Norwich Pharmacal orders: the right medicine for third party disclosure of information and documents in the Cayman Islands

Published: 4 Aug 2022

Type: Insight

Primary Contact

Sebastian Said

Partner: Cayman Islands

T +1 345 814 2766
E [email protected]

Susan Fallan

Counsel: Cayman Islands

T +1 345 814 2767
E [email protected]

Sebastian Said, Susan Fallan

A Norwich Pharmacal order (NPO) is a disclosure order available in the Cayman Islands to compel a third party who has been somehow ‘mixed up’ in wrongdoing to disclose certain information and/or documents to help the applicant identify and/or pursue a potential defendant to future proceedings, whether those proceedings are to take place in the Cayman Islands or overseas.

Obtaining a NPO can be a very effective tool in obtaining crucial information held in the Cayman Islands that is needed to pursue a claim against the ultimate wrongdoer anywhere in the world, which the applicant would struggle to obtain by other means.

A recent helpful decision

In Hangzhou Lingqin Investment v Harneys Liquidation Services (Cayman) Ltd and another (unreported, 7 June 2022, FSD 65 of 2022 (MRHJ)), the Grand Court has again shown its willingness to grant NPOs in the right circumstances, on this occasion against a Cayman based registered office and corporate filing agent (the defendants).

In Hangzhou Lingqin, plans were afoot to file proceedings in Hong Kong and the Cayman Islands against the ultimate wrongdoer: a Cayman Islands company referred to as Tongfang SPC (the Company). The Company was to be sued over a substantial unpaid debt, when it was discovered that it had been put into voluntary liquidation without notice to the creditor, and without paying the debt.

The applicant applied for a NPO against the defendants to obtain corporate documents and information held about the Company in the Cayman Islands, for use in applying to restore the Company to the Cayman corporate registry, a potential consequent winding up order, and/or for bringing proceedings against certain parties before any court or tribunal (including arbitration) in any jurisdiction.

The defendants’ position was that their involvement in the Company’s voluntary liquidation was limited to their roles as registered office and filing agent respectively. The defendants required the applicant to seek a NPO as some of the information required was confidential, and took a neutral stance in the application.

The Court granted the application, while providing a useful reminder of the criteria for obtaining a NPO in the Cayman Islands.

Criteria for obtaining an NPO

There must be a good arguable case that a wrong has been carried out
In Hangzhou Lingqin, this test was met because the Court was satisfied that the Company and its voluntary liquidator had been aware of the outstanding debt (having received a letter of demand), yet proceeded anyway to dissolve the Company without giving notice to the applicant as a creditor, and without paying the debt due.
The order must be necessary to enable action to be brought against the ultimate wrongdoer
As part of this consideration, the Court re-confirmed that “necessity” means there must be no other straightforward, available, or any, means of finding out information that is central to the applicant’s ability to obtain relief for proven or suspected wrongdoing.
The Hangzhou Lingqin application was found to plainly meet this test, as the applicant had no other means of obtaining the corporate information and documents in question.
The defendant must (a) be mixed up in the wrongdoing; and (b) able (or likely to be able) to provide the information needed to enable the ultimate wrongdoer to be sued
In Hangzhou Lingqin the defendants did not dispute that they had been mixed up in the wrongdoing.
As it turned out, the first defendant had not played any role in the liquidation at all, but had erroneously been advertised as voluntary liquidator in the Cayman Islands Gazette.
The second defendant had been involved in the voluntary liquidation, but only to the extent of its role as registered office and filing agent, which required submitting certain documents relevant to the liquidation to the Cayman Registrar of Companies.
The defendants also accepted that they would be able to provide, at least in part, the information the applicant was requesting.

Outcome

In Hangzhou Lingqin, the parties were able to agree the terms of a draft order to ensure that the disclosure required was proportionate and limited to relevant material only.

The Court then made its order on those terms, obliging the defendants to disclose, among other things, the books and records of the Company, all documents relating to the outstanding debt (including correspondence between the Company and the voluntary liquidator), various reports, certificates and other records.

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