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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Miles Smith Broking Ltd v Barclays Bank Plc  EWHC 3338 (Ch) (15 December 2017)
Cite as:  EWHC 3338 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Fetter Lane, London, EC4A 1NL
B e f o r e :
| MILES SMITH BROKING LIMITED
|- and -
|BARCLAYS BANK PLC
Hearing date: 6 December 2017
Crown Copyright ©
Factual background and basis for the claim
Applicable legal principles
"11. The three conditions to be satisfied for the court to exercise its power to grant Norwich Pharmacal relief were set out by Lightman J in Mitsui v Nexen Petroleum  EWHC 625 (Ch);  3 All ER 511 at  (in a passage approved in the notes to Civil Procedure 2016 at 31.18.4 and, albeit without attribution, in Hollander: Documentary Evidence 12th edition at [4–01]):
'The three conditions to be satisfied for the court to exercise the power to order Norwich Pharmacal relief are:
i) a wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;
ii) there must be the need for an order to enable action to be brought against the ultimate wrongdoer; and
iii) the person against whom the order is sought must: (a) be mixed up in so as to have facilitated the wrongdoing; and (b) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.'"
Wrong carried out or arguably carried out by wrongdoer
Need for order
"The second condition for relief is that the disclosure sought must be necessary in order to enable the applicant to bring legal proceedings or seek other legitimate redress for the wrongdoing and in considering the question of necessity, the cases emphasise the need for flexibility and discretion. This is clear from  of the speech of Lord Woolf CJ in Ashworth:
"The Norwich Pharmacal jurisdiction is an exceptional one and one that is only exercised by the courts when they are satisfied it is necessary that it should be exercised. New situations are inevitably going to arise where it would be appropriate for the jurisdiction to be exercised where it has not been exercised previously. The limits which apply to its use in its infancy should not be allowed to stultify its use now that it has become a valuable and mature remedy. That new circumstances for its appropriate use will continue to arise as illustrated by the decision of Sir Richard Scott V-C in P v T Ltd  1 WLR 1309 where relief was granted because it was necessary in the interests of justice, albeit that the claimant was not able to identify without discovery what would be the appropriate cause of action."
To the same effect is a passage in the judgment of Lord Kerr in The Rugby Football Union v Consolidated Information Services Limited (formerly Viagogo Limited) (in liquidation)  UKSC 55;  1 WLR 3333 at ."
"A somewhat different jurisdiction was considered and invoked by Robert Goff J. in A. v. C. (Note)  Q.B. 956, where the plaintiff had obtained a Mareva injunction pursuant to an ex parte application, and the court was considering a continuation of that injunction. The injunction, which the court granted, was based on the plaintiff's contention, which the judge, at p. 957f, accepted was supported by "prima facie evidence that a fraud had been committed," that he had been defrauded of substantial sums. The judge was considering an application which required a bank, which was, on the face of it, wholly innocent of any fraud, but through whose accounts the money may have passed, to disclose the sums presently standing in the names of the other defendants (who may well have been implicated in the fraud) and "all the facts within [the bank's] knowledge as to the present whereabouts" of the sum of which the plaintiff claimed to have been defrauded. Robert Goff J. held that he had jurisdiction to make such an order. He said, at p. 958e: "I take first the proprietary claim. In such cases, there is good authority that the court may make orders with the purpose of ascertaining the whereabouts of the missing trust fund." He found assistance from a decision of the Court of Appeal, Mediterranea Raffineria Siciliana Petroli S.p.A. v. Mabanaft G.m.b.H. (unreported), 1 December 1978; Court of Appeal (Civil Division) Transcript No. 816 of 1978 , where Mocatta J. had made what Robert Goff J. called  Q.B. 956 , 959a : "a sweeping order requiring directors and an employee of the defendant company to make full disclosure of certain specified facts." He then quoted and relied on what Templeman L.J. said about that order on appeal, namely that this was:
"a strong order, but the plaintiff's case that there is a trust fund of $3,500,000. This has disappeared, and the gentlemen against whom orders are sought may be able to give information as to where it is and who is in charge of it. The court of equity has never hesitated to use its strongest powers to protect and preserve a trust fund in interlocutory proceedings on the basis that, if the trust fund disappears by the time the action comes to trial, equity will have been invoked in vain. That is why orders of this sort were made long before the recent orders for discovery, and they are at the heart of the Chancery Division's concern, and it is the concern of any court of equity, to see that the stable door is locked before the horse has gone."
