THE DUTY OF FULL AND FRANK DISCLOSURE: A CASE IN POINT
In PCV -v- The Y Regional Government of X  EWHC 68 (Comm) Mr Justice Hamblen set out, in clear terms, the rigorous nature of the duty to give full and frank disclosure to the court when making a without notice application.
The defendants were seeking to set aside an order permitting the claimants to serve an arbitration claim form at the address of their solicitors. It was argued that the order should be set aside by reason of the mandatory provisions of s.12 of the State Immunity Act 1978, alternatively because of a failure to make full and fair disclosure.
The judge set aside the orders on the grounds that s.12 had not been complied with. However he also held that he would have set aside the orders in any event for failure to make full and frank disclosure
(4) Whether the November and December Orders should be set aside for failure to make full and frank disclosure.
- In the light of my conclusion on Issues (1) to (3) it is not necessary to determine this issue. However, since it was fully argued I shall briefly do so.
- The importance of making full and frank disclosure on without notice applications is well established and has been repeatedly emphasised by the Court – see, for example, Bank Mellat v Nikpour  FSR 87 at p92; Brink’s Mat Ltd v Elcombe  1 WLR 1350 at p 1357; Arena Corporation Ltd v Schroeder  EWHC 1089 (Ch) at .
- As stated by Bingham J in Siporex Trade SA v Comdel Commodities Ltd  2 Lloyd’s Rep 428 at p 437:
“[The applicant] must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state. If the duty of full and fair disclosure is not observed the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure.”
- In the present case it is now accepted that the Claimants failed to make full and frank disclosure in relation to the November Order in that they failed to draw to the Court’s attention s.12 of the SIA and its potential applicability.
- The explanation given in Mr Mohtashami’s evidence is that the potential applicability of Section12 SIA did not occur to Freshfields.
- Although the YRG may not be a State, its title states that it is a “government” and it is accepted that Freshfields were well aware of the publicly available information relating to it. This shows it to be a self-governing region which is recognised as a federal region in the country’s constitution which also acknowledges that the YRG has sovereign powers. It has an elected parliament, a president and a department of foreign relations with representative offices abroad. It also has its own military forces.
- In the light of the publicly available information known to the Claimants’ advisers the potential applicability of Section 12 SIA should clearly have occurred to them.
- Further, the potential applicability of Section 12 SIA was of fundamental importance to the application which was being made. That application concerned both method of service (the mandatory subject matter of s.12(1)) and time for acknowledgment of service (the mandatory subject matter of s.12(2)). The application was presented to the Court as a straightforward application under PD 62.4 which could and should be dealt with on the papers. There was no suggestion that there was anything unusual about the application being made. In fact the application raised serious and substantial issues, as the present application and hearing has borne out. There is no doubt that if the applicability of s.12 had been brought to the Court’s attention there would have been no question of it being dealt with on the papers. At the very least an oral hearing would have been required and the outcome of any such hearing is far from clear even on a without notice basis.
- The Claimants were therefore in breach of duty when they made their application for the November Order. Given what Freshfields knew and should have known and the fundamental importance of the disclosure to the application being made I regard that breach as being seriously culpable. As is accepted, the duty is a continuing one and the Claimants remained in breach of duty thereafter. They were in further breach of duty when they issued their application for the December Order on 12 December 2014 without reference to the potential applicability of the SIA.
- Freshfields were first alerted to the SIA issues by WilmerHale’s letter of 16 December 2014. The YRG were highly critical of Freshfields’ conduct thereafter and submitted that they were in deliberate breach of duty. I reject that allegation. Freshfields considered the position in the light of WilmerHale’s letter. That understandably took time. They eventually responded with a letter to the Court and to WilmerHale of 18 December 2014 in which they rejected the applicability of s.12 for the reasons stated therein. Although they were criticised for not ensuring that all WilmerHale’s correspondence was put before the Court, since they were told by WilmerHale that they had put it before the Court I consider that this criticism is unjustified. They were also criticised for not proactively going back before the Court and requesting that the November Order be set aside. However, the whole matter was before the Court as part of the application for the December Order. As far as Freshfields were aware all relevant correspondence relating to the applicability of the SIA was before the Court and the Court was therefore in a position to consider what should be done in relation to the existing November Order and the requested December Order. In the event it appears that through a mix up at the Court Office none of the relevant correspondence was before Flaux J when he made the December Order on 18 December 2104, but that could not have been foreseen.
- Subject to one matter I therefore do not consider that the Claimants continued to be in breach of duty after they had written to the Court on 18 December 2014. That matter is the potential applicability of s.12(2) to the December Order. In circumstances where the Claimants were asking the Court to abridge the time for acknowledgment of service I consider that they should have drawn the Court’s attention to the potential effect of s.12(2) if the SIA applied. On their own case they were asking the Court to make an order which might well facilitate depriving the YRG of any right it may have to rely on the SIA.
- I recognise that this is not a case in which injunctive or equivalent relief was being sought, that (if the Claimants are right on s.12(1) or s.12(6)) no significant advantage would have been obtained and that this is not a case of deliberate breach. Nevertheless the duty of full and frank disclosure is of the first importance and in all the circumstances I consider that the non-disclosures in this case are sufficiently serious to warrant setting aside the orders obtained. This was a seriously culpable non-disclosure by extremely experienced and well-resourced solicitors in relation to matters of fundamental importance to the applications being made. If the November Order is set aside then the December Order must equally be so regardless of whether there are independent grounds for so doing.
- Accordingly, had I found for the Claimants on any or all of Issues (1) to (3) I would nevertheless have set the Orders aside to mark the Court’s disapproval of the serious non-disclosure made.
- For completeness I would add that if the Claimants’ case had succeeded on s.12(3) but not otherwise then it would be an even clearer case for setting aside the Orders. In such circumstances the Claimants would be taking advantage of a Catch 22 which should never have arisen and only did arise because of their non-disclosures.
Posts on the issue of the duty of full and frank disclosure include.
- Freezing Orders and the duties owed on ex parte applications: nuclear weapons that can blow up in your face. (There are useful links to other articles on this subject in that post).
- Without notice applications for freezing orders: the dangers abound: Greenwich case contains some timely lessons