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Post-Judgment Norwich Pharmacal Orders

The decision of the Grand Court of the Cayman Islands earlier this year in ArcelorMittal USA LLC v Essar Global Fund Limited & Anor1 re-examines Norwich Pharmacal Orders (NPO) as a form of post-judgment relief. It will not be the last word on the subject (not least because it is subject to appeal) but it highlights the difficulties caused by the use of NPOs post-judgment applications and how different the regime which has been developed in Jersey is.

In December 2017 ArcelorMittal USA LLC (“ArcelorMittal”) obtained an ICC arbitral award against Essar Steel Limited (“Essar Steel”), a company incorporated in Mauritius. Enforcement proceedings were brought in England and Mauritius but the debt of over US$1.5 billion remained unpaid. ArcelorMittal sought a NPO in Cayman against two Cayman companies which it said actively controlled the Essar group of companies (including Essar Steel) and had demonstrated a propensity for directing the group to dissipate assets and evade debts.

The application was granted ex parte. The defendants sought to set it aside on the following principal grounds:

  1. A NPO could not be granted in support of a foreign arbitral award which was not being enforced and/or recognised in the Cayman Islands. This was because, in these circumstances, the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978 had supplanted the equitable jurisdiction.
  2. Deliberate non-payment of a debt was not an actionable wrong for the purposes of NPO relief. In this respect UVW v XYZ2 had been wrongly decided.
  3. The scope of the ex parte order was impermissibly broad, straying beyond essential information into broad discovery.

Save for narrowing the scope of the order, the defendants’ arguments were unsuccessful.

In arguing that the NPO jurisdiction had been ousted by statutory provision the defendants relied heavily on the English decisions in R on the application of Omar v Secretary of State for Foreign and Commonwealth Affairs3 and Ramilos Trading Ltd v Buyanovsky4. These decisions held that the relevant provisions of the Crime (International Cooperation) Act 2003 and Evidence (Proceedings in Other Jurisdictions) Act 1975 respectively had been intended to exclude the availability of NPO relief.

Kawaley J accepted that where an applicant can obtain adequate relief via the statutory route for obtaining evidence in foreign proceedings then the corresponding equitable jurisdiction would fall away. The key question was whether the statutory jurisdiction had truly been engaged. This was a mixed question of fact and law which required that, in the circumstances of the case, the statutory and equitable jurisdictions covered the same ground. On the basis that ArcelorMittal did not yet have sufficient information to commence substantive proceedings abroad and, having regard to the risk of information being destroyed, the statutory regime did not provide an effective alternative, this test had not been satisfied.

In analysing whether deliberate non-payment of a judgment debt constituted wrongdoing, the court emphasised that the essential purpose of a NPO is to do justice5. Applicants only need to establish an arguable case that the conduct complained of amounts to wrongdoing6 and that, in the case of a judgment debtor, a reasonable suspicion of wilful evasion will suffice7. Moreover, in addressing the wilfulness of evasion courts should be “astute and robust to see through a judgment debtor’s acts for exactly what they are.”8 Applying these principles, anticipated wilful steps to avoid the ICC Award met the threshold; however a general point was made that applications founded upon the evasion of debts would usually be stronger when brought in support of a domestic judgment or award, or one that has been formally recognised.

A comparable challenge based on statutory exclusion has not yet been the subject of a judgment in Jersey. The authorities discussed above would be highly persuasive and the law can be expected to develop in a similar direction. It is worth noting that the Royal Court has previously held that the NPO jurisdiction is effectively ousted by the common law jurisdiction which runs parallel to Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990[9].

Jersey has developed a considerably more permissive regime in respect of post-judgment disclosure in a succession of cases10 approving the dicta of Coleman J in Gridrxsime Shipping Co Ltd v Tantomar-Transportes Maritimos LDA11 at 310:

“It is to be observed, however, that both in Ashtiani -v-Kashi and in Derby & Co Limited-v-Weldon (Nos 3 and 4) the courts were concerned with pre-judgment orders which included Mareva injunctions. The orders for disclosure were therefore orders ancillary to those injunctions. There was no question of there being any other order in support of which a disclosure order could be justified. Where, by contrast, one has the position that a judgment has been already obtained or an award made and where a Mareva injunction in aid of execution is justified, the jurisdiction to make a disclosure order arises both as a power ancillary to and in support of the injunction and independently of the injunction as a power in support of the execution of the judgment or award.” [Emphasis added]

and at 312:

“That case was concerned with a pre-trial worldwide Mareva injunction coupled with a worldwide disclosure order. In my judgment, quite different considerations apply in the case of a post-judgment or post-award disclosure order. In such cases it is just and convenient that the judgment or award creditor should normally have all the information he needs to execute the judgment or award anywhere in the world. It does not need the supervision of these courts to ensure that double execution is not achieved or that the information is not otherwise abused”.