He concluded  Q.B. 956, 959:
"in an action in which the plaintiff seeks to trace property which in equity belongs to him, the court not only has jurisdiction to grant an injunction restraining the disposal of that property; it may, in addition … make orders to ascertain the whereabouts of that property."
A similar approach was adopted by the Court of Appeal on not dissimilar facts in Bankers Trust Co. v. Shapira  1 W.L.R. 1274, where Lord Denning M.R., having approved A. v. C. (Note)  Q.B. 956 and quoted from the decision in Mediterranea, 1 December 1978, said  1 W.L.R. 1274, 1281:
"In order to enable justice to be done—in order to enable these funds to be traced—it is a very important part of the court's armoury to be able to order discovery. The powers in this regard, and the extent to which they have gone, were exemplified in Norwich Pharmacal …"
He then went on to say, at p. 1282:
"This new jurisdiction must, of course, be carefully exercised. It is a strong thing to order a bank to disclose the state of its customer's account and the documents and correspondence relating to it. It should only be done when there is a good ground for thinking the money in the bank is the plaintiff's money—as, for instance, when the customer has got the money by fraud—or other wrong-doing—and paid it into his account at the bank."
Norwich Pharmacal relief
Wrong carried out or arguably carried out by wrongdoer
"2 Transfer of the IBA Assets
[The claimant] shall transfer to [SMP] all the IBA Assets … subject only to SMP providing confirmation that is registered with the GISC. [SMP] shall hold all IBA Assets and discharge the IBA Liabilities in a proper manner, consistent with the status of a Lloyds broker in accordance with the GISC rules. SMP shall not transfer any of the IBA Assets except to a creditor with an IBA liability, save as permitted under the GISC Rules and shall not appoint an agent or sub-trustee of them without the prior written consent of [the claimant]. The IBA Assets are held and shall continue to be held in a separate account or accounts to any non-IBA monies."
The GISC is defined as The General Insurance Standards Council. "IBA Assets" are defined as:
"The amount of debts owing to [the claimant] in respect of all insurance broking transactions of [the claimant] and the amount credited to all bank accounts of [the claimant] designated IBA in accordance with the requirements of GISC."
"IBA Liabilities" are defined as:
"The liabilities of [the claimant] in respect of all insurance broker transactions of [the claimant] and the amount debited to all bank accounts of the claimant designated IBA in accordance with the requirements of GISC. The term IBA Liabilities shall also include any Liabilities arising in relation to insurance business placed by [the claimant] prior to the Transfer Date [9 May 2003] of the nature of the IBA Liabilities which have not been incurred or reported at the Transfer Date."
("IBA" is defined as "Insurance Broking Assets".)
"[SMP] will from the Transfer Date, assume responsibility for the processing and accounting of all current and future loss advices, claims, premiums and treaty balances in relation to the IBA Fund, IBA Liabilities and Litigation without any costs whatsoever to the claimant ..."
("IBA Fund" is defined as "the Insurance Broking Bank Accounts" maintained by [the claimant] pursuant to the Regulations of GISC.)
This clause would be unnecessary if beneficial ownership of the IBA Assets had passed to SMP and also points to it having been retained by the claimant. Finally (for present purposes) the run off agreement includes a power of attorney granted by the claimant to SMP entitling it to compromise any claim made by or against the claimant in respect of IBA Assets, Liabilities or IBA Funds and to conduct litigation on the claimant's behalf arising out of them. Again, such a provision would be unnecessary if SMP had become the beneficial owner of the IBA Assets.
"No one can escape liability for his fraud by saying: "I wish to make it clear that I am committing this fraud on behalf of someone else and I am not to be personally liable."
Bankers Trust relief