In an information age, digital footprints are continually being created without regard to the desire of actors to maintain anonymity or pseudonymity in their online activities.

Victims of cyber fraud can leverage this data by deploying a versatile suite of tools under English law. This may lead to discovery of the facts necessary to trace the identity of the perpetrators of fraud; and in turn, the location of misappropriated assets.

The Norwich Pharmacal order

A Norwich Pharmacal order (‘NPO’) is a form of disclosure order which requires a person who is ‘mixed up’ in wrongdoing to disclose certain documents and/or information to the applicant.

The jurisdiction of the court to make an NPO originates from the case in which it was first made, Norwich Pharmacal v Commissioners for Customs & Excise [1974] UKHL 6. In that case, Norwich Pharmacal, a patent holder, obtained an order of the court which required Customs & Excise to provide information about the identity of third parties, for the purpose of facilitating a patent infringement claim arising from the illicit importation of chemical compounds.

In a case involving the misappropriation of cryptoassets, an NPO may assist a prospective claimant to, for example:

  • Identify account holders on social media platforms such as Twitter, Discord, and Telegram;

  • Obtain information from email providers, hosts and network suppliers, and website and server operators; and/or

  • Identify the name and address of a broadband subscriber from an internet service provider (ISP).

A distinct type of court order known as a Bankers Trust order may be used to obtain information from cryptocurrency exchanges such as Coinbase, Binance and Kraken, in circumstances where blockchain analysis reveals that cryptocurrency has been transferred onto an exchange hosted wallet. A Bankers Trust order is intended to allow assets to be traced and preserved in support of a proprietary claim (a claim in law which attaches to property, i.e. cryptoassets), and will often be sought together with an NPO.

Scope

Norwich Pharmacal relief is based on the principles of equity, and the development of the circumstances in which it has been granted demonstrates the flexibility and discretion that the English courts will apply to novel factual issues which arise.

Since the 1974 case, the NPO jurisdiction has expanded from an order relating only to the identity of the wrongdoer, to cover specific information without which the applicant could not allege liability; and further, to provide information to ascertain whether a legal wrong has been perpetrated at all.

At the time of publication of this article, in July 2021, the English courts have determined NPO applications in a number of cases involving cryptoassets - and it is expected that the scope of Norwich Pharmacal relief will continue to develop in this area.

In order to obtain an NPO, an applicant does not need to have a definite intention to commence proceedings against the wrongdoer. This means that in appropriate cases involving cryptoassets, a litigant may utilise the remedy as part of an evidence gathering exercise in order to assess the prospects of a claim.

Application

When exercising its discretion whether to grant an NPO, the court will carry out a ‘careful and fair weighting’ of the relevant factors of the case at hand. In all cases, the grant of relief must be a ‘necessary and proportionate response in all the circumstances’ in order to do justice. In Mitsui & Co v Nexen Petroleum UK Limited [2005] EWHC 625 (Ch), the court set out a list of essential conditions that must be met in an application for an NPO:

  • a wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer;

  • there must be the need for an NPO to be made to enable action to be brought against the ultimate wrongdoer; and

  • the person against whom the order is sought must be a) 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 wrongdoer to be sued.

In the subsequent case of Rugby Football Union v Consolidated Information Services Ltd [2013] 1 All ER 928, the court set out a list of 10 additional factors that should be taken into account in the exercise of the discretion. These include the strength of the claim that is contemplated by the applicant, the degree of confidentiality of the information sought, and whether innocent persons will suffer harm as a result of the disclosure sought.

Other requirements that must be satisfied before relief is granted include that there is no alternative provision of the Civil Procedure Rules (‘CPR’) that would provide the appropriate relief. An application for an NPO should be an option of last resort where a wrongdoer is unidentifiable, information cannot otherwise be obtained, or a claim cannot otherwise be brought.

Supporting evidence

The evidence presented to the court in an NPO application should support the disclosure order that is sought, and be persuasive upon the court that the order will ‘reap substantial and worthwhile benefits’ to the applicant.

Having first made proper available enquiries in the circumstances, the applicant is under a duty to provide full and frank disclosure of all material facts. Matters of gravity and relevance, irrespective of whether they are adverse to the applicant’s case, must be therefore be presented to the court.

In cases involving the misappropriation of cryptoassets, a prospective litigant is likely to obtain blockchain analysis evidence as a preliminary step – although this will generally support an application for a Bankers Trust order against a cryptocurrency exchange, rather than for an NPO.

Costs

An NPO is used to obtain information from a third party that has become embroiled in the wrongdoing of another through no fault of their own. The usual rule is therefore that the applicant pays the respondent’s costs, both of the application at court and in relation to provision of the information sought.

In applications that are made on a ‘without notice’ basis, the applicant will be expected to provide a cross-undertaking in damages to the respondent, and in all cases an undertaking will be required in respect of any third parties who might suffer loss as a result of an order being made. An application for an NPO may therefore present a substantial cost outlay to an applicant.

In circumstances where there is a good arguable case that a third party has actually or arguably carried out wrongdoing, an online service provider is likely to adopt a neutral stance, or indeed, consent to an NPO application. This may provide an opportunity to mitigate legal costs, since the applicant may seek a determination by the court on paper, rather than at a hearing.

Obtaining an NPO against respondents outside of the jurisdiction

The position under English law is that an applicant is not able to obtain an NPO for the sole purpose of facilitating actual or contemplated proceedings before a foreign court.

In cases involving proceedings in the England and Wales jurisdiction, the law has developed to assist applicants. In AA v Persons Unknown, Re Bitcoin [2019] EWHC 3556 (Comm), a case involving cryptocurrency fraud, the applicants opted to adjourn their applications for an NPO and Bankers Trust order against the Bitfinex cryptocurrency exchange after the Judge expressed concerns about whether there was a legitimate basis for service of those orders out of the jurisdiction.

The subsequent case of Ion Science Ltd and Duncan Johns v Persons Unknown, Binance Holdings Limited and Payward Limited – unreported, 21 December 2020 is a positive development for NPO applicants in cryptoassets cases. In the Ion Science case, the court gave permission for service of NPOs and Bankers Trust orders against the Binance and Kraken cryptocurrency exchanges, on the basis that a claim in the English jurisdiction had been issued against a person (‘Persons Unknown’) other than the respondents (Binance and Kraken).

NPOs are also available in offshore jurisdictions such as the British Virgin Islands, the Cayman Islands, Gibraltar and Hong Kong. Offshore courts have adopted a more flexible approach than the English courts to the grant of NPOs for the sole purpose of facilitating foreign proceedings. In ArcelorMittal USA LLC v Essar Steel Ltd [2019] EWHC 724 (Comm), a Cayman Islands case, the court confirmed the availability of Norwich Pharmacal relief in foreign jurisdictions in order to support and make effective a worldwide freezing order.

Comment

The Norwich Pharmacal jurisdiction provides litigants with a powerful tool to unmask putative wrongdoers.

The readiness and flexibility of the English court to adapt the jurisdiction to the novel challenges presented by cryptoassets serves the aims of the UK Jurisdiction Taskforce to provide market confidence and legal certainty as regards English common law.

Victims seeking redress in relation to acts of cyber fraud will welcome the outcomes in recent cryptoassets cases in which NPOs have been made.


Chris Gupta is a solicitor of the Senior Courts of England and Wales with experience in commercial litigation, civil fraud and asset tracing, and financial services litigation. He is the founder of Paradigm Legal, a legal services company focussing on dispute management, legal consulting, and legal publishing.

Disclaimer: The contents of this article do not constitute legal advice. Users of this website are advised to seek professional advice regarding their individual case circumstances.