent.  So the appellants can never get the information”.  

Thus the sine qua non of the application of the principle is that without disclosure there will never be a trial in relation to which the person holding information could give evidence.  Thus, as a first condition, the principle requires the plaintiff to show a “missing link” in his knowledge of key factual ingredients which form the chain of facts necessary to be proved to make out a claim for a civil remedy.  In Norwich Pharmacal the missing link was the name of the wrongdoer who would be the defendant to the proposed action.

As can be seen from the explanation of Tomes, Deputy Bailiff, the House of Lords considered that the policy of striking the correct balance between the obligation of the citizen to assist in the pursuit of justice and his right to privacy was further promoted by imposing a second condition requiring the holder of the information to have been involved in the wrongful acts of others so as to facilitate the wrongdoing.

Norwich Pharmacal was applied in Jersey in the search for the identity of wrongdoers in Grupo Torras SA & another v Royal Bank of Scotland plc & others[4]. In the Order of Justice the plaintiffs sought an order on the basis that disclosure of information could identify further wrongdoers against whom the plaintiffs might have a cause of action.  However the judgment itself discloses a decision founded on the application of the court’s so called “equitable jurisdiction” to help find stolen money.  This is discussed below.

Grupo Torras is not the first case involving the application of the Norwich Pharmacal principle by the Royal Court.  Three particularly interesting applications of the principle preceded it.  The cases were  In Re Lucas[5], O’Brien v Jersey Evening Post Ltd[6]and IBL v Planet.  In all threecasesthe Royal Court applied the principle not to identify a proposed defendant but in aid of a search for evidence without which a claim or defence might not be made.

The search for crucial evidence.

In 1981 in In Re Lucas the Royal Court granted a disclosure order to Mr Lucas, the Assistant Rating Officer of the Parish of St Brelade, against the Constable of the parish.  The Constable was held to have been innocently mixed up in the wrongdoing alleged against Mr Lucas in defamation proceedings brought against him by another parish employee. Mr Lucas proposed to rely upon the documents sought from the Constable in order to make out a defence of justification in the defamation proceedings.  

The court accepted[7] that, if it were to refuse the order, the position would be that when the case came before the Royal Court for trial, the applicant would be entitled to summon the Constable to bring to court such documents as he requested, and that the court would then be asked for a delay in order that the documents could be examined.  Such a delay was not seen to be in the interests of justice.  It is submitted, with the benefit of hindsight and following later English caselaw, that the injustice caused by any such delay could have been cured by the method approved in the later case of Pacific Investments Ltd v Christensen and others[8] which applied Khanna v Lovell White Durrant[9], wherein the trial “started” early at some date prior to the real trial in order to receive the documentary evidence of a witness subject to a subpoena duces tecum.  Once the documents were received, the “trial” was adjourned to allow the documents to be examined in preparation for the full trial at a later date.

The decision in In Re Lucas offends the mere witness rule because there was no risk of there being no trial without disclosure.  A further problem posed by the judgment is that it applies the principle in aid of the defence.  A defence presupposes an existing claim and a trial: a further breach of the mere witness rule.

In the subsequent case of O’Brien v Jersey Evening Post Ltd, the plaintiff asserted that he was contemplating proceeding against his former employer for wrongful dismissal.  He asked the Royal Court for an order that the defendant disclose the name of an advertiser who had placed an advertisement in the newspaper, but whose identity had been hidden by the use of a box number. The plaintiff suspected (but did not know) that the advertisement related to the position from which he believed he had been wrongly dismissed.  In refusing the application, the Royal Court distinguished Lucas from O’Brien on the basis that Mr O’Brien did not rely on the advertisement alone to make out his case whereas Mr Lucas’ defence was dependent upon the evidence from the parish rating list. This seems to be a clear acknowledgement of the importance of the mere witness rule, which had not been fully acknowledged, it seems, in Lucas.  It seems likely that, had Mr O’Brien been relying exclusively on the advertisement as evidence to support his proposed claim, the court would have granted his application.

