The Norwich Pharmacal order, named after the landmark 1974 House of Lords case, is a powerful legal tool that compels third parties involved in wrongdoing to disclose information necessary for the claimant to identify wrongdoers or recover stolen property. In the context of digital assets, obtaining such an order against a centralised exchange is crucial, as these platforms often hold key information about the transactions and individuals involved.

In this case, seal and gag orders were also sought to prevent the third-party digital asset exchange from tipping off the ultimate wrongdoers of the Plaintiff’s efforts to recover the misappropriated digital assets.

During the proceedings, the judge raised an interesting question regarding the procedural appropriateness of issuing "wrap up" orders (ie simultaneous orders for a seal and gag order with a Norwich Pharmacal order). The judge queried whether it would be more suitable to adopt a two-step process, wherein the seal and gag orders are first obtained on an ex parte basis (without notifying the defendant), followed by a separate on notice application for the Norwich Pharmacal order.

This two-step process is already gaining traction in other jurisdictions, notably in the British Virgin Islands, where it is becoming common practice (see here). The rationale behind the two-step approach is to ensure that sensitive information is protected from the outset, thereby preventing any potential interference with the ongoing investigation or recovery efforts whilst also protecting the principle of natural justice by providing notice to the defendant of the Norwich Pharmacal application.

However, in this case, the judge concluded that hearing the applications together was appropriate, and that this was the established practice in the Cayman Islands. The decision to maintain the current procedural approach suggests a preference for expediency and efficiency, ensuring that plaintiffs can swiftly obtain the necessary relief to recover misappropriated assets.

The judge's observations, although not formalised in a judgment, may signal a potential shift towards the adoption of the two-step process in future cases. If this trend continues, it could lead to a more structured approach in handling such applications, providing greater clarity and protection for claimants seeking to recover digital assets.

For legal practitioners, this development underscores the importance of staying attuned to evolving judicial practices, particularly in jurisdictions like the Cayman Islands, which are at the forefront of digital asset litigation. While the current practice remains to hear seal and gag applications together with Norwich Pharmacal applications, the possibility of a procedural shift should not be overlooked, especially as other jurisdictions begin to adopt the two-step process.

In conclusion, obtaining a Norwich Pharmacal order against a centralised digital asset exchange is a critical milestone in the recovery of misappropriated assets. The judge's remarks in this recent case highlight the dynamic nature of procedural law in this area, with potential implications for how such cases may be handled in the future. As digital asset-related litigation continues to evolve, it will be essential to monitor these developments closely and adapt legal strategies accordingly.