AXA Equity & Life Assurance Plc & Ors v National Westminster Bank Plc & Ors

The Norwich Pharmacal jurisdiction requires the third party to have been sufficiently involved in the relevant wrongdoing and the order not to offend the mere witness rule. A bank which merely supplies accurate information to its customer is not sufficiently mixed up in the customer’s alleged wrongdoing. A company may be sufficiently involved through the acts of its managing director, but discovery remains unavailable where the claimant can plead a viable claim and obtain the documents at trial by subpoena. The court must assess all evidence relevant to whether an arguable claim can be pleaded, rather than treating a solicitor’s assessment as conclusive.

Investors subscribed £19.3 million for debenture stock issued by Resort Hotels plc. After the company failed, they brought proceedings against its auditors, Coopers & Lybrand, alleging negligence and liability under the Financial Services Act 1986. They sought pre-action disclosure from the company and its principal banks under the jurisdiction recognised in Norwich Pharmacal Co v Commissioners of Customs & Excise [1974] AC 133.

Rimer J refused the application, holding that the investors could not establish an arguable case without the requested documents and that the orders were fishing applications outside the recognised exceptions to the mere witness rule. The central issues on appeal were whether the investors could plead an arguable claim against Coopers, whether the banks and company were sufficiently mixed up in the alleged wrongdoing, and whether disclosure would offend the mere witness rule.

1. Appeal dismissed. The orders sought against the banks and Resort Hotels plc were refused, with costs.
2. The court adopted the two conditions summarised by Hoffmann LJ in Mercantile Group (Europe) AG v Aiyela [1994] QB 366 at p.374: the third party must have become sufficiently mixed up in the transaction, and disclosure must not offend the mere witness rule.
3. The investors had a good arguable case against Coopers under s.150 of the Financial Services Act 1986 and in negligence. The court was not bound by the investors’ solicitor’s conclusion that they lacked sufficient information. It had to consider all the evidence before it. The material facts concerning the alleged £7 million and £4 million overstatements could be pleaded, leaving proof to be determined at trial.
4. The banks were not sufficiently mixed up in the alleged wrongdoing. Their only relevant involvement was as the company’s bankers and authors of accurate factual letters. They did not cause or facilitate the alleged forgery or Coopers’ alleged negligence.
5. The company was sufficiently mixed up because Mr Feld acted as its managing director and his conduct caused or facilitated the alleged wrong. Nevertheless, the mere witness rule applied. Since the investors could plead a case against Coopers, there would be a trial at which documents and testimony could be compelled by subpoena.
6. The court noted, without deciding, that Norwich Pharmacal might extend to a known document containing a missing fact essential to pleading, where the third party was sufficiently involved and the action could not otherwise proceed to trial.

• Court of Appeal (Civil Division): Appeal from the order of Rimer J dated 2 February 1998 dismissed, with costs.
• High Court of Justice: Rimer J refused Norwich Pharmacal disclosure orders against the banks, the company and other defendants.