In 1990, in IBL v Planet, the Royal Court made a disclosure order against a company which carried on the business of company and trust administration and against its chairman (the “defendants”).   The plaintiffs had also brought an action in the English High Court against persons (who intervened in the Jersey proceedings) including the former chairman of the first plaintiff company.  In the English action the plaintiffs alleged that the chairman had acted in breach of his fiduciary duties to the first plaintiff by artificially inflating the profits of that company, with the effect that auditors and prospective purchasers were deceived as to the true value of the first plaintiff.  In the Jersey action the plaintiffs alleged that the defendants had been involved in the wrongful acts of the chairman so as to facilitate the wrongdoing, and were thus under a duty to assist the plaintiffs by giving them full information and disclosing all relevant documentation.  In his judgment Tomes, Deputy Bailiff,[10] approved In Re Lucas, which he described as “a robust application of Lord Reid’s principle in favour not of the plaintiff or potential plaintiff but in favour of the defence in a case where the third party was a compellable witness”.  The court made clear its view[11] that, on the basis of the decision in In Re Lucas, the fact that a witness was compellable both to testify and produce documents at the trial was  insufficient to prevent an order for pre-trial discovery being made against a non party.  Another bad day for the mere witness rule.  Clearly not a sound basis for the decision.

Significantly, the court rejected the contention of the defendants and intervenors that the purpose of the plaintiffs’ application was a “fishing expedition” [14].  In doing so the court accepted the analogy of counsel for the plaintiffs that if the plaintiff were next to a pond and had not the faintest idea whether the pond contained fish or not, then to cast his line would be to fish in a way  which is not allowed.   However, if he had seen someone put fish into the pond but did not know how many or what type, he would be entitled to cast his line into the pond to catch the fish.  This can be seen as an illustration of, and perhaps as a development of, the “missing link” concept.  In other words, as long as the court can see the shape of the likely claim, the court may order the disclosure of a class of documents in evidence which may be crucial to success.

However, the result in IBL v Planet was clearly influenced by the fact that the plaintiffs were also making a tracing claim in the English action against the intervenors alleging that they had acted in breach of their fiduciary duties to the first plaintiff by transferring sums due to the first plaintiff to a Jersey company administered by the first defendant named Malverda Trading Ltd.  This tracing element would generally justify wide ranging disclosure.  The first plaintiff claimed that, without further information as to the dealings by Malverda with funds due to the first plaintiff and its subsidiaries, it was unable to ascertain the extent of the loss allegedly caused to it.  We will come to the significance of this tracing aspect as a separate basis for such disclosure orders below.

The English application in the search for crucial evidence

In P v T Limited[15] the High Court made an order for discovery against an employer for disclosure of information or documents for the purpose of determining whether the plaintiff (“P”) had a cause of action against an unidentified third party.  P had been summarily dismissed for gross misconduct on the basis of serious allegations made by a third party.  The employer had refused to give P any details of the allegations.  P therefore brought the action seeking an order for disclosure from his former employers, not only of the identity of the person who had made the allegations, but also of documents evidencing precise details of the allegations made against him.  

The Court decided that P had a legitimate fear that his employment prospects had been adversely affected by the dismissal, and that he needed the information to bring proceedings against the person who supplied the information which he contended to be false in order to clear his name.

Scott VC distinguished the case from Norwich Pharmacal on the basis that in the latter case the plaintiff was able to demonstrate that tortious infringements of patent rights were being committed, but it did not know by whom.  However in this case the question was whether a tort had been committed against P. The court concluded that, without the disclosure sought, it was not possible for P to know for certain whether he did or did not have a viable cause of action against the informant.  Scott VC concluded that although the principles expressed in the Norwich Pharmacal case “have not previously been applied so far as I know to a case in which the question whether there has been a tort has not clearly been answered, they ought to be applicable in a case such as the present”[16].

