Bond dispute case proves Norwich Pharmacal order jurisdiction is limited

An NPO is a disclosure order available in England and Wales which allows information to be obtained from third parties who have become 'mixed up' in wrongdoing, helping victims to investigate, pursue those ultimately responsible and recover their losses.

NPOs are often used where a victim of wrongdoing does not know the identity of the wrongdoer but can point to a third party who has this information. They can also be used to trace assets and obtain other information needed by the victim to put together its case against the wrongdoer.

Andrew Herring, commercial litigation expert at Pinsent Masons, said Mr Justice Knowles’ decision to deny the application made by Luxembourg-based European Topsoho SARL (ETS) showed that, while jurisdiction for obtaining NPOs is “flexible” and the circumstances in which they may be sought “can be wide-ranging”, the jurisdiction “is not infinite.”

ETS had applied for such an order against the London branch of the Global Loan Agency Services (GLAS) and a company within the private equity firm Carlyle Group. GLAS acts as the trustee for €250m of bonds issued by ETS in 2018, which were secured by shares in a French fashion company called SMCP. When the bonds matured in September 2021, ETS sought Norwich Pharmacal disclosure from GLAS and the Carlyle Group amid allegations that Carlyle had conspired to take control of SMCP.

ETS sought the disclosure of two documents: a deed of indemnity and an associated fee letter signed by some of the bondholders with GLAS in December 2020. ETS said the documents would allow it to identify which Carlyle entities had engaged in the alleged conspiracy and whether GLAS had been aware of it.

But handing down his judgment at the High Court last month, Mr Justice Knowles denied the application. He said it was clear from the documents that only one Carlyle entity had provided the indemnity in December 2020, and that the firm’s solicitor had already confirmed that there was no term in the deed of indemnity that incentivised GLAS to engage in the alleged conspiracy.

The judge added that the ‘necessity’ test for Norwich Pharmacal relief would not be met were ETS to amend its case following the disclosure of the two documents and make fresh allegations against GLAS, the Carlyle Group or others. He also cited ETS’s previous agreement not to bring a claim about the validity of GLAS’s appointment as trustee, after a dispute over the matter was settled in June 2021.

Herring said: “This case is one of a number of recent examples where judges have exercised their discretion to refuse the court order being sought. Where litigation has already commenced, it is likely that the more standard disclosure applications under the Civil Procedure Rules will be more appropriate.”

“The consequence for an unsuccessful NPO applicant advancing an overly ambitious application is likely to be severe, with an indemnity costs order for the benefit of the respondent made against the unsuccessful applicant in this case,” he added.