The Court of Appeal in BTA Bank v Ablyazov1 decided that a registered agent will be innocently "mixed up" in wrongdoing for Norwich Pharmacal purposes where the BVI company is a vehicle for fraud. But what if it is not? Where do the boundaries lie? A recent unreported case in the BVI High Court provides some helpful guidance.
The basic facts of the case were that a BVI company ("BVI Co") had opened a chain of fashion shops in China. One of BVI Co's competitors, a French fashion chain operating in China through a joint venture ("JV"), suspected that BVI Co was controlled by or related to the principal individuals behind the French chain's Chinese JV partner. This would, it was alleged, have been a breach of non-compete covenants in the JV agreement between the French company and its Chinese JV partner. It is important to note that BVI Co itself was not party to the JV agreement and there was no suggestion that, by competing with the JV company, BVI Co itself was doing anything wrong. So, the case was a long way from the facts in BTA Bank v Ablyazov, where the BVI companies were themselves vehicles for the fraud.
The French company issued proceedings in Hong Kong against its JV partner for breach of the JV agreement, based on what it claimed to be compelling evidence that the relevant individuals were connected to BVI Co. Nevertheless, it then applied to the BVI Court seeking Norwich Pharmacal relief against BVI Co's registered agent, in order to obtain more evidence that the relevant individuals were connected with or controlled BVI Co, for use in the Hong Kong proceedings.
Three principal questions arose:
- Was the registered agent innocently "mixed up" in the wrongdoing in these circumstances, even though there was no suggestion that BVI Co itself was doing anything wrong?
- Was it "necessary" for the applicant to obtain the information by way of Norwich Pharmacal relief, in the sense (amongst other matters) that this was the only way by which they could realistically obtain it?
- Did it make a difference that the applicant was trying to obtain the information for use in evidence in proceedings that had already been commenced?
As to question 1, the Court found that the registered agent was "mixed up" in the wrongdoing in this case, despite there being no allegation that BVI Co had itself done anything wrong. The registered agent was not a "mere witness". This means that the categories of case in which a BVI registered agent may be found to be mixed up in wrongdoing is potentially far wider than the BTA Bank v Ablyazov type of case where the BVI company is a wrongdoer itself.
As to question 2, the French company did not satisfy the Court that it had exhausted other avenues before applying for Norwich Pharmacal relief. In particular, the French company had not taken the basic step of writing to BVI Co to ask it for information. More significantly, there was no evidence about what steps, if any, the French company had taken or might be able to take to obtain the relevant information in the course of the Hong Kong proceedings, for example by an application for specific disclosure. The Court dismissed the application for Norwich Pharmacal relief on this basis.
The practical lesson from this is that an applicant for Norwich Pharmacal relief must come prepared with evidence that shows that it has exhausted all practical steps open to it to obtain the information, such that Norwich Pharmacal relief is the only alternative. In this case, it raises the interesting question of whether the Court would have felt inclined to exercise this jurisdiction if the Hong Kong Court had heard, but refused, an application for specific disclosure.
In relation to the third question, the Court considered whether the fact that there is statutory provision for the taking of evidence in the BVI in relation to other proceedings2 should preclude the exercise of the Norwich Pharmacal jurisdiction where the stated purpose of the application was to obtain evidence for proceedings in a foreign court. The Court considered relatively recent authority from England3 which indicates that, at least in criminal proceedings and possibly in civil proceedings, the existence of such a statute ought to be seen by the Court as a bar to the grant of Norwich Pharmacal relief.
Given that the Court had already found that the applicant could not satisfy the necessity test, this question was left open for another day. However, shortly after the BVI decision described in this article, the Privy Council confirmed4, citing R (Omar), that the Norwich Pharmacal jurisdiction is "not a permissible mode of obtaining material for use in actual or anticipated litigation"5. This in no way restricts the original rationale behind the development of the jurisdiction which is, broadly, to identify wrongdoers so that they can be pursued. It simply makes clear that when you know who the wrongdoers are and have already sued, or decided to sue them, the jurisdiction is not available to bolster the evidence for use in those proceedings.
Foonotes
1. JSC BTA Bank v Fidelity Corporate Services Limited and others HCVAP 2010/035.
2. The Evidence (Proceedings in Foreign Jurisdictions) Ordinance 1988.
3. R (on the application of Omar) v Secretary of State for Foreign & Commonwealth Affairs [2012] EWHC 1737 (Admin).
4. In Singularis Holdings Limited v PricewaterhouseCoopers [2014] UKPC 36, which will be binding authority in the BVI in this respect. See our update titled Hanging by a Thread: the Re-modelling of Modified Universalism for further details on this case.
5. Ibid., judgments of Lord Sumption at paragraph 24 and Lord Clarke at paragraph 113.
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