In the more recent case of Axa Equity & Law Life Assurance Society plc & others v National Westminster Bank plc & others[17] the English Court of Appeal refused an application seeking discovery from non-parties of documents relating to the actions of accountants Coopers & Lybrand.  The accountants had acted as auditors of a company whose debenture loan stock the investors/plaintiffs had purchased three years before the company went into administrative receivership.  The investors sought discovery of documents relating to the preparation by Coopers & Lybrand of the company’s accounts and listing particulars for the purpose, it was said, of establishing whether a case could be brought against Coopers.   However, the investors had already issued a writ against Coopers seeking damages for negligence or breach of duty under section 150 of the Financial Services Act 1986 in connection with the audited accounts and listing particulars.  It was held that it was “plain that the investors have sufficient information to ensure that there is a trial of the case they seek to make against Coopers if they choose to make it.  It follows that the orders sought against the company and the banks would offend against the “mere witness” rule and for that (in the case of the banks additional) reason should be refused. [18]” The Court ofAppeal noted that the judge below (Rimer J) had accepted that P v T Ltd “might be regarded as going beyond any previous decision” but not as authority justifying the order sought from him.  Further, Morritt LJ considered the argument put by the investors of the hypothetical case where, although the identity of the wrongdoer is known, one fact crucial to the proper allegation of this liability is not, but is susceptible of ascertainment from a known document in the hands of a third party.  Because of the particularity, he thought that such an argument could not be criticised as “fishing”.  However, he did not feel it necessary to decide the point though he said he could see much force in it.  Counsel for the investors had postulated this narrow example on the footing that any order for disclosure would have to be as specific as to the documents to be produced as would a subpoena duces tecum.  This seems to be a more restrictive approach than that taken by the Royal Court in IBL v Planet where, perhaps not unfairly, approval was given to qualified fishing.

Dwelling upon the example considered by Morritt LJ; what if there is more than one crucial fact which may be susceptible of ascertainment from a number of documents, or even from the oral testimony of a non-party?  How many pieces of the jigsaw do you need before you are entitled to call for them all?  After all, in P v T Ltd two pieces were missing.  Disclosure was ordered of “any documents containing or evidencing the precise details of the allegations made against [Mr P] which formed the basis for his dismissal … and the identity of the complainant who made those allegations”.[19]

A quantitative assessment is, surely, the wrong way to look at it.  Whether an order should be made and its extent should, it is submitted, depend upon the important qualitative tests laid down by Lord Cross in Norwich Pharmacal.  The first, and, it is submitted, crucial test is the strength of the applicant’s case against the unknown alleged wrongdoer.[20]

It is submitted that “full disclosure” should  be limited in all cases to that likely to be sufficient  to provide the missing link and no more.[21]

P v T Ltd. was briefly considered in Re Murphy’s Settlements[22]  (the facts of which we will come to in a moment).  After reviewing the Norwich Pharmacal cases, Neuberger J explained that the cases demonstrate two different types of circumstance in which the court can order a defendant, who is not otherwise an appropriate party to proceedings, to identify the name and address of a third party.  The first type of case is where the defendant has, albeit quite innocently, become “mixed up” in the wrong doing of the proposed defendant and the plaintiff has a claim in respect of that alleged wrong doing.  This was the Norwich Pharmacal principle, called by Neuberger J “the discovery jurisdiction”.  Secondly, there is what is called the “equitable jurisdiction” as applied in cases such as A v C[23] and Bankers Trust Co v Shapira[24]. 

The equitable jurisdiction.

In A v C and in Bankers Trusts Co v Shapira  the English court invoked its equitable powers based on the Norwich Pharmacal principle to protect and preserve trust funds by requiring parties who were not defendants to the substantive actions to make full disclosure of facts which would enable funds described as the property of the plaintiff to be located and protected.  This development was on the footing that the “missing link” for a plaintiff looking for his fund is information held by the defendant.  This variation on the Norwich Pharmacal order as used for that purpose has come to be known as the Bankers Trust order.

