High Court discharges a freezing order for material non-disclosure

Ellie Ismaili

In Breckons and others v Powerscourt Services Ltd, the High Court discharged a freezing order on the basis of material non-disclosure and misrepresentation by the claimants at the without notice application.  In so doing, the court followed the principles for applications based on material non-disclosure laid down in The Arena Corporation Limited v Schroeder [2003] EWHC 1089.

The claimants had all invested in a scheme called “SCS Farmland”, which was promoted through agents on behalf of an Argentinean company.  The claimants alleged that the defendant had played a vital role in the promotion of the scheme.  They brought a claim for deceit and misrepresentation against the defendant, based on alleged misrepresentations in brochures promoting the scheme, which the claimants claimed had been produced by the defendant or its agents.  The claimants applied for a freezing order against the defendant and, at the without notice hearing, produced in evidence a brochure with the defendant’s logo on the front.  The court granted the freezing order.

The defendant applied to have the freezing order discharged on the basis that in had not been involved in promoting the scheme and had not produced the brochures in question. At the hearing, it became apparent that there had been material non-disclosure by the claimants, in that the brochure they had presented at the without notice hearing had no connection to the parties and had been produced by another company.

The court followed the approach to material non-disclosure set out in The Arena Corporation Limited v Schroeder [2003] EWHC 1089, where nine principles were laid down:

  1. If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial
  2. Notwithstanding the general rule, the court has jurisdiction to continue or re-grant the order;
  3. That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure;
  4. The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction;
  5. The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little, if any importance;
  6. The court can weigh the merits of the [claimant’s] claim, but should not conduct a simple balancing exercise in which the strength of the [claimant’s] case is allowed to undermine the policy objective of the principle;
  7. The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice;
  8. The jurisdiction is penal in nature and the courts should therefore have regard to the proportionality between the punishment and the offence; and
  9. There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.

On the basis of the above principles, and the “highly material and substantial” nature of the non-disclosures relating to matters which were of “great concern” at the time of the without notice hearing, the judge decided to set aside the freezing order and refuse further relief.  This was on the basis that the non-disclosures were characterised as such; the judge commented that the conclusion might be “all the more compelling in the light of the positive misrepresentations that were made”, although he was not in a position to make a finding about whether or not they were deliberate.  The conclusion was also reinforced by the claimants’ failure to take a proper note of the without notice hearing (the judge described the note as “barely [complying]… with the claimants’ solicitors’ obligations”) and to include within it the judge’s comment on the need for the claimants to serve their particulars of claim by the return date.

This decision is a good illustration of the potential consequences for an applicant of failing to comply with its duty of full and frank disclosure.

Breckons and others v Powerscourt Services Ltd [2015] EWHC 1330 (Ch).

The judgment in this case is available on Lexis.

Post By Ellie Ismaili (2 Posts)

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