WITHOUT NOTICE APPLICATIONS FOR FREEZING ORDERS: THE DANGERS ABOUND: GREENWICH CASES CONTAINS SOME TIMELY LESSONS
I have written before of the dangers involved in making without notice applications, particularly for freezing orders (“nuclear weapons that can blow up in your face“). There is an extremely high duty on the applicant to disclose all relevant matters to the court. Another example of problems occurring is shown in the judgment of Peter Smith J in Greenwich Inc Ltd (in Administration) -v- Dowling & others  EWHC 2451 (Ch).
BACKGROUND TO THE CASE
The claimants obtained an ex-parte freezing order on the 4th December 2013. On the return date the defendants opposed the application and sought an order that the orders be discharged. The defendants argued that teh court had been misled; there was a failure to comply with the duty of full and frank disclosure and some of the claims were unarguable.
The claimants sought a freezing order and search orders. However their initial application was not ready. the main affidavit in support was unsworn and full of blanks.
THE INTERIMS LIST
The judge explained the procedure in the Chancery Division.
INTERIMS – AN OVERVIEW
- The Chancery Division has available for every day of the week a designated judge who only hears urgent interlocutory applications (both inter-partes and ex parte). By far the largest number of applications is ex parte or return days of ex parte injunctions previously granted. A judge is appointed to sit on a fortnightly basis. During that fortnight the relevant judge hears all the applications that are made in the interim court and the judge is also available on weekdays to hear urgent applications out of court hours. At the weekends a different judge hears the out of hours applications that might arise then.
- There is no limit to the number of persons who can apply. There is an overall limit that no application will be entertained if it has an estimated length of hearing in excess of two hours. Those two hours include pre-reading, hearing time and judgment time (a point regularly overlooked by Counsel and Solicitors). It follows that the relevant judge regularly sits very long hours. When the judge hears the cases on the day, the sittings might go as late as between 7pm and 9pm in the evening. There are regularly dozens of applications that are made. When the judge finishes that day he will then have to pre-read the applications that have been notified for the next day. During the day up until 4.15pm, parties can apply by contacting the clerk and asking to be heard.
- It is a challenging process both for the judge and the court staff. However, it is considered by the division to be a vital tool of the services that the division offers.
- It will be appreciated that when a judge is hearing so many applications, he will be provided with large amounts of material in respect of those applications. Given the limits it is unrealistic to believe that the judge will be able to read all the material that is put before him or her for consideration. Indeed if the interims judge pre-read all the material provided at the start of the day, there would be very little time for the actual hearings (despite often optimistic estimates of the time to read relevant material).
- The judges are therefore very dependent on what the advocates tell them. They are dependent first as regards the fleshing out of skeletons and explaining the basis of the case and second, as regards the material that it is necessary to read to be able to understand the case so as to make a decision. For example, in this case on 4 December 2013, I was told by counsel for the Claimants that I did not need to read the exhibits so I did not. They filled three lever arch files. If I had read them the case would have exceeded the two hour limit.
- Without that confidence in being able to rely on counsel, the interim system would simply collapse as there would not be enough time to accommodate the large number of applications that are brought before the judge. On the days in question, I had in excess of a dozen applications on each day. That did not count the ex parte applications which applied during the course of the days.
THE APPLICATION IN THE CURRENT CASE
The judge reviewed the transcript of the hearing and noted that the form of the order was considered.
- The form of the order was briefly considered as the transcript shows. I can only assume that I did not consider it in great detail in the light of counsel telling me it was a standard form freezing injunction. I firmly believe that if I had read the order without that assurance I would have noticed the errors that were in it. It is a matter of regret on my part that I did not read the order in full; I am afraid that is down to the pressures on judges on Interims as I have set out above. It only works if the judges can rely on counsel to tell them what needs to be read and what (in this case) departs from the norm.
THE ORDERS (AND OTHER COURT PAPERS) WENT MISSING
A major problem in the case was that the documents went missing.
- I put it that way because there are a number of oddities about the event. First, I inspected the Court File and I found no copies of the applications nor the affidavit on file. More particularly, there were no copies of the issued order nor any copies of orders which I had signed. I have no positive recollection of signing the orders.
- Further it is my invariable practice for my clerk to have copies of every order I sign. She also obtains a copy of the order as issued with the seal on it. In the present case she had neither.
