The Court of Appeal considered the rules regarding Norwich Pharmacal applications for non-party disclosure and the costs of the same. The decision concerning Natwest bank and a limited company, provides helpful guidance to parties when making applications for third party disclosure and understanding the importance of pre-action correspondence which may impact any order for costs.
Background to the Norwich Pharmacal application
The applicants, Benherst Finance Limited and Chestone Industry Holding invested in a property development which they believed to be fraudulent. In an attempt to recover the funds they considered were dishonestly appropriated, they sought information from National Westminster Bank plc (“the Bank”) and Jofa Limited, a building contractor (“the Company”) to assist them in bringing a claim.
Pre-action application for disclosure from Bank with prior agreement
Leggatt LJ considered the importance of the Bank’s duty of confidentiality and how it could not easily provide disclosure without a court order, at the risk of breaching confidentiality and therefore it was not unreasonable for the Bank to have required the applicants to seek a court order for disclosure.
The Bank had previously stated in pre-action correspondence that it would not oppose the order sought and the applicants had agreed to pay the Bank’s costs of complying with the order. The application was granted without the attendance of the Bank at the hearing.
This outcome highlights the benefit of engaging with the party prior to making an application and compliance with the pre-action protocols. An individual or organisation who is not a party to proceedings does not owe a legal duty to provide disclosure, therefore they may not be likely to provide the same without a court order, however steps can be taken for the parties to reach an agreement thereby facilitating the process.
Application for disclosure from Company who failed to engage in pre-action correspondence
Unlike the smooth process with the Bank above, the applicants sent pre-action correspondence to Jofa Limited, however the sole director of the company, Mr Farah failed to engage. The applicants therefore had no alternative but to apply to the Court for a Norwich Pharmacal Order without reaching any agreement as to costs.
Upon granting the application, the Judge ordered that the Company should pay a proportion of the applicants’ costs of applying for the order, taking into account that the Company had failed to engage in pre-action correspondence or comply with pre-action requests for disclosure.
On appeal, Leggatt LJ held that the long established principle for Norwich Pharmacal applications is that the applicant is liable to pay the respondent’s costs of the application which include the costs of providing the disclosure. This is based on the view that the respondent is not at fault and would not be able to recover its costs from the wrongdoer, which is what the applicant is able to do (Totalise plc v The Motley Fool Ltd).
In this case, the applicants argued that the application would not have been necessary had the Company engaged in pre-action correspondence and the justification for the order was plain. They argued that on this basis, the Company should contribute to the costs of their application.
The Court of Appeal disagreed holding that while there was no absolute rule, it would be difficult to award costs against a respondent who has required the applicant to satisfy the court that such an order is appropriate before providing disclosure. The respondent is not legally required to provide disclosure to the applicant without a court order. In this particular case, the disclosure sought included bank statements which the Court noted, the Company would also be entitled to declare confidential.
Costs of applications for Norwich Pharmacal Relief
This case highlights that a court will not impose a costs order on a respondent for requiring an applicant to obtain a formal court order before providing disclosure particularly where issues of confidentiality are involved in providing the disclosure sought.
Once a court order is obtained, the respondent is required to comply with the same and is entitled to reimbursement of its costs of compliance and providing the disclosure. Applicants are warned of this costs risk before pursuing such disclosure applications.
It is therefore important to seek legal advice on the disclosure being sought and approaching the non-party for the same, including complying with the pre-action protocol, which may facilitate seeking an order.
Instructing our specialist Litigation Lawyers in disclosure
We ensure that we provide the best possible outcome for our clients by conducting in depth investigation and research into the realistic prospects of a case before selecting the appropriate course of action in order to reduce time and expense. We can advise you from the outset and throughout the disclosure process to include disclosure from parties to the proceedings in addition to non parties.
Liability for costs is always an issue in litigation and based on our extensive litigation experience we provide our clients with as much strategic, practical as well as carefully considered legal advice in order to ensure minimum risk in respect of costs. Where appropriate we encourage the use of alternative dispute resolution (such as mediation and without prejudice negotiation) and our lawyer’s negotiation skills are first class. If early settlement at advantageous terms is not possible, we are extremely experienced and capable at navigating our clients through the litigation process.