An employer being defrauded by an employee is often faced with a difficult problem: how to gather information about the fraud and the location of stolen assets, including money, before the employee takes steps to destroy evidence and dissipate or hide misappropriated assets?
To address this problem, Ontario courts may compel an innocent third party to disclose otherwise confidential information about a client, including his or her assets as well as the history and use of bank accounts and credit facilities. It does so by way of a “Norwich order”, named after a British case, which permits the victim to obtain information from third parties for the purpose of proving a fraud, identifying the wrongdoer, and recovering stolen property.
An application for a Norwich order can be brought without notice, may be heard in a closed courtroom and will often be joined with confidentiality orders, including one which seals the court file for a certain period, so as to avoid tipping off the wrongdoer.
The order is, however, an extraordinary one, requiring the following:
- that the applicant for it show that the fraud claim is valid, bona fide and not frivolous or vexatious;
- that the third party from whom information is being sought is “involved”, even innocently, as will be the case with a bank holding, without knowing, stolen funds on deposit;
- that the third party is the only practicable source for the information being sought;
- that the applicant indemnify the third party for the costs associated with compliance with the order; and
- that after weighing the interests of and potential injury to the parties involved, the court is satisfied that it is in the interests of justice that the order be made.
Once granted, a Norwich order can be a powerful tool. With it, an employer can gather information that will often be critical to unraveling a fraud and determining where stolen property has gone – ideally well before the wrongdoer knows that he or she has been found out. The employer can then take steps to try to freeze assets and to preserve evidence.