- During the course of subsequent hearings, my original papers were not to be found. The practice on Interims is that when an application is concluded, all papers are handed back. There are two reasons for this. First, if they were all kept then a lot of unnecessary documents would rapidly be generated. Second, the judge that hears an application ex parte will not necessarily be the judge on the return date (as has happened here). To avoid confusion with the first judge retaining the papers and them not being handed on to the second judge, the practice is to avoid that by simply returning the papers back to the solicitor who is under an obligation to produce them at the next hearing date. Eventually some of my papers were found in Counsel’s room which is somewhat unusual.
- Counsel swore an affidavit which set out the drafts and how they had been created and further identified documents that were found in Counsel’s room. These included some papers which had come back from my bundle as they contained annotations in my handwriting on a draft order to be sought against Barclays bank (but without it having been initialled) and comments on various parts of the sworn affidavits of Mr Hunt.
- Counsel was also required by me to produce the drafts that had been used at the ex parte hearing. Some were produced but it was not possible to say with certainty that the drafts which counsel produced were actually the ones which were used in the hearing.
- There is thus no chain of drafts starting with the one created by counsel, moving on to the one produced at the hearing and concluding in the one that is signed off. Equally there are no documents on the court file as part of that chain of documents. This is disturbing and it is very difficult to see what has happened.
- One possibility is that the form of order with the seal on was never approved by me. The issued order against Ms McCracken included a worldwide freezing injunction although the affidavit (see above) stated a domestic order was only sought against her. Further, drafts of the orders produced by Counsel as set out above show that the draft against Ms McCracken started life as a domestic freezing injunction but was changed to a worldwide one (as shown by the drafts of the Defendants’ Solicitors letter of 10 April 2014 to the Claimant’s solicitors, Messrs Moon Beever.) Mischon (the Defendant’s Solicitors), in their letter dated 10 April to the Claimant’s solicitors, suggested that there might have been a deliberate changing of the order after the ex parte hearing before me. Messrs Moon Beever in response to that in their letter of 11 April 2014 set out the change of the draft as regards Ms McCracken which shows that the last draft as regards Ms McCracken was sent out at 9.48am on 4 December by Counsel and that showed a worldwide form.
- They also set out the lack of material on the court file. It is true as is said in that letter that associates on sealing orders compare one initialled by the judge and it is usual for those to be retained. Sometimes due to urgency the initialled copy is given to the solicitors to take to the associates for signature. In that eventuality my invariable practice once again is to retain a copy with my clerk so that there is a continuous record for comparison. No copies of such orders are on my clerk’s files. However, one must appreciate this was an order made on interims where there are a large number of hearings and a large number of orders. It is quite possible that the normal procedure was not done and that the initialled copy was taken away by the solicitors and has been retained by them.
- Nothing is clear and I am of the view that no definitive decision can be made as to the facts. I am not prepared to suggest that Messrs Moon Beever, an experienced and well known firm of insolvency lawyers who regularly appear in the Chancery Division, have done anything improper on the material before me (save in respect of participating in the failures that took place on 4 December 2013 and the failure to reveal that orders being sought for approval were not standard form).”
THERE WERE FAILINGS IN THE ORDER
The order differed from the standard form.
“FAILINGS IN ORDER
- It is accepted that, contrary to what I was told on 4 December 2013, the orders which were produced at the hearing were not in standard form. Further, Counsel wrote on 15 December 2013 accepting that the order was not in standard form and apologising for that, accepting that a decision of Lord Justice Mummery in Sidhu Memory Corporation (see below) required that the order should be drafted by Counsel personally and it was not. Finally, Counsel apologised because of an erroneous belief that the orders were in standard form.
- Apparently that letter of apology was not actually produced at court. Nor was it addressed to the relevant judge (i.e. myself) and I saw it only on the discharge application.”
THE DEPARTURES FROM THE STANDARD FORM
1. There was a failure to insert the standard exception that the defendant could make any disposition in the ordinary and proper course of business.
2. There was a provision preventing the defendants from informing anyone (except their legal advisers) of the extent of the injunction (something that does not occur in the standard form for freezing injunction, although it does occur in standard form Search Orders.
3. The order was stated to be worldwide.
4. The standard form preventing the applicant enforcing the order outside England and Wales without leave of the court was removed.
THE DUTIES OWED ON EX-PARTE APPLICATIONS
Paragraph 80 of the judgment reviews, in some detail, the duties owed by applicants for ex-parte applications.