Apart from the search for the identity of wrongdoers, this was the express reason for the granting of disclosure orders in Grupo Torras  v Royal Bank of Scotland and others, as well as one of the reasons given in IBL v Planet.

In Re Murphy’s Settlements the plaintiff sought disclosure of the names and addresses of the trustees of, inter alia, unidentified settlements which he believed had been created by his father, the defendant settlor, and which he thought might hold shares in the family company on trust for him.   In 1994 the plaintiff had issued separate proceedings claiming that he remained the beneficial owner of a third of the shares in the company and seeking an order that the shares be transferred to him.   The court held that the equitable jurisdiction of the court was exercisable even where there was no suggestion of wrongdoing on the part of the trustees and in favour of merely a potential beneficiary under a discretionary trust.  Neuberger J  in extending the principles of A v C said that “in so far as this case involves (as I accept that it does) extending the principle identified in A v C, I think that it is perhaps more a case of an existing child developing rather than a new child being born.  Equity, it has been said, is not to be presumed to be of an age beyond child bearing”[25].

Apart from the controversial In Re Lucas judgment, and, possibly, the wider scope of discovery orders in Jersey demonstrated in IBL v Planet, there seems to have been a convergence of English and Jersey caselaw from which we might arrive at the following common principles as to the basis upon which disclosure based upon Norwich Pharmacal principle should be ordered :-

a)         the discovery justification; firstly as to the identification of wrongdoers; and, secondly,  the circumscribed search for key evidence as in P v T  Ltd, O’Brien, and IBL v  Planet; and

b)         the equitable jurisdiction to protect proprietary interests seen in Bankers Trust v  Shapira, IBL v Planet, Grupo Torras; and as extended in a new form dealing with express trusts in Re Murphy’s Settlement.

There is a further important variation on the Norwich Pharmacal order which has been applied in England, and which might be applied in Jersey.  This is the post judgment jurisdiction demonstrated in the case of Mercantile Group (Europe) AG v  Aiyela & others[26].  In that case the High Court had entered judgment against the husband of the defendant.  Information was sought as to her financial circumstances and those of her husband.   Since there was prima facie evidence that the defendant was mixed up in his efforts to defeat execution of the judgment, it was held to be just and convenient to make a disclosure order against her.   The terms of the disclosure under appeal were wide ranging.   The defendant was ordered to provide detailed financial information, including particulars of companies or trusts which she or her husband had caused to be formed and the assets which they held[27].  The court  held[28] that in the case of discovery against a third party in aid of a post judgment Mareva injunction the mere witness rule can have no relevance, because the trial, if any, will already have taken place.   All that was necessary to found jurisdiction was that the third party should have become mixed up the transaction concerning which discovery was required.

Finally let us not confuse the Bankers Trust order with the disclosure order made to police a Mareva injunction[29] (in which a defendant’s assets are frozen).  This confusion can arise when such an order is granted in the  same Order of Justice as both a Norwich Pharmacal (discovery order to identify wrongdoers or evidence) and/or a Bankers Trust (protection of proprietary interest) order.  In relation to the latter, the court may often need to grant wide ranging disclosure to enable the plaintiff to trace his property.    On the other hand, the Mareva injunction and its related disclosure order simply seeks to prevent the defendant from hiding or disposing of his assetsto frustrate the execution of any final judgement.  In that respect, the scope of disclosure in order to police “freezing” injunctions is, usually, more limited, and has as its aim the identification and location of the assets of the defendant within the scope of the freezing order.[30]

Nicolas Journeaux is an advocate of the Royal Court of Jersey, and a partner of Olsens at 47 Esplanade, St Helier, Jersey, JE1 0BD and nicolas.journeaux@obdlaw.com