In Jomair v Hourigan12 the Royal Court confirmed that the threshold for obtaining disclosure in aid of execution of a judgment or award is much lower than that which applies when disclosure is sought in support of a pre-trial freezing order. The court further confirmed that the jurisdiction extends to third parties, not just the defendant:

“We are quite satisfied that the interests of justice require disclosure of his assets in Jersey. We note that disclosure is sought from the party cited rather than the defendant, but this does not affect the position. The essential principle remains that the Court can make disclosure orders whether against a defendant or third parties in order to aid in the execution of a judgment or award and the interests of justice would usually point in favour of ordering such disclosure.”

In short, a judgment creditor can seek disclosure from the judgment debtor or a third party provided that it is in the interests of justice for them to obtain it. In contrast with a NPO they need not point to any wrongdoing beyond the unpaid judgment debt or establish that a third party respondent is ‘mixed up’ in such wrongdoing. The scope of disclosure obtainable is also not subject to the same restrictions as apply to NPO relief.

The concerns expressed by the English Court of Appeal in NML Capital Ltd v Chapman Freeborn Holdings Ltd13 – in which it cautioned against the development of a “a jurisdiction of absurd width”14 – should not be overlooked; however there is a clear logic to the Jersey approach. Why should a creditor who has already been deprived of the fruits of their judgment be required to establish further wrongdoing? Should their enforcement efforts be stymied just because they cannot establish an argument that the recalcitrance of the debtor is wilful? If a third party has material that will aid enforcement or execution, why should it be necessary that they are ‘mixed up’ in either the wrongdoing which led to the judgment, or some further wrongdoing? This does mean that unconnected parties (mere witnesses) can be called upon to provide disclosure, but given that the applicant is paying for the privilege in the form of an undertaking in costs (which will be fortified in appropriate circumstances), their involvement is necessary to prevent enforcement being frustrated. On a policy level, it is also to the credit of an (so often maligned) offshore financial centre to develop its law to the point of an effective presumption in favour of disclosure to judgment creditors (foreign or domestic).

A final point arises from ArcelorMittal in respect of costs. While the court deferred the applicant’s costs application until the NPO had been substantially complied with, it repeated the usual rule that a NPO applicant should pay the costs of the respondent and may only obtain costs from a wrongdoer or third party who opposes the application unreasonably. The unfortunate consequence of this approach has been to enable respondents to launch a legal artillery barrage under the white flag of costs protection. Many practitioners will be familiar with lengthy skeleton arguments which express the respondent’s neutrality in the first and last paragraphs but devote the intervening paper to fierce resistance.

It is not clear from the judgment whether the defendants were seeking to recover any of their costs. Given that it runs to 59 pages and (pending appeal) the defendants lost on almost every point, it will be interesting to see whether the question of costs receives any further judicial attention.

By Charlie Sorensen, Senior Associate

1 FSD 2 of 2019 (IKJ)

2 BVI HC (Com) 108 Of 2016

3 [2013] EWCA Civ 118

4 [2016] EWHC 3175 (Comm)

5 Para 92

6 Para 94

7 Para 81

8 Para 81 (citing UVW v XYZ BVI HC (Com) 108 Of 2016)

9 Smith v Nedbank Private Wealth Limited [2018] JRC156

10 See, for example, Goldtron Limited-v-Most Investment Limited [2002] JLR424 at paras 25–28; Apricus Investments v CIS Emerging Growth Limited [2003] JRC 151 at paras 16–20; Africa Edge SARL-v-Incat Equipment Rental Limited [2008] JRC 175 at paras 8–10; and ENRC v Zamin Ferrous Limited [2015] JRC217 at para 26 et seq

11 [1994] 1 WLR 299

12 [2011] JRC042

13 [2013] 1 CLC 968

14 Para 26

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