- The Claimants in their skeleton contend that I had read the orders and carefully considered them as is shown by the corrections. I wish I had the confidence to say that. I firmly believe that if the draft orders put in front of me had the non-standard provisions and I had read them, I would have noticed them. I regret to say that I can only assume that like Hart J I fell into the trap of the blandishments of the statement by Counsel that the order was in standard form.
- The Claimants admit that the orders were not in the standard form and both Counsel and the Claimants’ solicitors should have been aware of that.
- I can only pray in aid the pressures that judges face on heavy interim days, summarised above. The procedures will only operate efficiently if the judiciary are able to rely on what they are told by Counsel at the hearing.
DUTIES OWED BY COUNSEL
“Evidence of Counsel ”
The ground of material non-disclosure relied on to discharge the freezing order is based on serious criticisms of counsel’s conduct on a without notice application. It is regrettable that counsel has not at any stage even attempted to supply the other party’s advisers or the court with a written statement of his recollection of the hearings that took place before Hart J late in the afternoon of 26 January and early in the morning of 27 January 1999. In particular he has not supplied a written explanation of how, as is evident from the transcript, he came to misinform the court on 27 January (albeit not deliberately) that certain paragraphs in the draft freezing order were in the standard form , when in fact those paragraphs were clearly not in the standard form and the judge was not given any good reason in argument or in the evidence for departing from the standard form.
In my judgment it is always prudent in cases where an advocate’s conduct of a case is subject to, or is likely to be subject to, controversy for the advocate to make a full written account of his recollection as close in time to the events in question as possible. This is particularly desirable where the impugned conduct occurred at a hearing at which the other side were not present and no transcript is available, as was the case with the hearing late in the afternoon of 26 January. Within the limits allowed by legal professional privilege, if it is not waived by the client, the advocate’s statement should be made available to the other side and to the court.
It is unsatisfactory for the advocate to do what counsel has seen fit to do in this case, namely to give oral evidence to Hart J and to this court many months after the relevant events and as an integral part of his overall submissions in the course of seeking to retain for his client the benefit of the order obtained in the disputed circumstances.
It was only when this court asked to see the papers in the Den Norske litigation used by Memory’s solicitors in connection with the application for the freezing order in this case that they were provided to the court. It was only when Alliott J indicated in the course of the hearing of this appeal that an apology in this court might be appropriate that counsel offered an apology. I cannot help thinking that if counsel had at an early stage written down his recollection of what had happened in connection with the January hearings he might have formed a keener appreciation of the seriousness of the criticisms of his conduct and of the appropriate response to those criticisms.
Duties to the Court.
It cannot be emphasised too strongly that at an urgent without notice hearing for a freezing order, as well as for a search order or any other form of interim injunction, there is a high duty to make full, fair and accurate disclosure of material information to the court and to draw the court’s attention to significant factual, legal and procedural aspects of the case. It is the particular duty of the advocate to see that the correct legal procedures and forms are used; that a written skeleton argument and a properly drafted order are prepared by him personally and lodged with the court before the oral hearing; and that at the hearing the court’s attention is drawn by him to unusual features of the evidence adduced, to the applicable law and to the formalities and procedure to be observed.
There was a lapse of duty in the failure to provide Hart J with a skeleton argument and a draft order before the oral hearing on 26 January 1999 started. It is unsatisfactory for an advocate to hand to the court for the first time during the course of an urgent hearing a long and complex draft order which requires close reading and careful scrutiny by the court. If the advocate is unable to produce a draft order for the judge to read before the oral hearing starts then the application should not be made, save in the most exceptional circumstances, until the order has been drafted and lodged.
I emphasise the special responsibility of the advocate for the preparation of draft orders for the use of the court. There may be a convenient precedent to hand on the word processor of the instructing solicitors or in their files or in counsel’s chambers, but it is the duty of the advocate actually presenting the case on the oral hearing of the application to settle the draft order personally so as to ensure that he is thoroughly familiar with the detail of it and is in the best possible position to respond to the court’s concerns and to assist the court on the final form of the order.
Applications of this kind should never be treated by the advocate and those instructing him as involving routine pieces of paper work containing common form orders to be printed out from a computer and rubber stamped by the court. The urgency of the application and the absence of the other side necessarily mean that the court is even more reliant than it normally is on the scrupulous and meticulous assistance of the advocate in deciding whether or not to make extreme orders of this kind in the circumstances of the particular case.
In this case I am sorry to say that Hart J did not receive from counsel as much careful assistance as he was entitled to expect on the detailed form of the freezing order. That lack of assistance contributed to the judge making an order in a form which I am confident he would not have made if counsel had performed his functions to the high standard required of the profession of an advocate.
APPLYING THIS TO THE GREENWICH CASE
- In this case counsel acknowledged before the 16 December hearing that there was an error and an apology was drafted, although what was done with it afterwards remains obscure. It is acknowledged that during the course of the present hearing there were errors of departure from the standard form. There were also errors of fact, namely telling me that all of the pubs were not trading.
- I note what Mummery LJ said on this but it is regularly the case where solicitors are experienced in repeat applications of a similar nature that they develop their own particular form of order. However, I should caution that if that is used it must nevertheless be provided to Counsel who must in effect approve it. Counsel has the primary responsibility to the court, as Mummery LJ spelled out clearly. It would be Counsel’s failure if the order does not comply with the requirements. Nevertheless that is not the end of the matter. If the solicitors prepare the order they will also have a liability if they do not appreciate that their order departs from a standard form or if they know that the order departs from a standard form and they permit Counsel to make the application without drawing to the judge’s attention the non-standard provisions.
- In short, in this case both Counsel and Solicitors were at fault in failing to draw this to my attention.
- The failures to disclose in the context of an application on a busy interims court day leads inexorably to the conclusion that the undertakings must be discharged. There may be an Admiral Byng element in this, but I cannot emphasise too much the need for Counsel to be very careful in how the order is presented and how the matter is deployed before the judge. It is essential that Counsel satisfies himself or herself that this case has been fully understood by the judge.
- Providing reading lists of large amounts of material to a judge on an ex parte application on the interims day is almost always likely to lead to the situation that the judge does not read the vast amount of material deployed before him. In this case there were three lever-arch files of exhibits which I was told I need not read.
- I was not reminded of what happened two days earlier and, given the volume of work, I could not begin to say that I remember specific observations I might have made then.
THE IMPORTANCE OF COMMUNICATION WITH THE JUDGE AND THE JUDGE’S CLERK
There were problems with obtaining the original documents signed by the judge.
- In my view, this case should be a warning. When a matter is before a judge it is always advisable for his or her clerk to copied into all communications arising out of the matter that is currently before the judge in some way or another. Had that happened in the present case I would have had direct knowledge of the letter of 21 May 2014. This is especially so on the Interims. If papers are lodged out of time it is always advisable that they are lodged with the judge and not with the Court Office as there is always a risk that documents lodged late at the Court Office will not arrive in time. This occurs sufficiently frequently for parties to be aware of that problem and to address it in the way I have suggested.
DELIVERY OF JUDGMENT AFTER MATTER HAS SETTLED: THE PUBLIC INTEREST PREVAILS
The judgment also contains a detailed review of the principles relating to the delivery of a judgment after the parties had settled the issues between them. The judge had been asked not to deliver a judgment and a consent order had been placed before a Master.
- Further, in my view even if the parties have effectively put an end to the dispute between themselves, that in itself cannot stop the court from raising matters which concerns it. For example, if during the course of the trial it was clear that a party had perjured themselves or was guilty of fraudulent conduct it would be a matter of public interest that that should be known and the judge would be perfectly entitled, in my view, to deliver a judgment on dealing with those matters because the parties cannot unilaterally block such a matter by compromising the case.
- In this case the circumstances which led to the granting of the injunction and the failings of the lawyers in respect of obtaining that injunction are matters of interest, if only to reinforce the strict requirements on counsel and solicitors when making applications to the court for ex parte relief especially on busy interim application days.
- Equally, it is important, in my view to reiterate the need for communications to the judge via his clerk. That is well demonstrated by this case. In my view, even if I had not started on delivering the judgment by announcing the result, those factors are such that the parties could not have properly sought to stop me from delivering the judgment. I accept it is a matter of discretion but the public interest in my view weighs very heavily in favour of publication of judgments in line with the modern policy of the courts of ensuring, as far as possible, that justice takes place in an open environment.
- I therefore conclude that I do have a discretion as to whether or not to deliver a judgment and that in the circumstances of this case, for the reasons set out above, it is appropriate that I do so.
- The judgment speaks for itself in relation to the duties owed on an ex-parte application.
- The judge must be informed if the form of the order is not the usual form.
- Strenuous efforts must be made to ensure that the original documents are retained and available.
- The judge’s clerk should be copied into all relevant communications.